Commons Sitting of 1 July 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    CLIFTON SUSPENSION BRIDGE BILL
    Lords amendments agreed to.
    FRIENDS MEETING HOUSE (REIGATE) BILL [Lords]
      GREATER MANCHESTER PASSENGER TRANSPORT BILL [Lords]
      Read the Third time and passed, without amendment.

    ALEXANDRA PARK AND PALACE BILL [Lords] (By Order)
    Order for Second Reading read.
    To be read a Second time upon Thursday.

ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    Health and Social Services Employees (Pay Settlements)
    Mr Peter Bottomleyasked the Secretary of State for Social Services if he will publish in the Official Report the date of the major pay settlements in health and social services in the past 12 months.
    The Secretary of State for Social Services (Mr. Patrick Jenkin): As the answer contains a list of dates, both of anniversaries and settlement dates, I will, with permission, publish it in the Official Report.
    Mr. Bottomley: Given the understandable concern that nurses should not
    1276
    Receive increases below those received by most other people, would it not be a good idea to bring together the settlement dates to a two or three-month period of the year so that various settlements can be looked at together and the nurses' settlement regarded as a maximum, with the rest of the country aiming at settlements lower than the 14 per cent. on offer?
    Mr. Jenkin: My hon. Friend makes two points. The first is a procedural suggestion that all settlements should be considered together. That point has some merit, although it would give rise not only to administrative difficulties but would be difficult to achieve without substantial extra cost in the year of changeover. The second point deals with the best way of trying to determine relatives between different groups in the Health Service with a view to trying to reach a better method of dealing with these matters.
    Mr. William Hamilton: Is the Secretary of State aware that the nurses feel a considerable sense of betrayal by this Government—not for the first time by a Tory Government—more particularly in view of the fact that both the Prime Minister and the Minister for Health, sitting beside the right hon. Gentleman, said that the nurses should be treated no less generously than the police, the Armed Forces and the firemen, and that has not taken place?
    Mr. Jenkin: The hon. Gentleman will know that the Clegg Commission, at the end of its report, drew attention to the need to avoid what has sometimes been called the four-year ratchet effect on nurses' salaries. This is a matter that the Government have taken on board and to which we are seeking solutions. A commitment was given by both parties before the election in relation to nurses' pay. The commitment has been met fully by this Government. It is now for the relevant Whitley council to decide whether the settlement recently reached can stand.
    Mr. Paul Dean: Will my right hon. Friend do his best to ensure that those persons, such as members of the Royal

    1277
    College of Nursing, who refused to use the strike weapon against patients, do not suffer as a result of their restraint?
    Mr. Jenkin: I accept entirely the point made by my hon. Friend. When professions decide, as a matter of principle, that they will not strike, thus avoiding detriment to patients, this places a considerable obligation on Governments and, indeed, on all parties to see that they are treated fairly.
    Mr. Orme: How can the Secretary of State justify his attitude to the nurses, particularly when the Minister for Health, as my hon. Friend said, is on record, on 15 March 1979, as saying that the nurses should be treated in a proper manner? How can the Secretary of State justify the different treatment accorded to doctors compared with nurses? When will he meet his obligations to the nursing profession?
    Mr. Jenkin: The right hon. Gentleman seems to forget that his party gave a

    MAJOR PAY SETTLEMENTS FOR NHS STAFF SINCE 1 JULY 1979

    Group

    Anniversary date

    Settlements

    Administrative and clerical.

    1 April

    10 July 1979. Operative from 1 April 1979. Payments made in four stages completed on 1 April 1980.

    Ancillary

    13 December

    14 February 1980. Operative from 13 December 1979. Plus payment resulting from Clegg award paid in two instalments on 1 August 1979 and 1 April 1980.

    Ambulancemen

    1 January

    7 March 1980. Operative from 1 January 1980. Plus payment resulting from Clegg award paid in two instalments on 1 August 1979 and 1 April 1980.

    Nurses and midwives

    1 April

    Payment resulting from Clegg award. Paid in instalments on 1 August 1979 and 1 April 1980.

    Professional and technical.

    1 April*

    July-August 1979. Operative from anniversary date, paid in three stages completed on 1 January 1980.

    Professions supplementary to medicine.

    1 April

    Payment resulting from Clegg award paid in instalments on 1 August 1979 and 1 April 1980.

    Doctors and dentists

    1 April

    28 May 1980. Operative from 1 April 1980. Plus final stage of 1978 settlement paid on 1 April 1980.

    * Anniversary date for some works staff: 1 July; anniversary date for opticians: 1 May.

    National Community Service
    Mr. Marlowasked the Secretary of State for Social Services if he will set up a study to identify what roles could be performed within his Department by a system of national community service based on a wide-ranging national voluntary scheme of one year duration for 16 to 21-year-olds.
    The Under-Secretary of State for Heath and Social Security (Sir George Young): No, Sir. I agree that young
    categoric pledge to the doctors in 1978 that it would honour not only the three stages of the award to enable the doctors to achieve an up-to-date level, but that it would honour the recommendations of the Doctors and Dentists Review Body report. Perhaps the right hon. Gentleman will find an opportunity to explain whether he would have rejected the DDRB's recommendations in the circumstances of this year.
    Mr. Orme: I would not have rejected them, but I should not have treated the nurses in a different manner, as has the Secretary of State.
    Mr. Jenkin: I do not want to get involved in bandying figures at a sensitive time when discussions in the Whitley council are taking place this week. A number of clear commitments to the nurses were made by both parties. The commitments have been met in full.
    Following is the information:
    people greatly benefit themselves and the community by taking part in voluntary activities—particularly those relevant to the services of the Department. But I am sure that a study would show that their potential is best encouraged locally.
    Mr. Marlow: Since the growing level of youth unemployment will give rise to many social problems, does not my hon. Friend agree that a system of national community work, starting with basic training and followed by various options, including options in the social field,

    1279
    would have a lot to contribute in dealing with the problems of our stretched resources in the hospital services, help for the elderly and looking after young people? Since the benefits, financially and otherwise, outweigh the costs, will my hon. Friend discuss the matter with his right hon. and hon. Friends with a view to making proposals later?
    Sir G. Young: I agree with what my hon. Friend says, so long as such a scheme is voluntary. For that reason the Home Office voluntary service unit makes grants of £600,000 a year to several organisations which provide opportunities and work for young people. My Department has drawn the attention of health authorities and local authorities to the opportunities under STEP and the youth opportunities programme to encourage work for young people and provide services to the community. I shall draw my hon. Friend's remarks to the attention of my colleagues who might be able to help.
    Mr. Kilroy-Silk: Does the Minister accept that community service orders have been successful for young adult offenders, particularly as a way of demonstrating the potential of a sentence which combines the element of punishment through the deprivation of liberty and with the ability to enable young people to perform constructive activities in reparation to the community? Will the Minister press within the Government for the scheme's extension to people under the age of 17? Will he also press for an extension of community service under the umbrella of intermediate treatment?
    Sir G. Young: I agree about the effectiveness of community service orders which apply to young people over the age of 17. For many juveniles it is agreed that community work is appropriate and helpful. Schemes to promote such work operate in many parts of the country. I believe that the hon. Gentleman is thinking of making it compulsory for the under-17s, and that raises issues which cover my Department and the Home Office. Powers are already available for the courts to make intermediate treatment available where appropriate. My right hon. Friend and I attended a
    1280
    conference today and yesterday to encourage the development of intermediate treatment throughout the country.
    Mr. Nicholas Winterton: Will my hon. Friend give more positive thought to the request by my hon. Friend the Member for Northampton, North (Mr. Marlow)? Does he agree that some form of voluntary community service for all young people between the ages of 16 and 21 years would be beneficial to the country? Is he aware that many young people would like to have the opportunity to serve the community, their fellow young people, the elderly and the handicapped but that the funds and schemes to enable them to do that are not available? Will my hon. Friend therefore, give more constructive thought to this reasonable request?
    Sir G. Young: The work done by Community Service Volunteers is exactly the same as my hon. Friend suggests. It makes available to interested young people a wide range of jobs and opportunities in the community. Various Government Departments support the CSV generously with grants. I shall certainly see whether there is a way of organising that scheme centrally. However, the opportunity for service arises locally and local initiative is needed to harness the good will of young people.
    Mr. Freeson: Is not the Minister missing the central point, however commendable are the other matters to which he has referred? Will he examine further, in conjunction with his Government colleagues, the question of paid service to the community? Is not it ridiculous that between £60 and £70 a week has to be paid out one way or another by way of lost revenue or actual payments to the unemployed when, if the funds were made available to local authorities and health authorities, it would be possible to establish a service on a paid basis—and not only for the 16 to 21 year-olds?
    Sir G. Young: I do not dissent entirely from what the right hon. Gentleman says. However, the concept of paying volunteers has always raised tricky issues with the trade unions. They would have to be resolved before progress could be made in that direction.

    Tobacco and Tobacco Products (Health Hazards)
    Dr. Mawhinneyasked the Secretary of State for Social Services if he will make a statement on the outcome of his discussions with the tobacco industry.
    Mr Cartwrightasked the Secretary of State for Social Services whether he will make a statement on the outcome of his talks with the tobacco industry.
    Mr. Patrick Jenkin: Our discussions with the industry are still in progress and I shall make a statement to the House when we reach agreement.
    Dr. Mawhinney: I thank my right hon. Friend for that reply. Will he confirm that discussions with the tobacco industry include the subject of publication of carbon monoxide levels in cigarettes? Does he agree that the publication of those levels is important, bearing in mind that they can be scientifically determined, as has recently been demonstrated by a Sunday newspaper?
    Mr. Jenkin: I fully accept the importance of being able to publish carbon monoxide figures for different brands of cigarettes, subject to one point—that any figures for which my Department takes responsibility are known to be accurate. The industry has made its calculations. They are being tested by the Government Chemist. Depending upon the results of the tests I hope that we shall be able to reach agreement with the industry on how the figures can best be presented.
    Mr. Dubs: If the Minister does not succeed in persuading the industry to take a more positive stand against advertising, will he use the threat to legislate as a last resort?
    Mr. Jenkin: The hon. Gentleman will know that there was little enthusiasm for legislation when we debated the issue in May. Discussions with the industry are proving to be constructive. Both sides agreed at the outset that we should not conduct our negotiations in public but that we wanted to reach an agreement.
    Mr. Higgins: Is not there a waste of resources involved in the Government spending money on warning advertising against cigarette smoking when the industry spends more on encouraging smoking?
    1282
    In his discussions will my right hon. Friend take account of the proposal that the amount of Government warnings on cigarette packets and elsewhere should be equal to the amount of advertising designed to promote cigarettes?
    Mr. Jenkin: I take note of my right hon. Friend's suggestion. He will realise that the health warning is one of the subjects of the current negotiations.
    Mr. Moyle: Does not the right hon. Gentleman agree that the time for reaching a voluntary agreement with the tobacco industry is grossly overdue? Does he agree that, while the time for reaching a voluntary agreement is rapidly disappearing, the time for introducing restrictive legislation on tobacco advertising is rapidly approaching? Without wishing to buy a pig in a poke, is the right hon. Gentleman aware that, if he introduced legislation, Opposition Members would want to be as co-operative as possible?
    Mr. Jenkin: I take note of that. I am sure that the right hon. Gentleman will adhere to the view which he held when he was responsible for these matters—that it is better to proceed by consent and agreement if that is possible. These are complex matters raising sensitive and difficult issues for the industry and other involvements. It is right to take time to reach a satisfactory agreement.

    Community Health Councils
    Mr. Trippierasked the Secretary of State for Social Services how many delegations he has seen on behalf of community health councils.
    The Minister for Health (Dr. Gerard Vaughan): I have met the Association of Community Health Councils for England and Wales twice, and my right hon. Friend is to meet it again on 8 July. I have also had a very large number of representations from individual community health councils both when they have come to see me and on visits I have made up and down the country.
    Mr. Trippier: Can my hon. Friend tell the House what percentage of the representations that he has received has been in favour of the continuation of CHCs in some form and what percentage has been against? Will he also inform the House

    1283
    when he, or his right hon. Friend, intends to make a comprehensive statement as to their future?
    Dr. Vaughan: The majority of the representations have been about individual hospital problems and closures but in answer to "Patients First" we have received almost 5,000 replies about the future of CHCs. The replies from voluntary bodies, individual members of the public and CHCs themselves show strong support for retaining them. Local authorities and health authorities were much more divided. We are in no doubt about the strength of feeling about retaining CHCs, but I must ask the House to wait until my right hon. Friend makes his statement later this month.
    Mr. Carter-Jones: Since the hon. Gentleman and the Government are concerned to support voluntary organisations will he explain why there has been a delay? Since the hon. Gentleman is a great admirer of the Secretary of State for Industry, and since this was his idea, why does he not encourage it?
    Dr. Vaughan: There is a general view throughout the House that many CHCs have done a good job and have brought to the attention of health authorities the views of voluntary organisations. We are mindful of the role that CHCs have carried out and would wish to support them.
    Mr. Adley: Does my hon. Friend believe that, to be effective, a community health council needs to be local? Is he aware that in my constituency there is widespread dissatisfaction with the Southampton and South-West Hampshire community health council because Southampton and its suburbs always get their own way? When my hon. Friend looks at reorganisation will he do his best to ensure that no single centre of large population will be allowed to get its own way at the expense of the rural areas?
    Dr. Vaughan: I am aware of the concern felt by my hon. Friend. We shall certainly look at this when we consider the future of CHCs.
    Mr. Rooker: Can the Minister say that when the Secretary of State makes his statement later this month it will be given orally in the House?
    Mr. Nicholas Winterton: Under privilege.
    Mr. Rooker: That is what we want to know today. Does the hon. Gentleman further appreciate that the widespread support for community health councils goes wider than the bodies he mentioned and that support also comes from all political parties at grass roots level? [Interruption.] Just because some community health councils—
    Mr. Speaker: Order. The hon. Member for Birmingham Perry Barr (Mr. Rooker) must be allowed to put his question.
    Mr. Rooker: Finally, does the hon. Gentleman accept that, just because some community health councils occasionally upset bureaucrats and administrators in local authorities and in the National Health Service, that is not a reason for abolishing CHCs? It is a reason for keeping them.
    Dr. Vaughan: The hon. Gentleman will appreciate that I had some difficulty in hearing part of his question and, perhaps, the reason for that. I ask hon. Members to wait until my right hon. Friend makes his statement which will be an oral statement.

    Renal Dialysis
    Mr. Dalyellasked the Secretary of State for Social Services whether, pursuant to his reply, Official Report, 3 June, column 1229, he will study the opting-out kidney donor system, and the relevant difficult, sensitive and emotive questions; whether he expects the number of patients on renal dialysis to increase at a rate of 15 per cent. per annum; and if he will make a statement.
    Dr. Vaughan: I have considered the case for an opting-out system, but in my view this is ruled out by the weight of public opinion against it, which was recorded in the survey published last year. I am hopeful that the supply of kidneys will be improved as a result of the new kidney card scheme and that we shall maintain the rate of increase in patients on renal replacement therapy, which has averaged 16 per cent. in recent years.
    Mr. Dalyell: Will Ministers and their officials cast their most critical and beady eye on precisely how these public opinion surveys on transplants were done? Could

    1285
    the Point be considered, in relation to the whole contracting-out scheme, that casual questions from strangers on highly emotive issues are not really a proper way of determining policy in this area?
    Dr. Vaughan: I shall certainly give the hon. Member an undertaking to look at this again. We are as concerned as he is that the maximum number of renal cases should receive treatment. We are concerned that there are 1,700 people waiting who could have kidneys if they were available.
    Mr. Peter Bottomley: Would not the best way to discover people's views be to get a sample survey done through GPs—who are thinking about medicine and the problems of those who need to be cured —rather than tying the matter into a questionnaire which might be about totally unrelated subjects?
    Dr. Vaughan: I shall give support to my hon. Friend's proposal.
    Mr. Alfred Morris: Further to my hon. Friend's important question, will the Minister state what is now the average waiting period for a kidney transplant and what action he is taking to improve staffing and resources to reduce the average waiting period?
    Dr. Vaughan: I know that the waiting period has been significantly reduced. I shall have to find out the exact period and I shall write to the right hon. Gentleman.

    Mentally Disordered Offenders (Hospital Care and Treatment)
    Mr. Kilroy-Silkasked the Secretary of State for Social Services if he will make a statement on the action he is taking to ensure that National Health Service hospitals provide hospital care and treatment for mentally disordered offenders.
    Mr. Patrick Jerkin: The NHS already accepts, under the Mental Health Act, a large number of detained patients from courts and prisons each year. There continues to be difficulty with a smaller number where a hospital place cannot be found or where the power to detain the person under the Act is in doubt. I and my Department will continue to tackle this by discussion with the NHS
    1286
    at all levels, close consultation with the Home Office and professional bodies and with the relevant trade unions and through research into the problem.
    Mr. Kilroy-Silk: Does not the Secretary of State accept that there would, quite rightly, be a major public outcry if hospitals were to refuse to accept and treat accident victims or kidney patients? Is it not both disgraceful and indefensible that the National Health Service should refuse to admit, treat and care for mentally disordered persons who, as a consequence, are in prison? There are 446 of them to date and that is not an insignificant or minimal number. When will the Secretary of State assert his responsibility for the National Health Service and insist that the service—doctors, nurses and ancillary staff—lives up to its proper obligations to mentally disordered and mentally ill persons?
    Mr. Jenkin: The hon. Gentleman has made a considerable reputation for himself for campaigning on this issue and he deserves, I think, the thanks of the whole House. We need to get the figures into perspective. In all, the National Health Service has, at any time, about 2,500 detained patients who have come from prisons and the courts. The service accepts almost 1,000 such patients a year and in 1978 the special hospitals admitted 187 of them. The main concern of my Department and the Home Office is with about 150 sentenced prisoners suffering from mental illness, within the terms of the Mental Health Act. The numbers, therefore, are not large.
    I fully accept the responsibility of the National Health Service to accept these patients as rapidly as possible. I can tell the hon. Gentleman that I recently had discussions with one of the trade unions involved and one or two hospitals where particular difficulties have arisen. Those discussions showed me some of the misunderstandings which may be creating difficulties in a number of cases. I am now considering the best way of overcoming those misunderstandings and hoping to get more movement in the matter.
    Miss Fookes: May I support the point made by the hon. Member for Ormskirk (Mr. Kilroy-Silk)? May I ask my right

    1287
    hon. Friend to insist that in future hospitals do take mentally disordered offenders? It appears that at present they have the right not to do that.
    Mr. Jenkin: I am well aware of the point made by my hon. Friend. Whether or not a patient should or should not be admitted to a hospital for treatment is, primarily, a matter of clinical judgment. That is not a matter which it would be right for any Minister to seek to override. But where clinicians have decided that a particular admission and particular treatment is right and appropriate, I am bound to say that I think it is intolerable that others take it upon themselves to deny the patient the treatment and the admission that has been recommended.

    National Health Service (Structural Changes)
    Mr. Moateasked the Secretary of State for Social Services what is the likely timetable for the introduction of changes in the structure of the National Health Service.
    Mr. Patrick Jenkin: I expect to make a statement later this month on changes to the structure and management arrangements of the National Health Service and this will include the timetable for their implementation.
    Mr. Moate: Does my right hon. Friend agree that continuing uncertainty is unsettling? In the meantime will he give some indication to the House as to the year in which he expects the changes to be implemented? If the system is to be based upon new and stronger ditricts does he agree that there needs to be local and outsider chairmen and local representation on those bodies? When does my right hon. Friend expect to make those appointments?
    Mr. Jenkin: I must ask my hon. Friend to await the statement which I hope to make within a matter of three or four weeks. There has been a widespread welcome for the proposals made in "Patients First" and a widespread expression of view that they should proceed with all due despatch so as to minimise the period of uncertainty. Those are matters which the Government are keeping carefully in mind.
    Mr. Heffer: Will the right hon. Gentleman assure us that the statement by the Minister for Health is an inaccurate reflection of Government policy? Is he aware that his hon. Friend indicated an intention to bring a large section of the Health Service within the area of private health? Will he give an assurance that that is not true and that profits will not be put before the interests of the mass of the people?
    Mr. Jenkin: The Government have never made any secret of their wish to try to bring more resources into the health care of the nation through the development of the private sector. The pace at which that will proceed will depend upon the willingness of people who are now subscribing in ever larger numbers through group schemes, trade union schemes provident funds and in other ways. It would probably not be right for the Government to attempt to set any target, except to say that we believe that these are making a valuable contribution that we hope to encourage.
    Mr. Paul Dean: Now that the initial period of consultation is complete will my right hon. Friend press ahead as fast as he can so that the staff in the NHS will know where they stand? Will he take into account the strong view that there should be flexibility in the administrative structure, and that no one pattern of administration should be imposed on the whole country?
    Mr. Jenkin: On the first point I hope that my hon. Friend welcomed our circulating to the Health Service a few weeks back the offer that had been made about staff protection terms, early retirement and so on which is currently under negotiation in a special committee of the general Whitley council. I think it has gone some way to relieve the anxieties of those who have been understandably concerned about what the future holds for them.
    On the second point, "flexibility" is certainly one of the words that has occurred most frequently in the representations to us, and it is a principle that the Government warmly adopt.
    Mr. Moyle: The right hon. Gentleman says that he does not want to set a target

    1289
    for private practice. Is he aware that his hon. Friend the Minister for Health did set such a target—
    Dr. Vaughan: No.
    Mr. Moyle: Yes, he did. Is the right hon. Gentleman aware that his hon. Friend said on television that he wants 25 per cent. of the health care of this country dealt with through private practice? Is the hon. Gentleman speaking for the Government or not? Further, is the right hon. Gentleman aware that his hon. Friend announced a timetable for the reorganisation of the Health Service during the Report stage of the Health Services Bill? In view of the right hon. Gentleman's vagueness on that this afternoon, are we to understand that he has overthrown his hon. Friend's timetable and will produce another?
    Mr. Jenkin: On the first point I must ask the right hon. Gentleman to await my statement, which will be coming shortly.
    I watched the programme in which my hon. Friend took part. It was perfectly clear, in relation to what had gone before about fund raising, charging, private practice, provident funds and about the whole issue, that the question put to my hon. Friend covered the whole amount. Therefore, when my hon. Friend made the statement about 25 per cent. he was not particularly concerning himself about private practice—
    Mr. Rooker: Yes. He was saying that he wanted 25 per cent.
    Mr. Jenkin: Of course he was not. I suggest that the right hon. Member for Lewisham, East (Mr. Moyle) studies the script because it was perfectly clear that the answer covered the whole range of factors. No question of any time scale in this direction has ever been raised. These matters must be left to find their own level.

    National Health Service Hospitals (Charges)
    Mr. Norman Atkinsonasked the Secretary of State for Social Services if he will reconsider the practice whereby a pensioner pays a hotel charge after a certain period in a National Health Service hospital whereas a person of working age does not.
    The Minister for Social Security (Mr. Reg Prentice): There are long-standing provisions under which certain social security benefits are reduced after certain periods of free in-patient treatment. My right hon. Friend has no plans to terminate these provisions which apply to most income replacement benefits regardless of the age of the beneficiary.
    Mr. Atkinson: Has not the right hon. Gentleman once again demonstrated his absolute ignorance of benefits paid? I am not talking about supplementary benefits. May I remind him of the shock that people suffer when they realise that their pensions, their sickness benefits or their industrial injury benefits are not paid as of right when they enter hospital? Is he aware that they realise then that, if they have no dependants, their benefit is reduced by £9·30 a week? Is he further aware that a person who is working and is being paid a non-contributory pension benefit, particularly in the public sector, has his deduction made up by his employer? Is this not discrimination against a person who is receiving benefit?
    Mr. Prentice: The hon. Gentleman referred to a reduction of £9·30 after eight weeks. That applies in the case of someone with no dependants. For a person with dependants the reduction would be £4·65. This principle has been operated since 1948 and has continued under all Governments because it has been generally recognised that public funds should not be used twice for a person's maintenance.
    Mr. Kenneth Lewis: Since millions of people get their pay made up when in hospital, and thereby make a profit out of being in hospital, why can there not be a charge in respect of those persons while they are in hospital?
    Mr. Prentice: That idea has been studied and rejected. There would be considerable administrative costs in operating a scheme of that kind. There would be problems of assessing people's incomes, including those incomes which were reduced because of the sickness. There would be a problem of collecting the money and of chasing up bad debts. Therefore, the net saving to public funds would be very small in relation to the problems that would be created.

    Drugs (Pregnancies)
    Mr. Campbell-Savoursasked the Secretary of State for Social Services if there is any substantial evidence to suggest that the taking of aspirin and similar drugs is in any way detrimental to the health of a pregnant woman or the foetus.
    Dr. Vaughan: I know of no evidence which indicates a special risk to the pregnant woman or foetus arising from such medicines. However, in view of a recent report of an association between aspirin and blue babies, I am urgently seeking the advice of the Committee on the Review of Medicines.
    Mr. Campbell-Savours: Is the hon. Gentleman aware that many women are greatly confused by the newspaper reports, particularly in the light of the comments of the director of the child hospital in Toronto, Dr. Richard Rowe, who suggested that the sensitive period is the last three months of pregnancy and that there is insufficient evidence to establish whether aspirin is dangerous? Can the Minister give guidance to pregnant mothers?
    Dr. Vaughan: I hope very much that the media, while warning of doubts about drugs, will also give reassurance in respect of drugs which have been used for a very long time. Aspirin is such a drug. There is extensive clinical experience that aspirin has no harmful effects. At first sight the evidence to which the hon. Gentleman refers is not strong, but I am taking urgent expert advice on this matter.
    Mr. Mellor: Does my hon. Friend agree that there are far too many scare stories about this sort of thing? Is he aware that, since the last scare story about Debendox, thousands of women throughout the country, including my wife, have given birth to perfectly healthy babies after taking the drug? Does he agree that it is about time this sort of preposterous scaremongering and publicity-seeking by certain hon. Gentlemen ceased?
    Dr. Vaughan: Yes, I agree wholeheartedly with my hon. Friend. I assure him that we shall do everything we can to see that scares are not perpetuated. Pregnant women are normally at no greater risk from aspirin than any other women.
    Dr. Roger Thomas: With more and more drugs coming under suspicion as to their tetragenic effects, ought it not to be the policy of the DHSS to ensure that women under 16 weeks of pregnancy should take medicine only when it is necessary and is prescribed for them by their physicians?
    Dr. Vaughan: As the hon. Gentleman knows, women are already advised that during pregnancy they should not take drugs except on the advice of their doctors.
    Later—
    Mr. Ashley: On a point of order, Mr. Speaker. The whole House will know that when a personal attack is made on one hon. Member, it is a convention of the House that that hon. Member should be allowed to reply. During Question Time this afternoon, a strong attack was made from the Government Benches on the campaign against Debendox. The House will know that I am the one hon. Member who has campaigned for the suspension—not the ban—of that drug. I have tabled an early-day motion and I have asked questions on the subject, and yet I was denied the right to reply to that personal attack. I therefore submit, Mr. Speaker, that you were wrong in refusing to allow me the privilege of making a reply.
    Mr. Speaker: The right hon. Gentleman was not named in the question that was asked, and, therefore, his complaint has no substance whatsoever.
    Mr. Ashley: Further to my point of order, Mr. Speaker. With respect, I submit that the fact that I was not named in the question to which I referred is wholly irrelevant, in so far as the whole House knows that I am the only Member who has campaigned for the suspension of the drug Debendox. I respectfully submit, Mr. Speaker, that you are wrong in your interpretation and that I have every right, in view of the fact that the Minister endorsed criticisms—[Interruption.] I know that the Minister has no evidence to support—
    Mr. Speaker: Order. I am sorry that the right hon. Gentleman is upset, but I cannot change my ruling.

    MIND
    Mr. van Straubenzeeasked the Secretary of State for Social Services what considerations led him to decide the size of his recently announced grant to MIND.
    Mr. Patrick Jenkin: There were four considerations. These were, first, our priority for mental health; second, our high opinion of MIND's work, especially by its branches; third, our assessment of MIND's income and expenditure; and, fourth, our policy on section 64 grants. With all these points in mind I decided that a grant of £275,000—a 10 per cent. cash increase over last year—was right.
    Mr. van Straubenzee: Is it a fact that during this consideration my right hon. Friend received a letter from the director of MIND apologising for the way in which he prosecuted his accusations against the staff of Broadmoor hospital? If that is so, if that written apology has been received, does not that totally vindicate those like myself who, in very sharp terms, criticised those who have sought to bring charges against the doctors and nurses when they were unable to defend themselves?
    Mr. Jenkin: I have both welcomed and accepted Mr. Smythe's apologies. As my hon. Friend knows, when I announced the 1980–81 grant for MIND I made two points—first, bodies that accept public money owe a high duty to act responsibly and not to fling about wild and unsubstantiated charges. Secondly, I said that it would be a sad day if the Government ever used the power of the purse to muzzle their critics. I hope that those sentiments are acceptable in all parts of the House.
    Mr. Whitehead: Does the Minister agree that wild and, as yet, unsubstantiated charges have been made under the protection of privilege against Mr. Tony Smythe which had nothing to do with the matter raised by the hon. Member for Wokingham (Mr. van Straubenzee). Does he accept that many hon. Members welcome the grant to MIND? Should not the other comments made by the hon. Member for Wokingham about Mr. Smythe be substantiated, made outside the House, or withdrawn?
    Mr. Jenkin: I am sure that my hon. Friend the Member for Wokingham (Mr.
    1294
    Van Straubenzee) is well capable of looking after himself.

    Social Security Advisory Committee
    Mr. Andrew F. Bennettasked the Secretary of State for Social Services when the members of the new Social Security Advisory Committee will be announced.
    The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker): My right hon. Friend will announce appointments to the committee well before it is due to start work at the end of November.
    Mr. Bennett: Because of the savage cuts being made in real terms in many benefits, is it not important that this vital committee be appointed as soon as possible so that it can have an effective voice in preventing people's benefits from being cut in that way?
    Mrs. Chalker: We are anxious to set up the committee as soon as it is reasonable to do so.
    Mr. Orme: Regulations have been submitted to the House in respect of the Social Security Act. Does the Minister recall that in Committee we asked that the new commission should consider the regulations? Is that still the Government's intention?
    Mrs. Chalker: As I explained in Committee, the commission will consider the regulations. However, to bring benefits into effect in November this year they will have to be considered by the House before the commission can consider them. We have agreed that it can consider them in retrospect.

    Death Grant
    Mr. Joan Evansasked the Secretary of State for Social Services when he expects to complete his consideration of all aspects of the death grant, referred to in his parliamentary answer to the hon. Member for Bolsover (Mr. Skinner), Official Report, 9 June, c. 64.
    Mr. Prentice: The problem is that we cannot look at the death grant in isolation but must consider it in the context of other priorites in the social security field and in the light of the overriding need to restrain public expenditure. However, we shall make a statement about

    1295
    our conclusions on the death grant as soon as we can.
    Mr. Evans: Is the Minister aware that the death grant would have to be increased to £140 to restore it to its 1949 value? Will the Government deal with the matter urgently in response to the strong representations that they have received from the Dignity in Death Alliance, which represents more than 47 organisations?
    Mr. Prentice: My figures show that it would cost more than £160 to restore the death grant, which illustrates the size of the problem. The House will be aware that since the death grant was inaugurated in 1949 it has been increased only twice, in 1958 and 1967. That shows the continuing problem faced by successive Governments in trying to deal with this difficult problem.
    Mr. Henderson: Is my right hon. Friend aware that many of our hon. Friends are concerned that the level of the death grant has not kept pace with reality and, feel that, if it is not to keep pace, rather than give it a lingering death, it might be better to do away with it?
    Mr. Prentice: We are considering all options. Our recent study "Families, Funerals and Finances" showed that about 90 per cent. of people did not have any financial problem when dealing with the expenses of a funeral but that the other 10 per cent. did face problems. It is difficult to define the categories of people and the difficulties that they face.

    Hospital Closures
    Mr. Adleyasked the Secretary of State for Social Services on how many occasions in the last year he has called in closures proposed by an area health authority and not objected to by the relevant community health council; and if he will list them, indicating his reasons for so doing.
    Dr. Vaughan: Once, in the case of the Overdene maternity hospital, Saltburn, when I was concerned at the strength of local feeling opposed to the closure. There have been a considerable number of other hospitals, whose future has been in question, where I have intervened to safeguard services in the interests of patients and the local community.
    Mr. Adley: Is my hon. Friend prepared to follow that solitary example with a problem in my constituency which is almost identical to the one that he has described? Is he aware that there is complete opposition to the proposed closure of the Barton maternity hospital so as to concentrate yet more resources on Southampton general hospital?
    Dr. Vaughan: I assure my hon. Friend that I am taking a close personal interest in the future of the Barton maternity home. Local concentrations are yet to be completed, but if at any point I feel that I should intervene, I shall do so.
    Mr. Christopher Price: Does the Minister recall the case of St. Olave's hospital in the Lambeth, Southwark and Lewisham area, the closure of which was objected to by the local community health council? Does he also recall that certain assurances were given by the Secretary of State to the House during the passage of the National Health Service (Invalid Direction) Act? When will the area health authority receive the money implicit in those assurances to re-open the hospital?
    Dr. Vaughan: I am not aware of any assurances given by my right hon. Friend. It was a temporary closure, and the consultations have extended over a considerable period. We are looking at the future of the hospital.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Adleyasked the Prime Minister if she will list her official engagements for 1 July.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be having further meetings with ministerial colleagues and others.
    Mr. Adley: Will my right hon. Friend look at the campaign started yesterday by the Evening Standard to highlight the importance to the economic well-being of London of the tourism industry? Will she discuss with her ministerial colleagues the importance of jobs in the service sector, which are in every way as important to employment as jobs in manufacturing industry?
    The Prime Minister: I gladly pay tribute to the importance of jobs in the service sector, and also to the importance of British tourism both to provide jobs and to provide income to the Exchequer. Last year foreign tourists spent about £2¾ billion in Britain, which was very much more than our tourists spent abroad, and long may that continue.
    Mr. Ednyfed Hudson Davies: Will the Prime Minister take note that although last year the tourist industry earned in excess of £3½ billion in foreign currency, that figure cannot be continued in the face of the world economic position and foreign competition unless there is a substantial increase in the £31 million allocated by the Government to the British Tourist Authority and the three national tourist boards?
    The Prime Minister: I would not necessarily say that success in the tourist industry depended upon the height of the Government grant to that industry. The industry has done extremely well, and I trust that it will continue to do so. The net benefit to the balance of payments last year through the tourist industry was about £700 million.
    Mr. McQuarrie: Will my right hon. Friend take time to congratulate her Minister of Agriculture, Fisheries and Food who obtained an increase from 9 per cent. to 14 per cent. in the import tariff on frozen fish and haddock? Is she aware that that has been warmly welcomed by the fishing industry?
    The Prime Minister: I shall gladly convey my hon. Friend's congratulations, and I shall add my own to them.
    Mr. Donald Stewart: Will the Prime Minister take time to study the speech made by Mr. Robin Duthie, the chairman of the Scottish Development Agency, in which he draws attention to the basically sound businesses that are collapsing in Scotland? He said that the social effects were intolerable. Will she accept the responsibility for governing the United Kingdom instead of the south-east corner of England?
    The Prime Minister: I am quite ready to accept the responsibility for being Prime Minister of the United Kingdom. As the hon. Gentleman is aware, it is our objective to create the conditions
    1298
    under which more small businesses can expand. If the hon. Gentleman would do me the compliment of reading my last speech in Scotland, he will discover a list of businesses which are expanding and increasing their exports.
    Mr. John Townendasked the Prime Minister if she will list her official engagements for 1 July.
    The Prime Minister: I refer my hon. Friend to the reply which I gave a few moments ago.
    Mr. Townend: Following the statement by Mr. David Lane supporting the establishment of a new civil rights organisation, and the subsequent statement by that body advising coloured people to cease co-operating with the police, will my right hon. Friend make it clear to Mr. Lane that his quango was set up to create racial harmony, not disharmony? Will she advise Mr. Lane to be careful about what he says in the future, otherwise she will have to reconsider whether the taxpayer is getting value for money for the £6 million a year which Mr. Lane's quango costs the country?
    The Prime Minister: It cannot be in the interests of any group to withhold co-operation from the police. I have noted the report to which my hon. Friend referred, that a number of extremists in a new group which it was proposed to set up advised that course of action. I join him in deploring it. The chairman of the Commission for Racial Equality has worked extremely hard to try to secure better co-operation between the ethnic community and the police. I am sure that he will continue to do so and that the vast majority of the coloured community will reject the advice to which my hon. Friend referred.
    Mr. David Steel: Will the Prime Minister not only read, but circulate to her Cabinet colleagues, the speech made by the chairman of the Scottish Development Agency yesterday, because he is someone whom the Government have just appointed to do a most important job? Will she take on board his point that, although individual companies can lay off people to save overheads, the country cannot?
    The Prime Minister: We try not to circulate too much paper to the Cabinet. It is generally a good principle not to do so. But in the end, be it the country or individual companies, we survive only by those companies producing goods which other people, whether here or abroad, will buy. None of us can escape that test.
    Mr. John Carlisle: Has my right hon. Friend had time today to read the reports of the massive losses by Vauxhall Motors because of a strike there in 1978? Is it not now time that the car unions of this country realised that by such action —encouraged by the Opposition—they are in effect bringing this country to the verge of bankruptcy?
    The Prime Minister: I read about those considerable losses with some concern. Of course, the car industry, not only in this country but in others as well, is in considerable difficulties. I agree with my hon. Friend that the strike at Ellesmere Port was a particularly damaging one to that company. Indeed, I well remember that when I was in the United States people actually referred to that strike as an example of things which were wrong with Britain.
    Mr. Dewar: Does the Prime Minister accept that it is dangerous to shrug off the speech which was made by Mr. Robin Duthie in Scotland yesterday? Does she accept that he is an extremely successful business man who has been appointed to a key economic post by the Government and that his speech amounts to a trenchant attack upon Conservative economic policy, which he described as complacent and positively dangerous to the economy of the West of Scotland? Will she accept that Mr. Duthie's views are evidence of the fact that there is now a consensus across party lines that the tight monetary policy which is being pursued borders on insanity?
    The Prime Minister: No. I am never prepared to pursue a policy which adds to the present amount of money which is being printed. To do so would be to provide next year's inflation at a very much higher rate than this year's. Of course, I shall not shrug off that speech. Similarly, I ask the hon. Gentleman not to shrug off the fact that prosperity comes from producing and selling goods at a
    1300
    price and of a kind which people are prepared to buy.
    Mr. Peter Bottomleyasked the Prime Minister if she will list her official engagements for 1 July.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some minutes ago.
    Mr. Bottomley: Is it not the case that what actually verges on insanity is the action of many employers and trade unions in this country, which agree to pay increases which the country and the firm cannot afford? Given that both the TUC and the Government have set their minds against a formal incomes policy, would not it be a good idea for the unions and the Government to consider what can be done by each to make sure that the general level of pay settlements in the coming year is at least half the general level of that in the past year?
    The Prime Minister: I agree with my hon. Friend that if the general level of pay claims exceeds by very much the increase in output, the result will be increases in prices as a result of which many people both here and abroad will choose to buy goods produced by other nations. One of the problems which we have faced for some time, and which the previous Government were concerned with as well, is that the increase in unit wage costs in this country has gone ahead of those in other countries. The result of that is to produce jobs overseas rather than here.
    Mr. Norman Atkinson: Does not the Prime Minister recognise that no evidence has been produced by any leading economist in this country to support the answer that she has just given? Is she not aware that of the 20 per cent. increase in prices over the last 12 months, economists have now decided that her Government are responsible for 11 per cent., that a further 4 per cent. came about as a result of increases in the cost of raw materials and that only 5 per cent. is directly due to wage increases? Therefore, will she reconsider the answer which she has just given?
    The Prime Minister: If the hon. Gentleman looks at increases in unit labour costs, he will find that between 1977 and now the increase in unit labour

    1301
    costs here has been 25 per cent., in the the United States 13 per cent., in Germany 6 per cent., and that it has remained unchanged in Japan.
    Mr. Rippon: On the subject of incomes policy, does my right hon. Friend agree with the view expressed by the chairman of the Conservative Party in another place, that Clegg is a disaster and the doctrine of comparability of very dubious validity? Will she, there-more, consider saying "Thank you" and "Goodbye" to Clegg and Boyle so that we can have a more realistic incomes policy in the public sector?
    The Prime Minister: I think that what Professor Clegg was asked to do was to compare things which were basically incomparable, and which would never admit of that analysis. In those circumstances, he did the very best job that he could. In fact, as my right hon. and learned Friend knows, he has tendered his resignation to take effect later this year. I do not think that the life of that commission will be indefinite.
    Mr. Woolmer: Will the Prime Minister take time today to study the letter from the president of the Leeds chamber of commerce and industry, in which he says that Leeds industries across the board—. textiles, clothing, engineering, printing and construction—are facing falling order books and working at 60 per cent. or 70 per cent. of capacity? Does she recognise that her policies are creating a divide in this nation between the industrial areas of the North and the commercial and prosperous areas of the South? When will she reverse her policies, and what will be her reply to the manufacturing industries of the North of England and Leeds in particular?
    The Prime Minister: Prosperous companies can be found both in the North and in the South. In no way is it a division between North and South. It is the way in which companies are run, the unity of purpose between management and labour and the simple test, which I constantly try to get across, of whether people here will buy goods which are produced here. In fact, net disposable income this year is greater than it was last year. The money is there, and consumer expenditure is up. I suggest that the hon. Gentleman should ask himself why so many of his consti-
    1302
    tuents prefer to buy foreign goods to buy those which his own people produce.
    Mr. Bill Walker: During her busy day, will the Prime Minister have an opportunity to look at the reports coming back from Russia on the comments which have been made about Chancellor Schmidt and what he said about the invasion of Afghanistan? Perhaps she would like to comment.
    The Prime Minister: I believe that Chancellor Schmidt put the whole case for the West very robustly and said to President Brezhnev in Moscow that he and the whole of the Western world insist that Russian troops be withdrawn from Afghanistan, that the continued occupation is totally unacceptable and that in the meantime he stood, and would stand, wholly by the decision of the NATO Alliance on the modernisation of theatre nuclear forces.

    HANDSWORTH
    Miss Wrightasked the Prime Minister if she will make an official visit to Handsworth.
    The Prime Minister: I have at present no plans to do so.
    Miss Wright: In that case, will the right hon. Lady ask her right hon. Friends the Secretaries of State for Trade and for Employment to brief her on the disastrous consequences to inner city areas such as Handsworth of the massive decline in industrial production during the past 12 months, and on the consequent heavy unemployment, particularly among young people? Will she also indicate when she intends to give some relief to the many small firms in the West Midlands which are being driven rapidly towards bankruptcy by high interest rates and an over-valued pound? If she does not intend to provide relief, what future does she envisage for the thousands of young people who will join the dole queue this month?
    The Prime Minister: My right hon. and learned Friend the Chancellor of the Exchequer gave a certain amount of relief to small firms in the Budget. We shall not keep interest rates high for one moment longer than we deem prudent in the interests of the control of money

    1303
    supply. With regard to unemployment and opportunities for the young, there are about 250,000 opportunities provided by the youth opportunities employment programme this year. With regard to the problems of inner cities, I am trying to get increased production. The hon. Lady will be well aware that one of the problems in this country is the extent of import penetration. People choose to buy foreign goods. They will choose to buy British goods when they are more competitive.
    Mr. James Callaghan: If the right hon. Lady wishes to restore confidence among small businesses in this country, is she not aware that the best thing she could do would be to dismiss the Secretary of State for Industry forthwith?
    The Prime Minister: No, Sir. There is no one of greater integrity in this House.

    QUESTIONS TO THE PRIME MINISTER
    Mr. Crouch: On a point of order, Mr. Speaker. It will not have escaped your eye that out of 49 questions to the Prime Minister this afternoon, 43 hon. Members wanted to know the Prime Minister's engagements today. Do you not agree, Mr. Speaker, that that is making a joke of the way in which we use the Prime Minister's time here? Would it not be possible for hon. Members to be required to use their ingenuity in order to ask the Prime Minister questions without this needless repetition? This afternoon other questions could have taken precedence over the repetition—namely, the questions on whether the Prime Minister was to visit Rawnsley, or the West Midlands, her attitude on the progress of the Queen's Speech, her attitude on cruelty to children, and when she next intended to meet the TUC. Should not those questions, where Members have exercised some ingenuity, take precedence over repetition?
    Mr. Speaker: I have a great deal of sympathy with what the hon. Gentleman says, because substantive questions used to be put to the Prime Minister. However, the matter is in the hands of the House. I must call the questions in the order in which they are tabled. However, with a little ingenuity we should be able to return to the Question Time to which the House was previously accustomed.
    Mr. Winnick: On a point of order, Mr. Speaker. My point of order relates not to matters that arose during Question Time but to the way in which questions are called. I am not concerned about how the questions are worded, but I am concerned that the number of questions that can be answered in 15 minutes are few. The chances of an hon. Member's question being called within the first three or four are remote. I hope that I shall not be misunderstood by raising the matter, but it would be useful if you, Mr. Speaker, could give some indication of the way in which you call hon. Members during Prime Minister's Question Time.
    Mr. Speaker: The House may like to know that I try to keep a register of the number of times that hon. Members have been called. This afternoon, two hon. Members who have never been called at Prime Minister's Question Time were called, and three hon. Members who had been called once before were called. The hon. Gentleman has been called five times.
    Mr. Farr: On a point of order, Mr. Speaker. Will you inform the House whether you have received a request from the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to make a statement or a personal retraction of the allegations that he made last week, which have since proved to be largely unfounded?
    Mr. Speaker: I have received no request.

FERRANTI LIMITED
The Secretary of State for Industry (Sir Keith Joseph): With permission, Mr. Speaker, I will make a statement about the disposal of the National Enterprise Board's shareholding in Ferranti. I undertook in our recent debate to study what was said and to report to the House.
The overwhelming view of the House was that if the NEB's shares were to be sold, they should be sold in such a way as to safeguard, at least temporarily, Ferranti's independence.
I had told the House that a placing of shares to achieve such a purpose would tend to be below market price, so that the taxpayer would probably get less than he would if bids for the company were considered. Moreover, to place the shares without conditions might not meet the purpose, since it might be possible for an over-bid at an attractive price to succeed. In that case the taxpayer would not have the benefit from the higher price, and the independence of the company, which would have been the purpose of the exercise, would not have been preserved.
I pointed out that conditions could be imposed, but that they would further lower the price. I explained that a placing of shares, with conditions, with a group of institutions, would not provide a guarantee of independence.
The board of the NEB told me that in all the circumstances, as a matter of commercial judgment, it considered that the right course was to place the shares with institutions. But it thought that to impose conditions on the disposal was not a normal commercial action, and accordingly it asked me to give it a direction. This I have done. Under powers in the Industry Act 1975 I directed the NEB yesterday to sell its shares on terms under which each purchaser agrees not to dispose of any interest in them for two years without the consent of the NEB. I have also directed the NEB to retain 4 per cent. of its holding for Ferranti's employees under an appropriate scheme. A copy of this direction has been laid before Parliament.
The NEB hopes to place the shares at £5·30 each. This compares with £5·97, the price immediately prior to the sus-
1306
pension of the shares yesterday morning—a discount of about 11 per cent.
The cost to the taxpayer of this arrangement, as distinct from selling the shares to the highest bidder, cannot be known. It must be recognised, however, that a successful bid might—I repeat, might—have been referred to the Monopolies and Mergers Commission, and some months would have passed before the outcome was known. Had the decision gone against the bidder, the taxpayers' interest would have suffered, and even a favourable decision would have deferred the sale receipts for some time. I believe, therefore, that the balance of advantage lies with a placing, subject to conditions, despite a small net loss to the taxpayer.
I believe that the whole House will wish the company well.
Mr. John Silkin: We are glad that the Secretary of State reported to the House, as we asked him to do during the recent debate on Ferranti.
It is just three weeks today since the Prime Minister told us that the NEB would sell Ferranti shares at what she called the best possible price. At least the fear that many of us had, I think overwhelmingly in this House, that Ferranti shares would be sold to one buyer, who would then engage in redundancies, closures and asset stripping—that worst of all solutions—has been avoided, but by the Secretary of State's own admission shares will be sold at a discount. What, then, of his beloved, long-suffering taxpayer? It is the taxpayer who will suffer the 11 per cent. discount of which the Secretary of State speaks.
In the light of that, would not the sensible course, from an industrial, technical and financial point of view, have been to leave them under the public control of the NEB?
Sir K. Joseph: But the taxpayer will be over £50 million better off than he would be if the NEB had kept it.
Mr. Silkin: The taxpayer will not, as the Secretary of State has said, get the full value of the shares, and the full value is the fruits of those shares.
Sir K. Joseph: That is because we tried to take into account the overwhelming wish expressed in the debate. Even then, I have to say that had the shares gone

1307
to a highest bidder it is conceivable that a reference to the Monopolies and Mergers Commission would have sharply narrowed the gap—the 11 per cent.
Mr. Churchill: Is my right hon. Friend aware that he is to be warmly congratulated on having followed the guidance given by this House in the recent debate on the disposal of the Ferranti shares, that his decision will be warmly welcomed by all employees of Ferranti, that the taxpayer, with an eightfold increase in his investment, will have done excessively well, and that the 4 per cent. disposal of shares to Ferranti employees is imaginative, and a very important factor in my right hon. Friend's statement?
Sir K. Joseph: I am grateful to my hon. Friend. I repeat that the wishes of the House were taken fully into account, particularly the strongly expressed wish by hon. Members representing Midlands and Scottish constituencies.
Mr. Alfred Morris: First, should not the holding of 4 per cent, for employees be much higher?
Secondly, the right hon. Gentleman said that it was the overwhelming view of the House that the independence of the company should be maintained temporarily. In my view, it is the expressed wish of most people that independence should be much more permanent. Will the right hon. Gentleman give a plain undertaking that if one competitor were to take over control after two years he would report the matter to the Monopolies and Mergers Commission immediately?
Sir K. Joseph: No, I can give no such assurance. The procedure for considering any bid is laid down by statute and, as the right hon. Gentleman well knows, it is not for individual Ministers to decide. The initiative lies with the Director General of Fair Trading, and his recommendation then comes to Ministers.
I think that the 4 per cent. of the NEB shareholding that is reserved for employees makes sense. It is 2 per cent. of the total shareholding. If fully taken up, it would call for £2 million from the employees. That is a substantial sum of money for them to find. If they want more, they can still buy on the market.
Mr. Nicholas Winterton: Will my right hon. Friend accept that his announcement this afternoon will be very warmly received? Will he also accept that the decision of the Government is an example of true Conservatism, which believes in private business, small business, and the wide distribution of share ownership? In his announcement this afternoon he has achieved all three.
Mr. Eastham: I recognise that the Secretary of State is hell-bent on selling the shares, contrary to any sensible practice in the industry, but will he explain to the House what measures he intends to introduce to protect the workers' interests in the industry? As there are 17,000 workers, will he now tell the House how he intends to introduce safeguards that will protect their future?
Sir K. Joseph: The idea of turning a company into a protected sanctuary is deeply hostile to the interests of the workers themselves and the people of this country. It is relatively unusual that we have been able to take steps for a limited number of years in this unique case.
Mr. Cyril Smith: Will the Minister accept the thanks and congratulations of Liberal Members for his statement this afternoon, for the fact that he listened to the debate that took place, and that he took notice of what was said in it? Will he particularly accept our thanks for the 4 per cent. shareholding for employees? May we take it that this is an indication that on occasions the Government are not afraid to intervene?
Mr. Emery: Will my right hon. Friend make plain that his action is for the benefit not only of the workers but of many sub-contractors of the company who were afraid that it would be run down if it were purchased by a particular organisation?
Secondly, will the Minister make clear to the Opposition that when they are talking about a discount on the share price they should understand that any placement by any company, Government, the NEB or any organisation is always at a discount from market rates, and that a discount of between 8 per cent. and 12 per cent. is quite usual.
Mr. van Straubenzee: Does my right hon. Friend understand how welcome his announcement is, and that it will be seen as a vote of confidence in the work force, who are quite determined that the company shall succeed?
Will my right hon. Friend accept that, in particular, we are grateful to him for the allocation of shares for those who work for and have placed their skills in the company?
Mr. Ron Brown: I followed the Secretary of State's statement with interest, particularly as many of my constituents work in Ferranti factories in my part of Scotland. What safeguards does the right hon. Gentleman have to prevent, perhaps, the GEC taking over the company? I ask that question as I have a confidential letter from Lord Weinstock saying that discussions are going on with the NEB to take over at least some of the NEB's shares. What safeguards are there?
Sir K. Joseph: There is a deep gulf between my concept of what is in the interests of the company and the country and that of the hon. Gentleman. I do not think that it is in the interests of either for companies to be permanently safeguarded from bids on the market. If the assets and skills of a company can be better used, it is in the interests of the people in the company as well as of the whole country that they should be better used.
Mr. Ancram: Is my right hon. Friend aware, contrary to the impression given by the hon. Member for Edinburgh, Leith (Mr. Brown), how much his statement will be welcomed in Edinburgh and across Scotland in general as confirmation of the Government's determination to promote successful expanding industry to build up prospects in Scotland? Does he agree that it is now for the financial institutions in Scotland to show their faith in this exciting company by putting their money where their mouths have been for so long?
Sir K. Joseph: Yes. Surely we should all rejoice that Ferranti is one of many successful companies on both sides of the border.
Mr. Ogden: Will the Secretary of State confirm that he told us nothing that was not available to hon. Members who read
1310
The Guardian or other newspapers beforehand? How does he justify a premium—[HON. MEMBERS: "Reading."] —facts ought to be right—of 67p for every institutional purchaser of one share? What has happened to the Conservative Party's theory of the wider share-owning democracy? No individual will be able to buy one of these shares, as happened with the BP shares. What has happened to the Conservative Party's policy of wider share-owning?
Sir K. Joseph: I undertook to report to the House. I do not think that the House would have been satisfied if I had used as an excuse the fact that some of the material was in one of the newspapers. Secondly, at least 31 per cent. of the shares is held neither by those who bought from the NEB nor by the Ferranti family. It is open to any individual to seek to buy those on the market.
Mr. Montgomery: Is my right hon. Friend aware that his statement will be warmly welcomed by many Ferranti employees? [HON. MEMBERS: "How do you know?"] Because it was the view put forward by constituents who came to see me about this very issue. The cynicism of the Opposition has been exposed, because my right hon. Friend has shown by his statement today that he listened carefully to the debate that we had on this issue a couple of weeks ago. Should more be done about selling shares to employees? Despite the blathering by the Opposition, is it not worth while that these shares should be sold to employees, because they could not be sold to employees as long as they were held by the National Enterprise Board?
Sir K. Joseph: That is true as to those shares, but it has always been true that employees could bid for shares on the market.
Mr. Gordon Wilson: Will the Secretary of State confirm that all he has done has been to provide a breathing space of two years? In view of the worry that has been expressed in Scotland about the independence of the company and the fact that he has already conceded a trust fund of 4 per cent., will he agree to transfer a proportion of the shares in trust for the Scottish people to

1311
the Scottish Development Agency, so that jobs in Scotland can be safeguarded?
Sir K. Joseph: The breathing space was precisely what I was asked for by people who came to see me from the management and work force and by many hon. Members.
Mr. Charles R. Morris: Is the Secretary of State aware that, irrespective of any views that I might hold on the subject, thousands of my constituents who are employed by Ferranti will accept today's statement as a signal victory in their campaign against the selling of the shares to the highest single bidder in one major controlled block? They will also see it as a vindication of their opposition to the Government's and the NEB's policy in this regard.
As for the 4 per cent. of shares allocated for the employees' interests, will the right hon. Gentleman indicate whether the intention is to give those shares full voting rights at the company's annual general meeting, and who is envisaged as exercising those voting rights?
Sir K. Joseph: I should certainly envisage that, but the details will be for working out between the institutions, the NEB, the company and representatives of the work force.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call four more hon. Members from either side and then to move on.
Mr. Beaumont-Dark: I welcome the sale in principle to as wide a number of shareholders as possible, but does not the Secretary of State think that it is a retrograde step now to create another kind of shareholder with restrictive rights? I thought that he was trying to get rid of non-voting and restricted voting shares as a principle. If the Monopolies and Mergers Commission can find that the marger is against the public interest, is that not enough of a defence for a fine company, which would have a prosperous record on its own and could justify being kept on its own?
Sir K. Joseph: I have much sympathy with what my hon. Friend said. That is why I hope that this situation will be unique.
Mr. Marks: Would not any sensible financial adviser have told the taxpayer that he had a perfectly good investment in Ferranti and that he should keep it there? Will the employees have the same discount rights as the institutions when the 4 per cent. is decided?
Sir K. Joseph: The taxpayer has a double interest in both recovering a prospect—not a double interest; I am misstating it. The taxpayers' interest is to see that the Government's borrowing is reduced. To the extent that this money comes back to the Government from the NEB, that will enable the Chancellor to reduce the borrowing.
Any discount to employee shareholders will be worked out between the Government, the NEB, the management and the representatives of the work force, not, as I wrongly said in my last answer, by a group including the institutions.
Mr. Bill Walker: The employees of Ferranti who live in my constituency, both in management and in the work force, are all grateful that the combined efforts of both the Scottish Office and hon. Members on both sides of the House have brought an answer that will benefit the company. Will my right hon. Friend confirm that we are looking to the company, its directors, managers and employees, to show that the faith that has been shown will be justified in the company's continued profitable expansion?
Mr. Cook: Does the right hon. Gentleman accept that if a sale must take place the conditions that he has attached to it are welcome? Does he recall that only a fortnight ago, in our debate, he made a compelling case that no number of conditions could protect the company against takeover in the longer run? Does he recognise that if, after two years, the company is taken over, he will be held responsible for interrupting a stable arrangement, which will mean that the company will lose a remarkable chance for expansion at a time when its rivals in the private sector are contracting?
Sir K. Joseph: I think that that misstates the history completely. In the debate I emphasised that no arrangements could guarantee the independence of the company, not only in the longer run but in the shorter run, because 31 per cent. of

1313
shares remain on the market, and those shares could give a purchaser a dominating interest in the company despite what has been done.
Mr. Hordern: Do not the institutions that will be getting the shares at a discount represent millions of policyholders? Is it not a matter of congratulation that my right hon. Friend has been able to find one company amongst those held by the National Enterprise Board that can be sold at a profit at all?
Sir K. Joseph: Yes, to the first part of my hon. Friend's question. I think that he overstated his good case a little on the second part of his question.
Mr. Ernie Ross: Does the Secretary of State accept that many Opposition Members will not seek to confuse Ferranti workers by encouraging them to buy shares in the company? If the Secretary of State were really concerned, the best interests of those shareholders would have been served by transferring the whole of the NEB shareholding to the employees.
Sir K. Joseph: I slightly agree with the first part of the hon. Gentleman's proposition. An employee gives careful thought before he invests his savings in the company in which he is employed. However, I cannot agree with the second part of the hon. Gentleman's question.
Mr. Eldon Griffiths: Has my right hon. Friend had any indication that the unions will encourage their members to take up this welcome opportunity to own a part of the company for which those members work? Were the sensible conditions the idea of my right hon. Friend, or of the NEB? Why were they not applied to the similar case of Fairey?
Sir K. Joseph: The idea of conditions came from far and wide. Indeed, it also came from my right hon. Friend the Secretary of State for Scotland. I do not know the degree to which unions will encourage their members to buy shares.
Mr. Spriggs: Is the right hon. Gentleman aware that the 4 per cent. of shares that have been offered to the employees of Ferranti is well below the figure that one would expect in a democratic society? Will the right hon. Gentleman reconsider the number of shares to be made available to workers in that firm? Will he
1314
also give those workers full voting rights at all board meetings?
Sir K. Joseph: The hon. Gentleman has failed to understand that it is open to the employees of Ferranti to buy shares on the market on any day.

NEW MEMBER
The following Member took and subscribed the Oath:
Robert McTaggart Esq., for Glasgow, Central.

MACHINE TOOL COMPANIES (SALE)
Mr. Park: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the sales of Alfred Herbert, Edgwick Machine Tool Works, and associated companies."
I have been prompted to make this application because an announcement appeared in a press release yesterday to the effect that notices had been given under the Employment Protection Act to all employees at Edgwick, with variations at the Lutterworth plant, Herbert Sigma, Herbert Numerical Controls and the Mackadown Lane plant. About 1,400 people out of a total of 12,000 employees will be adversely affected. The machine tool industry plays a key role in the industrial life of our country, and the use of up-to-date machines is the first step towards greater efficiency in manufacturing. In addition, general redundancies have been announced in Coventry. As a result, in the next few months Coventry's unemployment rate may rise to 50 per cent. above the national average.
The matter is urgent because under the Employment Protection Act there is a 90-day period during which sales of such companies must be completed. Unless the Government take prompt action there will be a greater reliance on foreign-built machines, as finance is available only during those 90 days. The sales have become necessary because the NEB decided not to advance the further

1315
funds that were needed to establish a business that is based on high technology turning machines. The Government said that funds would be available for such areas. If the Government have retreated from that undertaking, they should say so openly so that the issue can be debated.
I respectfully beg you, Mr. Speaker, to grant this application.
Mr. Speaker: The hon. Member for Coventry, North-East (Mr. Park) gave me notice this morning before 12 o'clock that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the sales of Alfred Herbert, Edgwick Machine Tool Works, and associated companies."
I listened with concern to the hon. Gentleman, who has brought a serious matter to our notice. No doubt it is an important issue, as the hon. Gentleman has indicated. As the House knows, I do not decide whether this matter shall be debated. I merely decide whether it shall have priority over the business set down for tonight or tomorrow night. The House has instructed me to give no reasons for my decision.
I have listened carefully to the hon. Gentleman, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

SOLICITORS (DISCIPLINE TRIBUNAL) (SCOTLAND) (No. 2)
Mr. Donald Dewar presented a Bill to enable more members to be appointed to the Scottish Solicitors Discipline Tribunal; to increase the amount of maximum fine it may impose and empower the Secretary of State to alter that increased amount: And the same was read the First time; and ordered to be read a Second time upon Friday 4 July and to be printed. [Bill 236].

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: By leave of the House, I propose to put together the Question on the five motions relating to statutory instruments.
Ordered,
That the draft Double Taxation Relief (Taxes on Income) (Canada) (No. 2) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Double Taxation Relief (Taxes on Income) (Cyprus) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Double Taxation Relief (Taxes on Income) (Japan) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Double Taxation Relief (Taxes on Income) (New Zealand) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Double Taxation Relief (Taxes on Income) (Sweden) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. MacGregor.]

CIVIL DEFENCE (INQUIRY)
4.7 pm
Mr. John Loveridge: I beg to move,
That leave be given to bring in a Bill to appoint a Committee of Inquiry to examine the improvements that might be made in protecting citizens of the United Kingdom both from accidents and from the threat of war, including chemical dangers and radiation, and in providing medical services; and for conected purposes.
The Proposed Bill pursues the purpose of my Naval Defence (Inquiry) Bill of 6 February 1978, and my Defence of the United Kingdom (Inquiry) Bill of 30 October 1979. It calls upon the Government to inquire how the British public can be brought to play a greater part in their own defence and security through voluntary action. We can get better value for money from voluntary services, yet we spend less than 2 per cent. of our defence budget on the reserves. Most of those reserves are committed to NATO in time of war or under threat of war. Our homes would be left an easy prey, open to invasion or attack. Civil defence volunteer groups should, therefore, be extended throughout the United Kingdom.
I welcome the fresh steps that the Government have taken to increase the reserves and Territorial Army. I also welcome their honesty in publishing the simple but four-year-old, leaflet entitled "Protect and Survive". More knowledge and sound publicity need not cause undue public alarm. Our people can be trusted to face the facts more calmly if they are free from anxious thoughts that are based on ignorance.
I welcome reports that private enterprise firms are preparing radiation-proof clothing and shelters, and also the initiative of those people organising campaigns for civil defence in Devonshire and elsewhere.
It is important that the Government should institute a major inquiry to ensure that the British public are more fully aware of measures that might enable them to survive attacks, whether the weapons used are nuclear, chemical, gas, germ or conventional. We have failed in recent years to trust our own people. Last month in Switzerland I saw a respectable citizen placing his automatic rifle in the boot of his car. Are we afraid that more
1318
volunteers here cannot be trusted in the same way? In Switzerland and Sweden the Government have gone a long way towards ensuring that householders have shelters. The Swiss have as much as two months' food and water at home, supported by three years of further food stocks, stacked away in tunnels.
We read of experiments that show that 100 times as much protection from radiation is reasonably practicable if simple measures are taken once outside two or three miles radius from a nuclear explosion. It is said that over 15 million people might survive an all-out nuclear attack on these islands. That is two or three times the population in Shakespeare's day. Are they not worthy of protection? In any case, it is more likely that any nuclear exchange would be on a restricted scale—perhaps one or two cities would be involved whilst negotiations went on.
Equally, some accident might carry nuclear waste over our country. That might occur from action at sea or even an accident in another country. We hear reports from the United States that deaths from anthrax in the Soviet Union have been shown to be from airborne spores, which could only have come from the manufacture of this dread disease. When a disaster threatens, whether from accident or direct design, any British Government have a duty to ensure that whatever protection possible within our capacity is given to our people, and that large numbers of them are trained to survive and to give first aid to their fellow citizens. Under Government control, they should also be trained in Home Guard duties in case our Regular and Territorial forces are employed overseas. The need for a major inquiry is clear.
The responsibilities given to the Minister of State, Home Office are a step forward. We await with interest his early review. Any major inquiry should examine whether the regulations under which, subject to political control, local government officers are asked to take charge are adequate in the event of major troubles. Few of these, except the oldest, have had any experience or training for war. Probably the best solution would be for an entirely new home defence service to be established and built up alongside other services. The problems

1319
are complex and need expert consideration and training. I have no doubt that experts and others from every walk of life and with wide experience would answer a call to serve.
There are those who believe that we should do nothing for fear of encouraging a "warlike attitude". But there is no turning our backs on the steps that have been taken in the Soviet Union, which enable that nation to wage war against civilian populations, on a small or large scale, should their Government choose to do so.
The Planned improvements in our deterrent strength through the new cruise missiles are welcome. But we need more than deterrents. They can have no real meaning if there is no realistic effort to protect our own people from the ghastly fruits of war. If we are to encourage the "doves" in Moscow, we must show our deterrent to be a real force, and we must also show that we are determined to protect our own people from any attack, which God forbid.
Equally, is it fair to ask our Service men to enter situations abroad where there could be threats of nuclear, gas or chemical weapons being used if they feel that the British Government have made no provision even to try to protect their wives and children at home?
The Possibility of accident alone is enough to require the building of a properly trained service in this country. I hope that the Government will give the Bill a fair wind and set up an inquiry. I hope that they will not be deterred from supporting the Bill merely because they have their own immediate departmental review about to report. This is a long-term question, which needs the development of long-term and expert judgment. It would be folly to give a false impression of our determination by the Government's not supporting my call for an inquiry.
This inquiry should include the best means of educating the public in measures for their safety, the formation of local civil and home defence units, the organisation of command structures for these units, help for those who have to move their families, the role of the medical services, plans to control the spread of disease due to chemical or
1320
radioactive fall-out, ensuring that water is free from contamination, and that strategic food and material stores are available. The inquiry should also examine the design and production of protective equipment and shelters. Building regulations should be eased in order to make this possible. There is also a need for protection of ports, transport and supply routes.
I urge the Government to institute an inquiry, not only because it is important, but because it is urgently needed.
4.17 pm
Mr. Frank Allaun: I wish to oppose this Ten-Minute Bill because, as I intend to show, civil defence against nuclear weapons is futile—it is a deceit and a cruel confidence trick. It is also wrong because it aims at mentally conditioning the population to accept war and to believe that preparations for war are inevitable.
There is no defence against nuclear war except to prevent its being waged. There is little hope of an East-West war being fought with conventional weapons. I cannot see either America or Russia sitting on a pile of nuclear weapons and not using them at the earliest opportunity. They would both act fast—before the other side, they would hope.
Most civil defence workers, such as the hon. Member for Upminster (Mr. Loveridge), are sensible and public spirited people, but they have not thought through their case. There are now 20-megaton bombs—the equivalent of 20 million tons of TNT. That is 1,000 times as powerful as the bomb that was dropped on Hiroshima. That bomb caused 200,000 deaths and there are still some people dying today as a result of it.
A Home Office publication, entitled "Nuclear Weapons", states that a 20-megaton bomb would cause reddening of the skin for everyone within a 25-mile radius of the explosion, blistering of the skin for everyone within 20 miles, and charring of the skin for everyone within 16 miles. In the latter case that virtually means death.
A dozen megaton bombs on Britain would finish off our country. If that occurs, I hope that I, my wife and children are

1321
right under the first bomb, because then we will die instantly. If we were 50 or 100 miles away, we would still die days later in agony because the atmosphere, soil, water, food and everything else would be contaminated with radioactivity.
It is true that some Ministers, local government heads and police chiefs would be five storeys below the surface, and might survive, to start with. However, they would have to emerge sooner or later from their regional seats of government—the RSGs. The world into which they emerged would be a radioactive desert. The fire storms would create winds of up to 150 mph. At Hiroshima, after its little, immature bomb, the fire storm lasted for six hours.
I wish to quote from the Government circular to local authorities:
"No part of the country could expect to avoid the effects of an attack."
Lord Belstead, who is in charge of civil defence for the Government, has estimated—
Mr. Nicholas Winterton: It is not Lord Belstead now.
Mr. Allaun: It was until a few days ago, and unless his estimate is repudiated by his successor, his words stand firm. Lord Belstead estimated that 15 million out of 55 million British people would survive. That is to say, 40 million would be wiped out. If civil defence precautions are taken, 30 million may survive, and that is pure guesswork. Lord Belstead does not say how many would die later, or how many minutes' warning of a raid people would have. He does not know the size of the bombs.
What kind of civil defence would be provided? Lord Belstead said that a national system of special shelters would
"cost billions and billions and billions of pounds".
Therefore, that solution can apparently be ruled out. I am told that since the Cabinet decided on cruise missiles last December there has been a tremendous interest in buying home shelters at a cost of £5,000 each. I can see Salford workers easily affording that sum from their wages! What about the remainder of the population—those who cannot afford £5,000?
I quote from the Home Office pamphlet "Protect and Survive", to which the hon. Member for Upminster
1322
referred. We are supposed to make a fall-out room to protect ourselves and our families against radioactivity. The pamphlet states:
"Use a table and cover it with heavy furniture, boxes of sand, earth, books or clothing, and stay there for at least 48 hours."
It contains drawings of the parents and children entering their self-made fall-out shelter. They are asked to have with them adhesive dressing and ointment, including Vaseline, toys and magazines. The pamphlet continues:
"Coat each window with light coloured emulsion paint."
The Pamphlet is pathetic. It goes on:
"You must be prepared to live in it for 14 days. Store extra water in the bath."
For a touch of realism, it acknowledges that there may be some deaths:
"Place the body in another room and cover it as securely as possible"
I repeat that civil defence is not only a waste of effort; it is part of the war plan. The hon. and learned Member for Cleveland and Whitby (Mr. Brittan) who is the Minister of State, Home Office, said in The Times that it was essential
"that civil preparedness should be adequate it the credibility of the military deterrent strategy was to be maintained."
He also said that military and civil preparedness was closely related. That is a point that I am making. I believe that the idea is that we can survive in a shelter and live to fight another day. As a speaker on a recent television programme said:
"We have to do it to show that we intend to fight."
Conservative Members must understand that there are millions of people who do not want to fight a war against anybody. Surely a more hopeful way of survival is to get rid of the cruise missiles, which make Britain such an obvious target. Switzerland and Sweden were referred to by the hon. Gentleman, but he omitted to mention that they are non-nuclear and neutral, and therefore less likely to be attacked.
Finally, I recommend hon. Members to read an excellent CND pamphlet entitled "Civil Defence" by Phil Bolsover.
For those reasons, I oppose the motion.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Com-

1323
mittees at commencement of public business):—
The House divided: Ayes 156, Noes 133.

Division No. 381]

AYES

4.26 p.m.

Alexander, Richard

Gower, Sir Raymond

Pawsey, James

Alton, David

Greenway, Harry

Penhaligon, David

Aspinwall, Jack

Gummer, John Selwyn

Peyton, Rt Hon John

Atkins, Robert (Preston North)

Hamilton, Michael (Salisbury)

Pollock, Alexander

Baker, Nicholas (North Dorset)

Harrison, Rt Hon Walter

Porter, George

Beaumont-Dark, Anthony

Haselhurst, Alan

Price, David (Eastleigh)

Bell, Sir Ronald

Hastings, Stephen

Rathbone, Tim

Benyon, W. (Buckingham)

Heddle, John

Rees-Davies, W. R.

Best, Keith

Henderson, Barry

Renton, Tim

Bevan, David Gilroy

Hicks, Robert

Rippon, Rt Hon Geoffrey

Blackburn, John

Higgins, Rt Hon Terence L

Rost, Peter

Body, Richard

Hill, James

Sandelson, Neville

Bottomley, Peter (Woolwich West)

Holland, Philip (Carlton)

Scott, Nicholas

Bowden, Andrew

Hordern, Peter

Shaw, Michael (Scarborough)

Bradley, Tom

Howells, Geraint

Shepherd, Colin (Hereford)

Braine, Sir Bernard

Hunt, John (Ravensbourne)

Silvester, Fred

Brinton, Tim

Johnson Smith, Geoffrey

Sims, Roger

Brocklebank-Fowler, Christopher

Johnston, Russell (Inverness)

Smith, Cyril (Rochdale)

Brotherton, Michael

Kimball, Marcus

Speller, Tony

Brown, Michael (Brigg & Sc'thorpe)

Lang, Ian

Spence, John

Buck, Antony

Latham, Michael

Squire, Robin

Budgen, Nick

Lawrence, Ivan

Steel, Rt Hon David

Butcher, John

Lennox-Boyd, Hon Mark

Steen, Anthony

Carlisle, John (Luton West)

Lloyd, Ian (Havant & Waterloo)

Stewart, Rt Hon Donald (W Isles)

Carlisle, Kenneth (Lincoln)

Loveridge, John

Stewart, John (East Renfrewshire)

Chapman, Sydney

Lyell, Nicholas

Stokes, John

Clark, Hon Alan (Plymouth, Sutton)

McCrindle, Robert

Tapsell, Peter

Clark, Sir William (Croydon South)

MacKay, John (Argyll)

Temple-Morris, Peter

Cockeram, Eric

Macmillan, Rt Hon M. (Farnham)

Thompson, Donald

Colvin, Michael

McNair-Wilson, Michael (Newbury)

Thorne, Neil (Ilford South)

Corrie, John

McQuarrie, Albert

Thornton, Malcolm

Costain, A. P.

Magee, Bryan

Townend, John (Bridlington)

Crouch, David

Major, John

Townsend, Cyril D. (Bexleyheath)

Dean, Paul (North Somerset)

Marlow, Tony

Trippier, David

Dover, Denshore

Mawby, Ray

Trotter, Neville

Durant, Tony

Mawhinney, Dr Brian

Viggers, Peter

Eden, Rt Hon Sir John

Meyer, Sir Anthony

Wainwright, Richard (Colne Valley)

Eggar, Timothy

Miller, Hal (Bromsgrove & Redditch)

Waldegrave, Hon William

Elliott, Sir William

Mills, Iain (Merlden)

Walker, Bill (Perth & E Perthshire)

Emery, Peter

Mills, Peter (West Devon)

Walker-Smith, Rt Hon Sir Derek

English, Michael

Moate, Roger

Wall, Patrick

Faith, Mrs Sheila

Montgomery, Fergus

Warren, Kenneth

Farr, John

Morgan, Geraint

Watson, John

Fell, Anthony

Morrison, Hon Charles (Devizes)

Wells, John (Maidstone)

Fenner, Mrs Peggy

Murphy, Christopher

Whitney, Raymond

Fisher, Sir Nigel

Myles, David

Wickenden, Keith

Fookes, Miss Janet

Needham, Richard

Williams, Delwyn (Montgomery)

Forman, Nigel

Nelson, Anthony

Wilson, Gordon (Dundee East)

Gardiner, George (Reigate)

Neubert, Michael

Winterton, Nicholas

Garel-Jones, Tristan

Page, Rt Hon Sir R. Graham

Glyn, Dr Alan

Page, Richard (SW Hertfordshire)

TELLERS FOR THE AYES

Goodhew, Victor

Patten, Christopher (Bath)

Mr. Ivor Stanbrook and, Mr. Robert Adley.

Goodlad, Alastair

Patten, John (Oxford)

Gow, Ian

NOES

Abse, Leo

Cowans, Harry

Fletcher, Ted (Darlington)

Adams, Allen

Crowther, J. S.

Foot, Rt Hon Michael

Allaun, Frank

Cryer, Bob

Foster, Derek

Archer, Rt Hon Peter

Cunliffe, Lawrence

Fraser, John (Lambeth, Norwood)

Ashley, Rt Hon Jack

Cunningham, Dr John (Whitehaven)

Freeson, Rt Hon Reginald

Ashton, Joe

Dalyell, Tam

Garrett, John (Norwich S)

Atkinson, Norman (H'gey, Tott'ham)

Davidson, Arthur

Graham, Ted

Bennett, Andrew (Stockport N)

Davies, Ifor (Gower)

Hamilton, James (Bothwell)

Bidwell, Sydney

Davis, Clinton (Hackney Central)

Haynes, Frank

Booth, Rt Hon Albert

Davis, Terry (B'rm'ham, Stechford)

Healey, Rt Hon Denis

Bray, Dr Jeremy

Deakins, Eric

Heffer, Eric S.

Brown, Hugh D. (Provan)

Dewar, Donald

Home Robertson, John

Brown, Ron (Edinburgh, Leith)

Dixon, Donald

Homewood, William

Buchan, Norman

Dobson, Frank

Hooley, Frank

Callaghan, Jim (Mlddleton & P)

Dormand, Jack

Hudson Davies, Gwilym Ednyfed

Campbell-Savours, Dale

Dubs, Alfred

Hughes, Mark (Durham)

Canavan, Dennis

Eastham, Ken

Hughes, Roy (Newport)

Carmichael, Neil

Ennals, Rt Hon David

John, Brynmor

Carter-Jones, Lewis

Evans, Ioan (Aberdare)

Johnson, James (Hull West)

Clark, Dr David (South Shields)

Evans, John (Newton)

Jones, Rt Hon Alec (Rhondda)

Cocks, Rt Hon Michael (Bristol S)

Field, Frank

Jones, Barry (East Flint)

Coleman, Donald

Flannery, Martin

Jones, Dan (Burnley)

Lambie, David

Morris, Rt Hon John (Aberavon)

Soley, Clive

Lamond, James

Morton, George

Sprlggs, Leslie

Lelghton, Ronald

Newens, Stanley

Stallard, A. W.

Lestor, Miss Joan (Eton & Slough)

Oakes, Rt Hon Gordon

Stoddart, David

Lewis, Arthur (Newham North West)

O'Neill, Martin

Stott, Roger

Lewis, Ron (Carlisle)

Orme, Rt Hon Stanley

Straw, Jack

Litherland, Robert

Park, George

Taylor, Mrs Ann (Bolton West)

Lofthouse, Geoffrey

Parry, Robert

Thomas, Dr Roger (Carmarthen)

Lyon, Alexander (York)

Pendry, Tom

Torney, Tom

McCartney, Hugh

Powell, Raymond (Ogmore)

Varley, Rt Hon Eric G.

McDonald, Or Oonagh

Prescott, John

Walker, Rt Hon Harold (Doncaster)

McKay, Allen (Penlstone)

Race, Reg

Weetch, Ken

McNamara, Kevin

Richardson, Jo

Welsh, Michael

McTaggart, Robert

Roberts, Ernest (Hackney North)

White, Frank R. (Bury & Radcliffe)

McWilllam, John

Roberts, Gwllym (Cannock)

Whitlock, William

Marshall, David (Gl'sgow.Sheltles'n)

Rooker, J. W.

Wilson, William (Coventry SE)

Marshall, Dr Edmund (Goole)

Ross, Ernest (Dundee West)

Winnlck, David

Marshall, Jim (Leicester South)

Rowlands, Ted

Wright, Sheila

Maxton, John

Sheerman, Barry

Young, David (Bolton East)

Maynard, Miss Joan

Short, Mrs Renée

Mikardo, Ian

Silkin, Rt Hon John (Deptford)

TELLERS FOR THE NOES:

Mitchell, Austin (Grimsby)

Silverman, Julius

Mr. Stan Thorne and

Morris, Rt Hon Alfred (Wythenshawe)

Skinner, Dennis

Mr. Allan Roberts.

Morris, Rt Hon Charles (Openshaw)

Smith, Rt Hon J. (North Lanarkshire)

Question accordingly agreed to.
Bill ordered to be brought in by Mr. John Loveridge, Mr. Julian Amery, Sir John Eden, Mr. Maurice Macmillan, Sir Derek Walker-Smith, Mr. Robert Adley, Mr. Peter Emery, Mr. Geoffrey Johnson Smith, Mr. Philip Holland, Mr. Richard Page, Mr. Ivor Stanbrook and Mr. Patrick Wall.

CIVIL DEFENCE (INQUIRY)
Mr. John Loveridge accordingly presented a Bill to appoint a Committee of Inquiry to examine the improvements that might be made in protecting citizens of the United Kingdom both from accidents and from the threat of war, including chemical dangers and radiation, and in providing medical services; and for connected purposes: And the same was read the First time; and ordered to be react a Second time on Friday 4 July and to be printed. [Bill 237.]
SUPPLY
[24TH ALLOTTED DAY]—considered.

INMOS INTERNATIONAL LIMITED
4.37 pm
Mr. John Silkin: I beg to move,
That this House, recognising the importance of creating a British capacity in the microelectronics industry, deplores the failure of the Secretary of State for Industry to come to a decision on the future of INMOS; and urges Her Majesty's Government forthwith to accept the advice of the National Enterprise Board given last December and to make available the second tranche of £25 million necessary for the creation of such capacity with its beneficial effects on British industry and employment prospects.
There is one point in common in our motion and the Government's amendment. Both recognise the importance of the microchip industry to industry in general. But there we part company, because the amendment is apparently unwilling to say that we should have a capacity of our own in the United Kingdom, whereas the Opposition motion urges that course.
There are those who say that we do not need a United Kingdom microchip industry. The grounds on which they say that are tolerably well known. They are that we can buy in from abroad and that the United Kingdom is too far behind the United States, in particular, and Japan to engage in an industry of its own.
I believe those to be tired old arguments, arguments, which ignore the reality of the situation. There can be no guarantee that United States or Japanese chips will always be available. Some years ago it was assumed that Middle East oil would always be available and cheap and that there would be no difficulty about it.
If we had not at that time undertaken exploration for North Sea oil, the position in which we find ourselves, and would have found ourselves in any event, would have been infinitely worse. The same situation could occur in relation to microchips if we do not rely on ourselves.
1328
The microchip industry starts with small companies, which are later taken over by much larger concerns. Those larger companies are, inevitably and rightly, liable to use the chips for their own concerns in their own production, ahead of anybody else. We have experienced shortages of one sort or another during the past few years. It can be said that American satellite companies have set up, or will set up, in the United Kingdom. The tragedy is that while companies may set up in this country they never bring their research and development with them. Research and development take place abroad. This country needs new technologists and research and development. The lack of research and development and technologists has meant a slowness in harnessing new technology to our products and processes.
Another factor that I should like to mention is, in the long run, perhaps the most important. There has been a great brain drain from the United Kingdom to the United States and to other countries. I am told that many vice-presidents of companies in the semi-conductor sector in the United States are of British origin. What we need—I do not know whether the words are appropriate—is a brain magnet to bring back the brains and to exploit those that already exist in our own country. We need profitable industries. Inmos would have been successful—and will be successful, if we continue with it—in generating that momentum. Precious little new industry has been created in this country during the past few years. We cannot afford to see any chance of creating new industries disappear.
There are those who say that Inmos is a high-risk concern. It is. It was an even higher risk two years ago, and it has begun to bear fruit. It has the great advantage of possessing one of the best design teams in the whole sector. That is not my view alone. It is that of those in the United States who are most competent to make such an assessment. It is argued that we are too far behind the United States. Ten years ago, the Japanese were totally reliant on the United States. However, they went ahead, and the Japanese chip industry now caters for about 90 per cent. of its domestic needs. It is also a heavy

1329
exporter. The chance arises for us to do the same.
If it is right that we should be developing our own microchip industry, we have to look at the possible effect of delay. Delay has already cost us very much. We lag behind the United States and Japan. We are dealing with a fast-moving technology. My right hon. Friend the Member for Huyton (Sir H. Wilson) once said that a week in politics was a long time. By the same token, a week in microelectronics is eternity.
This is so fast moving an industry that unless one takes advantage of it and moves as quickly as possible, one is in danger, as we have found, of being at the mercy of one's competitors and at the mercy of suppliers from abroad. Demand is expanding the whole time and expanding world-wide. The first Inmos products are working in the United States. There is a need to expand the quantity. That is one reason why Inmos should be encouraged without delay. Inmos estimates that delay, in turnover terms—annual turnover is worth £86 million—cost £300,000 a day. On that basis, while the Secretary of State has been making up his mind we have forfeited about £36 million worth of turnover. That amounts to a good deal more than the second tranche.
What is that delay? How does it arise? Is it due to indecision? William James, in "Principles of Psychology", wrote:
"There is no more miserable human being than one in whom nothing is habitual but indecision."
The right hon. Gentleman, as all who know him recognise, can be a jolly chap on occasions, such as at this moment. He is obviously not habitually given to indecision. My complaint about him, going back over all the years that I have known him, has not been so much his indecisions as his decisions. Any cracked-brain idea that has taken his fancy he has immediately decided upon. I recall the time when tower blocks were the residences in which the whole population was to be put. I remember the time when the right hon. Gentleman wanted to reorganise the National Health Service, and did, and would allow no one to make any amendments to the Bill that he brought before Parliament.
1330
There was also the splendid decision that he made—buried, I regret to say in the past—about socio-economic group V. He thought that socio-economic group V —another name for part of the working class—ought not to be allowed to have children. I wonder what happened to socio-economic group V. We have not heard of it for some time. More recently there has been the right hon. Gentleman's incursion into regional affairs. He said that the problems of the regions were due to immigrants. Most recently of all—last weekend—there was what may be termed the Joseph incomes policy. The right hon. Gentleman was one of the bitterest critics of the Labour Government's 5 per cent. norm incomes policy. He has now produced his own. His is a norm of a cut. It is the first incomes policy in British history, since the Conservative Government of 1931, to introduce cuts.
All these were decisive things. The right hon. Gentleman is the most decisive man one could possible meet, and, incidentally, the jolliest, while producing these various decisions. He was never so decisive—apart from on the last matter, which is still to come—as when he rejected every one of his previous decisions. That was a form of decisiveness.
It becomes very much a matter of contrast when we deal with the question of Inmos. One needs to consider the history of Inmos under the Secretary of State. A man must be allowed a fair crack of the whip and be given time to make up his mind and consider things. We start in September 1979, when the Government introduced a review of the National Enterprise Board. Hon. Members will no doubt recall the headline "Inmos decision in the balance". This must be one of the all-time record balances. It has gone on for a long time.
In December 1979, three months later, the National Enterprise Board, having reviewed Inmos reported to the Secretary of State and recommended continued support for it. Now, six months later, we find that last month the Secretary of State ordered the NEB to review its previous review.
The Secretary of State for Industry (Sir Keith Joseph): I interrupt only because that is an error. The review by the NEB

1331
was undertaken not at my request but on its own initiative.
Mr. Silkin: I accept that that may be the case, but is not the effect the same? It must, in the end, be the Secretary of State's decision, unless he says, here and now, that he is not prepared to make any decision at all. Is he prepared to make that statement? If not, the argument must hold.
The Secretary of State's attitude appears to be that the NEB should keep reviewing Inmos over and over again until it finally reaches the wrong conclusion. We are asked to commend this method in the Government amendment. The amendment asks the House to commend yet another review. The question that must be asked is "Why is the Secretary of State delaying?" I know that it is popular to assume that the Secretary of State, as many of the popular newspapers say, is a man of indecision. I have tried to point out that he is not. On the contrary, he normally makes his decisions very carefully, but very conclusively, and sometimes instantaneously.
Why is the Secretary of State delaying over Inmos? He faces the same dilemma as he faced over Ferranti. Ferranti was a success, despite all the right hon. Gentleman's words at the beginning when it was taken over by the Government, and despite the right hon. Gentleman's philosophy. He understands the importance to the country of microelectronics. Indeed, the Government amendment says so. Yet in his heart the right hon. Gentleman does not want Inmos to succeed because it is a disputation with his own philosophy.
Last week the hon. Member for Havant and Waterloo (Mr. Lloyd) asked a question that had some relevance to steel and much relevance to the microchip industry. I shall quote only that part of his question that relates to the microchip industry. The hon. Gentleman asked:
"Has my right hon. Friend or his Department made any estimate of what might have been created in terms of new employment, new exports and new prosperity had £5.000 million been invested in silicon?"—[Official
Report, 26 June 1980; Vol. 987, c. 762.]
One can get such an investment only with public finance. It cannot be obtained from private sources. The Secretary of State obviously objects to what I say. Will he give an illustration?
Sir K. Joseph: The chemical industry and the North Sea oil industry, to name but two.
Mr. Silkin: What about this industry?
Mr. Les Huckfield: One cannot fail to make money out of the North Sea.
Mr. Silkin: That is true, now that the country has invested in it.
The right hon. Gentleman's philosophy was expressed better even than by the right hon. Gentleman, who can be eloquent in expressing his philosophy, by the Under-Secretary of State for Energy, the hon. Member for Kingston-upon-Thames (Mr. Lamont), when he was a junior shadow spokesman on industry. He said that viable companies can obtain money from the markets and that those who cannot do not deserve to do so. The right hon. Gentleman nods his head. That is the basis of the Secretary of State's philosophy. It is also the basis of the accelerating decline in British industry under the present Government.
What is the Government's policy? The Secretary of State is like a small boy on a bicycle riding around saying "Look, no hands. Leave it to private investment." However, private investment prefers other avenues. It prefers avenues that are safe, remunerative in the short term and not job creating.
With the encouragement of the right hon. Gentleman and his Government, through the abolition of exchange control, money is going abroad and being invested abroad. The profits and rewards appear to investors to be better than they are by investment in their own country. Such money does not create a single job in Britain.
As I said during the debate on Ferranti, property companies listed in the Financial Times share index are valued on the Stock Exchange at about £3¼ billion. That figure is comparable with the whole of the mechanical engineering and metal sectors. In today's complex industrial societies, large-scale public intervention and investment are vital. It is impossible to exist without them.
The Secretary of State is fond of making international comparisons when it

1333
suits his book. He talks about productivity in other countries without taking any of the intermediate points of comparison. He never looks at his competitors when considering public investment. It is as well for us to do that.
I mentioned this subject at Question Time recently. I fear that the Secretary of State got his answer wrong, but perhaps he has had time to consider. En Japan, support for the microelectronics industry is about £500 million a year. En West Germany, £300 million has been given in grants for research and development in the computer industry. A further £200 million is available for the new generation of chip technology—very large-scale integration. In France, £70 million was set aside for microchip development over three years ago. That sum has grown, and all five French microchip projects receive State aid.
Even in Italy, which is experiencing economic difficulties, £80 million has been invested through State-owned semiconductor plant and £70 million in low-interest loans. In the United States, the apostle of free enterprise, which boasts about how little it relies on State intervention, the Government spent £10 billion on the electronics industry and over £2 billion on research and development in 1979.
It is possible to regenerate British industry. It is possible for British skills and innovation to bring prosperity back to the country. Three things are needed above all. First, there must be a return to full employment. Secondly, we need managed trade. Thirdly, there must be a transformation of attitudes within industry and a massive programme of public investment, including the maximum use of new technology. None of the three necessities for the advancement of British industry will occur under the present Government.
To the question implied in the motion "Can we afford further delay on Inmos?" must be added a larger question—"Can we afford a further day of the Secretary of State?" Our answer to both questions is "No", and I call upon my right hon. and hon. Friends to support me in the Lobby tonight.
Mr. Deputy Speaker (Mr. Bernard Weatherill): I must inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.
4.58 pm
The Secretary of State for Industry (Sir Keith Joseph): I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
'this House, recognising the importance of micro-electronics to United Kingdom industry, welcomes the review which the National Enterprise Board has decided to undertake of the projects for Inmos International Ltd. including the question of further finance.'.
I shall speak as briefly as possible to give maximum time to hon. Members on both sides of the House. My hon. Friend the Under-Secretary of State will seek to make a short reply of about seven minutes.
There is no argument between the two Front Benches about the importance of microelectronics or about the quality of the Inmos team. I am no expert, but I am told by experts that the Inmos team is highly respected. There is no argument about that. I have testimonials, including one from my hon. Friend the Member for Havant and Waterloo (Mr. Lloyd), as to the impressive quality of the operation at Colerado Springs where Inmos has invested the bulk of the money which has so far been given it by the British taxpayer through the National Enterprise Board.
I also acknowledge the sheer political nerve of the previous Administration. I intend a genuine tribute. I gather that the decision to invest in Inmos was taken against the advice of my predecessor. That was reported publicly at the time, so I use no private knowledge. The Labour Government, the dedicated opponents of multinational companies, gave their support to the creation of a new—
Mr. John Silkin: I hope that I shall be forgiven for intruding into Cabinet secrets, but what the right hon. Gentleman gathered about his predecessor was incorrect.
Sir K. Joseph: Then the newspapers at the time misled me.
I come to the second limb of my praise for my predecessor. The previous Labour Government backed the creation of what was intended from the start to be a multinational business. They had the political

1335
guts to approve a share distribution set up by the NEB and agreed with the Inmos entrepreneurs which could, and still can if the project is successful, result in the entrepeneurs and the managers associated with them becoming very wealthy indeed. I do not blame anyone for that. It was proper of the Labour Government to understand, and to harness, the motivation of enlightened self-interest subject to competition and the law. I have to say that that Administration did not, lamentably, tie up the location of the first Inmos plant in this country.
It was perfectly consistent with the philosophy of the previous Labour Government to approve the investment of taxpayers' money in the Inmos venture through the NEB. The House will be aware that we do not share that philosophy. We have asked the NEB that in any new venture it should, wherever possible, seek partnership with private enterprise. That is not because we have any disrespect for the board of the NEB. We believe that the decision-making of those whose money is at stake in the strict sense of company responsibility will add a healthy ingredient to the decision-making process which, by hypothesis, the NEB has to follow in the market and on the frontiers of technology.
Because of our change of philosophy —that is, our request to the NEB to seek private enterprise partnership in any new schemes or in the continuation of existing schemes—the NEB sought private enterprise money for the second tranche of the Inmos project. Over recent months there have been flickers of interest from private enterprise which have absorbed several weeks of the time of which the right hon. Member for Deptford (Mr. Silkin) complained, in analysis by the private interests concerned about whether they wanted to invest in the second phase of Inmos. However, I have to report to the House that private enterprise interest has not been carried through to fulfilment and the NEB, finding that the Inmos directorate wanted, properly, to update their corporate plan sought time, on its own initiative, to review the prospects for the project. That review which started in mid-June is now in full process. I hope that it will be completed in two or three weeks, though it is the responsibility of the NEB.
1336
I have to remind the House that the NEB is responsible for the judgment it makes. It must also be accepted—
Mr. Eric S. Heffer: Will the right hon. Gentleman give way?
Sir K. Joseph: May I finish this sentence? It must also be accepted that the Government have their responsibilities, too.
Mr. Helfer: Will the right hon. Gentleman explain why the private interest in Inmos has only flickered and, apparently, gone out? Is it because private enterprise has no confidence in the industrial policy of the Government? Is it because it has no confidence in the future of industry as a result of Government policies?
Sir K. Joseph: The hon. Member falls below his normal pungency of intervention. This is a risky project and the private enterprise firms concerned obviously considered whether it would be a sensible and prudent investment. So far they have decided that it is not. However, that is not the end of the story. There may be developments. Other private interests may make a decision the other way. The House should take careful account of the fact that those whose business it is to make successful judgments on market prospects have so far decided not to participate in an operation for which the entirety of the finance has been contributed by the taxpayer.
I have to report to the House that there may come a time when a partnership with a private interest may depend upon whether the entrepreneurs are willing to renegotiate the scale of their own equity interest in the company. I imgaine that it is in their interests to ensure that Inmos receives further finance for the second stage. But if they want that it may be necessary—I do not say that it is the only way—for them to renegotiate the scale of their own equity interest.
Mr. John Silkin: Does it not, then, come to this, that private enterprise in this country, at any event, is totally unwilling to invest in anything that requires high risk and waits until somebody else has made a success of it before it comes in because it is frightened?
Sir K. Joseph: The right hon. Gentleman gives me the opportunity to explain to him, if he does not realise it, that the philosophy and policy of the Labour Party over decades have been so hostile to the rewards of business success as to stunt the springs of risk-taking in this country. The brain drain to which he refers is, to a large extent, due precisely to that sustained hostility. The relative poverty of the people of this country, including our pensioners, is a direct product of Socialist misunderstanding of, and hostility to, the wealth-creating process.
Sir John Eden: Is there not another difficulty here, namely, that the sector in which Inmos is engaged requires world markets for its sales and that in order to proceed successfully it has to compete against American and Japanese companies which are already well established in world markets?
Sir K. Joseph: My right hon. Friend speaks accurately. But if this country had been more encouraging to risk-taking and profit-making, subject to competition and the law, there would be a far better climate and a far better source for risk capital than there is now.
Mr. Gwilym Roberts: Will the right hon. Gentleman give way?
Sir K. Joseph: No, I am sorry. I must not give way again.
The right hon. Member for Deptford teased me about the question of delay. It is true that there has been a six-month delay since the NEB recommended that the Government should provide the second £25 million. But I have to remind the Opposition that much of that delay has been due to the complete surprise caused to Government and Opposition by the Inmos decision to locate its first production project at Bristol.
It was necessary for the Government to consider this new project at a time when the natural instinct of any Government, when asked to contribute a large sum of money from the taxpayer, would be to see that the project went to an area crying out for new employment. My right hon. and hon. Friends do not take at all lightly any possibility of interfering with the preferences of management. We much prefer to leave management to
1338
make crucial decisions such as the location of the project.
Of course, we leave management, subject to the general law about IDCs and the rest, to make its own decisions. But when that same management is dependent upon public money the Government have to consider whether it would be right to allow the location of a first project in the highly attractive and suitable area of Bristol or to ask that it should go to some other suitable area where there are anxieties about employment.
Therefore, a certain number of weeks' delay was due to the discussion of the location and a certain number of weeks' delay was due to consideration by private enterprise firms.
I can best help the House if I canvass briefly the main arguments in favour of Inmos receiving further support, be it from private enterprise or the taxpayer, the main arguments against, and where we are now.
The main arguments in favour of providing a second slice of money for Inmos, whether from the private sector or from the taxpayer—and there is a big difference—is that Inmos, as the right hon. Member for Deptford emphasised, would provide a significant contribution if it developed here rather than in Colorado Springs to the design and production by a United Kingdom company we would hope in the United Kingdom of standard integrated memories and microprocessors. I must emphasise that Inmos would be providing a contribution to the production of standard chips. A number of British companies operating in the United Kingdom already produce special chips very effectively. The Inmos concentration, at this stage at any rate, is on standards.
The second main argument in favour is a byproduct of the first. It would increase the technology in this country and would as the right hon. Gentleman legitimately said, be an attraction to technical and relevant business brains to this country from all over the world. It is further argued that if we have our own design, research and production unit of standards—we already have it of specials—there will be easier geographical and physical access for our users of microtechnology to sustained dialogues with those operating at the frontier of the development of standard

1339
microtechnology. There is also the important question of jobs to which the right hon. Gentleman legitimately adds that it is a good to have in this country more research and development in standard integrated microtechnology.
Having given those arguments in favour of a successful development by Inmos in this country, I have to emphasise that this industry is very risky, that Inmos has chosen one of the riskiest parts of it upon which to enter, and that a further Inmos development operating in the United Kingdom may or may not be successful. It may or may not survive. It may or may not be competitive. We Cannot be sure.
Mr. Dan Jones: Will the right hon. Gentleman give way?
Sir K. Joseph: No, I am sorry, but I must be as brief as possible.
It is said to be an added advantage in favour of Inmos's developing here that its competitors all over the world, formidable though they are, are not having an altogether trouble-free experience in developing the 16 and 64K RAM memories upon which Inmos is concentrating.
I come now to the arguments against. One is that the United Kingdom is not dependent for the production of standard microtechnology products upon a future development here of Inmos. There are suppliers of standard integrated circuits in the United Kingdom. Admittedly they are owned by overseas companies, but there are several of them here and some of them are expanding. Other such companies are considering coming here. They provide some design and some research, but not the whole or the centre of the design and research that the parent companies sustain. Nevertheless, our users can have access to the front end of standard technology by, at worst, going to the centres of research abroad.
Mr. Dan Jones: On a point of order, Mr. Deputy Speaker. Can you not persuade the right hon. Gentleman to speak to the House and not exclusively to his hon. Friends? There are those of us who are vitally interested and we want to hear clearly what the Minister is recommending.
Sir K. Joseph: I stand rebuked, Mr. Deputy Speaker. I should not have turned my back on the Opposition for a moment.
The arguments against the indispensability of an Inmos United Kingdom operation are, first, that we have suppliers and, second, that our users can have access to the highest technology, even if there is not a totally British research and delevopment centre here.
It is an illusion to imagine that a second stage for Inmos would involve the British taxpayer, if it were supported by the taxpayer, in only another £25 million—if I may use "only" in respect of that large sum of money. The probable risk to the taxpayer of an Inmos development would be well over the £50 million originally projected because Inmos plans to spend money which it intends to borrow, and if it were to borrow money in addition to the £50 million which might be invested by the taxpayer, and if the project were to be totally unsuccessful and it could not sell its products on the world market, far more than £50 million of taxpayers' money might be written off.
Another argument against is that, while it would cost well over £50 million at risk to ensure an Inmos operation here, we can for very much less money provide the necessary contribution to ensure that more of the overseas parent companies invest in this country subsidiary factories and production centres with associated, though perhaps relatively modest, research and design activities.
Finally, in putting the argument against —I am trying to put the balance fairly—. I have to remind the House of the formidable competition that exists in this area, as my right hon. Friend the Member for Bournemouth, West (Sir J. Eden) has reminded us. However successful Inmos has been for far—and I am told that it is on schedule—there still remains for it inevitably a hard task ahead in production and marketing.
The House must therefore be aware that the arguments are not all one way. There are costs and risks. The existence of an Inmos production and research unit in this country cannot be seen as the only way by which British users will have access to the use of, to the design of, or to the research connected with standard integrated technology.

1341
In addition to the questions about whether it is prudent for the British taxpayer to invest further money, there is the subsidiary question of where any Inmos unit would go if it were to be provided with extra money in order to develop in this country. The previous Administration did not manage to commit the Inmos team to develop in an assisted area, but there are those who have strong views that if it is to develop here with public money it should be allowed to do so only in an assisted area.
Mr. Ian Jones: Will the right hon. Gentleman give way?
Sir K. Joseph: No. The hon. Gentleman is a very courteous man. He must understand that I am trying to be courteous to the House. I have given way to one Labour Member and to one of my right hon. Friends. I must defend the interests of Back Benchers.
It may be that the Opposition have chosen to debate this subject at a time when the NEB's review has kicked the decision about Inmos into touch. We cannot make a decision at this stage. I have explained that part of the delay was due to the location issue which the previous Labour Government did not tie up, and that part was due to a perfectly understandable examination by private enterprise of whether it would carry out an investment.
When the NEB is ready, it will come to its assessment of the prudence of a further investment in Inmos. It is required to continue to seek a private investment contribution. If the NEB were to decide to recommend further development of Inmos, and if it were to fail to find private enterprise money to carry out that development, it might approach the Government for further money from the taxpayer. The Government will then have to make a decision. We shall have to consider the risks. We shall have to recognise that Inmos, if it went ahead with the taxpayers' money, might be a great success, or it might not be a success. It might be profitable, or it might not be profitable.
In the light of the factors that I have explained, I hope that the House will recognise that a further development of Inmos in Britain, at the taxpayers' expense, is not so obviously indispensable that we should close our minds and say an automatic "Yes". Inmos is not a
1342
talisman, nor is it a shibboleth. If the decision falls to the Government, we have to make a prudent decision on behalf of the taxpayer.
Mr. Deputy Speaker: The debate is due to end at 7 o'clock. Twelve right hon. and hon. Members have indicated that they wish to take part in the debate. I appeal for short contributions.
5.22 pm
Mr. Alan Williams: It is remarkable that we are debating not the rightness or wrongness of a decision but the sheer absence of a decision. Having seen a bewildered Secretary of State at the Dispatch Box today, I can understand that absence of decision. He has had six months in which to make a decision on the applications for an industrial development certificate and the £25 million. In the three years that I dealt with industrial development certificates, I cannot remember a decision taking six months. My hon. Friend the Member for Liverpool, Walton (Mr. Hefter) might have similar recollections of his time in Government.
I find it astonishing that we have heard a repeat of the Secretary of State's soul searching on the issue of principle more than a year after the Government took office. When the Labour Party was in Government and the Secretary of State was in opposition, he was in no doubt at all but held clear views on the rightness and wrongness of Inmos—although I did not agree with his conclusions. It is important to remind ourselves of the backcloth to the delay. The Government purport to support an industrial philosophy that is geared to encouraging innovation, but we have seen little sign of that so far. We are dealing with a sector of industry that is experiencing the most rapid technological change that has been experienced by any sector of industry since the Industrial Revolution. The capacity of the chip doubles in the space of each year. The commercial implications are clear. If a company does not act quickly, its product is obsolescent, If it has a new product, it must be brought into production quickly. It is instructive to note that because of the stimulation of the electronic industry in Japan that country has 10 times as many electronic engineers as there are in Britain. That was pointed out by the

1343
Under-Secretary in his speech on 25 June. What is more, Japan probably keeps them, while ours emigrate to the United States. The other important factor to remember when considering the length of the delay is the massive Government support which, as my right hon. Friend the Member for Deptford (Mr. Silkin) said, is given directly in Japan and indirectly in the United States from the space and defence programmes.
The House will recollect that at the end of November last year we were presented with a new National Enteprise Board. I do not wish to rake over old wounds, but it will be remembered that the old board walked out after a dispute with the Secretary of State, and every member resigned. The right hon. Gentleman had a unique chance. He did not inherit a board from the terrible Socialists of the previous Administration but was able to establish his own new board at the end of June last year. The board consisted of people of the Secretary of State's choice, and he would be assumed to approve of their general pattern of thinking.
On 21 December the board took its first important decision to support the Inmos application. I received a letter from the deputy chairman of the NEB about the site for Inmos, in which he said that the board had notified the Government immediately:
"This was before any announcement was made by the company and was designed to comply with a request from Government to be informed in advance of any announcement."
That was the Government's first sign of any urgency about the issue. I am sorry to say that it was also their last. The judgment of the NEB was clear. In another letter on 18 January, after the board had taken its decision about Inmos, it said:
"It is in the interests of the UK as a whole that it should succeed and that it should succeed sufficiently for its production capacity to expand as planned."
The Department of Industry was in no doubt about the, NEB's views. In the debate on the Consolidated Fund on 12 March, the Under-Secretary said:
"I believe that the NEB has studied the prospects for the company most carefully and the application for the second £25 million funding is an indication of the NEB's confidence in its ultimate success."—[Official Report. 12 March 1980; Vol. 980, c. 1461.]
1344
The Secretary of State's men at the NEB were clearly of one mind about the project. The NEB was in no doubt, and the Secretary of State for Industry was in no doubt that the NEB was in no doubt.
There was another advantage. One would have thought that the Secretary of State was the right man to make quick decisions. After all, when in opposition he lectured time and again on the theme that Whitehall did not know best. Is it not strange that he should have taken British Leyland from the NEB but has dithered for so long on this issue? Time and again he said that it was not the job of Ministers to second guess business decisions. So we have a Secretary of State who does not want to second guess business decisions, who does not believe that Whitehall knows best, and whose men at the NEB are giving him a clear recommendation that the project should go ahead. Surely the way ahead is clear.
Mr. Dan Jones: In fairness to the argument, can it be said that the NEB was advised by experts in the microchip business?
Mr. Williams: I do not know the processes of consultation undertaken by the NEB. Sir Arthur Knight and his colleagues, faced with the most important investment decision since their appointment, would have considered the matter with great thoroughness. When I saw him in the new year, he indicated that the board was strongly in favour of the new project, but, far from the green light immediately being turned on for the project, the agonising began. I went to see the Secretary of State on 26 February. I took with me a deputation from various parts of the country, including my right hon. Friend the Member for Deptford. We found him deeply and genuinely concerned about the need for proximity of the production unit to the technology centre at Bristol. I asked him whether he had studied the report of PA Management Consultants Limited which, as we understood, recommended a site either in Cardiff or in Washington in the North-East, which seemed to dispose of the proximity argument. To my surprise, the right hon. Gentleman had not seen that report, yet that was the document that carried out the most detailed analysis of all the site options that were available.
Mr. Michael Colvin: One of the most refreshing things about this debate is that the one thing that we are not discussing is the siting of the Inmos production plant. Why is it that the right hon. Member is now raising this question? The Opposition do not mention the question of siting in their motion, which is a refreshing step forward.
Mr. Williams: The Secretary of State referred to the question of siting. Therefore, he obviously thinks that it is important in the timing of his final decision. I believe that it is legitimate to turn my attention to his comments.
As we now know—I invite Ministers to deny it—Ministers had great trouble is getting hold of a copy of that report. They had great difficulty in persuading the NEB and the company—possibly mainly the company—to part with it. Indeed, Ministers have never responded favourably to my frequent requests that a carefully doctored version—in order to avoid any confidential data—be placed in the Library for hon. Members to see. The PA Management Consultants report is almost a saga in itself. As my right hon. Friend the Member for Deptford is aware, when I visited the NEB not only could no one remember whether the PA report even recommended Bristol as a site but a copy could not be found even when the chairman requested one. When it was suggested that it should be made available to Members of Parliament, I was told that it would be misleading to do so.
Despite all the doubts about the possible site for this project, Ministers sought the most detailed study—the PA report—only after they had been put under pressure by the Opposition. Indeed, because the right hon. Gentleman was so concerned we sought to help him. The following day my right hon. Friends the Members for Chesterfield (Mr. Varley), who was Secretary of State when we were in government, and for Manchester, Ardwick (Mr. Kaufman), who was Minister of State, and myself sent a letter to The Times, in which we spelt out the commitment that we had received from the NEB—that the production units would be sited in the assisted areas if the technology centre went to Bristol. We were assured that there was no necessary link.
1346
As I am sure the right hon. Gentleman remembers, when we discussed this matter he took me to task and said "Ah, it was the NEB that said that there was no necessary link, not Inmos". However, I have with me a memorandum submitted to me by the chief executive of the South Glamorgan county council, in which he says that as late as July last year
"An Inmos Director told the South West and South Wales Computer Society that it did not matter at all whether the Inmos manufacturing modules were located in the Bristol area or not".
Therefore, as recently as a year ago Inmos was saying that the site was not critical.
Since then, I should have thought that the Bristol option had worsened, because, if we can believe press reports—the right hon. Gentleman discovered this afternoon just how wary one must be about press reports—the Minister of Agriculture, Fisheries and Food is now objecting to the Bristol site on the ground that it is prime agricultural land and that if the project goes ahead on that site it might well lead to further delays as it is called in for a planning inquiry.
The Secretary of State then had his first piece of political good luck, because GEC appeared in the field and we saw the start of a political flirtation. He hoped that an expedient marriage could be arranged with a suitable partner of established private enterprise stock. He wanted that very much because it would get him off the hook with his own Back Benchers, who remembered what he had said about Inmos when he was in Opposition. He knows very well that a group of his colleagues are waiting to pounce the moment that he gives the £25 million and shout "U-turn". When one looks at what the right hon. Gentleman said in opposition, and if he gives the project the go-ahead, one realises that that is what it will be, because he was so disdainful of Inmos in opposition.
Unfortunately, as the right hon. Gentleman rightly said, the GEC project eventually came to nothing. We have now reached 1 July, and we are in a worse position than we were before the NEB took its decision on 21 December. How does Inmos assess the impact of this state of affairs? Mr. Richard Hall, the finance director, has said:
"The deadline has to all intents and purposes gone … each week the project is delayed

1347
means lost future opportunities for Inmos and a worse return on its investment for the NEB."
That is the assessment of Inmos. There is certainly no enthusiasm on the part of Inmos for the delay that is taking place. Six months and one week after the original carefully considered decision the NEB team is now back in the United States looking at the whole question again.
The NEB will be hard pressed to make recommendations to the Government in time for a statement to be made before we go into the long Summer Recess. The team that is in the United States must come back and report to the board. The board must make a reassessment in the light of what has happened to inflation, the pound and domestic growth over the past six months. Even when the report is made, it must go to the Department of Industry, and the Department of Industry must go through the ministerial committee routine. Probably, because of the split issue of principle involved, it will then have to go to the Cabinet. Would it not be most unfortunate if we found ourselves going into recess before the Government were able to make an announcement? The only person who would be happy about that would be the Secretary of State himself. It would mean that he could make his statement when the 1922 Committee had gone on holiday.
It may well be that that is what the right hon. Gentleman is playing for. Before any hon. Member suggests that that is an outrageous suggestion, let us bear in mind that the right hon. Gentleman has just given £75 million to British Leyland and that he has not ever bothered or cared to tell his Back Benchers about that. Therefore, I am sure that if he could get away without having to face the 1922 Committee over Inmos, he would choose to do so.
The Secretary of State obviously realised that time was becoming a problem, because he said:
"Our review of these matters has been somewhat lengthy and very detailed."— [Official Report, 12 March 1980; Vol. 980, c. 1466.]
The right hon. Gentleman said that three and a half months ago. In fact, it has taken the Government six months not
1348
to make a decision. It has taken them six months to decide what questions they should ask. It is a repeat performance of the delays that we have seen with regard to changes in assisted area status for the steel redundancy areas. It is a repeat of the delay that we saw last week when the Secretary of State made his announcement on steel and did not know what he would do, despite the fact that it is a year since the first warnings were given by the Opposition that there was no way in which British Steel could live within the £450 million ceiling that he had set. The right hon. Gentleman has created a Department of dither, dawdle and delay.
Mr. John Butcher rose—
Mr. Williams: Mr. Deputy Speaker has just indicated to me that—
Mr. Tristan Gard-Jones: On a point of order, Mr. Deputy Speaker. I do not intend to take part in this debate, but I have come into the Chamber in the hope of hearing one or two speeches, apart from the one that we are now listening to.
Mr. Deputy Speaker: Order. In no sense is that a point of order, although it may be a matter for me.
Mr. Williams: That is the right hon. Gentleman's sole achievement. If ever we need a patron saint of procrastination, we need look no further than the Secretary of State for Industry. His guiding principle is not to put off until tomorrow what he can put off until next week, and not to put off until next week what he can put off until next month.
5.40 pm
Mr. Ian Lloyd: I declare an interest because of my service in private investment. Within the last 18 months I have had the unusual opportunity of visiting Silicon Valley three times —a privilege that I share with other hon. Members. I have also had the opportunity of visiting Colorado Springs—a privilege that it not shared with other hon. Members—and I am grateful to my right hon. Friend the Secretary of State for indicating that I made known directly to him the results of my visit to Colorado Springs. On another occasion, I made

1349
known my conclusions to the Prime Minister. What I say this afternoon will largely confirm what I said then.
First, however, I should like to refer briefly to one point that was made by the right hon. Member for Deptford (Mr. Silkin), and to one point that was made by my right hon. Friend the Secretary of State. The right hon. Member for Deptford said that he thought that it was unlikely that sums of about £5,000 million would be invested in the semi-conductor industry by private enterprise. The figures belie that claim. Between 1974 and 1978 a total of $3–2 billion was invested in the United States semi-conductor industry—76 per cent. of the world total—and a substantial proportion of that sum was from private enterprise.
Mr. John Silkin: I do not think that the hon. Gentleman heard me correctly. I said "in this country".
Mr. Lloyd: That is another matter, and I shall deal with that point later.
Mr. Gwilym Roberts: Does the hon. Gentleman agree that, although there is an enormous investment in the United States, it is not in standard chips? Investment in standard chips is fairly small.
Mr. Lloyd: I cannot accept that. The major investment in standard chips is in the United States and Japan, and a large proportion is made by the private sector.
My right hon. Friend the Secretary of State said that the United Kingdom would not be dependent on Inmos because the United Kingdom already supplied a large output of standard chips. My information is that that is not so. There has been a massive and increasing dependence throughout the rest of Europe on the import of standard integrated circuits from the United States and Japan. My figures for the United Kingdom show that over this period imports from the United States have increased by 87 per cent. I am not suggesting that our position is satisfactory. However, I confess that there is a certain dilemma, because although I share many, if not all, of the premises of my right hon. Friend, I cannot accept all his conclusions, whereas I share some of the conclusions of the right hon. Member for Deptford without sharing any of his premises.
1350
I should like to make it abundantly clear that I accept the overriding need for economy in public expenditure. I believe that much public expenditure is excessive and misdirected, that the excess lies at the heart of our inflationary crisis, that the Government are not good entrepreneurs, and that the United States semiconductor industry owes as much to dynamic private enterprise as to Federal research and development funding. Nevertheless, no policy, least of all the policy in this sphere, should be refined to the same levels of purity as semiconductor silicon. There must be and are exceptions to every rule. There is no more significant exception to the rule than investment that lies at the heart of recovery of British industrial performance and output.
Why Inmos? There are two levels of answer. Was the original decision right? I believe that it was. Were firm commitments made? I believe that they were. Are the Inmos executives and directors the right people? My right hon. Friend has expressed the opinion that they are.
The purpose of the original decision was to create within the United Kingdom the capacity to pursue large-scale integration, and to give the United Kingdom a significant position in standard integrated circuit technology. We know that the United States, Japan, West Germany and now France have it. The recent ACARD report pointed that out dramatically. We know that it is the world's most important industry. It has been described as the most complex production process ever adapted to mass production. No self-respecting, modern industrial country can claim to continue in that respect if it opts out of this area. The use of the most advanced production engineering and technology is now a condition of success. That is likely to make a significant contribution to the modernisation of British industry.
Mr. Dan Jones: If we fail with the microchip, are we not likely to be at a serious economic and industrial disadvantage as compared with the rest of the world for many years?
Mr. Lloyd: The answer to that is undoubtedly "Yes". But I do not think that we are yet on the verge of failure.

1351
Few industries are expanding more rapidly. The total sales of semi-conductors throughout the developed world in 1979 amounted to $9·6 billion. The forecast for 1984 is $32 billion, making it probably the largest single industry in the Western developed world. No industry plays a more vital role in transforming the information technology used by other industries. Few industries offer greater opportunities to the technical and scientific genius of the British people, which is why I support it.
Reference has been made to special integrated circuits, and Ferranti gave a presentation yesterday. They are limited purpose integrated circuits, which are important and necessary. But we can no more achieve the electronic transformation of British industry on special integrated circuits than we can feed the British people on caviar.
Our competitors have fully recognised the immense significance of the mass market for standard integrated circuits, and they are all striving for dominance because so much is at stake. An integrated circuit industry which cannot produce standard integrated circuits is equivalent to a Covent Garden opera without the leading tenors and sopranos. It would be a second rate opera, and it would have a limited repertoire. Japan saw that clearly in 1970, when I had the privilege of visiting that country and discussing the matter. France and Germany saw it soon after.
Mr. Michael Grylls: I am following my hon. Friend's technical knowledge carefully. If this is the hottest business prospect for years, why has nobody else seen fit to joint it?
Mr. Lloyd: I shall deal with that point in a moment.
The one act which I believed redeemed the previous, less than satisfactory, Administration was the act of the present leader of the Opposition when he was Prime Minister in 1977. He saw the necessity for this industry, and he acted conspicuously and importantly. I pay tribute to him for that alone.
I turn now to the arguments against the proposal. It is said that the applications are more important. The applications are more important and
1352
indispensable, but they are not a substitute for standard integrated circuit technology. The world once believed that British cloth was the best because Britain had the best wool and the best machines to produce the best cloth. But that argument is equivalent to saying "Wear the cloth, but let others produce the machines that make it". Those who build and improve the most advanced machines generally make the best product, and they make it first. That is as true of standard integrated circuits and all that flow from them.
Are we now to compete only in secondary areas of advanced technology? Who understands that better than Paul Schroeder and Dr. Petritz? They are both conspicuously successful in this area.
I now come to the argument that private industry would not invest. The decision of private industry not to invest has nothing to do with the Government's present philosophy or policy generally, but I believe that there is something approaching a sustained hostility, because Government dither in an area such as this is not encouraging to the private sector. Secondly, all the evidence points to massive State research and development support wherever else this technology is being developed.
It is asking a great deal of a private sector which has had the bashing it has in this country, as my right hon. Friend conceded, to say to it "Now come with your hundreds of millions of pounds "or whatever it may be—"and follow through in this area." Private sector confidence has been heavily eroded, and it continues to be eroded while borrowing rates remain—this may be a matter for justification by totally different criteria —at 20 per cent.
In criticising the private sector, it is rather as if we were saying to a group of people, immediately after a violent storm "Spread the table cloth and have a picnic", when we can see another dark set of clouds already on the horizon. Sensible and realistic people do not do that.
Why proceed now? First, to stop is probably a certain way of defeating the original purpose—the transfer of technology to the United Kingdom. It would, in my view, not be effective if we were to try to achieve this objective

1353
solely by merger. All the evidence is that mergers in this area do not succeed.
Secondly, the timing in integrated circuit production, as has been pointed out, is absolutely crucial. It will not tolerate the Isle of Grain syndrome. This is about the most sensitive area that there is, and if we waste time here we might as well take that £25 million and throw it down the nearest drain.
Thirdly, £25 million, large though such an absolute sum may be, is a small price to pay for a chance of succeeding in the worid's most important technology—and especially if we are willing to pay sums of the order of £5,000 million to maintain what some might describe as monuments of industrial archeology.
This is a decision of the same order or importance—I have chosen my words carefully—as Disraeli's decision to use public money to acquire the Suez Canal. If biotechnology is the left bank of that canal, integrated circuit semi-conductor technology is certainly the right bank, and they define together the channel through which national prosperity will flow. It is as important as that.
Can we ask whether firm commitments were made? I believe that the answer, from reading the record, is that they were absolute. I do not want to detain the House by going into them.
My right hon. Friend has answered my next question, which is whether these are the right people to undertake this work. I believe that the answer is "Yes".
Why do it in this way? The answer is that, as I said, there is no record of successful technology transfer via a merger, because the market for standards is international, and because the development rate is so rapid that commercial tariffs are absolutely meaningless. One either succeeds or survives in the United States and world market or one is not in business. Those are the alternatives.
The linkage between British scientific capability and United States technological and marketing expertise is, in my view, an inspired concept, and I mind not where that concept originated if it is right.
People have asked "What about Japan?" I accept that Japan is now considered to be a major threat to the United
1354
States semi-conductor industry, but I do not believe that it alters what I said about our choice between being in the first league or in the second league.
I conclude by drawing a brief set of conclusions. First, what are the implications of the debate for national policy? I believe that there are three. There is a lack of direction, cohesion and understanding throughout this field which has lasted, under successive Governments, for too long. We must now try to change that.
Secondly, major technological ventures involving long-term commitment of public as well as private money urgently require some mechanism of bipartisan appraisal, agreement and support—even if this should result, as it might well do, in two categories of projects. At least those who had bipartisan support would know that they could proceed in some safety and with some prospect of continuation.
Finally, I believe that as this House must accept final responsibility for a decision in this area—for example, whether the United Kingdom should equip itself to produce standard integrated circuits—this House should now consider when and how soon it car equip itself with an instrument such as the Office of Technology Assessment with which the United States Congress has decided to equip itself.
My right hon. Friend's amendment says that this House "welcomes the review", but that is where I part company with him. I do not welcome the review. This is too urgent a matter. The time is now—we must get on with it.
5.54 pm
Mr. Arthur Palmer: First, I congratulate the hon. Member for Havant and Waterloo (Mr. Lloyd) on his able and courageous speech. I work closely with him on the Select Committee for Energy, of which he is Chairman, I know the quality of thought that he puts into these and other matters.
The Secretary of State showed his usual talent today for finding a middle course between decision and indecision. It was a very fine performance in that direction, even for him. He brought out once again the new doctrine by which he lives.

1355
The doctrine is that if only the Government keep out the private investor will move in and take the strain, and presumably also take a chance on making a profit.
That may or may not still be true in the United States—it probably is, with its vast reserves industrially and financially —but I am afraid that it is no longer fully true in the United Kingdom. As the former chairman of the National Enterprise Board said, private enterprise in this country is often in these days reluctant to risk its money on leading-edge technologies—certainly if there is strong international competition. It is very easily scared; it does not wish to chance its money on what may turn out to have been a gamble.
The right hon. Gentleman, again rather typically, said that the fault was that of someone else—that of the Labour movement. That is a dangerous argument for him to use. If unaided private enterprise had been capable, over the years past, of doing all that is claimed for it today, it is doubtful whether the Socialist criticism of that system would have gained all the adherents that it has gained and still continues to gain. Why should there be so many Socialists if unfettered private enterprise has always been so splendid? That question might appeal to the intellectual claims of the Secretary of State.
The truth is that in the matter of microelectronics—and especially the kind of microelectronics in which Inmos specialises—unless the State intervenes it is unlikely that it will be done at all.
Assuming that Britain is to remain not just an industrial nation but one advancing with the times to higher technology, the question to be asked is whether we should as a nation have a first-class microchip industry? My answer is the one that the hon. Member for Havant and Waterloo has just given—"Yes".
The reason I shall give is one that has not been brought forward, I think, in the debate so far. It is that, apart from direct profitability, the effective presence in the country of a quality microchip industry will stimulate inventiveness in the user industries—create new applications and new ways of doing things by the natural exchange of people and
1356
of ideas. Simply to import components first hand or second hand is to handicap general industry in this country in directions apart from microelectronics. It is another branch of the argument that can be and is brought forward in favour of an independent British aerospace industry, computer industry and, I would say, nuclear power industry as well.
Many of us thought that the Inmos decision had been made in principle in 1978, subject to certain financial safeguards—that is, to proceed through the National Enterprise Board combining public capital with private ideas and brains from both sides of the Atlantic. It seemed, both industrially and internationally, an excellent partnership.
As we know, £25 million has already been invested, but the Government are dithering over the second payment. Some of it is due, perhaps, to a lingering respect for Government economy—not convincing with such a small sum—but much of it is non-interventionist dogma.
We then had the cry to Lord Weinstock for assistance. If Conservative Ministers are in any doubt about anything, they feel that they should ask Arnold Weinstock, because he might be able to help. They made an approach, but the former Sir Arnold Weinstock, now ennobled, and his GEC, said "No". Presumably Lord Weinstock looked at his shareholders' funds very carefully and. according to his definition of what pays and what does not pay, considered that this was not an area for his kind of private enterprise. Therefore, I assume that he was accepting the argument that the Opposition is putting forward tonight, for State intervention with as much private participation as can be obtained.
Many months have passed and no real decision has yet been made. We are again waiting for the NEB's report. The Secretary of State went to California. Some of us had made that pilgrimage before him and were well aware of what went on there. I wonder whether his journey, although enjoyable, was necessary. As my right hon. Friend the Member for Swansea, West (Mr. Williams) said, there has been procrastination which I think it is difficult to defend. The Secretary of State did his best.
Had, there been time, I might have been tempted to say something about

1357
the location of the productive facility, but I have already expressed my views on that subject. The headquarters of the Inmos project is already in Bristol. The local authorities there are more than anxious to help. The Bristol city council has been in touch with the Secretary of State asking him to make up his mind, because Bristol is waiting to get on with the development of the project.
But I do not propose to argue about the location. Inmos wishes to continue in the Bristol area, but it is not in the motion and we had a debate on that matter on 12 March. I shall content myself with saying that the Government must really make up their mind soon on Inmos generally. In my judgment, there is only one direction in which they can make up their mind, and that is to give the further money to the company. Bristol is ready and willing to do the rest.
6.4 pm
Mr. William Waldegrave: It is always a pleasure to speak after the hon. Member for Bristol, North-East (Mr. Palmer): He and I do something of a double act on this issue. We also encounter our usual opposition, the right hon. Member for Swansea, West (Mr. Williams).
I shall be brief, as others wish to speak. I thought that it was a pity that the right hon. Member for Deptford (Mr. Silkin) personalised his speech. These are serious issues, which to some extent transcend normal definitions of party politics. There are some occasions on which Conservative Governments invest in major new technology projects and others on which Labour Governments refuse such investments. We are concerned with this partticular investment and the arguments for it. The right hon. Member for Deptford is a shrewd man. I shall not follow him in personalising matters, but the question is whether people such as he would put their own money into this project.
We are concerned with two separate issues, which are closely linked. First, should we do it? Secondly, if so, what are the implications for the management of the project?
There are some poor arguments in favour of the project. The strict strategic argument is not particularly good.
1358
Inmos will not produce the nuclear blast-hardened chips that are necessary for defence systems. Those are already satisfactorily made in this country.
I should have declared an interest, in that the Inmos design unit is in my constituency and I work for GEC, which, amongst other things, manufactures special chips.
As I said, the strict strategic argument is not good. I do not think that the argument that we must secure for the systems suppliers access to standard chips is very powerful, either. The great thing about the manufacture of standard chips is, as Inmos would argue, that it must be done at high volume if it is to be done economically. From the nature of the animal, we are more likely to have a glut on the market than shortages, because of large investments trying to maximise their return by maximising output. So the access-to-supplies argument is not a particularly strong one.
The worst of all arguments that I have heard in the House today—the argument that makes me most nervous—is that based on national prestige and the "technological race". We have heard this argument before in this House, on aeroplanes, nuclear power and computers. We have, as a result, produced political aeroplanes and power stations, but they have not flown or worked very well. Whenever the taxpayer hears a politician talking about spending money on national prestige or the international race in some area, he should sew up his pockets.
On the other hand, there are arguments in favour of the project. They are the arguments of a prudent gambler, a gambler who rationally assesses the risks and the potential benefits. I accept the Secretary of State's argument that the next £25 million would not be the end of it, but the amount involved is still not very great. The House, year after year, poured money into Bristol and other constituencies for Concorde. This is the amount that Concorde at its height was costing in a few weeks. These are not gigantic sums in the inflated money of today.
The return could be very great. The return would not only be that we had one of the producers of standard chips in this country. In the next generation of the

1359
64K RAM there will be some new producers who do not now exist, or who exist only in embryo. There is no reason why we should not achieve one in this country. There is no reason why Inmos should not be one of the select few who will leapfrog into the next generation. It is likely from the history of this kind of technology that the next generation will be dominated by new companies. That has been so in the past.
If we achieve that aim in this country, there will be considerable benefits outside the immediate factory gates. It would have what I should describe as a constellation effect. The people trained in the new company would themselves start further new companies. The company would work as a flag carrier in this area of high technology, as it has done in the United States and Japan.
I have argued that it is not essential for the systems companies using electronic components, in which we are relatively strong, to have their own British-based standard chip maker, but it would be of use to them. It would strengthen those companies to have the close relations with the future design and techniques of production that would derive from having such a company in this country. I describe that as the constellation argument, and it is a strong one. It will contribute greatly to the necessary process of dragging this country back into the forefront of world technology. However, it is a gamble.
There is such a thing as rational gambling. If one wishes to minimise the odds against one, and to weigh the costs of losing against the gains from winning—a former Member of Parliament for a Manchester constituency, who is now in the other place—Lord Lever—was a great expert at that—it is important not to lengthen those odds. The House and its Ministers should have a self-denying ordinance. Perhaps it is wrong for one who is so new to the House to refer slightingly to previous industrial decisions that have arisen as a result of debates. However, they have been disasters more often than successes. Once a decision has been taken in principle, it is right to delegate responsibility to those who are more familiar with investment decisions.
If the Government wish to invest in industry, a creature such as the NEB is
1360
not so bad. However, if one has such a creature, one must let it take decisions. Sometimes those decisions will, politically, be mildly inconvenient. I admit that I have a constituency interest, but if one prevents the NEB and the management of Inmos from doing what they want about siting, the whole approach will be ruined. The odds against Inmos's success will be lengthened and the money is more likely to go straight down the drain.
The Secretary of State is accorded great respect because he tries to make decisions with compassion and care. However, the fact that an amateur gains somewhat more knowledge does not necessarily mean that his ultimate decision will be much easier or better. It makes it more difficult. Most hon. Members, with the exception, perhaps, of my hon. Friend the Member for Coventry, South-West (Mr. Butcher) and the hon. Member for Bristol, North-East (Mr. Palmer), will never become experts in these matters. The decision must be left to the experts. However, it is for the Secretary of State to take the gamble. He should not believe that it is possible to brief himself in such a way as to make himself an entrepreneur or a scientist.
The time has come to make a decision. Nothing much has been learned over the months. The decision is no easier and no more difficult now than it was six months ago. I beg my right hon. Friend to make a decision swiftly. Every day that passes lengthens the odds. With the greatest respect, with regard to this company the Government should get on or get out, now.
6.12 pm
Mr. Charles R. Morris: The decision facing the House is important and serious. If the House accepts that it is in the interests of our economic well-being to have a manufacturing capability in micro-technology, a decision will be required urgently.
My right hon. Friend the Member for Deptford (Mr. Silkin) was right to emphasise the urgency of the decision facing the Secretary of State. Equally, my right hon. Friend the Member for Swansea, West (Mr. Williams) was right to remind the House that we are taking not one but two decisions. He reminded us that the decision concerned the second tranche

1361
of £25 million to Inmos, and that another decision was required about the location of the manufacturing units. It appears that Inmos wishes to establish that unit in Bristol, alongside the technologists.
Throughout discussions in 1978 I followed the events surrounding Inmos. I contributed to a debate on this issue that took place during a discussion of the Consolidated Fund. I was a member of a deputation that went to see the Secretary of State for Industry about the location of the manufacturing units. Before the Secretary of State leaves the Chamber I should tell him that I was impressed by the solicitous way in which he received us and by the obvious consideration that he gave to our arguments.
I have accepted four main points on the general issue. The British Government were right to seek to establish a manufacturing capability in microprocessors and microtechnology. The Government were also right to commit £50 million in order to provide Britain with that capability. I reluctantly accepted the unusual financial base that was offered in order to attract the so-called elite of computer technologists to return to Britain from the United States. I recently listened to representatives of Inmos at the information group meeting upstairs. They declared that technologists had a financial stake in Inmos that would make them multi-millionaires if Inmos succeeded. Unfortunately, I must accept that it was right to provide that attraction if it encouraged that quality and calibre of technologist. I even accented the decision to locate the technology centre in Bristol. However, I cannot, for the life of me accept the justification for locating the manufacturing unit alongside the technology centre.
I have listened to arguments from Conservative Members. I have also heard my colleagues say that it is technically essential for the manufacturing units to be sited alongside the technology centre, already in situ in Bristol. The same people never explain why Inmos has its research centre in Colorado Springs—a continent away. Nobody questions that simple fact. If one considers the geographical distance between the research facility in Colorado Springs and the technology centre in Bristol, one must accept
1362
that the manufacturing units should be placed in an assisted area.
There are many assisted areas, and I do not seek to make a constituency point. However, the manufacturing unit should be sited in one of the assisted areas that has suffered a severe contraction in manufacturing jobs. I do not wish to see competition between the various regions. Each manufacturing unit represents 1,000 jobs. I do not want various regions to argue that unemployment is higher in one area than in another.
Mr. Tim Rathbone: I am not interested in the location of the units from a constituency standpoint. Does the right hon. Gentleman accept that such investment is least likely to relieve unemployment in assisted areas? This type of manufacturing activity is most likely to be automated and to use robots in an innovatory way.
Mr. Morris: The hon. Gentleman is entitled to his view. In the long term, computer technology will save a great deal of manpower. Each manufacturing unit represents 1,000 jobs. I am convinced that those units should be placed in assisted areas.
I wish to make a brief reference to the North-West, not only because I represent that area but because it has made a manor contribution to the history and development of computers in Britain and throughout the world. The House does not need to be reminded that the first digital storage base was invented at Manchester university. Manchester university, Salford university and UMIST provide more than 12,000 graduates every year with a capability in computer technology. The area is a centre of academic excellence in computer technology, yet it does not even get a look in.
I was impressed when my right hon. Friend the Member for Swansea, West talked about the PA Management Consultants' report. Not one hon. Member has seen the report. On the last occasion when this issue was debated Ministers acknowledged that they, too, had never seen the report. In trying to justify that, they told us that the report was commissioned by Inmos. It might have been commissioned by Inmos as a private company, but it has been paid for by public

1363
money. Therefore, the House is entitled to see the report, dealing with the location for the siting of the manufacturing units.
I believe that if time is needed to arrive at a decision on the second tranche of £25 million, no further time is needed to make a decision on the location of the Inmos manufacturing units. On that aspect, the time for decision is now.
6.21 pm
Mr. Barry Henderson: I have little doubt that the capability for development and mass production of chips by a successful, profitable, indigenous firm is certainly in the national interest, but that is a long way from saying that we should immediately give a quick nod and agree to another £25 million of our constituents' money going to Inmos.
I have been in the computer industry for most of my working life and I have followed the Inmos story closely. For the last few years I have been advising the users of computers on these matters. In that respect I declare an interest. I have great sympathy with my right hon. Friend the Secretary of State in the difficult problems facing him in this decision. I am glad that he avoided being pushed into an ideological corner by the speech of the right hon. Member for Deptford (Mr. Silkin), which seemed to be strong on ideology and short on a view of Inmos. I find it easier to ask questions about this decision than to have opinions on it. I hope that if I ask questions now it will help me to form an opinion either before the end of the debate or shortly thereafter.
The first question relates to the national interest. If the firm is successful, profitable and indigenous, obviously it is good for the national interest. But is it essential? My hon. Friend the Member for Bristol, West (Mr. Waldegrave) indicated that there are reasons for believing that it is not essential in the national interest. We are already able to develop and produce non-standard chips in this country. We also have facilities for the production of mass-produced chips, but not by indigenous firms. Therefore, it is fair to say that the project is not essential in the national interest, although it is highly desirable.
1364
I am an unashamed supporter of free enterprise in a fair competitive market but at home and abroad we do not have all these things ideally. We have suffered from Socialism and nationalism, and worse. We are not able to look at this project entirely in that ideal context. If it is not essential in the national interest, should constituents' money be put at risk?
In his opening speech my right hon. Friend touched on a crucial matter. Does not the original deal put off private investment from here on? I suspect that it might. From my understanding of the business projections of Inmos, for the sake of buying some 5p shares the three founder members stand to make £18 million between them. That was the deal which was put forward, supported by the Labour Government at the time.
By putting £50 million of taxpayers' money into the project, the taxpayer stands to gain £37 million on the basis of the same projection. If the taxpayers' share of £50 million in total expenditure for a return of £37 million is compared with the modest investment of capital, if not of skill, of the original three, giving them £18 million, this will not encourage other sources of private capital to come forward with great enthusiasm. There is a difficult balance here, and I wonder whether that is a cause of the difficulty in introducing private capital at this stage of the project.
If that is so, it may be that we have been forced by the nature of the deals put forward previously to recognise that we cannot readily and reasonably expect an injection of private capital. At that point I must ask another question. Whether or not we like the way in which the original deal was first made, are we not honourbound to a greater or lesser extent to carry this project through to its conclusion, at least within the terms of that original deal?
Labour Members seem to be trying to get a rise out of my right hon. Friend the Secretary of State, but it seems to me that we are not in the same position now as we were in 1978, or earlier. A different situation prevails. It was a clean sheet then; now it is a muddy pond. It is wrong of Opposition Members to try to make ideological points which will further confuse the issue.

1365
The next question on which I should like more information is whether the project will be indigenous. I still do not know the answer to that. The extent to which the control of Inmos will guarantee that it becomes and remains an indigenous British firm remains a mystery. What control will anyone have over the use of taxpayers' money once the additional £25 million is put in?
Mr. Ian Lloyd: Does my hon. Friend not agree that the concept of indigenosity—if there is such a word—is virtually obsolete? There is hardly a major semiconductor firm in the world that is not a multinational, operating multinationally, with cross-connections of every conceivable kind.
Mr. Henderson: There is a great deal in what my hon. Friend says. However, the point that he has just made slightly weakens the excellent and most interesting case that he put forward earlier.
If the project is to be successful and profitable, would there be any uncertainty after the next £25 million was put forward? This relates to the question why there has been no private venture capital coming from other sources. Is it the deal that has discouraged such capital, or is it the projections? Is it doubt about the progress so far?
In view of what my hon. Friend the Member for Havant and Waterloo (Mr. Lloyd) said, I am very impressed with reports about the progress of this company so far. I am impressed by the technical competence of the people running it. I am impressed by what I have heard in a superficial way about the progress made in developing and producing the products on which the company has set its course.
Concern has been expressed to the effect that we may be too late in the sweep of international competition in the mass-produced chip business. Its history so far has been not of steady evolution and development but rather of leapfrogging. Indeed, Inmos bases the strength of its case on the fact that it is about to leapfrog. That raises the question whether it will be ready and able to make a further leapfrog after that generation of chips has been developed. This is not the time to argue about the relevant 16K static and 64K dynamic RAMS, but they are in-
1366
tended to pre-empt a section of the market.
Even if private capital has been put off by the deal originally set but the expertise available to the Minister deems that the project is likely to be successful, it is cheap at the price. Further significant delay would be wrong, whatever decision was made. Two or three weeks' delay we can stand. However, the future profitability of Inmos depends on its bringing certain projects to the home market by a leapfrog effect. If we get the timing wrong, all the projections will be thrown out.
I do not doubt that there is a market, about which my hon. Friend the Member for Havant and Waterloo has told us quite a bit. There is a huge market. I hope that the Inmos venture will be successful, and that none of us will be blinded by political prejudice in reaching a decision. We should do so on the facts that confront us, whether we like them or not. We should make the sort of sensible and defensible decision that my right hon. Friend announced in connection with Ferranti this afternoon.
6.31 pm
Mr. Gwilym Roberts: I do not often call for a bipartisan approach. However, I echo the words of the hon. Member for Havant and Waterloo (Mr. Lloyd) in stressing that the growth of the microelectronics industry is so important that it needs, above all, the stability of a bi-partisan approach. We all agree on the need for growth in that industry and for Government support. In areas of high technology, short and medium-term profit margins may not be as high as in areas of lower technology. The danger is that developments will take place at a slightly lower level of technology if the matter is left to normal market forces. There is, therefore, an overwhelming argument for Government support.
I support the 1974 to 1979 application scheme and the 1980 to 1985 programme. If I have a criticism of the Government's approach, it is that they have reduced the sum available under the 1980 to 1985 scheme from £70 million to £55 million, when more money needs to be spent. However, Inmos is another matter. We are dealing with an area of high expertise. Almost without exception, we do not have the expertise to answer the

1367
necessary questions, and even the experts do not agree. The Secretary of State made an important point. The people and firms that have the expertise are not eager to move into standard chips. They would rather concentrate on the specialist, customer-oriented chips. Those of us who are not experts must have doubts, in view of the attitude adopted by commercial enterprise.
Inmos has a hard task ahead. America has about 60 per cent. of the microelectronics market. Britain's share is only 3 or 4 per cent., and the whole of the Western Europe has only about 20 per cent. In the United States and Japan, hundreds, if not thousands, of millions of pounds have been committed to support microelectronics development. The sum of £25 million is therefore a drop in the ocean.
By the time the production unit is producing, although there will have been a further enormous growth in the market, there will also have been an enormous increase in production generally. In Britain a dozen or more major companies might be battling for the market. The tariff position in the United States is about 10 per cent., but if the situation becomes more difficult the larger American market might prove a problem for Inmos.
I do not believe that the NEB or the Secretary of State should hesitate. The first £25 million has been committed. I shall not go into the arguments about location, although I believe that the initial £25 million should have been more closely tied up. Delays of weeks, or even days, will damage the chance of Inmos in this highly competitive market. We should not delay further. The debate is in a sense meaningless. The Secretary of State must allocate as quickly as possible this second £25 million.
I believe that the new allocation should be more closely tied, for example, to firm British jobs. We are talking about 3,000 jobs. We should ask Inmos to look at the exercise that is being undertaken. Is it going in the right direction? Perhaps it should look more at specialist chips, the defence market and customerorineted chips, and move away from standard chips. Would it be advisable
1368
for it to leapfrog beyond silicon and look at new developments?
Inmos should not regard the Government as having a bottomless purse. The Secretary of State said that more money would be required, and that may be so. We should not look at Government aid as a purse that can be dipped into indefinitely, but enormous amounts of Government money will have to be spent in microelectronics. If we are to spend vast amounts—I am talking in terms of perhaps £1,000 million or £2,000 million—it must be spent in the application of microelectronics. That should be the big area of expansion for Britain.
There is an enormous educational job to be done to allay the entrepreneurial fears prevailing throughout our industry. We shall need to allocate thousands of millions of pounds of Government money to the microelectronics industry if we are to have any chance of competing with our major industrial competitors.
6.40 pm
Mr. Michael Colvin: It is a pleasure to speak after the hon. Member for Cannock (Mr. Roberts). I agree with much of what he said, and particularly with his pragmatic approach to the subject, though I would be more cautious than he was about the amount that a future Government should spend on microelectronics projects.
I support the amendment, but I have considerable sympathy for the views expressed in the motion, as have my constituents and others in the Bristol area, for whom the Inmos project has been front-page news—sometimes good, sometimes bad, but more often indifferent, because there has been no real news—over the past three years.
I am delighted to see from the motion that the Opposition appear to be off the hook of assisted areas. I congratulate them, because they do not now seem to wish to prejudge the siting of the production units. The implication of the motion is that the Opposition are prepared to accept the company's decision on where the production units should be sited, once that decision has been endorsed by the NEB. That is a welcome step forward.
The last time that the House discussed the Inmos project was in the debate on

1369
the Consolidated Fund Bill on 12 March, when I raised the question of grant aid via the NEB. That debate centred on what the NEB had or had not promised about the siting of the production units. We also discussed at length the report prepared by PA Management Consultants Ltd., on alternative sites. Those are important matters, but they were debated in detail at that time and I see no point in going over the same ground again.
This debate is a little premature. I appreciate the frustration that has been caused by the delays that have occurred, but the amendment states that the new NEB has authorised a full review of the Inmos project. I understand that in the meantime the application for a second tranche of £25 million has been withdrawn.
I hope that the Government can tell us the time scale for the project. When may we expect the results of the review, and can the Government say when we are likely to have a decision? I understand the company's anxiety about the delays. Indecision is frustrating and costly.
No one has mentioned the cost of the delay to Inmos Limited. The company tells me that it is costing at least £20,000 a day in increased building costs and £300,000 a day in lost future sales. Everyone must be concerned about that, but the taxpayers should be particularly concerned, because if anything is done to put the project at risk the £25 million that has already been committed to it will also be at risk.
We are debating three matters. Does the United Kingdom want or need to be in the semi-conductor industry race? If there is not a decision on that question soon, we shall probably forfeit the opportunity even to start in the race. Secondly, is Inmos the right company to be in the race? Thirdly, if the answer to the first two questions is "Yes", what is the Government's role?
The first two questions have been adequately answered by previous speakers from both sides of the House. The answer to both is "Yes". We should be in the race, and Inmos is the company that should be raising the standard for the United Kingdom.
1370
I therefore turn to the most difficult question—the role of the Government. Why is it necessary for the Government to be involved at all? I accept what my hon. Friends have said on that subject. I raised the matter in the debate on 12 March, when I asked whether there had been a failure of private enterprise capitalism. I do not think that that is the reason. I suggested in that debate that it was deplorable that a situation had arisen in which the Government were under an obligation to put in money.
However, since then I have had an opportunity to look at some of the figures that are available—some are from not wholly reliable sources; one has to put a lot of faith in the technical press—of the sort of aid that other Governments give to their microprocessor industries.
The United States Government have given $500 million in direct support over the past five years. Indirectly, through their space agencies and massive defence programmes, they have contributed $1,000 million over the past 15 years. That is probably only the tip of the iceberg of Government help for the industry in the United States.
Japan, another serious competitor, has provided $300 million in direct aid over the past nine years and $1,000 million in indirect support in the past 10 years. Japan is considering even more programmes of State aid to its industry. France was mentioned by the right hon. Member for Deptford (Mr. Silkin). The French Government have given direct aid of $400 million to specific companies.
The Koreans certainly know a good thing when they see one. Their Government have agreed a six-year programme of $200 million of State aid to develop a semi-conductor industry. The Koreans will be buying American expertise, which will enable them to get off the ground fast.
The microprocessor industry is developing so fast that it is difficult to draw meaningful historic comparisons. The best thing that the Government can do is to look ahead to the opportunities that will be available to us if our microprocessor business gets off the ground and to appreciate that Inmos is the best company to back.
The siting of the production units is an important matter, and we should not

1371
overlook the importance of achieving what the company calls an integrated capability. Splitting the technical headquarters from the production units would put the whole project at risk, which would be undesirable. In the time available it is impossible to go into detail, but I endorse the bid of the hon. Member for Bristol, North-East (Mr. Palmer) for Bristol to be considered as the "Silicon Valley" of the United Kingdom.
6.50 pm
Mr. Giles Raelke: The Secretary of State said that there should be no automatic "Yes" for this project. That is a bit rich following six months of delay and a lengthy period of soul-searching, breast-beating and generally passing the buck. We must face the truth that the reason for the second NEB review is that the Government have failed to take a decision. That is the only reason.
The case for Inmos has been made strongly from the Conservative Benches. I shall not repeat it except to say that we need a British integrated circuit manufacturer. Otherwise, we shall be almost wholly dependent on foreign sources for mass-produced chips. That will be bad for native research and development, native skills and for manufacturing industry generally. If private industry will not do the job, the public sector must step in. That is the case for Inmos, made by the new chairman of the NEB, among others. A publicly owned industry has to be given proper resources. That is the case for the second tranche of £25 million. That case stands even if the company and the manufacturing process do not go to the development areas.
I want to argue briefly the case for the development areas. There is no doubt that the development areas face a major economic, industrial and, indeed, social crisis. Every day brings new redundancies in the North. Scotland and Wales. Every day unemployment is rising. Unless there are overriding technical reasons why the manufacture should not be based in a development area—I have not heard them and PA management consultants, I understand, made the case that it should specifically go to a development area—there must be a bias in favour of the development areas.
1372
As a northern Member, I hope that it goes to the North. The northern group of Labour Members has made the case to the NEB for Washington new town in my constituency. It is a new town of high quality—a former mining town that now has a varied manufacturing base. This shows the adaptability of the labour force. Its work force has been able to adapt from being miners to undertaking a whole range of new skills in industry. There is a high standard of housing—indeed, the highest standard of public housing in Europe. The new town has good schools and education standards and good leisure opportunities.
We must go ahead with Inmos. It should preferably go to a development area. It should go to the North, which has as strong a case as other regions, and to Washington in my constituency. Above all, we must make the decision now in favour of Inmos.
6.53 pm
The Under-Secretary of State for Industry (Mr. Michael Marshall): I am pleased to have the opportunity to reply, however briefly, to this debate. I appreciate the courtesy of the right hon. Member for Deptford (Mr. Silkin) in facilitating that process. We have had a fascinating debate.
I am, perhaps, one of the political romantics who regard the House as a place that plays a major part in the consideration of industrial matters. If proof was needed that this debate is worthwhile, may I say that some of the speeches have been valuable contributions that the Government will wish to take into account. I mention the tour d'horizon of my hon. Friend the Member for Havant and Waterloo (Mr. Lloyd), the "get on or get out" urging of my hon. Friend the Member for Bristol, West (Mr. Waldegrave), and the considerable expertise displayed by my hon. Friend the Member for Fife, East (Mr. Henderson), who asked questions that will certainly be pertinent to the review when it is completed. Finally, my hon. Friend the Member for Bristol, North-West (Mr. Colvin) sensibly suggested that this debate was, in a sense, premature.
Many of the speeches of Opposition Members have tended to concentrate on what, according to their argument, has been delay. It seems reasonable to accept

1373
and concede that under successive Governments delay must inevitably be locked into the process of investing risk capital when it is put forward by the taxpayer. If we consider for a moment the differing needs of Government and the pure entrepreneur, we realise that that is self-evident. I shall be dealing with some of the points raised by the right hon. Member for Swansea, West (Mr. Williams).
I should like to try to bring up to date one or two questions about which there may have been misconceptions. It will be helpful to clear them up. The first relates to the state of the market. There seems to be an assumption in some quarters that we are talking of Inmos as he only source of sandard chip manufacture in this country. It is important to put the matter in perspective. It is estimated, on the current figures, that by 1984 the Inmos production of standard chips, if it goes ahead as envisaged, will be at about £120 million a year compared with about £300 million a year of standard chip production in this country from other sources. The right hon. Member for Deptford very fairly made this point. It is interesting, however, looking down the list of those companies that have been in receipt of agreement by Governments for support in this area, to see the names Motorola in Scotland, ITT in Kent, National Semi-Conductors in Scotland and General Instruments in Scotland.
Mr. John Silkin: They are American firms.
Mr. Marshall: The right hon. Gentleman mutters "American firms." He must consider that, as we applaud the then Government for their decision to have an Anglo-American enterprise in Inmos, we cannot argue in a sour way about the process in reverse. These arguments run on all fours.
Mr. Silkin: I mention only the point about native British research and development. The American companies have their research and development in the United States.
Mr. Marshall: I take the right hon. Gentleman's point. It is, however, a matter of argument whether one says it is an advantage to pick up others' research and development provided that they put manufacturing facility into this
1374
country. The Government of whom the right hon. Gentleman was a member were rightly willing to give support for inward investment on that basis, so have the present Government.
I turn to the potential United Kingdom investment in the same product. Reference has been made to the GEC interest. One has to recognise that where interest of this kind is expressed it would be wrong of the Government not to facilitate the process by which that kind of examination might be undertaken.
These wider questions bring us to the matter of the site. The right hon. Member for Deptford and his colleagues were coy in raising this matter. The right hon. Gentleman himself has been skilful in sitting on the fence. He has not, so far as I am aware, expressed any view on site preference. His hon. Friends, however, have taken full opportunity today and on many previous occasions to express their view. The right hon. Member for Swansea, West, who chastises the Government for delay, should appreciate that much of the delay is of his own causing. If he wants to discuss seriously the question whether the Government should play a part in the looking at an alternative site to Bristol, it is not a matter that can be decided in five minutes. The right hon. Gentleman argues the case powerfully for South Wales. His right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) argues for Manchester. The hon. Member for Chester-le-Street (Mr. Radice) would like Inmos to go to the North-East. My hon. Friends also are inclined, naturally, to argue for their own constituencies. As my right hon. Friend made clear, if these are genuine differences, and if there is to be consideration of the question of the site, the Government have to take these views into account in making this kind of decision. All these factors must be weighed. That cannot be done in five minutes.
The question of the National Enterprise Board reappraisal is surely, above all else, the reason why this debate is, in a sense, premature. Given the state of the market and the substantial build-up of some of the companies to which I have referred, and given some of the interest expressed by other companies in a tie-up with Inmos, surely, when the National

1375
Enterprise Board comes to the view that this is the time for an overall look at Inmos, the House would want to go along with it. The idea that by making a fast decision we will get the matter right cannot seriously be argued.
The Opposition have tried to stick to the basic principles. They have tended to steer clear of some of the inconvenient matters of detail that need to be argued. The sum total of what has been urged upon the Government is part and parcel of the Opposition's general line when they say "Put the money in. It is a good cause". They do not really like getting down to the detail. It would be wrong, I feel, for the Government not to get down to the detail.
I should like to pick up one question which was put by my hon. Friend the Member for Fife, East. It is right to say that the role of the entrepreneurs and their commitment means that any potential partner would be involved in renegotiation situations. That is an added
complication. That is another reason why it would take time if further moves were made away from the original understanding.
It is not correct to say that the original agreement on the second £25 million was in some way binding. I pay tribute to the previous Government because they made the provision of the second £25 million conditional on a review of performance and progress. There is a sense of continuity. I argue strongly that if taxpayers' money is to be involved—and that is a basic question—there must be the most rigorous appraisal. That is a different kettle of fish from the normal activity of entrepreneurial ebb and flow. In such circumstances, a review is merited and right. I invite the House to reject the motion.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 251, Noes 312.

Division No. 382]

AYES

[7 pm

Abse, Leo

Cunliffe, Lawrence

Golding, John

Adams, Allen

Cunningham, George (Islington S)

Gourlay, Harry

Allaun, Frank

Cunningham, Dr John (Whitehaven)

Graham, Ted

Alton, David

Dalyell, Tam

Grant, George (Morpeth)

Anderson, Donald

Davidson, Arthur

Grant, John (Islington C)

Archer, Rt Hon Peter

Davies, Rt Hon Denzil (Llanelli)

Grimond, Rt Hon J.

Armstrong, Rt Hon Ernest

Davies, Ifor (Gower)

Hamilton, James (Bothwell)

Ashley, Rt Hon Jack

Davis, Clinton (Hackney Central)

Hamilton, W. W. (Central Fife)

Ashton, Joe

Deakins, Eric

Harrison, Rt Hon Walter

Atkinson, Norman (H'gey, Tott'ham)

Dean, Joseph (Leeds West)

Hart, Rt Hon Dame Judith

Bagier, Gordon A. T.

Dempsey, James

Hattersley, Rt Hon Roy

Barnett, Guy (Greenwich)

Dewar, Donald

Haynes, Frank

Barnett, Rt Hon Joel (Heywood)

Dixon, Donald

Healey, Rt Hon Denis

Benn, Rt Hon Anthony Wedgwood

Dobson, Frank

Heffer, Eric S.

Bennett, Andrew (Stockport N)

Dormand, Jack

Hogg, Norman (E Dunbartonshire)

Bidwell, Sydney

Douglas, Dick

Home Robertson, John

Booth, Rt Hon Albert

Douglas-Mann, Bruce

Homewood, William

Boothroyd, Miss Betty

Dubs, Alfred

Hooley, Frank

Bottomley, Rt Hon Arthur (M'brough)

Duffy, A. E. P.

Horam, John

Bradley, Tom

Dunn, James A. (Liverpool, Kirkdale)

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

Bray, Dr Jeremy

Dunnett, Jack

Howells, Geraint

Brown, Hugh D. (Provan)

Dunwoody, Mrs Gwyneth

Huckfleld, Les

Brown, Robert C. (Newcastle W)

Eadie, Alex

Hudson Davies, Gwilym Ednyfed

Brown, Ron (Edinburgh, Leith)

Eastham, Ken

Hughes, Mark (Durham)

Buchan, Norman

Ellis, Raymond (NE Derbyshire)

Hughes, Robert (Aberdeen North)

Callaghan, Rt Hon J. (Cardiff SE)

English, Michael

Hughes, Roy (Newport)

Callaghan, Jim (Middleton & P)

Evans, Ioan (Aberdare)

Janner, Hon Greville

Campbell, Ian

Evans, John (Newton)

Jay, Rt Hon Douglas

Campbell-Savours, Dale

Ewing, Harry

John, Brynmor

Canavan, Dennis

Faulds, Andrew

Johnson, James (Hull West)

Cant, R. B.

Field, Frank

Johnston, Russell (Inverness)

Carmichael, Neil

Fitch, Alan

Jones, Rt Hon Alec (Rhondda)

Carter-Jones, Lewis

Flannery, Martin

Jones, Barry (East Flint)

Cartwright, John

Fletcher, Ted (Darlington)

Jones, Dan (Burnley)

Clark, Dr David (South Shields)

Foot, Rt Hon Michael

Kaufman, Rt Hon Gerald

Cocks, Rt Hon Michael (Bristol S)

Ford, Ben

Kilroy-Silk, Robert

Cohen, Stanley

Forrester, John

Kinnock, Neil

Concannon, Rt Hon J. D.

Foster, Derek

Lambie, David

Conlan, Bernard

Fraser, John (Lambeth, Norwood)

Lamborn, Harry

Cook, Robin F.

Freeson, Rt Hon Reginald

Lamond, James

Cowans, Harry

Garrett, John (Norwich S)

Leadbitter, Ted

Craigen, J. M. (Glasgow, Maryhill)

George, Bruce

Leighton, Ronald

Crowther, J. S.

Gilbert, Rt Hon Dr John

Lestor, Miss Joan (Eton & Slough)

Cryer, Bob

Ginsburg, David

Lewis, Arthur (Newham North West)

Lewis, Ron (Carlisle)

O'Neill, Martin

Spearing, Nigel

Litherland, Robert

Orme, Rt Hon Stanley

Spriggs, Leslie

Lofthouse, Geoffrey

Owen, Rt Hon Dr David

Stallard, A. W.

Lyon, Alexander (York)

Palmer, Arthur

Steel, Rt Hon David

Lyons, Edward (Bradford West)

Park, George

Stoddart, David

Mabon, Rt Hon Dr J. Dickson

Parker, John

Stott, Roger

McCartney, Hugh

Parry, Robert

Strang, Gavin

McDonald, Dr Oonagh

Pendry, Tom

Straw, Jack

McElhone, Frank

Penhaligon, David

Summerskill, Hon Dr Shirley

McKay, Allen (Penistone)

Powell, Raymond (Ogmore)

Taylor, Mrs Ann (Bolton West)

McKelvey, William

Prescott, John

Thomas, Jeffrey (Abertillery)

MacKenzie, Rt Hon Gregor

Price, Christopher (Lewisham West)

Thomas, Mike (Newcastle East)

Maclennan, Robert

Race, Reg

Thomas, Dr Roger (Carmarthen)

McNally, Thomas

Radice, Giles

Thorne, Stan (Preston South)

McNamara, Kevin

Rees, Rt Hon Merlyn (Leeds South)

Tilley, John

McTaggart, Robert

Richardson, Jo

Torney, Tom

McWilliam, John

Roberts, Albert (Normanton)

Varley, Rt Hon Eric G.

Magee, Bryan

Roberts, Allan (Bootle)

Wainwright, Edwin (Dearne Valley)

Marks, Kenneth

Roberts, Ernest (Hackney North)

Wainwright, Richard (Colne Valley)

Marshall, David (Gl'sgow, Shettles'n)

Roberts, Gwilym (Cannock)

Walker, Rt Hon Harold (Doncaster)

Marshall, Dr Edmund (Goole)

Robertson, George

Watklns, David

Marshall, Jim (Leicester South)

Robinson, Geoffrey (Coventry NW)

Weetch, Ken

Martin, Michael (Gl'gow, Springb'rn)

Rodgers, Rt Hon William

Wellbeloved, James

Mason, Rt Hon Roy

Rooker, J. W.

Welsh, Michael

Maxton, John

Roper, John

White, Frank R. (Bury & Radcliffe)

Maynard, Miss Joan

Ross, Ernest (Dundee West)

White, James (Glasgow, Pollok)

Meacher, Michael

Rowlands, Ted

Whitehead, Phillip

Mellish. Rt Hon Robert

Ryman, John

Whitlock, William

Mikardo. Ian

Sandelson, Neville

Willey, Rt Hon Frederick

Millan, Rt Hon Bruce

Sever, John

Williams, Rt Hon Alan (Swansea W)

Mitchell, Austin (Grimsby)

Sheerman, Barry

Wilson, William (Coventry SE)

Mitchell, R. C. (Soton, Itchen)

Sheldon, Rt Hon Robert (A'ton-u-L)

Winnick, David

Morris, Rt Hon Alfred (Wythenshawe)

Shore, Rt Hon Peter (Step and Pop)

Woodall, Alec

Morris, Rt Hon Charles (Openshaw)

Short, Mrs Renée

Woolmer, Kenneth

Morris, Rt Hon John (Aberavon)

Silkin, Rt Hon John (Deptford)

Wrigglesworth, Ian

Morton, George

Silkin, Rt Hon S. C. (Dulwich)

Wright, Sheila

Moyle, Rt Hon Roland

Silverman, Julius

Young, David (Bolton East)

Newens, Stanley

Skinner, Dennis

Oakes, Rt Hon Gordon

Smith, Cyril (Rochdale)

TELLERS FOR THF AYES:

Ogden, Eric

Smith, Rt Hon J. (North Lanarkshire)

Mr. Terry Davis and Mr. Donald Coleman

O'Halloran, Michael

Soley, Clive

NOES

Adley, Robert

Buck, Antony

Eyre, Reginald

Aitken, Jonathan

Budgen, Nick

Fairbairn, Nicholas

Alexander, Richard

Bulmer, Esmond

Fairgrieve, Russell

Alison, Michael

Burden, F. A.

Faith, Mrs Sheila

Amery, Rt Hon Julian

Butcher, John

Farr, John

Ancram, Michael

Butler, Hon Adam

Fell, Anthony

Arnold, Tom

Cadbury, Jocelyn

Fenner, Mrs Peggy

Aspinwall, Jack

Carlisle, John (Luton West)

Finsberg, Geoffrey

Atkins, Rt Hon H. (Spelthorne)

Carlisle, Kenneth (Lincoln)

Fisher, Sir Nigel

Atkins, Robert (Preston North)

Carlisle, Rt Hon Mark (Runcorn)

Fletcher, Alexander (Edinburgh N)

Baker, Kenneth (St. Marylebone)

Chalker, Mrs Lynda

Fletcher-Cooke, Charles

Baker, Nicholas (North Dorset)

Channon, Paul

Fookes, Miss Janet

Beaumont-Dark, Anthony

Chapman, Sydney

Forman, Nigel

Bell, Sir Ronald

Churchill, W. S.

Fowler, Rt Hon Norman

Bendall, Vivian

Clark, Hon Alan (Plymouth, Sutton)

Fox, Marcus

Benyon, Thomas (Abingdon)

Clark, Sir William (Croydon South)

Fraser, Rt Hon H. (Stafford & St)

Benyon, W. (Buckingham)

Clarke, Kenneth (Rushcliffe)

Fraser, Peter (South Angus)

Best, Keith

Clegg, Sir Walter

Fry, Peter

Bevan, David Gilroy

Cockeram, Eric

Galbraith, Hon T. G. D.

Biffen, Rt Hon John

Colvin, Michael

Gardiner, George (Reigate)

Biggs-Davison, John

Cope, John

Gardner, Edward (South Fylde)

Blackburn, John

Cormack, Patrick

Garel-Jones, Tristan

Blaker, Peter

Corrie, John

Glyn, Dr Alan

Body, Richard

Costain, A. P.

Goodhew, Victor

Bonsor, Sir Nicholas

Cranborne, Viscount

Goodlad, Alastair

Boscawen, Hon Robert

Critchley, Julian

Gorst, John

Bottomley, Peter (Woolwich West)

Crouch, David

Gow, Ian

Bowden, Andrew

Dean, Paul (North Somerset)

Gower, Sir Raymond

Boyson, Dr Rhodes

Dickens, Geoffrey

Gray, Hamish

Braine, Sir Bernard

Dorrell, Stephen

Greenway, Harry

Bright, Graham

Douglas-Hamilton, Lord James

Griffiths, Peter (Portsmouth N)

Brinton, Tim

Dover, Denshore

Grist, Ian

Brittan, Leon

du Cann, Rt Hon Edward

Grylls, Michael

Brocklebank-Fowler, Christopher

Dunn, Robert (Dartford)

Gummer, John Selwyn

Brooke, Hon Peter

Durant, Tony

Hamilton, Hon Archie (Eps'm&Ew'll)

Brotherton, Michael

Dykes, Hugh

Hamilton, Michael (Salisbury)

Brown, Michael (Brigg & Sc'thorpe)

Eden, Rt Hon Sir John

Hampson, Dr Keith

Browne, John (Winchester)

Edwards, Rt Hon N. (Pembroke)

Hannam, John

Bruce-Gardyne, John

Eggar, Timothy

Haselhurst, Alan

Bryan, Sir Paul

Elliott, Sir William

Hastings, Stephen

Buchanan-Smith, Hon Alick

Emery, Peter

Havers, Ri Hon Sir Michael

1378

1379

Hawksley, Warren

Mayhew, Patrick

Shelton, William (Streatham)

Hayhoe, Barney

Mellor, David

Shepherd, Colin (Hereford)

Heath, Rt Hon Edward

Meyer, Sir Anthony

Shepherd, Richard(Aldridge-Br'hills)

Heddle, John

Miller, Hal (Bromsgrove & Redditch)

Shersby, Michael

Henderson, Barry

Mills, Iain (Meriden)

Silvester, Fred

Heseltine, Rt Hon Michael

Mills, Peter (West Devon)

Sims, Roger

Hicks, Robert

Mitchell, David (Basingstoke)

Skeet, T. H. H.

Higgins, Rt Hon Terence L.

Moate, Roger

Speed, Keith

Hill, James

Molyneaux, James

Speller, Tony

Hogg, Hon Douglas (Grantham)

Monro, Hector

Spence, John

Holland, Philip (Carlton)

Montgomery, Fergus

Spicer, Jim (West Dorset)

Hooson, Tom

Moore, John

Spicer, Michael (S Worcestershire)

Hordern, Peter

Morgan, Geraint

Sproat, Iain

Howe, Rt Hon Sir Geoffrey

Morrison, Hon Charles (Devizes)

Squire, Robin

Howell, Rt Hon David (Guildford)

Morrison, Hon Peter (City of Chester)

Stanbrook, Ivor

Howell, Ralph (North Norfolk)

Mudd, David

Stanley, John

Hunt, David (Wirral)

Murphy, Christopher

Steen, Anthony

Hunt, John (Ravensbourne)

Myles, David

Stevens, Martin

Hurd, Hon Douglas

Neale, Gerrard

Stewart, Ian (Hitchin)

Irving, Charles (Cheltenham)

Needham, Richard

Stewart, John (East Renfrewshire)

Jenkin, Rt Hon Patrick

Nelson, Anthony

Stokes, John

Johnson Smith, Geoffrey

Neubert, Michael

Stradling Thomas, J.

Jopling, Rt Hon Michael

Newton, Tony

Tapsell, Peter

Joseph, Rt Hon Sir Keith

Normanton, Tom

Taylor, Robert (Croydon NW)

Kaberry, Sir Donald

Nott, Rt Hon John

Taylor, Teddy (Southend East)

Kellett-Bowman, Mrs Elaine

Onslow, Cranley

Tebbit, Norman

Kimball, Marcus

Oppenheim, Rt Hon Mrs Sally

Temple-Morris, Peter

King, Rt Hon Tom

Page, Rt Hon Sir R. Graham

Thatcher, Rt Hon Mrs Margaret

Kitson, Sir Timothy

Page, Richard (SW Hertfordshire)

Thomas, Rt Hon Peter (Hendon S)

Knox, David

Parkinson, Cecil

Thompson, Donald

Lamont, Norman

Parris, Matthew

Thorne, Neil (Ilford South)

Lang, Ian

Patten, Christopher (Bath)

Thornton, Malcolm

Langford-Holt, Sir John

Patten, John (Oxford)

Townend, John (Bridlington)

Latham, Michael

Pattie, Geoffrey

Townsend, Cyril D. (Bexleyheath)

Lawrence, Ivan

Pawsey, James

Trippier, David

Lawson, Nigel

Percival, Sir Ian

Trotter, Neville

Lee, John

Peyton, Rt Hon John

van Straubenzee, W. R.

Lennox-Boyd, Hon Mark

Pink, R. Bonner

Vaughan, Dr Gerard

Lester, Jim (Beeston)

Pollock, Alexander

Viggers, Peter

Lewis, Kenneth (Rutland)

Porter, George

Waddington, David

Lloyd, Peter (Fareham)

Powell, ft Hon J. Enoch (S Down)

Wakeham, John

Loveridge, John

Prentice, Rt Hon Reg

Waldegrave, Hon William

Luce, Richard

Price, David (Eastleigh)

Walker, Rt Hon Peter (Worcester)

Lyell, Nicholas

Prior Rt Hon James

Walker, Bill (Perth & E Perthshire)

McCrindle, Robert

Proctor, K. Harvey

Walker-Smith, Rt Hon Sir Derek

Macfarlane, Neil

Pym, Rt Hon Francis

Wall, Patrick

MacGregor, John

Raison, Timothy

Waller, Gary

MacKay, John (Argyll)

Rathbone, Tim

Walters, Dennis

Macmillan, Rt Hon M. (Farnham)

Rees, Peter (Dover and Deal)

Ward, John

McNair-Wilson, Michael (Newbury)

Rees-Davles, W. R.

Warren, Kenneth

McNair-Wilson. Patrick (New Forest)

Renton, Tim

Watson, John

McQuarrie, Albert

Rhys Williams, Sir Brandon

Wells, John (Maidstone)

Madel, David

Ridley, Hon Nicholas

Wells, Bowen (Hert'rd & Stev'nage)

Major, John

Ridsdale, Julian

Wheeler, John

Whitney, Raymond

Marland, Paul

Rifkind, Malcolm

Wickenden, Keith

Marlow, Tony

Rippon, Rt Hon Geoffrey

Wiggin, Jerry

Marten, Neil (Banbury)

Roberts, Michael (Cardiff NW)

Williams, Delwyn (Montgomery)

Martin, Michael (Gl'gow, Springb'rn)

Roberts, Wyn (Conway)

Winterton, Nicholas

Mates, Michael

Rost, Peter

Wolfson, Mark

Mather, Carol

Royle, Sir Anthony

Young, Sir George (Acton)

Maude, Rt Hon Angus

Sainsbury, Hon Timothy

Mawby, Ray

St. John-Stevas, Rt Hon Norman

TELLERS FOR THE NOES:

Mawhinney, Dr Brian

Scott, Nicholas

Mr. Spencer Le Marchant and Mr. Anthony Berry.

Maxwell-Hyslop, Robin

Shaw, Michael (Scarborough)

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.
Mr. DEPUTY SPEAKER forthwith declared the main Question, as amended, to
1380
be agreed to, pursuant to Standing Order No. 18 (Business of Supply).
Resolved,
That this House, recognising the importance of microelectronics to United Kingdom industry, welcomes the review which the National Enterprise Board has decided to undertake of the prospects for Inmos International Ltd. including the question of further finance.

PRICES AND INCOMES POLICY
7.10 pm
Mr. David Steel: I beg to move,
That this House believes that inflation and unemployment cannot be effectively controlled without a prices and incomes policy; and calls on Her Majesty's Government to bring forward proposals for such a policy without delay.
Mr. Deputy Speaker (Mr. Bernard Weatherill): Mr. Speaker has asked me to announce that the amendment has been selected.
Mr. Steel: A Liberal Supply day debate is a rare event, and it will not surprise hon. Members to learn that we had a considerable debate on which topic to choose for discussion this evening. With little hesitation we decided that the time had come for the House to concentrate its mind, for a few hours at least, on the need to consider a prices and incomes policy, particularly in view of the speeches that have been made by many hon. Members, both inside and outside the House, in recent weeks in pursuit of such a policy.
The commitment of the Liberal Party to a prices and incomes policy as part of the general equipment of the Government in managing the economy goes back to an incident in June 1968 when, during the consideration of prices and incomes legislation under the Labour Government, the Conservative Opposition decided to force a fundamental vote against that policy and were supported in the Lobby by the Tribune group, led by the right hon. Member for Ebbw Vale (Mr. Foot). On that occasion we felt that the parliamentary arithmetic was such that our votes could well be crucial in seeing the policy survive, and we supported the Government.
My party's record on prices and incomes policy has been consistent ever since, in that whatever the inadequacies of individual prices and incomes policies—no doubt we shall debate those during the next three hours—we have solidly supported it, believing it to be a necessary part of the modern equipment of the Government in dealing with the economy.
Since that time, of course, we have had no fewer than six—some would argue even more—different prices and incomes policies. It is not true to say, as many
1382
commentators do, that incomes policies have been tried and found wanting. What is true is that incomes policies have not been properly tried on a sustained and continuous basis. Incomes policies have been undermined by the process of chopping and changing in between short-term policies and by the inevitable bursting of the dam after every individual incomes policy has been abolished.
I believe that an increasing number of people recognise that no incomes policy can be effective if the general mood in the country is that it will not last, or that the Opposition of the day are committed to abolishing it, or that the Government of the day simply see the policy as a one or two-year crisis measure. We are asking for real thought to be given now to the kind of mechanism and machinery that might make a prices and incomes policy acceptable and effective in the country at large.
My first point is that many of our more successful competitors have used different forms of incomes policy as part of their natural way of life. If we look at the OECD countries which have been more successful than we have and if we look at countries whose economies can stand comparison with ours, such as West Germany, or at others which are rather different, such as the economies of Sweden, Norway and Austria, we find many different examples of pay policy. Some have a statutory element, and others have a non-statutory element. All those policies, however, demonstrate the common acceptance that the Government of the day require such a policy in their armoury, and all those policies have succeeded.
There is no one magic formula, however. I and my colleagues in this debate are not bringing forward to the House, or suggesting, a magic formula that is a cut above any other that might be suggested from any other quarter. We are anxious to propel forward the acceptance of an incomes policy as a principle. That is why I say at the beginning that I believe that the Government amendment, which says
"this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation".
is not an alternative to an incomes policy.

1383
If one believes in an incomes policy, that does not mean that one does not believe in controlling public spending, that one does not believe in keeping adequate control over borrowing and the money supply or that one does not believe in a realistic and equitable framework of taxation.
The Government's extraordinary doctrinaire and dogmatic approach is amply represented tonight in the person of the Chief Secretary to the Treasury. That approach is that the whole of economic policy can be summed up in the Government amendment, and that that is all that is needed to put the country to rights. That approach indicates that all that is needed is control over the money supply, together with the associated practices which we believe are so wrong.
Mr. John Bruce-Gardyne: The right hon. Member is arguing that the other items suggested in the Government's amendment are also desirable with an incomes policy. Will he tell us how he proposes to achieve the degree of acceptance by the trade union movement, which is, presumably, needed to make his policy work, without a commitment to substantial expansion in public expenditure, which is totally counterproductive in terms of incomes policy?
Mr. Steel: I have taken the hon. Member's argument on board and I shall come to my proposals for dealing with these matters later in my speech. I believe that an effective incomes policy would enable money supply control to be less disastrously rigid. The Government are now widely believed to be running too tight a monetary policy, which adds to the over-valuation of the pound and involves excessively high interest rates.
We are not suggesting that monetary control, as a principle, should be abandoned. On the contrary, I remind the House of what was said by the last Labour Chancellor of the Exchequer during the period of the Lib-Lab pact when we supported both an incomes policy and monetary control. He said
"The rate of inflation is falling fast … Many factors have contributed to this success, including a responsible fiscal policy, and a monetary policy that has steadfastly renounced the profligacy of the last Conservative Govern-
1384
ment. But far the most important single factor has been the co-operation of trade unions and employers alike in adhering to senisble guidelines for pay policy."—[Official Report, 13 February 1978; Vol. 944, c. 46–47.]
It is undeniable, in retrospect, that the most effective counter-inflation period of government in recent years was the period of the Lib-Lab agreement. I see the hon. Member for Knutsford (Mr. Bruce-Gardyne shaking his head, so let me remind him since, fortunately, he was not in the House at the time, that during that 18-month period inflation came down from 20 to 8 per cent. His Government have been responsible for reversing those figures. What halcyon days those were. People were able to get mortgages at 8½ per cent, and to borrow money for industry at 7 per cent. That was the true state of the economy, and it was done not by reliance on one dogmatic economic theory but by a whole range of economic measures, including incomes policy.
That record is in great contrast to the past year of growing unemployment, growing inflation and growing despair. My criticism of the Prime Minister and of the Secretary of State for Industry is that the two of them believe that one can hector and lecture the country into accepting their 1930-style economic theories. All the evidence shows that the medicine that they are making us swallow is threatening to kill the patient. The appeal from this House must be for them to alter course.
It can be argued in part that the Government are already beginning—although they do not like the phrase—to consider something of a pay policy. Are they not to intervene in the recommendations of the Top Salaries Review Body? Are they not likely to intervene on the question of Members' salaries? A few weeks ago I met a deputation of teachers from my constituency. The Scottish teachers are currently engaging in industrial action in pursuit of a pay claim, having been offered about 14 per cent. I am not saying that the deputation represented the official view of the teachers union, because I have not discussed it with the union, but they constituted an ordinary representative group of one section of the community in the public sector that is being told that 14 per cent. is the limit.

1385
That deputation told me that it accepted that the present rate of inflation was around 21 per cent., and it was not even asking to be compensated for that. These rank and file teachers said that they would be prepared to accept, say, 18 per cent. if that would help to gear down inflation, and provided that a fair policy of that kind was being applied to everyone. But it is not. The Government are trying to screw down every group of workers whom they can tackle directly in the public sector but without the overall context of fairness within which such a policy might be acceptable. That is why I believe that an overall incomes policy is a more honest and straightforward approach.
I note that the policy is gaining acceptance. There was a notable speech from the right hon. and learned Member for Hexham (Mr. Rippon) last week. We heard from the hon. Member for Sidcup (Mr. Heath). The statement from the Conservative side of the House with which I most agreed was in an article on 5 February 1979 just before the last election. It said:
"What is needed is a consensus that Britain needs some kind of pay policy until its inherently inflationary collective bargaining system is replaced by something better—and there needs to be a consensus about what that should be too. Free collective bargaining is a euphemism for spiralling inflation and mass unemployment."
What an accurate forecast that has turned out to be.
"It is the militants' passport to huge wage increases which, in the end, impoverish even the people who receive them. They have become a virility symbol of the trade union movement. As a result they have stymied the living standards of trade union members."
That was written by a member of the present Cabinet, the Minister of Agriculture, Fisheries and Food, and I wonder how he, looking at his forecast of "spiralling inflation and mass unemployment" can sit happily in on the present Cabinet debates on pay policy.
Mr. Norman Atkinson: The right hon. Gentleman is making a series of serious charges against trade unionists. On what evidence does he base his allegations that wages are currently too high and therefore need restraining? Secondly, on what evidence
1386
is he saying that wages are responsible for inflation?
Mr. Steel: The hon. Member is falling again into the trap—this is what the Tribune group has in common with the Right wing of the Tory Party—of believing that there is one root cause of inflation. I believe that there is a series of causes. Spiralling and competing wage demands are certainly one.
One of the hon. Gentleman's trade union colleagues, Mr. Sidney Weighell, general secretary of the NUR, in a speech opening his conference the other day, was reported in The Guardian as saying:
"Support for a planned approach to incomes is growing in all parts, and at all levels, of the Labour Party."
Looking around me at the Labour Benches, all I can say is "You could have fooled me". I understand that there is to be no support for this motion from the Opposition Front Bench, although a few brave spirits on the Labour Benches will no doubt intervene. I hope that they will.
That view is not confined to Mr. Weighell. At the end of March this year the Leader of the Opposition said that if Britain was to recover from its present depressed condition an incomes policy was essential. Even so, we are not to have a speech from the Opposition Front Bench tonight in support of the motion. As for the brave stalwarts of the Social Democrats, the right hon. Member for Stockton (Mr. Rodgers) is on record earlier this year as saying:
"Labour's willingness to put to the electorate an effective policy for pay, prices and productivity, would soon become a test of the Party's credibility".
Where is that credibility tonight? The right hon. Gentleman is not with us, I am afraid, to add to the discussion.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) filled an entire page of The Guardian on the merits of incomes policy, but when we come to debate it in the House, when the opportunity is provided by the selfless generosity of the Liberal Party, where are the troops who will support the motion?
Mr. Eric Ogden: The right hon. Gentleman is complaining about those who are not here

1387
and many are not, but he is not supported by 100 per cent. of his party.
Mr. Steel: I invite the hon. Gentleman to test that claim by looking at the Division lists. Not even I expect a 100 per cent. audience from my party on every occasion. Perhaps the leaders of other parties are used to that sort of thing.
The charge against the Government is that they are simply not prepared to consider this subject, that they are blind and deaf to it. I turn to what ought to be the broad outline of the policy. This does not claim to be a sacrosanct blueprint.
The first requirement is for someone to monitor price increases. The Conservatives, not Labour, established the Price Commission and, sadly, it was a Conservative Government who abolished it. There is plenty of room for argument about what the powers of the body ought to be and whether it had grown too bureaucratic at the end of its life, but there is no doubt that it is generally accepted that some monitoring of price increases is essential as the price that one pays for assent to an incomes policy. I think that that is a general point of agreement.
Secondly, there must be some national forum within which trade unions, employers, the Government, chambers of commerce, and perhaps the academics, can discuss and assess the nature of the economy and the guidelines that should be established for the general movement in wages. The Chief Secretary looks askance at that suggestion. He thinks that it comes from some radical quarter. Let me quote from the blue document "The Right Approach to the Economy", published in October 1977, in which the Conservative Party said:
"Yet in framing its monetary and other policies the Government must come to some conclusions about the likely scope for pay increases if excess public expenditure or large-scale unemployment is to be avoided; and this estimate cannot be concealed from the representatives of employers and unions whom it is consulting.
"This is one of the reasons why some kind of forum is desirable, where the major participants in the economy can sit down calmly together to consider the implications—for prosperity as well as for unemployment and paybargaining—of the Government's fiscal and monetary policies."
1388
My source is a good and authentic Conservative Party document. [Interruption.] I invite hon. Members to participate in the debate instead of interrupting constantly.
My third point is that some specialist body—whether it be called the Prices and Incomes Board, the Pay Board, or whatever name that has been used in the past—is required to gain national acceptance of the idea of experts adjudicating in special cases, hard cases and special pleading. The old Prices and Incomes Board under Mr. Aubrey Jones, after many years of work, had just gained national acceptance, authority and expertise, when it was suddenly abolished.
I make my fourth point rather more tentatively because I am not 100 per cent. convinced that it will easily be achieved. It is desirable to enter into discussions with employers and trade unions about a move towards a synchronised pay day. That would help to prevent the process that we see in every wage round when each wage claim has to be topped by the next. If we were able to synchronise company accounting and wage levels on the same day, there would be a greater chance of controlling inflationary pay claims.
My fifth point is one that has not been included in past incomes policies but which my Party thinks is essential. The development of profit sharing and genuine productivity bargaining within pay policy should be encouraged. Nobody should be told by the Government that the maximum that he can earn in any one year is X per cent. but that that is the guideline that the country as a whole can afford. If a company is able to demonstrate that its productivity and profits have increased through the efforts of the company and the work force, those improvements should be shared among those who have contributed to those earnings over and above the agreed guidelines. If that were commonly accepted, and if the modest profit sharing scheme introduced during the Lib-Lab period—which the Government expanded in the Budget—were to be developed as part of an incomes policy, that would answer the criticism from those who say "Why should we restrain wages if it simply means higher profits for the company?" Those higher profits should be distributed, in part, to the work force. If we

1389
were to marry the traditional attitude of my party on profit sharing to an incomes policy, the result would be a policy that not only restrained incomes but positively encouraged higher production, higher efficiency, higher productivity and just rewards for those who helped to achieve them.
My last point relates to the vexed question of penalties. All Governments have faced this problem. How do we enforce a policy? Can we send people to gaol? The Liberal Party has toyed with the idea and advocated that there should be tax penalties for those who break the policy. In a recent conversation, Mr. Aubrey Jones—whose name I mention because he is a recent recruit to the Liberal Party and a considerable expert in this area—he took the view that penalties were not the most important element in the policy. He said that if we rely on penalties it means that the policy has not been accepted.
The whole point of an incomes policy is that it should be generally accepted as fair and should gain general consent and support. For that reason I suggest that the Government should examine not a penalty system but an incentive system. They have the mechanism to hand, because they are maintaining the 3½ per cent. national insurance surcharge on the employers' contribution. There is no reason why they could not frame a policy that said that all companies that maintain the Government's pay policy and remain within the guidelines—unless they were indulging in profit sharing and productivity schemes—should receive a rebate on the national insurance surcharge. Why should there not be a carrot to maintain the policy, instead of a big stick?
Mr. Nick Budgen: Would the right hon. Gentleman also be in favour of the continuing and progressive twist that the previous Labour Government gave to a pay policy, by which they made the adherence to a pay policy a condition of the granting of Government contracts?
Mr. Steel: If the hon Gentleman's memory is correct, he will remember that we regarded that policy as an illiberal and unsatisfactory way of getting round the lack of acceptance by the previous
1390
Government of the need for a formal pay policy which rested on more than a bilateral agreement between the Government and the trade unions. I recognise that that was a spatchcock policy that could not last and did not last. It broke down in the winter of discontent. We did not believe that backstairs arm-twisting was the way to make the policy effective. We thought that it should be more open, and planned in one of the ways that we are now suggesting.
I believe that this is an issue to which the House will return again and again over the next few years. Increasingly the country is rebelling against the economic policy of the Government which, in a sentence, is that the law of the jungle should prevail. The country is totally opposed to that philosophy.
7.38 pm
The Chief Secretary to the Treasury (Mr. John Biffen): I beg to move, to leave out from "That" to the end of the question and to add instead thereof:
'this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation.'.
The debate on the motion of the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) started rather late. As a veteran of prices and incomes policy discussions I know that life can be wearisome for Back Benchers in these circumstances. I wish to say at the outset that, although I have been given the privilege of replying for the Government, I hope that it will not be thought a discourtesy to the House—but rather that I remain a paid-up member of the Back Benchers union—if I content myself with five minutes.
The right hon. Gentleman deserves the good will of the House for having chosen this topic. As he said, we shall return to it again and again. I have absolutely no doubt about that, because we have lived with this subject, man and boy, since I have been in this place. I think of the hon. Member for Tottenham (Mr. Atkinson) as a distinguished contributor during the 1960s and 1970s. It is as old a subject as the fairground trick of trying to persuade people that there is an easy way to spot the three card trick. At the heart of the seductions of the policy elaborated by

1391
the leader of the Liberal Party lies the belief that somehow one can work one's way out of difficult positions by painless remedies.
The right hon. Gentleman did us the courtesy of providing a trailer of his speech. It is an innovation that I heartily recommend to many others. He did so in the Spectator newspaper. Therefore, I was able to be reasonably equipped for the arguments that he advanced this evening. They were advanced in a charming fashion, as we would expect from the right hon. Gentleman. However, somehow or other, despite his pleasant and relaxed manner, I felt that I was being introduced to old friends. There was nothing that much different in his speech. I suppose that after a while in this place one loses one's thirst for innovation. That is why I was reasonably content as I heard him develop his argument.
There are four major factors to the incomes policy that is being commended to the House. I am sure that the right hon. Gentleman will allow me to quote from his article in the Spectator a week ago under the rubric:
"Roy is ahead of his time".
The first factor is a forum of discussion between Government, the TUC, the CBI, chambers of commerce and academic experts—that is to say, a Professor Clegg with a pocket calculator that works. That should establish the limits to going rates of increase.
Secondly, there should be a specialist body, such as the old Prices and Incomes Board, to which the claims of special cases could be referred.
Thirdly, there should be a formula for flexibility in allowing the maximum of productivity bargaining and profit share-out above nationally agreed norms.
We then come to the novelty—it is nice to have novelty in this situation—which was the move to a "synchro-pay-day" when all wages are annually reviewed—the centraliser's dream. The only problem is that if one gets it wrong, one gets it monumentally wrong.
That is the policy. The right hon. Gentleman is perfectly correct in saying that he has argued it consistently over a period—I do not quarrel with that—but if we are to take this subject seriously we must recognise the essential ingredients
1392
—the real hallmark—of an incomes policy as opposed to an incomes noise. I shall tell the House what the essential features are. They are that a public authority should have the ability to identify, to select and to enforce the differential movement of incomes throughout the economy. That is what incomes policy is all about. Anything other than that may be dressed up as incomes policy, because it is a rather nice sort of mother image word, which, broadly speaking, is politically popular so long as one does not have to experience all the implications and consequences. However, the real thing has those essential ingredients.
I argue that because, like most hon. Members, I have lived through it at one stage or another.
Mr. David Steel: The right hon. Gentleman voted for it.
Mr. Biffen: It is interesting that the right hon. Gentleman, who is a man of great skill, has not done overmuch homework. It so happens that I have not voted for it, but I do not want to engage in small debating points. It is perfectly true that this is a policy that at one time or another has commended itself to successive parties. That is the point that I make, and I do not deny it for a moment.
Mr. David Winnick: Is the right hon. Gentleman saying that the Government rule out any possibility of a formal prices or incomes policy, wage restraint or wage freeze during the lifetime of this Parliament? Bearing in mind the right hon. Gentleman's views, which are well known, would he consider it a resigning matter if such a policy were introduced?
Mr. Biffen: If the hon. Gentleman cannot draw his conclusions from what I have said up to now—I do not think that I have been over-subtle—there is not too much that I can add. However, I shall bear in mind his suggestion that occasionally one's career is seasoned by the odd resignation.
Mr. Dan Jones: What the right hon. Gentleman cannot possibly challenge is the fact that the prices and incomes policy that we followed, with the assistance of the Liberal Party, brought inflation down to 7½ per cent. There is no doubting that.
Mr. Biffen: Other hon. Members will be anxious to reply to that point, and I do not want to anticipate other argments. I do not want to pilot a path that will become so well trodden as to be absolutely subterranean. It was the strictures and disciplines of the IMF, and the movement in the monetary aggregate, which had a major impact upon incomes. My recollection is not merely of the fall in the rate of income increases during the period referred to by the hon. Gentleman but the absolute disaster in social and economic terms that attended the conclusion of that exercise.
Such a policy, in the terms that I have described, necessitates sanctions and economic value judgments and, ultimately, an authority that I believe must reside in Parliament. It is in that Context—
Mr. Cyril Smith rose—
Mr. Biffen: Perhaps the hon. Gentleman will forgive me, but I have been reasonably generous to the House.
The first question is how the movement of incomes would be identified and reported in the scheme proposed by the right hon. Gentleman. I have no doubt that there would be arrangements for that. But let us be quite clear that there would literally have to be a comprehensive and universal system of companies reporting their income movements. I believe that that will need the authority of law, because I do not see how it can be undertaken otherwise.
We know that the actual investigation will be undertaken by the Prices and Incomes Board. Therefore, we are on very familiar territory. We then come to what has always been the most delicate of all issues—the sanctions that will be taken when companies and their employees decide to disregard the superior wisdoms of the CBI, the TUC, the chambers of commerce and the learned professors.
We have heard this evening that it would not be the old-fashioned form of sanctions but rather a form of tax penalty. I find that particularly compelling, because, although I have never been steeped in the history of the Liberal Party by personal experience, I can vividly remember reading of the great difficulties that were encountered by the authorities when it was attempted to
1394
impose education in the first decade of this century, with a Church backing that was resented by many Nonconformists who subsequently withheld their rates as a form of protest. The belief that one can secure compliance by work force or employers through financial sanctions in an area as sensitive as the remuneration struck between employers and work people is, I believe, a most dangerous delusion.
Therefore, the route that is being traced by the leader of the Liberal Party is destined to be an obtrusive extension of unenforceable Government responsibility, and voluntary exhortation will slide into statutory and mandatory requirements. The scene is then set for a demand for greater powers. To some extent, they have already been anticipated by the leader of the Liberal Party, because although the motion refers to an incomes policy, he said "And, by the way, it is also a prices policy". He argued on the radio that in order for there to be an incomes policy there must be a prices policy. I know that I am merely reinforcing what he said. The hon. Member for Rochdale (Mr. Smith) may have some misgivings about his right hon. Friend, but it should not distress him too much that I reinforce the remarks of the leader of the Liberal Party.
Mr. Cyril Smith: I have more misgivings about the Chief Secretary to the Treasury than I have about my right hon. Friend. Perhaps the Chief Secretary will answer a simple question. He, the Chancellor of the Exchequer, the Prime Minister and the Secretary of State for Industry are now stomping the country telling everyone that unless wage increases in the coming year are only 50 per cent. of the level of last year—between 5 per cent. and 10 per cent.—the Government cannot control inflation.—[HON. MEMBERS "No."] If that is so, and if they are not able to keep wage increases at the level that they seek, what do they propose to do about it?
Mr. Biffen: I share with the leader of the Liberal Party the strictures of the hon. Member for Rochdale. Indeed, I would not wish to be apart from the leader of the Liberal Party in that sense. I say to the hon. Member for Rochdale that I have never made arguments remotely similar to those that he suggests, and it is not my

1395
job here to answer tawdry McCarthyism. I shall not have arguments put in my mouth and then be asked to defend them.
The issue is beyond that of incomes. It covers prices and dividends. The CBI said that the 12-month experience of profit and price control after August 1977 cost £130 million. I believe that profit levels in this country are already sufficiently attenuated without being exposed to further politicisation. That is what would happen if they were subject to the proposals of the leader of the Liberal Party.
There are three predictable consequences to the policies that have been elaborated this evening. First, the crime will be visibility. Given the army of price and income controllers, with all their sophistication, there will be a rush to the undergrowth of the black economy, where people will be unseen and undetectable. Secondly, the criteria that will be applied will inevitably be adjusted to favour income redistribution. That has happened every time there has been strict State control of incomes. An attempt artificially to increase lower incomes in order to narrow differentials will create additional unemployment. Thirdly, the policy will end in industrial conflict.
I am wholly unashamed in quoting the Leader of the Opposition and to make cause with him in his analysis, when he said, on 15 February 1974:
"As the country now knows, fixing wages by law means tension, unfairness, evasion and strikes."
I appreciate that genuine anxieties have prompted the motion. The fact that I contest an argument doesn't in any sense mean that I contest the good faith with which it has been put forward. When this House can entertain debates on their merits, without becoming involved in personalities, it will have taken one step forward, and it will be the true mirror of the nation, as it should be.
I do not believe that even in the golden age of the Lib-Lab pact it was possible to secure proof against rising unemployment. Between March 1977 and August 1978 the figures rose by 60,000, seasonally adjusted, and by 225,000 in actual numbers. From our experience, there is nothing to suggest that this is a policy that can deal with inflation or unemployment.
1396
It deals with income distribution and the capacity of politics to intrude into every area of the economy.
We have before us a motion that invites a gigantic expansion in the economic role of government, a potentially dangerous flirtation with corporatism, and a most illiberal attempt to secure centralised control of the economy.
The amendment in the name of the Prime Minister, my right hon. Friends and myself is a stark amendment. I do not deny that. It sets out the policies that we believe are appropriate to our present economic circumstances if the central objective is a reduction in the rate of inflation. It seeks to control public spending, with a commitment to stabilise public spendng over the lifetime of this Parliament, or possibly to get a modest reduction. It contains a commitment to reduce borrowing and to reduce the growth of sterling M3. It seeks to provide tax policies on spending rather than earning, and to reduce taxation on capital.
Mr. David Penhaligon: Will the Chief Secretary indicate what he believes would be the current level of inflation if the Government had not pursued these policies so brilliantly over the last 12 months?
Mr. Biffen: I have no reason to believe that the present rate of inflation is other than mainly determined by the expansion in the money supply two years ago.
Mr. John Grant: Sheer dishonesty.
Mr. Biffen: The hon. Gentleman says "Sheer dishonesty". It is easy to pass those moral strictures across the Dispatch Box. But I have accepted that analysis many times. I may be mistaken, but I am not dishonest.
Mr. Grant: In that case, when I asked the Secretary of State for Employment for an estimate of the various factors that had contributed to the rate of inflation over the last 12 months—a question that was passed to the Chief Secretary for answer—why did not the Chief Secretary give me those estimates? He said that he could not give them. That does not square with what he has just said.
Mr. Biffen: I think that it squares entirely with what I said. If the hon. Gentleman is asking whether we can relate, with a degree of mechanical precision, the expansion in the money supply and the consequential increase in prices, the answer is "No". If he is asking what is the major determinant in the rate of inflation, the answer is that it is money supply, and there is a time lag of approximately two years.
Mr. David Steel: Is the Chief Secretary seriously telling the House that he believes that the income increases that have taken place over the last 12 months have not been a contributing factor to the rise in inflation?
Mr. Biffen: Broadly speaking, yes. The right hon. Gentleman clearly believes in the Wilsonian adage that one man's pay increase is another man's price increase. Over the past couple of years we have moved on a little from that rather simple analysis.
Mr. Ogden rose—
Mr Biffen: I have already given way several times and I have been on my feet for practically half an hour. There are many other hon. Members who wish to take part in the debate. I should have thought that I had given enough hostages to fortune without giving way yet again.
Some hon. Members seem to be quite certain that there is nothing in this monetary analysis, but it is supported by many in the highest positions inside and outside the Government. It may be a mistaken view, but it is not an eccentricity.
I want to tell my hon. Friends that the great problem is the transitional period before which these policies can be seen to be truly effective. I am, I suppose, almost the last person to be the great apostle of dawn. If I have been prepared to call myself the Jeremiah in any Administration—in the belief that there ought always to be a statutory Jeremiah—I am perhaps now speaking out of turn, but I want to say this to my hon. Friends—[Interruption.] Of course. I am addressing the whole House. but there have surely been times when Opposition spokesmen have felt it necessary to talk to their hon. Friends.
I will tell Opposition Members the good news; I will not keep it simply for my hon. Friends. There are very wel-
1398
come harbingers, namely, in the movement in the raw material prices index and in the index of industrial wholesale prices, which indicate that the index of retail prices will be falling during the second half of this year. I make those points in asserting that this policy can succeed, that it will succeed, and that there are signs of its impending success.
I say to the House—and particularly to the hon. Member for Burnley (Mr. Jones), who at the end may come with us into the Lobby—that the social market economy, with its emphasis on monetary discipline and a better ordering of Government spending and taxation, offers a better choice than the sterile world of State regulation of prices and wages. The latter is a policy that is now endorsed by the Liberal Party but is in total contrast to what we have sought to present to the House. Our policy reflects a commitment to freedom and economic reality—principles, unhappily, deserted by the present Liberal Party.
8.2 pm
Mr. Norman Atkinson: The House shoud recognise that this is not such an innocent occasion as it might appear to be. There is great significance in the fact that there are many hon. Members missing, in the fact that no one from the Labour Front Bench is to participate, that there is no amendment on the Order Paper representing a trade union or Labour view, and that the general advice given to Labour Members was to leave the Chamber, to leave the House of Commons, and not to participate in the debate. The general advice was to get as far from this place as possible to-night.
I suspect that similar advice has been given to many Conservative Members, because there is a division of opinion on each side, and there is ample evidence to demonstrate that. We now know about some of the things that are happening and why they are happening. Perhaps I may be permitted to let two or three small kittens out of the bag in referring to what is happening right now in the political arena.
I want to talk about the CBI as well as the Labour movement. I want to talk about some of the negotiations which I understand have taken place between the leader of the Liberal Party and a

1399
certain Roy Jenkins, who at the moment is domiciled in Europe but is shortly to return to the British political arena. This is what the debate is about at the moment and I shall explain shortly how events are likely to develop.
There is a difference of opinion in the Shadow Cabinet. The fact that this is a Supply day has posed a number of difficulties for those in the leadership of the Labour Party. That is clearly demonstrated at the moment. In the Shadow Cabinet there is an opinion represented by people who have become known euphemistically as the "Gang of Three". It is a new and young movement called "ROW". It stands, I gather, for Rodgers, Owen and Williams.
Mr. Ogden: Good brotherly stuff.
Mr. Atkinson: I make no comment about it. Of course, there are discussions taking place among friends on each side of the argument. What we have at the moment is the embryonic Social Democratic movement, of which no doubt the Liberal Party would like to assume the leadership, augmented by disssidents from the Labour movement. These people are hoping to find a popular programme on which to base the formation of such a party.
It involves ideas such as an extended industrial policy, based on co-partnership and the Bullock recommendations.
Mr. Richard Wainwright: No.
Mr. Atkinson: The hon. Gentleman may say "No", but those are some of the things that these people have been talking about. Co-partnership is one of them.
The leader of the Liberal party has just mentioned it. He puts that in his package. But part of the co-partnership argument is related to Bullock, because it is linked with the whole business of what is called an incomes policy. One is not possible without the other in the terms set down by the Liberal Party.
Linked with that is the argument among leading members of the CBI who are now wondering whether, together with certain people in the TUC, they should make a joint approach to the Government for some discussion to take place on the need to control—presumably
1400
voluntarily—incomes in this country. People in the CBI believe that that would probably be a far less damaging way of reducing the level of wage increases facing us in the near future.
They also believe—I think that they have been conned into believing it—that they can save some jobs which are now perilously poised at some point at which factories or sections of industry may go under. I believe that they are wrong in thinking that anything can be saved by crude wage restraint of the kind talked about in this context, and certainly by the CBI.
I should like to warn the House about one of the insidious things that these people will be suggesting. I hope that the Labour Party will take cognisance of it. It is now being suggested that there should be an all-party approach with regard to the setting up of a new Select Committee. The suggestion is that matters should not be left to the present Select Committee that is dealing with Treasury matters but that another all-party Select Committee should be set up to study the question of wage policy. The idea is that that Select Committee could then present to the House an all-party recommendation which would get the Government out of their present difficulty. It would, it is thought, be able to put before the House some serious and cogent arguments for introducing a wage policy.
Obviously the U-turn is horrendous. The Chief Secretary to the Treasury has already demonstrated that he is horrified at the vision of having to gyrate in such a physical way. It would obviously cause problems for him if the Conservative Party were to become involved in the incomes policy argument. None the less, the people who have been making these suggestions and having these discussions believe that a new Select Committee could possibly be the method of overcoming the present problems.
The stream of opinion on the Opposition side of the House is a demand for a statutory prices policy. I and others believe that there is no necessity to do other than control prices. Once prices are controlled, there are means by which the economy can be managed and within which wages can be voluntarily or freely negotiated. Free bargaining can take place within the constraints of price

1401
control. But there is no purpose in attempting to squeeze the whole process of wage bargaining from either end.
In a mixed economy of the kind that we have, it eliminates some of the worst excesses and weaknesses of a statutory incomes policy because it includes the public sector. Therefore, it is possible to talk about resource restraint for the public sector in line with price control for the private sector. If wages are bargained in that way, we can get a degree of equity right across the board and redistribute income in a fairer way than by trying to control incomes and wage bargaining generally. There is a great deal of support for such ideas, and I should not be surprised if they were to appear before too long.
We now know enough about inflation to know its cause. The computer has given us the ability to analyse in precise terms the contributory factors that have led to inflationary trends. We now know the root causes of the inflation of the past 12 months. It is not, as the right hon. Gentleman suggested to do with the money supply.
We now know that works accountants are putting together pricing strategies for their employers covering the next three years. They are analysing what they anticipate unit costs will be over that period. Therefore, they are now working on pricing strategies three years ahead. They have to do that to get sense into industrial structures and so on.
It is now agreed among leading economists that the policies pursued by the Government—particularly taxation policies, VAT and the rest—have largely contributed to the 20 per cent. increase in the prices index to which reference has been made. Of the increase in the price index over the past 12 months, 11 per cent. has come directly from Government policies. Our imports of oil and basic materials are responsible for no less than 4 per cent. of the increase during the past 12 months. That leaves 5 per cent. of the 20 per cent. attributable to wage increases. Those wage rises will mean much more next year.
As I said, works accountants, pricing strategists and analysts are now thinking through the implications of the wage agreements now being made. No doubt the 5 per cent. will increase during the period ahead. But we know what caused
1402
the 20 per cent. increase in the prices index during the past 12 months. There is no mystery about it. Therefore, we should look at that.
Mr. Nicholas Baker: This is very interesting. The hon. Gentleman is saying that for a proper prices and incomes policy we need only to control prices. How in that scheme would he persuade wage bargainers to negotiate within the price strategy that he would lay down? Secondly, what would be the effect on such a system of increases in prices caused by imports or the prices of goods from abroad?
Mr. Atkinson: Taking the last point first, values across the exchanges are a contributory factor. I do not run away from that.
The brunt of the hon. Gentleman's main point is about wage bargaining generally within price ceilings. All wage bargainers in modern times have knowledge of how far they can push across the table. Even now, irrespective of limits on prices, they know what is happening.
I am sorry that wage bargaining is not more sophisticated than it is. I should like trade unions, as in the United States, to employ a whole battery of economists and lawyers to go into the board room with them so that they knew how far they could squeeze the company and add constructively to its welfare by good wage bargaining. Within a price system of the kind that I have described the redistribution comes from pushing as hard as possible against the price ceiling without weakening the existence of the company. but at the same time paying due regard to the distribution of the gains that could be taken from increased productivity. The redistribution about which I am talking is when the price of the product is known. That applies to most establishments. That is the way in which experienced wage bargainers go about it.
I do not want to get involved in tax differentials—using the tax system to penalise those who break the barrier. It is an impossible situation. It cannot work. Such a system must have an appeals system built into it if anyone is to be taxed for taking a wage increase above the norm. The practicalities are immense. It is a very unfair system. In the absence of statutory provision there is no possibility of an incomes policy succeeding.

1403
Many people recognise that the problem facing politicians today is to know how to take from the system the means whereby welfarism can be developed. The basis of the discussions which would link the Liberal Party with the Social Democrats is finding a way to make this system work and to produce additional welfarism of sizeable amounts. The problem is that the system cannot deliver. The existing orthodox methods of redistributing income or wealth are insufficient to provide the welfarism that the Social Democrats are now talking about. I am a Socialist because I recognise that, without the fundamental transformation that we claim to be necessary in society, it is not possible for this system to deliver the sort of things about which we are talking.
That is why we are seeing these political developments and why this debate is taking place tonight. It coincides with the first opportunity that the Liberal Party has had of having a Supply day. It has caused difficulties on the Opposition side. There are differences to be argued through. I hope that in those areas where the trade unions and the Labour Party come together we shall ultimately find a way of making it possible or of giving confidence in future so that we can overcome the immense problems facing our community.
8.10 pm
Mr. Peter Lloyd: I congratulate the leader of the Liberal Party —the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel)—on tabling this motion. Prices and incomes policies have been the chosen path to destruction of two Governments—one ending in a statutory bang in February 1974 and the other in a voluntary whimper in May 1979. Since then, prices and incomes policies have been spectres in every economic debate in this Parliament. Both the Chief Secretary and the right hon. Member for Roxburgh, Selkirk and Peebles said that they had no doubt that the spectre would return again and again, but I hope that it will be exorcised in this debate.
The Liberal Party believes that wages are the prime engine of inflation. The right hon. Member for Roxburgh, Selkirk and Peebles suggested that that was so. If he thinks differently I shall be
1404
glad to give way. But, as that is what he and his party believe, they have no alternative but to seize the weapon with which the Conservative Government committed hara-kiri in 1974. That is a doleful prospect for a party that carries the name "Liberal". The right hon. Gentleman gave no trace, in his wide-ranging and determined speech, of that realisation.
Those on my side of the argument sometimes say that an incomes policy will always contain the seeds of its own destruction. That is not true. An incomes policy can be sustained but only by becoming more rigid and detailed. Any voluntary element would eventually disappear. Such a policy would end in disintegration or in the establishment of a command economy similar to that found in Eastern Europe. Economic, if not political, freedom would be extinguished. The system would be inefficient, because normal market forces would not be able to operate. The black market would provide the only lubrication to turn the wheels. That is not an idle or exaggerated threat. One has only to consider the rise of the black economy in recent periods of price and wage control in the United Kingdom.
Mr. Russell Johnston: I admit that Austria is a smaller country, but surely the consequences the hon. Gentleman so apocalyptically describes of a prices and incomes policy in a mixed economy are not found in Austria.
Mr. Lloyd: Austria's prices and incomes policy does not dominate market forces. The supporters of incomes policies always argue that their policy will be flexible and fair. It may be one or the other, but it cannot be both. Flexibility, in this context, is a euphemism for accommodating market forces and powerful interest groups. Fair, in this context, means overriding them to achieve lower pay settlements in general, and altering differentials and relativities in particular.
What is the point of inventing elaborate or simple incomes policies if they only give market forces free play? The irony is that if, in the interests of fairness or any other objective, a prices and incomes policy overrides market forces, it will prove inefficient and, in addition, will be seen as unfair by those whom it is supposed to benefit. The policy will

1405
prevent people from doing what they want to do and from doing what they think it is their right to do. Such a manmade policy would be seen as a far greater tyranny than the undoubted imperfections of the present market system.
The position one adopts in the argument depends on what one believes to be the prime cause of inflation. A few years ago there used to be as many ideas and theories about the causes of inflation as there were bar-room pundits to utter them. One heard a great deal about profiteering manufacturers, until the profits of industry almost disappeared. We heard a new cause this evening from the hon. Member for Tottenham (Mr. Atkinson). He said that inflation was the fault of the cost accountant. That is a new one on me, but I like it. At meetings I still find that there are old ladies who are convinced that decimalisation was the cause of inflation. I should have thought that that would have appealed to the Liberal Party if it were not for the anti-EEC implications, which might upset the hon. Member for Inverness (Mr. Johnston).
Two basic arguments are left, that of wage push, and that of excessive money growth. They are not as far apart as they are often alleged to be. Perhaps an Opposition Member will enlighten me, but I understand that wage-push sophisticates believe that the additional money to finance them will automatically follow not precede the wage increase, and will not arrive beforehand. Published statistics are always rough and ready, but they do not bear out that theory.
I regret that the wage and price outburst of 1974–75 followed the vast monetary expansion of the previous Conservative Government. After the IMF had imposed restrictions under Labour, a drop followed the decrease in monetary growth. The effects in that case may have been concealed by an incomes policy, and that may allow Liberal Members to argue differently, but it is difficult to accept that it is the greediness or determined aggressiveness of wage earners that varies so much each year and that it is that which is responsible for the vast annual differences in inflation. It is easier to believe that it is the money stock, not human nature, that is so volatile.
Mr.Cyril Smith: The hon. Gentleman appears to be arguing that wages play no part in inflation. If so, does he agree with the views expressed by the Prime Minister, the Secretary of State for Industry and the Chancellor of the Exchequer? During the past 14 days they have all pleaded for wage restraint this winter. They have pleaded that wages should not be increased by more than 50 per cent. of the amount agreed last winter. I shall leave the Chief Secretary out of that list, because he evaded the issue when I included him earlier. They have talked in terms of 5 per cent. or 10 per cent. Is the hon. Gentleman saying that that plea is irrelevant, because wages play no part in the inflationary spiral?
Mr. Lloyd: It is irrelevant to inflation, but it is relevant to the number of people who will be employed next winter. The hon. Gentleman must either accept that answer or reject it. Common sense and the figures coincide and show that it is money growth that is the prime engine of inflation. Therefore, the Government are right to embark on this course and to concentrate on money growth. That is one of the few factors which they have completely under their control. I fear that they will be shown to be right. I say "fear", because money growth has been at the top end of the Government's target. That means that inflation in the forseeable future is unlikely to be below 12 or 13 per cent.
There is a major fault in the Government's policy. Their policy is not concentrated exclusively on money. In their first Budget they sought not merely to curb money growth and to cut the PSBR but to reduce the standard rate of income tax. We have been trying to square the circle since then by means of excessively heavy and punitively high interest rates. The Government's mistake was to overestimate the beneficial effects on growth of a cut in the standard rate of income tax. They underestimated the difficulty of cutting public expenditure to pay for it. Some of my hon. Friends used almost to argue that there were neat packages of policies in every Department labelled "wasteful socialist expenditure". They seemed to believe that those packages could be chucked out easily. However, as the debate is on incomes policies, I have no time to argue that point now.

1407
I hope that when my right hon. Friend replies to the debate he will give an assurance that if the public sector borrowing requirement and public spending objectives are not met, or there are signs that they will be exceeded, rather than make interest rates bear the full brunt the Government will consider, and carry through if necessary, a policy of raising direct taxes.
Critics of the monetary policy say that it has no effect on wages until bankruptcy looms and that this price is far too high for the economy to pay. I believe that such people are right to pour scorn when the argument on this side is caricatured by one worker saying to another "I see that M3 was down last month. Let us reduce our wage claims by the same amount." But the critics are wrong in the assumption that employees are greedy and aggressive and have to be restrained, either by law or by some other less open, honest or direct method. I am certain that the high wage claims that we have seen in the last few years are largely defensive and that their intention is to keep those who make them at least up to, and if possible ahead of, the expected rise in prices. But it is not the change in M3, published in the serious newspapers, that will have an effect on wage claims; it is not even the knowledge that the retail price index has gone down—although this is something of which people are easily made aware—it is the fact that prices are seen to be coming down. It is not until that happens that the beneficial effects will be felt in wage claims.
Alas, the problem is that prices are affected after the contraction of jobs and firms. That is when siren voices on this side of the House say "It is all true about long-term monetary policies. One cannot have anything dainty or flexible. What about a freeze in order to minimise the damage done to jobs and firms during the transition?" I hope that my right hon. Friend will make it clear that that would be an unmitigated disaster. Now, as always, is the wrong time to have a freeze. Inevitably, any figure that would gain acceptance would have to be set far
1408
too high to be worth having at all, if prices are to come down—as I believe they will—in the second half of this year. The norm would be established by that figure for people who might even have settled for less. Then there will be the adjustments that will have to be made up afterwards.
If the monetary policy is sustained intact through all this, and if the inflation rate falls, Liberal Members will have another opportunity to say "It was not monetary policy at all. Inflation started to come down only when the freeze was introduced." I know that my right hon. Friend the Prime Minister has been very careful not to rule out the freeze. I have always been advised that in politics one should never say "never." I do not believe that is true. I believe that there are times when one should say "never", and this is one of them. Because without doubt—
Mr. Cyril Smith: Will the hon. Member vote against a freeze if it is introduced?
Mr. Lloyd: Certainly I shall.
Mr. Smith: We will remember that.
Mr. Lloyd: So will I. If a freeze were expected later, the effect would be to push up wage demands now and bring about the very situation that we seek to avoid.
Mr. Winnick: When I intervened in the Chief Secretary's speech he said, in effect, that there would be no such wages policy or freeze. Therefore, one would assume that the word "never" has been used tonight by the right hon. Gentleman in giving the Government's views.
Mr. Lloyd: The hon. Member can draw that inference, and the House can draw that inference, but I hope that it will be put more explicitly so that the inference can be drawn outside. If my right hon. Friend the Chief Secretary is able to make that clear tonight he will have done a service for the policy of which he has been such a stalwart defender.
8.33 pm
Mr. Cyril Smith: We have heard one or two interesting and remarkable speeches and some quite remarkable theories. For example, we heard from the hon. Member for Tottenham (Mr. Atkinson) that all Labour Members had been sent home.
Mr. Dennis Skinner: No.
Mr. Smith: I am delighted to hear it, but I understand that there are some hon. Members who do not do as they are told and I believe that some have refused to go home.
Mr. Skinner: No one told me.
Mr. Smith: Perhaps they did not know that the hon. Member had come back. Certainly we now know the importance that the official Opposition place on defending the view of the trade union movement in a debate on prices and incomes policy. It is astounding that the party that claims to be the champion of trade unionists, lower-paid workers and the working class generally should make no Front Bench contribution in a debate on a prices and incomes policy. It would at least have been a contribution had a Labour Front Bench spokesman said only that he did not agree with a prices and incomes policy. Not only has the Labour Party decided not to make a contribution: it has told its Members to go home, or to go as far from the House as possible.
The hon. Member for Tottenham expounded another interesting theory—that prices should be controlled but not wages. That theory rests on a responsible trade union movement, as I suspect the hon. Gentleman would agree. I believe that the trade union movement can and would be responsible if it was treated properly. I therefore believe that an incomes policy is possible.
The hon. Member for Fareham (Mr. Lloyd) said that a prices and incomes policy had caused the previous Tory Government to commit hari-kari. That in itself may be a good reason for having one. However, with great respect, the hon. Gentleman missed the point of the speech of my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel). My party seeks a long-term
1410
commitment to the future of this country through an incomes policy and not a short-term commitment. The hon. Gentleman's criticism was based on the assumption that we were talking of a stop-start incomes policy, to be introduced and thrown out again as soon as possible. I agree with many of his strictures against such a policy. However, as my right hon. Friend said, it is because there have been stop-start income policies that the problems were created.
The most remarkable speech was made by the Chief Secretary. I am sure that he will not mind my putting him right on a serious point. The right hon. Gentleman got rattled, which is unusual for him. I like him, and I was surprised by his attitude. He got annoyed when it was suggested that he was dishonest. I would not suggest for one minute that he was. However, he said that he had never voted for a prices and incomes policy. I am sure that he will be anxious for the record to be corrected.
Mr. Biffen: I know exactly what the hon. Gentleman is about to say. He is absolutely right, and I apologise.
Mr. Smith: The right hon. Gentleman did so vote in 1973 in a Second Reading debate.
Mr. Biffen: I was put on the Committee, and I caused immense trouble.
Mr. Smith: That proves the right hon. Gentleman's honesty. I have served on Committees with him and can vouch for the trouble that he is capable of causing.
The right hon. Gentleman talked about control of public expenditure as being the major weapon to control inflation. That may be why the Government have so far not been very successful. Perhaps the right hon. Gentleman can tell us how successful the Government have been over the past 15 months in controlling public expenditure. What was the level of public expenditure when they came to office, and what is it now? What does the right hon. Gentleman project as the level in 12 months' time? How does he propose to achieve that projection?
Public expenditure is unlikely to be controlled if the two financial consequences that we envisage still remain.

1411
The Government say that the way to control wages is create unemployment so that workers accept lower wage increases in order to retain their jobs.
The hon. Member for Fareham said that the Government were calling for lower wage increases in order to control unemployment and not to control inflation. It appears that unemployment is an important weapon in the Government's armoury for controlling wages. There are those who would argue that that is an incomes policy. It is certainly a policy which is intended to control incomes, though it is not an incomes policy which is acceptable.
I hope that the Chief Secretary will give us specific figures of the cost of keeping people on the dole. If 2 million or 3 million are to be forced on to the dole, what will that mean in terms of public expenditure? As those people will not be paying income tax, what will that level of unemployment mean in terms of reduced revenue for the Government? If the Government are in control of the economy, they should have some idea of how those figures will balance out.
There will be an increase in expenditure on the one hand and a loss of revenue on the other. Perhaps the Chief Secretary will explain how the Government will be able to increase public expenditure—one of the consequences of adding to unemployment—and reduce inflation at the same time.
The Chief Secretary also said that a wages policy would lead to industrial unrest. But that depends on what the policy is. If we had within a wages policy a statutory minimum earnings rule, which my party would not rule out, much of the unrest of the winter of 1978, particularly among hospital workers, would not have taken place. An incomes policy could have reduced industrial unrest.
Mr. David Mellor: Does not the hon. Gentleman appreciate that a minimum earnings rule would lead to an erosion of differentials and that, although one could buy off trouble from the lower paid, there would be trouble further up the line?
Mr. Smith: It could lead to a reduction in differentials, but it would not necessarily do so. It depends on the
1412
policy and how one goes about a minimum earnings rule. I used that phrase deliberately and did not say a "minimum wages rule".
Mrs. Elaine Kellett-Bowman: The hon. Gentleman and I share an interest in youth unemployment in the Lancaster area. He is vice-chancellor of Lancaster university. Does he agree that if a minimum wage for a school leaver were set too high the difference between that and the full salary would be compressed and would lead to an abnormally high number of young unemployed?
Mr. Smith: I take that point, but the Liberal Party has always referred to an adult minimum earnings rule.
The implication of the Chief Secretary's claim that incomes policies lead to industrial unrest is that a free economy does not lead to such unrest, but I did not see much evidence of that among the steel workers earlier this year. There was not much evidence either that the threat of unemployment affected their demands for higher wages or weakened their resolve. I believe that the Chief Secretary will have a rude awakening this winter if he believes that his present policy of a free-for-all, creating unemployment as a weapon to control wages—
Mr. Skinner: It is not a free-for-all. Much comment is made, not only here but outside, about Government's lack of intervention and everyone getting what they can in a free-for-all if they are big enough. I do not accept this notion. I hear constantly Tory Ministers, especially Treasury Ministers, saying that in certain areas of the public sector—for instance, the nurses, who have been kept down to 14 per cent.—this is a wages policy. They have a wages policy where they can implement it and get away with it against people who, seemingly, have not enough bargaining power. There should be none of this nonsense that the Government are not interfering. They are interfering all over the place where they can get away with it. The Chief Secretary, who reckons to stand up for the free-for-all, is secretly conniving at keeping down wages where it can be done without anyone challenging him.
Mr. Smith: I am grateful to the hon. Gentleman for that intervention. I agree entirely with the point that he makes.

1413
The Chief Secretary was arguing that there was a free-for-all and that, in that situation, industrial unrest would not occur. If that is his naive belief—I would not challenge him on economics but I would do so on industrial and trade union experience—he is due for some grave shocks during the winter.
Unemployment is a crude weapon. It is an anti-social weapon. In the end, it is not a weapon that works. I quoted the steel industry as an example. There are other examples to show that threats of unemployment do not force workers to go for lower wage increases. There are clear examples to disprove this point. The Government should not imagine that this approach will work during the coming winter. It will not work. If the Government take the view of the hon. Member for Fareham that wages have nothing to do with inflation, their policy may be justified. If they take the view that I take that wages have something to do with prices—I can assure him that in my company they have something to do with prices—and if prices have something to do with inflation, the Minister faces a great shock over wage demands.
Sir Raymond Gower: Does not the hon. Gentleman believe that the earnings of people in a particular industry should reflect the ability of that industry to pay the salaries and wages or does he ignore that altogether? Does he not take the view that, in a company of any kind, there must be some relationship between its success and achievement and the wages and salaries that it can pay? This does not obtain in the case of the Government. The Government are in a different state. Where the Government act as employer, they have to act on a different basis.
Mr. Smith: There are certain things that a company needs in order to proceed. I agree with the Government that it has to be able to sell the goods that it produces. It also has to be able to produce the goods. That means that the company has to be able to get skill. It cannot buy skill because there is not enough. There is enough labour, but that is not the same as skill. It cannot buy skill in competition with another firm unless it pays the same wage. If it has to pay the same wage, it has to be able to compete in prices. It has to draw a price for its
1414
products that allows it to pay that wage. There is a relationship between wages and prices. Of course, they have an effect on the inflationary spiral.
Mr. Peter Lloyd: The hon. Gentleman talks about the effect that wages have on relative prices. They do not cause inflation which is an across-the-board and continuous decline in the value of money. The hon. Gentleman must make proper distinctions.
Mr. Smith: Perhaps the hon. Gentleman wants to be an academic. To an ordinary working class fellow who earns his living in industry inflation is about having to pay prices which are 20 per cent. more this year than they were last year and receiving wage increases of only 10 per cent. more than they were last year. That is what the man in the street understands about inflation. There might he highfalutin academic tripe expressed, but what matters is what the man in the street thinks. That is relevant to the debate because there cannot be a proper incomes policy, nor can the Government make their free-for-all policies stick, unless the man in the street co-operates.
The man in the street understands that inflation is about prices rising much faster than he can afford. His mortgage and other things cost him more. That is what inflation means to me and the man in the street. The hon. Member for Fare-ham might have highfalutin academic ideas. They are all right for universities but not for the working man and the man in the street.
The present situation cannot continue. Some change must come. Last year I was faced with wage demands from my employees of between 15 and 20 per cent. I had to pay in order to retain labour. Industry is already talking about wage increases far in excess of 10 per cent. Of course, industry would like to persuade the trade union movement to accept wage increases of 10 per cent. or less. But no trade union will accept such an increase when unemployment is increasing, when mortgage rates are rising and when prices are increasing by 15 or 17 per cent. The only way to secure a breakthrough is to seek the co-operation of the trade union movement. That means round-the-table discussions. That is what my right hon. Friend the Member for Roxburgh, Selkirk and Peebles

1415
was talking about. He spoke of the possibility of a wages strategy and of getting all interested parties round the table.
Mr. Skinner: What about the Employment Bill?
Mr. Smith: I voted for it.
All these matters must be discussed if the co-operation of the trade unions is to be obtained. That cannot happen by refusing to talk about a wages stategy and saying that it is irrelevant to inflation. It is no use saying "Don't worry boys, we will beat you anyway because we will force up the number of unemployed." A stable society cannot be achieved in that way. In such a way, in the long term, the basis of industry will be destroyed. If inflation is controlled in that way, there will be nothing left to pick up because industry will have been destroyed and will be incapable of pulling itself together and getting back on its feet. It will not be able to give the country what it deserves, and what it could have if there was a proper strategy—a long-term, stable economy on responsible wage bargaining.
8.55 pm
Mr. David Mellor: I felt compelled to attend this debate because I sensed that it was bound to provide a somewhat singular experience. So it has, if only for the fact that at one point during the debate—almost an hour ago—there were eight Liberal Members in the Chamber. I cannot think that that has happened before during the lifetime of this Parliament.
One Liberal Member is company and two Liberal Members are certainly a crowd for most of our debates. The leader of the Liberal Party was somewhat foolish in trailing his coat and criticising Opposition Members who were not in their places. I cannot say that I expected that Parliament would revolve round the Liberals, but I have been somewhat surprised at the small contributions that they make to our debates.
Having regard to the way in which this debate has been trailed outside the House, it is no doubt looked upon by the leader of the Liberal Party and his colleagues as a major propaganda coup. No doubt
1416
they have been closeted night after night with their latest adherent, Mr. Aubrey Jones, who, sad to say, is a little bit of a "day before the day-before-yesterday's man."
There was the leader of the Liberal Party conferring with Mr. Aubrey Jones and the hon. Member for Colne Valley (Mr. Wainwright)—who I think will be speaking to us soon—who has come back into the breach as spokesman on Treasury matters now that poor old Tigger has gone to the happy hunting ground, courtesy of my hon. Friend the Member for Cornwall, North (Mr. Neale).
I cannot pretend to have been particularly impressed—
Mr. Ogden: Will the hon. Gentleman give way'?
Mr. Mellor: Later on; not now.
Mr. Ogden: Will the hon. Gentleman give way?
Mr. Mellor: No, I am not obliged to give way now and I do not intend to.
As my right hon. Friend the Chief Secretary said, the trouble with the proposals that have been put forward is that they have all been tried before. Sadly, they do not cut very much ice with anyone who looks back over the experience of the past 30 years in this country.
It would be unfortunate, of course, if were to lose the opportunity tonight not simply of considering the motion and the amendment before us, but of looking at the whole of the Liberal economic strategy, since it seems to be that which underlines the campaign that the Liberals are mounting—no doubt in readiness for the next by-election—in order to try to show that they have a viable alternative to Government policy.
If one recalls the last Liberal Party conference one has difficulty in finding any evidence that the arguments advanced by the leader of the Liberal Party and by the Liberal spokesman on economic affairs even got near to convincing their own party members at the conference. They have precious little chance of convincing us.
Perhaps we should examine one or two of the things that were said. Surely the key to the economic management of this country and to giving any future to our citizens is the question of an increasingly

1417
prosperous society and economic growth. At their conference last year the Liberals passed a motion saying that:
"Sustained economic growth as conventionally measured is neither achievable nor desireable."
Needless to say, the hon. Member for Colne Valley was not very keen on that proposition and sought to have it amended. He used strong words, saying that it was a reckless and arrogant forecast. He said that such a proposition would mean
"a far-reaching and unexplained reversal of all our economic policies."
He said that it was particularly illiberal. However, the conference was not prevented from passing the motion by a substantial majority.
The hon. Member for Colne Valley, in a speech that he no doubt wished to see as enlightened compared to those made by some of the people with whom he was debating had some criticism to make of another fundamental part of the economic strategy of any sensible Government. That concerned exporters. He said that Governments had been forced to search for economic growth
"at all costs—processing nuclear rubbish, selling armaments to Shahs and other oppressors and adventurers, and foisting on the Third world prestigious, expensive equipment irrelevant to their needs."
Once one cuts through the hot and intemperate descriptions one is left with a condemnation, apparently, of most of the export trades in which we are still capable of being competitive in the modern world. Is that the strategy that they will hawk round the country to the detriment of the Government, if they are given the opportunity? He went on to say
"Britain has thus resembled one of those families desperately over-stretched on mortgage and hire purchase payments which then advertises in the evening paper ' Must get work. Will take anything.'."
Is there anything wrong with some people in this country saying that they must get work and that they will take anything? If a few more people took that attitude we might he happier. It would certainly do something to deal with a situation in London where, notwithstanding the high unemployment rate, there are still hundreds of jobs remaining unfilled in any given area.
In what the hon. Member said later the cat was let out of the bag in respect of
1418
so much of this debate and so much of what the Liberal Party says on economic matters. He came to his central thrust on why the conference should not have passed the resolution that it did about economic growth. He said
"What a burden of defeatist nonsense to put on our future by-election candidates."
So there we have the nub of all this. It is not some high-minded approach to the future of this country's economy. Rather it is just something that can be cobbled together to be thrust at whatever constituency has the misfortune to have a by-election in which the Liberals think they have a chance. No wonder they were so unsuccessful at Southend, East when, notwithstanding a farrago of nonsense, coupled with a singularly unpleasent racialist attack upon my hon. Friend the Member for Southend, East (Mr. Taylor), who, apparently, because he was a Scotsman, was unfitted to stand there as a candidate, they finished third. They will have to devise a few better arguments than that.
The hon. Member for Colne Valley will be lecturing us tonight as, no doubt, he lectured his conference. The more one looks at last year's Liberal conference the less can one find anything that went through in the way that the platform would have liked.
Mr. Cyril Smith: Unlike the Tory Party conference.
Mr. Mellor: At least we know what we want to do and we set about trying to do it. The tragedy of the Liberal Party is that what is said is no doubt cobbled together in such a way that it is not even convincing to their followers.
The hon. Member for Colne Valley said that the consistent Liberal long-term aim was carefully continued growth. Here we have an extraordinary proposition, which makes it difficult to take the hon. Gentleman seriously as a sort of shadow Shadow Chancellor of the Exchequer. What an extraordinary way to describe growth! He speaks as though growth is something that some Ministry can conjure out of the air and then carefully control. That leads one to the essence of so much of what the Liberals think about the economy. They do not present a coherent strategy. That last sentiment is a collectivist sentiment and

1419
the whole of the policy that is being advanced is a rag bag and mish-mash of ideas drawn from all parts of the political spectrum which as well as being wrong is without the virtue of being consistent.
Of course, we want economic growth, but how can one say, as the Liberals did at their conference last year, that economic growth is not desirable while also saying—they passed a motion to this effect proposed by those wise financial heads in the Young Liberals—that there should be increases in public expenditure? We are being lectured tonight about incomes policy, and yet the Young Liberals proposed a motion that was passed at the conference that everyone in the public sector should be entitled to be compensated for the rise in prices. Are we saying that the norm to which we should be working within this incomes policy will be 20 per cent? What are we being told?
Some of my earlier observations caused amusement to the hon. Member for Isle of Ely (Mr. Freud). He did his best to try to argue with the conference. He had to deal with an intriguing motion, which tells us a little about how relevant the Liberals are to the problems of today. They put forward a five-point programme designed to put matters right. It provided for financial inducements for parents to stay at home, a return to village-type life incorporating all age and income groups, more spending on leisure facilities controlled by those who need them, and extended use of schools and community education. The hon. Member said that he thought that that amounted to paying a salary to housewives, and that he would have none of it. However, the conference accepted that programme, once again gratuitously adding to public expenditure in a way that makes it difficult to take its attacks on the Government seriously when we consider its alternatives.
Mr. Clement Freud: I wonder when the hon. Gentleman will come to this year's Liberal conference.
Mr. Mellor: I am talking about the conference of 27 September 1979. I do not know to which conference the hon. Gentleman refers. Reports of the conference appeared in the newspapers, and
1420
are readily available in the Library if the hon. Gentleman has forgotten about them. I do not wish to weary the House, but some of these matters should he put on the record so that the public know exactly what they are being sold when there is concentration on a specific point.
One would have thought that the Liberal Party's approach to free enterprise would be a key to the economic recovery of Britain. The conference dealt with a motion on multinational corporations—not favoured by the platform but none the less accepted overwhelmingly by the conference. That motion was extremely intemperate. It referred to multinationals creating and exploiting human suffering and manipulating democratic procedures and national economies. It referred not to companies in South Africa but to operations in England. Mr. Colin Dean came to the rostrum, amidst applause, and said that multinationals had no loyalty to any country, no ethics except their own, no answerability and no masters. Corruption, blackmail, bribery and threats were their business skills. Are those the sentiments of the leader of the Liberal Party about the multinational companies, when we as a country depend upon their investment? I thought that it was worth quoting those matters to show that the somewhat intemperate observations—observations that I thought the right hon. Member would have been only too happy to deny—of an offshore worker in North Sea oil, speaking at the conference, have now apparently become Liberal Party policy.
On this singular occasion when the Liberal Party introduces a motion, it is not enough for them to tell us about prices and incomes policy in terms which, as my right hon. Friend the Chief Secretary to the Treasury so rightly said, have been tried and failed before. We need to know exactly its basis for the constant sniping and jibing at the Government when we are trying to tackle the economic problems of the nation. Unless the Liberal Party can convince its immediate supporters of the wisdom of the totality of its economic package, it has precious little chance of persuading us. I have little doubt that the motion will be voted down tonight.
9.9 pm
Mr. Eric Ogden: The hon. Member for Putney

1421
(Mr. Mellor) clearly enjoyed himself this evening, if nobody else did. Of his rather verbose contribution, his misuse of words, I agreed with six words. I listened to them carefully, and he used them twice. He said "This House is being lectured tonight", and that is what he did. I tried to intervene because I wished to be helpful. He is comparatively new. The House can see what time has done to me, and I hope that it does the same to him.
It is not a custom in the House to attack those who cannot defend themselves in this place. We may, by all means, criticise one another, but let Mr. Aubrey Jones be answerable outside. Let former Members who are not able to defend themselves be left out of the argument. [Interruption.] I am offering the hon. Gentleman advice. From time to time he may need help, not from me, but from other hon. Members. However, that has been a useful convention. We hit one another because we can hit back. Those who cannot, be they Officers of the House or anyone else, should be left out of the argument.
Mr. Mellor rose—
Mr. Ogden: The hon. Gentleman did not give way to me. I shall not give way to him.
There seem to be three versions of what is happening tonight. First, I welcome the decision of the Parliamentary Liberal Party and its leader to introduce this subject. I agree with some of the right hon. Gentleman's arguments and disagree with some of his conclusions. There is still a large gap between us, even larger than the Gangway that separates us.
I came to listen, and I have been tempted to make a contribution. My hon. Friend the Member for Tottenham (Mr. Atkinson) referred to advice to Labour Members. I do not know whether none of my friends are speaking to me, but no one has offered me advice, either to come or to go. Technically I am paired, but I do not know what will come of that later on.
Earlier today the House seemed to be in a particularly stroppy and independent mood, which is not a bad thing. I regret that there is no motion on the Order Paper from the Parliamentary Labour Party. There was ample opportunity to recognise the differences that
1422
exist and yet to table a motion that would have commanded the full support of every member of the Parliamentary Labour Party. I regret that that has not been done. I am not criticising my hon. Friend the Member for Gateshead, West (Mr. Horam). I realise that he has a watching brief, and he is the best House-watcher in the business. He is an excellent contributor when he wants to be, but tonight he is doing the job that he was sent to do.
I remind the House of what we are supposed to be debating. We must decide the fate of this motion. We in this House should try to mean what we say and say what we mean. The Liberal motion states:
"That this House believes that inflation and unemployment cannot be effectively controlled without a prices and incomes policy; and calls on Her Majesty's Government to bring forward proposals for such a policy without delay."
The leader of the Liberal Party was euphoric, at least about the benefits that resulted from controlling inflation because of the Lib-Lab pact. If it was so good, and if the effect was so great, why was the right hon. Gentleman so keen to defeat the Labour Government at that time and to spend most of the time since then opposing everything that has been done by the Conservative Government, which the right hon. Gentleman knew would happen? Secondly, there is some confusion in the House about whether the Liberals are calling for a statutory policy or not.
We would be more honest to use the words that were used by the hon. Member for Rochdale (Mr. Smith). I almost said "my hon. Friend", because of the time when he and I were members of the Labour Party in Rochdale. The House should be aware of the things that he had to say about the Liberal Party in those good old days.
Three different voices seemed to be raised from the Conservative Benches. With respect, I think that the Chief Secretary gave us his personal version of what is Government policy. It would seem that if there were any U-turns he would no longer like to remain a member of the Government. However, there seems to be confusion between what he believes and what other Conservative Members believe; otherwise, how can he

1423
explain the almost 100 per cent. support for the Government from those Conservative Members who have spoken? It is always dangerous to give 100 per cent. support to one's Government, because when they change their policy one is left standing on a breaking branch.
There is the voice of the Prime Minister, who clearly links wage inflation to prices and jobs. The hon. Member for Fareham (Mr. Lloyd) said that "prices do not affect inflation, but they certainly affect jobs ". Before the next Liberal motion on this subject, perhaps the Tory Party can get together and give us the official version.
Mr. David Steel: The hon. Gentleman asked me two questions: first, why we ended the agreement and, secondly, why we support an incomes policy. The short answer is that if the hon. Gentleman invests in a copy of my book, published this week, price £6.50, he will find the longer answer, which I shall summarise. The lack of a formal incomes policy was one of the reasons, and the breakdown in the agreement between the Government and the trade unions was foreseeable. The hon. Gentleman asked whether the policy would be statutory. It is now widely recognised that any effective incomes policy would have to have some statutory element. Indeed, the Chief Secretary pointed out that the notification of income increases by companies would have to be brought within the statute.
Mr. Ogden: I am grateful to the right hon. Gentleman for giving us more information. I shall certainly agree to buy a copy of the right hon. Gentleman's book if the Prime Minister will allow the free collective bargaining of the House on the next tranche of hon. Members' incomes. The right hon. Member's book may have a scarcity value if nothing else. The Liberal Party's motion calling for a prices and incomes policy, and the Government's amendment to that motion, could fit very well together. The Liberal Party is calling for a policy. The Government—any Government—whether they like it or not, have a policy on prices and incomes, even if that policy is not to have a policy. That sounds a little strange but a prices and incomes policy is inevitable and unavoidable for any Government. Only the Opposition can refuse to
1424
have a policy on prices and incomes, because they have not yet decided what it is. The policy of the Conservative Party was to oppose the social contract and to oppose the limited sanctions of the previous Labour Government and they voted for free collective bargaining. The present Conservative Government, elected on the basis of free collective bargaining, lower taxation and less Government intervention, should not now complain that free collective bargaining is not producing the results that they expected. They have a prices and incomes policy, and they should recognise that as a fact.
I am one of that rare species who believed in the social contract, and I still believe in the social contract. More and more people outside are beginning to realise that perhaps it was not too bad. Perhaps we all have a monetarist policy. There is a monetarist policy at 26 Sherbrook Gardens, in Liverpool, and at home. If there is no money in the bank, there is a monetarist policy. A person can borrow money if he can repay it. It is no use going to the bank manager and asking for a loan of 20 per cent. when there is only 5 per cent. there.
We have had free collective bargaining for 12 months or more. I believe that the social contract was better than free collective bargaining for both the weak and the strong. My hon. Friend the Member for Bolsover (Mr. Skinner) may disagree. He is sponsored by the National Union of Mineworkers, and he will remember the NUM conference in Torquay in 1979, when the NUM rejected any further part in the social contract. The conference called for free collective bargaining. The following day, the then Secretary of State for Energy, my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said that the only way in which unemployment was solved before the war was by the use of public money on armaments. We must now find a way of using public money in investment to solve the problems. The only way in which we can do that fairly is through an understanding or an agreement between the trade union movement, the Labour Party and a Labour Government. The aim of the Labour Party and the trade union movement should be to put in power a Government who will listen to the voice of the trade unions and work things out with them. It has not worked out that way.

1425
We are all agreed that it is not working out in the way that we hoped last year. There must be a better way, and we have little time left to agree that better way.
Will the right hon. Gentleman, in his five minute peroration, by leave of the House—he forgot to ask about that—clarify the differences between himself, his Prime Minister, and his hon. Friends on the Government Benches who support him?
9.20 pm
Mr. Dennis Skinner: My hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) is absolutely correct when he says that there is no agreement between members of the Parliamentary Labour Party. In this narrow respect, there is not altogether agreement in the miners' parliamentary group. It may well be that within the Labour Party generally there could hardly be agreement on this question while we are living within the framework of what is loosely called a capitalist society.
But there is a party policy, nevertheless, and the party policy—as distinct from the Parliamentary Labour Party mess or shambles on this question—is quite specific. It threw out the last incomes policy, which was then 5 per cent., way back in 1978, when the Prime Minister at that time—foolishly, in my view—decided to throw away his general election prospects. It is all wrapped up in the decision taken at that time, and it is the same argument that we are discussing today.
The Prime Minister at that time had an opportunity of getting away from the rigours of an incomes policy and wage cutting. That is what it really is. We might as well call a spade a spade. That is what it is all about—to curtail the ability of those who work by hand and brain and create the wealth of this country to get as much money as they possibly can, left to the devices of the market. That is what has been talked about here today and that is why a lot of hon. Members are missing. It is unpleasant and they do not like to talk about it. They would like it to get through on the nod, in the hope that perhaps all the problems could then be solved.
The issue today is really a replay of what went on in 1978, after two years of wage restraint had resulted finally in
1426
the break-up and the collapse of the Labour Government. This is well known and rehearsed by many people who supported the 5 per cent. policy at that time. I did not support it. I did not support a 10 per cent. policy either. Many people are now saying that the Prime Minister of the day was wrong to go as low as 5 per cent. They say that if only he had had an airy-fairy 8 or 9 per cent., and called an election in October, the Labour Party would now be in office—and I would still have been in Opposition.
But we are not sitting on the Government Benches, and the opportunity was thrown away because of the attempts by the previous Labour Government to get involved in an incomes policy for the third successive year. I suppose it was about the ninth, tenth or eleventh time that there had been an incomes policy during the course of the past two decades. I have lost count of the number of times.
We are constantly being told by many experts, and particularly by the Liberal Party, which has never been in power and does not know what it is like—
[Interruption.] I cannot account for what happened in the nineteenth century. I am more concerned with what has happened since 1932, when I came on the scene.
Mr. David Steel: The hon. Member has not been in power.
Mr. Skinner: I have not personally, no. What I am trying to say is that the Liberal Party, without having power, has always been among those who believe that we would be better with a permanent prices and incomes policy. The Liberals believe that inflation and all the rest of the excesses exist because we have not had such a policy. Since I came here in 1970, there have been more years when there have been incomes policies than years when there have not. There have been statutory incomes policies; there have been semi-statutory incomes policies. The last one was non-statutory and it had a name all of its own. But all these policies are built around the same objective, namely, to cut wages.
I am speaking for the national executive committee of the Labour Party tonight. I do not care whether Labour Members have gone away from the House tonight. It is important that some

1427
of us have stayed in order to put the Labour Party point of view in the absence of the Shadow Cabinet's point of view. I know what their problem is. The Shadow Cabinet, or certain members of it—not all of them—were hankering after an incomes policy for most of the last 12 months, until they found that the Prime Minister and others on the Treasury Bench were gradually moving into one. Although they were saying they had not got one and that it was a wages free-for-all, the facts were staring the Shadow Cabinet in the face. The slight nuances coming into the speeches indicated that, after all, the Government were sliding into some kind of Biffen fashioned incomes policy. It has to be fashioned in a strange way if it is to include the Chief Secretary to the Treasury. I can see him disappearing from the end of the Table ere long if the nuances move more in the direction of formulating a fully-fledged incomes policy, because he, like me, would, I hope, argue against a fully fashioned incomes policy on the ground that it cannot work. Not only can it not work, but it cannot include everybody.
Mr. Arthur Lewis: That is the point.
Mr. Skinner: It does not include Members of Parliament.—[Interruption.] Here we go again pleading poverty. The Liberal Party is supposed to be looking after the little man and the first words that the leader of the Liberal Party utters are that it will affect us.
Mr. David Steel: Wait and see.
Mr. Skinner: We are not part of the poverty-stricken masses. We are lucky to be here. That is why we have never been part of the incomes policy brain-wave.
Mr. Steel: Wait and see.
Mr. Skinner: We had a wage increase a couple of weeks ago, and I suppose that the leader of the Liberal Party had his.
Mr. Steel: That is right.
Mr. Skinner: I hope that he will add to that the increase that he might get in the course of the next few weeks.
1428
In all the many times that incomes policies have been attempted, there has been no incomes policy for millions of people throughout the land. How can we impose an incomes policy on an estate agent?
Mr. Steel: Or an autioneer.
Mr. Skinner: Or an auctioneer. Or the many accountants who are added to the thousands of accountants used by people in every succeeding incomes policy to escape from incomes policies. Every time a new type of incomes policy is introduced, another 20,000 accountants have to be hired to find out another 1,001 devices to get round it.
It includes all the lawyers. How can we impose an incomes policy on a lawyer? I suppose that there are plenty of lawyers in here now. [An HON. MEMBER: "Not tonight.") They may not be here tonight as it is not a three-line Whip. How can we put an incomes policy on lawyers and all the people in our so-called professional life? We can extend it ad nauseam. I have no doubt that if the Tory Government, as is possible, introduce an incomes policy ere long, we shall see the Chief Secretary move out of the limelight into another area of the spotlight. When that happens, many more people will escape from the harshness of an incomes policy.
Nearly everybody who works on a building site has found a way round an incomes policy. I do not blame such people, because they are grafting every day, getting up at 6 or 7 o'clock in the morning to do some real work. I can well understand why they have got out of it.
Numbers are added every year. As every incomes policy is introduced, more perks are introduced. Every time we have an incomes policy, another newfangled perk comes on to the scene.
I well remember the first time that I got involved in this argument in 1972 when the right hon. Gentleman was a Back Bencher. The then Tory Government had a policy of £1 plus 4 per cent. The chairman of the Fatstock Marketing Corporation found a way round that. He got some kind of productivity bonus that made him £1 plus 44 per cent., and apparently it was legal. On and on it goes.

1429
How do we impose an incomes policy on the many Members of Parliament and others in the land who have moonlighting jobs? Some hon. Members are moonlighting six or seven times. Some of them are at it tonight.
Mr. David Steel: Most of them are the hon. Gentleman's hon. and learned Friends.
Mr. Skinner: I am not embarrassed when hon. Members point to empty Labour Benches. I am not here to answer for them. That is their business. The moonlighters have shown that millions of opportunities exist for people to escape an incomes policy. There is no such escape for the 250,000 miners. The Government may want to slap an incomes policy on them, but none of them are involved in moonlighting because they are too tired by the time they get home.
It is easy to impose an incomes policy on 250,000 miners. It is also easy to impose an incomes policy on dustbin men, because they are easily identified. In addition, they are nearly always members of trade unions. The same is true of teachers and local authority workers. It is easy for any Government to impose an incomes policy on those who have to bear the brunt of the economic mess that we continually face. That is another reason why I hope that the Chief Secretary will ensure that we do not slide any further into one.
The Chief Secretary should be the last person to argue that we have not got some type of incomes policy now. The nurses have been subjected to one. People in the public sector have not got any bargaining power. They are being subjected to an incomes policy. The Chief Secretary does not like hearing such remarks, but he knows that he is carrying out a policy that subjects certain people to a cut in their wages when inflation is running at 22 per cent.
To some extent, the workers at British Leyland are controlled by the Government's purse strings. They had to settle for between 5 per cent and 10 per cent. this year. They are not causing the inflation that we hear so much about. The same would have been true of the steel workers had they not decided to fight and to get about 20 per cent.
When the new-fangled policy that the Liberal Party so ardently desires is
1430
achieved, how will banks be controlled? According to their last annual returns, they made profits of about £1,500 million. What about them? They have made profits because there is a bank rate of 17 per cent. Their profits have nothing to do with the wages of those who create the wealth. How will the Liberal Party control those who have invested in Ladbroke's and in the casino economy? Our manufacturing base is being eroded and decimated. All sectors—textiles, carpets, boots, shoes and so on—are being run down by the Tory Government. However, Ladbroke's and the banks are allowed to make money hand over fist. Ladbroke's increased its profits by 71 per cent. How can its income be controlled? Why should it always be argued that those who are to blame are those who get up early in the morning, go to work and do a real job?
Mr. Arthur Lewis: My hon. Friend need not go so far away. Is he not aware that only a few weeks ago all the noble Lords in the other place attacked workers because they were expensive? Is he aware that those noble Lords are picking up £36 a day tax free? That is worth £125 per day to each and every one of them. However, they said that nurses should not get more than £30 or £40 a week.
Mr. Skinner: Like many Conservative Members, most of those in the other place are not only getting £36 tax free, but are also moonlighting. The chairman of the Tory Party is one of the biggest culprits. We have just heard the leader of the Liberal Party argue that he is in favour of trade unionists going to gaol.
Mr. David Steel: The hon. Gentleman was not here when I spoke.
Mr. Skinner: I have heard the right hon. Gentleman talk about a statutory policy. A statutory policy cannot exist without involving the possibility of sending honest-to-goodness trade unionists down the line if they refuse to comply. That is what it means. This wonderful, free, so-called Liberal Party of ours is in favour of sending people to gaol.
Mr. Steel: Absolute rubbish.
Mr. Skinner: I do not fall for that nonsense, nor do I fall for the nonsense that there is no wealth in our society. I am

1431
fed up with hearing year after year that this country is in a mess and that if only people would give a little bit here or there everything would be all right tomorrow.
Mr. Penhaligon: About 15¼ minutes ago the hon. Member said he would tell us what the national executive committee of the Labour Party thought about a pay policy. Is there any chance of his actually getting to that subject?
Mr. Skinner: The hon. Member must be deaf, because at the beginning I said that in 1978 the Labour Party threw out the 5 per cent. pay policy, and it has stood against a pay policy ever since. I shall be one of those on the NEC who will fight to steer clear of any incomes policy. When the Tory Government introduce a fully-fledged incomes policy for everyone my right hon. Friends on the Front Bench will run towards me and the NEC. They will not want to be tarred with the same brush. It has happened before and it will happen again.
The Liberal leader should be told to explain what he means by a statutory policy which results in trade unionists being sent to gaol. I do not fall for the notion that there is no wealth in this country, and that workers must suffer another incomes policy in order to drag the country out of a mess. It has been in a mess every year that I have been involved in politics. All Governments have declared that everything would be all right if only workers would pull up their socks. Yet there is £15,000 billion worth of petroleum revenue tax coming from the North Sea. That wealth should be used to reduce working hours, remove dole queues and increase public spending.
We should get away from the notion that incomes policies will resolve all our problems. There is plenty of wealth in this country, and it should be shared out among those who create it.
9.38 pm
Mr. Richard Wainwright: Putting the need for an incomes policy on the Order Paper today has exceeded the greatest hopes of Liberal Members. It has proved to be a magic spell. We have had three hours of House of Commons time, virtually without either
1432
Government or official Opposition influence. That is how Parliament should work. It has provided an opportunity for commendably frank and outspoken views to be exchanged between various segments of the official Opposition. Long may they argue their differing cases publicly, honourably and frankly as they have done among themselves tonight. That will be of educative value to British democracy.
The Government have trotted out the only Minister they could—their lone Horatius who alone is untainted from appeals to the British public for wage restraint. We have always given the right hon. Gentleman full marks for the sincerity of his purist, monetarist faith which has only deserted him once—in 1973 when, in a fit of absence of mind, he voted for a prices and incomes policy, for which we hereby forgive him.
The attitude of the Shadow Cabinet has been even more flagrant. Two Trappist monks have in succession taken their lonely place on the official Opposition Front Bench with the sole purpose of keeping Liberal Members off it. I do not know whether the heresy-hunting in the Labour Party has reached the stage where even the tone of voice of certain dissentients, including the hon. Member for Bolsover (Mr. Skinner), has to be reported to the Whips. Save for that, I see no purpose in the presence of the totally silent representatives on the Labour Front Bench.
Although persistent and tenacious as always, the Chief Secretary was a grave disappointment. He did not desert his faith, but he did not enlarge on it, nor did he take the opportunity, which, after all, is what the House of Commons is largely for, to get across to the country what the Government stand for and what they intend to do about inflation. The right hon. Gentleman must have very much on his mind the fact that the country does not appreciate the way in which the Government's policies are supposed to work. One would try in vain to get any accurate idea of the Government's money supply targets from talking to people on the streets of London, yet the Chief Secretary allows tonight's opportunity to educate the public to go unused.
Uncharacteristically, the right hon. Gentleman also failed to take on board

1433
the methods of enforcement that my right hon. Friend the leader of the Liberal Party was at pains to propose, namely, working through tax incentives for compliance instead of returning to the stale and somewhat clapped-out policies of penalties for infringing a prices and incomes policy. We suggest a positive method of enforcement, which could almost be designed to appeal to someone with the Chief Secretary's philosophy, and it is disappointing that it excited no comment from him.
I therefore wish to enlarge a little on what the right hon. Gentleman said. The Liberal Party believes that a Conservative Government could retain their credibility if they seized the opportunity to use tax incentives for compliance with a prices and incomes policy. We have suggested rebates on the national insurance surcharge, which would be appropriate for a Conservative Government, as the national insurance surcharge was entirely a Labour measure. It is rightly resented by employers, as it is a tax on jobs. Offering a rebate would alleviate the unemployment that the Government have helped to create. It would be relatively simple, as it is not as an assessed tax but one that has to be met week by week by every employer.
Mr. Norman Atkinson: Is the hon. Gentleman suggesting that if, for whatever reason, a worker receives an increase from one week to the next that exceeds the norm set by the Government, it should be subject to a tax penalty?
Mr. Wainwright: No. What is suggested—and it is open to elaboration or alteration by wiser heads—is that those employers who sign a declaration that they will comply with the prices and incomes policy, who at the end of the year sign again to say that they have complied and who have stood up to the necessary tests, inspections and examinations, should be automatically entitled to a fixed rebate on the national insurance surcharge. That is a positive approach, and deserves comment from the Chief Secretary.
The right hon. Gentleman has been disappointing in other ways. He had nothing to say about the effects of his monetary policy when and if the glorious time arrives when contraction and de-
1434
flation can end and the economy can once more be expanded. Throughout this Parliament we have never yet heard how the monetarists intend to allow the economy to expand eventually, without the old cycle of wage-push-inflation starting all over again.
It is unfortunate that the Chief Secretary, while poking fun at the admitted failures of some previous incomes policies, did not take the opportunity to demonstrate that there is a way out of his own policy that would enable the country to get back to some sort of prosperity without wage inflation starting all over again.
I was disappointed that the right hon. Gentleman did not comment on the success of incomes policies in other democratic countries. As my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) said, virtually every other country in northern Europe runs some sort of incomes policy. The fact that most have much more successful economies that ours surely requires comment from a Government who are obstinately refusing even to look at any measure of formal organised incomes policy, but are simply trotting out ad hoc incomes policies every time that there is an embarrassing report from Lord Boyle or Professor Clegg.
The Chief Secretary was unable to enlighten us on how much unemployment the country will have to suffer, and for how long, before inflation turns down and his measures appear to be working. It is a deplorable aspect of the Government's policies that the country is given no light at the end of the tunnel and no date by which we can expect something to begin to work.
Many economists believe that it will require unemployment of more than 3 million to have any serious effect on the mass of wage demands. We regard that as a barbarous method of proceeding and it enjoins us to search for every possible alternative. That is why we tabled the motion.
Opinion polls have shown time and again that the mass of working people in all parts of the country would welcome an incomes policy. They are willing to accept moderate settlements if they can be satisfied that their fellow-citizens are also accepting them. Surely that opens out an essentially Conservative approach.

1435
It stresses the unity of the country and of society. The alternative is to let the country descend into an anarchy of competing claims by frightened people who are scared that if they do not get in a big claim quickly, their neighbours will submit an even bigger one and put them at a disadvantage.
Our society is at a crossroads in that respect. Do we proceed on the basis of selfish individualism, with a host of mutually competing wage claims, or do we act as a responsible society, under the leadership of Parliament, in getting the sort of restraint that the great mass of our people are willing to accept if they can be assured that it applies to the majority of the population?
I was disappointed with much of the rest of the debate. We learnt that the Chief Secretary has a disciple in the hon. Member for Fareham (Mr. Lloyd), though the hon. Gentleman has some way to go and it may be that the monetarist policy will have become totally discredited before he emerges into full parliamentary maturity.
It was engaging to hear from the hon. Member for Liverpool, West Derby (Mr. Ogden). As always, he made his position clear and he incited some useful comments in reply from the hon. Member for Bolsover. The hon. Member for West Derby asked a question that must be answered. He wanted to know whether the Liberal Party was proposing a statutory policy. The answer is clearly and positively "Yes", in the sense that we believe that we should use the tax system to provide an incentive for compliance with the policy.
Of course, that is a world away from any threat of prison sentences or other criminal penalties.
Mr. Skinner: It is not.
Mr. Wainwright: We suggest proceeding by way of a tax incentive. We do not propose to send to gaol the odd extraordinary citizen who actually refuses a tax incentive. The whole object of getting away from tax penalties is to avoid the spectre of imprisonment that the hon. Member for Bolsover, having come late to this debate, introduced into our discussion.
1436
The fact is that we are drifting into incomes policy in the usual ad hoc, shambling and disorganised way that has characterised British government in the past. The plea of hon. Members on the Liberal Bench, not for the first time, is that instead of drifting into a wage freeze or a suddenly improvised, back-of-the-envelope incomes policy, from which this country has so often suffered, we should, this time, calmly and with as much support from both sides of the House as can be mustered, go into an organised, carefully planned incomes policy, based on the positive idea of a tax reward for compliance and thus follow the example, far too late in the day, of the other democracies of northern Europe. That proposition seems to us fully justified by the appalling experience of wage anarchy in this country in the past.
The alternative is the negative stance of continually pointing out the 1,001 little difficulties that can crop up, the anomalies, the odd people, such as Members of Parliament and members of another place, who do not quite fit into the picture. Those are trivial matters compared with the crisis confronting the country. Our fellow-citizens this winter, if Parliament does not assert itself and if the Government do not organise their existing ad hoc incomes policy into formal shape, will be ground between two millstones of deliberately created unemployment and trade union monopoly power. That is a fate that we want to spare our fellow-citizens.
It seems to me Nero-like to be raising a lot of trivial administrative objections when many school-leavers, who cannot be blamed for exercising extravagant claims, and also so many people who have been moderate in wage claims in the past now face endless periods of unemployment to which the Government are unable to set any term. It is because that is a prospect that Liberals and, I hope, many other hon. Members on both sides refuse to tolerate, that we have tabled the motion. We invite hon. Members to come into the Lobby in support of it.
9.53 pm
Mr. Biffen: With the leave of the House, I should like to reply to the debate. I join the hon. Member for Colne Valley (Mr. Wainwright) in reflecting upon the Trappist modesty that has overcome the Front Bench of the Labour

1437
Party. I only hope that the hon. Member for Gateshead, West (Mr. Horam) can perpetuate this new-found characteristic to cover Thursday's Standing Committee on the Finance Bill. The silence from the Front Bench however, was more than compensated by the contribution of the hon. Member for Bolsover (Mr. Skinner). I mean that sincerely. I mean it sincerely because the hon. Gentleman spoke with obvious great feeling, but, above all, with a real grasp of the immediate practical implications of what happens once one gets into any kind of policy of this character.
I hear the hushed words between Liberals consorting together—"Coalition" they say. Any hon. Members who have tested these policies in the outside world, no matter from what corner of the House they come, have the obligation to come here and discuss what are their limitations and what are their challenges. I tried to define, not out of any hostility to the Liberal Party but for the order of the debate, what I thought was the essential characteristic of an incomes policy. It is the process whereby the central authority engages in the identification, selection and enforcement of the differential movement of incomes throughout the economy. Anything less than that is not really gilt-edged incomes policy.
Mr. Skinner: Not fully fledged.
Mr. Biffen: The other variations are noises which Governments have essayed from time to time, usually as a prelude to ending up with the fully-fledged article. The experience with the fully-fledged article makes the House a little circumspect—by absence or by consideration of the motion.
Not much time is available for me to reply to the debate. I shall comment on the two speeches from the Liberal Benches as a courtesy to the party whose Supply time this is. The hon. Member for Rochdale (Mr. Smith) promised me great shocks this winter. I can believe him. He made a fair and pertinent point about the difficulties that the Government face on the control of public spend-
1438
ing. The targets are set out in the Red Book. Nothing has happened since to persuade us to depart from the targets.
The central Government borrowing requirement for the first couple of months certainly shows a disturbing overspend. However, that was early in the year and it would be foolish to make an elaboration of that. I accept that industrial conflicts occur outside incomes policies, but a characteristic of industrial disputes within incomes policies is that they bring the Government into direct conflict in areas where we wish to distance ourselves as far as possible.
The hon. Member for Colne Valley was complimentary when he said that I had not said much in my speech. I am told that that is a good characteristic for a Minister to acquire. He was worried about the novel form of penalty, the benefit for good behaviour—or incentive, to use that magic word. It all turns on the existence of an employer who pays the stamp. The hon. Member for Bolsover immediately saw the great scope for a rush into the black economy in order not to be visible to be caught up in this convoluted nonsense. That was a point that I made earlier in the debate.
I understand the anxiety of my hon. Friend the Member for Fareham (Mr. Lloyd) that we should do all in our power to ensure that interest rates fall. That certainly is at the centre of Government policy.
The short debate has been entertaining. It has thrown up a variety of divisions within the parties. That is not bad. The House has debated, as it should, and has engaged in earnest disputation. Hon. Members have not spoken for outside audiences, but to each other in the Chamber. However, the debate has not disarmed my scepticism about the statutory regulation of incomes. I do not think that incomes policies affect inflation. I do not believe that they affect employment. They are massive areas of social engineering. Above all, they are a supreme example of hope over experience —a true slogan for the party that introduced the debate.
Question put, That the original words stand part of the Question:—

Division No. 383]

AYES

[10.00 pm

Alton, David

Penhaligon, David

Wainwright, Richard (Colne Valley)

Grimond, Rt Hon J.

Ross, Stephen (Isle of Wight)

Hooley, Frank

Smith, Cyril (Rochdale)

TELLERS FOR THE AYES.

Howells, Geraint

Steel, Rt Hon David

Mr. Alan Beith and Mr. Clement Freud

Johnston, Russell (Inverness)

NOES

Aitken, Jonathan

Goodhew, Victor

Murphy, Christopher

Alexander, Richard

Gorst, John

Myles, David

Alison, Michael

Gow, Ian

Neale, Gerrard

Ancram, Michael

Gower, Sir Raymond

Needham, Richard

Aspinwall, Jack

Gray, Hamish

Nelson, Anthony

Atkins, Rt Hon H. (Spelthorne)

Greenway, Harry

Neubert, Michael

Baker, Nicholas (North Dorset)

Griffiths, Peter (Portsmouth N)

Newton, Tony

Beaumont-Dark, Anthony

Gummer, John Seiwyn

Normanton, Tom

Benyon, Thomas (Abingdon)

Hamilton, Michael (Salisbury)

Onslow, Cranley

Benyon, W. (Buckingham)

Hampson, Dr Keith

Page, Rt Hon Sir R. Graham

Berry, Hon Anthony

Hannam, John

Page, Richard (SW Hertfordshire)

Best, Keith

Haselhurst, Alan

Parris, Matthew

Bevan, David Gilroy

Hawksley, Warren

Pawsey, James

Biffen, Rt Hon John

Heddle, John

Pollock, Alexander

Biggs-Davison, John

Henderson, Barry

Powell, Rt Hon J Enoch (S Down)

Blackburn, John

Hogg, Hon Douglas (Grantham)

Proctor, K. Harvey

Boscawen, Hon Robert

Hooson, Tom

Rees, Peter (Dover and Deal)

Bottomley, Peter (Woolwich West)

Howell, Ralph (North Norfolk)

Renton, Tim

Braine, Sir Bernard

Hunt, John (Ravensbourne)

Ridley, Hon Nicholas

Bright, Graham

Hurd, Hon Douglas

Roberts, Michael (Cardiff NW)

Brinton, Tim

Jopling, Rt Hon Michael

Sainsbury, Hon Timothy

Brooke, Hon Peter

Kaberry, Sir Donald

St. John-Stevas, Rt Hon Norman

Brotherton, Michael

Kellett-Bowman, Mrs Elaine

Shepherd, Colin (Hereford)

Brown, Michael (Brigg & Sc'thorpe)

King, Rt Hon Tom

Shepherd, Richard(Aldridge-Br'hills

Browne, John (Winchester)

Kitson, Sir Timothy

Skeet, T. H. H.

Bruce-Gardyne, John

Lamond, James

Skinner, Dennis

Bryan, Sir Paul

Lamont, Norman

Speed, Keith

Budgen, Nick

Lang, Ian

Speller, Tony

Bulmer, Esmond

Lawrence,Ivan

Spence, John

Butcher, John

Lawson, Nigel

Spicer, Jim (West Dorset)

Cadbury, Jocelyn

Lee, John

Stanbrook, Ivor

Carlisle, John (Luton West)

Le Marchant, Spencer

Stanley, John

Carlisle, Kenneth (Lincoln)

Lester, Jim (Beeston)

Stevens, Martin

Channon, Paul

Lewis, Arthur (Newham North West)

Taylor, Teddy (Southend East)

Churchill, W. S.

Lloyd, Peter (Fareham)

Tebbit, Norman

Clark, Hon Alan (Plymouth, Sutton)

Lyell, Nicholas

Thatcher, Rt Hon Mrs Margaret

Clark, Sir William (Croydon South)

McCrindle, Robert

Thomas, Rt Hon Peter (Hendon S)

Clarke, Kenneth (Rushcliffe)

Macfarlane, Neil

Thompson, Donald

Clegg, Sir Walter

MacGregor, John

Thore, Nell (Ilford South)

Cockeram, Eric

Major, John

Thorne, Stan (Preston South)

Colvin, Michael

Marten, Neil (Banbury)

Trippier, David

Cranborne, Viscount

Mates, Michael

Waddington, David

Dean, Paul (North Somerset)

Mather, Carol

Wakeham, John

Dover, Denshore

Maxwell-Hyslop, Robin

Walker, Bill (Perth & E Perthshire)

Dunn, Robert (Dartford)

Mayhew, Patrick

Waller, Gary

Eden, Rt Hon Sir John

Mellor, David

Ward, John

Eggar, Timothy

Meyer, Sir Anthony

Watson, John

Elliott, Sir William

Miller, Hal (Bromsgrove & Redditch)

Wells, Bowen (Hert'rd & Stev'nage)

Emery, Peter

Mills, Iain (Meriden)

Wheeler, John

Faith, Mrs Sheila

Mills, Peter (West Devon)

Whitney, Raymond

Farr, John

Moate, Roger

Wickenden, Keith

Fenner, Mrs Peggy

Molyneaux, James

Wolfson, Mark

Fletcher, Alexander (Edinburgh N)

Montgomery, Fergus

Fookes, Miss Janet

Morgan, Geraint

TELLERS FOR THE NOES:

Garel-Jones, Tristan

Morrison, Hon Peter (City of Chester)

Lord James Douglas Hamilton and Mr. John Cope

Glyn, Dr Alan

Mudd, David

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith pursuant to
The House divided: Ayes 10, Noes 164.
Standing Order No. 32 (Questions on amendments):—
The House divided: Ayes 144, Noes 25.

Bevan, David Gilroy

Gummer, John Selwyn

Nelson, Anthony

Biffen, Rt Hon John

Hampson, Dr Keith

Neubert, Michael

Biggs-Davison, John

Hannam,John

Newton, Tony

Blackburn, John

Haselhurst, Alan

Normanton, Tom

Braine, Sir Bernard

Hawksley, Warren

Onslow, Cranley

Bright, Graham

Heddle, John

Page, Rt Hon Sir R. Graham

Brinton, Tim

Henderson, Barry

Page, Richard (SW Hertfordshire)

Brooke, Hon Peter

Hogg, Hon Douglas (Grantham)

Parris, Matthew

Brotherton, Michael

Hooson, Tom

Pawsey, James

Brown, Michael (Brigg & Sc'thorpe)

Howell, Ralph (North Norfolk)

Pollock, Alexander

Browne, John (Winchester)

Hunt, John (Ravensbourne)

Proctor, K. Harvey

Bruce-Gardyne, John

Hurd, Hon Douglas

Rees, Peter (Dover and Deal)

Budgen, Nick

Jopling, Rt Hon Michael

Renton, Tim

Butcher, John

Kellett-Bowman, Mrs Elaine

Roberts, Michael (Cardiff NW)

Cadbury, Jocelyn

King, Rt Hon Tom

Sainsbury, Hon Timothy

Carlisle, John (Luton West)

Lamont, Norman

St. John-Stevas, Rt Hon Norman

Carlisle, Kenneth (Lincoln)

Lang, Ian

Shepherd, Colin (Hereford)

Channon, Paul

Lawrence, Ivan

Shepherd, Richard (Aldridge-Br'hills)

Churchill, W. S.

Lawson, Nigel

Skeet, T. H. H.

Clark, Hon Alan (Plymouth, Sutton)

Lee, John

Speed, Keith

Clark, Sir William (Croydon South)

Le Marchant, Spencer

Speller, Tony

Clarke, Kenneth (Rushcliffe)

Lester, Jim (Beeston)

Spicer, Jim (West Dorset)

Clegg, Sir Walter

Lloyd, Peter (Fareham)

Stanbrook, Ivor

Cockeram, Eric

Lyell, Nicholas

Stanley, John

Colvin, Michael

McCrindle, Robert

Stevens, Martin

Cope, John

Macfarlane, Neil

Taylor, Teddy (Southend East)

Cranborne, Viscount

Major, John

Tebbit, Norman

Dean, Paul (North Somerset)

Marten, Neil (Banbury)

Thatcher, Rt Hon Mrs Margaret

Douglas-Hamilton, Lord James

Mates, Michael

Thomas, Rt Hon Peter (Hendon S)

Dover, Denshore

Mather, Carol

Thompson, Donald

Eden, Rt Hon Sir John

Maxwell-Hyslop, Robin

Thorne, Neil (Ilford South)

Eggar, Timothy

Mayhew, Patrick

Trippier, David

Emery, Peter

Mellor, David

Waddington, David

Faith, Mrs Sheila

Meyer, Sir Anthony

Wakeham, John

Farr, John

Miller, Hal (Bromsgrove & Redditch)

Walker, Bill (Perth & E Perthshire)

Fenner, Mrs Peggy

Mills, Iain (Meriden)

Waller, Gary

Fletcher, Alexander (Edinburgh N)

Mills, Peter (West Devon)

Ward, John

Fookes, Miss Janet

Moate, Roger

Wells, Bowen (Hert'rd & Stev'nage)

Garel-Jones, Tristan

Molyneaux, James

Wheeler, John

Glyn, Dr Alan

Montgomery, Fergus

Whitney, Raymond

Goodhew, Victor

Morrison, Hon Peter (City of Chester)

Wickenden, Keith

Gorst, John

Mudd, David

Wolfson, Mark

Gow, Ian

Murphy, Christopher

Gower, Sir Raymond

Myles, David

TELLERS FOR THE AYES:

Gray, Hamish

Neale, Gerrard

Mr. Robert Boscawen and Mr. John MacGregor.

Greenway, Harry

Needham, Richard

Griffiths, Peter (Portsmouth N)

NOES

Alton, David

Freud, Clement

Smith, Cyril (Rochdale)

Ashton, Joe

Hamilton, W. W. (Central Fife)

Spriggs, Leslie

Atkinson, Norman (H'gey, Tott'ham)

Home Robertson, John

Steel, Rt Hon David

Beith, A. J.

Howells, Geraint

Strang, Gavin

Campbell-Savours, Dale

Johnston, Russell (Inverness)

Wainwright, Richard (Colne Valley)

Canavan, Dennis

Lamond, James

Clark, Dr David (South Shields)

Lewis, Arthur (Newham North West)

TELLERS FOR THE NOES:

Cryer, Bob

Penhaligon, David

Mr. Stan Thorne and

Dixon, Donald

Ross, Stephen (Isle of Wight)

Mr. Ioan Evans.

Douglas, Dick

Skinner, Dennis

Question accordingly agreed to.
Mr. Deputy-Speaker forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).
Resolved,
That this House believes that a lasting cure for inflation and unemployment is best secured by policies designed to control public spending, borrowing and the money supply, whilst providing a realistic and equitable framework of taxation.

OFFSHORE OIL (LICENCES)
10.22 pm
Dr. David Owen (Plymouth, Devon-port): I beg to move,
That an humble Address be presented to Her Majesty, praying that the Petroleum (Production) (Amendment) Regulations 1980 (S.I., 1980. No. 721), dated 21 May 1980, a copy of which was laid before this House on 23 May, be annulled.
I make clear that my purpose in moving this prayer is not that we should vote against the regulations but that on this crucial decision the House should have an opportunity of discussing the policy for the North Sea. It also gives us an oppor-

1443
tunity to raise serious criticisms of some aspects of the Government's oil policy. I do not wish to delay in any way the procedure on seventh round licensing. I favour the need for the seventh round, and I consider that its size is about right.
There are arguments as to the exact number of blocks. I believe that the Minister has been correct in not moving towards auctioning of licences. However, there is the question whether we can gain access to substantially greater revenue by the auctioning of licences. That is a tempting question. The Minister's choice of having 20 blocks, in areas where there is a good likelihood of finding oil, where people should be expected to pay a £5 million premium, is a sensible step forward. If we learn from this experiment, it may be possible to go further. I think that it would be possible to have a higher initial fee than the £5 million fee that is proposed.
But the crucial thing that the Minister is right to protect is the need to have a discretionary element, held by the Secretary of State, giving some form of leverage over oil companies so that they will follow the practices and the policies of Her Majesty's Government. If we were to abandon that discretionary element entirely, we would have no leverage, for example, over oil companies in the sense that they should wherever possible purchase their supplies from United Kingdom suppliers.
I attach immense importance to retaining a very high percentage of work in the North Sea that is based in the United Kingdom. In areas of this country with very high unemployment—I know that the Minister, coming from a Scottish constituency, will understand this—it is necessary that this prosperous industry should show in its choice of firms, and in settling the sites at which it places some of its contract work, some understanding of the need for the less prosperous parts of the country to benefit, and in particular the people of Scotland.
I would not, therefore, be prepared to support a move towards an auctioning system, although I am prepared to move forward flexibly in the light of the experience of the seventh round.
I strongly object to what I believe to be a purely doctrinal decision taken by
1444
the Government that the British National Oil Corporation and the British Gas Corporation will no longer have a mandatory majority equity interest in future licences. There is not a shred of justification for it. I believe that it is motivated purely and simply by an animus against BNOC which has been a hallmark of the Prime Minister's policy ever since she took office. It is absolutely disgraceful that here we are debating in July the North Sea and the seventh round, when the cloud of uncertainty which has hung over BNOC ever since the election result which brought the present Government to office, has not been lifted.
I do not adopt a doctrinaire view on these issues. I fundamentally believe that the energy policy of this country is far too important for it to be a shuttlecock between differing Governments. (HON. MEMBERS: "Hear, hear."] Hon. Gentlemen say "Hear, hear", but what is sauce for the goose is sauce for the gander, and there is a responsibility on them as well as on my hon. Friends to ensure that degree of stability.
I say to the Minister—he knows my view of this—that if the control mechanism of BNOC is changed by taking an equity share in BNOC, we shall view it with the utmost seriousness. In the Committee stage of such legislation he will have to fight for it line by line. He will have to justify what I believe will be a very serious challenge to our position on the United Kingdom continental shelf if any change is made in BNOC. It is right to warn Conservative Members that it will raise very serious legal questions on the United Kingdom continental shelf which we shall expose in this House day by day. It will also raise very serious questions about the participation agreements which have been entered into by oil companies on the understanding that it was an arrangement between the Department of Energy, the BNOC and the individual oil company.
It is my personal view that, if we change any aspects of the BNOC relationship, we shall lay ourselves open to the risk that the participation agreements will be reopened. It is a well-known fact that many of the principal oil companies have not accepted, even to this day, the 51 per cent. participation agreement.
Mr. Tim Eggar: And quite right, too.
Dr. Owen: The hon. Gentleman has made the case for us. He says "And quite right, too." He wants to see the participation agreements unravelled, but his right hon. Friends do not want to see them unravelled. It is the cardinal point of their principle, having looked at BNOC and having looked at the 51 per cent. participation agreement—and, in my view, very strongly advised by the Secretary of State for Foreign and Commonwealth Affairs—that they have said that they do not wish to change the participation agreements, and that the arguments for national control over North Sea oil are very strong.
I believe that these arguments will also ring bells among Conservative Members. I do not believe that only on the Opposition Benches are we alarmed by the idea of in any way relaxing our control. Therefore, very wisely, the Minister and the Secretary of State have made clear that they do not wish to affect the trading arrangements or the 51 per cent. participation agreements. But I must warn them —and I speak not on the basis of my extremely limited legal knowledge, but from having consulted people who were deeply involved in the legal situation when those negotiations were first put forward—that it will put those arrangements in potential jeopardy if we introduce public equity into the BNOC. It is right that it should be made clear to the Government, before they take any step that they may later regret, that we shall not feel bound by the normal conventions. If they make that change, it will be resisted.
Furthermore, such a change will have a serious effect on the whole question of trying to have some degree of bipartisanship on energy and North Sea oil policy. It will be inevitable that if the BNOC is to be changed, if the partnership arrangements between the private and the public sectors is to be overthrown my right hon. and hon. Friends, will immediately demand full State involvement in the North Sea.
I am prepared to stand at this Dispatch Box and defend the existing arrangements. I believe that they were the right arrangements honourably negotiated in 1974. I know that there was pressure from the oil companies—they did not like it—but it was a sensible
1446
compromise between the national and the private interest. It was a genuine partnership—it needed to be a partnership—of international oil expertise and money and preserved what I believe is a fair and honest balance.
I object to some of the changes that have been made to date in BNOC, but I would not claim that they are outside the bounds of reasonable bipartisanship. The Minister will obviously not follow the same policy as the Labour Government on North Sea oil. If the Minister wishes to make those changes, we shall resist them. But there is all the difference between those changes and those others which have been broadly accepted by the oil industry. In my view, there is no demand from the oil industry for the dismantling of BNOC. I believe that the industry thinks that it is a doctrinaire policy that has no support and will unlock the issue of a large State ownership.
We are dealing with an important question relating to BNOC and the seventh round. The Government have an opportunity in the seventh round to show that they will not discriminate against BNOC. They have made the decision that it will not be given preferential treatment. I think that it is an unwise decision, but it is open to them to make it.
We now know that the BNOC has formed important partnerships, as have many others, to bid for blocks in the seventh round. When those blocks are announced, I hope that it will be evident to every fair-minded person that BNOC has had a reasonable share of the allocation. If that is done, that will be one of the first steps to restoring confidence and an agreement across the parties on how we should best exploit this most precious asset. Furthermore, if the Government decide not to drop any changes in the BNOC and give it the go-ahead, that, too, will be a welcome sign.
A third and most important sign is that BNOC should not be under any restriction to operate in the market, if it wishes to do so, to purchase any North Sea oil interests from companies which might wish to sell them. If it has the finance and is ready to purchase an interest in the North Sea, if any company wishes to sell such an interest, it

1447
should be free to do so. I should welcome an assurance that there is no financial limitation on BNOC's freedom to buy into interests in the North Sea.
Mr. T. H. H. Skeet: Will the right hon. Gentleman give way?
Dr. Owen: No. This is a short debate.
Mr. Skeet: On this important point?
Dr. Owen: No. These three issues are of fundamental importance.
I turn now to some of the more detailed points that arise. First, how much money does the Minister think will come from the 20 blocks? Is it £5 million per block? There was a great fanfare of publicity that £100 million would accrue to the Exchequer, but we find in another place an answer given by the Minister of State, Treasury, Lord Cockfield, which indicates that the disregards that can be claimed on the —5 million are extremely extensive.
I am worried because the large oil companies stand to gain the most. One of the main reasons for the seventh round was to encourage some of the smaller oil companies. I am told that if the premium can be offset against United Kingdom tax—there is a large bias in favour of the major companies that are already producing in the North Sea—the most extreme offsets against PRT and corporation tax could reduce the effective premium to only £750,000. If that is so we shall have about £15 million from the £100 million.
This is an important issue that the House should consider carefully. I hope that Conservative Members will urge the Minister to reassess it. The sum of £5 million is a facade. It means that oil companies will pay less than £1 million for those special favours. I thought that £5 million was pitched too low. We may now find that we are getting only about £15 million from those special favours. I wonder whether the Treasury understood that when it agreed to this system. We should seriously consider the disregards and the way in which they favour the large oil companies.
At present, the industry tends to avoid paying the full range of tax by turnkey contracts. The Minister should consider that carefully. The use of turnkey finan-
1448
cial packages for oilfield development has led to substantial revenues. The Government were right to make two increases in PRT since they took office. That barely deserves to come from the Conservative Party's mouth when one considers what it used to say about PRT. The oil industry is discovering that there is little difference in the taxation policies of the two parties. I welcome that. However, there is no point in increasing the tax if substantial loopholes are allowed. Those loopholes are usually exploited by very large oil companies.
Some assurances are needed about the £5 million premium, the ability to get away with paying as little as £750,000, and turnkey packages. I hope that the Minister will give us more figures when he replies.
I have long believed that one cannot have an exploration policy without a depletion policy. I welcome increased exploration. The sooner we know what is in the North Sea, the better. The size of the round is broadly right. However, I am extremely worried that the Government have not produced a depletion policy. The House has the most recent Brown Book before it. I do not know whether it is here by accident or design. Perhaps the Minister has made special arrangements. If so, we are grateful to him. It shows very important changes. It is estimated that United Kingdom oil production will be reduced by 13 per cent. this year. According to the Government's estimates, output by the United Kingdom could reach 80 million to 85 million tonnes, although last year 85 million to 105 million tonnes were forecast. On the whole, I welcome that. It is well known that I believe in a tough depletion policy of net self-sufficiency. We should export only the amount of oil needed to cover the cost of the imported heavy oil that we need in our refineries.
We should reach self-sufficiency this year. On the Government's forward estimates, the United Kingdom's oilfields should yield oil at their peak rate in 1983–84. Output would then be pegged at about 95 million tonnes. That should be the Government's depletion policy.
I think that the Secretary of State is right to enter negotiations with the oil industry. I have always supported that. I am not in favour of a rigid arrangement. I believe that we must have a

1449
flexible and adaptable policy, and that is best done through negotiation with the industry. A firm statement is needed, and the sort of firm statement that is necessary is a declaration that the Government wish to have no more than a certain amount—95 million tonnes would be sufficient. That would also allow them to meet the extra commitments which they will have to the EEC by 1985.
I should not like to see the upper limits reached. The Brown Book shows that production could go up to 130 to 135 million tonnes a year by 1983–84.
Mr. Eggar: Surely the question is not the global production permitted but whether specific companies will be able to produce specific fields at specific times. That is the question that the companies will face, and that will decide whether finance will be available.
Dr. Owen: It does not surprise me that the hon. Member should take the interests of individual oil companies. That is characteristic of most of his interventions.
The global contribution is made up of each of the individual companies, and it is true that there will be some people who, for technical reasons, will find that in slowing their production down they may end up with less oil out of the reservoir. Reservoir management is an extremely serious issue. But it works both ways, and the oil companies are pastmasters at giving technical arguments against a depletion policy. We always hear about technical difficulties and why it is impossible to moderate the amount of oil taken out of the reservoirs. But there are some extremely important technical factors coming to our notice that argue the other way.
The sands in the North Sea contain a considerable variation of ordered permeability variance, which is, I believe, the technical term. In those areas where there are permeability variances there is serious risk of bypassing potentially recoverable oil, and therefore reduce recovery rate. There are cases where this permeability variance exists and there is a great deal to be said for the oil companies extracting their oil at a slower rate than might be demanded by their finance people. This is the problem.
There are two aspects here. On the one hand, there is the short-term financial
1450
need, or a supply need, and, on the other, there is the question of reservoir management. I do not believe that that decision can be left simply to the individual oil companies. There is a genuine national interest which must be married up, and that will be difficult to do. It would be far easier if the Secretary of State made it clear that he did not expect the industry to go above a 95 million tonnes production profile over the next five years; that he wished to see the peak production flattened out; that he would take action under the powers that he already has to stop production peaking at 130 to 135 million tonnes; and that he would much prefer not to have to take legislative action in the House but to see a genuine agreement between the industry and the Government. Many people in the industry think that it would be a reasonable offer from the Government, and, in view of the slow-down in production, which has come as a result of many natural forces—the weather, and technical and other aspects—they would welcome it. This is an extremely important issue—how to exploit the North Sea, how to make the best use of this natural asset—which is of major concern to us.
One of my primary concerns is one that is affecting industry very deeply. All the signs are that the £ sterling is becoming a petro-currency. All the signs are that we are running a hopelessly unrealistic exchange rate, which is having a devastating effect on some of our industries whose export markets are being very severely affected.
With high inflation, poor productivity and all the difficulties that we face, this country cannot afford to go through the 1980s with an unrealistic exchange rate. An unrealistic exchange rate devastated Dutch industry. Ever since the Dutch discovered North Sea gas, it has been a serious problem that their Government have had to face. We went through most of the 1960s with an unrealistic exchange rate, and we paid a heavy price in industrial performance, which we are paying even today. Somehow the Government must find a way to manage the exchange rate or shield industry from its effect so that North Sea oil turns out to be the blessing and not the curse of British industry. If we continue with the present high exchange rate, we may look back on this period and wonder whether North

1451
Sea oil contributed to the serious devastation of our industrial base.
10.45 pm
The Minister of State, Department of Energy (Mr. Hamish Gray): I am grateful to the right hon. Member for Plymouth, Devonport (Dr. Owen) for the manner in which he delivered his speech. I am glad to note that he welcomes the size of the round that we have decided on and the retention of the discretionary system. I could not disagree with the points that the right hon. Gentleman made. He also welcomes the introduction of a system of premiums. That is encouraging, and we are grateful for the right hon. Gentleman's support.
This is a short debate, and I propose to answer some of the general points that the right hon. Gentleman raised and quickly to outline the regulations. If time permits at the end of the debate, I shall try to deal with points that other hon. Members may raise.
The right hon. Gentleman made the point against our proposals that BNOC and BGC were not being given the same privileges as before. That is correct. I shall deal with that later. After all, BNOC and BGC are perfectly capable of looking after their own interests in the North Sea. The removal of certain privileges from BNOC was welcomed by the corporation at the time. It is our intention that BNOC should be able to act like any other oil company. It is therefore essential that it should be seen by other oil companies as a fair competitor and not subject to privileges.
The right hon. Gentleman mentioned partnerships in which BNOC might engage. He hoped that we would not inhibit BNOC from being involved in farm-ins. That matter is entirely for the corporattion. It has to observe the limitations imposed on other public sector organisations, but each case is treated solely on its merits. There have already been cases in which BNOC has become involved in farm-in proposals, and that will continue. We have no intention of restricting the corporation in that way. It must be left to the commercial judgment of BNOC.
The right hon. Gentleman mentioned disregards. It is true that premium is tax allowable. However, the allowance will take some considerable time to work
1452
through. The benefit of money now BNOC would not have its trading arrange-fit in discounted terms will depend on the individual circumstances of the successful companies.
I shall not deal at length with the question of depletion. The right hon. Gentleman will appreciate why. My right hon. Friend the Secretary of State will make a statement on depletion in the next few weeks, and I do not wish to pre-empt anything that he might say.
It has been useful for the House to have the views of the right hon. Member for Devonport on the future of the BNOC. He rightly said that there were many matters about which we did not greatly disagree. The whole concept of the BNOC is accepted by the Government and there has never been any question of the corporation's trading arm being interfered with. That has been made clear by my right hon. Friend the Secretary of State in the House on a number of occasions.
The Government's proposals for the upstream section of the BNOC will be announced in due course.
Mr. Tam Dalyell: What is the advice of the Department's lawyers in relation to the possible alteration of BNOC, to bring in an element, so some of us understand, of retrospection? Are the Government's proposals in keeping with the advice of the Law Officers and the other legal advisers of the Department?
Mr. Gray: The hon. Gentleman has been a Member of the House long enough to know that the advice of the Law Officers is always sought on any such major proposals. Their views are taken into account before changes are made.
Mr. Skeet: My hon. Friend said that BNOC would not have its trading arrangements interfered with. I understand that there may be two corporations—the main corporation, and an exploration and production section. Is the latter company to have no marketing arrangements at all?
Mr. Gray: I must give my hon. Friend the answer that I gave the right hon. Member for Devonport. My right hon. Friend the Secretary of State will be making a statement in due course and I do not wish to pre-empt anything that he might say.
Mr. Dick Douglas: I hope that the announcement will not be made in a written answer.
Mr. Gray: We are supposed to be discussing the seventh round and the arrangements for licensing. We are confident that the response to the seventh round will be very good, that it will confirm that confidence is returning to the North Sea—that will show in the number of applications that we receive—and that it will show that the industry has been encouraged by the steps that the Government have already taken.
The industry will have recognised our intention to see that more exploration is encouraged, with the aim of licensing about 90 blocks. The round will be larger than the fifth and sixth rounds combined. The industry will also have been encouraged by the new concept of allowing companies to identify within an area of the northern North Sea the blocks that they would like to apply for—a concept which widens the scope for the nation to harness the companies' ideas to our mutual advantage.
That return of confidence will have been achieved whilst maintaining arrangements which safeguard the national interest. The Government will, through BNOC, obtain access to 51 per cent. of any petroleum found in the areas licensed under the round. Here we may be looking to the future perhaps 10 years hence. No one can forecast with accuracy what the situation will be at that time. We are ensuring that we have maximum flexibility on what action we then decide to take over new oil supplies from the seventh round.
Licence controls will be maintained over important matters such as exploration, development and production, and over the flaring of gas. Full account will be taken, when we examine applications, of the companies' previous performance and future plans. We will look carefully at their past and planned contribution to the United Kingdom economy. We will expect them to have given and continue to give United Kingdom firms full and fair opportunity to compete for offshore orders. We will examine how thoroughly companies have explored their existing licensed acreage.
We will continue to encourage the involvement of the smaller companies in
1454
the firm belief that they have an important contribution to make to our offshore ventures.
We will obtain early and substantial revenue from the higher payments introduced for certain areas. That revenue will be obtained without reducing the support we can give through the licensing arrangements to our wider offshore policies. I am convinced that the national interest will be served by the return of the industry's confidence to tackle the difficult and challenging tasks that lie ahead.
The amendment regulations that we are discussing are part and parcel of the approach on which we have settled. They bring into effect two main changes. They remove from regulation 6 the provision whereby the British National Oil Corporation and the British Gas Corporation, and only those corporations, could apply for offshore production licences without prior notice or invitation from the Secretary of State. BNOC and BGC are now put on an equal footing with all other companies. Any company will be able to apply for an offshore production licence outside rounds of licensing if, but only if, it has previously received notice from the Secretary of State that he is prepared to consider such an application.
Exceptional circumstances may arise where licensing outside this normal process of rounds would be desirable, where, for example, we are satisfied that the issue of a separate replacement licence covering an oilfield is necessary to facilitate the financing of such a field or where the development of a field may be held up because it extends into unlicensed—
Mr. Douglas: On a point of order, Mr. Deputy Speaker. In a short debate, is it not appalling that the Minister should resort to reading what is tantamount to a press release?
Mr. Deputy Speaker (Mr. Richard Crawshaw): It is not for the Chair to decide what the Minister reads or does not read. He is entitled to make his case.
Mr. Gray: I would point out to the hon. Gentleman that I have been speaking for exactly nine minutes which, in a short debate, is not bad.
Mr. Douglas: It seems longer.
Mr. Gray: If the hon. Gentleman does not wish to listen, the alternative is in his own hands.
The compulsory surrender arrangements set out in the model clauses for licences have been revised so that the licensee, at the end of six years, is able to retain 50 per cent. of the territory licensed to him. Special rules will apply for particularly small blocks. In the fifth and sixth rounds, licensees were required to surrender two-thirds of their territory after seven years. We think that as the number of small blocks increases this rule could become a disincentive to applications. The change is designed to remove that disincentive. At the same time, by shortening the period when surrenders must take place, we have provided an encouragement for licensees to get on more quickly with their exploration.
These are the principles on which the award of licences will be made. Since the regulations are about the terms of licences, it was important that those should be spelt out to the House. I commend the regulations to the House.
10.59 pm
Mr. J. Grimond: This is a short debate and I do not intend to go into the question of the BNOC, although it is a matter that should at some time be discussed in the House, except to say two things. I do not personally object to the removal of the discrimination in favour of BNOC. On the other hand, the Minister might make clear that the rumours in the press that there was some dissension in BNOC over the appointment of the new chairman were unfounded. Although we may not always agree with what BNOC does, it is important that it should not be pilloried for internal dissensions and other problems that are mythological.
The Minister has spoken about the purpose of the regulations. It is, I understand, to give the Government some right to look again at the North Sea position up to 10 years ahead. There are some points upon which he did not touch. One was the question of auctions. I am not wholeheartedly in favour of auctions, but there is a case to be made for them, with suitable safeguards. The matter was raised by the right hon. Member for Plymouth, Devonport (Dr. Owen). It is right to ask the Government why they have come
1456
down against auctions. The Minister spoke vaguely of what might be in the Government's mind but he was far from specific. It is important to the nation and my constituency to have the best possible Government estimate of production, especially in view of the strange announcement that it will fall.
The reserves of the North Sea are small compared with reserves in the Middle East and Africa. The impression given is that we have large reserves of oil and gas, at least for the next 10 to 30 years. Is that still the Government's view? The Government are not prepared tonight to outline their depletion policy, but we are entitled to know in general whether they will enforce a more strict depletion policy or whether a less strict policy will be allowed. It is important to have more definite estimates about how the Government see the immediate future.
The Minister mentioned the flaring of gas. That is an important matter. After all these years it should be possible for the Government to give more information about whether flaring of gas is to continue as it is or whether some use is to be made of an increasing quantity of gas which is flared.
Is the leverage to be used by the Government in relation to depletion policies and so forth, or do the Government intend to insist that contracts in connection with oil are placed in Britain? The Government should make clear how the regulations differ from their predecessors. The Government should explain how they will change the position of companies which are applying for licences. I am not clear about what the Government mean when they talk of giving licences between the normal rounds. I can see that that might be necessary. I understand from what the Minister said that that will be exceptional. Do the Government intend to break down the system of rounds and to grant licences when they believe it to be suitable? I hope that we shall have a longer debate, especially if there is an important announcement by the Secretary of State in the near future.
11.4 pm
Mr. T. H. H. Skeet: I shall make only one point because we do not have much time for this debate. The Government must be careful not to

1457
overregulate the North Sea. A total of 17 Acts apply to the North Sea. The important Acts are the 1934 Act, the Continental Shelf Act 1964, the Petroleum and Submarine Pipe-Lines Act 1975, the Oil Taxation Acts and the Energy Act 1976. They are enough to confuse anybody. In addition, 59 statutory instruments govern the North Sea.
We stand to overregulate the interest. It is not surprising that the right hon. Member for Plymouth, Devonport (Dr. Owen) does not know that depletion already operates. Paragraphs 15 and 16 of the schedule 5 licences cover phased consents and the Government can alter the conditions.
I make my plea to the Government. They have the model clauses for production licences under schedule 5 and 41 separate clauses. Would it not be a good idea for the Government to rely more and more in future on codes of good practice?
May I ask my hon. Friend for one or two details on the changes to be made to paragraph 11, which deals with royalties? What is the total of royalties paid into the national oil account? What amount of royalty oil is paid in kind, and if the royalty is deliverable to the Government, why is BNOC always used to dispose of it?
Would it not be better for the United Kingdom, where oil companies are short of oil—it may be that some of the smaller companies are concerned here—for the Government to dispense with some of the royalty oil to those companies? That would affect their marketing interests.
11.6 pm
Mr. John Prescott: Statutory instrument No. 721 is designed to improve statutory instrument No. 1129. However, it fails to take into account recent reports which indicate the need to improve regulations 24 and 25 of the original instrument. Those dealt with the powers of the Minister to issue directions about safety and training.
I have heard a great deal about contracts, how much oil will be obtained from our North Sea interests and how much money will be made. I am bound to say that, representing a union that represents divers, I am much more concerned about safety and the number of
1458
deaths and accidents that happen as we obtain this valuable resource from the sea bed.
It is interesting to note that in the Brown Book called "Development of Oil and Gas in the United Kingdom" issued by the Department of Energy today we are reminded not only of the value of oil but the cost in human life, accidents and misery involved in its production. The figures show a general increase in deaths, accidents and serious injury in the offshire industry. That evident trend is pointed out in a Financial Times health and safety report in April which compared the various industries in the country.
For example, one notes that those industries covered by Health and Safety Executive legislation have reduced the number of accidents since 1974 when the Health and Safety at Work etc. Act 1974 became applicable to them. Yet those industries that are controlled by Departments such as the North Sea oil industry, the energy industry and the maritime industry, have all witnessed an increase in the number of deaths and accidents—an opposite trend to that in those industries where the health and safety legislation operates.
In the offshore mineral exploration industry between 1974 and 1978 the number of accidents increased threefold. That is totally unacceptable. Those of us who fought for the Departments of Trade and Energy to be relieved of the responsibility for safety and for that responsibility to be transferred to the Health and Safety Executive feel that we were proved absolutely right to argue that case. Our case has been justified by the deplorable increase in the number of deaths and accidents.
On the basis of that argument, if one looks at the agriculture industry, which we managed to have brought within the scope of the Health and Safety Executive despite the opposition of the Ministry of Agriculture, Fisheries and Food, we see that the accident figures in the industry have decreased. I make that point because my experience in the shipping industry and the Department of Trade shows that Departments tend to rely more on codes and recommendations and less on statutorily enforceable standards. There is too often a cosy relationship between the industries concerned

1459
and the civil servants in the Departments. That tends to be reflected in the figures of deaths and accidents.
I hope that the Minister will, perhaps by way of a statutory instrument in future or by using the powers of direction that he has under the original statutory instrument, pay particular attention to the diving industry. I spent a great deal of time in the early 1970s campaigning for diving safety controls and took many delegations to see the hon. Member for Honiton (Mr. Emery), who was then the Minister in the Department of Energy responsible for some of the safety regulations. I put on record that the hon. Gentleman recognised that diving was a dangerous occupation and that a number of provisions that we secured were due to his active intervention.
The essential skills of a diver are correlated to the amount of training that he receives. While the accident figures have fallen to a certain extent from the high level of 1974, they show that diving is still the most dangerous occupation in the country. Training is the key to overcoming that. The Brown Book shows that the North Sea exploration industry spent in 1979 £2,600 million on exploration, development and exploitation. It spent only £4 million on safety training for fire, helicopters and survival. It spent nothing on diving training.
The Fort William diving school is the only such facility involving Government money. It was established in 1974. I was one of those who campaigned actively for it. I pressed that there should be a diving training school at which all divers should be given the minimum necessary training to work in an industry that was working in ever deeper waters. Unfortunately, the industry refused to pay for any such facility. It left the State to meet the charge alone.
One of the matters that concerns me about that school and the training was that contracts were offered to the private sector to manage a Government facility that was to be financed completely with public money. I had deep reservations about offering such contracts to the private sector. The hon. Member for Honiton will know, since I informed him earlier this evening that I intended to raise this matter, that when the Labour Government were in power and he was
1460
in opposition and the matter arose for decision he mentioned to me the possibility of my joining his company to conduct some of this training. My answer to him at the time was quite clear. I said that no Member of Parliament should get involved in any commercial transactions since I believed that they would compromise his position.
I have now read the report of the Public Accounts Committee which was published last week, and that view is shown to have been only too accurate. It confirmed what I learnt in 1974, that the contract was given to a company called the Shenley Trust. The hon. Member for Honiton is a director and former chairman of that trust. I protested to my right hon. Friend the Member for Doncaster (Mr. Walker) at that time, when he was a Minister in the Department of Employment, saying that I thought that it was wrong that a contract should be offered to a company that included a Member of Parliament who had been a Minister in the Department of Energy. I mentioned that to the hon. Member for Honiton.
The matter was dealt with in the twelfth report of the Public Accounts Committee which was published yesterday. It investigated the management of the underwater centre. It concluded that a most unsatisfactory contract had been given in the period 1974 to 1979 to the Shenley Trust. It said that loans from the Government were outstanding and that the cost to the public purse was £1·16 million. It concluded:
"We also consider that the contractual arrangements for running the Centre had unsatisfactory features."
It said:
"This contract allowed Shenley a margin of 70 per cent. over their attributable costs. This appears to us to be an extremely high rate of profit."
I note that the hon. Member for Honiton disputes that fact and is at issue with the Public Accounts Committee about it.
A further matter of concern in the report is that it drew the conclusion from the evidence given by the Civil Service that the decision was taken by the Minister. I do not believe that that tells the whole truth about the decision. That is a matter of real concern to Parliament.
I draw to the attention of the Minister the view expressed by the Civil Service in

1461
its evidence to the Public Accounts Committee indicating that the Departments of Energy and Employment and the Health and Safety Executive no longer considered it necessary to have statutorily enforced training standards. That is unacceptable and deplorable. This training facility is vital to this dangerous occupation, but the industry refuses to pay for it, devoting instead only one-sixth of 1 per cent. of its total expenditure to safety.
It is unsatisfactory to my union and to me that an essential public asset should have been managed in this way. The least that is required is for the Public Accounts Committee to look again at some of the remarks that have been made by individuals. It is even more essential that the House should debate the issue and that the Minister should look seriously at the matter.
Mr. Harold Walker: The decision to which my hon. Friend is referring, and the matter in the Public Accounts Committee report, was a decision entirely for the Manpower Services Commission and not for the Minister at the time, who was me.
Mr. Prescott: I thank my right hon. Friend for that intervention and record my appreciation for all that he did for safety in diving. The report points out that the Committee questioned civil servants on their evidence about whether the Minister made the decision. The Committee was not satisfied with their reply, and asked them to give evidence to justify that it was the Minister's decision. The only evidence that they furnished was a parliamentary question that I tabled in 1974. I tabled that question after discussions with my right hon. Friend, when it was made absolutely clear that he was not aware that the contract had been awarded in that way. But I was aware of it, and I informed him about it that day and then tabled the parliamentary question. This was totally unsatisfactory evidence by civil servants to a Committee of the House on an important matter—
Mr. Deputy Speaker: Order. The hon. Gentleman has made his point. We do not want to go into the full details. I hope that we shall not pursue the point in any greater depth.
Mr. William Hamilton: Is my hon. Friend the Member for
1462
Kingston upon Hull, East (Mr. Prescott) aware that this matter is still before the Public Accounts Committee because the Treasury minutes in reply to the report have still to be laid? If he or anybody else in the house is dissatisfied with the accuracy of the report, I advise them to write to the Chairman of the Committee, who will put their submissions before the Committee so that it can ascertain the true facts.
Mr. Prescott: I have imposed upon the time of the House, but this is a matter of considerable concern to those whom I represent. It is a vital matter of safety. We are concerned that the number of deaths of divers is increasing, and we intend to do all that we can to ensure that that stops.
11.18 pm
Mr. Peter Emery: I thank the hon. Member for Kingston-upon-Hull, East (Mr. Prescott) for giving me notice at 6.30 pm today that he intended to raise a certain matter in the debate and to mention my name. I declare an interest in diving, but not in any other matter concerning the regulations before us. Strangely enough, I agree with the hon. Gentleman that it is essential that regulations on diving safety and diving training should be introduced by the Government. As the right hon. Member for Doncaster (Mr. Walker) knows, I have been pressing for the introduction of such regulations since 1974.
The hon. Gentleman raised certain matters which appear in the Public Accounts Committee's Report No. 12. I wish to make make three specific points. On Wednesday of last week I wrote to the right hon. Member for Heywood and Royton (Mr. Barnett), the Chairman of the Committee, and I wish to read two paragraphs from that letter so that they may be put on the record:
"The Directors of Shenley Trust Services are very surprised that criticism has been made of Shenley when the PAC has neither asked Shenley or the Underwater Training Centre Ltd. to give evidence to you nor have you directed any questions to Shenley or even requested a written submission. The Directors see that there are a number of major errors in your report and we ask the PAC to consider a detailed submission that will be made to you after extensive study of your report and after we have ensured that the financial information that we provide has been checked by the auditors of the company.

1463
You will realise that certain of your criticisms might be considered extremely damaging. Therefore, the Directors would ask, and I am certain have every reason to expect, that your Committee will take every possible step to correct this damage as soon as is possible after you have been provided with the facts."
I have received a reply from the Chairman. I have not asked his permission to quote from it, but I am certain that he would have no reason why I should not do so. He thanked me for my letter and said that the
"PAC will consider whether to take further evidence on the Underwater Training Centre, when we receive the submission, which the Directors of Shenley Trust Services are preparing."
There are a number of matters which I do not think should be debated on the Floor of the House at this time. Here I agree with the hon. Member for Fife, Central (Mr. Hamilton). However, there is one specific point which has been referred to, and that is the degree of profitability. I wish that my company was so successful as to be able to make a 70 per cent. profit. The exact profitability, and the figure that will be provided to the PAC, is 6⅔ per cent., which is very different from the 70 per cent. alleged. It is very important that that should be registered now, and that in time it is examined by the PAC.
Mr. Douglas: This is a very important matter, and the House should be clear on what we are talking about. Is the hon. Gentleman directly contradicting paragraph 35 of the twelfth report of the PAC, which says:
"We also consider that the contractual arrangements for running the Centre had unsatisfactory features. The contract with Shenley, a 'cost plus' arrangement, was not the result of formal tendering procedures, but of MSC's consideration of informal proposals from three organisations. This contract allowed Shenley a margin of 70 per cent. over their attributable costs. This appears to us to be an extremely high rate of profit. We recommend that standard tendering procedures should normally be followed as closely as possible and that where competition is not fully effective, steps should be taken to ensure that the profit margin is restricted to a reasonable level"?
Mr. Emery: Quite plainly, yes. The 70 per cent. figure is absolutely and completely incorrect. That accusation was made without any reference. In fact, if one likes, the PAC has done a "Rooker". It has made accusations—
Mr. William Hamilton: On a point of order, Mr. Deputy Speaker. Is it proper for the hon. Gentleman to cast aspersions on a Select Committee of this House? The PAC, of which I am a member, took evidence in good faith. For an hon. Member by inference to charge it with dishonesty is an impertinence.
Mr. Deputy Speaker: I do not think that the hon. Gentleman has cast any reflection on the Committee. He is merely contradicting something in the report. That is perfectly in order.
Mr. Hamilton: But, Mr. Deputy Speaker, I heard the hon. Gentleman say—
Mr. Deputy Speaker: Is this related to the point of order?
Mr. Hamilton: Yes, Mr. Deputy Speaker. I do not think that the hon. Gentleman will dispute that he said that the PAC had done a "Rooker". You, Mr. Deputy Speaker, will recollect what the inference must be. It is very objectionable, and I as a member of the PAC object to it very much.
Mr. Eggar: On a point of order, Mr. Deputy Speaker—
Mr. Deputy Speaker: Order. I am already replying to a point of order. The hon. Member for Honiton (Mr. Emery) is entitled to tell the House, if he so wishes, that no information was asked of him or his company. That is the point which he has made. I think that he is suggesting that the other side of the story should have been told. I do not think he is making any other suggestion, or casting any reflection on the Committee.
Mr. Douglas: Further to that point of order, Mr. Deputy Speaker. I am sorry to detain the House. However, it should be clear that the PAC, in its observations, acts on factual evidence given by civil servants. We draw certain opinions. The paragraph which I quoted was related to factual evidence. The hon. Gentleman is quite entitled to contradict the factual evidence, but that remains a matter for the PAC and this House to review in the future.
Mr. Deputy Speaker: I have not heard the hon. Gentleman say anything that is a reflection on the Committee.
Mr. Emery: Thank you, Mr. Deputy Speaker.
There is another matter that is of considerable importance in relation to the regulations before the House tonight. I do not intend to deal with many of the other points of the Public Accounts Committee in regard to which only half a story has been put to the Committee. I give as one illustration the criticism that in diver training the underwater training centre did not keep in close touch with the industry. That is part of the criticism of the report.
No one has pointed out to the Public Accounts Committee that in an attempt to obtain the safety that the hon. Member for Kingston-upon-Hull, East wishes there is an advisory board to the centre of 16 members, all appointed directly from the industry, by the industry itself, and by the Government and the Health and Safety Executive in order to keep in touch, so that there can be a direct input into the centre. That point has never been made clear to the Public Accounts Committee. The lack of that information has allowed the Public Accounts Committee to come to certain conclusions. Had the Committee requested all the information, it would, I believe, have come to different conclusions.
It is suggested in the report that the centre had to be financed by public money. The suggestion put to the Government was that the whole of the centre should be financed by private capital. That has never been pointed out; it has never been mentioned. Why has that not been suggested in the report of the Public Accounts Committee?
I think I have said enough to show that there is a great deal of evidence that has never reached the Public Accounts Committee. It is therefore not very surprising that I take considerable exception to the fact that criticism linked with my name should have been made when, as a matter of natural justice, that criticism was never put to me before it was published. There has been the most scandalous criticism of me in the press, and it is entirely unjustified.
I congratulate the Government on going forward with the licensing round, as they had already indicated was their intention. I believe that they are right in so doing. I only hope, however, that they will pay
1466
some attention to the major point of the hon. Member for Kingston-upon-Hull, East as to the need very quickly to get diving safety regulations on the statute book.
11.27 pm
Mr. Dick Douglas: I shall be very brief concerning the regulations and return to the gravamen of the issue before us, which is related to the seventh round and the regulations amending the conditions of licensing.
I want to return to the role of the British National Oil Corporation and to put certain aspects of the Government's policy in relation to BNOC before the Minister. As I understand the position, the intention is not to privatise the downstream aspect of the BNOC but to try to inject some private aspect of capital in relation to the upstream, the exploration and the production side of the corporation.
I want to be clear about the method of financing the totality of BNOC's operations. At present, it is financed through the national oil account. If there are some alterations in the method of finance and if private citizens in one shape or another are asked for their contributions to the future development of BNOC, I want to know at what rate of interest these sums are to be forthcoming. Is it to be a rate of interest higher in any way than the Government would expect to get in terms of short-, medium- or long-term market considerations? If it is to be higher, it is a bad bargain for the company and for the country.
Therefore, we on the Labour Benches would resist very strongly any form of subvention to the private interests through the British National Oil Corporation's revenues when we would be paying as a nation a higher rate than we would expect in governmental terms. I think that we are entitled to some answers, because we must be clear about the Government's intentions.
Over and above that, there are important considerations in relation to international oil—
It being half-past Eleven o'clock, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 4 (Statutory Instruments, &c. (negative procedure)).
Question negatived.

OFFSHORE OIL (PROJECT GRANTS)
11.30 pm
The Minister of State, Department of Energy (Mr. Hamish Gray): I beg to move,
That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972, as amended by section 22 of and Part 1 of Schedule 4 to the Industry Act 1975 and section 1 of the Industry (Amend-

Table

(1)

(2:

(3)

(4)

Project

Persons carrying on project

Maximum amount of financial assistance exceeding £5 million previously authorised

Maximum amount of financial assistance exceeding £5 million now authorised

Establishment offshore of production platforms and other installations with their equipment for the development of the Brent oilfield

Shell UK Limited

£9 million

£20 million

Esso Exploration and Production UK

Establishment offshore of production platforms and other installations with their equipment for the development of Cormorant oilfield.

Shell UK Limited

£9 million

Esso Exploration and Production UK

Conoco North Sea Inc.

Gulf Oil Corporation

BNOC (Exploration) Limited

BNOC (Development) Limited

The offshore supplies interest relief grants scheme was introduced in October 1973 by a Conservative Government under section 8 of the Industry Act 1972. As the House knows, affirmative resolutions arise under that section of the 1972 Act when the amount of financial assistance to be provided for a single project is likely to exceed £5 million or, as the case may be, a maximum sum already authorised by an earlier resolution of the House of Commons.
I am sure that all hon. Members are aware that the OSIRG scheme has been terminated. The Government considered that the scheme no longer represented value for money overall, and in the light of the need to reduce public expenditure decided that it should come to an end. As a result of the Government's decision announced on 25 September last, grants will not be made in respect of any contracts placed after 2 July 1979.
Since the scheme began in 1973 the total number of contracts registered has passed the 1,250 mark, and in that time
ment) Act 1976, as grants towards obtaining in the United Kingdom goods and services for each of the projects specified in column 1 of the Table below carried on by persons specified in respect thereof in column 2 of the Table sums which, together with the sums already paid or undertaken to be paid by way of such financial assistance exceed the sum of £5 million or, as the case may be, the maximum sum authorised by a resolution of this House passed on 15th June 1977 in respect of the project specified in Column 3 of the Table but do not exceed the sum specified in respect of the project in Column 4 of the Table.
too, British industry has substantially increased its share of orders in the United Kingdom continental shelf market, from 25 to 30 per cent. in 1973 to 79 per cent. in 1979. Hon. Members will agree that the United Kingdom industry's performance last year was highly commendable, securing over £2 billion worth of business against tough international competition. It would, of course, be unrealistic to attribute all that improvement to the OSIRG scheme. Indeed, other factors, such as our proximity to the market and the considerable United Kingdom offshore industrial capacity that has been built up over the last six years or so, have contributed substantially.
The scheme before the House concerns only two fields, and the amounts of assistance for which I am seeking approval are best estimates of the likely outturn of grant payable under contracts for their development. They had been prepared after consultation with the operators.
Having placed contracts with United Kingdom firms and registered them for

1469
grant, the companies developing the two fields expect to be able to receive grant for the period of up to eight years provided by the scheme. The period of grant due on each field has still some two to three years to run. I hope, therefore, that the House will approve the motion, so enabling my Department to pay grant up to the revised limits recorded in the scheme.
11.35 pm
Mr. Dick Douglas: Fortunately or unfortunately, we now move to another topic. I do not want to probe the Minister about the previous prayer, but I should be happy, if it is in order, if he could respond to my questions about the BNOC.
I notice that the decision to terminate interest relief grants was made retrospectively on 2 July. I understand that there was some criticism of these grants by the European Commission. However, I understand that the Government unilaterally decided that it was timeous to end these grants even before the time determined by the Commission.
The Minister has rightly acknowledged that in United Kingdom terms we have 75 per cent. of the expenditure in the North Sea. As he knows, because he is very conversant with these matters, having a considerable constituency as well as departmental interest, a substantial number of production platform orders is in train. I should like an assurance that, in the absence of the interest relief grants that the Government have decided to terminate, we shall continue to obtain at least 75 per cent., if not more, of the expenditure on production platforms and the like in the United Kingdom. This is an important item because, in terms of recession, we must get every possible order within the United Kingdom.
I want to detain the House a little, because we have spoken about safety matters. If we are to build production platforms and go into relatively new devices, such as the tethered buoyant platform for Hutton, it is important that we should know what the safety considerations are. I understand that Conoco has made certain representations to the Minister recently. Whether it has an annex B is a matter that he will perhaps want to disclose to the House in due time.
1470
Outwith the interest reliefs, we know that a number of semi-submersible orders is in train. The United Kingdom has been extremely lax in getting into the semi-submersibles market in the past. I know that we built them in the early 1960s, but we have been bidded out of that market until recently.
Certain matters relating to the "Alexander L. Kielland" tragedy in the Norwegian sector have caught the public's attention. I note that in the press today there is a report:
"Phillips Petroleum has cancelled its four year charter contract with Norway's Stavanger Drilling for the semi-submersible floatel 'Henrik Ibsen'."
The Minister has a very good association with his Norwegian counterpart. Therefore, I should like his assurance that we are undertaking the most searching investigation of offshore structures and that we are getting the most up-to-date information on the research, development and design of the future generation of production platforms and semi-submersibles.
In the past it would have been appropriate to delay deliberation of this matter until the Norwegians had made up their minds, but, in view of the Phillips decision it is not appropriate now. The Phillips decision is not without some cost. According to Lloyds List today:
"Phillips is believed to have paid a cancellation fee of some £2.64 million"
to divest itself of its interest in that particular contract. I know that the Minister is conversant with such matters, and that he will be anxious to assure the House that he is trying to clear up such an important issue.
My hon. Friend the Member for West Lothian (Mr. Dalyell) will probably raise the question of interest relief grants, because one of his constituents is involved. Perhaps interest relief grants could be used to provide Scotland with industrial benefits.
The Minister has a constituency interest as regards the gas-gathering system. I also declare a constituency interest, because Moss Morran and the terminal at Braefoot Bay are on the borders of my constituency. We have not debated the gas-gathering system. I hope that the Minister will indicate that such an imaginative development will produce sufficient supplies of propane, butane and,

1471
particularly, ethane to sustain an ethane cracker at Moss Morran. I also hope that he will assure us that there will be an ethane cracker in the Cromarty Firth and, perhaps, in one other area. The Government should indicate their views, because the development of Scotland's petroleum industry could be placed in jeopardy.
Ministers have ways of avoiding answers and of giving written answers so that they cannot be questioned in the House. However, the gas-gathering system represents the most imaginative development in the North Sea for the past five or six years. We need not only a depletion policy, but a conservation policy. We must ensure that the United Kingdom, and Scotland, in particular, maximise their benefits from that finite resource. I am sincere, and I hope that the Minister will respond to my points.
11.42 pm
Mr. Tam Dalyell: I shall not take up the case of my constituent, Mr. Alan Bradshaw, because the Department of Energy has acted compassionately and sensibly. During the complex discussions that took place, Ministers were both helpful and fair.
As my hon. Friend the Member for Dunfermline (Mr. Douglas) asked, when will the House debate the "Alexander L. Kielland" and the Burgoyne report? Some hon. Members believe that we should not disperse for the Summer Recess without a proper discussion of that report. If—heaven help us—something similar were to happen in the North Sea, how could we look in the face those who had demanded formal public discussion? It is important to establish the Government's view of the note of dissent by Mr. Lyons and Mr. Miller. They have raised vital questions about the Health and Safety Executive.
What is the Government's response to the many recommendations and conclusions in the Burgoyne report? What is their opinion of safety zones, site investigation, drilling and well control, electrical safety, and diving in interface areas? Those points are particularly urgent.
I wish to refer to one other matter raised in the earlier debate by my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen). It is not quite
1472
good enough to say that anything the Government do has the agreement of the Law Officers of the Crown. Doubtless that is correct at one level, but it seems to us that the proposed alterations in BNOC raise serious legal matters of contract. At the very least it is a matter of unscrambling the most carefully worked out, detailed and solemn obligations. Are we certain that the Government have gone into all this? Many of us feel that they are in danger of introducing an element of retrospection into the solemn obligations entered into by people in good faith.
Mr. Tim Eggar: On the legal point, surely the contracts concerned were between two entities—BNOC and other oil companies. Is the hon. Member saying that the obligation of BNOC would be altered, and the whole legal question opened up, if one of the oil companies which had entered contractual arrangements were taken over by another company or had its shareholding changed? Of course it would not.
Mr. Dalyell: That is not quite the situation in these arrangements. The Government were categorically involved, and there were certain Government undertakings. That is also the understanding of my right hon. Friend the Member for Devonport. Those of us who have followed the BNOC story, and who have a constituency interest—I am not getting at the hon. Member for Enfield, North (Mr. Eggar), but I represent the Hound Point terminal, and have constituents who work in the North Sea—understand that the Government gave their name to these arrangements in a solemn pledge. One cannot unscramble them and alter them without a certain degree of retrospective action. If I am wrong the Minister has some obligation to say so, because this may be one of the few parliamentary opportunities to probe these matters. Also, I wish to know the Government's intentions on the whole question of debating the Burgoyne report. I think that we should have some indication of them tonight.
11.48 pm
Mr. Tim Eggar: I follow directly the remarks of the hon. Member for West Lothian (Mr. Dalyell) in his reference to the future ownership of BNOC. I wish to make a couple of

1473
points on this matter. When the Government are discussing the future ownership structure—and I welcome the injection of private equity capital in BNOC—perhaps they will comment on the detailed way in which that can be done.
There are two ways that have been canvassed in the press. The first is the mechanism of oil bonds—asking investors to buy bonds, the return being linked to the profits of BNOC, the price of oil or the value of oil lifted by BNOC. If such a procedure were adopted the Government would have two choices—either the bond could be structured in terms of an equity investor, in which case the potential returns—both upside and downside—to the bond holder are significant, or it could be more or less viewed as a fixed income bond with variations in return to the investors being only marginally linked to the value of oil, or whatever the medium chosen. In either case there is little point in issuing such bonds. They will either be very close to equity, in which case equity could be issued directly, or they will be very close to fixed interest securities, in which case issue fixed interest securities. We should not come out with an unclear hybrid that will not assist anyone.
The other alternative that has been mentioned is the possibility of an offer for sale to investors of equity in BNOC. It is said that it could be structured to be of interest to private investors, and could be offered on advantageous terms. I am not convinced that the benefit of such an offer for sale would not flow either to the institutions or to a limited number of individuals who are professional players of the stock market and who have the least need to benefit from an injection of equity into BNOC. I do not find that acceptable.
I refer to my speech on the Gas Bill, when I pointed out the advantages of giving shares in the British Gas Corporation to everyone over the age 18. Exactly the same could be done with BNOC. I shall not now enumerate the advantages. In reply to a parliamentary question my right hon. Friend the Prime Minister clearly stated that she did not rule out such a possibility. I trust that the Minister will look into that proposal with considerable care. As he knows, it has been adopted with success in British Columbia
1474
and Alberta, and has a large number of advantages.
11.52 pm
Dr. David Owen (Plymouth, Devon-port): A number of hon. Members have raised the question of BNOC. I confirm the interpretation of my hon. Friend the Member for West Lothian (Mr. Dalyell) of the arrangements on the participation agreements. I was deeply involved in those in the previous Government. No decisions were taken without the Ministers most concerned being involved collectively. At no stage was any arrangement made without the most careful consideration with the Law Officers.
Any change in the arrangements will be open to challenge. I do not expect an immediate challenge. International oil companies which wish to challenge the participation agreements will wait until the legislation is through the House, and then I believe they will challenge it. We shall not let that legislation go without those legal issues being exposed at every single stage. If necessary, I shall exercise my right, as I have done, to consult the documents and examine the legal advice proffered to the Government. The Government should not enter this area without the most careful consideration. We shall not let the matter pass lightly.
Mr. Dalyell: All the parliamentary experience and bloody-mindedness of which we are capable is at my right hon. Friend's service if that happens. Some of us will go to Dingwall, and go round the Minister of State's constituency to explain exactly what is up. Politics will be very rough.
Dr. Owen: It is a serious issue and I believe that the Under-Secretary is aware of it and has advised many of his right hon. Friends that it is a dangerous political issue. We do not wish to see another rise in the naked Scottish nationalism that we have seen in the House over the past few years, but playing around with the BNOC is a recipe for that.
The hon. Member for Enfield, North (Mr. Eggar) seems to be obsessed with turning the Floor of the House into a stock market where we spend our whole time discussing private equity shareholdings. The Conservative Party must realise that there is such a thing as acting in the national interest and that that interest is

1475
not safeguarded through a private equity shareholding. In a sense, those in government speak as custodians of the interest of the citizens of this country. It must not be thought that the State cannot run anything in the interests of the citizens.
It is well known that I am sceptical, to say the least, of constantly increasing the role of the State. I am a decentraliser. I have always challenged the belief that the only way of achieving Socialism is through State control. I am known to have a passionate dislike of the bureaucracy and inertia of the Civil Service. However, the idea that there is no role for the State and no way that it can safeguard the rights of the citizen is wrong. The equity stake of BNOC is small. At times, a case can be made against monopoly State holdings, though I do not always share that view, but the BNOC does not have a monopoly. It represents fairly flexibly the interest of the nation.
The two sides of the House part company when a change is proposed to the control mechanism of the BNOC. The two forms of bond have been mentioned. In relation to the equity bond, I agree with the hon. Member for Enfield, North that we may as well have equity shares. My objection is one of principle, because it would involve a change of control. The fixed income bonds would not mean a change in control, but one must ask what would be their purpose.
The hon. Member for Enfield, North suggests that everyone should be given free shares. Sam Brittan of the Financial Times has been advocating that proposition for some time. If such a course is to be adopted, there is much to be said for shares to be issued to everyone rather than sold. If they were sold, the distribution of the shares would be a matter of controversy. A high percentage of bonds would be purchased in Reigate and other places in the southern counties of England and there would soon be arguments about the number of bonds purchased in Scotland, compared with those bought in the more affluent South of England. North Sea oil is generally seen, north and south of the border, as a United Kingdom asset. We have got over the problems in that regard. If the Government bring them back to the Floor of the
1476
House they will be making a bed of nails for themselves.
If the bond issue does not mean a loss of control it is not as objectionable, but we should be opening a Pandora's Box for the sake of a minor change. The best course would be to stick to the existing system.
Mr. Dalyell: May we add to what my right hon. Friend has said so eloquently a warning to the Minister that if he goes ahead with the scheme the same thing may happen to him that happened to a previous Secretary of State for Scotland, who lost his seat at Moray and Nairn to Mrs. Winnie Ewing? As is well known to the House, I am not the greatest fan of the Scottish Nationalists. This is not a matter of the future constitutional arrangements of the United Kingdom. It is this kind of issue that will give the House an SNP Member for Ross and Cromarty.
Dr. Owen: I do not wish to clash with my hon. Friend with whom, over the years since we have been in the House, I have agreed on most issues. I am, and remain, a convinced devolutionist. This issue will not run away. We shall have to face it. The form in which it is carried out is open to discussion. All hon. Members recognise that it was on the issue of oil that much of the passion and much of the political force of the SNP was based. To start playing around with the matter now is extremely dangerous.
Many people inside Government—Ministers and civil servants—must be warning the Government at this moment to leave well alone. Many senior figures in the oil industry, I believe, are privately saying this to the Government. I strongly urge them to leave it alone. It requires no abdication of any commitments. There is no election pledge.
Mr. Douglas Hogg: The right hon. Gentleman is repeating himself.
Dr. Owen: Has the hon. Member for Grantham (Mr. Hogg) a point that he wishes to make? The hon. Gentleman, who interrupts from a sedentary position, does not seem to wish to intervene.
I now come to the small points. We have been extremely helpful to the Government over tonight's business. The

1477
hon. Member for Grantham, having arrived late, is not in a position to argue about the way in which the business has been handled.
I should like to refer to the offshore supplies interest relief grants. I believe that the Government were wrong in the basic decision to unwind the system and give it up. I know that the EEC and Commissioner Brunner have had their eye on this financial aid for some time. It is an open secret that the previous Government had some difficulty with Commissioner Brunner on the matter. I spent many hours dealing with this issue. I was always convinced that this was necessary, helpful and wholly legitimate aid. I took the view that we could support and sustain it within the interpretation of the Treaty of Rome. I am personally sorry that the Government did not stand firm.
I suspect that one reason why the Government gave up the aid was due not to the EEC but to the well known arguments advocated by the Treasury that it wished to wrap it up. I believe that the Secretary of State for Energy, as on many issues, has lost out to the Treasury because he decided not to fight in his belief that all public expenditure cuts are good. I would only say to the Minister that, according to the Department of Energy "Brown Paper" on "Development of the oil and gas resources of the United Kingdom":
"1979 saw the start of several new major devlopments on the UK Continental Shelf. Steel jackets were ordered for North Cormorant, NW Hutton and Magnus, the last being the largest ever ordered for the North Sea. In addition, a steel gravity platform with integrated deck was ordered for the Maureen field. Apart from the North Cormorant order which was divided between UK and French firms, UK yards were successful in winning the rest of these important orders."
That was a formidable achievement in 1979. It goes on:
"As well as these platforms, the developments give rise to a substantial level of orders for decks, piles, modules, process plant and other equipment and services.
The total value of orders reported by the operators for the year was £2,679 million of which the UK share was 79 per cent."
That is a formidable record of achievement. I regret deeply the Government decision to give it up, primarily, I believe, for financial reasons. If they had wished to sustain it and had been taken to court
1478
by the commissioners, they had a good chance of winning.
I should like to refer to the third report from the Public Accounts Committee on offshore supplies, interest relief grants.
My hon. Friend the Member for West Lothian has expressed his appreciation of the way in which his constituent has been dealt with. Two elements must be balanced. The Public Accounts Committee was right to draw attention to overpayments amounting to £150,000 resulting from mistakes in the calculation of grants. The Committee was right, when it found that there was some discrepancy in the evidence, to probe further. It would not be right if the House did not state that the people who serve in the offshore supplies office have done a splendid job over the years. Criticisms can he made and it is right, on an accountancy basis, for the Committee to be scrupulous about what is done, but the mistakes were made with the intention of administering the scheme in a sensible and reasonable manner.
In reporting it is possible that too great attention was paid to the discrepancies in financial control—which must be tight—and not enough to the extremely valuable role which the office played in protecting British industry, in ensuring jobs particularly in Scotland and the regions, and in ensuring that the North Sea was a success. Britain spends too much time bemoaning its inadequacies. We should not allow to go on record one account which is critical of the offshore supplies office without putting on record that that office has done a great deal to lay the foundations of success for the offshore industry.
Even in the absence of a grant I hope that the Minister will, with the flexible use of the power which we agree that he should retain in the next round, ensure that 79 per cent. is a minimum figure and that it does not fall any lower. We shall watch with attention for any fall in the orders placed outside the United Kingdom.
12.7 a.m.
Mr. Gray: With the leave of the House, I shall try to deal with some of the issues raised in debate. I thank the right hon. Member for Plymouth, Devonport (Dr. Owen) for his constructive remarks about the offshore supplies office. It is my responsibility. I attach importance to its achievements. We were able

1479
to attract only 30 to 35 per cent. of supplies in 1974. In 1979 we attracted 79 per cent. and that is a wonderful achievement. I agree that there is a tendency to go for the dramatic headline rather than to probe the behind-the-scenes working of the offshores supplies office.
The hon. Member for Dunfermline (Mr. Douglas) referred to the IRG scheme and the relationship with the EEC. I said earlier that the Government feel that the scheme has served its purpose. It has played a major part. Latterly it has not played such an important part in achieving orders because British industry has developed a great capacity and has proved to be sufficiently adaptable to take care of most areas of North Sea requirement. I regret that in some areas we are still not able to compete. They are being investigated. I hope that when the British Steel Corporation emerges with a new lease of life it will play a more prominent part.
At about the same time as we decided that the IRG scheme was not fulfilling its best requirement for us the EEC Commission, which had accepted the IRG scheme at its inception, came to the conclusion that it was no longer compatible with the Treaty of Rome and issued a directive on 2 May 1979 that the scheme should be withdrawn by 2 July 1979. That directive conflicted with the undertaking given to the United Kingdom Offshore Operators' Association by the previous Administration that nine months' notice would be given of any substantial changes to the scheme. So, as the right hon. Gentleman rightly pointed out, the EEC had its eye on this for some considerable time prior to the last election.
The Commission, however, considered that this period of notice was too long and, because no compromise with the Commission on timing was possible, it became clear that action against the United Kingdom in the European Court could well result. In the light of legal uncertainty created by the Commission directive of 2 May 1979, which we were advised would almost certainly have been upheld by the European Court, and because, in any case, we had already concluded that the scheme no longer gave overall value for money, we decided to terminate it forthwith.
1480
As a result of that decision announced on 25 September last year grants will not be available in respect of contracts placed after 2 July 1979. The hon. Member for Dunfermline may disagree with that decision but we took it after considering the matter as fully as we could and considering the implications of not discontinuing at that time. Rightly or wrongly, we concluded that the scheme must go. That is the explanation. I am convinced that we took the right decision and we have no evidence that would indicate that there will be any falling off in the performance of British firms in achieving orders in the North Sea.
The gas-gathering system was also mentioned and, of course, I accept that that is one of the most significant engineering projects of the latter years of this century. I cannot now answer the detailed questions put to me but I can say that we have set up an organising committee which is currently looking into all the implications and the necessary arrangements for the creation of a pipeline company.
The British Gas Corporation, as I indicated at Question Time recently, will have a substantial equity in that company. At the moment it is chaired by Sir Denis Rooke and we await the committee's recommendations. They will take some time, though the committee is aware of the urgency of the matter and is keeping in close contact with us.
Mr. Douglas: I know that the subject is difficult but the gravamen of my remarks—though I do not wish to pursue the issue—relates to the supply of ethane. The gas-gathering system as proposed, has a number of options and it is important to me and to my constituents that we get clear the Minister's view of the total supply position. I am speaking not only of propane and butane but also of ethane because if there is a shortage in terms of peaks and troughs, we need to know about it in Fife.
Mr. Gray: That is a fair point and I should have remembered to comment on it. The best information that we have at the moment is that it seems likely that there will be sufficient NGLs to satisfy the requirements of more than one cracker. The hon. Gentleman also mentioned the "Alexander L. Kielland" inquiry. As he

1481
knows, that is a matter for the Norwegians. They are keeping in close contact with us and when they produce their report we shall examine it closely. We shall take advantage of any lessons to be learnt from it. I want to link that with the point raised by the hon. Member for West Lothian (Mr. Dalyell) about the Burgoyne committee report. I am most grateful to the hon. Gentleman for his remarks about the Department and about the treatment that his constituent ultimately received.
The report contained more than 60 recommendations. I anticipate that the Government will accept the vast majority of them with little difficulty. We are currently taking views from various outside bodies on the remainder. We are having interdepartmental discussions about the implications of certian recommendations, and in particular we are investigating and considering the minority report, because that is most important. I know of no suggested date for a debate on the report. That matter is not within my remit. The hon. Gentleman has the power to raise it by other means.
We are extremely anxious to come to conclusions on the report and we shall do everything we can to hasten matters. We are as anxious as is the hon. Gentleman to ensure that the highest safety requirements are maintained in the North Sea. Obviously, the report has an important part to play in achieving and maintaining that.
Mr. Dalyell: I accept that I can raise this matter with the Leader of the House, but is it not fair for me to ask whether we have to wait for the report of the Norwegian inquiry before we can have the debate? That may not become available until after August and it will be unsatisfactory for us not to have had a proper discussion of this matter before the House goes into recess.
Mr. Gray: That is a matter for my right hon. Friend the Leader of the House. If we are to proceed along the lines of the Burgoyne committee report
1482
it will be useful for us to have the benefit of the Norwegian report at the same time.
The right hon. Member for Devonport, the hon. Member for Dunfermline and my hon. Friend the Member for Enfield, North (Mr. Eggar) all asked about the British National Oil Corporation. Labour Members have certainly been loud and clear in giving their views on what should or should not be done with BNOC. At this stage the only assurance that I can give them is that the Government are being meticulous in investigating all the possibilities. The hon. Member for West Lothian said that it is not good enough just to say that the Law Officers have been consulted. I can assure him that they are being consulted, but that all the aspects of changes to the BNOC are being equally carefully studied.
The question of participation agreements was raised. The agreements are between the BNOC, the licensees concerned and the Secretary of State. The Government have recently said that they have no intention of varying these agreements. More than that I cannot say at this stage.
This has been a useful opportunity to discuss these matters. We are grateful to the right hon. Member for Devonport for providing the opportunity of a debate on the prayer.
Question put and agreed to.
Resolved.
That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972, as amended by section 22 of and Part 1 of Schedule 4 to the Industry Act 1975 and section 1 of the Industry (Amendment) Act 1976, as grants towards obtaining in the United Kingdom goods and services for each of the projects specified in column 1 of the Table below carried on by persons specified in respect thereof in column 2 of the Table sums which, together with the sums already paid or undertaken to be paid by way of such financial assistance exceed the sum of £5 million or, as the case may be, the maximum sum authorised by a resolution of this House passed on 15th June 1977 in respect of the project specified in Column 3 of the Table but do not exceed the sum specified in respect of the project in Column 4 of the Table.

TABLE

(1)

(2)

(3)

(4)

Project

Persons carrying on project

Maximum amount of financial assistance exceeding £5 million previously authorised

Maximum amount of financial assistance exceeding £5 million now authorised

Establishment offshore of production platforms and other installations with their equipment for the development of the Brent oilfield.

Shell UK Limited

£9 million

£20 million

Esso Exploration and Production UK

Establishment offshore of production platforms and other installations with their equipment for the development of Cormorant oilfield.

Shell UK Limited

£9 million

Esso Exploration and Production UK

Conoco North Sea Inc.

Gulf Oil Corporation

BNOC (Exploration) Limited

BNOC (Development) Limited

UNEMPLOYMENT (SOUTH SHIELDS)
Motion made, and Question proposed, That this House do now adjourn—[Mr. Berry.]
12.20 am
Dr. David Clark: In the early 1960s, when Geoffrey Moorhouse was collecting information for his book "The Other Britain", he found that the North-East of England had been eager to meet the challenges of the day. Last Thursday on Radio 4 he gave a revealing account of a return visit to the region. He recounted an episode that occurred in South Shields. As he stood overlooking the shipyards of the town he had a moving encounter with a gentleman standing next to him. He was a 52-year-old former shipyard worker who had lost his job several months previously. In their conversation the gentleman said that it was rather strange that his father had been in the same predicament in the 1930s. He said that it was only because of the war that his father found full employment. The first time that he had seen an adult cry was when he burst into his house and found his father in tears over his predicament. He said "Only last week I found myself in the same position when my son burst into my house. It was only by biting my bottom lip that I did not repeat that previous episode."
I recount that tale for two reasons. First, it is always useful, when talking about employment statistics, to remind
1484
ourselves that each one of those statistics represents a living human being undergoing a most humiliating experience. Secondly, there are lessons to be learnt from the fact that that man's father had found work only at the outset of the war.
I wish to give some bare statistics about unemployment in South Shields. In doing so, I am aware that we live in a time of world recession when we are seeing rocketing unemployment nationally and, even more so, regionally South Shields is not a small town. It consists of about 100,000 people. It has known the problems of unemployment, like most towns in the North of England. But I doubt whether many people in the South of England realise the extent of unemployment in South Shields. The Minister knows that, at the last count, there were 6,269 people without jobs, representing 16·2 per cent. of the employed population. The figures for men are much worse. On 12 June 19·4 per cent. of the men in South Shields were without work—one in five of the men had no jobs, and the figure is rising. When does the Minister expect it to be one in four? More than half of those people have been out of work for more than six months, and the prospects are bleak. Since the Government came to power the position has become worse, with a 26 per cent. increase in the past 12 months. In other words, for every three people in South Shields without jobs in May last year there are now four.

1485
I accuse the Government of wilfully increasing unemployment, not only in South Shields but in Britain, and of failing in their duty to tackle the problem. By their fanatical adherence to the theoretical policy of monetarism, with its high interest rates, they are making it virtually impossible for business men to borrow at 20 per cent. in order to invest. Because of that stupid policy we have high exchange rates, which mean that the export potential is lost. We are losing orders and we are losing jobs. What can the Minister do? I return to my anecdote about the war. Obviously, we cannot have another war, but we should look at the circumstances that surrounded the war and ask what were the factors that led to full employment. They were the co-ordination of resources and an increase in public spending. We can do that today without a war, and I believe that we should do so.
I want to suggest four or five examples of what the Government could do to help unemployment in South Shields. Let us have some dispersal of Civil Service jobs. As I walk down the streets of Westminster, I find the Civil Service looking for people, yet the North of England is looking for jobs. Why not transfer some of the jobs? I know that the Government have cancelled some moves to Cumbria and to other parts of the North of England. Why not do a U-turn?
Secondly, I understand that it costs the Exchequer more than £4,000 a year for the average unemployed family man. Instead of cutting back on STEP, instead of cutting the financial provision of the Manpower Services Commission, would not it be better to save some of that £4,000 and gainfully employ those men? For example, the town of South Shields has one of the most attractive beaches in the whole of England. I can say that without fear of contradiction. It is a very poor town, being the smallest metropolitan borough. We have great problems of deprivation. We have people who are willing to work. Why could not extra aid be given to the authority to take on extra workers and teachers? Instead, the Government are trying to force the local authority to make more people redundant.
The Government may say that it is a question of finance, but I have heard the Prime Minister for ever bragging about
1486
the marvellous deal she got out of the EEC. Let us put some of that money into the regional fund, and let us have some of it put into areas such as South Shields.
There is also the question of British Shipbuilders, one of the major employers in my constituency. The Government promised British Shipbuilders public sector orders. British Shipbuilders has had a marvellous record of achieving other orders. It set a target of 45 ships. Many people said that it was impossible, but has achieved that.
Mr. Don Dixon: Ahead of schedule.
Dr. Clark: Ahead of schedule, as my hon. Friend the Member for Jarrow (Mr. Dixon) says. But it has been let down by the Government. As a result, many shipyard workers in my constituency are on short time directly because the Government will not advance public sector orders. It is about time the Government faced up to that fact.
I turn to the other problem of apprentices. The level of skill for the future in any town depends upon training the apprentices of today. Yet in an area such as mine, we find that apprentices are being made redundant, as a result of which they lose their skill, trade and ticket for ever. More than that, we are finding a drastic fall in the number of apprentices being taken on by companies in the constituency. Private industry has patently failed to provide the training for industry. The Government recognise that in Northern Ireland. I had a letter from the Minister only today in which he explains the difference. He says that in Great Britain responsibility for apprentice training is that of industry, but that in Northern Ireland the achievement of the target with regard to apprentices:
"was a matter of community development rather than the responsibility of industry".
I suggest that that applies equally to areas such as South Tyneside and South Shields. I know of the terrible unemployment rate in Northern Ireland, but the figure in South Shields is no less and the problem of training our skilled people of tomorrow is just as much a community development as an industrial responsibility. I plead with the Minister to try a pilot scheme in areas such as ours, where the Government will take on some of the responsibility for training some of

1487
the apprentices. They represent the only thing that we have in the community—our skill for tomorrow. I remind the Minister that only 14 per cent. of young people in South Shields stay on at school after 16. Through economic forces they have to leave school.
The previous Government were just about to embark on an imaginative pilot scheme to pay young people to stay on at school. I urge the Minister to consult his colleagues about reintroducing the scheme. Surely it makes sense to pay young people to stay on at school or at college to obtain higher skills and a higher education rather than to turn them out on the dole, which is the only alternative for many people when we have unemployment figures and unemployment rates at the level that we are talking about.
I could go on to make practical suggestions which could be applied if the Government had the will and really wanted to tackle the unemployment problem. It is being said throughout the North of England—my hon. Friends who are present will confirm—that the Government do not care one iota for what happens there. That is common folklore. It has often been put about that in any case the people in the North of England do not want to work. I refer to an article in the The Times last Wednesday by Louis Heren. When talking of the people of South Shields, he wrote:
" Most people I know would refuse to work under such conditions, but they worked with a will and apparently without supervision. Those people in the South who believe that the British have become work-shy should visit South Shields."
Louis Heren hit the nail right on the head, and there I rest my case.
12.31 am
Mr. Don Dixon: I speak in support of my hon. Friend the Member for South Shields (Dr. Clark), who has so effectively dealt with the alarming unemployment prevailing in our area of South Tyneside, which covers his constituency of South Shields and my constituency of Jarrow. He has put some sensible and constructive suggestions to the Minister.
As possibly one of the few hon. Members of this House who have been
1488
unemployed in recent years, I can speak with a certain amount of experience of the humiliation of standing in the dole queue. I have sometimes been unemployed for days, sometimes for weeks, and on one occasion for many months.
My main concern is for that ever-increasing army of long-term unemployed. In my constituency of Jarrow, in April of this year, out of 3,180 people over 18 registered as unemployed, almost half, 1,500, had been registered for six months or more. Of those, almost 1,200 were males. Long-term unemployment in areas of high unemployment is worse than a prison sentence. At least when a judge or a magistrate sends a person to jail, he is given the date of his release. In areas such as the North-East, when men in their late 40s and early 50s are put on the dole, there is no sign at all of any release.
As most of the unemployed are from the shipbuilding industry, as my hon. Friend has said, I shall mention some of the prospects, mentioned in the national newspapers, of those men trying to find work at their trade or their skill. A steel worker, for example, or a man in one of the boilermaking trades, has a 70 to 1 chance of gaining work. A plumber, painter, joiner or electrician has a 45 to 1 chance of getting another job. An unskilled person from the shipyards has a 370 to 1 chance of finding another job. It costs £5,000 more to put a shipyard worker on the streets than it does to keep him in work.
Because of the high unemployment in our area, the young and active are leaving to find employment elsewhere. This is leaving an increasing burden on the public and the social services in our district. The biggest employer of labour in South Tyneside is the local authority, and we all know that 70 per cent. of local authority expenditure goes in wages and salaries. The present policy of the Government in cutting back public expenditure is hitting particularly hard at areas such as South Tyneside.
I accept that the previous Government made South Tyneside a programme area, and during the Adjournment debate last week it was pointed out that about £2½ million of the urban aid programme assistance had been approved this year. However, I suggest to the Minister that he

1489
should put it to his colleagues in the Government that because of the serious unemployment situation in the area, as has been explained by my hon. Friend the Member for South Shields and me, South Tyneside should be classified as a partnership area instead of being a programme area. That would put more Government assistance where it is urgently needed—in our district.
12.35 a.m.
The Under-Secretary of State for Employment (Mr. Jim Lester): I congratulate the hon. Member for South Shields (Dr. Clark) on having the persistence to secure this Adjournment debate and I welcome the opportunity to reply to some of the points that he has made and also to those made by the hon. Member for Jarrow (Mr. Dixon). He has a record of exerting consistent pressure in looking after the interests of his area.
The hon. Member for South Shields knows that I share his considerable anxiety at the level of unemployment in his constituency. An unemployment rate of 12·9 per cent. for South Tyne is appalling. It is not for me to underestimate the effect of unemployment on the individuals concerned and on their families, and the story that the hon. Member told is a real and moving one.
Over the past year I have visited the Northern region on at least seven occasions. I returned only last night from a visit to Darlington, where I was tackled on television by five teenagers who were rightly concerned and determined to have a go at me on the subject of unemployment. I have also met a number of representatives from the region at meetings in London and I am, therefore, fully aware of the seriousness of the situation. Regrettably, I have not paid a recent visit to South Shields itself, but I would welcome the opportunity to discuss the problems facing the area at first hand.
The Government have never sought to disguise the severity of the present unemployment problem, nor have we made any secret of the fact that we believe that unemployment is likely to get worse before it gets better, but it is important to keep this in perspective. High unemployment is not a new phenomenon created by this Government. Unemployment in South Shields has not just started to rise. As the hon. Gentleman knows, between March 1974 and May
1490
1979 unemployment in South Shields rose by 53 per cent. Of course that is no comfort to the people in South Shields who are unemployed now, but what is absolutely clear is that had it not been for some of the measures that we are taking, unemployment in South Shields and elsewhere would have been a good deal worse.
One of our first tasks on coming to office was to concentrate regional assistance on areas of the greatest need, such as South Shields. The reduction in the coverage of the assisted area status announced by my right hon. Friend the Secretary of State for Industry in July 1979, and the increased differential between the benefit of special development area status and the other gradings of the assisted areas, will increase the relative attractiveness of those areas in Britain, such as South Shields, which are suffering the worst problem.
South Shields will remain an SDA and will continue to be eligible for the full range of regional incentives at the highest levels available in Great Britain. The Government's aim is to encourage firms to invest there, to create new jobs to replace those that are being lost in the area's traditional industries, and to expand still further the area's industrial base.
The picture in South Shields is not all gloom. Expansions are taking place, new projects are being set up, new jobs are being created—though not at as fast a rate as probably the hon. Gentleman or I would have liked. Since May 1979 Government financial assistance worth £6 million has been offered under section 7 of the Industry Act for 22 projects in the South Tyne travel-to-work area, involving a total estimated investment of nearly £56 million.
Dr. David Clark: The figures are slightly misleading. South Tyne is a big area, stretching from Prudhoe, which is near Hexham and relatively prosperous, in the west, to Chester-le-Street in the south. I ask the Minister to confine his remarks to the employment exchange areas in South Tyneside.
Mr. Lester: I realise that. The figures are collected on this basis, and therefore they are helpful. The estimated number of jobs associated with those projects was 1,490. During the same period, £677,000 was offered under section 8 of the Industry

1491
Act for 76 projects involving a total estimated investment of about £3·4 million.
Ten Government advance factories have been completed and are available for occupation by incoming firms in the South Tyne TTWA. Eight of the completed factories are in South Shields. A further five factories are under construction.
Furthermore, I understand that the English Industrial Estates Corporation has been authorised by the Department of Industry to build a number of small workshops, the size of double garages, on Tyneside and Wearside in an experiment to stimulate the creation of more small businesses. Twenty of these, some of which have already been completed, will be in South Shields. Arrangements are also in hand to construct industrial buildings with funds provided by the private sector, including a £5 million Legal and General Assurance Society scheme which involves 16,000 square metres of factory and warehousing in the South Tyne travel-to-work area.
Ultimately, however, the health of the economy in areas such as South Shields depends primarily not on the amount of regional assistance they receive, but on the vitality and competitiveness of the industry and commerce there and the degree of co-operation between managements and work forces.
The crucial need is to tackle the root causes of rising unemployment. The main one—the onset of a world recession partly due to the renewed upward surge in oil prices—is, of course, wholly outside this country's control. There is also the legacy that we inherited from our predecessors. Not only was public expenditure expanding ruinously, but crucial decisions on the economy and on industries in trouble had been dodged or postponed. We are getting to grips with these problems. But the Government can play only a part. It is up to both sides of industry and commerce to co-operate in raising production and in bargaining responsibly so that they increase their firms' ability to compete both in this country and overseas. The only prescription for a successful firm and a successful Britain is to produce and market competitive products with a design, quality, price, delivery date and backing service that customers demand.
Dr. David Clark: Will the Minister give way?
Mr. Lester: I have given way an awful lot. The hon. Gentleman has had most of the time available. I do not know whether he wants some of the answers.
Dr. Clark: Is the Minister saying that he agrees with his right hon. Friend the Secretary of State for Industry that workers in areas such as mine should take less in wages to become more competitive?
Mr. Lester: It is a question of workers in every area bargaining responsibly—not taking less wages than they are currently getting—so that they stay competitive. In the end that is the only way to maintain real jobs.
The Government cannot create real jobs in South Shields or anywhere else, as Labour Ministers seemed to think. What they can do, and what we are seeking to do, is to create the conditions which will enable United Kingdom firms, and firms in South Shields, to compete successfully in world markets, and so create a genuine demand for labour. This is the only way to reduce unemployment, and that is why there is no alternative and no easy way out.
Faster growth and improved industrial performance providing jobs are the way to a lasting solution of the unemployment problem. But it will not be achieved overnight. In the meantime our special employment measures can make a contribution by providing jobs or training opportunities for those who would otherwise be unemployed. The programme of special employment measures for 1980–81 makes an important contribution towards reducing unemployment and supporting what the hon. Gentleman mentioned. This is a question of training and helping youngsters over this difficult time. We have tried to concentrate the help where it is most needed.
Most of those youngsters in South Shields who leave school this summer will find jobs, despite the serious unemployment situation in the area. A minority of them, however, will need special help if they are not to remain unemployed for long periods and lose faith in the ability of the employment and social services to give them a helping hand. The

1493
youth opportunities programme provides that special help. The Government have not only continued YOP, but have expanded it.
Now the Government have agreed to the MSC's proposal to expand YOP nationally by a further 25 per cent. in 1980–81. In South Shields, 1,860 unemployed youngsters participated in YOP schemes in the year ending 31 March 1980 and it is planned to increase this number in 1980–81. YOP has gained great success by being aimed at those youngsters most in need of help and through being designed specifically to improve their prospects of obtaining satisfactory permanent jobs at the earliest possible moment. It is because the programme offers help only where it is needed and because it is highly relevant to the world of work that it has proved so popular both with young people and with employers. About 70 per cent. of former work experience trainees under YOP find a job after their period of training has ended.
The Government's special employment measures are not, of course, limited to young people. In addition to those benefiting in South Shields under the youth opportunities programme, 268 jobs are currently being maintained through the temporary short time working compensation scheme, 61 people are currently being assisted by the small firms employment subsidy, 57 by the job release scheme and 177 by community industry. In addition, 380 people were assisted under the special temporary employment programme. That is the type of scheme that local government can, and should use to do work on that delightful beach in South Shields. That is the purpose of the STEP scheme, and the reason why we have increased the number of places in areas such as South Shields.
But special measures such as those can never be the final answer to the present high levels of unemployment in South Shields. In the longer term the measures that we are taking to stimulate the economy offer the best hope of improving the employment prospects for everyone.
The hon. Gentleman raised five points. I have dealt with the extra aid that we provide through the STEP scheme, in order to do some of the work in relation
1494
to the infrastructure. The dispersal of Civil Service jobs has been examined and re-examined. It has been found that it is difficult to get the Civil Service to move. However, it is always a possibility. The matter of advance orders for British Shipbuilders has been raised before, and I have taken it up directly with the Department of Industry, to establish whether there is any delay. If there is any delay, I wish to ensure that it will be dealt with, in order to maintain employment in those areas.
The hon. Gentleman asked about apprentices and Northern Ireland. He obviously feels strongly about that. However, as I tried to explain in my letter, the apprentice system in Great Britain is very much bound up with the engineering industry training board. We work with that board and with the industry, including the trade unions. He suggested that the Government should give more help. However, we give £51,000,000 a year through the training for skills scheme, which is designed to do what the hon. Gentleman has suggested in South Shields, namely to provide additional apprenticeships above the industrial quota. As a result of the recession and of difficult times, industry cannot make up the numbers that it will need in the long term. I think that I have covered the hon. Gentleman's points. If any remain, I shall write to him.
The hon. Member for Jarrow sought to have his area classified on a different basis. That is not for my Department to consider, but I shall draw it to the attention of the relevant Department. As I said, special measures or regional aid will not provide the final answer for South Shields. The final answer is to get the British economy functioning as well and as efficiently as our competitors overseas. Only when our central economy is right will areas such as South Shields benefit.
Dr. David Clark: I have some figures about apprentices. Baker Perkins has reduced its apprentices from 19 to 12, the National Coal Board has reduced its numbers from 32 to 18, Northern Gas has reduced its apprentices from 66 to 52, Peter Johnston & Co. Ltd. has reduced its numbers from 14 to nil, NEI Reyrolle Ltd. has reduced the figure from 23 to nil and so on. It is not working.
Mr. Lester: As I have suggested, the numbers that industry directly finances have decreased. The training for skills programme means that Government support will top up the numbers. I shall write to the hon. Gentleman and point
1496
out where, and how, the scheme is working.
Question put and agreed to.
Adjourned accordingly at twelve minutes to One o'clock.