Commons Sitting of 24 November 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  Industry

    Worker Co-operatives
    Mr. Tilleyasked the Secretary of State for Industry what plans he has to promote the formation of worker co-operatives.
    The Secretary of State for Industry (Sir Keith Joseph): The Department has no plans to introduce any measures additional to those already in existence.
    Mr. Tilley: Will the Secretary of State speed up his review of the work of the Co-operative Development Agency, so that he can renew its grant quickly and it can continue with the work that it is already successfully carrying out of promoting not only the formation but the expansion and survival of worker co-operatives? They seem to many of us on the Labour Benches to be one of the major hopes for providing new worthwhile jobs in inner city areas.
    Sir Keith Joseph: Provided that they are unsubsidised, the Government regard co-operatives as a perfectly valid manifestation of private enterprise. We wish them well. However, that does not mean that the organisation concerned must continue to receive subsidies from the taxpayer. We shall be reviewing the performance of the agency in due course.
    Mr. Kenneth Carlisle: Rather than promote worker co-operatives, will my right hon. Friend press his colleagues in the Government further to extend profit sharing so that more employees can share in the profits that they have helped to create?
    Sir Keith Joseph: I have read my hon. friend's work on the subject, and I agree with his purpose. Sadly, however, manufacturing industry in Britain is currently, after allowing for inflation, making virtually no profit. The first priority must be to obtain the co-operation of the trade unions and the work forces in allowing management, as conditions allow, to rebuild some real profit.
    Mr. Les Huckfield: We find the Secretary of State's reference to the CDA worrying. Does he appreciate the need for his making his policy, including that in respect of the future financial support of the agency, as clear as possible as soon as possible?
    Sir Keith Joseph: The current grant to the CDA does not expire until November 1981. We have warned it that
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    we shall review its effectiveness before then. Of course, its effectiveness will be manifested to a large extent by the degree to which it becomes independent of the taxpayer.

    Chemical Industry
    Sir David Priceasked the Secretary of State for Industry what representations he has received from the British chemical industry about the high price of British energy compared with that of its European competitors; and what reply he has given.
    Sir Keith Joseph: I have received representations from the Chemical Industries Association and a number of individual companies in the industry, and now from the CBI. Comparisons of European energy prices are complicated and the government are considering these representations with those from other trade associations and companies.
    Sir David Price: Does my right hon. Friend accept the conclusion of the recent study by the Chemical Industries Association, dated 4 November, that the British chemical industry's total energy and fuel costs are 20 to 25 per cent. higher than those of its Continental competitors?
    Sir Keith Joseph: I do not think that I can accept such a generalisation. The comparison is complicated, but we are studying the analysis that has been put before us by the association and the CBI, and my right hon. Friend the Secretary of State for Energy has already announced some proposed changes.
    Mr. Carter-Jones: What representations has the Secretary of State had from each chemical company indicating all those who support and those who oppose his fuel policy? Will be publish them in the Official Report?
    Sir Keith Joseph: I cannot undertake to do that.
    Mr. Dudley Smith: Is my right hon. Friend aware that far more industrialists support the industrial policies of my right hon. Friends the Prime Minister and the Secretary of State for Industry than the media sometimes indicate? Is he aware that one of the problems at the moment is energy costs? In view of his remarks, will be give the utmost consideration to the representations being made?
    Sir Keith Joseph: The answer to all three questions is "Yes".
    Mr. John Silkin: Without anticipating the Chancellor's "Budget Statement" at half-past three, can the Secretary of State tell us what representations he has made to his right hon. and learned Friend about the over-high value of the pound sterling? Is he aware that Sir Maurice Hodgson, the chairman of ICI, a week or so ago attributed the losses that ICI has been making in the past three months to the over-high value of the pound?
    Sir Keith Joseph: My right hon. and learned Friend is not taking a leaf out of the Opposition's book and introducing an autumn Budget. Secondly, the question is a different one, but the right hon. Gentleman may have noticed that the value of the pound has been dropping in recent days.

    Regional Policy
    Mr. Barry Jonesasked the Secretary of State for Industry what new policies his Department will initiate to stimulate industrial activity in the regions; and if he will make a statement.
    Mr. John Evansasked the Secretary of State for Industry if he plans any changes in his regional industrial policies.
    Sir Keith Joseph: No new policies are in mind, because the existing policies of reducing public spending and borrowing so as to reduce inflation and interest rates and thus encourage private enterprise are, coupled with existing regional policies, the best way to achieve growth in industrial activity in the regions.
    Mr. Jones: Does the right hon. Gentleman recognise the mounting and desperate fear in the regions over 1920s-style unemployment queues? Will be consider new policies that will entail more intervention and more and more subsidies, in order to save jobs in coal, textiles and steel? Would not that policy be better than one of brutal indifference to the deindustrialisation of our country?
    Sir Keith Joseph: No, Sir. I do not believe that there is any comparison with the 1920s or 1930s. Secondly, further intervention would have to be paid for by some means that would do at least as much harm as the present decision. Thirdly, there is something that the hon. Gentleman could influence that could improve activities all over the country, including the regions. All objective observers realise that a number of jobs are being and have been lost because some trade unions and work forces are demanding unrealistic pay increases, unaccompanied by higher productivity, and are obstructing the higher productivity that improves competitiveness and is the only base for new jobs.
    Mr. Evans: Is the Secretary of State aware that his complacent answer will be treated with contempt and anger in the regions, which have suffered an appalling increase in unemployment since he became Secretary of State for Industry?
    Sir Keith Joseph: Opposition Members do not help their constituents by denying that our main weakness and the main cause of unemployment, in addition to the recession and the strong pound, is lack of competitiveness, and that at the heart of that is uncomprehending and obstructive trade unionism.
    Mr. Rippon: I do not dispute the truth of a great deal of what my right hon. Friend has said, but would he not regard it as right, in the present circumstances, to consider using a higher proportion of public expenditure to create new wealth and new jobs in regions, such as the Northern region, by using Government power, as the major purchaser of buildings, goods and services, to create something that will strengthen the country?
    Sir Keith Joseph: My right hon. and learned Friend assumes that it is possible to cut public expenditure in some areas in order to shift resources. That theory is impeccable, and my right hon. and learned Friend will improve his case if he gives us examples of where to shift resources from.
    Mr. Eastham: The Minister spoke about high wages being demanded by workers. Is he aware that, recently, ICL and Courtaulds did not give that as the reason for high unemployment and redundancies?
    Sir Keith Joseph: No, indeed not. I was making a generalisation, which, as a generalisation, is true. I did not refer to high wages. I referred to high wage claims, unaccompanied by a willingness to work towards higher productivity. It is high relative unit labour costs that are destroying jobs in this country.
    Mr. Maxwell-Hyslop: Will my right hon. Friend ease the public sector borrowing requirement and reduce the burden on the private sector by grasping the nettle and requiring British Shipbuilders to sell its London headquarters, which is a gross extravagance, and the ship repair yard at Falmouth, which it should never have bought in the first place?
    Sir Keith Joseph: My hon. Friend can be assured that the new chairman of British Shipbuilders has announced his intention to sell the London headquarters, and he will certainly consider the other alternative.
    Dr. John Cunningham: Is not the Secretary of State's claim about high wages manifestly untrue in the textile industry, the steel industry and a great many other industries in the regions which are now suffering principally because of the value of sterling and high interest rates, following his adherence to monetary policies? Is not the real problem for industry in this country that the Government have two Chancellors and no voice for industry in the Cabinet? Ought not the right hon. Gentleman to resign?
    Sir Keith Joseph: The hon. Gentleman is wrong in his analysis. We have a lethal combination of low real pay and even lower real output compared with our competitors. The result is that we have relatively low buying power out of wages because output is so relatively low. Compared with our competitors, our productivity, and therefore our competitiveness, is, overall, disastrously low. That can largely be rectified by a more comprehending attitude by many trade unions.
    Dr. Cunningham: If that is so, why is the right hon. Gentleman pursuing policies that are preventing industries in the regions from investing? Are not the right hon. Gentleman' s policies producing a catastrophic drop in investment in industry?
    Sir Keith Joseph: No. Investment is far more discouraged by overmanning of so much existing investment and the inability, as a result, to earn profits from it than by any other factor.
    Mr. McQuarrie: I accept my right hon. Friend's desire to provide regional development status to create wealth where it is needed, but does he agree that because of those policies certain indigenous industries, in, for example, the Grampian region, which rely on gas and oil are suffering severely because they are unable to create the necessary investment, due to the lack of work in those industries?
    Sir Keith Joseph: I am not sure that I understand my hon. Friend's question. I should be grateful to him if he would write to me or see me about it.

    British Steel Corporation
    Mr. James Hamiltonasked the Secretary of State for Industry whether he will report on his last meeting with the chairman of the British Steel Corporation, on the future of the corporation.
    Sir Keith Joseph: When I last met Mr. MacGregor I impressed on him the need in drawing up the corporate plan for the British Steel Corporation both to reduce as far as possible the corporation's need for external finance in 1981–82 and subsequent years and also to achieve the maximum possible private sector participation in the United Kingdom steel industry. I expect to receive the BSC corporate plan in mid-December.
    Mr. Hamilton: Before the right hon. Gentleman next meets the chairman of the BSC, will be ensure that he meets the steel unions, to discuss with them the new strategy for the industry? Will be also discuss with the chairman the possibility of cheap energy costs, so that we can compete with Europe?
    Sir Keith Joseph: Whom Mr. MacGregor chooses to meet is a matter for him. As for energy. we are considering the analysis sent to us by the CBI, and we have already had an analysis from Mr. MacGregor.
    Mr. Bruce-Gardyne: When my right hon. Friend saw the chairman of the BSC, did he ascertain—and can he tell the House—the precise cost per annum per man employed by the BSC of the employment subsidy from the taxpayer and from firms that could have a productive future if the cost of Government expenditure were reduced over and above what each employee of the BSC produces?
    Sir Keith Joseph: No, I did not. It would be relatively difficult, because the numbers employed by the BSC have been falling rapidly. However, Mr. MacGregor is in no doubt of the Government's desire to see the cost of the BSC to the taxpayer reduced as rapidly and as much as possible.
    Dr. Bray: Did the Secretary of State support Mr. MacGregor in his wish to win the order for the steel for the gas-gathering pipeline for Britain, instead of leaving it to Germany and Japan?
    Sir Keith Joseph: I respect Mr. MacGregor's ability to make his own case, which he is doing over many possible respects of further work for the BSC.

    Small Businesses
    Mr. Trippierasked the Secretary of State for Industry what interest has been shown in the North-West in the Norwich Union scheme for small businesses, which is administered by his Department.
    The Under-Secretary of State for Industry (Mr. David Mitchell: The Norwich Union Life Insurance Society has agreed to consider making investments in small businesses in the North-West on the basis of introduction and appraisal by counsellors engaged by the Department's small firms service. A number of business propositions have been examined. None of these has yet reached the stage where it has been submitted to the Norwich Union.
    Mr. Trippier: Does my hon. Friend agree that this scheme will become increasingly attractive as the rate of inflation continues to fall?
    Mr. Mitchell: My hon. Friend is correct and has hit the nail on the head in saying that once inflation has fallen the prospects for business growth will be placed on a sound basis. We shall have to wait and see the extent to which businesses need money by way of equity investment from insurance companies and the like, as well as the proportion that they need in the form of loans. My hon. Friend will know that in his constituency the European Investment Bank will lend at 10 per cent., plus 2 per cent. for insurance cover against changes in the exchange rate.
    Mr. Straw: In the light of the results of the CBI survey published this morning, which show that manufacturing industry faces prospects that are even worse than those of the 1930s, does the Minister agree that prospects for small businesses in the North-West will continue to be extremely bleak so long as the lethal combination of the Secretary of State and the Prime Minister pursuing uncomprehending and obstructive policies is continued?
    Mr. Mitchell: Given time, the Government's policies will create the basis for sound business growth. When we have the combination of sound money and lower interest rates, we shall see the birth of many more small businesses.
    Mr. Nicholas Winterton: Does my hon. Friend agree that it is cheaper to keep businesses going than to establish loans or other forms of assistance to get new businesses under way? I support the excellent point made by my hon. Friend the Member for Rossendale (Mr. Trippier), but do the Government agree that they have contributed directly to the fact that tens of thousands of good, solid working people have been put out of a job by a combination of high interest rates, the high value of sterling and unnecessarily forcing up the cost of energy which is vital not only to industry in general but to textiles and paper and board in particular?
    Mr. Mitchell: My hon. Friend does ill-service to his cause, because while he asks for public money to be spent to keep business in being, at the same time he asks for interest rates to come down. That must mean public sector borrowing coming down. Therefore, he cannot have it both ways.
    Dr. John Cunningham: Is it not true that the Association of Independent Businesses, which represents thousands of small businesses, has told the Government that conditions for small businesses have never been as bad as they are today? Does not that contrast starkly with the promises made during the election by the Conservative Party to aid small business men?
    Mr. Mitchell: I continue to maintain contact with all the organisations representing small firms, including the Association of Independent Businesses, with which I have a good working relationship. Of course we take into account what it says, and as time unfolds the House will see that during the lifetime of this Parliament we shall achieve all that we promised at the time of the election.

    Steel Production
    Sir Anthony Meyerasked the Secretary of State for Industry what consultations he has had with the chairman of the British Steel Corporation regarding the proposals by the European Coal and Steel Community high authority for quotas for steel production.
    The Minister of State, Department of Industry (Mr. Adam Butler): My right hon. Friend discussed the matter with Mr. MacGregor when they met on 23 September. During the whole of the time when the commission's proposals for production quotas were being considered, the Department was in constant touch with the British Steel Corporation and with the British Independent Steel Producers Association.
    Sir Anthony Meyer: Is it not clear that only Community policies that are effectively enforced will provide any kind of protection against cut-throat competition in Europe, which could be fatal to the orderly redeployment of forces within the British steel industry? Is not there a lesson here for other industries that are threatened by excessive competition or outside imports, namely, that only through European policies can we effectively protect our jobs?
    Mr. Butler: The answer to the second part of the question, is that each industry should be treated on its merits. However, I agree with my hon. Friend that this was a good example of the Community working together for the greater good of the steel industry among its members.
    Mr. Barry Jones: Does the Minister accept that some of us believe that the Government are cutting the throat of the British steel industry? Bearing in mind the recent loss of 7,000 jobs at BSC Shotton, is he in any way able to comment on the widespread rumour that about 400 coke oven jobs are at risk?
    Mr. Butler: The hon. Gentleman has gone somewhat wide of the question. The quotas that I supported, and argued for strongly, will be of help to those employed by the BSC.
    Mr. Moate: Does not my hon. Friend agree that it is sheer folly for the European Coal and Steel Community to apply these quotas to certain British companies, the vast proportion of whose production goes for export outside Europe? What steps can he take to ensure that this inflexibility of the quotas is not applied to those British companies?
    Mr. Butler: It is part of the arrangement that if companies find themselves in special difficulties the Commission will look at them. I am aware of the case that my hon. Friend has in mind, but I assure him that overall, and for the vast majority of companies in the private sector as well as for the BSC, the imposition of quotas will be of benefit.

    West Yorkshire
    Mr. Woolmerasked the Secretary of State for Industry what consideration he is giving to the reestablishment of assisted area status to areas of West Yorkshire where unemployment has been rising much faster than the national average in recent months.
    Mr. David Mitchell: My right hon. Friend is currently considering representation on this point from the West Yorkshire metropolitan county council and the Kirklees metropolitan district council.
    Mr. Woolmer: Is the hon. Gentleman aware that unemployment in West Yorkshire has risen by about 100 per cent. since the Government took office? As the Government's policies, which hit manufacturing industry
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    particularly hard, have caused unemployment in Batley, Dewsbury, Halifax and Huddersfield to rise by nearly 150 per cent., will the hon. Gentleman give some reassurance to the textile and engineering towns of Yorkshire that they will have assisted area status restored to them?
    Mr. Mitchell: I cannot prejudge my right hon. Friend's reply to the representations that he has received.
    Mr. Thompson: Does my hon. Friend understand that, although inflation is the first enemy, my constituents are bitter about the feather bedding that has been given to redundant workers in the steel and coal industries, and that they would like something similar?
    Mr. Mitchell: The level of redundancy payments in the steel and other industries is a matter for the management of those industries. It is not unusual to find similar payments made by large firms in the private sector.
    Dr. Summerskill: When considering this matter, will the hon. Gentleman bear in mind that the unemployment rate in Halifax has risen by 133 per cent. since the Government came to power? Once prosperous manufacturing industries throughout West Yorkshire are being eroded by the Government's misguided policies, and the hon. Gentleman must take that fact into consideration and restore assisted area status to West Yorkshire.
    Mr. Mitchell: In considering the question of assisted area status we shall take into account all the matters set out in the Industry Act 1972, and also the needs of other areas with even higher levels of unemployment, on which we are concentrating assistance at present.
    Mr. Sheerman: If the Minister will not reconsider giving assisted area status to the West Yorkshire areas, and Kirklees in particular, will be think of another way in which to tackle what is becoming a national scandal in an area that has a history of production and entrepreneurs? Is the Minister aware that the entrepreneurs in Huddersfield are saying that this Government and this Secretary of State are obstructive and uncomprehending of their needs?
    Mr. Mitchell: If we had in this country continental levels of productivity, which are 30 or 40 per cent. higher than those of the United Kingdom, we would not have the problems that we have today.

    Paper and Board Industry
    Mr. Moateasked the Secretary of State for Industry when next he expects to meet representatives of the United Kingdom paper and board industry.
    Sir Keith Joseph: I have no immediate plans for another meeting, but my noble Friend will be meeting senior representatives of the industry later this week.
    Mr. Moate: May I remind my right hon. Friend that when his Department made considerable efforts to help to save the Bowater, Ellesmere Port plants, his Department, successfully in some cases, encouraged certain nationalised industries, namely, the Forestry Commission and the National Coal Board, to reduce costs to the industry? Will be ask his Department to lean equally heavily on those bodies to ensure that those benefits are available throughout the paper industry to help save many other mills that are in great danger?
    Sir Keith Joseph: It is for the nationalised industries to co-operate in saving consumers, to the extent that they think that it is in their commercial interest to do so.
    Dr. McDonald: Is the right hon. Gentleman aware that the packaging and board industry makes a great contribution to the balance of payments, by saving £100 million a year? Is he further aware that two mills in my constituency are operating at well below capacity, and that his turning a deaf ear to almost all the representations that have been made by the unions and the manufacturers' federation is doing further damage to industry? When will be consider the questions of import controls and high energy costs of that industry, and when will be give it the assistance that it needs so that it can continue to provide a good service to the community?
    Sir Keith Joseph: I know that the industry is going through a difficult combination of pressures, but I do not think that the recommendation of the hon. Lady would benefit British industry or British consumers as a whole.
    Mr. Henderson: Is my right hon. Friend aware that one of the particular pressures on the paper-making industry is competition from new sources, mainly from within the European Economic Community? Is he further aware that there is a widespread feeling in the industry that the combination of subsidies and other inducements to those industries has many of the characteristics of a preemptive strike, aimed at capturing a part of our market, and certainly does not come under the general heading of fair competition?
    Sir Keith Joseph: If what my hon. Friend says is true, it may be very relevant. I should be grateful if he would substantiate what he is saying, either by seeing me or by writing to me.
    Mr. Robert Hughes: Is the right hon. Gentleman aware of the closure of the Culter paper mills near Aberdeen, with a loss of over 350 jobs and the ending of 300 years of paper making there? Is he further aware that the whole of the paper industry in the North-East of Scotland is complaining that it is suffering from high interest rates, high energy costs and fierce competition from subsidised foreign goods? When will the Secretary of State take off his blinkers and recognise that there is a real world outside the Department of Industry?
    Sir Keith Joseph: I do not underestimate the difficulties of the industry, but the hon. Gentleman must realise that the higher public spending that he and his colleagues are constantly pressing upon the Government would put up borrowing, and therefore take interest rates even higher.
    Mr. Nicholas Winterton: Will my right hon. Friend confirm that when he last met representatives of the industry the subject of the Catalonia Paper Tube Company Ltd. was raised with him? Is he aware that that company has received aid under the regional assistance scheme and under the provisions of the Industry Act 1972—thus enabling a Spanish-based company to set up in this country in an area of manufacture where there is already overcapacity—and that the two or three dozen jobs that have been treated at that factory are likely to put several hundred people out of work in the other companies in this sector?
    Sir Keith Joseph: I shall review yet again the case of which my hon. Friend speaks, and I shall write to him about it. However. I find it difficult to believe that his two propositions are valid.
    Mr. John Silkin: Does the Secretary of State recall that when I wrote to him in August about the paper-making industry I received a reply saying that it was in no danger of destruction but that there were difficulties because of the high cost of energy? I was told that the Government were looking at the position with a degree of urgency. In this instance, is four months urgent enough to save that industry from destruction?
    Sir Keith Joseph: Until last week we had not received the survey of comparative energy prices that the CBI promised some time ago. We recognise that high energy costs are an added difficulty for the paper industry, but I must point out that some paper firms are doing relatively well.

    Merseyside
    Mr. Allan Robertsasked the Secretary of State for Industry what plans he has for the revitalisation of industry on Merseyside.
    Mr. David Mitchell: The best prospects for industry on Merseyside, as in the country as a whole, lie in the Government's policies to defeat inflation and in firms' own efforts to regain their competitiveness. But the Government are enormously concerned about the problems of Merseyside. Hence, most of it remains a special development area, and manufacturing firms there are eligible for the highest level of Government assistance.
    Mr. Roberts: Is the Minister aware that 17,000 school leavers are facing the prospect of there being only 2,000 jobs available to them in the summer, and that there is now more chance, statistically, of a young person winning the pools than of getting a job on Merseyside? Is he further aware that his answer will be considered as complacent, particularly as the Government have altered the method by which grants are given in development areas so that manufacturing industry that wishes to expand cannot now get the grants that it received under the Labour Government?
    Mr. Mitchell: The hon. Gentleman will be aware of the statement that was made last Friday by the Secretary of State for Employment, which has a bearing on his first comment. With regard to his second point, we should not underestimate the substantial degree of Government assistance that is available for new businesses starting up on Merseyside in the special development area. There are available a 22 per cent. regional development grant—the highest level available anywhere — the section 7 selective financial assistance, and the product and process development scheme, with a 25 per cent. grant for new products. There are also available the manufacturing advisory service, the European Investment Bank loans—loans that are available for seven years at 10 per cent., plus a 1 per cent. surcharge for insurance cover against changes in the exchange rates—and the small firms advisory service. That is a substantial amount, and Labour Members do ill service to employment in the assisted areas by crying down the extent of Government aid.
    Mr. Hordern: Is my hon. Friend aware that the measures that he has announced concerning regional aid

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    to Merseyside appear to some hon. Members to be complicated and employ a great many bureaucrats and have not so far proved to be effective? Will be and his right hon. Friend consider whether a more generous fiscal regime might be preferable, and will be study in particular the free trade area zones that exist in the United States and other countries?
    Mr. Mitchell: I am grateful to my hon. Friend for his observations. We are constantly looking for more effective ways in which to achieve our objectives. By reducing the areas available for assistance the Government have concentrated assistance more effectively on those in greatest need. The automatic regional development grant is widely regarded as a major asset in bringing in industry.
    Mr. Spriggs: Is the Minister aware that the questions of my right hon. and hon. Friends on the subject of high interest rates, the high value of the pound, and the high cost of energy to industry mean more than he appears to understand? Does he not understand that British industry is having to compete with firms in the United States and the rest of the world whose energy is subsidised by their Governments, and whose interest rates are lower? On every count British industry is having to try to surmount almost impossible conditions. What will be do about the situation?
    Mr. Mitchell: What the hon. Gentleman says is partly true, but interest rates are now higher in the United States. If we could get our productivity up to their level, we should not have the problems that we have today.
    Mr. Les Huckfield: Since the sums of money available under the various schemes of assistance to which the hon. Gentleman has just referred are being reduced, is not that exhibiting the most appalling complacency in reply to my hon. Friend's question? Is not the whole tone of the reply the best encouragement that we could want for a massive turnout at the Labour Party's unemployment demonstration on 29 November?
    Mr. Mitchell: The sums are not reduced. These things are demand-led. It is up to the hon. Gentleman to let those who may use them know what is available.

    Telephone Equipment (British Telecom)
    Mr. Lennox-Boydasked the Secretary of State for Industry whether he intends to allow British Telecom to continue its monopoly control over the maintenance of private branch exchange equipment, notwithstanding the legislation promised in the Gracious Speech.
    Mr. Adam Butler: Yes. Under the British Telecommunications Bill, published on Friday, my right hon. Friend will have power to license activities which will compete in the area of British Telecommunications' present monopoly, but we intend to leave responsibility for the telephone network with British Telecommunications, and with it the maintenance of private branch exchanges.
    Mr. Lennox-Boyd: Does my hon. Friend agree that the public will be very surprised at the suggestion that private branch exchange equipment is an integral part of the telephone network, and will be most reluctant to buy or hire from the private sector equipment that is to be maintained by engineers in the public sector?
    Mr. Butler: My hon. Friend must be aware that the larger private exchanges are supplied by the private sector
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    direct to customers at the moment, and those are maintained by BT. It is correct to say that we considered this problem very carefully and decided that it would be to the general advantage if maintenance were left with BT, in view of the responsibility that we have left with it for the network as a whole.
    Mr. Golding: Is the Minister aware that this decision will be welcomed by those who work in British Telecommunications? Is he further aware that the customers will be pleased about the decision, as it would make no sense to call a maintenance man to examine a fault when that fault could have arisen in Post Office switching, in a Post Office line, or in private equipment on the subscriber's premises arid that it is far better for one concern to have complete responsibility for the maintenance, to avoid the duplication of calls?
    Mr. Butler: British Telecommunications will have to demonstrate very clearly that it is worthy of this continuing responsibility.
    Sir Bernard Braine: Is my hon. Friend aware that since 1 April evidence has been accumulating of damage to certain highly efficient and competitive British firms making telephone equipment, owing to the flooding in of foreign equipment that is not only not Post Office approved but is incompatible with the British telephone system? Does not the public interest demand some action from his Department?
    Mr. Butler: It will be part of the new regime that all equipment will have to be certified by an independent body and marked accordingly before it can be used.

    West Midlands
    Mr. Winnickasked the Secretary of State for Industry if he will take steps to regenerate industry in the West Midlands and the Black Country part of the region.
    Mr. Adam Butler: The regeneration of industry must ultimately depend on firms producing competitively goods that customers want to buy. The Government will therefore continue to pursue policies designed to help create the conditions in which competitive and enterprising firms can develop in all parts of the country, including the west Midlands, and managements and trades unions must work to remove restrictive practices, overmanning and all other obstacles to efficiency and lasting employment.
    Mr. Winnick: That reply is useless. How can one get across to Ministers the disturbing position in the West Midlands and in the Black Country of the never-ending redundancies, the closures, and the people—including a large number of my own constituents — on short-time working? Is this region also to bleed to death as a direct result of the Government's economic policies?
    Mr. Butler: Ministers are just as concerned as is the hon. Gentleman, and he might have some regard to what the Government have done to help the West Midlands, through their more selective regional policy, through the raising of the IDC limit, through naming Dudley as an enterprise zone—I think in the hon. Gentleman's own constituency—and through the operation of derelict land clearance areas. Those are specific items that have been made available to help the hon. Gentleman's constituents.
    Mr. Grieve: Will my hon. Friend make it plain to the hon. Member for Walsall, North (Mr. Winnick), and to the people of the West Midlands, that the regeneration of the industries of the West Midlands depends, in large measure, upon the revival of the motor industry? Will be also make it plain that the revival of the motor industry depends upon sustained and competitive production, and that such production is put in jeopardy by irresponsible wildcat strikes of the kind that we have seen over the provision of seats for the Mini-Metro? Will be also make it plain to the people of the West Midlands and workers in the motor industry that strikes of that kind jeopardise not only the revival of the industry, but the future of themselves and their children?
    Mr. Butler: I do not think that I could improve on what my hon. and learned Friend has said. I believe that people in this country are prepared to support British Leyland provided that it does not indulge in the sort of activity that my hon. and learned Friend has just described.
    Mr. Geoffrey Robinson: Is the Minister aware that he has before him a compelling case from Coventry to be counted as a designated area for inner city assistance, in view of the fact that unemployment in Coventry is shortly to go above 12 per cent. and will reach levels that we have not seen in Coventry since the depression of the 1930s? Will be give urgent consederation to that and to the wider implications for the West Midlands?
    Mr. Butler: That is not a question for my Department, but I am sure that my right hon. Friend will have noted it.
    Mr. Stokes: Is my hon. Friend aware that industry in the West Midlands, in spite of difficulties at present, supports the Government in their attempt to combat inflation, and that the very last thing that it wants are Socialist solutions?
    Mr. Butler: Furthermore, it is well aware that if there were to be reflation of the economy now it would put us straight back into massive inflation, which in turn would cause a higher rate of unemployment in the future.
    Mr. Les Huckfield: The Minister of State talks about enterprise zones. Will be refute the cruelly deceptive claims of those in charge of the Dudley enterprise zone, which he located in Dudley on a purely political basis? Has he not heard the ridiculous claim that that enterprise zone will create 40,000 new jobs? Will be admit that any new jobs created in that enterprise zone will be stolen from the surrounding areas, so that the net new job creation in that enterprise zone will be minimal?
    Mr. Butler: I do not think that the hon. Gentleman does any service by misrepresenting the position in that way. He might well discuss with his hon. Friend whether he wants an enterprise zone for Dudley.
    Mr. Winnick: On a point of order, Mr. Speaker. The Minister's statement was not correct. The proposed enterprise zone is not in my constituency.

    British Steel Corporation
    Mr. Neil Thorneasked the Secretary of State for Industry when he expects that the British Steel Corporation's financial situation will be stabilised.
    Mr. Adam Butler: As my right hon. Friend made clear in his earlier reply to the hon. Member for Bothwell (Mr.
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    Hamilton), he impresed upon the chairman of the BSC the importance that we attach to a rapid return to financial viability by the BSC and a marked reduction in the corporation's call on public finance. We expect to receive the chairman's proposals for meeting these objectives in the BSC's corporate plan, due in mid-December.
    Mr. Thorne: Does my hon. Friend accept that my constituents are extremely concerned about the amount of public money that is being poured into the furnaces of the British Steel Corporation? Does he realise how anxious my constituents are that that money should be diverted into reducing the high level of interest rates, so that small businesses can play their part in reducing unemployment?
    Mr. Butler: I hope that my hon. Friend will continue to repeat that message loudly and clearly up and down the country. Money put into the BSC or into any other company in equal difficulties is injected at the expense of jobs elsewhere.
    Mr. Hardy: Does the Minister agree that both the public and private sectors of the steel industry are facing difficulties largely because our French and German competitors receive more helpful support from their Governments than the steel industry receives from ours? Has the Minister studied the documentary evidence on energy prices that has been compiled by the public and private sectors of the steel industry in South Yorkshire? Does he accept that it demonstrates the disadvantage that the British steel industry faces?
    Mr. Butler: We have that report in front of us. However, the subject of energy prices has already been dealt with at some length. The amount of aid given to the public sector of the steel industry is not less, and is probably much more, than the average given to all other countries in the Community.

  Criminal Procedures (Delays)
  Mr. Stanbrookasked the Attorney-General what progress has been made in reducing the length of time between the committal and trial of accused persons and between the conviction and hearing of the appeal of convicted persons since 1 May 1979.
  The Attorney-General (Sir Michael Havers): Since May 1979 the previous steady worsening of delays before trial, and appeals, in the Crown court has been arrested. Though committals and appeals have continued to increase, backlogs of cases are beginning to come down. In London and the South-East, where the situation is worst, the backlog has been reduced by 800 cases.
  Mr. Stanbrook: That reply is satisfactory, as far as it goes. Will my right hon. and learned Friend consider some new ideas for reducing court lists? For example, will be consider offering an automatic reduction in sentence in return for a plea of guilty?
  The Attorney-General: Any idea or proposal to reduce the backlog will be considered. I should be grateful for any suggestions.
  Mr. J. Enoch Powell: Does the right hon. and learned Gentleman's reply refer to Northern Ireland, of which he is Attorney-General? If not, will be publish in the Official Report a note of any difference in respect of Northern Ireland?
  The Attorney-General: We have been very conscious of the delays in Northern Ireland, and over the past 12 months they have been reduced markedly. I shall write to the right hon. Gentleman and give him the information.
  Mr. Edward Gardner: Does my right hon. and learned Friend agree that in far too many cases the delay between committal and trial is intolerably long? Does he further agree that the passage of time affects the memory of witnesses and adds considerably to the anxiety of defendants and of all those involved in the trial? Will be take steps to treat this as a matter of urgency?
  The Attorney-General: My right hon. and noble Friend is very conscious of this problem. He has treated it as a matter of urgency. Although there was a 50 per cent. increase in indictable offences between 1972 and 1978, and although committals this year increased by between 10 and 12 per cent., the backlog has been reduced by 5 per cent. That is due largely to a huge increase in the number of sitting days and a big increase in court building programmes, which means that there will be up to 71 new courts by 1982. In particular, I pay tribute to the Lord Chief Justice, who has done so much to encourage that, and to the many circuit judges from all over England who have come to help the worst area, the South-Eastern circuit.
  Mr. S. C. Silkin: Does the Attorney-General agree that there is a marked and unjustifiable difference between the conventions as regards bail on conviction in the magistrates' court on appeal to the Crown court, and bail on conviction in the Crown court on appeal to the Court of Appeal? That can create great injustices. Will the right hon. and learned Gentleman discuss that with his right hon. Friend the Home Secretary?
  The Attorney-General: Of course, I shall discuss that with my right hon. Friend. I am sure that the right hon. and learned Gentleman knows that a conviction at a Crown court usually involves a much more serious offence than does a conviction at a magistrates' court.
  Mr. Grieve: When my right hon. and learned Friend deals with that matter, will be bear in mind the difficulty that courts face when long periods of time inure between committal and trial, particularly as regards sentencing young people? When my right hon. and learned Friend commends the Lord Chief Justice and the judiciary, will be also commend the efforts recently made by the Lord Chief Justice to persuade courts in London to sit at 10 am, thereby ensuring a much longer court day?
  The Attorney-General: I agree with my hon. and learned Friend on that point. It is a great tribute to the Lord Chief Justice that he has succeeded in getting the courts to sit earlier, when everybody else failed. The young are one of our great worries. However, a tribute is owed to my right hon. and noble Friend for the improvement that he has achieved, despite the rising incidence of crime.
  Mr. Jeffrey Thomas: Does the Attorney-General agree that the present delays amount to a public scandal and a blot on the administration of justice? As the present measures are not working, how does he propose to tackle the situation? What is the average delay between committal and trial? Will be and his noble Friend bear in mind the principle that justice delayed is justice denied?
  The Attorney-General: I am sorry that the hon. and learned Gentleman did not listen to what I said. These
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  things are working. I said that committals had increased from 10 to 12 per cent. but that in spite of that the backlog had been reduced by 5 per cent. It is a great tribute to those involved that that has been achieved in a year when crime has increased so much. Outside the South-Eastern circuit there are delays of between eight and nine weeks in custody, and 14 weeks on bail. On the South-Eastern circuit the situation is more grave, with delays of 14 weeks in custody and about 27 weeks on bail.

  Public Record Office
  Mr. Dubsasked the Attorney-General what representations he has received about reductions in expenditure at the Public Record Office.
  The Solicitor-General (Sir Ian Percival): The Lord Chancellor and my right hon. Friend the Attorney-General have received approximately 350 letters from Members of this House, organisations and individuals. In addition, representationshave been received from the Advisory Council on Public Records on behalf of users and from the Public Record Office trade union side.
  Mr. Dubs: In view of grave concern about the effect of cuts on the Public Record Office, what proposals does the hon. and learned Gentleman have to shelter it from the worst effects of those cuts?
  The Solicitor-General: The Lord Chancellor is still considering, and will carefully consider, all the representations that have been made. However, he must consider them in the light of the Government's policy to reduce expenditure on Civil Service manpower.
  Sir David Price: Will my hon. and learned Friend and the Lord Chancellor bear in mind that one of the most important functions of the Public Record Office is to make records available to the public? Is he aware that some of the proposals put that at risk?
  The Solicitor-General: I assure my hon. Friend that we shall bear that in mind. The Public Record Office has three functions. Its first function is to preserve the records, and there can be no lessening of that duty. Its second function is the selection of records to be preserved, and there can be no relaxation of that. Its third function, which is immensely important, is to make those records available.

  Law on Contempt
  Mr. Meacherasked the Attorney-General what proposals he has for reforming the law on contempt.
  The Attorney-General: As indicated in the Gracious Speech, the Government intend to introduce a Bill in the other place later this week.
  Mr. Meacher: If the Government are to introduce a Bill in this Session on the law of contempt, why are they showing such indecent haste in trying to modify the law by pursuing the case against Miss Harriet Harman?
  Mr. Speaker: Order. The hon. Gentleman might know that that case is sub judice. We do not wish to influence the decision of the court.
  Mr. Meacher: I do not wish to interfere in the decision of the court. However, it is right to question—
  Mr. Speaker: Order. We never have questions on a case that is before the courts.
  Mr. Christopher Price: Will the Attorney-General at least confirm that it is the present practice, and will be the practice in any law that is enacted, that he has to approve a proposal by any Department in Whitehall to bring cases of contempt?
  The Attorney-General: That is not the practice. When one has the form of contempt that involves one party to litigation saying that the other party has broken the rules, that is a matter for those parties. I am involved when it is a case of contempt possibly interfering with the administration of justice.
  Mr. Archer: Does the Attorney-General agree that the time has come to consider as a package the restrictions and privileges affecting the media? Should not decisions on these matters be taken by Parliament on the merits, rather than leaving them to be decided piecemeal by the courts?
  The Attorney-General: There is always the difficulty of balancing two conflicting interests: the right of the public to be informed and, equally, the right of a party to what is usually a criminal action to a fair and unprejudiced trial. I think that the system that we have is probably the best way of achieving that balance.

  Sub Judice Rule
  Mr. Christopher Price: On a point of order, Mr. Speaker. Recently you ruled on the House's
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  rule about sub judice and not discussing particular cases which are before the courts. Will you confirm that the House's rule on sub judice does not affect its right to legislate at any time and that if simultaneously there is an attempt in the Queen's Speech to legislate on an issue and an attempt by a Government Department—the Home Office—to achieve legislation through common law in another way, that conflict between the Home Office's attempt, on the one hand, and the Queen's Speech announcement, on the other, is a proper matter for discussion in the House of Commons?
  Mr. Michael English: Further to that point of order, Mr. Speaker—
  Mr. Speaker: Order. It was because of that that I allowed the questions to continue. What we have never done—and I am sure what the House would never wish to do—is to raise a case that is actually before the courts. We do not seek to influence the judgment of the courts.
  Mr. English: Further to that point of order, Mr. Speaker. I am very grateful to you and I am sure that the whole House and all the people of Canada will be grateful to you for your ruling. I am sure that you will agree that anything being discussed by Canadian courts should not be brought before us whilst it is being so discussed.
  Mr. Speaker: The hon. Gentleman's opening remarks made me pleased that I had called him. However, my doubts increased as he continued.

Economic Policy
3.33 pm
The Chancellor of the Exchequer (Sir Geoffrey Howe): With permission, Mr. Speaker, I wish to make a statement affecting both revenue and expenditure in the coming financial year.
I am today publishing the economic forecast that is required by the 1975 Industry Act. I said in my Budget speech that I would consider this autumn the roll-over of the monetary target of 7 to 11 per cent. growth at an annual rate set for the period from February 1980 to next April. I have done so in the light of monetary developments and developments in the economy generally.
Inflation is now falling rapidly. But monetary growth is likely to exceed the target. Recent statistics have, of course, been bedevilled by distortions apparent since the abolition of the corset imposed by the previous Administration. The excess will certainly be less than the figures so far suggest. There are signs that bank lending is now starting to slow down. And, as the public sector moves into surplus in the new year, I expect monetary growth to slow down in the rest of the target period.
The existing monetary target continues until April 1981. I do not propose today to extend the target period beyond that date, but I shall announce a new target in the Budget. The Budget will be designed to ensure that the thrust of the medium-term financial strategy is maintained.
The Treasury and the Bank of England have completed the consultations arising from the Green Paper on methods of monetary control published last March. As a result, between now and the Budget a number of improvements will be set in hand.
First, detailed consideration of new prudential arrangements for the banks will be brought to a conclusion so that the reserve asset ratio, which has complicated monetary control, can be phased out.
Secondly, the Bank of England will develop changes in its open market operations and last-resort lending in ways that will allow the market a greater role in the determination of the structure of short-term interest rates.
Thirdly, we are considering the future of the clearing banks' cash ratio and also collecting and publishing an additional series for banking retail deposits. These steps are desirable in their own right. They would be consistent with a gradual evolution towards a monetary base system and will help us to judge how far such a system would contribute towards our medium-term monetary objectives.
I shall take further steps to mobilise directly a larger share of personal savings. I shall, in particular, extend the eligibility for index-linked certificates so as to attract a total of not less than £3 billion of new money into national savings next year.
As the House already knows, the unadjusted figure for the PSBR in the first half of this financial year was about £8½ billion. I expect a much lower figure for the second half of the year. But it could be around £11½ billion for the year as a whole. Over half the increase is attributable to the recession being deeper than expected. I now expect the volume of expenditure this year to be some 1½ per cent. higher than expected at the time of the last White Paper, once again very largely because of the effects of the recession. If any excesses emerge over this year's cash limits, such overspending will be fully offset by reductions in the corresponding cash limits for 1981–82.
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Spending on unemployment and other benefits will be higher next year than allowed for in the White Paper of last March. The effect of the recession on trading conditions is similarly reflected in the external financing limits for the nationalised industries for 1981–82, which, excluding steel, are being announced separately today. These provide £620 million more than in the March White Paper. Even so, these industries are being required to secure substantial economies totalling more than £¾ billion. These amounts, and the other public expenditure changes that I shall mention, are in the 1980 survey prices at which the decisions have been taken — that is, broadly the prices of a year ago.
My right hon. Friend the Secretary of State for Employment last week announced extensions of the special employment measures. The Government have also decided to increase the provision for selective assistance for investment and support for industrial research and development. Next year the additional costs of these two measures will be £245 million and £50 million respectively.
Part of these increases will be balanced by the substantial reduction in our net contribution to the European Community budget as a result of the agreement negotiated on 30 May. We now expect our refunds next year to be some £650 million.
In order further to offset upward pressures on expenditure, we are making cuts in the volume provision for the majority of spending programmes. Our aim is to keep the planning total for the volume of public expenditure in 1981–82 about 1 per cent. below the outturn now expected for the current year.
I should mention some of the main changes. The scale of defence expenditure is such that we must make some adjustment. Planned expenditure in 1981–82 will be £200 million less than allowed for in the March White Paper. Defence expenditure grew by 3 per cent. in 1979–80. It is now expected to grow by some 2½ per cent. both this year and next.
For local authority current spending next year, we shall be seeking a reduction of about 3 per cent. in volume compared with the level we planned for this year. We also propose to calculate the rate support grant on the basis of providing a lower percentage of the reduced volume than the 61 per cent. — for England and Wales— in recent RSG settlements. My right hon. friends the Secretaries of State for the Environment, Scotland and Wales will be consulting their local authority associations on these proposals before the RSG settlements next month.
During 1980, prices have increased less than we allowed for when we decided on the uprating of social security benefits for this November. This will mean some increase in the real value of benefits. Subject to the necessary legislation, this over-provision, at present estimated at one percentage point, will be deducted from the 1981 uprating. This will maintain the real value of the retirement pension. Public service pensions will be treated in the same way. Any further action on index-linked public sector pensions will follow the report of the Scott inquiry, which is expected next month. We have also decided that the earnings limit for retirement pensioners will remain unchanged. A decision on child benefit uprating will be taken at the time of the Budget.

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In addition to a number of other specific reductions, cash-limited Government spending programmes, except health, are being cut by 2 percent. The total savings from all these reductions are over £1 billion next year.
I shall be publishing in the Official Report and making available in the Vote Office now a summary of the effect on expenditure programmes in 1981–82 of these decisions. Further details of the changes for the years to 1983–84 will be set out in the public expenditure White Paper to be published at the time of the Budget.
We must also restrict the cost, and so the cash requirements, of the public sector. The cost of public expenditure programmes is as important as volume. It is essential to our fiscal policy, and also entirely fair, to look in the corning year for a much lower growth in public service earnings than in the recent past. It has already been announced that the rate support grant limit will allow for a 6 per cent. annual increase in earnings from due settlement dates in the current pay round. It will provide for an increase in prices other than pay of 11 per cent. between the average levels for 1980–81 and 1981–82. Expenditure in other parts of the public services will be subject to broadly the same financial disciplines.
I have also been giving consideration to the revenue requirements for financing next year's expenditure. I am determined that the public sector borrowing requirement in 1981–82 should be consistent with the Government's medium-term economic strategy and the need to ease the burden of adjustment at present falling on industry. The main fiscal decisions must await my Budget. But I have already announced proposals for a new scheme of stock relief. This largely removes from continuing businesses the threat of tax clawback and holds out the prospect of significant relief for companies and the self-employed.
If we are to secure a full financial year's revenue, given the lead times involved, some other decisions are necessary now. That is why this is regularly the time of year for reviewing and announcing changes in national insurance contributions. We have concluded that an increase in employees' contributions would be appropriate. Full details of the changes, and their effects on the national insurance fund, are set out in the Government Actuary's report, to be published tomorrow.
In the first place, we propose that employees' contributions should be increased next year by ¼ per cent., which the Government Actuary's calculations show would be needed to keep the fund in balance, while meeting larger demands for benefits.
Secondly, in order to maintain the planned level of health services, we propose that the health element of the national insurance contribution should be increased, again for employees, by a further ¼ per cent.
Thirdly, the fund at present receives a substantial contribution from the general taxpayer through the Treasury supplement. In addition, the whole cost of noncontributory benefits also falls on the general taxpayer. In these circumstances, it is right that those in work should shoulder directly a larger share of the cost of contributory benefits. We propose, therefore, to reduce the Treasury supplement to the fund from 18 percent. to 14½ per cent. This will be offset by a further increase in the employees' rate of ½ per cent.
The combined effect of these changes will increase the employees' rate of national insurance contributions from
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1 April 1981, on earnings between £27 per week and £200 per week, from 6¾ per cent. to 7¾ per cent. The additional contribution income will be about £1 billion in 1981–82. Other rates and levels, including those for the self-employed, will also change. Having regard, however, to the financial pressures on industry and the way in which the employers' share has grown in recent years, employers' contribution rates—including the surcharge — will remain unchanged. My right hon. Friend the Secretary of State for Social Services will introduce the necessary legislation.
Since March there has been time to assess more fully the implications of the steep rise in the price of oil since 1978. This has been on as large a scale as that in 1973–74. The Government have concluded that there is scope for a further increase in oil taxation.
Petroleum revenue tax—because of the way reliefs are structured—does not provide an adequate means of obtaining further revenue. I shall, therefore, introduce in the next Finance Bill a supplementary tax to be paid in addition to PRT, to take effect from the beginning of next year. Present indications for the new tax point towards a rate of 20 per cent. on gross revenue less an allowance. It will apply to fields that are in production whether or not they are yet liable to PRT. It will be deductible in calculating petroleum revenue tax and corporation tax. The Inland Revenue is setting out further details in a press notice and will be inviting the industry to hold immediate consultations with it.
We are also examining the scheme of PRT reliefs, and any changes, which will take effect from the same date, will be included in the next Finance Bill.
I am confident that none of these changes will deprive companies of a fair return on their North Sea projects and exploration. They will together yield around £1 billion in 1981–82, mostly from the new tax.
The changes that I have announced should leave no room for doubt about my determination to control the PSBR so as to lighten the burden on the private sector. The growth in sterling M3 and the wider monetary aggregates is expected to decline in the new year and the narrower aggregates have been growing slowly. Inflation has come down appreciably and is well below the current level of short-term interest rates. In agreement with the Governor of the Bank of England, I have therefore concluded that some reduction in these rates is possible. Accordingly, the Bank of England, with my approval, is this afternoon announcing a reduction in minimum lending rate of two percentage points.
Mr Denis Healey: I start by thanking the Chancellor of the Exchequer for confirming the press leaks about his mini-Budget. I do not think that there was a single announcement that he made this afternoon, other than the reduction in minimum lending rate, that was not contained in newspapers over the last two or three days. I remind the right hon. and learned Gentleman that this is the fifth package of economic measures that he has introduced in less than 18 months.
Does not the right hon. and learned Gentleman feel it a little ironic that he has chosen as the day for making this announcement a Monday on which the Welfare State is suffering the greatest blow that it has suffered since the war, through big cuts in the real value of benefit increases introduced today, and a Monday on which the CBI is reporting the grimmest prospects for British industry since

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the great slump of the 1930s and when 78 per cent. of firms have said that they are now working below capacity? The right hon. and learned Gentleman has chosen this date to inflict further brutal blows on the Welfare State and to drive Britain further into depression.
We shall want to discuss some of the details of the Chancellor's statement in the debate on Thursday. However, I am interested to see that he has now confirmed that all the foundations of his economic policy are in ruins and that the money supply and the PSBR have been rising in the last six months at twice the rate he had planned for them.
I see from the forecast that the right hon. and learned Gentleman has just made available in the Vote Office that he expects output to have fallen by up to 6 per cent. in the two years to April 1982 instead of rising by 5 per cent. as it did during the years when the Labour Party was in power. Is he aware that this fall of 10 per cent. over two years in what should have been our rate of growth will by itself add £10,000 million to the public sector borrowing requirement? Why is he now allowing the automatic stabiliser, represented by this natural increase in the PSBR, to come to the help of the British economy as the Financial Secretary to the Treasury suggested should be done in a speech earlier this year?
We gather from the Chancellor's statement this afternoon that he is prepared to accept a PSBR this year £3 billion higher than he told us he was planning only six months ago. Why is he not prepared to allow another £7 billion to be added to the PSBR in the coming year? What gain does he feel he will get even to the PSBR from the decisions that he has announced this afternoon? How many more men and women will be added to the dole queues as a direct result of the measures that he has announced? What will be the cost to the PSBR in the coming year in terms of lost revenue and increased benefit?
We gather that the Government Actuary is to announce tomorrow his expectation about the increase in unemployment over the next 12 months. This is a figure that has been widely quoted in the newspapers— no doubt to be confirmed tomorrow—of 2·7 million men and women. The assumption made by the Actuary last year has turned out to be 500,000 too low. Are there any grounds, after this statement, for not believing that the level of unemployment in 12 months' time will be well over 3 million?
The Opposition welcome the Chancellor's announcement that he will put a tax on the windfall profits of the oil companies, although we do not welcome the fact that he will use all the revenue that he derives from North Sea oil in the coming year to finance unnecessary levels of unemployment. Why is he not announcing today a windfall tax on the profits of the clearing banks, which, owing to the record interest rates of the last 12 months, have profits which are absolutely obscene in a situation in which British industry is suffering as it is?
How does the Chancellor justify the massive breach of the Government's promises on personal taxation involved in the announcement that he has made? The national insurance increases are equivalent to an increase of well over 1p in the standard rate of income tax, but they are highly regressive by comparison with an increase in the standard rate of income tax. How on earth can the Chancellor justify loading £1,000 million of extra taxation
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on people earning up to £200 a week when the value of the benefits that they are intended to finance is being cut by this Government and not increased?
Is the Chancellor aware that, contrary to what he suggested, his statement involves massive new burdens on British industry? The cut in the rate support grant, we are told, will involve increases in local authority rates of 25 per cent., on average, during the next 12 months. The cuts in public expenditure will involve substantial further increases in the prices charged by nationalised industry for its products—and this at a time when the decision to make the employer responsible for the first eight weeks of sickness pay is in itself another £400 million on to British industry.
Above all, how does the right hon. and learned Gentleman justify this savage attack on the Welfare State? I must ask how the right hon. Lady, whom we are glad to see joining the right hon. and learned Gentleman at this moment, can reconcile the swindling of old-age pensioners next year out of 1 per cent. of the increase to which they are entitled with the many statements that she made during the general election campaign which, when quoted to her in the Cabinet, we are told, turned her puce?
Can the Chancellor of the Exchequer confirm what seems to be the implication of his statement that, after cuts of 2 per cent. in every aspect of public expenditure except health, public expenditure next year will be 1½ per cent. higher than he planned in the statement that he made at the time of the last Budget?
We welcome the fact that the minimum lending rate has been cut by 2 per cent. It should have been cut by 4 per cent. many months ago. We gather that the main purpose of the statement that the Chancellor made today has been to persuade the City of London that this cut in minimum lending rate is justified, although nothing in the Government's monetary performance can justify it under the Government's own criteria. We are told that the whole purpose of the Government's economic policy is to affect expectations. Can any rational person, after listening to the statement this afternoon, have any expectations of this Government other than that they will break every promise, miss every target, fail in every undertaking and, in so doing, bring catastrophe to the British economy and ruin to the Welfare State?
Sir Geoffrey Howe: The right hon. Gentleman has wholly misunderstood the nature of my statement and has uttered some characteristically imprudent observations about it. As the whole House must understand, this country, like every other large industrial society, is having to grapple with a major industrial recession that is impeding the growth of almost every other industrial economy. In those circumstances, it is inevitable that unemployment should be rising, as it has, from the very high levels that we inherited from the last Government. It is right that in those circumstances adjustments should be made in the burden of financing unemployment benefits. It is right that those who remain in employment should be invited to bear a percentage of that cost by the increase that I have described in national insurance contributions.
The right hon. Gentleman is wholly wrong when he says that my right hon. Friend's pledge to the pensioners is not being kept to the full. I have made clear that the real value of the pension is being maintained. It is entirely necessary and right, when we contemplate the growing share of welfare benefits as part of this country's spending,

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to take steps to see that this growth does not outstrip the resources of the productive economy. It is right that, in that respect as in every other of my statements, we should take steps to balance the burden being imposed by the public sector on the productive sector so that the productive sector is able to expand as it should.
The right hon. Gentleman suggested that our policies were in ruins. He chose to cite the CBI in support of that assertion. He may not have noticed that the CBI report makes a number of things clear—that the fall in output that has been taking place is slowing down and, as the forecast makes clear, is likely to be bottoming out shortly and that the level of pay settlements being arrived at in the private sector has come down sharply, as is right
The CBI document also makes clar that the level of inflation is now coming down very sharply, as I made clear in my statement. At a six-monthly rate, it is now running below 10 per cent., very much below the rate we inherited from the last Administration. In those circumstances, it is entirely right that I should have announced the other measures that I have outlined to the House.
The right hon. Gentleman spoke for a moment about the extent to which I should be wise to take his advice in reacting to the automatic stabiliser. If the House is to take the right hon. Gentleman's credentials seriously and believe that the advice of the Labour Party, of which he is deputy leader, is that the public sector borrowing requirement next year should rise to about £18 billion at the same time as minimum lending rate is cut by 4 per cent., the House has the final condemnation of the right hon. Gentleman's irresponsibility as a financial spokesman.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: The House is aware that it will have an opportunity in the course of this week to debate the Chancellor's statement. In order to be fair to the House, including the hon. Members who wish to take part in the debate on defence and foreign affairs, I shall allow half an hour for questions to the Chancellor of the Exchequer. If hon. Members' questions are brief, that ought to cover everyone.
Mr. J. Enoch Powell: Without inviting the Chancellor of the Exchequer to anticipate further than he has done his next Budget, may I ask whether he is aware that he will need a massive further increase in general taxation if he is to relieve the continuing burden on industry from the still high interest rate without risking the prospects of a recurrence of inflation at levels that we have not yet known?
Sir Geoffrey Howe: I am aware of the necessity, when the time comes to formulate my Budget next year, of ensuring that the public sector borrowing requirement is consistent with our medium-term financial strategy and with lightening the load that would otherwise unfairly rest upon industry.
Mr. Terence Higgins: As timing is vital and a cut in public sector borrowing is a necessary precondition of a cut in MLR, can my right hon. and learned Friend tell the House which of his measures will affect borrowing this year, as against next year? In particular, can he say why the increases in expenditure are
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to be offset by a reduction in the EEC budget when Ave were told that that was to be used to reduce the public sector borrowing requirement? Given the importance of cutting public expenditure and public borrowing this year, will my right hon. and learned Friend consider using the regulator, particularly on cigarettes and tobacco?
Sir Geoffrey Howe: I identified the money to be received from the EEC budget as making a contribution to the reduction of the PSBR next year of about £650 million, as was intended. The measures that I have announced are not designed to affect borrowing or spending in the current year, but we remain resolutely determined to enforce the cash limits that have been imposed and to make sure that any overspending within the limits is recouped from spending next year. I have considered my right hon. Friend's suggestion about the use of the regulator but I have judged that the contribution that it could make in the current financial year, even if it were right to think of using it, is not sufficient to justify its use at this stage.
Mr. Richard Wainwright: Does the right hon. and learned Gentleman realise that the sharp right-angle turn that he has confirmed forces the dwindling numbers at work to pay more and more national insurance tax in return for less and less benefit? Is he aware that the national insurance tax, which is not a matter of invitation, is the most regressive, cruel, primitive and. crude tax that could be imagined? If he must break his election promises about direct taxation, he should do so in a less obviously uncivilised way. Does the right hon. and learned Gentleman realise that the increase in the national insurance tax is not called for by the National Insurance Acts and that he is wrong to imply that he has a duty next year to increase contributions to keep the fund in balance? Does he not know that the Comptroller and Auditor General has made plain that it is only in the longer term that the level of the fund has to bear a relationship to the demands upon it?
As for the whole scope of the Budget that the right hon. and learned Gentleman has announced, is he aware that it would have been much more appropriate, in order to prevent a runaway recession, to have loaded the whole lot on to the public sector borrowing requirement, with the safeguard of an approved incomes policy?
Sir Geoffrey Howe: The hon. Gentleman does not appear to have learnt a great deal from the experience of recent years. It is clear that to try to offset the effects of loading unjustifiably large borrowing on the public sector borrowing requirement by the introduction of an incomes policy would be to do both wrong things simultaneously and to go in exactly the wrong direction. The hon. Gentleman spoke about the burden being placed on national insurance contributors. The Government Actuary's assessment is that one-quarter of the 1 per cent. that I mentioned would be justified for that reason. It is wrong to say that this is taking place at a time when benefits are being cut. Benefits are rising by a substantial amount today for the overwhelming majority of beneficiaries. When unemployment is rising in this country, as in many others around the world, it is surely right for the burden of financing that rise in unemployment to fall on the shoulders of those who are fortunate enough to be at work.
Mr. Paul Dean: On the day when pensions are being increased by 16½ per cent., may I warmly welcome the Government's firm intention to maintain the real value of pensions in future, in spite of the increased cost that will inevitably be involved? Does my right hon. and learned Friend agree that in the allocation of scarce resources pensioners cannot hope to compete with the industrial muscle of trade unions unless they have a firm guarantee from the Government, underwritten by Parliament?
Sir Geoffrey Howe: It is clearly right that we should take account, as we have over the years, of the interests and needs of pensioners in our society, but it is also right that we should remember the substantial extent to which the cost and burden of the total social security budget has been rising as a percentage of public expenditure. During recent years, quite apart from unemployment, the real value of the retirement pension has risen by 31 per cent. That is a formidable record, for which Governments of both parties are entitled to take credit. It must be right to take the action that I have announced to ensure that that record is kept in balance and that the burden is fairly shared.
Mr. Joel Barnett: Given that the recession is deeper than the Chancellor of the Exchequer expected, does he accept that by worsening the vicious circle that he had already created by adding to the level of unemployment and requiring yet further cuts in benefits next year he is introducing further measures while telling us that his policies are working?
Sir Geoffrey Howe: Many times in the past, when the right hon. Gentleman was in Government, he explained the extent to which public borrowing, above almost anything else, going beyond what could be sensibly financed was the most formidable threat to full employment and the conquest of inflation. In reaching the judgments that I have announced to the House I have had to take into account his advice, which has been given on many occasions.
Mr. John Bruce-Gardyne: Can my right hon. and learned Friend confirm that when he refers to the determination to maintain the thrust of the Government's medium-term financial strategy, which is most welcome, he intends that his monetary targets next year will be lower than the rolled-over targets for the current year? On pay in the public sector, will be confirm that the limits for cash from the taxpayer to finance settlements of 6 per cent. which have been announced for the public sector will apply also to the Armed Services, among others?
Sir Geoffrey Howe: The Armed Services are one of the groups for which the House has long recognised the existence of special arrangements in the review of their pay. They will have to be considered in the context of the policy as a whole. [HON. MEMBERS: "What about the firemen?"] The figure of 6 per cent. in relation to the allowance being made in cash limits for the pay element has so far been announced only in relation to the rate support grant. Broadly, the same financial discipline will be applied with the other cash limits. I shall be making my announcement about next year's monetary target in the Budget and my hon. Friend can be assured that the action that I take will be designed to maintain the thrust of our medium-term financial strategy.
Mr. Robert Sheldon: While I welcome the reduction in the MLR, may I ask whether the Chancellor of the Exchequer is aware that there is no certain relationship between a reduction in MLR and a lowering of the value of the pound? In fact, when MLR was reduced in the summer, the value of the pound went up. Will the right hon. and learned Gentleman therefore leave himself scope to do what every Government since the war have done, namely, actively to intervene in the foreign exchange markets in order to make sure that the pound goes down?
Sir Geoffrey Howe: The right hon. Gentleman has his own recollections of the way in which, and the extent to which, his right hon. Friend the Member for Leeds, East (Mr. Healey) — the former Chancellor — attempted to intervene on a substantial scale during 1977 and was in the event obliged to abandon that exercise. The experience of that attempt does not lead me to accept the right hon. Gentleman's advice now.
Mr. Peter Emery: Will ray right hon. and learned Friend accept that there should be massive congratulations to him—as will come from industry, and particularly small industry—on reducing MLR by 2 per cent. today? Will be tell the House that as he is producing a windfall tax on the oil industry he is still considering, as was announced in his Budget, the possibility of doing the same with regard to the banks? Can my right hon. and learned Friend explain why, when we are trying to reduce overall public expenditure, there will still be a major increase for the nationalised industries of, I believe, £620 million expenditure approved by the Government when most hon. Members on the Conservative Benches would like to see that figure come down?
Sir Geoffrey Howe: I am grateful to my hon. Friend for his congratulations. He rightly recollects that when the possibility of a tax on the windfall profits of banks was considered in the debates on the Finance Bill my hon. Friend the Financial Secretary made clear that the decision then being taken was being taken in the context of that Bill for that year. It must be remembered that the banks have a part to play, and are playing a large part, in the financing of the rest of the corporate industrial sector.
As for the burden being put on the rest of the economy by the nationalised industries, it is certainly right that those industries taken into public ownership, largely as part of the onward march towards Socialism, are not exactly good advertisements for the efficiency with which such public ownership serves the community's interests. But it must be stated that a significant part of the increase is clue to pressures on the nationalised industries similar to those being applied to the private sector to increase its borrowing. The nationalised industries are being required to make economies in excess of £¾ billion. I agree with my hon. Friend, and, I hope, with all my hon. Friends, that the best answer to excessive and uncontrolled borrowing and borrowing and demands from the nationalised industries must lie in the policy to which we are committed of privatisation, of return to the private sector so far as possible.
Mr. Ernest Armstrong: Does the Chancellor understand that there will be growing bitterness and resentment in areas such as the Northern

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region, which are meeting the cost of his policies, and that the vulnerable sections of those communities are once again being asked to pay the price? Does he recognise that the reductions in local government expenditure, for instance, will mean fewer home helps, fewer dinner attendants, and so on? They are the very people who are receiving low wages in order to eke out an existence. That contrasts starkly with the tax handouts that the right hon. and learned Gentleman gave in his first Budget. The division into two nations is causing bitterness and resentment with which the right hon. and learned Gentleman must come to terms. He must recognise that fiscal policy irrespective of the social consequences will lead to the ruin of the country.
Sir Geoffrey Howe: I am well aware of the extent to which hon. Members on both sides of the House wish to see the fabric and effectiveness of our social services maintained. Having represented a Merseyside constituency, I know also of the extent to which there is justified concern about the possible division of our society into two nations. But surely we must now all recognise that if we are to maintain and extend the quality of our social services we must look first and foremost to the health of our productive industrial economy. If we are to do that, in the North as well as in the South, it is crucial that we should be taking the measures that I have now announced to reduce the burden of interest rates on the productive trading sector, because—believe me, Mr. Speaker—I receive as many representations from both sides of industry in the North as I do from the South for the burden of the public sector upon the trading part of our society to be lightened.
Mr. Charles Morrison: Is my right hon. and learned Friend aware that the Government cannot reduce the rate support grant — a reduction that I well understand to be necessary—and expect local authorities at the same time to maintain their services at the existing level? There is a limit to the amount of waste that can be cut out. I do not imagine that my right hon. and learned Friend wishes to see huge rate increases. Therefore, have the Government given any consideration to reducing some of the statutory obligations on local government?
Sir Geoffrey Howe: My right hon. Friend the Secretary of State for the Environment and other colleagues have been giving consideration to ways in which the burden of statutory control can be lightened, and they have been making changes to that effect. But it must also be well understood by my hon. Friend, as I am sure it is, that if we are to secure the effective implementation of these reductions in public spending a continuing duty rests on local government to go on striving for efficiency, the achievement of low pay settlements and rising productivity, because they are just as important in the public sector as they are in the private sector.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I shall call the spokesman from the Opposition Front Bench at 4.30 pm.
Mr. Jim Marshall: Does the Chancellor accept that the measures that he announced today add up to a further tightening of the deflationary screw? Will be now reply to the question put to him by my
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right hon. Friend the Member for Leeds, East (Mr. Healey) and say how many people whom he describes as those fortunate enough to be in work will now lose that privileged position as a direct consequence of the measures that he has announced today?
Sir Geoffrey Howe: It is most important that those discussing the likely increase in unemployment understand that it will not take place as a result of measures announced today or of anything of that kind. The pressures giving rise to increasing unemployment in France, Germany, the United States and Canada — indeed, in every one of the industrial countries of the Western world — owe nothing whatever to the measures announced today. They owe a great deal to the fact that the entire industrial world faces a major recession as a result of the last huge increase in oil prices. Unhappily, our society faces that same recession with additional disabilities, because we have had a much higher rate of wage inflation over a number of years and, most important of all, because of our declining competitiveness, for which there are a number of reasons.
In those circumstances, there is no action that any Government could take today to offset or prevent the onset of that recession. What we can do is to ensure that the balance of our economy is effectively preserved, so that when the recession moves away we shall be better placed than we have been in the past to take advantage of the prospects.
Mr. T. H. H. Skeet: Will my right hon. and learned Friend give an assurance that the new supplementary tax on oil will be related only to the real price of oil and not to any other measures? Will be make certain that in order to maintain adequate reserves of oil in the future exploration is adequately provided for out of the profits earned by the companies?
Sir Geoffrey Howe: The details of the new tax will be among the matters for consultation on the basis of the documents that are being made available today. I shall bear my hon. Friend's point in mind. Of course, the intention will be to maintain an environment in which exploration continues to be worth while and encouraged. My right hon. Friend the Secretary of State for Energy hopes next month to make announcements about the next licensing round.
Mr. Dick Douglas: Will the right hon. and learned Gentleman concede that, no matter what his right hon. Friend the Prime Minister may say about not being for turning, the electorate will consider that she and her Government are not for trusting in relation to their overall economic policy? Will be answer some of the questions that have been put to him about the increase in unemployment that might be expected during the next two years and the downturn in manufacturing output? In addition, will be give the House now the figures for the total Government take from North Sea oil?
Sir Geoffrey Howe: I could hazard a reasonably accurate guess at the answer to the last question, but it would be safer if I had it put to me in precise terms by the hon. Gentleman, when I shall answer it.
As for the outlook for output and unemployment, like the right hon. Member for Leeds, East I have the gravest uncertainties about the pattern of forecasting, and particularly its timing. The hon. Gentleman will see that

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the Industry Act forecast published today suggests that the total output of the economy is now likely to have about bottomed out. Although there will be some decline next year on this year as a whole, the probability is that we have reached the bottom of the trough. That is the most likely outlook, but, of course, one cannot be sure about it.
The hon. Gentleman will be aware that Governments do not make a practice of forecasting unemployment. However, it is clear from the likely outlook for the world as well as for this country that unemployment is likely to go on rising for some time yet, although probably at a slower rate. When the Government Actuary's report appears tomorrow, it will be seen to contain the assumption which he has been asked to make about the average level of unemployment in the next financial year, 1981–82. For Great Britain, excluding school leavers, that average figure will be stated to be 2·3 million.
Mr. Kenneth Lewis: Is my right hon. and learned Friend aware that many people who accepted that the borrowing requirement had to be kept down will be relieved to know that he has done it partly by cuts and partly by taxation? Many people were worried that cuts would take the full load. Therefore, it is generally acceptable that there should be a split between the two, and my right hon. and learned Friend should take credit for it.
Sir Geoffrey Howe: I am grateful to my hon. Friend. In arriving at the measures that I announced today, we have tried to maintain the kind of balance that my hon. Friend has urged upon us.
Mr. Donald Anderson: Is not this mini-Budget a confession by the Chancellor of the Exchequer that the Government have lost their first year? Who, then, is to blame? Whose fault is it? Does the right hon. and learned Gentleman agree with Professor Friedman that, although the monetary policies are correct, our present plight is due to the incompetent execution of them by those in the Bank and the Treasury? Who is at fault for the failure of the monetary policy?
Sir Geoffrey Howe: I have no intention of exchanging views with professors from any country. It should be noted that securing a reduction in the rate of inflation, which is the first objective of our economic policy, is beginning to be achieved. It is coming down, and it has come down more quickly than we forecast. In the last six months it has come down to an annual rate of less than 10 per cent., which is substantially below the rate on the same basis that we inherited from the last Government. Our success in that direction is the reason why I am taking action today. My intention is to sustain that success and keep our policies on course.
Mr. Nicholas Winterton: I welcome the reduction in the minimum lending rate. However, is my right hon. and learned Friend aware that some Government supporters may not be altogether happy about his increase in the national insurance contribution for employees? Whether or not my right hon. and learned Friend is playing straight with the House, this is another form of direct taxation, and surely we are pledged to reduce direct taxation. Does not my right hon. and learned Friend agree that this tax is a disincentive to work and that we should be seeking an increase in production, which is the only way to achieve real wealth out of which the country once again can pay its way?
Sir Geoffrey Howe: We are seeking and want to seek an increase in production to secure the increase in wealth that we need in the economy as a whole. The most pervasive and long-standing enemy of an expansion in production is inflation. That is why it is of crucial importance to reduce the level of public borrowing and to do so, as my hon. Friend wishes, in a way that is consistent with a reduction in interest rates. The one factor standing in the way of a reduction in interest rates of a responsible quality would be a refusal to recognise the need to secure the right volume of revenue along the lines that I have commended to the House.
Mr. K. J. Woolmer: Is it not clear that the real problem of the economy is not that public sector spending is squeezing the private sector but that the private sector is suffering from grossly excess capacity and that there are more than 2 million unemployed and ample resources? Will not the consequence of today's statement be a further deflation in demand, more unemployed resources and the prospect of further cuts next year? When will the right hon. and learned Gentleman start expanding demand so that our producers can sell what they could produce instead of reducing demand and heaping further deflation upon deflation?
Sir Geoffrey Howe: The hon. Gentleman's analysis of the situation does not accord with that of the Government or with that of any wise analyst. If the hon. Gentleman still believes that the answer to our economic problems is to be found in expanding demand in the United Kingdom economy, he gravely deceives himself. Successive British Governments have expanded money and thereby sought to expand demand on a substantial scale and achieved no corresponding increase in output. The right way of dealing with the problem is to control inflation. Even today, there are ample markets around the world to which our goods can be sold if they can achieve the right degree of competitiveness. As we keep on emphasising, the answer to that is a more responsible pattern of pay bargaining of the kind which, fortunately, we see spreading widely throughout industry.
Mr. Tristan Garel-Jones: Has my right hon. and learned Friend had any evidence from the clearing banks of their intention to respond to the call made by my right hon. Friend the Prime Minister in her recent speech ins. the City that they should exercise social responsibility with their profits? What sort of social responsibility would my right hon. and learned Friend like to see exercised? Can he confirm that, if it is not forthcoming, he has not yet discarded the possibility of a special tax on these windfall profits?
Sir Geoffrey Howe: I have replied already to the suggestion about a special tax on windfall profits in answer to my hon. Friend the Member for Honiton (Mr. Emery). The Prime Minster's explanation of her hope for more venturous attitudes by the clearing banks is an indication which has been heard in those quarters. As is seen from a number of steps already being taken by them, it is not being disregarded. I do not think that we have seen the end of the story yet.
Mr. Andrew Faulds: Since, earlier, the industrial relations policies and now the economic policies of the right hon. and learned Gentleman have both proved

219
equally disastrous, will be do his country a service by retiring from politics, where he has repeatedly proved his ineptitude, and taking up a practice out of harm's way as a solicitor in somewhere like the Outer Hebrides?
Sir Geoffrey Howe: I am sure that the nation would be better served if the hon. Member for Warley, East (Mr. Faulds) himself resumed his own profession on the public stage rather than on the stage of the House of Commons.
Mr. Faulds: I do my job somewhat better than he does his.
Mr. Peter Viggers (Gosport): Is it not a tribute to the tenacity of the present Government that it has been possible to allow an increase in real terms in defence expenditure? By doing so, has not my right hon. and learned Friend helped to secure the jobs of those in the shipbuilding and aviation industries?
Sir Geoffrey Howe: I am obliged to my hon. Friend for his comment.
Mr. Tam Dalyell: If £¾ billion is to be cut back on the nationalised industries, what factual assessment have the Government made of the effect on the modernisation of the railways, on commuter services and on lines throughout the country? What are the facts of the assessment of what the Government are doing?
Sir Geoffrey Howe: The external financing limits of each of the nationalised industries have been decided after discussion between the responsible sponsoring Ministers and the managements of the industries concerned. In the public sector no less than in the private sector, access to external finance has to be curtailed in present economic circumstances.
Mr. Tim Eggar: Is my right hon. and learned Friend aware that a special welcome will be given to the additional method of funding the PSBR through index-linked national savings? Will my right hon. and learned Friend confirm that it is the aim of the Government to make available to companies a sterling capital market where they can fund their debts on a fixed-rate basis? To achieve this end, will my right hon. and learned Friend examine the possibility of ending the building societies' cartel and, in addition, ending their tax advantages?
Sir William Clark: Rubbish. There is no tax advantage.
Sir Geoffrey Howe: My hon. Friend the Member for Enfield, North (Mr. Eggar) raises matters that go far beyond the scope of my statement today. However, it is an objective of this Government to improve the opportunities for access by the company sector to the longterm capital market.
Mr. Peter Hardy: Will not the right hon. and learned Gentleman comfirm that his statement today is bound to increase unemployment, contrary to his earlier remarks, and that in the public sector of industry and in local government there are profound implications for increased unemployment? Will be also confirm that he has increased the cost of unemployment so that it must now reach £480 million for every additional 100,000 on the dole?
Sir Geoffrey Howe: The purpose of the measures that I have announced today is precisely in the opposite sense.
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If we disregarded the imperatives written upon our economic analysis and did not take the action that I have announced today, it would be much more difficult to offer the prospect of a fall in unemployment in due course.
Mr. Anthony Beaumont-Dark: Does my right hon. and learned Friend accept that industrialists will welcome the fact that our MLR has come down two points, making borrowing in this country about 3 per cent. cheaper than it is in the United States of America? Will be also resist the siren voices of those who say that the excess profits of the banks should be taxed and taxed again? Does my right hon. and learned Friend realise that without the banks' profits a great deal of industry would not be able to survive and that as long as banks lend their money to industry they are doing the job that they are there to do?
Sir Geoffrey Howe: If ever I search for a voice to act as a counter-siren to the voices of sirens, I shall look in the direction of my hon. Friends.
Mr. D. N. Campbell-Savours: Taking into account the reduction in MLR and the inevitable increases in industrial rates, what is the net effect of this mini-Budget on manufacturing costs? Will they rise or fall?
Sir Geoffrey Howe: That sort of question raises a large number of implications. The most important feature—the one for which industry has expressed its pleasure through its spokesmen in the House—is the reduction in MLR. That is a precise, visible and effective reduction of the costs to manufacturing industry, which I am sure will be widely welcomed.
Mr. Healey: The Chancellor has repeatedly stated that the increase in unemployment and the fall in output in Britain are due to the world recession. Is he not aware that in all the major countries that compete with us the fall in output and employment is only half as great as in Britain, although none of them enjoy the immense advantages that we enjoy from North Sea oil? Did he not give away the whole game when he admitted that an increase of 3 per cent. in the demand for the products of aerospace and shipbuilding through an increase in the defence budget would increase employment and output in those industries? Can he not get it into his thick head that deflation of the sort to which he is submitting the remainder of the economy is the main cause for excessive unemployment in Britain?
Sir Geoffrey Howe: It is remarkable that at no level of promotion within his party has the right hon. Gentleman learnt to speak with a degree of respect and common sense. Does he not realise that those countries with whom he wishes to compare Britain did not have to suffer during the past 15 years the misfortune of being governed for 11 of them by a Labour Government?
Mr. Speaker: Order. When the debate on the economy takes place, I shall bear in mind those hon. Members who were unfortunate today.
Following is the summary:

SUMMARY OF PUBLIC EXPENDITURE POLICY DECISIONS
A. Volume
1. The changes in expenditure programmes for 1981–82 due to policy decisions since the March Public Expenditure White Paper (Cmnd. 7841) are:

221

1981–82 £million at 1980 Survey Prices†

Nationalised Industries

Increases in EFLs (other than for British Steel) including revised provision for shortfall

+620

Other policy increases*

Special employment measures

+245

Industrial support

+52

Industry (other)

+10

Health (withdrawal of some proposals for new charges)

+121

Civil superannuation (accelerated retirement of civil servants)

+64

Trade

+21

+510

Other significant policy changes*

(i) Local Authority Current Expenditure (England)—reduction by about 3 per cent, instead of 2 per cent, from planned level for 1980–81

-165

(ii) Further changes in Departmental programmes (excluding elements of local authority current expenditure included in (i))

Agriculture Departments

-36

Department of Employment

-25

Department of Transport

-21

Department of Environment (including PSA)

-158

Home Office

-17

Department of Education and Science

-52

Office of Arts & Libraries

-10

Department of Health & Social Security (health)

-25

(iii) Other Departments

Defence

-200

Foreign & Commonwealth Office

-16

Export Credits Guarantee Department

-166

Department of Health & Social Security (social security)

-66

Scotland, Wales and N. Ireland (including changes to local authority current expenditure in Scotland and Wales)‡ (about)

-90

Other (about)

-15

-1,060

EC refunds agreed on 30 May 1980

-650

2. The changes take account of the salary savings expected in 1981–82: from the progressive reductions in Civil Service numbers to 630,000 by 1984.
3 The list does not include changes where the exact amount will be decided later, for example, British Steel and child benefit. Nor does it include the estimating adjustments, for example, for demographic and economic factors, which will be made in the public expenditure White Paper to be published at the time of the Budget. The White Paper will include further details of the policy changes for 1981–82 and will set out the plans for 1982–83 and 1983–84.
4. The figures are in the prices used for the 1980 Public Expenditure Survey. "1980 Survey Prices" means for most expenditure broadly the prices of late 1979, which were some 18 per cent. higher than the 1979 survey prices used in Cmnd. 7841, For transfer payments (including overseas aid), 1980 survey prices are generally estimated average prices for 1979–80, ie about the same as those in Cmnd. 7841, as a result of a change of definition since that White Paper.
B.Cash limits
5. Cash limits and Votes for expenditure other than pay will allow for an average level of prices in 1981–82 11 per cent. higher than the corresponding level in 1980–81.
6. The cash limits for the rate support grant and for the universities' grant will include allowance for increases in earnings of 6 per cent. in annual settlements due before 1 August 1981, and also provisionally of the same amount for annual settlements due after that date. The allowance for pay in other cash limits, and Votes, will be so set that the pay of the relevant groups is dealt with broadly within the same financial disciplines. The outcome of settlements in particular cases will depend on the way in which the cash is allocated.
Footnotes:
* The increases and reductions shown include the net effect of various minor policy changes.
† Total changes are rounded to the nearest £5 million.
‡ The exact changes to Scotland, Wales and Northern Ireland programmes, in parallel with those of English programmes, will be given in due course.

Statutory Instruments, &c.
Ordered,
That the draft Veterinary Surgeons Qualifications (EEC Recognition) Order 1980 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Brooke.]

Orders of the Day

  Debate on the Address
  [THIRD DAY]
  Order read for resuming adjourned debate on Question [20 November].
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. van Straubenzee.]
  Question again proposed.

Foreign Affairs and Defence
4.33 pm
The Lord Privy Seal (Sir Ian Gilmour): Before we begin our debate, I wish to say how shocked the Government and people of the United Kingdom are to hear of the series of earthquakes that occurred near Naples in Italy last night. The loss of life and damage have been appalling. I am sure that the whole House will wish to convey its sympathy to the Italian nation.
Her Majesty The Queen has sent a message to the President of Italy. The Prime Minister, who was in Rome for talks with the Italian Government when news of the disaster was received, expressed her sympathy personally to the President and Prime Minister. There are no reports so far of casualties among British residents or tourists in the area, but unfortunately reports are still incomplete. We have been in touch with the Italian authorities about possible aid from Britain. They have said that they are not in need of any immediate supplies. But we shall be considering what we may be able to contribute at the reconstruction stage.
Traditionally, debates on foreign policy are less partisan than debates on most other subjects. That is as it should be. Even more than domestic policies, foreign policy requires a consistency of action and purpose for it to be effective. Obviously, full bipartisanship is usually not feasible. But in the debate on the Address last year there was a considerable amount of agreement, and so far as I can remember I did not criticise the previous Labour Government or Foreign Secretary at all. Indeed, since then, in the exchanges and debates that we have had with the right hon. Member for Stepney and Poplar (Mr. Shore) there has been a large area of fairly common ground. The memory of office was still fresh in the minds of the Opposition Front Bench, which had not yet lost touch with the real world. But that era has evidently now come to an end. As my right hon. Friend the Prime Minister said last week, the Opposition appear to have no foreign policy. All the observer has to go by is a series of confusing and contradictory declamations and statements.
The Government, however, have to operate in the real world. In the real world, the Atlantic Alliance and the European Community are the bases of our foreign policy. They are the indispensable framework within which successive British Governments have organised the
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defence and promotion of our national interests. We have no doubt about their value, and we shall work to strengthen them. The Atlantic Alliance is a voluntary association of free and sovereign States. Unlike the Warsaw Pact, it is not the hegemony of a super-Power masquerading as an alliance. It has kept the peace for 30 years and is the foundation of our security. Naturally, it requires constant consultation between its members to maintain its vigour. We shall work to enhance the harmony of allied consultations. We look forward to establishing close contacts with the new American Administration.
Security depends primarily on the material resources devoted to defence. I shall not detain the House with the numbing statistics of Soviet military power—the SS20s, the battle cruisers or the giant submarines. Nor need I speculate on the Soviet Union's motives for the acquisition of military capability far beyond the needs of self-defence. Its aggression and subversive policies are as undeniable as Soviet military might. We cannot just ignore them. It is our fundamental duty to ensure the nation's security and take, together with our allies, the necessary measures to maintain a credible defence. Therefore, the Government are improving the effectiveness of our Polaris submarines by means of the Chevaline programme. That is why we have decided to replace Polaris with Trident to maintain our independent deterrent into the nineties and beyond. That is why we are introducing a new main battle tank, Challenger, to counter the growing power of Warsaw Pact forces in Europe.
These measures are not cheap. They have had to be taken at a time when there is a severe shortage of resources in many other areas. But a credible defence is not an alternative to schools, housing and social services. It is the only guarantee of our security and way of life. The Government therefore raised their spending on defence by 3 per cent. in real terms in the last financial year, in line with the NATO target. As my right hon. and learned Friend the Chancellor of the Exchequer has just told the House, defence expenditure is now expected to grow by some 2½ per cent. both this year and next.
Mr. Eldon Griffiths: Will my right hon. Friend say what international factors have changed the position so as to justify a reduction from 3 per cent. to 2½ per cent.? When he speaks of credibility, what nuclear policy has any credibility if the Opposition, for the first time since the war, have said in the words of their Leader that the installation of cruise missiles in Britain would be countermanded by a future Labour Government?
Sir Ian Gilmour: I shall come to the second part of my hon. Friend's question in a minute. On his first point, my right hon. and learned Friend the Chancellor of the Exchequer made it clear that it is not developments in the international position that have brought about the reduction. No member of the Government relished any cuts in the defence programme, but because of the general economic position they were inevitable.
I wish to ask the Opposition a question. Are they in favour of NATO or not? The leader of the Italian Communist Party is, but I am less sure about the British Labour Party. It is true that at Blackpool the Labour Party conference rejected a resolution to renounce NATO. However, the rejection of that resolution was immediately contradicted by the passing of three other resolutions. The conference decided in favour of unilateral nuclear

225
disarmament by Britain, and it also decided to get rid of all nuclear weapons and bases in this country. And, not content with unilateral nuclear disarmament by Britain, the Labour Party conference went on to adopt a resolution opposing
"British participation in any defence policy based on the use or threatened use of nuclear weapons."
This is a clear rejection of the strategy on which NATO is based, and would in a short time lead to Britain's departure from NATO.
On the very day before the Labour Party decided to repudiate the defence policy which it had supported with one short hiccup since the days of Attlee and Bevin, the then leader of the Labour Party, the right hon. Member for Cardiff, South-East (Mr. Callaghan), said that Labour would not vote for unilateral disarmament and that, if it did, Labour would be saying "Stop the world, we want to get off." Everything that the Labour Party has done since then indicates that that is exactly what it wants to do. To give him his due, the new leader of the Labour Party got off about 20 or 30 years ago. He was a fervent unilateralist then, as now. Of course, he clambered back on again from about 1972 to 1979. But everybody agrees that that period was a rather unfortunate experiment.
Released from office, the Leader of the Opposition has become a unilateralist again. He tells us that we should give up our nuclear weapons and that he would certainly send cruise missiles back to America.
The right hon. Gentleman's nostalgia for Aldermaston marches and Trafalgar Square in the fifties and sixties is certainly endearing, though a little self-indulgent, but it does not provide a basis of any sort for a foreign policy in the eighties. Whatever the delusions of the Leader of the Opposition, the rest of the world is not just waiting for a middle-ranking European Power to cast away its nuclear weapons in order joyfully to follow suit.
Does anyone seriously think that the Soviet Union would make concessions on its own armaments if it thought that the West was going to disarm anyway? Of course it would not. So, as I have shown, the policy of the Labour Party conference implies Britain's departure from NATO.
Is that also the policy of the Parliamentary Labour Party? Has the Parliamentary Labour Party also gone unilateralist overnight? Does it now want to leave, having held the contrary view for over 30 years? We look forward to hearing from the right hon. Gentleman shortly.
We know that adequate strength is indispensable to our survival. Of course, measures for the control and reduction of armaments are a necessary complement to this. No one in this House wishes to see an arms race. The Government remain deeply committed to pursuing arms control and disarmament. We are convinced that this is an essential part of our wider security policy. But arms control cannot be negotiated from weakness.
Mr. Tam Dalyell: If the right hon. Gentleman really means that, what precisely are the instructions that have been given to the Minister of State, Foreign and Commonwealth Office, who seems to many of us to have been active in the capacity of a wrecker at the Madrid conference?
Sir Ian Gilmour: I shall address myself to the Madrid conference later. If I may say so, the hon. Gentleman has
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made a fairly ridiculous comment. I cannot believe that the hon. Gentleman can have been following the events at Madrid with his customary care and closeness.
Mr. Victor Goodhew: My right hon. Friend may not be aware that I have recently returned after sitting for four weeks in the First Committee on Disarmament at the 35th General Assembly of the United Nations. I listened for four weeks to the speeches on disarmament of the representatives of various countries. Is it not absurd to fall for the hypocrisy and cynicism of the Socialist line, as the Opposition do, when at this very moment, while Afghans are being killed daily, the Russians are about to introduce into the committee a resolution entitled "Urgent Measures for the Prevention of War"?
Sir Ian Gilmour: I was intimately aware of my hon. Friend's movements. I knew that he was closely involved in these matters. I value his comment.
The right course is to explain that no one can win the arms race and that the only sensible answer for both sides is to call a halt and together to decide on a step-by-step process to maintain the balance at a lower level of expenditure and armament. We are convinced that that is the only approach that stands a chance of success. We therefore welcome the United States-Soviet talks on TNF, and we shall continue to play our part in MBFR and CTB negotiations.
Greater cohesion and strength among Western nations will also reassure our friends in the Third world. The Soviet invasion of Afghanistan was a salutary shock to many of them. The Soviet Union stood revealed as an aggressive, expansionist Power, whatever the motives that may be dreamt up to explain its actions. Its championship of the non-aligned was seen as a hollow facade. We shall continue to champion the right of the Afghan people to live under a Government of their choice. We believe that the only solution is a withdrawal of Soviet troops and a return to neutral, non-aligned status. We shall help Pakistan and other nations affected by the conflict to bear the burdens that it has imposed upon them. In all this, our policy is in common with the 110 other members of the United Nations which voted for the resolution of the United Nations General Assembly last Thursday, which again condemned the Soviet occcupation.
The House has been following recent events in Poland closely and anxiously. Our view is clear. Poland must be allowed to work out its own destiny. We have no intention of interfering, and we trust that the same is true of every other Government. Many other Governments have in fact made statements disclaiming any thought of intervention, and these we note and welcome. The internationalisation of events in Poland would mean the end of detente. I hope that is absolutely clear to all concerned.
In the troubled international situation, we must keep open our channels of communication both across the Atlantic and to the East. We in Britain can do more to develop our contacts with Eastern Europe. It is in our economic. strategic and other interests to do so. East and West are in fact meeting at this moment at the CSCE review conference in Madrid. We hope that it will reduce East-West tension and increase co-operation within Europe.
The Helsinki process brought hope to millions and should not be thrown away. But it depends on confidence

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and trust. These cannot be built on falsehood. That is why the Western nations were united in insisting that the past record of implementation must be thoroughly examined before new proposals were considered. This is now happening. If all nations are genuinely prepared to honour their commitments, further progress can be made.
Before passing from East-West to North-South, I want to say a word about another potential arena of East-West tension—the Middle East. The search for stability in that area and the removal of opportunities for outside exploitation must be one of our prime objectives. The present conflict in the Gulf is of immediate and grave concern. It has caused a serious dislocation of oil supplies and has threatened to spread to other States in the Gulf. The action we and other Western Powers have taken in the Gulf has increased safety in the area and enabled vital shipping to continue. It is unfortunately difficult to foresee an early end to the Iran-Iraq war, but we shall assist any attempts at mediation in every way possible and meanwhile work to limit the conflict.
But the Arab-Israel dispute remains a central cause for concern in the longer run. We and our European partners will continue the search for a just and lasting settlement. The Venice declaration of last June set out principles which we believe could lead to such a settlement. This should in our view ensure that the Palestinians can determine their own future and that Israel can live in peace and security. The Nine will be considering how to continue talks with the parties concerned, with the aim of securing their agreement to these principles and creating the necessary climate of confidence between the parties. We shall also, of course, keep in close touch with the United States, whose role remains indispensable.
I come now to North-South questions and the Brandt report. We fully accept that the harmonious development of relations between developed and developing countries is vital in the common interest. We accept that the outlook for the developing countries is very serious. We accept that if mounting recession and oil prices hit us hard, their effect on the poorest countries is devastating.
We do not agree with every prescription that has been put forward either in the Brandt report or in other fora. We believe that it would be unwise to destroy viable institutions which took a long time to set up, but we believe that such institutions should adapt to take account of changing circumstances.
Thus, we have, for example, agreed to the doubling of the World Bank's capital. We support its increased lending for structural adjustment. We have also taken parliamentary action to contribute some $1.2 billion to the sixth replenishment of the International Development Association. In the trade field, after the conclusion of the common fund negotiations, a new international cocoa agreement was signed in Geneva last week, in which we took an active part. All these are measures of significant benefit to developing countries.
Mr. Dick Douglas: Surely, one of the dilemmas is the fact that the OPEC surpluses will reach about $100 billion in the current term. If the West continues to run down its economy, how is it possible for those surpluses to be invested beneficially for both industrialised and developing nations?
Sir Ian Gilmour: The problem of OPEC surpluses is, indeed, basic. As the hon. Gentleman will remember, at the Venice summit conference the participants expressed a desire for a dialogue with the energy producers. That is certainly still our desire.
Our relations with the Third world are not purely economic and technological, important as these are. We also have a contribution to make to the political stability of developing countries, and we must use our influence to promote this.
I have read that the speech of the right hon. Member for Stepney and Poplar today may be his swan song in foreign affairs. If so, he will be missed. He will presumably be transferring his attention to economics, in which case he will be propounding the policy of the Labour Party on import controls. Whatever else may be said about import controls, one thing can be said with complete certainty—that import controls would do great damage to the developing countries. So, as usual, the Opposition are in a wholly inconsistent position. They proclaim their desire to help the less-well-off countries and then promptly adopt a policy which will do them great harm. I wish the right hon. Gentleman luck in seeking to resolve that contradiction.
We also believe that direct private investment and other financial flows from the capital markets have a major role to play in the development process. The abolition of exchange controls is one step towards this.
However, we recognise that such flows will benefit mainly the richer developing countries. For the poorer countries, official aid will be essential for a long time to come. Our aid programme has not been exempt from the cuts in public expenditure, but it is substantial none the less. In volume it is the fifth largest after the United States, Germany, France and Japan—all countries with stronger economies than ourselves—and as a percentage of GNP we are well above the average. We shall continue our efforts to improve its effectiveness and ensure that it is concentrated on those most in need. Some two-thirds of our aid now goes to the poorest countries.
I should like to reaffirm the Government's support for the voluntary agencies, which make such an important and distinctive contribution to British efforts for the poorer nations. In the current financial year, provision of £1·85 million has been made with an additional £½ million allocated for projects in Zimbabwe.
I come finally to the European Community.
Mr. Christopher Price: Is the right hon. Gentleman satisfied with his policies for overseas students' fees, since he said that we have a political responsibility to those countries? Is he satisfied, when the only result of his policy last year was to send vast numbers of students who would otherwise have come to Western countries to Moscow? Will be review those policies?
Sir Ian Gilmour: All policies are always kept under review. The figures are very much a matter for my right hon. and learned Friend the Secretary of State for Education, but it is my understanding that the number of overseas students entering university this year has kept up remarkably well.
Mr. John Maxton: They are 40 per cent, down!
Sir Ian Gilmour: Making a success of our membership of the European Community is essential to the future security and prosperity of this nation.
As the Community's policies evolve on major world problems, the role that Britain is now playing makes a contribution of real value to Europe, to the world and to Britain itself. The political case for full participation in the Community is overwhelming. A strong and united Europe is a focus of stability in an increasingly dangerous world. The Community's voice in world economic negotiations is already powerful. States throughout the world seek to strengthen their political and economic relations with it. Greece becomes a part of it in a few weeks. Two more States are negotiating to join and have our support.
Three years ago, at the Labour Party conference, the Leader of the Opposition had this to say on the subject of enlargement. [AN HON. MEMBER: "Will the right hon. Gentleman say what he has to say?"] Of course we are in favour of enlargement.
The right hon. Gentleman said:
"All of us know that our comrades in all those countries are very eager to become members of the European Community. Speaking as an international socialist, I do not see how I, as an international socialist, or this movement, could say that we would slam the door in the face of our comrades from Greece, Portugal and Spain."
That was well said, but, of course, at that time the right hon. Gentleman was in office. Now, instead of wanting to slam the door in the faces of Portugal and Spain, he wants to leave, slamming the door behind him. There is certainly nothing very international about the Leader of the Opposition these days.
However, at least the right hon. Gentleman was a bit nearer the truth than was the right hon. Member for Stepney and Poplar at Blackpool this year, who talked about
"the incompatibility with socialist policies of what is enshrined in the Common Market doctrines and philosophies of the Common Market."
In fact, there is scarcely a Socialist party in Europe that does not support the Community.
Mr. Tony Marlow: That is not surprising.
Sir Ian Gilmour: In Portugal the only party to oppose entry is the Communist Party, and in Spain not even the Communist Party is against accession. Obviously, like the Leader of the Opposition, the right hon. Gentleman believes that facts confuse his arguments.
It is the British Labour Party that is the odd man out.
Mr. George Foulkes: And the hon. Member for Southend, East (Mr. Taylor).
Sir Ian Gilmour: That, I think, is true.
We know that the Labour conference wants Britain to leave the Community. So does the right hon. Gentleman, who made that clear in his speech in Blackpool, in which he said a number of things that were quite untrue. We suspect that that great international Socialist, the Leader of the Opposition, also wants to leave this international grouping. However, what is the policy of the Parliamentary Labour Party? I cannot believe that all Labour Members are prepared to change their policy on Europe every time Labour wins or loses an election.
We shall have to wait to see whether the Parliamentary Labour Party is prepared to be dictated to by all those charming, moderate and civilised people whom we saw on
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our television screens at Blackpool. Somebody used the phrase "Left-wing fascists". Whatever they were, they did not look fit to control the destinies of a once great party.
Those who argue that membership of the Community has damaged this country's economic interests seem to me fundamentally misguided. They disregard the fact that well over 40 per cent, of our trade is now with the European Community and that since we joined the Community our exports to the Common Market have risen by 350 per cent., compared with an increase to the rest of the world of only 200 per cent. How many times do we have to point out that the Common Market now provides us with an irreplaceable and relatively stable market in difficult world trading conditions and that our trade performance in the Community since we joined has been rather better than our trade performance with the world as a whole? Moreover, investors from outside the Community are encouraged to come here to gain access to this market.
Mr. Marlow: That includes oil.
Sir Ian Gilmour: Did I understand that my hon. Friend wanted to intervene?
Mr. Marlow: I am grateful to my right hon. Friend. I should be grateful if in future, when he talks about trade with the rest of Europe, he could point out what has happened to trade in manufactured goods over the past three years with the Six. There was a deficit of £1,000 million three years ago, it was £2,000 million two years ago and it was a massive £3,000 million one year ago. Will he, in future, not always confuse the issue by bringing in trade in oil? Of course, there is a difference when one considers trade in oil. Oil is a currency like gold or any other commodity.
Sir Ian Gilmour: I tell my hon. Friend what I told him before. The issue does not confuse others, but, apparently, confuses only him. The export-import ratio in trade manufactures with all countries declined from 115 per cent, in 1978 to 105 per cent, in 1979. For the EEC it fell from 87 per cent, to 82 per cent., and for the United States from 92 per cent, to 82 per cent. We therefore did better than the rest of the world.
The European market is one in which Britain can, and must, succeed if we are to survive as a major industrial and trading nation. We can certainly do a lot better in the Community: we should certainly do a lot worse outside it.
The Government are working successfully for a Community with better balanced policies, which will further its development as well as being more in tune with Britain's interests. The 30 May budget agreement provided an important interim remedy to the inequities of our net contribution. More important, in the longer term it provided a firm Community pledge to resolve the budget problem by structural change. With our partners we shall be working for this in the coming two years. Structural improvement requires reforms in the common agricultural policy to eliminate wasteful surpluses and to reduce the policy's cost. To describe the abolition of the common agricultural policy as reform is not convincing. We reject that approach. There is nothing wrong with the objectives of the CAP as set out in the Treaty. We have to improve the manner in which they are implemented.
The Opposition have never learnt that we shall not win support for British objectives in the Community if our

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attitude is grudging and carping. It is because the Government are seen to be committed to the Community that they have succeeded in improving Community policies, and that is how we shall continue—working within the framework of the Community Treaties to secure the reforms that we need and taking into account the fundamental interests of our partners. For, if we are not prepared to have some regard for their fundamental interests, why should we expect them to have regard for ours?
Nor am I impressed by the arguments that Parliament has in some way "surrendered" to Brussels. This Parliament, of its own free will, decided to adhere to a Treaty in common with eight other States. The Government approve Community measures and the Government are responsible to Parliament. There were no secret clauses in the Treaty. This choice was overwhelmingly endorsed on a referendum two years after entry. There is no tenable position between adherence to the Treaty and withdrawal, or any reason to think that our partners would allow us to negotiate such a position. The notion is a fig leaf for withdrawal.
The right way to further our national interests, most immediately, of course, over fisheries, is to negotiate with firmness and determination within the framework that we and previous British Governments solemnly accepted. That is what we shall do.
I have underlined the principles of our foreign policy and dealt only with the main points of present concern. I admit to grave misgivings. I wish there were more common ground between the Government and the Labour Party. There was more a year ago—and more, too, when they were in office over a decade ago. It is not the Government who have defected from the post-war consensus. It is the Opposition who have withdrawn into a neo-isolationism. In trade and European matters they ignore reality. In defence and armament policy many of them ignore history and the clear evidence of what is happening. They denounce Western defence, while complacently accepting Russia's vast rearmament programme. They treat the military security of the West as of no importance. Nothing could be more damaging to the British people.
Now is not the time to retreat into our shell. British interests demand that we should be a respected and reliable ally and a country strong enough to help solve the difficulties that beset the world. The Government intend to see that Britain lives up to its history.
5.5 pm.
Mr. Peter Shore: I shall deal with a number of the points made by the Lord Privy Seal in what I thought was a spirit of almost frivolous partisanship in an otherwise almost customarily dull and lacklustre speech.
First, however, I join him in expressing to the Italian Government and people the sympathy and sorrow that we feel as a result of the great earthquake disaster, about which we have heard so much in the past 24 hours. One is horrified at the earthquakes that have hit so many areas during the past few months. Perhaps they should reinforce our belief that when nature inflicts so much damage on so many areas it is the duty of those of us who have some
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influence on affairs to see that in our conduct of those affairs we at least spare mankind from the disasters which are controllable.
The debate takes place at a time of great uncertainty in world affairs. Since last November major events—notably the seizure of the American hostages in the Teheran embassy, the further escalation of nuclear weaponry with the introduction of the Soviet SS20 and the NATO decision to answer with the cruise and Pershing missiles, the failure of the United States Senate to ratify the SALT II treaty, and the Soviet invasion of Afghanistan—have produced a chain reaction that has heightened tension and threatened peace and security throughout the world.
Meanwhile — no less important, but so often overlooked—there has been a major deterioration in the world economy, a further doubling of oil prices, the growing impoverishment of many developing nations, and spreading unemployment throughout the Western world. In the course of the four or five months since we last debated external affairs, there has been no lightening in the international scene. On the contrary, as we were reminded, no serious progress was made in the United Nations committee on disarmament in Geneva in August on such vital matters as a comprehensive test ban treaty, the banning of chemical and radiological weapons or a comprehensive programme for general disarmament.
The second review conference of the nuclear non-proliferation treaty which followed in September failed even to agree a final communique. The non-proliferation treaty still stands, but, unless progress can be made under article 6, which calls for the five nuclear Powers to halt the nuclear arms race and to begin nuclear disarmament, it is difficult to believe that the growing number of non-nuclear nations—those which have signed the treaty and those which have not — which have the capacity to manufacture nuclear devices will continue indefinitely to feel bound by the treaty's constraints.
The Gracious Speech contains a mention of the Iran-Iraq conflict. The Lord Privy Seal referred to it. It is surprising to me, however, that the Government do not link that conflict with the immense build-up of weapons in those two countries, weapons which, I agree, have been supplied to Iraq by the Soviet Union but to Iran, as with so many other countries in the Middle East, as a result of a kind of continued competition between the countries of the West. It is essential if we are to make progress and minimise the existing dangers—not only between East and West but in many other parts of the world—for us to reach agreement among ourselves and, and if possible, with others on limitation on the supply of arms.
It is remarkable that in the Gracious Speech there is no reference to that, to the non-proliferation treaty or to the world disarmament conference and the further objectives that we should still hold. These matters should unite not only both sides of the House but many nations. With the non-proliferation treaty there is a strong East-West bond upon which we should build.
There are two major uncertainties upon which I shall dwell. First are the policies yet to be announced of the American Administration to be formed when President-elect Reagan takes office in January. Second are the continuing events in Poland, to which I am glad that the Lord Privy Seal referred, and the still uncertain response to them of the Soviet Government.

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The first of those events—the policies of the Reagan presidency—will be anxiously awaited in many parts of the world, and, indeed, in many areas of policy. It will be awaited in many countries of Latin America, where there are strife, civil war, oppression and the most horrible abuse of human rights and where American influence may be of decisive importance. One has only to recall the areas where the greatest problems have arisen in the last 12 months — Nicaragua, El Salvador and Bolivia — to recognise at once how important the stance of an incoming American President is.
My hope is—although I do not necessarily feel very confident about it—that the United States and the new presidency will, as I think President Carter had increasingly begun to recognise, look not just to short-term stability and to the backing up of conservative and apparently anti-Communist regimes but to orderly progress in those countries so that there is some chance of human rights being protected and of advancement for the peoples of those countries and, therefore, for internal peace.
In Southern Africa, I suspect that South Africa is hoping that the new United States Administration will adopt a different policy and depart from the efforts made by President Carter, with others, particularly in relation to Namibia. The Gracious Speech refers to Namibia and to the Government's efforts in that area, but the Lord Privy Seal had nothing to say about that. I had hoped that he would tell us the stage which the negotiations had now reached. The almost endless delays cannot be allowed to continue much longer. A framework of agreement has been worked out and presented to the parties involved. I strongly press upon the Government and, through them, on the South African Government that they should now accept what is inevitable, namely, that there will be a free election in Namibia, that it will be externally supervised and that South Africa must abide by the result.
In the Middle East, the impact of a new American President can and will be of major consequence. I hope very much that in the Palestinian and Israeli dispute the American President will strongly reinforce the policies of his predecessor. I believe that the next step that needs to be taken, if there is to be the chance of a settlement on the West Bank and in Gaza, is the carrying out of the full autonomy proposals which were in the Camp David agreement but which have not yet been negotiated and achieved.
Mr. Andrew Faulds: I have just returned from a visit to the United States. Does my right hon. Friend accept that there is general acceptance among the more enlightened politicians that the Camp David initiative is as dead as the dodo? Some of us had the sense to tell the House that this would happen many months ago when it was first initiated. Will my right hon. Friend qualify his comments on autonomy as being sufficient for the Palestinians, because it is not, by accepting that many people in his own party do not go along with his view on this matter?
Mr. Shore: I understand my hon. Friend's point, but I believe that there is great advantage in carrying out the proposals for full autonomy. The words "Camp David" perhaps have other associations, but, to me, full autonomy under those proposals means the genuine election of representatives of the Palestinian people on the West Bank
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and in Gaza who will be able to speak for their people in subsequent dealings with the Israelis. It means the withdrawal of the omnipresent Israeli military presence on the West Bank and in Gaza to base camps. It then leaves entirely open the question of the third and ultimate step in the whole process, because it will be then, with representatives of the Palestinian people, that negotiations about the long-term future of the West Bank and Gaza can proceed.
I do not believe that those proposals and arrangements provide the full answer to the question, but I believe that they carry the issue forward in a very helpful way. I ask my hon. Friend to recognise that.
Mr. Ernie Ross: I do not wish to press my right hon. Friend too closely, but I think he missed the point that my hon. Friend the Member for Warley, East (Mr. Faulds) was trying to make. An ingredient is missing in the autonomy talks that everyone recognises must be there if they are to succeed in any way at all. Even at this stage, if one asked the Palestinians on the West Bank and in Gaza they would say that there are people whom they see as their representatives and who should be involved, namely, the Palestine Liberation Organisation, Until my right hon. Friend accepts that, Camp David or any other discussions cannot move forward.
Mr. Shore: The role of the PLO is a separate matter. But I believe that the elections—I am sure that we can think of arrangements to ensure that they are free and fair elections—of representatives from the West Bank and from Gaza are bound to give a new and more authoritative voice in any subsequent negotiations.
I have mentioned some of the areas in which I believe that the new American presidency will wish to declare its policy and will be of profound importance. But there is no area so important as the policy of the new Administration on the question of the limitation of nuclear weapons and the continuation of the SALT I and II process begun by his predecessor. In spite of the serious deterioration in East-West relations which followed the invasion of Afghanistan, it remains the clearly expressed intention of the Carter Administration to reintroduce the SALT II treaty into the Senate because it was and remains in the interests of the United States and its allies and of the Soviet Union that that treaty be ratified. The Lord Privy Seal expressed support for SALT when the question was last debated in the House. Unfortunately, the treaty became part of the presidential election campaign. It is now unclear whether the new Administration are seeking clarification, assurances, minor changes, minor revisions or major changes or whether it is to abandon the whole process.
This matter is crucial, because, if we are ever to get nuclear disarmament, we must first achieve nuclear arms limitation. If the SALT II process broke down or was aborted, it would be replaced by an open-ended nuclear arms race of the most dangerous kind which neither side could seriously expect to win and which both sides know would add nothing to their own security or to the maintenance of peace. I hope, therefore—I did not hear the Lord Privy Seal address himself to this subject—that Her Majesty's Government will make appropriate contacts in Washington and express plainly to President Reagan and his advisers now the overriding importance that we attach to an early resumption of the SALT II process.

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Equally important are the SALT III negotiations, to which the Soviet Union has agreed, involving Euro strategic weapons, including the SS20 and the cruise and Pershing missiles. The offer of negotiations on both those systems was made not just by the United States but by NATO collectively and was part of the decision in principle to locate American missiles in West European countries, including our own. There is no inevitability about the introduction of those missiles, but it is crucial that negotiations take place with energy and speed. Three years as the period before the first United States missile is due to arrive in Europe may seem a long time, but the complexity of these arms limitation negotiations is such that only the most determined efforts will bring them to a conclusion even within a three-year period.
I turn now to the dramatic and continuing events in Poland. Like most hon. Members—certainly all Labour Members—I have watched with admiration and anxiety the mounting pressure of the trade unions, the human rights movement and, indeed, the people of Poland on their inefficient and oppressive regime. Under the pressure of strikes, first in Gdansk and later nationwide, the new leadership of the Polish Communist Party has been forced to make substantial concessions. These have included the creation of genuinely independent trade unions — the Solidarity movement—the right to strike, access by the Church to the news media, public recognition of the rights agreed in the 1975 Helsinki accords and a relaxation of press censorship. There is much still to be settled, but I have no doubt that left to themselves—here I echo the Lord Privy Seal's sentiments—as they should be, the Polish people can secure changes in their Communist State which are satisfactory to them and beneficial to their country.
However, the question is whether they will be allowed to do so and whether the ideological policemen in the Kremlin will permit such a shift of power within the Polish Communist State. It is almost incredible that we should have to ask such a question in the 1980s. Almost everywhere else in the world, except in the countries both occupied and liberated from Germany, by the Red Army in 1945, has the right of self-government now been conceded, and by no country as wholeheartedly as by our own, as the size of the New Commonwealth presently testifies. Yet in Eastern Europe advanced peoples and developed nations are under permanent supervision and threat. That is no exaggeration. Germany and Poland In 1953, Hungary in 1956 and Czechoslovakia in 1968 have all experienced direct military repression by Soviet armed forces. The Russians judge, and Dr. Luns, the NATO secretary-general, has again affirmed, that the West will not intervene militarily in Polish affairs. They are right. But they should draw no comfort from that.
The Russians should understand that if they were once again to play the tyrant and the bully in Eastern Europe there would indeed be a price to pay. As the Lord Privy Seal said, detente has already been battered by Afghanistan, and it would grind to a halt. The Russians would find themselves totally isolated and condemned by the world community. Further, all that the Russians sought to achieve in the 1970s, culminating in the Helsinki agreement, would be lost.
Let me remind the House of the Helsinki declaration—the Final Act of the Conference on Security and Co-
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operation in Europe — which was signed in August 1975. Pride of place in the various agreements which were then recorded in the Final Act was given to the declaration on principles guiding relationships between participating States. It stated:
"The participating States will refrain in their mutual relations, as well as in their international relations in general, from the threat or use of force against the territorial integrity or political independence of any State, or in any other manner inconsistent with the purposes of the United Nations and with the present Declaration."
It went on to say quite specifically:
"No consideration may be invoked to serve to warrant resort to the threat or use of force in contravention of this principle."
There is here a major commitment to non-intervention and to accepting the right of nations to govern themselves—a commitment to which Mr. Brezhnev is himself personally involved because the document carries his name. The key question is whether that commitment overrides or is itself overridden by the Brezhnev doctrine of 1968—the statements which were then made and which sought to justify the Soviet occupation of Prague on the grounds that in the Communist world the sovereignty of States is limited; that the Soviet Union has the right to intervene in the affairs of other Communist countries not only to prevent change from Communist to non-Communist forms of government but to intervene to prevent what the Soviet Union considers to be deviations within the Communist system from the only correct form of Communism itself.
In my view, that Brezhnev doctrine and the uncertainty of the whole Russian approach to its Communist neighbours, are one of the fundamental causes of instability in the world today. No doubt the Madrid conference, at last under way, will review the whole complex of European relationships, including the major question of mutual security and the observance of human rights, but I do not think that we shall get far until this great question is solved. Sooner or later we must engage the Russians not in a propaganda dialogue or in an accusatory and public forum, but in a serious discussion of the future of Eastern Europe.
The Russians have a long and, indeed, all too recent history of insecurity and invasion from powerful countries of the West. That must be recognised and understood, because it still greatly influences the thinking of the men who dominate Soviet policy, in spite of massive changes in power relationships. They are old men who have lived their lives through the double invasion, near-disaster and disintegration of their country. Russian forward bases in Eastern Europe and the Warsaw Pact are, therefore, likely to exist for many years to come. Unless and until there is an improvement in the whole East-West relationship, both NATO and the Warsaw Pact will continue, with the presence of American troops in the West and of Russian troops in East European countries.
The question for the Russians to consider is whether the Warsaw Pact—which at least in the light of history we understand — is in future to be buttressed by the Brezhnev doctrine. I believe that the whole system in Eastern Europe is dangerously unstable. The desire for national freedom and self-government is a strong and abiding force in human affairs. Therefore, the assertion of the right of self-government will arise again and again until eventually it succeeds and wins the freedom and national self-expression in which all men believe. I do not think that it is in the interests of the Soviet Union itself to

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continue to sustain so outmoded, old-fashioned and imperialist a relationship. In the years ahead we must find ways of reaching understanding that combine the abandonment of the Brezhnev doctrine with the acceptance of Soviet strategic and security needs. I believe that that should be one of the major tasks of the political strategy of the West.
My reflection on Eastern Europe and Afghanistan leads me to many conclusions. Desirable changes that will assist the maintenance of world peace cannot be brought about by military means alone. Certainly, if Eastern Europe and, I suspect, Afghanistan, too, are to be free to rule themselves again, it is through negotiation and economic and political pressures, not military force, that desirable change will be achieved. The further proliferation of nuclear weapons on either side will contribute nothing to this end. We agree that the balance of military power must be sustained, and, of course, we shall remain members of NATO. That balance can be achieved at a higher or a lower level of armaments, and it is the lowest possible level that all sense surely argues for.
Indeed, the over-emphasis on military response, which was so clear in the Lord Privy Seal's speech, is in my view a principal failing of Western policy today—a failing certainly shared by the Government, whose policies include a massive new expenditure on Trident, of which we are not persuaded and which we shall certainly oppose. Although we cannot, and do not, ignore military dangers, in a large part of the world military solutions will not work, and there is a far greater threat to political security and stability, as well as to the friends that we have, through economic disorder than there is through external military forces.
Mr. Eldon Griffiths: As always, I find myself in agreement with a great deal of what the right hon. Gentleman has so eloquently said. He has said plainly that the party for which he speaks will oppose the Trident missile purchase. Will be say plainly—it is a matter of interest to both sides of the House—whether the Labour Party would send home the American cruise missiles if they were already installed here when a Labour Government took office and whether, if they had not been installed here under NATO's strategy, a Labour Government would prevent their being installed?
Mr. Shore: I have said what I have to say about Trident. On the question of cruise, we have three years before the first cruise missile will even be manufactured and available. We have the time, but we must also have the will to use those three years to ensure that we do not have cruise missiles in Western Europe and that the Soviet Union's SS20s are dismantled and removed. That is the joint objective that we must sustain.
Mr. Patrick Cormack: Will the right hon. Gentleman give way?
Mr. Shore: No, I shall not give way at the moment. I know what the hon. Gentleman will ask me, and I say to him straight away that I have no right, nor has anyone else the right, to say at this stage what our reaction will be if those negotiations fail. I know what I shall say if those negotiations fail, but I do not start on the assumption that before negotiations have started I have to state what I shall do or say.
It is on the outlook for the world economy that I have the deepest forebodings. Last Thursday the OECD met in
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Paris and updated its forecasts for economic growth. It stated that in 1981 the economic growth for the OECD member countries—Japan, America, Western Europe and Australia—is
"unlikely to exceed 1 per cent."
Even in 1982, 2 per cent, is considered to be the top range of the achievement. In 1980, we shall be lucky if growth reaches one half of 1 per cent.
The immediate effects are all too obvious. Unemployment in the OECD area continues to rise. The 24 million who are now out of work will rise to at least 25 million by the end of next year. The loss of production and the output of wealth is simply staggering. The occasion of this further downturn in the world economy is the further doubling of oil prices 12 months ago, which will leave the oil exporters with a surplus of no less than $150 billion this year and $175 billion in 1981. Consequently, the balance of payments deficit in 1981 of the OECD countries will be no less than $95 billion, and for the non-oil developing countries it will be no less than $89 billion.
The danger of the world slump should be in the forefront of our minds. The nearest the Gracious Speech comes to the problem is when it states that the Government
"recognise the serious economic problems … and will continue to work with other countries and international organisations in seeking to alleviate them."
In their response to the Brandt commission report, in their cuts in overseas aid and in their pricing out of higher education poorer students from overseas countries, the Government have shown an incomprehension and indifference, and they have done so in an appalling way. At the Venice summit of the Seven last June, the influence of the British Government was placed wholly on the side of deflation and on the West's passive acceptance of the consequences for the developing world of the deflationary results. The British attitude was immortalised in a non-attributable briefing: "They have their problems, we have ours."
The folly of that approach is that the problems relate to each other. About 14 percent, of United Kingdom exports and 12 per cent, of United Kingdom imports go to and come from Third world non-oil countries. It is a substantial part of our trade, and if those countries can no longer finance imports from us—most of them are now having to spend up to 70 per cent, of their export earnings in order to finance minimum necessary quantities of oil—we shall not be able to export to them.
The political consequences are likely to be even more serious. In the West, unemployment and recession are politically destabilising. During the past few months we have seen the collapse of a representative Government in Turkey, and extremist parties of the Right and Left are drawing new support in Spain, Portugal, Italy and elsewhere. In many developing countries the fall in living standards, added to political repression, will lead to conflicts of the most dangerous sort. In Latin America—Nicaragua, E1 Salvador, Bolivia and Guyana—revolution, civil war and repression have already taken place. In many countries in Africa, too, regimes are undergoing pressure. I shall mention only one—Zimbabwe, where our direct recent involvement is fresh in our minds. That country needs more aid, and it needs it now. The resettlement and demobilisation of the separate guerrilla armies are the most pressing problem.

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It would be a tragedy if, through lack of short-term assistance, that country were to be plunged into further and ruinous strife.
Worse, as we all know—I take the Lord Privy Seal's point here—protectionism is growing. The OECD area could, if present trends were reinforced, relapse into a trade war in which North America, Japan and the Common Market awere ranged against each other. Much of the discussion in Strasbourg now is precisely about how Japanese imports into the EEC can be limited. This is a major problem for us all. To solve the problems, and, above all, to reach a stable arrangement with the OPEC countries so that every time oil prices are raised the rest of the world is not plunged into deeper recession, requires a major and imaginative initiative. Yet all we have are the stalest platitudes from the Government about inflation.
It is the mention of platitudes that brings me inevitably and necessarily to the last subject on my agenda today—the European Economic Community. The Gracious Speech refers to the Government's
"strong commitment to the European Community".
I sometimes think that it would be more important to see a commitment by the EEC to Britain. I need not speak at length on this subject because our position has been stated on many occasions in the past year in previous debates. But we remain profoundly dissatisfied with the continuing arrangements of the EEC, and in particular with the package of measures which the Government agreed in May last year.
I wonder how much in the past few weeks departmental Ministers have lamented the fact that the Prime Minister has abandoned her original objective of a broad balance in Britain's contributions and receipts from the EEC budget. I have a feeling that there cannot be many Ministers who would not have found the £371 million to be paid this year and the £445 million to be paid next year a useful addition to their own programmes.
We all know that the Government hope that the forthcoming discussions will lead to changes in the CAP and in the Community budget on a long-term basis. I am entirely sceptical about that. Changes in the CAP have been on the agenda since the days of Dr. Mansholt in the mid-1960s. Whatever chance there may be of change, it will not have been assisted by the encomium delivered on the CAP by the Minister of Agriculture, Fisheries and Food last week. We all know that the Cabinet, from the Prime Minister downwards, decided to engage in what I can only call a Community love-in. What I fear, however, is that the right hon. Lady's wooing will be no more successful than was her scolding 12 months ago. I am not surprised at the recent formation of a Conservative European reform group—not at all.
Mr. Cormack: As somebody who is not a member of that group, may I ask the right hon. Gentleman a question? He talks about President-elect Reagan and about the need for the world to know what his policies are. It is even more necessary that we in this House should know where the right hon. Gentleman stands. Is the Parliamentary Labour Party now committed to coming out of the EEC or to staying in? Can we have a clear and unequivocal statement on that?
Mr. Shore: Before the hon. Gentleman intervened, I was going to say how warmly I agreed with the reform
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group's points, including the ending of the common agricultural policy and the restoration to national Governments of control over agricultural policy, the reform of the system of financing the Community budget to ensure that no State has to carry an unfair share of expenditure and the right to take action against dumping by third countries—and, I would say, in regard to trade generally. The final point is the reassertion of the powers of national Parliaments.
I was asked to state my position. We, too, have come to the conclusion that a fundamental change in our relationships with the EEC—broadly on the lines that commend themselves to the Conservative European reform group—is required. I look forward to the emergence—which I have always sought to build—of a great consensus in this House, stretching across the House, on the propositions that I now wish to put forward.
This is why we are determined—and I use a phrase that has become current in a Canadian context—to insist on patriating the British constitution. That is the word—"patriating". It means restoring the legal and fiscal powers of Parliament from Brussels here to Westminster, where they properly belong. With the repeal of the major part of the European Communities Act 1972, we shall face the European Community in an entirely different way—as equals. From that point we shall proceed in the way that discussion and events dictate, and I have no fears as to the outcome of those discussions.
The Queen's Speech and the speech that we heard from the Lord Privy Seal this afternoon are dangerously deficient on the key questions that face us. First, there are an all too obvious obsession with the military aspects of security and far too strong an emphasis on the nuclear weapons as part of that approach.
Indeed, looking at the totality of Britain's external policies, there is now a growing and gross imbalance between military expenditure and expenditures on aid, overseas representation and other expenditures which could contribute to our external influence and our external policy.
Furthermore, we are committed to absolute levels of defence expenditure which I do not believe we can sustain—certainly not with the declining national income that we are experiencing and to which we yet can foresee no end.
Towards the Soviet Union there is as yet no sign of serious thinking about this Government's policy or, indeed, about a contribution to a co-ordinated Western policy which has the prospect of influencing the Soviet Union towards new and more hopeful courses of conduct.
In the Third world—by far the most dangerous and unstable part of the world, where the opportunities for destabilisation and for the growth of Soviet power are greatest—there is a total failure by the Government to understand what the problems are and how their own policies are contributing to the deepening of what could be a catastrophic recession. What we have to do is to devise an economic strategy that will give some hope of once again restoring sustainable growth to the world economy.
It is very disappointing to me that I am faced with a Queen's Speech that is so lacking in real remedies to the very great problems that I deeply understand and deeply worry about.
5.45 pm
Sir Hugh Fraser: I am sure that the whole House will have listened with great attention to the powerfully long speech delivered by the right hon. Member for Stepney and Poplar (Mr. Shore). I must confess that I find myself in agreement with quite a considerable amount of it.
In the past few days we have had a large number of historical allusions concerning the disasters which face us, among them 1931, the slump of 1929 and the bankers' crash of 1882. It is fair to recall to the House that perhaps the most apt historical analogy is the year 1919, although history never repeats itself, except in speeches by politicians, as the late Professor Hal Fisher remarked. The position in 1919 was not entirely different from the desperate position in which the world finds itself today.
In 1919 the Soviet Union was engaged in a civil war. In 1919 there was a complete breakdown of peace in the Middle East. Many of the Western countries, including Germany and Hungary, were suffering from the ravages of a most desperate inflation. That is the sort of situation which could face the world today.
The right hon. Gentleman said that the answers to these problems should be not military but political and economic. That is a dangerous thing to say when the Gulf war, threatening oil supplies, has broken out in the last 10 weeks and when we have seen the ruthless invasion of Afghanistan by the Soviet Union. The debate is rightly couched, therefore, in terms of both foreign policy and defence.
In one area I totally agree with some of the things to which the right hon. Gentleman has referred and to which there has not been sufficient reference by the Government. The root of the problem today is oil. It is not just the increase in the price of oil but the fact that the oil revenues are largely in the hands of Governments who are unable or unwilling to recirculate that money into the economy of the developed or undeveloped world.
The only area in which there has been major investment, I regret to say, by the dictators or sheikhly families—or those few hundred groups who at the moment hold the economy of the world at threat and at risk—has been in armaments. I agree with the right hon. Gentleman that it is appalling to think what the West is still doing in pouring armaments—even at this moment—into the Middle East. The French Government especially are pouring Mirage fighters into Iraq.
Eighty thousand million dollars has been spent on armaments by the Arab Powers—other than Egypt—in the last seven years. This is still going on and the orders are there today. That is why we must consider this central problem very seriously. The price of oil will go up again this year. That will mean that the unspent surplus will rise, even after they have bought all the F14s and F15s that they can. It will be running at $200 million or $300 million unless there is a world crash and a world slump. That is the problem to which the Government should apply their mind. Western leaders and those who meet in Brussels, Venice or wherever should give it top priority. It is the biggest problem facing us.
I should like to run through some of the mistakes that the West has made in the past few years in the Middle East. There are two general categories. First, the Americans betrayed the man whom they thought could hold the balance, namely, the Shah. Perhaps they thought that by
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doing so they could find an answer to such problems. Secondly, in 1973, after the great meeting of the Nine in Copenhagen had been suddenly invaded by OPEC chiefs, the Nine thought that the answer to the flow of Middle East oil was to be beastly to the Israelis. They thought that in return for attacking the Israeli position they could get a free flow of Arab oil. Both of those accounts are, in general, true. Perhaps they exaggerate the position and make it seem more ludicrous than it appears to the holders of those policies. However, the Americans and the British Government should reconsider their policies.
If the Gulf war, which is now in deadlock, spreads or if, as a result of the deadlock, the regimes in Iraq and Iran collapse with a further increase in instability in the Gulf, a grave military problem will have to be faced. I disagree with the right hon. Member for Stepney and Poplar, because he claims that such matters can be solved by diplomacy and politics. There is a point at which such problems cannot be solved in that way. That is why I am convinced that the British Government should consider protecting our interests, and those of our friends overseas, through military means, if needs be. It is no good asking NATO to do that. It is the very essence of NATO that it cannot, in the short term, operate outside Europe.
It is no good asking EEC Ministers to operate outside Europe, however bold their declarations at Venice may have been. Those Ministers may gather together, but the EEC has no military power. When the Ministers hold a conference, they do not meet at a conference of war. The EEC is a coffee shop above a bazaar. That is its strength. It is no more than a restaurant run by the French Government and by Emperor Bokassa's hunting companions-in-chief. If NATO has no power to undertake operations outside Europe, the EEC has even less. Those great Ministers who assemble in Venice or wherever cannot take action unless they are prepared to send out a Luxembourg army, in all its glory. That is the military power and strength of the EEC.
Unpleasant though it may be, the time has come for the Government to consider how they can protect our interests. The British Government have acted well in the past. For example, the operations in Zimbabwe and Belize were conducted brilliantly by British forces. If we assume that the United States of America will continue to protect the sea lanes and the oil of Europe for ever, we shall be challenging the Americans — particularly after Camp David—to say that they have had enough and that we must do something ourselves. That is why we must turn our attention to the difficult problem.
My right hon. Friend the Secretary of State for Defence has done very well, because he has retained most of his budget without a cut. The Germans will reduce their budget by around half of 3 per cent, and other NATO Powers will carry out even greater reductions. That will upset NATO's balance, particularly as there is a new President in America.
The Government will face two problems. The NATO commitment of 3 per cent, per annum for three years will mean that it will prove almost impossible to afford the Trident missile. That element in the budget will have to go.
We have spent a great deal of money on Chevaline, and Polaris will remain effective until the 1990s. I shall not go into boring military arguments, but Trident is not an accurate military weapon. It is, essentially, an inter-city terror weapon. In the next few years we may find

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something more effective. Perhaps some of my right hon. and hon. Friends will be shocked by such a declaration. However, if we wish to safeguard world peace, we must have the capacity to do something major outside Europe, and that must mean a major reallocation of funds.
I turn to a subject that I have raised before. If we wish to mount an expeditionary or emergency force, such as the Americans are deploying in Egypt at this very hour, and if we wish to maintain our NATO commitment, our home base will be desperately depleted. About eight months ago, I asked the Government to reconsider some form of national service. Perhaps they should consider it even more seriously today. We are now faced with a new factor, namely, massive unemployment among the young. Although some of the schemes that are put forward are admirable, there is a touch of the spirit of outdoor relief about them, such as one might have found in the Victorian age. Some of the young people who join those schemes will see it as a mark of failure. If we wish to maintain the morale of the population and to make people feel wanted, the argument for national service of some sort, not necessarily military, must be reconsidered.
Because of the mounting cost of weapons, we shall have to consider a system in which manpower costs are not so high. Our new aeroplane will be 30 per cent, more expensive than the F14. It will be six times more expensive than the fighter-bomber that the Israelis are building. Everywhere, one finds that the mounting cost of equipment is almost impossible to meet from a normal budget.
Lastly, in this situation, which I can compare only with the situation which faced the world for those few desperate months in 1919 when the world teetered between collapse and massive revolution, bank crashes and so on, the people of this country must make a full contribution, in line with our NATO allies, as the Americans will soon have to do, to the sustenance of the peace and safety of the world.
6 pm
Mr. Russell Johnston: Some of my disagreement with the right hon. Member for Stafford and Stone (Sir H. Fraser) will emerge during my remarks.
At the beginning of the 1980s the prospect for ordered progress throughout the world seems rather less than at the end of the 1960s. If I were to pick out the one great change for good, it would be the shift in Chinese policy and the new openness of the Government of that great and potentially enormously powerful country. Everything that can be done to improve contact, understanding and trade with China should be encouraged.
The lesson of the 1970s is that while Britain retains considerable good will in the world at large, not least in the Commonwealth—as was constructively demonstrated in Zimbabwe—it is an illusion for us to think that we can do things by ourselves. That point came across in the remarks made by the right hon. Member for Stafford and Stone.
Britain can make her most effective contribution in dealing with the world's economic issues, of which the most dominant in the 1970s was the oil price explosion, to which the right hon. Member for Stafford and Stone referred, which had devastating effects on us and even
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more on the underdeveloped oil-importing countries, together with political stresses, in conjunction with allies who have similar aims and outlooks.
In this regard I would go a long way to agree with the Lord Privy Seal that the two essential pillars of our foreign policy should be our relations with the United States—whatever our judgment of President-elect Reagan may be, we must work to influence him as we are bound to have a 75 per cent, better chance of success with him than with Mr. Brezhnev—and with the European Community.
Since the summer we have seen a variety of statements, by Ministers from the Prime Minister down, pledging commitment to the European Community, and this rhetoric has found expression in the Queen's Speech. I use the word "rhetoric" not pejoratively or sarcastically but to record, from my point of view, a suspension of belief in their seriousness, because there has been little evidence of it so far.
The mass media continue to concentrate on the negative aspects of the undoubtedly enormous difficulties of knitting together disparate economies and political outlooks. It has in the main been left to Liberals, to some Social Democrats in the Labour Party, to those of the Heath persuasion in the Tory Party and to our two Commissioners in Brussels to stress two fundamental issues. The first is that if we cannot succeed economically in the European Community we are unlikely to do so anywhere else. The second is that the European Community is crucial to the political stability of the Western Alliance and offers Britain the only real chance of an effective political voice in world affairs. The Government have not given any genuine political lead.
Roy Jenkins, in his Winston Churchill memorial lecture in Luxembourg on Thursday 20 November, presented the only viable scenario for progress. He spoke of the need for a sharing Community. That means, as I have said many times in the House, a larger budget. Roy Jenkins spoke of 2 per cent, of the Community's GNP and of the need to make more effective the supranational character of the Community.
I do not believe that Western democracy can advance unless at the same time it can turn its back on nationalism, which is all too evident these days on both sides of the House, and within the European Community allow communities such as Scotland and Wales to have a larger say in running their own affairs. That can be done by federal institutions.
We cannot solve any of our major problems alone, but they can be solved by joint action. It makes no difference whether we are talking about unemployment, regional decay, environmental pollution or financial instability. I should like to know the up-to-date view on EMS. Are we moving towards it, ignoring it, or considering it? Surely, we are not going to opt out of the European Court of Justice and the right of individual appeal to it.
Any acceptance of further integration, if it is to be democratic, must mean an extension of the European Parliament's powers to check, regulate and initiate. The next election for the European Parliament is due to take place in 1984. The Treaty states that it should be carried out by a common system. I understand that the political affairs committee of the European Parliament will be meeting today and tomorrow to discuss the inability of its sub-committee to reach any agreement on this matter. I also understand that a large part of the responsibility for

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this disagreement rests with the Tory members of the committee. An earnest of the Minister's belief in democracy and fair play—it is unfair to say this to the Lord Privy Seal, because I suspect that he holds this view—would be to ensure that the next election to the European Parliament does not deny the 4 million or 5 million Liberal voters in Britain a voice in that Parliament because of a weighted and unjust system.
I complained of democratic injustice. The complaint of millions in the underdeveloped world is of the ferocious and cruel economic injustice, to which Brandt drew inspired attention and about which the member States, acting together, can do far more than Britain alone, although our experience could be of great value.
The British response to Brandt has not been adequate. Indeed, far from there being an advance, there has been a reversal. The cutting of support for overseas students, as was pointed out in an intervention, seems a particularly mean and retrograde step. Since Gladstonian morality has been the mainspring of the Liberal Party's approach to foreign affairs, many people have said that we are idealists, not practical people. But, from a practical point of view, to cut off grants for overseas students seems incredibly stupid for a trading nation desirous of maintaining links with developing countries. The Lord Privy Seal said that it was necessary to have some concern for the fundamental needs of others. If that view is fair in the context of Europe, it is equally important in the context of the Third world and the relationship between the developed and the underdeveloped world.
I turn now to the Middle East, some of the countries of which I visited in September and October with my right hon. Friend the leader of the Liberal Party and my hon. Friends the Members for Isle of Wight (Mr. Ross) and Liverpool, Edge Hill (Mr. Alton). The Middle East provides grievous evidence of the unpredictability of events in the undeveloped and semi-developed world. There seems to be an almost ineluctable movement towards their going through similar stresses, wars, conflicts and mistakes to those through which Europe went in the first half of this century and before.
The right hon. Member for Stepney and Poplar (Mr. Shore) referred to the West fuelling the Iraq-Iran war and the whole potential of conflict in the Middle East. I entirely agree with him that we need a very real new effort towards arms sales limitation.
With regard to the basic Israeli-Arab dispute, I would only say that it was our impression, in meetings with, among others, Mr. Yasser Arafat, King Hussein and President Assad of Syria, that there is some prospect that there are conditions in which the rejectionist States would recognise Israel and forswear violence, which is a fundamental of any agreement. Likewise, we saw some encouragement in Israel for our belief that if this were possible there could be a move towards enabling the Palestinians on the West Bank and in Gaza to choose for themselves what their future might be. That goes, frankly, beyond autonomy. It is almost certainly true that Camp David as originally envisaged would not go much further. But this is surely not to disparage what it achieved.
In parenthesis, as a Liberal, while I would be the last person to defend the Shah of Persia, I must say, on a personal level, that the consistency of treatment shown towards him in defeat as in strength by President Sadat said much for Sadat's loyalty and honesty. He is a key figure in solving the Middle East conflict. In speaking to him,
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one is speaking to a man of courage and optimism, which really sets a standard that many of us in the so-called advanced countries would do well to follow.
Finally, on the question of defence, we still spend too little time, energy and money—so far no one has spoken of this very much—looking at ways of improving the international machinery for stopping conflicts. What was achieved in Zimbabwe, which has been rightly referred to by a number of hon. Members with approbation, is still proceeding most successfully. I think that the contribution that the British Government are making through the Armed Forces in integrating ZANLA and ZANU forces is worthy of the highest praise. It makes evident the fact that we have expertise here, and I do not think that we are using it in any general way.
The International Peace Academy, of which, I understand, both the Minister of State and the deputy leader of the Labour Party are patrons, is doing a lot of hard practical work and deserves much more encouragement than it gets.
When we visited the Middle East, we went to see the United Nations in the Lebanon. We came away with the impression that its mandate is too restrictive to allow it to carry out its tasks successfully. One wonders how its experience is monitored. How do the Government evaluate the performance of United Nations peacekeeping forces? Are the Government working on any proposals to make their performance better—for example, through some sort of permanent command structure, which has been spoken of many times before?
The basic Liberal position on defence was clearly set out by my hon. Friend the Member for Isle of Wight in the House on 24 January, as reported at column 755 in Hansard and confirmed at the Liberal Party conference in Blackpool this autumn. We reject the need for this country to possess an independent nuclear deterrent. We opposed Polaris. Indeed, if we had been told that Polaris was being updated, which we were not—though, presumably, the present Leader of the Opposition was told, when in Government—we would have opposed that. We certainly oppose most strongly the Government's intention to proceed with Trident at so phenomenal a cost that no one seems to be able to estimate it to the nearest billion pounds, although it is somewhere between £4 billion and £10 billion.
I do not think that I need remind the House again of the arguments deployed by Field Marshal Carver in another place, but, quite simply, it is my view that Trident would not contribute constructively to our defence and it would be an intolerable burden. I was glad to hear the right hon. Member for Stafford and Stone expressing that as his opinion, too.
To reject Trident, however, is not the same thing as unilateral disarment. I should like to take the opportunity to correct the rather muddled remark made immediately following the speech of my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) in the debate on the Address on 20 November by the hon. Member for Windsor and Maidenhead (Dr. Glyn), when he suggested that the Liberal Party supported unilateral disarmament. We do not support unilateral disarmament; we support our membership of NATO. We recognise that this implies the siting of cruise missiles on British soil, under shared control, if that becomes necessary. I quite take the point made by the right hon. Member for Stepney

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and Poplar that we have three years to work with and we may be able to bring some pressure on the Soviet Union in that time.
Basically, there are those who hold that the best way to defend democracy, whether at home or abroad, is not to defend it physically—they are the "no defence" lobby—but, rather, by disarming unilaterally, to avoid at all costs a war that they say, in these days of nuclear proliferation, is, win or lose, the equivalent of collective suicide. That policy is perfectly respectable but, I suggest, misguided, for, if applied, a loss of freedom—perhaps a permanent loss of freedom—would be certain both for us and for some of our friends, and a general nuclear war, waged, as it were, over our heads, would still be quite possible.
On the other hand, a reasonable defence posture, if adopted, would not necessarily result in war and could well be the one way of preventing it. It is even arguable that a policy of no defence might actually promote a nuclear war, this country being fought over by Powers that might otherwise have been restrained from fighting. Unilateralism, by destabilising the present balance, would in my judgment increase the danger of war and decrease the opportunity of a settlement. Afghanistan has sadly confirmed the continuing capacity for aggression of the Soviet Union where it feels that it can safety act without serious response.
Liberals would press the Government as strongly as possible to do everything they can to further multilateral disarmament. Perhaps the most succinct expression of our view was contained in a speech by Hans Genscher, the German Foreign Secretary and leader of the German Liberals, on Thursday last, 20 November, when he said:
"A realistic policy of detente and co-operation is possible only on the basis of an assured equilibrium. Striving for superiority undermines this. We want to fix this equilibrium at the lowest possible level of armaments. For this reason the Western defence alliance made significant proposals in December 1979 for arms control, arms limitation and disarmament. Despite all setbacks and disappointments I am convinced that we still have the opportunity to make the 1980s a decade of disarmament."
He continued briefly:
"The Madrid follow-up conference should therefore decide on a concrete mandate for a European disarmament conference with the participation of all signatory states".
In conclusion, as a Liberal I believe in peace. I get very annoyed by people who say that because I do not believe in unilateral disarmament I am some sort of warmonger. That is far from the case. I believe in peace. I also believe in justice. Justice sometimes requires one to take difficult decisions. I hope that the two aims will be the basis of Government foreign policy.
6.18 pm
Mr. Raymond Whitney: I am happy to endorse the last points made by the hon. Member for Inverness (Mr. Johnston). I regret to say that I was left a little unclear about the policy of his party on cruise missiles. The Liberals seem to be falling into the standard Liberal Party trick of sitting resolutely on top of the fence, but I hope that the House will later be vouchsafed a clearer view of the Liberal Party's stand on that issue.
I think that all of us in the House are clear and agreed on one thing—that we live in a world, which is very much more dangerous than it has been for very many years. That is a point about which I would even be
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prepared to agree with the Leader of the Opposition and his friends in the Campaign for Nuclear Disarmament. That must be common ground among all of us.
We must examine the factors that have brought us to this newly dangerous position. There are basically two. First, there are the threats posed to the stability of the world, and, indeed, to the interests of this country, by the expansionist actions and ambitions of the Soviet Union. This is an area where we can find a broad measure of agreement. I need not detain the House over the actions in Afghanistan. They are well known and well elaborated. Less well appreciated, or steadily forgotten, are the actions of the Soviet Union and its surrogates and proxies in Africa. There are still about 50,000 Soviet mercenaries in 12 or 13 countries in Africa. If such a position were maintained by Western Governments, what would the Opposition be saying?
We must take account of what the Soviet Union actually says. One is reminded of the history of the 1930s when Adolf Hitler wrote "Mein Kampf" and no one paid much attention. He tried to carry out the policies he had put forward. Moscow makes no secret of the fact that the ideological offensive must continue. During detente, the propaganda war and political warfare must continue. The Times of 18 November contained an article translated from the Soviet weekly New Times, which stated, in affirmation of the Soviet policy,:
"It is quite legitimate for the Russians to encourage the spread of communism throughout the world"
and
"countries that have become communist cannot be allowed to change their systems because that would constitute counterrevolution."
This is one main contributory factor to the dangers of the world in which we live. A second factor was spelt out by Dr. Henry Kissinger a few weeks ago. I have not always been in agreement with Dr. Kissinger. I am sure that gives him little cause sleepless nights. Many of the things he is now saying are true and must be listened to. He suggested that the Powers in the West had forgotten, and become afraid of, the exercise of power. Governments exist for the exercise of power. We, in the West, have shied away from that exercise.
Those two factors have led to the dangerous world in which we live. However, the opportunity is now presented to us to improve that situation and to improve the prospects for peace. This comes from the results of a series of elections throughout the world culminating in the result of the American election on 4 November. However many excuses one may try to make for Mr. Carter and however many charitable allowances are made for the curious logic of our former Ambassador in Washington, who, in two recent articles in The Times extolling the virtues of Mr. Carter's presidency reflected only, I think, the fact that he played tennis too often on the White House lawn, there is no doubt that the Western world has been badly led.
The fact that President Carter was obliged to say last January that he had undergone a drastic change in his perception of Soviet attitudes was a sad commentary on President Carter and his advisers. Now we have a new situation and new hope. I believe that President Reagan and his advisers have a much clearer perception of the world and the possibilities for peace in the world. This offers an opportunity for all of us. We need to have the courage to exercise power. I believe that my right hon. Friend the Prime Minister, whenever she trusts her basic

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instincts, has the courage to exercise power. I believe that she will find an ally in President Reagan. There is now the possibility of reconstructing really effective Western unity and co-operation. Of course, there will be differences of perception and differences of interest between us. The Germans have their problems of a divided country. France will always be France and seek a special relationship.
Britain has its own problems. I make no further reference to our problems as some of them are present. However, those issues which unite us are much stronger and more powerful than those which divide us. We believe passionately in the principles of liberty and democracy, the expansion of economic trade and non-interference. These are the areas where we can build. We shall make mistakes. People and commentators will seek anxiously to capitalise on those mistakes. If, however, we concentrate on unity, we can achieve a great deal, not necessarily in military adventures. I agree with the right hon. Member for Stepney and Poplar (Mr. Shore) that we are not necessarily talking about military adventures, although I agree with my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) that some rapid deployment capability is necessary. Much more necessary is the courage to go back into the ideological warfare field to launch a counterattack against the attack that we have constantly suffered.
We have many great advantages. We need only to consider the lessons of the Helsinki negotiations and their subsequent history. Many people in the West were worried about what was involved in the Helsinki accords. We seemed to have accepted the negotiation of the status quo, the sanctification of the expansion of the Soviet empire which took place after the end of the Second World War, settling, in return, for some fairly uncertain deals in the greater flow of information, improved commercial exchange and possibly confidence-building measures in security.
What has happened? That negotiation has blown up in the face of the Soviet Union. The Helsinki accords can now be turned to our advantage in the war of minds being waged and which we must continue to wage. The discomfiture, to put it at its lowest, of the Soviet Union, which has been obliged to oppress its own citizens, and even more the citizens of East European countries, brings home clearly how truth and freedom are on our side. This gives us the opportunity of many actions.
I had thought one idea too dangerous. We understand the difficulty of the right hon. Member for Stepney and Poplar — I am glad to see that he has entered the Chamber—in portraying any foreign policy on behalf of his party. It was, however, fascinating to hear the right hon. Gentleman suggest that we must engage the Soviet Union in a dialogue on the future of Eastern Europe. The Helsinki accords seem to put that out of court. It seems to me a dangerous and destabilising area to enter. Not being a bellicose and aggressive man, but a cautious man, I look forward to the Opposition expanding this theme and stating clearly how they would get this dialogue going and work for the change in the balance of relationships in Eastern Europe. Much more modest ambitions can be achieved in other areas.
For example, the recent vote in the United Nations reminded us of the strength of the West and the non-Communist world. We should say to the Soviet Union and Mr. Babrak Karmal "Remember the example of Zimbabwe". Bishop Muzorewa had gone through a form of election and was holding the reins of power, but the
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international community did not accept his Administration as a legitimate Government and it insisted that the voice of the Zimbabwe people should be heard and that elections should be held under international supervision.
Surely, what was right for the people of Zimbabwe must be right for the people of Afghanistan. That is one area where the voice of freedom must be heard and where we can develop our counter-attack if only we have the courage to use our power.
Mr. Alan Clark: I am grateful to my hon. Friend for giving way. I may have misunderstood his point, because I had to be absent from the Chamber for a moment, but do I understand him to be saying, in criticising the Shadow Foreign Secretary, that he regards the suggested renegotiation of Eastern European politics as being too dangerous, as I do? In shorthand, is he saying that he favours the stablisation in concrete, as it were, of the old Yalta frontiers as delineating the two spheres of influence, which should be regarded as immune from interference on either side for all time?
Mr. Whitney: As a cautious man and a member of the Conservative Party, I am less aggressive in my intentions towards the present situation than the right hon. Member for Stepney and Poplar appears to be. I agree with my hon. Friend that it is a highly desirable objective that a different regime should obtain in Eastern Europe, but I believe in a step-by-step approach—a policy which we adopt in other spheres. It is not an area that we should go to first. It is a dangerous area at present.
One area where we must start to believe in ourselves again is in our negotiations with the Third world. We must understand that, as my right hon. Friend the Lord Privy Seal said, our community of interests is deep. There is a danger of slipping too easily into "Brandt-speak". It is a temptation that even the Archbishop of Canterbury seemed to fall for recently.
In 220 pages of the Brandt report there is a tremendous depth of knowledge and there vital contributions to policy, but there are also tremendous gaps. The shorthand of Brandt is dangerous. I welcome the importance that my right hon. Friend the Lord Privy Seal attached to trade. I hope that the Opposition will accept the points made by my right hon. Friend and will understand that the most damaging thing that the West could do would be to sink into protectionism.
When we deal with our friends in the Third world, we must do so on the basis of reality and the crucial fact for the world economy that OPEC has surplus overhangs of $150 billion a year and the oil importing bill of developing countries is $70 billion a year. That factor was not adequately dealt with in the Brandt report.
Mr. Maxton: Does the hon. Gentleman accept that the protectionism of the EEC in terms of agricultural products from the Third world is one of the most damaging factors in relation to trade with the Third world?
Mr. Whitney: No. We all accept that the CAP needs revising, but if the hon. Gentleman looks at it product by product he will find that the situation is not as simple as he suggests.
The third area where we must work much harder is in the offensive for peace. We must not yield to the unilateralists and the extreme Left in this country. Of course, we understand the dreadful dangers of nuclear war

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and we are all for peace, but we must also understand the threats that exist. What would be the result if we told the Americans that they must take their cruise missiles out of this country? What would be the consequences for NATO, and without NATO where would Britain and the West be?
I recognise that the Government accept that we must press hard for multilateral, effective disarmament. The areas where the Government work are not known. Not only are there talks on strategic arms limitation, but there is action on the comprehensive test ban, the non-proliferation treaty, theatre nuclear forces, radiological weapons and a whole gamut of areas where we work hard day by grinding day to achieve satisfactory results. The problem is that we are blocked nearly every step of the way by Soviet intransigence. That does not mean that we should stop trying, but it does mean that we should go on telling our people, who are genuinely worried, that our determination to achieve satisfactory, comprehensive arms control is sincere, deep and penetrating but that it cannot be achieved in the face of intransigence. When we face a country that will not even accept its own Helsinki document, the process will clearly be difficult.
It is sad that the Labour Party is now led by the right hon. Member for Ebbw Vale (Mr. Foot), who in his book "Guilty Men" told the nation of the dangers of appeasement and of being unprepared. The right hon. Gentleman has forgotten the lesson that he knew 40 years ago. We need peace, and the way must be through the unity and strength of the Western Alliance.
6.37 pm
Mrs. Renée Short: I do not intend to follow Mr. Speaker's proposals on the theme of the debate. I sat right through Friday's debate, as my hon. Friend the Member for West Lothian (Mr. Dalyell) knows, and I should like to direct the attention of the House to some other matters in the Gracious Speech that should greatly concern us all and are relevant in the context of the Chancellor of the Exchequer's statement this afternoon.
I find no joy, hope or optimism in the Gracious Speech. The Prime Minister is rapidly turning Britain into an industrial wasteland, using more and more of our precious resources on palliatives for those who are thrown out of work instead of using those resources for the creation of new jobs and new industries based on new technology, where we shall be rapidly left behind unless we are prepared to inject new resources.
The consequences of the Government's idiotic policies are plain to see. We have an unprecedented level of unemployment, combined with short-time working. The social and political consequences of the Government's determination not to turn could be devastating. Indeed, the Chancellor of the Exchequer mentioned earlier the dread figure of 3 million unemployed. We could easily see such a situation before long.
In the West Midlands and in my constituency the results of the Prime Minister's wrong-headedness are plain to see. In the Wolverhampton travel-to-work area, from the date of the election to October this year, almost 15,000 redundancies have been created, affecting 276 workplaces. This year, from January to October, 12,500 redundancies have been created, affecting 238 work-
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places. So this year the decline and the level of unemployment have been much more severe than during the first year of this Government.
It is quite clear that the unemployment level is not "bottoming out", as the Chancellor nicely called it this afternoon. In fact, it is rising. I have been notified by the Manpower Services Commission of a further 6,080 redundancies from May 1979 to October 1980 at 73 workplaces, and 3,745 redundancies from January to October 1980 affecting 53 workplaces. For the people now in that unpleasant situation we have 160 vacancies plus another 58 at the careers office. So the prospects are grim indeed.
We have 273 skillcentre places in Wolverhampton, which can cater for about 500 people per annum. We have another 196 training opportunities scheme places and 540 youth opportunity programme places — nowhere near enough for the massive unemployment that we now have.
The most up-to-date figure given to me by the Department of Employment for registered unemployed young people aged 18 and under shows that from October 1979 there were 1,175, and from October 1980 there are 2,089 young people who have had no job since completing full-time education. What sort of prospects do those young people have? I hope that the Conservative Party is concerned about this.
The effect on industrial output—the means whereby we create the wealth of the country, about which the Chancellor spoke today—of such high unemployment is extremely serious. The Central Statistical Office figures show that industrial output from June to September was over 9 per cent, lower than in the same period last year. In fact, the CBI estimates that output is now 11½ per cent, lower than in 1979. That figure is much more serious than the Treasury forecast of a 4½ per cent fall for the whole of 1980. Of course, the CBI is very worried about the Government's obsession with monetarism. At the CBI's recent jamboree, one member said that we were suffering the worst depression in 50 years. He said that people were being put out of work in pursuit of false dogma. We all second that. The message of Mr. Stan Husbands, the managing director of Seddon Atkinson, to the Prime Minister was:
"For God's sake, do something — if it is only to say 'Goodbye'."
That must be the quote of the year.
This industrial depression has far-reaching effects on the physical and psychological well-being of families, as we all know. The inequalities brought about by unemployment, poor diet and the appalling economic situation of the poor emphasise and accentuate longstanding inequalities in health. Differences in mortality rates between the social classes, especially the perinatal and neonatal rates; the death rates from heart disease and lung cancer, for example; the poor health of the aged poor compared with the better-off aged; the inadequacy of health education in all its aspects, lack of informaion about the human body and how it works; sex education and human relationships; and the unwillingness of successive Governments to tackle these problems—all these matters show how badly we have served our people and how we have undermined the National Health Service by our lack of courage in many directions, by our constant refusal to lay down targets and above all, by our refusal to monitor performance, so that successive Ministers and

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Departments are able to get away with it year after year. No one knows how effective the resources are and how they are being used.
Poverty is a main factor in the level of disease. To eradicate it is clearly not this Government's objective. The National Health Service and personal social services are suffering under this Government, and the Health Service will continue to bear a growing burden of neglect and indifference. Scientific innovation, new discoveries, new techniques and developing skills are available in abundance. A mass of dedicated, talented men and women are working at every level of the National Health Service. But how are they served by Governments? No Government have given the National Health Service the priority it deserves. Defence expenditure and research into ever more deadly weapons of mass destruction are the priorities of this Prime Minister and this Government.
We are demanding more resources to be used to improve the health and social services for our people, but these are being sidetracked into defence research and expenditure. We are demanding more resources for the regions where mortality and morbidity rates are high. We are demanding better health care for women from adolescence onwards, with a much more determined effort to eliminate the social and economic disadvantages that perpetuate an unequal society.
The Chancellor's statement this afternoon clearly demonstrates how the Government intend to keep poor people poor. The right hon. and learned Gentleman said that the national insurance contribution would be increased. I do not know how he can make that statement when the national insurance fund has been in considerable surplus for 22 of the past 30 years. We are not talking about a surplus of a few million pounds a year. Three or four years ago the figure was over £900 million. There must be billions of pounds salted away in that fund, yet the Chancellor has the nerve to ask for an increase in workers' contributions.
The Royal Commission on the Health Service and the Black report — which have been pushed aside by the Secretary of State for Social Services — and Select Committee reports have all shown what needs to be done and what resources, human and financial, are needed to deliver a good Health Service. Investment is necessary to provide a better service and to improve the general standard of living and the health of ordinary working people. The Social Services Select Committee recently examined proposals on the method of paying child benefit allowances, for example. The Secretary of State, presumably egged on by the Chancellor, has mow decided that the benefit should be paid monthly in arrear, with all the consequences that that means for sub-post offices. The evidence given to the Select Committee was that many families relied on child benefit to keep the family solvent, but the Secretary of State did not believe that this was important.
The change will enable the Chancellor to cook the books at the end of the financial year, because there will be a month's arrears of payment, which will be carried over to the next year. Therefore, he will be able to try to persuade us that the balance of public expenditure is much better this year than it has been in the past.
For working people and their families, for poor people, for the unemployed, for those working short time and
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those still living in bad conditions, there is no prospect of improvement as long as the present Government remain in office.
6.50 pm
Mr. Julian Critchley: Should Britain, as the Leader of the Opposition proposes, follow the example of Mr. Trudeau of Canada? That is a question that ought to receive a reasoned answer, for Canada is the one example of unilateral nuclear disarmament on the part of a nuclear Power and a Power that remains a member of NATO.
The leaders of the CND call for unilateral nuclear disarmament, but they do not call for a strengthening of NATO's conventional capability. The reverse, in fact, is the case. But the question that unilateralists must answer is whether the renunciation of nuclear weapons on the part of the United Kingdom would be of any value in reducing the dangers of world war.
It is a fact that the Canadian example has not been followed. It has had no effect on the nuclear Powers. Certainly it has had none on the United States or the USSR. While no one would follow our example, either, history and geography make the role of the United Kingdom in the defence of freedom very different from that of Canada. We are part of Western Europe, whose defence against a powerful enemy is indivisible. The weight of nuclear and conventional armaments of the Warsaw Pact today is so much greater than that of the Atlantic allies, including Britain, that there could be no hope of repelling or preventing a major offensive from that quarter and, therefore, no hope of deterring it without the assurance of instant and massive assistance on the part of the United States. That is why even the supply of facilities for American nuclear submarines, cruise missiles and air squadrons is in itself vital to the operation of the Alliance.
Were Britain to abandon its nuclear role—and my arguments have nothing to do with the future of Britain's strategic nuclear weapon, the Trident replacement—the result inevitably would be a disastrous weakening of the Atlantic Alliance and the rupture of the link between Europe and America. A vital staging-post would have been lost. Such a weakening would make a stable situation less stable and increase, not reduce, the risk of war.
What, then, remains of the moral case of the CND? In order to render, ostensibly, the risk of war for Britain less likely, its supporters would increase the chances of war breaking out for others, leaving aside the vitally important question whether we would escape unscathed. The logic of unilateralism leads inevitably to neutralism, for there is no point in our remaining a member of a defensive alliance when we have seriously weakened it by withdrawal in nuclear matters—and who is to say whether a neutral Britain would escape the consequences of a war in Europe fought with nuclear weapons? We have already seen that unilateral disarmament sets an example that no other nuclear Power is likely to follow. The route to security lies through multilateral and not unilateral disarmament. It is a long and a hard road, but it is the only route available.
In conclusion, I mention one aspect of British defence policy on which, in my view, we should focus, especially as in recent weeks we have had all the nonsense about whether our defence expenditure will or will not be cut in accordance with the dictates of the Treasury.
The real truth, I think, is that sooner or later Britain will have to make very difficult choices in defence matters. If

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our economy is not to grow—and there is little evidence that it will grow throughout the 1980s—the choices will become inescapable. There are four aspects of British defence policy for which we are responsible: first, the United Kingdom air defence; secondly, the British Army of the Rhine; thirdly, the function of the Royal Navy in the defence of the Western Approaches; and, fourthly, the strategic independent nuclear deterrent. I forecast that before very long there will be yet another fundamental review of our defence functions and that, as part of that fundamental review, one of those four will have to go.
The question is which one of the four would be the most convenient to get rid of. The answer, of course, is that none would be easy and none would be convenient. But the logic of events suggests that the last of those four—the independent nuclear deterrent, the Trident replacement—is the one that a middle-ranking European Power, as my right hon. Friend the Lord Privy Seal described Great Britain earlier, would have to look at very hard and that in the long term we shall have to rid ourselves of that aspect of defence policy.
It is not easy for middle-ranking Powers to afford to do everything that is desirable. In the Financial Times on Saturday there was an extremely interesting article that illustrated the various proportions that are spent on defence of the gross national products of all the allied countries. It linked our defence expenditure with our overseas aid. We came second after the United States and far above the French, Germans and Italians in that league table.
When we decided to get into the nuclear business under Attlee and Ernie Bevin nearly 40 years ago, Britain was the third-ranking world Power. Now that we wish to stay in that business, we are the sixteenth, seventeenth or eighteenth, depending always on how we measure our power and economic influence in the world. I am afraid that this leads this Government, and would lead any Government, to hard choices in matters of defence. But if we were not to continue to be a strategic nuclear Power, that would not be the same as unilateral nuclear disarmament. There is all the difference in the world between these two concepts, and it should be understood clearly.
It is not enough for the Labour Party to fudge the issue by talking about the Trident and not wanting it when it faces all sorts of more difficult decisions about the sort of foreign policy that a future Labour Government might adopt. When one discusses unilateral nuclear disarmament, one is discussing not defence policy but foreign policy. The logic of unilateral nuclear disarmament is a neutral Britain in the context of the cold war. What the CND is never asked to explain, because no member of the Conservative Party ever bothers, is the sort of neutrality that it seeks. Does it seek an armed neutrality such as Sweden's—and Sweden spends almost as much on defence as the United Kingdom—or does it seek an unarmed neutrality as between East and West?
The real truth is that for Britain to get out from under because we fear uniquely the consequences of a nuclear war upon ourselves would render a stable situation in Europe less stable and make war more likely than less likely. If that is so, so much for the moral case of the CND.
6.57 pm
Mr. Tom Ellis: I was fascinated to hear the hon. Member for Aldershot (Mr. Critchley), but I am afraid that time does not permit me to take up any of his arguments. Instead, I shall address my remarks essentialy to the issue of Europe.
The Lord Privy Seal began his speech by making two points. First, he said that the European Community and the Atlantic Alliance were pillars and that together they formed the foundation upon which our foreign policy rested. We all agree, of course. But that simple statement conceals a great deal of the complexity underneath. It conceals the relationships, for example, between the Community, ourselves—in or out of the Community—and America.
The right hon. Gentleman's second remark was that, apart from a slight hiccup, for a number of years we in this House had had a bilateral foreign policy and that this was good because it provided continuity, which was even more essential for foreign affairs than for other matters.
Again, I agree. But, taken together, the two statements mean that our foreign policy is fairly new. After all, we have been in the Community for only seven years. I do not think that any of my right hon. and hon. Friends will argue that during the period that my party was in Government ours was the most enthusiastic membership of the Community. So it is clearly a changing relationship. I hope that I use the word correctly when I say that there is a dynamic relationship between this country and the European Community.
It is important for us to grasp the scale of this relationship. The hon. Member for Aldershot said that we had gone from the second or third to the sixteenth, seventeenth or eighteenth ranking Power in the world. I put it more graphically in terms of foreign affairs by saying that only 16 years ago the Conservative Party, under its then leader, Sir Alec Douglas-Home, fought an election with the main plank in its platform the slogan "A seat at the top table." Russia, America and Britain jointly were to determine the destiny of the world and all its peoples. That was absolute rubbish. Even though that was only 16 years ago, we can now see that that was rubbish.
I wish to keep the party balance right. I am sorry that my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) is not here. He was Foreign Secretary in 1977, when the North-South dialogue was taking place. He argued that he would not enter the dialogue as-part of the Community. He intended to speak on energy for Britain, as Britain. Essentially, he was claiming his seat at the top table, and that was only three years ago. That shows our lack of imagination to grasp what is happening in the world and how fast the world is moving. I refer not only to "we in Britain" but to "we in Europe"—I like to use that phrase. We in Europe failed to grasp it. Only seven or eight weeks ago, in an article in The Times, Abba Eban remarked that he found it bizarre that European statesmen should argue among themselves whether to support American policy on Afghanistan and the hostages in Iran, as if they were American issues that were not relevant to Europe. That is a measure of our failure to grasp the reality of what is happening in the world in foreign affairs.
That is not to say that we should always rely on America and hide behind her skirts. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said that

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Dr. Luns had said that the West would not intervene in Poland. I was intrigued to see an article in this week's Christian Science Monitor in which Mr. Joseph Harsch made the point that had the West, meaning America, intervened it could have precipitated a direct military intervention by Russia. He pointed out that because France and Germany had close economic relationships not only with Poland but with Russia that, more than any other factor, might have meant that they were able to prevent possible precipitate action by the Russian military. That is an intriguing position. We are in a position of considerable flux, moving away from the old nineteenth century Europe of separate nation States into a world that is bipolar but is rapidly becoming something less than that.
I wish to speak about our position in the EEC, how I think it should change and what it should become in relation to what is happening in the world today. Currently, we are dependent on the Americans. We are sheltering behind America. I agree with many of the remarks of the hon. Member for Aldershot about cruise missiles. Two separate issues are involved. There is the question of the strategic nuclear balance and the separate question of being able to wage tactical nuclear war. The military people tell me that we are essentially concerned with the second question, because the cruise missile is a counter-force rather than a counter-value weapon—I think that that is the right jargon. It is evident that we in Europe—and the tactical nuclear war will be in Europe—must ensure that we are in position to do something for ourselves. Although we are dependent upon America, we can see clearly the way that things are going. Henry Kissinger, who has already been mentioned, himself brutally spelt that out in the past. Nothing stays the same for ever. The world is small and dangerous, and it is becoming smaller and more dangerous.
I was a little disappointed to hear what my right hon. Friend said about the way in which the Opposition sees our membership of the European Community. The Labour Party conference passed a motion committing us unequivocally to leaving Europe. I hope that we shall not leave Europe. If we do so, Europe will be made up of eight member States, but in January it will again be nine. Following that, Spain, Portugal and even Turkey will make its membership 10, 11 or 12. Whether or not we like it, the European Community is here to stay. There is no question about that, especially in foreign affairs, simply because of the exigency of circumstances.
I was heartened to read that the Foreign Secretary has put forward proposals to establish a permanent secretariat to give a fairly quick response to affairs as they develop. It is important that the Opposition should make their position clear on these important issues—for example, unilateralism. Are we in or out of NATO? I must say to my right hon. Friend that I found him less than persuasive in his reply when he was pressed to explain precisely what he meant. He was asked whether we intended to leave Europe. It is a fad in the Labour Party to say "This is what we say in Opposition, but when we are in Government we shall have to face the realities of circumstances." That is a fundamentally sick attitude. We should spell out precisely where we stand on major issues. No political party is entitled to say one thing when in Opposition and another when in Government. That is bad. It breeds cynicism. I deplore the fact that we have not had a clear-
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cut statement tonight from the Front Bench on where our Shadow Cabinet stands in relation to Europe. I deplore that. I cannot put it more strongly.
No one can say that I am throwing stones in glasshouses. I enjoy being in the House. It is a marvellous place. I hope that I shall stay here for many years. However, I must say clearly that as long as I am here—and I say this to my party, my constituency party and my constituents—I shall fight tooth and nail not only to ensure that we stay in Europe but to ensure that Europe becomes ever more politically homogeneous.
7.8 pm
Viscount Cranborne: It is a great pleasure to follow the hon. Member for Wrexham (Mr. Ellis). I pay a heartfelt tribute to his courage. As a relatively new Member of the House, it appears to me that the Opposition party presents a curious spectacle, especially when talking about foreign affairs. It is a pleasure for me to be able to support a Government who give so prominent a place in their deliberations to foreign affairs. It is also a pleasure to be able to see further evidence in the Gracious Speech that the Government intend to continue in that conviction.
When we examine the Opposition party we see a curious amalgam. It has often been said that the Conversative Party is a broad church. I think that the Opposition church is rent with schisms of an unheard of kind. We hear sensible speeches such as that of the hon. Member for Wrexham. We hear expressions of opinion from the right hon. Member for Ebbw Vale (Mr. Foot) which appear to vary depending on whether he is in or out of office, whether he is a young man or an old man, whether he is writing books against Hitler or considering the reactions of the Russians.
We hear some remarkable pieces of analysis from the right hon. Member for Stepney and Poplar (Mr. Shore). He said many things this afternoon with which I profoundly agree. He gave an analysis of the dangers for the world presented by the instability of Eastern Europe—with which I largely agreed. When he addressed himself to the question of what on earth the Opposition party would do about it, he swallowed a solution that consisted of two words. I made a careful note of it. His two-word solution to the Russian threat was "serious discussions".
We often have serious discussions in the House. They are part of our parliamentary way of life. They are part of the way of life that is led in the Western world in discussions with our allies. Would the right hon. Gentleman—I am sorry that he is not present to enable me to ask him directly—have recommended the 1968 inhabitants of Prague to hold serious discussions with the Russian tanks as they rumbled into their capital city?
We would welcome serious discussions between the nationalists in Afghanistan and the Russian hordes as they start another cruel offensive in Afghanistan to try to wipe out the few nationalistic feelings that they have allowed to remain alive. There should be serious discussions before the helicopter gunships drop their napalm. Of course, those reasonable gentlemen in the Kremlin will always listen to reasonable discussion. What a remarkable solution from a right hon. Gentleman who has shown a great deal of good sense in these matters on occasion.
Whatever the breadth of the Labour Party church and whatever the schisms that are beginning to appear in it

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when we debate foreign affairs, the different analyses and the different attitudes reach one conclusion, a curious isolationism that sits ill on the shoulders of a party that describes itself as Socialist, a creed that in my innocence I have always assumed to be bound up in internationalism. Such an attitude is totally absurd in the world as we know it.
In almost any area of human endeavour, the world is becoming increasingly closely knit. That applies in matters of trade. For example, the OECD countries have seen their exports grow at almost double the rate of their collective GNP over the past decade. There is an increasing interdependence of a sort that not even those who advocate import controls could possibly undo.
In science, technology and finance the international agencies have become increasingly important, as the right hon. Member for Leeds, East (Mr. Healey) found to his cost some years ago. I am pleased to be able to support a party that recognises the facts of life. There are those on the Opposition Benches who might scoff. It is true to say that the Conservative Party's attitude in matters pertaining to foreign affairs and defence recognises reality in a way that they should envy.
Mr. Robert Hughes: Give us an example.
Viscount Cranborne: I have already given several examples. I can assume only that the hon. Gentleman was not listening, for which I am sorry. I always assumed that good manners were part of his make-up.
Nowhere is interdependence more important than in defence and in the interests of our allies. When faced with the threat of that curious imperial regime, the Soviet Union—perhaps the most dangerous sort of entity in any international situation is a poweful military power which is backed by an increasingly weak economy, which is therefore more and more tending to indulge in foreign adventure to divert the attention of its population from the dangers of what is going on at home—the position of our allies and our relationship with them become of paramount importance.
I was therefore all the more heartened to read the press report of an interview with my right hon. and noble Friend the Secretary of State for Foreign and Commonwealth Affairs that he gave to the New York Herald Tribune on 14 November. If I read the article correctly, my right hon. and noble Friend undertook to ask our European allies to delay the start of their initiative in the Middle East, foreshadowed after the Venice summit, until we had had a chance to consult the incoming Administration of Governor Reagan. I hope that that impression is a correct one.
In some parts of the United States and among some of the more stable countries of the Middle East, the Venice initiative was regarded as a slap in the face to the efforts made by the Americans at Camp David and afterwards The only way to succeed in the Middle East and bring peace and a settlement along the lines that are so greatly desired by all hon. Members is by consulting our allies and ensuring that the foreign policy that my right hon. and noble Friend would like to see pursued is complementary to United States policy and in no way conflicts with it.
That is why I welcome the emphasis on foreign affairs that has been so much underlined in the debate and in the
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Gracious Speech. I welcome the implications in that interview with the New York Herald Tribune by my right hon. and noble Friend. I hope sincerely that these matters will be brought to a speedy conclusion. The only way of doing so is to ensure that we have the fullest consultation with our allies upon whom we so greatly depend.
7.18 pm
Mr. Dick Douglas: It is not my intention to take up the broad body of the remarks of the hon. Member for Dorset, South (Viscount Cranborne). I was somewhat intrigued by his reference to reality. I shall return to some of the apects that I consider to be fundamental in economic and defence issues as they relate to foreign affairs.
It is not carping criticism of the Gracious Speech to note the omission of any direct reference to OPEC. The Lord Privy Seal has done a little to repair that omission. No discussion of the issues faced by us in Western industrialised countries can go far without some analysis of the behaviour of the OPEC countries and the impact of their behaviour on our economy.
Events in Iraq, Iran and Afghanistan, together with the continuing Arab-Israeli conflict, serve to remind us of the vulnerability of our economies to events in the Middle East and in South-West Asia. These events have been softened for us by our indigenous resource of North Sea oil and the fact that we alone among the Western industrialised nations are self-sufficient in oil.
Let me look now at some of the implications of OPEC. We have a paradox in the supply of oil. It is, in economic terms, a backward-bending supply curve. That means that we can no longer depend on the OPEC nations to increase their supplies of oil to meet rising demand or cater for supply accidents like the present conflicts. Additionally, alternative resources have a long lead time of between seven and 10 years. Thus, we can expect the demand for oil and energy to come close to availability of supplies throughout the 1980s, even on the basis of low growth and energetic steps to conserve energy.
The significance of that is an additional paradox. The oil producers have surplus revenues in 1980. There is some dispute about the figures, but I took my figures from the Governor of the Bank of England's recent speech, when he said that the OPEC surplus in 1980 was in excess of $100 billion, and that may be prolonged beyond 1980. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) and the hon. Member for Wycombe (Mr. Whitney) gave a figure of $150 billion. I hope that this is not another case of the Governor of the Bank of England getting his figures wrong. However, they are substantial sums. Such sums can wash through the international monetary mechanism. However, because of our declining economic growth and activity in the West, we lack worthwhile investments for those OPEC surpluses.
The present position is that these surpluses will continue to grow. Against that background, we must see what can be done to enable us to overcome the difficulties of continually high oil prices. The right hon. Member for Stafford and Stone (Sir H. Fraser) indicated that the likely intentions of the OPEC nations when they come together in a few weeks' time will be to have a further oil price hike.
We have economic difficulties in the West. The hon. Member for Aldershot (Mr. Critchley) pointed out that against a background of economic growth it is feasible, if

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not excusable, to increase defence expenditure. However, against the background of economic decline, questions will be increasingly raised about the ability of a nation such as Britain to furnish the defence requirements that the Government place on it.
Let me make one thing indelibly clear. I am not a unilateralist. I do not believe that such a posture by Britain would have any effect on the Soviet Union. It would have nothing other than a negative effect on the United States. It would be counter-productive for us to renounce nuclear weapons at present. It would accelerate a regrettable tendency to isolation not only on the part of the older generation in the United States. What disturbed me even more on recent visits to the United States was a tendency to isolationism on the part of the younger generation, who are becoming increasingly inward-looking.
However, it is necessary to recognise that the burden on our economy of these competing defence requirements may become insuperable. A recent article in The Economist — "By land or sea" — points that out. It suggests that the United Kingdom cannot both pursue a nuclear strategy and continue to have a large conventional commitment in Europe. Government Members have alluded to that fact. I do not expect direct answers tonight. However, the Government have a responsibility to tell us whether they are committed irrevocably to the pursuit of the Trident programme.
I represent a constituency with a naval base. If there is to be a long-term flow of work in a naval base, it is essential to get the requirements of a dockyard like Rosyth and the loading of the base into close proximity. It is also helpful to British Shipbuilders to get clear which yards will be used.
Some of my hon. Friends renounce nuclear weapons, and in particular a strategic nuclear deterrent. If they do so, they have a concomitant responsibility to let the people who are employed in naval dockyards know what their future is, and not merely in amorphous terms. The bills that the workers have to meet do not appear in amorphous terms the Monday after the Friday.
Mr. Robert Hughes: How many people in the Rosyth dockyard are engaged in manufacturing nuclear weapons?
Mr. Douglas: Not many are engaged in manufacturing nuclear weapons, but the latest statistics that I have show 2,500 people engaged in the repair and maintenance of the Polaris fleet. That is a substantial proportion of the total of 8,000. I do not suggest that my right hon. and hon. Friends decide how to employ those people over the weekend, but as Members of Parliament we have a responsibility to them. If we wish to abandon such enterprises, what will be available immediately after?
Mr. Eldon Griffiths: Would the hon. Gentleman apply the same thinking to those employed, for example, in East Anglia in the preparation and maintenance of United States air force bases, who are already looking to the site preparation and undergrounding of the the expected cruise missiles for employment?
Mr. Douglas: That leads me too far from my point. I accept a responsibility where a Government are directly involved in an enterprise, be it a defence or other public sector enterprise. We cannot blame the vagaries of the market.
I am not complacent about the return from defence expenditure. It is suggested that too much of our
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innovative effort is taken by defence on the aircraft industry, whereas a large number of our competitors devote much more of their expenditure to consumer durables.
Our manufacturing base has been declining for 20 to 30 years. I do not attribute the blame for that to any particular Government. However, the present Government bear a heavy responsibility for accelerating the decline. Only today I was told in a written answer by the Secretary of State for Industry that there has been a decline of over 11 per cent, in manufacturing output this year compared with last year.
That decline is not inevitable. Our position is eased by the presence of North Sea oil, but, as the Governor of the Bank of England pointed out in his Ashridge lecture, it does not follow that the presence of oil means that industry will have to contract. The Governor illustrated most clearly that the nations that import oil have taken steps to pay for it by extending their manufacturing bases.
Here I cross swords a little with my right hon. Friend the Member for Stepney and Poplar on the European Community. It is often suggested that our difficulties arise from our uncompetitiveness in Europe. That is true, but much of our imbalance of trade comes from our inability to compete with countries such as Japan, the United States and—surprise, surprise—the Soviet Union. We have an adverse balance of trade with the Soviet Union, East Germany and Czechoslovakia. They are not in the European Community. We therefore have a responsibility to build up our manufacturing base.
I share the Governor's view that the doctrine that a substantial decline in our industrial base is inevitable is needlessly depressing and misleading. The maintenance of our industrial base will, however, require a substantial adjustment within our non-oil economy. I take it that these later remarks are common ground. What is not common is an acceptance of the Government's policies to bring that about. Almost without exception, the Government's policies are designed to deepen the economic recession and to make it more difficult for our economy to fit itself for the re-entry problems that the country will face in the late 1990s and early twenty-first century, when the flow of oil begins to diminish. The proposals in the Gracious Speech to deal with these issues are inadequate.
Let me, in parenthesis, deal with the proposal to privatise the British National Oil Corporation. There is a tendency for other oil-producing States to create national oil companies. However, our Government are intent on denying themselves the expertise of this unique instrument and on injecting private capital into it for reasons of pure doctrinaire Toryism. For the Government to dilute their role in this oil company now is stupidity of the highest order and they should desist from doing so.
It is against that background that we have to judge the Chancellor's announcements today, designed, we an; told, to get the Government's strategy back on course. I can see nothing in the proposals to give reason for any degree of optimism apart from the one small concession to lower the minimum lending rate. There was no indication by the Chancellor that they will do anything to extend our manufacturing base or safeguard the people who are unfortunately left in the growing army of the unemployed.
Unless we can increase our manufacturing base, the strain created by our defence expenditure could become unbearable. The Government cannot claim to be defending all aspects of the British economy while they are presiding

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over a declining manufacturing base. In viewing our posture in international affairs, it must be recognised that others see us with respect not only because we possess a range of weapons but because we are able to stand up for ourselves as a leading manufacturing country and cope with the technological problems not just of the 1980s but beyond that to the early years of the twenty-first century.
7.37 pm
Mr. William Shelton: My right hon. Friend the Member for Stafford and Stone (Sir H. Fraser), my hon. Friend the Member for Wycombe (Mr. Whitney) and the right hon. Member for Stepney and Poplar (Mr. Shore) were in a measure of agreement in discussing the causes of world instability. They all mentioned Russian aggression of one sort or another. I go beyond that to say that a greater cause of instability is probably the failure of Marxism. Events in Poland are causing instability throughout the Russian empire. The plight of the boat people is also causing misery, hardship and instability. In Russia the failure of the grain harvest this year may be causing great problems, too. Whether they are to our advantage I cannot yet say. Only time will show.
The same can be said about China. My intellectual friends had a great admiration for that country, an admiration that I shared to some extent. However, if we are to believe the reports, it now appears that events in China were somewhat akin to what happened under Stalin in Russia.
Several hon. Members, including the hon. Member for Dunfermline (Mr. Douglas) have spoken about oil. The rising price of oil was much of the cause of the recession. My hon. Friend the Member for Wycombe and the hon. Member for Dunfermline referred to the OPEC balance of payments, which enjoys a surplus of $100 billion or $150 billion. Meanwhile, the developing countries have to meet an oil bill of some $70 billion, when aid to them totals perhaps $25 billion. This problem was not dealt with to any great extent by the interesting Brandt report.
The third area of instability, which was the core of the Brandt report, is the disparity between rich and poor. I am prompted to consider that issue in relation to aid following remarks by his Grace the Archbishop of Canterbury which were described in The Times as his
"most outspoken contribution to political debate."
Speaking to a London seminar, he made four principal points. He said that it was "hardly encouraging" that British development assistance was being cut faster than other expenditure in Whitehall.
Secondly, he said that current British policies seemed to be more preoccupied with British needs than with the vital requirements of the developing world. He went on to say that self-interest on our part should dictate a wiser course when every £100 in aid to developing countries brought back £60 to £70 in orders—a reference to tied aid. He concluded that as a consequence "some of our policies" did not help our international respect and standing.
I have had the privilege and pleasure of meeting Dr. Runcie several times. I have a very great respect for him and the position he holds. However, I am sure that he would never dispute my right to speak on theological matters, and I certainly do not dispute his right to speak on political matters, if, as The Times called it, aid is
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political. I think that his views were perhaps one-sided and did less than justice to the generosity of the British people and this country as well as to the Government's determination to proceed with a developing aid programme as outlined in the Gracious Speech.
As my right hon. Friend the Lord Privy Seal said, the United Kingdom's performance on aid is something of which we can be proud and of which we can continue to be proud. [Interuption.] If the hon. Member for Crewe (Mrs. Dunwoody) listens to me for a moment, perhaps I shall be able to convince her. As my right hon. Friend said, last year the United Kingdom was the fifth largest donor in terms of absolute sums given. We were beaten to the post only by the United States, France, West Germany and Japan—all countries with larger economies than ours. This year, the present target is £960 million gross, which represents just over 0.5 per cent, of our GNP, whereas the average for the Western donors together is 0.35 per cent. Therefore, we are contributing considerably more in aid as a percentage of our GNP than the average of the Western donors, and in total amount given we rank fifth in the world.
Mr. Maxton: Does not the hon. Gentleman agree that his use of the term "generosity" of itself spells out what the Conservative Party means by aid—that it is a charity which is given out of the goodness of our hearts and not something which is there as of right? Does he not also accept that as a major ex-imperial Power our responsibility to a large part of the Third world is something that we should bear in much greater weight than other countries which were not the imperial power that we were?
Mr. Shelton: I would far rather use the term "generosity" than "self-interest".
His Grace the Archbishop may well have been right to say that aid has been cut faster than other expenditures in the Departments of State. Frankly, I do not know. It is difficult to measure one against the other. But I still believe that we are doing very much better than most other countries.
He also accused us of being more preoccupied with our own needs than with the vital requirements of a developing world. I believe that it is the duty of a Government to be preoccupied with the needs of its own citizens. Nevertheless, as my hon. Friend the Minister for Overseas Development said:
"Our ability to support development overseas is dependent on the state of our economy."—[Official Report, 20 February 1980; Vol. 979, c. 464.]
That must be true; no one can deny it, and no one can deny it who thinks about it. But, as has been fashionable over the past decade, it is all too easy to believe that Governments somehow have money of their own and that if they do not spend as much as someone wishes on a certain project it is either through malice or miserliness. In fact, Governments do not have money of their own. It comes from the people and the wealth-creating sectors. Aid must take its place within the framework of Government expenditure.
It is true that if the money given in aid is used to purchase goods from this country, one gives a sigh of relief and says "That is all right." I agree that it is advantageous in some ways in terms of self-interest. Nevertheless, that is equivalent to the Government giving away the goods, so it cannot be regarded as a completely painless operation.

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I am dubious and slightly cynical about gifts of large sums of money to help the Third world, the developing countries or the poorer nations. For nine or 10 years, I lived in a developing country in the Third world. I worked there and had an interface with the business community in that part of the world. If a disaster occurs, money should, of course, be given—I am sure that our sympathies go out to the people in Italy who have suffered so recently—but the transfer of massive resources from nation to nation is something that I view with a certain amount of cynicism.
I am not necessarily referring to the graft and corruption for which purposes aid moneys have been used—aeroplanes, cars, roads leading to the palace, Swiss bank accounts, arms purchase, or the unintentional bolstering of regimes which might be better not bolstered. I believe that the best way to give aid is a far more direct way. There is a Chinese saying that if one meets a hungry man, one does not give him a fish; one gives him a fishing rod. To me, that sums up our approach with regard to aid.
I am sure that the hon. Member for Crewe is aware that the United Kingdom is the world's second largest overseas investor. That is one way of giving aid. Whether or not she agrees, the multinational companies give aid. I do not believe that the inhabitants of those parts of the world in which I lived would have had access to the drugs and medicaments that they did had it not been for various large American drug companies. It is true they made a profit, but they supplied the aspirin and the drugs which those countries needed. In my experience, investment, joint partnership and international companies are of profound importance when we speak of aid.
When I lived in South America, I was enormously impressed by the work of the American Peace Corps. I am sure that hon. Members will know that the Peace Corps is very similar to the Voluntary Service Overseas organisation in this country, which I also support very much. The director of VSO is an ex-colleague of ours, Mr. Frank Judd, for whom we all had a great respect. The VSO receives from the Overseas Development Agency just under £2 million, and it receives another £1 million from overseas Governments. That is excellent, because if overseas Governments contribute they give the VSO more room, help and support. This year, the organisation will be recruiting 360 volunteers who will serve for two years. It will therefore have just under 1,000 volunteers serving in 20 or 30 markets.
The House knows what those people do. They work on the spot, teach, train, dig latrine ditches and do an outstanding job. Again, that is the sort of aid that I view favourably. It is absolutely first-class. Not only is it helpful to the countries involved, but it is also excellent training for the volunteers. I understand that discussions are at present continuing about a VSO grant, and I very much hope that it will be increased rather than cut. We are talking about £2 million out of a total of just under £1 billion which this country is giving in aid. Whatever his Grace the Archbishop may think, our international standing is higher than it has been for a number of years and we have much to be proud of in our aid record.
7.50 pm
Mr. Bruce George:I should not like to allow the remarks of the hon. Member for Streatham (Mr. Shelton) to go completely unchallenged. It is wrong to assume that all developing nations are incapable of receiving and utilising aid ethically and competently,
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although some may fall into the trap to which he has referred. I have just returned from Botswana, a country that is genuinely multi-party and multi-racial. There are many countries in Africa that are struggling to maintain or create a viable democratic system either on the Westminster model or on an American model, or developing their own forms of African democracy. Many countries are capable of assimilating aid and using it for the benefit of their populations.
Two problems confront any hon. Member in a debate of this sort. First, will we catch Mr. Speaker's eye, and, secondly, to which of the many subjects should we address ourselves in a field as vast as defence and foreign affairs? I shall resist commenting on defence and gloating over the Government's predicament, and saying "I told you so." There is no way in which we could have a viable, conventional defence and a "nuclear deterrent". I do not wish to comment on and reiterate my regular pleas to the Lord Privy Seal on the future of democracy in South Korea and the need to get over to that country the fact that it will be regarded as an international pariah if it continues to pursue its present policy.
I should like to mention briefly the future of Anglo-American relations as a result of the election of Mr. Ronald Reagan. What will be the future for European, American, East-West and North-South relations as a result of his election? As a schoolboy, on the way to school I used to pass a church outside which there was a sign saying "Do not worry; it may never happen." I am afraid that hope is running out on that score. It will happen, and we should hope that Mr. Reagan turns out to be different from my and many of my colleagues' initial expectations.
I propose to talk about a subject that was not included in the Queen's Speech—a subject that will engulf and envelop this House over the months ahead, namely, the patriation of the Canadian constitution. A delegation of Canadian-Indian chiefs warned us 18 months ago of what would happen. That has now happened. Even though there has been no formal request by the Canadian Government, we know that it will shortly be made. It is a minefield, both politically and constitutionally. A googly is being bowled by Mr. Trudeau, which means that one thinks that the ball is going one way and, in effect, it turns the other way and goes past and often knocks the wicket down.
The Canadian Prime Minister has warned people against speaking about the Canadian constitution. In a speech in Winnipeg, he said that he understood that some Members of the British Parliament wished to meddle in his country's affairs and that they had better not try. I do not think that any hon. Member in this country will be warned off talking about a subject that is legitimately within his competence. If the Canadians had wanted their constitution back at any time since 1867, they could have got it back. The fact that they could not agree on its patriation is not our fault. Members of this House and of the House of Lords have every right to comment on what Prime Minister Trudeau is seeking to do.
When I was in Canada, I put forward a view on behalf of the people who were there 20,000 years before the French or the English—the native Canadians. Just after I left, a Liberal Member of Parliament, a Mr. Gus Cullen, sought unsuccessfully to have me censured by the House of Commons in Canada and suggested that unless I minded my own business I should be patriated back to England. As it happened, I was already back in England. He accused me of being a colonial, but my definition of a colonial is

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a person who exploits indigenous people. I do not think that Britain can be castigated for exploiting indigenous people, namely, the Indians of North America.
A few weeks ago, the Canadian newspaper The Globe and Mail said:
"Who's interfering in whose affairs?"
If the Canadian Prime Minister is trying to ramrod through his legislature and the British legislature a proposal that is not agreed by the provinces and the federal Government, he is interfering in our affairs rather than the other way round.
A document that was sent to me marked "For Ministers' eyes only"—their capacity to keep secrets is matched only by ours—said that the fight in Parliament in Canada and in the country would be "very, very rough". I am not anti-Canadian—I am far from it—but my opposition to what Mr. Trudeau is doing is based on genuine constitutional arguments. If the Canadians want their constitution, let them have it, but it must be done in the right way. I have considerable reservations as to the way in which Mr. Trudeau is pursuing his—one may say—"obsession" to patriate the Canadian constitution. I also have reservations that I express on behalf of the indigenous peoples of Canada, who still have a claim on the British Crown. That claim was not extinguished in 1867 or in 1931. The obligation is still there.
If the British Government accede to the demands of Mr. Trudeau, we shall be proceeding wrongly. In Canada there is opposition from the official Opposition, from at least six of the 10 provinces, from the original Canadians, from many other Canadians and from many constitutional lawyers. The Globe and Mail states:
"If the Prime Minister of Canada were to ask the British Government to submit to Parliament a bill that provided merely for the patriation of the Constitution—that is a bill that put the power to amend the BNA Act into Canadian hands, according to a formula to be settled by agreement between federal and provincial governments—then the only course open to the British Government would be to act on that request… But the resolution that Mr. Trudeau's Government is attempting to ram through Parliament in Ottawa asks for much more than patriation. It sets out to entrench in the constitution a bill of rights… In plain words Mr. Trudeau is asking Britain to make changes to the Canadian constitution that go far beyond the changes he could make himself if the constitution had already been repatriated. Worse, they are changes that go far beyond the changes he could make if, in addition to repatriation, the substantive constitutional amending changes he demands had already been made. For he does not have in Canada the support he would need to carry through these amendments… If Mr. Trudeau continues on the course he has chosen he will find himself asking Britain to amend Canada's constitution in a manner that the constitution as amended would show to be clearly unconstitutional. He would be asking what he has no right to ask."
That is the problem that the British Government will have to face. Despite the bravado of the Canadian Government, they are not certain of their constitutional and political position.
The document to which I referred earlier states that the Government could
"take a position that it is confident of its legal position."
The report continues:
"Obviously, the foregoing suggests that while unilateral action can legally be accomplished, it involves the risk of prolonged dispute through the courts once the possibility of adverse judicial comments that could undermine the political legitimacy, though not the legal validity, of the patriation package …"
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The report says that if the matter goes before the courts it could take between one and a half and two years to settle, and that
"there would be the additional risk of an earlier, possibly critical, provincial court judgment."
What certainty is that as to what they are doing?
The report goes on:
"There would be a strong strategic advantage in having the joint resolution passed and the United Kingdom legislation enacted before a Canadian court had occasion to pronounce on the validity of the measures and the procedure employed to achieve it. This would suggest the desirability of swift passage of the resolution under United Kingdom legislation."
Who is being used? The idea appears to be to rush it through Canada and through Parliament here before the courts can get at it. If the courts get at it, they may strike down the validity of the legislation. Who is being used?
If the British Government and Her Majesty's Loyal Opposition accede to Prime Minister Trudeau's request or demand, they will be going about the problem in the wrong way. They must be cautious before supporting the federal Government.
I have looked at a variety of constitutional authorities—not just those of the provinces, which I understand will be submitting evidence to the Select Committee, but people such as Senator Eugene Forsey, an eminent and distinguished lawyer and senator. He said that
"some distinguished constitutional lawyers argue only after all, or almost all, the provinces have consented to such a request"
can the Canadian Government proceed.
Professor Forsey refers to Professor W. R. Lederman as Canada's "premier" constitutional authority, and Lederman has argued that the convention that all the provinces must agree has now hardened into a rule of law.
All the provinces have not agreed. Until now, the provinces have been consulted in the majority of cases. In 1965, a Canadian White Paper said:
"The Canadian Parliament will not request an amendment directly affecting Federal-provincial relations without prior consultation and agreement with the provinces."
Even if in some cases this procedure has not been followed, consent is still the norm to be pursued.
On this most crucial occasion, should the principle of consultation and agreement between the federal Government and the provinces be violated, what moral authority will such a constitution then possess? What must we do? If we accede, we shall be wrong. Shall we say "Let them get on with it"—simply pass a Bill to give them the right to work out their own future within Canada? If that is done, I hope that there will be consent, if not consensus, with compromise on the part of every group. Or should we allow the Canadian courts to decide before we act? That course of action attracts me very much.
This Government should encourage the Canadian Government to seek to solve the problems within Canada, otherwise we shall have jet loads of lobbyists coming over here. If the Indians can find me, Quebec can find somebody else, and the fishermen of the provinces can find somebody else. Then this House will be the battleground for a contest between proxies of groups in Canada who ought to be fighting it out over there. Let them solve their problems in Canada.
I do not want to get involved in any fist fight—perhaps I should not use that phrase—with the Canadian Prime Minister, but the problems should first be resolved in Canada. If they are resolved, I hope that it will be with the co-operation of the native Canadians.

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I speak not on behalf of but in support of the three native Canadian groups—the National Indian Brotherhood, representing a quarter of a million full-blooded or "status" Indians; the Native Council of Canada, representing 800,000 people of mixed blood, or Metis; and the ITC, representing some 25,000 Inuits or Eskimos.
Distinguished lawyers such as Gordon Bennett and Professor Douglas Sanders have argued that
"It is not widely appreciated that the UK retains a residual responsibility for the native peoples of Canada".
They go on to argue that Parliament and the Crown could refuse to patriate the constitution
"if persuaded that the proposed constitution adversely affected Indian status".
This may appear to be a rather novel, almost unique, interpretation of the Canadian constitution. That is not so. A relationship was established between the British Crown and the Indian nations two centuries ago, and that relationship still exists. The British Government and the Canadian Government may choose to ignore this. It has not been tested in the courts, but that relationship still exists.
The duties set out in the Royal Proclamation of 1763 have never been extinguished by the passage of time, and the Crown still has an obligation.
The report of the House of Commons Select Committee on aborigines in 1837 said that in return for receiving lands in Canada Great Britain pledged to the Indians protection and guaranteed that changes would occur only by negotiation and agreement.
The British North America Act was not passed in 1867 with the co-operation of the native peoples. One cannot simply transfer legal responsibility, having signed treaties in perpetuity. The Indians, when they signed, thought that the terms were to apply for ever.
There were hundreds of treaties signed by Indian tribes and the Crown. The Statute of Westminster does not refer to the Royal Proclamation of 1763. Treaties continued to be negotiated with aboriginal nations after the British North America Act, as before, and we still have the legal obligation. The obligation of the Crown has never been transferred to Canada, although both Canada and the United Kingdom act as though there had been a transfer.
I shall not talk about the case that the Indians—Inuits and Metis—are putting. They will put their own case. Briefly, they are calling for a collective recognition of themselves as distinct peoples. They are asking for the protection of their traditional cultures, life styles and aboriginal rights. They are asking for political rights, for a certain degree of self-government within the confines of the Canadian State. They are asking for certain economic rights to lands and resources—the lands that they had originally but were signed away.
I hope that the British Government will realise that they still have an obligation and will not be dragooned by the Canadian federal Government into taking a course of action that would renege on constitutional responsibilities signed not only with native peoples but with the provinces. The Queen is not only the Queen of the federal Government. The Crown has responsibilities for each of the provinces, and we must never forget that.
The leaked document to which I referred ended with a quotation from Machiavelli. Having read the document, I can understand why Machiavelli was cited, because "Old Nick" would have been proud of the document that was submitted to the Cabinet in Canada. One must note that
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"The Prince" Machiavelli's principal tract was intended to bring about the unification of his country, but he did not succeed. Indeed, unification came 400 years after the initial document was written. I trust that the desires of the Canadian peoples will not have to wait that long.
Machiavelli said—to quote again the leaked document—that
"It should be borne in mind that there is nothing more difficult to arrange more doubtful of success, and more dangerous to carry through, than initiating changes in a State's constitution".
One can underline that statement. It is bound to be a complicated process. There are people in this House and in the House of Lords who, far from being anti-Canadian, will want to see that the patriation, when it eventually takes place, is done properly. That means not only a close examination by the Select Committee; it should also mean a reference to the Canadian courts, before the British Parliament, the British Government and the British Crown are asked to put their collective heads on a chopping block.
If that is done we can proceed, as many would want us to, as a rubber stamp, but a warning must go out from this House. We are not desirous of "meddling" in Canadian affairs—no one doubts that Canada is an absolutely sovereign nation—but this House has responsibilities. I, as an hon. Member, did not ask for them. No one in this Chamber is old enough to have participated in the initial legislation, which was enacted more than a century ago, although some of us may seem old enough to have been around at that time. Nevertheless when the constitution is patriated it must be done properly.
I hope that this legislature will then pass the necessary measures swiftly. I do not want relations between Canada and Britain to be endangered. However, if we accede to Mr. Trudeau's request we shall not be acting in a neutral manner. If we accede to his request we shall be taking the side of the federal Government against the provincial Governments. There is a need for more discussion. I hope that wiser counsels will prevail in Canada and that the British Government and Opposition will not be railroaded into supporting a position that many regard as unconstitutional and untenable.
8.10 pm
Mr. Peter Fraser: In the course of this debate hon. Members have ranged widely over the matters contained in the Queen's Speech. I shall restrict my remarks to the sentence in the Gracious Speech which deals with the Government's continued support for the Government of the United States of America
"in their efforts to find an early and peaceful solution to the prolonged illegal detention of the United States' diplomatic hostages in Iran."
It was riot without hesitation or reservation that the House agreed initially to the imposition of economic sanctions against Iran as part of the pressure to secure the release of the hostages. That decision was not taken easily, and was not taken without some commercial and trading sacrifices by this country when we could, perhaps, ill afford them. I am sure that no hon. Member would wish to do or to say anything that will prejudice the early release of the diplomatic hostages. Indeed, hon. Members must be as anxious as the American people that those hostages should be freed and reunited with their families as soon as possible.
Although the sanctions that the House imposed were specifically related to the seizure of the American hostages, we should be equally concerned about the fate

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of the British citizens who have been detained without charge or trial and denied access by any member of the United Kingdom consular staff, by any other consular staff in Iran or by legal advisers or friends. One of the four detained in Iran is a constituent of mine, Miss Jean Waddell. I am acutely aware of the distress and anxiety that her continued detention in Iran causes, not only to her family and friends in my constituency but also to her Church.
The detention of Miss Jean Waddell, together with that of Dr. and Mrs. Coleman and Mr. Pike, is an affront to all that we hold to be fair in a judicial system, and, indeed, an affront by any international standard. The fact that they have remained in detention without access of any form being allowed must be unlawful. The character of Miss Waddell's detention may be different from that of the diplomatic hostages, but it is no less reprehensible. It is now an unconscionable time since she was first detained by the Iranian revolutionary authorities, and there is no justification for failing to provide any information about her health, the charges that might be preferred against her or for failing to provide any information about her wellbeing.
It is rumoured that investigations into the extraordinary allegations of spying—they refer to a lady who went to that country to serve the Anglican Church—have been completed. The Foreign Office has discovered that the documents on which the allegations are based are patent forgeries, and anyone with English as his first language could tell that.
It appears that Miss Waddell has been moved by the revolutionary authorities from Isfahan to Tehran. Given the conclusion of investigations into the allegations, it is difficult to understand why nothing has been said about her whereabouts or what is to be done about her. If she were in similar circumstances in Britain, she would have been charged and have seen legal advisers, or she would have been released from prison.
Miss Waddell is a middle-aged lady who went to work in Iran as a secretary to the Anglican bishop. Earlier this year she was seriously wounded in an incident. She was still recovering from that when she was arrested by the revolutionary authorities. Prior to her detention, our embassy in Tehran did all that it could to secure permission for her to leave the country. I make no criticism of the activities of the embassy staff while they were in Iran. Nor can any criticism be levelled against the Foreign Office for its decision to withdraw diplomatic staff from Tehran. It was clear that events were moving in such a way that we might have found ourselves in much the same situation as the American diplomats.
It is worth recording that the staff of the Swedish embassy have been tireless in their efforts to secure some access—on humanitarian grounds—to Miss Jean Waddell and the other prisoners. They have attempted to find out something about her. Despite their efforts, the prospect of securing her release is increasingly bleak. Judging from the correspondence that I have received, there is a mounting sense of anger about her continued detention.
It would be wrong to attempt to heighten ill feelings against Iranians who are studying or working here. It goes without saying that the Government should not contemplate any form of military intervention to secure the release of our hostages. However, before the release of the
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American hostages, or in the event of their release, the Government should ensure that our own fellow citizens in detention in Iran do not become forgotten prisoners.
I have been considerably reassured by the public statements made by the Minister to the effect that there can be no question of resuming full and friendly relations with Iran as long as these prisoners are held without charge, trial or access. Nevertheless, that may not be all that is required. I urge the Government to take every step to let the new American Administration know and appreciate that we consider an early solution to the prolonged, equally illegal, detention of our citizens to belong to the same category as that of the illegal detention of their diplomatic staff.
I hope that our partners in the European Community will be apprised of our resolve to ensure that our prisoners in Iran are accorded their rights. As long as Iran is at war with Iraq, and as long as it is difficult for the Government to determine exactly where the base of power lies as regards the detention of these prisoners, the opportunities for mounting fresh initiatives to secure their release will be difficult and scarce. I ask only that the Government ensure that, however difficult our relations with Iran may be, and although the location and the charges against those prisoners are at present unknown, these people are not forgotten by the House.
8.18 pm
Mr. Robert Hughes:I am sure that the House shares the concern expressed by the hon. Member for South Angus (Mr. Fraser) about his constituent, Miss Jean Waddell, and the other British people who have been detained in Iran. We pay tribute to him for the work that he has done on behalf of his constituent. From the press, we know of the frustrations that he has experienced when trying to put his point of view fairly and squarely to representatives of the Iranian Government. I am sure that the House hopes that not only the British detainees but the American hostages will soon be released. I hope that such happy events do not have to wait until the end of the conflict between Iraq and Iran. If they do, that is an added reason why the conflict should be ended as soon as possible.
There is one sentence in the Gracious Speech to which I should like to devote considerable attention:
"Negotiations to find an internationally recognised settlement in Namibia in accordance with the United Nations' plan will continue."
I apologise to the Lord Privy Seal for having missed his opening remarks. However, I have heard with astonishment from some of my hon. Friends who were present that the right hon. Gentleman made no mention of Namibia. This is surprising considering the reports in today's press which suggest that South Africa and the West have agreed a formula for a conference on Namibia.
I think that we are entitled to ask forcefully why no statement was made today about these discussions and the possibility of such a conference taking place. We are entitled further to ask, following from the single sentence in the Gracious Speech, how long the negotiations will continue. How long will South Africa be allowed to defy world opinion and the United Nations? How long will South Africa be allowed to prevent free elections in Namibia?
If there is to be an all-party conference, or however it may be dressed up, such a conference will have no hope

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of success unless a firm date is set for the holding of elections. South Africa has prevaricated for many years on the holding of free elections in Namibia. Each time South Africa is pressed to implement the United Nations plan, which apparently is accepted in principle, the response is "Not now; sometime tomorrow"; and tomorrow never seems to come.
It is generally believed that an election must take place in 1981. That is the only way to get the basis for a conference. If the conference is to decide on the nuts and bolts, given a firm commitment to an election as early as possible next year, I would go along with such a conference. Without such a commitment, I would not support the conference. The only way that we can get South Africa finally to bite the bullet, so to speak, and to make clear that it must accept United Nations—supervised elections next is for us to say that the West will no longer veto any sanctions resolution in the United Nations Security Council. It is important that that should be said as early as possible. With the General Assembly beginning its debate on Namibia tomorrow, the Government should have said today that they would not rule out sanctions.
I do not expect the Government to say that they will support sanctions. I know how much one can ask for if one hopes to get a reasonable response. However, the Government should make it clear that the day has passed when they can hold out against the implementation of sanctions on South Africa. Only South Africa is holding back elections in Namibia. SWAPO has for many years said that it is willing to put itself to the test of opinion in a free election. Why is South Africa holding back? The front-line States surrounding that part of Africa have said that they want to see free elections in Namibia. Almost all in the United Nations have said that they want free elections in Namibia. Only South Africa is unwilling to commit itself to free elections in Namibia.
I appreciate that the Government have convinced themselves that they solved the Rhodesian problem and brought Zimbabwe to independence. The truth is that the impetus for a resolution of the conflict in Rhodesia was the position within that country. Resolution of the Rhodesian conflict came only when the Smith regime, South Africa and the West realised that the Patriotic Front armies were winning and that a fight to the finish could lead only to a major cataclysmic result. Must we wait until the number of lives lost in Namibia reaches Rhodesian proportions before the Government act publicly to demonstrate their opposition to South Africa's prevarication?
We know that Tory Members would not listen to us during the many years of UDI. I beg them to listen to us now. They took refuge, in the days of UDI, by saying that those who were opposed to the Smith regime and supported the Patriotic Front were the supporters of murderers, guerrillas and so on. They sought to blind themselves to the reality of the situation. If they had listened to us 10 years ago, if they had given the 1966–70 Labour Government the necessary support, we might have saved 10 years of bloodshed and achieved a much better future for the new country of Zimbabwe. I do not want to go into the difficulties now facing Zimbabwe. However, we could have saved many lives from being lost. We could have saved a great deal of destruction of people's bodies. We could have saved a great deal of loss of property. We could have achieved a much better economy if the Conservative Party had listened to us.
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I hope that people will realise that SWAPO and the Namibian people will not give in on their fight for freedom. If it has to go on, it will go on, and we shall support it. The Government must learn the lesson of Rhodesia and realise that they must act with resolution.
Conservative Ministers complain about lack of elections in Afghanistan, and there ought to be elections in Afghanistan. But it is no use complaining about Afghanistan or the lack of democracy in Eastern Europe—there should be greater democracy in Eastern Europe—if within the boundaries of our own influence—no one can deny that we have influence in South Africa, because economically South Africa is part of the West—we do not act to achieve elections in Namibia. Unless we commit ourselves to freedom in South Africa, our pleas to the Russians will carry little weight. If we have a commitment to freedom, we must show that we are willing to do more than talk about the issue. There must be a greater willingness to understand what is happening in the whole of Southern Africa.
As time is short, I shall not go into the matter in great detail. However, one of the best things that has happened in Southern Africa during recent years has been the establishment of a series of conferences of the South African Development Co-ordination Committee, the second of which has begun today or will start tomorrow in Maputo. Certain countries are now beginning to realise that they are over-dependent on South Africa. They now realise that they must develop their own economies in cooperation with each other. I hope that the Minister for Overseas Development, who has gone to Maputo, has gone with a specific commitment to put money into the first of the proposals worked out for transport communications, which I think will cost about $800 million. That is the figure that I have in mind. We must put our money where our mouths are on this issue.
I turn briefly to an issue which constantly arises these days—where we stand on nuclear weapons. More and more, the question has been posed as being that of nuclear weapons versus jobs. I am sorry that my hon. Friend the Member for Dunfermline (Mr. Douglas) is not in his place, because he posed this question very strongly. He said that those of us who are unilateralists must answer the question of what we shall do about the people who work in Rosyth dockyard if we have unilateral nuclear disarmament.
As I have said, apart from the fact that nuclear weapons are not made in Rosyth dockyard, that is carrying the argument too far. In a sense, what my hon. Friend was in great danger of arguing was that the best provider of jobs is massive rearmament, not disarmament. In many respects, one could argue—although I certainly do not argue this—that the best provider of jobs and a booming economy is war itself—preferably a local war far away from one's country, such as fighting a war by proxy in Vietnam or Kampuchea.
It is not a question of unilateralism losing jobs, because, in a sense, the biggest danger to jobs is multilateral disarmament, as one would not then be speaking about doing away with only a few highly sophisticated nuclear weapons; one would be doing away with a very large and very job-consuming part of the defence economy. I hope, therefore, that we shall not have that kind of argument about things versus jobs. At the end of the day, we must draw the line somewhere. Some of us believe, as I do, that nuclear weapons are such evil things

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that, although in their building they provide jobs, jobs should be the last possible reason for having such weapons.
One could move to the other extreme and say that, after all, heroin is a dreadful thing through what it does to people, but, if it provides jobs, why should we not license the providers of heroin, and why should we not license cigarette companies to provide cannabis cigarettes? It is all an extension of the argument.
Mr. Clive Soley:If we follow that line of argument, and if we are serious about multilateral disarmament, should we not have contingency plans for jobs anyway? That is the crucial point. It is perhaps a measure of our lack of seriousness about the issue that we do not have contingency plans.
Mr. Hughes: There are two great disadvantages in giving way. One is that one may get an irrelevant interruption, and the other, as more often happens, is that the person to whom one gives way steals one's best line. I was about to make the point that if there are to be multilateral or unilateral disarmament or cuts in defence expenditure demand, we must provide a strategic plan for the provision of peaceful jobs. That contingency plan should be worked on now.
I want to refer briefly to a very curious argument that is beginning to be advanced in some very strange quarters but very widely and publicly. That argument against unilateralism is as follows. We are told that if the nuclear disarmers would only realise it, there would have been no Hiroshima or Nagasaki if Japan had had nuclear weapons. That may well be so. I do not know. However, one can extend that reasoning. One might argue that if Nazi Germany had been a nuclear Power, Germany would not be a divided country between East and West and that the geographical line where the Iron Curtain now rests, according to the Conservative Party in particular, would be much further back. Possibly Poland would have still been under German domination instead of under Russian domination.
Is that really the concept that we are arguing? If we are arguing that, we must ask ourselves whether those who lost their lives in destroying the heavy water plant in Norway gave their lives in vain. Were we mistaken in holding back Germany's nuclear weapons capacity? I wish sometimes that people would answer that question. I do not pretend to know what the answer is. I think that people would concede that if Japan had been a nuclear Power, Japan would still hold the large parts of South-East Asia which it held at one time.
It is an obscene argument, because we know that there was no need to use nuclear weapons. It is an obscene argument against unilateral nuclear disarmament to say that there would have been no Hiroshima or Nagasaki if Japan had been a nuclear Power. The truth is that probably the atrocities carried out by the Japanese and the Germans would have continued apace and no one would have been able to do anything about it, although I suspect that at that stage of the world's existence we would have seen people using up what nuclear weapons they had on a much wider scale.
In our discussions on defence and foreign policy generally, I hope that we shall not continue to blunt our power of reasoning by an irrational hatred of the Soviet
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Union. There are very great signs of that happening—that anything is possible just as long as one thwarts the Soviet Union. One finds all kinds of strange reasoning being adopted in foreign policy if we let reason go out of the window. One example of an action for which there was no reasonable support but which was still done was this Government's support in the United Nations for the accession of the Pol Pot regime. There can be no rationale for such action. It is done because people are blinded by other considerations.
I hope that the Government will say that the visit that Mr. Botha, the Minister of Foreign Affairs of South Africa, made to Mr. Luns of NATO does not represent a change of policy. I understand that, apart from that one meeting, which it is now admitted took place, although there is some argument about whether it was held at NATO headquarters or at Mr. Luns's private residence, there have been three such meetings within the last 18 months between prominent NATO personnel and South African Foreign Ministers. I hope that we can be given an assurance that there have been no policy changes regarding South Africa's integration or non-integration with NATO.
I hope that I have time to refer to one or two issues beyond foreign affairs which are of great importance to my constituents and, I believe, to the whole of our industry. On fishery negotiations, there is great suspicion, constantly repeated by fishermen, that we face a sell-out. The French constantly repeat that the so-called agreement on a rebate of British contributions is contingent on an agreement being reached on fishing by the end of this year and that, unless there is such an agreement, no rebate will be available. I know that the Government have denied this, but we are getting ever closer to the end of the year, with no agreement. If there were a chance to go into detail, one could say that what we are offered under a fishing agreement is worse than what we were offered two years ago.
Industry is being destroyed in this country. We are seeing the decimation of British industry in almost every single field. There has been a modest reduction in interest rates today, which will help, but it will be of no value to the paper industry, facing massive energy costs. We must use oil revenues for investment and not simply for cutting taxation and such like matters. We must use this resource from the North Sea in the best possible way. The Government are to take more revenue. It will be used simply to cut the public service borrowing requirement. At the same time, the Government are cutting local industry and causing tremendous damage to the economy.
Some people may feel that it does not matter that the Government have broken almost every pledge that they made before coming to office. People may feel that it does not matter if the Government fail in their economic policy. Perhaps, they feel that it does not matter that within this country there is deep resentment simmering below the surface. I find that resentment disquieting. The failure of successive Governments to tackle our economic problems and to show that we can resolve the difficulties of ordinary people is breeding a contempt for politics and all its works. It is not only the Government who will suffer. Opposition parties will also suffer.
Unless we have a clear policy for the regeneration of British industry and a clear policy for solving the deep-seated problems that we face, it will not be only a matter of inter-party difficulties, but the very fabric of our democracy will be under threat. If that is the case, the only

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people who can repair the damage to that fabric are the Labour Party following very strong Socialist policies. We must not merely fight the Government. We must make clear our position for the future of our country and of our people. We must stand firm for human rights, whether in this country or abroad. At the end of the day, the only people who can speak for Britain and speak for freedom with any conviction and any degree of success are the Labour Party wedded to a Socialist policy.
8.39 pm
Mr. Eldon Griffiths: The hon. Member for Aberdeen, North (Mr. Hughes) will not expect me to agree with his concluding remarks. My main theme is that the Opposition, by their slide towards neutralism and unilateralism on nuclear weapons, are in danger of putting at risk the most important single element in the security of this country, namely, the American Alliance.
With deep regret, I have to say that the Government too, to some extent, have rubbed the shine off one of their greatest assets in Washington—the Prime Minister's reputation for saying what she means and doing what she says on defence. The Government have gone back on their commitment to NATO to increase our defence expenditure in real terms by 3 per cent. a year. I believe we shall live to regret that.
The main threat on today's world scene is the readiness and ability of the Soviet Union to project its armed forces outside the Eastern bloc. I have seen at first hand the projections of this armed power into member countries of the Warsaw Pact. I was in Budapest and in Prague. I hope we shall not to see similar events in Poland, but no one can be sure of that.
But the new development over the past decade is the Soviet Union's willingness to reach outside its own perimeters. We saw this in Angola, where the Soviets had the help of the Cubans. We saw it in the Horn of Africa, where help was given by the East Germans. Above all, we have seen it, in full force, in Afghanistan.
On every occasion, the Western response to these aggressions has been "Next time we shall not be caught napping." Whenever a new Soviet adventure takes place, we are always going to do better next time. After Afghanistan, it is time the West took strong action. There was the ban on the Olympics, though it turned out to be a wash-out. There were the limits on Western supplies of capital, credits and technology to the Soviet Union, and the United States imposed a grain embargo. Above all, there was to be a 3 per cent. increase in arms spending by NATO.
But what has actually happened? The attempt to isolate the Soviet Union diplomatically was broken almost before it began by the President of France rushing off to Poland for bilateral talks with Mr. Brezhnev. The attempt to limit credits and technology to the Soviet Union has been smashed to smithereens, not least by the West German Government's offer of $10 billion in credits against Soviet oil and gas supplies. As for the 3 per cent. increase in defence spending, first the Germans and now Britain have gone back on it.
What are the consequences of the Western failure effectively to resist one Soviet adventure after another? The first is to encourage the hawks in the Kremlin to
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believe that they can get away with it. The second is to impair the credibility of the European side of the Alliance in the United States.
I spent nearly 16 years off and on in America. I have taken careful note of the evolution of Mr. Reagan, first when he was head of the Screen Actors Guild in Los Angeles, later as a very effective governor of California and a considerable crusading politician, and, most recently, as President-elect. I, for one, am glad that he has won. But it is enormously important that we in this country should understand that there is now a new dispensation in Washington.
As a Californian, Mr. Reagan, understandably, is apt to look more towards the Pacific and perhaps more towards Latin America than any American President for a number of years. In the present-day circumstances of the United States, he will be right to do so. His Administraion will also be politically more sef-assertive in international affairs. We shall not like everything that this new selfsenstiveness may mean for this side of the water. I believe that there will be much more emphasis on building up America's armed strength. For my part, I shall welcome that, though it will certainly bring howls of protest from the weak sisters within the Alliance, if not from within this House. There will also be greater pressures from Washington for its European allies to do more to help carry the common burden of Western defence. The Germans will be expected to pay more to meet the costs of the United States Army in their country, and it would not surprise me if pressure were put on this country, with its new-found, strong oil currency, to bear a greater share of the cost of the United States Air Force stationed here.
Overall, I believe that there will be greater emphasis in Mr. Reagan's America on hemispheric self-sufficiency. The word "isolationism" was used earlier. I do not believe that isolationism is possible for the United States. American business and industry are far too inextricably involved in the entire world. The national interests of the United States also require that she adopts a global strategy, involving allies in both Europe and in the Pacific.
However, I have no doubt whatever that this new Administration, with the support of very many Americans, will seek a greater measure of what I can only describe as North American continentalism. There is a view that the United States, together with its immediate neighbours—Canada to the north and Mexico and the Latin American countries to the south—has within its own hemisphere the ability by the end of the century to be self-sufficient, both in armaments and in energy. The wall-to-wall carpeting of coal that is waiting to be tapped in the Rocky Mountain states and the oil and gas of Canada and the Arctic and, indeed, of the Caribbean and South America can certainly enable the United States to rescue itself from its "dependence on the undependable" of the Middle East, as President Carter put it. This theme, I am sure, will be repeated by his successor, only more so.
In the face of these changes towards a more robust, more self-assertive, more continentalist America, I believe that we shall see some of the strongest pressures within the Atlantic Alliance leading towards divergence rather than convergence. There will be tensions between the Americans and the Europeans and only the Soviets will gain. Nothing is more likely to exacerbate those tensions than the shift in the British Labour Party towards something very close to neutralism and unilateralism.

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Let me put it in practical terms. Faced with the Soviet deployment of SS20s—not the threat; the reality of that deployment—at the rate of two a week, the NATO Alliance agreed that it was necessary to deploy into the European theatre the American cruise and Pershing Missiles. Reluctantly an agreement was arrived at, signed and sealed in good faith. The United States is now making ready to produce those missiles, to put in the serial production orders for a vast array of expensive equipment, some of which I have seen in the factories in California. It is having to make provision in the fiscal years 1982–83 and 1983–84, as required by the Congress, for the site preparation work, for the undergrounding of the equipment, for its delivery, and for the purchase of the British Rapier missiles which are to help to protect the existing United States bases in this country.
Against this background of hard practical commitments, what is the United States to do if the present Leader of the Opposition comes close to taking office? I do not think that he will, but it is a contingent possibility that any prudent American Administration must take into account. So, if that were the case, or if it were the likely prospect, no American could possibly doubt that there was at least a very good chance of the heavy expenditure on the British-based cruise missiles and on the preparation of the bases proving to be abortive. It would be a total waste.
So, what are the Americans to do? I believe that some of them will be saying to the President that they might be better off relying on the German alliance. I do not think that that view will prevail in Washington. Others will recommend to the President a continental strategy based on the long-range ballistic missiles and on the great submarine fleet which the United States is capable of building and operating, largely on her own.
It may be that Opposition Members will say "So be it." But I am just old enough to remember Churchill's greatest achievement as well as his wise advice. His greatest achievement was not the Battle of Britain. It was, in his own words, to
"call in the New World to the rescue of the Old."
Ever since that time, when the Americans helped Britain to avoid defeat and thereafter to liberate Europe, we have enjoyed the benefits of the Marshall plan, the reconstruction of Europe and, within NATO, the sure arm of the United States in helping to secure the freedom and prosperity of Europe. It would be a sad day if now, through the internal evolutions of the Labour Party, we were to put at risk that one sure guarantee of the security of our nation, through the alienation of our American allies. That would be a historic turn of the gravest consequence to the British people.
I conclude with a simple plea to the Government. No British Prime Minister for a long time has stood so high in the estimation of the American people as our present leader. None has enjoyed more confidence in the Congress, in the Democratic Party and in the Republican Party. Her reputation stands high. But it depends to a great extent on the belief, shared by most Americans of all parties in positions of authority, that, when my right hon. Friend identified before anyone else the main threat from the Soviet Union and when she undertook in Opposition that a Conservative Government would devote to our Armed Services the resources needed to ensure their efficiency and our common security, she would do what
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she said. I believe that she has done so. But the Government's shift on defence in the main will take the shine off at least some part of that reputation. I ask my right hon. Friends to guard it from further damage.
8.55 pm
Mr. John Maxton: The debate was opened by a typically languid, disinterested and bored—I use the word "bored", not "boring"—speech by the Lord Privy Seal. His speech reflected the Queen's Speech. The most languid and disinterested part was that in which he dealt with the Third world and the developing countries. He put in that part—or it was put in for him—because somehow or other he felt that it should be included. Perhaps it is fashionable to talk about developing countries. However, he and his Government have no commitment whatsoever to the problems of the Third world. That is reflected clearly in the Queen's Speech, which states:
"My Government recognise the serious economic problems that affect both developed aid developing countries and will continue to work with other countries and international organisations in seeking to alleviate them."
That commitment is less than the commitment that they gave last year, when the Queen's Speech stated:
"My Ministers will have regard to the need for trade with, and aid to the developing countries."
The Government mentioned aid last year—although all that they did was to cut it. This year, they have not bothered to mention it at all.
During his speech, the Lord Privy Seal said that aid to the developing countries had to be cut along with other Government expenditure. I find it obscene and appalling that a Government can link aid to developing countries with that sort of terminology and use financial terms to describe it. We heard such expressions from the Conservative Benches during the debate. When public expenditure is cut—and I oppose that as violently and as strongly as anybody else—it creates unemployment, poor education facilities and poor health facilities. We do not want to see that happening. But when overseas aid is cut it may cause the death of children and adults in developing countries. It is a matter not only of lowering the standard of living but of actually causing death to individuals in other countries.
Despite what the hon. Member for Bury St. Edmunds (Mr. Griffiths) said, it is an obscenity that a Government can increase defence expenditure by 3 per cent. —and they will increase it by 2½ per cent. this year, which the hon. Member for Bury St. Edmunds may abhor but which I think is a step in the right direction—and while doing so they are cutting aid to developing countries and causing increasing problems in countries that are already hard hit by poverty. That is immoral. It is time that hon. Members on both sides talked more about the morality of policies and less about the economic effects.
It is not only aid that matters, because we do not help Third world and developing countries only through direct financial aid. The disastrous decline in our industries and the high interest rates that are sucking money into Britain have an effect on the economies of the developing countries. If the spending power of people in Britain is reduced, as is happening, inevitably that affects the spending power of people in the developing countries, and much more drastically. They cannot take the cut in spending power as easily as we can.

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That is happening. For example, there has been a 10 per cent. reduction in the sale of sweets in our shops as a result of the economic depression. That may be regarded as marginal or minor, but it can have an effect on the ACP sugar-producing countries in terms of EEC quotas and on the standard of living of those in the Caribbean and African countries that produce cane sugar.
It is important also to bear in mind the effect of the Government's public expenditure cuts. The hon. Member for Dorset, South (Viscount Cranborne) said that we are in an interdependent world when it comes, for example, to science and education. The hon. Gentleman is a Back Bencher who is supporting a Government who are cutting education provision. In Scotland, that has led to the closure of two colleges of education and the amalgamation of a third. It may be argued that the population no longer requires those colleges to train teachers. However, when large parts of the world have populations that are illiterate and are crying out for education for their people, it is wrong that we should be closing any education institute, especially when all the evidence suggests that the closures, far from saving the Government money over the next two or three years, will cost them more than if they were to decide to keep them open.
It would be a much better use of the buildings, the equipment and the highly trained staff in our colleges of education to bring in students from abroad or to train some of our people to teach in developing countries. That would be a correct use of education resources. It would not cost the Government much more and we could do a great deal for developing countries by that process.
We are finding that research programmes are being cut back in the universities because of the Government's cash limits. That applies to some programmes in agriculture that have allowed developing countries to expand their development of agriculture and agricultural produce. For example, the development of crop research has allowed them to harvest two or three crops a year instead of one, to produce new strains of seed and to introduce new strains of cattle. That research has not disappeared, but it is being threatened by the cash limits that are being imposed upon our economy and the universities. It must be wrong if public expenditure cuts are having that effect on Third world countries.
There have been tremendous cries from Conservative Members that we in Opposition are isolationists. They are saying that we are trying to retreat into ourselves by attempting to leave the EEC. I must disagree with my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). I should find it extremely difficult to join with the gang of 39 on the Conservative Benches in their task of trying to come out of or reform the EEC. My objection to the EEC is different from that of the gang of 39. I object to it because it is a supranationalist organisation that damages the international work that Britain could be doing. In particular, it damages our relationships with developing countries.
Sugar agreements have been developed with the EEC. The African, Caribbean and Pacific countries that grow cane sugar are allowed to send to Europe 1,300,000 tonnes of sugar a year. Nearly all of it comes to Britain. Only one-tenth goes to the remainder of the EEC. It is sometimes said that we are extremely generous to take that amount of sugar, However, in 1973 two-thirds of the sugar
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consumed in Britain was from cane sugar and one-third from beet. As a result of EEC policy, one-third comes from cane sugar and two-thirds from beet.
European beet farmers are overproducing. The free market for sugar is small compared with total world consumption. The price of sugar on that market is going up. There is at present a marginal shortage of sugar because of the poor summer in Europe, which lowers the sugar content of sugar beet, and because of the hurricanes and bad weather in the Caribbean. However, that is short-term. Over the next two or three years, sugar will probably be in surplus. That is certainly so in Europe.
As a result of that surplus the ACP countries, whose economies depend on sugar, unlike Europe, will be affected in two ways unless there is a change in sugar production quotas in Europe. The ability of the cane sugar-producing countries to sell on the world market will be damaged by the export of the European surpluses. European farmers will get EEC subsidies to keep sugar at a reasonable price, which will affect the opportunities of the cane sugar-producing countries to sell their sugar at a reasonable price.
The Ministry of Agriculture, Fisheries and Food, as well as responsible departments in other countries, is holding up a cut in the quotas of sugar beet. It was suggested that Britain should take a 30 per cent. cut in its sugar beet quotas. However, unless we have a solution to the quota problem, the quotas under the Lome convention for ACP countries will be cut.
It could happen by accident. For instance, if Tate and Lyle closes its Liverpool refinery, there may not be sufficient: cane refining capacity in Britain to take the entire quota. The ACP countries could suddenly and that we were no longer able to take in the quantities previously allowed. However, it is more likely that there will be a cut in the quotas from ACP countries. The CAP could damage dramatically whole economies in the Caribbean, Africa and the Pacific. That is the effect that the CAP can have on developing countries.
What is required from us is development of long-term trading agreements. Conservative Members are right to say that trade with developing countries is essential, but it has to be trade not merely on a free market economy basis but on a long-term basis, in which the countries that are selling to us know that they can sell us a certain amount at a guaranteed price. Those are the sorts of trade agreements that we have to work out. If we do not, the economy of the Third world can only decline, and we need the Third world as much as it needs us.
If the wealth of the developing world does not increase, the economies of the industrialised countries cannot hope to improve. We depend upon them. Equally, they depend upon us to give them a start, which in turn will get the world economy going again. The Government have been guilty of sheer hypocrisy in talking in bland terms about the extent of their aid and how they are fifth in the league. It is not enough. We have to develop a proper policy towards the Third world if we hope to develop our own economy.
9.11 pm
Mr. John Stokes: I shall deal briefly with our defence position and then speak of our relations with the EEC, the United States and the Third world.

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A new factor is emerging in defence matters at home in the form of the rise of an anti-nuclear movement that is more formidable and sinister than anything this country has seen over the past 30 years. The movement is all the more dangerous because the Leader of the Opposition heads it. It is dishonest, in that the country cannot disarm its nuclear forces without undermining its whole defence policy, including, of course, conventional arms. It is also dishonest because unilateral disarmament is an impractical proposition that would make the Soviets laugh and of which they would take immediate advantage.
The Government rightly give defence first priority. However, I deeply regret the cut in the increase in defence spending from 3 per cent. to 2½ per cent. It will be ill received by our allies. Nevertheless, the Government must spell out the dangers of the anti-nuclear movement in the clearest terms at every opportunity.
Those of us who have sat through much of the debate have been disappointed in the fact that so few Labour Members have spoken in wholehearted defence of NATO and the Western Alliance. Where are the so-called moderates of the Labour Party who are supposed to hold those views?
Our relations with the EEC are improving, but they are by no means satisfactory. The Government now have to contend with public opinion that is sceptical of, if not outrightly opposed to, the EEC. My right hon. Friend the Prime Minister is playing the position just right by maintaining the national interest, as France always does, while proving herself a good European.
We must improve our relations with France and Germany by good old-fashioned diplomacy. That means secret diplomacy rather than our trying to bring a so-called European initiative into effect. I approve of the sentiments behind the recent European initiative on the Middle East, but I do not believe that it has been helpful to the United States, to Israel or even to the Arabs, because they do not know what weight to attach to such a proposal. The proposal has no more weight behind it than the proposed new-fangled EEC passport would have. Diplomacy must be about nations' interests. In the end, there must be some force to back those interests. I therefore believe that the time for a European foreign policy, like the time for the so-called European Parliament, has not yet arrived. That may be sad to some people, but it is a true fact. Surely, the Tory Party has people in the Foreign Office who understand what foreign affairs is all about—what Disreali called "real politics".
I believe that our main job in the EEC must be to improve relations with France. I served with the French forces under General de Gaulle for most of the last war. Unfortunately, France and the French Government still have a chip on their shoulder about the United States. We must try to wean Germany away from giving too much emphasis to detente, which, in the terms in which they talk about it, is a complete chimera. I still look upon the first task of the EEC as that of underpinning the NATO Alliance and as acting as a bastion of the West—if one likes, of Christendom. Progress in this direction has so far been disappointing, in my mind far outweighing disappointments over the CAP or fisheries policy.
With Mr. Reagan as President, we have a chance of improving our relations with the United States. He believes in the West being strong, and we must support
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him in that. We must devoutly hope that he will increase the fighting efficiency of the United States armed services, which gives cause for some concern among our allies.
Much breath has been expended on the Brandt report and the Third world, including that of the hon. Member for Glasgow, Cathcart (Mr. Maxton). The Brandt report is, in my view, treated with exaggerated respect, as if it were some sort of tablet of stone handed down to Moses from Mount Sinai. I believe that the whole basis of the report is misconceived. Indeed, I feel like using the words of Lord Castlereagh about it, which he used in respect of the Holy Alliance:
"A piece of sublime mysticism and nonsense".
The nations of the Third world not only differ from each other but they differ profoundly from Western nations. They have other ideals and goals. They do not all wish to become exactly like modern Western capitalist nations. In some respects, some of them are less materialistic than we are in the West. Trade with them is, of course, vital, but the whole concept of aid in itself is doubtful and can be self-defeating.
From my own direct experience of countries in the Third world, I believe that the best thing that we can do to help those nations is to encourage some of our best young men and women either to go out there and trade, to start businesses and manufacturing concerns or to help the local people as specialists in the skills that they do not always possess, such as skills in agriculture, medicine, industry and so on. Above all, they can help the local people to help themselves. That was exactly what I saw in Dominica recently.
It is easy for the do-gooders among us to say to the Government "Give them all more money", by which they mean that we should impose greater taxation on our own people so that aid can be sent out to the Third world. That is usually the worst sort of aid. People are wanted to help the Third world—good, educated, energetic and devoted people, preferably young, who can show the way to the new nations. [Interruption.] The hon Member for Cathcart laughs. No doubt his experience of the world is vast, but I can tell him that there are many such young people in voluntary and other such services who are doing a good job. I fail to understand why he finds that amusing.
Mr. Maxton: Will the hon. Gentleman give way?
Mr. Stokes: No, Sir.
Since the Government came to power less than two years ago, British prestige abroad has improved enormously. I noticed that recently when I took a delegation to the Government and people of Portugal. However, that prestige can be soundly based only if we overcome our economic and industrial troubles and have a sound base here. That is the best possible gift that we can give to our Foreign Office. We are enormously respected throughout the world for our experience of world affairs and for our stable institutions at home, which are the envy of many other nations. Wherever they go, our Armed Forces are marvellous ambassadors for us and we should be deeply proud of them. But all those precious possessions will be put at risk if we do not get our economy right. The world is watching to see whether we succeed or fail. I do not believe that we shall fail.
9.22 pm
Mr. Clive Soley: I always listen to the hon. Member for Halesowen and Stourbridge

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(Mr. Stokes) with interest, because he represents what I describe—I do not mean it disrespectfully—as a dying breed of people.
Mr. Stokes: I am still alive and kicking.
Mr. Soley: I am sure that the hon., Gentleman believes what he says. But the speech that he has just made is in no way an example of moderation. I regard it as a speech of extremism. I shall try to explain that later, because I should also like to relate those comments to the opening speech of the Lord Privy Seal, to which I listened with increasing concern. I heard words and phrases that I had not heard since the cold war. To the extent that those words were so readily used, we heard today a cold war speech from the Lord Privy Seal. It is, perhaps, a measure of the deterioration of international relations that the Lord Privy Seal made such a speech.
An incredible assumption was made: that the Soviet Union automatically has aggressive intentions. I do not stand here as a defender in any way of the Soviet Union. I have many things to criticise that country for, not only in its international relations but in its internal affairs, but I do not believe that the great Satan in which the Ayatollah Khomeini believes exists in Moscow either. If the Lord Privy Seal is to have his great Satan, he will make the same profound and foolish mistakes as the Ayatollah Khomeini is making in Iran.
The theory that has been put forward suggests that the tension in international relations is in some way due to an evil State or an evil group of people who run the affairs of the State. I do not believe that that is so. The hon. Member for Halesowen and Stourbridge also suggested that, which is why I described his speech as extremist. The Soviet Union does not represent a group of evil men with the aim of disrupting world peace. I suggest that the two dominant world Powers have lost control of an increasingly complex balance of power in a way that is reminiscent of the period immediately prior to the First World War. I put it to those who condemn, as I do, the Soviet invasion of Afghanistan that we put ourselves in a curious light, because only a few years ago we defended the United States' intervention in Cambodia, now Kampuchea, during the Vietnam war.
If it was wrong for the Soviet Union to invade Afghanistan, it must also have been wrong for the United States to attack Kampuchea—unless, of course, we fall back on the theory that there is virtue in fighting for what we believe to be right and that it is not a virtue to bow down in the face of extremism. The problem with that argument is that if we believe it so strongly that we are prepared to fight and die for it, the people on the other side might also be prepared to fight and die for what they believe to be right.
When I hear Conservative Members referring to the words of the Soviet Union about Communism ruling the world, I tell them that I also do not want that to happen in the form in which it is practised in the Soviet Union. But when people in the West talk about democracy, or the world being made safe for democracy, what we are saying to the Soviet Union, in a different language, is "We shall defeat you." That is how it is seen in their language.
Conservative Members who cannot put themselves into the culture, experience and history of the Soviet Union are in danger of blinding themselves to the beliefs, ideas and fears of that country. If the hon. Member for Halesowen
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and Stourbridge had been born and brought up in the Soviet Union, I suspect that he would be making speeches very similar to the one that he has just made. I get no pleasure from describing the reason for that, but I put it to him that the reason is quite simply that nationalism is still the dominant force in the world. Nationalism is stronger than religion, stronger than political ideology and stronger than individual leaders and their personalities. I do not get any satisfaction out of that. I would far rather have a more rational world in which we worked things out in a different manner. But I have to accept that the evidence before my eyes is that nationalism is the driving force.
If the hon. Member and any of his colleagues, including the Lord Privy Seal, believe that it is right to fight and die for their country, one of the things they have to understand is that other people in other countries will believe exactly the same and be prepared to act in exactly the same way. The problem for humanity now is that whereas previously that was a tolerable way of living, inasmuch as wars could be contained, because our technology has outstripped our understanding of human behaviour nuclear war must necessarily represent the end of civilisation as we know it.
I put it to Conservative Members that if we condemn the Soviet Union in Afghanistan, as I do, we must understand that in the West we at times do what we consider to be in our vital interests. The reason why the United States attacked Kampuchea was precisely because she believed it to be in her national interest to do so. The reason why the United Kingdom attacked Egypt in 1956 was precisely because we believed that the Suez canal was vital to our interests. It is worth suggesting that in those two examples, and also in the case of Afghanistan, history will prove that in none of those cases was it in the interests of the country concerned to attack another country in the way that it did. In other words, we perceive our interests to be something that is not a true representation of the world. I did not rise originally to speak on that matter; I rose because of my concern at the way in which we are slipping into yet another cold war.
I should like to direct my closing remarks to the EEC. I do so because I think it is becoming an increasingly important issue in broader political terms. When I look back at the history of the United Kingdom since the Second World War, I notice that it has often been a case of trying to make our defence capacity meet a foreign policy that was becoming increasingly unrealistic. In the last 10 to 15 years, the shift by the United Kingdom has been massively towards a European role. The problem is that we have not said what we want Europe to be.
I stand here unrepentant. I believed from the word "go" that it was a mistake for Britain to join the European Community. Whether we like it or not, the EEC is developing into a nation State. We are discussing foreign policy. Representatives of the EEC countries meet to discuss the policy that Europe will support at the United Nations. I could cite many similar examples, but if such things happen the EEC must be acting as an individual nation State.
The EEC does many things that lead one to the inevitable conclusion that it will become a nation State. As Brussels takes more power to itself—as it has done for many years—people in this country rightly ask where our democratic control has gone. The European Parliament

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was invented and given limited powers. However, as soon as we send people there, they want more power. That once happened to the House of Commons.
Many people from both political parties have said—some of them recently—that they want the EEC to become a nation State and they want to see a united Europe. There is a good case for that. In my bleaker moments, when I feel that it is inevitable, I think of two good examples.
First, if a united Europe to act as a nation State it would do more to solve the problen of Northern Ireland than anything else. Secondly—this is a factor on which I love to dwell—a united Europe would remove the Royal Family from any significant role in the British constitution. I believe that that would be a good thing, for reasons that I shall not go into now. Those are some of the advantages of a united Europe, and I am sure that there are others.
I must make clear that we should not be members of the European Community. In the interests of other speakers, I shall paraphrase my remarks. What is happening to the United Kingdom is almost poetic justice. Something similar happened to Ireland and Scotland in the eighteenth and nineteenth centuries, when those countries were linked to Britain. In those days, the centre of the economic market was primarily England, and to a lesser extent Britain. That demanded a price from Scotland, Ireland and, perhaps, parts of Wales. Today, the centre of the market is in Europe.
It is not surprising that many of the most profitable companies in Europe are British. They find it more profitable to move to where the market is. If I were an investor and if I were interested only in improving my return on my investment, I would seriously consider investing my money in Europe first and then in Britain. The only part of Britain that will do moderately well from the Community in the short term is the South. In the long term—20, 30 or 50 years—Britain may do well. Perhaps we shall return to the role that we had before the Industrial Revolution, namely, that of being a primary producer and a service industry for Europe. That might be a comfortable position.
Although we have a population of 56 million, we lose some of that population, particularly the skilled part, to English-speaking countries. Now, however, people are increasingly turning to Europe. Unless we take action to protect the economy and our people who live here, our future will be gloomy.
I shall nail one other lie. I accept that the majority of European parties—both on the Left and on the Right—believe that the EEC is a good idea. I shall not lecture them on what is best for them. Perhaps they are right. However, we are necessarily the odd man out in Europe. Despite the Government's new clothes, we still behave as bad Europeans. We inhibit the possibility of European unity—we do not encourage it—whilst we behave as we have behaved in years past.
Basically, my message is that we should come out of the European Community. It is clearly in our interests and, I would argue, in the interests of a united Europe that we should come out. However, we are getting dangerously close to the stage when we shall not be able to come out.
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If we cannot come out, the price that the people of this country will have to pay will be very high, and I cannot see that prospect being reversed for many years.
9.36 pm
Mr. Christopher Murphy: The Queen's Speech rightly draws attention to the seriousness of the international situation. With that in mind, I should like to ask the House to consider the essence of British foreign policy in this new decade.
Leadership is essential. There can be no doubt that my right hon. Friend the Prime Minister is providing this, as her Soviet accolade "The Iron Maiden" has clearly illustrated.
Sound defence is essential. There can be no doubt that the emphasis laid on this by the Government shows that there can be an iron fist rather than a limp wrist as we had before. Determination is essential. There can be no doubt that the country wants to see an iron resolve in its international dealings.
Britain's interests are the interests of the West. If we truly believe in a way of life based upon freedom—in other words, democracy—determination is called for in ensuring that the case for its existence and development is made throughout the world. If we regard the type of society for which this country stands as worthy for ourselves and our fellow man, sound defence is crucial in ensuring its continued survival. If we accept that ideology based upon repression, dictatorship and force of arms must be resisted, leadership is vital in ensuring that such resistance is firm and constant.
It is, perhaps, significant that the word "relations" is always used in the context of East and West. We in the West seek good relations on terms that recognise the rights of individuals and nations to self-determination. But our opponents seem to prefer the role of bad relations—for ever undermining those rights but overlaying all with a veneer of hurt pride when the mask of sweet moderation slips, and they falsely wear that mask of sweet moderation as in the invasion of Afghanistan.
Reality must be the key factor in the approach adopted by the West when dealing with the Eastern bloc. We must not be left with our guard down. We have to be prepared to stand up for what we believe in. We should rally the countries of the free West to ensure the survival of democracy and to bring about its extension.
The actions of Her Majesty's Government must be seen to reverse the trends of recent years. The Soviet Union, rather than the Western democracies, has enjoyed the spirit of resolve and a sense of mission. That is why the maintenance of military strength, the working for steady progress towards greater democracy and urging closer cooperation amongst Western nations in developing a common policy are essential. Only in these ways can the West successfully begin to counter the growth of Soviet power and influence.
Britain is now in a better position than for many years to exercise influence over the Western Powers and throughout the world. I believe, however, that Britain must take particular advantage of its links with other nations to achieve these ends.
The need for Britain to build upon the latent strengths of the Commonwealth and to convert this potentially powerful grouping into an organisation to further those

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aims is, I fear, sometimes overlooked. Therefore, I particularly welcome the Government's emphasis on the Commonwealth in the Queen's Speech.
Commonwealth affairs need to be given a higher priority. Efforts must be made to put more political purpose into the Commonwealth, and a greater sense of commitment to agreed ideals in the Commonwealth has to be achieved. Of course, one recognises that some Commonwealth countries are not as dedicated as we are to the tenets of democracy, but those nations still reject the all-pervading power of Soviet might.
The principal Commonwealth member States would welcome such commitment from the outset, for they already speak up in support of the Western approach in their several ways. The smaller and more newly emergent Commonwealth countries need to be encouraged in their political purpose so as to become leaders in geographical regions which face common problems. They need to meet under Commonwealth auspices to discuss such difficulties. They also need to take united action. It thus behoves the United Kingdom to give that higher priority to the Commonwealth, because it can readily become a more successful instrument for pursuing the goals of the West in both political and material terms.
Many nations have learnt in recent years to act together to pursue common aims — through treaty obligations, through efforts in the United Nations and other world bodies, and by grouping together as non-aligned States or in political blocs. With the Commonwealth we have a historic link and a wide-ranging association, and one which could have a far stronger voice in international affairs with increased British guidance. The Lusaka conference pointed towards a new recognition of the value of the Commonwealth, and this framework waits to be built upon.
East-West relations will continue to be of fundamental importance in our foreign policy. The West has shown undoubted weakness in recent years—a situation that the present British Government are clearly determined to rectify by an activist approach to foreign affairs. In terms of national freedom and human rights, the scales of justice rest upon the balance of power—a balance between East and West. We have a duty to ensure that those scales come down firmly in favour of democracy and of the individual.
9.41 pm
Mr. George Foulkes (South Ayrshire): I find myself inadequate to follow the lecturette on leadership by the hon. Member for Welwyn and Hatfield (Mr. Murphy), which made the hon. Member for Halesowen and Stourbridge (Mr. Stokes) look positively progressive. However, in following it I shall be bold enough to make a prediction about the Queen's Speech. After the statement by the Chancellor of the Exchequer this afternoon, prediction is a very dangerous occupation. However, at 70p for two and a half pages of turgid prose, I predict that the Queen's Speech will not join the list of best sellers.
Also, something very important is missing from the Queen's Speech. I am glad to see the Leader of the House in his place, because he will be very much involved in this matter. As my hon. Friend the Member for Walsall, South (Mr. George) said, the Queen's Speech contains no mention of the duty that is to be thrown upon this House to patriate the British North America Act. I should have
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thought that we should have had some discussion of that subject in this House long before now, because we are being forced into a corner.
The Chancellor of the Duchy of Lancaster, Leader of the House of Commons and Minister for the Arts (Mr. Norman St. John-Stevas): No, No.
Mr. Foulkes: Everyone else outside the House is talking about the subject. It is only the House that seems unable, until now, to talk about it.
When I was in Canada in July, the whole question of patriation seemed remarkably simple. It seemed that, following discussions, the federal and provincial Governments would be thrashing out an agreement and putting something to us on an agreed basis. There would have been reasonable expectation that that would go through the United Kingdom Parliament on the nod. We could have put pressure upon a few eccentric elements to persuade them to agree.
However, in Canada there has been no agreement on this matter, and we shall be faced by a unilateral approach by Pierre Trudeau. Seven of the 10 provinces are actively opposing what is being suggested. Six of those seven have taken the matter to their provincial courts. Some people have questioned whether we can proceed with discussion of this matter while it is before the provincial courts. I think that we can do so, but it raises serious doubts.
I must confess that the situation in which we find ourselves places Socialists in a dilemma. On the one hand, we have an unwanted colonial legacy in the British North America Act. The first feeling is to get rid of it and to send it to Canada as soon as possible. On the other hand, we are being asked to interfere in Canadian affairs. We are being asked by the federal Government of Canada to interfere. We are being asked to enact a Bill of 59 clauses with a charter of rights and an amending formula that is causing great controversy in Canada.
We cannot forget—they are being pressed upon us—the rights of the minorities and the rights of the provinces. It has been said to me that what Mr. Trudeau asks is unacceptably Socialist. I do not think that it is. I believe that it is simply unacceptable. I wish to make clear that I have great understanding and sympathy with the provinces and with the minorities in Canada.
We are being asked to enact a charter of rights that deals with relations between the provinces and the federal Parliament. Relations between the provinces and the federal Parliament are vital. Yet we are asked to agree changes that have not met with the agreement of more than a fraction of the provinces in Canada. I am afraid that many Members of this Chamber do not understand the sensitivity that exists within a federal parliamentary system.
We are being asked to introduce a controversial amending formula that ultimately enables a referendum to be called by the federal Parliament to change the whole basis of the relationship between the provinces and the federal Government. It is a referendum that can overrule the rights of the minority. By its control of the media, the federal Parliament can make sure that the minorities—not just Indians and Eskimos but those on the East coast and on the West coast—can be overruled by the vast majority in Ontario and Quebec.
Another point is that we are being asked to enact a Bill that gives an expanded role to the Supreme Court at the

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expense of Parliament. One might say that a slogan suitable for that situation is "Denning rules OK." It may be all right for Lord Denning to say that the Supreme Court has more power at the expense of Parliament. In doing so for Canada, we are creating some dangerous precedents.
Many people will ask what Trudeau is up to. I think that he is blackmailing us and asking us to amend the Act in his way, saying "Send it to Canada or else", meaning that he will attack the United Kingdom for unwarranted interference. I was greatly disturbed to read in the Canadian press following discussions between Mr. Mark MacGuigan and the Lord Privy Seal a report that Trudeau was getting his own way on patriation as the United Kingdom backed down.
The Government seem to be backing down and letting Trudeau have his own way. We should say that he is not going to get his own way. That message should come from the United Kingdom Government and the United Kingdom Parliament. We should say to Trudeau "Think again" and ask him to have discussions with the provinces and produce an agreed formula, which we can then enact easily
I should like to deal with one other point to which most contributors in this debate have addressed themselves, namely, the question of defence. Most of the debate is concentrated on the question whether there should be a 3 per cent. increase. As soon as that is mentioned, we get Orwellian muttering and champing from the Government side as if it were something thrown down from heaven. These are meaningless statistics to people outside, who are becoming increasingly aware of the frightening reality of nuclear and chemical weapons.
There is now a great ground swell of public opinion against these weapons. Those who do not want the United Kingdom to have an independent power of annihilating the world 10 or 100 times over when many people in our own country, let alone the Third world—as my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said—live in poverty.
I know of disabled people who are prisoners in their own homes because they cannot get adaptations and help with mobility from this penny-pinching Government. As was highlighted in Glasgow today, families and old people are living in squalid housing conditions. The election of my right hon. Friend the Member for Ebbw Vale (Mr. Foot) as leader of the Labour Party is a recognition of the ground swell of opinion.
Far too much of our huge defence budget is spent on Trident and the nuclear deterrent. My hon. Friend the Member for Dunfermline (Mr. Douglas) referred to jobs, and there is great pressure for us to spend money on more conventional weapons, which can genuinely be used to defend our country rather than to annihilate other countries or destroy the whole world 10 times over.
Let me give the Government two examples. The first is the replacement of the ageing Devon and Pembroke aircraft, which are used as communications aircraft by the RAF. In Prestwick we have a superb new plane, the Jetstream 31, which has been accepted by the Ministry of Defence as a replacement and which the Prime Minister said should be bought if the money was available. But, because so much is being spent on the useless nuclear deterrent, none is available for replacing the outdated communications aircraft.
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The second example follows on the farce of Operation Crusader. I heard from someone who was involved in the operation and whose vehicles broke down, got stuck in the mud and were totally incapable of dealing with the modern conditions that our defence forces have to face. It was a veritable Dad's Army. Yet there is an all-terrain vehicle that could have made the British forces mobile and effective in Operation Crusader. The truck was designed and built in Scotland, it is approved by the Ministry of Defence and the troops would like it. It is the Stonefield vehicle, made in Cumnock, in my constituency. The reason why the Government cannot provide the money for that truck is that they are spending so much on Trident missiles.
I hope that the Ministry will give in to the gentle pressure that is being put on it to make some money available for Jetstream and Stonefield. Those projects will provide jobs. They are vital equipment for defence and not weapons for destruction. There are many thousands of reasons for voting against the Queen's Speech. I hope that I have given two.
9.53 pm
Mr. David Atkinson: The hon. Member for South Ayrshire (Mr. Foulkes) did a grave injustice to the Queen's Speech by suggesting that copies of it will not be in great demand. I advise him to buy in bulk and cash in on its undoubted appreciation by the British people. I believe that it will be a sell-out, because it marks the second Session of a Parliament in which, unlike any previous Parliament of the past 20 years, the Government will stick to the policies on which they were elected. When we look back on the first 18 to 24 months of any Government of the past 20 years, we find that at the end of that period they have panicked. The Labour Government reversed their policies and started producing prices and incomes policies in a way that was never suggested in their manifesto. The previous Conservative Government did the same thing, and the earlier Labour and Conservative Administrations also reversed their policies after about the same lapse of time. I advise the hon. Member for South Ayrshire to make certain that he has enough copies of the Queen's Speech. I am sure that they will appreciate in time.
This debate is on foreign affairs. I think that the House will agree that since we last debated a Gracious Speech the greatest threat to world peace has been the Soviet occupation of Afghanistan. We have also seen the massive clampdown in the Soviet Union and Eastern Europe on people campaigning for more human rights and fundamental freedoms. Now, there is the evolving situation in Poland, which may yet lead to tragedy.
In matters of foreign policy and East-West relations, it is wise in any event to remind ourselves how much the West has aided and abetted the Soviet Union in achieving the position of military superiority which Mr. Kruschev was determined his country should achieve after his humiliation over the Cuban missiles crisis in 1962. For example, since the end of the Vietnam war the West has supplied the Soviet Union with technical aid and equipment worth £25 billion, including engine assembly lines, chemical plants, oil drilling equipment and computers. American superiority in missiles accuracy has been eroded because the Russians have been able to purchase 164 centre-line machines which manufacture the miniature ball bearings which enable missiles to alter

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direction during flight. Another example lies in the fact that the Red Army in Afghanistan is riding into battle in lorries produced at American-designed plants turning out 150,000 lorries a year.
Let me give another example. An Austrian company is supplying forging equipment which produces high-quality gun barrels for the Soviet Union. There is another example: the entire Soviet computer system is based on two IBM models bought by the KGB, no less. At the time when President Carter was applying trade sanctions in January this year in retaliation against the Afghanistan invasion, the United States Government approved a contract to supply technology for producing hardened drill bits which would enable Russia to mass-produce more effective projectiles.
The irony of all this is that not only has the West supplied the technological know-how but it has paid for it. That aid and equipment has cost the Soviet Union £25 billion, yet the total debt of the Soviet bloc to the Western world stands at about £40 billion. Not only has the West contributed to the rapid build-up of the Soviet war machine; it has paid for it, perhaps bearing out Lenin's prediction that capitalism would sell the rope by which it would be hanged.
I do not object to the principle of aiding the Soviet Union, but let us provide that country with the right things. Food is an obvious example. The Russian people are starving outside the cities. We cannot ascribe to the Russian people the same ambitions as their Soviet masters. We should give them food not only for sound humanitarian reasons but for sound strategic reasons. People whose physical needs are satisfied are better motivated to seek higher ideals, including freedom of expression.
When will the West learn its lesson regarding the supply of trade and technological aid to the Soviet Union? Fortunately, there is one lesson which apparently the West has now learnt, as it is now showing at the Helsinki review conference in Madrid. I congratulate my right hon. Friend the Lord Privy Seal together with his team and our NATO allies in Madrid on their firmness, which resulted not just in one and a half day's debate, not just in one week's debate, as the Soviet Union wanted, but now, apparently, in a full six weeks' debate on the human rights provisions of the Helsinki Final Act.
In remaining united as we have, we have shown that we have learnt the lessons from the last Helsinki review conference, which took place in Madrid in 1977. We now are provided with the opportunity to hold the Soviet Union to account for having violated every one of the 10 principles of the 1975 Helsinki accord. But let us appreciate also the reason why the Soviet Union accepted that it would have to go through what will be for it a humiliating review of its appalling record on human rights. The reason is that it wants a detente and disarmament conference to follow that review.
It is not difficult to understand why they want that. Until now, the Russians have done very well out of detente. For them it has been a "Heads we win, tails you lose" situation. It has meant the recognition of the acquisitions which they made during the Second World War in Europe, thus, for example, burying the hopes of the Baltic States which looked to the West for help and support in regaining their independence—
It being Ten o'clock, the debate stood adjourned.
Debate to be resumed tomorrow.

Coal (Liquefaction)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]
10 pm
Sir Anthony Meyer: On 8 November last year, my hon. Friend the Under-Secretary of State for Energy, the hon. Member for Croydon, Central (Mr. Moore), announced to the House that the Government and the National Coal Board had decided that the Point of Ayr colliery in my constituency was the most suitable site for pilot plants to make oil from coal. My hon. Friend pointed out that the decision whether to go ahead with these plants would be taken in the light of cost estitnates which would be available in the spring of this year.
I need hardly say how warmly that announcement was received in my constituency. The decision was taken as a tribute to the excellent work clone by management and workers alike at the Point of Ayr pit and to the very healthy state of industrial relations there, which is due in large measure to the extremely responsible attitude of the two unions locally.
It was not just the prospect of some 180 jobs in the construction of the plants and a substantially larger number in their operation when they were erected. It was not even the hope of many more jobs from 1985 onwards if the operation of the two pilot plants showed that the process was commercially viable and the decision was then taken to go ahead either with a demonstration-scale plant using some 200 tons of coal per day or a full-scale commercial plant using 2,500 tons per day. Goodness knows, these jobs are badly needed in an area which has been hit simultaneously by the largest steel closure in the Western industrial world and by the textile crisis and which has gone in a matter of months from a position well below the national average to not far short of double the national average level of unemployment.
On the basis of jobs as well as on the basis of the work record, my area's claim to this project is surely incontrovertible. But it is not merely in the number of jobs that this project is so vitally important to this part of North Wales. It is important above all because it will bring to the area and to the mining industry in the area the high technology opportunities which have been so conspicuously lacking there and which have so beneficent a spin-off in stimulating other activities, in raising standards in education and training and in attracting new investment into the area.
I hope, therefore, that there is no risk of anything going wrong with this programme. Speculation is already beginning to appear that the cost of each of these two pilot plants, originally estimated at some £32 million, has now been revised upward to £55 million or more, and recently I have heard a figure of £64 million mentioned.
Naturally, this raises fears that the Treasury—whose very laudable determination to cut public expenditure all too often causes it to lose sight of the vital distinction between non-productive current expenditure which must be trimmed, however painful the consequences, and highly productive capital expenditure which ought not to be trimmed, however great the need—may even now be lifting its axe to this highly desirable capital project. I hope that my right hon. and hon. Friends in the Department of Energy will fight for this desperately needed scheme.

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I am well aware that even at the present very high level of prices it is still not economic to extract oil from coal. I am not one of those alarmists who believe that the world will run out of oil altogether. But it appears to be indisputable that, as geologically easy or politically stable oilfields become exhausted, the price of oil will rise towards the level at which it becomes commercially profitable to extract it from what are known to be the world's gigantic reserves of coal.
Of course, there is the argument that, even when that cross-over point is reached on the oil-from-coal graph, it might still be cheaper to import the oil processed from coal, just as it would no doubt at present be cheaper to import all our coal. However, that is a dangerous, unworthy and foolish argument. It would make us totally dependent on imports for our very life-blood, which, in the event of hostilities, would bring us to our knees in a week, would expose us to grave danger in the event of a sudden political crisis or an earthquake in some foreign country, and would cast away our principal asset, namely, our huge energy reserves. I doubt whether even the Treasury, pursuing short-term economies, would dare to advance that argument.
Much more plausible is the argument that we should import not coal-based oil but the technology of making oil from coal and that we should leave the research and development to others and then exploit, under licence, whatever turns out to be the most efficient process discovered by others. No doubt, the ghosts of Concorde, the TSR2, Blue Streak and others still stalk the corridors of Whitehall. The frontiers of knowledge are dangerous places for careful civil servants. But to reason thus is to ignore the lead that the National Coal Board has already built up in that area. The NCB, in partnership with BP, is ready to exploit two processes developed by the Coal Research Establishment each of which is more promising for commercial exploitation than the methods at present in use in South Africa or anywhere else.
To take the easier and safer option of importing technology would be to cast away the opportunity to maintain our lead in an area where we enjoy huge natural advantages in the form of proven coal reserves. Above all, if we opt out of the leadership in that area, where we have everything going for us, what conceivable claim could we have to be a leader of any sort among the industrial nations? We should be deliberately choosing to become a nation of unskilled operatives dumbly carrying out the routines devised for us by other and cleverer men. It is surely in the area of energy, above all, that Britain has an important contribution to make both to Europe and to the world. Is that contribution to be simply that of a place where the coal reserves happen to be? Are we to be the backward Arab sheikhdoms of the next century, with our unearned riches exploited by the skills of others and by the manual labour of our own people?
The flight from greatness—indeed, from ordinary responsibility—must stop somewhere. Surely, this is where it stops.
Mr. George Grant: May I support the hon. Gentleman?
Sir Anthony Meyer: I should be grateful for the hon. Gentleman's support, but perhaps I should continue.
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Even if we are talking of funding the entire operation from taxpayers' money, the sums involved—even at the upper limit of £60 million for the two pilot plants—are trivial in comparison with the hundreds of millions that we are spending in a vain effort to cling to jobs in obsolete industrial processes. I sincerely trust that, in this matter at least, the Department of Industry is on the side of the future and not of the past.
It is not only public money that is available. In addition, there is the participation of BP. There is also the European dimension. We have heard far too little about the involvement of the EEC, or, more properly, the ECSC. As I understand it, the Community has committed about £3·5 million to the super-critical gas solvent extraction process trials. There is as yet no commitment to the liquid solvent extaraction process, which is the other process that is being tried out. That seems hopelessly inadequate by way of European involvement. If it is inadequate, is it partly because the Department has been somewhat reserved in its attitude towards European energy policies? I am sure that the National Coal Board under Sir Derek Ezra's leadership can have had no such reservation.
Ever since my right hon. Friend the Prime Minister secured the drastic revision of Britain's budgetary contribution, the European Community has been casting about for sensible ways of putting Community funds into Britain to match the contributions that we make through the common agricultural policy. Here would be a glaring example of European money well spent. Why is the European contribution so miserably inadequate? After all, £3·5 million is peanuts. I hope that my hon. Friend the Under-Secretary will be able to assure me that his Department will seize the opportunity with both hands.
Europe needs to invest in Britain and Britain badly needs investment capital. In this project of getting oil from coal, we have a marvellous and unique investment opportunity. Seldom can there have been so good a bargain to both sides or one so superbly timed. My constituents—especially my mining constituents—will be listening with great care to what my hon. Friend has to say.
10.12 pm
Mr. Tam Dalyell: The Under-Secretary of State is a generous man. I think that he will concede that a great deal of work was done by his predecessor, my hon. Friend the Member for Midlothian (Mr. Eadie), who is my parliamentary neighbour and who for personal reasons cannot be present. I hope that the House will accept his apology.
I merely want to ask whether anything has become of the project that was dear to Jimmy Cowan, the former director of the Scottish area of the National Coal Board, who is now a full member of the NCB. Will there be some sort of project at Kinneil near Bo'ness?
10.13 pm
Mr. George Grant: I do not want to take too much of the time of the Under-Secretary of State. The hon. Member for Flint, West (Sir A. Meyer) raised this issue in a serious manner—I agree with every argument that he has advanced—because of his constituency interest. A great deal of money has been spent on research and development. That has not been confined to the Point of Ayr. There are many other areas awaiting investment

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in the development. It is vital to Britain that the development should go ahead when it is set against the background of world energy supplies.
When we were discussing the Coal Industry Bill in Committee, the Government said that liquefaction would not be part of the NCB's restricted finances. When will the money be made available? A long wait will be to Britain's detriment.
As I said, I support the hon. Gentleman's case. We are discussing a development that is in the national interest. I' plead with the Government to make the money available that will enable Britain to remain in the fore. The money is needed now, not only for the Point of Ayr but for all the other areas where this remarkable technology can progress.
10.14 pm
The Under-Secretary of State for Energy (Mr. Norman Lamont): I begin by conveying to the House the regret of my hon. Friend the Under-Secretary of State for Energy, the hon. Member for Croydon, Central (Mr. Moore), who has special responsibility for coal. I present his apologies for not being here tonight. The House may be interested to know that he is in the United States. Among other things, he will be looking at work on liquefaction, fluidised bed combustion and in situ gasification. He will obviously take the opportunity to measure the work being done in this country against that in the United States.
My hon. Friend the Member for Flint, West (Sir A. Meyer), in raising the question of the United Kingdom's coal liquefaction programme, has brought to the fore the concern that we all feel and that was echoed by the hon. Member for Morpeth (Mr. Grant) about what will happen when our North Sea oilfields are no longer able to meet our needs. Our Western society is heavily dependent on oil, some countries more so than others.
It is argued that our highly industrialised society has become over-dependent on oil, but oil has provided a basis for many of the improvements in living standards that we have enjoyed over the past 25 years—fuels for industry, transport and the home, feedstocks for the chemical industry, the source of the plastics and synthetic materials that play such an important part in modern living. Those are just some of the important uses that oil has.
My hon. Friend did not agree with people who talk of the world running out of oil. I agree. However, what will happen as oil becomes scarcer and dearer? That question is being addressed seriously in most countries, together with the problems created by OPEC's determination to preserve and maximise its return on what it now clearly recognises as a short-lived but extremely valuable asset.
Natural petroleum is a complex mixture of hydrocarbons. Coal can be similarly regarded, although it is even more complex. Oil is a liquid, convenient to handle, transport and store. Coal is a solid, with all the drawbacks that that brings. However, because we have a strong coal industry, which has survived the intense competition created by the cheap oil era of the 1950s and the 1960s, we have retained much of our expertise on coal utilisation.
The first priority for the oil consuming countries of the industrialised world is, of course—as has been recognised with the EEC and the International Energy Agency and at the Venice summit earlier this year—to reduce dependence on oil through energy conservation efforts and substitution of other fuels. The first major opportunities
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for substitution lie in power station and bulk industrial use of oil. The United Kingdom's strength in coal and the infrastructure that we possess have already enabled us to make substantial progress in reducing oil- burn in electricity generation.
The next priority market for our own coal industry-and for coal suppliers around the world, as opportunities in electricity generation are taken up—will be the industrial market. It is in these two areas that the substantial early gains can be made that will help to ease pressure on world oil supplies and spin out our own limited oil resources.
That is a rather lengthy introduction, but I hope that it sets the background and perspective for the production and use of synthetic fuels in the United Kingdom.
Unlike the Amercians, whose objectives in coal liquefaction have been dominated by a requirement for non-premium liquid fuels—heavy fuel oil in power stations—to enable clean air standards to be met our programme has set its sights firmly on the premium liquids—the transport fuels and chemical feedstocks that play such an important role.
The National Coal Board started work on coal liquefaction about 10 years ago and has conducted a research and development programme that can stand comparison with anything done anywhere else in the world—often in countries possessing significantly greater resources. It is a measure of the inventiveness of the board's scientists and engineers that not one but two processes of considerable merit have emerged. One uses a heavy coal-derived liquid to dislodge the hydrocarbon structures within the coal substance; the other uses supercritical gases.
In 1978, the work had reached the stage where serious thought could be given to taking the work out of the laboratory and building pilot plant of sufficient size for a start to be made on the engineering development needed to move the processes towards commercial exploitation. In February 1979, the hon. Member for Midlothian (Mr. Eadie)—the hon. Member for West Lothian (Mr. Dalyell) was right to pay tribute to his work on the subject—as Under-Secretary of State for Energy signed an agreement with the chairman of the National Coal Board which provided Government support for design studies to be made on two 25 tons per day pilot plants to enable the board to develop further its liquid solvent extraction and super-critical gas solvent extraction processes. At a later stage BP became associated with the project, and the oil industry experience that it has brought to the project has proved invaluable. This work is now complete and the results are being studied in depth.
At this point, two questions pose themselves. One is, when is the United Kingdom likely to need synthetic liquid fuels based upon coal? The second is, what must we do to ensure that when the time comes we have the technology and expertise needed to provide these fuels?
I am not sure that I can provide definitive answers to these questions tonight. There are many imponderables. The Government recognise, however, that there are important factors that relate to the markets for indigenous coal, opportunities for the process plant industries and employment which must be weighed in the balance before decisions can be taken. We start from a position of some disadvantage in that, while our coal resources are abundant, the seams are deep and mining costs are high. Despite an efficient industry and work force, British coal

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is not cheap by world standards. It is vital that both management and unions take full advantage of the Opportunities created by the massive investment in the industry made under "Plan for Coal" and after. Making the best possible use of our vast coal resources depends crucially upon the industry achieving the performance and efficiency which the investment is designed to produce.
The period to the end of the century will see several oil-from-coal processes reaching commercial application. Most of these will be American, since their development work is further forward and their need is more urgent. A wide choice of processes is beginning to emerge and many of these will have worked their way through the inevitable difficulties that accompany new processes. Their economics will be firmly established by the time a United Kingdom need for synthetic liquids begins to develop
On present forecasts, that is likely to occur some time around the turn of the century. However, much will depend upon the use that we make in the interim of our North Sea reserves. Coal, of course, will have a part to play in this. The more coal we burn in place of expensive fuel oil, the more effective will be the use we can make of our crude oil reserves by preserving them for the premium uses to which oil is best suited. We must also bear in mind that our natural gas reserves are finite and that at around the turn of the century we shall probably need to start producing substitute natural gas from coal. The demand for coal-based gas is likely to increase during the early part of the next century. I agree with my hon. Friend that a United Kingdom initiative in coal liquefaction must not be allowed to suffer the same fate as other examples of ill-fated excursions to the frontiers of technology, such as those mentioned by my hon. Friend. The United Kingdom liquefaction processes must, therefore, look first to the opportunities offered in the countries which will wish to liquefy coal earlier than will the United Kingdom.
A programme of development aimed only at meeting United Kingdom demands runs the risk of having limited objectives and of working to a time scale that lacks the urgency of competing programmes in other countries. The resources that will be required to bring United Kingdom technology to the point of commercial exploitation are considerable. It is, therefore, important that clear business objectives are identified.
The correct way forward is to secure the involvement of industry, particularly the oil industry, which in effect is the customer for this technology. In that way, its worldwide experience can be brought to bear, and in that way partnership with industry will also allow the sharing of risk as well as the rewards in due course.
Mr. George Grant: Will the Minister give way?
Mr. Lamont: I am sorry, but I cannot.
Earlier this year the Department of Energy received the results of preliminary design studies carried out by Matthew Hall Ortech for a dual pilot plant facility at a site at the Point of Ayr colliery in Clwyd for the two liquefaction processes that the NCB has developed—the LSE and SGE processes. For a facility capable of operating at nearly 25 tonnes a day on either stream, the estimated cost at 1980 prices will be £34 million for construction over the period from 1981 to 1984, with a further £21 million for operation from 1984 to 1987.
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As my hon. Friend pointed out, the European Community is providing financial support for the NCB's supercritical gas extraction pilot plant. This falls in the first round of the Community's alternative energy demonstration programme and covers only the design and construction phases. The question of aid for the operational phase and, indeed, support for the board's LSE process, which my hon. Friend raised, is being considered in the discussions presently taking place on the possible enlargement of the Community programme.
Concurrent with the design studies for Point of Ayr was a study carried out by an independent process engineering consultant—the Badger Corporation—which sought to compare the economics of the NCB's processes with those of some of the major United States processes currently under development. The results of this comparison may be of interest to hon. Members.
The first point to be made is that the estimated cost of producing oil from coal in the United Kingdom is still some way from being competitive. Using coal at current United Kingdom pithead prices, the average cost of finished products such as petrol, diesel or LPG would be about 25 per cent. higher than if made from crude oil. Put another way—and if the mathematics seem a little odd that is because of the way premium products are priced relative to crude oil—crude oil would need to increase in price by about 50 per cent. and the price of coal remain constant before oil from coal began to look competitive in the United Kingdom.
But, of course, an increase in crude oil prices of this magnitude over the next couple of decades cannot be ruled out. In any event, a start will soon be made on commercial liquefaction in other countries that have coal resources but not our access to indigenous oil. This is likely to provide firmer figures for the economics of oil from coal and help materially in developing our strategy.
The second point that emerges from the study is encouraging. The study suggests that, on the basis of producing premium products, the NCB's processes could offer substantial advantages, both on capital costs of plant construction and on thermal efficiency, over present United States processes.
I can tell the hon. Member for West Lothian that Kinneil was considered as a possible site for the oil-from-coal pilot plants during the initial stages of the project. However, Pount of Ayr possessed advantages over Kinneil, and so the decision was to base the pilot plant design on the former. I shall see whether there is anything further that I can add, and I shall write to the hon. Member.
The processes should, therefore, be of wider interest and potential than just to the United Kingdom. We are anxious to explore this further, and we need to look at the results of the design and comparison studies in an international dimension. It is because of these important factors, and not the shadow of the Treasury axe, that the Government have not yet announced their decision. Because it is so important to map out carefully the way forward and to make certain that we start on the right foot, it has become clear that our appraisal will take longer than was originally expected. This means that we are unlikely to be able to make any announcement until sometime in the new year—
The question having been proposed at Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at half-past Ten o'clock.