Commons Sitting of 7 February 1985

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  DARTMOOR COMMONS BILL
  Read the Third time, and passed.

  BIRMINGHAM CITY COUNCIL BILL (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday 14 February.

  BRITISH RAILWAYS BILL (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday 21 February.

  LINCOLN CITY COUNCIL BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Thursday 14 February.

  NATIONAL BANK OF NEW ZEALAND LIMITED BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Tuesday 12 February.

  PLYMOUTH MARINE EVENTS BASE BILL (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday 14 February.

  ROYAL BANK OF SCOTLAND BILL (By Order)
  Read a Second time and referred to the Examiners of Petitions for Private Bills

  YORKSHIRE WATER AUTHORITY BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Thursday 14 February.

  HIGHLAND REGION (KINLOCHBERVIE) ORDER CONFIRMATION BILL
  Read the Third time, and passed.
Oral Answers to Questions
  NORTHERN IRELAND

    Junior Ministers (Portfolios)
    Mr. J. Enoch Powellasked the Secretary of State for Northern Ireland if he will re-allocate the portfolios among the junior Ministers of the Northern Ireland Office so as to avoid the same Minister being responsible for both environment and health and social services.
    The Secretary of State for Northern Ireland (Mr. Douglas Hurd): The two portfolios have been carried with distinction by my hon. Friend since June 1983. I have no plans to re-allocate them.
    Mr. Powell: Is the Secretary of State aware that this question carries no sort of imputation or criticism of the hon. Member for Bath (Mr. Patten), but does not the Secretary of State recognise that the detailed part of these duties could be much more effectively carried out if it were administered by locally elected representatives?
    Mr. Hurd: I accept what the right hon. Gentleman says in the first part of his supplementary questions. He is really criticising the system under which it is I who have too wide powers which in his view ought to be in the hands of an elected authority. I have a great deal of sympathy for that point of view. If it were possible to reach agreement in the Province on arrangements that would pass some of those powers out of my hands into the hands of an elected authority or authorities, and if they gained widespread acceptance in so doing, both I and the House would wish to look at them very carefully.

    Terrorism (Damage Claims)
    Mr. William Rossasked the Secretary of State for Northern Ireland whether he is satisfied with the procedures followed by his Department in the processing of claims for damage due to terrorist activity.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Nicholas Scott): Yes, Sir. The present procedures enable claims to be dealt with quickly and efficiently within the framework provided by the criminal damage legislation.
    Mr. Ross: But surely the Minister is aware of many cases where further information is requested from the applicant at a fairly late stage in the proceedings. Would it not be helpful to all concerned if the Government were to prepare and issue to every applicant a detailed list of the information that would be needed before the application for compensation was completed? Surely that would benefit everybody in Northern Ireland?
    Mr. Scott: Almost invariably in these cases, those with any substantial claims have legal advisers to help them. Guidance is issued by the Northern Ireland Office for the assistance of claimants. Many of the delays occurring at a late stage are those related to consequential loss which requires detailed accounting information. This can take some time both to produce and then to assess.
    Rev. Ian Paisley: Will the Secretary of State inform the House of the time that certain cases have been outstanding? Is it not a fact that many claimants have been waiting an extremely long time for final payment?
    Mr. Scott: That is right in terms of final payment, but it is the practice of the branch concerned in the Northern Ireland Office always to issue interim payments so as to reduce the hardship suffered by individual claimants.
    Mr. McCusker: I accept that interim payments are useful, but how can the Minister describe the system as speedy and efficient when it takes up to and over two years for the final settlement to be made? Surely the Minister should re-examine the entire procedure.
    Mr. Scott: Final settlement has still not been completed in the Droppin' Well Inn case, but well over £500,000 has been paid out in criminal damage and criminal injury claims in that case. We want to tidy up the final details as quickly as possible.

    Security
    Mr. Parryasked the Secretary of State for Northern Ireland if he will make a statement on the security situation in the Province.
    Mr. Lathamasked the Secretary of State for Northern Ireland whether he will make a statement on the security situation in the Province.
    Mr. Proctorasked the Secretary of State for Northern Ireland if he will make a statement on the current security situation in Northern Ireland.
    Mr. Hurd: Since I last answered questions in the House on 10 January, one member of the Ulster Defence Regiment and one civilian have died in incidents arising from the security situation in the Province.
    The security forces continue to combat terrorism with courage and determination. Since the beinning of this year a total of 57 people have been charged with serious offences including two with murder and five with attempted murder; and 14 weapons, 691 rounds of ammunition and 1·5lbs of explosives have been recovered.
    Mr. Parry: Will the Secretary of State consider reviewing the use of weapons by these security forces, bearing in mind the killing of Mrs. Norah McCabe by the Royal Ulster Constabulary and the killing recently of a young joyrider by the Ulster Defence Regiment? Both these innocent people lost their lives unnecessarily. Will the right hon. Gentleman consider disbanding the UDR, which is a sectarian organisation with fewer than 2,000 Catholic members? Will he make a statement on the recent protests made by the Irish Foreign Secretary to his Department?
    Mr. Hurd: Every soldier and police officer in Northern Ireland who goes out on an operation knows that he is subject to the law. The courts take a serious view if they find that the force used went beyond that which was reasonable. That is a serious constraint that is not always properly appreciated. I do not believe that it would be compatible with the security of Northern Ireland or with the safety of its citizens to disband the UDR. We have had various exchanges of a courteous kind with the Irish Government on several recent incidents and I am not sure to which one the hon. Gentleman is referring especially.
    Mr. Latham: Is my right hon. Friend aware that on the Conservative Benches and, I suspect, on others in this place there is the hope that we shall hear no more talk of disbanding the UDR? It has been doing excellent work and it is regrettable that deaths have occurred recently.
    Mr. Hurd: Yes, Sir. Talk of disbanding the UDR ignores the crucial role that it plays in many parts of the Province. It is important that by its methods of recruitment, training and deployment it is made clear that it is a force whose aim and purpose is to defend all citizens of the Province and that it is not, as has been alleged, a sectarian force.
    Mr. Proctor: In the light of the proposed talks between the hon. Member for Foyle (Mr. Hume) and the so-called Army Council of the IRA and the statement of Dr. FitzGerald that if the meeting takes place in the Republic he will take measures to ensure that it is broken up, will my right hon. Friend take similar measures if the talks take place within the United Kingdom? Will he give an assurance that the provisions of the Prevention of Terrorism Act will apply to all those who participate in the talks and condemn all those who take part in the talks, which are treasonous talks?
    Mr. Hurd: I have expressed my view that the proposal that such a meeting should be held is not wise. Under our system it is not for me to decide or direct how the law in Northern Ireland, let alone any other part of the United Kingdom, should be upheld. That is the responsibility of the chief constables. It is clear that if members of the IRA Army Council were to meet in Northern Ireland, avowedly in that capacity, they would be committing an offence under section 21 of the Northern Ireland (Emergency Provisons) Act 1978 of belonging or professing to belong to a proscribed organisation.
    Mr. Hume: In the light of the obvious controversy that surrounds the UDR, has the Secretary of State yet apprised himself of the numbers of members of that regiment who have been charged with or been found guilty of serious offences? Does he not think that he should have apprised himself of such figures?
    Mr. Hurd: Of course I am aware of the serious cases that have occurred over the years and which have involved different members of the security forces, not solely the UDR. Those cases have been taken very seriously by the judiciary and the courts. I am also aware, because I have met them and, in some cases, their widows, of the large numbers of people in Northern Ireland who have joined the UDR at great personal risk. Under continuing tension and risk over many years they have given a great deal of selfless service to their fellow citizens. That must also be taken into account.
    Mr. Peter Robinson: In view of the great controversy involved in the hon. Member for Foyle (Mr. Hume) meeting murderers, and in view of the Secretary of State's statement at the Dispatch Box today that such a meeting would be illegal, does he agree that under the Criminal Law Act 1967 anyone who refused to give information about such a meeting would commit an offence that is punishable by imprisonment? Does the right hon. Gentleman agree with the golden principle that no-one—politician or pauper—should be seen to be above the law?
    Mr. Hurd: No one is above the law. I am advised that under section 5 of the Criminal Law Act 1967 a person who has information likely to secure the arrest of someone who has committed an arrestable offence commits an offence if he fails within a reasonable time and without reasonable excuse to give that information to the police. That is probably the section to which the hon. Gentleman referred.
    Mr. Molyneaux: Will the Secretary of State consider the use of additional units of the SAS to counter the IRA's campaign of genocide in the frontier regions—genocide which, unfortunately, has involved many members of the Ulster Defence Regiment?
    Mr. Hurd: That is not directly a matter for me, but units of the Regular Army are available to the General Officer Commanding when, in consultation with the Chief Constable, he believes that they are needed.
    Sir John Biggs-Davison: I welcome my right hon. Friend's denunciation of the campaign of character assassination as well as physical assassination of the UDR, but is not the reason why some people are able to misrepresent the Regiment as sectarian the systematic murder of so many Catholic members of the UDR and the systematic intimidation of their families? Was not the first fatal casualty in the UDR a Roman Catholic lining in the Falls road?
    Mr. Hurd: I believe that that is right. It is certainly true, regrettable and understandable that the proportion of Catholics in the UDR has declined. I have no doubt that intimidation has played an important part in that. It is essential that the UDR's role is understood and defended by those who recognise the realities of terrorism in Northern Ireland. The regiment itself, by its recruitment, training and deployment, should show to the world that it is not a sectarian force.
    Mr. Duffy: What specific action has the Secretary of State taken about the partiality of the UDR revealed at the recent trial of one of its privates, Mr. Geoffrey Edwards, for the murder of a Sinn Fein election agent, Mr. Peter Corrigan? What incentive is there to abandon the bullet for the ballot if one puts one's self at risk from, of all people, men in British Army uniform?
    Mr. Hurd: I am surprised that the hon. Gentleman should take that line. Under our system, it is for the courts to take a view of offences of that kind. As he knows, the courts took a serious view of the case to which he referred. There are plenty of opportunities for members of the minority community to take part in the public life of Northern Ireland, and I wish that they would increasingly do so.
    Rev. Ian Paisley: May we have an assurance that every step will be taken in the Lisnaskea area to see that UDR men who are serving valiantly the cause of peace in the area get the adequate cover that they need? Will the right hon. Gentleman order an inquiry into the circumstances of the tragic murder of Mr. Jimmy Graham, who, in going to Derrylin without any cover, might as well, from the security point of view, have beeen going to Crossmaglen?
    Mr. Hurd: The hon. Gentleman has told me of his concerns about that case, and they are being looked into.
    Mr. John David Taylor: Will the Secretary of State confirm that about 35,000 people in Northern Ireland are

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    serving or have served in the UDR and that, on the basis of those figures, it is wholly irresponsible for the right hon. and learned Member for Warley, West (Mr. Archer) to call for the disbandment of the UDR? Will he remind the right hon. and learned Gentleman that the disbandment of that force could result only in the transfer of many thousands of regular soldiers from the British Army back into Northern Ireland?
    Mr. Hurd: I have said that what the UDR does in the Province is indispensable for the protection of its citizens. I agree with the hon. Gentleman that it is wrong and misleading for generalised accusations to be built on the basis of particular cases. I am surprised that people with experience, particularly those with experience in the legal profession, should fall into that trap.
    Mr. Spencer: Does my right hon. Friend agree that the security situation in Northern Ireland is not helped by actions such as those of the hon. Member for Islington, North (Mr. Corbyn), who, on a day when marches had been banned in the city of Leicester, came to the city and spoke publicly in favour of the actions of Sinn Fein and spoke in an inflammatory manner?
    Mr. Hurd: I am hardly surprised. I am even less surprised at my hon. and learned Friend's reaction, which I share.
    Mr. Archer: Has the right hon. Gentleman had an opportunity to study the poll carried out by the Northern Ireland consumer panel, and published in the Belfast Telegraph, demonstrating that 89 per cent. of Protestants in Northern Ireland believe that the system of justice is fair, while only 36 per cent. of Catholics have a similar belief? Reverting to the question asked by my hon. Friend the Member for Sheffield, Attercliff (Mr. Duffy), will the right hon. Gentleman try to identify those aspects of the system which cause such anxiety among Catholics? Does he propose to make a beginning by introducing legislation to implement the Baker recommendations?
    Mr. Hurd: I read the interesting poll which was published in the Belfast Telegraph yesterday. Although one should take such surveys with some scepticism, it showed the truth of something that I have been trying to say for some months, namely, that it is misleading to generalise about such matters as the attitude of members of the minority community to the Royal Ulster Constabulary, and such generalisations are not borne out by those findings. The right hon. and learned Gentleman is entitled to prod me from time to time about legislation to reflect decisions on the Baker review. I hope that we shall be able to make an announcement about that before long and that legislation will follow as soon as we can find a slot for it.

    Nuclear Burst (Damage)
    Mr. Hayesasked the Secretary of State for Northern Ireland what effect a 1 megaton nuclear burst at a height of 300 miles would have on the equipment and resources in his charge.
    Mr. Malinsasked the Secretary of State for Northern Ireland what action he is taking to harden vulnerable equipment in his charge against the effects of nuclear electromagnetic pulse.
    Mr. Scott: The principal effect of a high level nuclear blast of 1 megaton would be an electromagnetic pulse.
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    This could cause very widespread damage to telecommunications, electronic equipment, and electricity supply and appliances if they were not protected. Much work and research is presently going on throughout the world on the question of protection against the effects of such a pulse, and we in Northern Ireland will make full use of all available information to protect essential equipment such as that designated for civil defence purposes.
    Mr. Hayes: I am grateful for that answer. Will my hon. Friend ensure that technical advice on those matters is available for those who need to know?
    Mr. Scott: A great deal of work is going on and we shall ensure, for example, that the new purpose-built buildings in Northern Ireland, which are planned for completion by 1988, will be fully protected up to the most modern standards.
    Mr. John David Taylor: In view of the serious nature of the Minister's reply, will he assure the House that the Government have no such intentions in Northern Ireland?

    Community Relations
    Mr. Flanneryasked the Secretary of State for Northern Ireland if he has any new plans to try to bring together the two communities in Northern Ireland to discuss their fundamental differences.
    Mr. Hurd: I have recently had further talks with the constitutional parties during which I urged them to seek practical arrangements for a system of government which they can agree to operate.
    Mr. Flannery: Has not the killing and maiming—not just from one side—been going on for 16 years? If no initiative is taken, 16 years from now people will be sitting here still trying to solve the same problems. Are we going to bring the two sides together? I do not mean have discussions with them privately; I mean to bring them together in a proper conference to have them air their differences so that we can all share them, discover precisely what they are, and take it from there, otherwise when will there ever be an end to it?
    Mr. Hurd: A public conference of the kind that the hon. Gentleman advocates would not do much good, because public positions are frequently proclaimed. It is necessary for the party leaders to find an occasion to meet, two by two, or collectively, to see whether some of the more hopeful things that have been written and said in recent months can be turned into practical proposals. That is what I am trying to encourage.
    Mr. Beggs: Does the Secretary of State accept that further polarisation of the communities is undesirable, and that to date the housing needs of the Northern Ireland communities have been well satisfied and good progress has been made on that front? It is now the appropriate time for the Northern Ireland Housing Executive to maintain mixed communities where there have been good community relations and where Roman Catholics and Protestants have lived side by side, but where, because of the executive's present allocation there is a real possibility that further single community ghettos will develop, which will hinder progress and reconciliation.
    Mr. Hurd: I agree with the hon. Gentleman's first point. On his main point, it is difficult for the Housing

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    Executive or anyone else to generalise too broadly about what is best in each case. If the hon. Gentleman has particular instances in mind which he has not yet drawn to the attention of my hon. Friend, I hope that he will do SO.
    Mr. Latham: Is it not clear that sectarian differences are likely to be worsened if representatives of one constitutional party in Northern Ireland decide to meet terrorist representatives?
    Mr. Hurd: I have given my view on that several times recently. I do not believe that such a meeting would be wise, not least because of the setback which I believe it would constitute to the edging forward and the progress which I believe has been made towards the leaders of the constitutional parties having serious discussions.
    Mr. Hume: Leaving aside the background to that affair, which requires a little more time than that provided by Question Time, does the Secretary of State agree that the reaction of members of the Unionist party and the Democratic Unionist party, who have said that they will call off the proposed talks with the SDLP because I have decided to confront a violent organisation about its violence, is dishonest and hypocritical, given that they have been openly sitting down, not to confront violent organisations, but to collaborate with them with the objective of bringing down the power-sharing executive?
    They were members of the council of a murderous organisation which murdered more than 500 innocent people in Northern Ireland. They did that not to stop violence but to collaborate with such organisations. It is hypocrisy to criticise me for confronting a violent organisation to get it to stop. Further, will he tell me whether he agrees with the statement that the hon. Member for Belfast, East (Mr. Robinson) made yesterday? He described an organisation which has murdered more than 500 innocent civilians as a counter-terrorist organisation and therefore not really a terrorist organisation. Does the Secretary of State agree with that statement? Will the right hon. Gentleman—
    Mr. Speaker: Order. That will be plenty.
    Mr. Hurd: It is for Unionist Members to explain their views about that meeting. I have explained mine. The courage of the hon. Member for Foyle (Mr. Hume) in denouncing and resisting violence is, I believe, unmatched in the House. I hope that he will think again about this, as I believe that he and the other elected Members of constitutional parties in Northern Ireland had reached the stage at which definite practical discussions between them were possible and might be fruitful. I should very much regret it if that prospect were put at risk.
    Rev. Ian Paisley: Is the Secretary of State aware that the leaders of Unionism in Northern Ireland have made it perfectly clear that the door is open for the hon. Member for Foyle (Mr. Hume) to come and talk to them provided that he does not talk to the IRA, so it is he who is closing the door, not the Unionist leaders in Northern Ireland? Is the Secretary of State further aware that the hon. Gentleman's accusations today are totally false and that at no time did Unionist leaders sit down with murderers or the Army Council of either the UDA or the UVF, and well he knows it.
    Mr. Hume: Practise what you preach.
    Mr. Hurd: In my view, it is precisely that kind of exchange, taking place in the earshot of members of the British public throughout the country, from which we must get away if there is to be any real progress in Northern Ireland.
    Mr. Archer: Does the Secretary of State agree that whether something might be gained for the cause of peace and reconciliation by speaking to a particular group is a matter of judgment which each of us has to make in good faith and on which we may disagree? Will he try to persuade the hon. Member for Antrim, North (Rev. Ian Paisley) that if we refuse to speak to those with whose judgment we disagree the cause of reconciliation and the prospects of finding a solution will move further away?
    Mr. Hurd: I agree that it is a matter of judgment, and we are all entitled to make our own judgments.

    Local Government
    Sir John Farrasked the Secretary of State for Northern Ireland what new proposals he has to strengthen the structure of local government in Northern Ireland.
    Mr. Hurd: The Government will consider any new proposals for regional or local administration that command widespread acceptance throughout the community.
    Sir John Farr: I thank my right hon. Friend for that reply. May I draw his attention to the recent Assembly report, which shows that a strengthening of local government responsibility would be welcomed? As it is widely felt that certain central Government responsibilities could now be transferred to local government, will my right hon. Friend consider initiating a conference on the subject in the spring in the Province?
    Mr. Hurd: I am not very enthusiastic about transferring powers to the existing district councils in Northern Ireland, for reasons which should be apparent to anyone who studies that scene at the moment. My hon. Friend is right, however, in saying that the Assembly Committee has made a preliminary report, although it did not attempt to discuss the basic matters which he rightly raises. I hope that in the coming weeks a further report, although not necessarily a final report, will be produced. The Committee is handicapped in that the SDLP is not represented on it or giving evidence to it, but a further report could examine on behalf of the parties represented on the Committee various options which they believe are worth carrying forward.
    Mr. McNamara: Can the Secretary of State tell us whether, when he met the IRA, and when his noble Friend Lord Whitelaw and his hon. Friend the Minister of State, Department of Trade and Industry met the IRA, they confronted the IRA on the question of violence, or did they merely talk about local government?
    Mr. Speaker: Order. That question would more appropriately have been asked on the preceding question, although I did not manage to call the hon. Gentleman then.
    Mr. McNamara: With respect, Mr. Speaker—
    Mr. Speaker: Order. Does the question relate to strengthening the structure of local government?
    Mr. McNamara: With respect, Mr. Speaker, I asked whether the Secretary of State discussed those matters or whether he discussed local government.
    Mr. Hurd: I never discussed local government on that occasion.
    Rev. William McCrea: Could not the Secretary of State's failure to proscribe Sinn Fein destroy the present local government set-up rather than strengthen it?
    Mr. Hurd: No, Sir. That is a separate question, but I do not agree with the hon. Gentleman's conclusion.
    Mr. Molyneaux: Would not some suggestion of an enhanced role for councillors encourage many people of real ability to come forward as candidates for all the political parties in Northern Ireland at the coming elections?
    Mr. Hurd: I understand that argument. If the party leaders, of whom the right hon. Gentleman is one, or the Devolution Report Committee of the Assembly, were able to bring forward proposals that I could commend to the Cabinet and the House as commanding widespread acceptance, that would be a step forward.
    Mr. Stanbrook: Is there not a role for the Assembly in serving as the upper tier of local government in Northern Ireland?
    Mr. Hurd: That role would be rather different from the one given to the Assembly by the House. The Assembly is doing a good job in the scrutinising role that is its immediate responsibility. However, if the elected representatives of constitutional parties in the Province came forward with a proposal on the lines that my hon. Friend has suggested and could show that the proposal was widely accepted across the communities, it should certainly be considered.

    Ancillary Medical Staff
    Rev. Martin Smythasked the Secretary of State for Northern Ireland if he will list the target norms for community doctors, nurses, psychiatric nurses, social workers and therapists set for the various health and social service boards; and whether he is satisfied that they have been met.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Chris Patten): Target norms are generally not used by the Department of Health and Social Services as a basis for determining priorities for service development, largely because they are not sensitive to local variation in service needs. The Department's existing regional guidelines for determining priorities are set out in circular HSS(P)1/80, a copy of which is available in the Library.
    Rev. Martin Smyth: Is the Minister satisfied that there are enough people in post, in the western board area in particular, to serve the needs of the people? Should not more attention be paid to raising the level of provision of community doctors and workers in that area and others?
    Mr. Patten: We have been attempting to do so. The Department has consistently increased funds to community services at a faster rate than those to institutional services over the past decade. We shall continue to do so, whatever the occasional difficulties.
    Mr. Bell: Has not the number of unemployed nurses in Northern Ireland spiralled from about 350 when the Government took office to between 1,450 and 1,500? That is the number of qualified nursing personnel who are available for work but cannot be employed by any of the four area health boards because of insufficient funding. Is it not also true that there is a major psychiatric hospital in Antrim which is understaffed to the extent of 100 trained nursing personnel?
    Mr. Patten: The hon. Gentleman will welcome the fact that the number of qualified nurses in Northern Ireland has spiralled over the past five years. There are 2,000 more of them now than there were when the hon. Gentleman's party left office. More nurses are unemployed because more qualified nurses are staying on than was once the case.

    Short Brothers
    Mr. John David Taylorasked the Secretary of State for Northern Ireland if he will pay an official visit to the aircraft manufacturing factories of Short Brothers in Belfast.
    The Minister of State, Northern Ireland Office (Dr. Rhodes Boyson): My right hon. Friend and I visited Shorts' headquarters at Queens Island last November and were shown its aircraft, aerostructures and missile manufacturing activities. I keep in regular contact with the chairman and expect to make further visits to the company in due course.
    Mr. Taylor: Will the Minister join me in congratulating Shorts on its success in selling eight commuter aircraft to China, as announced earlier this week? Does he agree that that underlines the marketing strength of Shorts, which could also be used to sell the Tucano trainer aeroplane abroad on its own or with the British Aerospace model?
    Dr. Boyson: I rang the chairman the following morning to congratulate him on the sale of eight aircraft to China, other sales that it has recently achieved and the option on seven more aeroplanes. I know that many people in the Province hope that the Tucano aircraft will be chosen, bearing in mind what it will do for Shorts and employment in the Province.
    Mr. Stephen Ross: Is the Minister aware that there are other contenders for the RAF basic trainer? Will he convey to the Secretary of State, who I am sure will want to make the right decision, that the right aeroplane to choose is that which the RAF wants most and which can be acquired at the most sensible price? Does he agree that that is probably the PC9, which is linked with British Aerospace?
    Dr. Boyson: I am well aware that there are other contenders. The fact that Shorts has done so well in the past is at least a recommendation for future contracts.
    Mr. Bell: When the Minister pays his next visit to Shorts, will he take with him the appropriate copy of the American business magazine "Industry Week", which last year forecast that Shorts might be on course to becoming one of the United Kingdom's biggest industrial success stories? If that is so, why does the Minister want to inflict on Shorts the dogma of privatisation?
    Dr. Boyson: I welcome the achievements of Shorts to which the hon. Gentleman referred. There are no

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    immediate plans for privatisation, but we are taking advice on the problems, advantages and costs of privatisation. As with other denationalised industries, employees would be able to become shareholders, but it is essential that Shorts remains in Northern Ireland.

    Aldergrove and Belfast Harbour Airports
    Mr. Robert Atkinsasked the Secretary of State for Northern Ireland if he will make a statement on the future of Aldergrove and Belfast Harbour airports.
    Mr. Chris Patten: Algergrove will continue to be the main airport serving the demands for air transport in Northern Ireland. However, additional services are provided from other airports in Northern Ireland, including Belfast Harbour airport, where scheduled services recommenced in February 1983.
    Mr. Atkins: Does my hon. Friend agree that the Civil Aviation Authority proposal to include Harbour airport but to exclude Aldergrove within the area operating facility list is a slap in the face for competition in the Province, which has so far forced Aldergrove to reduce its charges and then to keep them steady for the past two years? Will the Minister ensure that Harbour airport maintains its place in the interests of non-jet airlines, passengers and Shorts?
    Mr. Patten: I do not recognise any slaps in the face. As my hon. Friend knows, the matter is principally one for the CAA and therefore in this House for my right hon. Friend the Secretary of State for Transport.

    Northern Ireland Assembly
    Mr. Bellinghamasked the Secretary of State for Northern Ireland when he intends to devolve more power to the Northern Ireland Assembly.
    Mr. Hurd: I hope that the Assembly will produce proposals as soon as it can for devolved arrangements which would be likely to command widespread acceptance throughout the community and which I could therefore recommend to this House.
    Mr. Bellingham: Does my right hon. Friend agree that, unless all parties take their place in the Assembly, it cannot fulfil its proposed role? Does he agree also that it would make sense to set a date by which all of the parties should have participated and that, if they have not, we should reconsider the Assembly's future?
    Mr. Hurd: I am not sure that it would be sensible now to act on my hon. Friend's advice. I hope that the Devolution Report Committee on the Assembly can produce proposals, mainly in a further interim report, which could help us to work something out that would command widespread acceptance.
    Mr. Flannery: Is not the Northern Ireland Assembly a farce? The minority communities distrust it so much that they do not attend it, and it is therefore completely one-sided and talks to itself.
    Mr. Hurd: The hon. Gentleman is wrong. The Assembly does a good deal of practical and useful work, which has improved the quality of administration in the Province.

    Job Creation
    Mr. Couchmanasked the Secretary of State for Northern Ireland what is the current rate of job creation in Northern Ireland; and how this compares with Great Britain.
    Dr. Boyson: An analysis of employment returns in Northern Ireland shows that at least 732 employers, employing 25 or more staff, increased their employment by a total of 11,151 jobs in the 12 months ending September 1984.
    Mr. Couchman: Is my hon. Friend satisfied that this impressive rate of progress will lead to a significant diminution in the tragic rate of unemployment in the Province?
    Mr. Boyson: I hope, as my hon. Friend does, that that will be the case. Similarly, we hope that there will be an increase in job creation this year, even against last year's figures.

  PRIME MINISTER

    Engagements
    Mr. Dixonasked the Prime Minister if she will list her official engagements for Thursday 7 February.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
    Mr. Dixon: Will the Prime Minister find time today to apologise to the Archbishop of Canterbury for trying to steal the credit for the release of the four Britons from Libya? Now that she has seen that the Church has shown more initiative, wisdom and diplomacy about foreign affairs than her Government, will she accept its advice on domestic affairs and get the National Coal Board to negotiate a speedy and honourable settlement of this dispute?
    The Prime Minister: I gladly pay tribute to the Archbishop of Canterbury and Mr. Waite, as I did on Tuesday. The hon. Gentleman will find that in Hansard. All the praise is theirs for having secured a successful outcome to the Libyan hostages problem.
    Mr. Gerald Howarthasked the Prime Minister if she will list her official engagements for Thursday 7 February.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Howarth: My right hon. Friend will have heard today that more miners going to work have again been stoned by pickets. In view of the critical part played by violence and intimidation in prolonging the coal dispute, will she set up an inquiry to examine the organisation and the financing of organised picketing and violence in the dispute?
    The Prime Minister: As my hon. Friend knows, my right hon. and learned Friend the Home Secretary has been undertaking a review of the Public Order Act, which will take account of experiences on the picket line. I agree that

    1097
    the strike has been prolonged by violence and intimidation. The Home Secretary's review is nearing completion, and I hope that we shall soon be in a position to make an announcement about it.
    Mr. Kinnock: Throughout the miners' strike the Prime Minister has repeatedly demanded that the National Union of Mineworkers accepts the NACOD agreement. In the light of today's joint statement from the unions, which says that
    "the conditions being demanded of the NUM by the NCB effectively negate the agreement reached between NACOD and the NCB"
    will she strongly advise the board to return to full negotiations, so that the strike can be settled?
    The Prime Minister: The right hon. Gentleman will be aware that the board met NACODS early this week and made it clear that it would honour the agreement with NACODS in full. The board reaffirmed that position to NACODS. It is perhaps a greaty pity that this morning NACODS was unable to persuade the NUM to accept the NACODS agreement and the spirit of it, or, alternatively, to accept the single compromise that was previously negotiated through the Advisory Conciliation and Arbitration Service.
    Mr. Kinnock: The Prime Minister is either grossly misinterpreting or grossly misrepresenting this morning's events and the discussion and agreement between the NUM executive and NACODS. She has before her the joint statement issued by those unions. Now that there is a serious effort to restart negotiations for settlement, will she start to act like a responsible Prime Minister instead of seeking further to impede negotiations and being a wrecker who wants conquest at any cost?
    The Prime Minister: That is absolute nonsense. The board will honour the agreement with NACODS in full. May I stress that again and again. It is not in doubt. If the NUM would also accept the NACODS agreement and the spirit of it, the coal strike could be over. I urge the right hon. Gentleman to urge the NUM to accept the NACODS agreement.
    Mr. Kinnock: The Prime Minister has used exactly the words that she used last week. I urge her, because the circumstances are significantly changed by this morning's discussion and agreement between the two unions, to use the power that she knows she has to advise the board to resume negotiations. The National Association of Colliery Overmen, Deputies and Shotfirers has said:
    "It is agreed that the conditions being demanded of the NUM by the NCB would effectively negate the agreement reached between NACODS and the NCB in October 1984."
    Does the right hon. Lady not understand that the whole basis of agreement is in jeopardy because of her interference and the way in which she has sought to prolong the dispute? She has a chance to secure negotiation and settlement now. Why does she not take it?
    The Prime Minister: The right hon. Gentleman is trying to make out that an agreement freely negotiated between the NCB and NACODS is in jeopardy. It is not, and nothing that he says can put a freely negotiated agreement between two sides in jeopardy. That agreement with NACODS is not in jeopardy. The National Coal Board met NACODS earlier this week to re-affirm, yet again, that the agreement will be honoured in full. Why does not the right hon. Gentleman urge the NUM to accept
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    that agreement? It will be honoured by the NCB in full, regardless of the impression that the right hon. Gentleman is trying to give to prolong the strike.
    Mr. Sackville: In view of what many pensioners and chronically ill people are being told by their doctors about the future availability of medicines, will my right hon. Friend confirm that no limited list will be issued which, of itself, compels NHS patients to pay for or do without medicines for which they have a clear clinical need?
    The Prime Minister: My right hon. Friend the Secretary of State for Social Services has gone into this matter in great detail. The proposals that he has put forward are in the interests of NHS patients and will release money for the care of more patients.
    Dr. Owen: Will the Prime Minister clarify the NACODS settlement? Is it not true that the settlement allows for an independent reviw procedure, but that it also allows the NCB to close pits against the advice of the independent review procedure? Equally, there is no commitment on NACODS' part to accept the independent review procedure, and it can take strike action. The same would apply to the NUM if it signed the NACODS agreement. The unions are not bound to accept the advice of the independent review procedure. Does the Prime Minister accept that it is vital that the NCB's right to manage should not be interfered with?
    The Prime Minister: Yes, Sir. The last paragraph of the NACODS agreement states:
    "If, at the end of this process"Ȕ
    that is the colliery review procedureȔ
    "the matter was still in conflict and might lead to a foreshortening of a colliery's life expectancy, this question, as has already happened in the past, can be referred for national consideration and, indeed, would then be subject to the Independent Review Body and full weight given to its findings, just as would be the case in any question of a distinct closure proposal."
    The NACODS approach was given in evidence to the Select Committee. It was different from the NUM approach given in evidence to that same Select Committee. On 25 November 1982 NACODS made it clear that it would, as the right hon. Gentleman said, oppose closures. Its representatives made it clear that the association would normally agree to closures only when reserves of coal had been absolutely worked out. It went on then to make the right hon. Gentleman's other point:
    "In other circumstances, the decision to close will be made by the National Coal Board."
    The right hon. Gentleman is correct. NACODS may oppose all the way, but in the end it will accept the National Coal Board's right to manage, and of course it is perfectly free to use the strike weapon should it choose. [Interruption.] Right hon. and hon. Gentlemen do not want to hear the agreement or the evidence that was given. An agreement cannot be negated by things said outside the room in which it was reached.
    Mr. Wilsonasked the Prime Minister if she will list her official engagements for Thursday 7 February.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Wilson: With the renewed onset of severe winter weather, will the Prime Minister read the letter sent to her by her own Solicitor-General for Scotland criticising the unfair and unjustifiable fuel allowances system that caused so much concern three weeks ago? Is she not aware that

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    there are rumours circulating that, instead of conducting a review intended to bring in fairer allowances, the intention of the DHSS and the Cabinet is to abolish heating allowances altogether? Since the average electricity heating bill in the north of Scotland is £290, compared with £204 in the south of England, will she take action to deny the rumours that the DHSS does not intend to reach a fairer fuel allowance system and pledge that the Government will introduce one as soon as possible?
    The Prime Minister: The hon. Gentleman will be aware that we have already announced a review of these provisions, and that is being undertaken by my right hon. Friend the Secretary of State for Social Security. I have in front of me the letter to which the hon. Gentleman refers. It says:
    "Although every Scottish MP knows that more than four hundred million pounds is spent on heating allowances throughout the United Kingdom each year, that fact is being conveniently overlooked."
    It also says that I should
    "be aware that the SNP as well as the Labour Party have been outspoken in their support for this very damaging, costly and violent strike. They ignore the fact that the potential effect of this industrial action on pensioners' fuel bills is far greater than anything this additional heating allowance could ever cover."
    Mr. Speaker: Order. I appeal for shorter questions, please. [HON. MEMBERS: "And shorter answers."]
    Q.4 Mr. Stokesasked the Prime Minister if she will list her official engagements for Thursday 7 February.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Stokes: Has my right hon. Friend noticed in yesterday's and today's newspapers the great success story of a firm in the north-east of England, Tyne Shiprepairers, which, since privatisation only a year ago, has turned a loss of £13 million into a profit, has gained new orders of £l9 million and has doubled its labour force—all in the space of one year? Is there not a moral here?
    The Prime Minister: I congratulate the Tyne Shiprepair company on an excellent first year. It took 500 people on to its payroll. It has done extremely well under the spur of privatisation and has now 1,200 on its payroll. Success and privatisation — [Interruption.] — create genuine jobs—and how the Opposition hate that.
    Mr. Foot: Reverting to the mining dispute, does the Prime Minister appreciate that what changed the situation last week was the issue, by the Coal Board with her approval, of a demand that the National Union of Mineworkers should sign a document before it came to the negotiating table? Does she not understand that it was that demand that also wrecked the position with NACODS? Does she not understand this, and will she say why she and her Ministers did not consult NACODS before they gave approval to the document that injured the negotiations? As she has played such a prominent part in injuring those negotiations, will she at last make some effort to get decent negotiations going?
    The Prime Minister: The right hon. Gentleman is, I believe, under a fundamental misconception. An agreement negotiated between two bodies holds and is reaffirmed and can never be upset, except by further agreement between those two bodies. The NCB met
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    NACODS earlier this week and reaffirmed that the agreement that they had previously negotiated still stands. It cannot be upset by what is said elsewhere.
    Mr. Flannery: On a point of order, Mr. Speaker.
    Mr. Speaker: Does it arise from questions?
    Mr. Flannery: Yes, Mr. Speaker. Is it in order for the Prime Minister to adopt a completely new habit of reading from the pamphlets that she brings with her, so much so that Back Benchers now have less time available to ask questions because of the amount of endless and boring reading in which the Prime Minister engages?
    Mr. Speaker: As the House knows, I take a particular interest in ensuring the protection of Back Benchers. My view is that at Prime Minister's Question Time a little too much time is now taken up by the Front Benches, thereby denying time to Back Benchers.
    Mr. Kinnock: Further to that point of order, Mr. Speaker. I think that my hon. Friend the Member for Sheffield, Hillsborough (Mr. Flannery) was referring to a very recent habit — repeated again today — of reading from a lengthy statement of Government policy, on this occasion in response to a question from an Opposition Member. However, on Tuesday the Prime Minister did so in response to a vital question on Gibraltar from a Conservative Member.
    As you are concerned about the time taken by the Front Benches, I invite you to go through Hansard for the last few months and to compare my subscriptions with the responses of the Prime Minister. I am sure you will discover that the House has been preoccupied much more with the right hon. Lady's long answers than with any of my questions.
    Several Hon. Members roseȔ
    Mr. Speaker: Order. We have a busy day ahead of us and I do not think we should get into any dispute on this matter. I simply say to the Leader of the Opposition that I leave him wide discretion to rise more than twice—mostly on three occasions — for that very reason. I realise that a very important issue was discussed today.
    Mr. Loyden: Further to that point of order, Mr. Speaker. Is it not an abuse of the House and of the protection afforded Back Benchers who are entitled to question the Prime Minister — who is already under considerable protection, given that she answers questions for only half an hour each week—for the right hon. Lady to use Back Benchers' time to avoid responding to questions?
    Mr. Speaker: It is a question of balance, and in the past we have done rather well. On one occasion we got through 15 questions to the Prime Minister.
    Sir John Biggs-Davison: Further to that point of order, Mr. Speaker. Would not some of these points be met, and would not we all get on much better, if the Opposition abandoned their consistent attempts, Tuesday after Tuesday, Thursday after Thursday, to prevent the Prime Minister from being heard, thus adding to the time it takes for my right hon. Friend to inform the House of her views?
    Mr. Speaker: Order. I think that it is generally acknowledged—and I say this with sadness—that the noise during Prime Minister's Question Time has increased. I have mentioned this in recent weeks. I hope that the House will take that very much to heart.
    Mr. Skinner: Further to that point of order, Mr. Speaker. It is not only a matter for the Front Benches of the Labour party and a question of the Prime Minister taking up more time than my right hon. Friend. You should also take into account, Mr. Speaker, that whenever the Leader of the Social Democratic party is called he
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    speaks with the same voice as the Prime Minister, so, in effect, you should subtract his time and add it on to the Government's.
    Mr. Speaker: I do take that into account, and I did so today.

Business of the House
3.35 pm
Mr. Neil Kinnock: May I ask the Leader of the House whether he will state the business for next week?
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business for next week will be as follows:
MONDAY II FEBRUARY—Private Members' Motions until seven o'clock.
Afterwards, timetable motion on the Local Government Bill.
Motion relating to the Control of Industrial Major Accident Hazards Regulations 1984.
TUESDAY 12 FEBRUARY — Second Reading of the Transport Bill.
Motion relating to the Housing Benefits (Amendment) (No. 4) Regulations 1984.
WEDNESDAY 13 FEBRUARY AND THURSDAY 14 FEBRUARY—Committee stage of the Representation of the People Bill.
FRIDAY 15 FEBRUARY—Private Members' Bills.
MONDAY 18 FEBRUARY — Second Reading of the London Regional Transport (Amendment) Bill.
Mr. Kinnock: First, I understand that all Governments have to introduce guillotines, but the timetable motion for next Monday is an outrage because it concerns a Bill which will deprive 13 million electors of democratic rights over an important tier of local government. I express the hope that Conservative Members who are opposed to the measure will join us in our efforts to prevent the guillotine falling on this Bill.
Will the Leader of the House clear up the matter of when the House will debate the White Paper on public expenditure? On 17 January the right hon. Gentleman told me during business questions that he hoped that the House could proceed to debate it in the normal manner. Will he confirm that the debate will take place therefore in the normal manner well before the Budget on 19 March?
Finally, I ask the Leader of the House whether the Government will provide time as soon as possible for a debate on the proposed closure of one third of Britain's network of skillcentres. We know now that the Manpower Services Commission came to its decision to recommend the closures by the narrowest of margins. It is therefore vital that hon. Members whose constituencies will be seriously disadvantaged by closures should have the opportunity to express their views in the House before a final decision is made.
Mr. Biffen: On the first of the three points that the right hon. Gentleman has raised, I hope that, when he appreciates the time that has been taken on the legislation, the care that has been given to opposing viewpoints and the fact that 80 clauses remain to be debated, he will realise that what is proposed on Monday in no sense can be regarded as converting the House of Commons into a Reichstag.
I notice also that the right hon. Gentleman intends to pit his charm and appeal against that of my right hon. Friend the Patronage Secretary in recruiting the loyalties of the Conservative Back Benches; we shall see who will be the winner of that glamour contest.
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As to the White Paper on public expenditure, I am as ever anxious that we proceed to a debate which should take place before the Budget, but preferably with the benefit of the report of the appropriate departmental Select Committee.
Finally, I note the points that are made upon skillcentres. This is a matter that we might consider through the usual channels.
Sir Bernard Braine: My right hon. Friend will know that this week marks the 40th anniversary of Yalta. Has his attention yet been drawn to early-day motion 320?
[That this House recalls that Mr. Winston Churchill, when Prime Minister, was a signatory, together with President Franklin Roosevelt and Marshal Joseph Stalin, to the Yalta protocols in February 1945 which guaranteed self-determination, sovereignty and democracy for the peoples of Central and Eastern Europe; notes that Marshal Stalin, despite being a co-signatory, used his military power and political influence to frustrate those intentions; deplores the resultant widespread and systematic abuse of human rights which still continues to this day; supports peaceful endeavours by the peoples concerned to regain their rights; and urges Her Majesty's Government, on the fortieth anniversay of the Yalta Protocols, to declare its refusal to accept the division of Europe into spheres of influence and to reaffirm the right of the peoples of Central and Eastern Europe to genuine self-determination.]
This has been signed by no fewer than 227 hon. Members of all parties, and condemns the denial of self-government, independence and democracy to 125 million of our fellow Europeans. Can my right hon. Friend give us some sign that this massive demonstration of feeling, which is shared in the country, can be expressed in a debate on foreign affairs dealing primarily with European security matters?
Mr. Biffen: I take account of the interest in having a foreign affairs debate, and am only sorry that there is no time for one next week. When it occurs, it would be appropriate for the House, if it is to engage in reminiscence, to place on record the foresight of that handful of Members that voted against the Yalta agreement.
Mr. Roland Boyes: Does the Leader of the House recall that last week, on the day that the university of Oxford refused to honour its most distinguished daughter, the Prime Minister, I drew the attention of the House to the fact that the Droylsden Littlemoss boys county secondary modern school had not honoured its most distinguished son, my hon. Friend the Member for Bootle (Mr. Roberts). Will the Leader of the House take note of early-day motion 367?
[That this House congratulates the Droylsden Littlemoss Boys High School, formerly Droylsden Littlemoss Boys County Secondary Modern School, on its decision to honour its favourite son, the honourable Member for Bootle, following the attempt of the honourable Member for Houghton and Washington to raise their failure to do so in the House; notes that the presentation ceremony is to be held at the school on 15th March; hopes that this event will be used to recognise and publicise the valuable role in the education system of the nation that over the years has been carried out by secondary modern and comprehensive schools; and

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further fails to understand why so much importance is attached to honours handed out by less important, status-ridden educational establishments.]
Will the right hon. Gentleman also note that the university of Oxford has not changed its mind about the Prime Minister but that the Droylsden Littlemoss boys school has changed its mind about my hon. Friend the Member for Bootle? Will he join me in my appreciation of the services that secondary modern schools and comprehensive schools have done for hon. Members and in congratulating the school on changing its mind?
Mr. Biffen: The Droylsden Littlemoss secondary school better deserves the esteem of this House than to be constantly compared with Oxford university. That said, I think that nothing more should occur next week.
Mr. David Crouch: Is my right hon. Friend aware that there are many questions hanging over the nationalised industries these days? Is it sufficient for hon. Members to have to consult documents in the Library on this question and to resort to the negative procedure? Has not the time come to give serious consideration to the reconstitution of a Select Committee on the nationalised industries, so that we can give full consideration to these problems?
Mr. Biffen: I have no doubt that the working composition and responsibilities of a Departmental Select Committee are matters that the House would wish to consider from time to time. However, what my hon. Friend proposes constitutes a fundamental change, and I do not think that it should be contemplated in isolation.
Mrs. Renèe Short: In view of the Government's confusion over the problem of limited lists for prescribing, and of the change in their attitude since 1981 and 1983, when Ministers expressed their view on the Greenfield report, is it not time that the House had an opportunity to debate the Department's proposals so that we could put forward views to help the Government out of this mess?
Mr. Biffen: I take account of all that the hon. Lady says. I am happy that the Greenfield recommendations are brought into the debate. She will appreciate that what my right hon. Friend the Secretary of State for Social Services proposes will be the subject of regulations that will be the subject of regulations that will have to be confirmed by the House by means of a debate.
Sir. Dudley Smith: My right hon. Friend mentioned regulations on the limited list of prescribed drugs. As the constituents of all hon. Members are seriously concerned, will he give earnest consideration to a much longer debate than is usual on these kinds of regulations, to enable all views to be reflected?
Mr. Biffen: Without making a commitment, I can say that I shall look into this point with some sympathy.
Mr. Peter Hardy: Does the Leader of the House accept that, in normal circumstances, I would agree that the request I am about to make is unreasonable? However, will he not accept that at Question Time the Prime Minister displayed a serious lack of adequate understanding of the coal dispute and of the position of the
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association with which I am involved? Would not the right hon. Gentleman accept that the Prime Minister's misunderstanding is so great that it almost certainly causes further peril and protracted difficulty?
Would not the right hon. Gentleman accept that the dispute has gone on long enough to justify urgent and positive steps to achieve a negotiated settlement and that that settlement is now being blocked by no other person than the Prime Minister? If the right hon. Lady allowed the National Coal Board to open the door, a settlement could be achieved and peace could reign in the coalfields of Britain, as it certainly needs to reign. Will not the right hon. Gentleman accept that the House should be given a further opportunity next week to debate this matter?
Mr. Biffen: The hon. Gentleman warned me that I might just conceivably find his proposition unreasonable. I have to confirm at once that from such a reasonable source the proposition is eminently unreasonable. I believe that the words spoken by my right hon. Friend the Prime Minister were well chosen. My right hon. Friend, like every other Member of this House, wishes that there should be a speedy resolution of this dispute. Last-minute attempts to try to fluff it will not be conducive to that end.
Mr. James Hill: One of the most important items of the age is the progress being made by the European Space Agency, the European co-operation on the Columbus space laboratory, the latest announcement that we are to co-operate with the United States on a space platform and the very important announcement in the American budget of the strategic defence initiative in the United States. Surely all this must mean that it is about time that we got into the 20th century and started to talk about this very important matter.
Mr. Biffen: Alas, the only, rather narrow-minded, advice that I can give to my hon. Friend is that in his early essay or attempt to get into the 20th century he should look for an Adjournment debate, when he will be able to make this very important point.
Mr. A. J. Beith: On limited list prescribing, is it not essential that we should have a full debate before any regulations are brought forward, because the regulations will be incapable of amendment by the House? On the Local Government Bill guillotine, what evidence does the right hon. Gentleman have that the Bill has been unduly delayed in the discussions so far? Would he not in his younger days, had he been on this side of the House, have complained that the guillotine was being brought forward only because of the overloading of the Government's legislative timetable by an indigestible Bill?
Mr. Biffen: The hon. Gentleman has overlooked a very signal and important factor: that I am no longer on that side of the House. As for limited list prescribing, I shall look at that point.
Mr. Robert Jackson: May I draw the attention of my right hon. Friend to early-day motion 104 on the possible taxation of lump sums?
[That this House would find unacceptable any change in the tax system which devalued the 'lump sum' which members of occupational pension schemes can now anticipate receiving on retirement; notes that, over many years, pay has been negotiated, contributions have been paid and, sometimes, financial obligations have been

1107
assumed on the good faith of receiving such payments in due course; and would regard it as totally inconsistent with the declared principles of Her Majesty's Government to change the present procedure which makes a real and useful contribution to a more widespread capital earning democracy.]
Since the number of signatures has now risen to 210 and in view of the continuing concern that is expressed in our postbags, would it be possible to have a debate on the subject before the Budget?
Mr. Biffen: My hon. Friend makes a very fair point. There is no doubt that the early-day motion reflects widespread concern about this topic. However, there will be every opportunity to discuss it in the Budget debate, and even, possibly, subsequently.
Mr. Michael Foot: Reverting to the question put by my hon. Friend the Member for Wentworth (Mr. Hardy) about the mining dispute, in view of what many of us consider to be the grievous misunderstanding of the present situation which the Prime Minister revealed at Question Time in response to questions from my right hon. Friend and other hon. Members, if the right hon. Gentleman cannot arrange a debate on the matter, can he ensure that the Prime Minister shall come to this House on Monday and answer questions on this subject? We wish to make absolutely certain that what the Prime Minister said today does not block an agreement, just as what the right hon. Lady said a week ago blocked an agreement. Therefore I urge the right hon. Gentleman to ask the right hon. Lady to come to the House of Commons on Monday and make a statement.
Mr. Biffen: There is never a more touching moment than when the right hon. Gentleman is anxious to disabuse my right hon. Friend the Prime Minister of some misunderstanding under which she labours. I shall convey to her the matters that he has requested should be drawn to her attention.
Sir Kenneth Lewis: Would my right hon. Friend like to register his place in history in the House by being the Leader of the House who brings in timetable motions for all major and controversial Bills, so that the House is able to discuss such Bills clause by clause from beginning to end? It is ridiculous that half these Bills are never properly discussed without the introduction of a timetable motion.
Mr. Biffen: I am the Leader of the House who does not even want to appear in a footnote in "Erskine May", let alone have a place in history. My hon. Friend must await the report of the Procedure Committee, which has been considering Public Bill procedure. Perhaps the printing of the report will be the occasion when he can take his arguments further.
Mr. Andrew Faulds: In view of the appalling and damaging implications of the Arts Council grants which are to run at 1·9 per cent. against an inflation rate of 4·6 per cent., will the House have an opportunity to debate this very important matter in the near future?
Mr. Biffen: I do not disparage for one moment the importance of the topic, but no provision has been made for such a debate in the immediate future.
Sir Anthony Meyer: In view of the continuing difficulties facing Members of the
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European Parliament in seeking to attend meetings in this building, will my right hon. Friend re-examine the matter on the ground that the Labour party, which has hitherto blocked all such suggestions, is likely now to modify its views in its anxiety to make contact with, among others, Mr. Les Huckfield?
Mr. Biffen: This is too serious a matter to be trivialised by the inclusion of Mr. Les Huckfield. The issue is considered from time to time.
Mr. John Home Robertson: Will the Leader of the House read early-day motion 345 on the Government's intention to publish new advice on food production in the aftermath of a nuclear war?
[That this House notes the findings of the study of Messrs, Turco, Toon, Ackerman, Pollack and Sagan concerning the likelihood of a prolonged period of darkness and severe cold as a result of the obstruction of sunlight by smoke in the atmosphere following a nuclear conflict; further notes that the Minister of State for Agriculture told the House on 24th January that the Government would not wish to dismiss the nuclear winter out of hand; considers that it would be absurd for the Government to publish a new booklet on home defence and the farmer without referring to the fact that food production could be prevented by the climatic consequences of nuclear war in addition to the devastation caused by blast and radiation; and calls on the Government to postpone further consideration of this issue until the findings of the International Scientific Committee on Problems of the Environment have been debated in the House.]
The motion has been signed by over 100 Members of virtually every party which is represented in the House. Will the right hon. Gentleman ensure that the House will have an opportunity to debate the SCOPE report on the nuclear winter theory before the Minister of Agriculture, Fisheries and Food publishes any further advice on the subject?
Mr. Biffen: I understand that the matter is the subject of a study which is awaited by my right hon. Friend the Minister of Agriculture, Fisheries and Food. I shall convey the hon. Gentleman's comments to my right hon. Friend.
Mr. Ivor Stanbrook: My right hon. Friend will be aware that during the passage of the Hong Kong Bill it has been suggested that there should be an annual debate on Hong Kong. As we almost never discuss any other part of our dependent territories, will my right hon. Friend consider allocating a day annually for the discussion of all the United Kingdom's dependent territories as well as Hong Kong?
Mr. Biffen: From my standpoint I see already a great deal of parliamentary time pre-empted for specialised topics. I would be reluctant to see that trend accentuated, but I shall consider what my hon. Friend has said.
Mr. Dennis Skinner: Will the Leader of the House review the answer that he gave to my hon. Friend the Member for Wentworth (Mr. Hardy) about the Prime Minister making a statement on Monday on the coal dispute or the allocation of a day's debate on that issue? It was put to me the other day that, although an archbishop's envoy can go to the hard-faced Colonel Gaddafi and manage to release four prisoners and arrange negotiations without preconditions with that regime, it

1109
seems that every archbishop, bishop and leader of a church of all denominations has been banging on the doors of the Prime Minister and the Secretary of State for Energy, only to be met with the response, "Get lost." One is bound to come to the conclusion that the Prime Minister is more hard faced that Colonel Gaddafi.
Mr. Biffen: In certain circumstances that would be proffered as a compliment. However, I shall ensure that that comment is passed to the Prime Minister, like all the others about the coal dispute which the House wishes to be referred to her.
Mr. Neil Thorne: Has my right hon. Friend yet had the opportunity to read the Hansard report of the debate on civil defence in another place yesterday which was introduced by Lord Renton? Will he please note that the contributions from all sides of that Chamber were extremely supportive? Does he have any plans for such a debate in this House in the near future?
Mr. Biffen: I must confess that I have no plans for that, but I shall bear in mind my hon. Friend's particularly perceptive comments.
Mr. Gordon Wilson: Since one of the functions of the House is to address its mind to matters of great public concern, and in view of the early-day motion signed by hon. Members of all parties and from all parts of the United Kingdom about the need for a comprehensive fuel allowance, will the Leader of the House promise an early debate on the subject, so that opinions can be ventilated before the social security review comes to an end?
[That this House believes that the present system of exceptional heating allowances which is supposed to ameliorate the effects of severe weather conditions is completely ineffective in its application; and requests the Secretary of State for Social Services to replace this inadequate provision with a comprehensive scheme which takes into account the general climatic differences within the United Kingdom and associated heating costs so that all those in receipt of supplementary benefit can afford to heat their homes adequately regardless of which part of the United Kingdom they live in.]
Mr. Biffen: The hon. Gentleman will appreciate that there is to be an Adjournment debate initiated by the hon. Member for Dunfermline, East (Mr. Brown) on 13 February. We had better see how we go from there.
Mr. Peter Fry: May I refer my right hon. Friend to notice of motion No. 24 on the Order Paper, and to early-day motion 358, which between them were signed by every available member of the Select Committee on Transport yesterday and which express concern that the House is to proceed on Tuesday with the Second Reading of the Transport Bill without awaiting the Select Committee report which is imminent?
[That this House should commit the Transport Bill to a Special Standing Committee so that the members of that Committee may have the opportunity of jointly studying the imminent report of the Transport Committee and the evidence submitted to it on what is the most fundamental upheaval in the bus industry for over 50 years.]
Is my right hon. Friend aware that it is possible that hon. Members selected to sit on the Standing Committee will
1110
not be in possession of the Select Committee report or of all the evidence which is relevant to the most major change in the bus industry for over 50 years? Does he agree that the House and the Standing Committee should have that evidence before they begin their deliberations on the Bill?
Mr. Biffen: I am sure that my hon. Friend will be fair-minded enough to acknowledge that a balance of factors has to be assessed when choosing the time for the Second Reading of a Bill. My hon. Friend might be able to make his point at greater length during the Second Reading debate.
Mr. Allan Rogers: Will the Leader of the House find time for us to discuss the wearing of Her Majesty's uniform by persons not entitled to do so, especially in view of the limited military experience of the Secretary of State for Defence?
Mr. Biffen: I am not in a position to do a comparative assessment of the military experience of my right hon. Friend and the hon. Member for Rhondda (Mr. Rogers), but I have noted his intriguing proposition.
Mrs. Edwina Currie: Has my right hon. Friend noticed that today marks the start of the electrification of the east coast line—the biggest British Rail development in 25 years, involving an expenditure of £300 million and the employment, mainly in the private sector, of about 3,000 people, including many from my constituency? Since this clearly shows that, despite their critics this Government do invest in and are interested in the infrastructure, can we please have another debate on the subject soon?
Mr. Biffen: I note with great approbation the record related by my hon. Friend. I cannot be forthcoming in promising additional parliamentary time for debating the topic, but with a modicum of ingenuity my hon. Friend might be able to comment further during the Second Reading of the Transport Bill.
Mr. Terry Davis: Since the right hon. Gentleman seems to be blaming the Select Committee for the delay in arranging a debate on the public expenditure White Paper, will he have a word with the Chairman and ask him to get a move on?
Mr. Biffen: It is not true to assert that I implied that any blame should attach to the Select Committee.
Mr. Michael Latham: Before we have the debate, which my right hon. Friend half promised, on the regulations limiting the list of NHS drugs, may we have a statement explaining what will be on that list and, more seriously, what will not be on that list?
Mr. Biffen: I shall certainly convey that request to my right hon. Friend the Secretary of State so that he may consider it when assessing how best to proceed with the parliamentary handling of the matter.
Mr. Sidney Bidwell: May I refer the right hon. Gentleman again to the attitude taken by his two predecessors in relation to Select Committee work and again refer to the early-day motion on the Order Paper signed by members of the Select Committee asking for the presentation of the Transport Bill to be delayed until the Select Committee's report is completed? I raise the matter with the right hon. Gentleman as a matter of principle and

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so that he can ensure that this does not happen again—that is, if he attaches any importance to Select Committee work at all.
Will the right hon. Gentleman take on board the growing feeling that, when the Bill proceeds to Committee it should be dealt with under the new Special Standing Committee procedure? Is the right hon. Gentleman aware of the widespread concern about the Bill, which will cause the biggest upheaval in the bus industry for 50 years? Since there is anxiety across the political boundaries, does the right hon. Gentleman agree that the Bill should be considered under the new procedure so that evidence can be taken from interested parties?
Mr. Biffen: I recognise the desirability—when, from all viewpoints, it is practical—of having the views of the Select Committee ahead of the Second Reading debate. That is why I have been particularly anxious to establish that in no sense was I implying that there were any faults with the Select Committee in this matter. As I say, a number of factors help to weigh with the timing of a Second Reading debate, although I take the point that is made to me. The point made by the hon. Gentleman in the second part of his question will be considered, although at first sight it does not seem to be a Bill which falls within the original criteria which were appropriate for legislation. We will see how we go.
Mr. Tim Yeo: Although I readily recognise my right hon. Friend's reluctance to grant time for a further debate on the coal mining strike, does he agree that an aspect of it that deserves the attention of the House is the way in which NUM members were denied a ballot and are now voting in increasing numbers with their feet?
Mr. Biffen: My hon. Friend makes a pertinent point, but I hope that he will excuse me when I say that we do not need a day's debate to demonstrate it.
Mr. William O'Brien: Is the Leader of the House aware that this is International Youth Year? If so, will he find time for the House to discuss unemployment among the youth of the nation? Does he agree that we should be considering ways of developing employment, particularly for the long-term unemployed, and that we should be crushing unemployment and poverty rather than people?
Mr. Biffen: The hon. Gentleman is absolutely right to draw the attention of the House yet again to the significance of unemployment in the totality of economic policy. As we approach the period of the Budget and all the debates that flow from that, I am sure that many of the points that he has in mind can be made in that context. I note what he says and I underline the importance of it.
Mr. Tony Marlow: As the majority of hon. Members on both sides of the House, privately if not publicly, share the view of my hon. Friend the Member for Stamford and Spalding (Sir K. Lewis) that it is better to put a timetable to any controversial measure at the beginning, rather than part way through its progress through the House, is he surprised that the Leader of the Opposition should be spouting the old gobbledegook about outrage against democracy? Is it not rather sad that tomorrow's man should still be trying to purvey yesterday's myths?
Mr. Biffen: The matter does not quite have that clean simplicity. I must ask my hon. Friend to show the proper sense of deference to the Select Committee on Procedure, the observations of which will, I am certain, form part of an interesting debate which awaits the House.
Mr. Allen Adams: It is said that last year the Secretary of State for Scotland authorised more than 70 phone tappings in Scotland. Will the Leader of the House arrange a debate on the subject of interference with private communications? This is clearly a matter of grave national concern, on which a White Paper has been presented?
Mr. Biffen: Perhaps we should proceed one step at a time in these matters. As the hon. Gentleman will realise, once I sit down, I am but John the Baptist for a much more significant statement that will shortly come from the Home Secretary.
Mr. Kinnock: John the Baptist?
Mr. Biffen: Yes—we know what happened to him!
Mr. Robert Atkins: May I press my right hon. Friend for an early debate on the Royal Air Force? The debate that we were to have had was delayed for reasons which were really the fault of the Opposition. Urgent and early decisions relating to the RAF need to be taken. We had debates on the Army and Navy in the latter part of last year. The need for a debate on the RAF is now pressing.
Mr. Biffen: My hon. Friend was the first to make the point to me when I announced the alteration in business, and I am happy to give him now the answer that I gave on that occasion—that arrangements will be made for such a debate in the reasonably near future.
Mr. Robert Parry: In view of the great concern of the National Union of Public Employees and other Health Service unions about the contact that some of their members may have had with people suffering from acquired immune deficiency syndrome, and in view of the worries of nurses, ancillary staff and ambulance personnel, will the Leader of the House urge the Secretary of State for Health and Social Services to make an early statement to the House about the action that the Government intend to take to allay the fears that exist?
Mr. Biffen: The hon. Gentleman raises what I believe to be an immensely important and deeply disturbing problem. I shall at once report his question and observation to the Secretary of State for Health and Social Services.
Mr. James Couchman: In view of the splendid efforts of the Royal Engineers, particularly the sappers of the Royal School of Military Engineering, yesterday at RAF Molesworth, which contrasted starkly with the shambles at Greenham common, will my right hon. Friend grant time to the House to debate the security for the perimeters of our defence establishments against marauding bands of anarchists and apologists from Moscow?
Mr. Biffen: After such a demonstration, why such a debate?
Mr. Kevin Barron: Will the right hon. Gentleman find time next week for a statement to be made about how the Prime Minister comes to be so muddled

1113
about the settlement applying to the National Association of Colliery Overmen, Deputies and Shotfirers in relation to the National Union of Mineworkers? There seems to be a clear contradiction, with the Prime Minister saying that the situation is still open, and NACODS this afternoon condemning what it regards as nothing short of a ripping up of that agreement by the National Coal Board, and everybody knows that the NCB is supported by the Government.
Mr. Biffen: I appreciate that the hon. Gentleman is doing his best to salvage what he can from a difficult afternoon—[Interruption.] I shall of course see that his anxieties are represented to the Prime Minister.
Mr. Harry Greenway: Will my right hon. Friend accept that I speak as a confirmed non-smoker when I explain that this week I met a number of the 718 constituents of mine who work in the tobacco industry and who are concerned about the pressure that is being placed on people as they choose whether to smoke? While they accept that smoking should be taxed and that there should be a reasonable degree of propaganda explaining the dangers connected with smoking, they are concerned lest they suffer unreasonable pressure in their jobs as might come from the removal of the royal warrant which has been applied to some companies. Will my right hon. Friend arrange for an early statement to be made on the subject so that it may be discussed in a balanced and fair way? People's jobs are at stake.
Mr. Biffen: I am not sure whether the House has authority in the matter; therefore, I cannot be forthcoming in my reply to my hon. Friend, except to say that I will look into the point that he raises.
Mr. Geoffrey Lofthouse: May I impress on the Leader of the House the seriousness of the decision that has been taken by the executive committees of the NUM and NACODS today? Is he aware that, if the Prime Minister does not now allow the NCB to negotiate an honourable settlement to the mining dispute, there could be a complete closure of the mining industry? Is he aware that the best possible answer would be for the Prime Minister to take the reins of the NCB and that, if she does not do that, she should tell the House why?
Mr. Biffen: I have told several Opposition Members, not least the right hon. Member for Blaenau Gwent (Mr. Foot), that I would pass their anxieties to the Prime Minister. I shall add to those the anxieties now expressed by the hon. Gentleman.
Mr. Michael McGuire: Will the right hon. Gentleman endeavour to get the Minister responsible for the mining industry — the Secretary of State for Energy—to make a statement to the House next week? Will he impress on him the fact that NACODS is now joining the NUM in demanding open negotiations without preconditions? It is to be hoped that that demand will not be—as it has been in the past—contemptuously spurned by the Prime Minister, remembering that NACODS has a statutory duty for maintenance and for the safety of men underground.
Is the Leader of the House aware that, if the NACODS men withdraw their Labour—this was pointed out in the
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debate on Monday — the consequences will be disastrous? I urge the right hon. Gentleman to see that a statement is made by the Secretary of State for Energy to the effect that the Government welcome with open arms the resumption of talks without preconditions. Is anybody seriously suggesting that if NACODS and the NUM withdrew their labour, the Government would still insist that negotiations could be resumed only with preconditions? In such a situation, they would welcome with open arms any offer of talks. They should be giving such a welcome to the resumption of talks now.
Mr. Biffen: Everyone in the House — on the Conservative Benches as well as the Opposition — is anxious to see a settlement to that dispute. I do not believe that it would be a proper use of next week's business for me to engage in a debate on the various and somewhat contentious points raised in the hon. Gentleman's preamble, but as it was attendant upon the proposition that I should refer the matter to my right hon. Friend the Secretary of State for Energy to secure a statement next week, I shall, of course, make that request.
Mr. Allan Roberts: Will the Prime Minister arrange for a statement next week from the Secretary of State for Trade and Industry about the way that the Association of British Travel Agents works, in the light of the fact that the people who liquidated Budget Holidays only a few weeks ago are now floating a new travel company that will operate out of Scotland and which has obviously been bonded by ABTA? Will he get the Secretary of State for Trade and Industry to explain also how Buckingham palace has an ABTA number? It seems that "Her Majesty's bucket shop" is being run from Buckingham palace without any bonding or high street shops. I am not suggesting that the royal family books cheap flights to Mustique, but the staff are avoiding the rules and regulations, and ABTA must be involved in that. I am proud to be receiving an honour from my school, because after this I do not think that I will get one from Buckingham palace.
Mr. Biffen: It is nice to know that that deprivation causes grief. I shall of course refer those points to my right hon. Friend the Secretary of State for Trade and Industry.
Mr. Jack Straw: Is the Leader of the House aware that the Government have now guillotined in Standing Committee more Bills in five years than previous Governments guillotined in 20 years? Given the fact that good progress has been made in Committee—there has been no filibustering from the Opposition; the longest speech has come from Ministers and his hon. Friend the Member for Northampton, North (Mr. Marlow)—and that this is a major constitutional measure which would on current progress get through within this parliamentary Session, how can he justify curtailing discussion at this stage?
Mr. Biffen: It is kind of the hon. Gentleman to reinforce his article in The Times with yet another preview of the speech that he hopes to make on Monday. I am afraid that I cannot extend a similar courtesy.
Mr. D. N. Campbell-Savours: Will the Leader of the House ask the Secretary of State for Social Services to make a statement to the House on why he has directed that the south Cumbria district health authority gives the cleaning contract for south Cumbria to a private

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Blackpool cleaning operator when the in-house tender by the Roose hospital authorities in Barrow-in-Furness was cheaper? As the Government are supposed to be pursuing the cheapest course, why does not the district health authority take the cheapest tender and allocate the contract to the National Health Service in-house contractor? Is that not an abuse of the rules and of the Secretary of State's position?
Mr. Biffen: I am in no sense in a position to comment upon the merits of the case raised by the hon. Gentleman, but I shall refer the point that he makes to my right hon. Friend the Secretary of State for Social Services.
Mr. Max Madden: Does the Leader of the House agree that if the allegation is true that a Minister in the Department of Employment referred to black Britons as people from Bongo Bongo Land, he is unfit to serve in even this Government? Will the right hon. Gentleman take this opportunity to confirm or deny that allegation? If it is true, will he tell the House that the Minister's letter of resignation is now on the Prime Minister's desk?
Mr. Biffen: Everything that has been associated with that incident, including that question, persuades me that the silly season is starting somewhat earlier than usual.
Mr. Dave Nellist: May I endorse the calls made by my right hon. and hon. Friends for a statement on the miners' strike on Monday next week, as that is the day when hundreds of thousands of workers in Humberside, Yorkshire and the south-east will be taking industrial action in support of the miners? Secondly, the Leader of the House replied to an earlier question on International Youth Year. If he is thinking of a statement or debate on youth issues, will he arrange it for Thursday the 28 of this month—three weeks today —on the subject of the disgraceful proposals coming out of the Department of Health and Social Security to remove 234,000 16 and 17-year-olds from the right to supplementary benefit? I can promise him something—
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there will be over 5,000 youngsters outside the House on that day to show that young people will not take that suggestion easily.
Mr. Biffen: On the second point, we had a good-natured exchange last week, and I have nothing to add to what I then said. On the first point, I shall, of course, add the hon. Member's voice to the others when making the observations that I will to my right hon. Friends the Prime Minister and the Secretary of State for Energy.
Mr. Martin Flannery: Since the Government's policies are increasingly driving new sections of industry, as well as the miners, to desperation and into industrial action— a vote for the Tories now seems to be a vote for industrial action—and since the teachers, who are normally well-behaved people, have been driven to the point of desperation—their industrial action is developing and will develop on a grand scale—will the Government consider making a statement on that industrial action as well as on the others that they have caused, so that we can discuss the matter properly?
Mr. Biffen: I hope that the hon. Gentleman is neither encouraging nor exhorting industrial action. I shall, of course, draw the attention of my right hon. Friend the Secretary of State for Education and Science to the points that have been raised.
Mr. Terry Lewis: Will the Leader of the House consider providing time for a debate upon the closure of the DHSS resettlement centres, which was announced a day or two ago? Will he take it from me that many of us are dismayed, to say the least, that such an important announcement was made through the device of a written question?
Mr. Biffen: As the hon. Gentleman will appreciate, next Tuesday the Department of Health and Social Security is first for questions in the House, but I shall of course draw the attention of my right hon. Friend the Secretary of State for Social Services to the point that has been made.

Interception of Communications
4.16 pm
The Secretary of State for the Home Department (Mr. Leon Brittan): With permission, Mr. Speaker, I should like to make a statement on the interception of communications on which the Government have undertaken to introduce legislation in this Session.
I am today presenting a White Paper on the interception of communications in the United Kingdom. Copies are available in the Vote Office. The White Paper sets out the present position on interception authorised by all the Secretaries of State concerned. It outlines the main features of the Bill which the Government will introduce next week in fulfilment of their undertaking, and it describes how effect will be given to the legislation. It supplements the White Paper published in 1980 and gives the figures for the number of warrants issued by the Home Secretary, the Secretary of State for Scotland and the Secretary of State for Foreign and Commonwealth Affairs in recent years.
I should stress at the outset that the Government are not through the proposed legislation in any way either seeking or permitting the extension of the present scope of interception. The Bill will, however, establish a comprehensive statutory framework for the interception of communications, which are defined for these purposes as all forms of telecommunications in the public networks and also the post. It will incorporate into the law the existing stringent controls and limitations. It will define the grounds on which a Secretary of State will be empowered to authorise interception. These are in line with existing practice and are narrower than those specified in the European convention. They will be national security, the prevention and detection of serious crime, and the safeguarding of the economic well-being of the United Kingdom. In the latter case interception will be permissible only when it is for the purpose of obtaining information about events outside the country. Unauthorised interception will be made a criminal offence.
The legislation will also greatly increase the existing safeguards, not only by creating the new criminal offence, but also by providing a means of redress for those wishing to complain that interception has been improperly authorised. An independent tribunal will be established to adjudicate on complaints. It will be able to get at all the facts, and if it concludes that the issue of a warrant does not come within the statutory criteria it will be able to quash the warrant and award compensation. The post of the existing monitor of interception arrangements will be replaced by a statutory commissioner. He will be given the task of keeping under continuing review the exercise of the Secretary of State's powers and all the arrangements to do with the issue and execution of warrants. The Bill will lay down requirements to secure the proper handling of intercepted material.
Communications of the kind covered by the Bill merit special protection because they are committed by somebody into the custody of a carrier over whom he has no control. Legislation to deal with other aspects of privacy, such as surveillance, gives rise to quite different and so far unresolved issues.
Parliament will shortly have the opportunity to consider the provisions of the proposed Bill in detail, though hon.
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Members will appreciate the constraints which must inevitably apply to what can be said about some aspects of these matters. The interception of communications is always distasteful but sometimes essential if serious crime is to be thwarted, terrorism effectively combated and our national security adequately safeguarded. But it is right that the extent of interception should be strictly limited and a means of redress provided where it has wrongfully taken place.
I commend the Government's proposals to the House. I believe that they strike the right balance and that they will ensure that that balance is effectively maintained.
Mr. Gerald Kaufman: I thank the Home Secretary for letting me see an advance copy of the White Paper published today. In view of the issues involved, I suggest that when the legislation comes before Parliament the use of the Special Standing Committee procedure should be considered.
I pay tribute to Mr. James Malone, without whose court action and application to the European Court of Human Rights the Government would not have felt obliged to introduce the legislation foreshadowed in the Home Secretary's statement.
The White Paper refers to the backstop safeguard to be built into the Bill in the form of the tribunal. Who will appoint that tribunal, and how will its essential independence be safeguarded?
I suggest that the Government's proposals should be judged in accordance with the statement of Mr. Justice Megarry in the Malone case. He said that
"telephone tapping is a subject which cries out for legislation … in any civilised system of law the claims of liberty and justice would require that telephone users should have effective and independent safeguards against possible abuses."
In the light of those words, the Government's proposals arouse some profound misgivings rather than allaying them. As the White Paper makes clear, telephonic interception is carried out by
"British Telecommunications and any other public telecommunications operators licensed under the Telecommunications Act 1984".
Any form of surveillance gives rise to anxiety, but there has been a change since the 1980 White Paper. BT is no longer a public corporation, and under the legislation privately owned licensed operators will be able to tap telephones. We have the gravest misgivings about authorising private agencies to intercept the communictions of private citizens or democratic organisations.
The White Paper also does not cover providing access to the results of telephone metering. Yet the European Court in its judgment six months ago specifically said:
"Metering amounts to interference with the exercise of a right guaranteed by Article 8"
of the convention. How does the Home Secretary intend to deal with that aspect?
Above all, we are extremely worried by paragraphs 21 and 22 of the White Paper. Referring to the issue of warrants
"in support of the Government's defence and foreign policies",
paragraph 21 uses phraseology not previously used in any White Paper or public document on this matter. The incorporation of such a provision into legislation would open the way to surveillance for almost any purpose. For instance, it could be used in connection with the grotesque and ominous operation at Molesworth, in which the Secretary of State for Defence has been disporting himself as a bargain basement version of John Wayne.
Mr. Dennis Skinner: He bought himself out of the Army for that.
Mr. Kaufman: He has the funds.
Paragraph 22 also arouses great concern. It states:
"The legislation will empower the Secretary of State to issue warrants where they are necessary for safeguarding the economic well-being of the United Kingdom, but only if they are for the purpose of acquiring information about matters outside the country. It is an important part of the Government's foreign policy to protect the country insofar as it can from adverse developments overseas affecting the well-being of the economy. Foreign intelligence which may be necessary in support of the Govermnent's foreign policy will on occasions include foreign intelligence which is necessary for the protection of the economic well-being of the country."
I appreciate that the phrase "economic well-being" is covered by the European convention, but how far will that be expanded in the legislation and in the exercise of the powers? Will it be used, for example, for the surveillance of communications by currency dealers as the level of the pound is a matter of economic well-being? Will it be used for the surveillance of international trade union links in connection with, say, the miners' strike? It could be used for partisan political purposes disguised as the national interest.
What the legislation contains and omits is fundamental to civil liberties and human rights. We shall scrutinise the legislation minutely to ensure that it does not open the door to the expansion of Big Brother State.
Mr. Brittan: On the last point, far from expanding Big Brother State, the legislation will for the first time put on a statutory footing the exercise of a power which has very properly been exercised by Governments of all political complexions for many years. The addition is not a broadening of the exercise of power but the provision of safeguards—effective safeguards, in my view—which did not previously exist. It is therefore in a spirit of readiness to have the legislation measured against the kind of test described by Mr. Justice Megarry that I present the Government's proposals to the House.
I am not sure that this legislation is best suited to the Special Standing Committee treatment, but I shall discuss the matter with my right hon. Friend the Leader of the House. My only comment on the Malone case is that the Government were committed to legislate in this area before the European Court made its judgment. The case for legislation did not arise merely as a result of the litigation before that court.
The Bill will provide that the tribunal should be appointed in the same way as the Ombudsman. The Crown, on the advice of the Prime Minister, will make the appointment by letters patent. Members of the tribunal will be distinguished legally qualified people chosen because they will command the confidence of both the House and the country.
British Telecom will be merely the agent of the interception ordered by the Secretary of State. The operations of British Telecom will be controlled and regulated by law in a very firm way. I do not believe that the change in commercial status will make any difference to that regulation.
I draw the attention of the right hon. Member for Manchester, Gorton (Mr. Kaufman) and the House to paragraph 17 of the White Paper, which deals with access to metering in a reasonable way.
The right hon. Gentleman expressed anxiety that paragraph 21 would permit surveillance for any purposes.
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He made an number of hypothetical suggestions. I do not think that he is right. The requirement of national security, for example, has appeared in no fewer than 50 different statutes without definition and has been regarded as acceptable by Governments of both political parties. Several of the statutes were introduced by Labour Governments.
The right hon. Gentleman referred to the criterion of safeguarding the economic well-being of the country and asked how much that would be expanded in the Bill. The answer is that it will not be expanded at all. That will be the criterion. What is more, the Secretary of State will have to judge that information relating to events and information overseas must necessarily be intercepted for the purpose of the economic well-being of the country. There will be further protection. If it is felt that interception has taken place that is not necessary for that purpose, the tribunal will have full power to look at the facts, quash the interception and award damages.
Sir Edward Gardner: Can my right hon. and learned Friend confirm that any legislation restricting the use of telephone tapping will apply to the police special branch? Further, is he satisfied that the operations of the special branch are effectively co-ordinated and properly controlled?
Mr. Brittan: Yes, I can confirm that the special branches will be subject to the legislation. They operate under the guidelines that I issued last December. Under the previous guidelines, the terms of reference of the special branch were not made public. The Government decided to make the guidelines public, and also decided that they should involve a considerable tidying up of the operations of the special branch in that area.
Dr. David Owen: As someone who has had to authorise interceptions, I welcome the introduction of this legislative framework. It is long overdue that administrative discretion should in some way be checked and safeguarded.
I am concerned about the appointment of the independent tribunal. The tribunal is the most crucial safeguard in the legislation. The tribunal is unlike an ombudsman, in that it will in effect investigate the judgment of the Secretary of State. There is a strong case for saying that the House should authorise the appointment of the members of the tribunal. At the very least, there should be a mechanism for consultation among the parties so that the appointments are not seen as an aspect of Government patronage when it is the Government themselves and their decisions that are to be scrutinised. These important appointments should be made objectively.
Mr. Brittan: I am glad that the right hon. Gentleman, with his experience of such matters, welcomes the proposed legislation.
I shall, of course, consider what the right hon. Gentleman said about the tribunal, but I do not think that in practice that aspect of the matter will cause any great difficulty. We are talking about the appointment of a body which will essentially exercise judicial functions, deciding whether or not an interception which has been authorised falls within the statute.
The courts of this country scrutinise the operations of the Government and, as Ministers of all Governments have

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found, do not hesitate to strike them down, although the appointments are made in the normal way. It will not be difficult to find a way of appointing people who will command general confidence. There would be no point in any appointments which did not have that effect.
Mr. John Wheeler: I congratulate my right hon. and learned Friend on introducing proposals that are important from the point of view of civil liberties. However, can he confirm that the important decisions to be made in connection with these issues will be made by him personally and not by officials?
Mr. Brittan: I can give my hon. Friend that confirmation. That has always been the case, and will continue to be the case. I scrutinise each application made to me to make sure that it meets the relevant criteria. The procedure is the same for the Secretaries of State for Scotland, Northern Ireland and Foreign and Commonwealth Affairs. Such applications are prepared at a high level and scrutinised personally by the relevant Secretary of State—not even by any other Minister in the Department.
Mr. Bruce Millian: I welcome the Government's intention to put the whole business on a statutory basis. However, the criterion of the economic well-being of the country is new. It has not been necessary before. Why is it necessary now?
Secondly, someone who may have legitimate cause for complaint may not be aware that his telephone is being tapped, so the case will never come before the tribunal. Is the tribunal to investigate only authorised interception, or will it be able to inquire into possible unauthorised interceptions by, for example, the police or the security services? It is in that area that many of us feel the greatest disquiet. There is a feeling that a good deal of unauthorised interception takes place, regardless of the authority of any Secretary of State.
Mr. Brittan: The economic criteria have not been publicly stated in this way before, but they are not new. Right hon. Members on both sides of the House who have exercised such responsibilities will be aware of that and will be able to confirm that that is true. Such power has not been exercised by the Secretary of State for Scotland but, as the White Paper makes clear, the power has been exercised by the Secretary of State for Foreign and Commonwealth Affairs. The Bill will not extend in any way the area in which those powers are exercised.
It may well be that someone will not know whether or not his telephone calls, for example, have been intercepted. It has been the practice of Governments of both political parties never to confirm or deny whether an individual interception has taken place. Whichever answer was given, the consequences would be obvious to people who might be involved in drug trafficking or terrorism. That would be very dangerous. Anyone who has suspicions will be able to refer them to the tribunal, which will have access to the relevant information and will be able to establish whether there had been interception—authorised or not—and whether, if the interception was authorised, that authorisation was properly given.
Sir Paul Bryan: I congratulate my right hon. and learned Friend on a commonsense approach to
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a sensitive problem. To what extent will the provisions of his statement affect the strict guidelines already issued to the police on the issue of surveillance equipment? Does not telephone tapping frequently play an effective part in the detection of criminals?
Mr. Brittan: It does indeed. The legislation and the proposed scheme fit in entirely with the tightened-up guidelines on surveillance. The guidelines on the use of equipment in police surveillance operations were issued on 19 December 1984, and a copy was placed in the Library of the House. The guidelines laid down detailed criteria and procedures for the authorisation of the use of surveillance devices. Further, the guidelines are especially designed to ensure that police surveillance is not used as a back-door method of securing interception of telephone communications without a warrant from the Home Secretary.
Mr. A. J. Beith: Does the Home Secretary agree that the citizens of Britain ought to have more confidence than they now have, or can now have, that their communications will not be intercepted unless their activities, on overwhelming evidence, represent a great threat to their fellow citizens? Ought not the ultimate determination of what constitutes such a threat lie in the hands of other than those of politicians? Is the Home Secretary satisfied that, within the Bill and existing provisions, there is sufficient safeguard against the interception of communications by other countries operating in the United Kingdom?
Mr. Brittan: Safeguards against improper interceptions which are not in any way authorised by any agency of the Government cannot be guaranteed by legislation. That might be a matter of concern, but any interception that takes place outside the authorisation procedures of this legislation will, from now, be a criminal offence. That is new. Until now, a criminal offence has been committed only, for example, if it has been done improperly by British Telecom employees. There has not been a general criminal offence of unauthorised interception. This is a major step forward in the interests of protecting citizens.
I fear that politicians have to act in these matters, but those who have exercised such a responsibility agree that there is no exercise of ministerial responsibility which is looked into with greater care, and which is exercised in a less partisan way. This legislation provides, for the first time, an opportunity for an independent tribunal to express its view on whether the interception has been proper, and to quash the interception and award damages if something has gone wrong.
Mr. John Gorst: Does my right hon. and learned Friend recall that, on April Fool's Day 1981, his predecessor, Lord Whitelaw, as he now is, told me before I voted against the Government on this matter that statutory provisions would be unworkable? His reason was that interception must be secret and that the judicial process must be open. On those grounds he rejected the amendment which I and a couple of my hon. Friends tabled to achieve what my right hon. and learned Friend has now advanced. What has changed since then to make statutory provisions workable? Will it now be possible for an individual to take the Home Secretary, or the relevant Secretary of State, to the tribunal to discover whether his telephone is being tapped?
Mr. Brittan: An individual will be able to complain to the tribunal if he thinks that his telephone calls have been improperly intercepted and the tribunal will tell him whether the telephone calls have been intercepted improperly. It is important that individuals should not be told whether their telephone calls have been intercepted. Indeed, there are many circumstances in which it would be quite wrong for them to be told. The tribunal will consider whether there has been interception, whether it has been authorised and whether the authorisation was proper. If there has been improper interception, that will be made clear, compensation can be given, and the order can be quashed. If there has been authorised interception, the tribunal will merely say that there has been no breach of the Act.
As to what my hon. Friend said about my right hon. and noble Friend the Lord President of the Council in 1981, producing a legislative framework has not been easy. The difficulties to which my right hon. and noble Friend referred were real and should not be underestimated. I hope that, now that my hon. Friend has got the legislation that he sought, he might look forward rather than backwards, when the difficulties seemed greater.
Mr. Harry Ewing: The statistics concerning annexe 2 are explicit but, to complete the picture and to advise the House and the country how widespread the practice is, could the Home Secretary give the number of applications for warrants which were made and refused, rather than those which were made and granted? If he does not have those figures to hand, will he make them available? Has he refused to grant any applications for a warrant?
Mr. Brittan: I do not have the figures to which the hon. Gentleman asks, but I do not think that producing them will be quite as easy or helpful as the hon. Gentleman suggests. I shall explain why. The process is not a straightforward one by which the agency says, "Here is an application. Yes or no?" Unless there is urgency, there is much interchange between the agency and those who advise the relevant Secretary of State. An application might not be made formally if it is made clear that it is unlikely to be granted.
Mr. Michael Mates: I warmly welcome my right hon. and learned Friend's proposals. Will he remind the House of the crucial importance of proper interception of communications in the battle against terrorism? Will he take this opportunity to confirm that any part of the legislation that he produces will not make that difficult job even more difficult?
Mr. Brittan: I am grateful to my hon. Friend for his comments. He is right in saying that the role of interception in the battle against terrorism is extremely important. The Government's proposals provide a framework in which the carefully controlled use of intercept can continue to play an important part in combating terrorism. I assure my hon. Friend that the safeguards and advances that I have described will not prevent the proper use of this weapon, where necessary, against that evil threat to our society.
Mr. John McWilliam: Is the Home Secretary aware that the Post Office Engineering Union, which sponsors me, welcomes his intention to legislate on this matter? Indeed, it has been calling for such legislation
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for more than five years. Is he further aware that his answer to my hon. Friend the Member for Falkirk, East (Mr. Ewing) about refusal to grant interception warrants makes me more worried about this legislation than I was when I came into the Chamber? Is he also aware that his saying that an application would not come forward when it would not be granted can only confirm what right hon. and hon. Members have been saying for years—that the interception is done in any case? The legislation does not cover that. Is the Home Secretary further aware that what he suggests in paragraph 21 of the White Paper would have made the Watergate affair legal if it had happened in Britain? We cannot tolerate that for long. He could have avoided all of this by accepting the amendment in which the hon. Member for Hendon, North (Mr. Gorst) and I had a hand in 1981.
Mr. Brittan: I do not accept the hon. Gentleman's latter point. As to his first one, there has been a genuine misunderstanding. I said not that the application would not come forward because the interception is made anyway, but that the application would not come forward because, in the circumstances to which the hon. Gentleman referred, it would clearly be refused.
Mr. Teddy Taylor: I welcome my right hon. and learned Friend's proposals. Can he reassure people who might question the need for interception in any circumstances by outlining some of the achievements and progress in the battle against crime and drug abuse, for example, as a result of the controlled use of telephone interception?
Mr. Brittan: It is difficult to do that without quoting individual examples. However, the police in England and Wales estimate that, in the past 10 years, they have been able to make more than 5,000 arrests, to recover about £40 million-worth of stolen property and to seize drugs valued in excess of £50 million as a result of interception.
Mr. Dafydd Wigley: I welcome the move towards legislation, but will the Home Secretary say whether in the matter of surveillance, for which guidelines were issued before Christmas, the Government intend to move towards a legislative framework? Is he aware of the misgivings about paragraph 21, which effectively says that the Secretary of State may issue warrants in support of the Government's defence and foreign policies? Is that not a licence to tap the telephone of any member of Campaign for Nuclear Disarmament?
Mr. Brittan: The answer to the hon. Gentleman's first point is that the legislation deals with interception, not with surveillance. I hope the hon. Gentleman will feel that the guidelines published in December, which amount to a considerable tightening-up of the previous arrangements, show that we recognise the concern about surveillance, and are prepared to take action to the extent that that is possible. It would be wrong to hold out any prospect of legislation in that area.
With regard to CND, the hon. Gentleman was present in the House when on another occasion I said that there was no question of special branch interception or interest in any organisation which campaigns in a legitimate way for legitimate political objectives however contrary they may be to the interests and policies of the Government.
Mr. Michael Howard: I welcome my right hon. and learned Friend's announcement, but can he clarify the nature of the European Court's ruling? Was objection taken to the current practice or to the manner in which the power has been exercised, or was it simply to the absence of a statutory basis for the power?
Mr. Brittan: My hon. and learned Friend raises an important point. The European Court made no criticism of the procedures by which interception is authorised, nor did it comment on the merits of the use of interception in the case before it. Its only criticism was that the law in the United Kingdom did not spell out sufficiently clearly the scope of the power to authorise interception or the criteria for its exercise. Our proposal will meet that criticism and go further by reinforcing the safeguards against abuse and by providing a remedy for the individual.
Mr. Jeremy Corbyn: May we take the Home Secretary's statement as a retrospective apology to the House, because he and his immediate predecessor have stood at the Dispatch Box and told the House that nothing is wrong with the way in which telephone tapping is carried out? As he will legislate on the matter, will he tell the House whether complainants will have a right to be legally represented at the proposed tribunal?
Mr. Brittan: There is no question of apologising, because there is nothing for which to apologise. As I have said, the area covered is the same as that which has existed until now. Nothing improper was done in past practice. This legislation provides for a statutory framework within which to operate, and extra safeguards for citizens. Therefore, I feel no need to apologise for myself or my predecessors, on either side of the House. We may consider legal representation when we deal with the Bill.
Mr. Geoffrey Dickens: Is my right hon. and learned Friend aware that former Home Secretaries have told the House that they signed between 200 and 300 applications for warrants to tap telephones each year, yet it is common knowledge throughout the United Kingdom that we have specialised units capable of tapping thousands of telephone calls every day? I welcome the legislation, but will my right hon. and learned Friend give an undertaking today that, because of public anxiety about people having their telephones tapped, we shall be as flexible as possible with the
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legislation in Committee and will not make it a matter of political dogma, and that between us we shall try to get the legislation right for the sake of the British people?
Mr. Brittan: My hon. Friend is right to express the anxieties that undoubtedly exist about what I described in my statement as a disagreeable practice. I assure him that the figures set out in the White Paper are accurate. We shall debate the Bill fully and, I hope, in the spirit that has been shown in our exchanges so far this afternoon.
Mr. Skinner: Will the Home Secretary give a categorical assurance from the Dispatch Box that none of the trade union leaders involved in the miners' strike have had their phones tapped during the past 11 months?
Mr. Brittan: The hon. Gentleman will know why it is impossible to give such an assurance. As I said in answer to a previous question, it is never the practice in the case of individuals either to confirm or deny whether interception has taken place.
Mr. Derek Spencer: Will my right hon. and learned Friend confirm that during the Malone case the European Court accepted that the present procedures were effective in keeping the number of warrants at a low level, notwithstanding the increased use of the telephone and the increase in the level of serious crimes?
Mr. Brittan: My hon. and learned Friend is right. The figures published in the White Paper must be taken in the context of a massive increase in the use of the telephone. It is fair to consider them in that context. If they are considered in that way, they show a greater degree of restraint than if the absolute numbers are considered cold.
Mr. Peter Bruinvels: Is my right hon. and learned Friend aware of the anxiety felt at the time of the European Court's judgment on James Malone? Conservative Members greatly supported the independence of the Home Secretary that day. Will he therefore confirm now that his powers will in no way be hampered to secure and ensure the protection of this country in the interests of national security?
Mr. Brittan: I believe that the framework that I am announcing will enable me, and my other right hon. and hon. Friends who exercise these powers, to do what my hon. Friend wants. At the same time, it will provide a satisfactory statutory framework and enhance protection for individuals.

Water Authorities (Return on Assets)
Mr. Speaker: Before I call on the hon. Member to move the motion in the name of the Leader of the Opposition, I should say that today's debate is not one of those in which I am empowered to use my discretion to impose a limit of 10 minutes on speeches in the early evening. However, it is clear that many right hon. and hon. Members wish to speak and, therefore, I appeal for reasonably short speeches.
4.57 pm
Mr. Jeff Rooker: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Water Authorities (Return on Assets) Order 1984 (S.I., 1984, No. 1995), dated 17th December 1984, a copy of which was laid before this House on 7th January', be annulled.
I hope that it is convenient for the House to debate the second motion on the Order Paper:
That an humble Address be presented to Her Majesty, praying that the Water Authorities (Return on Assets) Order 1985 (S.I., 1985, No. 78), dated 24th January 1985, a copy of which was laid before this House on 24th January, be annulled.
I shall wish to move it formally later, Mr. Speaker, and we shall seek to divide the House upon it.
Mr. Speaker: If that is the wish of the House, so be it.
Mr. Rooker: We should not commence the debate without being aware that water is a natural resource and that we have today received the report of the Health and Safety Commission on the tragedy of the Abbeystead pumping station, in which many people lost their lives. Although we shall argue about finance, we should remember that in that tragic case we paid a high cost in human terms for ensuring that water reached our constituents' taps.
The water authorities are executive boards of Government. Members are appointed by Ministers of the Crown. They are subject to ministerial direction and control, and Ministers are accountable to Parliament. That brief description was given by a Minister at the Dispatch Box last Friday. The first question that will have to be disposed of is why we are here in mid-February—less than two months from the end of the financial year—debating whether to give Ministers retrospective approval for the directions and financial control they gave to water authorities behind closed doors at the end of 1983 and early 1984 for the year 1984–85, which is almost at an end.
The House is simply being asked to act as a rubber stamp on the first order. The effect of annulment within a few weeks of the end of the financial year was never contemplated by Ministers. There have been complaints about that in the past. In response to the complaints, the Government said in February 1984 in Cmnd. 9138:
"The Government accepts the desirability of laying before Parliament at the earliest opportunity the Orders which set the financial targets for water authorities."
That abuse of the House must stop. It is useful to put it on the record that we do not expect the House to be asked in future merely to be a rubber stamp.
We cannot stop the abuse today, but for 1985–86, which is what the debate is about, the award for making Ministers accountable to the House in time for us to take action must go to Mr. Roy Watts, the chairman of Thames water. With single-figure inflation, he and the other chairmen are being
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asked to increase water charges by double figures. Most want and need increases at about the rate of inflation. Thanks to Mr. Watts's insistence that he would not increase water charges beyond 3 per cent. without an order from Parliament, we are having this debate today. I should add that he is supported by his board of ministerial appointees.
The question that we must ask ourselves today is whether Parliament should give its approval to tax water through the orders. Can we all defend the proposal to our constituents, all of whom use the commodity?
Perhaps we are all here by mistake—a mistake of the Chief Secretary to the Treasury. It was reported in the Financial Times yesterday that during the bilateral negotiations with the Department of the Environment he lost,
"the Treasury's fall-back position."
He stuck to his initial demand because he forgot what his second demand would be, and apparently the Environment Ministers gave way to him. I am sure that some time today we shall be told that a highly respected journalist on the Financial Times, Mr. Robin Pauley, got it wrong. However, we may be here by mistake.
We must decide whether the 1985–86 order taxes water, and I submit that it does. The CBI takes that view, as does the National Farmers Union. In the words of the Water Authorities Association, the water industry is being asked to
"make more money than is necessary to run the industry."
A reason given by a previous Secretary of State for the Environment, now the Secretary of State for Employment, for the reorganisation of the water authorities, and which was repeated in the 1983 Conservative election guide at page 289, was:
"Customers have not felt that they were really represented."—[Official Report, 7 July 1982; Vol. 27, c. 293.]
Following that reorganisation, dozens of water consultative committees were set up. They were meant to be a voice for the consumer, especially the industrial consumer. But they were not consulted about this proposal, and, so far as I am aware, none is in favour of it. Indeed, given that the water authority chairmen learnt of the proposed change only from television and radio after the Chancellor of the Exchequer's autumn statement, it is hardly surprising that the consultative consumer committees were completely ignored.
It is clear—I hope that it will not be a point of argument—that income collected on rateable value, as is half of water authorities' income, is a charge based on a taxing instrument, not a charging device. That is not an unimportant point. This is neither the time nor the place for a seminar or a long debate on current cost accounting. I for one would not be qualified to participate in such a debate, let alone to lead it on behalf of my hon. Friends. Anyone who compares the replacement cost of reservoirs with that of aircraft and says that it should be handled on the same basis will, in many people's view, be nothing less than a water wally. The attempt to revalue assets each year can be futile. There were not too many aircraft around when many reservoirs were under construction. It is easy to check the current value of an aircraft and its replacement — one telephones the British Aircraft Corporation or Boeing. We would need a time machine to do that for the water industry.
I suspect that, as yesterday, we shall be told that Price Waterhouse claims that current cost accounting for the

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water authorities is, "soundly based and sensible". Of course, as a partnership, Price Waterhouse does not publish accounts, so we cannot tell how it would cope with such a procedure. I rest my case on the report of the Monopolies and Mergers Commission, which in 1981 examined a water authority. That was the year in which the Price Waterhouse report was published. It stated:
"All the regional water authorities have encountered problems in assessing the present day replacement values of their substantial and in many cases highly specialised fixed assets … Knowledge of the extent and condition of the water industry's mains and sewers is incomplete, and uncertainties surround both the probable operational lives of these assets and the techniques that may be employed to facilitate renewal and refurbishment in situ."
That report on the Severn-Trent water authority and two private water undertakings was published as House of Commons Paper 339.
The Labour Government's White Paper on nationalised industries in 1978 cannot be prayed in aid in respect of water authorities. No targets were fixed at that time. In any event, if people wish to use that White Paper to prove their case, why have we not heard about it before? That argument will not stand up.
The current cost accounting techniques—I apologise to the House for going into some detail, but several points must be put on the record—involved in the statement of standard accounting practice No. 16, which has just lapsed, might be applicable to fixed assets such as aircraft, computers, machine tools and even buildings, but can they apply to Victorian-laid sewers, mains and reservoirs? The National Water Council, which no longer exists, set up a steering group to consider accounting techniques. It gave different estimates for the life of service reservoirs, mains and boreholes to the accountants Deloitte Haskins and Sells, which did the same job for the statutory private water companies. There was a difference of opinion even before the system began.
It is worth noting that the private water companies, which are not controlled by Ministers and whose borrowing is not included in the PSBR, were planning modest increases in charges of 2 to 3 per cent. The Essex water company is an example of that. But what are they doing? They are tagging along on the coat tails of the regional water authorities and jacking up their prices by double figures. That is Government-led inflation. There can be no other description of what is proposed by the private water companies.
The accounts of Thames water show it to be more profitable than ICI, Esso or Bowater, on any system of conventional accounting. That cannot be denied. Current cost accounting is disliked by private industry, and it has not gone unnoticed by the water authorities that, on the privatisation of British Telecom, one of the first actions was to scrap current cost accounting and to return to historic accounting.
Mr. Richard Tracey: Before 1979, did the Labour Government accept the principles of current cost accounting in relation to water authorities?
Mr. Rooker: The White Paper published by the Labour Government at the end of 1978 forecast changes in the financial structure of nationalised industries. That was never put into operation, but there was nothing in the White Paper about water authorities. No targets were set,
1130
as they are now, for a return on the assets of the water authorities. Since then, the water authorities have been reorganised. The system for those authorities was completely different before reorganisation.
I do not know—I challenge any hon. Member sitting on the Government Front Bench or on the Back Benches to give the House examples — of a private sector company that bases the figures on which it arrives at the prices of its products on a system of current cost accounting. They would not have a market for their products, whether it was ICI or British Steel or anybody in the private sector. Nobody does it. If they do, I think that we should have some examples today.
The system of current cost accounting is used—and in this case, we think, abused—as a cash generator, and in respect of a monopoly, of course, even more cash can be generated. Price is not a factor for water authorities. It is not for my constituents, and I doubt whether it is for the constituents of any hon. Member on the Government Benches. Obviously, in terms of industrial use, where there is large-scale metering, it would be. But the charge for water is not based on consumption, and the provision of water is a monopoly—this was reinforced by the Prime Minister in a written answer last week, in column 292 of the Official Report for 31 January, when she described it as a natural monopoly. She then seemed to dismiss privatisation of the water authorities because they were a natural monopoly of a crucial commodity.
From 11 million people, which is a quarter of the English electorate, in the Thames area, their water authority needs to collect and generate only £292 million in the coming financial year. This order demands that those 11 million consumers be charged £505 million, and this will still leave £12 million less for capital spending than had been originally planned. It is absolutely crazy.
Under this order, present-day customers will definitely pay more than the true cost of the service. That is taxation; it cannot be denied; it is a tax on taps; it is even a tax on toilets. We know that the Government's aims are lower inflation, increased capital spending and, we thought, more commercial freedom for the public sector. We are all aware that the Treasury has a Bill—or an owner's charter, as it has been described by some nationalised industry chairmen—to get even more control over the public sector than it has at present. The Bill was not mentioned in the Gracious Speech, but it is quite clear that one is being prepared for the next one. So we must take as our criteria for today, as the present state of the art, the five objectives for water authorities set out by the Parliamentary Under-Secretary for the Environment, the hon. Member for Sutton and Cheam (Mr. Macfarlane), in the Adjournment debate on 19 December 1984, at column 454. These were higher investment, greater efficiency, a reasonable rate of return, moderate charges increases, and a reduction in borrowing.
As far as higher investment is concerned, the Thames water authority, for 1985–86, will be able to invest under this order only £114 million against its planned £126 million—a drop of £12 million. In 1987–88 it will be able to invest only £129 million against its planned £166 million—a drop of £37 million.
For the North-West water authority, planned investment of £195 million in 1987–88 is cut under this order to £170 million, which is a drop of £25 million. That is what the chairman told me—I say this in case there is any

1131
argument about it— in writing before Christmas. The chairman of the North-West water authority, George Mann, says that the effect of the order
"in view of the state of the economy here in the north-west is extremely worrying".
The Lancashire water services council has told the CBI and right hon. and hon. Members that without this order charges in the north-west would be increased by an amount only marginally above the forecast for inflation. With this order it will be over 13 per cent. What a slap in the face for the north-west.
On the second point, greater efficiency, no one denies—and we applaud the fact— that virtually every water authority has achieved greater operating efficiency in the last two or three years. We congratulate them on that.
The third point which the Minister made was about the rate of return. This can deliberately be made to look artificially small with current cost accounting, when the assets on which the accounting is based are as specialised and as old as those in the water industry, 80 per cent. of which are under the ground. On profit against turnover water authorities are among the most successful 1 to 2 per cent. of businesses in this country. I repeat that, because it needs saying again and again. It is a tribute to those who run the industry and work in it. The water authorities are among the most successful 1 to 2 per cent. of businesses, based on profit against turnover.
On the fourth point, the Minister's objective of moderate charges increases is destroyed completely by the order. Thames planned 3 per cent., the Minister says 10 per cent.; Yorkshire planned 4 per cent., the Minister says 12 per cent.; the South-West planned 4 to 5 per cent., the Minister says over 10 per cent.; the North-West planned around 5 per cent., the Minister says over 13 per cent. And this goes on and on through every water authority in the country.
All authorities—I qualify this because I am not sure about Wessex—will increase their charges by double figures. I do not know whether the Wessex increase is in double figures or not. This is what each chairman told me in writing before Christmas. I regret that those chairmen, with the notable exception of Roy Watts of Thames, have accepted the Treasury line. I bet that some consumer consultative councils have been asking some very embarrassing questions of their authorities in the past few weeks because of the lead by the Thames water authority.
The Severn-Trent authority is even trying to stop paying its £100,000 rates on its luxury offices, which, if this order and the Government's machinery in respect of financial control go through, will be another £100,000 going to the Treasury instead of paying for home helps and road mending in Birmingham. The idea that water authority luxury head offices can be de-rated because they are somehow connected with the supply of water is ridiculous beyond belief and I certainly hope the Minister will support the line that the Inland Revenue is taking in opposing this kind of change. The Inland Revenue might be doing that, but the Treasury, of course, wants the money back.
Thames water will see its charges rise by a massive 29 per cent. in the next three years—we know that because of what is in the order and the financal figures—when the Government are targeting zero inflation.
The Minister for Housing and Construction (Mr. Ian Gow)indicated dissent.
Mr. Rooker: The Minister shakes his head.
Mr. Gow: I did.
Mr. Rooker: I always understood that the Government's target was zero inflation. That is what steady prices mean. Steady prices mean zero inflation. This brings with it many technical problems that we cannot go into today. Thames water is to have a 29 per cent. increase in charges, and North-West water is even worse. The North-West will have cumulative charge increases in the next three years of 40 per cent. That is what the authority is saying to hon. Members.
Mr. Ivor Stanbrook: The hon. Gentleman is basing most of his argument upon the specific example of the Thames water authority—at least, that, for him, provides the most striking example of his thesis. But is it not a fact that we all want greater financing of the infrastructure in this country, and that includes water supply? Therefore, should he not welcome the fact that in these areas where costs are low, where extra revenue can be raised for finance for the infrastructure, charges should be so raised?
Mr. Rooker: I was conscious in preparing my remarks for this debate that I must not concentrate solely on Thames. The North-West, as I have highlighted, will be affected even more badly than Thames over the next three years in the cumulative effect on charges. It is devastated by its capital expenditure. The North-West will have less money for capital expenditure in two to three years' time than it is planning for. We all want increased expenditure on the infrastructure in the water industry, as elsewhere, but my figures show that the authorities I have cited will have less than had been planned even though they have to increase their charges. That is the point of the argument.
Mr. Michael Grylls: Is not the logic of all the hon. Gentleman's argument pointing towards the flaw in the theory of nationalisation? The real trouble is that while Governments own industries like the water industry Ministers of all parties will be tempted to interfere where perhaps they should not do so. I hope that he will agree that the solution to get everybody off the hook is to take the industry out of the public sector. Investment can then go ahead. If we can privatise the successful authorities the interests of the consumers and the people who work in those authorities will be best served.
Mr. Rooker: I shall await the hon. Gentleman's speech with interest, and I shall look with even more interest at the Lobby that he enters at the end of the debate.
What effect will this policy have on industry? There will be a 40 per cent. increase in the north-west and a 30 per cent. increase in the Thames area. There is a considerable amount of industry in the Thames area, and a quarter of the English electorate lives there. The CBI says that it will be a serious blow to manufacturing industry. That is not exactly bare knuckle stuff, but it is clear that the CBI is not happy about it and considers these increases to be a tax. We cannot understand why the Government are seeking to generate extra cash over and above that required from this vital industry.
We shall no doubt be told that water does not cost very much—only 21p per day for the average consumer. If the order is approved, that will increase by only 2p per day. However, I remind Conservative Members that for

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many millions of people the need to watch the pennies in order to allow the pounds to take care of themselves is a fact of daily life. The argument, "It is only 2p" simply will not wash.
The fifth target announced by the Minister in the Adjournment debate before Christmas was that of less borrowing, which clearly affects some authorities more than others. I do not deny that. Given the history of the authorities, their borrowing structure varies. I again use Thames as an example because it is a fair one. It is also a foretaste of what will happen to the other authorities in two or three years' time. In addition to the fact that Thames will have to increase its charges vastly over what is needed and cut its capital expenditure plans, it will have to pay back £61 million against a planned £18 million. Will any penalty be involved in early repayment?
In 1987–88, Thames will be required to pay £113 million, but it will have only £1 million of debt. For 11 million water users that will amount to forced lending to the Treasury. That is a tax and there is no other way of describing it. We shall be faced with complete self financing, debt redemption and a nice annual surplus to the Treasury. The 1985–86 order will mean that more than £100 million will be siphoned off from all the water authorities to the Treasury. That is what the Treasury will gain cumulatively. Much of it will come from Thames as some authorities will not be affected in the first year.
Current customers — our constituents — will in the next few years have paid off all the past debts and provided the assets for the 21st century. As well as stupid financing, that is absolutely unfair to elderly people who will not use the assets. It is also unfair on the working poor for whom there is no relief, given that the rateable value based system of water charges carries no rebate arrangement. I emphasise "the working poor" — there are millions of them—as opposed to those on supplementary benefit. So long as we maintain the present crazy rating system for property, those who suffer from that regressive system of taxation, such as single people, widows and small families, will be hit even harder because of the changes in water charges.
I know that we shall also be told that water authorities pay no VAT or corporation tax. Does anyone suggest that they should? Following implementation of the order, everything will be done at arm's length from the Chancellor. This measure flows from the Chancellor's autumn statement and the demands of the Treasury, and VAT is hardly needed when this technique is used. One does not need to introduce a Bill to levy VAT on water if a technique such as this is used, and I warn the House and the country that the same is in store for gas and electricity.
If I am doubted, I suggest that hon. Members look at the paper that the Treasury deposited in the Library on 20 December. No press notice accompanied it, but since then I have discovered that 70 copies went to the Press Gallery and that every political editor received a personally addressed copy. Obviously, on 20 and 21 December, the professional journalists of Britain were otherwise occupied.
Mr. Frank Dobson: Not with water.
Mr. Rooker: It is quite clear from the proposals that have gone out for consultation that this procedure, which
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will levy a back door tax on water in order to avoid the need for VAT, will be used in respect of gas and electricity.
Mr. George Park: I merely remind my hon. Friend that exactly the same tactics have been used in the case of the Post Office, which has been asked to double its profits despite the fact that the Government have already creamed off scores of millions of pounds in excess of what the Post Office needs.
Mr. Rooker: I remind my hon. Friend that the Post Office is on the list in the consultative paper. It is clear that the Treasury intends to tighten the screw even further.
Water charges are based on rates, and for the vast majority of the British people rates are a tax. Is it seriously suggested that we should tax a tax? That is what the order amounts to.
The Government got control of the water authorities —in reality, consumer co-operatives—in 1973 without giving a penny of compensation to the many local authorities which ran the previous set-up. In exchange, half the membership of the boards were allocated to councillors. But now we have executive boards which are all appointed by Ministers and which meet behind closed doors. Someone in the Treasury has decided that they are ripe for plucking, and consequently they are asked to levy a tax on water. I invite the Minister to bluff his way out of this and the House to reject the second order.
5.27 pm
The Minister for Housing and Construction (Mr. Ian Gow): I begin by responding to the request of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) in relation to the dates on which the House is invited to approve these orders. I give the hon. Gentleman and the House an undertaking that in future these orders will be introduced before the start of the financial year to which they relate.
I also wish to comment—some of my hon. Friends would want me to do so—on the story which appeared in yesterday's Financial Times. It was a hilarious story. Neither the author of the article nor the hon. Member for Perry Barr was present when these discussions took place. I have the advantage of having been present. I must tell the House that I have never known a Treasury Minister to mislay a paper of that kind, and most certainly my right hon. and learned Friend the Chief Secretary to the Treasury would not, and did not, mislay the paper.
This is a serious debate. It is one about which many of my right hon. and hon. Friends feel deeply. It is clear from the speech of the hon. Member for Perry Barr that it is an issue on which he too feels deeply.
The debate is essentially about four issues. First, it is about the rate of return which should be earned by the water authorities. Secondly, it is about higher investment in the water industry, something for which hon. Members on both sides of the House have been calling. Thirdly, it is about the reduction in borrowing by the water authorities. Fourthly — a matter to which the hon. Gentleman rightly referred—it is about charges.
Mr. Andrew Bowden: I apologise for intervening so early in my hon. Friend's speech. When he was talking about the substance of the debate, he mentioned charges and those who have to pay the charges. Many of his hon. Friends wish to go into the

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Lobby with him tonight, but, unless he can give an assurance that he will consider carefully the possibility of introducing rebates for water rates, it will be difficult for me, and I believe for some of my hon. Friends, to join him in the Lobby. The proposed increases will have a devastating effect upon many pensioners and those on low incomes. Under the previous system in which rate rebates were applicable, general rates and water rates were taken together, so that rate rebates were available to pensioners and others on low incomes. Will he not at least consider and discuss this with his right hon. and learned Friends?
Mr. Gow: My hon. Friend is characteristically persuasive, and of course I shall consider what he says. However, I must remind the House of one matter, which will be the subject of part of my speech later. I think that a distinction can be made between general rates and water charges. The charge made for water is for services provided. My hon. Friend will know also that, in the calculation of entitlement to supplementary benefit, water charges are taken fully into account and some 3 million households already receive help with their water charges through the supplementary benefit system.
Mr. Simon Hughes: I think that the hon. Gentleman is misleading the House in two ways. First, although it is a charge for service, everybody in Britain receives the service. Secondly, it is only partly and not entirely in relation to supplementary benefit that the charges are taken into account and, as the Minister well knows, for those not on supplementary benefit, as his hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) said, there is no rebate. On that basis, the premise of the Minister is inaccurate and, at least in part, misleading.
Mr. Gow: I accept of course that almost everybody in the United Kingdom is in receipt of piped water, although many are not on mains drainage. That is not in dispute. I repeat that, when entitlement to supplementary benefit is calculated, water charges are taken into account, and some 3 million households receive help in that way.
Mr. Anthony Steen: I am sure that the Minister will wish to enhance his reputation by helping the House in this way. If old-age pensioners will not, or may not, receive a rebate, can he assure the House that they will not pay more and that an upward adjustment will be made? Can he also say something about those who are retired and on fixed incomes, because they too will suffer extreme hardship unless there is provision in the Budget for a tax rebate for those who just do not have the money to pay a 12 per cent. increase?
Mr. Gow: It is of course the case that increases in charges for water in the coming financial year will have to be paid by pensioners. I was referring only to the 3 million households which already receive help through supplementary benefit. For them, supplementary benefit will reflect the higher charges that will be imposed next year.
Mr. Gordon Oakes: Will the Minister give an undertaking to the House that he will introduce a rebate on the water rates of those pensioners and other poor people who currently receive rebates on their general rate and are not on supplementary benefit?
Mr. Gow: No. I made clear in response to my hon. Friend the Member for Kemptown that I was not able to
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give that assurance. Indeed, the position is that, although rate rebates are given because rates are regarded as a kind of taxation, there is no rebate of water rates. Water charges, as I prefer to call them, are taken into account when calculating entitlement to supplementary benefit.
Mr. Michael Shersby: Is my hon. Friend aware that many pensioners who live on fixed incomes just above the level of entitlement for supplementary benefit, housing benefit and, no doubt, other benefits will find an increase of 9 per cent. intolerable? What justification can there be for imposing such a charge on them when the Government have a policy of reducing inflation?
Mr. Gow: As my hon. Friend knows, the charges made for water are included in the retail price index. An increase of 1 per cent. in water charges has the effect of one hundredth of 1 per cent. on the RPI. I shall return to that matter later.
I deal with the rate of return. This afternoon we are debating the fourth and fifth orders which have been laid under section 29 of the Water Act 1973. That section enables my right hon. Friend to direct that water authorities shall achieve such a rate of return on the value of their net assets as he considers to be reasonable.
The first order was made in respect of the financial year 1981–82. In that order, the current cost value of net assets was adopted as the basis of the calculation, and that change was agreed by the House without dissent. Since 1981, the same basis of asset valuation has been used in all subsequent orders, including those before the House today.
The House will have noted, not with surprise, that the hon. Member for Perry Barr made only a passing reference to the Labour Government's White Paper on the nationalised industries presented to Parliament by the right hon. Member for Leeds, East (Mr. Healey) in March 1978. I wish to repair his omission.
Paragraph 3 of the White Paper affirmed:
"The Government must be concerned…in ensuring that there is an acceptable return on the public capital invested".
Mr. Rooker: Yes, they must.
Mr. Gow: I am glad to have the support of the Opposition.
Paragraph 4 affirmed:
"It was the Government's policy to treat the nationalized industries as commercial bodies so far as the expected return on investment was concerned".
My third and last quotation from the 1978 White Paper comes from paragraph 55:
"An adequate level of nationalised industry profits is essential to the continuing well-being of the industries and their customers and of the economy as a whole. They provide some of the funds for the very large investment programmes necessary to maintain supplies and services to the public. This keeps down the industries' new borrowing requirements, thus helping to reduce the burden of taxation and enabling the Government to maintain other important public expenditure priorities."
The House may think that the hon. Member for Perry Barr would have been more candid if he had pointed out that the Government are now following policies on water authorities that are precisely the same as those that I have quoted from the 1978 White Paper — a White Paper fashioned after even the Labour party had learned, with some humiliation, lessons taught it by the International Monetary Fund.

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The average rate of return set for the water authorities in the 1984 order, for the current financial year, is 1 per cent. The 1985 order increases the average rate of return to about 1·4 per cent. for the coming year.
Mr. Robert Jackson: The White Paper that my hon. Friend has been quoting talks about a 5 per cent. rate of return being expected from the nationalised industries. When does my hon. Friend envisage that the water authorities will have such a rate of return, and how much will charges have to be increased to bring such a rate of return about?
Mr. Gow: The Government have set targets, as my hon. Friend knows, only for the next three financial years. For the year 1985–86, the average rate of return for the water authorities goes up from 1 per cent. to 1·4 per cent. In the following year, the average goes up from 1·4 per cent to 1·7 per cent. and in the third year it goes up to 1·9 per cent. Thereafter the Government have set no targets.
Sir Kenneth Lewis: The Government reorganised water authorities. Arising out of that reorganisation, they expected greater efficiency and productivity. I am assured by my water authority that it is providing greater efficiency and production, and that this will increase. Therefore, why should it not be able to increase its return on capital, arising out of that reorganisation and increased productivity and efficiency, without interference from the Government? What is the use of that increased productivity and efficiency if the water consumer gets no advantage?
Mr. Gow: I understand my hon. Friend's point. There is a passage later in my speech which deals with efficiency. I give him an undertaking. If, after that passage, my hon. Friend is still dissatisfied, I shall give way to him again. I wish to make a little progress in my speech, not least because some of my right hon. and hon. Friends may want to catch your eye, Mr. Deputy Speaker.
The targets differ from authority to authority because of differences in the rates of return presently being earned, and because of differences in investment levels, but the general policy will be the same for all authorities. Even next year's average of 1·4 per cent. is low when compared with a rate of return of 2·75 per cent. for the electricity supply industry and 4 per cent. for British Gas. As for the private sector, the Bank of England recorded that in 1983, for major non-oil industrial and commercial companies, the current cost return was 9 per cent.
The higher financial targets set by the Government will fund higher investment next year of about £90 million, bringing the total to £814 million, an increase of 12·5 per cent., as compared with the provision for this year. This extra investment in the infrastructure is something for which demands have been made within and without the House, and not least after last year's drought. Those demands have come from Labour Members, including the Leader of the Opposition, and from my right hon. and hon. Friends.
On 1 August last year, in a debate in the House, my hon. Friends the Members for St. Ives (Mr. Harris) and for Devon, North (Mr. Speller) and the hon. Member or Truro (Mr. Penhaligon), who uncharacteristically is not in his place, called for greater investment by the South-West
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water authority. This is exactly what the South-West will now get. Investment next year will increase by 15 per cent. from £33 million to £38 million. Investment in the North-West water authority, mentioned by the hon. Member for Perry Barr, will rise by 11 per cent. or £16 million. For Wessex, investment will rise by 40 per cent., from £35 million to £49 million. For the Welsh water authority, investment will rise by 19 per cent., from £47 million to £56 million.
Mr. Dafydd Wigley: I note what the hon. Gentleman says about investment increasing in the Welsh water authority area. Is it not true that the rate of return for which he is now looking is similar to that of last year, and that the borrowing limits are being substantially lowered? The lowering of the borrowing limits, together with the allowing of the capital investment, will lead to an increase in water prices of 12 per cent. next year and of 30 per cent. over the next three years.
Mr. Gow: I hope that the House will understand that I have ministerial responsibility only for the nine water authorities in England. My hon. Friend the Under-Secretary of State for Wales, who has responsibility for the Welsh water authority, will, if he catches your eye, Mr. Deputy Speaker, wind up the debate. I would prefer it if he dealt with the Welsh water authority.
Mr. David Harris: My hon. Friend mentioned that I and some of my colleagues from the south-west called for extra investment in infrastructure. Can he confirm that, although the capital programme of the South-West water authority may be increased, that increase will be used mainly for meeting the extra burdens that central Government have put on the authority through the Control of Pollution Act? It will not improve the basic infrastructure for the ordinary consumer.
Mr. Gow: Mercifully, I am able to say that to diminish pollution is one of the most worthwhile tasks that can be carried out by water authorities.
The extra investment to which I referred will enable the water authorities to make more progress with the maintenance and renewal of sewers and water mains and further improvement in the quality of rivers, estuaries and coastal waters. Those who call for higher investment in the water industry are sometimes too ready to overlook the truth that, if money is to be spent, it has first to be found. That brings me to my third point about lower borrowing.
When the Labour party was in power, one of its most disastrous characteristics was that it believed that it was possible to finance extra spending by resorting to deficit financing on a massive scale. The author of the 1978 White Paper, from which I have quoted with approval, was the same right hon. Gentleman who, when Chancellor of the Exchequer, wrote his celebrated letter to the International Monetary Fund 15 months earlier. In that letter — [Interruption.] It is all very well for Labour Members to yawn. I want to remind them what happened when the right hon. Member for Leeds, East wrote to Dr. Johannes Witteveen on 15 December 1976.
Mr. Dobson: Does the hon. Gentleman propose sending details of this letter with every water rate demand?
Mr. Gow: That intervention makes me realise that I should not have given way.
I shall quote from the letter. It says:

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"It is also essential to reduce the public sector borrowing requirement in order to create monetary conditions which will encourage investment and support sustained growth and the control of inflation".
Next year's higher rate of return permits the external finance limit for water authorities to be set at £203 million compared with £284 million this year. That is to say that there will be £203 million of additional borrowing next year by the water authorities as a whole. Only in the case of Thames, to which I shall turn in a moment, will there be a reduction in borrowing. By the end of this financial year, the total debt of the water authorities as a whole will be no less than £4·75 billion.
My fourth point is about charges. Understandably, there has been concern. Increases for next year will vary from authority to authority. So far, only three authorities have fixed their budgets. Our estimate is that the average increase will be rather more than 10 per cent. As I explained in reply to my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden), a 1 per cent. increase in water charges adds one hundreth of 1 per cent. to the retail price index. For this year, the average bill for domestic customers of water authorities is £77 a year, or 21p a day. Assuming an increase in charges of 10 per cent. next year, the average bill would rise from £77 a year to £85 a year, or from 21p to 23p a day.
In the case of Thames—easily the largest authority, serving 11·5 million people — the average bill for domestic customers is at present £73·41, or 20p a day. If next year's increase for the domestic customer should turn out to be 9 per cent., that would mean an annual bill of £80, or 22p a day. Even then, the charges made by Thames to its domestic customers would be below the average in England and Wales.
Mr. Roger Freeman: Is the Minister aware that the Thames water authority has considered the introduction of compulsory metering for all households? Is not this the sensible solution to the problem? It would provide a fairer, more equitable basis for charges and would enable investment decisions to be more sensibly made.
Mr. Gow: At my invitation, the chairman of the Thames water authority has agreed to serve on a committee that is considering the introduction of metering.I hope to receive the first report from the committee chaired by Mr. Roy Watts before the end of next month. Both the Government and this committee are considering the introduction of metering. Of course, water authorities' charges also reflect their operating costs.
I wish to deal with the point raised by my hon. Friend the Member for Stamford and Spalding (Sir K. Lewis). The House will remember that, under the Water Act 1983, we reconstituted the authorities with small, businesslike boards. We have taken vigorous action to improve efficiency. We have agreed objectives with water authority chairmen. We have set performance aims which are agreed targets for reductions in operating costs. Efficiency as been improved, as the hon. Member for Perry Barr acknowledged. In the three years to 31 March 1984, all 10 authorities reduced their operating costs in real terms. All have reviewed their organisations, streamlining their headquarters staff and in most cases cutting the number of their divisions. Since 31 March 1979, the numbers employed have been reduced by 10,400 to 52,000. The largest reduction, of nearly 3,500, was achieved last year.
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The Monopolies and Mergers Commission has just reported on the Yorkshire water authority. The report said:
"We have no doubt that the level of efficiency achieved by the Yorkshire water authority in its early years"—
that is when the Labour party was in power—
"fell far short of what might reasonably be expected in a large public enterprise. However, we are satisfied that there has been a substantial improvement in recent years and that the pace of improvements has increased since the authority was reconstituted in October 1983."
Mr. Geraint Howells: I am sure the Minister is well aware that in 1973 many water authorities inherited a large debt. If the proposals are put into effect, when does the Minister envisage that the Welsh water authority will pay back to the Treasury its debt of £100 million?
Mr. Gow: If I may, I shall leave that question to my hon. Friend the Under-Secretary of State for Wales, as he has responsibility for the Welsh water authority. I shall deal later in my speech with the general point about repayment of debt.
Mr. William O'Brien: The Minister referred to the Yorkshire water authority. As a member of that authority, may I ask the Minister to be honest with the House and explain the work that the authority had to do because of the introduction of new technology and the grid system? It also had to ensure that sufficient water supplies were made available in the county. Will the Minister also explain that it took a number of years, because of the resources that were available upon reorganisation, to achieve those results? The Minister ought to be fairer to the Yorkshire water authority.
Mr. Gow: I was quoting with approval from the recent report of the Monopolies and Mergers Commission. Following the quotation that I have just read out, I hope that the House will join me in paying tribute to the chairman of the Yorkshire water authority, who is a doughty Welshman, Mr. Gordon Jones, to his board and to his employees for what they have achieved. The same tribute can be paid to all of the water authorities.
I turn now to the system of current cost accounting adopted by the water authorities.
Mr. Frank Field: Before he leases this point, could I remind the Minister that he has not answered the question asked by his hon. Friend the Member for Stamford and Spalding (Sir K. Lewis) about why increased efficiency has not resulted in lower charges?
Mr. Gow: I said that I was going to deal with that point later in my speech. I gave an undertaking to my hon. Friend and I give a similar undertaking to the hon. Gentleman. If he is still unhappy when I have dealt with that matter I shall give way to him again.
Prior to 1981, the authorities produced historical cost accounts only. Those accounts suffered from two limitations. First, in common with all historical cost accounts they failed to reflect inflation — a factor of special importance in the case of water authorities with their very long-lived assets. Secondly—this applies to water authorities only — the way in which assets inherited from predecessor organisations in 1974 had been valued for accounting purposes compounded this weakness.
The following note appears in the accounts of Thames for the year ended 31 March 1984— accounts which

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were approved by the board, signed by the chairman and the director of finance and audited by Arthur Andersen and Co.:
"Pre-vesting tangible assets are included at the net book value recorded by the various predecessor authorities at 1 April 1984. In the majority of cases these values represented only the amount of loans outstanding on debt-financed assets, thus excluding assets that had been financed from revenue, internal funds and capital grants and contributions, or for which doubt had been redeemed."
A similar note—I believe that this is the point which the hon. Member for Perry Barr raised—appears in the accounts of the other nine authorities.
What that means in plain English is that a significant part of the assets of water authorities do not appear at all in their historical cost accounts. Calculated on that basis, it is hardly surprising that water authorities appear to show a reasonable rate of return. It is equally clear that historical cost accounts are not a sound basis for assessing a water authority's financial performance.
There is no need to take my word for that. Hearken to the present Chairman of the Public Accounts Committee when, in an earlier incarnation, he was Financial Secretary to the Treasury. On 1 August 1978, replying to a debate in this House on accounting practice in the nationalised industries, he said:
"For the avoidance of doubt, let me reaffirm what my colleagues have said on previous occasions — that the Government wholeheartedly support the concept of current cost accounting in the private and public sectors". — [Official Report, 1 August 1978; Vol. 955, c. 670.]
The shortcomings of historical cost accounts were recognised by the water authorities themselves. In 1980, it was decided that water authorities should publish supplementary current cost accounts in accordance with the inflation accounting standards issued in that year. In the following year, the Department of the Environment, with the approval of all 10 water authorities and all of their auditors, asked Price Waterhouse to review the current cost accounting principles adopted by the authorities. Price Waterhouse, as the House would expect, carried out a most thorough review. In its report dated November 1981 it concluded:
"The approach to current cost accounting which has been adopted is both soundly based and sensible."
The report acknowledged that a considerable amount of further CCA research and refinement needed to take place in future years. That is a continuing process and a further element of it is the working party on CCA asset valuation, whose chairman is Thames's director of finance. I hope that the working party's report will be available in the summer.
In setting the financial targets of individual water authorities for 1985–86, the Government have been guided by three considerations. The first is the need to bring the various rates of return on existing assets from their present level to a common figure over the next three years. That is a policy of convergence. Secondly, there is a need to ensure that new investment earns a rate of return of 5 per cent. The third consideration is to allocate the investment levels broadly in line with the differing needs of each authority as expressed in its corporate plan.
I do not think that I am overstating the case when I report to the House that none of the authorities was enthusiastic about the Government's policy of raising rates of return. However, all save Thames have accepted our
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decision and most have welcomed the scope for increased investment, which they see as necessary to improve services and standards in their regions.
I promised earlier to return to Thames, and I shall do so. The current cost valuation placed on its tangible fixed assets by Thames, and confirmed by its auditors, was £4,425 million at 31 March 1984. At the same date, the value of its tangible fixed assets at historical cost was £826 million and its debt amounted to £423 million. It is fair to say that neither my right hon. Friend the Secretary of State nor I was aware of any dissatisfaction by any of the water authorities with the system of current cost accounting until after the Government had announced that they would seek a higher return next year. The proportion of the debt of Thames to its assets is very much less than that of any other authority. That is why the setting of a higher rate of return for Thames and for all the other authorities—Thames has been repaying debts since last year—takes the form of an earlier repayment of debt next year. Debt repayment in 1985–86 will be £60 million compared with £34 million in the current year.
Mr. David Howell: It is true that Price Waterhouse recommended current cost accounting in 1981. Whether it was right to do so is a matter for debate, but surely it did not recommend also the imposition of a financial target on the basis of CCA, which when translated into historic costs, as is the system in most of private industry, would lead to a rate of profit above that earned by ICI, even though Thames is a monopoly. Surely Price Waterhouse did not do that.
Mr. Gow: In 1973 my right hon. Friend was a Member of this place and I was not; he was also a member of the Government and I was not. Under section 29 of the Water Act 1973, my right hon. Friend the Secretary of State is empowered to set the rate of return for water authorities. If my right hon. Friend and his colleagues were right to introduce that measure, I think he might accept that which appears in the recently published report of the Comptroller and Auditor-General. If the Comptroller and Auditor-General had thought we were wrong to set financial targets on the basis of current cost accounts, possibly he would have referred to it. However, my right hon. Friend will have studied the report closely and he will know that the Comptroller and Auditor-General made no such reference.
Some of my right hon. and hon. Friends have suggested that the water authorities might be transferred to the private sector, and I understand that that prospect would not be unwelcome to the chairman of Thames. There is a precedent, at least in part, for such a course. There are 30 private water companies in England and Wales supplying 25 per cent. of that area's customers wth fresh water. Although the companies are subject to financial controls by statute, they raise their money in the market place. Their funding is not included in the public sector borrowing requirement.
In our manifesto, we promised to transfer more public sector businesses to independent ownership. The transfer of water authorities, which form a natural monopoly, presents special problems, not least because of their regulatory functions. Nevertheless, my right hon. Friends and I will be examining the possibility of a measure of privatisation in the industry.
Mr. Nigel Spearing: I am grateful to the Minister for allowing me to intervene. It is unfortunate that his political views on these matters are not up to his courtesy.
The measure to which he referred when responding to the right hon. Member for Guildford (Mr. Howell) put together for the first time the organisation of water supply, water disposal and sewerage. All that we have been discussing applies as much to water disposal and sewerage as it does to water supply. Is the Minister suggesting that the regional water authorities and their subsidiary parts, which used to be local authority operations and funded by the Exchequer to the extent of £100 million a year in rate support grant up to 1974, be similarly transferred to private enterprise?
Mr. Gow: The House knows that the function of the 30 water companies is only to provide fresh water and that the function of the water authorities is to provide fresh water, take away foul water and deal with other environmental and regulatory services. My right hon. Friends and I will be examining the possibility of a measure of privatisation in the water industry, and that means the water authorities.
Mr. Spearing: Fresh water or foul water?
Mr. Gow: Fresh and foul.
Mr. A. J. Beith: I represent an area which is largely supplied with water by an efficient private enterprise company. I hope that the Minister will not delude his hon. Friends into thinking that private enterprise water companies within the present system are immune from the burden of debt which is brought to them by the regional water authorities. For example, the Newcastle and Gateshead water company has to increase its charges to consumers because of the amount that it has to pay for what is provided to them, supposedly in capital, by the regional water authority.
Mr. Gow: I take the hon. Gentleman's point, which is well known to the House.
The House has been patient and I am almost done. I have something to say particularly to my right hon. and hon. Friends. All of us, faced with a choice between lower or higher increases in charges, would opt for lower. But the Government have to take a broader view, not least because of the principles set out in the 1978 White Paper, which have been endorsed by this Government—and not by this Government alone but by Parliament.
On 6 December, the House approved the autumn statement presented to Parliament by my right hon. Friend the Chancellor. On page 21 of that statement, the external financing limits for the nationalised industries were set, including £203 million for the water authorities. Having approved the whole, we have also approved the parts.
So far as the water authorities are concerned, we have followed a policy which has been consistent and persistent. It is a policy which has meant streamlined boards, a commitment to greater efficiency, better service, a realistic return on public assets, and now more investment.
The journey to a Britain of sound money and honest finance is, in many respects, a painful one, but that journey has to be made and these orders are an essential part of that strategy.
6.11 pm
Mr. Gordon Oakes: As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) so clearly told the House, for the first time in the history of the realm the Government are imposing a tax on water — a basic commodity. That is what the orders mean. Conservative Members are as worried about that as we are. In the Minister's final words he sought to sell the concept of a tax on water on the basis that he would privatise the nationalised water industry. A tax on water is as repulsive to Conservative Members as it is to us.
The Minister talked about water companies and the extent of their operations. It occurred to me to ask whether the order is hybrid. Does it affect the water companies or only the water boards?
Mr. Gow: The orders apply only to the water authorities.
Mr. Oakes: Some of the water companies supply water. One part of the supply of water is involved, but not the other. That smacks of hybridity.
Government Back Benchers must be puzzled at the Government's action. Last night there was a three-line Whip on the rate capping of local authorities because they are spending too much. Today Tory Members are operating on a three-line Whip to order water authorities to charge the consumer more.
I shall be brief because many right hon. and hon. Members wish to take part in the debate. I want to discuss the nature of water rates. One has control over the consumption of gas or electricity, but no control over the consumption of water. Even if one does not limit the amount of water one uses, one still pays the same rate. The whole rating system tends to be regressive, but water rates are particularly so.
I sympathise with the poor people who are not on supplementary benefit and who will have to pay this Government-imposd levy without rebate. The Minister said that he is unable to allow rebates. For the average household the increase will be £11 or £12 a year. That will be a considerable increase for all our constituents.
People are being taxed but cannot fight back. That is why hon. Members will resist the order. In a cowardly way the Government are trying to place responsibility for their tax on the already unpopular water authorities. The public should realise that we are talking about a tax. For the first time a Government are taxing water. They are trying to push it through the Lobbies tonight by promising their hon. Friends privatisation.
6.15 pm
Mr. David Howell: I hope that my hon. Friend the Minister for Housing and Construction will take the Government's proposal for 1985–86 back to the Treasury and change it, although I realise that he cannot because he is bound by the writ of the autumn statement on public spending.
I regard the Minister as one of the most courteous in the Government. He is scrupulously attentive to the worries of the House, but this time he has been sold a pup by the Treasury. He now has the miserable duty of trying to sell it to the House. I should have no qualms if we were dealing with a matter which was unpopular but for which the intellectual foundations were right. All Governments have to put forward unpopular measures which are difficult to

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sell and it would be absurd if Government supporters ran away every time that that happened, no matter how difficult the sales task.
I do not hesitate to support a policy that seeks to improve the financial organisation of nationalised industries and to establish a proper basis for recovering their long-term costs, provided that those costs and the assets which have to be financed are properly valued. I fear that in this case that proper evaluation has not been worked out.
As the Minister said, Price Waterhouse recommended current Government accounting for nationalised industries in 1981, and that was accepted by the Government at the time. However, that is four years ago and since then the accounting profession has split about the virtue of CCA. We are also living in a far less inflationary age—thank goodness—so the situation is different.
It was agreed four years ago that CCA was right and the water boards accepted it. However, there was no agreement about setting a financial target which produces, when translated into historic costs, a rate of return on capital higher than that earned by ICI and other major industrial companies when that organisation is a monopoly. CCA has the effect of vastly uprating the value of the capital assets of any organisation, particularly a water authority.
What would happen if those rules were applied in the private sector? Parts of ICI have a natural monopoly, but great care is taken not to push up to astronomical heights the rates of return on a historical basis. The question of whether CCA should be used involves a different debate. The key difficulty lies in the use by the Government of the words "adequate rate of return."
The figure of 1 per cent. sounds miserable when applied through current cost accounting to the colossally inflated value of the assets of some gigantic organisation such as the Thames water authority. However, in the language of historical costs, that produces a return higher than that earned by ICI. In applying financial targets, caution and balance have to be used. I cannot see where the caution and balance are being used in this application of policy.
The current cost accounting method, which is now under intensive dispute among accountants, must be treated cautiously. It inflates asset values enormously and it inflates the depreciation which must then be covered by income to finance those asset values. In the case of the Thames water authority — I am concentrating on that authority not only because my constituency comes within it but because it is such a glaring case of all that can go wrong when one applies this sort of policy too rigidly—the amount of depreciation that is required by what is proposed is three times what Thames believes it needs fully to replace its assets and maintain them in high quality order.
Under the Government's plans, the authority will be investing less than it would otherwise wish to do.
Mr. Jackson: Is my right hon. Friend aware that the net asset value of British Telecom is £8·4 billion, which, on the basis of the valuation of Thames water authority's assets, means that that authority is more than half the size of BT?
Mr. Howell: That illustrates the absurdity of the approach. CCA may be the general basis on which nationalised industries operate, but it must be applied with great sensitivity to different types of industries.
Even in the case of water authorities, there is a convention by which the value of assets, certainly those in place before 1981, is abated by 40 per cent. I suspect, however, that even that asset valuation is highly doubtful because one must bear in mind the replacement cost of a sewer, reservoir or installation, which has a life of perhaps 800 years. Is the replacement cost to include the cost of digging another hole for another reservoir or a new sewer?
One need only ask such questions to see the basic absurdity of building up a gigantic capital value, on which a rate of return is then calculated and which inevitably looks minuscule. It is clear that a mistake has been made somewhere in the Whitehall machine. I do not blame Ministers at the Department of the Environment in particular—they have had a heavy load to bear in other areas—but it looks as though they missed this one.
The Minister of State says that he has been even-handed as between water authorities, and I see his feeling about the virtue in that. But why was the Treasury even-handed as between what are very different concerns? The Thames water authority is by far the largest. It is a gigantic outfit and a wholly different business proposition. It is much better equipped than the other water authorities and, above all, it is paying off its debt and returning money to the Government. It has what is called in the jargon a negative EFL—a negative external financing limit—so that it is a different proposition.
It would have been a happier outcome for these affairs if, instead of even-handedness in the literal sense of applying a broad and unsatisfactory formula to all authorities, more sensitivity had been shown as between the different water authorities, some of which operate under completely different conditions. Hon. Members in all parts of the House could speak of the different problems that affect water authorities in different parts of the country.
I fear that this issue has been handled carelessly in the bowels of Whitehall. I do not like to see the Minister of State loaded with the duty of having to present such a weak case. It sounds as though it has been formulated not on the basis of rational argument, discussion and understanding of the nature of the industries concerned, and not even on the basis of trying to establish, within the overall framework of the Government's correct policy for the nationalised industries, different details for different industries. It has been settled on the basis of saying, "Do not bother me with facts. These are the figures. You make them fit."
I do not like to see policy made on that basis and I hope that it is not symptomatic of anything deeper inside the policy-making machine in the Treasury and Whitehall. The position should be corrected, although the Minister explained that unfortunately he is not free to correct it. At least let us hope that next year the same unhappy and intellectually unsound basis for dealing with the accounts of a body such as the Thames water authority are corrected. In the meantime, I would find it impossible to support the Government in the proposals as set before us.
6.26 pm
Mr. William O'Brien: I join the right hon. Member for Guildford (Mr. Howell) in saying that

1147
some gross errors have been made in the Treasury's bookkeeping relating to the water industry. I hope that his hon. Friends noted what he said about the financing of regional water authorities.
I support the motion for a number of reasons, not least because of the 4·5 million people in the Yorkshire and Humberside area who will be affected by this legislation a substantial number will suffer hardship. The Labour group for the region is strongly opposed to the order because, as has been pointed out, many householders will not qualify for supplementary benefit or other help towards the additional costs that will be imposed upon them. Housing benefit does not include a refund in respect of water charges. It is clear that the Government are deliberately creating hardship for many people.
Hon. Members, including Conservative Members who represent Yorkshire constituencies, have been asked to oppose the order. I hope that they will heed that appeal. Whatever may be said about the possibility of privatising the water authorities in the future, we must consider the costs that will fall on consumers now. There was no more than a hint from the Minister that privatisation might come in due course. It is clear that before that stage is reached the consumers will be paying dearly.
Even the CBI, a friend of the Government, states in its parliamentary brief that industry, already struggling for survival in the competitive world in which we live, will be caused additional expense, perhaps of as much as £100 million a year, as a result of the order. The Minister said that it was hoped that in future years the regional water authorities would be given more notice of orders such as this. It is clear, therefore, that water charges will increase and that there will be greater hardship for those who rely on the regional water authorities.
The CBI warns that, unless industry is buttressed against the proposed increases, the additional cost could cause further unemployment. That is a stark warning from an organisation which has supported the Government throughout. The CBI confirms what my right hon. Friend the Member for Halton (Mr. Oakes) said about this being a tax on water. It says that the regional water authorities will be tax collectors for the Government. One way to change, the proposal is by supporting the motion, and I hope that Conservative Members will give that serious consideration.
Reference has been made to average increases and the way that they will affect householders. 'The Minister mentioned averages. We were not told the average rate assessment that was taken into consideration. In the Yorkshire area the increase is based on an average rateable value of £135. What will happen to people on fixed incomes, and pensioners who will not qualify for rebate and whose rateable assessment is above that? Their increases will be substantially more.
The Minister said that the increase for domestic consumers in Yorkshire would be 12·5 per cent. and that the overall increase would be 10·5 per cent. Some Yorkshire domestic ratepayers will have an increase of 19·6 per cent. in their water charges because of the way in which the rating system is applied. Is that a fair or just tax to impose upon consumers?
Consumer councils have been mentioned. When the local consumer council was told that the decision had been taken to increase charges, there was a call from the consumer council for all members of the Yorkshire water authority to resign because the increases would have
1148
serious consequences for users in the Yorkshire area. The anxiety expressed by the consumer council should not be underestimated. Consumer councils were set up to tell water authorities of the views of consumers, but no notice has been taken of the anxiety that they have expressed.
Consumers in Yorkshire are worried about the way in which the regional water authority and the Government are attacking consumers. Domestic consumers will suffer in a number of ways from the increases. First, there is an average charge, and it has been pointed out that the average increase in many cases will be three times greater than the rate of inflation. On numerous occasions we have been told by the Prime Minister and other Ministers of the importance of keeping inflation low and under control. In some areas the increase will be five times greater than the rate of inflation. Where is the justice and fairness in that approach to water consumers?
I should like the Minister to take note of a further injustice being caused to domestic ratepayers. The Yorkshire regional water authority is transferring charges for treating foul water and sewage from commercial undertakings to the domestic consumer. That kind of decision can be made without any explanation or notice because the public and press have no right of admission to the meetings of the regional water authorities. Ratepayers and consumers in Yorkshire should be given an explanation of why that transfer is necessary. I ask the Minister to inquire into the circumstances of that decision in the area.
Domestic consumers suffer more than others because they have to pay two standing charges. One is for water, and one for sewerage. We have been told that in the Thames area there is a suggestion that the installation of meters should be mandatory. When I was a member of the Yorkshire water authority, we talked about meters. We said that by using a percentage of the water that had gone through the meter we could assess charges for sewerage and for treating foul water. If that is done, the domestic consumer has to pay one standing charge only. Two standing charges are a great injustice to domestic consumers.
The Minister talked about the Water Act 1973. Section 30 gives water authorities comprehensive powers
"to fix, and to demand, take and recover such charges for the services performed, facilities provided or rights made available by them".
That section has been superseded by the Government's action and by the way in which they are instructing water authorities to fiddle the charges that they are imposing on industry, commercial undertakings and domestic consumers.
The Minister also mentioned the matters that affect charges throughout the nine English regions and the area of the Welsh water authority. I received a copy of a newspaper which highlighted the dramatic rise in water charges and spoke of them as being double the rate of inflation, and referred to consumers paying more towards capital investment. That was not the Daily Mirror or The Sun; it was the Yorkshire water authority's newspaper. The author of the article was the chairman of the authority. The Minister paid him a tribute. The chairman decried the Government's action and the way that they are forcing all water authorities to increase charges by more than they want to.
I find it strange that Gordon Jones, the chairman of the Yorkshire water authority, is criticising the Government

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for the way in which they are imposing their wishes upon regional water authorities, because the Minister said that, although some water authorities were reluctant to accept the increases, his own chairman had done so without reservation. The chairmen of water authorities must decide whether to support the consumers or the Government. They cannot tell the Minister that they accept the increase and then go back to their regions and criticise the Government. That is why I take off my hat to the chairman of the Thames water authority for his action on this issue.
I remind Conservative Members that their constituents, too, expect their support in seeking to annul the order. I appeal to all of them to vote accordingly today.
6.40 pm
Mrs. Edwina Currie: I have the good fortune—or misfortune, however one cares to look at it—of being a graduate of Oxford university. One of the intellectual games that we played when I was there was to take a subject to which one felt strong emotional hostility and try to argue in favour of it. That was my approach to today's debate. Having done some reading on the matter, I now conclude that there is a great deal of sense in what the Government are trying to do.
When I used to serve in local government I was responsible for some very large capital programmes, some of over £100 million. But the capital expenditure levels in some water authority reports show an astonishing complacency about the need to repair and replace existing systems, and particularly about the need to provide new systems in areas of population growth and new industrial development. The figures for the past 10 years show no growth at all. Most water authorities seem to have gone backwards.
My husband's family lives in the area of the South-West water authority. Ten years ago that authority's capital expenditure was £18 million and it blithely went on spending roughly that amount for the next decade, although to maintain its programmes at 1974 levels it should have been spending about £38 million by 1979–80.
Mr. Robin Maxwell-Hyslop: Will my hon. Friend give way as she is referring to my area?
Mrs. Currie: No, I should like to get on. When we spent our holidays there and visited Lundy Island, there was not even any water for the sheep.
Mr. Maxwell-Hyslop: If my hon. Friend knew anything whatever about the south-west, she would know that the water authority's programme of reservoir building was disrupted time and time again by objectors to new reservoirs.
Mrs. Currie: I defer absolutely to my hon. Friend's knowledge of the area, but I took the trouble to read the authority's annual report. The report for the subsequent year, 1977–78, is full of photographs of the chairman, who referred to a feeling of anti-climax and pointed out with great complacency that the reservoirs of Devon were still half full at the end of the subsequent rather wet summer. The figures do not bear out his complacency. I suspect that the £20 million per year being spent would be just about enough to provide a water service for a place like Lundy without taking account of the increase in housing and industry in the area.
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Last summer there was another drought and my family and friends again had to use standpipes.
Mr. Maxwell-Hyslop: Sheer ignorance.
Mrs. Currie: My hon. Friend should ask his constituents what they think of the water authority.
Mr. Harris: Will my hon. Friend give way as she is referring to my water authority, too?
Mrs. Currie: No. I have sat through several debates in the past couple of weeks and no one has given way to me. Not one water authority has managed to maintain its 1974–75 capital programme in real terms.
Mr. Steen: Will my hon. Friend give way?
Mrs. Currie: The worst region is Wales, which is spending about £50 million per year when merely to maintain the 1974–75 level would require more than £100 million. It is no wonder that there are problems there. All the water authorities are culpable and it is worth considering why.
In the past, the water authorities' finance has been split between the consumer and the Government. Effectively, the consumer has paid for current expenditure, including debt charges, but as this is not a labour-intensive industry and much of the debt has been written off over the years, we have had cheap water and sewerage on a day-to-day basis. Capital expenditure has been financed at least in part by borrowing. That is part of the public sector borrowing requirement whether we like it or not, and I certainly do not.
Part of the reason why the water authorities have failed to respond to need is that throughout the 1970s pressure on the public sector borrowing requirement by the Labour Government, who had to go cap in hand to the IMF, led to sharp cuts in capital expenditure, not just for the water authorities but for the Health Service, housing and virtually everything else. As my hon. Friend the Minister for Housing and Construction said, in 1978 the Labour Government introduced a White Paper putting the first financial restrictions and constraints on the activities of water authorities. It is sheer humbug for Labour Members to talk about hardship, because they started it.
It has therefore been decided, as I understand it, to cut the water authorities loose from the public sector borrowing requirement. There are several ways of doing that. The Government have chosen to shift the burden of finance entirely from the Government to the consumer and to reduce the present borrowing requirement of £286 million to nil by 1986–87. That is quite neat. It is claimed that it is not inflationary. On the figures that we have heard today, a 12 per cent. increase in water charges will add just one tenth of 1 per cent. to the retail prices index and only £7 to the average domestic bill, so talk of hardship is to a large extent sheer humbug. The effect is certainly far less than that of the recent increase in mortgage interest rates.
The rate of return chosen is 1·9 per cent. by 1987–88 on current cost accounting. That is extremely modest compared with the levels set for other public utilities. The electricity supply industry is being asked to find 2·75 per cent., the gas industry 4 per cent. and British Airways 5·75 per cent. in 1983–84. It is certainly far lower than the 9 per cent. average on current cost accounting reported in the Bank of England Quarterly Bulletin last September for the average of all industries and sectors. The best in the consumer goods sector is the health side, which is

1151
returning 16 per cent. in current cost accounting terms and 25 per cent. in historic cost terms; so much for the worries of my hon. Friends about the effect on this sector of limited list prescribing.
I do not know where my right hon. Friend the Member for Guildford (Mr. Howell) got his figures for ICI, but if he got them from the Thames water authority he might consider asking that authority to read the accounts again, as the latest available return for ICI—1983–84—was 6·2 per cent. in current cost terms, which is a great deal more than is being asked of the water authorities.
Mr. David Howell: I got them from Conservative Central Office.
Mrs. Currie: That might explain a good deal.
The only industrial sector to show a return of around 1 per cent. is the car industry. The best that one can say about that is that at least that industry is now beginning to make a profit, and thus a positive return rather than a negative one.
Mr. Freeman: I am following with great attention what my hon. Friend is saying. Can she explain how the water authorities can make sensible judgments about investment decisions without a sensible basis of charging? Without some price-sensitive method of charging, how can the industry judge whether or not to build a reservoir in a particular area?
Mrs. Currie: The water authorities, with their background knowledge of what it costs to replace their assets, are in a better position than anyone else to make such judgments. That is the root of the problem. If they do not allow for adequate depreciation in the cost of replacing their assets, they have to come cap-in-hand to the Government for the money.
I understand—I defer to the professional competence of my hon. Friend the Member for Kettering (Mr. Freeman)—that we are trying to shift the burden from the Government to the consumer. There are other ways of doing that, and perhaps we should ask our hon. Friends to consider them. I suggest that it is intelligent to borrow long term to finance long-term assets. In housing, we borrow over 60 years. I am not the only hon. Member who has had the privilege of climbing on to a JCB machine and pulling down property for which we will still be paying well into the next century.
We could, and should, take the water authorities out of the PSBR all together. I suspect that we could do that by fiat, in much the same way as we decide week by week which measurement of money supply—M1, M2 or M3 —we will use that week to make a judgment about the growth or decline in the money supply.
However, it would be better to do it properly. I should prefer to see those bodies returned to the private sector altogether. They could then borrow to their hearts content at whatever rate they could get. They could make a profit, and that would be financially lucrative for the Government —if the water authorities are as profitable as they say they are—because they would then pay corporation tax, which they do not now pay.
If we were to privatise the water authorities, irate consumers could become shareholders. Nobody loves the water authorities. There might even be lower charges. Much of my constituency is served by the South Staffordshire water company. That company's charges for
1152
water supply are increasing by only 2 per cent. in 1985–86. I commend the company. We might avoid the silly situation that often arises in Derbyshire, which is blessed with the sweetest water in the world, in which local users of traditional springs have to pay a tithe to the Severn-Trent water authority before they can use them. The effects of privatisation on other industries such as freight and shipbuilding have been entirely beneficial.
The Government should decide whether the water authorities are part of Government—in which case they do not need to make a profit, but they should be public and allow the public into their meetings — or they are businesses. If they are businesses, why do the Government own all the capital and set targets of any kind, whether spurious or worth while? I call on the Government to make up their mind.
I set myself a target and I have tried to fulfil it. In all honesty, I say that a Government who are committed to keeping down inflation should be cautious of any price rises and of any increases in taxation, in whatever form they masquerade. The public services require a steady, well-organised and well-funded programme of investment. We should beware of fiddling around with the accounts at the behest of the annuality fiends in the Treasury. The Government have my support tonight, but I look forward to more radical thinking in future.
6.55 pm
Mr. Simon Hughes: This debate is about the Government's proposal to tax people more for what they drink and, among other things, what they flush. It raises significant constitutional issues about how we should deal with proposals for taxation. The Minister was right to say that on the first three occasions when orders under the 1973 Act came before the House they went through without debate. This is the first occasion on which there has been a challenge to the executive action of fixing the real rate of return — the Government's power to decide how much profit the water authorities should make in the coming year.
There have been protests in the past. Those protests have mounted. The most recent protests were heard, I believe, in the Treasury and Civil Service Select Committee at the end of last year, when my hon. Friend the Member for Colne Valley (Mr. Wainwright) asked the civil servants who were giving evidence for the Treasury in answer to questions on the Chancellor's autumn statement what was the basis of the accounting for the water industry. It seemed to my hon. Friend and to others, including the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), that it was inappropriate to apply the same tests as elsewhere. Amazingly, the civil servants did not know the basis of the accounting method. If the Minister does not believe me, I refer him to page 34 of the Select Committee minutes of 26 November 1984. That is a worrying start.
As newspapers have made clear, by these orders the Government are taxing through the back door. This is yet another example. They have gradually increased backdoor taxation in the cases of gas and electricity and they are now increasing the proportion of it in the case of the Post Office. When, instead of the finite or relatively finite resources of gas and electricity, or the commercial context of the Post Office, what is involved is—thank God—an infinite resource, people feel that the sticking point has been reached. Water is a resource that everyone gratefully

1153
receives and uses. The same principles, therefore, do not necessarily or properly apply to water as apply to gas or electricity.
Some people do not use gas. A few people are not customers for electricity.
Mr. Jackson: The hon. Gentleman says that everybody uses water. Would he not agree that if we were considering this measure as a form of tax it would be highly undesirable, because it would hit the businesses that are heavy consumers of water and discriminate against them in comparison with businesses that are not heavy users?
Mr. Hughes: Yes. There is also a valid question about the relation between how much a customer uses and how much he should pay. However, the fundamental point of the present debate is that what the customers are being asked to pay is far more than the cost of running the service at a profit—the cost of properly managing the water authorities that process and supply the water.
There is another constitutional point. The Minister referred to it in his opening speech. The proposals involve differential levels of taxation. I accept that there may by an argument for making sure that the real rate of return in different water authority areas is similar. It could be justifiably claimed, however — no doubt the hon. Member for Caernarfon (Mr. Wigley) will do so in a moment—that the Welsh people should be asked to pay for what they receive but should not be asked to subsidise what other people across the border receive. There are arguments about the proper relationship between services received and the charges paid. My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) has told me that, in his area, customers of the private water company in Newcastle contribute half what they pay to the regional water authority's costs of the Kielder dam and all its works, which do not benefit them at all.
There are many discrepancies. However, if there is to be an equivalence of charges, why should it be at an ultimate rate of 5 per cent. in real rate of return as opposed to 1·5 per cent. or 2 per cent., which would itself be more than the rate of return for any water authorities at the moment?
The House normally deals carefully with taxation matters. To protect the rights of citizens, we ensure that we scrutinise carefully anything to do with finance. The injustice here is that we have only an order, debatable for a little more than one hour, concerning a form of taxation that is at its highest ever level for unjustifable reasons. Moreover, the taxation is not being imposed by the Government, who are chosen from Parliament — an elected body—but by bodies that are appointed and the meetings of which, with the excepton of Wales, are closed to the public. The consumer consultative bodies that have been set up to protect consumer interests oppose the tax and we cannot resort to the Audit Commission to get it to investigate what is going on. The only accountability that is available is through the House, and we are given invalid arguments.
The Minister has to make much of the accountancy techniques. Current cost accounting has been used in the past too, but that does not make it any more valid. In the gas industry, pipes must be identified because of dangers that might arise from them. As the hon. Member for
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Derbyshire, South (Mrs. Currie) said, the assets of the aviation industry are obvious. The assets of water authorities—in the case of Thames, 80 per cent.—are underground. Many water authorities do not have plans of their assets and they certainly do not have detailed knowledge of them. The Government are applying an unrealistic exaggeration of the value of such assets in assessing the current cost. It is no more than an estimate and it is based on an inaccurate and unverifiable premise.
The proposals are amazingly inconsistent with Government policy. The Minister said that everyone must increase their payments to reduce their borrowing. I should like to quote from a letter that the chairman of Thames water sent to hon. Members. He wrote:
"Ministers frequently argue that repayments of debt followed by a continuing paying to Treasury are only to be expected in the case of Thames because we have a relatively low level of outstanding debt—in other words a low interest burden. The impression is given that we enjoy a 'windfall' advantage. The simple reason why Thames has a low level of borrowing is because Thames and its predecessors followed prudent spending and financing policies for years. We avoided the costs of borrowing. Ministers appear to be saying that past efforts don't count. It is rather like saying that I have a low mortgage, partly paid off. My neighbour has a newer and higher mortgage. Since we are equally wealthy we should pay the same. My mortgage is quickly paid off but since I can obviously afford to pay I have to continue to pay out the money."
It is also inconsistent to argue that, although Thames water has a lower debt burden, it must accelerate its rate of repayment. Like other water authorities, Thames is a commercial enterprise and does not need to repay that amount of money.
There is another constitutional argument which shows how flawed the Government's arguments are. We still have private water companies. If, with the same level of profits, they increased their charges to their consumers by the same level — 10 per cent. — they would be acting illegally. It is wrong to have different standards and the Government should ensure that the monopolies—water authorities—do not exploit their position.
Like other water authorities, Thames water has made it clear that it needs money to invest in infrastructure. We know that 25 per cent. of the water that is gathered is lost as it flows round the pipes. It is ludicrous to require water authorities to reduce capital investment because the Government want money to be paid back. All the demands are for investment in infrastructure to increase. All hon. Members will have seen local press reports outlining water authorities' need for more money to spend on infrastructure. I have a press cutting for 30 January which says:
"Huge spending cuts in flood-protection and land-drainage by the Severn-Trent Water Authority have come under attack."
The Lynn News and Advertiser reported:
"Threats of delays in providing long-awaited sewerage schemes in West Norfolk have been strongly criticised … Anglian Water has suggested that schemes at Castle Acre … could be postponed".
The Grantham Journal reported:
"A major review of all new water supply, sewerage and sewage treatment projects in the region is being carried out by Anglian Water because of the financial squeeze."
Sheffield's Morning Telegraph reported:
"Repairs to Sheffield's Victorian sewerage system have been delayed by cash shortages."
Building reported:
"Sutton is having talks with Thames Water Authority"
to ask it to divert more money because there is not enough money for the sewage replacement works in its area.

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During the recent freezing weather, people in Rotherhithe had to use standpipes in part at least because we have not the investment necessary to provide the perfect service.
The Government's policy does not work socially or economically. Consultative committees have written to hon. Members saying that, although they were set up to be consulted by the Government, the Government seemed determined to ignore their views. We also conclude that the Government's policy has no logic in economic terms. They rate cap local authorities one minute and then rate up water authorities the next. There is no incentive for management in water authorities to do the job that they have set out competently and professionally to do. The fight against inflation will suffer, the commitment of board members in water authorities will be impaired, employee motivation will suffer and eventually customers will suffer as they will have to pay more. The Government will be the only possible beneficiary. They are making an unjustified claim and I hope that the Minister realises that the logic of the Government's case is clearly flawed.
7.7 pm
Mr. Robin Maxwell-Hyslop: I was interested to hear from my hon. Friend the Minister the advice that that eminent firm of consulting engineers—Price Waterhouse — has given. Its knowledge of the condition of mains pipes throughout the United Kingdom must be second to none. That is what we are talking about —wholly spurious figures which might seem convincing to Messrs. Price Waterhouse but which are meant to represent a perceptible reality when they appear in the books of water authorities. If they are not meant to represent a perceptible reality, they are not a sensible base on which to attach a return, whatever the figure might be.
I am grateful to my hon. Friend the Minister for bringing me a glass of water.
Mr. Harris: No charge.
Mr. Maxwell-Hyslop: We need not waste time on absurd speeches such as that we have heard from my hon. Friend the Member for Derbyshire, South (Mrs. Currie), who seems to be under the impression that Lundy is the responsibility of the South-West water authority. If she reads the Water Act 1973, even her own eyes will tell her that it is not.
Mrs. Currie: May IȔ
Mr. Maxwell-Hyslop: Yes, she may go and read the Act. If my hon. Friend were familiar with the history of the South-West water authority of the past decade and a half, she would know that delays went into years, not months, for example at Meldon reservoir. Plans for Swincombe reservoir were frustrated, and it did not come into existence. If those reservoirs had functioned when they should have, the picture of drought would have been wholly different. The delay at Roadford reservoir prevented it from functioning during last year's drought. She made no reference to that, although she claimed some expertise.
Mrs. Currie roseȔ
Mr. Maxwell-Hyslop: I shall give way as often as my hon. Friend did, which is once, and when I come to a suitable point. To import such deplorable ignorance about the South-West water authority into such a debate is not a service to the House. I shall give way when I have finished dealing with such nonsense.
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The debate is not about how one costs aeroplanes or visible things with a known maintenance cost and visible attrition. It is about what are technically termed assets, but which can be a liability because the cost of replacing them can be even higher than starting the scheme de novo, which obviously is not the case. We are dealing with a historic network that in many cases bears no relationship to the pattern of the authority which exists today, and which at hideous cost links the disparate parts of the system so that they relate the pattern of population and demand today to the resources.
Mrs. Currie: I am grateful to my hon. Friend for the gracious way in which he has given way. It was no part of my case to suggest to him anything other than my ignorance of his area and his considerable knowledge of it. I did not say that Lundy was part of that water authority area, but merely that the cost of providing a service to such a place would have taken the entire capital programme of the water authority at the time. Does my hon. Friend agree that the kind of capital programme that he advocates, and, indeed, which is needed in the South-West water authority, would cost a great deal of money and result in a substantial increase in charges to his constituents, whatever accounting system is used?
Mr. Maxwell-Hyslop: We could have had three times the capital programme for the same cost if the water authority had been allowed to conduct itself as a business, which is what Ministers often exhort it to do. The previous chairman of the South-West water authority wanted to borrow money at 8ߪ5 per cent., but was forced to go to the Public Works Loan Board and borrow at up to 22 per cent. Exhortations to behave like a business are followed by interdictions on so doing.
An authority is still not allowed to behave like a business or to borrow money as a good business man would. It is forced to adopt accounting practices which attach a wholly artificial value to what are not assets. They are not assets if they require extra reservoir capacity because they leak like sieves, and cause constant complaints about discoloured water because they are made of old flaking pipes that are scaled up, and if they are subject to variations in pressure at times of low flow from some sources, or when demand is highest when it is swollen to three times its normal size in the summer. To treat those as assets, as in the ridiculous computation by Price Waterhouse, and to expect a putative return on them is the sort of nonsense that I do not expect from a Conservative Government, and which I do not intend to support.
A dangerous heresy was nearly expressed—that was, of regarding water authorities as if they were owned by the state. They are not. The component parts of the South-West water authority were owned by the local authorities concerned, and have never been owned by central Government. There is no parallel between the financial disciplines, in terms of yielding a net yield to central Government, imposed on gas or electricity, which are owned by central Government, and those of local water authorities, which are not. The Government are endeavouring to generate employment, especially in the peripheral areas, by holding down avoidable costs in local authorities in the form of rates. It is wholly counter to that policy artificially to force up the costs of the charges imposed by water authorities. The costs are not confined

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only to supplying water and removing foul water and sewage, but include environmental charges, which are pure taxation. The decisions that lead to environmental charges are political, not business decisions. Yet they take place in secret and with the press excluded from the deliberations leading to them. That is an undeniable fact.
We are dealing with a matter that runs counter to much of the Government's policy — which I support — to minimise costs, generate new enterprises, and reduce as far as possible the capital requirements on new entrepreneurs. That is cut away if, with the other hand, one imposes on them wholly avoidable costs.
It is not good practice to say that capital equipment with a long service life should be financed from revenue rather than borrowing. That is exactly what borrowing is for. The borrowing of which we disapprove is the borrowing from a failure to balance current accounts: it is borrowing in substitution for income on current account, not capital account. We must let the authorities behave like businesses and exercise business acumen about where to borrow. We must not force them into the public borrowing sector. There is no earthly reason why they should not have borrowed on the continent instead of from the Public Works Loan Board. That is the crux of the matter. We do not get out of nonsense of that kind—the Government have it in their power to rectify it by a stroke of legislation —by supplementing it with nonsense of this kind.
As statutory instruments cannot be amended, the best thing to do is to invite the Minister to withdraw them. That is always open to him, and it is the sensible thing to do. Other Ministers have done it in the past. The sensible thing is to treat the statutory instruments as though they were presented in draft form to the House, to collect the views of the House, and to withdraw them. The orders should not be passed into law. If the Government seek to do that, they will do so with the opposition of many hon. Members, not with their consent.
7.19 pm
Mr. Dafydd Wigley: As hon. Members will recall from previous debates, water in Wales is a burning issue. Indeed, it is hot water that has become even hotter today. Wales is in the unenviable position of suffering from excess rainfall, which leads to floods, and of having inadequate reservoir and water networks, which leads to drought in summer. It exports water to regions such as the Severn-Trent water authority and the North-West water authority, but Welsh consumers pay twice as much rate poundage as the consumers in those areas. Wales seems to get the worst of all worlds.
Perhaps I may describe the background against which we are considering the orders. In Wales, water rates are considerably higher than those in the rest of the country, and have been twice as high as those in nearby areas. It is interesting to consider the report of the Comptroller and Auditor General for 1983–84, which shows that in the average household bill in Wales water charges account for £47·76. That compares with an average in England of £33·87, and it is interesting to note that the figure for Severn-Trent is £30·27 and for the north-west is £31·15. A 10 per cent. increase in Wales, which will also be hard hit by the orders—we are agreed that they are bad for everyone—will mean an increase in real terms of £4·76. In the north-west area, the increase will be £3·03.
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Therefore, the increase in Wales will be 50 per cent. higher in real terms than the increase in the north-west area, yet in Wales disposable income is lower than in many regions of England. The position is extremely bad.
The position could be improved in two ways. First, the Welsh water authority could obtain adequate payment for the water that it exports to other areas. The recent High Court case against the Welsh water authorty, to which Plaid Cymru was a party, was settled out of court, with the water authority recognising that it had the right to charge more for the water that it sends to other authorities in England. The Welsh water authority may have been a little slow in catching on to that, but the Severn-Trent authority was not. The Western Mail of 21 January, under the headline, "Water bills for city trebled by authority", states:
"Birmingham is trebling the price of Welsh water … and selling it to Liverpool. Birmingham — which has always insisted that Wales cannot make a profit out of selling water to England, has increased its bill to Liverpool from £360,000 to around £1 million."
The other way of getting a fairer deal, if we must have a near uniform rate of return on capital to which the orders refer, would be to have an even scale of charges in England and Wales. We pay the same price for a Mars bar whether we buy it in Birmingham or in Caernarfon; why do we not do that with water? It would be more equitable. But Wales gets neither a fair price for the water taken out nor equal charges. As I said, Wales gets the worst of both worlds.
The increases have been introduced against that background. For the first time, there is a statutory requirement on water authorities to make specified profits that are higher than many of the water authorities would have wished. Many hon. Members have referred to the rebellion of the Thames water authority. That rebellion is partly because the increase is a tax. It is a tax without representation, because the water authorities that impose such charges are not elected bodies. That is a bad principle.
The chairman of the Welsh water authority led us to expect a decrease in real terms in water rates this year. In a letter that he sent on 30 November to the local advisory councils in Wales, he said that, although the authority had hoped for a 2.5 per cent. decrease in real terms, the Government's policies announced in November had made that impossible. The letter stated that the proposals of the Government are to do this
"by a combination of higher target financial returns and much lower borrowing limits. As a result of this Governmental policy decision, the Authority can no longer restrain the increases in charges below the increase in the RPI. The new financial constraints are such that we will have to raise charges by considerably more than this in each of the next three years."
That is, indeed, bad news.
Mr. Donald Coleman: Will the hon. Gentleman care to comment on the other position adopted by the Government? If this were a local authority that wished to increase its charges, it would be rate capped.
Mr. Wigley: That is the great irony. Only last night the House was debating rate-capping legislation which stops authorities increasing their charges, yet here is a specific provision to increase charges. Not surprisingly, there has been a massive reaction in Wales and elsewhere. One is reminded of the water rate rebellion in Wales three years

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ago, when 20,000 people withheld their water rates. The Government are heading towards stirring up a similar reaction.
In a letter of 22 January to the Secretary of State for Wales, the consumer advisory committee of Gwynedd says:
"At a special meeting of my Committee held yesterday members expressed their great personal concern, and the concern of the consumers they represent, at the Welsh Water Authority's proposal to increase their charges by 30 per cent. over the next three years. They were further incensed when they recalled statements made last year by the Chairman of the Water Authority that it was the firm intention that annual increases be kept within the level of the retail price index. Members were given to understand that this undertaking could have been fulfilled but for the intervention of the Government in November 1984 … It is the stated hope of my committee that there will be less Government intervention in future in the operations of the Water Authority."
That letter is signed by Mr. Vernon Hughes.
The National Farmers Union also wrote to me, and perhaps I may quote from the original:
"Mae ein aelodau yn methu a deall sut mae yr Awdurdod yn medru cysdiro codi y pris cymaint dros ben lefel chwyddiant yn y wiad."
—[Laughter.] Hon. Members may laugh. I am used to that reaction from certain hon. Members but for the benefit of hon. Members I shall translate the letter. It states:
"Our members fail to understand how the Authority is able to consider increasing the price so much above the level of inflation in the country."
That is especially pertinent in Wales, because many farmers are milk producers, who have been clobbered from another direction because of the ineptitude of the Government.
The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts): The hon. Gentleman will realise that we do not yet know precisely by how much the Welsh water authority will increase its charges next year, because it has yet to meet to decide that. However, there will be at least three elements in the decision. The authority must allow for inflation when it decides the increase in charges. Another factor in domestic charges relates to the transfer of costs from the non-domestic sector, and there is also the factor caused by the change in Government targets. The change in targets amounts to only about 2·75 per cent. of the proposed overall increase in charges.
Mr. Wigley: Once again, the Minister's figures do not add up. Of course, there are swings and roundabouts, and some people will have higher increases than others because of the move towards an equalising of charges within the Welsh water authority area. Everyone recognises that, but the chairman of the authority was talking about an average increase of 30 per cent. over three years, not about a maximum increase. The Minister says that there is inflation. Of course, there is, but the Welsh water authority has been especially effective in keeping down costs, and, without the Government's interference, it would have increased its charges by about half the retail price index for the coming year. That argument is disposed of.
Sir Anthony Meyer roseȔ
Mr. Wigley: I have not quite finished with the Minister yet. His third argument was the effect of the Government's proposals, and I shall come to that in a moment.
Sir Anthony Meyer: One reason why the Welsh water authority has been so effective in keeping down costs is that it was reorganised by my right hon. Friend the Secretary of State for Wales, in the face of intense opposition.
Mr. Wigley: There have been reorganisations and some have been beneficial. Some have led to problems for the consumers, but they have led to lower operating costs and we should be seeing the benefit of that in our water bills. We are not, because of Government policies.
What we are seeing is an increase in the water capital investment programme in England and Wales for the next year from £686 million to £769 million. That is an increase of £83 million in the investment that the Government recognise is needed in the water industry.
The hon. Member for Derbyshire, South (Mrs. Currie) referred to projects that need to be undertaken. We in Wales know from last summer's drought and from the floods of a few years ago of the expenditure needed, and I recognise that other areas have needs as well. There is recognition by the Government of a need for £83 million more in capital expenditure, but at the same time the Government, because of their monetarist and cash limits policies, have decreased the external financial limit from £264 million to £183 million, which is a drop of £81 million. Taking those two together, this is a difference of £164 million that has to be met; a shortfall of £164 million.
So the Government say that they are going to increase the rate of return from 1 per cent. to 1·4 per cent. That is an increase of 40 per cent. The return last year was some £400 million over England and Wales, and 40 per cent. of £400 million is £160 million. That more or less balances the books. But the Government cannot escape the criticism being made from this side of the House particularly that it is their policy of cash limits and reducing the available capital that is leading to the need for the excuse of getting a higher return on capital. It is not a matter of following a theoretical conception—or perhaps it is. I will come back to that. It would appear that there is a need to find £160 million and therefore there has to be this theoretical justification of a required return on capital.
Responding to the Minister's point that it was not the Government that caused the problem with increased charges in Wales, they most certainly made things worse. In Wales, the return last year was already 1·47 per cent. Therefore, one can expect little additional revenue to come from the return on capital of 1·45 per cent. stipulated in this order. But there is a need next year for £14 million more in terms of the capital expenditure that the Government have sanctioned for Wales, and by 1987–88 there is a need for £35 million more. If that £35 million is to be funded by increasing the profits generated by the authority and retained for capital expenditure, that needs a return of over 2·5 per cent. on the assets of the authority by 1987–88. That is the logic of what the Government have sanctioned on the one hand by the capital investment programme that they have boasted of in Committees and elsewhere and which is needed, and on the other hand by the restrictions that they announced last November in the external financial limit. Therefore, there is a need for an increase of £35 million, which is equivalent to some 30 per cent. over the three years. That has come directly from the Government's own policies, and the Minister cannot escape from it.

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Turning to the background of this whole issue, it is a move towards privatisation. As the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who opened the debate for the Opposition, said, we have to consider it in the context of the "Nationalised Industries Legislation Consultation Proposals", which were lodged in the House only five days before Christmas. This is directly relevant to what we are discussing, because it refers to the private sector companies being regulated by a common set of statutory provisions and says that
"the Government considers that it would be advantageous if a single Act set out the core framework to be applied to nationalised industries."
It goes on—and this is very important—to say that one of the six elements that it refers to in such legislation would be
"the formation of companies and privatisation."
If we look at the list of the industries that would be privatised we see, in annex A, the Welsh water authority.
In other words, what we are seeing tonight is the first step along the road towards privatisation. What we have in the document lodged five days before Christmas, when some people were in an alcoholic haze, apparently, according to comments heard earlier tonight, is a framework to get the accounts of water authorities in a format that will be transparent to those who may want to make a take-over bid, that is, these proposals are meant to make the road to privatisation easier.
There we have it. These orders are not just a pragmatic response to a shortage of cash in the water industry; they are a step towards the privatisation of the industry, not only in Wales but elsewhere, as part of an overall privatisation package which, side by side with cash limits, is giving the problems which Wales and other areas will have to pay for by a 30 per cent. increase in water charges.
7.35 pm
Mr. Michael Stern: I think it might be helpful if I were to review briefly some of the principles on which these orders are based. The Government, in putting them forward, wish to achieve, among other things, three things in the water industry. First, they wish to see increased investment; secondly, they wish to reduce public borrowing; and, thirdly, they wish to encourage water authorities to achieve on publicly owned assets what the Government consider to be a reasonable rate of return. It occurs to me, particularly listening to the debate tonight, that, far from being criticised for these aims, the Government could almost be criticised for not going hard enough for them. Let me just elucidate that point.
We are all in favour of increased investment in the water industry. I have heard that cry many times from both sides of the House. What it would seem the Opposition parties are against—indeed, they seem to have struck a chord of sympathy in one or two of my hon. Friends—is not so much the investment as paying for it. I have often wondered, particularly in the years before I entered the House, why it was that it was always future generations that seemed to be being caned for the fact that past generations had put in investment and not paid for it. I am beginning to understand why, because there is this reluctance to link the two necessary facts, that investment is not going to drop into our laps from on high, and that
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it has to be paid for. So, when we talk tonight about increased investment, should we be surprised that there are going to be increased charges to pay for it?
One of the objectives of these orders is to reduce public borrowing. I am not surprised that the Opposition parties are against the orders, because they are not very keen on reducing public borrowing. All the Opposition parties fought the last general election on the basis of increasing public borrowing. They were soundly defeated. I hope, for the sake of the political careers of myself and my hon. Friends, that they will be so again. Nevertheless, the aim of the orders is to reduce public borrowing. That inevitably brings with it the possibility that charges will go up.
The third objective which is a basis for these orders is to produce what the Government consider a reasonable rate of return on net assets. The Government have set as a reasonable rate of return 5 per cent. on new investment, and 1·4 per cent. rising to 1·9 per cent. in 1987–88 on existing assets valued on current costs. We have heard many protests at this rate of investment tonight. I assure my hon. Friends — the Opposition parties will not be interested, because they do not believe in a rate of return on public assets—that if we are looking at privatisation of parts of the water industry, with the exception of the Thames water authority, we have a long way to go before we will produce a rate of return which the market will find attractive to enable us to privatise these public assets at the proper price. The rates of return quoted by the Government are by no means exceptional in large companies which are trying to utilise their assets. If anything, in my view, as a practising accountant, the Government have been overgenerous to the water authorities in the past and are sensibly taking the view that it will take time to catch up.
Those are the principles on which these orders seem to be based. We have heard a lot about those authorities which object to the orders, but there was one authority which was referred to by the hon. Member for Birmingham, Perry Barr (Mr. Rooker) as not having sent in any information. That is not surprising, because it is an authority which totally disproves his case. It is the authority which covers my constituency — the Wessex water authority.
I wish to comment briefly on the effect of the orders on the Wessex water authority to show that, far from being the gross attack on water authorities that they have been painted, the orders highlight the effect on an authority which for a number of years has run on a sound financial basis. It has invested sensibly over those years and has conducted all possible economies, and after these orders the Wessex authority will be able to go into the world perfectly able to offer a reasonable service to its customers.
The chairman of the Wessex water authority, Mr. Malcolm Anson, points out:
"we have a compelling need to increase the level of investment above that which has been permitted in recent years and, particularly, above the level permitted in the current year, if we are to arrest the decay of old assets, maintain, let alone improve, our levels of service, provide for growth in the region and meet our statutory duties under the Control of Pollution Act and other regulations. This has been recognised by the Government"Ȕ
in the external financial limit which has been set.
"the setting of the financial target for Wessex at 1·4 per cent. simply provides another reason for doing something which we would have needed to do in any case … I hope … you will feel that the Return on Assets Order 1985 is beneficial in its implications for your Wessex constituents and that you will feel able to support it."

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I reassure the chairman that I have every intention of supporting this order.
The amazing difference between a well-run authority such as Wessex and some of the complaints that we have heard today is also revealed in a reply which the chairman of the Wessex authority has given to the CBI, whose views were quoted with approval by several hon. Members. He said:
"I do not believe that it is generally true that the setting of financial targets in the form of return on assets is unnecessarily adding to charges. It is not so in Wessex … It is past capital expenditure on storage, mains, telemetry and automation that has enabled us in Wessex, in the last ten years, to get through two droughts, a strike and exceptionally severe winter storms without any real inconvenience to industry or our other customers, and at the same time to reduce operating costs by 2 per cent. per annum for the past four years—a trend which is continuing. For the future, I believe that the levels of investment now proposed are what industry should be asking for and supporting."
It is clear that there is a dichotomy of views between the water authorities about the effect of these orders. Following the comments of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), I hesitate to dare to comment on other authorities, but although some may have particular problems because of the way they have been managed in the past and the effects of financial targets, with the exception of Thames, the position by and large cannot be nearly as bad as some hon. Members have tried to make out.
It is only fair to remind the House that I speak as a practising accountant and a member of the firm of Harpern and Woolf, which has been involved in the debate on current cost accounting. I also speak as an opponent of current cost accounting, and have consistently opposed SAP 16. I was delighted when it was withdrawn. Although there is no black and white in accountancy, I believe that one or two industries are perhaps less inappropriate for current cost accounting than others. Those industries can be distinguished by the fact that, whether we use the term "fixed assets" or "fixed negative assets", their assets have extremely long lives. As a result, the depreciation charges included in their accounts which are based on those assets are totally meaningless if based on historical costs.
As an opponent of current cost accounting, I accept that CCA has at best been an imperfect substitute. However, in the case of industries such as water authorities, CCA is probably a better substitute than historical costs. I was delighted to see that, in his financial report in October, the chairman of the Thames water authority agreed.
Any chairman of a body such as a water authority has an opportunity either to use current cost accounting or to say in his report that he believes it to be inappropriate for his industry. That opportunity was not taken by the chairman of the Thames water authority, who signed the accounts without such a rider. Indeed, his auditors, Arthur Andersen — not consulting engineers, -but nevertheless auditors used to looking at accounting principles — approved those accounts despite the fact that the chairman and his director of finance did not add a rider about current cost accounting.
That report states:
"the current cost convention is not a system of accounting for general inflation, but allows for price changes specific to the Authority's operations".
In other words, the chairman is agreeing with me and is saying that, although CCA is imperfect, it is appropriate to the operation of a water authority. The chairman adds:
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"In the current cost accounts, all fixed assets are depreciated over their estimated useful lives".
Those lives are set out in the report.
Therefore, I was somewhat surprised to read in a letter from the Thames water authority that there has been a conversion on the road to Damascus and that the chairman now totally disagrees with the report that he signed four months ago. He now believes that the asset lives included in his authority's report are inappropriate for the purpose of fixing rates of return. I am not sure, however, to what other purpose accounts should be put in an authority of that size. Despite the chairman's absence of adverse comment four months previously, he also believes that CCA is wholly inappropriate to the operations of Thames Water and the relationship between accounts and the rate of return which is inevitably based on those accounts.
My right hon. Friend the Member for Guildford (Mr. Howell) said that CCA was an imperfect tool and that it should not be used as a method of fixing a rate of return. His point was echoed with greater force by the hon. Member for Southwark and Bermondsey (Mr. Hughes). However imperfect CCA may be as a means of fixing rate of return, it is the best guide we have. It is certainly far better in the case of a water authority than the historical cost convention, which on asset lives of about 200 years is wholly inappropriate. I accept that current cost accounting must be treated with caution, but nevertheless it is far better than anything else available.
Mr. Jackson: What is my hon. Friend's estimate of the effect on charges in his area of the application of a 5 per cent. rate of return on a current cost accounting assessment of the assets?
Mr. Stern: In the Wessex water authority, the charges next year are expected to rise by 11 to 12 per cent. after the application of the required rate of return to assets valued under the current cost accounting practice.
Mr. Maxwell-Hyslop: I have the impression that the form of argument of my hon. Friend is that an aeroplane with one wing is better than an aeroplane with no wings, whereas I would say that neither was any use for flying.
Mr. Stern: My hon. Friend, with his customary humour, has slightly twisted my point. I was saying that the only way of fixing a rate of return and of measuring the public's use of the public's assets is by valuing the assets that are being used. I do not agree with my hon. Friend about aeroplanes because they have far too short a life for current cost accounting to be wholly appropriate. We are discussing assets with a life of between 100 and 200 years. In that case, current cost accounting can be appropriate. In adopting a financial target and in conducting a financial exercise we must use a financial tool, and current cost accounting is the best tool available.
Mr. Simon Hughes: Will the hon. Gentleman accept that one of the reasons that the chairman and the board of Thames water are unable to accept the Government's present policy is because, the higher the rate of return, the greater the inadequacies of the accounting mechanism that are revealed, particularly with this mechanism, although it may be better than others. However, I take the point of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) that if one demands—and there is demand this year—a greater rate of return, the result of working on an inadequate premise is multiplied many times in the

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inadequacy of the criterion that the Government are now applying. We ought to allow Thames water to make that judgment, as the hon. Gentleman said, rather than suggest that the Government make it for the authority.
Mr. Stern: I would not agree in any way with the hon. Gentleman. The rate of return is merely a factor applied to a value. The closer one can arrive at the true value to the authority of an asset or group of assets, the more accurate the rate of return will be. The suggestion that we should move away from current cost accounting because it gives an inconvenient result to Thames water is wholly opposed to the principle of trying to find the most accurate possible method of measurement of the way in which public assets are being used.
I hope that I have demonstrated that the opinion of one authority has changed in the course of four months from the time that it produced and signed a public document to the time that it realised the effects of using the figures in that public document.
We are debating, I suggest, not the basic argument about accounting principles or assets' lives but rather the contrasts between different water authorities. I have quoted the case of Wessex, which is prepared to accept that present and future investment has to be paid for and that it must consider the interests of not only present but also future ratepayers. Rather than load an unacceptable burden on the future, Wessex accepts that part of that burden must be borne today. It is part of the burden only because, as the House knows, investment in the water industry is a continuous process. It is like painting the Forth bridge.
The authority in which my constituency lies is prepared to accept the financial consequences of the present situation, and other authorities in my view are crying out to court cheap publicity at the expense of present and future ratepayers. [HON. MEMBERS: "No."] That is my honest view, based on the contrast between the statements of the chairman of Thames water four months ago and the exactly opposite statements that he now makes. I believe that that is fair comment.
I call upon the Minister to protect my constituents, the ratepayers in the area that I represent. I ask him to ensure that the prospects of what appears to be a very well-run authority, as in the case of Wessex, will be protected by the orders.
7.54 pm
Mr. Gareth Wardell: I shall confine my comments to the implications of the orders for the people of Wales. In doing so I pay tribute to the Welsh water authority for its openness in granting access to its meetings to the media and to the public, and because it will soon be the only water authority in the United Kingdom to retain a virology laboratory. That is significant, because the quality of water is vital for the health of the population. I hope that the Minister will consider having similar virology facilities in other water authorities, and also the benefits of public access to water authorities.
In 1985–86 the financial target of the water authority in Wales will be 1·45 per cent. of the value of net assets, while the external financing limit will be set at £20 million. Under the orders, by 1987–88 the rate of return will be raised to 1·9 per cent. and the external financing
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limit will be lowered to £13 million. The Government have chosen to impose upon water authorities the combination of a higher rate of return and a lower external financing limit. The Government faced a number of options, one of which was to increase the rate of return in line with the retail prices index, combined with an increase in the external financing limit.
The Parliamentary Under-Secretary for Wales, in his winding-up speech, owes it to the people of Wales to say why he has chosen to force the Welsh water authority to increase its charges when areas of England which receive Welsh water, as the hon. Member for Caernarfon (Mr. Wigley) made clear, pay lower charges than the area from which the water comes. This is the situation at a time when the people of Wales, according to the latest statistics of the European Commission, live in one of the six poorest regions in the European Economic Community. It is another hidden tax on one of the poorest regions in the EEC. In my view, this is an unacceptable measure, and I hope that the Minister will ponder the words of the hon. Member for Tiverton (Mr. Maxwell-Hyslop) and consider withdrawing the orders.
The matter goes deeper than that. The Minister must explain why the Government have chosen not to raise the external financing limit of the Welsh water authority so that even greater effort can be made to increase investment in the Welsh water industry. To take the example of current availability of capital, the Welsh water authority will require at least 30 years in which to construct sewage outfalls to the sea which comply with Department of the Environment criteria. It is vital for the tourist industry in Wales, at a time when the Government have cut regional financial assistance by £60 million this year, that such a programme of investment is radically speeded up.
It is little wonder that the Secretary of State for the Environment, in a reply that he gave me in the first week of December last year, was not prepared to accept the recommendations in paragraph 4.68 of the tenth report of the Royal Commission on Environmental Pollution. That paragraph recommended the setting of a date by which the recommendations of the Jeger working party on sewage disposal relating to discharges of crude sewage were to be implemented in full. It is bitterly disappointing for the people of Wales that the Government are not prepared, after talks with the water authority, to set a date for the implementation of that programme. The Government are once again ducking their responsibility by giving the Welsh water authority the task of forcing the Welsh people to pay for capital investment out of current revenues, while at the same time projecting their own sterile philosophy on to the shoulders of others.
I wish to give the Government their proper due. Their proposal has one major advantage—it is consistent. The consistency is borne out of the overwhelming confidence which the Government are generating daily in the hearts and minds of the people of Wales. That confidence relies heavily on the tenet that the Government must, at all costs, continue to pursue policies which accelerate the slide of Britain down the world economic order. Britain's economic standing in the world is going down, and the people of Wales are at least confident that the Government are pursuing the correct economic policies to continue that course.
An example of this consistent economic idiocy is that water, a free public good according to the economic textbooks, is about to become very expensive for the

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people of Wales. Therefore, I once again urge the Minister to consider carefully what the hon. Member for Tiverton and other Conservative and Labour Members have said, and withdraw these orders.
8.2 pm
Mr. John Wheeler: At the outset, I wish to say that when the House divides, I shall vote against the Government. No hon. Member does that lightly or without careful consideration. In the discussions that I and other colleagues have had with my hon. Friend the Member for Eastbourne (Mr. Gow) he has been the most courteous, considerate and careful of colleagues in spending both his time and energy endeavouring to explain the issue and the Government's position.
My vote tonight against the Government in no way reflects my hon. Friend's inadequacy in getting the case across. The issue is quite straightforward and has little to do with accounting practices or the return on assets. It is about straightforward politics. It is about the Government's central and major objective of containing inflation and ensuring that ratepayers receive good value for services provided as cheaply and efficiently as possible. Therefore, it is with great regret that I shall cast my vote against the Government.
My hon. Friend the Member for Eastbourne said that the Government's objective is the containing of inflation, and I agree with that. Throughout my time in the House since 1979, I have voted consistently with the Government on their central economic policies on reducing inflation. I see that that is absolutely essential and in the best interests of the people of the United Kingdom. The Government's objective of seeking to secure wage increases of around 3 per cent., particularly in the public service, is also the right objective.
However, if the Government have the right objectives, how can we say that the water authorities should increase their charges by about 10 per cent.? How can we then say to the work force of Great Britain and to British commerce that their charges should be held? This is why the Government are so wrong in what they are proposing.
There are other aspects to the matter. Last night, the House had to decide about rate limitation. Throughout my time here, I have been critical of the minority of local authorities who have wilfully disregarded the interests of the poor, commerce, industry and the institutional ratepayers such as the Health Service, and have put up rates faster and higher, to the great damage to the community as a whole. The House, in its wisdom, has agreed rate limitations. If we support that principle, it is inconsistent then to vote to increase water charges. That is impossible, and as a matter of conscience, apart from any duty to my constituents in Westminster, North, I simply could not follow that contradiction. I think that I speak for many hon. Friends who will not be supporting the Government tonight, but who may not be as fortunate as I have been, Mr. Deputy Speaker, in catching your eye.
Alas, the Government are almost friendless on this issue. In the debate, one or two speeches have been in support of them, but even one of those had some limit in its support. The Government's friendlessness arises from not only the lack of support within the House and on the Conservative Benches, but from those voices outside the House whose opinion is so significant and who generally support the Government's policy and objectives. The CBI, the chambers of commerce and industry and the
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consultative councils for the water authorities are all against the Government. We know the opinion of the chairman of Thames water, and my comments about water authorities naturally relate to that authority as my constituency is in the Thames water authority area.
The Government's proposals remove from the management of Thames water, and perhaps the other authorities, the one plank that management has to encourage efficiency within its business. If there is to be no tangible gain of lower charges to the consumer of the water services, why should management and the employees of the water authorities work to achieve a higher standard of efficiency? The Government's proposals would seriously damage the ability of management in the water industry to manage.
Alas, the only comment that my hon. Friend the Member for Eastbourne made in his interesting speech with which I could find much favour was his suggestion that at some point denationalisation might be a possibility. I applaud that suggestion. Surely the answer is to remove the water industry with its extremely interesting, developing businesses with many opportunities both at home and overseas from the quagmire of the Treasury's public sector borrowing requirement and from all the other areas that constantly drag us into the whirlpool of dissent and confusion. I very much hope that my hon. Friend will be persuaded to heed the message that we cannot go on increasing charges without looking at fundamental principles.
I do not intend to discuss the return on assets. I am not an accountant. I cannot judge between the claims and statements of my hon. Friend and his excellent civil servants and the claims and statements of the chairman of the Thames water authority and his excellent employees. I do not know who is getting the best return on assets. I do not believe that to be a particularly relevant argument. The case is quite simple. We are saying to the public that we should keep inflation down. We are also saying that we should keep rates down. The public want that to be achieved. Therefore, the public cannot understand, nor will it understand, why the rates should go up.
Moreover, commerce and industry, which are seeking to hold their prices and make themselves competitive overseas, cannot understand this policy. The knock-on effects of putting up water charges to commerce and industry involve hundreds of millions of pounds. We should remember who are the big ratepayers. They are the London electricity board, the gas boards and the retail food industries. All of them pass on these charges to the consumer. One cannot even protect those who are on supplementary benefit. The poor always pay, even if it is only via the back pocket. Therefore, I join other hon. Members in suggesting to my hon. Friend that even at this late hour he should consider whether or not the Government ought to proceed with these orders. It will not do if significant groups of people are constantly ignored by the Government. The Government have many strengths. Their one weakness is that they do not listen well enough and hard enough to many of their own supporters and, perhaps more importantly, to the people of this country.
8.12 pm
Mr. Gerald Bermingham: I wish to pay one compliment to the Minister. I have found a cliché for him. One of his ministerial colleagues said

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recently that the water authorities would not be privatised. It appears that because of his open statement this afternoon the Minister has become a courteous assassin of that ministerial declaration by his colleague. The Minister will recognise that some months ago I suspected that privatisation was lurking in the background or in the wings. Nevertheless, that declaration was not made last Friday; it was made this afternoon.
The Government are prepared to sell almost anything. I have been racking my brains to discover what else they could find to sell. If the Government get rid of the water industry and of all the other nationalised industries, the best thing that we could then do would be to turn Great Britain into a limited company, stick it on to the Tokyo and New York stock exchanges and sell it off. The Government would then have completed the job. Everything would have gone.
It is nonsense to talk about the water industry in terms of its being a publicly owned asset that is up for sale to a certain group of city bankers or speculators on foreign stock exchanges. It just is not so. How are the Government going to do it? Are the water authority areas to be rearranged? They are quite arbitrary, in any event. We have heard that Wales sells its water to Birmingham, which in turn sells its water to the north-west. It is quite ludicrous. There ought in this land of ours to be some assets which belong to us all—air, water and, with a bit of luck, light and heat, but even those might be up for sale soon, so I must be careful about what I say.
We ought to consider the water industry in a realistic way. What are the Government seeking to do? By means of these orders they are seeking to reduce borrowing, for if they reduce borrowing there will be less pressure on the public sector borrowing requirement. One or two hon. Members who are accountants have spoken in this debate. Having heard what those hon. Members had to say, I am jolly glad that I am a lawyer and not an accountant. If a sewer has been lying under a road for 50 or 70 years, how can one put a notional figure on it and expect a financial return at the end of the year? To try to do so would be the height of absurdity.
Based upon SAP16—what a pity it is that we have to use initials instead of words; would it not be better to say standard accounting practice No. 16?—the Government are valuing the Thames water authority at about £4,425 million worth of assets. The Government are looking for a 1 per cent. return and therefore wish to raise an extra amount of money. Consequently, the rates are to go up this year by 12·4 per cent. In the north-west the rates are to go up by 12 per cent. Over the next three years the Thames water authority rate will go up by 29 per cent., while that in the north-west will go up by about 40 per cent. For what purpose? Who will pay? The ratepayers will pay.
We cannot get away from the fact that we are all taxed either as ratepayers or as householders. To use a rating term, the levy is based upon a notional rental value. Upon that basis a sum of money is levied upon one's property. Regardless of whether one uses a bucket or a tubful of water a day that property attracts the same levy. It does not matter whether one's income is £50 or £5,000 a week. On that property, the same amount of money will be levied.
It is a very unfair form of taxation. Rating always has been unfair. We are to allow the nine English authorities
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and the one Welsh authority to impose a levy at that kind of rate. We, the mere ratepayers, have no say. Those authorities are not accountable to us. They are run by people who have been appointed by Ministers. In the old days they were at least partly accountable to us. Before 1983 there was local authority input into the running of the water authorities. That is no longer so.
I would remind our courteous Minister that the Boston tea party, which was about taxation without representation, did not do King George very much good. I suggest that the Minister ought to take a leaf out of our history books and remember what might happen if he continues down this particular road. With great respect to him, by pursuing this policy he is doing neither us nor himself much good. The people who will have to pay are the ratepayers. The ratepayers include both the rich and the poor. The poor have no way of recouping these charges. We know that under the rules of the Department of Health and Social Security water authority payments have to be paid by these people. They have to reach into their own pockets.
If a notional profit is made, the Government will increase the amount of money in their coffers at the end of three years. That is the object of the exercise. The Minister is aware that at Question Time yesterday I asked him this very question. Hansard will show his reply. He said that he did not consider it to be a tax, but I think that everyone else recognises it to be one.
At the end of the day the public sector borrowing requirement will fall slightly and it will be said that more money is available for tax cuts. The poor, who will pay increased water charges with no relief, do not benefit from tax cuts, because they do not pay tax. Once again, the poor will finance the tax cuts of the not so poor. The poor will pay, and so will industry and commerce. The unit costs of products will increase and Britain will become slightly less competitive in world markets. We shall all become the losers. The Government seem hooked on the policy that even the air that we breathe must make a profit for someone. That policy does not produce a fair society. It does not produce the society which any of us wants.
Many hon. Members on both sides of the House accept that there are certain services that are fundamental to our way of life and are not for sale or profit. They believe that they should be for the use of everyone, at the most economic rate.
8.22 pm
Mr. Peter Fry: I hope that the hon. Member for St. Helens, South (Mr. Bermingham) will forgive me if I do not respond to his speech. Instead, I shall take up some of the remarks which were made in the two speeches from the Government Benches which were in favour of the orders.
My hon. Friend the Member for Derbyshire, South (Mrs. Currie) seems to defend the Government's case on the basis of some esoteric games that she played at Oxford university. I played games there in a rather more straightforward and simple manner and perhaps that is why I disagree with my hon. Friend in this instance.
My hon. Friend the Member for Bristol, North-West (Mr. Stern) confirmed my fear that accountants are second only to lawyers in being able to make a mystery of any issue and to use language that the rest of us, alas, cannot often understand. If my hon. Friend were still in the Chamber, I would put it to him that if he is in favour of

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privatisation he would be in favour of water authorities borrowing their money on the open market and arranging their finances accordingly. If we are trying to move industries from one sector to the other, why should we make one set of rules for the public sector and another and different set for the private sector? We do our credibility no good when we do that.
I listened carefully to my hon. Friend the Minister because it is always worth doing so. I welcomed what he had to say about privatisation. We expected only a skilful rendering from my hon. Friend, but he reminded me of an experienced lawyer who chose to defend his client in a case in which he was not really sure of the merits. The lawyer felt that he had to put up a good show because of the high fees that his undoubted abilities entitled him to receive. I was not sure that the Minister was as convinced of the Government's case as he wished us to believe.
It is about time that other areas were discussed apart from those covered by the Thames water authority, the Wessex water authority and the Welsh water authority. My comments will be directed to the area covered by the Anglian water authority. I have been requested specifically by Wellingborough borough council to make a protest about the charges that will be imposed upon those living in the area. I received a deluge of pieces of paper from the Anglian water authority containing many different comments.
The chairman of the Anglian water authority stated:
"No one likes to see this level of increase but it is inevitable if we are to maintain investment to safeguard the standards of existing services and at the same time cope with the tremendous demands which are imposed on us by regional growth—the fastest in the country."
He continued:
"The Government has also decided that this should be paid for by increased charges rather than more borrowing. These decisions account for about one half of our charges increase and inflation on our costs for the remainder."
The income of the Anglian water authority is about £270 million but its operating costs are only about £115 million. It is having to find £95 million to cover depreciation and £55 million to cover the rate of return on assets fixed by the Government. Figures such as these illustrate why so many of my right hon. and hon. Friends are unhappy about the Government's proposals.
I was worried when I read the statement made by the Anglian water authority about the future. It states:
"The Government intends to continue to reduce the amount of money that water authorities like Anglia can borrow until they eventually become self-sufficient with customers paying for all capital investment directly through charges."
I do not think that there are many families or firms that could adhere to that sort of financial regime, however much they wished to do so. I suggest that my hon. Friend the Minister is asking the impossible and the unnecessary of water authorities. It is no wonder that the National Farmers Union at local and national levels is extremely worried about the proposed increased charges. The local county secretary of the area that I represent wrote to me as follows:
"The Order, if confirmed, will raise charges to some two to three times the current rate of inflation for the next three years, and perhaps longer, and will bear harshly upon consumers. Livestock producers and horticulturalists will be particularly oppressed by the measures".
That includes the especially hard-hit dairy industry, which is already reeling from the effects of the Common Market.
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Local authorities, farmers' organisations and the CBI are worried about the order, and so it is not surprising that constituency Members are concerned.
I thought that one of the benefits of increased charges would be the implementation of many much-needed capital projects in the east of England. Yet in the third piece of paper that the Anglian water authority sent me I read the following:
"A major financial crisis is threatening essential work on sea and river flood defence schemes to protect people and property in the Anglian region according to local land drainage committees. Government cutbacks in the amount of money which is made available for such projects, coupled with strict financial controls on the amount of money which Anglian Water can borrow to help finance capital schemes, means that all five land drainage committees face the prospect of vital schemes being delayed".
It seems that the increased charges will not result in the implementation of the capital projects that are needed. Anglia is the fastest growing part of the country and it has many new installations. It is odd that it is being asked to accept a system of depreciation that is based on assets being many years old. My hon. Friend the Member for Bristol, North-West suggested that an accounting system must be devised that reflects the difficulty of estimating the length of life of certain assets because it is so long. It is peculiar that the system that has been adopted shortens the period of depreciation rather than lengthening it. I hope that that will be explained when my hon. Friend the Under-Secretary of State for Wales replies.
Against this background it is not so surprising that many of us have become somewhat bemused by the Government's actions. It seems that the Government are saying that water authorities can no longer run their own affairs commercially, as we said at one time that we wanted them to do.
The backlog of capital projects is still too big. Charges are to go up at least by two-and-a-half times the rate of inflation. The enforced rate of return means an extra taxation on water.
I thought, perhaps naively, that the Government believed that we should ensure that nationalised industries are run and managed commercially and responsible for their own decisions. I believed that our first aim was to fight inflation. I also thought that we had a special concern for the lower paid who are in danger of being caught in the poverty trap.
Before Christmas I tabled a question to the Department of Health and Social Security to discover how many people were in receipt of rate rebate and therefore, by definition, not in receipt of supplementary benefit and without help with their water rates.
The Minister said today that 3 million people are assisted by supplementary benefit. The answer that I received was that 3,600,000 people receive rate benefit. That means that 5 million people, or one-tenth of our population, will have to meet the increase in water charges in full without any help.
Mr. Gow: I said that 3 millon households were involved.
Mr. Fry: The point is that more people will not be helped than will be helped.
I also asked the Department how much it would cost to operate a water rate rebate scheme. I regret that after many weeks I still await that information.

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So despite my hon. Friend's eloquent explanation the position is unsatisfactory and not understood. It is not understood by local councils, by the farming community or by industry and commerce. Their attitude and mine is based not on an abstruse argument about accounting but on common sense. If one increases the price of anything above the inflation rate that increase causes inflation. The Government are shooting themselves in the foot. They are attacking their own policies.
Those of us who have supported the Government over local government reform are entitled tonight to say "If you want that continued support at least be consistent". Despite the great admiration that I have for my hon. Friend the Minister for Housing and Construction, I cannot, on behalf of my constituents, support the orders. Indeed, it is my duty to oppose them. I trust that my hon. Friends will join me in the Opposition Lobby tonight.
8.34 pm
Mr. Harry Cohen: I have enjoyed many of the speeches from both sides of the House tonight. I particularly enjoyed that of my hon. Friend the Member for St. Helens, South (Mr. Bermingham). I agree with his exposition of the lunacy of the Government's privatisation and profit motivation, particularly as applied to water services, which are so important to the healthy lives of our people.
The Government are in hot water, not least with their own Back Benchers. The orders will result in an increase in water rates for everyone. If all Government Members realised that, they too would rebel against the Government.
The Treasury has brought the matter to the boil. The Thames water authority is primarily affected by the orders. I shall outline the objectives and achievements of that authority since it was created in October 1983.
I recently received a letter from the chairman of Thames water, Mr. Roy Watts, to whom I paid tribute last week. He said:
"Thames' objective including 'running the Authority as a major well-run business'. We were also exhorted to ensure that charges to customers were below inflation. My Board and executive have done that. We have substantially reduced costs, including a reduction of one-quarter in the number of managers and an equal amount of office property. We have restructured the Authority, adding the disciplines of profit loss and of the marketplace
And much more. So much, in fact, that we have produced a programme for 1985 which repays £18 million of due debt, introduces an enlarged capital programme which will accelerate projects and introduce cost-saving techniques, but which also holds down price rises to customers to 3 per cent., some two points below inflation. Equally important we have tested our programme against the best practices in the private sector. And our plans ensure continuing improvement in future years."
The Government are turning those policies on their head. They are sabotaging those beneficial policies.
The underhand tax rise in the Chancellor's autumn statement is to blame. The Minister is defending that underhand tax rise. He is imposing the Treasury's policy upon the water authorities by forcing the orders through. He could be described as the water industry's "Gow-leiter".
The Minister said that there was a difference between water charges and water rates. The customers do not recognise such a difference because there is no practical
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difference. The Minister claimed that this was not a tax. If the Government compel water authorities to generate funds beyond those that are necessary and require them to pay them to the Treasury, that is a tax. It is like VAT on take-away fish and chips.
The Minister stressed current cost accounting. Roy Watts in his letter said:
"The Thames Board — a Board full of professional and business experience—is clear that such a basis for targeting is wrong in principle, wrong in application, generates excessive cash surpluses, and is inflationary."
The CBI — not an organisation which I would normally cite — believes that there are serious doubts about applying CCA to the water industry
"where long-life assets are concerned, and where the useful life is a subjective judgement; where the assets comprise basic infrastructure, and could not be sold; where the assets are never likely to be replaced but will be maintained at current cost, such as reservoirs … any comparison between water authority rates of return and those in the private sector is bound to be misleading … there is every reason to believe that the water authorities are already highly profitable enterprises compared with the private sector if a common method of appraisal is used."
The fallacy of using current cost accounting was exposed by Roy Watts in an interview that he gave to The Sunday Times, published on 20 January, in which he said:
"We believe that the current cost convention and other arguments used by the Government are a smokescreen for the real intention, which is to raise money for non-water purposes from my water customers."
In other words, it is a tax.
Mr. Freeman: Will the hon. Gentleman explain, for the benefit of hon. Members on this side of the House, what particular technical aspects of current cost accounting concern him most?
Mr. Cohen: I should have thought that the CBI's objections to it would have the hon. Gentleman's support. I would be happy to discuss the details of CCA with him, but hon. Members may think that a 15-minute speech is not the occasion for that.
The Minister said that the argument was about four categories of effort. One category to which he did not refer was that of efficiency, which surprised me coming from a Minister whose Government are always extolling the virtues of efficiency. The record of the Thames water authoriy is excellent — I doubt whether even Conservative Members would deny that—yet it is being penalised for its efficiency. The Government pay lip-service to the need for efficiency and value for money, but when the crunch comes they penalise those who give value.
The Thames water authority's plans show that the authority is acting in a prudent manner and would in 1985 repay £18 million of its debts. It would be debt-free by 1989 if it had its way. It is clear, however, that the Government want unjustified increases even on that rate of efficiency. Any surpluses that water authorities receive from high charges will go not to the consumer but straight into the Treasury. That is a tax all right.
There is opposition right across the political spectrum to what the Government are doing. Not just the Thames water authority but the water industry generally opposes the order. From the business point of view, the CBI said:
"The increases proposed for next year will add £100 million to business and industry's costs. They will hit certain industries such as food, chemicals, pharmaceuticals, textiles, brewing and paper, particularly hard…Such increases could threaten still more jobs at a time when industry is compelled to match the efforts of its international competitors."
Mr. Eddie Loyden: My hon. Friend is dealing with an important aspect which, to be fair to Conservative Members, has also been raised by them. The North-West water authority has made it clear that, because it will not be permitted to use capital resources, the increases proposed will not only affect jobs in the area but will create hardship for many people, in particular the low-paid. That is a critical issue in this debate.
Mr. Cohen: I agree with my hon. Friend that the possible loss of jobs and the hardship that will be created are issues of paramount importance. I was citing the CBI's view of this legislation because that body is supposed to be a friend of the Government and to support their policies and strategies.
Many people will be adversely affected by the order, and I have received many letters to that effect from constituents, particularly those living on small incomes. The Minister has refused to allow rebates to people in that situation. There will be unnecessarily high water rates bills. In the Thames water authority area, for example, there will be an increase of 12 per cent. rather than of only 3 per cent. in 1985–86.
There will be great anger in March and April of this year when bills arrive through people's letter boxes. It should be made clear to the public on those bills that the Government's surcharge is to blame. The Government seem determined to press ahead with their unpopular strategy, come hell or high water. The House should ensure that it sinks without trace.
8.46 pm
Mr. Martin Stevens: I apologise to the House for not having attended the earlier part of the debate. I have been upstairs in a Standing Committee.
Had I been in the Minister's shoes, I would have made exactly the same decision in this matter as he made. I chide him, however, by adding that I would have handled the announcement and implementation of the decision differently, for I feel that his handling of it contributed to the response of the Thames water authority.
In speaking about that authority, I am sorry to be on the opposite side to my hon. Friend the Member for Westminster, North (Mr. Wheeler). The Thames water authority claims that it has been running the organisation as a private company, and it is generally agreed that its management has been extremely efficient. I have known Roy Watts for many years, since in my capacity as chairman of Annual Reports Limited I produced British Airways' annual report, and I know him to be a man of exceptional ability. However, it is fair to probe a little his claim that the accounts of the Thames water authority match those of a private company.
I hope that the Minister will ask him bluntly whether, in his opinion, the rate of depreciation proposed in the authority's figures is adequate. I do not think that it is. One can argue that because of the higher quality of the infrastructure, and because Thames has been experimenting with methods of rebuilding sewers which do not require the digging of holes, there may be detailed questions to ask about the way in which the current cost accounting system has been applied. Even if we take that into account, Roy Watts would be bound to confess that his level of depreciation is inadequate.
The second point that I should like to consider in Thames water's accounts is its borrowing. I never like to
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contradict the hon. Member for Leyton (Mr. Cohen). He said that under present plans Thames water would have repaid its debt by 1989. The true timetable under its present plan is 15 years. I do not believe that many accountants employed by a private company would welcome such a long loan. If my hon. Friend were to press Roy Watts on that point he would accept that there is merit in the proposition, in a nation that is still overborrowed despite all our efforts, that that rate of borrowing should be paid off more rapidly than the authority was planning.
Thames water is annoyed by the fact that it will have to go on paying £60 million a year even after the debt has been paid in three years' time. It does not pay corporation tax. Water is zero-rated. I hope that my hon. Friend will consider the matter in the coming month to see whether it will be possible to arrive at a slightly more gentle arrangement. To be asked to continue repaying debts after they have been settled might have the same result—I believe that it is called negative debt repayment or some such term.
Mr. Gow: Negative EFL.
Mr. Stevens: I am grateful to my hon. Friend. That is rather like negative recruitment, as it used to be called when I was a business man. It always gives rise to understandable resentment.
There is the issue of the corporation's asset value.
Mr. Simon Hughes: Does the hon. Member agree that what is unique about Thames water is that none of its capital expenditure is being financed from borrowing, unlike other water authorities? It will therefore inevitably be reducing its borrowing requirement and borrowed money. It already has less than any other water authority in England.
Mr. Stevens: The hon. Gentleman is right. Every Conservative Member has commended Thames water for the admirable way that it has carried out its business. I do not belittle that achievement. It is the only one of 10 regional water authorities in England and Wales conducting its business without borrowing.
When we talk about asset value, we return to our old friend—current cost accounting. It is right that my hon. Friend the Minister should remind Roy Watts that it was his former finance director who originally proposed that that system of accounting should be used by the 10 regional water authorities. Price Waterhouse, which is not wholly unknown, although not as distinguished as the partnership to which my hon. Friend the Member for Bristol, North-West (Mr. Stern) belongs, but which is nevertheless a highly regarded firm of accountants, agreed that that system was the best in the circumstances. At this moment, a working party is reviewing the method of accounting used throughout the 10 water authorities. The present finance director of Thames water is the chairman of that review body.
If Thames water is denationalised, which is what I believe its directors desire, how much will it be worth? The value of such an undertaking will depend upon its profitability. We may argue that my hon. Friend the Minister's profitability requirement is insufficient to produce a £4 billion asset value which the current cost accounting system has generated, but if I were doing his job I should want to ensure that if that asset were sold it would attract as much money as possible. I am sure that that point has been made already today.

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If I were to tell my constituents that we are protecting them against a water price increase of something under 2p a day but that the price that they will have to pay for that will be the loss of £1 billion or more, I think that they would agree that the national interest is best protected by the profit requirements that my hon. Friend has imposed.
Mr. Loyden: The hon. Gentleman will be aware that some industries are intensive water users. The car industry is one example, and there are many others. Has he taken into account the fact that if these increases are imposed they will have consequences for jobs and the economy. A broader view must be taken, we must get away from current cost accounting. Like it or not, water is something that the state must provide for domestic and industrial consumers.
Mr. Stevens: I think that the figure for trade and industry is £100 million. That is 100th part of 1 per cent. on inflation.
We must accept, as my hon. Friend the Member for Westminster, North so cogently put it, that the proposals are an extremely difficult package to sell. We cannot enter the House, as all Conservative Members did after the general election, on the ticket that we shall cut public spending and borrowing and ensure that our national assets pay their way, and then start moaning when we have the difficult job of implementing that proposition. My hon. Friend the Minister is carrying out his job manfully. I shall be happy to be a humble member of his following.
8.57 pm
Mr. David Harris: I am pleased to follow my hon. Friend the Member for Fulham (Mr. Stevens). Apart from his final remarks, his contribution showed that those who have taken part in the debate, at least on the Conservative side, are divided into two categories —those who have taken the academic accounting or "Oxford" approach, and those of us who like to think that our feet are firmly on the ground and who see the matter in simpler terms and certainly in political terms.
Having sat through the whole debate, I still do not really know what current cost accounting is. If I tried to cover up my ignorance, my hon. Friend the Member for Kettering (Mr. Freeman) would no doubt shoot me down by asking questions as effectively as he did to the Opposition. Moreover, I do not begin to understand what negative external financing limits are. I am absolutely sure, however, that my constituents share my ignorance of those technicalities and will see the matter as I see it.
What will hit my constituents in a couple of weeks' time will be the rate demand from the South-West water authority telling them that if they are domestic ratepayers they face an increase of roughly 12 per cent.—way over double the rate of inflation. When they ask me to explain the reasons for that, I might offer to send them a copy of the speech made by my hon. Friend the Member for Fulham and hope that it will persuade them, but I know that they will not be persuaded any more than I am. I regret to say that I was also not persuaded by my hon. Friend the Minister, despite all his charm and courtesy and an excellent glass of muscadet last night—[Interruption.] I apologise if I have breached some awful convention which Back Benchers are expected to observe. However that may be, I remain unconvinced by my hon. Friend's argument.
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I take the example that I mentioned to my hon. Friend last night — the little old lady living on the Lizard peninsula in my constituency. The South-West water authority tells me that a person with an average house, if such a house exists, will be paying £104·59 per year in the coming financial year — a much higher figure, incidentally, than the national average of £80 given by my hon. Friend the Minister—so if my little old lady on the Lizard lives in an average house she will face an increase of £11·11. To Members of Parliament, particularly Opposition Members, that may not seem a great deal of money, but to my little old lady, probably living alone on a pension, it is a lot of money and she cannot obtain any rebate.
My next comment would be addressed to my hon. Friend the Member for Derbyshire, South (Mrs. Currie) if she were present. On the basis of a holiday in the southwest—we are, of course, delighted to have her as one of the emmets — she launched into an attack on the South-West water authority. If the South-West water authority needs to be attacked, Members from Devon and Cornwall have no hesitation in doing so. We do not require the assistance of my hon. Friend the Member for Derbyshire, South, especially when her comments are based on ignorance of the situation.
Mr. Robert Hughes: The hon. Gentleman is making a very spirited riposte to his hon. Friend the Member for Derbyshire, South (Mrs. Currie). Has he observed the usual parliamentary courtesy of advising her of his intention to do so?
Mr. Harris: Yes, of course. My charming hon. Friend came and sat down just across the Gangway and said that she hoped she had not offended me. I assured her that she had not offended me, but told her that I might make a passing reference to her speech in my own contribution. The hon. Gentleman may rest assured about that.
My hon. Friend the Minister and my hon. Friend the Member for Derbyshire, South both referred to increased investment. I would go along with that package if I could put my hand on my heart and tell my constituents that the awful Victorian sewerage system in St. Ives town, which has polluted beaches and damaged tourism, and which attracted international publicity two years ago, would be renewed as a result of the Government's proposals, but I cannot do that—I only wish that I could.
I have made inquiries of the South-West water authority and I understand that there is to be no great advancement of the investment programme of the authority for sewerage and water supply schemes. Much of the extra money will be spent on meeting the proper demands of central Government in connection with implementing the control of pollution legislation. There may be a spin-off for St. Ives and for the tourist industry, but the increase must be seen against a background of drought last year and of antiquated sewerage systems. People in the south-west ask, "When is something going to happen?" I do not think that the increase will result in much acceleration in normal capital programmes.
I have spoken for long enough. With the greatest reluctance, I have to say that I shall not be with my hon. Friend the Minister in the Division Lobby tonight.
9.6 pm
Mr. Roger Freeman: It is a pleasure for me to follow my hon. Friend the Member for St. Ives (Mr.

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Harris). I take a different view. I shall support the Government in the Lobby tonight. I should like, first of all, briefly to explain why.
Once we had accepted the medium-term financial strategy and the autumn statement, it was crystal clear some three months ago that water rates would have to rise in the coming financial year. One cannot wish the end and then not will the means.
My hon. Friend the Member for St. Ives conjured up the proverbial old lady who asks each hon. Member, "Why are my water rates going up?" In the Anglian region the rise is to be 12·5 per cent. One must be honest and explain in simple language that the Government are determined to reduce the aggregate external financing limit of the nationalised industries. One must explain that in simple language, and explain the need for increased capital expenditure. The reasons have been made clear. It then becomes clear that charges must inevitably rise—that the self-financing ratio of water authorities must rise. We must be honest in explaining the background to our constituents, and we must be honest with ourselves in deciding whether the water rate increases were inevitable. I believe that they were, and I shall support the Government.
I have two important questions to ask my hon. Friend the Minister. First, how can water authorities judge investment programmes in future? My hon. Friend the Minister for Housing and Construction will remember admitting several months ago that perhaps, in the case of the Kielder project, there was over-provision. He was not the Minister responsible. There are examples of capital investment projects in the water industry that in my humble judgment were not properly thought through, and cannot be adequately justified today.
I look forward to reading the Watts committee report on metering, which is due at the end of March. I suggest that the capital expenditure figures that my hon. Friend the Minister gave are questionable. I do not believe that any industry can justify such a significant capital investment programme. My hon. Friend the Member for St. Ives said that the only justification for capital investment was need. That is not a satisfactory answer. The correct way in which to measure capital investment in the water industry is to examine the price elasticity of demand, as is done in the electricity and gas industries, and any other utility. That can be measured only if the consumer is allowed to make the decision on the basis of price. The correct way in which to measure capital investment is to use a universal metering scheme.
I hope that my hon. Friend the Minister will argue with the Treasury, once again, that the rules which govern the involvement of private sector capital in public sector projects should be revised. The water industry has capital investment of £200 million to £300 million. In some water authorities, a higher level of capital expenditure is justified, but it is not possible for them to carry out their capital investment programme because they are constrained by Treasury limits. If private sector capital could be introduced in the construction of, for example, a pumping station or a reservoir, we might not be faced with these substantial water rate increases.
My hon. Friend should ask the Treasury to think again about the imposition of these rules. One way out of the impasse might be to ask the Treasury to take professional advice on how to take a view about the extent of contingent liability that will fall on the taxpayer if the public sector
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projects in which private sector capital is introduced fail or do not live up to the original promises and predictions. The Treasury says that it represents the taxpayer, who will have to pick up the bill, thus making it difficult for private sector capital to come in on such projects.
I hope that what I have said has been constructive. I encourage my hon. Friends who doubt their ability to persuade their constituents about the applicability of or the justification for the increases to think back to the autumn statement debate and their commitment to the medium-term financial strategy.
9.12 pm
Sir Nicholas Bonsor: It gives me little pleasure to speak today for two reasons. First, I have an extremely painful toothache and, secondly, I must oppose my hon. Friend the Minister's proposals.
I shall be brief because most of the issues that I intended to cover have already been dealt with. I should like to associate myself wholly with what my right hon. Friend the Member for Guildford (Mr. Howell) and my hon. Friend the Member for Westminster, North (Mr. Wheeler) said. My hon. Friend the Member for Westminster, North dealt with the details of why the Government's proposal is not satisfactory and the political reasons why we cannot accept it.
I cannot see that current cost accounting is the right way in which to approach the valuation of capital in an industry such as the water authorities. Their assets consist largely of sewerage pipes, water pipes and tunnels, some of which have been there for as long as 180 years. The Thames water authority covers most of my constituency, and it says that the valuation put on its pipes is £4·5 billion. It is not reasonable to assess the return that the authority is expected to make on its annual expenditure by referring to asset values which have been plucked by that weird accounting process. I am no expert, and do not propose to go into the details of it for fear of tripping over myself. There is no reason for putting a figure of £4,500 million on the assets of Thames water authority.
A more realistic way to assess whether the authority is operating sensibly and profitably is to examine the cash cost of the operation and the returns that it is receiving over VAT, and to see whether it is making an adequate trading profit on its turnover. The authority's cash operating expenditure for 1985 will be £292 million. The Government's current cost accounting process demands that it should also cover a depreciation figure of £145 million and an additional profit of £68 million. That means that the return that it must generate is more than two thirds as much again as the operating costs which it incurs.
I am not a business expert, but I run a small farm. To expect that sort of return on that sort of annual turnover seems to be a wholly unrealistic way of assessing a proper return from the industry. It is grossly unfair of the Government to attack the water authorities, which, as my hon. Friend the Minister acknowledged, have done a tremendous amount of work and achieved tremendous success in pulling the industry round and making it more efficient and effective during the past few years. To say that the industry is not returning an adequate figure because it is only 1 per cent. of the £4,500 million figure on the current cost accounting is unfair. The asset value and turnover are two reasons why I find it impossible to support my hon. Friend the Minister, and why I must vote against the proposals.

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The way in which the accelerated repayment of loans is being demanded from water authorities is serious. Thames water authority was to repay its Government debt over 10 years. That has now been reduced to three years. Its annual repayment this year was to be £20 million, but under the Government order it will have to pay £60 million. My hon. Friend denied that that constitutes taxation, and said that he was clawing back money that the Government had lent. I do not accept that, but even if it were so it is an unreasonable banking practice for a bank suddenly to tell a continuing industry, "I am sorry but the plan that we previously agreed to repay the debt over a substantial number of years will have to be scrapped, and we demand the full repayment down to zero borrowing within three years". That is what the Government are doing in their role as lender in this operation. That is an unreasonable way to approach the business.
That sums up the two points that I wished to make in addition to what has been said. It is politically impossible for the Government to rate cap local authorities, to fight inflation, and to try to keep costs down as a primary objective in our strategy — which all Conservative Members fully endorse—and then to increase by 10 per cent. a basic cost that will hit at the poorest section of our community and cause great anxiety and trouble to those who can only just afford to find such a payment.
9.18 pm
Mr. Robert Jackson: I join Conservative Members in congratulating my hon. Friend the Minister for Housing and Construction on the patience and courtesy that he has shown before and during this debate. I wish that the substance of his argument was as impeccable as the form of his presentation this afternoon. I am one of those hon. Members who cannot find sufficient justification in what the Government have said for voting in favour of the orders. Having heard the lecture that my hon. Friend the Member for Kettering (Mr. Freeman) recommends that we give to our proverbial old ladies, I believe that they will not be satisfied by what he said either.
I am worried not only about the impact of what the Government propose to do this year, but about the danger in future years. I regret very much the fact that my hon. Friend the Minister could not repudiate the suggestion that the principle of a 5 per cent. rate of return will be applied to the water authorities on all their assets in the future.
I do not wish to repeat arguments that have been made by others. I welcome the Minister's statement, for which he has not been given sufficient credit so far in the debate, that the privatisation of water authorities is under active review. The Conservative party believes that, in general, private enterprise manages better than the public sector. We believe this, not because we think that managers in the public sector are less competent, but because we have concluded from hard experience that the public sector is so constituted, in terms of parliamentary accountability and Treasury financial discipline, as to be a peculiarly difficult environment for commercial enterprise. The case that we are discussing today demonstrates that point fully.
That being so, the House should draw two main conclusions from this debate about water rates. First, there will inevitably continue to be many economic activities in the public sector which cannot be privatised for various reasons, or at any rate cannot be privatised immediately.
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Therefore, we must not let up on the effort to make the public sector a more satisfactory environment for commercial enterprise. We must not neglect our continuing responsibility to those who run the nationalised industries, to those who consume their products, and to the workers in those industries. In that context, the proposals that we are considering are unsatisfactory.
The second conclusion that I draw from the debate is that the Government's review of the privatisation of water authorities which the Minister announced today should come to an early and positive conclusion. I need not remind the House that the Chancellor of the Exchequer says that he needs £2 billion-worth of asset sales each year. Although the Thames water authority is certainly not worth £4·5 billion, as the Minister claims, it is probably worth between a quarter and a half of the amount that the Chancellor requires.
Mr. Gow: I did not claim that. It was claimed by the chairman and the director of finance of Thames water authority, who put that figure on the assets. Of course, the figure was confirmed by the authority's auditors.
Mr. Jackson: The question whether current cost accounting should be applied to nationalised industries, especially to the water authorities, in valuing their assets is one issue. A separate issue is the rate of return that should be expected from them. That is what we are concerned with tonight. To return to my point, the Government will not obtain £4·5 billion if they sell the Thames water authority, but the proceeds from such a sale would go some way to meeting the Chancellor's requirement. That is one reason for considering it seriously.
Of course, it has been said, and it is true, that water is a natural monopoly—but there are ways of overcoming the problem. In many countries, water services are not in the public sector. Mayor Chirac of Paris has just privatised the water supplies to that city. We should study all such examples. In the case of British Telecom we have organised sophisticated mechanisms for the regulation of a monopoly, and those mechanisms could easily be applied to the operation of water authorities.
I am afraid that, if such mechanisms were applied, they might have the effect of preventing the future private owners of water authorities from behaving towards their consumers as the present "owners" now propose.
9.23 pm
Mr. Roger Sims: Like my hon. Friends the Members for Westminster, North (Mr. Wheeler) and for Upminster (Sir N. Bonsor), it gives me no pleasure to disagree with my hon. Friend the Minister and the Government on this matter. It will give me even less pleasure to vote against my party for the first time in 11 years, but I was sent to Parliament with a duty to represent my constituents' interests and to use my judgment in assessing the issues that come before the House. Doing both those things, I must say that my hon. Friend's proposals are wrong.
I am strengthened in that judgment by the seven consumer consultative committees set up to safeguard the interests of the 11 million customers of the Thames water authority. All those committees are against the proposals and the orders.
Many of the arguments against the orders have been well rehearsed, and I do not intend to detain the House by

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going over familiar ground. But my hon. Friend speaks of increasing capital expenditure and reducing borrowings. He knows perfectly well that the Thames water authority has been increasing and is planning to increase its capital expenditure, and to do so from revenue. There is a clear and perfectly respectable economic argument for telling a water authority that it should invest more in capital projects, and we all know the reason for that. But to go on to say that it must not borrow money to do it because that will increase the PSBR, that its capital investment must be from revenue and that it must increase its water rates to enable it to do so is another matter.
Of course, the Thames water authority does invest from revenue, and it plans to continue to repay such debts as it has. Therefore, it would be reasonable to assume that the requirement to increase the rate should not apply to it. But, in that case, says my hon. Friend, it must repay its existing debt more quickly, so it will still have to put its water charges up. I do not think that that is equitable or sensible. I share the view of my hon. Friend the Member for Upminster that it is barely ethical, and certainly there is no economic justification for it.
I do not intend to go into the detail of the argument on current cost accounting, except to say that it seems to me impossible to draw a comparison between the assets of something like British Airways and those of the Thames water authority. The sort of figures that have been produced are hypothetical and unrealistic. I understand that current cost accounting is widely considered to be a very unsatisfactory system. It is little used outside the state industries and it certainly is not appropriate for the water industry.
My hon. Friend says that he has dealt with the authorities in an even-handed fashion, but he has admitted on several occasions that Thames water authority is in a different position from the other authorities. It is different by virtue of its financial circumstances and of the state of its assets. So why is it necessary to treat the Thames water authority in exactly the same way as the other authorities and to impose a wholly unnecessary financial burden on the 11 million customers of the authority, including my constituents?
I hope that, even at this stage, my hon. Friend will take the advice of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and others and consider again the effect of these orders. I put it to him that he should withdraw the order in its present form and re-table it, without involving the Thames water authority in its requirements. If he does not do so, if he intends to proceed with the order as at present drawn, I cannot vote in favour of it and will have to vote against it.
9.27 pm
Mr. Christopher Murphy: Even at this late stage, recognising that it might be difficult for my hon. Friend to take up arms against this reservoir of troubles and by opposing end them, I appeal to him nevertheless to reconsider. I deeply regret that I must add to the very evident ripples of discontent with an alternative Oxford view, for I cannot support the order as it stands tonight. However, I welcome the Government's commitment on privatisation of the water industry, as I have previously welcomed the inquiry into water metering.
Mid-Hertfordshire has the benefit of a combination of water company—in the main the Lea Valley, but in part
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the Colne valley—and water authority, that of Thames. Charging to the consumer is therefore also a combination, approximately 50 per cent. being the consequence of company as water supplier and 50 per cent. that of authority as sewage disposer. Without the intervention of Government, the net result would have been an increase in overall charges of probably just under the rate of inflation. Now the signs are that the consumer will be faced with approximately double that figure. I fully appreciate the anxiety about the need for an adequate return on public investment, because the taxpayer must be protected. However, I hope that the anxiety expressed by my constituents will equally be appreciated. They are also water rate payers, and they also expect protection.
The Government have been well advised to seek far greater efficiency from the water industry and a far more commercial approach. The Government have been ill advised to act so that such gains for the consumer are overtaken by what amounts to a tax on water. The order should now be withdrawn and a bridge over these troubled waters be found. The central policy objective of ending, not adding to, inflation must be adhered to. Having dipped a toe, my hon. Friend has surely found the temperature somewhat lukewarm!
9.30 pm
Mr. Roy Hughes: We have had a rather longer debate than originally anticipated, but the basic fact remains that these two orders are essentially part and parcel of a Government exercise to increase the cost of water quite unnecessarily. Needless to say, domestic consumers throughout England and Wales, let alone business interests, are not very pleased.
The issue has been spotlighted by the courageous stand taken by Mr. Roy Watts, the chairman of the Thames water authority, who has voiced his concern in the columns of The Times and elsewhere. Nevertheless, this is not confined to the area covered by the Thames authority and applies equally to the 10 water authorities throughout England and Wales.
As the National Farmers Union pointed out:
"It is wrong that what is effectively a tax is to be levied on an indispensable product provided by a monopoly supplier."
Likewise, the CBI pointed out that it would constitute an additional cost burden, and added:
"It could threaten still more jobs".
With 3 million to 4 million unemployed, I would have thought that it was time that the Government gave all their attention to what is perhaps the most important question of all.
The Government's policy towards water has been spawned over a number of years. What was once essentially a local government service has been taken over. All board members throughout the country are now appointed by Whitehall. Since the late 1970s there have been successive restrictions on capital spending, and by 1981 water authorities were committed to current cost accounting. It is noticeable that British Telecom switched from this system of accountancy back to historic cost accountancy as soon as it became a private enterprise concern. There must be a moral in that.
The 1985–86 target for the Welsh water authority is 1·45 per cent. Presumably that will go up to 1·7 per cent. next year and 1·9 per cent. the year after. I confess that those figures look modest. With this arcane system of accountancy, they constitute a considerable burden. It

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means that the present generation is being asked to pay off debt far more quickly than necessary. When a waterworks is built to last 50 to 100 years, how can one justify taking all that money from people who are living today when the waterworks will benefit people who are not yet born? The idea, of course, is to have a regular annual surplus of funds to flow back to the Treasury.
I was interested in the minor altercation that took place earlier between the Minister and his right hon. Friend the Member for Guildford (Mr. Howell) over charging procedures, among other things. The Minister indicated that the right hon. Member for Guildford had served in the Government in 1973 when the Water Bill went through Parliament. My hon. Friend the Member for Newham, South (Mr. Spearing) pointed out to me that in the debate on 2 May 1973 the late Mr. Graham Page, the then Minister for Local Government and Development, gave clear promises that consultation would take place with all manner of interested parties. In practice, we know that there has been little or no consultation with the consumer bodies, and certainly no agreement with them. It has been apparent in the debate that the Government have had little or no consultation, and certainly no agreement, with their Back Benchers.
We know that in other public utilities—for instance, gas and electricity — prices have been increased unnecessarily again. However, the difference is that a change in the consumption of water has little effect because the charges for many consumers are based on rateable value.
Then there is the contradiction which the hon. Member for Westminster, North (Mr. Wheeler) pointed out. On the one hand the Government are pressing local authorities to hold down the rates—and many Conservative Members support the Government in that respect—while on the other they are driving up water charges, which are also based on rateable value. The hon. Member for Wellingborough (Mr. Fry) put it clearly when he said that in his view the Government were shooting themselves in the foot. What is more, there is no system of rebate for the less well off. Many people will suffer considerable hardship as a result of the measures, and no satisfactory answer was given by the Minister in opening the debate.
The Government's policy has an element of farce about it. Somebody has suggested that the next move might be value added tax on sewage disposal, which is perhaps the biggest take-away business of all. What a ridiculous position the Government are getting themselves into. Listening to the remarks of the hon. Member for St. Ives (Mr. Harris), I feel that it will need more muscadet to convince even the Government's own Back Benchers.
I know from correspondence that I have received from individuals in my constituency that the Welsh water authority has cut its labour force to the bone. For the forthcoming year, it had hoped to propose an increase in line with the retail prices index. Now, directly as a result of the Government's measures, water charges in Wales for the next three years will go up by 30 per cent. Other authorities throughout the country will make similar increases.
I should have thought that a Government must be pretty heartless to increase the price of water, which is such a basic commodity. There have been ridiculous forms of taxation throughout history. Pitt introduced the window
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tax, which was virtually a tax on light and air, to finance the Napoleonic wars. The Prime Minister has often lectured us on Victorian values, but she seems now not to be satisfied with that and wants to go back to Georgian times.
Water in Wales, as the Under-Secretary of State for Wales knows, is an emotional subject. We have abundant supplies and our people can never understand why they have to pay such an exorbitant price for water. My hon. Friend the Member for Gower (Mr. Wardell) pointed out eloquently the increased burden that will continue to be put on the whole of western Europe. How can any Welsh Minister go along with such proposals? The chairman of Thames water has made a principled stand. His lead should be followed and the Government forced to change course.
9.41 pm
The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts): We have heard speeches from 18 Back-Bench Members, from constituencies that lie in all parts of England and Wales. That alone reflects the fact that the two orders that we are debating apply to all water authorities in England and Wales. That is a significant point. Recent articles in the press have concentrated on the effect on the finances of the Thames water authority of the Government's target for the return on assets. In fact, the Government's policy is consistent for all 10 water authorities. In raising the target from 1 per cent. on average to 1·4 per cent. on average, the Government are generating additional funds for all authorities, enabling each to undertake additional investment and to make some contribution to the reduction in public borrowing.
Over the past few weeks, we have heard sincere cries from Labour Members that there should be more investment in the water industry, as in other forms of infrastructure. I am astonished to hear them playing down that call for investment tonight. Each authority is being enabled to make some contribution to the reduction in public borrowing; that is a cause that is dear to the hearts of many Conservative Members.
As the policy applies to all 10 water authorities, so it affects all their consumers. In one way or another, nearly every man, woman and child in England and Wales is a customer of a water authority and so is financially affected by these orders. But these orders affect the whole population in another way. Everyone is affected by the management of the national economy. We are all taxpayers and have a responsibility for what public bodies and the Government borrow. The debate on these orders reflects that interest, too — our interest in sound economic management and the proper control of public expenditure. The debate has been about the Government's resolution of the competing claims of taxpayers and consumers. However, let me make it quite clear that water authorities are not consumer co-operatives and never have been.
Mr. Simon Hughes: Will the hon. Gentleman give way?
Mr. Roberts: I have many points to answer and I would ask the hon. Gentleman to forgive me.
Some hon. Members, including the hon. Member for Bermondsey (Mr. Hughes), who has just tried to intervene, the right hon. Member for Halton (Mr. Oakes),

1187
the hon. Member for Birmingham, Perry Barr (Mr. Rooker), my hon. Friend the Member for Wellingborough (Mr. Fry) and the hon. Member for Leyton (Mr. Cohen), have argued that water authorities will be required under the orders to raise more money than they need, that this is taxation by the back door and, by implication, that this is an abuse of monopoly. The Government reject that view. We are of course sensitive to the consideration that water supplies and the other services provided by the water authorities are vital to public health and that they are provided on a monopoly basis.
Of course we cannot permit the customer to be overcharged for these services, but I must remind the House of what my hon. Friend the Minister said in his speech:
"Our policy for the nationalised industries and the policy of the Water Act 1973 is that water authorities should make a reasonable return on their net assets."
The rates of return which are specified in the orders we are debating are in all cases less than 2 per cent. By any reckoning that is not an unreasonable rate of return. Therefore, I argue that the question of taxation does not arise. There would only be an abuse of monopoly power at the point where an unreasonable return was to be exacted.
We are debating the fifth order of this kind and have never previously been accused of using orders for taxation purposes. It is quite a novel approach to this kind of order. Other hon. Members, including my hon. Friend the Member for Upminster (Sir N. Bonsor), asked why a Government who are prepared to cap local government rates are at the same time setting targets for water authorities that will require them to increase their charges.
As we all know, the water authorities are quite separate from local government. They have been separate since 1974, when the local authorities were reorganised under the Local Government Act 1972 and when the water services were reorganised under the Water Act 1973. Water authorities have kept their spending under control, consistent with the Government's public expenditure requirements. As my hon. Friend the Minister said in his opening speech, since 1981 water authorities have controlled their operating costs and, indeed, have reduced their operating and manpower costs year by year in response to the Government's objectives for the management of the public sector and the control of public expenditure.
With controls over capital and current expenditure established, it is possible, as it is also necessary, both to increase water authorities' targets and to reduce water authorities' borrowing. The result is to increase self-financing and the proportion of their expenditure met from charges.
Local government presents an entirely different picture. Many local authorities have been sedulous over the years in controlling their expenditure and in seeking to make it efficient, economical and effective, but others seem to regard spending as a sign of virtue. As a result, the Government have had to introduce this series of measures to contain local government expenditure. That has been done by means of the Local Government, Planning and Land Act 1980, the Local Government Finance Act 1982 and most recently the Rates Act 1984. It was essential for the Government to keep their economic strategy on course — to control public spending and reduce inflation, particularly as it affects industry and commerce.
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Where local authorities had not been responding by reining back expenditure to the constraints of the block grant, target and penalty system, we had no alternative but to seek Parliament's approval to placing a limit on the amount that they could raise from their ratepayers.
I see no inconsistency with what we are doing in the water industry and in local government with its special problems. Within the framework of the Water Act 1973, the water authorities have provided and developed their services consistent with the public expenditure policies of the Government of the day.
Mr. Simon Hughes: If it is part of the Government's policy to reduce costs for commerce and business by reducing rates and thereby holding down inflation, surely that is not consistent with their policy of increasing the costs of commerce and business by increasing water rates and thereby increasing inflation.
Mr. Roberts: My hon. Friend the Minister for Housing and Construction has dealt with the target achievement and its effect on inflation. The hon. Gentleman's argument about costs for commerce and industry has been advanced by the CBI. I remind him and others that the CBI was among those who called for higher investment in the water industry, especially in the document entitled "Fabric of the Nation".
The hon. Member for Perry Barr appeared in an article on the front page of The Times this morning and appeared in "The World At One" as a result of his "discovery" in the Library, of all places, of a document entitled "Nationalised Industries Legislation: Consultation Proposals". Reference has been made, either directly or indirectly, to this by a number of hon. Members, including the hon. Members for Normanton (Mr. O'Brien) and for Caernarfon (Mr. Wigley) and by my hon. Friend the Member for Wantage (Mr. Jackson). Better informed Members than the hon. Member for Perry Barr will know that the document has been available and widely circulated since 20 December, when my right hon. and learned Friend the Chief Secretary to the Treasury announced in a written answer that he was placing a copy in the Library. He tells me that there was consultation for months before 20 December.
The proposals apply to water authorities along with 17 other industries. Among the proposals is one that the Government should introduce legislation to empower industries to set up subsidiaries under the Companies Act and to transfer to them property rights and liabilities. This would enable industries to carry out their activities through Companies Act companies. We say that this may or may not be a prelude to privatisation.
As far as that discovered document is concerned, general enabling legislation is being considered and we are still at the consultative stage. It is consistent with the Government's view that activities of state-owned businesses should be transferred to the private sector where this makes commercial and practical sense.
Mr. Maxwell-Hyslop rose—
Mr. Roberts: I shall come to the issue raised by my hon. Friend in his speech.
Mr. Maxwell-Hyslop: But will my hon. Friend give way?
Mr. Roberts: I shall take up my hon. Friend's remarks when I come to the relevant part of my speech.

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The setting up of Companies Act company subsidiaries to water authorities is one of a number of possible ways of bringing a measure of private sector participation into the operations of water authorities. There is no question of setting up a private company to control water pollution. As my hon. Friend the Minister for Housing and Construction said, we must have a regulatory mechanism to prevent the abuse of monopoly.
The Companies Act subsidiary company is not necessarily the best option. It is too early to discuss what the options might be. I go no further than to say that we shall examine the possibilities.
My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) suggested that the water authorities' assets are really liabilities. In that remark he recognised the investment needs to which other hon. Members referred. However, my hon. Friend is wrong to conclude that it is therefore wrong to value and account for assets. Water mains and sewers deteriorate and provision must be made for their replacement. They will be replaced at today's or tomorrow's prices, not at yesterday's prices. That is why current cost accounting is needed. Values are based on the analysis of recent contract prices.
My right hon. Friend the Member for Guildford (Mr. Howell) rightly reminded us that the possibility of over-provision — because we have improved methods of renovation and some items may not need to be replaced—has been recognized—
Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. Can you confirm that under Standing Orders the debate does not have to finish until 11.30? The Minister does not have to gabble as if the debate must end at 10 pm. Is that correct?
Mr. Speaker: That is entirely correct.
Mr. Roberts: As I was saying—
Mr. Maxwell-Hyslop: My hon. Friend referred to what is common in state-owned industries. Is he aware that we are not talking about state-owned industries? The water authorities are not state-owned.
Mr. Roberts: I never said that they were state-owned, but they are quasi-state-owned. They are publicly owned.
The 40 per cent. abatement factor was reviewed by Price Waterhouse and it gave its opinion, to which reference has been made. A later opinion can also be quoted—that of Professor Carsberg, now the director general of Oftel, who reported on CCA in the water industry in 1983. His report
"supports water authorities in their use of current cost accounting and commends their skill in using it… Strictly defined historical cost numbers are not available: to obtain them would involve the use of procedures even less reliable than those required for the measurement of current cost".
This has been a far-reaching debate, covering even more than the four issues that my hon. Friend referred to in his opening speech, but at this very end of the debate the issue is whether the public are best served by the implementation of the orders that we have before us, or by abandoning them in response to the Opposition's prayer.
The Opposition's argument falls because, on the one hand, they cry out for more investment in the water industry, and, on the other, they are not prepared to will the means, except by their usual, thoughtless profligate
1190
universal remedy—increased public borrowing. It is the remedy to which they always resort, like addicts to their fix, and it is a fix that does no good for them or, in the end, for the people of Britain.
The Government's position and that of their supporters on the Benches behind me has been clear and constant — [Interruption.]—ever since we approved the public expenditure White Paper. I agree with my hon. Friend the Member for Kettering (Mr. Freeman) in that I cannot see how any of my hon. Friends who approved that White Paper can oppose these orders, which are associated with it. There can be no turning back on this issue. [Interruption.] There can be no turning back tonight, and I commend the orders to the House.
Question put and negatived.

Water Authorities (Return on Assets)

  WATER AUTHORITIES (RETURN ON ASSETS)
  Question put,
  That an humble Address be presented to Her Majesty, praying that the Water Authorities (Return on Assets) Order 1985 (S.I., 1985, No. 78) dated 24th January 1985, a copy of which was laid before this House on 24th January, be annulled. — [Mr. Rooker.]
  The House divided: Ayes 191, Noes 295.

  Division No. 95]

  [10.00 pm

  AYES

  Abse, Leo

  Deakins, Eric

  Adams, Allen (Paisley N)

  Dewar, Donald

  Anderson, Donald

  Dicks, Terry

  Archer, Rt Hon Peter

  Dobson, Frank

  Ashdown, Paddy

  Dormand, Jack

  Ashley, Rt Hon Jack

  Douglas, Dick

  Ashton, Joe

  Dover, Den

  Atkinson, N. (Tottenham)

  Dubs, Alfred

  Bagier, Gordon A. T.

  Dunwoody, Hon Mrs G.

  Banks, Tony (Newham NW)

  Eastham, Ken

  Barnett, Guy

  Evennett, David

  Barron, Kevin

  Ewing, Harry

  Beith, A. J.

  Fatchett, Derek

  Bell, Stuart

  Field, Frank (Birkenhead)

  Benn, Tony

  Fields, T. (L'pool Broad Gn)

  Bennett, A. (Dent'n & Red'sh)

  Fisher, Mark

  Bermingham, Gerald

  Flannery, Martin

  Bidwell, Sydney

  Foot, Rt Hon Michael

  Blair, Anthony

  Forrester, John

  Bonsor, Sir Nicholas

  Foulkes, George

  Boothroyd, Miss Betty

  Fraser, J. (Norwood)

  Boyes, Roland

  Freeson, Rt Hon Reginald

  Bray, Dr Jeremy

  Freud, Clement

  Brown, Gordon (D'f'mline E)

  Fry, Peter

  Brown, Hugh D. (Provan)

  Garrett, W. E.

  Brown, N. (N'c'tle-u-Tyne E)

  George, Bruce

  Buchan, Norman

  Gilbert, Rt Hon Dr John

  Caborn, Richard

  Gilmour, Rt Hon Sir Ian

  Callaghan, Jim (Heyw'd & M)

  Godman, Dr Norman

  Campbell-Savours, Dale

  Gorst, John

  Cartwright, John

  Gould, Bryan

  Clarke, Thomas

  Greenway, Harry

  Clay, Robert

  Hamilton, James (M'well N)

  Clwyd, Mrs Ann

  Hamilton, W. W. (Central Fife)

  Cocks, Rt Hon M. (Bristol S.)

  Hancock, Mr. Michael

  Cohen, Harry

  Hanley, Jeremy

  Coleman, Donald

  Hardy, Peter

  Cook, Frank (Stockton North)

  Harman, Ms Harriet

  Corbyn, Jeremy

  Harrison, Rt Hon Walter

  Cowans, Harry

  Hart, Rt Hon Dame Judith

  Cox, Thomas (Tooting)

  Hawkins, C. (High Peak)

  Craigen, J. M.

  Haynes, Frank

  Crowther, Stan

  Healey, Rt Hon Denis

  Cunliffe, Lawrence

  Heffer, Eric S.

  Cunningham, Dr John

  Hogg, N. (C'nauld & Kilsyth)

  Davies, Rt Hon Denzil (L'lli)

  Holland, Stuart (Vauxhall)

  Davies, Ronald (Caerphilly)

  Home Robertson, John

  Davis, Terry (B'ham, H'ge H'l)

  Howells, Geraint

  1191

  Hughes, Robert (Aberdeen N)

  Pike, Peter

  Hughes, Roy (Newport East)

  Prescott, John

  Hughes, Simon (Southwark)

  Radice, Giles

  Hunt, John (Ravensbourne)

  Randall, Stuart

  Jessel, Toby

  Rees, Rt Hon M. (Leeds S)

  John, Brynmor

  Rhys Williams, Sir Brandon

  Jones, Barry (Alyn & Deeside)

  Richardson, Ms Jo

  Kaufman, Rt Hon Gerald

  Roberts, Ernest (Hackney N)

  Kinnoek, Rt Hon Neil

  Robertson, George

  Lamond, James

  Robinson, G. (Coventry NW)

  Leadbitter, Ted

  Rogers, Allan

  Lewis, Terence (Worsley)

  Rooker, J. W.

  Litherland, Robert

  Ross, Stephen (Isle of Wight)

  Lofthouse, Geoffrey

  Rowlands, Ted

  Loyden, Edward

  Sedgemore, Brian

  McCartney, Hugh

  Sheerman, Barry

  McDonald, Dr Oonagh

  Sheldon, Rt Hon R.

  McGuire, Michael

  Shore, Rt Hon Peter

  McKay, Allen (Penistone)

  Short, Ms Clare (Ladywood)

  McKelvey, William

  Silkin, Rt Hon J.

  Mackenzie, Rt Hon Gregor

  Sims, Roger

  Maclennan, Robert

  Skinner, Dennis

  McNamara, Kevin

  Smith, C.(Isl'ton S & F'bury)

  McTaggart, Robert

  Smith, Rt Hon J. (M'kl'ds E)

  Madden, Max

  Snape, Peter

  Marek, Dr John

  Soley, Clive

  Marshall, David (Shettleston)

  Spearing, Nigel

  Mason, Rt Hon Roy

  Steel, Rt Hon David

  Maxton, John

  Straw, Jack

  Maxwell-Hyslop, Robin

  Thompson, J. (Wansbeck)

  Maynard, Miss Joan

  Thorne, Stan (Preston)

  Meacher, Michael

  Tinn, James

  Meadowcroft, Michael

  Torney, Tom

  Michie, William

  Townsend, Cyril D. (B'heath)

  Mikardo, Ian

  Wallace, James

  Millan, Rt Hon Bruce

  Wardell, Gareth (Gower)

  Miller, Dr M. S. (E Kilbride)

  Wareing, Robert

  Mitchell, Austin (G't Grimsby)

  Weetch, Ken

  Morris, Rt Hon A. (W'shawe)

  Wheeler, John

  Morrison, Hon C. (Devizes)

  White, James

  Murphy, Christopher

  Wigley, Dafydd

  Nellist, David

  Williams, Rt Hon A.

  Oakes, Rt Hon Gordon

  Winnick, David

  O'Brien, William

  Woodall, Alec

  Orme, Rt Hon Stanley

  Young, David (Bolton SE)

  Owen, Rt Hon Dr David

  Park, George

  Tellers for the Ayes:

  Parry, Robert

  Mr. John McWilliam and

  Pavitt, Laurie

  Mr. Sean Hughes.

  Penhaligon, David

  NOES

  Adley, Robert

  Bowden, Gerald (Dulwich)

  Aitken, Jonathan

  Braine, Rt Hon Sir Bernard

  Alexander, Richard

  Brandon-Bravo, Martin

  Alison, Rt Hon Michael

  Bright, Graham

  Amess, David

  Brinton, Tim

  Ancram, Michael

  Brittan, Rt Hon Leon

  Arnold, Tom

  Brooke, Hon Peter

  Ashby, David

  Brown, M. (Brigg & Cl'thpes)

  Aspinwall, Jack

  Bruinvels, Peter

  Atkins, Rt Hon Sir H.

  Bryan, Sir Paul

  Atkins, Robert (South Ribble)

  Buck, Sir Antony

  Atkinson, David (B'm'th E)

  Budgen, Nick

  Baker, Rt Hon K. (Mole Vall'y)

  Burt, Alistair

  Baker, Nicholas (N Dorset)

  Butcher, John

  Baldry, Tony

  Butler, Hon Adam

  Banks, Robert (Harrogate)

  Carlisle, John (N Luton)

  Batiste, Spencer

  Carlisle, Kenneth (Lincoln)

  Bellingham, Henry

  Carttiss, Michael

  Bendall, Vivian

  Cash, William

  Benyon, William

  Chalker, Mrs Lynda

  Biffen, Rt Hon John

  Channon, Rt Hon Paul

  Biggs-Davison, Sir John

  Chapman, Sydney

  Blackburn, John

  Churchill, W. S.

  Blaker, Rt Hon Sir Peter

  Clark, Hon A. (Plym'th S'n)

  Body, Richard

  Clarke, Rt Hon K. (Rushcliffe)

  Bottomley, Peter

  Cockeram, Eric

  Bottomley, Mrs Virginia

  Colvin, Michael

  Bowden, A. (Brighton K'to'n)

  Coombs, Simon

  1192

  Cope, John

  Key, Robert

  Corrie, John

  King, Roger (B'ham N'field)

  Couchman, James

  Knight, Gregory (Derby N)

  Crouch, David

  Knight, Mrs Jill (Edgbaston)

  Currie, Mrs Edwina

  Knowles, Michael

  Dorrell, Stephen

  Knox, David

  Douglas-Hamilton, Lord J.

  Lamont, Norman

  du Cann, Rt Hon Sir Edward

  Lang, Ian

  Dunn, Robert

  Latham, Michael

  Durant, Tony

  Lawler, Geoffrey

  Dykes, Hugh

  Lawrence, Ivan

  Edwards, Rt Hon N. (P'broke)

  Lawson, Rt Hon Nigel

  Eggar, Tim

  Leigh, Edward (Gainsbor'gh)

  Emery, Sir Peter

  Lennox-Boyd, Hon Mark

  Eyre, Sir Reginald

  Lewis, Sir Kenneth (Stamf'd)

  Fallon. Michael

  Lightbown, David

  Farr, Sir John

  Lilley, Peter

  Favell, Anthony

  Lloyd, Peter, (Fareham)

  Fenner, Mrs Peggy

  Lord, Michael

  Finsberg, Sir Geoffrey

  Luce, Richard

  Fookes, Miss Janet

  Lyell, Nicholas

  Forman, Nigel

  McCurley, Mrs Anna

  Forsyth, Michael (Stirling)

  Macfarlane, Neil

  Forth, Eric

  MacGregor, John

  Fowler, Rt Hon Norman

  MacKay, John (Argyll & Bute)

  Fox, Marcus

  Maclean, David John

  Franks, Cecil

  McNair-Wilson, P. (New F'st)

  Fraser, Peter (Angus East)

  Madel, David

  Freeman, Roger

  Major, John

  Gale, Roger

  Malins, Humfrey

  Galley, Roy

  Malone, Gerald

  Gardiner, George (Reigate)

  Marland, Paul

  Gardner, Sir Edward (Fylde)

  Marlow, Antony

  Garel-Jones, Tristan

  Marshall, Michael (Arundel)

  Glyn, Dr Alan

  Mates, Michael

  Goodlad, Alastair

  Maude, Hon Francis

  Gow, Ian

  Mawhinney, Dr Brian

  Grant, Sir Anthony

  Mayhew, Sir Patrick

  Gregory, Conal

  Mellor, David

  Griffiths, Peter (Portsm'th N)

  Merchant, Piers

  Grist, Ian

  Meyer, Sir Anthony

  Ground, Patrick

  Miller, Hal (B'grove)

  Grylls, Michael

  Mills, Iain (Meriden)

  Gummer, John Selwyn

  Mills, Sir Peter (West Devon)

  Hamilton, Hon A. (Epsom)

  Miscampbell, Norman

  Hamilton, Neil (Tatton)

  Mitchell, David (NW Hants)

  Hampson, Dr Keith

  Moate, Roger

  Hannam, John

  Montgomery, Sir Fergus

  Hargreaves, Kenneth

  Moore, John

  Harvey, Robert

  Morris, M. (N'hampton, S)

  Havers, Rt Hon Sir Michael

  Morrison, Hon P. (Chester)

  Hawkins, Sir Paul (SW N'folk)

  Moynihan, Hon C.

  Hawksley, Warren

  Neale, Gerrard

  Hayes, J.

  Nelson, Anthony

  Hayhoe, Barney

  Neubert, Michael

  Hayward, Robert

  Newton, Tony

  Heathcoat-Amory, David

  Nicholls, Patrick

  Henderson, Barry

  Normanton, Tom

  Hickmet, Richard

  Norris, Steven

  Higgins, Rt Hon Terence L.

  Onslow, Cranley

  Hill, James

  Oppenheim, Phillip

  Hogg, Hon Douglas (Gr'th'm)

  Oppenheim, Rt Hon Mrs S.

  Holland, Sir Philip (Gedling)

  Osborn, Sir John

  Holt, Richard

  Ottaway, Richard

  Hordern, Peter

  Page, Sir John (Harrow W)

  Howard, Michael

  Page, Richard (Herts SW)

  Howarth, Alan (Stratf'd-on-A)

  Parkinson, Rt Hon Cecil

  Howarth, Gerald (Cannock)

  Parris, Matthew

  Howe, Rt Hon Sir Geoffrey

  Patten, John (Oxford)

  Howell, Ralph (N Norfolk)

  Pawsey, James

  Hubbard-Miles, Peter

  Percival, Rt Hon Sir Ian

  Hunt, David (Wirral)

  Pollock, Alexander

  Hunter, Andrew

  Porter, Barry

  Hurd, Rt Hon Douglas

  Portillo, Michael

  Irving, Charles

  Powell, William (Corby)

  Jenkin, Rt Hon Patrick

  Powley, John

  Jones, Gwilym (Cardiff N)

  Prentice, Rt Hon Reg

  Jones, Robert (W Herts)

  Price, Sir David

  Jopling, Rt Hon Michael

  Proctor, K. Harvey

  Joseph, Rt Hon Sir Keith

  Raffan, Keith

  1193

  Raison, Rt Hon Timothy

  Smith, Sir Dudley (Warwick)

  Rathbone, Tim

  Smith, Tim (Beaconsfield)

  Rees, Rt Hon Peter (Dover)

  Soames, Hon Nicholas

  Rhodes James, Robert

  Speed, Keith

  Ridley, Rt Hon Nicholas

  Spence, John

  Ridsdale, Sir Julian

  Spencer, Derek

  Rippon, Rt Hon Geoffrey

  Spicer, Jim (W Dorset)

  Roberts, Wyn (Conwy)

  Spicer, Michael (S Worcs)

  Robinson, Mark (N'port W)

  Squire, Robin

  Roe, Mrs Marion

  Stanbrook, Ivor

  Rost, Peter

  Stanley, John

  Rowe, Andrew

  Stern, Michael

  Rumbold, Mrs Angela

  Stevens, Lewis (Nuneaton)

  Ryder, Richard

  Stevens, Martin (Fulham)

  Sackville, Hon Thomas

  Stewart, Allan (Eastwood)

  Sainsbury, Hon Timothy

  Stewart, Andrew (Sherwood)

  St. John-Stevas, Rt Hon N.

  Stewart, Ian (N Hertf'dshire)

  Sayeed, Jonathan

  Stokes, John

  Scott, Nicholas

  Stradling Thomas, J.

  Shaw, Giles (Pudsey)

  Sumberg, David

  Shaw, Sir Michael (Scar'b)

  Taylor, John (Solihull)

  Shepherd, Richard (Aldridge)

  Taylor, Teddy (S'end E)

  Silvester, Fred

  Tebbit, Rt Hon Norman

  1194

  Temple-Morris, Peter

  Walker, Rt Hon P. (W'cester)

  Terlezki, Stefan

  Waller, Gary

  Thatcher, Rt Hon Mrs M.

  Ward, John

  Thomas, Rt Hon Peter

  Wardle, C. (Bexhill)

  Thompson, Donald (Calder V)

  Watson, John

  Thompson, Patrick (N'ich N)

  Watts, John

  Thurnham, Peter

  Wells, Sir John (Maidstone)

  Townend, John (Bridlington)

  Whitney, Raymond

  Tracey, Richard

  Wiggin, Jerry

  Trippier, David

  Wolfson, Mark

  Trotter, Neville

  Wood, Timothy

  Twinn, Dr Ian

  Yeo, Tim

  van Straubenzee, Sir W.

  Young, Sir George (Acton)

  Viggers, Peter

  Younger, Rt Hon George

  Waddington, David

  Wakeham, Rt Hon John

  Tellers for the Noes:

  Waldegrave, Hon William

  Mr. Carol Mather and

  Walden, George

  Mr. Robert Boscawen.

  Walker, Bill (T'side N)

  Question accordingly negatived.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the Motion relating to Ways and Means may he proceeded with, though opposed, until any hour.
—[Mr. Archie Hamilton.]

WAYS AND MEANS

  London Regional Transport
  Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.
  10.11 pm
  The Secretary of State for Transport (Mr. Nicholas Ridley): I beg to move,
  That provision may be made specifying as £258,179,588 the amount which the Greater London Council are to pay to London Regional Transport under section 49 of the London Regional Transport Act 1984.
  This motion paves the way for the introduction of a Bill to determine the total of grants to London Regional Transport to be payable by the GLC for the financial year 1984–85, after 29 June 1984 when the Government took control. [Interruption.]
  I explained why this measure is needed in my statement to the House on 29 January. The High Court quashed the direction that I made under section 49 of the London Regional Transport Act 1984. There is thus now no direction in force regarding the payment to LRT of the grants that the GLC budgeted for and precepted to pay to London Transport in 1984–85. [Interruption.]
  Mrs. Gwyneth Dunwoody: On a point of order, Mr. Speaker. We are debating probably one of the most important measures that will ever affect London transport, but I cannot hear a word that the Minister is saying.
  Mr. Speaker: Order. I appeal for quietness, in order that the Secretary of State may be heard.
  Mr. Ridley: This matter must be urgently resolved, if possible before the end of the financial year. As I told the House, I intended to appeal against the High Court judgment. But, having studied the judgment, I concluded that it was the Act itself that did not correspond with our intention, which was clearly stated at the time when it was passing through Parliament. Clearly an appeal would not resolve that problem, let alone the uncertainty over the amount to be paid. The Government had no option but to bring a new Bill before Parliament to settle quickly the amount of grant that the GLC should pay to LRT.
  I say "settle quickly" beause both LRT and the GLC need to know what their financial position will be, and they need to know as soon as possible. LRT has to budget and plan ahead for 1985–86 and beyond, as well as to settle its 1984–85 accounts. The GLC is at the crucial final stages in its annual budgetary and rate-precepting processes. Legislation is the only way to resolve the uncertainties and give Parliament the opportunity to determine the outcome in a way that is reasonable as between the parties concerned. If the House approves the resolution, I intend to introduce a Bill immediately.
  Mrs. Dunwoody: I had understood that it was not the Secretary of State's intention to take the Bill immediately this evening. Am I to understand that he has changed his mind?
  Mr. Ridley: I said that I would introduce the Bill. It is not possible to introduce the Bill until the House has passed the Ways and Means resolution, but the normal intervals between introduction and Second Reading will of course obtain.

  1197
  In laying this motion, I have at the front of my mind the interests of travellers, LRT and London ratepayers. All stand to lose if we do not legislate. The GLC, through creative accounting and legal action, has tried to deprive LRT of substantial sums of money which ratepayers paid specifically for public transport and which LRT, by its efforts during the past seven months has earned. I think that the House would agree that such money should be returned to the ratepayers and passengers, not squandered on GLC lunacies. The Government are not trying to rob the GLC—we have not seen the colour of any of the money under discussion tonight. It is the London ratepayers and the London traveller who the GLC is seeking to rob.
  Mr. Frank Dobson: Would this so-called robbery by the GLC have been possible if the Secretary of State had drafted properly the Bill that became the Act that he is now amending?
  Mr. Ridley: I used the word robbery as it is the word which the hon. Member for West Bromwich, East (Mr. Snape) used on the day of the statement. So untrue were those phrases that they are more appropriate put as I have used them. I agree that the legislation is defective. I am sure that the whole House wants to put it right so that the intention of the House can be fulfilled.
  There are four separate sums of money at issue as a result of the court's judgment. The first is a sum of £10·2 million which the GLC argued that it had already paid in the financial year but for which we had not given it credit in setting the direction.
  When I made the direction under section 49 on 29 June, the statute required me to deduct from the total grant required the amount of grant already paid to LT by the GLC up to 29 June. Accordingly, acting on the best information then available to me, I deducted the sum of £78·7 million. In fact, a payment of some £10·2 million had been made by the GLC at the beginning of 1984–85, which LT had requested to close its accounts with the GLC for the previous financial year, 1983–84. It subsequently came to light that the GLC had paid that money but had carefully labelled the payments as relating to 1984–85. This was a trick—a piece of creative accounting—to enable the GLC to avoid paying what it owed LT in 1983–84. LT clearly considered that the payments should have been made for 1983–84. Indeed, the ratepayers had been precepted for the full amount. LT endeavoured to settle the matter with the GLC accordingly, but the GLC, of course, was in charge, and LT had reluctantly to accept the GLC's decision.
  In all conscience, the GLC should have paid this money out in 1983–84 to settle its outstanding liability and because it had already asked the ratepayer for this amount. However, I did not pursue this sum before the court because section 49 relates only to payments during 1984–85. The GLC got round section 49 by relating the payment to 1984–85. The payment amounts to £10,220,412. I therefore propose to increase the amount for which the GLC was given credit in the period before the Government took control to £88,920,412. The House should be under no doubt that the GLC has robbed LRT and the ratepayers of this £10·2 million by a trick.
  Secondly, there is an issue arising from amendments agreed by this House to the GLC's Money Act 1984,
  1198
  which covers the financial year 1984–85. At the time that the direction under section 49 was made, the House had passed an of instruction to the Committee considering the Money Bill. The import of this was that, unless specific proposals for reductions in expenditure were put forward by the GLC, the expenditure provisions in the Bill should be reduced by just under 7·5 per cent. In the event, and after the direction had been made, the GLC decided not to put forward proposals, so reductions were duly made across the board according to the instruction to the Committee. The effect for LRT was to reduce the provision for prescribed capital expenditure to be funded by grant from the GLC by some £12·9 million. The Money Bill has recently been enacted in that form and the Bill will reflect the reduction in provision for capital expenditure.
  The figure quoted in the motion, therefore, is accordingly the figure in the original direction, £281·3 million, abated for payments in respect of 1984–85 and the £12·9 million reduction arising from the GLC Money Act. That gives the figure in the money resloution. Within that sum, two sums of money remain at issue. The first is LRT's expected surplus for this financial year.
  The hon. Lady will doubtless seek to argue, as her amendment implies, that payments of grant by the GLC should be further abated in respect of the improvements in LRT's financial position which have developed since control was transferred to the Government. That is an intolerable suggestion. It would mean that additional income, which has resulted from improved productivity, better than expected sales of travelcards and from LRT's decision to raise fares earlier this year, would all be handed over to the GLC. It would mean that the benefits from the efforts of LRT's management and work force since the GLC lost control of LRT would go to the GLC, and not to LRT, its passengers, and London's ratepayers.
  I would like to remind the House of two remarks I made during the debate on section 49 in Committee—
  "It is not my intention to take more through the clause than is strictly necessary for running LRT for the year in question, so that they shall not end up with a surplus."—[Official Report, Standing Committee B, 15 March 1984; c. 1114.]
  When I made my original direction, LRT's forecasts showed that it would need funds equal to the maximum that I could specify under section 49. Indeed, LRT had forecast a deficit. I made my direction accordingly. As I said in Committee, it was almost impossible to get it plumb right when we were working for a year ahead and did not know what the circumstances would be. I therefore said:
  "If there is a surplus or deficit at the end of 1984–85 … that will go towards next year's determination of subsidy. It will either be added to or subtracted from the needs for the following year."—[Official Report, Standing Committee B, 15 March 1984; c. 1116.]
  Later in the year, in November, I had to decide how much grant LRT would need for the following year, 1985–86. By that time the estimates showed a small cash surplus for the current year. It is now forecast at £29·5 million. Also by that time LRT, in the course of turning the business round, had necessarily incurred transitional costs which will now show as accrued liabilities in this year's account. Therefore, LRT's grant for 1985–86 and the proposed ratepayers' contribution have been calculated on the basis that LRT would not have to meet any unfunded liabilities accruing from 1984–85 in 1985–86.
  I expect that we shall hear the hon. Lady argue that that money should be given to the GLC instead. Not only

  1199
  would the GLC receive an undeserved windfall, but LRT would be left without adequate funds. Is that what Opposition Members really want? It would mean big fares increases or cuts in services or investment, or an increase in the ratepayers' contribution for next year.
  It is quite clear to us that the only fair outcome is for the money to be retained by LRT and used to benefit the passengers and ratepayers who contributed to it in the first place. As I said, I made it perfectly clear in Committee that our intention was that any unforeseen surpluses or deficits should be carried forward into the subsequent year.
  There is a further sum at issue. Before the Government took over LRT, the GLC encouraged London Transport to enter into agreements to lease £27 million worth of assets —mainly buses. The GLC had never done that before. It decided to indulge in leasing for 1984–85 after the Government had determined the GLC's capital allocations for the year. That was another piece of creative accounting deliberately designed to circumvent the controls of the GLC's capital expenditure. By financing part of LRT's capital through leasing, knowing that it would shortly lose responsibility for LRT, the GLC hoped to escape the responsibility for funding more than a tiny fraction of those costs, pushing the rest on to LRT and the hapless ratepayer for future years.
  I explained clearly when the Committee was considering section 49 that we regarded this dodge as unacceptable. I made it clear that we would expect the GLC to pay to set up a reserve for that leasing. Therefore, within the total sum specified in the resolution, there is provision for a payment by the GLC to enable LRT to set up a capital reserve to cover the financing costs of the assets leased in 1984–85. That reserve provision amounts to £20·8 million, which is no more than the GLC was notified at the time that it would be required to pay, and it is no more than would be required to cover the costs of the leasing payment. I will explain precisely how it is made up, if the House wishes.
  I have given the exact explanation for the figures. No doubt the hon. Lady has come armed to the teeth with sheaves of briefing from the GLC. She looks a little perplexed, perhaps because I have anticipated so many of her arguments and she cannot think of what to say. No doubt that will not stop her. But before we hear the voice of London, intoning as though in a seance through the medium of Crewe and Nantwich, I challenge the hon. Lady to tell us whether she will oppose a measure that will protect the interests of London passengers, ratepayers and taxpayers, or whether she will vote to rob them of money they have paid for public transport to give the GLC a windfall to spend on God-knows-what. Does she want higher fares and rates in London? That is the implication of voting against this measure tonight, and I commend the resolution to the House.
  10.32 pm
  Mrs. Gwyneth Dunwoody: I beg to move, as an amendment to the motion, in line 1, leave out '£258,179,588' and insert '£208,300,000'.
  I am deeply angered by the fact that we should be discussing such important legislation so late on a Thursday night. If I gave the Secretary of State the impression that I was perplexed, perhaps I could explain it to him in simple terms. Even I, after many years in the House of Commons, am astonished at the effrontery of any Secretary of State who dares to pass legislation which, when it is examined
  1200
  by the courts, is found to be so badly defective that he has to come to the House to put it right. What is more, he comes to the House, not in the state of penitence that one would have expected from any reasonable Minister, and not to explain to the House how he dared to introduce something that was regarded by a judge in a major court as being unlawful, irrational and procedurally improper; he comes here with true arrogance to suggest that, if his laws are unacceptable, he will change them.
  This is the Government of law and order. This is the Secretary of State whose attitude towards the ratepayers of London is that, when it suits him, he will take over the major transport system. However, he will not pay for that system. That would be too easy. He will insist on levying on the ratepayers of London further sums of money to pay for something which they did not want, which will provide a worse service, and which in the final analysis will be extremely difficult to defend.
  I am really deeply offended that we should be taking this measure now. I understand that the Government do not intend to go ahead with the second measure on the Order Paper today, but I would have thought that, knowing as they did that we had major debates to take place in the realm of water and a number of other things, if there had been even a grain of — I will not say "humility", because that is a word that the Secretary does not understand — but of sensitivity to what is really important he would have said that we could not possibly take a measure of this importance at this hour.
  The Secretary of State has used the English language in a cavalier fashion which really astonishes me in his talk of creative accounting, robbery and trickery and all the other words that seem to be part of his normal, measured way of addressing those for whom he is responsible. Let me just remind the House of what this piece of legislation is all about.
  I am deeply angered, and I think it is possibly a measure of the insensitivity of the members of the Government that they do not seem to understand that what we are talking about is a major transport system for the capital city of the United Kingdom of Great Britain and Northern Ireland. So let us talk about what the Secretary of State really intended to do.
  The right hon. Gentleman decided originally that he was going to take over the whole of London transport and he set up, without any consultation whatsoever, a Bill which was to make the GLC pay for London regional transport. Four areas of really great importance were involved in this decision: first, the causes of the decision; secondly, the methods being used to implement it; thirdly, the Government's real reasons for wanting the change; and, lastly, the effect that this decision will have on the whole of London.
  Three days after the LRT Act became law, the Secretary of State took over LRT and demanded, without consultation, £281·3 million from the GLC under section 49 of the Act. The Act did not require consultation, and of course it was not something which leapt naturally to the mind of the Secretary of State. But when the GLC took him to court Mr. Justice McNeil found in his verdict that
  "natural justice entitles the payer at least to make representations".
  One result was that the Government made an error and charged £10·2 million above the maximum allowed even by their own section 49. The right hon. Gentleman conceded this after the court verdict.

  1201
  The Government's claim also involved creating a surplus for LRT by three different methods. First, they decided to reduce the LRT capital needs by £12·9 million, but they still, of course, charged the GLC. Secondly, LRT's budget for 1984–85 was based on a fares freeze. The Government, however, when they took over, pushed up fares by 12 per cent. on 1 January 1985, thus reducing the need for grants by £8 million. But the Government still asked that the GLC should be responsible for that sum. The LRT reduced its need for redundancy money, after being taken over by the Government, by £21·1 million, but the Secretary of State still charged the GLC for the surplus.
  So the Government tried to take £42 million from the GLC to create a surplus for LRT once it was within their sector—this in spite of the fact—and we have heard the Secretary of State quote from his own remarks in Committee—that he had said
  "There is no intention of trying to make a surplus." — [Official Report, Standing Committee B, 15 March 1984; c. 1116.]
  He was referring, of course, to section 49.
  However, when the GLC challenged the Secretary of State it was revealed in court that a letter from an LTE executive member to an Under-Secretary in the Department of Transport proved that there was an intention to create a surplus of at least £11 million by 6 June 1984—before, in other words, the Bill became law. The Government also sought to take a further £20·8 million from the GLC to pay off in one go the total cost of the leasing reserve. We have heard from the Secretary of State that this was because the GLC was cheating and trying to fix things. In fact, the right hon. Gentleman was asking the GLC to pay off the total cost in one lump sum.
  The Secretary of State made it quite clear in Committee that he would do this, even though he was perfectly well aware that it is traditional that new authorities inherit the debts of their predecessors, and that a leasing reserve is a standard practice among transport authorities.
  The Hon. Mr. Justice McNeill, who, after all, was asked to judge these matters, said of this decision that the Secretary of State could have legally enforced his view through a Money Bill but that he did not choose to do so. He concluded:
  "was it reasonable for him to do so … in the circumstances set out above it was not".
  The Secretary of State used five methods to take a total of £73 million from the GLC. On every one he was found guilty by a court of law. On every one the judge allowed no possibility of misinterpretation or confusion, with the one exeption of the leasing reserve. That verdict was given on 11 January 1985.
  The Secretary of State had conceded his £10 million error before the verdicts. However, he repeated in this House — not once, but four times — during transport questions that he would not discuss the implications of the case, apologise to the House or give any indication of what he intended to do to put right his own fault. He said that he had appealed or was appealing and that the matter was sub judice. That was not so. Not only did he not appeal but it emerged that he had been given very clear intimations by his own legal advisers that were he to do so, he would have no possible grounds for winning as it was plain that what he had done was unlawful, irrational and procedurally improper.
  1202
  On 29 January, the Secretary of State announced plans to change the law. In other words, he had been found out and decided to create retrospective legislation. He gave five excuses for this action. First, he said in a rather lordly fashion that the court took a different view of his legislation. That is a nice way of saying that the court said that he had broken the law. It is rather like a burglar saying that theft is not actually against the law, just that the judges tend to take a different view.
  Mr. Martin Stevens: I thought that section 49 meant exactly what my right hon. Friend thought it meant. Did the hon. Lady and her hon. Friend think it meant something different at the time when the Bill was going through the House?
  Mrs. Dunwoody: I think that any Secretary of State who brings a law to this House has a responsibility to ensure that it makes sense and that it is written so that it will stand up to examination, particularly if it affects the transport system of London. On top of that, having been found out, the Secretary of State should have had the decency to apologise to the House. Instead of that, he has come back with a change in the rule book. He does not like the game, so he will change the rules. London Regional Transport would have to give back to the GLC £50 million, we were told. This is wrong because the grant happens to be paid in instalments and only £177 million has been paid so far. If the Secretary of State had accepted the ruling of the court, the GLC would have had to pay only another £31 million instead of £81 million.
  The Secretary of State said that the old legislation would accomplish what he wanted. Of course, that is not surprising because what he wants to do is to break the law. He said that an appeal would not effect what he wanted. What the Secretary of State wants has been found by the law courts to be unlawful. He said that it would be wrong for rates that had been raised to pay for transport to be used to buy something else. In that case, perhaps the Secretary of State thinks that in 1983–84, when the GLC budgeted to spend £235 million on transport but needed only £173 million, the £62 million should have been spent on transport irrespective.
  Secondly, if the money goes back to the GLC, all of it will go to reduce the rate. If it goes to the LRT on the other hand and reduces LRT's needs, only two thirds will go back to the ratepayers. So much for the empty boast of the Secretary of State that he is worried about the ratepayers of London.
  What the Secretary of State is doing is putting before the House legislation which has already reduced the sum demanded. The amount has been reduced from £281 million to £258 million. In other words, the Secretary of State has surrendered on the £10·2 million but also on the £12·9 million surplus capital money. If the Government conceded that the capital surplus was unacceptable, why are they still demanding a revenue surplus of £29·1 million?
  Let us be clear, whatever the wording of the Bill, that it is retrospective legislation. The Conservative party in the past has been exceedingly outspoken on the question of restrospection. The GLC will be charged for services provided by another authority in a period of time predating the enactment of the Bill, and they never warned at any point that this might happen. The Conservative party has always prided itself on disliking such Bills. The present Foreign Secretary, referring to retrospection, said:

  1203
  "First, warning must be given to the taxpayer of the intention to legislate in this way".—[Official Report, 12 July 1978; Vol. 953, c. 1641.]
  In 1978, the Financial Secretary to the Treasury said:
  "This is entirely destructive of civilised life in this country."
  The House of Lords also does not care greatly for retrospective legislation. That may be one reason why we are debating a motion which cannot be amended by the House of Lords. We are not even clear whether the Government intend to allow the other place to debate the matter in any detail.
  The discussion really concerns the fact that the Government intended to charge the GLC £73 million more than they had the legal right to demand. Now, as a great concession, they will charge the GLC only £50 million more than they have a legal right to demand. The reason is to conceal the cuts that have been made in LRT since it was taken over by Whitehall. Even though they are no longer the responsibility of the GLC, the rates for LRT will rise 35 per cent. in April under the subsequent levy order. The total burden will increase from £208 million to £281 million. The Government want control of LRT, but they do not want the financial responsibility. As far as the Government are concerned, the GLC can pay for a Whitehall-run service. That was the motive, of course, behind the 12 per cent. fare rise. It created a surplus of £8 million which the Government intend to use to cut fares and funds for LRT next year. The Secretary of State for the Environment is claiming that the GLC has balances of £71 million. When the law is changed, the GLC will have to pay more to the Government, but it estimates that its balances will then be zero, while its rate-capping limit and its rate targets are all based on the £71 million balance. Secondly, the Bill assumes that the GLC must pay over to LRT £20·8 million for the leasing reserve fund. However, it is interesting to note that the GLC would have to borrow that money to pay that sum. It has no powers to do any such thing. Therefore, are we to believe that the GLC will have to risk breaking the law to change the Secretary of State's calculation, and to support him in what has already turned out to be a clearly illegal move.
  The Secretary of State said, in an article in The Standard on 4 April 1984:
  "The savings of money is a matter of the greatest interest to 4,000,000 people who pay rates in London. We are determined to reduce the burden upon them".
  Very soon, the ratepayers of London will find themselves facing yet another intolerable levy on top of their existing problems.
  Mr. Jeremy Hanley: Is not the hon. Lady's anger based on the fact that LRT, since the Act came into force, has been more successful, efficient, profitable and popular than the hon. Lady and her hon. Friends suspected or hoped? Does she not prefer the GLC to receive benefits for its dubious causes rather than to provide genuine services to the people of London?
  Mrs. Dunwoody: The hon. Gentleman has always had some confusion in his mind about what service to the taxpayers and ratepayers means, or he would not be a member of the Conservative party. I point out that many people in London have no doubts about the effects of the changes on LRT. Not only are the fares higher and services worse, but look at what the local papers are saying. When there was a discussion in Sutton about the rate for the next year, the local paper said:
  1204
  "Optimistic forecasts about Sutton's rate next year were dashed this week with the announcement of the new Transport Rate.
  What this means is almost 11p in the pound will be added to rates bills by the new London Regional Transport quango…
  Next April, despite no longer having responsibility for London Transport, County Hall are to be permitted to keep their precept at 36.75p.
  So the new LRT precept of 10.8p just announced will be extra money. It will add about £26 to the average rates bill in the area…
  Dr. David Trafford, leader of Sutton Council, said it was absurd to permit the GLC precept to stay at 36.75p when they no longer had to pay for LT.
  'It makes a nonsense of our rates plans,' he said."
  No member of a local authority has any doubt about what is happening. They all know that we have a Government that are so determined to centralise that they have gone ahead with their plans with no consultation either with the people who will be most affected, or with the duly and properly elected members of the local authorities.
  We have a Secretary of State who produced inept, badly drafted and incompetent legislation, and then had the effrontery to come back here and say that as the judges had found that what he was doing was unlawful, he would redraw the law. Therefore, this is retrospective legislation. Those Conservative Members who boast of their commitment to law and order may find it difficult in the future to explain to the ratepayers of London how they can stomach this Government. They say that everybody else must obey the law, but when they found themselves in a position, created by the Secretary of State for Transport, in which they had a bad deal—the ratepayers of London will get a bad deal out of it—they came back to the House. They will not apologise, nor will the Secretary of State offer his resignation, or even suggest that he was in any way wrong. Instead, the Government are trying to make a new law so that the next time that the Secretary of State is challenged, he will not be told that what he has done is unlawful, irrational and procedurally improper. The Secretary of State may find it amusing, but there are many people in this capital city who tonight will understand exactly what is happening. They will know why it is necessary to take this measure late at night. They will know why the Secretary of State does not want it to be debated in the full light of day. They will draw their own conclusions about how genuine his commitment is to the transport system of the greatest capital city in the world.
  10.55 pm
  Mr. Frank Dobson: The London Tories never cease to amaze me. At the last general election the Prime Minister announced— as an afterthought, so we are told by several distinguished members of her party—that the Greater London council would be abolished, that London Regional Transport would be set up and that the power to control transport in London would be taken away from the elected representatives of the people of London. What was not said—I have checked what was said in their election speeches—was that the power to control transport in London would be taken over by a secretive, unelected quango over which the people of London would have no control and which would be able to levy a rate on Londoners. It meant that the most arrogant, inept and stupid member of the present Cabinet—which means

  1205
  that he has had to work very hard for the title—had to introduce a Bill which had proved to be totally inept and did not do what he said it would do.
  The Secretary of State then applied it wrongly and the High Court decided that what had been done was irrational —that should be no surprise to any hon. Member—unlawful and procedurally unsound. We do not know whether the Secretary of State overruled his ministerial advisers about the way in which he ought to proceed. Perhaps the Secretary of State did overrule them and that is why he placed himself in this position.
  The Secretary of State then came to the House to announce what he already knew — that he had been caught out. He misled the House. Because he was scared stiff of being asked questions he applied the sub judice rule, which meant that he could not be asked questions. He said that he had appealed against the decision, and we now know that that was not true. On the strength of that alone, the right hon. Gentleman ought to resign.
  The right hon. Gentleman has now introduced a most amazing piece of retrospective legislation. He did not have the guts to bring a Bill before the House and then the financial consequences that would flow from it. We have the financial consequences, and there is to be a Bill which will flow from the financial consequences. If others ran their businesses or Departments as the Secretary of State is running his, they would be hounded out of office. He should be hounded out of office for his abysmal performance.
  Tonight the Secretary of State managed to give the impression that his own total incompetence was in some way or other the fault of the Greater London council. The GLC opposed his Bill. It said that it was badly drafted, but the Secretary of State took no notice. The GLC said that what he was trying to do was stupid, ignorant, incompetent and unlawful, and that is how it has turned out to be. Yet the Secretary of State has used it tonight to attack the GLC.
  What I ought to say, because the Secretary of State does not represent a London constituency, to the few Conservative Members who purport to represent London constituencies — not many of them are here tonight representing those constituencies — is that they really ought to consider how they should discharge their responsibilities to their electors. Within the last two days this House, in a three-hour debate, has decided the budget of the GLC and the budget of the Inner London education authority. That is what we did last night by means of the rate-capping orders.
  Those authorities would have spent hours and hours in detailed and careful deliberations before deciding the fate of many services in London and the fate and standard of inner London schools. Instead, Ministers have proceeded in their craven way and accepted everything that the Prime Minister has demanded of them. The Government decided the budgets of the GLC, the Inner London education authority and two metropolitan counties in one three-hour debate. It seems that "Yobbos rule — OK" under this Government.
  Mr. Eddie Loyden: My hon. Friend is being too charitable. He has not mentioned that Merseyside and South Yorkshire were dealt with as well in the three-hour debate.
  Mr. Dobson: I accept that. That is a reflection of the Government's wide-ranging intellectual powers. Tonight we are determining partly the budget and future standard of service of London Regional Transport. We are about to come to a decision on another whacking chunk of the GLC's budget. This will follow the despicable speech of the Secretary of State, which clearly made some of his hon. Friends ashamed. That was their reaction to his inept presentation of his stupid case.
  Mr. John Maples: Does the hon. Gentleman think it right that money raised from London's ratepayers by the GLC for London Regional Transport's purposes should be applied by the GLC for some other purpose?
  Mr. Tony Banks: Yes, such as reducing the precept.
  Mr. Dobson: As my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) said, the Secretary of State was trying to steal from the GLC. Some of the money could reasonably stay with the GLC and some of it could reasonably be returned to the ratepayers. The hon. Member for Lewisham, West (Mr. Maples) should be reminded that some of the money will go straight from the pockets of London ratepayers into the surplus of an unelected transport quango. That is the form of local government which he and his right hon. and hon. Friends have introduced.
  Mr. Nigel Spearing: The money resolution which accompanied the London Regional Transport Bill, as it then was, was a strange one, on which I spoke. It provided that any surplus arising from LRT's business would be transferred to the Treasury for the ensuing year. The hon. Member for Lewisham, West (Mr. Maples) shakes his head, but that is my understanding. Does my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) agree that we are discussing a sum that is £50 million more than the needs of London Regional Transport for the current year?
  Mr. Dobson: I confess that I no longer have a grip of one part of the detail on which my hon. Friend's intervention turns. The Secretary of State is smiling, but he has no right to claim that he has a grip on anything. It is only his incompetence that brings us here tonight. I remember that it was made clear during the debate on the money resolution of the LRT Bill, as it then was, that surpluses could go to the Treasury from London Regional Transport. I note that the Secretary of State no longer shakes his head. Perhaps the right hon. Gentleman has steadied his brain for a moment.
  Mr. Tony Banks: I invite my hon. Friend to refer to the report of the proceedings in Committee on the London Regional Transport Bill of 15 March 1984, at column 1114. He will find that the Secretary of State gave a clear undertaking that money would not be taken away from the GLC to create a surplus for London Regional Transport.
  Mr. Dobson: That is another argument to support our case.
  Most London Tory Members have long ceased to recognise that their function is to represent the people who elected them. Apparently they think that their function is to vote with the Government everytime that they shout. In the last two days they have battered the GLC and the ILEA through rate capping. Today the bulk of them —

  1207
  including the bulky hon. Member for Fulham (Mr. Stevens)—have voted for an 11 per cent. increase in the water rate levied by the Thames water authority because the Government have invented a water tax.
  Tonight Tory Members will show their loyalty to the Prime Minister, if not loyalty to the people whom they represent, by trooping through the Lobby to support the Secretary of State and his retrospective legislation to put right the consequences of his own incompetence, stupidity and unlawfulness. Some of those words were used by the judge in the High Court. According to the judge, the Secretary of State was also irrational.
  Tory Members should remember that their primary duty is to the people who elected them. It is about time that they discharged that duty. The only way that they can discharge it is by sharing the anger expressed by my hon. Friend the Member for Crewe and Nantwich.
  11.7 pm
  Mr. Martin Stevens: The hon. Member for Holborn and St. Pancras (Mr. Dobson) rants about London Conservative Members sheepishly following the Government into the Lobby no matter what the Government propose, barely 60 minutes after a sizeable Tory rebellion. I did not take part in it because, although I thought my hon. Friends honest, I also thought them mistaken.
  Opposition Members want to squeeze the last drop of outrage out of this debate. They are entitled to a bit of a giggle about something that went wrong, but they should not make absurd accusations such as that made by the hon. Member for Holborn and St. Pancras.
  The hon. Member for Crewe an Nantwich (Mrs. Dunwoody) made a number of statements to which I took exception. She asked why the Government did not consult the GLC. Perhaps she can make us a list of the times when, over the last decade, Governments, Royal Commissions and proponents of the Local Government Bill sought discussion and were turned contemptuously away. If I were Secretary of State, I am not sure that I should feel an obligation to seek the views of members of that extraordinary gang.
  Mr. Tony Banks: They were elected.
  Mr. Stevens: The present team was not elected. The electorate voted for others who were immediately given the chop and the new lot were put in.
  While my hon. Friends and I do not begrudge the Opposition their hour of fun and frivolity, I do not believe that hon. Members who served, as I did, on the Standing Committee on the London Regional Transport Act thought that section 49 meant anything different from what the Secretary of State thought it meant. They certainly did not say so.
  I do not have the slightest doubt that the GLC leadership were playing tricks, in exactly the way that my right hon. Friend accuses them; I have been in their company too often not to recognise the signs. They resemble the modern Labour party; like a flash city financier who is much too fly ever to break the law. The moment he has done something, we must have a new law to prevent him from doing it again. In a way, that is what we are doing tonight.
  Mrs. Dunwoody: And the court case?
  Mr. Stevens: For the hon. Lady to exult in the result of the High Court case, she must be able to show that she and her hon. Friends disagreed with the Secretary of State on the significance of section 49, and she has not been able to do so. [Interruption.] I would not make an adverse comment about a judicial decision. What we are proposing tonight is to return the Act to what we all thought it meant, and I shall support the Government in so doing.
  11.11 pm
  Mr. Stephen Ross: We are seeking tonight what happens when one divorces the upper tier of local government from its proper role as a transport authority and places it in the hands of civil servants and an arrogant Secretary of State.
  I voted against the London Regional Transport Act—I, too, served on the Standing Committee on that measure— and I always thought that it was a lousy piece of legislation. The facts are proving it to have been so.
  The breakdown in relations between central and local government, which this debate so typifies — there is much more to come, particularly when the Transport Bill is debated next week and in the many months to follow— is a tragedy not only for this House but for the whole United Kingdom.
  I understood that leasing for most bus companies was a proper way of proceeding. Most local authorities have been forced into leasing because they have no means to fund the capital programmes for which there is a necessity.
  We have had to adopt that means in my constituency to provide facilities for dealing with our rubbish and waste material. There are no more holes to fill up and we cannot finance a programme out of capital because we do not have any capital receipts, so we must go in for leasing. That is what bus companies have had to do in recent years to acquire the buses they need.
  If we are now to run LRT in the way that we are running the water authorities, heaven help the ratepayers.
  By introducing this motion, the Secretary of State is admitting that he could not win an appeal and, therefore, that he misinterpreted the law. He is also breaching the undertaking that he gave, when the measure was debated, that the money was to cover running LRT for "the year in question."
  It is widely admitted that £50 million is not needed for this purpose. That was the burden of the court judgment. The money included £20·8 million, which did not even feature in the GLC's budget. By this motion, the Secretary of State is trying to appropriate from the GLC money to which he is not entitled, either in law, as the law currently stands, or in equity.
  As with the rate precept, to be debated another day, the right hon. Gentleman is proving to be more profligate with ratepayers' money than the GLC, which he frequently attacks. There is a clear element of retrospectivity in what the right hon. Gentleman is doing. Under the law as it stands, the GLC has a duty to pay the Secretary of State £208 million. This provision, and the order—when it comes before us — are changing the rules halfway through the game. I suggest that the probity of such action is open to challenge. We can imagine the screams of horror that the Tories would produce if a Labour Government were to do it to a Tory council. We should not be debating the matter at this time of night; that is certain.
  The only honourable course for the Secretary of State to take is to admit that he did not understand his

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  legislation, and settle for the sum to which he is legally entitled under the amendment. He should stop showing his naked contempt for the law and the courts, swallow his pride and withdraw his motion.
  11.14 pm
  Mr. John Maples: I had not intended to intervene in the debate, but the phony indignation that has been worked up by the hon. Members for Crewe and Nantwich (Mrs. Dunwoody) and for Holborn and St. Pancras (Mr. Dobson), neither of whom was present in Committee, and the somewhat lesser indignation worked up by the hon. Member for Isle of Wight (Mr. Ross), who did not often attend the Committee, force me to do so.
  I want to make just one point. It was abundantly clear during the Committee's proceedings on what was then, I think, clause 42, that money that had been raised by the GLC from London's ratepayers to subsidise London Transport should be paid to London Regional Transport. That principle was not challenged by any member of the Committee.
  Mr. Dobson: It was.
  Mr. Maples: It was not. The hon. Gentleman was not present in that Committee. The principle was never challenged by any member of the Opposition in Committee. A couple of amendments were tabled. They dealt with what would happen if there were a surplus, and my right hon. Friend the Secretary of State made it clear that surplus would stay in LRT, would inure for its benefit and would not be appropriated by the Treasury.
  It would be outrageous if money that was raised from London's ratepayers for that purpose were to be left with the GLC to be misapplied for some other purpose and have to be raised again.
  Mrs. Dunwoody: It would lower the rates.
  Mr. Maples: Does the hon. Lady wish to intervene?
  Mrs. Dunwoody: No.
  Mr. Maples: The hon. Lady does not want to do so, but she was speaking from a sedentary position.
  Mr. Harry Cohen: I was a member of that Committee. The hon. Gentleman has just mentioned the surplus and the fact that the Secretary of State said that the surplus would go to LRT. In fact, the Secretary of State said:
  "It is not my intention to take more through the clause than is strictly necessary for running LRT for the year in question, so that we shall not end up with a surplus."—[Official Report, Standing Committee B, 15 March 1984; c. 1114.]
  He gave the undertaking to the Committee and the House that there would be no surplus. It is on that that the court case hinges.
  Mr. Maples: The money that was raised by the GLC was raised from London's ratepayers for that purpose. It is indisputable that it would be outrageous for it now to be applied to any other purpose, which is what the result would be. London's ratepayers would effectively have to pay twice. The Opposition's amendment, which is designed to chop off £50 million, is pure political opportunism. It is another example of what we saw again and again during the proceedings on the Bill—the GLC tail wagging the parliamentary Labour party dog.
  1210
  The people who live in this city, except for the hon. Member for Crewe and Nantwich and her right hon. and hon. Friends, are sick and tired of the GLC's meddling, interference and games with London Transport. We hope that this is the end of it.
  11.17 pm
  Mr. Nigel Spearing: I came into the debate to support those of my hon. Friends who had served on the Committee, and the hon. Member for Isle of Wight (Mr. Ross) on this matter. As the debate has progressed, I have become more and more uneasy. The Secretary of State for Transport has not been known for being frank in the House.
  The Minister of State, Department of Transport (Mrs. Lynda Chalker): Not so.
  Mr. Spearing: If I do him any injustice in what I am going to say, I am sure that his hon. Friend the Minister of State will do him more than justice and put me right. I invite the right hon. Gentleman to intervene if I have it wrong.
  My hon. Friends and the hon. Member for Isle of Wight are familiar with the statistical interstices of this argument, but I doubt whether any casual listener to the debate will have been able to gather the degree of what I believe to be the enormity of the Secretary of State's action. That is why I wish to be strictly fair to him. For once we have the time, and he has the ability courteously to put me right if anything that I say is incorrect.
  I intervened in the speech of my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) because I have vivid memories of the debate on the money resolution voted on and passed by the House on 13 December 1983 after the Second Reading of the Bill, and equally vivid recollections of a strange provision in that money resolution. I am testing the Secretary of State on this, as I availed myself of the opportunity in the No Lobby to re-read the Official Report of that debate.
  The Secretary of State said in reply to that short debate:
  "The system will be as follows. In any given year an estimate will be made of the subsidy needed by London Regional Transport which will be based on its own budget and plans. At the end of the year, having levied that amont partly through the rate and partly through taxes"—
  presumably that is the Department of Transport contribution—
  "the sum will be determined, and may be slightly more or less than previously estimated, and paid over. Consequently, the figures will be adjusted next year. That is how it will work. There is no question of the Treasury making a profit at the expense of ratepayers, or of its pocketing surpluses, as has been suggested." —[Official Report, 13 December 1983; Vol. 50, c. 940–41.]
  As I understand it, however, that is exactly what is now about to happen. I shall be happy to give way to the Minister if I am wrong, but I am trying to understand this as a user of London Transport. Like most of my constituents, I do not own a car and this issue is vital to the quality of transport available to citizens of the capital which the Government have treated with such scant respect. As no one has challenged me, I assume that I am right so far.
  Understandably, there was a clause in the Bill allowing money to be transferred from the GLC in the transitional period of six months or so when London Transport would be under the Minister rather than the GLC. That is perfectly reasonable. Having decided to effect the transfer

  1211
  in the middle of the financial year and of the calendar year, the Government had to make some provision to sustain London Transport during that period. As my hon. Friend the Member for Leyton (Mr. Cohen) has pointed out, that was accepted by the Committee as an administrative arrangement.
  It is alleged, however—the Secretary of State has not so far rebutted the allegation—that the amount that was levied was in excess of the amount required by London Transport in that balancing period. The figure has been bruited around and my hon. Friends have stated that the excess is £50 million. Neither the Secretary of State nor the Minister of State has denied that, or indeed anything that I have said up to now—so far, so good.
  On the money resolution and the matter on which I intervened in the speech of my hon. Friend the Member for Holbom and St. Pancras, it is within the knowledge of all my hon. Friends now present that when I made that allegation both Ministers shook their heads. The money resolution provides that the Secretary of State will be authorised
  "to require that body to pay to him any excess of revenues over charges (as determined by that Act) in respect of any accounting year (within the meaning of that Act) of that body, so far as that excess appears to him to be surplus to that body's requirements". —[Official Report, 13 December 1983; Vol. 50, c. 933.)
  There we have it. There is a power voted by the House, by means of the money resolution, to enable the Secretary of State, if he so wishes — it is not mandatory, but optional—to take back from London Regional Transport any surplus that may in any one year arise out of surplus revenues.
  The Secretary of State may say that the subsidy from the GLC is not, for the purposes of the resolution, revenue. That is the only loophole that I can see.
  Mr. Ridley: It would be kind to put the hon. Gentleman out of his misery. He does not understand what happened in Committee, when it was carefully explained that all money from the trading accounts of LRT that was excess to its requirements would be rolled over into the following financial year. The hon. Gentleman has quoted what I said. The power in the money resolution was intended to cover the unlikely event of the discovery of oil or of a gold mine on LRT property, or of major property development, the proceeds of which had nothing at all to do with London Transport. Such proceeds would be paid into the Treasury. In no sense would the money resolution power be used for the purpose of paying in the surpluses.
  The hon. Gentleman asked me to intervene if his point was a false one. I hope that he will accept that it is false.
  Mr. Spearing: I am grateful to the Secretary of State for putting me right. Making the point was still worthwhile. Not all the citizens of London, and indeed not all the Members of the House of Commons, can sit in any one Committee. However, it seems strange that such a money resolution was included, because presumably the disposal of capital assets, land values and so on might have had to be considered.
  I take it that the Secretary of State has no intention—assuming that the resolution is passed tonight—of taking back any of the moneys that he intends to transfer from the GLC to LRT in the succeeding year, as in the money resolution, or to abate his own contribution out of taxes through the consolidated fund by a similar amount. I assume that all the additional revenue, over and above the
  1212
  requirements for this year, will be used for improving the service or reducing fares. I hope that the right hon. Gentleman can give me that assurance.
  Mr. Ridley: I am happy to give the hon. Gentleman that assurance categorically.
  Mr. Spearing: I thank the right hon. Gentleman. I hope that at least we understand rather more than we did before the debate. The disgraceful way in which the right hon. Gentleman tied up the finances and operations of LRT is one of the reasons why we are right to probe these matters. People will always be suspicious of the right hon. Gentleman whenever the word "buses" is spoken, whether in London, Merseyside or any of the conurbations, because the difficulties that he has found himself in tonight will be magnified many times if he pursues other legislation now before the House.
  11.28 pm
  Mr. Eric Deakins: I did not serve on the Committee on the Bill. The hon. Member for Lewisham, West (Mr. Maples) seems to believe that only hon. Members who served on the Standing Committee may speak in the Chamber on matters that may arise once the Bill in question has become an Act and has been queried in the courts. That is a strange doctrine, especially from an hon. Member who may not have been in the House for very long.
  What moves me to speak is what, if I were not in the House of Commons, I would regard as the humbug and hypocrisy of the Secretary of State. I understand that I am not allowed to use those words. I shall therefore talk about the right hon. Gentleman's brazen effrontery in daring to talk about the robbery of the four million ratepayers of London. That from a prominent member of the Government who for the past five years, have drastically cut rate support grant for London ratepayers by hundreds of millions of pounds, thus forcing up rates in all London boroughs, irrespective of their political complexion. Only today, the Government have forced through the House the first ever water tax in our history. Charges for Londoners will now rise by 10 per cent. instead of 3 per cent. I remind the Secretary of State, who probably does not know about these things, that there are no rebates on water rates, unlike general rating. The poorer section of the community will suffer as a result of what the House has done today.
  The chairman of LRT recently unveiled the business plan. He was kind enough to organise a reception for London Members of Parliament. That was good, this being the first year of LRT's operation. The Secretary of State is suggesting that LRT is running its affairs much more efficiently than the GLC ran London Transport. The forecasts that many of my hon. Friends made in Committee, and which people outside made, are being shown to be true. There have been disproportionate fare increases and cuts in services. The 275 route which runs through my constituency on Sundays is being cut out. It is a double-decker bus route which runs principally to and from the Claybury mental hospital in north east London. Many elderly and disabled people use that service to visit friends at Claybury. Other services are available, but people in my constituency and neighbouring ones will now have to use three or four bus services to get to Claybury on a Sunday. That is expensive and inconvenient.
  The 275 service is being cut out only because, according to LRT, it does not have enough passengers.

  1213
  That is what the argument about the control of London's transport has been all about. We cannot expect every bus service to make a profit. We have always accepted that unprofitable but socially desirable services should be cross-subsidised by the profitable ones. The cut would not have been made under the GLC, but it has happened under LRT. It is the beginning of a long process of the attrition of London's bus services.
  We will also have more one person operated buses. Some say that they are more economic in that only one person is employed. Some years ago, when London Transport was keen on introducing one person operated buses, it decided after an experimental period that it would limit the proportion of one person operated buses bacause, although it saved money, it held up passengers, held up traffic and was not good for business people. Under LRT's business plan there is a massive increase in the number of one person operated buses. It will save money but I question whether it will make a more efficient service for ratepayers and public transport users.
  Many people who support the GLC and oppose its abolition might have thought that abolishing London Transport and establishing an undemocratic quango under the Secretary of State would make no difference. They are wrong. The greatest difference will be felt by poorer people in my part of London. That is insupportable, as it comes on top of many other burdens that the Government have imposed on them. Therefore, I shall vote against this motion and in favour of my right hon. Friend's amendment. I hope that the Opposition will carry its views with it and vote against the Bill when it eventually comes to the House.
  11.37 pm
  Mr. Tony Banks: I apologise for popping in and out of the debate, but the Local Government Bill is in Committee upstairs. The Government are dragging the House deeper and deeper into the affairs of local government, to the point that this place is becoming like a mega town hall. At some stage someone will no doubt suggest that Mr. Speaker should be addressed as Mr. Mayor. All hon. Members must by now think that it is time for the Government to draw back because they are making life impossible for both hon. Members and democratically elected councillors in town and county halls.
  The issue can be sufficiently starkly and simply put for even the average Tory Member to understand. It is that the Secretary of State broke the law. What is worse, he broke his own law. The fact that he acted illegally is compounded with incompetence — he did not even understand the law that he had taken through the House. That puts into context the Government's position vis-a-vis local councillors. They lecture councillors about breaking the law and constantly accuse them of abusing their powers.
  The Widdicombe inquiry will not be impartial—it is a fig leaf. Tory Members ask when these abuses will be stopped, which shows that they have already prejudged the issue of local government. In reality the purpose of the inquiry is to produce sufficient evidence for the Government to move strongly against local government
  1214
  spending under sections 137 and 142. However, when the Government abuse their position and break the law they merely change the law, and retrospectively at that.
  If a councillor had broken the law as the Secretary of State has done, there would have been an outcry from Conservative Members. I can imagine the articles in the loony Right-wing rags, such as The Sun, the Daily Mail, the Daily Express and The Times. While we are getting the Secretary of State off the hook this evening, I remember Claycross in 1972, when councillors did the decent thing and defied an appalling piece of legislation. Many of them are still suffering from the imposition of bankruptcy and are unable to hold elected office. However, when the Government break the law, they simply change that law. Tonight we are witnessing the Government's double standards, which stink to high heaven and call into question their position and statements about occupying a higher moral stand point than local councillors.
  In the judgment of 11 January the judge said that the Secretary of State had acted
  "unlawfully, irrationally and procedurally improperly in giving a direction which exceeded his statutory powers without consideration of all the relevant material and without consultation with the GLC".
  What an indictment of a Minister. He should feel ashamed of himself. I can only hope that at some time in the near future he will do the decent thing and offer his resignation.
  I raised this issue at Question Time on 14 January, soon after the High Court judgment. The Secretary of State came to the Dispatch Box and said that the matter was sub judice. At best, that was a deliberate attempt to prevent debate in the House; at worst, it was a deliberate attempt to mislead the House. On that score, too, he should offer the House an apology. The Secretary of State had not appealed at that time; he was only thinking about whether to appeal. One understands now that his officials advised him that there would not be much point in appealing, because he would lose. That is why we have this Ways and Means motion and the Bill that will follow.
  The Secretary of State will ask the GLC to pay money to London Regional Transport which that body does not need. That point is crucial, and we discussed it at length in Committee on 15 March last year, on what is now the London Regional Transport Act 1984. I was a member of that Committee, and I looked up what the Secretary of State said. He said:
  "It may help if I start by underlining the principles on which I intend to operate the clause."
  He was talking about clause 49.
  "The normal processes of determining the subvention to LT by the GLC will be gone through, and most of them have been … The GLC having determined both the revenue and the capital amount, we shall expect it to pay us that amount for the full year. However, that amount is not to be taken entirely at its face value because we must be careful that neither the Government demand too much from the GLC nor that the GLC gives too little to LRT. I hope that the matter can be agreed sensibly and without difficulty. It is not my intention to take more through the clause than is strictly necessary for running LRT in the year in question, so that it shall not end up with a surplus. That is our firm intention but I am sure that the Committee will agree that it is almost impossible to get it plumb right when we are working for a year ahead and do not know what the circumstances of that year will be."
  He went on to repeat:
  "There is no intention of trying to make a surplus … However, there is no intention of trying to get more out than we should."

  1215
  That is what the Secretary of State said in Committee, but he is now suggesting that he should be allowed to do precisely the opposite to what he promised the Committee in 1984.
  My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), who was leading for the Opposition on that Committee, said:
  "I do not think that the Secretary of State's assurance is worth a great deal. If I were a London ratepayer … I should not put much store by that promise." — [Official Report, Standing Committee B; 15 March 1984, c. 1114–17.]
  How right my hon. Friend was. But, of course, that had no influence on the Secretary of State, and the Bill duly received its Royal Assent on 26 June.
  As to consultation, officials of the Department of Transport promised that there would be consultation with the GLC before issuing the direction. But no such consultation occurred. That is why Mr. Justice McNeill found this contrary to the principles of natural justice. Had the Secretary of State consulted the GLC and taken account of its reponse, he could have avoided an illegal direction, and especially avoided an error of £10·2 million, which was the amount that the GLC had already paid that year.
  The Secretary of State's illegality is compounded by his incompetence and his impoliteness in not consulting the GLC, which could have told him that he was making an error. Indeed, in July 1984, the GLC told him that he was making an error and that, in its view, the direction was unlawful. However, the GLC said that it would continue to make payments without prejudice to maintain the continued operation of LRT's services. The GLC was not prepared to play ducks and drakes with London's transport services, despite all the accusations that have been made by Conservative Members. It told the Secretary of State that he had got it wrong, but the Secretary of State, in his usual arrogant manner, decided completely to ignore the GLC because he did not believe that it was worth consulting that body. We now see the consequences of his incompetence.
  I could have raised many points tonight, but I shall content myself with one that was mentioned by Conservative Members. The Secretary of State says that it would be improper for this money, which has been taken from ratepayers for one purpose, to be used for another. He says:
  "I cannot accept … that the money belongs to the GLC. The GLC precepted the ratepayers of London for the express and explicit purpose of passing the money on to LRT. How it can then be said that because it rated the money it should not give it to LRT baffles me."—[Official Report, 29 January 1985; Vol. 72, c. 171.]
  Of course, most things baffle the Secretary of State, including his own legislation, but let me answer the point.
  The argument that he is putting, which is supported by other hon. Gentlemen, and particularly by the hon. Member for Lewisham, West (Mr. Maples), who also raised that point during questions in January, is contrary to all normal local government practices and to all past practices between the GLC and the LTE. The GLC precepted for 1984–85 on the assumption that the council would maintain fare levels, secure close integration between London Transport and British Rail and extend dial-a-ride schemes, concessionary schemes, and so on. That was the reason why the GLC precepted at the levels.
  1216
  that it did. But, of course, all that has since changed, because LRT is now busy changing all the policies upon which the GLC precepted ratepayers in the first instance.
  It is outrageous that the Secretary of State should now ask the GLC to pass over money to London Regional Transport which it does not need, in order that LRT should create a revenue surplus. Consider that against what the Secretary of State said in Committee last year. The GLC would not voluntarily hand this money over, but if it is required to do so it will be against all good financial management in local government.
  In 1983–84, for example, the GLC's budgeted grants in transport were £235 million, but only £173 million was paid. The balance was used to reduce the precept for 1984–85. It is quite absurd and contrary to the interests of London ratepayers that moneys must be spent for the purpose for which they were precepted regardless of need or changed circumstances. It is absolutely crazy, and no sensible, well-managed local authority would do it. That surplus could be used, as it has been used in the past, to reduce the transport precept being required from London. That is how we could use the £50 million which the Secretary of State is to steal from the GLC by legal means, and we shall be discussing the 35 per cent. increase in the transport precept very shortly.
  So much for the good management of London Regional Transport now that it has found itself in the bungling, incompetent hands of the Secretary of State, who is trying to screw the ratepayers of London in order to build up a revenue surplus in LRT which it does not need and should not have because of the assurances which the Secretary of State gave the Committee on the London Regional Transport Bill.
  On the question whether the short LRT Bill should be a money Bill, what concerns me is that if it is to be a money Bill—I understand that the Government want it to be, according to a note that I have of the minutes of discussions that took place between officials of the Department of Transport and the GLC—there will be certain constraints operating on the House of Lords when that Bill goes to it. I find it rather strange that the Government should be talking in terms of its being a money Bill, because I have always understood that it was only Mr. Speaker who decided what Bill was to be a money Bill. I hope that we shall be able to decide this at a later date, because it would appear to me that the Government, by insisting that this should be a money Bill, will prevent the Lords from bringing to bear their judgment and their decisions on retrospective legislation, which is what this is all about.
  If the Government are able to achieve a compliant House of Lords by denying it the right properly to debate and discuss that Bill, they will thereby continue their practice of acting in a high-handed and undemocratic fashion, using the language of democracy while they ride roughshod over democracy, and in this case over the ratepayers of London, who, unfortunately, now find that their transport system, which was previously under the control of a democratically accountable Greater London council, is in the hands of an incompetent, bungling, undemocratic and unlawfully acting Minister, the Secretary of State.
  11.49 pm
  Mr. Harry Cohen: I shall be brief, given the hour and the relevant comments which Opposition Members have already made.
  The whole substance of the Secretary of State's speech was to describe the GLC as robbers and tricksters, whereas the court's decision—I do not apologise for repeating it again—was that the Secretary of State
  "acted unlawfully, irrationally and procedurally improperly in giving a direction which exceeded his statutory powers without consideration of all relevant material and without consultation with the Greater London Council".
  For the right hon. Gentleman to describe the GLC as robbers and tricksters is really a case of him being caught with his hand in the till.
  I was reminded of the fact that a few years ago there was a campaign in the east end of London with the slogan
  "George Davis is innocent, OK?"
  The same could be said of the right hon. Gentleman's speech. He made out that he was innocent, even though the court decision came out against him. I remind the Secretary of State that George Davis eventually got sent down, and the same may well apply to him.
  In many respects the right hon. Gentleman has also misled the House. When on 14 January my hon. Friend the Member for Newham, North-West (Mr. Banks) asked a question, the right hon. Gentleman said that his Department was in the process of appealing and, therefore, the matter was sub judice. We have now discovered that he has not appealed and has no intention of appealing, because he knows that he would lose.
  The right hon. Gentleman also misled the House on the question of the subsidy. His Department's plans to ensure that LRT had a subsidy was contrary to his assurance to the House and the Standing Committee. This is important, because the subsidy was one of the essential pieces of evidence by which the court found against the Secretary of State.
  In spite of the right hon. Gentleman's rantings against the GLC, the council has acted legally and responsibly throughout. It informed him in July of last year that it considered that his direction was unlawful. That proved to be correct. The GLC said that it would continue the payments to LRT without prejudice in order to maintain the operation of LRT's services. The GLC has made it clear that it has always been prepared to pay overgrants to meet LRT's operating needs in 1984–85.
  The Minister has robbed the GLC of between £50 million and £73 million. That reveals an amazing level of incompetence, given that the right hon. Gentleman was responsible for the writing of the Bill and for steering it through Committee. It is clear that he did not understand its provisions.
  For the Secretary of State now to bring forward this retrospective legislation and Ways and Means resolution is very much a fraud. It merely covers up his own incompetence. However, it must be introduced in this way because the Secretary of State would lose any appeal. It is not in the interests of the ratepayers of London. If the Money were paid back to the GLC, it could be used to reduce the GLC's precept to the London boroughs and thus the London boroughs' rates would be reduced. Taking that £50 to £73 million, which is relevant this year, and applying it to later years will result in London ratepayers being deprived of the benefit that the Secretary of State can claim—only two thirds of the amount in later years,
  1218
  with the Exchequer having to pay one third. The Secretary of State is robbing London's ratepayers of one third of the £50 to £73 million of which they would have received the direct benefit. That extra bill will have to be faced by the ratepayers.
  The Government said that the GLC precepted for the amount, so what did it matter? The GLC, of course, was forced to precept for the additional sum. If the same principle were applied to all local authorities in the country, it would send the Secretary of State's rate-capping right through the roof. Indeed, there would never be any savings from underspending. The argument is therefore a phoney one.
  The court made it clear that the money is GLC money and should be paid back to be used for the benefit of London's ratepayers. This retrospective legislation and the motion amount to robbery and trickery by the Secretary of State.
  11.56 pm
  Mrs. Dunwoody: With the permission of the House.
  There are occasions when the House witnesses hon. Members who cynically try to distort the truth or who, for reasons of self-aggrandisement or as a result of other less attractive characteristics, seek to obfuscate rather than to clarify.
  I believe that the Secretary of State should have come to the House today and said plainly that what he was doing had been found to be unlawful, that he knew himself to be wrong and that he therefore accepted the verdict of the courts and would not seek to bring in legislation. I believe that he should never have put retrospective legislation before the House. It is not in the interests of the House that a Government with a large majority should use that muscle in a blatant and unacceptable manner to insist on legislation which has been tried and tested in the courts and found to be sadly wanting.
  I believe that the Secretary of State should have come to the House at least not to hand out cheap jibes against the GLC. He should have come to the House to apologise and to say he was wrong to have sought to suggest that the matter was sub judice because his Department was appealing when he knew that that was not so. He should have said that he was wrong to have insisted on legislation which would have a direct effect upon the ratepayers of London and upon the transport services that the ratepayers of London have a right to expect. Above all, the Secretary of State should have said that he would not move such a motion late on a Thursday night when the entire House could not be present to examine in detail the implications of the Government's proposals.
  I believe that there has been a misuse of the Government's large majority. In every sense it has been a discreditable episode. If I were the only hon. Member present in the Chamber, I would still vote against this piece of chicanery. The matter is too important to be handled with levity and contempt. The Secretary of State should have had the decency to come to the House and apologise.
  11.58 pm
  Mr. Ridley: With the leave of the House, Mr. Deputy Speaker, I shall deal with some of the lesser points before coming to deal with the bogus hypocrisy that has effused from the Labour Benches. I shall first ask a question of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). She said in her first speech that, if the £50 million had been

  1219
  left with the GLC, it would all have gone to reduce the rates. Would that happen? I doubt it, and I do not think that she will be thanked by her paymasters in county hall for having gone so far as to say that.
  I confirm to the hon. Member for Newham, South (Mr. Spearing) and to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) that any surplus from the money raised for LRT, either by the GLC or, in due course, by the ratepayer levy, that is surplus to the requirements of one year will be paid into LRT's accounts for use in future years.
  Mr. Spearing: Although we do not always agree with the right hon. Gentleman's policies or actions, he is always courteous, so I am grateful to him for giving way. The £50 million over current requirements that he is collecting, which he says will be put to the use of LRT in succeeding years, he is taking from the ratepayers ahead of need. Why did he not go to the GLC and, on a gentleman's agreement, take only the amount that it was not going to send back to the ratepayers? Would that have not been a more satisfactory and businesslike way to go about the matter?
  Mr. Ridley: I shall come to that point. I hesitated to give way to the hon. Gentleman because I prefer to make my own speech in my own order.
  The hon. Member for Walthamstow (Mr. Deakins) said that the service has deteriorated, but I must disagree with him. It is improving rapidly, as is the efficiency of LRT. However, if he has a particular point, about the service, I am sure that he will find the chairman very willing to help. I shall draw the attention of the chairman to the hon. Gentleman's concern, and I am sure that the chairman will take any opportunity to get in touch with the hon. Gentleman.
  Mr. Deakins: I have already taken the matter up with the chairman of LRT, and it was on the basis of his reply that I made my brief remarks about the fact that the service is being cut for financial reasons when it is really a social service.
  Mr. Ridley: There have been very small, if any, cuts for that reason, but I do not know the circumstances of the case that the hon. Gentleman raised, and I shall draw his point to the attention of the chairman.
  The hon. Member for Newham, North-West (Mr. Banks) is not here.
  Mr. Spearing: He is in Committee.
  Mr. Ridley: He did not hear my opening speech, and he will not hear my closing speech. He left me several questions—to whom would I be answering if I answered them? To answer one of them, this is a money Bill not by virtue of the Government's wish but because money Bills are things that raise money and are certified as such by Mr. Speaker, and the Government have no choice in a matter such as that.
  The hon. Member for Crewe and Nantwich, and one or two other hon. Members, made the error of saying that rates for LRT will rise by 35 per cent. This is not true. The old total—the figure for the current year—raised by the GLC was £340 million, of which the ratepayers paid just about three quarters. When we debate the levy order the hon. Lady will hear that the total to be raised for next year is £323 million — that is, less. The ratepayers'
  1220
  contribution will be two thirds of that amount. How can two thirds of £323 million be more than three quarters of £340 million? It cannot be.
  The rate in London has gone up because the Greater London Council drew down its balances last year and spent them. The result is that this year it has had to raise its rates for non-London Regional Transport purposes by a very great amount — indeed, by more than the relief to ratepayers that removing LRT from it has produced. The GLC has taken the opportunity of not having to finance LRT next year to increase its rate by almost the same amount as has been saved.
  The hon. Lady asked how the GLC was going to pay this money. I do not believe that the GLC has any excuse for not paying this money since the London Regional Transport Bill was published in December 1983 and certainly since the Committee stage in March 1984, and for not planning on the assumption that their maximum exposure in 1984–85 would be £360 million. Indeed, even after the judgment on 11 January, the GLC has been told that the Government intend to contest the effects of the court's ruling. There has never, therefore, been a time during the past 15 months when the GLC could reasonably have assumed that it was not liable to pay.
  The new legislation concedes £23 million to the GLC. It will have £23 million more than the maximum amount that it might have expected. I should have thought that that was a bonus. When the Department of the Environment proposed to rate-cap in December, the position was that the direction which had been made had not been overturned. But we had conceded the £10·2 million. Therefore the reserve position of the GLC must be £12·9 million easier than when the rate cap was proposed.
  Several Opposition Members asked about the surplus. The total amount that was necessary for London Regional Transport this year was not just what it spent. It was what it incurred in liabilities. It has necessarily incurred transitional costs which will now show as accrued liabilities for 1984–85 in this year's accounts. Therefore, LRT is carrying forward a reserve to meet those charges. There is nothing special about that. At the beginning of the present financial year it carried forward £24 million from the previous year. The GLC left it with that amount of money as a working reserve. The Government have left it with a similar amoount of money. LRT needs money. It is not a question of a surplus but of money that is strictly necessary for LRT.
  The other point that was made was that I had overturned the judgment of the court or in some way had broken the law. I reject entirely that suggestion. The only way that a judgment can be overturned is on appeal. On this occasion I have invited the House to change the law since it turns out not to be the law that the House was led to believe it would be. I would remind the hon. Lady of the Travel Concessions (London) Act 1982, which was the result of the Bromley case. The House of Lords decided that the Greater London council did not have the power to allow concessionary fares to be paid, although it had been doing so. I suppose that the hon. Member for Crewe and Nantwich would say that that was disgraceful, illegal and unlawful, but the Government legislated to overturn that decision of the courts.
  Mr. Dobson rose—
  Mr. Ridley: No. The hon. Gentleman can sit and listen to this. He had some pretty unfair things to say to me.
  Mr. Dobson: On a point of order, Mr. Deputy Speaker. I know that there is extreme delicacy in saying that an hon. Member is misleading the House, but I think that it would be advisable for you to suggest to the Secretary of State that he looks to what the Solicitor-General said—
  Mr. Deputy Speaker (Sir Paul Dean): Order. It is clear that the hon. Gentleman is raising a point of argument and not a point of order for me.
  Mr. Ridley: I shall repeat the matters which seem to have caused the hon. Member for Holborn and St. Pancras (Mr. Dobson) to be puzzled. There are the decisions of the courts on section 49, which we are discussing, and on whether the GLC had power to grant travel concessions. The courts found that what we believed was not the case. When the House was invited to legislate to give the GLC power to grant travel concessions in the 1982 Act, there were no accusations of impropriety and illegality, because the House was invited to change the decision of the courts. Of course there were not. I have never heard such a partial argument as that which has been advanced by the hon. Member for Crewe and Nantwich. I advise the House that there is no foundation for the charges which have been levelled.
  The hon. Member for Isle of Wight (Mr. Ross) said, "God help the ratepayers." It is the Government who will help them and not God. They will do so by proposing that the money resolution should be accepted by the House. If it is not, London ratepayers will pay twice for that which has been provided by London Regional Transport. There will be an uncovenanted windfall to the GLC which will not be used to the benefit of the ratepayers. They will be made to pay twice for something and they have not been told what it will be. I invite the House to support the motion.
  Question put, That the amendment be made:—
  The House divided: Ayes 67, Noes 150.

  Division No. 96]

  [12.14 am

  AYES

  Banks, Tony (Newham NW)

  Hughes, Sean (Knowsley S)

  Barnett, Guy

  Hughes, Simon (Southwark)

  Bennett, A. (Dent'n & Red'sh)

  Hume, John

  Callaghan, Jim (Heyw'd & M)

  Leadbitter, Ted

  Campbell-Savours, Dale

  Leighton, Ronald

  Clay, Robert

  Lewis, Terence (Worsley)

  Cocks, Rt Hon M. (Bristol S.)

  Loyden, Edward

  Cohen, Harry

  McDonald, Dr Oonagh

  Cook, Frank (Stockton North)

  McKay, Allen (Penistone)

  Corbyn, Jeremy

  McNamara, Kevin

  Cowans, Harry

  McWilliam, John

  Cox, Thomas (Tooting)

  Madden, Max

  Craigen, J. M.

  Marek, Dr John

  Crowther, Stan

  Maynard, Miss Joan

  Cunliffe, Lawrence

  Meacher, Michael

  Cunningham, Dr John

  Mikardo, Ian

  Davies, Ronald (Caerphilly)

  Parry, Robert

  Davis, Terry (B'ham, H'ge H'l)

  Pike, Peter

  Deakins, Eric

  Prescott, John

  Dobson, Frank

  Richardson, Ms Jo

  Dormand, Jack

  Rogers, Allan

  Dubs, Alfred

  Ross, Stephen (Isle of Wight)

  Dunwoody, Hon Mrs G.

  Ryman, John

  Fatchett, Derek

  Sedgemore, Brian

  Fields, T. (L'pool Broad Gn)

  Shore, Rt Hon Peter

  Flannery, Martin

  Short, Ms Clare (Ladywood)

  Fraser, J. (Norwood)

  Silkin, Rt Hon J.

  Godman, Dr Norman

  Skinner, Dennis

  Hancock, Mr. Michael

  Smith, C.(Isl'ton S & F'bury)

  Harrison, Rt Hon Walter

  Snape, Peter

  Hart, Rt Hon Dame Judith

  Soley, Clive

  Holland, Stuart (Vauxhall)

  Spearing, Nigel

  1222

  Straw, Jack

  Tellers for the Ayes:

  Thompson, J. (Wansbeck)

  Mr. Norman Hogg &

  Torney, Tom

  Mr. Frank Haynes.

  NOES

  Alexander, Richard

  Hunt, David (Wirral)

  Amess, David

  Hunter, Andrew

  Ancram, Michael

  Jessel, Toby

  Ashby, David

  Jones, Robert (W Herts)

  Aspinwall, Jack

  King, Roger (B'ham N'field)

  Atkinson, David (B'm'th E)

  Knight, Gregory (Derby N)

  Baker, Rt Hon K. (Mole Vall'y)

  Knox, David

  Baker, Nicholas (N Dorset)

  Lawler, Geoffrey

  Baldry, Tony

  Leigh, Edward (Gainsbor'gh)

  Batiste, Spencer

  Lennox-Boyd, Hon Mark

  Bellingham, Henry

  Lewis, Sir Kenneth (Stamf'd)

  Benyon, William

  Lightbown, David

  Biggs-Davison, Sir John

  Lilley, Peter

  Blackburn, John

  Lloyd, Peter, (Fareham)

  Blaker, Rt Hon Sir Peter

  Luce, Richard

  Boscawen, Hon Robert

  Lyell, Nicholas

  Bottomley, Peter

  McCurley, Mrs Anna

  Bottomley, Mrs Virginia

  Maclean, David John

  Bowden, Gerald (Dulwich)

  Major, John

  Bright, Graham

  Malins, Humfrey

  Brinton, Tim

  Maples, John

  Brittan, Rt Hon Leon

  Marlow, Antony

  Brooke, Hon Peter

  Mather, Carol

  Brown, M. (Brigg & Cl'thpes)

  Maxwell-Hyslop, Robin

  Bruinvels, Peter

  Merchant, Piers

  Buck, Sir Antony

  Miller, Hal (B'grove)

  Budgen, Nick

  Mills, Iain (Meriden)

  Burt, Alistair

  Mitchell, David (NW Hants)

  Carlisle, John (N Luton)

  Moate, Roger

  Carttiss, Michael

  Morris, M. (N'hampton, S)

  Cash, William

  Moynihan, Hon C.

  Chalker, Mrs Lynda

  Murphy, Christopher

  Channon, Rt Hon Paul

  Neubert, Michael

  Chope, Christopher

  Newton, Tony

  Clark, Hon A. (Plym'th S'n)

  Nicholls, Patrick

  Clarke, Rt Hon K. (Rushcliffe)

  Normanton, Tom

  Coombs, Simon

  Norris, Steven

  Cope, John

  Onslow, Cranley

  Couchman, James

  Oppenheim, Phillip

  Currie, Mrs Edwina

  Osborn, Sir John

  Dover, Den

  Ottaway, Richard

  Dunn, Robert

  Page, Sir John (Harrow W)

  Eggar, Tim

  Page, Richard (Herts SW)

  Evennett, David

  Parris, Matthew

  Fallon, Michael

  Patten, John (Oxford)

  Favell, Anthony

  Percival, Rt Hon Sir Ian

  Fenner, Mrs Peggy

  Portillo, Michael

  Forsyth, Michael (Stirling)

  Powell, William (Corby)

  Forth, Eric

  Powley, John

  Fraser, Peter (Angus East)

  Proctor, K. Harvey

  Freeman, Roger

  Raffan, Keith

  Gale, Roger

  Raison, Rt Hon Timothy

  Garel-Jones, Tristan

  Rees, Rt Hon Peter (Dover)

  Gorst, John

  Rhodes James, Robert

  Grant, Sir Anthony

  Rhys Williams, Sir Brandon

  Gregory, Conal

  Ridley, Rt Hon Nicholas

  Griffiths, Peter (Portsm'th N)

  Roe, Mrs Marion

  Hamilton, Hon A. (Epsom)

  Rossi, Sir Hugh

  Hamilton, Neil (Tatton)

  Rumbold, Mrs Angela

  Hampson, Dr Keith

  Sainsbury, Hon Timothy

  Hanley, Jeremy

  Shaw, Giles (Pudsey)

  Hargreaves, Kenneth

  Silvester, Fred

  Harvey, Robert

  Soames, Hon Nicholas

  Havers, Rt Hon Sir Michael

  Spicer, Jim (W Dorset)

  Hawkins, C. (High Peak)

  Squire, Robin

  Hawksley, Warren

  Stevens, Martin (Fulham)

  Hayward, Robert

  Stradling Thomas, J.

  Heathcoat-Amory, David

  Thompson, Donald (Calder V)

  Hickmet, Richard

  Thompson, Patrick (N'ich N)

  Holt, Richard

  Trippier, David

  Howard, Michael

  Twinn, Dr Ian

  Howarth, Alan (Stratf'd-on-A)

  Walden, George

  Howarth, Gerald (Cannock)

  Wheeler, John

  Howell, Rt Hon D. (G'ldford)

  Wood, Timothy

  1223

  Yeo, Tim

  Tellers for the Noes:

  Young, Sir George (Acton)

  Mr. Tony Durant and

  Mr. Ian Lang.

  Question accordingly negatived.
  Main Question put and agreed to.
  Resolved,
  That provision may be made specifying as £258,179,588 the amount which the Greater London Council are to pay to London Regional Transport under section 49 of the London Regional Transport Act 1984.
  Bill ordered to be brought in upon the foregoing resolution by the Chairman of Ways and Means, Mr. Nicholas Ridley, Mr. Secretary Jenkin, Mr. Peter Rees, Mr. John Moore, Mrs. Lynda Chalker, Mr. David Mitchell and Mr. Michael Spicer.

  LONDON REGIONAL TRANSPORT (AMENDMENT)
  Mr. Secretary Ridley accordingly presented a Bill to make provision specifying as £258,179,588 the amount which the Greater London Council are to pay to London Regional Transport under section 49 of the London Regional Transport Act 1984: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 77.]

  STATUTORY INSTRUMENTS, &c
  Mr. Deputy Speaker (Sir Paul Dean): With the leave of the House, I will put the Question on the motions relating to statutory instruments according to subject.
  Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &c.).

  STATUTORY INSTRUMENTS, &c

    RATING AND VALUATION
    That the draft Water Undertakings (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved
    That the draft British Waterways Board (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.
    That the draft Glasgow Underground (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, he approved.
    That the draft British Alcan Aluminium Limited and Lochaber Power Company (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.
    That the draft Scottish Electricity Boards (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.
    That the draft British Gas Corporation (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.
    That the draft British Railways Board (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.
    That the draft British Telecommunications plc (Rateable Values) (Scotland) Order 1985, which was laid before this House on 15th January, be approved.

    TERMS AND CONDITIONS OF EMPLOYMENT
    That the draft Redundancy Payments (Variation of Rebates) Order 1985, which was laid before this House on 15th January, be approved.
    LIBRARIES
    That the draft Public Lending Right (Increase of Limit) Order 1985, which was laid before this House on 16th January, be approved.

    INTERNATIONAL IMMUNITIES AND PRIVILEGES
    That the draft International Union for the Protection of New Varieties of Plants (Legal Capacities) Order 1985, which was laid before this House on 18th January, be approved.—[Mr.Mather.]
    Question agreed to.

PETITION

  Human Embryos
  12.24 am
  Mr. Tim Yeo: I beg to ask the leave of the House to present a petition signed by over 1,400 of my constituents who feel strongly about the need to enshrine in legislation protection for the human embryo as a real living individual human being, and the need to oppose those practices which violate his or her human dignity or right to life. I share their concern.
  Wherefore your petitioners pray that the House of Commons will take immediate steps to enact legislation which forbids any procedure that involves purchase or sale of human embryos, the discarding of human embryos, their use as sources of transplant tissue or as subjects for research or experiment (unless this is done solely for the benefit of the embryo concerned).
  And your petitioners, as in duty bound, will ever pray.
  To lie upon the Table.

  Limited List Prescribing
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mather.]
  12.25 am
  Mr. Thomas Torney: When Nye Bevan introduced our National Health Service, he had to fight on two fronts. One was the doctors who were apprehensive about becoming civil servants and so possibly becoming subject to the dictates of some Government. The other was the Tory party. While the doctors finally agreed to become perhaps reluctant partners, they are now enthusiastic supporters of what was the finest Health Service in the world. They now believe that the welfare of patients counts before savings for the Treasury, whereas the Tory party against which in those days Nye Bevan was battling to establish this great service — from these very Benches — was opposing its establishment. It fought our Health Service every inch of the way.
  The Tories have not changed. They believe now, as they did then, that only those who can afford to be sick should be allowed to be sick.
  Restricting prescription strikes at the heart of our Health Service. To tell a doctor that he must take into account the patient's ability to pay before he decides what the patient needs is criminal and makes a mockery of the Prime Minister's statement:
  "The Health Service is safe with us."
  The National Health Service was founded by the Labour party upon the principle that the best health services should be available to all and that money should not be the passport to better or quicker treatment. The Government seek to undermine those unimpeachable principles by stealth.
  I have a serious constituency problem created by those proposals. The city of Bradford has a serious unemployment problem. It has well over the national average of unemployment. Those unemployed people could never afford to pay the full price for the drugs at the chemists.
  Bradford has an aging population. With the help of many of the drugs that the Government now propose to ban, people are living longer. The forecasters say that Bradford will have even more older people in the years ahead.
  Those elderly folk are more likely to fall sick, often with serious and painful maladies. Many are pensioners on supplementary benefit who could never afford to purchase the drugs now prescribed for them under the National Health Service.
  I have received hundreds of handwritten letters from constituents. I will quote from just a few. I apologise for any mispronunciation of chemical names as I am not a doctor. One constituent writes:
  "I collected my prescription for Fybogel and was informed that the Government propose that it will be on private prescription only, from the 1st of April.
  It is the only product I can have for my condition as everything else including pain killers give me a horrible itchy rash from top to toe. I am a pensioner aged sixty eight".
  She complains that the cost would be too much for her to pay.
  Another writes:
  "I am very concerned regarding Propain tablets"
  which the doctor gives her for arthritis
  "as I suffer mostly in my knees and joints."

  1227
  That constituent, aged 77, also complains about the high cost which she could never afford.
  Another objects to the Government withdrawing the drug Gaviscon from the prescription list as he suffers from a hiatus hernia and has been told that it is
  "imperative that I be treated with Gaviscon or a similar drug." He, too, is afraid that he will no longer be able to get the drug.
  Another pathetic letter begins:
  "To look at me now you would not tell I am arthritic, but I have suffered from Arthritis for 33 years. In that space of time I have progressed from being crippled to quite active, but believe me at times the pain is excruciating. Obviously after coping for so long I only take painkillers when really necessary.
  I am only 35 yrs. old now, so if we take the average life-span I have another 35 yrs. of life left, with the distinct possibility that my Arthritis will worsen. I have faced this gruesome thought in the past, with confidence, as I have known if necessary I can take Distalgesic tablets when the pain is bad, but how can I and thousands of others now face the future, when we are given to understand we will no longer be able to obtain Distalgesic tablets on prescription?"
  Many people who attend my regular surgeries tell me that their doctors have said that there is no generic alternative to the antacids asilone and mucaine, the analgesics distalgesic and equagesic or the laxative dobinex.
  Branded drugs are made by reputable companies to the highest standards, backed by years of research at very high cost. Generic drugs may not be made by reputable companies. They may be produced in the far east or in eastern European countries. They may be sold cheaply without the Government safeguards and inspections that we have here. Will the National Health Service compensate patients if something goes wrong?
  Another example of lack of consideration by the Department is the fact that only one benzodiazepine has been left in the Government formula — diazepam, otherwise known as valium.
  I have it on the best authority that medical opinion is very concerned about the effects of the continued use of valium over a prolonged period. There are newer, more effective and less harmful drugs that could be used, but the Government have taken them off the list.
  I have had letters galore from doctors, health authorities, community health councils and, above all, the BMA, all condemning the Government's pernicious scheme.
  Mr. Tim Yeo: Is not valium some 14 times more expensive than a clinically identical substitute? Does the hon. Gentleman seriously suggest that the Government should, by including valium on the list, waste resources that could be used elsewhere in the NHS?
  Mr. Torney: The hon. Gentleman cannot have listened to what I said. I said that valium is one of the few drugs that has been left on the list, although there are newer—
  Mr. Yeo: It is not.
  Mr. Torney: That is my information. [Interruption.] Conservative Members may scream as much as they like, but I have it on good medical authority that valium is on the list, although there are newer and better drugs. The medical profession does not like valium because of the danger to the patients if it is used for a long time.
  In 1982, the informal working group on effective prescribing reported to the Secretary of State for Social Services. According to the report,
  1228
  "There are in the region of 6,500 preparations available for prescribing at NHS expense and the new BNF lists some 4,500 of these. In comparison, the average prescriber is said to use a range of 200–300 drugs. A number of schemes for the introduction of a national Limited List of drugs has been proposed at various times by different people. We have considered these, but it is our view that a limitation on prescribing at NHS expense would be interpreted by some doctors as an attempt to curtail their clinical freedom. Since we have not seen any convincing evidence that suggested financial benefits would outweigh the administrative problems in, drawing-up and maintaining the list, we have concluded that such a move would not be justified and we do not recommend any measures to introduce nationwide a Limited List."
  On 9 January 1985, a resolution of the BMA council stated that
  "The Government's intention to limit by Regulation the range of drugs available for prescription on the NHS from 1 April 1985 is in our opinion contrary to the spirit of the NHS Act The Act lays a duty on the Secretary of State to provide a comprehensive health service, including the supply of proper and sufficient medicines ordered by a medical practitioner, free of charge except in so far as charges (e.g. prescription charges) are made under any enactment."
  Between 8 December 1983 and 8 November 1984, there was a complete reversal of Government policy. There were no discussions or consultations, and no evidence was produced to explain the reversal of policy. The objections raised by the Department to the introduction of a limited list are still valid and the controversy that followed the announcement on 8 November 1984 proved the accuracy of the conclusion in the departmental paper that the introduction of a limited list would cast doubt on the Government's intentions towards the standard of provision of general medical services in the NHS.
  Last but not least, the list makes for double standards in the Health Service. Those who can afford it can have the best that the drug industry can offer, but people who, like most of my constituents in Bradford, are poor, members of a low income group, dependent on pensions or benefits are condemned to suffer pain and hardship for the rest of their lives, and perhaps early death, simply because they cannot afford to pay for the drugs that are available and so that the Tory Government can save money, perhaps to give tax cuts to the better off.
  12.39 am
  The Minister for Health (Mr. Kenneth Clarke): I congratulate the hon. Member for Bradford, South (Mr. Torney) on his good fortune in the ballot, but I cannot say that I believe that he has made constructive use of it. With respect, his speech on our limited list proposals, on which we are still consulting, comprised an amazing amount of cant and nonsense.
  The hon. Gentleman gave his version of the origins of the National Health Service and claimed that we are trying to change it into a service in which treatment is dependent on a patient's means, or ability to afford better treatment. Most of the objections to our proposals come from commercial and professional lobbies, which have obviously spent some of their time briefing the hon. Gentleman. They are perfectly entitled to lobby. The professional interests involved are extremely respectable people such as the British Medical Association. Whatever reasons might be raised against our proposals, I hope to persuade the hon. Gentleman, and anyone else who shares his feelings, that the argument that we face a two-tier service or that the poor and the elderly are threatened with suffering is misplaced.

  1229
  To illustrate his point that elderly patients are at risk, the hon. Gentleman drew heavily on many letters that he has received from patients citing the drugs that they are using. It is obvious that they are not altogether spontaneous letters, because they are written in terms about the drugs that would not ordinarily come immediately to elderly patients. They cite the drugs that they are taking, and most patients do not know the professional name of drugs. Some of the names were given inaccurately, as though a layman was doing his best to give the name. It is quite obvious that, within the hon. Gentleman's constituency, there are some doctors who have been carrying out what I regard as an unethical and unscrupulous campaign by alarming their patients and telling them to lobby their Member of Parliament because they face the risk of pain and suffering because the Government are threatening to withdraw a drug.
  A doctor is quite entitled to campaign against any part of the Government's proposals for the NHS if he wants to. We have invited every doctor to make his professional views known to the chief medical officer if he criticises the list that the Government have proposed. It is not right for doctors to alarm patients, such as those who have been writing letters in Bradford, by combining political campaigning with medical advice, thus inspiring patients to write what I accept are heart-rending letters in the hope that the Government will be pressurised into change.
  I hope that, faced with these problems, the hon. Gentleman will show his usual concern for his constituents by trying to reassure them and by telling doctors that this is no way in which to conduct a sensible political debate. The hon. Gentleman should tell doctors in his area to respond to the request that they have had. If they are worried about the effect on patients of any changes in the drugs available, they should give their considered opinion, as forcefully as they like, to Ministers and the chief medical officer—our adviser.
  The hon. Gentleman has obviously leapt on the opportunity that is provided by the letters to stoke up fears and alarm among the elderly and the poor in his constituency. He is lending himself to an unscrupulous campaign. I strongly regret that he and some of the doctors in his constituency have set about things in that way. If he will not reassure people in Bradford, it is obviously my duty to do so. The Government have no intention of debarring any of the poor or elderly from the treatment, free if necessary, under the NHS that they require. We have every intention that under the NHS it should be possible for doctors and patients to have access to a complete list of preparations, which is sufficient to cope with all the clinical and medical needs of the service.
  Mr. Torney: When the right hon. and learned Gentleman said that my constituents would not know the names of their drugs, is he aware that when a doctor gives a patient a presciption to take to the chemist, in 99 out of 100 cases the chemist will write the name of the drug on the bottle for the patient to read? Some old people have been taking a drug for so long that they are well aware of the name of it. How does the Minister account for the fact that the BMA is opposed to the list—surely he does not doubt its bona fides?
  Mr. Clarke: The BMA is opposed to the list for a variety of reasons. Some sections of the BMA are advising
  1230
  doctors to campaign in the way that has clearly taken place in Bradford. In some parts of the country pre-prepared letters are presented to patients when they visit their doctor, on which the name of the drug is written by the doctor so that the patient can send it to his Member of Parliament.
  Mr. Torney: These are all hand-written letters.
  Mr. Clarke: Those are obviously all hand-written letters, but, if the hon. Gentleman explores further, he will discover that one, or probably more than one, practice in Bradford has been inspiring patients in a subtle and varied way to write to him complaining about the proposals. I am not saying that such doctors are bad. All doctors have been asked to give their considered professional opinion, if they wish, to the chief medical officer about a proposal to limit the range of drugs in certain therapeutic categories that will be prescribable on the NHS. Doctors would have been better advised to give their professional opinion and to reserve judgment until they see the final proposals that will be published shortly. It was not right of doctors to campaign in such a way as to cause alarm and anxiety — the hon. Gentleman admitted that — to many frightened elderly patients who had visited the surgery for treatment, reassurance and help.
  Mrs. Edwina Currie: Is it not a fact that the total number of letters received by the DHSS from our doctors in practice amounts to no more than 2 per cent. of doctors and that 1,800 of them either mention a particular commodity or make warm comments about the proposals?
  Mr. Clarke: I am not sure of the precise percentage, but I accept that my hon. Friend may well be right. Certainly we have had 1,800 letters from doctors giving constructive comments on the contents of the list and saying which preparations they would like to see on the list, as it was suggested all those concerned should do.
  We have not issued a final and definitive list, but a proposal that in certain therapeutic categories it would be wise for the service to restrict the total number of products available because at present the NHS provides a large number of similar, and sometimes identical, products at varying prices. We saw the possibility of making substantial savings for the NHS by restricting that range to the full list that is required to deal with all patients' clinical needs. We therefore issued a list for discussion, and have received the 1,800 responses that I mentioned, and many others from pharmacists and companies in the pharmaceutical industry. The chief medical officer and a panel of distinguished outside experts from all the specialties and areas affected by the proposals are considering what the final list should be. Nothing has yet been taken from the list. Any patient who is told, as the hon. Gentleman was told, that his drug will definitely not be available after 1 April has been misled, because no decisions have been taken about what drugs will be available on 1 April. Anyone who discovers when the final list emerges that the brand of product to which he is used is not available will also discover that the alternative is an equally effective drug, which will do the medical job required at somewhat less cost to the National Health Service.
  I cannot emphasise too much the fact that there is no motive to introduce a two-tier service, thus driving

  1231
  patients to buy their health care, or any of the bizarre theories advanced by the hon. Gentleman. What we are doing here is what we are doing throughout the Health Service — seeking sensible economies that do not adversely affect patient care. We are seeking better value for money for the resources that we put into the National Health Service. We are increasingly trying to maximise the patient care that we obtain for the money that we spend. If we can save up to £100 million on the drugs bill without damaging patients, that will enable us to sustain the increased expenditure on the Health Service that we are planning for next year and the two years beyond that.
  The subject of cutting drug costs has been examined for some time, including, in 1982, by the expert committee that produced the report cited by the hon. Gentleman, which is usually known as the Greenfield report. In all the discussions that we have had about drugs costs, one thing unites the Government, the BMA, the vast bulk of the medical profession and the pharmacists: everyone is agreed that it is legitimate to consider ways of reducing the drugs bill. Anyone who is interested in the NHS appreciates that it is undesirable that our drugs bill has continued to increase at the rate that it has. It is increasing by more than 5 per cent. above the general rate of inflation each year, and is now £1,400 million in total. The number of preparations and prescriptions is increasing, as is the cost per prescription. If that money continues to be drawn into an ever-increasing drugs bill, it will be more difficult for the Health Service to maintain other services. Everyone has co-operated in searching for ways to reduce drugs costs.
  The Greenfield committee considered various methods, and recommended the system known as generic substitution. I will not burden the House with the details of that tonight, because it is not the issue raised by the hon. Member for Bradford, South. The Government rejected it because of the immense damage that it would have done to the British pharmaceutical industry, and because it was opposed by the British Medical Association. The BMA believed that it would create considerable difficulties if a doctor prescribed one drug and the pharmacist dispensed another. It was worried about instances of a doctor prescribing a drug and never knowing what the pharmacist eventually dispensed to the patient as the cheapest generic equivalent.
  It is true, as the hon. Gentleman said, that the Greenfield report mentioned a limited list, and he fairly and accurately quoted the terms, saying that the committee was aware of it. It believed that some doctors would argue that their clinical freedom would be threatened if such a list were introduced. However, only some would do so, because it is extending the concept of clinical freedom a little far to say that it means that not only should doctors have the full ability to treat all the clinical needs of their patients, but that they should be able to prescribe any product on the market at any price, even though a cheaper alternative may be available.
  The Greenfield report rejected a limited list because there was no evidence that financial savings could be
  1232
  made. Since 1982, we have done substantially more work on that aspect. We have considered experience here and abroad, and international experience is very enlightening. We realised that the paucity of evidence could be remedied. When one considers the experience abroad, it is plain that, although no country has exactly the same provisions for drugs as Britain does—every country has variants in drug pricing and policies—but every one of the Western developed countries has some element of selection of products and some element of listing of drugs in its health care policy.
  More to the point, we are certainly the only country with our present system whereby every product that obtains a licence can come on to the market at a price determined by the manufacturing company and is immediately available for prescription by any doctor in the National Health Service, paid for by the taxpayer without question. The number of products available under the NHS has gone up to 18,000 and doctors can select any one of those.
  I believe that the list we are producing will eventually be seen by doctors as useful guidance, based on the work of an expert panel which has sifted through all the advice we have received from the professions and set out a full list that will allow doctors to deal with all needs in these limited categories of drugs. Two thirds of the drugs we are talking about can be bought over the chemist's counter without a doctor's prescription, anyway. The prescription-only drugs are largely the tranquillisers, which are often criticised — the benzodiazepines, many people have argued, are over-prescribed in this country and not always prescribed carefully. Valium is a criticised drug and is not on our provisional list, contrary to what the hon. Gentleman asserts.
  We will look at all the drugs and select those which are essential to patients out of the very wide range of very similar tranquillisers available on the Health Service at the moment, and similarly with sedatives and some sleeping pills. But we have very carefully confined the categories of drugs we are dealing with. We have not touched the life-saving drugs; we have not touched many of the more advanced areas. We believe that we can safely introduce a system within this section of the drugs Bill that does not adversely affect patients and saves money for the Health Service.
  We are the real friends of the Health Service, by improving its efficiency and its cost-effectiveness, and making sure that its resources are devoted to patient care. The hon. Gentleman is rehearsing old arguments, old prejudices. He has not got any ground for rehearsing them on this occasion. He has been misled by a commercial campaign and the rather odd behaviour of some of his doctors into believing that there is a cause to be pursued here, which I believe, when he thinks about it more carefully, he will realise should not have been pursued on this particular ground.
  Question put and agreed to.
  Adjourned accordingly at five minutes to One o'clock.