Commons Sitting of 30 July 1980

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

  SOUTH YORKSHIRE BILL [Lords] (By Order)
  As amended, further considered.
  Amendments agreed to.
  To be read the Third time.

  INVERCLYDE DISTRICT COUNCIL ORDER CONFIRMATION BILL
  Considered; to be read the Third time tomorrow.
ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Sheltered Housing
    1. Mr. Bowdenasked the Secretary of State for the Environment how many sheltered housing units will be built in the year 1980-81 in England and Wales.
    The Minister for Housing and Construction (Mr. John Stanley): Some information about numbers of sheltered housing units being built will be given in local authorities' housing investment programme returns for 1981-82. Authorities have been asked to submit these by 8 August. Copies will be placed in the Library.
    Mr. Bowden: What steps will my hon. Friend take to ensure that the elderly are given high housing priority in these difficult days, when the programme has had to be cut back?
    Mr. Stanley: In the circular on this year's HIP allocation my right hon. Friend the Secretary of State has asked local authorities to give high priority, within their allocations, to special needs, particularly those of the elderly and the disabled. My hon. Friend will be glad to know that in the first five months of this year starts on new dwellings for the elderly in England represented 46 per cent. of all local authority and new town starts, compared with 26 per cent. last year.
    Mr. Frank Allaun: As it is estimated that council house starts will drop from their present low record to 30,000 a year, does that not mean that such starts will be confined to houses for the elderly and the disabled? What will happen to the other half of the population, who cannot afford to buy council houses or houses on the private market? Even with the aid of a mortgage such people cannot afford to buy a house.
    Mr. Stanley: As the hon. Gentleman knows, we are looking to the private sector as well as to the public sector to meet the need for rented accommodation. In view of what the hon. Gentleman has said, I hope that he will urge the Opposition Front Bench to withdraw its commitment to repeal shorthold, as that will make more rented accommodation available.
    Mrs. Kellett-Bowman: Does my hon. Friend accept that Lancaster city council is eager to sell council houses and has the best record for such sales in the North-West? Does he also accept that the council is extremely anxious that it should not be obliged to sell old people's dwellings? It has a high proportion of such dwellings which are not, strictly speaking, sheltered accommodation. Will the Minister seriously consider the amendment put forward on 21 July in the House of Lords, which would not oblige councils to sell houses that have been specifically built for and habitually occupied by, old people? At the very least, will he introduce a permanent preemption clause for councils?
    Mr. Stanley: My hon. Friend will be aware that that amendment was the subject of debate yesterday during consideration of the Tenants' Rights Etc. (Scotland) Bill. During the proceedings in the other place, their Lordships chose to

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    reject that amendment decisively. I shall consider the point that my hon. Friend has made about pre-emption, before the Bill comes back to the House.
    Mr. Kaufman: Since, in Committee, the hon. Gentleman constantly rejected any attempt to make comparisons between the Scottish Bill and the Bill relating to England and Wales, will he now give a clear answer to the question asked by his hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman)? As the House of Lords has voted to exclude not only sheltered accommodation, but other old people's dwellings, from compulsory sale, will the Government accept the amendment and retain it in the Housing Bill?
    Mr. Stanley: The answer is "No", but we shall consider pre-emption.
    Mr. Frank Allaun: Shame.

    Local Authority Expenditure
    2. Mr. Durantasked the Secretary of State for the Environment what response he has received from local authorities to his request for revised budgets for 1980-81.
    4. Mr. Andersonasked the Secretary of State for the Environment whether he will make a statement on the response to his circular to local authorities of 13 June on their revised expenditure plans.
    The Secretary of State for the Environment (Mr. Michael Heseltine): We have asked the local authorities to return their revised, reduced expenditure plans by 1 August. Until my Department has analysed the revised plans, it will not be possible to say whether local government as a whole has made the reductions we requested.
    Mr. Durant: Will my right hon. Friend not weaken in his resolve to deal with this matter, which is of great importance? Will he bear in mind those local authorities, mainly Conservative, which have cut back over the years at the request of the Labour Party? Will he deal firmly with those irresponsible authorities that have little regard for their ratepayers and financial prudence?
    Mr. Heseltine: I welcome my hon. Friend's support. The provisions of the Bill will give to the Government, in their administration of the block grant, a more sophisticated method of allocating resources between those authorities which overspend and those which underspend. The problem goes a little wider than the difficulty facing Conservative authorities. It is clear that there are Labour as well as Conservative authorities that are complying with the Government's target. All that the authorities are doing by not complying with the Government's request is pre-empting resources from those that are. If there is to be a degree of fairness, it is important that all authorities understand that the burden must be spread equitably throughout the country.
    Mr. Jim Marshall: When will the right hon. Gentleman realise that there is no more sophisticated way of allocating rate support grant resources? Secondly, when will he wake up and accept that local authorities are responsible bodies and that his actions represent an unwarranted intrusion into local democracy?
    Mr. Heseltine: The hon. Gentleman knows that the traditional relationship between central and local government is that the Government set the guidelines for local government expenditure. It is sometimes necessary for the Government to ask for reductions to take place, as my predecessor did in 1976. I have not yet used the draconian measures that the previous Labour Government used to secure those ends. I have tried to rest on the voluntary basis, which hon. Members prefer as a first priority. If I am not able to secure the targets that the Government have set—we shall not know that until the next few weeks have passed—I shall have to consider a range of other measures, some of which the Labour Government used rather earlier than I have done in similar circumstances.
    Dr. Mawhinney: In considering these revised budgets, will my right hon. Friend bear in mind that in some county and district councils that have high growth areas and new towns, one component of the increased spending is population growth? Will he bear that in mind when considering the revised budgets?
    Mr. Heseltine: My hon. Friend has raised an important issue. We shall be able to consider factors such as that under the new grant-related expenditure parts of the block grant proposals. The Government have asked local authorities to reduce by only 2 per cent. what they spent in 1978-79. In view of the magnitude of the national economic difficulties, that is not an impossible target for any authority.
    Mr. Hattersley: The Secretary of State has referred twice to the block grant, which will begin not this year but next year. Does he recall that on Monday Sir Gervas Walker urged him to postpone the introduction of the block grant for a year, as he believes that it cannot be operated fairly and equitably next year? Does the right hon. Gentleman believe that Sir Gervas was motivated by malice or ignorance in advocating that postponement?
    Mr. Heseltine: I know Sir Gervas extremely well, and I know that he would not be motivated by either of those motives. It does not serve the right hon. Gentleman well to trivialise a debate of this sort. The leaders of the local government associations are right to express their legitimate concern about the Government's proposals. That is a vital part of the democratic process. It is the Government's view that the block grant proposals will answer many of the deep-seated criticisms that right hon. and hon. Members have expressed about the present basis of regression analysis. It is upon that basis, and in the light of the work that we have done so far, that we shall press ahead with the block grant in 1981-82.

    Agricultural Land (Building Use)
    3. Mr. Lyellasked the Secretary of State for the Environment what steps he is taking to discourage building on good agricultural land between new towns and other urban areas.
    The Under-Secretary of State for the Environment (Mr. Marcos Fox): The Government's policy is, where possible, to avoid development of agriculural land and, where it must be taken, to use lower, rather than higher quality land.
    Mr. Lyell: I am grateful to my hon. Friend for that answer. That may be the
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    policy where possible, but will my hon. Friend please remember that there is a large amount of vacant and dormant land around new towns throughout the country? Will he consider imposing a moratorium on the use of agricultural land until that land is used?
    Mr. Fox: If my hon. Friend considers carefully the measures that the Government have taken since coming into office, he will realise that we have done that which he has asked me to do. We shall ensure that underused land is brought forward for development. Only as a last resort will we consider using agricultural or green belt land.
    Mr. Douglas-Mann: Is not the one principal measure that the Government have taken that of virtually stopping all building? Has the Minister had an opportunity to consider yesterday's report of the Select Committee on the environment, which predicts that building starts in the private sector will stay at 100,000 and that starts in the public sector will decline to 31,000? Is that not the sort of measure that the Government are taking, rather than the measures indicated by the Minister?
    Mr. Fox: In due course the Government will give their answer to the issues raised at yesterday's meeting of the Select Committee. My responsibility is for land availability. The Labour Government were not very successful in building houses or in providing land. We intend to ensure that when our economy expands—[HON. MEMBERS: "When?"] That will come sooner than Labour Members realise. Our intention is to ensure that shortage of land will not be a detriment to building the number of houses that we deem to be necessary.
    Mr. Chapman: Will my hon. Friend establish beyond doubt that at least 50,000 acres of agricultural land are used for development purposes of various sorts, while at the same time probably a quarter of a million acres are lying derelict or unused in our large towns or conurbations? I recognise the progress that the Government have made in utilising derelict urban land, but will he ask his right hon. Friend to consult the Minister of Agriculture, Fisheries and Food to ascertain whether fresh initiatives can be taken to encourage the conservation of agricultural land?
    Mr. Fox: Our relationship with the Ministry of Agriculture, Fisheries and Food is on an ongoing basis. The difference between this Government and the Labour Government is that our Departments work closely together. I assure my hon. Friend that Environment Ministers, and sometimes Ministers from the Ministry of Agriculture, Fisheries and Food, are involved when it comes to the use of green belt land. A register of derelict land is being prepared. I take note of my hon. Friend's remarks.
    Mr. Hardy: Will the Minister tell the House a little more about the relationship between his Department and the Ministry of Agriculture, Fisheries and Food? It may be ongoing, but we do not know where it is going. Have the Department's consultations on conservation covered the deplorable proposals which the Ministry of Agriculture, Fisheries and Food has put before the House, which will make the Government's already deplorable record on conservation quite outrageous?
    Mr. Fox: The hon. Gentleman tempts me to give an ongoing answer, but I shall resist that. We shall be prepared to defend our record on conservation, certainly when it is compared with that of the previous Labour Government. What we have done already is quite an achievement.

    Herbicide 2,4,5-T
    5. Mr. Hooleyasked the Secretary of State for the Environment if he will issue a circular to local authorities on the use of the pesticide 2, 4, 5-T in municipal parks, gardens or on highway verges.
    The Minister for Local Government and Environmental Services (Mr. Tom King): The need for advice will be considered in the light of the Government's conclusions on the present review of 2, 4, 5-T by the Advisory Committee on Pesticides.
    Mr. Hooley: Will the Minister accept that that at least gets us somewhere? Is he aware that Sheffield has already banned the use of this dangerous pesticide? Will he encourage other authorities to follow that excellent example?
    Mr. King: The hon. Gentleman will be aware that the matter has been considered before. I have here the review
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    of the safety of the use of the herbicide 2, 4, 5-T in the United Kingdom, dated March 1979, which was submitted by the chairman of the Advisory Committee on Pesticides to the hon. Member for Edinburgh, East (Mr. Strang) when he was Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food. In view of further evidence, the advisory committee is reconsidering the matter. The National Union of Agricultural Workers has also produced a dossier of evidence, which is being reviewed. The advisory committee will then report.
    Mr. Latham: Does my right hon. Friend know whether local authorities use that pesticide in municipal parks and gardens, and along highway verges?
    Mr. King: My understanding is that it is used by local authorities. One or two have decided temporarily to cease to use it. The hon. Member for Sheffield, Heeley (Mr. Hooley) referred to one such authority.
    Mr. Concannon: Due to disquiet about that pesticide, will the Minister accept that it may not be a bad idea to ask local authorities to keep a register of where it is used in their localities?
    Mr. King: The advisory committee will report shortly. The last report was only 16 months ago. The Royal Commission on environmental pollution, in its seventh report on agriculture and pollution, also considered the matter but did not suggest that such steps were necessary. All pesticides, even, for example, sodium chlorate, are dangerous. The question is the method and extent of their use. That is why we should adopt a sensible approach, and the Government feel that it is right to take the advice of the best qualified advisory committee on the matter.

    Programme and Partnership Authorities
    6. Mr. Anthony Grantasked the Secretary of State for the Environment to what extent programme and partnership authorities have attracted private investment for urban renewal in their areas.
    16. Mr. Thompsonasked the Secretary of State for the Environment to what extent programme and partnership authorities have attracted private investment for urban renewal in their areas.
    Mr. King: It is not possible to measure the amount of private investment in urban renewal deriving from the many activities of partnership and programme authorities. However, my right hon. Friend made it clear in his statement on inner cities policy last September that urban programme resources should help create the right conditions for private investors.
    Mr. Grant: Does my right hon. Friend agree that a great deal more can be done? I appreciate that he cannot give orders, but will he do all that he can to encourage clearing banks, pension funds and insurance funds to change their attitude to investment in inner city and urban renewal?
    Mr. King: We are giving the matter the highest priority. In discussions that I had with the previous chairman of the Development Commission about the rural areas, I encouraged the enlargement of private sector finance, which enabled the commission virtually to double the resources available at a time of considerable public expenditure restraint. On the urban side, the Post Office superannuation fund has purchased 100,000 sq ft of new factory development, which otherwise might have fallen on the urban programme for Beckton, and the work by Legal and General in Team Valley is helping with funds. There is also the work by Commercial Union on a feasibility study for the Manchester central station site. All those projects are receiving private sector funds, and the burden does not fall entirely on public sector resources.
    Mr. Speaker: Order. I appeal for shorter questions and answers.
    Mr. Thompson: Will my hon. Friend consider ways to guarantee loans from building societies and other financial institutions in the more difficult urban areas?
    Mr. King: I apologise, Mr. Speaker, for the length of my previous answer, but there is a long list of private sector investment in these projects.
    There are a number of possibilities, and my hon. Friend has mentioned one. I cannot give a commitment, but we are anxious to examine every possible way in which to stimulate private sector regeneration of urban areas.
    Mr. Dixon: Will the hon. Gentleman accept that, when programme and partnership authorities were introduced by the previous Government, a promise was made that the matter would be kept under review? It he aware that South Tyneside metropolitan district council, which covers my constituency of Jarrow and the constituency of my hon. Friend the Member for South Shields (Dr. Clark) has an unemployment rate of 174 per cent. or 11,784 men, women and children out of work, and only 154 notified vacancies? Will he consider regrading South Tyneside from a programme to a partnership authority?
    Mr. King: We have been considering reviewing authorities. We have protected the volume of resources available for the urban programme, but it is not possible at present vastly to expand them. It is important to sustain programmes in designated areas so that we can see what results are achievable and monitor progress. I hear what the hon. Gentleman says, but will he understand that if one dissipates it widely it will be difficult to judge the impact of the urban programme.
    Mr. Steen: As one of the problems of inner cities is the refusal of banks, insurance companies and large financial institutions to invest in inner cities, will the Government consider setting up a register, not of derelict public land, but of the amount of money that the clearing banks are investing in the inner areas to show how much they are concerned about urban renewal?
    Mr. King: We are having discussions with a number of major companies, institutions and clearing banks about the ways in which they can contribute to that important objective. I shall bear in mind my hon. Friend's point.
    Mr. James A. Dunn: Is the Minister aware that in spite of the information that he has given today about companies and institutions moving towards investment and changing their attitudes, there is still concern about enterprise zones? Is he further aware that those bodies would like to know all the conditions attached to the establishment of the zones before making the final disposition of the allocation of their resources, to see what advantages would accrue if they sited themselves there?
    Mr. King: My right hon. Friend the Prime Minister made an announcement yesterday, and my right hon. Friend the Secretary of State will answer a further question on the matter today. The information about enterprise zones and our proposals will therefore become much more widely available. We see them as a major step in encouraging enterprise in some of the most derelict areas of our industrial cities. We hope that they will make a useful contribution to regeneration.

    New Town Policy
    7. Dr. Mawhinneyasked the Secretary of State for the Environment when he expects to announce the results of his review of new town policy.
    Mr. Stanley: The Government's conclusions on target dates for winding up the development corporations of the first and second generation new towns were stated in my reply to my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) on 23 June. We expect to announce our conclusions on the third generation new towns before the end of the year.
    Dr. Mawhinney: Bearing in mind the uncertainty about how much agricultural land will need to be used, and about whether enough jobs can be created to meet current third generation target figures, will my hon. Friend ensure that that announcement is made as quickly as possible?
    Mr. Stanley: I recognise what my hon. Friend says about the need for the maximum degree of certainty. These are important decisions. They affect six major new towns, and they require careful evaluation. We shall do all that we can to produce the results for the third generation as soon as possible before the end of the year.
    Mr. Graham: Is the hon. Gentleman aware that there is frustration and despair in the new towns? When the long-delayed and long-awaited policy emerges, will it reflect the opposition that I and the hon. Gentleman's colleague heard at Harlow at a conference on new towns? Is he aware that there is particular hostility to selling commercial and industrial assets and the terms on which Development Corporation housing is
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    likely to be transferred to district councils?
    Mr. Stanley: I have almost completed a series of visits to third generation towns, and I have visited towns in the North-East. It is not my view that there is a mood of frustration and despair. Each of the new towns that I visited is making an important contribution to industrial development and the creation of new jobs.

    Housing Stock (London)
    8. Mr. Christopher Priceasked the Secretary of State for the Environment if he will publish in the Official Report his correspondence with those London boroughs which have yet to complete the takeover of housing stock from the Greater London Council.
    The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg): I have today placed copies of the consultation letter sent to local authorities, and other relevant correspondence, in the Library of the House.
    Mr. Price: Why did the Minister, earlier this month, send bullying letters to the eight London boroughs, giving them wholly inadequate time to respond, when his own powers were in doubt? Although no date has been set, the eight London boroughs have decided to appeal. Will the Minister delay the enforced handover of dilapidated housing, which in many cases has been stripped of decent assets, until the courts have disposed of the matter, instead of continuing to ride roughshod over the courts?
    Mr. Finsberg: The Government, unlike their predecessors, do not try to ride roughshod over the courts. The situation is perfectly clear. As was said in the letter, consultation was without prejudice to the outcome of proceedings brought by certain local authorities.
    Mr. Squire: Will my hon. Friend reconfirm that the sooner Greater London is treated in the same way as the rest of the country, and has one housing authority and one level of responsibility instead of two, the better it will be for all concerned? Many of us would consider that to be a substantial improvement.
    Mr. Finsberg: I note what my hon. Friend has said. I think he will understand that if I expressed any view on

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    the merits of the case I should be prejudging my right hon. Friend's decision, which he must take in a quasi-judicial capacity.
    Mr. Tilley: Does the hon. Member intend, after the court case is settled, to consult the tenants direct? People in my constituency bitterly oppose the prospect of the handover, not for any love of their Tory GLC landlords, but because the financial provisions that are on offer from the GLC mean that the boroughs will not have the necessary money to put right the rundown state of those estates after three years of Tory rule.
    Mr. Finsberg: Of course we shall take account of any views that tenants care to express. It is interesting to recall that about two years ago the London borough of Camden asked its GLC tenants what they wanted. When they said that they wanted to be transferred to Camden, the council appeared to drop the results of that questionnaire.
    Mr. Nicholas Baker: Will my hon. Friend encourage the London boroughs and the GLC, by correspondence or any other means, to solve their own housing problems in their own areas and not to purchase land for housing in rural areas?
    Mr. Finsberg: As my hon. Friend knows, the purchase of land in areas outside London requires permission from the Secretary of State and is, in any case, contained in the allocation of money under the annual programmes. The wholesale grabbing of land that went on under the last Administration will not find favour with this one.

    Housing (Homeless Persons) Act
    9. Mr. Soleyasked the Secretary of State for the Environment if he will give guidance in accordance with section 12 (2) of the Housing (Homeless Persons) Act 1977 to all authorities having international ports or airports within their areas on the implementation of the Act.
    Mr. Geoffrey Finsberg: A code or guidance already exists for the use of all authorities with responsibilities under the Act. We are currently reviewing both the Act and the code of guidance to see whether any changes may be necessary.
    Mr. Soley: Will the Minister bear in mind that some boroughs, particularly
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    Hillingdon, have already turned down offers of help from the GLC? Will he take this opportunity to remind the London borough of Hillingdon that it is morally objectionable to use homeless families as political pawns to serve its own rather dubious political ends?
    Mr. Finsberg: I doubt whether the hon. Member is qualified to ask me to tell the London borough of Hillingdon its moral duties. I am satisfied that the views of the London borough of Hillingdon—and the views of the London Boroughs Association, which have been conveyed to the Government—will be given due weight in the review.
    Sir Albert Costain: Does the Minister appreciate that it really is pathetic to make a political issue out of this? Does he also appreciate that in the Channel ports, for example, there is a special problem, and that people on the housing waiting lists suffer very severely? They will continue to do so until there is some revision of the rules.
    Mr. Finsberg: I understand the frustration of thousands of people on waiting lists who find that their places, which they have been keeping for years, are suddenly overtaken for one reason or another. That is why the Government are taking some time to consider the whole process. If my hon. Friend's authority wishes to express any views, it should do so as soon as possible.
    Mr. Winnick: In view of the Select Committee's report, published yesterday, is it not clear that the Government's policies are leading to an acute crisis that will make many more people homeless? Why should thousands of people, waiting desperately for housing, have to wait longer and longer on the waiting lists and become homeless as a result of Tory domga over council housing?
    Mr. Finsberg: In view of the dogma of the Labour Party in trying unsuccessfully to kill shorthold, such a criticism lies ill in the mouth of the hon. Member. With regard to the press reports about the Select Committee, I must tell the House that when the Government have a chance to read the Committee's report in full, a comment will be made, as is normal.
    Mr. Shersby: Does my hon. Friend agree that it was not the intention of Parliament in 1977 to impose on a borough such as Hillingdon, which has an international airport within its boundaries, a national duty to house people from all over the world at the expense of the indigenous population of that borough? Is my hon. Friend aware of the amendment in the names of 56 hon. Members to early-day motion No. 786? Will he amend the Act as soon as possible in the interests of the people of this country? [Interruption.]
    Mr. Finsberg: We are reviewing this matter as quickly as we can. I understand the depth of sincerity with which my hon. Friend puts the views of his constituents, and I find it somewhat objectionable to hear the comments from the Labour Benches.

    Domestic Rating System
    10. Mr. Knoxasked the Secretary of State for the Environment what representations he has received supporting the domestic rating system.
    Mr. Heseltine: None, Sir.
    Mr. Knox: Does that not suggest, to put it mildly, that the domestic rating system does not have many friends? In view of the unfairness of the system, particularly to single-income households, when will my right hon. Friend introduce legislation to abolish or reform the system?
    Mr. Heseltine: Had my hon. Friend turned the question the other way around, the answer would have been very different. I am considering the issue of domestic rates. In my Department we have begun working on the alternative to the present system. I shall have to ask the House to bear with me until we are able to complete the detailed work that is necessary to enable us to take a considered judgment before bringing any proposals to the House
    Mr. Marks: I am sure that the Secretary of State has in front of him the figures that would result from increasing VAT or income tax to provide the equivalent of the domestic rate. Will he give us those figures? In view of his dictation to local authorities, is it not
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    time that those taxes took over some of the burdens of domestic rates?
    Mr. Heseltine: It would be wrong to give the impression that the Government are committed to those alternatives. We are looking at all the alternatives, of which those are only two. It would be wrong to plant figures in the minds of hon. Members as if that indicated the only option that the Government were considering.
    Mr. Murphy: Will my right hon. Friend confirm that a poll tax is among the alternatives that he is considering?
    Mr. Heseltine: Yes. I am looking at the poll tax, in that I see it as my duty to look at all the alternatives. That is one of them.
    Mr. Straw: Why should the House show any patience with the Secretary of State, bearing in mind that in 1976 he said that the abolition of the domestic rating system was one of the wisest political commitments that he and his party had ever made? Did he make that statement not knowing how he would replace the domestic rating system? As the alternatives to domestic rating were well aired in the Layfield report, which does he intend to pursue—local income tax, a block Government grant or a local sales tax?
    Mr. Heseltine: The hon. Member might wait until we look at all the alternatives. He should remember that since the initial commitment was made to abolish domestic rating we have had a Labour Government who dramatically increased the levels of income tax. It is the reduction of that income tax that has priority over and above the question of domestic rates.

    Water Authorities
    11. Mr. Temple-Morrisasked the Secretary of State for the Environment if he will make a statement of progress on his monitoring of the water authorities.
    Mr. King: I am currently considering a number of issues arising from my meetings with water authority chairmen and chief executives, including issues of accountability and manpower levels. I am also considering the performance aims to be set for next year. The most recent batch of references to the

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    Monopolies and Mergers Commission included a major water authority.
    Mr. Temple-Morris: As a result of my right hon. Friend's inquiries, has he been made further aware of the unsatisfactory situation whereby water charges in some parts of the country greatly exceed those levied in other parts? This is largely unrelated to the efficiency or otherwise of the individual water authorities. What is the Government's approach to this not unimportant matter?
    Mr. King: My hon. Friend will have noticed that I referred in my answer to performance aims. One of the approaches that we are adopting is the introduction of performance indicators—initiated by the previous Government—following on to performance aims, to start to get a real measure of the performance of individual water authorities. It is true that they vary. This is due partly to the geographical situation and the availability of cheaper resources and partly to the incidence of smaller sewerage plants, as opposed to major, more economic plants. This is a matter of the general efficiency of the industry, to which we are giving particular attention.
    Mr. Crowther: Is the Minister aware that one of the most useful actions that he can take is to ensure that the authorities have adequate resources for capital expenditure so that they can do their job of reducing pollution in the nation's rivers, especially in the industrial areas? Does he realise that the progress that was being made in improving the badly polluted rivers Don and Rother in South Yorkshire has come to a stop because of the Government's attitude to public expenditure?
    Mr. King: I do not know what justification the hon. Gentleman has for the instance that he cites, of which I am not aware. We have broadly tried to safeguard the capital investment programme of the water industry, but it is a substantial programme. More than £100 million is being spent, for instance, on one sewerage scheme in Tyneside. The scale of resources required is massive to catch up with years of neglect and the acceptance of levels of pollution that are no longer acceptable. We shall do the best that we can within the resources available.
    Mr. Rathbone: Will my right hon. Friend accept that, because of the scale of expenditure by water authorities, it is crucial that they manage their own finances better? Is he aware that the Southern water authority, for instance, does not even have a finance committee to supervise those expenditures? I hope that he has taken that factor into consideration in his talks with them.
    Mr. King: My hon. Friend and a number of hon. Members came to see me about the Southern water authority. I am seized of the point that he made about its structure and how it operates without a finance committee. Water authorities have wide responsibilities and deal with substantial sums of public money. This is one of the aspects that I shall consider with the chairmen concerned.

    Enterprise Zones
    Mr. Nicholas Bakerasked the Secretary of State for the Environment if he is now able to announce the location of the proposed enterprise zones.
    Mr. Heseltine: My right hon. Friend the Prime Minister announced the locations of the proposed enterprise zones yesterday. Those for England are: on Tyneside, parts of Newcastle and Gateshead; on Merseyside, Speke; in Greater Manchester, parts of the Salford docks area and Trafford Park industrial estate; and in London's docklands, the Isle of Dogs.
    One or two further enterprise zones will be announced in due course. One of these will be in the Midlands. The other sites announced yesterday are at Belfast, on Clydeside, and in the Lower Swansea valleys. Questions on them are, of course, for my right hon. Friends the Secretaries of State for Northern Ireland, Scotland and Wales.
    Mr. Baker: Is my right hon. Friend aware that the Government's initiative on enterprise zones will be welcomed by everyone on this side of the House and the country as central to the regeneration of the economy? Will he when reviewing other potential sites, consider placing them in areas where the benefit from them will not be destroyed by hostile Labour authorities?
    Mr. Heseltine: I thank my hon. Friend for his support of this imaginative concept. I should go over old ground if I were to repeat that the object of the exercise is to establish enterprise zones in areas where there is a degree of welcome and co-operation. There are far more authorities asking for enterprise zones than we are able to provide. Large numbers of those authorities are Labour controlled.
    Mr. Parry: Has the Secretary of State received any proposals from the Freedom Association concerning enterprise zones suggesting that legislation covering health and safety, trade union organisation and minimum rates of pay should be ignored? If the Secretary of State receives any such proposals, will he reject them out of hand?
    Mr. Heseltine: I should have to look carefully to see who had written to me on what aspects of the matter to answer specifically the question that the hon. Gentleman has asked. I think that I can assure him that it would not be my intention, or that of my colleagues responsible for other facets of the legislation, to do anything that would prejudice public health or safety.
    Mr. Hawksley: When does my right hon. Friend hope to be able to announce the location of the Midlands enterprise zone?
    Mr. Heseltine: I hope to do so within the next few weeks. I realise that it is a matter of urgency. I would want to enable that area, once chosen, to catch up with the rate of progress that we hope to make in the areas already chosen.
    Mr. Jay: Do the Government intend to declare north Wandsworth an enterprise zone?
    Mr. Heseltine: I have to say to the right hon. Gentleman that we have announced the sites that we have chosen. There is a wide range of applications from other areas, but we shall be able to choose only another one or two in the first round. After that, there will undoubtedly be a significant pause. I am committed to one of the sites yet to be announced in the Midlands. It is unlikely that the one remaining candidate will not be chosen from somewhere in the North of England.
    Several Hon. Members rose—
    Mr. Speaker: Order. I shall call one more hon. Member from either side on this question.
    Mr. Nicholas Winterton: Does my right hon. Friend agree that it should be Conservative philosophy to have enterprise zones in every area of the United Kingdom, because that means less restriction, less government and more business? When will we get on with it?
    Mr. Heseltine: I hope that my hon. Friend will see yesterday's announcement as a step in the right direction, if not the culmination of all his wildest hopes. This is an important experiment. If the lessons work as we hope, there will be opportunities to apply them elsewhere. The House will realise that substantial public resources go with the commitment, at a time when these have to be conserved.
    Mr. Spearing: Does the Secretary of State agree that intervention is required by the Chancellor of the Exchequer, to the extent of about £50 million a year? If these zones are successful, even by the Government's criteria, it will mean that they are successful because of public money. If they fail, they will be a waste of public money. Are not both policies contrary to the stated belief of the Government?
    Mr. Heseltine: The hon. Gentleman is trying to make a narrow doctrinal point. I understand that the £50 million is the full cost of the rating concession that would fall to the Chancellor if the enterprise zones were successful. I must ask the hon. Gentleman to calculate the enormous increase in wealth, jobs and investment that will have been brought about if we find ourselves with a £50 million bill.

    Local Authority Staff (Car Allowance)
    14. Mr. John Huntasked the Secretary of State for the Environment if he will issue a circular to local authorities in respect of the level of car allowances for local government employees.
    Mr. King: No, Sir. The rate of car allowances for local government employees is negotiated nationally between the employers and the unions concerned.

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    and is thus a matter for each individual employing authority.
    Mr. Hunt: Will my right hon. Friend confirm that the rate per mile for local government employees now stands at the staggering figure of 31.5p, which means, on the basis of a car doing 30 miles to the gallon, that these town hall employees are being reimbursed at the rate of nearly £10 a gallon? How can that be justified? Is it not a further indication that the financing of local government administration is out of control?
    Mr. King: The way that my hon. Friend has put the question is somewhat misleading. The rate that he mentions is only at the bottom level, up to 1,000 miles. It falls smartly, in the same scale of cubic capacity, to 8-4p a mile for a car that is being used for more than 9,000 miles in a year. If my hon. Friend has based his question on the letter in The Times, I must tell him that the letter was extremely misleading. This is a matter for local authorities. We want them to negotiate in an effective and responsible way. While they are doing so, it would be helpful if the figures were accurately reported.

    Vacant and Underused Land
    15. Mr. Pawseyasked the Secretary of State for the Environment on what basis and by what criteria he selected the 21 areas where vacant and underused land would be registered; and if he will make a statement.
    Mr. Heseltine: The selection took into account the possibilities for land release in these areas, the opportunities this would give to developers, and the extent to which land records were already available. The districts chosen are also mainly urban in character since it is in urban areas that the benefits of registers are chiefly to be gained.
    Mr. Pawsey: I welcome that reply. Does my right hon. Friend accept that registers do not necessarily ensure that local authorities sell off their land banks? Does he agree, therefore, that he should take steps to ensure that land banks are reduced, to the general benefit of local ratepayers?
    Mr. Heseltine: I am glad to be able to commend to my hon. Friend the Local
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    Government, Planning and Land (No. 2) Bill, which gives me powers, in the last resort, to direct the disposal of the land that we are discussing. We are talking not only of local authority land, but of land owned by public bodies. Large acreages of land are owned by the nationalised industries.
    Mr. Heddle: I welcome my right hon. Friend's statement. Does he accept that 250,000 acres of vacant and derelict land are ripe for development? In the areas that he has not designated for registers to be set up, will he continue to encourage local authorities and other bodies to release land for sale by way of partnerships, for the building of "half and half" homes for people on local authority housing lists?
    Mr. Heseltine: I should like to go further. Once we have established a basis of understanding about the original 21 registers, I intend to move further and designate additional areas for registers. That is the most effective way of achieving the results that my hon. Friend has in mind. There is nothing to stop local authorities from getting on with the work of preparing for registers—an important step in bringing about a quicker disposal of land.

    Cheshire County Council
    18. Mr. Nicholas Wintertonasked the Secretary of State for the Environment if his Department is satisfied with the budget for expenditure in the next financial year by Cheshire county council; and if he will make a statement.
    Mr. King: We have no information regarding the expenditure plans of Cheshire county council for the next financial year. We have asked all authorities to reduce their expenditure in this financial year by 2 per cent. below what they actually spent in 1978-79.
    Mr. Winterton: I thank my right hon. Friend for that reply. Does he agree that it is increasingly difficult for hon. Members to explain to their constituents why their borough council can peg the rate for four consecutive years, while the county council increases its rate by more than 25 per cent. each year? Will my right hon. Friend examine Cheshire's expenditure plans carefully with that in mind? Does he accept that borough

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    councils can peg the rate, but that county councils are unable to do so because of their spendthrift policies?
    Mr. King: It is important to recognise the different services provided by the different levels of authorities. One cannot ignore the impact of Clegg on county council expenditure. It has had severe implications. It is difficult to explain what is happening in county, district and metropolitan counties. It is difficult to obtain accurate information so that electors, councillors and Members of Parliament understand what is happening. Clause 2 of our Bill has been welcomed widely because it will enable more meaningful information to be published by all authorities so that we have a better understanding about what is happening.
    Mr. Hattersley: Does the right hon. Gentleman agree that his hon. Friend's question reflects the fact that there is a great deal of uncertainty in many authorities, particularly in the county authorities, about how the Government's policies will operate next year? If it is the Government's intention to penalise 20 authorities on the transitional arrangements, may we be assured that even if the 20 authorities cannot be named before the recess, there will be a statement about the rules under which they will be penalised, under a Bill which has not been passed, but which the Minister intends to operate in November?
    Mr. King: The right hon. Gentleman knows that we cannot determine which authorities will be affected by the provisions until we have the revised budgets. It would be wrong not to wait for the revised budgets, which will determine the levels of spending proposed by the different authorities for this year.
    At the appropriate time we shall put before the House for its approval the rules and criteria by which we hope to operate the transitional arrangements under the increase order in November. It will be for the House to determine whether the rules and the approach are fair. That is the democratic procedure. The Labour Government operated a clawback procedure which did not involve the House, but which was an arbitrary exercise by civil servants.
    Mr. Hattersley: Will the Minister confirm that the clawback of which he is so
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    critical will operate next year? If the Minister proposes to penalise 20 authorities in November, is it not intolerable that such authorities will not know the rules under which action might be taken? I ask not for the names, but for the rules. Is the Minister aware that if we are not given them before the House rises the Opposition will pursue the matter in every way open to them?
    Mr. King: We have made clear in the House, in Committee and at length in circulars to local authorities, the ground rules for the transitional arrangements. They have been made absolutely clear, and local authorities understand the position. When we receive the revised budgets we shall be in a better position to give further information. We shall then put our decisions before the House for its approval or otherwise.

    Sports Council
    19. Mr. John Carlisleasked the Secretary of State for the Environment when he expects to meet the chairman of the Sports Council to discuss the allocation of resources for those sporting authorities who refused to participate in the Olympic Games.
    The Under-Secretary of State for the Environment (Mr. Hector Monro): This was one of a number of matters that I discussed very recently with the chairman and principals of the Sports Council at one of our regular informal meetings.
    Mr. Carlisle: Does my hon. Friend agree that the presence in Moscow of so many British athletes is an insult to the British Government and British taxpayers, who over the years have spent millions of pounds on providing facilities for them? Is it not about time that the Government either withdrew their facilities or asked the athletes to come home?
    Mr. Monro: The Government have made their position clear in relation to the Olympic Games in Moscow. Little more can be added at this stage. My hon. Friend will know that the Sports Council has not assisted financially in the transport or other arrangements for the team in Moscow.
    Mr. Dalyell: Is the Sports Council, or are civil servants, to give any money to

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    bodies such as the Royal Yacht Squadron and the equestrian team, which refused to go to Moscow? If that is so, is it because the Sports Council has refused to muddy its fingers, quite rightly in the opinion of many of us, in something that amounts to bribery by the Government?
    Mr. Monro: That is a convoluted question. The body to which the hon. Gentleman referred is not the Royal Yacht Squadron, but the Royal Yachting Association. The Government made a firm commitment to assist those sports which decided not to participate in Moscow, and that we are doing.
    Mr. Wilkinson: Does my hon. Friend accept that many of us, notwithstanding the politically mistaken view of the athletes who are participating in the games, have great pride in the achievements of British athletes in Moscow? Will he undertake not to take action that is in any way vindictive, petty or mean-minded?
    Mr. Monro: Of course we shall not take such action. I warmly welcome the successes of our medal winners and of the athletes who have broken British records in Moscow. However, I should have preferred them not to go, and to have taken the advice of the Government, bearing in mind that Russia has invaded Afghanistan and is committing atrocities there.
    Mr. Hattersley: As the Minister responsible for sport echoes the Prime Minister's good wishes to athletes who have won medals, may I ask whether the Prime Minister intends to follow precedent and give a reception for the team when it returns?
    Mr. Monro: The right hon. Gentleman will know that the Prime Minister and the Government do not indulge in U-turns. We have made it clear that we do not approve of our Olympic team being in Moscow. Naturally, it cannot expect a warm welcome on its return.

    Urban Development Corporations
    20. Mr. Bob Dunnasked the Secretary of State for the Environment when he plans to designate the area of the docklands urban development order.
    26. Mr. Peter Lloydasked the Secretary of State for the Environment when
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    he plans to designate the area of the two urban development corporations.
    Mr. Heseltine: I intend to make the orders designating the urban development areas in London and Merseyside docklands as soon as possible after the Bill receives the Royal Assent.
    Mr. Dunn: Will my right hon. Friend undertake to draw the boundaries to include some of the blighted hinterland of the London docks, especially the North Greenwich peninsular?
    Mr. Heseltine: If my hon. Friend will forgive me, I do not wish to give assurances at this stage about precisely where the boundaries will be drawn. In general terms, the hinterland of the disused docks is bound to be included, but I should not wish to go as far as to indicate which local authority areas are likely to be chosen.
    Mr. Steen: In view of the mess that Liverpool planners have made of the inner area of that city, will my right hon. Friend ensure that they have as little as possible to do with the planning necessary in the enterprise zone at Speke?
    Mr. Heseltine: I think that my hon. Friend will understand that the enterprise zone concept means that local and central Government have to agree the planning régime that will apply in each zone. It is a condition of establishing an enterprise zone that such agreement should be reached before designation. Therefore, it will be for me to establish in my own mind that the right conditions exist for an enterprise zone.
    Mr. James A. Dunn: Will the Secretary of State take an early opportunity to discuss with those on Merseyside the problem of the attraction of the three schemes—the inner city partnership the urban development corporation and now a new enterprise zone? There are not sufficient resources to support them all. Will the Secretary of State undertake a review, and at the same time examine, the criteria used to appoint people to office in the corporations?
    Mr. Heseltine: It is not necessary to have a review other than the continuing attention that is paid to these matters by my Department. We are apprised of the urgency of the real problems on

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    Merseyside. That is why we are giving them so much attention.

VANUATU (UNITED KINGDOM TROOPS)
Mrs. Dunwoody Mrs. Dunwoody (by private notice) asked the Lord Privy Seal when it is his intention to withdraw British troops from Vanuatu.
The Lord Privy Seal (Sir Ian Gilmour): In response to an earlier request from the Government of Vanuatu that we and the French should leave our troops on Santo for one week after independence we have agreed to do so. We have reason to believe that the French Government will also agree. British troops will, of course, remain under our control. Yesterday afternoon the Vanuatu Government asked both Britain and France to leave our troops in the country for a total of three weeks after independence. We are considering this. My hon. Friend is in Vila and we are in touch with him on the question of how best we can further assist this newest member of the Commonwealth.
Mrs. Dunwoody: We are happy to hear that British troops are to remain on the island for a limited period, but can the Minister give us an assurance that the writ of the central Government there runs throughout all the islands? An undertaking about that has been given in this House more than once. Can the right hon. Gentleman say that there is no danger of immediate secession by the rebel régime of Jimmy Stevens and that British citizens will be safe from harassment and possible violence?
Sir I. Gilmour: I hope that I can give an undertaking that British citizens will be safe from harassment and violence. The hon. Lady will be aware that negotiations have been in progress for some days and have only recently broken down. That is the reason why the Prime Minister of Vanuatu made the request referred to in my statement.
Mr. Dalyell: Is it not one thing for British Service men to ensure stability in a British Crown colony but something quite different to have them in a position in which they are at the service of those who may be of a particular group or faction in an independent State? Does
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that not alter the situation? Does the Lord Privy Seal understand that some of us are greatly concerned lest a week becomes three weeks and then runs into months, or even years? There must be a finite time limit.
Sir I. Gilmour: British troops being in that country while it is still a British colony is, obviously, different from their being in an independent country. I agree that there must be a finite period, and the point made by the hon. Member for West Lothian (Mr. Dalyell) will be an important factor when we consider our decision. The hon. Gentleman will also be fully aware that there are many precedents for British troops remaining in a country after independence. He will hardly have forgotten Malaya, but even if he has forgotten that he will not have forgotten Kenya or Tanzania.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call the three hon. Members who have been rising. However, I hope that they will bear in mind that we are to have two short debates later today and other business before that.
Mr. Maxwell-Hyslop: Will my right hon. Friend confirm that, independence now having come to Vanuatu, it is no longer necessary to get the agreement of the French to anything that the Government of the United Kingdom decide to do?
Sir I. Gilmour: I am not sure that I agree with either the premise or the conclusion of my hon. Friend. It was not necessary before and it is not necessarily necessary now. But I think that my hon. Friend will agree that since we are dealing with a former condominium it is desirable that we should, if possible, work in full conjunction with the French.
Mr. Hooley: In the event that the newly independent State requests some form of United Nations or Commonwealth presence in the early days of independence, would such a request receive support from Her Majesty's Government? Is there any evidence that American commercial interests are still interfering in the affairs of the territory?
Sir I. Gilmour: I have no information concerning the second part of the hon. Gentleman's question. In relation to the

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first part, it would be entirely a matter for the new Government of Vanuatu.
Mr. Christopher Price: The Lord Privy Seal said that negotiations have been going on for some days. Is he aware that negotiations have been going on for several years and that no agreement has been reached with Jimmy Stevens? Is the right hon. Gentleman further aware that Walter Lini's Government looks to Britain to safeguard their interests against French and American commercial interests? Will he assure the House that British troops will not be withdrawn from the New Hebrides unless French troops are withdrawn simultaneously?
Sir I. Gilmour: I hope that the hon. Gentleman will give me credit for understanding that negotiations have been in progress for a long time. I was, of course, referring to the most recent negotiations. The second part of the question seems to be expressed in unduly contentious terms. I should not like to endorse that. The third part of the question is genuine, but at this stage I do not wish to go further than my original answer to the hon. Member for Crewe (Mrs. Dunwoody).

BRITISH NATIONALITY
The Secretary of State for the Home Department (Mr. William Whitelaw): With permission, Mr. Speaker, I will make a statement about the law on nationality.
It has long been recognised that our nationality law is out of date. The previous Government published a Green Paper in 1977. We said in our election manifesto that we would introduce a new British Nationality Act. I have published today a White Paper that contains our proposals for legislation. A Bill will be introduced as soon as parliamentary time permits.
It is widely accepted that we need a new citzenship, confined to those who have close connections with the United Kingdom. We propose that this should be known as British citizenship.
The Green Paper proposed that all those citizens of the United Kingdom and colonies who did not become British citizens should become British overseas citizens. We have, however, been impressed with the argument that a separate citizenship should be established for the dependencies as a whole. We propose that this should be called citizenship of the British dependent territories. I emphasise that the establishment of this separate citizenship will not alter the United Kingdom's obligations and commitments to our overseas territories.
Those who are now citizens of the United Kingdom and colonies but do not qualify either for British citizenship or for citizenship of the British dependent territories will become British overseas citizens.
Children born in the United Kingdom, the Channel Islands or the Isle of Man will normally acquire British citizenship by birth, but we think that in principle there is a good case for providing, with the safeguards contemplated in the White Paper, that a child of parents neither of whom is a British citizen and neither of whom is settled here should not acquire British citizenship solely by his birth in the United Kingdom.
A British citizen by birth, whether male or female, will transmit his or her citizenship to the first generation born abroad, and, normally, to the first generation

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only. But children born abroad to Crown servants who are British citizens will be citizens by birth, and there will be special provisions for children born abroad to certain other people who have close connections with business and other organisations based in the United Kingdom, or with some international bodies.
All adults, whether Commonwealth citizens or foreigners, who wish to obtain British citizenship will do so by naturalisation. The present automatic entitlement of wives to obtain our citizenship by registration will be ended. Instead, both husbands and wives will be able to apply for naturalisation on the same terms as. others, though after three years' residence instead of five.
The present entitlements to acquire citizenship by registration possessed by wives and by Commonwealth citizens who were settled here before 1 January 1973 will be preserved for an interim period of two years. After careful consideration we have decided not to introduce any restrictions on the holding of dual nationality by those people who come here and acquire British citizenship by naturalisation or registration.
Citizenship of the British dependent territories will be acquired under the same general pattern as that proposed for British citizenship. This citizenship will not give the right of entry to a dependency other than that with which a person is connected.
British overseas citizenship represents, in essence, the relationship with the United Kingdom held by people connected with countries that were once part of the British Empire, or whose ancestral connections with the United Kingdom or its present dependencies are not sufficiently close to qualify them for British citizenship or citizenship of the British dependent territories. Children born after the Act comes into force to parents who have become British overseas citizens will not themselves hold that citizenship.
I make it clear once again that we shall continue to recognise the special position, for immigration purposes, of certain United Kingdom passport holders, mainly from East Africa, and we shall maintain our undertaking to continue the special voucher scheme for them.
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It will no longer be necessary to use the term "British subject" as the common status of all people connected with the Commonwealth. In the Bill, the only expression denoting the common status of all people connected with the Commonwealth will be "Commonwealth citizen"
All those who have citizenship of the United Kingdom and colonies at the time when the Act comes into force will acquire one of the new citizenships. No one who is then a citizen of the United Kingdom and colonies will be left without a citizenship. Generally speaking, those citizens who or whose parents or grandparents were born, adopted, naturalised or registered in the United Kingdom will become British citizens. Those citizens of the United Kingdom and colonies from overseas who have been here for five years and are settled will also become British citizens.
There is a small group of people, formerly stateless, and most of them children, who have become patrial by registration overseas and who we think ought to be given whichever citizenship their mothers acquire. Apart from these, every citizen of the United Kingdom and colonies who is patrial will become a British citizen, and no one who has the right of abode in this country will lose it. In the long term, only British citizens will have the right of abode. But individual people who are not citizens of the United Kingdom and colonies but now have the right of abode will retain it. The Bill will not adversely affect the position under the immigration law of anyone who is lawfully settled in the United Kingdom, whether or not he becomes a British citizen. Nor will it affect our commitment to admit the wives and dependent children of men lawfully settled here.
When the Act comes into force there will be some applications for citizenship still outstanding. The Bill will provide that an application for citizenship that has been properly made and is still under consideration at the time when changes in the law come into effect should be dealt with according to the law at the time when it was made, though if citizenship is granted it will, of course, be whichever of the new ones is appropriate.
Mr. Speaker, I commend our proposals to the House.
Mr. Merlyn Rees: I have had the White Paper—quite properly—for only a short period. Although I have been concerned with and about the nationality legislation for over 10 years, I must admit to finding the White Paper a complicated matter. I hope, therefore, that before we reach the point of producing legislation a way will be found of discussing these issues—perhaps in Select Committee fashion, or something like it—so that when we discuss principles we shall not be bogged down with British citizens without citizenship, protected persons, and so on. There are principles to discuss and we ought to get the basic material cleared up.
Given the amount of material in the White Paper, I wish to raise only matters of general important principle. Do the Government intend to hold a meeting of members of the independent and equal Commonwealth countries to discuss the issues concerned? Do all the countries in the Commonwealth wish to continue with Commonwealth citizenship? Are they prepared to give us reciprocity with the steps that will be taken in the new legislation? When we in the Labour Government were discussing this sort of legislation I found some Commonwealth countries who kept their distance and seemed to regard it as a matter for us, whereas we are legislating on a Commonwealth basis.
I do not think that the EEC is mentioned in the White Paper, but are there any implications for citizenship in the law of the EEC that ought to be taken into account before we legislate? What is the position of citizens of Pakistan in this country, given the changes that have arisen from that country's leaving the Commonwealth? Does the White Paper confirm that there will be full legal rights of citizenship on British women? There are three factors here. There is the question of equal rights of transference of citizenship and of the equal entitlement of a spouse of either sex to nationality by registration. Is there to be equal treatment for foreign fiancés and spouses, with the same right of entry regardless of sex?
The right hon. Gentleman spoke of people being left without citizenship. However, he said in his statement:
"There is a small group of people, formerly stateless and most of them children, who have become patrial by registration overseas, and
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who we think ought to be given whichever citizenship their mothers acquire."
Is that a qualification?
At a first look I cannot see the case for three citizenships rather than two. In our Green Paper the Labour Government suggested two. What prompted the Government to go to the third classification? We believe that the right hon. Gentleman is right to propose that British citizenship should descend only to the first generation of children born abroad. Will he, however, take into account the words that he used in his statement:
"we think in principle there is a good case for providing, with the safeguards contemplated in the White Paper, that a child of parents neither of whom is a British citizen and neither of whom is settled here"—
on the face of it that is fine—
"should not acquire British citizenship solely by his birth in the United Kingdom."
I am concerned a little about the way in which that is put.
The right hon. Gentleman did not refer to the Irish Republic in his statement, but it is dealt with in the White Paper. May I congratulate him on maintaining the status quo of section 2 of the 1948 Act?
Mr. Budgen: Why?
Mr. Rees: Because it is good sense.
Mr. Budgen: Why is it good sense?
Mr. Marlow: Why should they be treated differently from other foreigners?
Mr. Rees: If Conservative Members want to shout they should shout at the Home Secretary, not at me.
With regard to dual nationality—a subject on its own—while I feel strongly that acquisition of citizenship must be a positive act of identification with this country, I think that there is good sense in paragraph 89 of the Secretary of State's statement.
Mr. Whitelaw: The right hon. Member for Leeds, South (Mr. Rees) asked many questions, to which I shall do my best to reply.
I agree that this is a highly complex and difficult subject, and that it is therefore right that the House should have an opportunity to discuss it. I fully respond to the right hon. Gentleman's idea that it might be discussed before the legislation, in some form of Select Committee

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or otherwise. That would be sensible, and with the permission of the Leader of the House—who seems to have left me—I consider that to be a reasonable proposition.
From the time of the Green Paper issued by the previous Labour Government, Commonwealth Governments have been aware of the general lines of our proposals. We do not plan to hold a meeting, but they are totally free to comment on the proposals. They all have different sorts of arrangements for us, and many different detailed plans.
I am given to understand that EEC law mainly concerns freedom of movement, not citizenship, and therefore there is no conflict with our proposals.
The position of Pakistan is the same as for other foreign countries now.
British women will have equal rights for the first time. They will be able to obtain nationality by naturalisation. The position regarding the immigration rules is separate from the Nationality Act, but I made clear at the time they were changed that if the Bill were passed we should consider the implications for British women.
On the question of people being left without citizenship, British overseas citizenship will provide certain protection, and I do not think that it should be undervalued. There will be British consular protection for British overseas citizens, and, at the same time, many of the people concerned will acquire the citizenship of the country in which they were born or of the country in which their mothers were born. That should meet the point raised by the right hon. Gentleman, but it can be carefully considered.
We changed to three citizenships instead of two because it was the wish of some of the dependencies concerned. We felt, after discussion with them, that this was a reasonable change.
The proposal about certain citizens of Eire being British subjects is limited. It is confined to people who were British subjects before 1949. The proposal does not affect civic rights, or the right to vote. The right of citizens of Eire to vote was given in the Representation of the People Act 1949, and if there is to be any change that Act will have
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to be amended. [HON. MEMBERS: "Why?"] That point can be argued, and my hon. Friends may wish to argue it. Since the right was given in the Representation of the People Act, if it is to be changed it would seem right to do so in that way.
I am grateful to the right hon. Gentleman for his support on the proposal for dual nationality. It is a sensible provision.
Mr. David Steel: Like the right hon. Member for Leeds, South (Mr. Rees), I have had only a cursory glance at the White Paper. Does the Secretary of State accept that there should not only be a debate in the House but that it would be an obvious candidate for a pre-legislation Select Committee? Some of the detailed provisions in the White Paper are extremely welcome, but does the right hon. Gentleman not accept that the White Paper as a whole does nothing to remove some of the repugnant, discriminatory features of the Immigration Act 1971? Whereas that Act divided our citizens into sheep and goats, this White Paper merely proposes to divide them into sheep and two lots of goats.
What will be the rights of entry for British protected persons? The White Paper is rather vague on that. What will be the future status of United Kingdom passport holders? Are the queues in other countries to continue indefinitely, or will this legislation assist people to gain their right of entry?
Mr. Whitelaw: Rights of entry are not affected by the White Paper, and the voucher system will continue. I should have thought that our citizenship proposal was a major step forward, and one that accorded with this country's position in the modern world. Our British citizenship, which gives full rights to British citizens, should be confined to those who belong to this country and who have a close relationship with it. We can also base all our future immigration control policies on the principle of our nationality and citizenship, which is a considerable advance in the modern world.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to allow 20 minutes for questions from Back-Bench Members in order to guard the business, and then I shall have to move on.
Mrs. Kellett-Bowman: Will my right hon. Friend reconsider his proposal not to include the Irish and their civic rights in the Bill?
Mr. Whitelaw: This is a nationality Bill, and therefore it is not concerned with civic rights. Civic rights should be dealt with separately.
Mr. Faulds: How will the White Paper affect someone such as my sister—a genuine sister who was born on the mission field, as I was, and who married a South African, but is now a widow, and who may wish to remarry and return to this country? How would it affect four of her children, two of whom are girls, who were born in Southern Africa, who might wish to marry Commonwealth—[Interruption.]
Mr. Speaker: Order. That is a very important question. If my sister were concerned, I should like the question answered.
Mr. Faulds: It should be an important question to Conservative Members who are always concerned about kith and kin.
How would the White Paper affect four of my sister's children, two of whom are girls, who might wish to marry Commonwealth or foreign citizens and return to Britain?
Mr. Whitelaw: It would be unwise of me to give a snap answer now, on which the hon. Gentleman's sister would subsequently rely as being entirely correct. I should prefer to look into the particular circumstances of the case if the hon. Gentleman will give me the details. I should then, of course, give a considered reply.
Mr. Edward Gardner: I welcome the White Paper as a valuable contribution to the debate on nationality, but will my right hon. Friend say when he expects parliamentary time to be given to permit the introduction of a new nationality Bill to replace our obsolete laws, so that our immigration rules can be firmly based upon our nationality laws? As this new legislation will be of profound importance, not only to this country but to other Commonwealth countries, including the territories of Hong Kong and Gibraltar, will my right hon. Friend assure
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the House that he will do everything possible to consult fully representatives of those Commonwealth countries before he introduces legislation?
Mr. Whitelaw: I am grateful to my hon. and learned Friend, who has made a considerable study of this matter. Indeed, much that is now planned is based upon proposals in the document that he put forward.
With regard to parliamentary time, I understand that although the doctrine has been somewhat eroded in recent years, one is not entitled to anticipate the Queen's Speech. Being an old traditionalist, I propose to maintain that position and refuse to anticipate the Queen's Speech, so I will simply say "As soon as possible".
As my hon. and learned Friend knows, we have already had considerable discussions with the dependencies, out of which has come the proposal for citizenship of the British dependent terrorities. We shall wish to hear all the comments from all sides. That is the purpose of having the White Paper. In the final event, when we have had all the comments a decision about the citizenship of this country must be a matter for this Parliament. I think that every Commonwealth country would accept that that should be the case.
Mr. Alexander W. Lyon: Will the Home Secretary give an undertaking that any Commonwealth citizens at present settled in this country will either become British citizens on day 1 or become eligible to be naturalised under the procedure outlined in the White Paper?
Secondly, among the many controversial issues of detail that arise, why has the Home Secretary included in the requirements for British citizenship those who have a right of abode by reason of a grandparent who was born in this country? Is not this a way of perpetuating the worst effects of patriality contained in the 1971 Act?
Mr. Whitelaw: First, with regard to those lawfully settled here, there is that undertaking.
Secondly, with regard to the grandparent position, the proposals cover the transitional period. It is, in my view, a sensible provision, but it is one of the details that can be argued.
Mr. Stanbrook: Is my right hon. Friend aware that our sense of national identity in this country is derived from a sense of common allegiance to Her Majesty the Queen? In those circumstances, are not the provisions in the White Paper regarding the continuation of the privilege for Irish citizens, dual citizenship, and transmission of British nationality by a mother living abroad to her children, things that will weaken the effect of that national identity? Should they not therefore be rejected?
Mr. Whitelaw: In the long term, the purpose of these proposals is to have a citizenship that is confined to those who basically belong to the United Kingdom. There are certain transitional arrangements to be made clear, but that is the fundamental purpose in the long run.
I have already answered the question about the Irish.
Mr. Bidwell: Will the right hon. Gentleman have in mind that during the course of the events that led to the giving of British citizenship or British passports to many East African people of Asian origin, a pledge was given by the Crown? Is it, therefore, necessary to carry on with the voucher scheme? Surely there cannot still be many people of that kind of origin who wish to come here. During the course of the discussion, will the right hon. Gentleman reconsider that matter, and particularly have in mind that the Select Committee in the last Parliament specifically recommended that British passport holders overseas in this category should be admitted forthwith unless they wished to remain and obtain their livelihood in other States, in which case they should take out citizenship of those States. Does he agree that there is a special obligation towards these people and that there is no necessity to keep them away any longer?
Mr. Whitelaw: The commitment of the Government concerning the special voucher scheme to the passport holders was based on the 1968 Act, brought in by a Government that the hon. Gentleman supported. That was our commitment. We have stood by it because it was a commitment of a previous Government. We continue to stand by it. The special voucher scheme must remain for the purpose of immigration policy.
Mr. Wilkinson: May I congratulate my right hon. Friend on having traced a remarkably careful path through a political and legal minefield, and add that the document is a work of great skill and very careful drafting which will commend itself not least to members of the Asian community settled in this country?
Will my right hon. Friend accept from me that the White Paper follows very largely the proposals of the Anglo-Asian Conservative Society's document "Passport to Britain", and that with regard to dual nationality and the rights of Commonwealth citizens settled in Britain the White Paper is slightly more generous than "Passport to Britain"?
Mr. Whitelaw: I am grateful to my hon. Friend, particularly for what he said about dual nationality. I shall pass on his kind remarks to the very skilled people who drafted the White Paper. The House will be fully aware that I was not one of them.
Mr. Jim Marshall: May I press the Home Secretary a little further concerning paragraphs 41 to 44 of the White Paper? He will remember that he failed to answer my right hon. Friend's question in this regard. Will he give a categorical assurance that those children covered by paragraph 44, born here prior to the legislation coming into effect, will not lose their British citizenship?
Mr. Whitelaw: Children born here prior to the legislation will be all right. That is the undertaking that I give.
Mr. Biggs-Davison: Another statute is involved, and there is a unique relationship with the Irish Republic—to use the expression in a recent communiqué—but are the Government contemplating that they should seek reciprocity in voting rights and the right to stand for Parliament?
Mr. Whitelaw: That is something that can be considered. It refers especially to the relationship that was enshrined in the original Acts between this country and the Republic of Ireland, and is somewhat different from nationality all over the world.
Mr. Tilley: In view of the confusion arising over the ending of the status of British subject, will the Home Secretary

1527
give a categorical assurance that Commonwealth citizens residing in this country who are not yet British citizens will, like Irish citizens, not lose any of their civic rights, including their right to vote, as a result of the White Paper?
Mr. Whitelaw: As I said in the original statement, I give an absolute assurance that the Bill will not affect the position under the immigration law of anyone lawfully settled here, whether or not he becomes a British citizen. I am glad to re-emphasise that. That also goes for civic rights.
Mr. Budgen: Does my right hon. Friend agree that many people in all parts of the country will be concerned because he has no proposals to end the anomaly of dual nationality? Will he not, on reflection, agree that the cohesion of our country depends upon the rights and obligations of British citizens being restricted to those who owe their principal allegiance to the British Crown and constitution?
Mr. Whitelaw: My hon. Friend should appreciate that some of the pressures for dual nationality come from all parts of the Commonwealth—the old Commonwealth as well as the New Commonwealth. Many people in all parts of the Commonwealth would be very upset if it were taken away. I hope that my hon. Friend will take that into account.
Miss Joan Lestor: Does the right hon. Gentleman recall correspondence that I have had with him and a discussion in this House with regard to the status of girls born abroad who have been adopted by families in this country, and whether they would be regarded as having the same rights as any other British girls to bring in a foreign husband? He may recall that his reply was that it would depend on the circumstances of the adoption.
Since this has caused a great deal of concern among many people in this country who have adopted such girls, will the right hon. Gentleman say whether his White Paper gives them that equal status? I find it rather confusing.
Mr. Whitelaw: Subject to correction, I think that I am right in saying that those who are adopted in this country would have the full rights. May I check
1528
that and inform the hon. Lady if I am wrong?
Mr. Kershaw: My right hon. Friend said that he would have no objection to dual citizenship for those who came here and acquired British citizenship by naturalisation or registration. How does that leave people who acquire dual citizenship by foreign process of law, who are otherwise British citizens but have dual citizenship wished upon them by the place where they were born?
Mr. Whitelaw: I understand that on that basis they can have dual citizenship, the same as the others.
Mr. Douglas-Mann: Does the Home Secretary agree that the proposals in the White Paper affecting young people-particularly paragraphs 44 and 78 to 82—are capable of creating great hardship to people who have spent most of their lives here and may suddenly be banished to countries in which they would be virtual strangers—for example, on the death of their parents? Does he further agree that the hardship under the existing regulations—I have in mind the case of Suto Miah, of which the right hon. Gentleman may be aware—should be alleviated rather than intensified? Will he assure the House that such discretion as he has under the regulations and will have under the new legislation is and always will be exercised with humanity and discretion?
Mr. Whitelaw: The hon. Gentleman fairly raises various immigration control points. As for children born here neither of whose parents are settled in or have a close connection with this country, it is fair to point out that we are referring, for example, to foreign students who may be here for a very short time. If that is the case, ours is a reasonable proposition.
Mr. Kenneth Lewis: Is my right hon. Friend aware that the House will be gratified to know that he does not propose to introduce a Bill in this Session? Under the title "Citizenship of the British Dependent Territories", will he explain how many citizens are involved and whether they will be able to come and live here?
Mr. Whitelaw: I understand that there are several million. I could read out the

1529
dependencies to my hon. Friend, but I do not think that either you, Mr. Speaker, or the House would wish me to do that. It is in appendix C of the White Paper. They have not got the right to come here.
Mr. Arthur Davidson: As the purpose of any legislation is to make sense out of the confusing state of the nationality law, what is the purpose of the third category of citizen? British overseas citizenship seems to confer no right of abode and a passport that is almost meaningless, and seems not to simplify the present law but to make it more confusing.
Mr. Whitelaw: The first point of simplification is the main purpose of full British citizenship. A British citizen is a person who belongs to this country and has full rights here. That is a new and sensible position, on which we can base our policies in future.
British overseas citizenship is in the main a transitional provision, as the hon. and learned Gentleman will see, because it is not transmitted.
Mr. Hal Miller: Does my right hon. Friend accept that there will be a wide welcome by dependent territories for the introduction of the third category? Will he assure the House that there will be an opportunity for further consultation, particularly about the name chosen?
Mr. Whitelaw: I shall stick to what I have said. There has been considerable discussion already. We are ready to receive comments. We could not say that we would go into a further long period of consultation, because we are coming to the point at which we must put legislation before the House.
Mr. Dubs: Is the Home Secretary aware that there will be a wide welcome for his assurances that the rights of people resident here will be fully safeguarded whether they be of Commonwealth or of Irish origin? Could he say a little more about the position of the third category—British overseas citizenship? What would be the position of such people under international law if for some reason they were to be deprived of their right of abode in the countries in
1530
which they are now residing? What would this country's obligations be in that respect?
Mr. Whitelaw: I understand that we are bound by the convention on the reduction of statelessness. We would consider any case against that background.
Mr. Bruce-Gardyne: Reverting to my right hon. Friend's answer to my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman), he said that it was not appropriate to deal with the position of Irish citizens in this country because this was not concerned with civic rights. Will he specify which parts of these proposals have nothing to do with civic rights?
Mr. Whitelaw: The proposals for nationality do not impinge on voting rights. That was the point that I was trying to make to my hon. Friend. They do not impinge on voting rights because voting rights arise from the Representation of the People Act. That is the position. I think that they are genuinely separate.
Mr. Bruce-Gardyne: Nonsense.
Mr. Whitelaw: My hon. Friend says "Nonsense". Voting rights are normally based on the Representation of the People Act.
Mr. Garel-Jones: Further to the question asked by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne), I should like to press the Home Secretary a little further on civic rights and duties. Paragraph 14 of appendix A says that
"civic privileges do not stem directly from the law of nationality".
Does not the right to vote stem in part from one's position as a British citizen? If we are not to discuss the matter on this White Paper, will my right hon. Friend indicate when we might discuss the two serious anomalies, first, of British subjects resident abroad who are disfranchised and, secondly, of foreigners in this country who register as voters and vote?
Mr. Whitelaw: They are two different propositions. On the Irish position, I repeat what my right hon. Friend the Prime Minister said in answer to my hon. Friend the Member for Northampton,

1531
North (Mr. Marlow) on 20 November 1979:
"the Government has no proposals to change the unique position of Irish citizens living in this country who, although not British subjects, enjoy the privilege of voting in our elections."—[Official Report, 20 November 1979; Vol. 974, c. 90.]

DRAFT EDUCATION (ASSISTED PLACES) REGULATIONS
Mr. Cryer: I am grateful for the opportunity to raise what I consider to be an important point of order, Mr. Speaker. It concerns the Draft Education (Assisted Places) Regulations, which are to be dealt with tonight.
The Joint Committee on Statutory Instruments was established by a Standing Order of the House and the instructions to that Committee are set out in the current Standing Orders in page 97 and onwards. It is the duty of the Committee to examine instruments that are placed before the House. The instructions require the Committee to report to the House from time to time on matters laid before it and to make reports.
The regulations that are to come before the House tonight were first considered by the Committee on 29 July. That was the first occasion on which the Joint Committee considered the instrument. The Committee examined the instrument and asked for a memorandum from the Department.
The Committee cannot report to the House that the instrument is either within or without the criteria laid down by the Standing Order. The Committee must direct its attention to eight matters when considering an instrument. Therefore, it asked the Department for a memorandum, which it must have before making the report.
We are informed that the memorandum will be available by next Tuesday. In order to expedite matters, the Committee has also asked for witnesses to be present in case it wishes to elucidate the position further.
It is clear that if the instrument is dealt with tonight the Joint Committee on Statutory Instruments will not be able to carry out the functions and duties that the House has laid upon it. Therefore, I ask the Government to agree to withdraw
1532
the instrument until the Committee can fulfil its function of examining the instrument and obtaining the memorandum. I emphasise that it must obtain the memorandum, because that is laid down in the Standing Orders. The Department must be given an opportunity to present its case before the Committee makes the report. Arrangements have been made for that case to be given in writing and orally next Tuesday.
I submit that it is impossible for the House to consider the matter before the Joint Committee has completed its consideration and made a report. Under the circumstances, I ask that the instrument be withdrawn until the report is completed.
Mr. Foot: Further to that point of order, Mr. Speaker. We are deeply conscious that we are eroding the time that is available for the next debate, but the point raised by my hon. Friend the Member for Keighley (Mr. Cryer) is of extreme importance to the House. Before you give your ruling, Mr. Speaker, I submit that it would be inconvenient—and a great ill-usage to the House—if the Government were to proceed in these circumstances. Irrespective of your ruling. I trust that the Government will take the opportunity provided by my hon. Friend to say that we shall not proceed with the matter today. That might assist you with your verdict on the point of order.
The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): Further, to that point of order, Mr. Speaker. I am aware of the necessity not to cut into the time allowed for the Liberal Party debate. I am aware of what happened in the Joint Committee on Statutory Instruments. If it is a question of vires, and if the regulations are defective in any way on those grounds, the Government do not intend to move them. However, it may be that a political point is involved about the discretion held by my right hon. Friend the Secretary of State on that matter. I cannot make an off-the-cuff decision. I must consider it in greater detail during the course of the afternoon. I assure the hon. Member for Keighley (Mr. Cryer) that the rights of the Joint Committee will be respected. If there is any question of

1533
the regulations being defective in any way, or of being unsatisfactory on basic grounds, we shall not move them.
Mr. Foot: Further to that point of order, Mr. Speaker. I appreciate the remarks made by the Leader of the House, but it is not only a question whether the orders are defective. The House wishes to know the view of the Committee. We shall not know that view if the debate is held tonight. The only way in which the Government can deal satisfactorily with the matter is to say that they will not proceed with the question today. That would be best for the House. If the Government decide to debate the matter tonight we shall find ourselves in difficulty. As my hon. Friend the Member for Keighley said, the Joint Committee has the right to consider the matter according to the normal procedure. I hope that the Leader of the House will go further, because it is not only a question whether the regulations are defective.
Mr. Cryer: Further to that point of order, Mr. Speaker. I press the Leader of the House to withdraw the instrument for at least a week until the Joint Committee has had the opportunity to consider it at its regular weekly meeting. The Committee has asked for the evidence. The right hon. Gentleman said that he would consider whether a question of vires had been raised. We have asked a wide range of questions. It is not for the right hon. Gentleman to judge what the Joint Committee will do about the instrument. There are eight separate bases on which the instrument can be reported to the House, including vires. It is wrong for the right hon. Gentleman to prejudge the position. If we do not give the Department the right to present its point of view the Committee will be in breach of the duty laid upon it. If the Leader of the House will not withdraw the instrument, he will also be in breach of the Standing Orders of the House.
I appeal to the right hon. Gentleman to withdraw the instrument for a week to give the Committee a proper opportunity to make its judgment.
Mr. St John-Stevas: Further to that point of order, Mr. Speaker. I am taking fully into consideration everything that
1534
the hon. Member for Keighley said, but it is unreasonable to ask for a snap decision. I must have time to consider the complex issues involved. I have given an undertaking that the interests both of the Committee and of the House will be fully taken into account.
Mr. Kinnock: Further to that point of order, Mr. Speaker—
Mr. Speaker: Order. I shall take the point of order raised by the hon. Member for Bedwellty (Mr. Kinnock), but I remind him that there are two short debates to follow. I warn the House that an enormous number of hon. Members wish to speak on textiles.
Mr. Kinnock: Further to that point of order, Mr. Speaker. I am aware that there are two debates to follow. That is why I was reluctant to make an earlier contribution. I hope that it is within the consideration both of yourself, Mr. Speaker, and the House, that there is no rush about this business. All the time that is needed can be taken to observe the rights and to enable the duties to be fulfilled by the Committee chaired by my hon. Friend the Member for Keighley (Mr. Cryer). There is no political implication involved.
Mr. Speaker: I am sure that that point will be noted.

BRITISH STEEL CORPORATION v. GRANADA TELEVISION
Mr. Greville Janner: 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 effect of today's decision of the House of Lords, in the case of the British Steel Corporation v. Granada Television, upon the freedom of the press."
The decision will give any court the power to order any journalist to reveal his source of information about any matter. If the journalist refuses, he is, by definition, in contempt of court and liable to be imprisoned. The decision extends to the protection of private interests—a power previously and rarely exercised for the protection of the public in matters of the security of the State, such as that of the Daily Mail journalist, Mulholland.

1535
As no journalist will reveal his source, the immediate and damocletian nature of the danger suspended over the heads of all journalists is obvious. The matter is specific, urgent and important. I hope that there will be a space later tonight, when another debate may be postponed for a week, when this matter can be discussed.
Mr. Speaker: The hon. and learned Member for Leicester, West (Mr. Janner) 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 believes should have urgent consideration, namely,
"the effect of today's decision of the House of Lords, in the case of the British Steel Corporation v. Granada Television, upon the freedom of the press."
I listened with care to what the hon. and learned Gentleman said. As the House knows, I am directed to take into account the several factors set out in the order, but to give no reasons for my decision. I have to rule that the hon. and learned Gentleman's submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit his application to the House.

UNITED KINGDOM PARLIAMENT (RESUMPTION OF TRADING POWERS)
4.25 pm
Mr. Tony Marlow (): I beg to move,
That leave be given to bring in a Bill to restore to Parliament the right to raise tariffs, set quotas and to make anti-dumping regulations, notwithstanding the provisions of the European Communities Act 1972.
In seeking leave to introduce the Bill, which will restore to Parliament the right to raise tariffs, to set quotas, and to make anti-dumping regulations, I have two purposes. First, I wish to give the Government the necessary powers. Secondly, I wish to show the Government that, should they feel inclined to move in that direction, they will have the support of the House—even though the proposals could lead to a change in the nature of our relationship within the EEC.
It would be wrong at this stage to become bogged down in the theology of Europe. It is manifest, however, that
1536
we, geographically Europeans, are part of historic Europe. There are vast areas—political, economic and even sometimes military—where we must work together. In 1973 we joined at the wrong time the wrong institution, fashioned not for us but for the needs of others. The momentum of that commitment is such that some of us still continue to deceive ourselves that it is best to persist in damaging tactical activities—pregnant though they are with natural conflict, and thus wildly destructive of any sensible and necessary common strategy. We have fundamental and structural differences from Continental Europe. It is time that we recognised that we do not have a similar industrial or agricultural economy. We damage both ourselves and Europe unnecessarily so long as we pretend that we do.
What of the present arrangement? Despite the great success of my right hon. Friend the Prime Minister, the budget deal struck is far from satisfactory. When will we get back our money? Delay means borrowing, borrowing means interest, and time is cash. What strings are attached? Who holds them and by what authority will they be released? That is an obvious quarry in which my right hon. Friend the Member for Taunton (Mr. du Cann) and his Select Committee could properly excavate.
The criminal waste of the CAP runs on. Last year £4 out of £5 of the whole European budget, 60 per cent. of all Europe's spending, blued on surpluses—50p out of every pound that we sent to Brussels poured alone into milk and beef—butter balls for Comrade Brezhnev and contre-fillet and cutlets for the colonial colonels of Kabul. No Hindus ever cosseted such a sacred cow.
In all this muddle, harmful harmonisation proposals pour out of Brussels overriding the sovereignty of this House and bearing heavily, through cost and administrative burden, on our hard-pressed industry. Harmonisation, whose purpose is to equate trading environments throughout the EEC, is rendered pointless, dwarfed by the massive difference in fuel and financing costs within the different countries of the Community.
I come now the area in which there is an urgent need for legislation. On joining Europe we surrendered our right to an independent trading policy—to tariffs,

1537
to quotas, and to anti-dumping measures. Times have changed. The North Sea ensures that we have and will continue to have a strong currency—quite unrelated to our industrial performance or potential. In one year the paradoxical and simultaneous surge in both sterling and wages shattered our competitiveness by 25 per cent. Mr. Speaker, no other industrial economy has ever faced a similar problem, certainly no country bereft of its own trading powers but blessed instead, as we are, with more than its fair share of unproductive and declining industries.
Not surprisingly, the desk of my right hon. Friend the Secretary of State for Trade is smothered with an ever-growing mountain of pleas for help—textiles, footwear, foundries, paper, car components and now even wooden doors. Yet the poor fellow is powerless; there is nothing he can do. He has no authority, and few—and then only limited—voluntary measures at his disposal.
Of course, in our dramatically changing circumstances, some industries will die while others are born. That is evolution. But some need not and should not die. They have a viable future. But first they have to be steered past the rocks and currents that lie ahead. But what can my right hon. Friend do? After all, we have delivered the steering gear to Brussels.
We are threatened in two ways—first, from outside Europe. In nine years we have moved from balance of trade with Japan to a balance of two and a half times in Japan's favour. In such circumstances of imbalance, whatever my right hon. Friend might conceive, there could be no risk of retaliation. But sadly, as his powers are so limited, such conception could not lead to policies, however embryonic.
The men's footwear industry in my constituency, as elsewhere, is threatened by dumping from Czechoslovakia and the Third world. Salvation lies with Brussels. Cruelly, Europe's perception of its interest in trading with Comecon is quite different from our own. After all, Germany has its Ostpolitik. Italian ladies' shoes are unaffected. So the steamroller rolls on. Imports rush in, the industry declines, without the Minister having any
1538
direct influence whatever, and without a single European finger being lifted.
We are also threathened by Europe herself—efficient Europe, productive Europe, a Europe of unjustifiably cheap, unfairly cheap, energy, cheap currency and cheap finance; a Europe on a different competitive footing. And should we wish and should the Minister ever wish, there is nothing that he can do to nurse and protect our industries, our jobs and our constituencies from Europe's onslaught, the strength of which is daily reinforced by the necessity for them to seek fresh markets during the international recession.
Finally, a plea from the heart: please, no more bogus statistics. We must remember not that Europe is our fastest-growing market but that it is our greatest threat, the area in which our trade deficit in manufactured goods has become most marked, from balance to £2½ thousand million in eight short years.
This House has one purpose and that is to secure the best interests, long and short term, of the people of the United Kingdom. It has of itself no commitment to Europe save where that commitment enhances this basic function. Where treaties and Acts of Parliament conflict with that function, it has a bounden moral duty to seek all necessary modifications and amendments.
It is for these reasons that I believe that we must urgently return to Parliament the powers to supervise our own trade and return to our Government the ability to act on behalf of our people.
4.35 pm
Sir Anthony Meyer ()rose—
Mr. Speaker: Is the hon. Gentleman rising to oppose the motion?
Sir A. Meyer: Yes, Mr. Speaker.
My hon. Friend the Member for Northampton, North (Mr. Marlow) is concerned—who of us is not?—about the loss of jobs in many industries facing foreign competition, so he wants this country to set aside its treaty obligations by erecting our own national barriers to trade. This proposition is doubly foolish. It is foolish because, as the Prime Minister so forcefully pointed out yesterday,
"we do not feel that general import controls really deal with the problem and they could

1539
have very damaging effects on exports and on our industry generally. If trade is two-way, barriers also work two ways, and in this country there are a lot of jobs in exports. Indeed, one-third of our manufacturing output goes into export. We export a greater proportion of our GNP than all our major competitors—double that of Japan and four times that of the United States."—[Official Report, 29 July 1980; Vol. 989, c. 1306.]
Indeed, after the Prime Minister's speech yesterday, I am astonished that my hon. Friend has not withdrawn his Bill, as the hon. Member for Dunbartonshire, East (Mr. Hogg) so fruitfully withdrew his Bill yesterday.
If import controls have any role in saving jobs, whether in infant industries or in industries threatened by really unfair competition, this can be done only through the mechanism of GATT under article 19. The one field in which the EEC has proved outstandingly successful, even by the admission of its severest critics, has been in conducting negotiations under GATT, where it has been able to deploy, as the world's largest trading bloc, considerable powers for securing for its member States better deals than they could possibly have got for themselves had they negotiated separately.
By far the largest factor causing our terrifyingly high level of unemployment is the world recession. This—and we all know it perfectly well—can be cured only by effective international action to expand world trade. It can only be aggravated and perpetuated if each country takes measures to restrict international trade. For this country, which, as the Prime Minister said yesterday, exports a greater
proportion of its production than all our major competitors—for this country of all countries—to set an example of cutting trade would amount to suicide while the balance of our minds was disturbed.
What my hon. Friend is doing is pursuing his own vendetta against the European Community. He is entitled to his point of view. But membership of the European Community has been the policy of every Government since 1962. It was massively endorsed by the people in the referendum in 1975. It is and it remains the policy of the present Government and of the Conservative Party, and we shall not abandon it because it is temporarily unpopular.
I do not honestly see how any of my hon. Friends can possibly support a Bill which is so clearly contrary to the policy of the Conservative Party and contrary to the country's wider interests. I invite Opposition Members who still believe in international co-operation and in the importance of keeping our pledged word to think very carefully indeed before they enter, even for this one vote, into so dubious an alliance.
I invite the House to reject this foolish and faint-hearted measure.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 136, Noes 153.

Division No. 436]

AYES

[1.40 pm

Aitken, Jonathan

Davis, Clinton (Hackney Central)

Harrison, Rt Hon Walter

Alexander, Richard

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

Hawksley, Warren

Bagier, Gordon A. T.

Deakins, Eric

Haynes, Frank

Barnett, Guy (Greenwich)

Dixon, Donald

Home Robertson, John

Bennett, Andrew (Stockport N)

Dobson, Frank

Hooley, Frank

Blackburn, John

Dubs, Alfred

Hughes, Roy (Newport)

Booth, Rt Hon Albert

Eadie, Alex

Janner, Hon Greville

Brown, Michael (Brigg & Sc'thorpe)

Eastham, Ken

Jay, Rt Hon Douglas

Budgen, Nick

Edwards, Robert (Wolv SE)

Jessel, Toby

Callaghan, Jim (Middieton & P)

Ellis, Raymond (NE Derbyshire)

John, Brynmor

Campbell-Savours, Dale

Evans, John (Newton)

Johnson, James (Hull West)

Carlisle, John (Luton West)

Fitt, Gerard

Jones, Barry (East Flint)

Carmichael, Nell

Flannery, Martin

Jones, Dan (Burnley)

Carter-Jones, Lewis

Fletcher, Ted (Darlington)

Kerr, Russell

Clark, Hon Alan (Plymouth, Sutton)

Fookes, Miss Janet

Kilroy-Silk, Robert

Clark, Dr. David (South Shields)

Foot, Rt Hon Michael

Kinnock, Neil

Cocks, Rt Hon Michael (Bristol S)

Forrester, John

Lambie, David

Cohen, Stanley

Foster, Derek

Leighton, Ronald

Cox, Tom (Wandsworth, Tooting)

Fry, Peter

Lewis, Arthur (Newham North West)

Crowther, J. S.

Graham, Ted

Lloyd, Peter (Fareham)

Cryer, Bob

Grant, George (Morpeth)

Lofthouse, Geoffrey

Cunningham, George (Islington S)

Greenway, Harry

McDonald, Dr Oonagh

Davidson, Arthur

Hamilton, James (Bothwell)

McElhone, Frank

Davies, Ifor (Gower)

Hardy, Peter

McNamara, Kevin

Marlow, Tony

Powell, Raymond (Ogmore)

Straw, Jack

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

Prescott, John

Summerskill, Hon Dr Shirley

Marshall, Dr Edmund (Goole)

Price, Christopher (Lewisham West)

Taylor, Mrs Ann (Bolton West)

Marshall, Jim (Leicester South)

Proctor, K. Harvey

Taylor, Teddy (Southend East)

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

Race, Reg

Thorne, Stan (Preston South)

Maynard, Miss Joan

Rees, Rt Hon Merlyn (Leeds South)

Urwin, Rt Hon Tom

Mikardo, Ian

Richardson, Jo

Varley, Rt Hon Eric G.

Millan, Rt Hon Bruce

Roberts, Albert (Normanton)

Wainwright, Edwin (Dearne Valley)

Miller, Dr M. S. (East Kilbride)

Roberts, Ernest (Hackney North)

Walker, Rt Hon Harold (Doncaster)

Mills, lain (Meriden)

Robinson, Geoffrey (Coventry NW)

Waker, Bill (Perth & E Perthshire)

Mitchell, Austin (Grimsby)

Rooker, J. W.

Weetch, Ken

Moate, Roger

Ross, Wm, (Londonderry)

Welsh, Michael

Molyneaux, James

Rowlands, Ted

White, Frank R. (Bury & Radcliffe)

Morris, Rt Hon Alfred (Wythenshawe)

Sheerman, Barry

Winnick, David

Morris, Rt Hon Charles (Openshaw)

Shepherd, Richard (Aldridge-Br hills)

Winterton, Nicholas

Newens, Stanley

Silkin, Rt Hon John (Deptford)

Woolmer, Kenneth

Orme, Rt Hon Stanley

Soley, Clive

Wright, Sheila

Palmer, Arthur

Spearing, Nigel

Young, David (Bolton East)

Parris, Matthew

Speller, Tony

Parry, Robert

Stallard, A. W.

TELLERS FOR THE AYES:

Pavitt, Laurie

Stewart, Rt Hon Donald (W Isles)

Mr. William Whitlock and

Pawsey, James

Stoddard, David

Mr. John Fart.

Powell, fit Hon J. Enoch (S Down)

Stott, Roger

NOES

Alison, Michael

Grant, Anthony (Harrow C)

Needham, Richard

Alton, David

Gray, Hamish

Nelson, Anthony

Arnold, Tom

Grieve, Percy

Newton, Tony

Atkins, Rt Hon H. (Spelthorne)

Griffiths, Eldon (Bury St Edmunds)

Nott, Rt Hon John

Atkins, Robert (Preston North)

Grimond, Rt Hon J.

Osborn, John

Banks, Robert

Grylls, Michael

Parkinson, Cecil

Beith, A. J.

Hampson, Dr Keith

Penhaligon, David

Benyon, W. (Buckingham)

Hannam, John

Percival, Sir Ian

Berry, Hon Anthony

Haselhurst, Alan

Pollock, Alexander

Bevan, David Gilroy

Havers, Rt Hon Sir Michael

Porter, Barry

Boscawen, Hon Robert

Heddle, John

Prentice, Rt Hon Reg

Bowden, Andrew

Heseltine, Rt Hon Micnael

Price, Sir David

Boyson, Dr Rhodes

Higgins, Rt Hon Terence L.

Renton, Tim

Bradley, Tom

Holland, Philip (Carlton)

Rifkind, Malcolm

Brignt, Graham

Howell, Rt Hon David (Guildford)

Roberts, Michael (Cardiff NW)

Brittan, Leon

Howell, Ralph (North Norfolk)

Roberts, Wyn (Conway)

Brocklebank-Fowler, Christopher

Hunt, David (Wirral)

Ross, Stephen (Isle of Wight)

Brooke, Hon Peter

Hunt, John (Ravensbourne)

Rossi, Hugh

Brotherton, Michael

Hurd, Hon Douglas

Royle, Sir Anthony

Browne, John (Winchester)

Jenkin, Rt Hon Patrick

Sainsbury, Hon Timothy

Buchanan-Smith, Hon Alick

Johnson Smith, Geoffrey

St. John-Stevas, Rt Hon Norman

Butler, Hon Adam

Johnston, Russell (Inverness)

Shaw, Giles (Pudsey)

Carlisle, Rt Hon Mark (Runcorn)

Jopling, Rt Hon Michael

Shepherd, Colin (Hereford)

Chalker, Mrs. Lynda

Joseph, Rt Hon Sir Keith

Shersby, Michael

Channon, Paul

Kellett-Bowman, Mrs Elaine

Silvester, Fred

Chapman, Sydney

Kershaw, Anthony

Sims, Roger

Clark, Sir William (Croydon South)

King, Rt Hon Tom

Skeet, T. H. H.

Clarke, Kenneth (Rushcliffe)

Knox, David

Speed, Keith

Cockeram, Eric

Lamont, Norman

Spence, John

Cope, John

Lang, Ian

Spicer, Jim (West Dorset)

Corrie, John

Lawrence, Ivan

Stanley, John

Costain, A. P.

Le Marchant, Spencer

Steel, Rt Hon David

Cranborne, Viscount

Lester, Jim (Beeston)

Stewart, Allan (East Renfrewshire)

Critchley, Julian

Loveridge, John

Tebbit, Norman

Crouch, David

Luce, Richard

Thompson, Donald

Dorrell, Stephen

Lyell, Nicholas

Waddington, David

Douglas-Hamilton, Lord James

McCrindle, Robert

Wainwright, Richard (Colne Valley)

Dunn, Robert (Dartford)

Macfarlane, Neil

Wakeham, John

Dykes, Hugh

MacGregor, John

Warren, Kenneth

Edwards, Rt Hon N. (Pembroke)

McQuarrie, Albert

Wells, John (Maidstone)

Emery, Peter

Marshall, Michael (Arundel)

Wheeler, John

Eyre, Reginald

Mather, Carol

Whitehead, Phillip

Fairbairn, Nicholas

Maude, Rt Hon Angus

Whitney, Raymond

Fairgrieve, Russell

Mawhinney, Dr Brian

Wiggin, Jerry

Fenner, Mrs Peggy

Mills, Peter (West Devon)

Wilkinson, John

Finsberg, Geoffrey

Mitchell, David (Basingstoke)

Williams, Delwyn (Montgomery)

Fisher, Sir Nigel

Mitchell, R. C. (Soton, Itchen)

Young, Sir George (Acton)

Fletcher, Alexander (Edinburgh N)

Monro, Hector

Younger, Rt Hon George

Forman, Nigel

Moore, John

Foulkes, George

Morrison, Hon Charles (Devizes)

TELLERS FOR THE NOES:

Fox, Marcus

Morrison, Hon Peter (City of Chester)

Mr. Tom Ellis and

Gardner, Edward (South Fylde)

Mudd, David

Mr. Robin Squire.

Garel-Jones, Tristan

Question accordingly negatived.

ORDERS OF THE DAY
  SUPPLY
  [28TH ALLOTTED DAY]—considered

  SMALL BUSINESSES
  Mr. Speaker: I have selected the amendment in the name of the Prime Minister.
  Mr. Stanley Orme (): On a point of order, Mr. Speaker. I understand that the Liberal Party would accept the amendment of the official Opposition. If the Government oppose the motion and do not move their amendment, our amendment could be taken.
  The Under-Secretary of State for Industry (Mr. David Mitchell): Further to that point of order, Mr. Speaker. The Government have a constructive amendment on the Order Paper that we should like to be debated.
  Mr. Speaker: In that case, I am afraid that my selection must stand.
  4.51 pm
  Mr. Stephen Ross (): I beg to move,
  That this House deplores the indifference of Her Majesty's Government to the desperate plight of small enterprises in the United Kingdom.
  We have great sympathy with the hon. Member for Salford, West (Mr. Orme). He now knows what it is like to be a member of a minority party and not have one's amendment called.
  It is a rare occasion on a half or even a quarter Supply day when the Liberal Party is invited by the official Opposition to choose the subject for debate. We are grateful to the official Opposition.
  Today sees the publication of a sombre document by the CBI, showing that the morale of manufacturing companies is at its lowest ebb since 1974, when we had the three-day working week. No less than 91 per cent. of the firms that replied to the survey report a shortage of orders. No less than 72 per cent. are pessimistic about the future. Only 2 per cent. were optimistic, and 26 per cent. said that they were experiencing no change. Those are frightening statistics.
  1544
  In a press release, Mr. Cleminson, chairman of the CBI's economic situation committee, said:
  "The Survey results show that, as expected, both home and export demand have weakened. We cannot force people to buy British made products when they cost more than comparable products from other countries. The cost competitiveness of industry has deteriorated even further. The result of all this has been that output and employment in the UK have fallen and this decline is expected to continue at least as rapidly over the next few months."
  Mr. Bryan Rigby, the deputy director general of the CBI, said that he was worried about the effects on small firms. He went on to say:
  "It is vitally important that the industrial base necessary for economic recovery is not prejudiced by irreversible damage to small suppliers and whilst the CBI is not pressing for interest rates to be reduced in advance of the necessary reduction in monetary growth, it does feel that a steady fall is essential to the well-being of manufacturing companies, whether they be large or small."
  We agree with the terms of the amendment in the name of the Leader of the Opposition, which highlights one more burden that the overpressed small business sector is being expected to carry. My hon. Friend the Member for Truro (Mr. Penhaligon) referred to the matter on 31 March in the House.
  It may seem that the motion is a little unkind to the Under-Secretary of State, whose heart is known to be in the right place. However, I fear that he does not carry sufficient muscle to persuade those hard-faced men in the Treasury and the Prime Minister of the disaster hitting many of our smaller enterprises. I am glad to see so many Members on the Opposition Front Bench. We managed to persuade the previous Administration to give the job to a Cabinet Minister of known authority. With no disrespect to the Under-Secretary, we believe that that policy should have been continued by this Government.
  The Government have carried out welcome reforms, particularly in regard to taxation, legislation and investment, but such reforms presuppose that firms are able to survive and make profits in what is now a hostile environment.
  The Bolton report, published in 1971, defined small businesses as those with up to 200 employees. That appears to be the type of enterprise that the CBI and many Conservatives have in mind when they

  1545
  talk of small businesses. The other criterion appears to be firms with a turnover of £½ million or more. We wish to deal with firms that are very much smaller—the seed corn on which to base the future, if there is to be one.
  I declare an interest. I am a very small business man. I am the proud owner of a china retail shop, with only one employee. My wife has a bookshop, with one and a half employees. I lease premises to a furniture manufacturer, a firm making double glazing, a potter and an architect. I lose on the deal because I have not dared to put up the rent for the past three years. My bank overdraft increases.
  Mr. Russell Kerr (): The hon. Gentleman needs a business manager.
  Mr. Ross: The hon. Gentleman is right. I am also a non-executive director of Pilotus Britten Norman, which employs about 235 people at Bembridge, on the Isle of Wight. It is a bit larger than the firms that we wish to discuss in this debate.
  Mr. Toby Jessel (): Will the hon. Gentleman give way?
  Mr. Ross: I should like to continue.
  I know from personal experience how infuriating it is to be on the margin of deciding whether to register for VAT, and I know the time that is spent dealing with returns. The lift in the Budget from £10,000 to £13,500 was not worth while. We were criticised for that when we were in the Lib-Lab pact. We should be pressing, through the EEC, to take that figure to £30,000 at the very least. The present figure is hardly worth collecting.
  Mr. Bob Cryer (): The hon. Gentleman voted for the EEC.
  Mr. Ross: What is wrong with that? I shall give way if the hon. Gentleman wishes to say something. He used to speak for small businesses in the previous Administration, although he did not do much for them.
  My bank overdraft on the business always seems to be increasing. It gives a hard-working manager little heart when interest rates are running at 20 per cent. or more and other niggling charges ap-
  1546
  pear on the bank statement. Constantly escalating rate demands and heating and water charges continue to pour in without respite. I pay a water, sewerage and environmental charge to the Southern water authority on a store to which no water or soil drainage is connected. Under present legislation I am obliged to do so.
  Hoteliers are having a poor season and are incensed at having to pay water rates on a domestic and not commercial tariff. The water authority has found out that the commercial tariff is lower. Hotels, however, are closed for about six months of the year. The Government should look into all these matters and try to remedy them.
  Poor unfortunate glasshouse growers are consulting local NFU secretaries on the best way to make their already reduced work forces redundant. They dare not face a new planting season with the prospect of even more astronomical losses than at present. I doubt whether their banks will finance them much longer, anyway. The Dutch, Germans, French and probably Albanians, for all I know, are already giving their growers subsidies to cover the ever-increasing cost of energy. Our producers are efficient and have invested heavily in recent years, mostly with Government encouragement and grants. Will they be left to go to the wall, or is there a chance of a little compassion, even at this late hour? I beg the Minister to put his oar in on their behalf with both the Ministry of Agriculture and the Department of Energy.
  The Government's amendment talks about policies which
  "increase incentives … whilst reducing obstacles which discourage the"
  establishment of small businesses. That really misses the point of the debate. The point is highlighted by examples provided to me by two of my constituents only last week. Incidentally, both constituents are paid-up members of the Conservative Party. They certainly did not vote for me in the last election. When I was canvassing they told me that they would not vote for a man who kept "that shower" at 10 Downing Street. I am sure that they have changed their minds now.
  Those constituents have a small factory in South Hampshire designing and manufacturing helpful aids for desk and table

  1547
  tops which are sold through multiples, such as Boots and W. H. Smith. Their products are exported in quite large quantities to the United States. Until this year their turnover averaged about £300,000. Now it has fallen dramatically. Their goods are over-priced in the United States and they are replaced by cheaper imports at home.
  My constituents are very indignant, and I quote from a letter that they sent a few days ago to the local chairman of the Conservative Association in their area. They said:
  "Loyal Conservative businessmen all over the country are questioning not monetarist policies, which are largely doses of good old-fashioned deflation, but the Chancellor's interpretation—or misinterpretation—of their execution. Professor Milton Friedman, criticising the March Green Paper on Monetary Control, quotes the United Kingdom administration as an egregious example of misunderstanding. He is far from approving the application of his principles. We knew Geoffrey and Elspeth Howe, having lived and voted in Woldingham for 20 years. He is capable of being wrong like anyone else. What if he is? The Sunday Times says that the mechanism chosen is crude, slow and wasteful. What if they are right? Please do not tell me again that Wedgie Benn is the only alternative, so that we must therefore blindly accept everything that the present administration does without question. Moderation now would help to keep him out; it is not we who are putting him in: you are.
  Listen to a moderate man writing to The Daily Telegraph: 'If the price of beating inflation, which is clearly necessary, is to put private enterprises out of business, let the Government say so clearly, so that we can retire gracefully and with the minimum loss. For this was not in the election manifesto.' No it wasn't, was it! …
  Traditionally many small businessmen have been staunch Conservatives, which makes this casual betrayal by their own party even more despicable. Many of the Government's supporters were voting for their own self-destruction without being told from the election platforms. Being made bankrupt through no fault of one's own concentrates the mind wonderfully: there will be long memories and longer time to reflect; with bankrupt Tory businessmen for voters Conservatives may well find that their enemies outnumber their friends in 1984."
  It is hard for people like my constituents to be told by their local chairman, who is a retired military man with an inflation-proof pension, to "grin and bear it". There cannot be many hon. Members who are not being approached at ever more frequent intervals by small manufacturing enterprises in their constituencies who are unable to meet their
  1548
  PAYE or VAT payments and who now face imminent seizure of plant and machinery.
  I must make it quite clear that I always get a sympathetic hearing when I contact the collector of taxes or the VAT collector and I plead for time for firms to pay. Usually they allow me that time. I wish to put that fact on record. But they have their job to do and they cannot wait for ever. Surely this is an area in which a sympathetic Government could help, perhaps by dropping the interest charges or putting a lien on the property. The answer does not lie in moving in and taking away the machinery that the company needs if it is to survive. Larger firms can help also by paying their bills more rapidly. I appreciate that the Minister has appealed to them in this respect.
  The CBI bulletin of 18 July also highlights the problems that smaller firms face in this respect. Lower rates of tax, fewer planning controls and improved incentives for outside investors are to be welcomed, but they are of little interest to the business man who is fighting to survive on a week-to-week basis. He has had to contend with usuary rates of interest for far too long and he cannot survive much longer. He has been priced out of overseas markets, not because he is inefficient but because his goods are 30 per cent. dearer today, in competition with the Japanese and others, than they were 12 months ago. He can do absolutely nothing about that.
  Of course we all want to see inflation brought down, but not totally at the expense of the creators in our midst. We should positively discriminate in favour of manufacturing industry. If that means some form of two-tier interest rates, so be it. I wish that we had discussed that in the House before now. Perhaps, we could give some relief on insurance payments. My right hon. Friend the leader of the Liberal Party suggested that yesterday. Perhaps such payments could be taken away immediately for employees under 21. The surcharge could also be removed, at least for certain businesses.
  A Government who were really sincere in their desire to help the small man would devise ways to give temporary relief for rate payments to local authorities for firms that were facing excessive

  1549
  increases. This has been done before. It was done in 1929, and agricultural rate relief still exists. There is a case for considering whether we could give some rate relief to smaller commercial enterprises.
  We should also ensure that there are no foreclosures through failure to pay VAT or PAYE where there is a real chance of the enterprise remaining viable. We must ensure that as far as possible our firms compete on equal terms with those in other countries. I hope that the auspices of COSIRA, the Development Commission and other development agencies will be used to provide a much more comprehensive service for financing small firms and for the presentation of their future intentions to bankers and others.
  We should look much more closely at the whole area of co-operation. I am trying to save two small firms in my constituency through such a suggestion. I am trying to get the work force involved in a co-operative. The Government would do well to look at the Mondragon experiment in Spain, which is a really amazing story of the success of co-operation in that country. Let us look at what has happened in Northern Ireland through Ledus. That has been very successful. In an area that still has the highest unemployment in the country, it has nevertheless achieved a considerable amount.
  There is a case for looking again at the small firms employment subsidy. I know that it has been run down, but it played a useful part. Owners of small firms have told me that if they could continue to employ with grant aid, some of the people whom they took on under the work experience programme, beyond the prescribed six months, they would do so. There should be some flexibility in that respect, although I realise that the idea is to give everyone an opportunity. A small grower in my constituency employs mentally handicapped people who are very good at that job. He hates having to lose them after six months, particularly those with special attributes. A small builder wrote to me recently saying that if only he could have a little financial help he would continue to employ a particular lad who had done extremely well in the firm. It seems a great shame to put that young man back on the dole.
  1550
  I want to see small firms given greater opportunities for tendering for Government contracts. That happens in the United States—up to a certain percentage—and there is something to be said for having it here.
  I was shopping in Norwich at the weekend and I was horrified to go into a tailor and to find that there was not one British shirt in the place. That firm used to sell only British shirts, but now it, seems to have only shirts from Taiwan, Hong Kong and India. I believe that shopkeepers should indicate in their windows the percentage of British goods on sale. That could be done without cost.
  The Government could do a lot more by guaranteeing loans and subsidising interest rates, but after yesterday's debate there seems to be no hope of that.
  Those are the sort of measures that are long overdue. They are not meant to be permanent, but unless first aid is provided now, the patient will be dead and buried before the year is out. With the collapse of our industrial base, everything else will go as well—social welfare, pension and education provision and so on. That is not a pleasant prospect and it should not be allowed to happen.
  The Minister recently lunched at 10 Downing Street with several representatives of small enterprises from various parts of the country. I am sure that he knows about their worries. He receives deputations and he visits factories. He must know all about the problems, and he must be just as worried as we are. When will his Government react? Perhaps the Minister, too, has given up the ghost. We do not expect a total U-turn, but a little light relief would be very acceptable at this time.
  5.10 pm
  The Under-Secretary of State for Industry (Mr. David Mitchell): I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  "this House supports the Government's policies to increase incentives to entrepreneurs whilst reducing obstacles which discourage the start-up and growth of small businesses in the United Kingdom."
  The Government have made considerable progress with their programme to help small firms. I recognise that there is

  1551
  still much to do, but it is ridiculous to refer to us as indifferent to their problems. Before getting to the substance of what I have to say, I should like to consider the indifferent case that has been presented to the House. It is based upon a series of points with some of which I shall seek to deal at the beginning of my remarks and the rest as I develop my argument.
  The hon. Member for Isle of Wight (Mr. Ross) referred to the gloomy forecasts of the CBI. I join with hon. Members on both sides of the House in their concern at the situation revealed by those forecasts. I notice, however, that the CBI is not calling for a change of policy; it is simply hoping that it will work soon. To that I say "Amen", as do many others. There is a subtle difference. This policy, pursued to its end, will work, and will produce what we need as a sound basis for growth by giving us sound money, not inflation, and lower interest rates. That combination is the basis for business growth. To follow the siren voices that press alternatives would simply restart the engine of inflation.
  The hon. Gentleman called for a Cabinet Minister to be responsible for small business policy. I have to tell him that we have a Cabinet Minister responsible for small business policy. My right hon. Friend the Secretary of State for Industry has that task and responsibility. [HON. MEMBERS: "Where is he?"] My right hon. Friend was here earlier and intends to return shortly, but he has had to go to another engagement. The timing of the debate has not fallen when most hon. Members expected. We know that it has been delayed for good reasons. It is I who do the donkey work.
  Mr. Russell Kerr: Very well put.
  Mr. Mitchell: It is, therefore, perhaps appropriate that I should later reply to the debate.
  The hon. Member for Isle of Wight asked that the VAT exemption limit should be raised to £30,000, yet he was one of those who supported the Lib-Lab pact. He was one of those who supported the EEC negotiation when the previous Government sold the pass and arranged that there would be no increase in VAT exemption greater than that sufficient to cover inflation.
  Mr. Stephen Ross: Are the Government negotiating over the possibility of raising the exemption? We are never told these things. It is all very well to keep firing matters back. Are the Government negotiating to see whether the exemption can be raised?
  Mr. Mitchell: That is a valid point and I shall answer it. There is no point in opening a negotiation when one knows that one has no prospect of winning it. We could get that change only with the consent of the other members of the EEC. The hon. Gentleman will know that we have the highest exemption within the EEC. There is no reason to think that we would get any response from the others to give us a higher exemption than any of them. I say without fear of contradiction that Opposition Members sold the pass when in office.
  The hon. Gentleman talked of his own small businesses. I recognise that he talks with experience. I value the points that he made. He spoke about how his overdraft is growing year by year. In that respect, he speaks as the authentic voice of many small businesses with the same constant worrying problem. Why?
  Mr. Kerr: They are being squeezed by the Government.
  Mr. Mitchell: The reason is that inflation makes every small business cash hungry. One needs more money to do the same volume of business. That is why it is the top priority policy of the Government to attack the causes of inflation. It ill behoves those who left us the legacy of the Augean stables of inflation to complain about the size of the shovel that we have to use to clear up the mess left to us.
  I should like to refer to two other amendments on the Order Paper. The amendment in the name of my hon. Friends the Members for Hertfordshire, South-West (Mr. Page), Upminster (Mr. Loveridge), Luton, East (Mr. Bright), Fareham (Mr. Lloyd), Bridlington (Mr. Townend) and others welcomes the enterprise package in the Finance Act 1980 and looks forward to more similar benefits. They have perhaps not overlooked the saying in politics that gratitude is a lively anticipation of further benefits to come.

  1553
  The other amendment proposed by the official Opposition is extraordinary. It calls for the withdrawal of the consultancy paper on sickness pay. Surely the purpose of a consultancy paper is to enable people to make their views known and for the Government to take those views into account. We shall listen to what is said in the debate. To call for the withdrawal of the possibility of further consultation seems an extraordinary response to an invitation to make one's views known.
  It is right and proper that I should report back to the House on the work that has been done in the small firms area. I shall not spend much time on the scene because the House is not unfamiliar with it. There is, however, a recognition on both sides of the House of the importance of small businesses as the seed corn from which wealth creation and many jobs in the future will come. We have far too few such businesses. We need many more. The balance between the incentives to start a business, the hurdles which face those who start and the burdens they have to carry has been tipped so far that the logical person has not felt it worth while to start a business.
  The Government are engaged on a threefold task. The first is to identify the burdens and to pull them down, to identify the hurdles and to take them away, so that it is easier for people to start. Secondly, we have to increase incentives for them to do so. Thirdly, we have to look at the problems of financing those who have started, or are seeking to start, in terms of the money inside the business as well as incentive in terms of what one can take out in reward for success.
  I should like to examine the burdens. The compliance cost of dealing with Government regulations and controls is much higher for the small business than for the large. The smaller the business, the higher up the management pyramid one goes. It is a case of "Mon Dieu et mon droit ", or, as my children translate it, "My God, I am right". In a small business, it is the working proprietor whose time is taken out from driving the business forward by having to deal with the cost of compliance. I invite the House to study what the Government have been doing and what has to be done.
  1554
  For those who are starting a business, there is the problem of planning. Two central areas are involved. The first is the delay in getting a decision and the second is the decision itself. Planning is important. Most people starting a business begin in their own back yard. When their wives tell them to get off the kitchen table or out of the garden shed, they need sub-standard, low-cost second-hand premises in the neighbourhood—a double garage or something of that nature. At that point they come up against the planning regulations.
  My right hon. Friend the Secretary of State for the Environment has made two changes to speed up planning decisions. First, there can be an appeal to him if no decision is taken by the local authority within eight weeks. Secondly, in many, although not all cases, inspectors will issue their decision at the time of their inquiry instead of waiting between three and six months.
  An important question is the decision itself. I am able to say to the House that within six or eight weeks the Secretary of State for the Environment will be issuing a development control circular which will make considerable advances in relation to the ability of small firms to start up and to continue their businesses where they are not disturbing the neighbours. regardless of the zoning of the area in which they are operating. After the substandard starting stage a small firm needs purpose-built and modern premises of about 2,500 sq ft. A substantial survey conducted by Coopers and Lybrand and Drivers Jonas shows that there is an acute shortage of premises for small firms. It also shows that the absence of premises stops people from starting a business. The availability of premises is one of the catalysts which persuades a man to start a business. It is therefore important to get it right.
  Mr. Michael Grylls (): Will my hon. Friend examine the over-stringent building regulations which result in new premises being built to such a high standard that their prices are much higher than comparable premises in California, for example? Premises there are built to a lower standard, but they are cheaper.
  Mr. Mitchell: As chairman of the Small Business Bureau, my hon. Friend

  1555
  is in touch with the problems from which small business men suffer. I take my hon. Friend's advice on board.
  We have made some progress. As a result of the survey, the Chancellor of the Exchequer introduced a 100 per cent. tax allowance for three years on new premises up to 2,500 sq ft, and on conversions. In the Budget £5 million was provided for the assisted areas. The Department of Industry has taken that money and found another £15 million in pension fund money from the private sector. With that we shall start building over 1,000 units up to 2,500 sq ft in the assisted areas this year. In addition, we have done a deal with Barclays Bank. It will invest £5 million in small firm premises in the assisted areas. That is hardly an indication of indifference.
  I turn to the Employment Protection Act, which has been a major burden for small firms. We have made three significant changes. First, the tribunal procedures will be revised to take into account the size and resources of small firms. Secondly, people who present frivolous claims will be warned that they will be liable to pay costs. That is of major importance. It means that the chap who has no case will no longer be able to blackmail his employer to the tune of £400 or £500. Thirdly, for firms with up to 20 employees we have introduced a two-year qualifying period for unfair dismissal which aligns with the two-year qualifying period for redundancy payments. That removes one of the major worries of small firms which take on additional employees.
  We have taken two further minor steps forward. First, we are allowing small businesses to pay rates in instalments. Some local authorities already allow that, but others do not. Secondly, we have also introduced fairer treatment for mixed hereditaments in relation to the domestic portion of such premises.
  Mr. D. N. Campbell-Savours (): Will the hon. Gentleman give way.
  Mr. Mitchell: I am sure that the hon. Gentleman will be able to make his own speech. I have many things to say which I wish to get on to the record, and time is short.
  The Under-Secretary of State for Trade has introduced a £1 million cut-off in
  1556
  terms of disclosure which reduced substantially the amount of disclosure for businesses with turnovers up to £1 million.
  Mr. Richard Wainwright (): Will the hon. Gentleman give way?
  Mr. Mitchell: I am sorry. My hon. Friends have asked what we are doing. I have been accused of being indifferent. Surely I should be allowed to explain what we are doing.
  We have prevented over 1 million questionnaires going out. That will save a substantial amount of work which would have landed in buff envelopes on the desks of small firms. Office development permits have gone. IDCs do not affect small businesses now. We are sweeping away much of the frustrating paraphernalia, regulations and controls which have restricted small firms.
  I do not need to remind the House of the substantial change in incentives contained in our first Budget. The change has increased from 17 per cent. to 40 per cent. the take-home pay of successful small business men. Changes in the Budget this year affect the pensions of the self-employed. Minor changes have been made in capital transfer tax, and further changes are to come.
  Some of my hon. Friends are worried about finance inside businesses. Some progress has already been made and we hope for more. All the high street banks have in the last 12 months introduced some new form of loans for small businesses. Many banks are giving new options and new opportunities and several of them do not require the same degree of security which they have required in the past.
  Mr. Campbell-Savours: At market rates.
  Mr. Mitchell: Yes, at market rates. The banks have been moving in response to requests to extend the frontiers of their lending. We should welcome that. The European Investment Bank loans operate in the constituency of the hon. Member for Workington (Mr. Campbell-Savours). He will be glad to know that the rate has been reduced to 10 per cent. for interest over seven years. We have also reduced the size to a minimum of £15,000 compared with the previous

  1557
  £17,000 minimum. I hope that the hon. Gentleman will welcome those improvements.
  The hon. Member for Isle of Wight referred to the problems in country areas. The Council for Small Industries in Rural Areas will have about £4 million to lend this year in its traditional role of lending to small firms in the rural areas. In addition, it has made arrangements for £9 million from either the Industrial and Commercial Finance Corporation or the banks to be made available to enterprises which it has vetted and to which it would have lent, so that if demand exceeds its resources that money will be available. That means that small businesses will be able to obtain the money that they need either direct from COSIRA or from the money that it can tap.
  Pension funds are a major source of investment money. The problem is that they cannot cope with small investments when they are investing £1 million or more a day. We are using the Department of Industry's counselling service to make the assessments. In the East we are involved with the Post Office pension fund and in the North-West with the Norwich Union. We shall do the work through the counselling service and present the evidence to the investing institutions. That is a practical way in which we can bridge the gap in order to bring outside equity into the smaller firm.
  However, the small enterprise needs a private backer to start. In the Budget this year the private backer was given the opportunity of having his interest allowed for tax. If he loses money on the investment, that can also be written off against income tax. The top tax on investment income has been cut from 98 per cent. to 75 per cent., so encouraging the private backer yet again.
  If one adds to all that the other concessions such as lowering corporation tax, and doing away with the close company regulations and controls which prevent small businesses from accumulating money for investment, it comes to a substantial package of measures achieved.
  I could go on much longer, but if I did I should be trespassing on the time of the House. I hope that I have opened up the area in such a way that my hon. Friends may suggest other things that
  1558
  we might do in the coming year. I hope that the House will say that the charge of indifference is not fair in view of our record of achievement.
  5.30 pm
  Mr. David Penhaligon (): The Minister made an interesting speech. He sounded to me like a doctor who has been treating a patient for an annoying bunion when the patient was suffering a serious attack of cancer. The problems referred to clearly need attention.
  During the general election I remember, while trying to persuade one of my farmer constituents not to desert me, telling him that we had persuaded the Labour Government to introduce rollover taxation relief for farmers. He replied "Ar boy, it would help if I had paid any tax in the last 15 years." His point was that this minor modification—no doubt useful to the agriculture industry—was of no real import if our economy was experiencing enormous difficulties.
  My accusation against the Government is not that their heart lies in the wrong place but that the record of their performance during the past 15 months compares so miserably with their rhetoric in 1978 and 1979. Today we are discussing one of the greatest rip-offs by a political party in the history of British politics. The cynicism that has built up in this great nation towards politicians who have miserably failed to deliver what they promised is a matter for concern. The attitude of small business men towards the Government has to be seen to be believed and I do not doubt that there are Conservative Back Bench Members who know precisely how the owners of small businesses feel.
  One of the most effective lines produced by the Conservatives during the general election was that if each small business in Britain took on one extra employee between one half and two-thirds of our unemployment problem would be eroded. We heard that slogan time after time. I do not know who thought it up, but I understand that the organisation that I suspect was its author has also got the sack.
  When we compare the mood and the expectations created by that kind of electioneering to what has happened, it is obvious that the contrast is appalling. The

  1559
  Minister said that the Government's first intention was to get rid of inflation. I do not decry that as a major aim, but I recollect that at the end of October 1978 inflation was 9 per cent. At the general election I think, though I stand to be corrected, that it was 11 per cent. Inflation is now 17 per cent. and we are being told that it is a triumph that it is coming down. If we take out VAT the underlying inflation rate is currently 17 per cent.
  I prefer the new index invented by the Government because it gives a truer indication of the level of inflation. It will be interesting to see whether the Government mention that index from the end of next month, because it will register a higher figure than the crude index of inflation that we formerly used. Inflation has almost doubled in the past 15 months. That fact hardly compares favourably with the rhetoric at the general election.
  If one wishes to borrow money for a slight risk enterprise—that is what small businesses are engaged in—interest rates are 20 per cent. I pointed out to the House long ago that if inflation continued at 20 per cent. until the day I retired at 65, the average wage in Britain would be something like £45,000 a week. That is what compound interest at the rate of 20 per cent. produces.
  Bankruptcies have hit appalling levels. More frightening than the levels recorded by current statistics is the feeling in one's own constituency that bankruptcies are on an upward trend. One gets the feeling that we have not reached the peak and, therefore, cannot expect an improvement. The feeling in one's constituency is that the situation is deteriorating. Clearly, business men wil not approach their Member of Parliament and tell him, just before it happens, that they are about to go bankrupt the following week. They can hardly allow that to become public knowledge if they believe that they can survive. One gets the feeling, talking to one's constituents and to owners of small businesses at all levels, that bankruptcies are escalating. The number of bankruptcies, it seems, has no real chance of being reduced in the near future.
  My hon. Friend the Member for Isle of Wight (Mr. Ross) mentioned the ending of the small firms employment subsidy. I believe that that was one of the most useful aids afforded to genuine
  1560
  small firms. It also helped alleviate some of the unemployment experienced in far too many areas. I am pleased that the official Opposition have specifically referred to the ending of the sickness benefit scheme. That is what the Green Paper means. The idea that the Government should no longer make a major contribution to the sick during the first eight weeks of sickness heralds the end of the national insurance principle for working people. We all know that big firms—in which the Conservative Party is so interested—might well approve of the Government's new scheme. On the principle of swings and roundabouts they can virtually run their own sickness schemes for what they formerly cost the Government.
  However, for a person employing two or three people, the scheme could be an unmitigated disaster if two of those three employees were sick at the same time. Such employers will not only have to pay the sickness benefit for the first eight weeks; they will need to employ someone else in the short-term to do the valuable work done by their regular employees. To have one out of three employees sick means, for the small business man, that one-third of his work force is missing, and in a small firm that is undesirable.
  A side effect which does not affect small businesses but which is potentially desperately unfair in areas such as my constituency, where unemployment has long been a major problem, is that, given the new arrangements, many firms will be less willing to take on the person in his late forties or early fifties with a record of sickness. If the principle is included in legislation it could mean that small firms would not take on workers who were unable to produce an Al health record. That would be highly regrettable in a section of the community which already has enough troubles to deal with.
  Will the Minister tell us what is the present position of sub-post offices? They are small businesses in rural areas and on urban estates. Some of them are the only elements of small business left in certain areas. Where do we stand in relation to current proposals, which, if fully implemented as originally outlined, would close down at least one-third of

  1561
  the sub-post offices in Britain? I gather that the Government have retreated somewhat on that issue. But how far have they retreated? Why do not the Government announce that the scheme has been chucked into the bin where it belongs?
  Mr. W. R. Rees-Davies (): Has the hon. Member seen the Select Committee report on this matter? Having investigated the issue carefully we found that a considerable volume of agency work could be put in the way of sub-postmasters. They had been pressing for that. If that happens, the sub-postmasters will have substantial additional income from the Giro, the agencies, the electricity boards and the tourist board. Those issues were well and fully covered by the Select Committee and the sub-postmasters are happy about the future.
  Mr. Penhaligon: I have to choose to argue with the hon. and learned Member. For many years I was a sub-postmaster and therefore have had some marginal experience of running such an office. The backbone of post office business, which the post offices are losing, is the payment of family income supplement and pensions and—tragically, in my part of the country at least—unemployment benefit. No agency work can make up for that loss. There is no agency work in the poorer parts of the country where these offices are the only small business enterprise. Obviously they would appreciate the extra agency income, and there are one or two areas in which it might be useful. What is the Government's position on this matter? Are they to give agency work? How much work is to be withdrawn?
  In effect, the Government have wrecked the small insulation businesses that were growing up throughout the country. Insulation was one of the growth industries and it was badly needed in order to help the country make more use of its valuable energy resources. The Government wrecked that industry's prospects by substantially reducing the insulation scheme grants. The announcement about that reduction was made the day after the Government announced that they would find the money to build 10 pressurised water reactors at a total cost of £12,000 million. In reducing the grant, the Secre-
  1562
  tary of State for Energy told us that he was seeking to save £12 million. I shall never forget the sequence of events in the House on those two consecutive days.
  Mr. David Alton (): In supporting my hon. Friend may I tell him of a firm in my constituency which has folded after only 12 months? It has provided jobs for six people installing domestic insulation. As well as providing employment it was helping do something about the energy problem. I agree with my hon. Friend, therefore, that on two fronts—employment and energy—the Government's actions are having a disastrous effect.
  Mr. Penhaligon: I must indicate my basic agreement with my hon. Friend. If the Government want a stop-gap arrangement to combat unemployment, the labour-intensive household insulation schemes are probably the most sensible area for them to consider.
  The crux of the matter is that there are two types of small business. There are those businesses that run on the internal economy—building, retailing, and so on—which compete with other businesses in this country. That section—apart from building—while not doing well, is surviving. The building industry is so dependent upon interest rates and confidence in being able to sell its products when they are constructed that it is a special case.
  The section that is in desperate trouble is that which competes in the external economy, the economy which faces international competition. Sometimes the industries in the external economy do not conceive that they are competing with foreign interests. The tourist industry in my constituency is an example of that. Every year it says that it is having a bad season, but this year I am inclined to believe that it is. It is complaining about interest rates, but its true problem is the exchange rate. One has only to read the newspaper advertisements to see the trips to Spain, Portugal, Italy and even, under some incredible offers, to the United States, that are open to people who used traditionally to holiday in my part of the country and elsewhere in Britain. The tourist industry is being crippled by the exchange rate which the Government have imposed upon it.

  1563
  The same argument can be made in respect of textiles, cars and other industries. The one big issue upon which the Government should be concentrating is the exchange rate. The current level is buoyed up by North Sea oil and the Government's interest rates policy. That rate is wreaking damage upon this country in a way that no other policy has done before.
  It is all very well for the Government to say that they are cutting the economy back to enable it to grow forth more vigorously. The simple reality is that if they pursue that policy there will be very little basic industry and small business left to grow forth. The time has come for the Government to produce at least a Green Paper on possible ways of reducing the exchange rate to a more sensible and intelligent level. There is no way in which tourism and textiles, cars, and other manufacturing interests can survive if left to compete internationally on the basis of the current rate of exchange.
  The one period during which unemployment fell during the past five years was when the pound was at a low level against other currencies. During that period, British industry was highly competitive. That is not, in splendid isolation, a solution to our problems. Clearly the sensible exchange rate is to be found somewhere between that low point and the current high level. Unless the Government bring the exchange rate down, they will wreck that part of the economy which competes internationally, the sector that provides the basis of our standard of living. The internal economy would collapse soon after because it is dependent in turn upon the external economy.
  5.46 pm
  Mr. John Loveridge (): I am glad to take part in the debate, and I congratulate the Liberal Party on its initiative in drawing attention to some of the requirements of small businesses. We on the Conservative side, particularly my hon. Friends who are officers of the small businesses committee, of which I have the honour to be chairman, believe that the smaller business sector can conquer unemployment. That is a big claim. Large firms will shed labour. In good times they will do so because of the silicon chip. In bad times they will do
  1564
  so for lack of demand. It is noticeable that in recent years small firms employing up to 100 staff have provided all the new jobs in the kingdom, net of those vacancies created by people leaving employment.
  In this country our small business sector is too weak. It needs strengthening. There are 1.3 million firms in the United Kingdom compared with 5-2 million in Japan, which is twice as many as we have on a population basis. Likewise, Germany and America are also ahead of us. It is because they are ahead of us that their economies are so lively and adaptable. We need to build up our small business sector—in part by a transfer of resources from the public to the private sector. The private sector is repeatedly squeezed whenever there is an economic squeeze. It was well said that the construction industry formed the economic regulator for the economy.
  The Budget this year has helped the small business sector. I hope that the Liberal Party will note that: an estimate in the Financial Times put the value of that help at £369 million. Since then the Government have added more. The combined measures are a great help to small businesses starting up. The small man has been helped by the Government. He is greatly encouraged to found new business.
  Let me list just a few of the measures. There are tax cuts on income, stock relief measures, the removal of double taxation in respect of capital transfer tax and capital gains tax, employment protection improvements, planning improvements, enterprise zones, the provision of new premises, and encouragement to banks, which have responded well with new ideas, including a recent scheme to replace interest rates with royalties. Form filling has been cut, and there has been a Green Paper on the buying in of companies' shares.
  Those are only a fraction of the measures that have been taken by the Government, but they form a goodly package. Some are measures in response to proposals put forward by members of the Conservative small businesses committee. Here I should like to recognise the work of the Minister responsible for small businesses. He has set up a regular system of consultations with outside

  1565
  organisations as well as those in the House. He has done more than any of his predecessors to keep in personal touch with organisations such as the Association of Independent Businesses, the Union of Independent Companies, the National Federation of the Self-Employed, the National Chambers of Trade and the small business section of the CBI, as well as the Smaller Business Bureau. This regular exchange of views is a great help to the whole of the small business sector.
  I wish to put forward two specific proposals, one of which has already been touched upon by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). It is a proposal to set up an operations room within the Department of Industry where all those who are interested can see, set out dramatically, international comparisons, so that they may draw their own conclusions and see for themselves what is happening worldwide in this sector. Is Japan ahead because it has a larger small business sector? Is high taxation a disincentive? Which incentives have worked best, in which countries? There are too many partial studies, and no one central place in Government where information is gathered together, and where those people who are interested in this sector can make their own comparisons. Such research should be readily available to hon. Members and others who wish to know.
  We have some clear guidance already. We know that medium-sized firms have been vanishing over the last 30 years. We know from the Wilson inquiry that there are 71,000 manufacturing firms with up to 100 staff, and only 3,000 firms with between 100 and 200 employees. Those figures are of the greatest importance, and I hope to be able to demonstrate why.
  The famous Massachusetts Institute of Technology survey of 1969-76 showed that firms with fewer than 20 staff at the beginning of the survey provided, during the course of the survey, two-thirds of all jobs in the United States, and that most of those jobs were in new firms. Those figures have been widely quoted in the House. What is not as generally known is that the firms that grew from under 20
  1566
  staff at the beginning of the survey to medium-sized firms employing 100 to 250 staff by the end of the survey provided most of the jobs. Thus, it can be seen that it is the fast-growing firm—from small to medum size—that can provide the jobs that are needed in this country, as in the United States. We can only conclude from the figures that the proper way in which to create new jobs and new demand within the economy is to build up the medium-sized firms sector as quickly as possible.
  As I said, the Budget has done much for start-ups. The next step is to drive for expansion of existing firms. That requires a change of attitude, because so many of our firms stop growing at about 100 staff. First, we need easier access for the fast growers to capital in firms that do not involve the loss of equity. I ask the Government to examine closely the self-financing loan guarantee scheme that was put forward by the officers of my committee. I hope that the Government will in no way compare it with the schemes in the United States, which might put them off. Our scheme is self-financing and totally different.
  Secondly, we want less fear of destruction of a firm by capital transfer tax. It is possible for medium-sized firms in the ownership of a man and wife to be hit to the point of destruction by the impact of capital transfer tax when the owners die. That cannot be right when we wish that sector to grow.
  The Chancellor of the Exchequer has told us:
  "We have, as I promised last year, subjected capital taxation to a thorough review … What I can do this year must be constrained by our financial position."—[Official Report, 26 March 1980; Vol. 980, c 1482.]
  Of course, he has done much to help the smallest companies. He has helped by removing the double taxation charge and raising the capital transfer tax threshold. That has freed any business with assets of £100,000 or less from any charge on the death of its owners. But was the Chancellor right when he said that he should be constrained this year over his review of capital taxation in relation to the medium-sized business? If, as the figures plainly show, it is to the medium-sized firms that we must look for the creation of new employment, should we

  1567
  not immediately and urgently act on all the questions relating to this sector, including capital taxation, which is radically reducing its growth and the will of individual firms to grow?
  Thirdly, should we not remove anomalies, such as the so-called marginal relief for corporation tax? It is agreeable to have a 40 per cent. reduced rate for small businesses up to a certain level of profits. But what inconceivable folly then to throw in a band of taxation far above the normal. It suddenly leaps to 66 per cent., not to the 52 per cent. which is the normal rate of corporation tax. There is a very wide band at 66 per cent. Many firms have no desire to leap that band and go through that heavy tax area. That should be put right, even if it means reducing the threshold at which the 40 per cent. band operates so that the cost to the Government is not increased. The medium business sector is especially significant to job creation, and now is the time to push it, because it takes two or three years for any push to be activated. Firms do not grow overnight like mushrooms. They require effort and time.
  Hon. Members have referred to the economy and to the effect of high interest rates, to firms failing through no fault of their own, and to the 64 per cent. in the CBI's latest survey of industrial trends which show that their volume of new orders is falling. In my constituency I have had complaints from people, who have had to wait to be paid for their goods, and the time they have had to wait has increased from 30 to 90 days. That is causing severe liquidity problems. It is an area in which the Government could and should help to take mitigating action. Likewise, although exports have kept up well, one of my constituents, the owner of a trucking company, told me that he had 380 lorries but had had to sell 70, and of the 310 that remain most are leaving the country empty and returning full. It cannot augur well if that trend is increased or becomes general. I do not know what delay there is in the export figures that come through to the Government, but at home it is time to increase demand, as inflation is brought under control, and a considerable improvement in this area should be seen this month. I hope that that improve-
  1568
  ment will be seized upon by the Government and that they will act urgently, as best they may, to increase demand in the private sector, which is so heavily hurt by the squeeze. In order to do this, they must keep their own housekeeping in good order in the public sector.
  But the secret of the future of our country's expansion lies, I am sure, in developing the medium-sized firms. I do not think that this has been recognised before throughout the kingdom. There is evidence of it, and I hope that the Government will pursue this area of fast expansion and give it the stimulus that it requires.
  6.1 pm
  Mr. Bob Cryer (): I shall be as brief as I can because I know that a number of hon. Members wish to speak in the debate.
  The hon. Member for Isle of Wight (Mr. Ross), the Liberal spokesman who introduced the debate, was rather scathing about the record of the Labour Government. It is worth mentioning that in 1977-78 we were responsible for what must have been a record number of improvements and opportunities for small firms. Indeed if that economic environment could be produced today small firms would very much welcome the improvement and the change.
  We introduced the small firms' counselling service in 1976 and extended it throughout the country in the next two years. We introduced the market entry guarantee scheme to help small firms export abroad by guaranteeing them 50 per cent. of the cost We introduced the small firms employment subsidy, which has been mentioned by several Opposition Members in somewhat glowing terms. I shall return to that in a moment. We introduced improvements to the Council for Small Industries in Rural Areas—COSIRA. In the special set of measures announced in the following year, we introduced a number of tax concessions which were greatly welcomed by small firms. Above all, we created an economic environment which was not punishing to small firms. By contrast, the Conservative Government, as a deliberate act of policy, have created an environment in which there are swingeing rates of interest, which are crippling small firms and driving them to the wall.

  1569
  I refer particularly to the small firms employment subsidy that we introduced. It was a product of collaboration between the Department of Industry and the Department of Employment. In my own constituency, over 50 jobs were created by that subsidy. Nationally, about 50,000 jobs were created by it.
  If a Minister came to the Dispatch Box today and said "We have a scheme for creating 50,000 jobs nation-wide", Conservative Back Benchers would cheer him to the echo, because our present economic climate is the reverse of what it was under the Labour Government. Ministers now come to the Dispatch Box to announce measures that are putting 50,000 extra people on the dole month by month—and many of those redundancies relate to small firms.
  The temporary short-time working compensation scheme was introduced by the Labour Government to replace the temporary employment subsidy, which was stopped by the EEC. That scheme was a great boon to small firms, but the Government have cut back the temporary short-time working compensation scheme by 50 per cent. as part of their public expenditure cuts, to enable them to reduce taxes for the better off.
  The Under-Secretary of State for Industry talks in comatose terms about the position of the small firms sector and all the Conservative Government are supposed to have done, but they are not creating jobs. There are more and more people on the dole. Their numbers are increasing week by week. More and more small firms are going to the wall because they cannot succeed in the economic climate which the Secretary of State for Industry—who is barely awake—is creating, along with his other Cabinet cronies. He and his Cabinet cronies have a lot to answer for. They are deliberately creating the dole queues. They are deliberately smashing small firms to the wall. It is part of their policy, and it is time that we made that absolutely clear.
  The cutbacks that the Government have introduced are severely affecting small firms. Many of the public contracts that are now being cut back were provided and fulfilled by small firms. The small firms in particular are suffering from the ricochet effect of Govern-
  1570
  ment policy, but we cannot leave large firms out of the debate, because small firms are often suppliers of components and services to the large firms.
  I remind hon. Members that when the Labour Government saved British Ley-land and Chrysler, both actions were opposed by the Conservative Party, so we know its view about creating and retaining jobs. Conservative Members voted against those measures. When those companies were saved, 10,000 small firms were also saved, because they supply components and services to the two giants. When people buy a Mercedes or a Renault car, they might bear in mind that some of the components on the British cars that they are ignoring are supplied by small firms—perhaps small firms in their own constituencies.
  I should like to refer briefly to the position in the textile industry, which was mentioned earlier in the debate, because it is affecting industries in every sector of manufacturing. I want to anticipate slightly and peripherally the debate that is to take place later. The textile industry, like the car industry and other manufacturing sectors, is facing great difficulties. It is an industry that has as its hallmark small manufacturing concerns employing fewer than 200 people.
  I noticed in my local paper yesterday a not unusual announcement for these days, during which the country is led by the Conservatives. It stated:
  "Textile firm cuts workforce by half",
  It went on to say:
  "A Keighley textile firm is to make almost half its workforce redundant. Forty-one weavers and ancillary staff employed by Smith Bros, and Foster Ltd., worsted manufacturers, will lose their jobs during September and October. A sharp fall in demand for commission weaving is blamed for the redundancies."
  The Government could help small firms in the textile sector almost at a stroke by toughening up the multi-fibre arrangement and pressing the EEC to take action about dumped imports in this country. It is no good saying that there is an anti-dumping mechanism in the Department of Trade, because we know that that has been used as an excuse for inaction for far too long. It is something that the Government could do and ought to do to save small—and also large and medium-sized—textile firms.

  1571
  My own constituency depends to a great degree on small firms. Under the Labour Government it was doing relatively well. The same newspaper reports:
  "Unemployment is now at its highest since records began in 1945 with almost 9 per cent. of the local workforce on the dole. In addition, a growing number of firms are operating on short time and, according to Keighley Jobcentre manager, Mr. Vic Boyce, the immediate outlook is not very promising."
  He can say that again.
  It is interesting to note that the textile industry has done everything that the Secretary of State for Industry—and the Prime Minister, whose thoughts he seems to control so well—desires from an industry. This point has been made by the general secretary of the National Union of Dyers, Bleachers and Textile Workers. He said:
  "It has rationalised and reorganised. It has invested heavily in new plant and machinery. Its improvement in productivity is second to none. It has not been subject to exorbitant wage claims and its record of disputes is as good as any other industry and better than most. Yet, after a decade of doing what the Tories say we should do, the result in 1980 will be a loss of up to 100,000 jobs."
  That is what comes of conformity. As I said, many of the firms that are vitally affected are the commission weavers which I mentioned earlier. We cannot isolate the small firms sector from the general level of the economy, but we can say that small firms are affected more by high interest rates. They should be reduced to enable small firms to survive.
  Some of the incentives to small firms that were of enormous benefit, such as the small firms employment subsidy, should be reintroduced if the Government are concerned about preserving jobs. The public expenditure cuts and the national schemes of assistance introduced by the Labour Government should be restored. It is not true that, for example, the schemes of assistance introduced under the Industry Act 1972 benefited only the large firms. The majority of the expenditure under the ferrous foundries scheme, for example, went to firms employing fewer than 200—the small firms sector about which we are talking. We need that kind of stimulus for the small firms sector.
  The hon. Member for Upminster (Mr. Loveridge) said that it was time to provide a stimulus to demand, and he is right. As more money is put into workers'
  1572
  pockets they will demand products, many of which stem directly or indirectly from small firms which form an important and integral part of our economy.
  In order not to suck in imports we shall need an effective system of selected import controls. I am sorry that the Secretary of State is leaving, because I am giving him an outline of what is necessary. It will not affect him, of course, because there will be no U-turns. The worst news for many decades for small firms and workers is that there will be no U-turns. The Government will go on to the bitter end. That means that many small firms will go to the wall and the dole queues will lengthen.
  I started my remarks with the Labour Government's record. Many small business men did not regard the Labour Government with much approval and criticised them in many respects. We met some of those criticisms and had a far better record than many of them, with their views and attitudes, had any right to expect. If we could turn back the clock, many small business men would say "Give us back a Labour Government. They did a better job for us than the Tories."
  It is no use the Tories shaking their heads. They know that it is true. [HON. MEMBERS: "It is not."] If they go round their constituencies with any regularity they will not get the praise that they were getting in May, because small business men are disappointed with the Government for which many of them voted. The letter read out by the hon. Member for Isle of Wight from two dedicated Conservatives is an illustration of that kind of change. They will be part of the move towards the restoration of sanity, decent economic principles and full employment, which will be brought about by the next Labour Government.
  6.13 pm
  Mr. Michael Grylls: There seems to be no difference of view between the two sides of the House that small firms are suffering extremely from the effects of the measures to deal with inflation. Indeed, over the past few years they have suffered badly from inflation, but we should remind ourselves that the small business sector will gain the most when inflation

  1573
  is conquered and brought down. There is a major gain to be achieved.
  I want to consider one aspect which I believe to be important to small business. I want to look critically—and I hope to take some Opposition Members with me on this matter—at the Government machinery that looks after the interests of small business and see whether it is adequate to defend those interests. Looking at it impartially, the answer must be a resounding "No". We do not have the machinery to ensure that small business has a proper hearing. I think that all would agree that over the years the over-regulation that has taken place in Britain, America and Western Europe has made it difficult for small business to exist and even to start. We are paying the price for that folly here and in America and Western Europe.
  The pendulum has been pushed by both parties against the small business man through over-regulation. Therefore, the small business man has started at a grave disadvantage to the large firm. The large firm can employ tax lawyers and—dare I say it?—the services of a Member of Parliament as a consultant to help it through the maze of regulations and laws. The large firm can do that, but the small firm cannot.
  There is a need—I hope that I take the hon. Member for Isle of Wight (Mr. Ross) with me on this matter because his speech was generally helpful—for positive and effective discrimination in favour of the small business man. The House would be wise to recognise that need.
  Let us consider what the Government machine provides for small business. With no disrespect to the Minister, he is, unfortunately—not from his own choosing—an Under-Secretary of State, not a senior Minister. Therefore, we have one Minister only for small business, and he is a junior Minister.
  In the Department of Industry there is the small firms division. It may surprise the House to know that the small firms division reports not to the Minister, but to the Secretary of State and the Permanent Secretary. The Secretary of State, poor man, has a very wide remit. He is like the beam of a lighthouse going
  1574
  round. Because there are only 24 hours in a day, he can think for only brief moments in the day about small business. So in no way is he a small business Minister.
  In the small firms division there are 25 people. There are about 52 people in the small firms advisory service, spread throughout the country, and 130 part-time counsellors. That is all that Britain provides to counteract the disadvantages from which the small business suffers. There are 1¼ million small firms employing 5½ million people.
  I want to compare that with what is provided for agriculture, which is not a bad example. There are 228,000 farms, employing 650,000 people. What do they have to look after their general interests and to protect them? There is a Cabinet Minister, two Ministers of State, one Parliamentary Secretary and 14,000 civil servants to look after the agriculture lobby—the farmers and farm workers. They do a good job, because agriculture is very productive. The small firms sector has just under 200 people, compared with 14,000 for agriculture.
  There is a real need for a more effective body to defend the interests of small business. The representative bodies of small business—I am the chairman of the Small Business Bureau—which try to look after small business outside the Government machine are weak and fragmented. They do not operate together. There is no national agency, to coin an American expression, to fill the advocacy role for small business. That is perhaps the most effective part of the Washington bureaucracy in helping small firms. There is no one omnipotent part of the Government machine that can say "That regulation may be all right for the large firms, but it is no good for the small firms because it will damage them".
  My hon. Friend the Under-Secretary of State has done a noble job in the year that he has been in office, but, for the reasons that I have put forward—that he does not control the civil servants in the small firms sector of the Department—how can he carry out the advocacy role? He has no one to do it with him. What he does is a miracle, but how much more could he do with the proper, modest staff to back him up? The small firms division, within the Government machine, is

  1575
  ill co-ordinated to know what is happening in other Departments about new regulations and laws. It has no responsibility over other Departments.
  My right hon. Friend the Minister with responsibility for the disabled is listening to the debate. I am glad to see him here. There is no official link—and he would be the first to accept this—between his Department and that of my hon. Friend the Minister with responsibility for small business. What can we do about that? My proposal may appeal to the Opposition because it was made originally by the Wilson committee. It is a sensible proposal. We should establish a modest structure called the English Development Agency for small business. It should not be included in the Department of Industry, but should be in the Cabinet Office. A Minister of State would head that agency—I hope that it would be my hon. Friend, who deserves promotion. He would be able to go direct to my right hon. Friend the Prime Minister and say that other Departments were damaging the small business sector and that they must stop doing so. That happens in Washington. Vernon Weaver, the director of small business administration, has direct access to the President if he believes that action being taken in other areas may damage small business. If the Minister with responsibility for small business is to be really effective he must have direct access to my right hon. Friend the Prime Minister.
  Under the Minister would come the small firms department—currently included in the Department of Industry. That should be included in the Cabinet Office. Directly under that department would come the really effective organisation—the Development Commission, which would continue to look after COSIRA, but not within the ambit of the Department of the Environment. That is an unsatisfactory and illogical place for COSIRA. I would place the Development Commission and COSIRA under the direction of the Minister, within the Cabinet Office. Alongside COSIRA I would establish the English development agency for small business.
  There is an argument for a third office—the office of advocacy—which would do nothing other than comb every new and past regulation to judge its effect on
  1576
  small business. The English development agency would look after such matters as the inner urban decline, the small firms advisory service, and the working together of the public and private sectors to help small business generally.
  In the few minutes available to me I have tried to put forward my proposals for an effective method of giving small business a positive discrimination at the heart of the Whitehall bureaucracy which parties of both political persuasions have built up, for good or ill, over the past few years. That would provide small business with a better opportunity to achieve what my hon. Friend the Minister wants it to achieve—and which it has started to achieve—namely, to cut away the shackles of restraint that make it difficult for small firms to start operations and for existing firms to expand. We all want to achieve that.
  6.24 pm
  Mr. J. W. Rooker (): I intervene briefly, out of necessity, to put some points on behalf of the Opposition. They are rather narrow points about the recent consultation paper on the change in sickness benefits, to which the Minister alluded in his speech. The Liberal Party spokesman, the hon. Member for Isle of Wight (Mr. Ross) intimated that he would have accepted our amendment, but Mr. Speaker, in his wisdom, did not select it.
  The Minister said that he was surprised that our amendment called for the withdrawal of the Green Paper because it is a consultation paper. We know that it is a consultation paper, but, quite frankly, we are opposed to the change, root and branch. Perhaps the Minister would note that point for the future. We do not wish to consult about a change such as that proposed in the Green Paper. It undermines the national insurance principle and attacks the benefit entitlements of the sick.
  The July Journal of Social Welfare Law states:
  "These proposals will implement further structural discrimination against sick and disabled people."
  The proposals also invade privacy in doctor-patient relationships. The British Medical Association will tell the Government its views about that in strong terms.

  1577
  We are concerned with the effect of the proposals on small business. They will be highly damaging to that sector. I would be the last to say that the Government have not considered the problem of small firms in respect of the change in sickness benefits. They have clearly done so, and that is spelt out in paragraphs 32 to 34 of the Green Paper. Paragraph 32 states:
  "The Government's policy is to encourage small firms".
  It points out the infrequency of sickness pay schemes in small firms. It points out also that if there are only a few people on the staff it needs only one or two to be away from work and not only must the sickness benefit be paid but wages for the replacement temporary staff that are necessary because, without them, the business cannot function.
  The Government have other problems in mind. For example, if an employee suffers a long spell of sickness at the end and beginning of a tax year, that could be highly damaging to a small firm. The Government are aware of the problems faced by small business when trying to impose a burden on employers to pay the first eight weeks of sickness benefit.
  Paragraph 33 dismisses those arguments. Far from consultation, it appears firmly to close the door on any gateway for small firms to avoid being penalised by the legislation. Paragraphs 32 and 33 show that there is not an open mind on the part of the Government. They make the point that there is no obvious line to draw between small firms and others in the number of employees. Paragraph 33 states:
  "Any definition would be arbitrary and would create inequity between those just within and just outside the definition."
  It goes on to argue:
  "Many small firms are in industries, such as construction, where the work force is highly mobile."
  That is true, but they do not comprise the whole of the small firms sector. The Government also claim that it would not be possible to monitor small firms.
  Our point is that none of those considerations applies to other changes that have been made in respect of small firms—some of which the Minister mentioned. The argument about where the line is drawn on numbers of employees did not
  1578
  figure when the Government introduced a limit of 20 when they changed the rules about unfair dismissal. They did not argue about firms employing 18, 21 or 22—they drew the line at 20 and stuck to it. Likewise, the argument did not apply when they set the limit of employees at five when they changed the rules about maternity leave. The Government cannot claim that there is no possibility of drawing a line on the number of employees in small firms so that they will not be discriminated against by legislation passed by the House.
  When talking about equity and monitoring, there do not appear to be any problems when removing the rights of workers. That is all that the Government have done in their changes for small firms. It is not the same position for the sickness benefit scheme. The argument about not finding a dividing line does not hold water. The Government have closed off that possibility in paragraph 33.
  More frightening, almost Orwellian, is that the Government claim that they have saved 1 million forms from being sent to small firms. They say that they do not want to impose burdens on small firms. I must put on record the final two sentences of paragraph 33. The Government say:
  "And finally it must be recognised that any system of claiming reimbursement in respect of expenditure on individual employees, however streamlined it might be, would inevitably mean an increase in paperwork. This would fall, if small firms were involved, on just those employers who are least well equipped to cope with it and whom the Government are trying to relieve of such burdens."
  The Government are saying "We put the burden on you; we find a way of relieving the burden to get some of the money back; but you will have to fill in some paperwork. But we are also committed to reducing the paperwork burden on small firms, and therefore, in line with our policy, we cannot proceed". It is Catch-22. It is ridiculous for the Government to have put that statement in the Green Paper. That leads small firms to believe that there is no hope of changing the Government's mind about consultation.
  There will be other problems over the changes in sickness benefits as they affect small firms. The trade unions that are organised in small firms will undoubtedly

  1579
  press for higher benefits. When the earnings-related supplements are abolished in 1982, that will have a catastrophic effect on small firms, as opposed to larger firms, because there will be an attempt to secure from the employer the benefits that have been taken away under the national insurance system.
  There is another factor about which we complain, and we take this early opportunity to put it on record. In the Green Paper it is stated that employers will be relieved partly of the national insurance contribution—½ per cent.—because of what they will be doing for the Government. There is no mention of any reduction in national insurance contributions by employees, yet their benefit will be removed following a payment to the national insurance fund. Therefore, employees will again put pressure on small firms. That is where it will be felt, and more of them will go under.
  The Minister mentioned the number of small firms' organisations with which he was in contact. One of those is the National Federation of Self Employed and Small Businesses Ltd. I want to quote briefly from the letter that I received from the West Midlands regional chairman, Dr. Juby, whose letter has been with the Minister of State since 9 July. In respect of the Green Paper he said:
  "Federation members in your constituency (and indeed throughout the country) are becoming increasingly disturbed by the implications contained in the Government's Green Paper entitled "Income During Initial Sickness—A New Strategy." We see it not only as being potentially disastrous to employer/employee relations and a means of taxing yet again the self-employed and small businesses of this country but it also demonstrates quite clearly"—
  I am not quoting Labour voters—
  "the total lack of understanding of the problems that face small business men and self-employed people today!"
  That is what spokesmen of the self-employed and small business men are saying about proposals put forward by the present Government.
  I wish to make one last point in respect of the Green Paper. It ought to be taken on board by Conservative Members who complained during the years when my party was in power about the growth of bureaucracy. The only way in which one can complain about the growth of public bureaucracy is by being able to know its
  1580
  size. When it is in the public sector, Members of Parliament can table questions and make points in debate, and therefore they can challenge the arguments because they have the facts.
  In this Green Paper the Government are moving part of the public bureaucracy, namely, that in respect of payments of sickness benefit, to the private sector—private bureaucracy, in other words—where there will be no possibility of measuring the scale. The problem will not go away. The benefits will still have to be paid. There will still be problems of the number of days, waiting days, and so on. It is no good the Minister for Social Security shaking his head. He will have to take cognisance of this in the consultations that he is undertaking.
  I quote again from the Journal of Social Welfare Law.
  The Minister for Social Security (Mr. Reg Prentice)rose—
  Mr. Rooker: Perhaps I might just make this point, because I want to give way to the Liberal spokesman. It is the Liberal Party's debate, and a Liberal Member will be winding up the debate. I want to make this last quotation:
  "By spreading the administrative burden amongst numerous employers it becomes impossible to see or discover the size of the private sector bureaucracy."
  There is no way out of that.
  The Minister for Social Security may want to take up some time, but I do not see why I should give way to him. This is a consultation document, and we shall hear a winding-up speech from the Minister responsible for small firms. Let him answer the debate. I thank the Minister for Social Security for sitting in on the debate, but I do not think that he ought to take up time. Ministers have a collective responsibility. That is what it is all about. That is what we were always told about.
  The House will not be in a position to know the scale of private bureaucracy when the Government hive off an important part of the public sector.
  The Minister responsible for small firms has received many congratulations from his hon. Friends on what a good job he has done for small firms. From the speech of the hon. Member for Surrey, Northwest (Mr. Grylls), I was astonished to

  1581
  learn that the small firms unit in the Department does not report to the Minister responsible for small firms. That explains something that happened to me and to some of my constituents a few months ago. I do not intend to use my position at this Dispatch Box to lay out a constituency case, other than to say that the Minister knows that on 26 March I wrote to him about a serious case in my constituency of a small firm that could not get any electricity supply to a new factory unit. I received a letter—[Interruption.]
  Does the Minister of State, Department of Industry want to intervene?
  The Minister of State, Department of Industry (Mr. Adam Butler)indicated dissent.
  Mr. Rooker: The Minister of State seemed to intervene from a sedentary position. If he has anything to say, he had better get up and say it. [HON. MEMBERS: "Get on with it."] No. If the Minister of State, Department of Industry wants to intervene on what has just been said from a sedentary position, let him do it. He obviously does not want to intervene.
  The Under-Secretary knows that on 26 March I wrote to him about the serious problem regarding electricity supply. It took his office until 22 April to reply, in a lettter from him, and to say "Sorry, pass the problem over to the Department of Energy". Of course, I wrote back saying "You are the Minister for small firms. That is why I wrote to you in the first place". By the time that the Department of Energy wrote to me, six weeks later, my constituents said "Sorry, we cannot afford to go to that unit".
  The Minister apologised. There had been a slip-up in the office. He wrote and told me that. I can understand why there was a slip-up in the office if the Government have a Minister responsible for small firms, but the small firms unit of the Department of Industry does not report to the Minister. It is no wonder I and other hon. Members have problems in pursing the difficulties of small businesses, irrespective of the arguments that I have put forward on sickness benefits.
  1582
  I should have thought that the Secretary of State would take on board that point. Clearly, he is too busy to deal with all the minutiae of problems. That is why I did not bother him about it, but I do not see why my constituents should have to suffer in the way that they did if the departmental structure laid down by civil servants is incorrect for the workings of small business. I hope that the Minister will take that point on board, as I hope that the Government will take on board the rest of my points about their proposals to abolish another vital part of the national insurance fund.
  6.37 pm
  Mr. Richard Wainwright (): On parliamentary occasions such as debates on the Queen's Speech and the Budget, usually a special cupboard is opened, and, after a great deal of dusting down, a set of pious assurances and generalised promises are brought forward by some superior Government butler in the form of the treatment of small businesses. Eventually, this teapot is put back in the cupboard until the next great occasion. The Libera] Party has now sent for the whole tea-set off season, so to speak. It is not a teapot day. Unfortunately, all that has happened is that a very hardworking and diligent Government footman has had some difficulty in bringing out a lot of very broken and dilapidated china. Furthermore, I gather that the very same footman has the difficult task of taking it all back to the cupboard in a few minutes' time.
  That is not what the Liberal Party wanted when it put down this motion, hoping that it was a service to the whole House. The essence of the many problems of new and small enterprises of all kinds, whether companies or cooperatives, or whether sole traders or the self-employed, derives from major policies of the Government, and is not confined to these minor matters of which the junior Minister spoke.
  It seems that the Government—or at any rate the Department of Industry—are unable in this sphere to distinguish between a small irritant, on the one hand, and a poison. We had a long speech about the removal of certain irritants, based on the assumption that almost all small businesses are still making profits which cause them liability for tax. In

  1583
  our view—and this is why, out of many subjects which tempted us for the rare occasion of a Liberal Supply day, we chose this topic—it is the Government's central policies that are destroying small enterprise.
  I am sure that the whole House is obliged to the hon. Member for Surrey, North-West (Mr. Grylls), speaking from an eminent position in his own party, for raising the central issue of the constitutional position with regard to enterprises that need special protection because they are not of a size that enables them to employ public relations lobbyists in this Palace, and so on. We heartily endorse most of the proposals that the hon. Gentleman made. I hope that he will forgive me if I say that we preceded him, because in July 1977, when the then Government were somewhat dependent upon Liberal support, we made a specific proposal to the then Prime Minister that the Chancellor of the Duchy of the time should be appointed, as a senior Cabinet Minister, with a completely roving commission throughout all Departments, for the protection and encouragement of new and small enterprises.
  The Prime Minister of the day accepted that suggestion with some alacrity. It worked so successfully in collaboration with the Department of Industry—whose contribution in the shape of the hon. Member for Keighley (Mr. Cryer) I do not want to decry—that in April 1978 the leader of the Liberal Party wrote to the Prime Minister asking that this position be fully regularised and that it should become, so far as any Prime Minister can do it, a feature of the Cabinet. We asked that a senior Cabinet Minister, with a special title for the job and without responsibility for any other major Department, should be given the job of looking after the interests of new and small enterprises of all kinds and the needs of the self-employed.
  Unfortunately, the Prime Minister at the time did not see his way to accepting that. Therefore, the way was open for the present Prime Minister to downgrade the whole proceeding, with the disastrous results that small businesses are now experiencing. I need scarcely repeat that it is not the arrival of buff envelopes, or the possibility of some minor bureaucratic fracas, that is destroying small
  1584
  businesses. It is the monstrous interest rates which were denounced by the right hon. and learned Member for Hexham (Mr. Rippon) as usurious only the other day, the chronic over-valuation of sterling, which makes it almost impossible to start a new export business at present and the chaos of pay bargaining, led by the Government's own cowboys, that is doing that. They have created a situation that is the despair of anyone wanting to build up a small labour force, yet on none of those issues have we so far heard a word today in respect of the Government's views.
  The other feature that has contributed to the depression among small businesses has been the ample demonstration over the past 15 months that it is impossible to combine tax incentives with reliance upon rigid monetary control as the total arbiter of Government policy. Therefore, the dual promise which the Prime Minister held out at the election, of tax incentives and reduced inflation, has come to pieces in her hands, and small businesses are suffering accordingly.
  As the hon. Member for Upminster (Mr. Loveridge) mentioned, there are also irritants of a major kind with which the Minister has not so far dealt. For instance, there is the national insurance surcharge, which means that before a small business man ever starts work, and as soon as he has signed a contract with his first employees, he is landed with the horrific poll tax of national insurance—20–5 per cent. of the employee's wage altogether—which most jungle chieftains would hesitate to impose upon members of their tribe.
  The hon. Gentleman also pointed out that the Government have entirely reneged on their promise to reform capita] taxation. Therefore, those small businessess that are still managing to achieve something like success are scared stiff that the rewards will all be creamed off in the shape of an extremely unfair tax on inflation, known as capital gains tax.
  Nothing has been said about Government purchasing. Surely we could be told that the Government are genuinely trying to get buying Departments to have regard for the smaller enterprises, even if only by insisting that the larger suppliers do a great deal of sub-contracting

  1585
  in the course of fulfilling Government requirements. Surely we should hear something about that from the Minister.
  Mr. Michael Shersby ()rose—
  Mr. Wainwright: I am sorry, but I am pressed for time. I hope that the hon. Gentleman will forgive me if I do not give way.
  On VAT, there was a most extraordinary suggestion from the Minister that this country is unique in the threshold that it applies for VAT. Is the Minister really suggesting that throughout the length of Italy small traders account meticulously for the VAT on their sales, or is he suggesting that anywhere, except perhaps in the prim Duchy of Luxembourg, VAT is paid on the nail and in the right amounts by small traders? That is not the impression among European tax experts. To rely upon the letter of the statute in a matter such as that is wholly unreal.
  There are other matters that weigh upon small traders, especially the iniquities of the rating system. It is within the recollection of hon. Members that when the present Prime Minister was in Opposition she promised that her party would abolish the rating system. That prospect was a shot in the arm for many small businessess. Instead, rates are soaring to unimagined heights, and a desperate Secretary of State for the Environment is now trying to chase after them when they already have a big start, are wearing roller skates and are likely to get away.
  In the "no confidence" debate yesterday, the Prime Minister received a great ovation from Conservative Members for suggesting that she was about to set on foot seven small enterprise zones in a mere handful of towns in this country. It is the Liberal view that the people of Britain want the whole of these islands to be one enterprise zone. It is because the Government through their major policies—not simply the policies of a small section of the Department of Industry—are crushing enterprise throughout the length and breadth of the country that we condemn them as indifferent and will vote accordingly tonight.
  6.47 pm
  Mr. David Mitchell: We have had an interesting debate covering a wide range
  1586
  of subjects. [HON. MEMBERS: "With the leave of the House".] By leave of the House, I should like to reply to a number of points that have been particularly directed towards me.
  The hon. Member for Truro (Mr. Penhaligon) started by contrasting the Conservative Party's election promises with performance. I hope that he will forgive me if I point out that we have not been in office for the lifetime of a parliament, and he can be assured that well before then we shall have fulfilled all of the promises relating specifically to small businesses that we made in our election manifesto.
  I was fascinated—I am sure that the House was as well—by an important and beautifully illustrative remark that he made. The hon. Member referred to the fact that when he reached retiring age the average wage would be £45,000 a week if we continued as we are. Does not that underline how right it is for the Government to give absolute priority to dealing with the causes of inflation?
  The hon. Member also asked about the pension work of sub-post offices. I can assure the hon. Gentleman that no pensioners will be forced to draw less often than weekly against their wishes. Therefore, there is an absolutely clear assurance on that. As to the various alternatives, such as electricity accounts and so on, being paid through sub-post offices, we are certainly studying what the options are.
  The hon. Member also referred to cutbacks in relation to the insulation grant. I think that he will welcome, as I do, the new £4 million scheme that will come into operation in August. It will provide a 90 per cent. grant towards insulation improvements in the homes of old-age pensioners. I am sure that he will welcome that, not only because it will benefit pensioners but because it will provide extra work to those in the insulation and building industries.
  Mr. Penhaligon: Does the Minister still intend to introduce a system that will make it far easier for those in receipt of a pension to have it paid directly into a bank account? That is the crunch of the matter. If that is made easier, one-third of the pensioners will probably opt for that system.
  Mr. Mitchell: This is a complex matter and it is still under consideration. I cannot give the hon. Gentleman an answer today.
  My hon. Friend the Member for Up-minster (Mr. Loveridge), who is also chairman of the smaller businesses committee, raised several important points. He drew attention to an item that time did not allow me to deal with earlier, namely, the assistance that the Government have given as regards stock relief. The Government have arranged for the first two years to be written off. In addition, the Government have arranged for the entire liability to be written off six years in arrears. My hon. Friend also raised an important point about the Green Paper, which my right hon. Friend the Secretary of State for Trade introduced, dealing with firms buying their own shares. He has put his finger on an important point. It is part of reality that empire builders in the world of business do not like outsiders muscling in on a share of that empire. This is one way in which temporary outside equity investment can be made. Those who own the business will know that they can buy them out later. I am sure that my hon. Friend was right to draw attention to that.
  Mr. Clinton Davis (): The Minister referred to some of the provisions proposed by the Department of Trade. How can it be in the interest of the small business man to abolish the registry of business names, upon which small creditors substantially rely?
  Mr. Mitchell: Unfortunately, time is short and it is difficult to deal with that point in addition to the others that have been raised. I should be happy to discuss this matter with the hon. Gentleman, although it is primarily a subject for the Department of Trade. The existing register is very patchy in its impact. If I were to trade under my own name I would not appear in the register. Nobody would have any means of tracing me. If I were to disappear tomorrow after I had been trading in one town and living in another, nobody would know where to find me. They would have no means of tracing me. The register is very partial. I urge the hon. Gentleman not to go too far in his assumption that it plays
  1588
  an important part in the operation of credit security.
  My hon. Friend the Member for Up-minster also drew attention to the importance of the middle-sized firm. He stressed some rather frightening figures. He pointed out that only 3,000 manufacturing firms employed between 100 and 200 employees. There are two reasons for that. First, a decade ago not enough small businesses started. Secondly, capital taxation means that many business men in their fifties decide that they cannot pass the business on to the next generation. Such business men ask themselves why the next generation should have the business when they are only going to be forced by taxation to sell it. They realise that they may as well sell the business and live on the proceeds in their old age. Because of the impact of capital taxation, far too many industries have become part of the ever-increasing concentration of British industry. My colleagues and I welcome the review carried out into capital taxation by the Treasury.
  The hon. Member for Keighley (Mr. Cryer) mentioned the work done by the noble Lord Lever and the previous Labour Government. I should like to pay tribute to Lord Lever and to the work that he did. The hon. Gentleman also asked for sanity and sound economic principles. I found it slightly uproarious that such remarks should come from him. He also referred to the ferrous foundry scheme. That industry has sought grants to modernise plant and to increase production and productivity. It now seeks grants to rationalise the industry and to close down some of the units in production. Whether that is sanity and sound economic principles I do not know. I would take a certain amount of convincing. The hon. Gentleman then said that if more workers have more money in their pockets, they will want to spend it on the products of small businesses. Those workers will want to spend their money in a way that will give them the best value for money. The customer is king and he is the deciding factor. We must create the circumstances in which small businesses can provide the customer with the best value for money. One does not do that by artificially distorting the pattern of demand.

  1589
  My hon. Friend the Member for Surrey, North-West (Mr. Grylls) spoke about the need to have a Cabinet Minister responsible for small businesses. We already have a Cabinet Minister responsible for small businesses and he is sitting on the Front Bench. I refer to my right hon. Friend the Secretary of State for Industry. I do the donkey work and I report to him direct on matters of small business policy. My hon. Friend pointed out that 14,000 civil servants are employed to look after small businesses in the agriculture industry. Indeed, that industry is dominated by small businesses. I hope that my hon. Friend did not seek to suggest that we should set up another empire of 14,000 civil servants to look after smaller businesses. That would conflict with his other objective of bringing about economies in Government expenditure.
  The hon. Member for Birmingham, Perry Barr (Mr. Rooker) was concerned about the proposals for sickness benefit. He will know that the Government have issued a consultation paper. We shall bear in mind the hon. Gentleman's views, and the views of many of the organisations which represent small firms and that have written either to me or to the Secretary of State for Social Services. My right hon. Friend has sat here throughout the debate and the House will know that he has listened carefully to all the comments that have been made on this subject.
  The Government have two significant goals, which they hope to achieve. First, we wish to save 5,000 civil servants, and the cost that that involves. Secondly, the Government seek to ensure that sickness benefit is paid through PAYE, as we wish to make certain that people are not better off sick than at work. The consultation document seeks to discover the most effective way of achieving that. I hope that we shall not in some way lose
  sight of the substantial benefit to be gained from achieving that.
  The hon. Member for Colne Valley (Mr. Wainwright) raised some important points and I am glad that he drew attention to them. Several of his points were raised by other hon. Members and I have tried to cover them. He also harked back to the suggestion that VAT exemption should be lifted to £30,000 or £40,000. It would appear that my earlier remarks did not go home. The Labour Government made an agreement in Brussels to the effect that the exemption would be no higher than £5,000, indexed for inflation. We cannot go back on such an agreement unless we secure the consent of the other Governments involved.
  Mr. Richard Wainwright rose—
  Mr. Mitchell: Unfortunately, the clock is against me and I shall not give way. The small business community wants to see a return to sound money, and that is the Government's priority.
  The business community wants lower interest rates. They will come as our attack on the causes of inflation succeeds. It seeks fewer hurdles. Of all the things that smaller businesses need, the most precious ingredient is motivation. There is a need for lower taxes so that the personal motivation of the individual may be harnessed with the national interest. That is the most powerful combination, and it is featured in our policies for small businesses.
  I ask the House to support the Government's amendment and to reject the motion which suggests that we are indifferent to a community for which we have great concern.
  Question put, That the original words stand part of the Question:—
  The House Divided: Ayes 245, Noes 310.

  Division No. 437]

  AYES

  [7 pm

  Abse, Leo

  Barnett, Rt Hon Joel (Heywood)

  Brown, Ronald W. (Hackney S)

  Adams, Allen

  Benn, Rt Hon Anthony Wedgwood

  Brown, Ron (Edinburgh, Leith)

  Allaun, Frank

  Bennett, Andrew (Stockport N)

  Buchan, Norman

  Alton, David

  Bidwell, Sydney

  Callaghan, Rt Hon J. (Cardiff SE)

  Anderson, Donald

  Booth, Rt Hon Albert

  Callaghan, Jim (Middleton & P)

  Archer, Rt Hon Peter

  Boothroyd, Miss Betty

  Campbell-Savours, Dale

  Armstrong, Rt Hon Ernest

  Bottomley, Rt Hon Arthur (M'brough)

  Cant, R. B.

  Ashley, Rt Hon Jack

  Bradley, Tom

  Carmichael, Nell

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

  Bray, Dr Jeremy

  Carter-Jones, Lewis

  Bagier, Gordon A. T.

  Brown, Hugh D. (Provan)

  Cartwright, John

  Barnett, Guy (Greenwich)

  Brown, Robert C. (Newcastle W)

  Clark, Dr. David (South Shields)

  Cocks, Rt Hon Michael (Bristol S)

  Hooley, Frank

  Powell, Raymond (Ogmore)

  Cohen, Stanley

  Horam, John

  Prescott, John

  Concannon, Rt Hon J. D.

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

  Price, Christopher (Lewisham West)

  Cook, Robin F.

  Huckfield, Les

  Race, Reg

  Cox, Tom (Wandsworth, Tooting)

  Hudson Davies, Ednyfed (Caerphilly)

  Radice, Giles

  Craigen, J. M. (Glasgow, Maryhill)

  Hughes, Mark (Durham)

  Rees, Rt Hon Merlyn (Leeds South)

  Crowther, J. S.

  Hughes, Robert (Aberdeen North)

  Richardson, Jo

  Cryer, Bob

  Hughes, Roy (Newport)

  Roberts, Albert (Normanton)

  Cunliffe, Lawrence

  Janner, Hon Greville

  Roberts, Allan (Bootle)

  Cunningham, George (Islington S)

  Jay, Rt Hon Douglas

  Roberts, Gwilym (Cannock)

  Dalyell, Tarn

  John, Brynmor

  Robinson, Geoffrey (Coventry NW)

  Davidson, Arthur

  Johnson, James (Hull West)

  Rodgers, Rt Hon William

  Davies, Rt Hon Denzil (Llanelli)

  Johnson, Walter (Derby South)

  Rooker, J. W.

  Davies, Ifor (Gower)

  Johnston, Russell (Inverness)

  Roper, John

  Davis, Clinton (Hackney Central)

  Jones, Barry (East Flint)

  Ross, Stephen (Isle of Wight)

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

  Jones, Dan (Burnley)

  Rowlands, Ted

  Deakins, Eric

  Kaufman, Rt Hon Gerald

  Ryman, John

  Dean, Joseph (Leeds West)

  Kerr, Russell

  Sandelson, Neville

  Dempsey, James

  Kilroy-Silk, Robert

  Sever, John

  Dewar, Donald

  Kinnock, Neil

  Sheerman, Barry

  Dixon, Donald

  Lambie, David

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

  Dormand, Jack

  Lamborn, Harry

  Shore, Rt Hon Peter (Step and Pop)

  Douglas, Dick

  Leadbitter, Ted

  Short, Mrs René e

  Douglas-Mann, Bruce

  Leighton, Ronald

  Silkin, Rt Hon John (Deptford)

  Dubs, Alfred

  Lestor, Miss Joan (Eton & Slough)

  Silkin, Rt Hon S. C. (Dulwich)

  Duffy, A. E. P.

  Lewis, Arthur (Newham North West)

  Silverman, Julius

  Dunn, James A. (Liverpool, Kirkdale)

  Lofthouse, Geoffrey

  Skinner, Dennis

  Dunnett, Jack

  Lyons, Edward (Bradford West)

  Smith, Cyril (Rochdale)

  Dunwoody, Mrs. Gwyneth

  Mabon, Rt Hon Dr J. Dickson

  Smith, Rt Hon J. (North Lanarkshire)

  Eadie, Alex

  McDonald, Dr Oonagh

  Soley, Clive

  Eastham, Ken

  McElhone, Frank

  Spearing, Nigel

  Edwards, Robert (Wolv SE)

  McKay, Allen (Penistone)

  Stallard, A. W.

  Ellis, Raymond (NE Derbyshire)

  McKelvey, William

  Steel, Rt Hon David

  Ellis, Tom (Wrexham)

  MacKenzle, Rt Hon Gregor

  Stewart, Rt Hon Donald (W Isles)

  English, Michael

  Maclennan, Robert

  Stoddard, David

  Ennals, Rt Hon David

  McNally, Thomas

  Stott, Roger

  Evans, Ioan (Aberdare)

  McNamara, Kevin

  Straw, Jack

  Evans, John (Newton)

  McQuade, John

  Summerskill, Hon Dr Shirley

  Faulds, Andrew

  McWilliam, John

  Taylor, Mrs Ann (Bolton West)

  Field, Frank

  Magee, Bryan

  Thomas, Dafydd (Merioneth)

  Fitch, Alan

  Marks, Kenneth

  Thomas, Jeffrey (Abertillery)

  Fitt, Gerard

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

  Thomas, Mike (Newcastle East)

  Flannery, Martin

  Marshall, Dr Edmund (Goole)

  Thomas, Dr Roger (Carmarthen)

  Fletcher, L. R. (Ilkeston)

  Marshall, Jim (Leicester south)

  Thorne, Stan (Preston South)

  Fletcher, Ted (Darlington)

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

  Tilley, John

  Fool, Rt Hon Michael

  Mason, Rt Hon Roy

  Tinn, James

  Ford, Ben

  Maynard, Miss Joan

  Torney, Tom

  Forrester, John

  Meacher, Michael

  Urwin, Rt Hon Tom

  Foster, Derek

  Mellish, Rt Hon Robert

  Varley, Rt Hon Eric G.

  Foulkes, George

  Mikardo, Ian

  Wainwright, Edwin (Dearne Valley)

  Fraser, John (Lambeth, Norwood)

  Millan, Rt Hon Bruce

  Wainwright, Richard (Colne Valley)

  Garrett, John (Norwich S)

  Miller, Dr M. S. (East Kilbride)

  Walker, Rt Hon Harold (Doncaster)

  Garrett, W. E. (Wallsend)

  Mitchell, Austin (Grimsby)

  Weetch, Ken

  George, Bruce

  Mitchell, R. C. (Soton, Itchen)

  Welsh, Michael

  Gilbert, Rt Hon Dr John

  Morris, Rt Hon Alfred (Wythenshawe)

  White, Frank R. (Bury & Radcliffe)

  Ginsburg, David

  Morris, Rt Hon Charles (Openshaw)

  White, James (Glasgow, Pollok)

  Golding, John

  Morton, George

  Whitehead, Phillip

  Gourlay, Harry

  Moyle, Rt Hon Roland

  Whitlock, William

  Graham, Ted

  Newens, Stanley

  Willey, Rt Hon Frederick

  Grant, George (Morpeth)

  Oakes, Rt Hon. Gordon

  Williams, Rt Hon Alan (Swansea W)

  Grimond, Rt Hon J.

  Ogden, Eric

  Williams, Sir Thomas (Warringon)

  Hamilton, James (Bothwell)

  O'Halloran, Michael

  Wilson, William (Coventry SE)

  Hamilton. W. W. (Central Fife)

  Orme, Rt Hon Stanley

  Winnick, David

  Hardy, Peter

  Owen, Rt Hon Dr David

  Woodall, Alec

  Harrison, Rt Hon Walter

  Paisley, Rev Ian

  Woolmer, Kenneth

  Hattersley, Rt Hon Roy

  Palmer, Arthur

  Wriggiesworth, Ian

  Haynes, Frank

  Park, George

  Wright, Sheila

  Healey, Rt Hon Denis

  Parker, John

  Young, David (Bolton East)

  Heffer, Eric S.

  Parry, Robert

  Holland, Stuart (L'beth, Vauxhall)

  Pavitt, Laurie

  TELLERS FOR THE AYES:

  Home Robertson, John

  Pendry, Tom

  Mr. A. J. Beith and

  Homewood, William

  Penhaligon, David

  Mr. Clement Freud.

  NOES

  Adley, Robert

  Baker, Kenneth (St. Marylebone)

  Biffen, Rt Hon John

  Aitken, Jonathan

  Baker, Nicholas (North Dorset)

  Biggs-Davison, John

  Alexander, Richard

  Banks, Robert

  Blackburn, John

  Amery, Rt Hon Julian

  Beaumont-Dark, Anthony

  Body, Richard

  Ancram, Michael

  Bendall, Vivian

  Bonsor, Sir Nicholas

  Arnold, Tom

  Bennett, Sir Frederic (Torbay)

  Boscawen, Hon Robert

  Atkins, Rt Hon H. (Spelthorne)

  Benyon, Thomas (Abingdon)

  Bottomley, Peter (Woolwich West)

  Atkins, Robert (Preston North)

  Benyon, W. (Buckingham)

  Bowden, Andrew

  Atkinson, David (B'mouth, East)

  Bevan, David Gilroy

  Boyson, Dr Rhodes

  Braine, Sir Bernard

  Grist, Ian

  Morrison, Hon Charles (Devizes)

  Bright, Graham

  Grylis, Michael

  Morrison, Hon Peter (City of Chester)

  Brinton, Tim

  Gummer, John Selwyn

  Mudd, David

  Brittan, Leon

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

  Murphy, Christopher

  Brocklebank-Fowler, Christopher

  Hamilton, Michael (Salisbury)

  Myles, David

  Brooke, Hon Peter

  Hampson, Dr Keith

  Neale, Gerrard

  Brotherton, Michael

  Hannam, John

  Needham, Richard

  Brown, Michael (Brigg & Sc'thorpe)

  Haselhurst, Alan

  Nelson, Anthony

  Browne, John (Winchester)

  Hastings, Stephen

  Neubert, Michael

  Bruce-Gardyne, John

  Havers, Rt Hon Sir Michael

  Newton, Tony

  Bryan, Sir Paul

  Hawkins, Paul

  Normanton, Tom

  Buchanan-Smith, Hon Mick

  Hawksley, Warren

  Nott, Rt Hon John

  Budgen, Nick

  Heddle, John

  Onslow, Cranley

  Bulmer, Esmond

  Henderson, Barry

  Oppenheim, Rt Hon Mrs Sally

  Butcher, John

  Heseltine, Rt Hon Michael

  Osborn, John

  Butler, Hon Adam

  Higgins, Rt Hon Terence L.

  Page, John (Harrow, West)

  Cadbury, Jocelyn

  Hil, James

  Page, Rt Hon Sir Graham (Crosby)

  Carlisle, John (Luton West)

  Hogg, Hon Douglas (Grantham)

  Page, Richard (SW Hertfordshire)

  Carlisle, Kenneth (Lincoln)

  Holland, Philip (Carlton)

  Parkinson, Cecil

  Carlisle, Rt Hon Mark (Runcorn)

  Hooson, Tom

  Parris, Matthew

  Chalker, Mrs. Lynda

  Hordern, Peter

  Patten, Christopher (Bath)

  Channon, Paul

  Howell, Rt Hon David (Guildford)

  Patten, John (Oxford)

  Chapman, Sydney

  Howell, Ralph (North Norfolk)

  Pattie, Geoffrey

  Churchill, W. S.

  Hunt, David (Wirral)

  Pawsey, James

  Clark, Hon Alan (Plymouth, Sutton)

  Hunt, John (Ravensbourne)

  Percival, Sir Ian

  Clark, Sir William (Croydon South)

  Hurd, Hon Douglas

  Peyton, Rt Hon John

  Clarke, Kenneth (Rushcliffe)

  Irving, Charles (Cheltenham)

  Pink, R. Bonner

  Cockeram, Eric

  Jenkin, Rt Hon Patrick

  Pollock, Alexander

  Colvin, Michael

  Jessel, Toby

  Porter, George

  Cope, John

  Johnson Smith, Geoffrey

  Prentice, Rt Hon Reg

  Cormack, Patrick

  Jopling, Rt Hon Michael

  Price, David (Eastleigh)

  Corrie, John

  Joseph, Rt Hon Sir Keith

  Prior, Rt Hon James

  Costain, A. P.

  Kaberry, Sir Donald

  Proctor, K. Harvey

  Cranborne, Viscount

  Kellett-Bowman, Mrs Elaine

  Rathbone, Tim

  Critchley, Julian

  Kershaw, Anthony

  Rees, Peter (Dover and Deal)

  Crouch, David

  King, Rt Hon Tom

  Rees-Davies, W. R.

  Dean, Paul (North Somerset)

  Kitson, Sir Timothy

  Renton, Tim

  Dickens, Geoffrey

  Knight, Mrs Jill

  Rhodes James, Robert

  Dorrell. Stephen

  Knox, David

  Ridsdale, Julian

  Douglas-Hamilton, Lord James

  Lamont, Norman

  Rifkind, Malcolm

  Dover, Denshore

  Lang, Ian

  Rippon, Rt Hon Geoffrey

  du Cann, Rt Hon Edward

  Langford-Holt, Sir John

  Roberts, Michael (Cardiff NW)

  Dunn, Robert (Dartford)

  Latham, Michael

  Roberts, Wyn (Conway)

  Durant, Tony

  Lawrence, Ivan

  Rossi, Hugh

  Dykes, Hugh

  Lawson, Nigel

  Rost, Peter

  Eden, Rt Hon Sir John

  Lee, John

  Royle, Sir Anthony

  Edwards, Rt Hon N. (Pembroke)

  Lennox-Boyd, Hon Mark

  Sainsbury, Hon Timothy

  Eggar, Timothy

  Lester, Jim (Beeston)

  St. John-Stevas, Rt Hon Norman

  Elliott, Sir William

  Lewis, Kenneth (Rutland)

  Scott, Nicholas

  Emery, Peter

  Lloyd, Ian (Havant & Waterloo)

  Shaw, Giles (Pudsey)

  Eyre, Reginald

  Lloyd, Peter (Fareham)

  Shaw, Michael (Scarborough)

  Fairbairn, Nicholas

  Loveridge, John

  Shelton, William (Streatham)

  Fairgrieve, Russell

  Luce, Richard

  Shepherd, Colin (Hereford)

  Faith, Mrs Sheila

  Lyell, Nicholas

  Shepherd, Richard (Aldridge-Br hills)

  Farr, John

  McCrindle, Robert

  Shersby, Michael

  Fell, Anthony

  Macfarlane, Neil

  Silvester, Fred

  Fenner, Mrs Peggy

  MacGregor, John

  Sims, Roger

  Finsberg. Geoffrey

  MacKay, John (Argyll)

  Skeet, T. H. H.

  Fisher, Sir Nigel

  Macmillan, Rt Hon M. (Farnham)

  Smith, Dudley (War. and Leam'ton)

  Fletcher, Alexander (Edinburgh N)

  McNair-Wilson, Michael (Newbury)

  Speed, Keith

  Fletcher-Cooke, Charles

  McNair-Wilson, Patrick (New Forest)

  Speller, Tony

  Fookes, Miss Janet

  McQuarrie, Albert

  Spence, John

  Forman, Nigel

  Madel, David

  Spicer, Jim (West Dorset)

  Fowler, Rt Hon Norman

  Major, John

  Spicer, Michael (S Worcestershire)

  Fox, Marcus

  Marland, Paul

  Sproat, lain

  Fraser, Rt Hon H. (Stafford & St)

  Marshall, Michael (Arundel)

  Squire, Robin

  Fraser, Peter (South Angus)

  Marten, Neil (Banbury)

  Stainton, Keith

  Fry, Peter

  Mates, Michael

  Stanbrook, Ivor

  Galbraith, Hon T. G. D.

  Mather, Carol

  Stanley, John

  Gardiner, George (Reigate)

  Maude, Rt Hon Angus

  Steen, Anthony

  Gardner, Edward (South Fylde)

  Mawby, Ray

  Stevens, Martin

  Garel-Jones, Tristan

  Mawhinney, Dr Brian

  Stewart, Ian (Hitchin)

  Ginsburg, David

  Maxwell-Hyslop, Robin

  Stewart, John (East Renfrewshire)

  Glyn, Dr Alan

  Mayhew, Patrick

  Stokes, John

  Goodhart, Philip

  Mellor, David

  Stradling Thomas, J.

  Goodhew, Victor

  Meyer, Sir Anthony

  Tapsell, Peter

  Goodlad. Alastair

  Mills, lain (Meriden)

  Taylor, Robert (Croydon NW)

  Gorst, John

  Mills, Peter (West Devon)

  Taylor, Teddy (Southeno East)

  Gow, Ian

  Mitchell, David (Basingstoke)

  Temple-Morris, Peter

  Grant, Anthony (Harrow C)

  Moate, Roger

  Thatcher, Rt Hon Mrs Margaret

  Gray, Hamish

  Monro, Hector

  Thomas, Rt Hon Peter (Hendon S)

  Greenway, Harry

  Montgomery, Fergus

  Thompson, Donald

  Grieve, Percy

  Moore, John

  Thomas, Neil (Ilford South)

  Griffiths, Eldon (Bury St Edmunds)

  Morgan, Geraint

  Thornton, Malcolm

  Griffiths, Peter (Portsmouth N)

  Morris, Michael (Northampton, Sth)

  Townend, John (Bridlington)

  Trippier, David

  Walters, Dennis

  Wilkinson, John

  van Straubenzee, W. R.

  Ward, John

  Williams, Delwyn (Montgomery)

  Vaughan, Dr Gerard

  Warren, Kenneth

  Winterton, Nicholas

  Viggers, Peter

  Watson, John

  Wolfson, Mark

  Waddington, David

  Weils, John (Maidstone)

  Young, Sir George (Acton)

  Wakeham, John

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

  Younger, Rt Hon George

  Waldegrave, Hon William

  Wheeler, John

  Walker, Rt Hon. Peter (Worcester)

  Whitelaw, Rt Hon William

  TELLERS FOR THE NOES

  Walker, Bill (Perth & E Perthshire)

  Whitney, Raymond

  Mr. Spencer Le Marchant an

  Walker-Smith, Rt Hon Sir Derek

  Wickenden, Keith

  Mr. Anthony Berry.

  Waller, Gary

  Wiggin, Jerry

  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 be agreed to, pursuant to Standing Order No. 18 (Business of Supply).
  Resolved,
  That this House supports the Government's policies to increase incentives to entrepreneurs whilst reducing obstacles which discourage the start-up and growth of small businesses in the United Kingdom.

  TEXTILE AND CLOTHING INDUSTRIES
  Mr. Deputy Speaker (Mr. Richard Crawshaw): Mr. Speaker has selected the amendment in the name of the Prime Minister.
  7.13 pm
  Mr. John Smith (): I beg to move,
  That this House deplores Government policies which are causing massive damage to the textile and clothing industries and leaving them exposed to unfair foreign competition.
  There can be little dispute about the crisis in the textile and clothing industries, the extent of which can be measured in many ways. Hon. Members from all parts of the country have in recent weeks been drawing the attention of the House to the crisis by pointing out bankruptcies and closures. The most telling and poignant measurement is the sharply rising level of unemployment in those industries. Over a number of decades employment in the industries has been declining, but in the late 1970s there was some stabilisation. Since April 1979 there has been a steep and vicious acceleration. Since the Government came to power about 50,000 jobs have been lost in the textile industry and 25,000 in the clothing industry.
  1596
  Those are tragic figures in that short period. They are over twice the loss for the total of the previous three years, which throws the crisis into sharp relief. In one and a little bit years, more jobs have been lost than in the previous three years. The present rate of job loss is six times the average for the preceding three years.
  Domestic demand for the products of the textile and clothing industries has sharply declined. It has dropped by at least 6 per cent. The deflationary policies of the Government and the increase in VAT are largely responsible, particularly in the clothing industry. Over the past year import penetration in footwear and clothing has sharply increased from 25 to 29 per cent., and in textiles from 31 to 33 per cent. Those figures are slightly out of date, and I suspect that the current figures are worse.
  Those industries have always had a good export record, particularly at the high-fashion end. From time to time the Government comfort themselves with the thought that export figures are holding up better than might be expected, but that is an illusion. The present figures relate to past orders and not to current or future orders. When the orders work their way through the system we shall see a sharp turndown.
  I doubt whether our textile and clothing industries have ever been in a worse position. There does not even appear to be a glimmer of light at the end of the tunnel. The predicament can largely be laid at the door of the Government. In their somewhat defensive amendment they refer to what they call their "broad economic policies". Those policies are the basic difficulty. The lethal combination of high interest rates and an overvalued pound, leaving aside cuts in our standard of living and doubling VAT, have caused havoc throughout British industry. Nowhere is that felt more deeply, swiftly and, I suspect, permanently, than in the textile and clothing industries.

  1597
  For much of the 1970s, investment in those industries was high. That is drying up, and confidence is being destroyed. Export effort is being crippled by the savage loss of competitiveness caused by the rise in the exchange rate. That exchange rate also acts as a magnet to draw in imports on an ever-increasing scale. British industry generally is suffering from the effects of the Government's policies. Apart from the general engineering industry, the textile industry is bearing the brunt of those policies. Those broad economic policies are central to our indictment of the Government.
  In addition, we have to add to the problems of the textile and clothing industries the dilution of the regional development policy, and the schemes for employment assistance and financial assistance to investment that were undertaken by the previous Government but are largely disappearing under this Government. A dramatic indication of the plight of those industries, particularly in regard to employment, is given by the figures for the temporary short-time working compensation scheme.
  The Employment Gazette contains figures for May which show that, of the distribution of potentially reundant jobs covered by the scheme, 32–5 per cent. are in textiles and 17 per cent. in clothing and footwear. If one adds those together, one sees that the clothing, footwear and textile industries cover 50 per cent. of all the jobs covered by the temporary short-term working compensation scheme. I hope that the Secretary of State will confirm that that scheme will continue, because it is vital to maintain such little confidence as is left in the future employment prospects of the industry.
  All those problems are bad enough for any industry, but over the years the textile and clothing industries have had to struggle to survive in the face of intense and sometimes unfair foreign competition.
  Mr. Thomas Torney (): Is my right hon. Friend aware that the level of American imports of carpets is 10 per cent. today, whereas it was only 4 per cent. a year ago? Is he also aware that in the carpet industry, which is part of the textile industry, the
  1598
  numbers employed fell from 32,000, to under 26,000 in May this year? Those numbers are now down to 25,000, a quarter of whom are on short time. This is due to the unfair subsidisation of American oil used in the manufacture of tufted carpets.
  Mr. Smith: I am grateful to my hon. Friend for drawing attention to that serious matter. A little later in my speech I shall concentrate specifically on the question of man-made fibre imports from the United States.
  We have two problems relating to imports which affect the textile industry—those that arise under the multi-fibre arrangement and those arising from the United States. It is true that the multi-fibre arrangement provides the best overall framework that can be obtained for the regulation of imports from low-cost countries. When it started in 1973 it had a number of important defects. Some of these were put right in 1976 by the previous Government, but I am under no illusions that there are still a number of defects to be put right when the Government renegotiate the arrangement.
  Some problems will be difficult to deal with—for example, those of free circulation and that of the Mediterranean associates. These problems are complicated by the attitudes that are taken in the European Community, and also by what I might describe as a certain lack of alacrity by the EEC Commission in monitoring the arrangement and seeing that the quotas are adhered to. I am not underestimating some of the difficulties that exist in this scheme. I have no doubt that other hon. Members will point out defects that affect firms in their own constituencies.
  The present MFA will have to remain in force until it is renegotiated in 1981. I hope that the House will concentrate for a moment on the importance of successful renegotiations in 1981. The Government must set clear objectives for what they hope to achieve. When they came to office they did not seem to have any clear idea about the importance of the renegotiation in 1981. In the months since they were elected we have pulled them around to a more realistic appreciation of the need for that, but that hesitation will be seen by other countries in the EEC as a lack of resolve on the

  1599
  part of the Government, let alone by those with whom we must negotiate outside. We should like the Government to commit themselves to certain objectives now, and we hope that they will campaign within and without the EEC to achieve them.
  The most important new thing that needs to be negotiated is a recession clause. With the benefit of hindsight, I think that it was a mistake not to have one in the 1976 arrangement. It was not foreseen that there would be a world recession on the scale that we see at present, and certain disastrous policies that are now afflicting the industry were not being proposed then, or even thought of. It is important that the Government should make the recession clause one of their objectives. I am being frank about the position, and I hope the Government will be equally frank.
  Mr. Cyril Smith (): It is very important that the right hon Member should make the point that even under the 1976 arrangement there is nothing to stop the Government from doing something to revise the existing quotas.
  Mr. John Smith: I believe that the whole MFA must be constantly policed and monitored by officials from the member States, including this country. It must be watched very closely because the Commission, particularly, has a habit of allowing the horse to gallop around the course long before it even thinks of slightly closing the stable door.
  Mr. Robin Maxwell-Hyslop (): Does the right hon. Gentleman agree that one of the disastrous weaknesses of the MFA is that when additional signatories come in they are given an extra quota, rather than an alloction within the existing quota? That seems to be the greatest single weakness of the arrangement.
  Mr. John Smith: That is another fair criticism of the MFA, and there are problems that will be caused by the accession of other countries to the EEC. The hon. Member's point is also particularly relevant to China. There is a possibility of a massive inflow of textiles from that country if care is not taken. A recession clause is something that should command the assent of all Members of the House, and the Government should start cam-
  1600
  paigning for it now, with the resolve of a united House of Commons behind them.
  There is one other important area that has come very much to the fore in the last 18 months—the upsurge of man-made fibres from the United States, to which my hon. Friend the Member for Bradford, South (Mr. Torney) referred. Here the Government are not faced with the complexities of the MFA, and I believe that they have been plainly incompetent in dealing with the matter. The problem arises from the unfair policies of the United States Government, who intervened to ensure lower energy prices, which were translated into lower feedstock prices for their man-made fibre producers. That is unfair trading.
  This problem was realised by the previous Government, and in April 1979 I proposed a motion to the EEC Council of Ministers—the Council dealing with foreign affairs—and it was resolved that in the event of artificial differences in the price of energy and petroleum raw materials the Community would have recourse without delay to the appropriate provisions of the GATT. There was a recognition that action needed to be taken. I am afraid that the present Government did nothing. They were hoodwinked by the EEC Commission and the United States Government into permitting long delays in the negotiations. That was, of course, in the interests of the United States exporters, who were busy cornering their share of the market while the long-delayed negotiations were going on.
  In February 1980, many months after the Government took office, they received EEC approval to impose quotas on two products. They asked for them on three products, including tufted carpets, for which they were given no quota at all, so there remains no protection against the flood of imports of tufted carpets. On nylon carpet yarn the quota for 1980 was 30 per cent. higher than the disruptive level of 1979, and for polyester filament yarn the quota allowed consolidation of the considerable increase that had taken place in 1979. That is a hopeless form of protection.
  I believe that in the course of these negotiations the Government played their cards badly and were outmanouevred by the United States. They have allowed a

  1601
  manifestly unfair state of trading to continue, and the protection offered by these quotas is simply hopeless. For all those reasons, we indict the Government.
  Mr. Jim Marshall (): Does my right hon. Friend agree that it is grossly unfair to the Third world countries, which are adversely affected by the MFA, when we take protectionist measures against them but seem to shrink away from taking measures against our more powerful trading ally, the United States?
  Mr. John Smith: There is a great deal in what my hon. Friend says, especially when we know that the EEC as a whole, under the MFA, takes a far larger share of the Third world exports than does the United States, which has a quite restrictive agreement on access of Third world goods. The problem that arises is serious. I believe that the figures for our trading relationship with the United States will show that it is deteriorating badly over the present year. This is due to the overvalued pound, and for other reasons. There will have been great penetration in this area.
  Mr. Michael Latham ()rose—
  Mr. Smith: I have given way a great deal, and I am not prepared to do so again. Many hon. Members wish to speak.
  I deal now with the defensive terms of the amendment. Hon. Members will notice that the Government give support to the multi-fibre arrangement, with the important qualification "wherever possible". That allows a considerable loophole to the Government. The amendment talks of the "existing" multi-fibre arrangement. There is not a hint of a commitment to renewing the arrangement.
  The Government refer to new restraints that are being imposed, not all to the good. To say that 32 new quotas have been approved does not tell the House very much. We want to know what quotas, at what levels, and with what effect. Over the last year there has been a considerable increase in import penetration into this country.
  1602
  At the end of the amendment, the Government refer to their broad economic policies. The truth is that these broad economic policies—high interest rates, the over-valued pound, the cuts in the British standard of living and the whole deflational impetus of the Government's policy—are creating disaster for British industry. That disaster is felt all the more keenly in the textile industry, weakened as it is by all the other factors to which I have referred. Faced with this grim situation for the industry, for its management and for the very large work force that it sustains throughout the length and breadth of these islands, it did not seem right to the Opposition to rise for the Summer Recess without drawing the attention of Parliament and the nation to the gravity of the problem. That is what we seek to do. I hope that the House will support our motion. I believe that it is sensible.
  7.32 pm
  The Secretary of State for Trade (Mr. John Nott): I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  "this House welcomes the Government's continuing commitment to support, wherever possible, the textile and clothing industries under the existing Multi-Fibre Arrangement which was both negotiated and accepted by the previous Labour Government; acknowledges that the Government has negotiated through the European Community a number of new restraint arrangements in addition to 32 new quotas on imports from other suppliers since it came into office; expresses its concern at the continuing decline over many years of textile employment; applauds the successful record of the textile and clothing industries in export markets; and believes that the long-term health of the industries can best be restored by the success of the Government's broad economic policies".
  It is a little hard to believe—I put it no higher—listening to the speech of the right hon. Member for Lanarkshire. North (Mr. Smith), that until 15 months ago he was Secretary of State for Trade in the Labour Government. During his Government's period in office, the number of people employed in the textile and clothing industries fell by 150,000. His attempts, no doubt sincere, to stem the long-term decline in textile employment signally failed. More than 700,000 jobs have been lost in the textile industry since 1950. It was the right hon. Gentleman's predecessor and the right hon. Gentleman himself who had charge, for

  1603
  the then Labour Government, of the negotiations which created the present shape and structure of our trading arrangements for textiles. We have not changed the structure of the trading arrangements for textiles. We have kept that structure in place and we have substantially increased the number of quotas and restraint arrangements that we inherited from the right hon. Gentleman and his colleagues.
  I should like to remind the House of the current international trading arrangements for textiles that we inherited from the right hon. Gentleman on 5 May 1979, the date on which he tends to imply that the problems all began. First, the basic elements of the multilateral trade negotiations were skilfully conducted and sometimes orchestrated by Mr. Edmund Dell between 1976 and 1979. The ratification of these new world trading agreements fell to us but the essential features for the maintenance and strengthening of the open trading system under the MTNs were negotiated and agreed by the Labour Government—and by the right hon. Gentleman himself. It is remarkable how only 15 months later all that seems to have been forgotten.
  The specific feature of those negotiations which cause textile exporters particular concern is the high level of tariffs against our textile exports overseas. The wool textile industry, hard-pressed but signally successful as an exporter, is confronted by tariffs of 44 per cent. against our exports to the United States and tariffs of 34 per cent. or more against our exports to Australia. I can give many other examples. In contrast, the EEC tariff, at 13 per cent., offers to foreign companies opportunities in the valuable European market that are clearly not matched by similar opportunities for British exporting firms. Even when the final tariff cuts of the Tokyo Round have been made, we shall still have a tariff of 35 per cent. against our woollen textile exports into the United States. The House and the country should know that, however dense the smokescreen to which we have been treated by the right hon. Gentleman, these agreements were made while he was in office and some of them while he held my present job.
  I am not saying that this country has an automatic right to have a balanced trade in each particular sector. Of course
  1604
  we have not. I do believe, however, in reciprocity of opportunity and I make no disguise of the problems of access that our textile exporters face even at the end of the latest tariff-cutting round. This lack of reciprocity is a matter of deep concern to the Government. The Minister for Trade and I have visited some 40 countries in the last 15 months. Our principal objective is to get those tariff barriers down against our goods. In my visits to countries such as Korea and Brazil, both publicly and privately to Ministers, I have done my utmost to press them for greater equality of opportunity for our textiles, but I have to recognise that we have their exports to us under constraint. In 1979 we ran a surplus with these countries of £1 billion on our balance of payments.
  Mr. Michael Meacher (): The right hon. Gentleman is well known for his antipathy to import controls on the ground that they would lead to retaliation. If he is so strongly opposed to what I agree are excessively high tariffs that are unfair, why does he not retaliate?
  Mr. Nott: Why did the hon. Gentleman, while a Trade Minister, not resign when his own Secretary of State agreed to these world-wide tariff arrangements under the MTNs?
  I come now to imports. If the problem of low-cost imports stems in part from the lack of a "recession clause" in the existing MFA, as mentioned by the right hon. Gentleman, there may be fault, but the fault cannot lie at the door of the present Government. By no means do I claim that the right hon. Gentleman's predecessor could have obtained a "recession clause" in those negotiations. I do claim, however, that it is a preposterous assertion to suggest that the growth in low-cost imports during the present recession is in some way due to us. An inbuilt growth in low-cost imports was an integral part of the MFA that the right hon. Gentleman had a part in negotiating. That growth pattern in imports was specifically agreed and accepted by the whole Labour Government of the day, including the right hon. Gentleman himself.
  I remind the House of the facts. Growth rates under MFA II agreed by the Labour Government probably average between 1 and 2 per cent. a year. The

  1605
  Labour Government negotiated a 7–5 per cent. growth per annum for T-shirts from Korea. The Labour Government agreed a 3–78 per cent. growth per annum for jerseys from the Philippines. The quota for jerseys from Sri Lanka is 10–1 per cent. per annum and for trousers from Malaysia 16.9 per cent. per annum. They are the basic growth arrangements, superimposed upon the quotas, agreed by the Labour Government. It is not in our power to change them until the expiry of the existing MFA at the end of 1981. Thus, the basic framework governing trade in textiles was already in place when we came to office. I do not deny that we have not been able to change it.
  Mr. Torney: Playing politics from the Dispatch Box does not help. It is no consolation to the thousands of my constituents in Bradford who are jobless, who face losing their jobs, or who are already on short time. We want action on the quotas. The Government must examine the problem caused by Portugal and Spain threatening our textiles. We want a social clause inserted in the agreement. If the Secretary of State cannot achieve that through the MFA, he should act unilaterally.
  Mr. Nott: Now that the hon. Gentleman has made his constituency speech and thereby kept other hon. Members out of the debate, perhaps he will withdraw from the Chamber. He has made two constituency speeches already. As a politician, I do not see any reason why I should not bring politics into the debate.
  Perhaps it is not universally appreciated that the MFA was not imposed on the developing world. It was a two-way deal. It restricted access to our markets in return for an assured growth in exports to us by the developing world. With over 400 quotas now in place, we cannot abandon the arrangement before the expiry of the present agreement.
  Within the overriding constraints of the MFA, agreed by the previous Government, we have been continuously active in extending wherever possible protection for our industry. Since we took office 15 months ago, 32 new quotas with 14 countries have been negotiated through the Commission. Each has re-
  1606
  quired painstaking and lengthy negotiation. The MFA was never an imposed solution. It was a bilateral and overall GATT deal. The new quotas have had to be negotiated. That has taken time.
  Mr. John Smith: I hope that the right hon. Gentleman will be fair and will concede that I did not attack the present Government on the basis of the existing MFA since I know that the rules cannot be changed until renegotiation. My criticism of the Government was twofold. First, they are slow to agree to a renegotiation of the MFA. Secondly, they should seek a recession clause as an objective. Will he deal with those matters?
  Mr. Nott: The right hon. Gentleman's motion is critical of the Government for what is described as "unfair" trade. He mentioned a "recession clause" and said that with hindsight it was probably a pity that we do not have one. Some of the problems about which hon. Members complain stem directly from an agreement into which the right hon. Gentleman entered.
  Mr. Jack Straw (): Will the right hon. Gentleman give way?
  Mr. Nott: I have much to say. I am sure that the hon. Member will get into the debate.
  We inherited many outstanding problems with individual countries. For instance, Turkey, Cyprus, Malta and China pose problems. As members of the Community we have not been free to act unilaterally in each of the cases, but we have done our best for the textile industry. If hon. Members have questions about the many negotiations involved, the Minister for Trade will deal with them later.
  I appreciate that imports exceeded two of the global ceilings, but by only small amounts. As opportunities open up for British exports—in China, for example—we cannot ignore the need for jobs in other British industries. The right hon. Member for Lanarkshire, North would not if he still held my post. Total inflexibility might possibly benefit some sections of our textile industry, but it would be damaging to our wider trading interests, and to our textile exports.
  The MFA is concerned with the low-cost, developing countries. It is easiest

  1607
  to see them as the greatest threat to our textile industry. But nearly 60 per cent. of our imports of clothing and textiles come from other advanced industrial countries. We cannot claim that they are taking advantage of low wages. In 1979 our imports from developed countries totalled about £1–6 billion, but our exports to that same group of countries also totalled £1.6 billion. We were nearly in balance. Such an exchange of goods is what trade is all about. We cannot rush into protection for the textile industry against developed country competition because the first to suffer from retaliatory action would probably be the textile industry itself.
  I turn to the question of synthetic textiles from the United States. We made our applications to the Community first under an article of the GATT. We failed. We made another application under article XIX of the GATT to restrict imports of three products, including carpets. We did our best to persuade the Commission to include carpets. It was agreed that only polyester filament yarn and nylon carpet yarn should be included. At the time of the application the penetration figure for tufted carpets into our market from North America was 8½ per cent. That figure has now risen to between 10 and 12 per cent. of the market. The Commission and the Government are monitoring this situation. I do not rule out further action if it becomes essential. We must have good cause before we take action against the United States under the international rules of procedure.
  I negotiated the quotas through the Commission. I went to Washington to discuss the matter. As soon as we obtained the quotas the United States applied for compensation of $ 60 million against our industry. The negotiations are not concluded. The United States claim that we must agree to that compensation and impose lower tariffs on other textiles in the European Community. [HON. MEMBERS: Why?] We operate under the rules of international trade. We have a huge export business to the United States. It is not in the interests of the Western trading community to destroy the basis of international trade which has regulated the trading world since the war.
  I did my best to achieve a good deal with the United States. I regret that we
  1608
  were not able to negotiate a better one. As soon as we imposed the quotas, complaints were made because by imposing quotas we raised the basic price of raw materials for large sections of the textile industry. The parts of the industry affected are upset at the quotas. Those are the facts of life when dealing with a complex industry such as the textile industry, which depends largely on low-cost imports for its basic raw materials. It is impossible to get it right both ways.
  Dr. Keith Hampson (): Talking of realities, the United States industry has the gross advantage of deliberately keeping gas prices below world prices. Our industry relies on oil for basic raw materials. Since the United States does not intend to decontrol gas prices until 1985, and most of our chemical producers do not think that that target will be met, we face a long-term, critical problem.
  Mr. Nott: I entirely agree with my hon. Friend. That was one of the principal justifications for our ability to apply for the quotas in the first place and we naturally used that principal argument.
  This problem, which we have raised continuously with the United States, goes on and there are now before the Commission proposals for definitive antidumping duties to be imposed on acrylic yarn from the USA. A formal investigation is going on into the pricing of American polyester filament yarn and the industry is now pressing for antidumping action to be taken against polyester woven fabric. The anti-dumping unit in my Department is now helping with these cases which, to a considerable extent, are the result of low energy pricing in the United States.
  What more can we do apart from exercising constant vigilance against fraud together with a continuing determination to monitor and uphold the existing agreements? Even the upholding of existing agreements is not without its dangers. We shall uphold them vigorously. But only recently there was an example of how difficult it is to arrive at a correct balance in these matters.
  At our insistence quotas were imposed on imports of shirts, blouses and trousers from Indonesia. We took that action because we were concerned about the effects on other MFA suppliers of our

  1609
  agreeing to large quotas. But already we believe that as a consequence of our insisting upon upholding the quotas we may have lost a £4 million export order for scientific instruments.
  That single order is worth as much as the whole of our textile imports from Indonesia at present. Apart from that, we have export orders worth over £150 million with Indonesia in a late stage of negotiation with the possibility of a further £700 million worth of trade. At the moment our textile imports from Indonesia are extremely small.
  We shall uphold the quotas, but I must tell the House that we cannot continue always to transfer job losses from one industry to another. That is the dilemma faced by any trade department and it was the dilemma that faced the right hon. Gentleman when he had my job.
  Mr. Barry Sheerman (): Will the right hon. Gentleman tell the House how many successful actions there have been against dumping in the past year? I am not talking of Indonesia; I am asking how many successful actions against dumping have been drawn to the attention of his Department.
  Mr. Nott: I shall check the figure. My recollection is that the figure is about 14 since we came into office.
  Mr. John Smith: That is trivial.
  Mr. Nott: It may be trivial, but I guess that the figure is rather higher than that which obtained when the right hon. Gentleman was in the Department. However, we shall check the figures and inform the right hon. Gentleman. He spent five years in the Department of Trade negotiating half the problems from which the country now suffers. What more can we do?
  Mr. Bob Cryer (): That is typical.
  Mr. Nott: The hon. Member for Keighley (Mr. Cryer) had the good sense to resign. It was a sensible thing for him to do; the record of the then Government should have led to many more resignations.
  Mr. Cryer: It is no good the right hon. Gentleman answering my hon. Friend the Member for Huddersfield, East (Mr.
  1610
  Sheerman) in that trite way. The Secretary of State must accept that the MFA was renegotiated by the Labour Government from the very poor base instituted by the former Tory Government. Therefore, the question of anti-dumping hardly arose because there were only 12 months of Labour Government during which anti-dumping action could have been taken.
  Mr. Nott: The MFA has nothing to do with anti-dumping. What more can we do? I have already spoken of the 32 new quotas which have been negotiated since we came into office. There are new voluntary restraint agreements with several countries and we are, of course, continuously making applications to control free circulation under article 115.
  But there are other means by which we are endeavouring to help the textile industry and British purchasers of its products. Nothing will lead me to say that the plight of the textile industry is not extremely grave. Of course it is.
  Mr. Straw: That is because of the Government's policies.
  Mr. Nott: It may be something to do with some policies, but, as I have said, 150,000 jobs were lost in the textile industry during the period of office of the Labour Government.
  I stoutly defend the right of British people to have a wide choice of goods at prices they can afford. But that right includes the choice of buying British. One of the most heartening developments of the past year has been a greater coming together of retailers and manufacturers to discuss their problems and their requirements. I am sure that that can greatly improve the responsiveness of British manufacturers to customer preference.
  Although the Government, local authorities and public corporations are obliged to look for value for money, we have a prime obligation, as public purchasers, to ensure that British manufacturers provide that value. Well over 90 per cent. of central Government purchases of textiles and clothing are from United Kingdom sources. I trust that all hon. Members, whether as trade unionists, or through their connections

  1611
  with local government and the nationalised industries, will do their best to convince the public sector of its responsibility. That responsibility is to use its purchasing power to specify the right design, price and delivery from British manufacturers. The House will also know of the determination of my right hon. Friend the Minister for Consumer Affairs to provide for greater consumer preference under her origin marking proposals for textiles but I shall not deal with that now.
  I turn briefly to the question of the next MFA. I do not think that we have been slow to say that we shall do our utmost to negotiate the best possible deal that we can for the British textile industry. There is no reason for us not to do that. That is our job. I said to my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman):
  "We shall obviously, discuss whether there should be a recession clause in MFA III. That will be a central matter for negotiation and I take the comments of my hon. Friend to heart."—[Official Report, 14th July 1980; Vol. 211, c. 1036.]
  Of course, we shall do our best to negotiate a sound MFA III for the industry. That is what we are here to do.
  Mr. John Smith: So that the House knows where it stands on this matter, will the right hon. Gentleman say whether it will be one of the Government's central objectives to seek to obtain a recession clause?
  Mr. Nott: I have said we shall get the best possible deal that we can for the textile industry. I have explained to the many delegations of trade unionists and employers who have seen us that it would be foolish of us—because it would not help in negotiations—if we tied ourselves down in the House of Commons to what we hope to achieve, what we can achieve and what we shall fight for. I do not think that that would help us to get the best possible deal. However, MFA III, like MFA II, will not be an imposed arrangement. It will be a deal between groups of countries that will involve an extremely difficult and delicate set of negotiations.
  When the present Government took office in May 1979 we inherited an environment in which 150,000 jobs had
  1612
  been lost in the previous five years. Over 32,000 men and women were kept in work by the temporary employment subsidy, which the Labour Government, if I recollect rightly being told in the textile areas, were committed to ending. Under the Labour Government we were a temporary employment Britain and, to a large extent, we had a temporarily employed textile industry when we took over. We shall see, after five years of Conservative Government, whether we have succeeded in arresting the decline.
  I deplore, as do all my right hon. and hon. Friends, the acceleration of unemployment in the textile and clothing industries during the past few months. But the notion, sedulously fostered by the Opposition, that insecurity, lack of confidence, decline and import penetration began in June 1979 is simply and clearly not the case. The clothing and textile industries have had grave problems for many years.
  Our commitment is to do our best to ensure the arrest of that decline and see it reversed. That is our task and I am happy to have it. Whether we succeed or fail will ultimately depend upon whether the industry can produce the goods that the public wish to buy.
  The right hon. Member for Lanarkshire, North dwelt on the high price of the pound. It is not simply a question of price. If price were to be the prevailing factor, we should sell no woollen and worsted products in the United States over a tariff barrier of 44 per cent., but we do. Last year over that tariff barrier we exported to the United States 2–3 million square metres of cloth compared with 2 million for the year before when the right hon. Member for Lanarkshire, North was in office.
  The notion that as more low wage countries enter the world market with their products we can become more competitive with a weak pound where we are not now competitive with a strong pound is false. When the Labour Government lurched from one financial crisis to another, with sterling falling in value from $ 2–40 to $ 1–60, there was no sudden upsurge in overseas sales. The decline in the United Kingdom textile industry was not arrested.
  Mr. Austin Mitchell (): I am sorry to interrupt the Secretary of State's long procession of excuses for why the Government can do nothing to arrest the decline. Since he is now discussing the value of the pound, does he accept that in a highly competitive market, where margins are very slim, the fact that the pound is heavily over-valued—the Financial Times last week said that our decline in competitiveness last year was 30 per cent.—constitutes such a disastrous burden that the industry simply cannot bear it?
  Mr. Nott: The hon. Gentleman's point about declining competitiveness is most serious. In the past five years competitiveness has declined by 50 per cent., but that is overwhelmingly due to wage increases generally—
  Mr. Cryer: Not in textiles.
  Mr. Nott: I talk of the economy generally in response to the general comment of the hon. Member for Grimsby (Mr. Mitchell).
  Last year, with a strong pound, the value of exports of textiles rose to over £2 billion. So far this year they are up to £900 million against £791 million for the corresponding period last year. That represents an increase in textile exports this year of 15 per cent. It has happened in spite of a high value pound because our textile industry came out top on fashion, design, delivery and style, and that, with more and more low-wage countries coming into the business, has to be where our future lies. We have no choice.
  Even if we wish to do so we cannot wish away the benefits of North Sea oil. They exist and they are ensuring a higher standard of living than would otherwise be possible. It is a matter of congratulation, optimism, hope and confidence that even in a recession our clothing industry managed to expert £750 million of goods last year, and is aiming for £1 billion this year. If the clothing industry has that target even with a strong pound it is not for me to criticise it.
  In the meantime, nobody can be other than deeply concerned at the current loss of employment in the textile industry. However, over the period from 1977 to 1979 consumption in this country rose generally by 10 per cent. while non-oil
  1614
  industrial production generally rose by only 2 per cent. In three years we suffered a 30 per cent. decline in our competitiveness. If the Government were to reverse this process a recession from the pre-election consumer boom of 1978 and 1979 was inevitable, and this has led to falling demand for textile products, to de-stocking and to low production with some of the severe difficulties that face the industry today. But after a pre-election boom demand was bound to be lower. As my right hon. Friend the Prime Minister said yesterday, "No U-turns are available." Until inflation is reduced and competitiveness is restored to our economy the Government cannot and will not relax their present policy.
  8.5 pm
  Mr. Ben Ford (): First I congratulate my hon. Friend the Member for Batley and Morley (Mr. Woolmer) on having been selected to reply to the debate for the Opposition. My hon. Friend has worked assiduously in the Chamber, and I am sure that the House will listen to him with interest.
  The question to be asked tonight is the one that was put in an article in the Investors Chronicle of 20 June. Under the heading
  "Will textiles become the new waste land?"
  it said:
  "The pace of decline in British textiles has speeded up dramatically this year. The stockmarket predicts disaster."
  It continued:
  "Of the embattled sectors of British textiles, the Yorkshire woollen industry is probably most at risk. It has already been in the doldrums for a couple of years and could now be on the verge of extinction."
  Hon. Members and all organisations representing sections of the textile industry have approached the Government, many with constructive suggestions, and the response that they have received is summed up in the Yorkshire Post report of 17 July, which reads:
  "A plea for a Government commitment to prevent the textile industry from slipping below an agreed level fell on deaf ears in Whitehall yesterday."
  I do not think that the Yorkshire Post is noted as a particularly Left-wing Socialist organ.
  Throughout this year mills have been closing, on average, at the rate of one per week. Redundancies in June totalled

  1615
  1,245. The total for this year so far is 12,100. The average is 2,016 redundancies a month—2,016 personal and family tragedies—yet the Government have turned down a proposal for a new skill-centre for training redundant people in Kirklees. It seems that there is no end to the decline in the textile industry, and again one must ask
  "Will textiles become the new waste land?"
  I want to put one clear and specific question to the Government. It may be said to be hypothetical, but it becomes less so every day, as I have illustrated. There have been reports in local newspapers in the past few days of mill closures and redundancies. Should a national emergency occur and our imports be interfered with, and, as has been suggested in the quotations that I have made, there is no textile industry, what contingency plans have the Government to meet the demand? What would people do for clothes? It seems that the Government would have us back in the days of the spinning wheel and homespun cloth. We need textiles for many classes of products—fanbelts, tubing, fire hoses, overalls, parachutes, brake linings, tents and upholstery. The list is endless. Most products of engineering could not operate without some component of textiles. I repeat, what plans do the Government have in the event of the total loss of the textile industry should a national emergency arise? I can envisage the time when our national flag will be smuggled in by submarine from Hong Kong.
  I understand the Government's philosophy. It is enlargement of the private sector—more competition, high interest rates and a strong pound. I do not agree with it. It is quite clear, however, that they are attempting to shake out inefficient firms and to tame the trade unions, which in the textile industry have cooperated in the industry's rationalisation and by making moderate wage demands. Yet they are still suffering, despite the repeated words of the Prime Minister. We have not often had a Government who, in engineering terms, are prepared to test their theories to destruction.
  It becomes a matter of fine judgment when to modify those policies in time for industry to stage a recovery, particularly when we are in the throes of a world recession. For the textile industry that time is here now. If the party
  1616
  opposite errs in making that judgement, the result will be economic and social chaos. They, and perhaps the political system as we know it, will be swept away, and the Prime Minister and her right hon. and hon. Friends will for ever be reviled in the annals of British history.
  8.11 pm
  Mr. Tom Normanton (): Right hon. and hon. Members who are present in the Chamber tonight, and who have been present for our many other debates on textiles, could be forgiven for having a feeling of dé jà vu, but today we are dealing with four major differences from those debates, which are probably still vividly—certainly in my personal and industrial experience—deeply and painfully in our minds.
  The first difference is that whereas in the past when we talked of textiles what we really meant were cotton products and products from allied textiles and fibre sources and processes, today the problem extends right across the board. Secondly, whereas in the past we have expressed our concern about the British textile industry, today the problem faces the whole of the European industrial sector, not simply Britain in isolation. We in the Western world are experiencing one of the most traumatic and painful recessions in our history.
  Thirdly, when we talk about the competition facing our industry we must realise that not only is there a new source of competition; that competition has been regulated, which has eased some of the impact of the recession. We are experiencing competition from the sophisticated producers of the world, particularly the United States. Fourthly, we have handed over to Brussels full responsibility for commercial policy, including responsibility for dealing with anti-dumping measures. I make a particular point of that, for reasons that most hon. Members will appreciate.
  I have highlighted the four differences from previous debates. I wish to make four points in connection with those differences. First, we are facing a multi-fibre, multi-process and multinational industry that is in considerable difficulty. An industry of that magnitude demands an appropriate mechanism to deal with the difficulties that it is facing, both now and in the future. A man-made fibre

  1617
  arrangement has been in operation and will continue until the end of 1981. Without it there would have been total disaster for the British and European textile industry.
  We must concentrate on discovering ways in which the policy that was appropriate in 1977 can be updated to deal with the changes that have taken place since then. As the Secretary of State said, what is desperately needed is a commitment by the Government to a more appropriate regulatory mechanism in international trade and to the expansion of trade. Any move that restricts or restrains trade is bound to be to the detriment of our economy as a whole. I hope that my right hon. Friend will apply his mind and ingenuity to that new sort of regulatory mechanism—an updated MFA—to try to ensure that by 1982 we have an appropriate measure to deal with the pressures that the textile industry will face.
  Secondly, I believe that the GATT, which has been responsible for an enormous expansion of growth of world trade, and which was an appropriate mechanism for the world trading and industrial economy of the 1950s, should be updated in the light of the new conditions into which we are moving.
  Thirdly, I earnestly hope and believe that my right hon. Friend the Secretary of State will exercise all the dynamic drive and determination that is necessary to ensure that the drafting of the mandate, which the Council of Ministers has asked us to present to the Commission, reflects the needs of the textile industry for the next five years. That would be a starting point for our negotiations for a new mandate—a new MFA.
  The depth of the crisis has been aggravated by the American Government's concealing subsidies on man-made fibre production. There is a danger that if we and our European partners step too far in the direction of a regulatory mechanism that can be interpreted and then played back against us, we shall be the poorer. A trade war and a trade protection policy would bring disaster. I was glad that my right hon. Friend the Secretary of State repeated that. It needs to be repeated again and again.
  I make one suggestion to my right hon. Friend, and I hope that it will reach the
  1618
  ears of the important and responsible people in the industry. The representational machinery in the textile industry is the oldest in Britain. The employers and unions on both sides of the dividing line between Yorkshire and Lancashire have seen the burden of the development of representational machinery. I earnestly hope that we can move to establishing one voice for the British textile industry, instead of continuing with a surplus of representational machinery. We want one voice for the British textile industry and one voice for the European textile industry. The sooner we have that the better we shall be in the representation of our interests to the European Community and to the Governments of the nine Member States.
  The fourth and probably most important point is to indict the Labour Government for the way in which, throughout the whole period of their Administration, they undermined Britain's credibility in the Community. That attitude left behind it an albatross around Britain's neck, and it has been a great hindrance in our efforts to be more effective in representing our interests within the framework of Community policies. I hope that my right hon. Friend will concentrate all his efforts to ensure that his representations, unlike those of the Labour Government, have credibility in the eyes of the politicians and administrators of the other member States.
  I trust that my right hon. Friend will continue with his efforts to be even more effective in influencing Community policy. At least his political integrity, in terms of our membership of the Community, is crisp and clear. That is a good starting point from which to enter into negotiations.
  I am sure that the House will reject the critical and highly hypocritical Opposition motion.
  8.21 pm
  Mr. Frank R. White (Bury and Rad-cliffe): I associate myself with the compliments paid to my hon. Friend the Member for Batley and Morley (Mr. Woolmer), who will be replying to the debate, and congratulate him on his position on the Front Bench.
  I start in this debate, as I have in all the textile debates in the House since 1974, by asking this Administration, just

  1619
  as I have previously asked the Labour Administration, this simple, basic question: do the Government want a British textile manufacturing capacity and, if so, what is its level to be? Is it to be 20 per cent., 25 per cent., 30 per cent. or 40 per cent. of the British market? Let us define it sector by sector and justify it for all the reasons which have been expounded by hon. Members on each side of the Chamber over many years. Once we have defined it, everything else falls into its place.
  Ministers, past and present, have catalogued instances of action taken on behalf of the industry. We have seen it again tonight. Unfortunately, that action has followed disruption and damage to the industry rather than preceding it or anticipating it. No Government and no Ministry can claim not to have received early warning signals from each side of the industry.
  Hon. Members have made reference to the American man-made fibre imports. They were anticipated over 15 months ago. The damage that they would cause and have caused to the industry was catalogued and related to the Department and to Ministers by each side of the industry.
  Regrettably, after mill closures and loss of capacity and jobs that cannot be replaced, the Government indicate their actions and have the gall to expect us in the industry, and those on the unemployment list, to be full of gratitude.
  The Prime Minister has indicated to the House on a number of occasions that she rejects import controls but that she would act to prevent disruption and unfair imports coming on to our market. She would also further help by directing positive policies towards buying British through a campaign generated by Government contracts. Her words would carry more weight if her Government's actions followed her good intent.
  This morning hon. Members on each side of the House will have received a leaflet from the Society of Civil and Public Servants entitled "UK Exposed!" In this document the society makes a strong case against Government cuts in the Customs service. Under the heading "The Control of Cargo" it states:
  "Cuts in the Department have:—severely reduced the number of consignments selected
  1620
  for examination. These checks are necessary to ensure that … duties are properly levied, import restrictions are not evaded, quotas are not being exceeded and so on."
  I ask the Minister what good it is crowing to the House about his quota policies if he fails effectively to control those quotas at the point of entry.
  In the area of public purchasing, the United Kingdom Government lead the field in the EEC in opening our tendering procedures to the Community, while the rest of the Community—notably France and Germany—operate very strict national closed shops. I trust that the hon. Member for Cheadle (Mr. Normanton) will take that message back to his previous incarnation. These two instances alone indicate areas where Government deeds fail to match their words. The United Kingdom insists on playing to the rules, while the rest practise karate. Unfortunately, it is the United Kingdom textile operative who takes the chop.
  I realise that many hon. Members wish to speak, so I shall not repeat the arguments or go over ground that they may wish to cover. I would rather quote to the House two instances which have occurred in my constituency. They are living examples of the failure of the Government to respond to the needs of the industry and fully justify the motion before the House this evening.
  Recently, Bury Ring Spinning Company went into liquidation and 120 operatives lost their jobs. The company specialised in fine spinning and doubling, and had an established place in the market for its type of product. Having weathered most of the market difficulties in the past, last year the Government's monetarist policies placed it in severe financial difficulties, but they were difficulties that the company set out to overcome. It secured a large order from a well-known multinational company but could not fully service the order, as it appeared that for three to four months in the summer it would have a severe cash flow problem. The bank refused to bridge the loan—the period involved was three months, as I have mentioned—despite the fact that on presenting the accounts it could be seen quite clearly that there would have been a break-even position in the autumn, going into profit by the end of the year.

  1621
  The multinational company concerned, anxious to maintain this valued supplier, arranged to cancel some outstanding debts and offered to match the bank pound for pound on credit to keep the company in business. The bank refused, and hence the receiver moved in. That capacity cannot be replaced in this country. Not only have jobs been lost; we have now presented an opportunity for import penetration to a foreign supplier whose Government, unlike our own, are actively supporting their textile industry in a most aggressive manner. Bury Ring Spinning Company has been sacrificed on the altar of false free market forces.
  The other company presents what I believe to be one of the most distressing examples of the plight of the textile industry. For 238 years A.C. Bealeys in Radcliffe has operated a textile finishing plant. The family which founded that company was a great benefactor to the community. Opposite the factory is the Bealeys community hospital, once a maternity home, where seemingly half of Radcliffe's citizens first saw the light of day.
  During past years the company has diversified its product range, has introduced high technology and, with a cooperative work force, has fought to maintain a place in the market. For the past few years it has either been profitable or it has broken even. Anyone who can say that in textiles for the past five years has been going some. The parent company, Whitecroft, has maintained a level of investment.
  Why now, after weathering all that and after 238 years, should this company, which has followed all the positive criteria urged upon the textile industry with full union support all along the line, fail?
  Mr. John Tavare, the chairman of Whitecroft and vice-chairman of the North-West CBI, gave the answer in a recent interview in The Guardian dated 21 July. Asked why this year, after 238 years, the company should fail, his answer was:
  "There is something special about this year's worsening economic climate. In the early days, companies were so glad to get labour off their backs that they did not react."
  1622
  When asked whether opposition to Government policies was economic or political, he answered:
  "I would also almost say it was political. Today they would not get in … there is a lack of understanding by the Government about what is happening to the manufacturing base of Britain as a result of the strong pound, high inflation and high interest rates—the first time that industry has had to suffer all three at the same time."
  Dr. Hampson: Oh, rot.
  Mr. White: Perhaps the hon. Gentleman who said "Oh, rot" will communicate to Mr. Tavare and the 130 workers to be made redundant at Bealeys what his views are.
  I would say to Mr. Tavare and to the management that the true sufferers of the Govenment's disastrous monetarist policies are the people who work at Bealeys and others like them throughout the North. Bealeys is now to close with the loss of 130 jobs. One family alone until recently had grandfather, father, son and two daughters working at that unit. The effect on the community is demoralising and depressing.
  The Prime Minister and the Chancellor of the Exchequer yesterday stated that no single party had the patent right to compassion for the unemployed. I accept that. If so, let them prove it by reversing the policies which are closing mills week by week. I believe that the Cabinet has no idea what it is creating in our industrial regions.
  In the article which I quoted the chairman of the North-West CBI verified that point. Mr. Jim Mundell, chairman of the CBI in the North-West, says:
  "The Government must have no idea what is happening to manufacturing industry because if they did know they would care."
  I now call upon the Government to prove their care and concern by changing their policies—policies which have achieved for Bealeys what Napoleon, the American Civil War, the Kaiser and Hitler failed to do. The Government have achieved in 15 months—at a stroke—the wiping out of 238 years of experience and textile expertise.
  As I mentioned, Bealeys had a place in the community, but it is no longer to be there. There is a commemorative plaque in Bealeys factory which shows that in 1793 the Methodist Society was established in Radcliffe at a meeting on the

  1623
  factory premises. It is even thought possible that Charles Wesley preached in the factory. In a short time that factory chimney will no longer smoke. No more shall we hear the engines. The plaque will go into a museum. The people of Radcliffe will regard the empty factory shell as a tombstone to the textile way of life destroyed by Tory monetarist policies devoid of human compassion. I fear that tonight is the start of a wake for the industry unless the Government change course.
  8.34 pm
  Mr. Eric Cockeram (): I should like to concentrate on the clothing industry. Many hon. Members do not appreciate that 70 per cent. of the clothing sold in this country is made here. The 30 per cent. which is imported has been the subject of many of the points made this evening. Imports are much higher than 30 per cent. in many industries. The motor industry is an obvious example. I believe that a mix between imported and home-produced goods is desirable.
  In an attempt to restrict imports, the Labour Administration introduced the multi-fibre arrangement. I do not speak against that entirely, but they did not appreciate its consequences. I shall mention two of them. First, overseas supplies no longer have to be so competitive on pricing as was formerly the case. They know that importers in Britain have an import quota and that, in consequence, there is now not the same competition on price. Secondly, overseas suppliers are trading up. Previously, they were allowed to export to Britain a higher quantity of merchandise units. The multi-fibre arrangement restricted the number of units, and in consequence they are sending more expensive garments. As a result, the British industry is feeling the competition from the Far East of a higher quality garment—a competition that previously did not exist.
  Why does Britain import so much clothing from Western Europe and the United States when our wage rates are often lower than those in other EEC countries? The answer is that other countries are more nimble on their feet in producing fashion garments and items of colour and design. The British textile industry has been slow, and has stuck to the classics. An example of that is the
  1624
  jeans industry. That was not started in Britain, and in the early days the fashion was imported. For many years Britain was desperately slow about producing the cloth needed for jeans. It was simply not available in Britain.
  We have heard a number of speeches this evening on behalf of various constituencies. That is proper. But let us not forget that there are 55 million consumers in Britain, and it is time that the House started to think about them as well as about the producers.
  Mr. Cyril Smith: Do not forget the employees.
  Mr. Cockeram: We are all employees. Those who argue that we should have more quotas and more restrictions on imports are advocating first, higher prices for merchandise, and secondly, reduced choice for the consumer. In the London shops during the past month one saw consumers exercising choice in cut-price merchandise. It is not in the interests of Britain to restrict the choice either in fashion, in colour or in price. I ask the House not to forget that while an important section of the community is engaged in the production of textiles, the remainder are consumers. It is in our interests to have choice and variety rather than restriction.
  8.38 pm
  Mr. Cyril Smith (): The speech of the hon. Member for Ludlow (Mr. Cockeram) will be a great tonic to the thousands of textile workers in the North-West who have been put on the dole during the past 15 to 18 months. I assure the hon. Gentleman that I shall read his speech in Hansard with great pleasure. I shall cut out his speech and use it to persuade people in the North-West not to vote Tory.
  The Secretary of State made a distressing speech from the point of view of the industry. He started with a political knockabout—which is all that we now expect, and all that we now receive, from the Government Front Bench. It is rather like a gramophone record about what the Labour Party did when it was in power, and how its performance record was no better. In every debate we now hear that gramophone record being played. We expected that today, and we got it—true to form. The

  1625
  right hon. Gentleman dealt with all his problems with the import agreement and the negotiations. It was perfectly fair and proper for him to outline those problems—but he did not deal with the problems of the industry. We know the Secretary of State's problems. He is a Minister, and it is his job to give some grain of hope to the industry. There was not a spark of hope in the whole of his speech for the textile industry.
  As I listened to the Minister, I began to wonder whether he understood what the problems were. At the end of his speech he had almost painted a picture in which there were no problems and nothing to worry about; the industry was exporting this and doing that; someone was exceeding a quota by exporting 2–3 million of something instead of 2 million.
  The first thing that one must do tonight is to place on record that what this House is discussing now is the most serious crisis that has faced the British textile industry for close on 50 years. That is not the view simply of Labour Members, or even of Liberal Members, or even of trade union officials. It is the view of all the employers' associations in the British textile industry.
  I could produce a long list of facts and figures to prove that statement, but probably the most graphic comment, which I imagine almost all hon. Members will have received, is in the opening sentence of the brief sent to hon. Members on both sides of the House by the British Textile Confederation. That sentence reads:
  "For many firms the renewal of the MFA after 1981 is an academic question. Their problem is to survive until then."
  That is the view of the British Textile Confederation. That is not a Left-wing trade union movement somewhere in Lancashire, in Rochdale or anywhere else. That is the employers' organisation, saying that the job of employers at present is not to worry about whether they will get a new agreement in 1981 but whether they can survive until 1981. There was not a word in the Minister's statement to show the slightest indication that the Government understand the seriousness of that situation.
  In my constituency of Rochdale closures since 1979 read like the death
  1626
  roll after an air disaster—the Eagle mill, 290 jobs; the Townhead mill, 220 jobs; the Croft mill, 240 jobs; the Shawclough mill, 70 jobs; the Arkwright mill, 100 jobs; the Lowfield mill, 120 jobs; the Moss mill, 240 jobs; and in today's local press there is the announcement of yet another closure, the Barchant mill, with the loss of 70 jobs. That is 1,350 jobs and eight mills closed between the beginning of 1979 and the present date—in my little constituency of Rochdale, with 90,000 constituents.
  Of course, I concede entirely that some of these closures took place during the remaining months of the Labour Government, so the Minister is right, if he wants to make the point, in saying that these problems did not start under the present Tory Government. Of course they did not start under this Government, but that does not alter the fact that they are continuing, that the Tories won the last general election, and that if anything is to be done about the textile industry, it is the present Government who have the power to do it.
  It is no good wailing on about what the previous Government did or did not do. Of course some of the closures that I have mentioned happened under the Labour Government, and of course that Government were as responsible for the situation as are the present Government for the current position. But the Labour Government are history. We are dealing with the position as it is, and not as the Labour Party or anyone else would like it to be.
  These closures and redundancies represent human misery, worry, the loss of self-respect, and the destruction of whole communities, as the hon. Member for Bury and Radcliffe (Mr. White) said. We are entitled to ask the Government for how long they intend to watch the industry bleed before they do something about it.
  The figures of unemployment and redundancies that have been read out tell only part of the story. They give no indication, for example, of short-time working in the industry. I should have thought that any Government who claim to know anything about business would realise that if more and more companies are on short-time working, ultimately those companies are potential closures. Short-time

  1627
  working compensation may help employees but it does not pay the overheads and standing charges of companies. Those go on whether or not the company is in receipt of short-time working compensation. As long as this situation continues, so much greater is the danger of those companies now on short time ultimately having to close, unless something is done to assist them.
  I shall not detain the House any further with the history of the situation. However, since the Minister almost suggested that there were no great problems in the textile industry, and so on, I felt it necessary at least to put on record what the situation was.
  I turn briefly to one or two constructive suggestions or possible solutions, the first of which relates to import controls. As a Liberal, I would like to be a free trader. I have had many rows with my colleagues in private on this matter, and I shall say in public what I have told them privately—that I have long since come to the view that free trade is a theoretical economist's pipe dream. Frankly, it works only so long as everyone else practises free trade. Imports to the United Kingdom largely come from countries that are sheltering behind high protection barriers. They come from countries which are aided by subsidies, which have low interest rates, which make cheap capital available, which have tax concessions, and so on. Many of those imports come in under false labels, particularly from Eastern Europe and often through West Germany. They are politically-priced exports as far as they and we are concerned.
  If one mentions import controls to the Government, even temporary ones, they immediately say "But there will be retaliation". I do not accept that there will be retaliation if we introduce temporary import controls. I do not believe that that has been proved to be the case in practice. If that is the position, and if the Government do not wish to introduce import controls on the basis of retaliation, we are at least entitled to ask when they intend to retaliate. If they say that retaliatory action will be taken against them, it is time that they stopped behaving like the gentlemen of Europe and retaliated themselves. For example, I understand that only this month the
  1628
  EEC Commission reported that Britain, alone among the Nine, gave details to Brussels of all her aids to industry. For God's sake, when will we stop being the gentlemen of Europe?
  I wish to make three other brief points. First, the Government should press for the proper labelling of goods in order fully to show the country of origin. That should be done to protect the consumer. I ask the Minister directly when that will be done. I do not want a promise that we are negotiating or that we are nearly there. When will it be done? In June, along with the hon. Members for Macclesfield (Mr. Winterton) and Blackburn, I was told that it was imminent. I should like a statement tonight about when that will occur.
  Secondly, dumping legislation could be strengthened. The burden of proof must be shifted to the supplying country. The price of goods in such countries should be shown at the point of export, and from time to time the Government should check that the prices shown are the correct ones.
  Finally, I believe that we should have a "Buy British" campaign. If they do nothing else, I hope that the Government will seriously consider whether they, either publicly or privately, cannot give some kind of lead in trying to persuade people to buy British. That should not be confined to Government Departments or local government departments. Perhaps they will consider the possibility of inviting privately to the Ministry members of all parties to see whether, collectively, they can do something.
  Some of us have already tried. The hon. Member for Burnley (Mr. Jones), the hon. Member for Macclesfield and I visited companies and pleaded with the managing directors to buy British. However, there are such things as transport, meeting rooms and hospitality in respect of which the Government could help if they were serious in their desire to try to promote a "Buy British" campaign. If they were to invite some hon. Members to come together as a sort of all-party committee to try to promote the purchase of British textiles—with the help of the Government, but not on the Government's initiative—that could be of great assistance. If nothing else comes out of the debate, that at least is a con-

  1629
  structive point which the Government could take on board.
  I ask that the Government should understand the serious plight of the industry. What is more, they should not only understand it but do something about it.
  8.49 pm
  Mr. John Lee (): This debate takes place against a bitterly depressing background of closures, redundancies and short-time working in the textile industry. It is a tragedy that this has happened in a sector that has manifested substantial capital investment, excellent labour relations and modest wage settlements.
  In my constituency of Nelson and Colne, where in years gone by well over 90 per cent. of the workers worked in textiles, the industry probably provides barely 20 per cent. of today's jobs. For every job vacancy there are 35 people in the queue. Nearly one-third of the unemployed are school leavers and people under the age of 20. One in 12 of those of working age is on the dole. On top of all that there is considerable short-time working. The decline of the textile industry is at the core of all those figures.
  The textile industry in Britain is suffering from the "IRI" syndrome, namely, interest rates, recession and imports, which work in combination. At present, the industry is going through the equivalent of open-heart surgery. It is in a critical condition. As with an open-heart patient, it needs the equivalent of oxygen, drugs and intensive care. I am sorry that all we have had from the Government—although the same is true of the previous Labour Government—is a mixture of sympathy and some swabbing of blood as it seeps through that absorbent gauze called the multi-fibre arrangement. Indeed it is probably imported gauze.
  The United Kingdom textile industry is haemorrhaging to death. According to today's edition of the Financial Times, one of our better and more successful textile companies, Vantona, announced half yearly profits that were 60 per cent. down. The Financial Times commented on the company's results and stated:
  "It now looks as though the textile sector's trough has deepened severely."
  1630
  No one pretends that there is an easy solution to our problems, but lower interest rates are imperative. I should have favoured a 2 per cent.—not a 1 per cent.—cut in the minimum lending rate. Once again, I raise the question whether the clearing banks have been overdoing it as regards the premiums that they have charged over and above the MLR. We have succeeded in creating a two-nation commercial society; the lenders and the borrowers.
  It is vital to get speedier and more effective action on dumping. It is nonsense that there should be only 16 officials working in the anti-dumping unit of the EEC, endeavouring to investigate complaints that involve all the Common Market countries and all products. That is an impossible task.
  The Government and industry should promote a "Buy British" policy for Governments and local authorities and for the general public. On Saturday, I shopped in the largest supermarket in my constituency. It was depressing and saddening to see goods on sale in the clothing section from Hong Kong, South Africa, Taiwan, Sri Lanka, the Philippines, Singapore, Macao, Italy and India. However, I should add that it is to the credit of that store that the goods were clearly labelled. There were substantial quantities of those goods. At times of pressure on family budgets the customer will gravitate towards cheaper items. In addition, our textile and clothing manufacturing industries may have declined to such an extent that certain ranges of clothing and fabric are no longer manufactured in the United Kingdom. How can the people of Lancashire and of the textile belt ask shoppers in Glasgow, Glamorgan, Cornwall and Coventry, to buy British if we do not do so when our relatives, friends and neighbours are suffering the hardships and trauma of unemployment and short-time working?
  In part the answer lies in our hands. I pay tribute to the way in which my right hon. and hon. Friend on the Front Bench have been available and willing to meet delegations of hon. Members and of representatives from both sides of industry. They have been willing to hear our case. We have been given considerable time and have been received most courteously. I thank my right hon. and hon. Friends. The Labour Govern-

  1631
  ment, this Government and, indeed, industry, lack the original ideas and initiative to ease the situation. One of our more successful business men in the industry advocated a gradual transfer of import licences from the importers and merchants to the manufacturers. This would provide a more direct link between the merchanting of both home-produced and imported merchandise and the employment of labour. It would help to encourage manufacturers to be more flexible and entrepreneurial and would result in profits accruing from cheaper imports being used to finance the development of our potential productive competitiveness.
  I advocate the acceptance by the Government and industry of a common, recognisable and colourful symbol or emblem for all United Kingdom-produced fabric and clothing, perhaps on the line of the British Standard mark or the wool mark. Many would prefer to buy British if they could easily make the identification.
  The carpet industry is embarking on a "Buy a British Carpet" campaign. The PR handout refers to
  "A British lion leaning nonchalantly on a roll of Union Jack carpet."
  What about a lion on a Union Jack as an example, an emblem that in time could be extended across a range of goods? The Government and industry have a duty to give a lead.
  We have had a lively but rather depressing debate. I am sorry that we have not had a firmer commitment to a strengthened and renegotiated MFA when the present one expires. Without it, which manufacturers will feel confident enough—with interest rates at their present high level—to invest and modernise on the scale that is necessary to meet the challenge of the 1980s?
  In all the circumstances I must register a protest. It is meant in a democratic sense and intended to convey the anguish and fear that exists in the mills, the valleys and the homes of Lancashire. I must inform the Government that I cannot support them in the Lobby. It is with regret that I intend to abstain at the end of the debate.
  8.57 pm
  Mr. William Whitlock (): I welcome the courageous speech of the hon. Member for Nelson and
  1632
  Colne (Mr. Lee). The Opposition will welcome him in their Lobby tonight. Like the hon. Member for Rochdale (Mr. Smith), I found the comments of the Secretary of State remarkably complacent. Nowhere in the textile industry can I find anyone who shares his complacency about the industry's future. I shall quote one or two comments that indicate the feeling of the industry.
  On 10 July I talked about the problems of the knitwear and hosiery industry and illustrated its excellent record. I do not intend to go over that again. I merely say that in spite of that record it is in danger of extinction, because it is being crucified. It is being crucified by the Government's monetary policy. It is being crucified by the doubling of VAT by the Government. It is being crucified by the high interest rates that obtain under the Government. It is being crucified by yawning gaps in import restriction arrangements, by fiddles, by quota dodging and by the bending of many international rules. That is going on without much effort on the Government's part to stop it.
  That is what the industry has been saying to Ministers for some time. An indication of the despair on the industry's part can be given by a sentence that appeared in a letter from the president of the Knitwear Industry Federation to the Financial Times. He wrote:
  "It would appear that we now have a Government that is prepared to oversee the destruction of British industry."
  Recently in the Nottingham Evening Post there appeared an article headed:
  "Lace chief blames Tories".
  That lace manufacturer claimed that Government policy lay behind the collapse of many parts of the lace industry. He said:
  "I simply don't believe that the Government and the public have got a clue about how things are."
  That is the trouble. The Government do not have a clue about how things are because they will not listen to those in the industry.
  That is illustrated by what the Secretary of State for Industry said in replying to the debate on 10 July:
  "Low-cost competitor countries, without any unfairness, buy the most modern machinery in the world, hire excellent management and put low-cost but fair labour to work, in order to

  1633
  compete with Britain and the rest of the world."—[Official Report, 10 July 1980; Vol. 988, c. 821.]
  Everywhere I went, the industry bitterly resented those words. That nonsense is at variance with all that the industry has been saying. Who told the right hon. Gentleman that?
  Our competition comes from countries where workers are savagely exploited, such as Sri Lanka. I can give many other examples. As I pointed out on 10 July, the textile industry agrees that developing countries must be assisted, but the responsibility for helping those countries must be fairly shared among all developed countries. The industry is demanding only a fair deal. The Government are making no effort to that end. They close their eyes to the fact that Britain is receiving the rawest deal of any developed country because our markets are more open.
  My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) mentioned the American textile industry. In November 1978 President Carter said that he was determined to assist that beleagured industry. He invoked the consultation clauses in the multi-fibre arrangement and saw to it that import quotas from major competing countries were reduced. That industry is no longer beleagured. It is not only protected against disruptive imports; it is subsidised by artifically low energy prices and it is being helped by a weak dollar.
  The American textile industry is flooding Britain with garments of all kinds, to the detriment of our industry. T-shirts are coming here from America at an average price of 85p per piece, compared with £1–39 from Hong Kong and 91p from Portugal. Jumpers and pullovers from America are arriving at an average price of £1–72 per piece, compared with £2–39 from Hong Kong and £1–80 from Korea. Against that background, a leading knitwear group has announced that it is to slash its manufacturing operations in Leicester by half in favour of importing from Hong Kong.
  Do the Government want our industry to die and the home market to become a battlefield for every country that wishes to export textiles, including State trading countries such as Poland, which is dumping low cost goods here in a desperate
  1634
  effort to obtain foreign currency? The Government must come clean and tell the industry what they honestly believe its future to be. I hope that, following this debate, the Government will agree to meet leaders from the various sections of the industry, along with officers of the all-party group. They should listen to what they say. That is the key. They have not so far done so.
  Early in the last century operatives in Nottingham began smashing stocking machines. They had a legendary leader, Ned Ludd, and were known as Luddites. Luddism has come to mean senseless sabotage of machines, but those poor wretches were faced with absolute want, were meagre with famine, sullen with despair, careless of life and famished into guilt. Lord Byron used such phrases in his maiden speech in the House of Lords when he described the Nottingham scene, which he knew so well.
  Today we have a Government who seem bent on halting machines en masse and wishing Britain into an industrial waste. But members of the Government, unlike the Luddites, have no compelling personal reasons for their action beyond that of adhering to their own dogma. Increasingly they are seen in various parts of the country as Luddites. That is how history will portray them unless they change their policies. I hope that this debate tonight will result in changed policies, at least towards the textile industries.
  9.11 pm
  Mr. Charles Fletcher-Cooke (): I want to speak very briefly about competition from our high-wage competitors. In his excellent speech the Secretary of State said that this accounts for about 60 per cent. of our import penetration. Different considerations apply to high-wage competition from those that apply to the Third world and the MFA. The high-wage competition causes our main problems now.
  For the past 25 years we have had a paradox. In the United Kingdom we have a well organised, well run and highly competitive industry, with excellent labour relations. The industry has modernised itself and invested in itself. Why is it unable to compete with the industry in other high-wage nations? We all know

  1635
  the difficulties caused by low-wage countries. But I am talking about countries such as the United States, Canada, Western Europe and Australia. Those of us who sit for textile constituencies have always said that we cannot protect the industry against high-wage competitors. The industry must compete and succeed against them.
  Somewhere along the line we have been let down, because in spite of our efficiency, good relations, not-too-excessive wages and shifts worked we cannot compete with them. I have been pondering on this paradox for a long time and I have come to the conclusion that too many burdens have been imposed on British industry generally and the textile industry in particular compared with our competitors. This shows up particularly in the textile world because competition is so internationally cut-throat that even 1p a yard makes all the difference. In some other industries the difference in burdens that must be borne is not so obvious in the market.
  There are, of course, the great burdens of high interest rates and the high rate of exchange, which were referred to yesterday. I cannot discuss them again tonight but I support completely the reasons for them although they impose a particular burden on all our industry.
  There are other burdens that have been imposed by successive Governments and some that are about to be increased by this Government. These burdens seem to break the camel's back. First, there is the intolerable burden of increasing local government and water rates. These are increased every year because industry has no vote. That is taxation without representation. This burden is now falling with increasing velocity on British industry, and it is a burden that industry in Europe and America does not bear.
  Secondly, there is the increased burden of energy costs—costs which our competitors do not have to bear. This is a negative subsidy given to our competitors in Germany and elsewhere because industrial consumers there are not taxed at the same rate as ours. The Secretary of State for Industry should be having a considerable argument with the Secretary of State for Energy who is determined to keep up the net cost of energy to our industry in a way that does not happen
  1636
  among our competitors, not so much because their industry is charged less but because it is taxed less on the energy it consumes.
  I have also been amazed by the increasing burden on the level of social security contributions falling on industry. Hitherto, British industry has been somewhat better off than some of our competitors. Even that small advantage is apparently to be removed by the proposal, for example, that the first eight weeks of sickness of any employee is to be paid for by the employer. One may say that is a small burden. It is, nevertheless, an increase on British productive industry at a time when the burdens are already far too great.
  I understand the motives. The old motives were that one must temper rates to the individual domestic ratepayer, whether water rates or general rates, and impose the burden on industry because industry's shoulders seemed much broader. Straw after straw has been placed on the broad shoulders of industry in rates and energy costs and now social security contributions. The last straw is breaking the camel's back.
  The effect shows first in the textile industry—the most internationally competitive and the most sensitive. The way to cure this paradox is to take the financial burdens off industry even if individuals have to pay. So long as these enormous and exceptional burdens, in relation to those faced by our competitors, are placed on our manufacturing industry, no amount of tariffs and no amount of fiddling around, one way or another, will help. This is seen in the amount that industry has to pay for its feedstock compared with what the Americans have to pay. It is seen in the amount that industry has to pay for all these charges, including rates and water rates.
  We have too many burdens compared with those placed on our industrial competitors. All of our industrial competitors have some of these burdens but none of them has all of the burdens. It is time that we reduced them.
  9.13 pm
  Mr. Dan Jones (): I had intended to speak for at least 10 minutes, but because so many of my colleagues still

  1637
  hope to make a contribution I will speak for only five minutes.
  I do not believe that the Government know where they are going. We have heard successive leading Ministers talk of the need to work to provide a job. There is a certain logic in that approach. We have heard about people pricing themselves out of a job. Some of us are aware of that situation.
  In the textile industry we are dealing with one of the most responsible trade unions in the country. Since the turn of the century there has been no talk of strikes or go-slows or anything that could disrupt industry. The installation of new machinery has been accepted. It seems to me that this is the attitude, on which the Government depend for the economic recovery of our country, that will alone prevent serious repercussions. Yet you are crucifying the industry. Are you really sure where you are going? You have talked about the effect of the MFA and its contribution to rallying the forces of good will in the EEC. It can and should be used to obtain more help. Are you not aware—
  Mr. Deputy Speaker (Mr. Bernard Weatherill): I hate to intervene, but the hon. Gentleman must not accuse me of anything.
  Mr. Jones: I would not dare, Mr. Deputy Speaker. I am going at a pace because I promised to be brief.
  Just before the last election the authorities in Brussels made a statement about burden sharing. Can the Minister say truthfully that the Government have used the forces of good will for that purpose? The answer should be given. Frankly, we have been ruthlessly deceived by burden sharing. There is no doubt about that.
  The instrument to which I refer has been used to the advantage of the EEC. Can it be said that the textile industries of France and the Low Countries have suffered like the British textile industry? I expect the Minister to give an answer.
  My constituency has made as great a contribution to the nation's well-being as any other. Today, as a result of the joint machinations of both parties, instead of producing more textiles before breakfast than any other part of the country pro-
  1638
  duced in the rest of the day, textile production has been almost decimated.
  Do the Government really think that the economy, which is so precariously poised, can stand what they are doing? In 1947 the people of Burnley, when given an alternative form of work, were asked to stick loyally to textiles. They did that. The Government are now rewarding them with bankruptcy.
  The Government will suffer as they have made the people suffer. I know something about that because I was unemployed for five years. If Ministers had been in that position, their attitude would be distinctly different.
  9.19 pm
  Mr. Nicholas Winterton (): I shall try to be brief. I wish to make it clear that I shall not support the Government tonight. I intend to abstain. I shall certainly not support the Opposition, because I believe that successive Governments have neglected the textile industry. I feel deeply about the problems of the industry. I should have little or no credibility if I voted for the motion or the amendment. I am critical because the cant and hypocrisy that we have heard from the mouths of Ministers in successive Governments have let down one of the most important and strategic industries in Britain.
  I quote one or two figures that have not been mentioned in the debate because not all the facts have been put to the House. Mills have been closing at an alarming rate this year—a fact mentioned by the hon. Member for Rochdale (Mr. Smith). In the cotton sector alone mills have been closing at the rate of two a week. That is a serious state of affairs.
  Between March 1979 and March 1980, 40,000 textile jobs were lost. In the same period, 8,000 jobs were lost in the cotton and allied sector. The rate of job loss in the textile industry is increasing month by month, and over 11,000 textile workers in the North-West are on temporary short-time working compensation. Sadly, many of them are likely to lose their jobs unless the scheme is extended.
  Among the mills that have closed, or are in danger of closing, are many owned by highly efficient firms, which

  1639
  have installed the latest capital intensive plant and machinery.
  Rev. Ian Paisley (): Is the hon. Member aware of the serious situation in the textile industry in Northern Ireland? It once made up to 30 per cent. of the whole of the United Kingdom textile industry, but now it has almost disappeared.
  Mr. Winterton: I am aware of the extremely serious situation in Northern Ireland. The economy of Northern Ireland is greatly dependent upon textiles, which is one of the largest industries in that part of the United Kingdom. Many communities, not least that represented by the hon. Member for Antrim, North (Rev. Ian Paisley), are dependent upon this important industry.
  In the last 10 months, 18,000 clothing sector workers have lost their jobs, and it is estimated that between 70,000 and 80,000 in that sector are now working short-time.
  I wish to refer briefly to the evolution of MFA II, because I have followed and monitored it since it came into force. I pick up the comment made by my hon. Friend the Member for Ludlow (Mr. Cockeram), who spoke as a respected retailer; that the problem facing the clothing industry is the threat posed by low-cost imports, which account for 74 per cent. of total imports of clothing into this country. Whether or not the amount of imported cloning is great, the problems faced by our industry are the result, chiefly, of low-cost imports.
  I wish to mention the enlargement of the Community—a matter that has not been touched upon in the debate. The enlargement of the EEC will pose a serious threat to our industry. As often happens in Community affairs, the main focus of attention in discussions on enlargement has been on agriculture and horticulture. I believe that the implications of enlargement are far more important for the textile and clothing industries, because they employ more workers than our agriculture and horticulture industries together.
  It is vital that the accession treaties for Portugal and Spain—Greece is about to join the Community on agreed terms—should make specific proposals for trade in textiles and clothing if the entry of
  1640
  those countries into the Community is to be orderly and a positive step forward for Europe. The overriding political objective of bolstering democracy in those countries will not be achieved by allowing the markets of the Nine to be disrupted, with added unemployment posing a threat to the political stability of the EEC. I hope that my hon. Friend the Minister of State will deal with the question of the enlargement of the Community when he replies to the debate.
  I wish to make a number of proposals to the Government, all of which I hope will be taken on board. I recommend that the Government extend the short-time working compensation scheme, and that they improve its terms. They should give a firm and positive commitment to a new MFA which includes a recession clause. They should in due course introduce temporary selective import controls. In making that last proposal I remind my hon. Friends on the Front Bench that it is supported by the industry as a whole and by the Confederation of British Industry. I am not advocating those proposals just as a maverick from the Government Benches.
  I also believe that, failing a fairly dramatic reduction in interest rates in the near future, a two-tier interest rate system should be introduced to assist industry, and the textile and clothing industries in particular. The Government must consider the use of non-tariff barriers, such as a much stricter licensing system for imports like that used by France.
  We must have much more effective origin marking and commodity labelling. I want to back Britain and buy British. I hope that I am a walking and living advertisement for British clothing. I am wearing a light worsted suit that was made in Yorkshire. My shoes came from Northampton. My shirt was made in Congleton, in my constituency. My tie was made in Lancashire, and is the tie of the all-party cotton and allied textiles group. I am delighted that it is being worn by a number of my colleagues in the House today. My underclothes—St. Michael—were obviously also made in this country. I want to back our country, and I want our people to buy British.
  Mr. John Farr (): Is my hon. Friend aware that he is never properly dressed unless he is wearing something from Leicester?
  Mr. Winterton: I am grateful to my hon. Friend for that observation.
  I believe that the Government's proposals for origin marking are inadequate, and I should like to put one proposal in this respect. All garments should indicate whether they were manufactured in the United Kingdom. They should say "Made in the United Kingdom"—or "Scotland", "Wales" or "Northern Ireland" if that is more appropriate. All goods from abroad should be marked "Foreign", because how many people want to buy foreign goods when they have the chance to buy British?
  Retail outlets should be obliged by law to display notices indicating what percentage of the goods they sell are produced in the United Kingdom. The industry can help in the "Back Britain—Buy British" campaign by promoting itself. The TUC could encourage its members to buy British as well.
  Why can we not have a two-tier system of VAT—one for home-produced goods and one for imports? Why not use, as my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) suggested, our North Sea oil revenues to aid all British industry by no longer charging it above the odds for energy, which puts it in an uncompetitive position in trade abroad?
  9.28 pm
  Mr. James Molyneaux (): Yesterday the right hon. Member for Ebbw Vale (Mr. Foot) referred to redundancies in Courtaulds and in what he described as about another dozen textile factories in Northern Ireland. He seemed to imply that these difficulties were due to the Government's economic policies, and there was more than an implication that the problems could be resolved if the Labour Party's policies were adopted. I have to submit, however, that those aspects of economic policy that we were debating yesterday have relatively little bearing on the problems of Courtaulds, ICI and other man-made fibre concerns in Northern Ireland. We are tonight discussing a quite different area of Government policy, one from which the Opposition have not yet sufficiently distanced themselves. I refer to Britain's membership of the EEC.
  On 10 June, my right hon. and hon. Friends and I tabled a motion which read:
  1642
  "That in the opinion of this House the internal régime of the European Economic Community prevents measures of textile import control from outside the Community having the intended effect in assisting the British textile industry; and this House calls on Her Majesty's Government to ensure that additional measures to meet this problem are taken either by the Community or by the United Kingdom."
  Unless that reality is faced, all the chatter about safeguards and assistance will be valueless. We have been assured that two anti-dumping cases have been opened by the EEC Commission, but how long will that take, and how effective will be the resultant action? In February 1980 the EEC Commission decided to limit imports of various man-made fibres into the United Kingdom. The results have been totally inadequate.
  With regard to the free circulation of goods within the Community, it is said that mechanisms exist to deal with the problem, but representatives of the various branches of the textile industry in Northern Ireland inform us that this is their main difficulty. From the point of view of the textile industry in Northern Ireland the safeguards are not working. In the short term, the Government have a duty, as we say in our motion, to ensure that
  "additional measures … are taken either by the Community or by the United Kingdom"
  Government.
  The right hon. Member for Lanarkshire, North (Mr. Smith) almost boasted that in certain aspects of Community policy he and his colleagues had pulled the Government round. Perhaps I could suggest that when he has pulled the Government round full circle he should wholeheartedly join us in endeavouring to pull them out of the Community. That is the only effective way of restoring our freedom of action to put British interests first.
  9.31 pm
  Mr. K. J. Woolmer (Batley and Morley): The Secretary of State concluded his speech with what was clearly meant to be a clarion call. He said that there will be no U-turns, and no changes of policy. There was no waving of Order Papers tonight from the Government Benches. Tonight hon. Members from textile constituencies showed their deep concern about the direction of the Government's economic policies. There was

  1643
  opposition from the Labour Benches, and doubts—even fears—from Conservative Members in marginal textile constituencies.
  This has been an important debate about one of the largest groups of industries in the United Kingdom. It bears repeating that textiles employ over 400,000 workers, and that the clothing industry employs over 300,000 workers—a combined total of over 700,000 workers, or 10 per cent of manufacturing industry. Together they export well over £2 billion worth of goods. By all agreement in the House tonight, these are key industries in the nation. There are few urban constituencies where some employment in clothing and textiles is not to be found, although there are particular concentrations in West Yorkshire, the North-West, the East Midlands and Northern Ireland.
  The loss of jobs has been of frightening proportions since the electorate so unwisely voted this Government into office 14 months ago. Over 50,000 jobs have been lost in textiles, and about 25,000 in clothing. Over 75,000 jobs have been destroyed, tens of thousands more people are on short-time working, and even more workers are worried about the security of their employment. Virtually all sections of the textile industry have suffered—man-made fibres, cotton and linen, woollen and worsteds, knitting, carpets, finishing and clothing, particularly men's and women's outer wear and women's dresses.
  Figures that were issued by Credit Insurers "Trade Indemnity" this month show that textile and clothing companies lead the growing queue of businesses in the bankruptcy courts. There was a 46 per cent. increase in the number of business failures in the first six months of this year compared with last year. The number of textile and clothing firms going broke more than doubled in the first six months of this year. The monthly survey of trends in textiles and clothing, conducted jointly by the CBI and the National Economic Development Office, not only highlights the enormous loss of confidence by those businesses over the last 14 months but forecasts further substantial decline. The last survey, published in June, showed 76 per cent. of firms with order books below normal,
  1644
  68 per cent. with export orders below normal and 61 per cent. holding excessive stocks.
  Next Wednesday, the July trends for these industries will be published, and they are firmly expected to show further rapid deterioration. In April 1979 a clear majority of firms in these industries were optimistic about business prospects, with order books above normal, and the volume of new orders rising. It is not good enough to deny that this is the fault of Government policies. At local level these nation-wide figures mean closed mills and factories, lost jobs to towns and communities—scarcely an area untouched. Weekly, almost daily, the list grows—50 or 100 jobs lost here; 900 or 1,000 jobs lost there.
  Last year, the Secretary of State for Industry took pleasure in withdrawing regional assistance from large areas of the country. Now, just a few months later, many of the areas which are losing Government help are the very textile areas which are now suffering so badly from the result of these Government policies. Across the country unemployment has risen by an appalling 44 per cent. since the Tories took office. That is bad enough, but in the textile towns the rise in jobless has been even worse. In West Yorkshire, we have seen unemployment rise by 77 per cent. in Keighley, 83 per cent. in Dewsbury and Batley, 91 per cent. in Hudderstield, and 92 per cent. in Halifax.
  In the North-West, the rise in unemployment has been 68 per cent. in Bolton. It has been 87 per cent. in Preston. I do not see the hon. Member for Preston, North (Mr. Atkins) in his seat tonight. It has been 95 per cent. in Oldham, and 102 per cent. in Nelson. I am not surprised that the hon. Member for Nelson and Colne (Mr. Lee) is to abstain tonight. He should have courage and vote against the Government. In Accrington, there has been a shocking increase in unemployment of 110 percent.
  All the towns that I have mentioned are losing assisted area status at the very time that it is needed most. I ask the Secretary of State for Industry to look again at his policies. Now is not the time to be cutting regional aid to increasingly hard-pressed areas. I ask the right hon. Gentleman to reconsider the position of the worst-hit textile areas as a matter of urgency.

  1645
  There is also uncertainty about the Government's intentions regarding the short-time working compensation scheme, which employers and trade unions, as the Ministers know, wish to see maintained and strengthened in a number of ways. My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) mentioned this in his opening speech and I shall be most grateful if the Minister will deal with it. I hope to see the Secretary of State for Employment respond quickly and sympathetically to the representations being made to him on this matter.
  The British Textile Confederation, in its latest note to Members of Parliament, has said candidly that
  "For many firms, renewal of the MFA after 1981 is an academic question. Their problem is to survive until then."
  I shall turn shortly to the question of the immediate future but I should like first to deal briefly with the international trading position of these industries. Trade Ministers have not helped confidence in the industries, nor their negotiating position within the EEC machinery, by the appearance they gave of half-hearted foot-dragging over the need for a firmer renewal of the MFA and the bilateral agreements when they expire at the end of 1981 and 1982 respectively.
  There are many issues on which dissatisfaction exists with the present working of the trade arrangements. Many have been voiced this evening, such as the need for a recession clause to prevent increasing imports compounding the difficulties of depressed home markets; the treatment of imports from the Mediterranean associate countries and the consequences of the entry of Spain and Portugal into the EEC; political pricing by COMECON countries; the abuse of free circulation within the EEC; outward processing; unreasonably high barriers to our own exports of textiles and clothing. I welcome from the Opposition Dispatch Box the statements made earlier by the Secretary of State and the efforts that are being made on this last matter. These are all vital matters on which the industry is looking tonight for clear and strong Government support. I hope that the Minister will give a view on these and not hide behind the veil of secrecy of negotiations.
  There remains the suspicion that the only country playing to the rules is
  1646
  Britain—a point made by my hon. Friend the Member for Bury and Radcliffe (Mr. White). The impression is frequently given that the Government and the European Commission are unable and unwilling to control and police adequately the existing arrangements.
  The tragedy is that on top of the worry caused by import penetration and difficult international trading conditions, the industry is in even deeper trouble as a result of the Government's deflationary economic policies. Within weeks of coming into office the Government had doubled VAT. Within a few months the living standards of all but the wealthiest began to slump. We had the remarkable sight of winter sales starting before Christmas last year as shops tried to unload unsold stocks.
  The Government's rigid monetarist stance with punitive interest rates and their use of North Sea oil revenues to finance deflation and unemployment rather than investment and growth have together led to a grossly overvalued pound, which makes exporting increasingly difficult and competing with imports often impossible. The Government's reckless disregard of the effects of the overvalued exchange rates upon manufacturing industry, such as textiles and clothing, is already causing considerable problems. I believe that the overvalued pound will wreak havoc over the nex few months.
  For textiles and clothing the recession is already well under way. There is no sign of the slump levelling out, let alone turning upwards, as the Government appear to hope. Indeed, recession is gathering pace into a downward spiral. When will the economy recover? When will the textile and clothing industries see the bottom of this apparently bottomless pit?
  Perhaps the Government will say that these problems are not their fault. Perhaps the doubling of VAT, record high interest rates, the overvalued pound and depressed demand are not the causes of the slump in textiles and clothing. I do not think that any Opposition Members will seriously believe that. Perhaps it is the fault of the workers in these industries. Perhaps they have not been listening to the Prime Minister's advice. Perhaps they do not understand monetarism.
  The record of the textile and clothing industries bears stating clearly. Earnings

  1647
  are typically £10 to £20 a week below those in manufacturing industry as a whole. The number of days lost in strikes has been far below the national average for decades. Last year, less than half of 1 per cent. of all working days lost were in textiles, clothing and footwear. Throughout the 1970s productivity per head increased significantly faster in those industries than in manufacturing as a whole. The unions have co-operated fully in technological change, labour-saving investment and rationalisation schemes. Carpet industry workers settled for a 10 per cent. wage increase in January. In March the wool textile workers settled for 14 per cent. The cotton and allied workers settled for 14 per cent. in May. Those settlements are well below the rate of inflation, as workers take cuts in real income and fight desperately to save their jobs.
  Yet, despite low wages, moderate pay settlements, better than average productivity and industrial relations, those industries have lost 75,000 jobs at the hands of the Tory Government. It is often the modern, efficient mills which are closing or working short time. Investment is falling—the very seedcorn of the future growth which the Government hope will come about as a result of their policies. The textile and clothing industries have records which stand the test of close examination.
  The Government must stop blaming others for the consequences of their policies. Is it any wonder that workers and their families—even employers—are desperately worried, even frightened, about their future? In April, the director-general of the British Textile Employers' Association told the Prime Minister that the industry was in the middle of a crisis of near disaster proportions. What further advice and moralising do Ministers have to offer those workers and industries? Are they to have no pay increases? Are they to move—unemployed textile workers swapping homes with unemployed steel workers? Is not the truth that the Government need to move to policies based on expansion, not deflation, and to policies which strengthen, not destroy, these two great industries?
  I ask the House to support the Opposition's motion.
  9.45 pm
  The Minister for Trade (Mr. Cecil Parkinson): I join with hon. Members on both sides of the House in congratulating the hon. Member for Batley and Morley (Mr. Woolmer) on his first appearance at the Opposition Dispatch Box, and on the assured and knowledgeable way in which he presented his case. It will come as no surprise to him when, in the course of my remarks, I demonstrate that I do not agree with much of what he said—but we all admire the way that he said it.
  I shall deal immediately with the question of origin marking, raised by the hon. Member for Rochdale (Mr. Smith) and others. He asked when we would bring forward our proposals. We were bound to put the proposals forward for consultation, and we did so. The consultation period ends tomorrow. As my right hon. Friend the Minister for Consumer Affairs said on 21 May, after the full representations have been considered she intends to prepare draft orders with a view to putting them before Parliament in the autumn. That is the Government's plan.
  The Government, like their predecessors, are in no doubt about the importance to our economy of the textile and clothing industries. They are important as employers, as suppliers to our home market, and as exporters. I stress that our home industry still supplies 70 per cent. of the home market. My hon. Friend the Member for Macclesfield (Mr. Winterton) is doing his best to raise the national average. At one stage in his speech I thought that he intended to undress to prove that we could rely on what he was saying. I am doing exactly the same. I shall not undress, but I am wearing the same proportion of British clothes. I repeat that our industry supplies 70 per cent. of our considerable home market.
  As various hon. Members said, the industry exports more than £2,000 million worth of goods a year to markets all over the world. Everybody in the House recognises that the industry is going through a tough time. I can claim to have seen more textile delegations in recent weeks than I have had hot dinners. The basis of that claim is not

  1649
  that I have suddenly been converted to cold meals. There is no shortage of knowledge in the Government about the problems of the industry.
  Opposition Members suggested that to-tonight they would reveal, for the first time, some strange truth that we have never heard before. They have been misled. I have seen innumerable delegations, visited many parts of the country, and discussed the problems of the industry with management, labour and representatives of federations. We know the problems. The Opposition try to claim that one of the causes of the industry's problems is that, somehow or other, the Government have exposed the industry to unfair foreign competition of a nature that they were protected from by the Labour Administration. My right hon. Friend the Secretary of State, in his typically gentle and uncontroversial style, destroyed that claim. But other Opposition Members repeated the allegation.
  A number of my hon. Friends, including the Member for Nelson and Colne (Mr. Lee), commented on the weakness of the present multi-fibre arrangements. We do not deny that. My right hon. Friend and I have spent a considerable time during the past few months strengthening the existing arrangements. That is why we introduced the 32 new quotas. That is why we used article 115, which restricts the free circulation of goods that might undermine the national quotas. That is why we have used it on a regular basis. That is why—I say this to the hon. Member for Burnley (Mr. Jones)—free circulation has not undermined the quotas. We have monitored them very carefully. We estimate that free circulation has, at most, added 1 per cent. to the flow of the quota goods. In making that assertion we take no account of the goods that have come in here and left under free circulation, and we know that they represent a fair proportion.
  Mr. Dan Jones: Why, then, is the industry being decimated?
  Mr. Parkinson: That is why we have negotiated new arrangements for Malta, Cyprus and Mauritius. There were gaps in the MFA arrangements, and we spent a considerable time plugging those gaps.
  1650
  The right hon. Member for Lanarkshire, North (Mr. Smith) was in charge of the Department of Trade during the negotiation of the terms for Greek accession. With his strong views about the need to be tough, one would have expected him to drive a very hard bargain for Britain. In fact, he drove no bargain at all. Our only defence against a possible flood of imports from that source is a weak safeguard clause which he must have known it would be virtually impossible to use. Having learnt from the right hon. Gentleman's mistakes, the present Government have set about, in our negotiations with Spain and Portugal, achieving as a prime objective proper transitional arrangements which will give our industry some safeguards.
  I am getting rather tired of defending at this Dispatch Box the right hon. Gentleman's own achievements to him. He knows full well that he wanted to have a recession clause in the last MFA. He knows that he and his predecessor, Mr. Edmund Dell, failed to obtain one. I accept the arguments of hon. Members on both sides of the House that it is absurd to have a policy based on a set of assumptions which are subsequently proved to be wrong and yet to continue to work on the basis that the original assumptions were correct. That is why we shall seek in the renegotiations to obtain a reasonable safeguard against this type of problem. We recognise, as the right hon. Gentleman does, that this is a problem, and we shall do our best to deal with it.
  Mr. Dan Jones: Will the Minister give way?
  Mr. Parkinson: I should prefer not to give way, if the hon. Gentleman does not mind.
  A number of my hon. Friends have asked about a successor to the present MFA and about the Government's proposals. We have always been committed to seeking a successor. The Prime Minister has confirmed that we shall be seeking a tough successor, and we are pledged to doing so in close consultation with the industry. Let there be no doubt at all about the Government's position on the successor to the MFA. We have made our position clear on a number of occasions. I should like to underline our commitment tonight.

  1651
  But one has the feeling that at the heart of Opposition Members' complaints—the hon. Member for Nottingham, North (Mr. Whitlock) spelt this out—is a fundamental hypocrisy, which I find distasteful. The Labour Party persistently demands discrimination against the products of low-cost suppliers. I find it a strange argument, from a party that pretends to care, that it should demand that we should ban products produced by other countries on the ground that they are produced by people who are poorer than we are. Labour Members persistently use this argument about low cost. They are actually saying that it is a crime in the modern world to be poor, and that if one is poor one deserves to be discriminated against. I find that particularly hard—
  Mr. Straw rose—
  Mr. Parkinson:—to take from a party that couples this total lack of concern about developing countries with criticism of us for the fact that we have reduced our aid programme.
  The truth is that trade and access to our markets are absolutely vital for the developing countries. If Opposition Members want a harder-headed reason for maintaining our markets for low-cost countries in the controlled way in which they are maintained now, I would point out that it is in our own interests to do so. Only one-third of the products that we import from those countries are manufactures. The rest are raw materials.
  Mr. Frank Haynes (): Will the Minister give way?
  Mr. Parkinson: Ninety per cent. of all our exports to those countries are manufactures. That is why we have a surplus of more than £2,000 million in manufactures in our trade with low-cost suppliers.
  The multi-fibre arrangement recognises the need to control the flow of imports, and as a result of that arrangement imports are controlled at about 12 per cent. of our market. Although there are flaws in the arrangements, and although they sometimes do not work as well as they could on some occasions, we work hard to strengthen them in order to make them work better. But, on the whole, the arrangements are effective, and low-cost imports represent only about 12 per
  1652
  cent. of our market, which was the intention when the policy was negotiated.
  Let there be no misunderstanding about this. We have had a lot of passion and breast-beating tonight from various Opposition Members. The truth is that on a day-by-day basis we work very hard to ensure that our market is not flooded by low-cost imports and that those which come in do so under control. Where there is fraud, we seek it out. We intend to strengthen the Government's capability for seeking out fraud, and we take action regularly.
  Mr. Straw rose—
  Mr. Parkinson: The second strand of criticism was criticism of the Government because sterling was strong, and interest rates and the rate of inflation high. The hon. Member for Batley and Morley seemed to suggest that the Government should embark on a big spending policy as a way of dealing with our problems. That would certainly be a way of lowering the rate of exchange, because it would be a way of announcing to the world at large that the Government had abandoned their economic policies and that they accepted that a Britain in which hyperinflation was a permanent feature of our existence was the only Britain which it was possible for a Government to have—
  Mr. Haynes: On a point of order, Mr. Deputy Speaker. The Minister is deliberately misleading the House—
  Mr. Deputy Speaker: Order. That is not a point of order. It is a debating point.
  Mr. Parkinson: Whenever the hon. Member for Ashfield (Mr. Haynes) speaks in the House, the only thing that he manages to prove is that he has a very loud voice.
  The truth is, as my right hon. Friend the Prime Minister pointed out last night, that there is nothing unnatural about a high rate of interest at a time of high inflation. A rate of interest that does not reflect the rate of inflation is a fraud on the saver and an encouragement to the spendthrift, and is no basis for a sound money policy. The Government are determined to restore soundness to the nation's currency. The truth is that those who are basing their expectations on a

  1653
  fall in the rate of exchange are wasting their time.
  Mr. Arthur Davidson ()rose—
  Mr. Parkinson: The Government have no intention of abandoning their economic policies. They believe that public spending must be properly controlled. They believe that a proper rate of interest should be charged. The Government recognise that only by getting inflation under control is there any hope for the country.
  As one talks to business men and discusses the problem with them, one hears

  Division No. 438]

  AYES

  [10 pm

  Abse, Leo

  Dobson, Frank

  Horam, John

  Adams, Allen

  Dormand, Jack

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

  Allaun, Frank

  Douglas, Dick

  Huckfield, Les

  Alton, David

  Douglas-Mann, Bruce

  Hudson Davies, Ednyfed (Caerphilly)

  Anderson, Donald

  Dubs, Alfred

  Hughes, Mark (Durham)

  Archer, Rt Hon Peter

  Duffy, A. E. P.

  Hughes, Robert (Aberdeen North)

  Armstrong, Rt Hon Ernest

  Dunn, James A. (Liverpool, Kirkdale)

  Hughes, Roy (Newport)

  Ashley, Rt Hon Jack

  Dunnett, Jack

  Janner, Hon Greville

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

  Dunwoody, Mrs. Gwyneth

  Jay, Rt Hon Douglas

  Bagier, Gordon A. T.

  Eadie, Alex

  John, Brynmor

  Barnett, Guy (Greenwich)

  Eastham, Ken

  Johnson, James (Hull west)

  Barnett, Rt Hon Joel (Heywood)

  Edwards, Robert (Wolv SE)

  Johnson, Walter (Derby South)

  Beith. A. J.

  Ellis, Raymond (NE Derbyshire)

  Johnston, Russell (Inverness)

  Benn, Rt Hon Anthony Wedgwood

  Ellis, Tom (Wrexham)

  Jones, Barry (East Flint)

  Bennett, Andrew (Stockport N)

  English, Michael

  Jones, Dan (Burnley)

  Bidwell, Sydney

  Ennals, Rt Hon David

  Kaufman, Rt Hon Gerald

  Booth, Rt Hon Albert

  Evans, loan (Aberdare)

  Kerr, Russell

  Boothroyd, Miss Betty

  Evans, John (Newton)

  Kilroy-Silk, Robert

  Bottomley, Rt Hon Arthur (M'brough)

  Faulds, Andrew

  Kinnock, Neil

  Bradley, Tom

  Field, Frank

  Lambie, David

  Bray, Or Jeremy

  Fitch, Alan

  Lamborn. Harry

  Brown, Hugh D. (Provan)

  Fitt, Gerard

  Leadbitter, Ted

  Brown, Robert C. (Newcastle W)

  Flannery, Martin

  Leighton, Ronald

  Brown, Ronald W. (Hackney S)

  Fletcher, L. R. (Ilkeston)

  Lestor, Miss Joan (Eton & Slough)

  Brown, Ron (Edinburgh, Leith)

  Fletcher, Ted (Darlington)

  Lewis, Arthur (Newham North West)

  Buchan, Norman

  Foot, Rt Hon Michael

  Lotthouse, Geoffrey

  Callaghan, Rt Hon J. (Cardiff SE)

  Ford, Ben

  Lyon, Alexander (York)

  Callaghan, Jim (Middleton & P)

  Forrester, John

  Lyons, Edward (Bradford west)

  Campbell-Savours, Dale

  Foster, Derek

  Mabon, Rt Hon Dr J. Dickson

  Cant, R. B.

  Foulkes, George

  McDonald, Dr Oonagh

  Carmichael, Neil

  Fraser, John (Lambeth, Norwood)

  McElhone, Frank

  Carter-Jones, Lewis

  Freeson, Rt Hon Reginald

  McKay, Allen (Penistone)

  Cartwright, John

  Freud, Clement

  McKeivey, William

  Clark, Dr. David (South Shields)

  Garrett, John (Norwich S)

  MacKenzie, Rt Hon Gregor

  Cocks, Rt Hon Michael (Bristol S)

  Garrett, W. E. (Wallsend)

  Maclennan, Robert

  Cohen, Stanley

  George, Bruce

  McNally, Thomas

  Concannon, Rt Hun J. D.

  Gilbert, Rt Hon Dr John

  McNamara, Kevin

  Cook, Robin F.

  Ginsburg, David

  McQuade, John

  Cox, Tom (Wandsworth, Tooting)

  Golding, John

  McWilliam, John

  Craigen, J. M. (Glasgow, Maryhill)

  Gourlay, Harry

  Magee, Bryan

  Crowther, J. S.

  Graham, Ted

  Marks, Kenneth

  Cryer, Bob

  Grant, George (Morpeth)

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

  Cunliffe, Lawrence

  Grimond, Rt Hon J.

  Marshall, Dr Edmund (Goole)

  Cunningham, George (Islington S)

  Hamilton. W. W. (Central Fife)

  Marshall, Jim (Leicester South)

  Dalyell, Tam

  Hardy, Peter

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

  Davidson, Arthur

  Harrison, Rt Hon Walter

  Mason, Rt Hon Hoy

  Davies, Rt Hon Denzil (Llanelli)

  Hart, Rt Hon Dame Judith

  Maynard, Miss Joan

  Davies, Ifor (Gower)

  Hattersley, Rt Hon Roy

  Meacher, Michael

  Davis, Clinton (Hackney Central)

  Haynes, Frank

  Mellish, Rt Hon Robert

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

  Healey, Rt Hon Denis

  Mikardo, Ian

  Deakins, Eric

  Heffer, Eric S.

  Millan, Rt Hon Bruce

  Dean, Joseph (Leeds West)

  Holland, Stuart (L'beth, Vauxhall)

  Miller, Dr M. S. (East Kilbride)

  Dempsey, James

  Home Robertson, John

  Mitchell, Austin (Grimsby)

  Dewar, Donald

  Homewood, William

  Mitchll, R. C. (Soton, Itchen)

  Dixon, Donald

  Hooley, Frank

  Morris, Rt Hon Alfred (Wythenshawe)

  them freely admit that an exchange rate at the present level coupled with a reasonable rate of inflation, would not be a problem and that it is the rate of inflation which is the principal threat to our exports. The Opposition—
  Mr. James Hamilton ()Mr. James Hamilton (Bothwell) rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly, That the original words stand part of the Question:—
  The House divided: Aves 252, Noes 309.

  NOES

  Adley, Robert

  Clarke, Kenneth (Rushcliffe)

  Gorst, John

  Ailken, Jonathan

  Cockeram, Eric

  Gow, Ian

  Alexander, Richard

  Colvin, Michael

  Grant, Anthony (Harrow C)

  Amery, Rt Hon Julian

  Cope, John

  Gray, Hamish

  Ancram, Michael

  Cormack, Patrick

  Greenway, Harry

  Arnold, Tom

  Corrie, John

  Grieve, Percy

  Atkins, Rt Hon H. (Spelthorne)

  Costain, A. P.

  Griffiths, Eldon (Bury St Edmunds)

  Atkins, Robert (Preston North)

  Cranborne, Viscount

  Griffiths, Peter (Portsmouth N)

  Atkinson, David (B'mouth, East)

  Critchley, Julian

  Grist, Ian

  Baker, Kenneth (St. Marylebone)

  Crouch, David

  Grylis, Michael

  Baker, Nicholas (North Dorset)

  Dean, Paul (North Somerset)

  Gummer, John Selwyn

  Banks, Robert

  Dickens, Geoffrey

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

  Beaumont-Dark, Anthony

  Dorrell, Stephen

  Hamilton, Michael (Salisbury)

  Bendall, Vivian

  Douglas-Hamilton, Lord James

  Hampson, Dr Keith

  Bennett, Sir Frederic (Torbay)

  Dover, Denshore

  Hannam, John

  Benyon, Thomas (Abingdon)

  du Cann, Rt Hon Edward

  Haselturst, Alan

  Benyon, W. (Buckingham)

  Dunn, Robert (Dartford)

  Hastings, Stephen

  Bevan, David Gilroy

  Durant, Tony

  Havers, Rt Hon Sir Michael

  Biffen, Rt Hon John

  Dykes, Hugh

  Hawkins, Paul

  Biggs-Davison, John

  Eden, Rt Hon Sir John

  Hawksley, Warren

  Blackburn, John

  Edwards, Rt Hon N. (Pembroke)

  Heddle, John

  Body, Richard

  Eggar, Timothy

  Henderson, Barry

  Bonsor, Sir Nicholas

  Elliott, Sir William

  Heseltlne, Rt Hon Michael

  Boscawen, Hon Robert

  Emery, Peter

  Higgins, Rt Hon Terence L.

  Bottomley, Peter (Woolwich West)

  Eyre, Reginald

  Hill, James

  Bowden, Andrew

  Fairbairn, Nicholas

  Hogg, Hon Douglas (Grantham)

  Boyson, Dr Rhodes

  Fairgrieve, Russell

  Holland, Philip (Carlton)

  Braine, Sir Bernard

  Faith, Mrs Sheila

  Hooson, Tom

  Bright, Graham

  Farr, John

  Hordern, Peter

  Brinton, Tim

  Fell, Anthony

  Howe, Rt Hon Sir Geoffrey

  Brittan, Leon

  Fenner, Mrs Peggy

  Howell, Rt Hon David (Guildford)

  Brocklebank-Fowler, Christopher

  Finsberg, Geoffrey

  Howell, Ralph (North Norfolk)

  Brooke, Hon Peter

  Fisher, Sir Nigel

  Hunt, David (Wirral)

  Brown, Michael (Brigg & Sc'thorpe)

  Fletcher, Alexander (Edinburgh N)

  Hunt, John (Ravensbourne)

  Browne, John (Winchester)

  Fletcher-Cooke, Charles

  Hurd, Hon Douglas

  Bruce-Gardyne, John

  Fookes, Miss Janet

  Irving, Charles (Cheltenham)

  Bryan, Sir Paul

  Forman, Nigel

  Jenkin, Rt Hon Patrick

  Buchanan-Smith, Hon Alick

  Fowler, Rt Hon Norman

  Jessel, Toby

  Budgen, Nick

  Fox, Marcus

  Johnson Smith, Geoffrey

  Bulmer, Esmond

  Fraser, Rt Hon H. (Stafford & St)

  Jopling, Rt Hon Michael

  Butcher, John

  Fraser, Peter (South Angus)

  Joseph, Rt Hon Sir Keith

  Butler, Hon Adam

  Fry, Peter

  Kaberry, Sir Donald

  Cadbury, Jocelyn

  Galbraith, Hon T. G. D.

  Kellett-Bowman, Mrs Elaine

  Carlisle, Kenneth (Lincoin)

  Gardiner, George (Reigate)

  Kershaw, Anthony

  Carlisle, Rt Hon Mark (Runcorn)

  Gardner, Edward (South Fylde)

  King, Rt Hon Tom

  Chalker, Mrs. Lynda

  Garel-Jones, Tristan

  Kitson, Sir Timothy

  Channon, Paul

  Gilmour, Rt Hon Sir Ian

  Knight, Mrs Jill

  Chapman, Sydney

  Glyn, Dr Alan

  Knox, David

  Churchill, W. S.

  Goodhart, Philip

  Lamont, Norman

  Clark, Hon Alan (Plymouth, Sutton)

  Goodhew, Victor

  Lang, Ian

  Clark, Sir William (Croydon Gouth)

  Goodlad, Alastair

  Langford-Holt, Sir John

  Morris, Rt Hon Charles (Openshaw)

  Roper, John

  Thomas, Dr Roger (Carmarthen)

  Morton, George

  Ross, Stephen (Isle of Wight)

  Thorne, Stan (Preston South)

  Moyle, Rt Hon Roland

  Rowlands, Ted

  Tilley, John

  Newens, Stanley

  Ryman, John

  Tinn, James

  Oakes, Rt Hon. Gordon

  Sandelson, Neville

  Torney, Tom

  Ogden, Eric

  Sever, John

  Urwin, Rt Hon Tom

  O'Halloran, Michael

  Sheerman, Barry

  Varley, Rt Hon Eric G.

  Orme, Rt Hon Stanley

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

  Wainwright, Edwin (Dearne Valley)

  Owen, Rt Hon Dr David

  Short, Rt Hon Peter (Step and Pop)

  Wainwright, Richard (Colne Valley)

  Paisley, Rev Ian

  Short, Mrs Reneé

  Walker, Rt Hon Harold (Doncaster)

  Palmer, Arthur

  Silkin, Rt Hon John (Deptford)

  Weetch, Ken

  Park, George

  Silkin, Rt Hon S. C. (Duiwlch)

  Welsh, Michael

  Parker, John

  Silverman, Julius

  White, Frank R. (Bury & Radcliffe)

  Parry, Robert

  Skinner, Dennis

  White, James (Glasgow, Pollok)

  Pavitt, Laurie

  Smith, Cyril (Rochdale)

  Whitehead, Phillip

  Pendry, Tom

  Smith, Rt Hon J. (North Lanarkshire)

  Whitlock, William

  Penhaligon, David

  Snape, Peter

  Willey, Rt Hon Frederick

  Powell, Raymond (Ogmore)

  Soley, Clive

  Williams, Rt Hon Alan (Swansea W)

  Prescott, John

  Spearing, Nigel

  Williams, Sir Thomas (Warringon)

  Price, Christopher (Lewisham West)

  Stallard, A. W.

  Wilson, William (Coventry SE)

  Race, Reg

  Steel, Rt Hon David

  Winnick, David

  Radice, Giles

  Stewart, Rt Hon Donald (W Isles)

  Woodall. Alec

  Rees, Rt Hon Merlyn (Leeds South)

  Stoddard, David

  Woolmer, Kenneth

  Richardson, Jo

  Stott, Roger

  Wrigglesworth, Ian

  Roberts, Albert (Normanton)

  Straw, Jack

  Wright, Sheila

  Roberts, Alan (Bootle)

  Summerskill, Hon Dr Shirley

  Young, David (Bolton East)

  Roberts, Ernest (Hackney North)

  Taylor, Mrs Ann (Bolton West)

  Roberts, Gwilym (Cannock)

  Thomas, Dafydd (Merioneth)

  TELLERS FOR THE AYES:

  Robinson, Geotfrey (Coventry NW)

  Thomas, Jeffrey (Abertlllery)

  Mr. James Hamilton and

  Rodgers, Rt Hon William

  Thomas, Mike (Newcastle East)

  Mr. Donald Coleman.

  Rooker, J. W.

  Latham, Michael

  Normanton, Tom

  Spicer, Jim (West Dorset)

  Lawrence. Ivan

  Nott, Rt Hon John

  Spicer, Michael (S Worcesetershir)

  Lawson, Nigel

  Onslow, Cranley

  Sproat, Iain

  Lennox-Boyd, Hon Mark

  Oppenheim, Rt Hon Mrs Sally

  Squire, Robin

  Lester, Jim (Beeston)

  Osborn, John

  Stainton, Keith

  Lewis, Kenneth (Rutland)

  Page, John (Harrow, West)

  Stanbrook, Ivor

  Lloyd, Ian (Havant & Waterloo)

  Page, Rt Hon Sir Graham (Crosby)

  Stanley, John

  Lloyd, Peter (Fareham)

  Page, Richard (SW Hertfordshire)

  Steen, Anthony

  Loveridge, John

  Parkinson, Cecil

  Stevens, Martin

  Luce, Richard

  Parris, Matthew

  Stewart, Ian (Hitchln)

  Lyell, Nicholas

  Patten, Christopher (Bath)

  Stewart, John (East Renfrewshire)

  McCrindle, Robert

  Patten, John (Oxford)

  Stokes, John

  Mactarlane, Neil

  Pattie, Geoffrey

  Stradling Thomas, J.

  MacGregor, John

  Pawsey, James

  Tapsell, Peter

  MacKay, John (Argyll)

  Percival, Sir Ian

  Taylor, Robert (Croydon NW)

  Macmillan, Rt Hon M. (Farnham)

  Peyton, Rt Hon John

  Taylor, Teddy (Southend East)

  McNair-Wilson, Michael (Newbury)

  Pink, R. Bonner

  Temple-Morris, Peter

  McNair-Wilson, Patrick (New Forest)

  Pollock, Alexander

  Thatcher, Rt Hon Mrs Margaret

  McQuarrie, Albert

  Porter, George

  Thomas, Rt Hon Peter (Hendon S)

  Madel, David

  Prentice, Rt Hon Reg

  Thompson, Donald

  Major, John

  Price, David (Eastleigh)

  Thorne, Neil (Ilford South)

  Marland, Paul

  Prior, Rt Hon James

  Thornton, Malcolm

  Marlow, Tony

  Proctor, K. Harvey

  Townend, John (Bridlington)

  Marshall, Michael (Arundel)

  Rathbone, Tim

  Van Straubenzee, W. R.

  Marten, Nell (Banbury)

  Rees, Peter (Dover and Deal)

  Vaughan, Dr Gerard

  Mates, Michael

  Rees-Davies, W. R.

  Viggers, Peter

  Mather, Carol

  Renton, Tim

  Waddington, David

  Maude, Rt Hon Angus

  Rhodes James, Robert

  Wakeham, John

  Mawby, Ray

  Rhys Williams, Sir Brandon

  Waldegrave, Hon William

  Mawhinney, Dr Brian

  Ridsdale, Julian

  Walker, Rt Hon. Peter (Worcester)

  Maxwell-Hyslop, Robin

  Rifkind, Malcolm

  Waker, Bill (Perth & E Perthshire)

  Mayhew, Patrick

  Rippon, Rt Hon Geoffrey

  Walker-Smith, Rt Hon Sir Derek

  Mellor, David

  Roberts, Michael (Cardiff NW)

  Waller, Gary

  Meyer, Sir Anthony

  Roberts, Wyn (Conway)

  Walters, Dennis

  Mills, lain (Meriden)

  Rossi, Hugh

  Ward, John

  Mills, Peter (West Devon)

  Rost, Peter

  Warren, Kenneth

  Miscampbell, Norman

  Royle, Sir Anthony

  Watson, John

  Mitchell, David (Basingstoke)

  Sainsbury, Hon Timothy

  Wells, John (Maidstone)

  Moate, Roger

  St. John-Stevas, Rt Hon Norman

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

  Monro, Hector

  Scott, Nicholas

  Wheeler, John

  Montgomery, Fergus

  Shaw, Giles (Pudsey)

  Whitelaw, Rt Hon William

  Moore, John

  Shaw, Michael (Scarborough)

  Whitney, Raymond

  Morgan, Geraint

  Shelton, William (Streatham)

  Wickenden, Keith

  Morris, Michael (Northampton, Sth)

  Shepherd, Colin (Hereford)

  Wiggin, Jerrry

  Morrison, Hon Charles (Devizes)

  Shepherd, Richard (Aldridge-Br hills)

  Wilkinson, John

  Morrison, Hon Peter (City of Chester)

  Shersby, Michael

  Williams, Delwyn (Montgomery)

  Mudd, David

  Silvester, Fred

  Wolfson, Mark

  Murphy, Christopher

  Sims, Roger

  Young, Sir George (Acton)

  Myles, David

  Skeet, T. H. H.

  Younger, Rt Hon George

  Neale, Gerrard

  Smith, Dudley (War, and Leam'ton)

  Needham, Richard

  Speed, Keith

  TELLERS FOR THE NOES:

  Nelson, Anthony

  Speller, Tony

  Mr. Spencer Le Marchant and

  Neubert, Michael

  Spence, John

  Mr. Anthony Berry.

  Newton, Tony

  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 be agreed to, pursuant to Standing Order No. 18 (Business of Supply).
  Resolved,
  That this House welcomes the Government's continuing commitment to support, wherever possible, the textile and clothing industries under the existing Multi-Fibre Arrangement which was both negotiated and accepted by the previous Labour Government; acknowledges that the Government has negotiated through
  1658
  the European Community a number of new restraint arrangements in addition to 32 new quotas on imports from other suppliers since it came into office; expresses its concern at the continuing decline over many years of textile employment; applauds the successful record of the textile and clothing industries in export markets; and believes that the long-term health of the industries can best be restored by the success of the Government's broad economic policies.

  TEXTILE AND CLOTHING INDUSTRIES

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the Law Reform (Miscellaneous Provisions) (Scotland) Bill [Lords] may be proceeded with, though opposed, until any hour.—[Lord James Douglas-Hamilton.]

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL [LORDS]
As amended(in the Standing Committee), considered.
LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL [LORDS]
  Clause 1

    QUALIFICATION OF JURORS
    10.15 pm
    The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): I beg to move amendment No. 5, in page 3, line 8, after ' ineligible ', insert ' or not qualified'.
    Mr. Deputy Speaker (Mr. Bernard Weatherill): With this we may take Government amendment No. 1.
    Mr. Rifkind: When the Bill was being considered in Committee, the hon. Member for Glasgow, Garscadden (Mr. Dewar) pointed out that, while there were certain penalties imposed for a person who was ineligible to serve on a jury, no such reference was made to one who was not qualified but who, despite that, served on a jury. The hon. Member's point was well founded and this amendment seeks to remedy that matter.
    Government amendment No. 5 is designed to ensure that the validity of a verdict cannot be challenged on the ground that one of the jurors was not qualified in terms of clause 1 (1). The effect of Government amendment No. 1 is that there should be the same penalty for serving on a jury when not qualified as there is for doing so when ineligible.
    I am sure that these amendments will be acceptable to the House, and I commend them.
    Mr. Donald Dewar (): I thank the Minister for tabling these necessary amendments. I pay tribute to him and to the Solicitor-General for Scotland, because I cannot remember a Bill on which Ministers have been more helpful or obliging. Perhaps this is not the most epoch-making measure, but it has been a useful exercise.
    I am also glad that we are imposing a possible fine of £200 rather than £1,000 which at one time I believed was in the
    1660
    ministerial mind. If one was of evil disposition, one could have a great deal of fun differentiating between a person who was "disqualified" and a person who was "not qualified" for jury service in Scotland. I shall resist the temptation to indulge in theological speculation.
    I am grateful to the Minister for clarifying this point, and I promise that I shall say nothing further on this measure.
    Amendment agreed to.
    Amendment made: No. 1, in clause 3, page 4, line 21, after 'ineligible', insert ', or not qualified, '.—[Mr. Rifkind.]

  Clause 23

    AMENDMENT OF PRESCRIPTION AND LIMITATION (SCOTLAND) ACT 1973
    Mr. Norman Buchan (): I beg to move amendment No. 2, in page 16, line 42, after 'above', insert 'the expression'.
    Mr. Deputy Speaker: With this we may take amendment No. 3, in page 17. line 6, at end insert
    '; but the expression does not include an interlocutor dismissing a cause by reason only of a provision mentioned in subsection (1) above.'.
    Mr. Buchan: This amendment seeks to clear up what I regard as an anomaly arising out of the favourable response of the Government to my new clause in Committee. This would remove my last remaining doubts. I should like to hear a word of confirmation that it meets all the points that I put.
    We have had two or three months of fairly heavy slogging in which we have been saying things that were not exactly nice about the Solicitor-General and the Under-Secretary, so I should like to take this opportunity to thank them for the response to my amendments, which, I suspect, will be favourable.
    Mr. Bruce Millan (): I did not have the good fortune to serve on the Committee, so I did not have the unusual experience of Ministers being helpful. I believe that this is an admirable clause and the amendment qualifies the remaining doubt about it. I, too, am grateful to the Government.
    The Solicitor-General for Scotland (Mr. Nicholas Fairbairn): I welcome the generous plaudits of the hon. Member for Renfrewshire, West (Mr. Buchan) and the right hon. Member for Glasgow, Craigton (Mr. Millan), who did not serve on the Committee but who had a great interest in it. This is an important amendment which I hope will assist us to do justice in situations in which justice may previously not have been done. Subject always to the concepts of equity and the controls of the court which will be contained in the Bill under the amendments introduced by the hon. Member for Renfrewshire, West, the Government are happy to give their endorsement of these amendments and to hope that justice will be done.
    Amendment agreed to.
    Amendment made: No. 3, in page 17, line 6, at end insert
    '; but the expression does not include an interlocutor dismissing a cause by reason only of a provision mentioned in subsection (1) above.'.—[Mr. Buchan.]
    Bill accordingly read the Third time and passed, with amendments.

INTERNATIONAL MONETARY FUND
10.21 pm
The Financial Secretary to the Treasury (Mr. Nigel Lawson): I beg to move,
That the draft International Monetary Fund (Increase in Subscription) Order 1980, which was laid before this House on 4 July, be approved.
The purpose of the order is to authorise payment by the United Kingdom of our share in the International Monetary Fund's seventh quota increase. This follows a decision by the Governors of the IMF in December 1978 that all members' quotas should be increased by 50 per cent. This will raise the IMF's general resources from 39 billion special drawing rights, or about £23 billion, to 59 billion special drawing rights, or about £35 billion. This decision will come into effect once members of the fund holding three-quarters of the quotas have ratified the increase.
This moment is still some way off. At the last count, members representing 34 per cent. of the fund's quotas had ratified the increase. As our quota ranks second after that of the United States at just under 7 per cent., this House's approval of the order will take the fund some way further towards its target.
The United Kingdom's present quota is 2,925 million special drawing rights, about £1,630 million. The increase authorised by the order before the House will take this to 4,387½ million special drawing rights, about £2,450 million.
I should explain that, because of the nature of the IMF's operation, the payment for the quota does not add to public expenditure. Twenty-five per cent. of the increase will be paid for with SDRs. Incidentally, this will not affect the overall level of the reserves since we shall simultaneously be increasing the so-called reserve position in the fund, that is to say, the amount that we ourselves could draw automatically on the fund by exactly the same amount. Since 1972, as the House will be aware, this reserve position has been counted as part of the United Kingdom's reserves.
The balance will be paid in non-interest bearing notes that will be re-deposited by the IMF at the Bank of England for possible use at another time.

1663
When the IMF needs to use some of this sterling to make up the currency package for another member country's drawing, our reserve position in the fund will again increase by the same amount. In other words, the fund would owe us money and our claims would be increased. We obtain one asset in exchange for another. Again, this does not score as public expenditure.
The House may be curious as to why it has taken until now for the fund to implement a decision taken at the end of 1978, but it was always expected that the legislative procedures in so many member countries would take the best part of two years. The fund planned on the basis that the quota increase would be implemented towards the end of 1980. I cannot yet guarantee to the House that the quota increase will be in place this year, but the Government hope that it will. The Government intend to play their part in this process as we and other industrialised countries committed ourselves to do at the recent Venice summit. I pay tribute to our predecessors, who smoothed the way for us by providing powers in the International Monetary Fund Act 1979 for the Treasury to make orders subject to the affirmative resolution of the House increasing our IMF quota. Previously each such increase had to be ratified by primary legislation.
The extra resources will now arrive at an opportune moment. The Government are keenly aware of the implications of the latest round of oil price increases for the balance of payments of a large number of countries, including the developing countries. A series of inter-related problems are involved. They will continue to be the subject of intensive public debate, as the interest of the House in the Brandt report showed recently.
Estimates of the OPEC balance of payments surplus for 1980 amount to over $ 130 billion. Non-oil exporting developing countries, on the other hand, may have a collective deficit of about $ 55 billion. Much of this will be concentrated in a few relatively advanced countries which will be able to arrange most, if not all, of their finance on the markets. However, other countries are less fortunately placed and will need official balance of payments assistance, mainly from the IMF.
1664
It is common ground, in the words of the Venice summit communiqué, that private lending will need to be supplemented
"by an expanded role for international financial institutions, especially the IMF."
Up to now the fund has got by on the basis of its existing resources, consisting of members' payments for their quotas, supplemented by borrowing under the so-called special supplementary financing facility from the richer OECD and OPEC countries.
The fund is possibly in a lull before what might be a storm. It will need substantially increased facilities to meet the needs of its members once the impact of the oil price increases is fully felt. The quota increase will make a sizeable contribution. Nevertheless, the fund will need to add to that by borrowing. That was also endorsed by the Venice summit. The fund management has started discussions with potential OPEC lenders. The Government welcome the discussions.
Within the IMF the United Kingdom's representatives are participating in the work which has been set in hand to improve both the size and the quality of the fund's contribution to the recycling process. I am well aware of how heavily the fund is criticised. Perhaps we shall hear some criticism this evening. Some of the critics do not fully understand the nature of the fund and its operation, and the delicate part which it has to play.
The fund is not an aid-giving institution. The essence of its lending and borrowing arrangements is that they are intended to lubricate the process of changing domestic policies so as to find a more sustainable balance of payments. The fund's resources are not unlimited. They are meant to revolve. As each member country recovers and repays, money becomes available for others.
The fund must be responsive to its members and to their social and political backgrounds. It is. However, marrying those requirements has never been easy. It is harder than ever in the difficult world economic environment in the wake of recent oil price increases. Indeed, countries face painful choices. The fund must continue to be able to influence its members to adjust their economies in the

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light of unfavourable economic developments. Such developments might frequently be outside the individual member's control, but they must be tackled.
The fund's effectiveness as a balance of payments financing organisation would be prejudiced, and nobody would be advantaged, if it were drawn into areas which are more properly the responsibility of individual aid donors and multilateral aid-giving institutions such as the soft loan affiliates of the World Bank. There are hard cases. However, the House will not wish to dwell too much on matters which are the subject of delicate negotiation between the fund and Governments.
I can assure the House that the fund's management and its executive board are very much alive to their responsibilities. The fund has fully recognised that the economic policy terms that it negotiates with borrowers under its main facilities must reflect the change in world circumstances and particularly the length of time that is necessary to adapt to the oil price increase and the likely duration of the OPEC balance of payments surplus.
Mr. Tam Dalyell (): Would one be wrong in assuming that this represents a change of philosophy in relation to the Third world from the days of Pierre-Paul Schweitzer when certainly some of us understood that the IMF thought that it had rather special obligations to the Third world? Is the Financial Secretary trying to tell us about a change of policy?
Mr. Lawson: The fund has obligations to the Third World as it has to all its members who have recourse to it. But there is no change in the fund's role—the reverse is the case. It is those critics who are trying to turn it into an aid-giving institution who are suggesting that it should have a different role. The role that I am outlining is the one that the fund has always performed, and with a considerable record of success. Of course, the Labour Government, of which the hon. Member for West Lothian (Mr. Dalyell) was a supporter, had particular reason to be grateful to the fund, both for the facilities that it made available to them and also for the policy prescriptions which it imposed upon them.
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For the reasons I have given, the fund is implementing or preparing significant changes in its arrangements. The first is to make regularly available significantly greater sums in proportion to quotas than has up to now been the case. The second is to make assistance available over longer periods by arranging for a succession of annual standbys for making loans under its extended financing facility. The third is to allow more time for adjustment, given the nature of the structural changes now needed in many countries to reflect the higher oil prices about which I spoke earlier. The fourth is to concentrate more on fixing its lending and conditionality policies on vital supply side factors such as energy measures and import substitution. One example of this is the IMF's co-operation with the World Bank in Guyana in order to finance hydroelectric investments which would make that country virtually self-sufficient in energy.
In order for the fund to play its proper part, it needs this quota increase, and I ask the House to make its contribution by approving the order.
10.33 pm
Mr. Denzil Davies (): This is an important debate which is being conducted fairly late at night. It may seem on the face of it to be a rather insignificant order. However, the factors behind it are extremely important. There are big questions to be asked about the role of the IMF and our subscription to it.
I could not follow the Financial Secretary's figures as well as I should have, but I understand that our contribution to this increase in the fund's assets is about £800 million. The hon. Gentleman went to great lengths to show that this was not an increase in public expenditure. It seems that even if the fund were to spend the money it would still be a loan by the British Government to the fund. I do not quite understand that. I accept that technically it may be that, if the money is spent it has been spent, and I do not suppose that the IMF would ever repay it. To that extent, therefore, it is an increase in public expenditure.
We on this side certainly have reservations about the role of the IMF. The Financial Secretary was very negative in his response to that. He seemed to suggest that all was well, that the IMF did

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not need to. change. But it was set up a long time ago in world conditions different from those now obtaining. I certainly argue that it needs to change and to fulfil a different role today. There is no need for it to be an aid-giving institution, but there is a different role for it and I would like to see a change in its role. I do not oppose this order, but, subject to certain conditions and reservations, the Government must press for a change in the composition and statutes of the IMF and the way in which it operates in order to take into account the changing world situation.
The House will agree that there are two major problems facing the international community in terms of monetary matters. Both are difficult problems, and they were touched upon in the Brandt report. The British Government and other Governments must address their minds to those problems.
The first problem, and perhaps the more difficult to resolve, concerns the reform of the international monetary system and the role of special drawing rights within that system. I hope that the Government will try to press for a change so that the SDR becomes an alternative reserve asset in the international monetary system, thus creating stability. The Brandt report recommended that the SDR should be used for asset settlements between central banks, and to some extent replace national currencies in those reserves. That could be done by means of a substitution account. I hope that the British Government will try to press for that.
I understand that the Americans do not wish the dollar to lose its reserve currency role. My fear is that sterling will then become a reserve currency. One of the dangers of the Government's policies and of the oil surplus is that sterling will become a reserve currency, with all the problems that that entails.
But the world has changed. We do not want one or two large reserve currencies. National economies cannot support that. It is not easy, but we must constantly press for some sort of change so that an asset such as the SDR can gradually take over national assets and provide the reserve backing that the world needs. Part of the problem of the last few years stems from the fact that President Nixon closed the gold window. One can argue about the position of gold,
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but at least there was some backing for the currency. When the dollar was no longer backed by gold the world had a reserve currency without economic strength and backing. We had the same problem with sterling, certainly after the end of the war. I hope that the Government will try to push forward the idea of that sort of reserve currency.
The second problem, which is more pressing and perhaps easier to solve, is the need to channel the OPEC surpluses to the non-oil exporting, less developed countries. The Financial Secretary said that the figure for 1980 for the OPEC surpluses would be $130 billion. I thought that it might be about $100 billion, but these are difficult matters, and they are related to the price of oil. The deficits of the non-oil exporting countries amount to between $45 billion and $60 billion. There is a great need for an international mechanism to channel some of that money to the less-well-off countries rather than to allow it to stay in bank accounts in New York, London or wherever.
Until now the commercial banks have not done a bad job in channelling that money. The multinational banks are in business to lend money, and the salaries of their managers are paid as a result of lending money. But we are now approaching a different situation. More and more frequently those banks are facing reserve asset requirements. Margins on lending are getting smaller, and the banks are becoming worried. If one or two banks collapse and one or two countries are unable to repay the money, part of the multinational banking system could collapse.
There are many multinational bankers—[Interruption.] I certainly believe that the system could collapse. I thought it would have happened before now and I think the possibility is even greater now. The Governor of the Bank of England and other central bankers are, as their speeches show, very concerned about it. There is a definite possibility of this happening, and if it were to happen the repercussions would be considerable.
I do not believe that permanently this is the role for the commercial banks. I recognise the problems and the very great difficulties. I think it should be done by an international institution. Some of my hon. Friends may say that it is not for

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the IMF, but the IMF is there, and provided that it can change its attitudes—and possibly even change its statutes—I believe that it should take on a greater role in channelling this money to help the poorer countries.
Mr. Stephen Dorrell (): Does the right hon. Gentleman agree that the point he is making has nothing to do with the argument that my hon. Friend the Financial Secretary was putting forward about the IMF being used as a quasi-aid organisation? If I understand him aright, he is suggesting, not that the money should go to the Third world as a form of aid to the Third world and the less developed world but that it should go—as is clearly in the economic interests of the West—as credit to them to enable those countries to buy the goods that we need to be able to sell to them if we are to secure an economic recovery for ourselves.
Mr. Davies: I think that the Financial Secretary was using the word "aid" in contradistinction to loans at a proper commercial rate of interest, with all the conditionality involved. That was how I understood him to be using the word "aid". I think he was drawing a distinction which perhaps we should not draw any more.
The IMF should possibly change its statutes, because it has been a balance of payments organisation, if one may put it that way. The whole basis of the IMF was that it merely provided room for balance of payments adjustments. That may be all right for Western industrialised countries, but, if the IMF is to play a role in channelling OPEC surplus money to countries that are too poor to operate in the same way as Western industrialised countries, it will have to change its statutes, if necessary, and its whole attitude. That means, not that it should not apply normal prudent yardsticks, but that it must change the way in which it lends money.
After the war we seem to have set up the IMF, which is on one side of the road in Washington, as the bank for the rich, and the World Bank, on the other side of the road, as the bank for the poor. I do not think that that sort of arrangement should continue in the present international monetary world,
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with all the problems that exist. We have to look again at those institutions. As the hon. Member for Loughborough (Mr. Dorrell) said in his intervention, it is in the interests of the West to ensure that this money is channelled to the poorer countries so that they can buy our goods and build up their own industries and therefore contribute to the health of the international economy.
It was pointed out recently in an article in the Financial Times that the IMF has only about $8 billion outstanding to the non-oil less developed countries. If we take repayments into account, we find that it has lent very little to these poorer countries because, as I have said, it has been a kind of bank for the rich Western countries and is not really geared to do what has to be done.
There are two criticisms to be made of the IMF, although I accept that they have restraints in their statutes. Its only policy is to apply a deflationary policy. If there is a problem, its policy is, first, to cut public expenditure; second, to devalue; third, to have tight targets for M3; fourth, to cut food subsidies; and, last, to have no import controls. That is the classic—almost monetarist—way of approaching the problem.
That might or might not be all right for a developed Western economy, but it makes no sense at all for the poorer countries. These monetarist policies mean nothing to the pooorer countries, especially to those which are primary producers. Looking at the examples of Jamaica, of Bolivia and of Ghana over the last few years, we can see that the IMF has been completely insensitive and quite incapable of understanding the real problems of those countries. Not only does it often apply classic monetarist policies; it does not differentiate between different economies. The economies of those three countries are completely different and the same orthodox economic solutions cannot properly be applied to all of them. That, again, is what has happened and that is the problem with the IMF.
We would put forward two conditions and qualifications. First, the IMF must look to its status. It must cease to be a balance of payments organisation mainly helping the richer countries to adjust their balance of payments between

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one and the other. It must try to develop to help the poorer countries. It must raise its own capital and try to channel some of the money in commercial banks in the interests of the world economy. It must look at import controls not as being terrible but as a partial solution sometimes to the problems of the lesser developed countries.
Secondly, the Foreign Office, which seems to be more progressive than the Treasury in this matter, in its commentary on the Brandt report, recognised that the IMF must change the way that it chooses staff. It must look elsewhere for recruits. It is no use recruiting staff from the Chicago Business School. They may be all right to deal with various orthodox economic problems. Conservative Members shake their heads. This paper has been produced by the Government and it clearly states that the IMF must take into account that there are different problems in developing countries and that its staff must understand them. If it recruits staff from the universities and business schools, which often do not teach them about these problems and deal only with classic economic problems, they will not be as sensitive to the problems of the poorer countries as they should be.
Those are the two conditions and qualifications.
The Financial Secretary was rather negative. He did not recognise that there was a problem. My hon. Friend the Member for West Lothian (Mr. Dalyell) mentioned Pierre-Paul Schweitzer, but the hon. Gentleman did not think that there had been a change. I think that there has been a change. This depends on the personality of the managing director. It may be that the present managing director looks at things differently from his predecessor—I do not know—but there certainly has been a change.
I hope that the Government will recognise, as the Foreign Office did to some extent in its memorandum on the Brandt report, that there is a problem and that it is necessary for institutions to change. Institutions ossify and conditions change. It is for the British Government, and other Governments, to try to change the attitude of the IMF to ensure that it is in tune with the problems of the international monetary system, especially the problem of channelling these vast surpluses to help the poorer countries.
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We shall not officially oppose the order, but I hope that in future we shall hear something positive from the Government on their approach to these matters, not the negative approach that we have had from the Financial Secretary.
10.47 pm
Mr. Stuart Holland (): Many of us are deeply concerned about the current activities of the IMF for a variety of reasons. One is its economic rationale, precisely because it is operating on criteria which are more relevant to the developed than to the less developed countries.
Another reason is the alleged neutrality of the intervention of the fund. The Financial Secretary said that the fund has to take account of economic and social circumstances, but in reality many of us are concerned that it does more than that and directly intervenes in the political process in individual countries and discriminates between those countries in the allocation of funds.
The first analytic point, which has been made by implication by my right hon. Friend the Member for Llanelli (Mr. Davies), concerns the general philosophy of monetarism in relation to financing by the fund. Many Government spokesmen now pride themselves on the fact that we have avoided beggar-my-neighbour protection, on the model of the 1930s. But, in practice, the standard fund formula of a domestic deflation of demand, coupled with devaluation, as a policy for rectifying balance of payments deficits has now been imposed on so many countries on such a scale that it is contributing not to beggar-my-neighbour protection but to beggar-my-neighbour deflation. In other words, the contraction of spending by several countries on which the International Monetary Fund has imposed deflationary policies is restricting world trade. Thereby, that falsely-based monetarist philosophy is actually aggravating the level of trade, and aggravating not only the exports of the less developed countries, but those of the more developed countries. It is a beggar-my-neighbour syndrome, as serious as in the 1930s, and even more serious in respect of one crucial aspect of the fund's intervention, namely, the attack on public spending programmes. Whether that country is Egypt, Tanzania, Portugal or Jamaica, there is a

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clear and explicit bias in the fund's programme towards individual countries.
Many hon. Members on the Labour side of the House, when considering whether to oppose the order, should take account of a current position of great seriousness—the relation of Jamaica with the IMF, which throws gravely into question the rather bland statement from the Financial Secretary about the relative neutrality of the fund's intervention. For example, the Financial Secretary said that the fund's managers take into account changing world circumstances including the OPEC price rises. If the fund takes them into account, what sense can be made of the IMF internal memorandum of November last year, which admitted in respect of Jamaica
"a number of events—severe flooding, sluggish mining (bauxite) exports, and a sharp increase in fuel prices and foreign interest rates—mostly unforeseen and outside the control of the authorities—have worsened the balance of payments prospects for 1979 in spite of a better than expected performance with respect to tourism and non-traditional exports and an import level somewhat below the original forecast."
Granted that Jamaica was performing somewhat better than expected on its import level and tourism earnings, and granted the admission of drought, disaster and external factors involved one could expect the fund, in those circumstances—if we are to take the Financial Secretary seriously—to have done precisely what he now says the fund is doing, namely, to extend further finance so that, on the second of his criteria, Jamaica could have longer assistance for stand-bys, to give, on his third criteria, more time for adjustment, and to relax his fourth criteria of conditionally—that is, the conditions for lending. In practice, that was not so.
The fund claimed that since Jamaica had fallen short on one of its performance criteria by less than 10 per cent. it could not support it. In practice, that means that it forecloses on the country. It means that the country is thrown into a position virtually equivalent to bankruptcy. For a country with very primitive resources that means not only taking oil from the transport on the roads but, in a country like Jamaica, taking the oil from the oil lamps on the tables by which many homes are lit.
Mr. Frank Hooley (): On a point of accuracy, my impression was not that the fund would not support Jamaica, but that Jamaica would not accept the fund's support on the conditions that it wished to impose. That is somewhat different.
Mr. Holland: I am grateful to my hon. Friend for his intervention.
If we look at the conditions on which the fund is offering that intervention, we see that they range far wider than its own test of purely economic criteria. For example, the internal memorandum of the fund claimed:
"The Government is not seriously committed to its economic programme, judging from perceived inconsistencies between its foreign policy and domestic political stances on the one hand, and the dictates of the programme on the other."
What does that mean in practice? Does it mean that Mr. Manley's Government happens to be avowedly Socialist? Does it mean that Jamaica has contacts with other countries in the Caribbean such as Cuba?
The key test which the fund was making here was political, not economic. We know, in practice, that on many missions which the fund makes to Latin America, it first clears its brief with the State Department, and that this is an area of intervention where it is clearly within United States influence and is not the neutral technical instrument which we are led to expect. This is of very considerable significance, granted that not only is the United Kingdom paying towards the IMF funding but also that we have a United Kingdom director on the fund.
The Jamaican example is significant. When the fund found, in April this year, that the Jamaican Government would not accept the scale of the deflation demanded by the fund, it claimed that to complicate matters for itself
"the balance of power within the ruling party shifted decisively in favour of those who opposed the basic tenets of the programme, viz., reliance on the market mechanism and on the private sector to effect recovery."
This is what the fund is actually about. It is a very serious situation indeed, not only for Jamaica but also for a country such as Tanzania.
The irony is that when the fund negotiates with a country such as Poland,

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it does not, in this sphere of influence, actually insist on the
"reliance on the market mechanism and the private sector to effect recovery."
When it was lending to certain other countries, for example, to Egypt, although the terms of the fund's loan to Egypt were enough to cause riots in the streets, it did not insist on the wholesale change of the Government's social priorities because that country happens to be in a different sphere of influence and because of wider and quite clear United States interests in relation to a Middle East settlement.
I shall not elaborate these specific cases further, but I want to underline the point that the Jamaican Government are in the front line not only of a fight against the pressures from the IMF, not only against the principles of monetarist policy, but also pressures of United States foreign policy.
It is improbable that hon. Members on the Opposition Benches—although I cannot commit them to this—will oppose the order. If we do not oppose the order, it will be because we are concerned that more funds should be made available on a major scale to increase international liquidity. But if we do not oppose the order, it will be with the most major misgivings on the policies of the fund.
We are concerned about the nineteenth-century ceteris paribus reasoning of the fund, its assumption when it deals with an individual country that the rest of the world economy basically stays in some kind of equilibrium rather than the fact that, as the Financial Secretary has admitted and as the fund formally admits, in practice everything is changing. We are concerned about the fact that the fund's reasoning on exports, devaluation and internal deflation—the same package as it recommended for this country—assumes that trade on a world scale is predominantly between different companies in different countries, whereas in fact it is now predominantly within the same companies in different countries. The global dimension of multinational companies' production is now greater than the total volume of world trade.
In key cases in Latin America, and in Jamaica, for example, where an individual commodity such as bauxite, subject to the pricing of multinational companies, pre-
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dominates and in the export trade, the activities of these companies and non-price factors are more important than the devaluation itself. To impose a devaluation, as the fund has done on several of these countries, in practice means raising their import prices without increasing their external export revenues.
I therefore urge Opposition Members, in considering whether to support the order, to urge on the Financial Secretary and the Government the case for challenging the beggar-my-neighbour deflation policies of the fund and the case for saying—as my right hon. Friend the Member for Llanelli argued—that if, in practice, we are to support the fund we must do so in terms of a transformed role not only for the fund itself, but also for other international agencies. There must be a recycling of OPEC surpluses and an extension of credit and aid to less developed countries.
It used to be argued that the less developed countries benefited from trade more than from aid. They now need both aid and trade. The IMF is not the most appropriate instrument for the job. It was originally tailored to the needs of the more developed countries and it is not serving the interests of the less developed countries. In many cases it is damaging their interests. We must strongly support the Brandt proposals for a world development fund within the context of not only pushing for a recycling of OPEC surpluses, but also of a higher aid content.
In addition, we must endorse a framework by which fund policies do not mean that individual countries are subjected to the trading and pricing decisions of multinational corporations rather than to those of their Governments. These practices can and should be restrained by both borrowing and aid-receiving countries without imperilling aid finance and transfers. For example, in the Portuguese case the Government, in negotiation with the fund, argued in favour of tougher policies towards foreign multinational capital. It was made effectively plain that aid would not be forthcoming if that policy was pursued.
Further, we must ensure that the Governments of recipient countries decide how to mix their economies between public and private enterprise, and in what way they distribute reflationary spending between their social and personal sectors.

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Not least, we must demand the joint reduction of interest rates by central banks and donor agencies, which would be justified by a higher volume of lending and sales on a global scale. I stress that I am recommending a "no holds" policy in fund lending towards the less developed countries. It does not mean blank cheques for the Mobutus and Somozas of this world so that they can squander funds as they think fit. It means recognition—as stressed in the Brandt report—that there is a genuine mutuality of interest between the less developed and more developed countries.
On several estimates, the sheer scale of the under-utilisation of resources is massive. It has been estimated in the Brandt case that that amounts to $200 billion in the developed countries.
The programme in favour of the less developed countries on both an aid and trade basis should be far in excess of that now being considered. We must insist that any further finance for the fund or major extension of its international financial role must be on the basis of "Keynes plus" rather than "Friedman minus". We must transcend this beggar-my-neighbour deflation of trade with a commitment to reflation of world trade through the channel of development in the context of a transformed fund.
11.3 pm
Mr. Frank Hooley (): The debate is becoming extremely interesting. A little while ago I was concerned about it, particularly—to be candid—in relation to the Labour Party. It seemed that we were in danger of attacking the concept of international mechanisms as regards co-operation in monetary and aid methods. I want not to destroy the IMF but to reform it. That is important, and needs to be said from this side of the House.
I am aware of the various criticisms of the IMF. The criticisms of individual cases and of its overall attitude to balance of payments problems over the past decade are justified. The IMF is becoming aware of those criticisms and is endeavouring to respond.
It has been said that the IMF has two roles. First, it has a traditional role within the OECD and the industrial
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North. Indeed, it was largely designed for that purpose. Secondly, it has a developing role—I take issue with the Financial Secretary for suggesting that it is not a proper role—in those Third world countries that run into difficulties.
I welcome the new idea of the substitution account, which was referred to by my right hon. Friend the Member for Llanelli (Mr. Davies). It is rather ironic that the Americans have been opposed to the account. Had it been established and had it existed, it would have saved President Carter a considerable amount of trouble.
If we can bring into effect an effective substitution account using the SDRs, that will take the pressure off a major reserve currency. It will save the United States, or possibly sterling should it become a reserve currency again, heaven forbid, pursuing deflationary policies for balance of payments reasons. That will be the effect if the strain can be taken by an international subsitution account. I welcome my right hon. Friend's comments.
I hope that we shall have a positive and energetic policy within the IMF in support of the idea from Her Majesty's Government. I hope that it will exercise some persuasion on the foot-dragging of the West Germans and the Americans, who do not seem so far to have grasped the importance of the concept.
It is not correct to say that the IMF should not have a role in aid for the Third world. The compensatory financing facility and the oil facility—there is a third factor that I cannot call to mind—were specifically designed within the IMF to help to meet the problems of the Third world. It could be said that it was not aid because it related to balance of payments, but we are drifting into a grey area if we try to divide what is aid and what is balance of payments help because both are inevitably interlinked.
In the broad sense it is not true to say that the IMF does not have and has not had an aid role. How has it exercised that role? We run into the conditionality argument, which has been so well spelt out by my hon. Friend the Member for Vauxhall (Mr. Holland) and illustrated by the various examples that he mentioned. I do not need to go into that in great detail.

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It is interesting that the IMF is becoming extremely sensitive in its published statements about that problem. It is getting neurotic about the statements that the IMF kills or starves babies.
Mr. Frank Dobson (): Quite true.
Mr. Hooley: I hesitate to say that. However, there is a school of opinion that claims that the IMF's rigorous conditionality has done serious social and economic damage to some Third world countries that have asked for its aid. Undoubtedly, there are indications—I do not know whether they stem from the change in managing director—that the IMF has become sensitive to such criticism and is endeavouring to do something about it.
The Financial Secretary mentioned Guyana. That is an interesting example, although it is regrettable that the exercise in respect of Guyana, sensible as it is in itself, where we have had a marriage of effort between the IMF and the World Bank, should have been in favour of a Government who seem to be killing the leaders of the principal opposition parties. That is a somewhat separate issue. Nevertheless, the concept of marrying up the efforts of the IMF to deal with the balance of payments problem of a Third world country to those of the World Bank to do something about the real resources of wealth of that country is a sensible and good idea. I hope that it will be developed, although perhaps in happier circumstances than in Guyana.
My fourth point concerns the control of the IMF. It is dominated by 20 of the wealthiest countries in the world, and particularly by the United States. It has been argued that the articles of agreement should be amended to allow Third world and OPEC countries to have a much more direct say in how policies are formulated, so that the IMF is not felt to be the preserve of the rich but a genuinely international institution in which North and South, and, if necessary, East and West, can combine for the benefit of the whole world.
This is an important debate. The debate on the role of the IMF is part of the fundamental debate about the international mechanisms, including GATT, that have served us reasonably well for two and a half or three decades, but which
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now need re-examining. However, in our enthusiasm for perfectly proper reform, we should not undermine the immensely important and sophisticated mechanisms that mankind has developed for itself over the past 30 years simply because they may have gone down a road that we do not care for.
11.12 pm
Mr. Frank Dobson (): When I first read the title of the order—
"International Monetary Fund (Increase in Subscription) Order"—
I thought perhaps the Chancellor of the Exchequer had received one of those letters that members of organisations these days receive, saying: "Dear Member, Owing to unforeseen circumstances, the present rate of inflation and the disastrous demands for wage increases by our members, unfortunately it has been necessary to call upon you once and for all to make an increase in your subscription." If there are unforeseen circumstances, and the world economy and trade are in such desperate straits, the IMF, as one of the primary monetary and financial organisations that the world has established to make things better, has been failing badly in the role that it was given in 1945.
It is worth reading two of those famous articles that set out the purposes of the IMF when it was established in order to see how far it has moved away from them. I do not know whether I agree that it is a body worth preserving if it can move so far away from its clearly enunciated purposes. One of its purposes is:
"To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of productive resources of all members as primary objectives of economic policy."
That the IMF has not done. It has acted contrary to that article on many occasions. It may not have intended to do so, but the practical effects of its intervention have been contrary to that article.
A further purpose enunciated in 1945 was:
"To give confidence to members by making the Fund's resources temporarily available to them under adequate safeguards, thus providing them with opportunity to correct mal-

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adjustments in their balance of payments without resorting to measures destructive of national or international prosperity."
That sounds sour to many poor people whose countries have been visited by the hatchet men from the IMF. Those people have suffered as a result. I make no mention of the adverse effects on the standard of living of ordinary people in this country that resulted from the IMF's most recent foray into the British economy.
The general approach of the IMF to underdeveloped or developing countries is to insist on domestic deflation, and cuts on welfare provision for ordinary people and public expenditure generally. It has always set out to frustrate the efforts of member Governments to redistribute the wealth of poor countries in favour of the worst off. It has insisted on the introduction of anti-strike or antitrade union legislation.
It has also set about promoting the role of the multinational companies in international trade. Consequently, many of its policies have smothered locally based industry and put it at a disadvantage in relation to the multinationals. It has insisted on the member country offering tax benefits to foreign investing companies which are not available to domestic companies and has also insisted, on occasions, that the country guarantees remittance of profits back to whichever country the multinational decides is convenient to own the multinational when sorting out how to minimise tax payments by shuffling their profits round the world.
These policies have been pursued unremittingly in the developing world. Generally speaking, the IMF has forced countries to adopt policies which put those countries increasingly at the mercy of the IMF and the richer countries rather than allowing and encouraging them to promote their own independence instead of dependence on the developed West. This can only be described as a long history of undermining democratically elected Governments by deliberately frustrating the aspirations of the ordinary people of many underdeveloped member countries. That has happened recently in Jamaica. It has occurred in many other countries.
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Sometimes, when the IMF has finished its process of undermining democracy, by imposing politically unacceptable solutions on the democratic underdeveloped countries, it has moved in like a vulture following the military coup that the fund itself has precipitated. A wonderful example is Chile. Not long after the generals had overthrown the democratically elected Government the IMF was picking up the pieces and praising the generals. Seen in the terms in which the IMF views Governments, economies and societies, that is right. The generals are its sort of people. Generals, armies and those possessing no democratic relationship with their populations are the people who can keep down the aspirations of their poor populations. The IMF has promoted such people.
In such circumstances, I cannot bring myself to say that we should not vote tonight. I believe that we should divide the House and vote against the order. The phrase "IMF riot" is used in the underdeveloped world. The IMF has often insisted on policies which have so depressed the standards of living of ordinary people that riots have resulted. It is unlikely that we can transform the organisation. It would be better if it were scrapped and replaced.
Someone who is more familiar with the issue than myself, and who is more familiar with the IMF's activities in the underdeveloped world than any hon. Member, is that good Socialist the president of Tanzania. He stated:
"The problems of my country and other Third world countries are grave enough without the political interference of IMF officials. If they cannot help, at the very least they should stop meddling."
11.22 pm
Mr. Tam Dalyell (): I do not know what conclusions to draw, but I suspect that if this debate had taken place 15 years ago there would have been a full House of Commons to hear it. Those of us who remember that incredible night involving George Brown, the then Foreign Secretary, and his ramifications of IMF prejudice must reflect that something has changed in the nature of British politics when the IMF attracts so comparatively few people to a debate, in spite of the deeply interesting speeches of my right hon.

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Friend the Member for Llanelli (Mr. Davies) and my hon. Friend the Member for Vauxhall (Mr. Holland).
I should like to ask one specific but long question arising out of the Brandt report. On page 255 of the report, recommendation 6 states:
"The use of IMF gold reserves either for further sales, whose profits would subsidize interest on development lending, or as collateral to borrow for on-lending to developing countries."
I should like to ask a question about the collateral that can be provided for gold reserves. The matter is mixed up with aid-giving.
There is a strong impression that in the days of Pierre-Paul Schweitzer there was a different concept by leading members of the IMF of its role. It had a great deal to do with Third world aid. Over the years, I do not say that it has become harder, but the concept of function has changed.
It is stated on page 246 of the Brandt report:
"There are ways of raising more automatic resources through the monetary system … These measures could be implemented relatively quickly. The continued creation of Special Drawing Rights consistent with the total reserve needs of the world economy and a more equitable allocation of SDRs to developing countries would be one such measure. Another measure lies in the use of gold holdings with the IMF. One possibility would be to use these gold holdings as collateral for raising resources in financial markets which can be re-lent to developing countries."
Do the Government agree with that? It is a great pity that in neither of our debates on Brandt—both the Friday debate, in which I took part, with a number of my hon. Friends, and the major Monday debate—was there any reference by the Government, as far as I know, having checked, to their attitude to these propositions.
The report goes on:
"The profits from the progressive sale of the remaining two-thirds of the IMF's gold holdings—about 100 million ounces—could amount, on the basis of a market price of $300 to $400 per ounce of gold, to a sum in the order of $30 to $40 billion over a period of time. Such a sum could yield annual revenues in the order of $2–4 to $3–2 billion, assuming a return of 8 per cent. If these resources are used to subsidize interest, they could enable a substantial volume of semi-concessional finance to be made available to developing countries."
That would do a heck of a lot.
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"Members could decide in negotiation the proportion of the profits which would be devoted to development lending as well as the purposes for their use. Even if member countries insist on keeping a part of these profits, they might agree to keep their share of the profits on deposit, and to permit the annual return from these deposits to go to development uses."
That was the considered view of the Brandt committee.
At a meeting upstairs, the right hon. Member for Sidcup (Mr. Heath) was asked whether he was serious about this recommendation. He very honestly and candidly said that there were certain proposals that he would find it very difficult to agree with and sustain an argument about. The arms tax, about which I asked him, was one. But the right hon. Gentleman made it quite clear that he and his colleagues were absolutely serious about this recommendation.
Therefore, I ask the Government what study has been made of Brandt's views on the whole question of gold and the collateral use of gold for development finance. If they do not accept it, will they use this opportunity to say why they do not?
It is a great pity that Brandt has been discussed in such general terms. Certainly some of us in the coming Session intend to go through the recommendations point by point. It may not be very sensible to suggest that any Government would accept every recommendation simply because it is enshrined in Brandt. I do not think that anyone would be so silly as to suggest that. But at least on this kind of recommendation, and many others, there comes a point when the Administration of the day must give good reasons why they are not acceptable.
I should like to hear the Financial Secretary say a word or two on the whole question of gold and the nature of the collateral benefits that could accrue to developing countries and—as is taken for granted by some of my hon. Friends, particularly my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) and others who also know a great deal about the matter—the consequent advantages to British and other Western European industry.
11.28 pm
Mr. John Browne (): Unlike the hon. Member for Holborn and St. Pancras, South (Mr. Dobson), I

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believe that the International Monetary Fund, together with its sister organisations—the World Bank, the International Bank for Reconstruction and Development and the International Finance Corporation—has done, given the circumstances of the world, a very good job. Over the years since those organisations were formed we have had a time of unparalleled economic growth, unparalleled financial prosperity and unparalleled international peace, on a major scale. For those three matters we owe a great deal to the efforts of the IMF and the World Bank and their member nations in sticking by their original principles, which grew out of the Bretton Woods agreement.
Not everything has been perfect, and I have a number of criticisms. They are important criticisms when we come here to vote an extra 1½ billion SDRs in our subscription. The responsibilities of the IMF were to encourage healthy economic growth, as we have been told by the hon. Member for Holborn and St. Pancras, South. That is true and it has happened. Whether, in latter years, growth has been so healthy is an open question.
Secondly, the aim was to discourage economic instability by reducing extremes of surpluses and deficits. The IMF has been fairly successful in controlling, and influencing for the good, reductions in deficits. Where it has failed has been in reducing surpluses. This has been a special problem since 1973, with the vast OPEC surpluses. One Opposition Member mentioned those who control the IMF and the World Bank. Originally the IMF was very much a United States-influenced body. In those days the United States ran gigantic surpluses. There was very little effort, as far as I can see, to reduce surpluses. All the effort was to reduce the deficits. Now, the United States is running deficits and the situation has changed. This will be a good thing.
The United States, with its large shareholding in the voting sense, has started to support a policy of equality. I ask whether it is not too late, when we have these gigantic OPEC surpluses, to stop now using only our old mechanisms. We have to try to achieve a balance rather than just hitting at deficits. I hope that
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our officials will press for such a balance now that they will get the agreement of at least the United States.
A third aim, or responsibility, of the IMF was to maintain international monetary liquidity by making facilities available to member countries. It has succeeded very well in this—one might say too well. The fourth, and, I believe, the most vital, of the responsibilities of the IMF was to maintain international confidence in money. I believe that the IMF, not alone but together with its member Governments, has most certainly failed in that, especially in recent years.
I want to spend a short time dealing with the issues of excessive liquidity and lack of confidence in money, illustrating what I mean. International liquidity has certainly been increased. We are increasing IMF liquidity tonight. I wonder whether past increases have been a camouflage for various nations which have not accepted monetary disciplines or faced economic reality. If they have, such increases in liquidity have largely been a disservice to the world because the basic problems have grown and grown whilst the IMF and other world organisations have pushed more and more dollars after the problems without solving the underlying problems. This is similar to the problem we now have in our own economy. The Government should be pressing for the same sort of monetary discipline for the IMF and the World Bank as they are pursuing at home. It is important that tonight's 1½ billion SDR increase in our subscription—with which I agree—should be accompanied by a demand for a much more serious and disciplined approach to its spending and the granting of liquidity to member nations.
It is appalling when we think that $450 billion a year is spent on armaments in the world. I am not saying that the IMF is to blame for this. The big super-Powers account for a huge chunk of it. But I am sure that member nations and recipient nations which benefit from the World Bank spend undue amounts of the money they receive on armaments. This is not a good use of proceeds, and we as a member nation must be much more strict in demanding a proper use of proceeds from the IMF and the World Bank.
My final point is about confidence in money. This is one of the five classic

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duties of any Government, and, therefore, it must be one of the five classic duties of an international government organisation, particularly one involved in finance. At birth, all these sister organisations were founded when the United States dollar was king and there was universal confidence in it. There was no real monetary problem for the world. However, with the massive deficit financing of the Vietnam war, because the United States Government would not face their population with reality and demand extra taxes to pay for the war, people began to get suspicious of the United States dollar.
The deficit financing of the United States ran up large surpluses in other countries. One of those countries, France, started to ask for the conversion of its dollars into gold. But the most important fact about the United States dollar was that, as a last resort, it was convertible into gold. The late President de Gaulle started to convert his French national dollar surpluses into gold. Confidence in the dollar was maintained. But in November 1971 President Nixon closed the "gold window" and with it the last link of any major trading currency with gold. Since then, we have had international monetary chaos largely because monetary confidence has evaporated. It has been salvaged partially and temporarily by all sorts of swap arrangements—this deal and that deal. There has been a tremendous financial massage to try to get—
Mr. Dobson: The gold standard.
Mr. Browne: The hon. Gentleman refers to the gold standard, but he must realise that there are four grades in the gold standard. I am not talking about going back to a full gold standard. I am talking about the gold exchange standard, where one deals and trades in normal money, but the paper money is itself convertible into gold.
I ask my hon. Friend the Financial Secretary to press, in the IMF and the World Bank, for the reinstitution of the gold exchange standard. If the United States is unwilling to have the United States dollar itself again convertible into gold, as it was until 1971—I see some Labour Members smiling. They should remember that there was relative international monetary stability until 1971. This was the great growth phase. The chaos has happened since
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1971, a time of no gold-currency convertibility. I believe that confidence will be restored only if, somewhere along the line, gold convertibility is restored. SDRs are virtually mere accounting transactions. I have yet to see a paper SDR—even a piece of paper. I think that even if the SDR is adopted, somewhere in that SDR there must be a gold convertibility clause. I believe that we should press for that at the IMF. I ask my hon. Friend to consider that and press for it in future negotiations, particularly as we are being asked to ante up our IMF subscription. This is the very time when we can ask for certain conditions.
Mr. Anthony Nelson (): I am interested in my hon. Friend's suggestion. Does he agree that one thing that has changed substantially in recent years is that the holdings of gold are more widespread than used to be the case? Whereas they were predominantly in the coffers of national Governments, notably in Europe, in recent years the removal of convertibility and the free exchange market in gold has meant that the ownership of gold has been much more widespread. I mention this because the result has been that gold has become a much more volatile commodity on the international market. Therefore, I—and, I suspect, others—question whether it is right that it should be restored as a basis for the value of the funds to which my hon. Friend is referring.
Mr. Browne: That is a most interesting point, and basically I agree with my hon. Friend. I would solve the problem by having gold convertible but not at the free market price. There is indeed a real risk that gold has catapulted itself out of the monetary system and out of its stabilising role. Governments must start clawing it back. The prime reason for this volatility in gold price is the lack of confidence in paper money. It is the duty of Governments to restore that confidence, and it is they alone who can solve the problem with gold. If they do not solve it, we shall end up on the full gold standard. People will not take money. They will accept only gold bars and gold coins. There will then be a world recession that would make 1939 look like a picnic.
The solution that I suggest is that the members of the IMF should agree a pre-

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mium conversion price for gold. For example, the price of gold today may be $650 an ounce. A new international currency should be created. I suggested such an international currency for Europe in 1972 and called it the Karl, because Karl der Grosse-Charlemagne was the first unifier of Europe. Also the K was a new monetary sign. None the less, if we create a new international currency to be used only by central bankers, not even used by the banking system—it could not be successful without all economies being the same—and convertible into gold not at, for example, $650 an ounce but at a premium of, say, $850 an ounce, people would not immediately convert into gold without a sound reason. This would start to restore confidence in the paper Karl currency because it would be convertible, not at the market price but at a big premium.
When I originally put the idea forward in 1972, gold was standing at less than $100 an ounce. I said that the conversion premium should be $200 an ounce. In those days that could have been done, but $200 an ounce is out of the question now. Some thought must be directed to restoring gold-currency convertibility while at the same time deterring a rush to convert the currency into gold. This could be done by creating a premium conversion price.
Of course, the selection of a specific but adjustable premium would be up to the members and the experts in the IMF and of the member Governments. With closer co-operation in the world, discount facilities could be allowed in the new currency. As a second phase, banks other than the central banks could then be allowed to use it if it were a success in its first phase as a central bankers' currency. I think that it would be a great success if we had the courage to implement it on a central banker basis. I hope that that answers the question by my hon. Friend the Member for Chichester (Mr. Nelson).
With that I should like to close and to ask my hon. Friend the Financial Secretary if he will consider my suggestions seriously.
11.43 pm
Mr. Lawson: In the few minutes that remain I cannot do justice to the many important issues that have been raised in
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the debate. Perhaps, therefore, it will be appropriate for me to begin by replying to some of the points made by the right hon. Member for Llanelli (Mr. Davies). He seemed to wish to merge the IMF and the World Bank into a single institution. I think that that would be a great mistake. I think that he was wrong to characterise the difference between the fund and the bank as the fund being for the richer countries and the bank being for the poorer. That is not the case. The difference has been much more accurately described in the rubric that the bank is a fund and the fund is a bank. They have very different roles.
The right hon. Gentleman was on to a better point when he asked what the fund was doing to help the developing countries that have been hit by the oil price increases. The International Monetary Fund fully recognises the difficulties of the less developed countries, and it is currently examining ways of making an increased contribution to the recycling process. Various measures, apart from the increase in quotas that we are now discussing, such as direct borrowing from the OPEC countries by the IMF, are under consideration.
The right hon. Gentleman was widest of the mark when he suggested that the fund had no interest in the less developed countries. The fund's operations are geared extensively to the needs of the developing countries. Until a few years ago, most of the standby arrangements were for 12 months or less. The fund has now recognised that, given the changes in the economic environment, many members cannot be expected to correct their balance of payments in so short a period. As a consequence, many arrangements now provide for longer adjustment periods.
The fund also has an extended financing facility providing enhanced credit over three years, with repayments staged up to 10 years. A supplementary financing facility, to which the hon. Member for Sheffield, Heeley (Mr. Hooley) referred, provides extra and substantial credit for members with standby and extended arrangements whose financing problems are large in relation to their quota. Of the $10 billion available under this facility, nearly $4 billion has so far been committed, all of it to less developed countries.

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The compensatory financing facility—the so-called CFF—provides credits virtually without conditionality to members at 100 per cent. of their quotas. The quota increase that we are now debating will increase the sums available under this heading by 50 per cent. Fifty-two less developed countries currently have drawings amounting to $3–4 billion on facility, which is nearly 40 per cent. of the fund's lending to the less developed countries.
Following a disposal of one-sixth of the fund's gold holdings—this refers to some extent to the point made by the hon. Member for West Lothian (Mr. Dalyell), although the Brandt proposal on gold is under discussion and is being considered by the IMF and the World Bank—about $1–3 billion of profit has been distributed directly to 104 developing countries. A further $2–6 billion has been lent to the poorest less developed countries at a ½ per cent. interest rate, with a maturity of six to 10 years. That gives the lie to much of what has been said by Labour Members, including the right hon. Member for Llanelli. The total lending to less developed countries by the fund currently stands at $11 billion—86 per cent. of total fund lending. Concessional lending to the less developed countries stands at $7–8 billion and constitutes 60 per cent. of total lending to all its members.
The fund insists on certain economic policies, in the sense of conditionality, which will lead to the recovery from the problems from which the countries are suffering. The hon. Member for Vaux-hall (Mr. Holland), with his infantile
Leftist economics, supported by the hon. Member for Holborn and St. Pancras, South (Mr. Dobson) and the right hon. Member for Bristol, South-East (Mr. Benn), suggested policies which would be disastrous if they were imposed in this country, and which would be equally disastrous if they were imposed in the less developed countries. Therefore, it is not surprising that the International Monetary Fund has no wish to see those policies followed in the countries concerned.
Mr. Stuart Holland: Rather than launching into elaborate adjectives, will the Financial Secretary answer a simple point? If there is a joint deflation in main trading countries, does it or does it not reduce their import trade from each other, and does it or does it not reduce their export trade to each other? When he argued that the sums he mentioned give the lie to arguments of Labour Members, is he not aware that the Brandt report reckoned that the total trade deficit for less developed countries this year would be $60 billion as opposed to the $7 billion or $8 billion about which he spoke?
Mr. Lawson: I hardly have time to reply to the hon. Gentleman. I entirely repudiate the suggestion that the policies of sound economics—
It being one and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business):
The House divided: Ayes 75, Noes 14.

Wakeham, John

Watson, John

Waldegrave, Hon William

Wheeler, John

TELLERS FOR THE AYES:

Walker, Bill (Perth & E Perthshire)

Whitney, Raymond

Mr. Tony Newton and

Waller, Gary

Wickenden, Keith

Mr. David Waddington.

Ward, John

Winterton, Nicholas

NOES

Browne, John (Wincheser)

Evans, John (Newton)

Roberts, Alan (Bootle)

Campbell-Savours, Dale

Faulds, Andrew

Soley, Clive

Cook, Robin F.

Hamilton. W. W. (Central Fife)

Cryer, Bob

Haynes, Frank

TELLERS FOR THE NOES:

Dalyell, Tarn

Holland, Stuart (L'beih, Vauxhall)

Mr. Frank Dobson and

Duffy, A. E. P.

Parry, Robert

Mr. Joho Home Robertson.

Question accordingly agreed to.
Resolved,
That the draft International Monetary Fund (Increase in Subscription) Order 1980, which was laid before this House on 4 July, be approved.

AXMINSTER (BYPASS)
Motion made, and Question proposed, That this House do now adjourn.—(Mr. Cope.)
12.1 am
Mr. Peter Emery (): It is with considerable pleasure that I raise, even as the first minute of the new day strikes, the largest single traffic and road problem in my constitutency, namely, the need for a bypass to the town of Axminster. It is no new idea or scheme. I have had correspondence during the past 13 years with different Ministers of Transport. I had hoped that the idea was enshrined and certain from the time of the 1978 White Paper, but it has been fought for since it was first predicted in 1949.
Axminster is a bustling, small in modern terms, town serving and connecting East Devon to parts of West Dorset and South-West Somerset. Its population in electoral terms is about 4,000, out of a total population of 5,500, but it has a trading catchment area of four times that amount. It provides a massive service to the agriculture community and industry in my constituency and its surround.
In a recent White Paper the Government set out the priorities governing the policy for roads in England in 1980. The White Paper stated:
"The first priority of the Government is national economic recovery. The road programme has to be judged in that context. We have to strike a balance. New road schemes can bring undoubted economic advantages. Exports can reach their markets more
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quickly; goods can be distributed more efficiently; traffic can flow more easily and fuel can be saved. At the same time substantial environmental benefits can be gained."
I was surprised to find little, if anything, in that paragraph about road safety and the saving of lives. Why I find that worrying will become more evident as I press on with the case for a bypass at Axminster.
I presented a petition to the Minister on behalf of my constituents, signed by more than 2,500 residents in East Devon and more than 25 different organisations. I shall not bore the House with all that it says, but it points out that those
"who live in Axminster and in the immediate countryside surrounding Axminster humbly do Petition that—

1. In order to relieve the danger to life and limb.

2. In order to lessen the traffic congestion.

3. In order to stop heavy traffic and juggernaut lorries passing through the 14½ ft main street of Axminster

immediate action should be taken by the provision of a bypass for the town of Axminster."
The problem in the town is that, coming down a steep hill from Lyme Regis, one comes into the centre of the town, round a bend where on one side there is no pavement, the road itself is 15½ ft wide and the pavement, according to the county engineer, is 3 ft 6 in wide. This is to transport all the people from one side of Axminster to the other—from the main shopping area up to the Co-op, or, if one does not like that simile, up to the post office or to many of the other shopping areas in the town. The wheels of two out of three juggernaut lorries which go round this corner mount the pavement. I have been all but crushed by a lorry turning that corner, avoiding traffic coming in the other direction, because the driver had no alternative but to mount the pavement. To make things worse, as one proceeds, having just come round the bend, one meets a pelican crossing, and having moved off from that

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crossing, 200 yards further down the carriageway narrows to 15 ft 9 in.
I have before me the Leitch report. In the references in that report, nowhere can it be shown that the widths of these roads are anything other than completely inadequate. Even the S73M recommendation, on page 15, would have, as the very minimum of any type of rural road layout, a 24 ft wide road. I believe that Axminster would probably qualify for a 33 ft road, if one were starting from scratch.
What I am saying, therefore, is that there is no other place in the constituency where there is such a need, on grounds of road safety and congestion, for traffic to bypass the town.
I accept immediately that in the White Paper the Government have stressed the need to deal with the problem of bypasses. Therefore, I find it most disappointing that Axminster has been struck out from the preparation pool to be dealt with "at some time", when it is convenient in the future. That is not good enough.
If we had all the money in the world—indeed, if there was a fairly reasonable level of capital expenditure—I believe that the Minister would immediately accede to my demands. I realise and accept the Government's problem in reducing public expenditure. I support the Minister and the Government in carrying through that policy. Therefore, for me to be able to demand that the Axminster bypass is restored immediately into the preparation pool, not only must I prove that this is the most important road improvement necessary in East Devon, but I must be willing to give up something in the Minister's financial programme to provide the finance with which that could be brought about.
In pages 39 to 57 of the White Paper setting out the scheme, East Devon is mentioned five times, I think. It refers to the A35 Honiton link and states that it constitutes 1–4 miles and will cost £1–5 million. It refers to the Honiton to Marsh link and states that it is 8–4 miles long and will cost £13 million. It refers to the Honiton to Exeter stretch of road which is equivalent to 22 miles and will cost £11–3 million. It says that Wilmington bypass will cost £1 million and is 1–3
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miles long and the Axminster bypass is 2–7 miles long and will cost £4–6 million.
Obviously, Tory Ministers favour Tory Members. I should therefore like to ask how much of the programme that affects my constituency will be left in. If my hon. and learned Friend does not know the answer, I shall not ask him to work it out. In fact, the answer is £1–5 million, and that is only 3–5 per cent. of the amount that my constituents know is necessary. The Honiton link has been approved, and will cost £1–5 million. I know that some people in Honiton will blame me for my next remarks, but I say this openly and to their faces. There is nothing as important as an Axminster bypass. If the Honiton link had to be postponed, I would ask the Minister to spend the money on the Axminster road.
I have had conversations with my hon. Friend the Member for Dorset, West (Mr. Spicer). In the 1984 reserve list there is a bypass for Bridport. My hon. Friend has informed me that the expensive part of the scheme has been left in—under the approved reserve list—but that a simpler scheme could be applied. That could mean a saving of 40 to 60 per cent. of the amount estimated. In other words, there could be a saving of about £3 million. Together with the Honiton Jink, that would provide the £4–5 million necessary for the Axminster scheme.
Will my hon. and learned Friend seriously consider this matter? I do not want him simply to accept the offer of putting these programmes back. I shall be after his tail if he does that and does not give me Axminster in their place. I have known Ministers who would do such things. However, I should not for one moment suggest that my hon. and learned Friend would think of doing such a thing. Will he consider whether Axminster could be reintroduced into the programme?
I stress that the Axminster bypass will have to be built. I beg the Ministry not to find itself being forced to take action because lives have been lost. Within the next 24 months, I believe, that lives will be lost. The lorries are so big that they have to back up to get round. When two lorries meet head-on, it is impossible for them to pass each other. Once lives have been lost, the scheme will be brought forward. Surely it is nonsense to defer

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such an important scheme which would cost so little until lives are lost.
I hope that the Minister will give way and accept my plea to restore the bypass to the programme. In addition, if the Minister is unable to restore the Axminster bypass to the programme he must ban all vehicles that weigh over 10 tons from entering Axminster. They must be routed via the other part of the A35, from Lyme Regis to Exeter on the southern route. Traffic from Bournemouth to Honiton could be routed on to the A30 and the A303 before it reached Axminster. I realise that that may add an extra 12 miles to the journey to Honiton and that it will add about 4 miles on to a journey to Exeter. However, local emotion is higher than I have ever known.
I think that my hon. and learned Friend will agree that I am not given normally to exaggeration. However, I shall have to restrain people from lying down in the street and disrupting traffic if there are not positive answers from the Department. I shall do everything in my power to stop such action because I believe that it does no one any good. I must inform my hon. and learned Friend of the strong feeling locally. My constituents feel that they have been promised a bypass for years and years and that the project has been postponed permanently. Surely I am not asking too much, especially when I am willing to provide the necessary funds so that my hon. and learned Friend does not have to go outside the budget to bring Axminster back into the scheme.
I conclude by asking which it will be: will the Axminster bypass be put back in the programme, or are we to have a ban on heavy vehicles in the town? It has to be one or the other.
12.16 am
The Parliamentary Secretary to the Ministry of Transport (Mr. Kenneth Clarke): I congratulate my hon. Friend the Member for Honiton (Mr. Emery) on his good fortune in obtaining the Adjournment debate and on the way in which he has pressed Axminster's claims.
I hope that my hon. Friend will dissuade his constituents from allowing their frustration to take any foolish forms. I
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assure him that I do not approve of direct action of any sort. It does not have the slightest effect upon any decisions on the roads programme, whether it takes place at public inquiries or on the roads of any town where people feel aggrieved. One is more impressed by cogent argument, and that is what my hon. Friend has produced. I realise that he feels strongly about the issue and that he and his constituents are disappointed by the decision that we announced in the recent roads White Paper to suspend preparation work on the Axminster bypass for the time being. I am sorry that that decision was taken. It was taken in the full knowledge of the fact that many in Axminster would be disappointed, especially because my right hon. Friend had received a petition, presented by my hon. Friend, from Axminster residents pressing for the bypass.
I know that there is a considerable claim for a bypass around Axminster. It is no part of my position to try to deny the need. I do not know the town intimately, but as part of my job I do quite a lot of driving in various parts of the country. I last drove through Axminster—I did so anonymously in the course of a personal visit—during Easter. I find that in my present job I look in a way that I did not do previously for potential bypasses and trouble spots when driving I recognise fully the description that my hon. Friend gave of conditions in the town.
Axminster has an old-fashioned road system. It is an old town which is unsuitable for modern traffic conditions. The worst of the traffic conditions occur in the middle of the main shopping centre. I well understand the frustration of those who live there that has been expressed by my hon. Friend.
The Government have to decide how best to progress the various claims for bypasses around many towns such as Axminster and how we can fit them into a realistic budget. That was the problem that my right hon. Friend and I faced when it came to producing the roads White Paper this year. We inherited the previous Labour Government's plans for about 400 trunk road schemes of various sorts throughout the country. We inherited plans that appeared to be based on the notion that there would be a steadily increasing sum available for

1699
building trunk roads, although the previous Government had severely cut the trunk road programme in 1976. However, they left us plans on paper that appeared to envisage the steady restoration over the next few years of that which they had taken out of their plans. Unfortunately, they left us not the slightest idea of where the funds were supposed to come from.
It is plain in the present economic position that there was no room for growth. We have therefore decided to stabilise the level of expenditure on trunk roads each year at about £300 million, which is the level of spend achieved by the previous Government. We are not intending to cut that expenditure, but within that realistic budget we have had to go through the entire programme and try to draw up a list of priorities and decide when schemes can be managed.
What we have decided is when roads can be built and not whether they will be built. The Axminster scheme has retained its place in the trunk road programme, and we are merely deciding whether it is possible to get on with the scheme in the next few years. The decision in the White Paper was to defer the bypass and its preparation for the time being. It was not a decision to abandon the proposal. We are merely deferring it to a time when we feel resources may be available to do more work on it.
In the light of what my hon. Friend said, that still seems a hard decision. We drew up priorities based on the stated principles set out in the White Paper. The first schemes must contribute most to the industrial revival of the country and be the large key schemes that link our major industrial centres and the ports. We have to make room for major routes of industrial importance, like the M25 motorway box around London and the Al-Ml link between the Midlands and the East Coast ports. Those schemes are vastly expensive compared with modest schemes such as the Axminster bypass.
My right hon. Friend and I have also been anxious to make room for as many bypass schemes as we can around older towns with old road systems but modern traffic. We are alive to the problems of road safety that are posed in those towns facing most difficulty. We are led to the conclusion that we can allocate funds for a number of schemes between
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now and 1984. We have to decide thereafter what to do about the substantial number that will have to be deferred. Unfortunately, there is a possibility that a number of schemes in our road programme cannot be built until at least the end of this decade.
We inherited a situation where some kind of preparation—engineering work and economic analysis—was under way for most schemes. There is a point at which it is no longer possible to justify expenditure on all the preparation work, including schemes that cannot be built until the next decade. The expenditure on preparation work was at the expense of present construction. We therefore decided that we would halt work on about 100 schemes until a later stage, which would be shortly before there was a realistic chance of finding the money to build them.
The Axminster bypass fell into the category on which, for the time being, we would suspend preparation work. However, as I said, that does not mean that the scheme has been struck out of the preparation pool. It is intended to build a trunk road scheme to bypass Axminster, but we have decided that we will suspend preparation until we are nearer a realistic date for building.
I hope that I have underlined the fact that we have made that decision knowing that there are serious problems of congestion in Axminster, although the A35 to the west of Dorchester does not carry a great deal of through traffic compared with many other roads in the country. A bypass will eventually provide substantial environmental and road safety benefits. However, looking at the country as a whole, there are large numbers of competing schemes. We have decided therefore that others are more urgent, including the Dorchester bypass, which is on the same road and not far from my hon. Friend's constituency.
Although we feel that the bypass cannot be built for some time, we realise the problem, and have decided to look at measures to bring short-term relief. My Department's officials at Exeter have been working with the Devon county council and the town council to try to improve the situation, pending the construction of the bypass. I am told that the restrictions on parking and waiting

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and the traffic circulation system at the George hotel have helped give relief. However, there are limits to what can be done without diverting traffic into residential areas. Now that we have announced our decision on the bypass, it is intended to ask our officials to consider whether anything further can be done to offer short-term relief, pending a proper solution.
My hon. Friend is trying to persuade my right hon. Friend and I to reconsider the decision to postpone preparation work. I assure him that we shall ponder on everything he has said to see whether there is anything we can do. It is not possible, even when my hon. Friend is fortunate enough to get an Adjournment debate, to concede that we should restart preparation work on this scheme. Eventually, if we were not careful, we would be making the same concession to many disappointed communities up and down the country and would find that we were carrying out a lot of work on preparation of schemes at the expense of immediate construction.
My hon. Friend accepted frankly the constraints upon the Government. He was not making an idle claim for increased public expenditure or imagining that it was easy to find the funds for which he asks. He realised that funds for Axminster meant finding resources at the expense of other schemes. He suggested that the scheme to improve the A35 and the A30 at Honiton—the so-called Honiton link scheme—is less important than a bypass at Axminster. I shall consider what he says. In trying to draw up priorities, we are influenced very much by the opinion of our colleagues who know their own constituencies and advise us that we may have made the wrong distinction between competing traffic claims in their areas.
The Honiton link is a smaller scheme from our point of view than the Axminster bypass. It is designed to deal with a difficult hill by building a "crawler" lane and making some realignment to the road. Most importantly, the Honiton link that has found a place in the reserve scheme with a definite date in the White Paper will cost only about a third of the amount that would be required to build a bypass round Axminster. We are using out-of-date figures
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in the White Paper, but those figures show £1–5 million envisaged for the Honiton link, as against £4–5 million for the Axminster bypass.
I shall discuss further with my hon. Friend the Member for Dorset, West (Mr. Spicer) the position at Bridport where, again, we have retained a scheme in the reserve list in the White Paper, intended to give relief to that town. If we have chosen an expensive and unpopular route, that is plainly a matter that we must reconsider. I do not recollect playing any part in choosing a preferred route for that bypass. I suspect that it was my predecessor. I shall, however, reopen the matter and see whether it is possible that some resources are being used that may not be needed. That, I am afraid, is all I can offer. I shall reconsider the matter and I shall allow myself to be influenced heavily by what my hon. Friend has said about his judgment of local needs and priorities to make sure that such resources as are available to use in Devon are being devoted where the local population will benefit most. I can make no offer beyond that.
I do not think that there is any realistic alternative. My hon. Friend suggested that a possible alternative, demanded by him and his constituents, was a lorry ban, with traffic being diverted on to other roads. It is not suitable, I suggest, to have a lorry ban on a trunk road. The road is designated as a trunk road in order to be a national arterial route. It may not be very suitable to be designated as such, but there are not many alternatives for heavy traffic to follow without making enormous detours.
My hon. Friend mentioned the possibility of diverting traffic on to the A303. I shall not bore him with the list of schemes for improving the A303, relieving considerable congestion along that road. I could refer to a number of hon. Members, not least my right hon. Friend the Member for Yeovil (Mr. Peyton), who would be somewhat alarmed at any proposal to divert more lorries through villages in his constituency on the A303 if a lorry ban was imposed at Axminster.
I am sorry that I cannot promise to bring any immediate relief of through traffic at Axminster. I can promise that we shall reconsider our priorities to see whether we can divert resources from other schemes so that we can at least

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resume some preparation work at Axminster. That preparation work may take a long time. There are geological problems, and a survey will probably be required before we can even get down to examination of a definite scheme for a bypass. We have looked at various routes to the south of the town, but there is a great deal of work to be done.
If we were to resume preparation work on the Axminster bypass, it would be only as a reserve scheme. It would be more expensive than the Honiton link. When it comes to fitting reserve schemes into spare resources, there is less chance for a £4–5 million scheme than for a £1–5 million scheme. There is a risk that we would finish by doing nothing for my hon. Friend's part of Devon.
I appreciate how strongly my hon. Friend feels. He has expressed the strongly-felt opinions of his constituents. I promise to review the decision and eventually to let him know my conclusion. I would not want to be too encouraging. Perhaps the most optimistic
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note on which I can conclude is that the difference between us, which I shall reconsider, is simply when we will build the bypass at Axminster. The fact that there will be a bypass has not been placed in doubt. We are simply trying to find a realistic place for it in the programme and to devise a timetable that will not raise false hopes in the locality.
Mr. Emery: With the permission of the House, Mr. Deputy Speaker, I should like to thank my hon. and learned Friend for listening so carefully to my remarks and for dealing in great detail with the points that I raised. He has made clear that he will consider the arguments that I put forward. My constituents can ask for no more than that. We hope that when his consideration is completed the conclusions will be favourable to us.
Question put and agreed to.
Adjourned accordingly at half-past Twelve o'clock.