Commons Sitting of 24 November 1987

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

    Thames Regions (Cash Reductions)
    Ms. Ruddock: To ask the Secretary of State for Social Services what advice he has given to the four Thames regions regarding the specific services to be cut in order to meet their cash reduction over the next three years.
    The Minister for Health (Mr. Tony Newton): Before I answer the question, may I take this opportunity to express the regret of my right hon. Friend the Secretary of State at being unable to be here today because he is unwell?
    There are no plans for cash reductions. The overall cash increase projected for the next three years is about 15 per cent. Health authority allocations for 1988–89 will be announced shortly.
    Ms. Ruddock: I thank the Minister for his answer, but I fail to understand why, therefore, regional and district health authorities are all having to discuss how to meet the cuts that the Government are imposing. What does the Minister have to say about the findings of the medical committee of the South East Thames regional health authority that it is not unusual for breast surgery to be cancelled four or five times? What does he say to the terrified women whose lives may depend on swift and effective surgery and who are being treated in this disgraceful way so that Government financial guidelines can be met?
    Mr. Newton: The Government have made clear their plans for the further development of breast cancer screening services and for ensuring that appropriate treatment is available. Additional moneys were made available to the Thames regions, under the heading of the so-called resource allocation working party bridging fund, last year. There will be further allocations under that heading in the allocations that are to be announced shortly.
    Mr. Maples: Is my hon. Friend aware that, in the South East Thames region, the Lewisham and North Southwark district health authority has pioneered such innovations as cross-charging for out-of-district use and is selling services to the private sector and to other district health authorities? Will he consider encouraging authorities to extend the use of such market mechanisms in the context of a free NHS, to widen choice and improve services?
    Mr. Newton: I shall certainly very much encourage all health authorities to examine such measures, which can
    124
    assist in improving the services that we all want to be provided. The Lewisham and North Southwark district is also a good illustration of something else important—the massive capital investment taking place at Guy's.
    Mr. Tony Banks: Would the Minister be prepared, after Questions today, to meet a delegation of doctor and nurses from St. Thomas's hospital on the other side of the river, in which 137 beds have been closed? Is he aware that that hospital serves the needs of Members of the House of Commons—or at least those who have not made private arrangements?
    I do not wish ill on any Conservative Members, but if they all have a heart attack at the same time in the same massage parlour there will be a great strain on the health services, and particularly on St. Thomas's, where there will not be enough beds.
    Mr. Newton: As it happens, I discussed some of these problems last week at a meeting with a consultant from St. Thomas's, and I shall take into account what he said when considering some of the matters to which I have already referred.
    Mr. Squire: Is my hon. Friend aware that, despite his welcome news about continuing increases in money for the regions, somehow or other in many districts—certainly in my region of North East Thames—there are still just as many difficulties as there ever were? Will he look again at the basis of allocation for the district health authorities?
    Mr. Newton: We are reviewing what is called RAWP at the national level, and we are discussing with the regions the operation of their allocation policies at the sub-regional level. Of course, I shall take account of my hon. Friend's point.

    Flu Vaccines
    Mr. James Lamond: To ask the Secretary of State for Social Services if he will make a statement on the state of supplies of flu vaccines within the National Health Service.
    The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): Vaccination for flu is a selective programme recommended only for at-risk groups. The number of doses given in recent winters has varied between 1·4 million and 1·6 million, but demand this winter appears, for extraneous reasons, to have increased to more than 2 million doses. That is 25 per cent. higher than normal. We expect some 2·2 million doses to have been delivered by next week.
    Mr. Lamond: Is the Minister aware that as long ago as early October constituents of mine were being turned away by their doctors, especially at the Royton health centre? They were told that no flu vaccine was available and that if they wished they could put down their names for next year. It is obvious from press reports in the last few days that this situation is widespread. Surely the Minister realises that this is preventive medicine at its best and that to have allowed flu vaccine supplies to dry up was a grave mistake.
    Mrs. Currie: I hope that the figures I have just given show that rather than flu vaccine supplies drying up, they have substantially increased this year. I understand that the scare stories running in the press resulted from a press conference held by an organisation called the Influenza

    125
    Monitoring and Information Bureau which is run and funded by the three companies which produce the vaccine. We have no evidence whatever of any such epidemic or of any such scare having any basis in actuality.

    Qualified Medical Laboratory Scientific Staff
    Mr. David Marshall: To ask the Secretary of State for Social Services what reports he has received on the problem of retaining qualified medical laboratory scientific staff within the National Health Service; and if he will make a statement.
    Mrs. Currie: We are aware of reports of problems in some areas.
    Mr. Marshall: Does the Minister accept that medical laboratory scientific officers are highly qualified people and an integral and essential part of patient care? Does she agree that they are grossly underpaid and will she now agree to include them in the pay review body as soon as possible?
    Mrs. Currie: We do indeed regard them as very important people. The hon. Gentleman may not know that last week the staff side of committee A of the appropriate Whitley council accepted the offer of a 5 per cent, increase in pay and allowances, that this has been back dated to 1 April 1987, and payment of it is now in hand. However, we accept that there are problems with the present grading structure and we have commissioned an independent study covering the whole subject of the provision of pathology staff. We hope that the results of that study will shortly be available.
    Mr. Michael Morris: My hon. Friend will be aware that I wrote to her on this subject. I welcome her response to the grading study. Does she now accept that the laboratory staff have patient contact and that they are a vital link in the chain of medical care? We need to retain the most senior ones with experience, and the study should concentrate on them.
    Mrs. Currie: I hear what my hon. Friend says and thank him for his kind remarks. I understand that the difficulty is in retaining the basic grades, and therefore the study will pay a great deal of attention to that.
    Mr. Hoyle: Will the Minister supplement the 5 per cent, salary increase with uniform payments? I am sure she will agree that that would reduce the high turnover and lift the morale of this vital but underpaid sector of the Health Service.
    Mrs. Currie: We shall take the hon. Gentleman's remarks into account.
    Dr. Michael Clark: Will my hon. Friend tell us how the number of scientific staff has increased during the lifetime of this Government? Is there any sign that the current salary levels have handicapped recruiting?
    Mrs. Currie: I have no details for all the scientific staffs of all types employed by the National Health Service, but I can tell my hon. Friend that the number of qualified medical laboratory scientific staff, which is the subject of this question, is now 11,000. That is an increase of 34 per cent, since 1979. The salary scales range from just under £7,000 for the lowest basic grade to over £17,000.

    Community Care
    Mr. Cryer: To ask the Secretary of State for Social Services if he will make a statement on the progress of community care programmes undertaken by district health authorities.
    Mr. Newton: Considerable progress has been made in implementing Government policies on community care, although the rate obviously varies from place to place.
    Mr. Cryer: Does the Minister accept that there is much evidence that mentally handicapped people are simply being dumped on the community and are being given highly inadequate facilities and inadequate care? Will he give me an assurance that he will look sympathetically at village community schemes developed, for example, for Westwood hospital in my constituency rather than see hospitals close? Patients have been dumped on the community and the sites have been sold for private speculative development.
    Mr. Newton: I do not accept the generalisation at the outset of the hon. Gentleman's question, but I certainly accept that some schemes have been better planned than others. Certainly the hon. Gentleman's suggestion about village schemes could be considered.
    Mr. Latham: Will my hon. Friend confirm that it is not, and cannot be, Government policy that elderly or handicapped folk should just be sent home, and that it is essential to ensure that the necessary supportive welfare is in place before any old hospitals are closed?
    Mr. Newton: Not only could it not and should it not be Government policy, but it is not Government policy. It is Government policy to ensure proper preparation of the sort that my hon. Friend rightly advocates.
    Mr. Wigley: Does the Minister accept that, for there to be a positive policy that facilities are available in the community, those facilities must include provisions such as domiciliary services for physiotherapy, speech therapy and so on? Does he accept that in practice that just does not happen in many areas, which means that the commitment to community care is a charade in those areas?
    Mr. Newton: I agree that we would like to see a good deal more progress in various ways. The hon. Gentleman is well aware that we hope to make a further statement about primary care generally before too long. That statement will have some relevance to the points that he has raised.
    Mr. Nicholas Winterton: Can my hon. Friend say when Sir Roy Griffiths is to report to the House on care in the community? Will he ensure that no psychiatric hospital or hospital for the mentally handicapped is closed before the report is published and the House has had a full opportunity to debate this critical issue?
    Mr. Newton: We expect to receive Sir Roy's conclusions early in the new year. I do not think that I can give my hon. Friend the guarantee that he asked for in the latter part of his question. However, at our previous Question Time I gave him a guarantee that we would not agree to the closure of any hospital unless we were satisfied that proper alternative arrangements had been made.
    Mr. Tom Clarke: Does the Minister accept that the assertions of my hon. Friend the Member for Bradford,

    127
    South (Mr. Cryer) are supported by the Comptroller and Auditor General's report, in which Sir Gordon Downey commented most unfavourably on the Government's approach to community care and was particularly scathing about transitional funding arrangements? Does he accept that many hospitals are closing, not as a natural progression towards community care, but because they are in such a dreadful state of disrepair? Finally, whatever the hon. Gentleman says at the Dispatch Box today, does he agree that the Government's community care policies have been fatally and skilfully undermined by their approach to social security payments, which means that private homes are being subsidised to the hilt?
    Mr. Newton: I do not accept either the last part of the hon. Gentleman's remarks or his suggestion that hospitals are being closed simply for reasons to do with buildings rather than patients. I readily accept that many areas of community care policy have been the subject of criticism. We accepted that those areas needed looking at, and that is precisely why we commissioned Sir Roy Griffith's work.
    Mr. John Browne: Does my hon. Friend accept that sufferers of schizophrenia require not just community care on discharge, but a gradation of community care? Will he please take that into account before closing hospitals and institutions and when advising local district authorities on the sort of care that they must have in place?
    Mr. Newton: The question of psychiatric patients is particularly complex, and undoubtedly a range of care in the community is needed. In my judgment, it is being planned or provided in many places.

    Housing Benefits
    5. Mr. Battle: To ask the Secretary of State for Social Services how many claimants of housing benefit will receive lower benefit in April 1988.
    The Parliamentary Under-Secretary of State for Health and Social Security. (Mr. Michael Portillo): Most housing benefit recipients also get at least one other social security benefit. Our tables show that, taking the income-related benefits together, some 3·65 million people will receive less benefit than if the old schemes had continued. In cash terms the number of losers is less than 1 million.
    Mr. Battle: What will the Minister be telling pensioners whose Christmas bonus, pensions and savings will be eroded by an increase in rents in April? Will he spell out that it is his Department that is reducing housing benefit, rather than live in the hope that local authorities will take the blame for the cut?
    Mr. Portillo: I shall be telling pensioners that most of them will see a cash increase in housing benefit next April and that 70 per cent, of housing benefit losses will be under £2 a week.
    Mr. Brazier: Will my hon. Friend confirm that one of the reasons why the Government were elected was to end the "Why work?" syndrome and that the present arrangements for housing benefit are grossly unfair for the working poor?
    Mr. Portillo: The present arrangements have necessitated the very complicated housing benefit supplement, and that is lifted in the reforms. Altogether, the reforms will mean that more people will gain or experience no change than will lose.
    Rev. Martin Smyth: Will the Minister accept that many people will experience tremendous hardship in Northern Ireland? Will he acknowledge that while £2 a week would not be a great loss to hon. Members, it will certainly be a loss to people at the lower end of the income scale?
    Mr. Portillo: The point that I want to make to the hon. Gentleman, and this applies as much to Northern Ireland as to Great Britain, is that as much money is going back into income-related benefits as is coming out of housing benefit. The figures balance each other out.
    Mr. Dickens: Will my hon. Friend accept that when we talk about Government money we are talking about taxpayers' money? Is it not right that a responsible Government should target help where it is most needed? That is what we are doing with the reform of the state welfare system.
    Mr. Portillo: My hon. Friend is absolutely right. The problem is to tell poor taxpayers with no savings that they should be making contributions to pay the housing benefit for people with more than £6,000 in the bank.
    Mr. Robin Cook: Will the Minister admit that his changes in housing benefit will remove all entitlement to housing benefit from 1 million current claimants and that most of the remainder will lose some, if not most, of their benefit? What kind of targeting leaves behind 6·5 million caualties from 7 million claimants?
    Mr. Portillo: I accept only the hon. Gentleman's point that 1 million people will lose housing benefit altogether. At the end of the reforms there will still be more people receiving housing benefit than there were under the previous Labour Government.
    Mr. John Townend:What proportion of households will receive housing benefit after April 1988? Does my hon. Friend believe that that proportion will be too high?
    Mr. Portillo: The proportion today is one third. That is made up of 7 million households, of which 1 million will lose eligibility to housing benefit, and therefore the future proportion will be somewhat under one third.

    Redundancy Arrangements (NHS)
    Mrs. Walley: To ask the Secretary of State for Social Services what is his policy towards redundancy arrangements in the National Health Service in the light of the decision of the employment appeal tribunal in the case of Cato v Hammersmith and Queen Charlotte's special health authority that the authority unlawfully discriminated against Mrs. Cato.
    Mrs. Currie: The hon. Lady will be aware of the statement made on 28 October by my right hon. Friend the Secretary of State for Employment about the changes that the Government intend to make to statutory redundancy provisions, under which currently a woman cannot claim redundancy pay over the age of 60. The management side of the general Whitley council will shortly be reviewing present NHS redundancy arrangements.
    Ms. Walley: I thank the Minister for her reply, and I am indeed aware of the announcement by the Secretary of State for Employment. Will the Minister tell us when the Whitley council arrangements will be announced? Does the Minister intend to back-date pay for women who have

    129
    been illegally discriminated against, as they are now entitled to redundancy payment following the signing of the treaty of Rome?
    Mrs. Currie: The review that I mentioned will be conducted as quickly as possible. The hon. Lady is probably not aware that the current arrangements were introduced more than 20 years ago by a Labour Government headed by the present Lord Wilson. I have no intention of back-dating the changes to then.
    Ms. Richardson: Is the Minister aware that her right hon. Friend the Secretary of State for Employment, in spite of his statement, could have saved her and the DHSS some embarrassment if he had accepted a Labour amendment during the passage of the Sex Discrimination Act 1986 which would have prevented what is happening now? We should welcome the ending of discrimination in the National Health Service. Will the Minister make it her business—I know that she has the power to do so—to ensure that the Government extend the reform to the private sector as well?
    Mrs. Currie: The hon. Lady should be aware that the Government are steadily removing the discriminatory rules against women that were introduced by previous Labour Governments. We have done better for disabled housewives and for married women caring for the sick. I am not in the least embarrassed. I am pleased with the progress that is being made.

    Family Income Supplement
    Mr. Watts: To ask the Secretary of State for Social Services how many families currently in receipt of family income supplement will receive an increase in benefit following the introduction of family credit.
    The Minister for Social Security and the Disabled (Mr. Nicholas Scott): Almost all families in receipt of family income supplement are expected to receive a cash increase when family credit is introduced.
    Mr. Watts: Does my hon. Friend agree that these impressive figures are a vindication of the policy of concentrating resources on low-income families, rather than spreading them thinly through increases in child benefit, which benefit the better off most of all? Will he tell the House how many families will receive an increase of more than £5 a week when family credit is introduced?
    Mr. Scott: I agree with my hon. Friend's comments. We shall be spending over £300 million extra on low-income families as we move to the new system of benefits, when 240,000 families will benefit by more than £5 a week.
    Mrs. Virginia Bottomley: Does my hon. Friend agree that this important benefit, which was first introduced by my noble Friend Lord Joseph, does much to remove families from the indignity of being better off out of work than they are in it? Does he agree that the particularly important modifications that he has introduced give greater recognition to the needs of teenage children, which is a matter on which the poverty lobby has campaigned for a long time?
    Mr. Scott: I am sure that the benefit is a major improvement and will be of particular help in the sectors that my hon. Friend has identified. We want it to be available to as many people as possible after the changeover.

    AIDS
    Miss Lestor: To ask the Secretary of State for Social Services how many children have been born suffering from AIDS in the last three years.
    Mr. Newton: We have had no reports of any babies diagnosed with AIDS at birth. Since the beginning of 1985 there have been reports of 63 children born in the United Kingdom with antibodies to the human immunodeficiency virus. All were born to mothers who were either infected with HIV or at high risk of infection. We do not know in how many of those children the HIV antibodies will persist. There may also have been other babies with HIV who have not been tested and reported.
    Miss Lestor: Is the Minister aware that the report of the Select Committee on Social Services goes into some detail about the fact that we do not yet know how AIDS is transmitted to babies, whether it be after birth or during pregnancy? The report makes many recommendations on how money should be spent and research carried out to discover the extent of the problem. When will the hon. Gentleman respond to the recommendations in the report?
    Mr. Newton: We hope to respond to the Select Committee's recommendations quite shortly. I shall have in mind the points that the hon. Lady has made.
    Mr. Beaumont-Dark: Does my hon. Friend accept that, grievous though the problem of the number of children born suffering from AIDS is, the problem of children born with heart defects is much more serious, as is highlighted by——
    Mr. Speaker: Order. The question is about AIDS.
    Mr. Rowe: To ask the Secretary of State for Social Services if he will detail the provisions he has made to ensure that social services departments who care for people with AIDS and their carers are properly equipped to fulfil this duty.
    Mr. Newton: Social services departments have an important role to play in supporting people with AIDS. An additional £5 million was included in the rate support grant settlement for 1987–88 in recognition of the extra work for local authorities arising from the increase in drug misuse and AIDS. We are currently considering what extra help will be needed next year, particularly for the local authorities with the greatest case loads.
    Mr. Rowe: I thank my hon. Friend for that reply, but will he assure me on two points? First, is the money that was put aside reaching the social services departments? It often tends to get sidetracked. Secondly, social services departments that have so far not had large case loads of AIDS seem to be in danger of reinventing the wheel. Will he ensure that departments that have had a lot of experience are able to share it with those that do not
    Mr. Newton: I must tell my hon. Friend that, as he is already aware, unless the Government attempt to dictate each and every aspect of local authority expenditure, the amount that is spent on social services depends on the decisions of local authorities. On the latter point, I am hopeful that the reports and co-ordination between different kinds of authorities that are entailed in the AIDS (Control) Act 1987 will contribute to his aim.
    Mr. Harry Greenway: Is my hon. Friend aware that there are more cases of AIDS in north-west London,

    131
    because of the hospital facilities and other facilities there to cope with them? Will he ensure that local authorities and health authorities have the resources that they need to cope with the problem, without penalising other vital services?
    Mr. Newton: Of course, North-West Thames has about half the current AIDS cases in England. We have been making extra allocations to it accordingly. There will be further allocations to North-West Thames next year, which I hope to announce shortly. I have also had talks with some local authorities in the relevant parts of London in the hope of finding some way of making appropriate help available to them.

    Occupational Pension Schemes
    Mr. Bellingham: To ask the Secretary of State for Social Services how many people are in occupational pension schemes.
    Mr. Scott: In 1983, which is the year covered by the Government Actuary's most recent survey, 11·1 million employees were members of occupational pension schemes.
    Mr. Bellingham: I thank the Minister for his reply. Does he agree that, in spite of what Opposition Members say, the provisions of the Social Security Act 1986 will be welcomed by millions of people? Does he agree also that such provisions will give them greater independence and will amount to a social revolution that is on a par with the revolution that was caused by the sale of council houses in the first two Parliaments?
    Mr. Scott: I totally agree with my hon. Friend. For some years the number of people in occupational pension schemes has remained stubbornly at about 50 per cent. The Act will widen flexibility, opportunity and choice in the provision of pensions.
    Mr. Harry Ewing: Does the Minister accept that occupational pension beneficiaries are becoming angry at the amount of abatement in their occupational pensions when they have to retire early? It means that their pension approaches unemployment benefit rates. Many occupational pensioners have to retire early. Will the Minister examine the matter and give occupational pensioners much more generous treatment?
    Mr. Scott: Unemployment pay is designed to insulate people against unexpected unemployment. It is not designed to top up occupational pension schemes. The Government were right to move in the direction in which they did.
    Mr. Dykes: Does my hon. Friend agree that the rapid development of occupational pension schemes is a most attractive feature of modern society, but they should go hand in hand with the future development of state retirement and old-age pension systems and not be a replacement therefor?
    Mr. Scott: I am sure that the state retirement pension should be a basic provision. The more that people can look to the provision that they are able to make, either through personal or occupational pension schemes, the better they will be able to enjoy their retirement.
    Mrs. Beckett: Does the Minister recognise that if people do as the hon. Member for Norfolk, North-West
    132
    (Mr. Bellingham) said and welcome the passage of the 1986 Act, it can only be because they have not read what the Secretary of State has said about the way in which people who took out personal pensions will assume full responsibility for success or catastrophe in their pension arrangements? Does he further accept that, as my hon. Friend the Member for Falkirk, East (Mr. Ewing) said, the way in which the Government are continually eroding the rights of those with occupational pensions is particularly pointed? Does he acknowledge that, in effect, with the Social Security Act 1986, the Government are saying that the age of 55 is the age of retirement, but at one's own expense?
    Mr. Scott: On the first point, the Financial Services Act 1986, when it comes into operation, will provide proper consumer protection for those who take out personal pensions. There will be an early opportunity in Committee to discuss the interaction between unemployment benefit and occupational pensions. We shall see who wins the argument.

    North West Region
    Mr. Hind: To ask the Secretary of State for Social Services what proportion of the increases in the National Health Service budget announced by the Chancellor of the Exchequer for 1988–89 and 1989–90 in the Autumn Statement he intends to grant to the north-west region; and if he will make a statement.
    Mrs. Currie: Health authority allocations for 1988–89 will be announced shortly. Allocations for 1989–90 will be announced towards the end of next year. The North West regional health authority this year has taken 9·1 per cent, of the total allocated budget.
    Mr. Hind: I am grateful to my hon. Friend for her response. On behalf of the people of the north-west, I give hearty thanks to her. On Friday the new children's ward at Wrightington hospital was opened for extremely sick children. Will my hon. Friend confirm that the second biggest allocation in the country is going to the north-west and that nine hospitals are under construction at the moment? Will she confirm that the 22 hospital projects that are planned for the next few years will be secure and that the people of the north-west can look forward to their new hospitals?
    Mrs. Currie: I thank my hon. Friend for his kind remarks. He knows that I took a personal interest in the children at Wrightington hospital. I am pleased to hear about the progress being made. My hon. Friend is absolutely right about the capital scheme. The sum of £73·4 million has been allocated to the north-west region this year. It is the second largest capital allocation in the country. It compares with £38 million in 1978 under the Labour Government, of which various Opposition Members were members. Of the nine schemes under construction, there are major schemes in Oldham, Tameside and the Manchester royal infirmary, for which my hon. Friend the Under-Secretary laid the foundation stone last year. I shall take my hon. Friend's other remarks into account.
    Mr. McCartney: Some time ago I wrote to the Minister about the cuts in budget in the Wigan health authority area, where the cervical cytology scheme is £30,000 short. She refused to meet me and other hon. Members on this

    133
    question. Will she reconsider the matter, as the health authority is now doing what the Government asked it to do in relation to the scheme?
    Mrs. Currie: I am delighted to hear that the hon. Gentleman is interested in cervical cytology. The Government are determined to cut the death toll from this appalling cancer affecting women. I am satisfied that all our health authorities will have the appropriate computerised call and recall systems in place by next year.
    Mrs. Kellett-Bowman: In making allocations to the north-west, will my hon. Friend take into account the fact that places such as Lancaster have substantial aging populations? While we are very happy to take responsibility for this natural phenomenon, matters are complicated by the enormous influx of people from places such as Blackburn. That puts a very considerable strain on our resources. Will my hon. Friend take that into account in her allocations?
    Mrs. Currie: I am glad to report to the House that in the Lancaster health authority area we do, indeed, take into account the pattern of demography. From 1982 until now patient activity has increased on all fronts. In-patient cases treated are up by 12·5 per cent., out-patient attendances have increased by 12·3 per cent, and a major redevelopment of the Royal Lancaster infirmary, costing nearly £16 million, is due to start shortly. My hon. Friend's remarks point to the reasons why we are giving extra money to Blackburn and the other health authorities in the north-west region.

    Care in the Community
    Mr. Campbell-Savours: To ask the Secretary of State for Social Services what representations he has received on the question of care in the community in the last month.
    Mrs. Currie: We continue to receive a considerable number of representations. Those received last month included the letter of the hon. Member for Workington (Mr. Campbell-Savours) of 6 October, to which I replied yesterday.
    Mr. Campbell-Savours: Is it not outrageous that Kent county council has ignored allegations made by Yorkshire Television about community care in Kent and the treatment of the elderly and mentally handicapped? Is it not significant that the Conservative-controlled Kent county council discussed those allegations behind closed doors and that it has taken no action at all, despite repeated representations by Labour councillors about the fact that criminal elements own homes in Kent and are licensed by the local authority? Will the Minister intervene now, or do we have to see heartless Thatcherism at its very worst persist?
    Mrs. Currie: I am disappointed that the hon. Member is not in the least interested in the excellent developments in this field in Workington. He has asked me about Kent. He should be aware that Kent county council has not only taken immediate action, but had taken action before the television company got round to making its programme. The council is fulfilling its statutory obligations in the way that we would expect of it.
    Mr. Rowe: Is my hon. Friend aware that Kent has one of the most innovative community care and residential
    134
    care programmes in the country and that, as she hinted, a great many of the defects to which the programme drew attention had already been rectified before the programme went out?
    Mrs. Currie: My hon. Friend is quite right to be very angry at the stupid remarks made by the hon. Member for Workington.
    Mr. Ashley: Is the Minister aware that the financing of community care is hopelessly muddled between hospitals, local authorities and her Department? Until that is clarified and far more money is provided for community care, it will remain more of a slogan than a reality.
    Mrs. Currie: The right hon. Gentleman will remember that I was a member of the Select Committee which reported on community care a little while ago. That Committee said very much the same sort of thing. That is why my right hon. Friend the Secretary of State last year asked Sir Roy Griffiths to report to us on the pattern of financing and how it might assist us to promote further that important policy.
    Mr. Simon Coombs: Has my hon. Friend received representations directly on the worrying number of cases of individuals with mental illness or mental handicap, particularly those with behavioural problems, who are being passed to and fro between the social services and local authorities, very much to their disadvantage? The buck is being passed to and fro. Has my hon. Friend received those representations herself?
    Mrs. Currie: The appropriate care and treatment of mentally ill people, particularly those who are voluntary patients, is extremely difficult. I am aware that the number of mental illness units in the Health Service in general hospitals has increased and the number of in-patients has decreased, which has enabled our staff to look after them much better.
    Mr. Fearn: Does the Minister agree that the onus for care is now falling on voluntary bodies and that those bodies have no budgets to deal with it? The carers association in Southport receives a grant of only £50.
    Mrs. Currie: I am sure that the hon. Gentleman can make the appropriate representations to the authorities in Southport on that.
    Mr. Patrick Thompson: Bearing in mind the problems faced by the families of those who are mentally ill, even in areas such as Norfolk, where the community care programme is going quite well, does my hon. Friend agree that attention needs to be paid to the rate of closure of the larger mental hospitals, as outlined by the Select Committee, which was referred to a moment ago, and by the early-day motions on the Order Paper at present?
    Mrs. Currie: Yes, I share my hon. Friend's concerns. The care in the community initiative is neither a cheap option nor an exercise to achieve indiscriminate hospital closures. We look to Sir Roy Griffiths to advise us shortly on how we may proceed.

    Health Authorities (Budgets)
    Mr. Pike: To ask the Secretary of State for Social Services what representations he has received concerning actions taken by health authorities to balance their 1987–88 revenue budgets.
    Mr. Newton: Representations have been received from a number of right hon. and hon. Members including the hon. Member for Burnley (Mr. Pike).
    Mr. Pike: What does the Minister intend to do to enable health authorities to meet the demands of the community and avoid making cuts in patient care, as they are being forced to do throughout the country? For example, in Burnley there is the closure of the Victoria hospital, which the local authority claims is a temporary closure, but it will be permanent, thus avoiding the consultation procedure.
    Mr. Newton: I am somewhat surprised at the hon. Gentleman raising that point. He knows that the background to the proposals concerning the Victoria hospital in Burnley is the recent opening of a major extension costing £6 million providing the facilities at the Burnley general hospital.
    Mr. Devlin: Is my hon. Friend aware that a regional audit team was recently put into my district health authority, where there is currently a shortfall of some £200,000, which will rise to a shortfall of £500,000 by the end of the year? Is my hon. Friend aware that cost-cutting reductions are being asked for across the entire northern region, but that there are other district health authorities within the northern region which are not being asked to make the same reductions? Will he join me in pressing the regional health authority to put the audit team into every other district health authority so that proper cost-cutting reductions can be made everywhere?
    Mr. Newton: What I will continue to do, and have done on previous occasions, is to encourage regional health authorities to work together with district health authorities to tackle some of the problems. In my view the use of audit teams to look at the scope for savings and to contribute to the maintenance of services is a sensible part of those arrangements.
    Mr. Nellist: Is the Minister aware that the real cuts that have taken place in health authority budgets have led in recent days to repeated cancellations of heart operations for babies as young as 11 weeks old in Coventry? Is he further aware that we learnt just over an hour ago that the parents of six-week-old David Barber, constituents of my hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding), were refused permission in the High Court for an injunction to compel the Birmingham health authority immediately to carry out a life-saving operation on that baby? If there are any deaths because of cancelled heart operations, the Minister, his team and the Prime Minister will not be able to pass them off as accidents—it will be murder.
    Mr. Newton: As the hon. Gentleman knows, the principal problem in these cases has been a shortage of intensive care nurses. I understand from the chairman of the West Midlands regional health authority, to whom I spoke this morning, that there has been some improvement in the staffing position, as a result of the return of some staff from illness, and that all the intensive care beds there are now open. I am hopeful that this will help, although I recognise that the clinicians must decide the order in which patients are treated, according to the urgency of their case.

  PRIME MINISTER

    Engagements
    Dr. Michael Clark: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty The Queen.
    Dr. Clark: Is my right hon. Friend aware of the decision taken yesterday by the North East Thames regional health authority to build a new cancer treatment unit at Harold Wood on the eastern outskirts of London and to close the cancer treatment unit in Southend, which will mean a very long journey for my constituents and those of my right hon. and hon. Friends in the area? Will she prevail upon my right hon. Friend the Secretary of State for Social Services to review this decision, to spend some of the money at Southend and to keep open this cost-effective unit, which gives dedicated care to thousands of cancer sufferers every year?
    The Prime Minister: I am aware of the decision of that regional health authority. As my hon. Friend knows, the matter will now come to my right hon. Friend the Secretary of State, who will look carefully at the authority's proposals, and his prime concern will be to ensure the best interests of the patients. My right hon. Friend will take into account the Department's own review of the basis on which radiotherapy services are provided.
    Mr. Kinnock: Will the Prime Minister tell us precisely what is the justification for making nurses in residential homes liable for the whole of the poll tax?
    The Prime Minister: Nurses in residential homes will have the same treatment on community charges as other people. Of course, if their incomes are low, they will be able to get up to 80 per cent, rebate on the community charge.
    Mr. Kinnock: Is the Prime Minister making a new announcement that low wages, such as those of nurses, will be enough to qualify people for the full 80 per cent, reduction in poll tax liability?
    The Prime Minister: No. What I am saying—as the right hon. Gentleman is aware—is that student nurses receive more than those at universities who receive student grants. That is the reason for the difference. I note that the right hon. Gentleman tries to masquerade as being on the side of the nurses—[Interruption.] The Opposition can hardly claim to be the nurses' friend. They cut nurses' pay in real terms for three years running, and in 1976–77 by 10 per cent. In the five pay years between 1974–75 and 1978–79 they cut nurses' pay in real terms in four of those years. Under this Government the pay of nurses has gone up by 30 per cent, in real terms.
    Mr. Kinnock: If the Prime Minister is concerned now about the economic position of nurses, will she instruct the Secretary of State for Social Services not to withdraw the special night-time and weekend payments from nurses, and will she instruct the Secretary of State for the Environment not to impose the poll tax obligation on people who currently have little or no rates obligation?
    The Prime Minister: No, Mr. Speaker. The proposals go to the review body for nurses' pay, which was granted by this Government and which nurses did not have under previous Governments. It is necessary to consider the pay of nurses structurally. One thing which arose on a question to which I heard the answer given a moment ago is that nurses who serve geriatric patients are given higher pay than those who serve in paediatric units. That is causing problems. Yes, the pay needs to be looked at structurally, and the review body is the right body to do it.
    Sir Fergus Montgomery: In view of the repugnance felt in all parts of the House about the horrific atrocities committed by the IRA, will my right hon. Friend seek a meeting with the Leader of the Opposition on Privy Councillor terms in order to ensure that the Opposition withdraw all support from the hon. Member for Brent, East (Mr. Livingstone)? [Interruption.]
    Mr. Speaker: Order. It is perfectly in order for the Prime Minister to answer the question whether she will have a meeting.
    The Prime Minister: No, Sir. I will not seek a meeting with the Leader of the Opposition. I think that most of us believe that no one in this House should have contacts with the IRA or Sinn Fein.
    Mr. Tony Banks: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Banks: Will the Prime Minister tell the House why she is so opposed to the televising of proceedings in the House of Commons?
    The Prime Minister: Suppose we wait until the debate. I do not think that televising the House would enhance its reputation.

    New Zealand
    Mr. Butler: To ask the Prime Minister if she has any plans to seek to pay an official visit to New Zealand.
    The Prime Minister: I have at present no plans to visit New Zealand.
    Mr. Butler: Will my right hon. Friend perhaps reconsider her decision? The New Zealand Government are Socialist, but they are at least following my right hon. Friend's economic policies and cutting higher taxation as well.
    The Prime Minister: I note what my hon. Friend says. I know that New Zealand is following Thatcherite economic policies in removing exchange controls, selling shares in a number of Government-owned enterprises and reducing the burden of taxation and Government expenditure as a proportion of output. I agree with those policies. It only goes to show that the Labour party is out of step, not only with the mood of the country as a whole, but with its brothers abroad.
    Mr. Grocott: Will the Prime Minister take a lesson from the Government of New Zealand and learn that it is possible for a Western democracy to have a foreign policy which is not one of total subservience to the United States?
    The Prime Minister: I believe that if a country relies on another country to help with its defence it should give that country's ships refuge in its harbours.

    Engagements
    Mr. Atkinson: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Atkinson: Does my right hon. Friend recall that last month she received a telegram from the newly formed Moscow branch of the International Society for Human Rights, the release of whose leaders, Alexander Ognorodnikov and Vallry Sendlrov, many right hon. and hon. Members on both sides of the House campaigned for in recent years, and who are now resuming monitoring of the Helsinki Final Act? Does my right hon. Friend agree that the existence of such groups without discrimination, harassment and persecution will be the shrewd test of glasnost and the end of the Stalin terror?
    The Prime Minister: Yes, Mr. Speaker, I recall that telegram. I agree with my hon. Friend that the right of such groups to operate freely, which was guaranteed by the Helsinki accords, will be one of the tests of openness and democracy in the Soviet Union. But it is encouraging that two of the founders of the group, whom my hon. Friend mentioned, both with a long record of human campaigning, were released from prison earlier this year.
    Mr. Wallace: The Prime Minister will be well aware that in the run-up to the Ministers' conference on pollution in the North sea there has been much criticism from nations traditionally friendly towards us, not only of the extent to which Britain is responsible for pollution of the sea, but of the degree to which we have been feet-dragging in coming to agreements to do something about it. Is the Prime Minister concerned about Britain being known as a bad neighbour? If so, what initiatives will Britain be taking this week to clean up the North sea and this country's image?
    The Prime Minister: We are delighted to be hosting the second international conference on the protection of the North sea. The United Kingdom is committed to a clean North sea, and is therefore ready to play its part. The majority of pollution input to the North sea is via rivers, and with £200 million of expenditure on improvement, I am pleased to say that the Thames is just about the cleanest metropolitan river in Europe.
    Mr. Andrew MacKay: During her busy day, will my right hon. Friend consider the claims that Vanessa Redgrave and two other members of the CND funded the operation to spring George Blake from Wormwood Scrubs? Bearing in mind that at a recent press conference Miss Redgrave appeared to admit to that serious crime, should not Miss Redgrave, Mr. Pottle and Mr. Randle be charged?
    The Prime Minister: As the House knows, charging people for a crime is not a matter for me but for the prosecuting authorities.
    Mr. Livingstone: Will the Prime Minister explain to the House how she equates her view that there should be no negotiations with the IRA with her membership of a

    139
    previous Conservative Government in which Lord Whitelaw actually met and negotiated with the IRA? Can she assure us that there have been no further contacts between the IRA and members of her intelligence services, MI5 and MI6, during the last eight years?
    The Prime Minister: Ever since 1979 the policy of the Government has been that we have no contact at ministerial level with the IRA or with other terrorist organisations. They are working fundamentally against the citizens of this country, fundamentally against democracy and against all innocent people in this country and in the Republic of Ireland.
    Mr. Jim Spicer: Does my right hon. Friend agree that if criminals carry weapons and firearms and are prepared to use them, they must expect to meet that sort of force exercised on behalf of our society?
    The Prime Minister: If there were not terrorism it would be easier to tackle these matters, but the police and the security forces who operate on our behalf must have full means for proper self-defence.
    Mr. Harry Barnes: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Barnes: In the light of the previous exchange between the hon. Member for Coventry, South-East (Mr. Nellist) and the Minister for Health about open-heart surgery, will the Prime Minister ensure that the Government take action today on the case of David Barber, who has had his operation put off five times? Will she ensure that immediate action is taken so that the operation takes place and his life is saved, or is her only intention to attend the funeral?
    The Prime Minister: I heard my hon. Friend say from the Dispatch Box that the unit of the Birmingham hospital is today back to full strength. It is hoped that the operation will now take place as soon as possible. My hon. Friend also explained that previously there was a shortage of peadiatric nurses—[HON. MEMBERS: "Why?"] I have indicated, in answer to a previous question, that that was one reason why we need to look at the pay of nurses structurally, to see that such shortages are remedied.
    Mr. Barry Field: As the Prime Minister's responsibilities include the security of the nation, will my right hon. Friend consider whether the advice of Arthur Scargill that members of the Communist party should be able openly to join the Labour party——
    Mr. Speaker: Order. That is not within the Prime Minister's responsibilities.
    Mrs. Mahon: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister: I refer the hon. Lady to the reply that I gave some moments ago.
    Mrs. Mahon: As a mother, would the Prime Minister be happy with a Government who create conditions in which a small baby has to apply for a life-saving heart operation six times, but has still not yet had it?
    The Prime Minister: As I have stated earlier, there have been enormous increases in expenditure on the Health Service. Birmingham was short of paediatric nurses, but we are trying to deal with that problem by looking at the pay of nurses on the basis of the areas in which we need more nurses. I understand that the unit is now back to full strength and that it is hoped that the operation will take place soon.
    Mr. Alexander: To ask the Prime Minister if she will list her official engagements for Tuesday 24 November.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Alexander: Has my right hon. Friend had time to consider the current proposal of the EEC that British summer time should end in September instead of October? Bearing in mind that most people object to its ending in October, will my right hon. Friend tell her colleagues in the EEC when she next meets them that it is yet another of their daft proposals and that we do not want anything to do with it?
    The Prime Minister: I understand that a draft directive has now been proposed that extends the existing arrangements for a further year. It would have the effect of maintaining the status quo in all countries until the end of 1989, so that we shall have time to consider whether it is advisable that we take on a similar date to Europe.

British Rail Engineering Ltd
3.31 pm
The Secretary of State for Transport (Mr. Paul Channon): As the House knows, British Rail Engineering Ltd. is one of the main suppliers of railway rolling stock to British Rail. It is also a wholly owned subsidiary of BR.
BREL has been extensively reorganised in the past few years. These changes have stemmed largely from the modernisation of BR's locomotive and rolling stock fleets, which has reduced substantially the need for repairs. BREL now consists of four main works—Crewe, York and two at Derby—and concentrates on manufacture and heavy overhaul.
The Railways board has now completed its review of options for the future of BREL. Sir Robert Reid has recommended to me that BREL should be offered for sale as soon as possible. I have now given my approval to this. I share the board's view that selling BREL will be in the best interests of the railway and of the BREL work force.
The board plans to invite offers for all four main works together as a single business. The aim is to be ready to invite offers by next spring, and to complete the sale as soon as possible after that. The Railways board and its merchant bank advisers will be in the lead in developing plans for the sale. My approval will be needed for the eventual sale.
The board proposes making separate arrangements for the sale of the BREL foundry at Horwich, The aim would be to find a buyer to take it over as a going concern, probably some time next year.
Great strides have been made by the BREL management and work force towards commercial viability and competitive levels of productivity, but I believe that the business can best develop and flourish in the private sector. There it will also have much greater freedom to diversify and compete for work outside the railway supply industry and, I hope, to create new employment opportunities.
Privatising BREL will be good for the railway, good for the railway supply industry, and good for the railway supply industry, and good for BREL itself. I hope, therefore, that the House will welcome it.
Mr. Robert Hughes: The Secretary of State's statement confirms the cynical manipulation and betrayal of the work force at BREL. Does he not remember that under his Government the work force will have fallen from 35,000 to 7,500 by April next year? Is it not also the case that BREL's sales will have fallen from £668 million in 1979 to £430 million, again by April next year?
Does the right hon. Gentleman recall that the Government claimed that they would not implement the Serpell report? Is he aware that this is the eighth time that BREL's work force has been deceived? Will he accept that the only people who have paid the price for this rationalisation have been the 25,000 people who lost their jobs in a vain attempt to secure the jobs of their workmates who remained?
Can the Secretary of State guarantee that privatisation will provide a secure future for the work force? What are the arrangements for pension rights —will they be affected by privatisation? Does he accept that the Government's and the management's response to the self-sacrifice of the work force has been contemptible? Is he
142
aware that BR's management has ignored investment and, instead, has invested in redundancy cheques to the tune of £127 million? Does he accept that he is ultimately responsible for the framework that has encouraged the betrayal of the BREL work force? Does he not understand that, by putting his party's squalid obsession with competitive tendering before investment, he has chosen to put at risk the life of an industry?
Mr. Channon: I entirely disagree with the hon. Member for Aberdeen, North (Mr. Hughes) and especially with his last remarks. He said that we have not invested in BR, but I recall the enormous investment programme in BR worth some £3 billion of which approximately £1 billion will be in rolling stock and locomotives and for which BREL has an excellent opportunity to bid.
I am in no way cynically manipulating the work force of BREL. What I am trying to do—I genuinely believe this to be the case—is to offer BREL the possibility of a secure future. No one can guarantee for ever more the size of any particular industry. However, I am convinced that privatisation will offer BREL a much better chance in the future than it has had in the past.
As regards the fall in sales, I have a list before me of BR contracts currently placed with BREL and they total much more than £300 million. Since BR began to place new-build orders competitively, BREL has obtained about 70 per cent, of those orders. Thus, far from manipulating or deceiving the work force, my announcement today is an opportunity for that work force to have a better future than it had in the past.
Mr. Greg Knight: Is my right hon. Friend aware that a matter of concern is BR's tendering policy and the fact that BREL is currently unable to tender for work where a penalty clause is included in the contract because, in effect, BR would be penalising itself? Will my right hon. Friend confirm that such a problem will disappear on privatisation? That will leave BREL well able to improve on its 70 per cent, success rate. Therefore, does he agree that anyone who is really concerned about the long-term future of BREL will warmly support his statement?
Mr. Channon: I am extremely grateful to my hon. Friend. I am aware of the case to which he has referred about the new diesel locomotives and the question of having a contractor who can take full responsibility for the design components and for any subsequent failures. Indeed, that matter was raised in the House in the recent transport debate. As my hon. Friend pointed out, any problem that may exist will be removed if privatisation goes through.
Mrs. Margaret Beckett: Does the Secretary of State recall that about a week ago, in a debate in this House, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody)—unfortunately, she cannot be here today—drew his attention to the pattern of previous privatisations, which is major investment followed by massive redundancies and the rundown of order books? My hon. Friend asked whether that was a prelude to the privatisation of BREL. Plainly it was. Can the right hon. Gentleman add to his statement by telling the House and the BREL work force how much he expects his friends in the City to make from this privatisation?

143
What safeguards is he offering against foreign ownership since the safeguards offered in the case of Rolls-Royce —also in my constituency—patently failed?
Mr. Channon: Yes, I am aware of the speech of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)—I was present when she made it. I disagreed with a great deal of what she said.
I am trying, if it can be arranged, to get a secure future for BREL. No one can ever give a guarantee about that. However, I am convinced—as is BR and, I understand, the management of BREL—that BREL will have a much better future in the private sector. That is why I am pressing ahead with the proposals for the privatisation of BREL. I should have thought that the constituents of the hon. Member for Derby, South (Mrs. Beckett) would welcome my statement. I believe that she will find that she has done them a disservice by her attitude.
Mr. Kenneth Warren: I welcome my right hon. Friend's statement, but will he give an assurance that, before and after the sale of BREL, there will be no inhibition on that operation bidding for opportunities in either the Channel tunnel or the London Underground equipment programme? Will he also give an assurance that, when BREL is sold, there will be no inhibitions on the purchasers bidding for British Rail equipment?
Mr. Channon: I can give my hon. Friend assurances on both those points. I am very glad that he has drawn attention to the opportunities available in connection with the Channel tunnel and London Underground. They are in addition to the already very large sums that I quoted to the House a few moments ago about British Rail investment.
Mrs. Ray Michie: Does the Secretary of State accept that the real test of his proposals will be whether they produce a viable, competitive industry, with good job opportunities? Will he tell us whether he has any proposals for a management-staff buy-out, and can he reassure us that money from the sale will be reinvested in British Rail?
Mr. Channon: I agree with what the hon. Lady has said. The intention of the proposals in my statement is to create a viable and competitive industry, and it is because I am convinced that this is the best way forward that I have reached my decision, in consultation with British Rail.
As for the question of a management buy-out, I understand that the executive directors hope to proceed with a bid that will include employee participation. If that succeeded, it would no doubt be welcomed by the House. However, I cannot express views on its merits as opposed to those of other bids until I see what the other bids are. Certainly it is a possible opportunity.
Mr. Phillip Oppenheim: Does my right hon. Friend agree that the real betrayal of BREL occurred during the period when it was allowed to become a cosy, uncompetitive, tied supplier to British Rail? Does he further agree that competitive tendering must be in the best interests of British Rail and its passengers and that, in any competitive tender, BREL must have as good an opportunity as any other company to be allowed to supply equipment to British Rail?
Mr. Channon: I agree with everything that my hon. Friend has said. Competitive tendering must be good for British Rail, for the traveller and for the taxpayer and BREL must have the opportunity to compete fairly.
It is interesting to note that, since British Rail began placing new-build orders competitively, BREL has obtained about 70 per cent, of them. It has several overseas contracts at present, and hopes to secure substantial work in the future—on, for instance, Channel tunnel rolling stock. All those opportunities will be better in the private sector.
Mr. Tam Dalyell: My hon. Friend the Member for Derby, South (Mrs. Beckett) asked about foreign buyers. May we press the Secretary of State on that? Surely there is a feasible possibility—it is not an Aunt Sally—of a foreign buyer buying a workshop and getting hold of the whole new order book. After a certain period, it is not nightmarish to suggest that that order book might be transferred back to a factory abroad. What protection is there against a foreign takeover, over a period, of these valuable British assets?
Mr. Channon: I take note of what the hon. Gentleman has said. At present, I see no reason to exclude overseas bids; indeed, there are strong commercial arguments for allowing them. It is important that we should see what is the best price available for public assets, and that railway supply is an international market.
I want to ensure competition and a source of suppliers. The railway supply industry is strongly competitive, and I can see no reason for its not remaining so. All the issues can be taken into account in assessing offers, and, if there was ever any question of a monopoly being created, that would be a matter for the Director General of Fair Trading.
Mr. Tom Sackville: Does my right hon. Friend agree that the BREL foundry in my constituency in Horwich is one of the most efficient and best capitalised in Britain? There is a great and diverse market opportunity for its products. Does my right hon. Friend agree that that opportunity can be better realised in the private sector?
Mr. Channon: Yes; my hon. Friend is right. Horwich is a specialist foundry facility outside the mainstream business of rolling stock manufacture and heavy overhaul. BR and its advisers think that Horwich's future would be best served if it was marketed separately. I think that that is a good decision, and I hope that all will go well.
Mr. Michael J. Martin: Surely the words of Labour Members are coming home to roost. It was put to the Minister that the redundancies in and the closures of workshops, such as happened at Springburn, were all about getting a neat little package so that the Government could sell them off. Within weeks of the announcement of the proposed closure at Springburn, an American business man telephoned me and BREL directors promising hundreds of jobs in the Springburn area. BREL officials were convinced that he was only interested in the hundreds of acres of land that are now lying derelict in the inner city of Glasgow. What assurances will the Minister give that those who buy BREL will be more interested in providing jobs than in getting the land?
The Minister has not mentioned BREL Springburn, a maintenance company. What will be its future?
Mr. Channon: Springburn is not part of my announcement today because of the earlier decisions to which the hon. Gentleman referred. I understand his concern about that, but he knows what was announced about that some months ago. I am trying to create a viable industry with a secure future. I have had some experience of that in other industries in the past—[Interruption.]— and it has worked, despite the scoffing of Labour Members.
All the factors that the hon. Gentleman mentions clearly will be relevant when we decide what offer, if any, to accept for the sale of BREL. If the management buy-out is successful, I am sure that the hon. Gentleman's suggestions will be totally ill-founded, and I am sure that that will be true of any sale which the Government eventually approve. We are trying to create a viable industry with a secure and better future for the work force. Frankly, Labour Members do the work force no service by raising such issues when there is an opportunity to provide it with a much better future.
Mr. Michael Fallon: Is it not a characteristic of nationalised industries that they make thousands upon thousands of their workers redundant, as has happened at Shildon, including several hundreds of my constituents? Will my right hon. Friend confirm that, had this announcement been made 10 or 15 years ago and BREL had been allowed to diversify and compete on equal terms, it is at least possible that the Shildon wagon works would be operating today?
Mr. Channon: My hon. Friend may well be right, but the important point that the House should understand is that great strides have been made by the management and work force towards greater efficiency.
Mr. Bob Cryer: The right hon. Gentleman does not care.
Mr. Channon: I care for the future of the industry and for those working in it. The hon. Gentleman and others who make such points are the ones who are threatening the long-term future, not me. The changes that have taken place in BREL were the inevitable result of modernisation. BREL will have a much greater freedom to diversify and compete for work outside the railway supply industry, which I am convinced will be good for BREL and its work force.
Mr. Ken Eastham: May I assure the Minister that the engineering workers who are deeply involved in these enterprises firmly believe that the Government have colluded with British Rail in sabotaging their future and their opportunities by prohibiting them from tendering for work? Since the workers have the biggest investment in the industry what consultation will take place with them, what assistance will be given to them and why is it that the Minister can suddenly say today that the Government will help them to tender for contracts when for months and years they have been precluded from so doing?
Mr. Channon: I do not understand how the hon. Gentleman can say that, when I have read out to the House a whole list of contracts that BREL has won in the past few years. As I have already said, BREL has obtained about 70 per cent, of new-build orders since the competitive tendering system started, so what the hon. Gentleman has said clearly is nonsense.
146
As for the allegation about some collusion with British Rail to destroy BREL—or words to that effect—I cannot imagine what conceivable motive British Rail or the Government would have for such a course of action. We are trying to create a secure future for the industry, with more jobs for the work force, more opportunities for diversification and more orders to be won in British Rail, the Channel tunnel, the Underground and in other areas outside the industry. I am amazed at the blinkered, out-of-date, doctrinaire attitude of Opposition Members.
Mr. Simon Coombs: Does my right hon. Friend recognise that today's announcement comes too late to save the Swindon railway works, which could have followed in the footsteps of Jaguar and other industries that have been let loose in the private sector and become infinitely more successful as a result? Is he further aware that former employees of British Rail Engineering Ltd. in Swindon have now found themselves jobs in the highly successful private-sector industries in Swindon and are now earning more money in better circumstances than they were before?
Does my right hon. Friend also recognise that the great days of the railway were in the times of the Great Western Railway, which was a private company? Has he ruled out the possibility of giving BREL workers a chance to buy a share in the equity in the new company that is to be created?
Mr. Channon: On my hon. Friend's last point, as I said earlier, one possibility is that of the executive directors proceeding with a bid that would include employee participation. I hope that that answers my hon. Friend's point.
Yes, I know the position in Swindon. As my hon. Friend knows, I was in Swindon with him last Friday, so I well know what is happening there. He has shown what can happen in certain parts of the country as a result of what has gone on in the past. In the four areas that are left—York, Crewe, Derby and Horwich—I am trying to secure better opportunities for people, and I think that I shall do so.
Mr. Cryer: As BREL has been in the forefront of railway technology, with the introduction and development of high-speed trains that are sold not only here but throughout the world, why is the Secretary of State giving the workers who developed and built those trains a kick in the teeth by placing all their jobs in jeopardy? As he is so mesmerised by private sector ownership, does he think that the new private-sector owners of BREL will be more or less competent than Townsend Thoresen?
Mr. Channon: I am not giving the workers a kick in the teeth; I am giving them an opportunity that they have not had in the past. Many of them will welcome that and realise that their best chance in the future is to be in the private sector and to enjoy the advantages of diversification and all the other things that I have announced which will help them. So far from the announcement placing their jobs in jeopardy, I have no reason to assume that it places anyone's job in jeopardy. I can give no guarantee—nor could any Minister—but I hope that my announcement will provide more security and opportunities for jobs.
Mr. Peter Rost: If, as I hope, my right hon. Friend receives a viable proposal for a management—

147
employee buy-out, will he give us an assurance that he will give it especially favourable consideration even if it is not the highest cash offer that he receives?
Mr. Channon: I shall give it careful consideration and examine all the relevant factors—including what my hon. Friend has said.
Dr. John Marek: If the Secretary of State is not giving the workers a kick in the teeth, and if, as he says, he thinks that the constituents of my hon. Friend the Member for Derby, South (Mrs. Beckett) would welcome his announcement, why does he not ask them and find out what they really think? I am sure he would discover that the overwhelming majority of opinion was that this was a large-scale betrayal, a confidence trick and a policy that has been agreed on by the Government for political purposes. The result is an announcement today that creates even more redundancies. In all likelihood, of the 35,000 workers that it once had, only 7,500 will remain in the industry.
Does the Secretary of State realise that he is announcing the death of a once great and powerful British industry? My simple question is, what guarantee can he give that there will be 7,500 jobs in the industry in a year's time?
Mr. Channon: Far from announcing the death of the industry, I am announcing new opportunities for it to expand. I am not announcing redundancies. I am offering the workers in Derby, Crewe and York a new future in a private industry and opportunities that they have not had in the past and that the Opposition would seek to deny them.
Mr. Patrick McLoughlin: Does my right hon. Friend agree that his announcement will lead to independence for British Rail Engineering Ltd., and will release it from management by British Rail? That will present new opportunities. Does he acknowledge that it would be more in line with Government policy and Government thinking for an offer from the workers and the management to be more seriously considered than a straightforward buy-out offer by any other company? Will my right hon. Friend give us that assurance?
Mr. Channon: I shall look carefully at any offer by the management and the workers. I understand the views of my hon. Friends the Members for Derbyshire, West (Mr. McLoughlin) and for Erewash (Mr. Rost). I also understand the general views of the House about management buy-outs. My record shows that on many occasions in the past I have given opportunities for management buy-outs. My hon. Friend the Member for Derbyshire, West is quite right about the future of the company. This announcement offers BREL and its management and work force independence and more opportunities. It does not offer them fewer opportunities, a dreary future with more redundancies or a future of decline. We are giving the company opportunities for the future and the Opposition, by their blinkered, doctrinaire, out-of-date views, are trying to deny it those opportunities.
Mr. Dave Nellist: Is the Secretary of State aware that when he said that this privatisation was in the best interests of the work force his nose grew by half an inch? It is certainly not in the best interests of the thousands who were sacrificed in Swindon,
148
Glasgow, Derby and Crewe to enable the Minister to get to the position that he is in today. If he wants to pray in aid Jaguar and Rolls-Royce—and he will not do that for more than three or four months, given the way that the order books of those companies are going—why does he not remind the House of what happened, in his earlier incarnation, to Self-Changing Gears, the company that makes the gearboxes for British Rail trains? Immediately on privatisation it sacked 20 per cent, of its work force in Coventry. Five years ago Coventry Climax had 3,000 employees, but as a result of privatisation the company was reduced to nowt.
I ask the Minister for the final time: when it comes to privatisation, will he monitor the promises that he makes to the House to make sure that they are kept? Our experience in Coventry is that his promises are never kept.
Mr. Channon: On many enjoyable occasions in my previous job I debated privatisation with the hon. Gentleman. We agreed to disagree. He gives a few examples of failure in the motor industry and elsewhere, but I could give many more examples of successful companies, some of which employ more people, are more profitable and have much more secure futures. As I have said, we are offering BREL a better future. That is my genuine belief, and this announcement will be widely welcomed when it is fully understood.
Mr. Dennis Skinner: Is the Minister aware that, based upon the statements already made in Parliament, it is apparent that the Government have a hatred for workers, especially those that are organised in trade unions? In view of the fiasco of the BP sale, will he give a guarantee that the Chancellor or some other Minister will not underwrite the underwriters? If he cannot get bidders in Britain, will he give a guarantee that the Kuwaitis will not be in with the first 10 per cent.?
Mr. Channon: The hon. Gentleman may not have heard my statement. I said that we would have a trade sale and not a flotation.
Mr. D. N. Campbell-Savours: Was the tender price submitted by BREL for the 158 Sprinter in any way influenced by the knowledge that that company may have had that it was to be privatised?
Mr. Channon: No.
Mr. Robert Hughes: Will the Secretary of State confirm that BREL has successfully competed for work outside the railway industry? If the reorganisation of BREL and its recent success in tendering have been so good, why is the Secretary of State privatising it, other than for reasons of pure dogma and trying to make sure that once it is profitable his friends can get their snouts in the gravy trough?
Mr. Channon: As I have tried to explain to the House, it will give BREL the opportunity to diversify into other industries apart from the railway supply industry, it will give it financial opportunities, it will remove it from the shackles of Government financial control—inevitable in nationalised industries—and will provide it with a whole range of opportunities that are not available at present. That is why we will privatise BREL. It will be widely welcomed by BREL management and, I hope, the workers because it will give them the best opportunities.

Written Answers
4.1 pm
Mr. Doug Hoyle: On a point of order, Mr. Speaker. Are you aware that there have been no written answers since last Friday's Hansard, which contained answers for Tuesday 17 November, and that yesterday's Hansard and today's Hansard contained no written answers? The work of the House is being impaired. Therefore, will you carry out an investigation?
Mr. Speaker: I was not aware of that. I will look into it.
Mr. John McFall: On a point of order, Mr. Speaker. Last Friday I put down a question to the Secretary of State for Scotland about the consultation process, school management and the role of parents. In my question I asked for the answer to be categorised, but I was not given an answer at all. It is an important matter for parents in Scotland and I think it is an insult to the House that I have received no answer. Perhaps more experienced hon. Members will say that it has nothing to do with you, Mr. Speaker, but as the question of the rights of Members of Parliament I seek your advice and implore your action.
Mr. Speaker: I am afraid that I, too, have to say that it is nothing to do with me. I am not responsible for Ministers' answers. The hon. Member has made his point, and I hope that he will get a proper reply.

Statutory Instruments, &c.
Mr. Speaker: With the leave of the House, I shall put together the Questions on the three motions relating to statutory instruments.
Ordered,
That the Customs Duties (ECSC) (No. 2) (Amendment No. 11) Order 1987 (S.I., 1987, No. 1902) be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Grants by Local Housing Authorities (Appropriate Percentage and Exchequer Contributions) (No. 2) Order 1987 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft International Trust Fund for Tuvalu (Immunities and Privileges) Order 1987 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Alan Howarth.]

Concessionary Television Licences for State Retirement Pensioners
4.3 pm
Miss Marjorie Mowlam: I beg to move,
That leave be given to bring in a Bill to provide for concessionary television licences for state retirement pensioners.
Many people outside the House would assume that there would be all-party support for a Bill that sought to introduce a more rational and just system for concessionary television licences for pensioners. Sadly, that is not the case. When a similar Bill entitled Free Television Licences for Pensioners was introduced in January by my hon. Friend the Member for Walsall, North (Mr. Winnick), Conservative Members either abstained or voted against it. Eighty-six per cent, of Ministers trotted obediently into the Lobby to vote against concessionary television licences for pensioners and 100 per cent, of the "caring" Ministry—the Health and Social Security Ministers—voted against it. The Prime Minister did not vote, and I can only assume that by not voting she was declaring an interest as one of the few pensioners in the Cabinet.
During the June election, Conservative Members put pensioners high on the political agenda and talked a lot about the need to give them a decent standard of living and care. I assume and hope that there has been that change of heart by Conservative Members and that they will support the Bill to increase the number of pensioners who can get concessionary licences.
The importance of the issue to Labour Members has been well illustrated by the efforts made to change the existing legislation. The statutory authority for concessionary television licences is contained in the Wireless Telegraphy (Broadcast Licence Charges and Exemption) Regulations 1970. An extension of that scheme was introduced in 1978 by the then Home Secretary, my right hon. Friend the Member for Morley and Leeds, South (Mr. Rees).
Following representations in 1983, my hon. Friend the Member for Bolsover (Mr. Skinner) and my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) pushed for a further extension to allow for physically and mentally disabled persons living in local authority residences or sheltered accommodation to receive concessionary licences. The House has been kept informed and aware of the issue by the hard work and perseverance of my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay), who has introduced no fewer than four ten-minute Bills since 1980. I know that he would agree with me that, ideally, the answer is not to introduce concessionary television licences but to pay pensioners a decent pension.[Interruption.] The hon. Member for Mid-Worcestershire (Mr. Forth) obviously agrees with me. I hope that he will vote for the Bill. If he is unable to do that, I hope that he will vote for an increase in pensions when he gets the chance.
I hope that Conservative Members will give consideration to concessionary TV licences because we are just asking for fair play. At present, pensioners can be in exactly the same financial situation and have exactly the same income, but if they live in different households, or even in the same building, one pensioner can get a TV licence while another cannot. It is that inequality and

151
injustice that the Bill seeks to change. I have talked to pensioners and have received considerable correspondence from them in which they have said that they want, not freebies, but to be treated equally.
Over the past couple of years the Government have not shown the attention to pensioners that they indicated during the election that they would. In the short time that I have been in the House, we have seen the full impact of the Government taking away the funeral grant; legislation recently introduced whereby if pensioners manage to save £3,000 as security for later in their lives they will be denied housing benefit; and the severe cold weather payment negated by the increase in electricity prices. Above all, there has been a cut in real pensions because pensions are not linked to earnings. If Conservative Members appreciate the effects of those changes, will they look positively upon the Bill as it improves just one small aspect of TV licences for pensioners? If Conservative Members read the Peacock report, they will see that it states that many more pensioners rely on television for information and entertainment than other sections of the population.
The present legislation needs to be looked at. Under the present concessionary licence, it costs three times as much to collect the 5p licence cost as is received in revenue. It is clearly irrational and needs reform. The present inequalities lead to feelings of bitterness and inequality among pensioners. They are not the sort of feelings that we want to create.
The cost to implement the proposals in the Bill would be either £230 million or £330 million, depending on whether the cost was per household or per head. Compared with the amount of money that the Government have clawed back from pensioners and the amount of money that they have wasted advertising for share ownership, the cost is small. Its effect on income tax would be so minimal that I am sure that every rational hon. Member would support it.
If supported and allowed by the Government, the Bill would make it possible to alter the present unequal and unjust system of the cost of TV licences. Such a change would bring just rewards for the pensioners on Teesside who have campaigned hard on the issue, such as Syd Clay, George Dixon, George Short, Sid Spencer and the late George Sundell.
I am asking Conservative Members to think about a fair deal and fair play for pensioners. Can it be argued that, on anyone's definition of "fairness" it is fair for a pensioner or pensioner couple who are over 70 on a basic pension should pay for a TV licence when Mr. Thatcher and his wife, Margaret, at No. 10 Downing street have 13 televisions but, because that is a Crown property, pay nothing? Is that just?
4.10 pm
Mr. Eric Forth (Mid-Worcestershire)rose——
Mr. Speaker: Is the hon. Gentleman rising to oppose the Bill?
Mr. Forth: Yes, Sir.
Mr. Frank Cook: On a point of order, Mr. Speaker.
Mr. Speaker: I will not take points of order in the middle of the presentation of a ten-minute Bill.
Mr. Forth: One of the most nauseating sights in the House is the sight of the Opposition trying to bribe people
152
with their own money—and it is repeated many times. They try that trick time and again, but fortunately the electorate have grown accustomed to it and have seen through it. Yet again we have before us another Opposition folly. They are lumping together in a most patronising manner all old-age pensioners. Opposition Members assume that all people of pensionable age need state assistance, handouts and support.
Opposition Members assume that all old-age pensioners have not made adequate provision for their later years and that they are not able to afford adequately the £1 a week that it costs for a television licence. They assume that pensioners must be subject to the kind of patronising claptrap contained in the Bill today.
Another difficulty with this kind of measure is that yet again it is an example of the blindness of Opposition Members when it comes to the indiscriminate giving of benefit. Opposition Members are quite happy to give taxpayers' money without question to everyone, regardless of whether they need it or not. They are not remotely cognisant of the concept—[Interruption.]
Mr. Speaker: Order. No interventions are allowed on a ten-minute Bill.
Mr. Forth: Opposition Members are not remotely cognisant of the concept of targeting benefits. Therefore, they bring such measures before us willy-nilly, believing in the most patronising and condescending way that they will buy the votes of those who will be truly grateful in spite of the fact that it involves yet again the taking of taxpayers' money from people and then giving it indiscriminately to those who may not need it.
The hon. Member for Redcar (Miss Mowlam) asked whether Conservative Members had consulted the electorate and whether electors had written to Conservative Members on this matter. They have not written to me. I would not expect the electors to write to me on it because most of them are robust enough and ready enough to pay for their own television licences.
The hon. Lady was honest enough to refer to the fact that this matter was brought before the House earlier in the year. The acid test is that it was then deliberated on and disposed of. There was a general election. I need not rehearse the results of that general election now. Suffice it to say that the Conservative party is back in government running the country responsibly and we are yet again the custodians of the public purse. We are taking a continued and responsible attitude to the raising of taxes and the dispensing of benefits. We will not try to bribe the electorate with the electorate's money.
The final proof of the matter lies in the fact that, when Opposition Members brought a similar measure before the House and it was disposed of, Conservative Members were rewarded by the electorate by being returned to power. For that reason, I am confident in asking the House yet again to reject this nauseous and patronising measure so that we, as responsible custodians of the taxpayers' purse, may enjoy the continued support of the electorate.
Question put and agreed to.
Bill ordered to be brought in by Miss Marjorie Mowlam, Mr. Allen McKay, Mr. Martin Redmond, Mr. Don Dixon, Mrs. Llin Golding, Mr. David Winnick, Mr. David Marshall, Mr. Peter Hardy, Mr. Dennis Skinner, Ms. Hilary Armstrong, Miss Joan Lestor and Mr. Frank Cook.

Concessionary Television Licences for State Retirement Pensioners
Miss Marjorie Mowlam accordingly presented a Bill to provide for concessionary television licences for state retirement pensioners: And the same was read the First time; and ordered to be read a Second time upon Friday 15 January 1988 and to be printed. [Bill 57.]
4.14 pm
Mr. Frank Cook: On a point of order, Mr. Speaker. I was trying to raise a point of order before—and if in any way I appeared to challenge you, Mr. Speaker, I assure you that I did not seek to do so—because I feel very strongly on this subject. Is it not a convention of the House that on the presentation of a ten-minute Bill, if an hon. Member rises to challenge that Bill, it should be put to a Division? I understand that that has always been the case.
When I presented the Renewable and Alternative Energy (Promotion) Bill, the hon. Member for Darlington (Mr. Fallon), who has left the Chamber, sought to challenge it. He was then so spineless that he did not have the courage to force a Division. We have seen a repetition of that spineless behaviour today from the hon. Member for Mid-Worcestershire (Mr. Forth). I ask you, Mr. Speaker, to advise the hon. Member so that he might avoid being quite so cowardly.
Mr. Speaker: It is of course in order for the hon. Member for Mid-Worcestershire (Mr. Forth) to oppose a ten-minute Bill. When I put the Question, the hon. Member indicated that he was against it. However, when I collected the voices, I did not hear him persist in that.
Mr. David Winnick: On a point of order, Mr. Speaker.
Mr. Speaker: I hope that we will not adopt the practice of opposing ten-minute Bills just for the sake of it.
Mr. Winnick: You have said, Mr. Speaker, that you hope that hon. Members would not oppose ten-minute Bills for the sake of it. Is there any way in which the mechanism can be changed? The hon. Member for Mid-Worcestershire (Mr. Forth) spoke very strongly against the ten-minue Bill. When you asked for the "Noes" there was a very muted "No".
It is not only contemptible but cowardly for an hon. Member to speak as the hon. Member for Mid-Worcestershire spoke and then refuse to vote against the Bill.
Mr. Speaker: The hon. Gentleman must not impute that motive to the hon. Member for Mid-Worcestershire (Mr. Forth). This House is about very strong feelings. Will the hon. Gentleman withdraw the word "cowardly"?
Mr. Winnick: I have not changed my mind in any way. However, if you say that I cannot use the word "cowardly" on the Floor of the House, I have no alternative but to do as you say, Sir. My quarrel was with the hon. Member for Mid-Worcestershire, not with you, Sir.
Mr. Dennis Skinner: Further to that point of order, Mr. Speaker.
Mr. Patrick McLoughlin: On a point of order, Mr. Speaker. Are not Opposition Members confused because they do not understand parliamentary democracy? Is it not the case that it is not necessary for Conservative Members to call a Division? Any hon. Member who was present in the Chamber on Friday will be aware that a Division was called against the Opposition's wishes. Do they not understand parliamentary procedure? They could have forced a Division themselves.
Mr. Skinner: Further to the point of order, Mr. Speaker. There is another aspect to this matter of gutless Members not being prepared to follow their voices with their votes. A ten-minute Bill, especially early on in a parliamentary Session, must be queued for with only a chance of parliamentary debate at some later stage once leave has been granted for the Bill to be introduced. On rare occasions ten-minute Bills have been presented early in the Session and have managed to reach the statute book. However, with many ten-minute Bills, on a Friday towards the end of the Session, a Government Whip—this has happened under both Labour and Conservative Governments; I am not making a party point here—has shouted "Object" at the end of the discussion. Recently, Bills about pensioners and television licences have suffered as a result of Whips objecting late in the Session.
My point for you, Mr. Speaker, is that if there is no vote on leave to bring in a Bill, even though there is a muted voice, it would seem that it would be right for a Government Whip who has already perhaps given instructions that a vote should not be held not to issue instructions later in the Session to kill the Bill. Therefore, if Government Whips do not have the guts to oppose it now, they should not follow a guillotine-like procedure at the end of the Session. What has happened today illustrates that the Government are not prepared to argue the case or to test it in the Lobbies. My hon. Friend's Bill might suffer the fate of being lost without a Division.
Mr. Andrew MacKay: The hon. Member for Bolsover (Mr. Skinner) referred to hon. Members not having the courage of their convictions by voting. Is it not correct that the hon. Member for Stockton, North (Mr. Cook), who raised a point of order with you earlier, Mr. Speaker, did not have the courage of his convictions on Friday, when he did not support his hon. Friend the Member for Rother Valley (Mr. Barron)? The hon. Members for Mansfield (Mr. Meale) and for Bolsover (Mr. Skinner) were the only two Labour Members who had the guts to support the miners.
Mr. Frank Cook: Further to that point of order, Mr. Speaker. If the hon. Member for Berkshire, East (Mr. MacKay) wants to find out how gutless I am, I shall see him outside.
Mr. Speaker: Order. I do not think that this behaviour shows us in a good light. The hon. Member for Bolsover (Mr. Skinner) is right in saying that occasionally a ten-minute Bill gets on to the statute book. However, I must say to the House that any hon. Member who opposes it should do so from sincere motives and should carry his opposition into the Division Lobby.

Multilateral Investment Guarantee Agency Bill
Order for Second Reading read.
4.22 pm
The Minister for Overseas Development (Mr. Chris Patten): I beg to move, That the Bill be now read a Second time. [Interruption.]
Mr. Speaker: Order. If there is to be further discussion, it should take place outside.
Mr. Patten: I hope that I shall be able to calm things down.
I realise that it may well be thought that some of the other Second Reading debates in the House during the next few weeks and months are likely to be a touch more controversial than this one; some may even be regarded as more important. But we should not underestimate the value of the Bill. Britain is the second largest investor in the developing world. From 1982 to 1986, our private investments totalled £6,727 million. International investment insurance is therefore particularly important for us. In ratifying the Multilateral Investment Guarantee Agency convention we shall be discharging an obligation that we implicitly accepted at the Venice economic summit earlier this year, and which we reaffirmed during the Commonwealth Finance Ministers' meeting in September.
The Bill is required to enable the United Kingdom to ratify the convention establishing MIGA, which is an international organisation associated with the World Bank, and is intended to promote foreign direct investment in developing countries, primarily by offering would-be investors insurance against non-commercial risks. The Chancellor of the Exchequer signed the convention establishing the agency on behalf of the United Kingdom in April 1986. In order to become members of the agency, we need to ratify the convention; and before we can ratify, legislative provision is needed to give effect in domestic law to our obligations under this convention.
I should like first to give the House some background on the general subject of international investment insurance, and explain in more detail what the agency will do. The idea of insuring foreign investment against noncommercial risk is not new; it is more than a century old. In the late 1800s, state authorities in the United States guaranteed payment of interest and principal on railway bonds sold in the capital markets of London and Paris. Following the second world war, the industrialised nations began establishing programmes and agencies for investment insurance for their citizens. The United States began the first programme in 1948. Our Export Credits, Guarantee Department's investment insurance scheme began operations in 1972. Today, there are such schemes in 22 countries.
Foreign direct investment represents an attractive source of capital for developing countries. The investment return will be related to the commercial success or otherwise of the enterprise, unlike the interest paid on an ordinary loan. It can assist the process of industrialisation and help to increase employment, introduce new skills and transfer technology. However, such investment has been inhibited by investors' concern about non-commercial or political risks. The agency has been created to counteract that.
156
International efforts to establish an agency providing multilateral insurance began in the late 1950s, but did not build up a sufficient head of steam to proceed. In the early 1980s the idea was revived, and the convention establishing the agency was opened for signature in October 1985. To date, 62 countries have signed the convention, including 50 developing countries. Twenty have ratified, 15 of which are from the developing world. The 20 that have ratified have about 23 per cent, of the allocated shares. In order for the convention to enter into force, five developed and 15 developing countries, representing between them at least one third of the allocated shareholding set out in the convention, must ratify it.
We wish the United Kingdom to be among the founder members. We have already played a full role in the preparatory stages, and were the first of the five major industrialised countries to sign the convention. When we signed it last year, Mr. Tom Clausen, then president of the World Bank, noted:
"The United Kingdom played a key role in the negotiation of the MIGA Convention".
We have much to contribute to the agency, particularly during the crucial formative stages.
The agency's main activity will be to offer insurance, in the form of "contracts of guarantee", to would-be private investors. Those investors may come from other developing countries, as well as from the developed world. Four categories of risk will be covered: first, the risk of loss as a result of host Government restrictions on currency conversion and transfer; secondly, the possibility of expropriation of assets by host Governments; thirdly, repudiation risk, where the investor suffers a loss through breach of contract by the host Government, in cases where the investor has no recourse to a judicial or arbitral forum or where the decision of such a forum is unreasonably delayed or cannot be enforced; finally, loss as a result of military action and civil disturbance is covered.
However, the agency will be more than just an insurance agent. It will carry out a number of promotional activities designed to increase the flow of private investment to developing countries. It will disseminate information on investment opportunities, carry out research on investment issues, provide technical assistance and advice as requested by member countries and, particularly important, it will serve as a forum for members for discussion on questions of investment policy. Those activities, and the provision of insurance for particular investments, are intended to be mutually reinforcing. The promotional activities are likely to generate business for MIGA, and as the agency builds up experience in insurance across the developing world it will become better equipped to carry out its promotional activities.
The criteria for eligibility for investors and investments are, at the same time, broad and flexible. Eligible investments must be new and economically sound. The enterprise concerned should be run on commercial lines, and preferably should be in the private sector. Investments may comprise equity interests, loans made by investors with an existing equity interest, or other forms of direct investment as may be determined by the agency's board. One important point is that only investors from a member country may obtain insurance. Therefore, the United Kingdom must join the agency if British companies are to benefit.

157
The general operations of MIGA will be the responsibility of a board of directors, elected by a council made up of one governor appointed by each member. The number of votes each member has in the council is dictated mainly by its shareholding. The indicative shareholdings set out in the convention are based roughly on relative economic weight. Britain is likely to hold about 5 per cent, of the total shares. The board of directors will appoint a president, who will be responsible for appointing the staff of the agency. There are measures under the convention to ensure a reasonable balance of shareholding and representation in the board between developed and developing countries.
The agency is intended to be financially self-sufficient. That means that administrative expenses and insurance claims should be paid from premium income and other revenues, such as returns on invested funds. Initial financial contributions will come from members' share subscriptions.
Under the convention, the agency is specifically directed to co-operate with related international development organisations. I place particular importance on that point. It is to complement existing national and regional investment insurance programmes and agencies. We envisage close co-operation between MIGA and our own Export Credits Guarantee Department. Useful exchanges, in which we have been able to pass on the benefit of our experience in ECGD, have been going on for some time between officials here and those concerned at the World Bank in Washington.
I refer now to the details of the Bill. Legislation is required for three main purposes: first, for the payment of our initial subscription to MIGA, and for certain additional payments; secondly, for certain privileges and immunities for MIGA, its property and personnel; and, thirdly, for the enforcement of awards from arbitration proceedings held under the convention, and the powers of the courts in connection with such arbitration.
The first clause refers to the convention establishing the agency, and notes that parts of the convention are set out in the schedule to the Bill.
The second clause concerns payments to and from the agency. It authorises payments for the United Kingdom initial subscription. That is likely to be, in total, just over $52·5 million. Ten per cent, of that will be paid in cash, a further 10 per cent, will be deposited in promissory notes, and the remainder will be callable. The clause also authorises the Secretary of State, with the consent of the Treasury, to make other payments under the convention by order made by statutory instrument. Any such order would have to be approved in draft by this House. Similar provision is made for the payment into the Consolidated Fund of any sums received from the agency.
The third clause provides that certain privileges and immunities, as set out in the convention, shall have the force of law in the United Kingdom. That is subject to certain protective provisions and arrangements. Privileges and immunities along those lines are standard for international institutions of this type. The relevant articles of the convention that confer the privileges and immunities are reproduced in the schedule to the Bill.
The fourth, fifth and sixth clauses relate to arbitral proceedings held pursuant to the convention. Under the convention, certain disputes between MIGA and its
158
members and ex-members, should they ever arise, are to be submitted to procedures including arbitration. The convention also provides that any awards rendered in such proceedings are to be enforceable as awards of the courts in member states. That obligation is given effect by clause 4, which provides for the registration in the High Court of such arbitral awards, and for their enforcement as if they were judgments of that court. Clause 5 extends the power to make rules of court required to give effect to clause 4. Clause 6 authorises the Lord Chancellor to make orders to apply provisions of the Arbitration Act 1950 concerning procedural matters—for example, the attendance of witnesses and the production for documents—to such arbitration proceedings, were they ever to take place in the United Kingdom.
The seventh clause concerns Scotland. It provides for the application of the Bill there, and substitutes appropriate references to the Scottish legal system for certain expressions used in clauses 4, 5 and, the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) will be delighted to know, 6.
The eighth clause—it will give the hon. Gentleman as much gratification as the seventh clause—provides for the application of clauses 5 and 6 to Northern Ireland, with appropriate references concerning the courts and arbitration there.
Clause 9, the final clause, says that the Bill will come into force on a date to be appointed by the Secretary of State. It is intended that the appointed date will be the date when the convention enters into force for the United Kingdom. It formally extends the Bill as a whole to Northern Ireland. It gives power for the provisions relating to privileges and immunities and to arbitration to be extended, with appropriate modifications, to the Channel Islands, the Isle of Man and any colony. That power is to be exercised by Order in Council.
There is also a schedule to the Bill. It contains various articles of the convention that are specifically referred to in the Bill, together with certain related articles. Hon. Members will find that the complete text of the convention was published in June of this year as Cmnd. 150.
I believe that the agency is a welcome new recruit to the battalion of financial institutions which are designed to promote development in developing countries. Its arrival on the scene is certainly timely. As my right hon. Friend the Chancellor of the Exchequer announced in his Autumn Statement, our aid budget is set to increase in real terms over the next three years. Official funds are therefore set to play their part in the development process. New commercial bank lending to developing countries has declined sharply in recent years, because the banks have wished to reduce their exposure and because developing countries have sought to contain their debt service obligations.
The agency is designed to promote the flow of capital and technology for productive purposes to the private sector in recipient countries. It therefore conforms to our view that private flows to developing countries should in the long term, be mainly in the form of project or equity investment, rather than of bank lending for general balance of payments support. It conforms equally to our conviction that we must do more to help the private sector in the developing world. That should be one of our priorities—a priority for all donor countries and also

159
for multilateral donor institutions. The Bill will allow us to play our full part in the new agency, and I wholeheartedly commend it to the House.
4.37 pm
Miss Joan Lestor: I agree with the Minister. The Bill is likely to be one of the less controversial matters to come before the House in the next few months. As he has given a detailed explanation of the Bill, I shall not go into the details of it. I begin by confirming the Opposition's support for MIGA. We hope for an early ratification to enable it to begin its operational life as soon as possible. As the Minister said, the purpose is to encourage foreign direct investment in developing countries, mainly by offering to private investors guarantees against non-commercial risks.
We offer our support because we recognise that development is about partnership—the partnership of official aid with private charities and commercial companies. All of them together can make their contributions, working with Third world countries towards the common goal of economic development. Foreign direct investment has always had a legitimate, if controversial, role to play in the development process.
We welcome the World Bank's initiative, because the prospect for finance for development in the Third world is gloomy. The Third world is facing financial strangulation through lost earnings caused by collapsed commodity prices, increased debt service burdens and a sharp curtailment in the availability of private finance. Between 1981–86, total net financial flows to developing countries have contracted sharply—from $139 billion to $84·7 billion in current dollar terms. That dramatic decline has occurred almost entirely in private flows. The steepest falls have been in bank lending and export credits, which last year fell to one tenth of their 1981 levels. Foreign direct investment has similarly contracted. According to the OECD, net direct investment fell by more than half of its 1981 level of $17 billion to $7·6 billion in 1985.
In response to the recession of the early 1980s, the private sector, far from embracing the challenge of enterprise in developing economies, has turned on its heel and fled. For many countries, trends in direct investment, bank lending and provision of export credits move together. The judgment of the market place on Third world creditworthiness, growth and export potential has provoked the private sector's ungainly retreat from the business of overseas development. Therefore, Opposition Members are delighted that the international public sector, in the form of the World Bank, is offering a helping hand to those faint hearts in the private sector. MIGA is really an extension of the international public sector, offering confidence-boosting measures to timid entrepreneurs.
Mr. Nicholas Soames: Would the hon. Lady agree with me—I do not seek to make a party political point—that the experience of the private sector in developing countries has been an unhappy one, in most cases through no fault of its own? Many companies have been badly treated. An important aspect of the MIGA convention is that it will enable companies to have a good deal more confidence when they are badly treated.
Miss Lestor: I would not disagree with that. One of the reasons for the convention, as the Minister mentioned, is to provide safeguards and stimulate companies to go in the direction in which we want them to go.
160
For that reason and others, Opposition Members welcome the collaboration to which I referred. We recognise the validity of public and private partnership to promote growth and development. We are happy to extend what our Tory opponents often call the nanny state to multinational corporations. We hope that MIGA will help to persuade the private sector more readily to invest in the Third world, and restore the loss of finance that has occurred in recent years. We are realistic, however, in recognising that for the foreseeable future the role played by foreign direct investment in development will remain very small.
Although monetarists ignore the evidence, foreign investments cannot replace the crucial role of official development assistance. For many developing countries, especially the poorest, aid remains a crucial source of income to finance development. To most of them, the apparent luxury of hosting foreign investment is not available. Most foreign investment occurs in the industrialised world, which accounts for about three quarters of the total. The remainder is heavily concentrated in a few higher income nations, notably in La tin-America and Asia. The largest such recipients include Brazil, Mexico, Hong Kong and Singapore. In marked contrast, the low-income countries hardly gain any foreign investment at all. Between 1980 and 1983, for example, Africa obtained only 3 per cent, of world overseas investment.
Figures for the United Kingdom show a similar pattern of concentration on the industrialised and richer developing countries. In 1985 only 16 per cent, of United Kingdom overseas investment, worth £ 1 ·4 billion, went to the developing countries, and Africa received only £95·4 million—just 1 per cent, of total United Kingdom foreign investment.
Those figures serve to illustrate the fallacy of the argument that private investment should take over the aid role. Despite the yearnings of Lord Bauer and others, the major multinational companies will not fulfil the theorists' aspirations. Africa does not loom large in boardroom agendas. For the poorest countries, the majority of which are found in Africa, official aid will remain the primary source of foreign finance. Last year, for example, 73 per cent, of the region's external finance was accounted for by official aid.
Even the better-off developing countries are becoming more, rather than less, dependent on aid. In 1980 the upper-middle income countries relied on aid for only 11 per cent, of their total financial inflows. Now aid accounts for 33 per cent., as a result of the sharp drop in bank lending and other forms of private sector finance. While we welcome the MIGA initiative, we have no illusions about the potential for foreign investment. It is no viable substitute for official aid and the Minister did not try to pretend that it was. It is official aid, well planned and well spent, which provides the firm foundations on which private investment can grow. Few companies are prepared to undertake the primary investment in infrastructure and so-called human capital that is required in the less-developed countries. Official aid, free from the constraints of commerce, can provide the necessary long-term provision of concessional finance. It is the public sector which must act as the pioneer, creating an environment in which private investment will eventually occur.
For those and other reasons the Labour party has strongly opposed the successive cuts in the aid budget. In

161
1979, when Labour left office, the absolute level of aid spending in current prices amounted to £1·6 billion and stood at 0·52 per cent, of GNP. Since then, United Kingdom aid has fallen to a mere 0·32 per cent, of GNP. If the real level of annual aid spending had merely remained constant at the 1979 level, the United Kingdom aid programme would have benefited cumulatively by a staggering £1·6 billion.
It would take many years of sustained aid increases to match the performance of the last Labour Government. The prospect of reaching the United Nations aid target of 0·7 per cent, of GNP seems even more remote. We all welcome the recent small increase announced in the Autumn Statement of about 1 per cent, in real terms, but the Government's overall aid performance has been shortsighted and ungenerous. Britain has tumbled down the league of international generosity. We led the aid donors of the Group of Seven industrialised countries in 1979, whereas today we are in fifth place.
What kind of leadership does that abysmal record offer to our major companies? A large and expanding aid programme would be the best catalyst available to encourage just the kind of foreign investment that it is hoped that MIGA will serve. I take this opportunity to urge the Government again to reaffirm their commitment to reach the United Nations target for official aid and to set a timetable of annual aid increases to achieve that target and to encourage other forms of investment. We must also ensure that our aid budget and the programmes of the major international agencies, such as the World Bank are of the very highest quality. Good projects and sound development are the best kind of investment. Too often, donors have favoured projects that suit their own commercially-based interests and not those of the recipient country. Fortunately, today there is a much greater awareness of the risks of aid-funded "cathedrals in the desert".
There is also much greater recognition of the need to focus development on human needs, and I hope that MIGA will contribute towards that. In the mid-1970s, the World Bank played a major role in shaping the debate about so-called basic needs and the strategy of redistribution with growth. After Robert McNamara left the bank and the chill winds of laissez-faire swept around Washington, these ideas seemed unfashionable. Today, the bank is returning to the agenda of the alleviation of poverty.
That turnaround is encouraging. It proves that concern for basic needs is not simply humanitarian but is a prerequisite for sustained economic growth. It is a strategy of investment in people. To ignore that dimension is, to quote Richard Jolly of the United Nations Children's Fund.
"an economic error of the most fundamental sort. Much evidence already exists of the economic returns to investment in human resources. To fail to protect young children at the critical stages of their growth and development is to wreak lasting damage on a whole generation, the results of which may well have effects on economic development and welfare for decades ahead".
Richard Jolly's analysis is humanitarian and it presents an economic case which is of fundamental importance to the promotion of foreign investment in the Third world.
Ultimately, the best guarantee of security for foreign investors in any country is a secure, well-fed and healthy
162
population. Poverty, hunger and disease are the primary causes of the instability that commercial investors fear. MIGA can play its part, but without sustained effort by the international community to promote human welfare and economic development, the present decline in overseas investment is unlikely to be reversed.
Action to deal with the debt crisis is also urgently required to stimulate fresh flows of investment. The severe debt-induced austerity, in both Latin America and Africa, is causing a major slowdown in economic growth and investment.
Therefore, we strongly support efforts to achieve debt relief both in Latin America and Africa. We endorse the Chancellor's efforts to promote a plan for debt relief in sub-Saharan Africa. Bipartisan support for this initiative is warranted given the scale of Africa's plight, but since the debt plan was initially put into effect by the previous Labour Government, we have no difficulty offering our approval. Indeed, given that the agreement to convert former aid loans into grants was negotiated in 1978 by my friend and colleague Dame Judith Hart, I think that in the interests of determining accurate parentage we should stop talking of the so-called Lawson plan and refer now and again to the Hart plan. In any event, I hope that the Minister will prevail upon the Chancellor to acknowledge in at least one of his speeches on the subject of debt the Labour origins of his African debt proposals.
I hope that the forthcoming meeting in Paris will make real progress on African debt relief. There really is little chance for such countries to attract foreign investment while debt burdens are hung round their necks. Steps to improve their creditworthiness will also enhance their investment appeal.
Of course MIGA's purpose is to offer guarantees to private investors. That is a fair point, but it is also fair to ask what guarantees are offered to developing countries that accept such investment. The recent history of international investment and the growth of multinational companies provide plenty of fuel for controversy. The case of ITT and its attempts to destabilise the democratically elected Allende Government are, of course, well known—and brilliantly documented in Anthony Sampson's book "The Sovereign State: The Secret History of ITT". One must hope that malpractice by multinationals on this scale is rare. However, legitimate anxieties remain, about, for example, the practice of transfer pricing and other devious accountancy tricks designed to defraud Third world Governments of tax receipts and other income.
The tragedy in Bhopal highlights other risks. It is almost three years since the world's worst industrial accident killed at least 2,500 people, but the argument about responsibility and compensation still rages on. The Union Carbide company has tried to distance itself from its local subsidiary, even though it holds over 50 per cent, of the Indian company's shares. Meanwhile the Indian Government are suing for $3 billion on behalf of the claimants. This appalling case clearly shows the need for a clear definition of responsibilities and liabilities of multinational companies.
While MIGA is a timely initiative, it is disappointing that more progress on offering guarantees to developing countries has not been made. In the long run, more transparent and legally enforced principles to govern foreign investment will be required. While regulation and control of multinationals may seem unfashionable, it

163
would build confidence between both the investor and the host Government. That is what we want to see if investment is to take off as we hope.
Today it seems that the international community is concerned only with the interests of private sector investors—predominantly multinational companies that are among the most powerful institutions in the world. We trust that MIGA will display broader concerns, building on the work of its parent, the World Bank. We hope that MIGA will concentrate its activities on the poorer developing countries. It must try to persuade investors to risk higher levels of investment in Africa. If it is successful, it can broaden the geographical spread of foreign investment away from the newly industrialised developing countries towards the low-income nations that desperately need foreign capital. It can also facilitate investment between countries in the developing world. So-called South-South investment can complement the traditional patterns of investment from North to South.
MIGA must also ensure that the investment that it supports is of the highest quality. In recent years the World Bank has suffered justifiable criticism for environmental short comings of some of its larger development projects. The new World Bank president has addressed these worries and seems willing to improve project appraisal to take account of the impact on the environment. MIGA must follow the bank's example and refuse to guarantee any investments that fail to meet stringent developmental and environmental criteria.
The task facing MIGA is challenging, it must encourage investment in the best projects in the most difficult countries where entrepreneurs fear to tread. We shall watch its progress under the guidance of the World Bank with much interest.
4.55 pm
Mr. Jim Lester: It is a great pleasure to follow the speech of the hon. Member for Eccles (Ms. Lestor), my namesake, on an issue where, yet again, we speak with a common voice and enthusiasm about something involving the developing world and the interdependent world. We frequently share platforms on this issue and, although I will not follow her down some of the routes spelled out in her speech, I join her and my hon. Friend the Minister in welcoming this Bill and the agency.
When we are looking at the World Bank and the change in the pattern of its lending, the hon. Lady and many of our colleagues will remember that the House sent a letter to Barber Conable. It was signed by 250 Back Benchers, roughly an even number on both sides of the House. It spelt out the direction and the pattern that we thought the World Bank should follow. Apart from the percentage argument, my hon. Friend the Minister agreed with that letter. It was a helpful move to show the way that many people feel. The letter was also supported by the Australian Parliament, the Canadian Parliament, members of the Senate and members of the Congress. Therefore, the question of interdependence and the transfer of resources in a meaningful and worthwhile way to the developing world is of wide concern.
I also congratulate my hon. Friend the Minister on increasing the aid budget this time round. As one who has spoken on every occasion and even voted on this issue against my Government, I am interested to see that there is now a reversal of the original programme. However, we
164
can become too mesmerised by the 0·7 per cent, of GNP. Frequently on public platforms, I have been able to point out that it is possible to put together an aid programme of 1 per cent, of GNP that would be going to the poorest countries in the world but still would not help any of the really poor people in those countries. It is important to increase the aid budget, but it should be increased as effectively as possible. That is why it is possible to give an enthusiastic welcome to the agency. It is another way of ensuring the effective transfer of resources in another direction into the developing world.
We all recognise that the three flows—trade flows, aid flows and private direct investment—all have a role to play. It is important that we recognise, especially through the difficult times of the past few years, that trade flows especially have declined and, as has been pointed out already, so has private investment and private flows. Therefore, aid flows still retain an essential role.
With this organisation, we seek to ensure that those countries most in need and which are always at the tough end of the stick, as we say in my part of the world, get a better deal. It is true that, naturally and sensibly, commercial decisions will be made to invest where there is likely to be the greatest commercial return. That would not be sensible otherwise. With this form of guarantee and help, companies will see that there are good commercial prospects in those African countries. The guarantee will mean that the argument in the boardroom about whether the company should invest here or there, and the myths about a country's record can be dealt with. It is a natural guarantee of the sort that most sensible people would seek.
I am also delighted that we are a main role founder member of this organisation. I welcome the partnership struck between my hon. Friend the Minister for Overseas Development and my right hon. Friend the Chancellor of the Exchequer in this key area of increased transfer of funds and the interdependent world. This is important, as the Chancellor made clear to the interim committee in plenary session when the matter was introduced. He said:
"This morning I signed a convention which makes the United Kingdom a founder member of the Multilateral Investment Guarantee Agency. I have long said that flows to the developing countries should be increasingly in the form of private equity investment rather than Bank lending. In my speech to the Annual Meetings of the IMF and the World Bank in 1984, I expressed the hope that we should be able to bring to fruition a workable plan for the insurance of private overseas investment. I am delighted that we have done so. This should make a real contribution to removing the obstacles to private investment in the developing countries."
In September of this year, the Chancellor said to the development committee:
"The World Bank Group has an important role to play in encouraging private investment flows. I welcome the setting up of the Multilateral Investment Guarantee Agency. The United Kingdom was an early signatory and we have already embarked on the parliamentary procedure for ratification. I hope that MIGA can begin its operations as soon as possible."
It is welcome to see the Treasury, not the most prominent body in aid and development, recognising the importance of the interdependent world and the need for the transfer of resources, and being prepared to take a lead in bringing this about. I am unstinting in my praise for the way in which the Chancellor has set out the issues involved in the debt problem, which will become overwhelming unless other agencies show greater urgency.
I do not disagree with the hon. Member for Eccles about the original transfer from aid loans to grants. There

165
is no reason why we should not ensure maximum bilateral understanding and support. However, some people believe in transferring back from grant aid to loans as a preferable system. The battle is not over. We must maintain those values in which we believe and extend them to our European colleagues, and particularly to such countries as Japan. Unless we do this, there is little hope for those sub-Saharan African countries who carry most of their debt with the official agencies rather than with the private sector.
This partnership is valuable and worth supporting. I hope that hon. Members who take an interest in these issues will ensure that their support is known. We are all good at criticising when we do not like things. Occasionally, it is useful for both sides of the House to come together and support something, and let that message be known, rather than constantly harping and criticising. This will help to ensure much wider contact with those countries which we are seeking to help. Those of us who take an interest in these matters know that official aid flows, although important, tend to go from Government to Government, so contact is through Governments, rehabilitation commissions and their parastatals. These countries have a wider infrastructure and it is important to involve that infrastructure.
Recently I was in a refugee camp in Djibouti, in Dikhil, where refugees from the Ogaden war have lived for some eight years. They trade and are entrepreneurs. They may trade with the world programme for food, but it is the only way in which they can operate. They sell food in the town so that they can afford to buy things. That is not the sort of thing that private investment will take up, but the point is that in every person, however poor or destitute and whatever his status, there is an instinct to do something to improve himself. Whatever country one goes to, one finds people in a better way of business who will welcome this input and the possibility of partnership.
Often this is a tender flower. Some countries such as the United States try to make the growth of the private sector in developing countries a measure of success and of whether they get further aid. Those countries should be very careful. In countries such as Jamaica, which do not have a commercial background or a tradition of development business, if the prospect of commercial return is applied too quickly and too harshly and if people are expected to go from zero to producing a commercial return within two to three years, that will kill off the very entrepreneurial spirit that we want to encourage.
Many of us strongly support the bank system, where people are given time to develop their business and management instincts and all the things which are required in a successful entrepreneurial development. In regard to the discussions, I remind my hon. Friend that one needs to set realistic targets and potential for the investments which we encourage. We must not go too far too hard and therefore defeat the whole object.
I do not think that the Bill is designed to give weak-kneed entrepreneurs protection where they will not proceed themselves. I think there is a reasonable prospect of their needing protection against the very things that MIGA is established to do. It is difficult to make a commercial decision based on war expropriation of assets by host Governments and exchange restrictions. As I travel through Africa, companies ask me to see if I can do
166
anything to facilitate the repayment of money that is being held or to encourage the repatriation of profits, because that would help them to make more investment in those countries. That is a real and understandable concern. Therefore, it is not unreasonable that a guarantee agency such as MIGA should give an assurance against unreasonable risk, if I may put it like that. Reasonable risk in a traditional investment is fine, but this is unreasonable risk.
I am sure the agency will be welcomed by those with an interest in the developing world. Many multinational companies have not just a commercial interest in but an overall commitment to world development. Many of us recognise that the future of our standard of living is in investment in the developing world. There is no way that the developed world will trade with itself for ever more. Therefore, the change of emphasis towards realistic investment in the developing world is essential and should be encouraged.
The agency will be widely welcomed in the developing world itself. My hon. Friend referred to the signatories, the countries which hopefully will be recipients of the private investment. Another valuable element in the Bill is that, in the discussions between various partners and shareholders, there will be agreement and wider education hopefully on both sides about what is needed to make successful private transfers and investment.
For all those reasons, I welcome the Bill. I hope that, when the agency's title was proposed, consideration was given to what the acronym would sound like. I hope that MIGA by name will not be meagre by nature. I hope it will be generous and supportive. I would perhaps prefer to give the body its full name, the Multilateral Investment Guarantee Agency.
5.9 pm
Sir Russell Johnston: I am happy to follow the hon. Member for Broxtowe (Mr. Lester), whose record on aid has been so consistent and enlightened. Evidently this is not a controversial measure. It is a limited proposal—useful, effective and constructive, but not exactly far-reaching. Indeed, when one realises that the agency's authorised capital will be only one thousandth of the total value of Third-world debt, one appreciates the scale of the thing, which is why I had exactly the same thought as the hon. Member for Broxtowe has just enunciated about the acronym "MIGA" and the word "meagre". If I have worked out correctly the pound-dollar relationship, we will have to contribute directly and immediately between cash and promissory notes roughly £7 million or perhaps more, because the United Kingdom contribution is $10 million. That is not very much.
While I welcome the Bill, like all hon. Members who have spoken, I find it difficult to get ecstatic about it. I spent three weeks in Brazil this autumn and saw directly the consequences of the debt crisis. Having spoken with representative politicians and economists from President Sarney downwards, I think the ongoing delay in facing up to the problem is the urgent, dominant issue.
Although it is beyond the direct purpose of the Bill, I thought that the Minister might have taken the opportunity to make wider references to the most up-to-date thinking of the Group of Seven. These things move very slowly. From the Seoul meeting which established the agency in October 1985 to ratification has taken more than

167
two years. One wonders whether there is a more rapid system of doing these things, particularly since in the end we are not talking internationally about vast sums of money but about agreement on a limited sum.
As the Minister said, MIGA is not a new idea, but it is good to see it finally put into effect. One hopes that it will enable more foreign investment in profitable production which will be of value both to underdeveloped countries and independent companies and enable them to build a mutually beneficial partnership. MIGA is a small international industrial insurance company. I congratulate the Government and the Minister. I welcome the agency and the United Kingdom's involvement. I hope that it will be a harbinger of determined wider action to tackle the major issues of Third-world debt.
5.13 pm
Mr. Nicholas Soames: First, I should like to congratulate my hon. Friend on the speed with which the matter has been brought before the House. It is a remarkable tribute to the British Government that they should have been singled out particularly for the effort that went into establishing MIGA and for the work that went into framing the convention. Like hon. Members on both sides of the House I greatly welcome this important extension to facilitate trade in the Third world.
No one could sit on this side of the House without reflecting how great is the interest among Opposition parties in the Third world. It is a sorry day for the House when so few hon. Members have come to take part in this debate on what is, after all, a very important matter which greatly affects several countries which are great friends of ours. This convention will play an important part in increasing the flow to developing countries of private equity investment, instead of bank lending.
I entirely agree with the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) as to the consequences of this terrible over-lending for some developing countries. However, I would like to pay tribute to my right hon. Friend the Chancellor on the particularly enlightened work which the Treasury has undertaken recently. I understand that a good deal of discussion is taking place as to what further steps Britain might be in a position to take to assist Third-world countries in resolving their terrible debts which undoubtedly make their difficult lives even harder. This is therefore an important step in facilitating non-debt-creating capital flows. As my hon. Friend the Minister said, our aid budget will increase in real terms during the next three years.
That is an important achievement on the part of my hon. Friend, and I hope that all sides of the House will acknowledge the wisdom of the Treasury in agreeing that this should go ahead. Nothing could be more timely, with Ethiopia being on everyone's mind at the moment, and the heightened publicity that has been given to it. Although this may not be the right forum for it, I must say that I hope that my hon. Friend will do all he can to ensure that, if a request is made, the Royal Air Force Hercules are released again to facilitate food distribution in that most unhappy country.
Nothing could be more timely than to try to facilitate the extension of private sector investment in developing countries. Indeed, private sector trade with developing countries is critical to their future. I think that British industry is not aware of the many opportunities that are available in the Third world. However, in fairness to
168
British industry—the hon. Member for Eccles (Miss Lestor) is not in her seat; I do not mean to speak behind her back, but she was a little unfair when she spoke about weak-kneed entrepreneurs—British companies have had a wicked time in the Third world.
The Third world is scattered with the relics of British companies, some of which have been bankrupted by sequestration of assets, by war and by famine. British business has every right to view with extreme caution, and some cynicism, the opportunities that are available to it. Nevertheless, having regard to the fact that there are many substantial opportunities, with a little assistance and with a little push, British industry could play an important role.
The MIGA convention is an extremely important extension of a highly effective aid programme. My hon. Friend at Question Time recently made much of the tributes paid to the British aid programme. I have seen that aid programme in operation in some parts of the world, and would like warmly to endorse those tributes. Our aid programme is marked by the effective way in which we give aid, by the direct way in which it helps those who most need it, and by the fact that we are not hidebound in our thinking, but all the time look for the most effective and easy way to facilitate the lot of Third-world countries. It is a valuable extension to the many different types of assistance that we make available to industry to help its trading efforts. I hope that British industry will respond positively, pick up the opportunity and run.
Not before time, there is a new realism in developing countries. Even in the most shambolic, private equity investment is now welcomed with open arms. British industry, with the Confederation of British Industry, and other local industry bodies, should carefully assess the countries that they believe are the most likely to welcome the provision. They should then select the projects that are easiest to fund and the countries in which MIGA guarantees will be extremely important to the overall success of any project.
I hope that the private sector will seize the extended opportunity offered to it by the convention. To murder a great saying of Mark Twain, this is one of the few occasions when a banker is likely to lend one his umbrella before it starts raining.
5.20 pm
Mr. Michael Jack: In opening my remarks on this important international development, I should like to say how glad I was to hear that when my hon. Friend introduced the Bill he laid emphasis on the fact that all sections of the United Kingdom would specifically be named and have the opportunity to benefit from the MIGA measures. That may help to heighten awareness of in all parts of the kingdom of the opportunities that are afforded by this interesting development.
I was touched equally be the remarks of the hon. Member for Eccles (Miss Lestor) who, sadly, is not in her place at the moment. She drew the attention of the House to a matter that is of great concern to the entire world —the worsening terms of trade, especially for Africa. I have recently had the privilege of being a member of an all-party delegation that visited the United Nations. In some of our many discussions during that interesting visit, it became clear that the problems of Africa and of the terms of trade will be with us for many years to come. The present financial problems of the world are amplifying

169
those difficulties. That is why any measures that can be introduced to increase the amount of investment and thus trade in the world must be seen as positive contributions.
During my time in New York, I became aware of another matter that we miss in the somewhat cloistered surroundings of the Palace of Westminster—the way in which people in other parts of the world perceive what we are doing. That was brought home to me most forcefully when visiting the United Nations Children's Fund. Dr. Richard Jolly, who has been mentioned in the debate, told us how grateful he was to the hon. Members who had signed an early-day motion praising the work that had gone into securing immunisation facilities for people in the Chatila and Bourj el Barajneh camps in that strife-torn and trouble-ridden country of the Lebanon. He said that the text of the early-day motion had reached Lebanon and had given great courage and heart to those who were involved in that vital work.
I cite that as an argument that what we do here this afternoon will no doubt be communicated to other countries that are considerably less well-off than ourselves as a gesture and statement of how important we consider the subject of finding ways, other than direct governmental intervention, of improving opportunities for investment in those countries. The development of the private sector throughout the less-developed world is most important. That was another theme that came out of our discussions at the United Nations, especially on the United Nations development programme. Even in its environmental strategy, for example, it sees an important role for private venture and private capital.
Although the measure may act as a catalyst to encourage private involvement, we must also recognise the need, as other hon. Members have already suggested, to develop an economic regime that can respond to private investment. I am delighted that the United Nations has taken such a leading part in monitoring such measures through its Economic and Social Council.
It is worth putting the MIGA measure into context. The report of 4 February 1987 by the Commission on Transnational Corporations, which was made to the United Nations, sees the MIGA measure as part of a much wider attempt to try to gain co-operation in commercial matters. That growing commercial partnership has covered areas such as consumer protection, international trade law and even pesticide use. Therefore, it is part of a wider development in the world to try to combine various efforts, and should not be seen simply as an isolated example.
I should like to pay tribute, through my hon. Friend the Minister, to the fact that the United Kingdom is a founder member of the MIGA development. It is good that this country has been seen to be taking the lead in yet another important stepping stone on the way to international cooperation in this vital work. It focuses again on the important point that Britain is taking a leading role in the international community where specific projects are involved.
I have already mentioned the United Nations development programme. To that I should add a tribute to our work and contribution to UNICEF. I know how strongly we as a country were praised when we visited the United Nations. I feel certain that, if we returned, we should be thanked for our support for MIGA.
170
In my business activities before entering the House, I faced the problem of assessing overseas investments. The measure is about minimising risk. Although Portugal is now a member of the Common Market, the company for which I worked considered investing in Portugal's agricultural activities before Portugal began its journey into membership of the Community. After one had visited the underdeveloped part of that country—underdeveloped in the sense that the infrastructure had been built by the Salazar regime but then deserted because investors had become worried about the political risks of that regime—one was left wondering why nobody was developing that part of Europe. The recurring answer was, "We are not sure how certain our investment will be."
I am sure that, when looking around the world, at parts of Africa and South America where stability is always an issue, many people will welcome the MIGA proposals because they underwrite the answer to the question, "Is it a safe place to invest?" Addressing that problem, together with the other forms of commercial insurance that are available, will underpin people's intentions to invest internationally.
I recognise that the other problem facing any such development is world debt. That was brought home to me by an article in the Financial Times of 27 March 1986 which stated:
"Debt service payments by developing countries exceeded new borrowings by an estimated $22bn in 1985, according to figures published today by the World Bank."
Certainly, the $1,000 billion total of liabilities for 1986 —that is according to the World Bank—amplifies the major problem of Government and bank lending that is faced by the less developed world.
Therefore, the MIGA proposals open the door to a new tranche of investment capital that could be put into those areas of the world. Most importantly, the generalised projects can be targeted to specific activities and the risk can perhaps be more carefully assessed in terms of economic investment potential and the cover that could be afforded by the proposals. The proposals will assist in generating that additional investment capital and help to counter the problems of the debt burden.
The record of foreign private investment is a sad tale. In 1981, for example, $17 billion was invested, but in 1984 that amount had dropped to $9·3 billion and that is a matter for considerable concern. As this country and the Western world in general have pulled out of a recession, corporate sector profits have increased. When the Minister spoke of training, hon. Members made reference to the use of those profits and suggested that more money should be put into training. Private enterprise companies in the Western world should reconsider their priorities and consider the use of such increases in funds.
One of the other major effects of the MIGA initiative is the fact that—it has not come out in the debate so far—the agency will offer to encourage and advise on investment decision-making in the Third world. That is extremely important. We are not talking about little bits of charity going to unspecified activities. We must consider it as a two-way process and try to encourage the correct identification of possible investment targets. That is clearly laid down in the proposals for the MIGA convention. I commend that advice and encouragement as I believe that that is a fundamental effect of the measure and it means that we can get excited by this initiative. It is a positive tool.

171
However, I am rather concerned about the American continent. I was delighted to learn that the South Americans have warmly taken to this measure. That region has presented difficulties for private investment. However, when the Minister replies, I hope that he will address the question of the United States and its contribution to development. I am somewhat unclear whether the Americans fully support this measure. Obviously, I am aware of their difficulties vis-a-vis the United Nations' contribution. However, I should like to be reassured that they will fully participate, because their participation is important in making the package credible.
The measure is an important additional back-up facility to our own export credits guarantee activity. The maximum liabilities to which we are presently committed—as reported in the export guarantees overseas investment annual report by the Secretary of State for Trade and Industry on 31 March—are only £150 million. Obviously there are facilities to expand the amount of trade that can be backed. If the MIGA proposals receive the right amount of publicity it will enable people to understand that not only can the political risks be covered, but that there is an obvious possibility for commercial risks to be covered. Indeed, the two go hand in hand.
If the House passes this Bill and it eventually becomes an Act, I ask the Minister that we take seriously the promotion of opportunities for investment in the most risk-free way. It is important that the Government take the responsibility to get the message across to industry. In this country we do a good job in telling people about Department for Trade and Industry back-up for schemes based in the United Kingdom. I suggest that we do likewise for overseas "risk aids".
There is a drawback to any investment activity abroad. When my right hon. Friend the Chancellor of the Exchequer discussed this matter on 25 September 1984 at a joint meeting of the World Bank and the International Monetary Fund, he correctly drew attention to some of the difficulties that affect those wishing to invest. The MIGA proposal tries to take away some of the risks. Indeed, hon. Members have referred to that and the question of bringing funds in and out of the countries involved. However, there are other bureaucratic problems.
At that meeting, my right hon. Friend the Chancellor said:
"I welcome the emphasis the managing director has given to the importance of borrowing countries taking steps to dismantle or relax administrative or other obstacles which often apply to inflows of direct investment. This is a matter to which I believe the executive board should always pay close attention both in its regular surveillance and in its examination of country programmes. An important advantage to developing countries, especially debtors, of seeking private direct investment is that it can service itself as, and only as, it contributes to profitable output … I hope we shall be able to bring to fruition a workable plan for the insurance of private overseas investment."
That last sentence refers to MIGA, but his other remarks refer to removing barriers so that advantage may be taken of something such as MIGA. That is a fruitful area for us to consider.
The measure has a number of practical implications. Before I entered the House I was involved with the fruit and vegetable business. That business draws many of its raw materials from the less developed parts of the world. There is an existing mechanism for that trade through third party agents and trading houses. I believe that that
172
business lends itself—it is a golden opportunity—to direct investment in the countries that are potential suppliers. To that end, I can see a role, for example, for Britain's leading supermarkets. They should talk with their major suppliers in this important industry and discover the potential within the food industry for that industry to invest directly and generate controlled sources of supply—those countries that would produce the raw materials of the right quality for sale in this country.
The sale of Third-world food products is certainly expanding. People are much more willing to try new things. I believe that seeking to lengthen the supply chain and to invest in that chain right back to source would be a good way to take full advantage of the opportunities afforded by the MIGA proposals. MIGA removes politically-orientated risk. It is a catalyst and generates interest in the subject of overseas investment. I commend it to the House.
5.36 pm
Mr. William Powell: Like other hon. Members who have spoken, I welcome the Bill. I congratulate the Minister on introducing it and I welcome his speech. I wish the Bill a speedy passage through both Houses so that it may become law as quickly as possible.
I welcomed the content, tone and style of the speech of the hon. Member for Eccles (Miss Lestor). I would rather that she was not the hon. Member for Eccles. I do not mean that in any personal sense and that is not to say that I would not wish the hon. Lady to be a Member of this House; rather, I recall with great affection her predecessor, Lewis Carter-Jones. I spent many happy moments, indeed hours, talking to him during the previous Parliament. I got to know and love him very deeply and I miss him greatly in this House. No matter how long the hon. Lady stays here and no matter how distinguished her career may be, I shall think of her predecessor as the hon. Member for Eccles. That is not to say that I did not welcome the hon. Lady's speech and indeed, all the other contributions that have been made.
The personnel in debates on aid have changed a bit since I had the privilege and pleasure of being the bag carrier, as Parliamentary Private Secretary, to my right hon. Friend the Member for Aylesbury (Mr. Raison), when he was the Minister for Overseas Development. The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) is still here, as he was in those days when he was accompanied by the hon. Members for Vauxhall (Mr. Holland) and for Monklands, West (Mr. Clarke).
Mr. Greg Knight: Long may he stay where he is.
Mr. William Powell: Yes, indeed. In fact, the hon. Member for Carrick, Cumnock and Doon Valley is the only face that I recognise today apart from that of my hon. Friend the Member for Broxtowe (Mr. Lester), who was always present when overseas matters were discussed in those happy days not so long ago. Indeed, the Minister is extremely lucky to be able to carry on the work that was undertaken by my right hon. Friend the Member for Aylesbury during his years at the Department. I know that he is assisted by officials of the highest calibre, who are deeply devoted to their work. They do magnificent work, not only on behalf of this country, but on behalf of many people elsewhere.

173
The hon. Member for Eccles made an important point, on which it is worth dwelling for a moment. Inevitably, in a debate of this kind, hon. Members will tend to concentrate on the backcloth to the Bill, and try to put it into the context and perspective of the general aid scene. The hon. Lady's point about equality of overseas aid was as important as any that can be made on this subject. My hon. Friend the Member for Broxtowe (Mr. Lester) said that it would be possible to devote 1 per cent, of our gross national product to overseas aid, and for the quality of that aid to be no higher than it is at present. That is undoubtedly true—it is possible to spend aid money badly, just as it is possible to spend it well—but we owe it to those whom we are trying to assist to spend every pound of our overseas aid budget in the most effective way.
I must confess that, although I concede that certain multilateral aid agencies do outstanding work, I have— alas—a bias against working through many such agencies. Unfortunately, the quality of the aid with which the European Community has provided some Third-world countries has not been as effective as it should have been; I regret to say that that applies to some of the contributions made down the years by UNESCO. However, I feel that the central thrust of British aid has been as well directed as we are ever likely to make it. We have had some castles in the desert, and that may happen again in the future, but we are becoming more experienced.
We should try to channel as much of our aid as possible into infrastructural development—the building of roads and bridges to open up communications systems in countries that will then be able to operate more economically. We must also try to channel as much as we can through private development agencies such as Oxfam, Christian Aid and some of the charities run by the Roman Catholic church. All those agencies are working at local level, and all contain people who are experienced in agricultural and agriculture-related schemes. Such schemes may have a much greater impact than the building of international airports, and other such huge projects.
I hope that we will do everything possible to maximise the quality of our overseas aid contribution, and try to eliminate schemes that are grand in their conception, inefficient in their execution and disastrous in their long-term consequences. The Bill will give us a modest additional resource, which—as the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) pointed out—will enable us to do exactly that. Mistakes made in the 1960s and 1970s had a disastrous environmental effect on some of the countries that we are anxious to assist, and we must avoid such mistakes in the future. Deforestation, for instance, will have a profound long-term impact on the countries that have been affected by it.
My hon. Friend the Member for Crawley (Mr. Soames) spoke of the need to stimulate private industry and enterprise. What worries me is that, at present, the big fish in the commercial sector seem to benefit most. Companies such as GEC and Plessey are the most anxious to become involved in aid work. I do not for a moment deny that they have been involved in projects of considerable importance to the countries where they have been working, and, if they have managed to make a profit at the same time, I shall
174
not complain. However, it is important to encourage companies that have not been involved in such projects to invest in the Third world.
As my hon. Friend the Minister knows, my constituency contains a thriving—indeed, booming—small manufacturing sector. Many of those companies have never been involved in any kind of international trade. They would not know how to go about becoming involved—trying to identify markets where they can assist, and to master the rules that they must follow if they are to trade successfully and prosperously. I hope that some kind of sponsorship can be found—perhaps using the mechanisms mentioned by my hon. Friend the Member for Crawley, such as the CBI or local enterprise agencies, or perhaps more direct sponsorship through seminars organised by my hon. Friend's Department.
I am not putting forward any definite ideas, but a much more intensive effort must be made to encourage those who have not been involved in aid work to realise that there are openings for them. They may then be able to identify new markets, to the benefit not only of the countries in which they are investing and trading, but of our country as well.
Let me emphasise, however, that one of the most disagreeable features of the development of aid policy in the Western world—and elsewhere—in recent years has been the tying of trade to aid. Too many countries look on their aid budget merely as an extension of subsidies for their own companies to engage in trade. We were not the leaders of that trend, but we have been forced to react to some of the schemes, projects and incentives that have been made available to our competitors. That does not make for good aid, and it entirely misses the point of our involvement in it.
I do not argue for a moment that we should not try to derive advantage, if it is legitimately there, for our own country and our own people from our overseas trade. However, to imagine that the purpose of our aid is simply to tie as much as possible to companies resident in this country is wrong, and is likely to lead to numerous mistakes. Regrettably, that trend has been increasing.
Let me make a final point which I regard as being of considerable importance—something for which we in this country must argue much more clearly. There is no doubt that a few people outside take a considerable interest in the subject of aid. They keep me on my toes in my constituency, and I am sure that all other hon. Members are frequently lobbied by their constituents on aid matters.
Alas, support for the aid programme generally among electors is not strong. In particular, one hears the siren calls of protectionism in some industries to protect them from what they would regard as subsidised sales into Britain from countries such as Bangladesh or Pakistan.
I speak with some feeling on that matter because I represent part of Northamptonshire which has been part of the boot and shoe industry, in which many thousands of people have been engaged down the years. They have found that imported shoes, frequently, but not always, from the Third world, are much cheaper than those manufactured in Northamptonshire.
I have to face constituents, not just in the boot and shoe industry but in the textile and clothing industries, and so on, who complain that they are being undercut by cheap

175
imports. I try to tell them as clearly as I can that we have a choice. Let me single out one prominent and important, although not exclusive, example—Bangladesh.
We either enable trade to grow between Britain and Bangladesh so that it can acquire some economic stability, perhaps even a modicum of prosperity, from what it can sell to Britain, or subsidise it from beginning to end. All that Bangladesh is able to offer us is its manufactured goods—clothes, shoes or whatever—and if that is the cheap product of their cheap labour, we should be willing to accept those goods, offered in good faith. We must tell the British people that we either accept them, even though they are cheaper than those produced by our industries, or the money that we shall have to spend on feeding that country's people will be much greater. In other words, there is a knock-on effect to everything, which is not clearly enough understood in Britain.
It is important that the Northamptonshire shoemakers should concentrate on quality products that cannot be produced in countries such as Bangladesh, rather than chase the mirage of imagining they will be able to produce goods more cheaply than is possible in the primitive low-wage economies in the East. The same applies to the textile industry. It is important that we should get across to our people the message that protectionism against the poorest in the world is a fatally flawed policy which we must resist in all circumstances.
I have inevitably taken some time to canvass issues that may be slightly wider than the narrow provisions of the Bill and that has followed some of what other hon. Members have said. None of the wider aspects that I have highlighted in the aid debate should diminish my welcome to the Bill, but I want to ask two questions which I hope that my hon. Friend the Minister will be able to take some time—who knows, perhaps quite a long time—to reply to.
Will the effect of the Bill be confined to what we traditionally regard as the Third world, or will it be extended to some of those areas which have tended to be excluded from aid provisions but in which it may become politically increasingly important for us to invest? I take the point rightly and forcefully made by the hon. Member for Eccles that it is wrong that our aid should go to countries such as Hong Kong, Singapore and South Korea—the newly industrialised countries. Often they offer the most attractive markets for private industry to invest in, and investment will continue because of that, but it is important that our aid should be concentrated in those areas which have not enjoyed the industrial take-off that has occurred in some areas of the Pacific rim.
Some countries have been devastated by the political and military events of the past decade. All or nearly all of the economic aspects of Lebanon, a formerly prosperous country, have been ruined as a result of its political developments and its people are increasingly impoverished and in need of our sympathetic help to enable them to recover from the recent calamities.
Almost every day we hear from our newspapers how serious the crisis is in many countries of Eastern Europe. Those have been excluded from our aid budgets in the past and, for the most part, we have been content to leave them well alone. However, we know that, not just in Romania and Yugoslavia, but in Poland and Czechoslovakia, matters are becoming ever grimmer.
With new opportunities arising out of the policies of the Soviet Union, we may—it is too early to say—not go
176
down the path that has been followed in the Russian empire of Eastern Europe in the generations since the second world war. If we are to have glasnost not only in the Soviet Union but in Eastern Europe, which may be the case, I hope that we shall be able to play our part in enabling those other peoples of Europe to enjoy at least the opportunities for progress and expansion which those of us who are lucky enough to live in Western Europe have been able to enjoy in the generations since the second world war. I hope that my hon. Friend will find a moment or two to comment on those aspects when he replies.
That is enough from me. I welcome the Bill and I wish it a speedy progress through the House.
5.57pm
Mr. John Bowis: I am happy to follow my hon. Friends and it is no wish of mine to upset the spirit of unity which seemed to be created early in the debate by the hon. Members for Eccles (Miss Lestor) on behalf of the Labour party and for Inverness, Nairn and Lochaber (Sir R. Johnston) on behalf of the Liberal party, who seem to have been rather left to it by their hon. Friends. Perhaps we can tempt those one or two who step in from time to time and sit on the edge of the green Benches to contribute. I am sure that those hon. Members would appreciate some support.
Let me restore the balance immediately by referring to the comment made by my hon. Friend the Member for Crawley (Mr. Soames) about the hon. Member for Eccles. For understandable reasons relating to her predecessor, he regretted her arrival from Eccles, but it would be churlish not to acknowledge her real concern for and the genuine contribution that she has made to this subject over the years. I remember that well, as a member for the focus committee of the Royal Commonwealth Society. The contribution that she made today bears out that concern. My hon. Friend the Minister has shown no less a concern in the debate. I am sure that what he said was valued by all hon. Members.
These wretched initials have already been referred to. Whenever I heard my hon. Friend the Minister referring to "this meagre initiative" I thought that he was being unduly modest. Perhaps we could suggest to him that he takes up the matter with his international chums, so that they either change the combination of initials or do what happens in places such as NATO and put them into French so that they are switched round. I shall not translate into French now, but they might come up with something like BIGMA—which might be a more satisfactory combination to preach to the uncoverted.
Mr. Chris Patten: My hon. Friend has made a perfectly understandable point. If, in future, we made the "MI" rhyme with pie or sky, that would get around the difficulty to which he has referred.
Mr. Bowis: Whatever the Minister wants, so long as he does not call it MIG anything, which has other connotations.
This is a pioneering scheme, and I pay tribute to my hon. Friend's work on it and, through him, to the people who created it. He rightly referred to the Venice conference where is started, which was an example of the best work of an international conference. All too often we perceive conferences as rows about South Africa and so on, whether they are to do with the Commonwealth or other

177
international issues. Sometimes, however, good comes of their work and that is a tribute to the countries and Ministers concerned. It is a tribute too, to the civil servants behind the Ministers of the various countries, who go to considerable lengths to create the schemes for us and make them work. I hope that my hon. Friend will accept my tribute for this welcome measure on behalf of his colleagues and Department.
This is a good scheme, and I certainly welcome it. Almost everyone else who has spoken today seems to have been round the world in the past few weeks or months. Almost invariably, they start by saying, "When I was in Timbuctoo." I have not been anywhere as exotic as that, but I have been to Wandsworth, which is no less exciting a place, even if its connection with the Bill may seem slightly remote.
When we examine the problem of overseas aid, we must try to take our constituencies and electors with us on it and related subjects. Often politicians must give a lead to their constituencies to pressurise Ministers, Governments and countries to do more for the developing countries of the world. That is not always as difficult as we might sometimes think. Our electors, as taxpayers, are right to want a balanced use of taxpayers' money and Government action. They look to Governments to provide a proper balance, and often tell one that what they want first is a solution to the problems at home. Of course there are real problems in our cities and urban areas that need solution, but I do not believe that constituents are blind to the needs of the world. They have a conscience about the world's problems, and we can guide the development of their consciences so that they understand the issues.
Whenever pictures of disasters around the world are shown on television, there is an immediate and genuine concern among the people of this country that something should be done. That is now happening again with the starvation problems in Africa. That is the sort of thing about which people have genuine and immediate feelings, which they convey to their politicians. Work to solve starvation is understood, because it is dealt with in headline stories.
Although this initiative is not an immediate response to starvation headline stories, people will welcome it because they sit back and ask themselves why these countries have problems today. The answer is, because they could not solve them yesterday. How can we help them to solve problems today so that they become less acute tomorrow? When people think about that, they understand the initiatives that are needed worldwide to bring together this sort of initiative with direct and indirect aid from Governments.
This measure ties in well with initiatives that the Government have taken in other areas, such as those for the sub-Sahara and the problems of Third-world debt. To enable the developing countries to overcome their problems, we, as a world community, must help them to develop their own economies. The Bill goes some way towards achieving that aim. There must be a combination of Government and voluntary sector aid with investment from private industry. The figures from this country, when aid from those three areas is counted together, are impressive. A partnership of all three is needed. When that partnership works well, it succeeds.
178
I welcome the all-party support that has already been given to this measure. However, I could not help noticing the enthusiasm of the hon. Member for Eccles for the schemes in the Bill to protect British investors from the threats of nationalisation—I think they call it expropriation abroad. Perhaps the hon. Lady and her hon. Friends will go on one day to protect investors from a similar threat at home. It is good that they recognise that our investors should be protected from that threat abroad.
I should welcome clarification of one or two of the Bill's provisions. Frequently, the problems that firms that are investing abroad face are not caused by the country in which they are investing. The world is an interlinked community, and sometimes, the actions of the citizens or state in a neighbouring country to that in which a firm is investing can cause problems. Will the Bill cover risks incurred by a firm due to the neighbours of the country in which it is investing, or will there be endless problems of litigation and arbitration to sort such problems out? If there are endless anythings, as we all know too well from Export Credits Guarantee Department problems, the small company can go to the wall here while it waits for claims to be sorted out.
Will special encouragement be given under the scheme to smaller firms? We need to do more to encourage small firms to invest abroad. They often have the expertise that goes well in a small developing country and the goods that that country wants. Will smaller firms in partnership with local firms be given special consideration? That is a good way of bringing together the world's communities—by bringing together the small firms of the world, and getting them to solve its problems. Will encouragement be given to small firms in this country that are run by ethnic minorities to invest in these countries? Often, such firms have cultural links with the countries concerned, and they should be encouraged and pushed in the direction of the developing nations.
Can I be given some reassurance about what happens when a company is registered in more than one country? I think that the Minister said that, until Britain had signed the agreement, British firms would not be protected. After we have signed the agreement, will British firms with partners in countries that have not signed the agreement face a complication or is there a straightforward way of ensuring that those firms are protected?
The hon. Member for Eccles spoke about Bhopal. I do not want to speak about that case but to ask whether the taxpayer will be protected in claims against a British firm that gets into problems because of negligence and malpractice in another country. It is quite right that we should protect our firms around the world when they are conducting business efficiently, honestly and ethically, but if a firm is guilty of malpractice can we be assured that the British taxpayer will not have to pick up the tab for what would be, in effect, a criminal charge? I hope that I can be reassured about that.
I hope that in allocating funds and in encouraging people to go to other parts of the world, certain areas will be highlighted. Other hon. Members have touched on this. It is important that the poorest countries receive assistance first and that firms are encouraged to go there rather than to the rapidly developing countries in the Third world. It is important to encourage training schemes, because training and communications, such as roads, and irrigation schemes are important for developing countries. If we can encourage such schemes, in a short time those

179
countries will become self-sufficient and we can work with them as genuine partners in the world economic community.
Above all, I welcome this Bill because all too often when looking at world problems the British, the French, the Italians, the Americans and other countries tend to look at their own zones of interest. We concentrate on the Commonwealth, the French on their former colonies and the Americans on what they see as their areas of interest. We look at the world as a whole all too infrequently. Perhaps coming into the European Community has helped us to understand the Francophone countries more than we used to, but many parts of the world are still largely untouched by British interests and support.
This Bill helps us to look at the whole world as a community. If in looking at world problems and in identifying the world's less fortunate members this Bill goes some way towards encouraging us all to work together and to help the people of the developing countries to solve their own problems and to become developed, it will make a contribution that we can welcome not only today but in many years when we look back to this debate.
6.13 pm
Mr. Richard Alexander: It is a pleasure to follow the thoughtful speech by my hon. Friend the Member for Battersea (Mr. Bowis). In the course of my speech I shall take up a couple of the points that he made. My first impression of the debate is that there is no representative here from the SDP. I remember being challenged by that party and its supporters at a general election joint meeting. They told us that we were not doing enough and they pretended to occupy the high moral ground on overseas aid. However, a representative from that party is not here for this debate.
I welcome the Bill. Today and on many other occasions my hon. Friend the Minister has explained the significant amount of overseas aid that Britain gives in various ways. It is a vast amount and only four other major industrialised countries do better. Of course, quality rather than quantity must be the main consideration. There is no great point in merely being able to recite statistics about how much aid we or other countries give, unless that aid is closely geared to quality and infrastructure. Aid from Britain is highly prized abroad for the development of Third-world countries.
Our official aid is complemented by considerable private investment from British businesses. The total flow from official and private sources is significant and exceeds the 1 per cent, gross national product target of the United Nations. The Overseas Development Administration administers all our relief and I know that it is very concerned to see aid reach the poorest communities. If the poorest countries are to receive real help rather than temporary palliatives, they should get aid to establish infrastructure that will enable them to provide the services that their people need.
From time to time in my post bag and in this Chamber I hear the cry, "If Europe has so many food surpluses, why does it not just give food away?" I am not sure that that is the sort of long-term aid that poorer countries really need. If we took that course it could have a variety of unfortunate ill effects. The main one is related to the fact that virtually all those countries are trying to promote and build up their own agriculture and infrastructure. If we give food and similar items to those countries as a matter
180
of policy and do it over a longish term, we will by definition undermine the agriculture of those countries and the people will become dependent on agriculture in the donating countries. It is perhaps a difficult and harsh decision to decide not to give food to poorer countries, but in the long run it is the only course that will ensure stability in the countries that need our aid.
As I said, our aid can take many forms and does not involve merely giving away free food. I take issue with my hon. Friend the Member for Battersea who complained in the nicest possible way that, although he had been in the House since June, no one had sent him abroad. I am sure that after his participation in this debate he will receive many invitations. One of the great advantages of those of us who have had the opportunity to go abroad, especially to poorer countries, is that we can see what can be done and where aid can best be given.
Last year I was fortunate and honoured to be invited to lead a delegation to Gabon, which is a French-speaking country. It is a Third-world country in receipt of overseas aid. Its main concern was that it wanted more aid, and one accepts that concern. The delegation was an all-party one and in the course of our visit it became clear that there were other concerns. The first was that Gabon would like to have closer contact with Britain, the British Government and the British people. That is the other point about which I take issue with my hon. Friend the Member for Battersea.
It is not correct to assume that, because countries are in the French sphere of influence, we should leave France to do the work and to make the contacts. That is not for purely selfish reasons, but because those countries wish to have closer contacts with Britain—clearly, they are happy to have British overseas aid—and they wish British businesses to compete more effectively for projects in their countries. I welcome that attitude by the Government of Gabon.
Even though Gabon welcomes assistance, certain difficulties are experienced by British business men that are not experienced by French business men. The French Government seem to be much more able to underwrite feasibility studies in Gabon, and possibly also in other Francophone countries; that enables businesses to get off the ground. I am told that our Government is poor at that and that business men have to take their courage in both hands and go out, spend money, and just see what transpires. That may be an honourable thing to do, but it is unfair competition when British businesses have that initial hurdle to overcome.
French business men are able to compete on much more favourable terms because in those overseas countries where we are supposed to be providing aid, the French Government allow much more competitive rates of interest. For example, I have been told that 15-year loans at 2 or 3 per cent, interest are not uncommon. That makes it difficult to invest in overseas countries where aid is needed. It is difficult for business men to say that they should go to that country and compete when they do not know whether the Government are behind them. If the Government do not encourage business men in those ways, they will look for softer markets.
British business men also believe that they do not gel the help from the Export Credit Guarantees Department that they should. I accept that I am only repeating hearsay., but I have been told that, particularly in Gabon, firms have difficulty in finding out precisely what guarantees

181
they may be offered and at what rates. In the Balinga iron ore mining project, a joint project with French business men, British business men have to work in the dark because they do not know what they will get at the end of the day or the terms under which the project will operate. That is unsatisfactory, and I hope that when considering our attitude towards overseas aid and what can be done in some of the donee countries, my hon. Friend will consider that.
In Francophone Africa, where we are trying to involve business men in overseas aid projects, some of our business men do not trouble to learn the language of the country in which they are running their businesses. It is discourteous to send business men to a country in which they are trying to invest if they do not speak the language. Language assistance, with French in particular, for potential exporters would be welcome and useful if we are to encourage our business men to take their rightful part in the infrastructure of the Third world that we all want to see. I commend the Bill to the House.
6.26 pm
Mr. Tony Baldry: It is imperative that we always recall that we are part of an international community, that we are part of one world and that we are all interdependent. It is in the interests of the developed world to see the Third world develop, not only for sensible, humanitarian reasons but so that developed countries will have additional countries with which to trade. The legislation that we are considering simply reinforces the fact that we are part of one world, encourages the flow of investment for productive purposes among member countries, in particular among developing countries, and supplements the activities of the World Bank in reconstruction, development and international finance. It must increasingly make sense that there is a growing recognition that many of the problems that we now face require more than the resources of a nation state to resolve. They require international action. Nowhere is that more evident than in assistance to the Third world so that it can resolve its own difficulties.
I have a recurring nightmare that I am standing in the fields of Korem and that, as far as the eye can see—it is difficult to think of an area near Westminster that is as large, but one could think of perhaps four or five football pitches—are people who have come to Korem because they are starving, and children are literally dying in front of my eyes. I, and I imagine other hon. Members, thought that that nightmare was over many years ago and that, because of the concern of the international community, it would not recur. However, the international community has not been able to resolve that problem.
We have not managed to help parts of Africa stop fighting each other. I am bitterly depressed that there seems to be no movement in Ethiopia between Eritrea and Tigre to even begin to resolve their difficulties. I am depressed that some countries within the developing world seem to have the attitude that in moments of difficulty they can look to the international community for assistance and otherwise simply ignore the good advice and recommendations of the international community. That must be so with Ethiopia, where 80 per cent, of State investment in agriculture still goes into inefficiently run State collective
182
farms that produce only 10 per cent, of the nation's food, while little is done to encourage peasant farmers to grow more food for themselves.
The Bill laudably and commendably sets an international framework in place but also demands mutual contract. We should play an important role. I am delighted that the aid programme in Britain is now set to increase in real terms from £1,235 million this financial year to £ 1,420 million in 1990–91. That means an extra £70 million of aid next year; £ 140 million extra the year after, and £ 185 million extra in 1990–91. That is excellent news.
We must play our part in trying to eradicate poverty. However, that demands and expects a response from other countries. It demands a reciprocal contract which shows that they have obligations to the international community to resolve their difficulties and problems. From many countries in Africa, it demands a greater commitment to resolving boundary and other disputes without recourse to force of arms and the massive spending that that involves. Indeed, much of the cash crop in Ethiopia goes to Russia to pay for arms. It also demands a greater commitment to resolve disputes without recourse to arms, because inevitably that results in massive numbers of refugees. The number of refugees in the world in general and in Africa and parts of Asia in particular is growing year by year. Refugees are not only human tragedies, but cause massive dislocation to the economies of the countries which give them shelter and refuge.
Mr. Ian McCartney: I am interested in the theory that the hon. Gentleman is propounding in a genuine manner, especially in relation to what is happening in Eritrea. However, will he recognise the tragedy in southern Africa and the destabilisation of Mozambique, Namibia and Angola and the incursion of the South Africans and South African-backed regimes? That has meant massive famines and a dislocation of agriculture, industry and transportation and also genocide in southern parts of Mozambique and the murder of innocent children. All that is happening as a result of South African-backed arms and little or nothing has been said or done by this Government to influence the role of South Africa in the destabilisation of the southern part of that massive continent.
Mr. Baldry: I understand the hon. Gentleman's sentiment. For two years I had the privilege to be the Parliamentary Private Secretary to my right hon. Friend the Member for Wallasey (Mrs. Chalker), the Minister of State, Foreign and Commonwealth Office. She has a particular responsibility for southern Africa. I cannot think of anyone who has worked harder than my right hon. Friend to bring purpose and resolve to eliminate apartheid and therefore bring justice to South Africa.
Wherever the force of arms is used to resolve difficulties, it leads to dislocation, refugees and the entrenchment of poverty. While we must have a commitment to play our part, other nations must also play theirs. Countries such as Ethiopia should not look blindly to the assistance of the international community in times of difficulty and ignore the best advice of the rest of the international community at any other time.
African countries such as Zaire, which have released enterprise and encouraged initiative, are doing well and improving their economic prospects. If the international community as a whole can work together with those

183
countries, there is no reason why such nations should continue to go backwards. There is no reason why Africa should be locked into a declining spiral of poverty, famine, disease, pestilence, war and the horror stories which I have witnessed before, which we saw in 1984 and which inevitably will occur again. We should never see those horrors happen again, but they will. They are recurring not because of the failure of the West or the developed world to respond to the needs of Ethiopia, but because no progress has been made to resolve the fundamental internal problems of Ethiopia which are controlled by Ethiopia itself.
I very much hope that the House and the country will continue to make the elimination of poverty and hunger in the world one of their foremost objectives. That presupposes the need for the international community to co-operate to help developing countries to create and develop their own infrastructures and encourage their industries and economies to grow. That is a duty for us all.
Like my hon. Friend the Member for Battersea (Mr. Bowis), I do not believe that there is any shortage of good will or support for that duty among our constituents. People in this country want to see the rest of the world develop. We often underestimate the desire in this country to see a world free of hunger where the developing countries are seen to be growing positively, with prospering economies. There must be a mutual contract. We can play our part, but other countries must play their part. There must not be a simple one-sided contract.
I commend the Bill to the House. I particularly commend the work of my hon. Friend the Minister for Overseas Development in ensuring that those issues are high on the political agenda. Let no one think that those moves can be only one-sided and that it is simply a matter of the developed world giving to the Third world. Both have an important role to play; they are mutually dependent. Unless both sides are prepared to be involved in such a contract, the contract is worthless.
6.36 pm
Mr. George Foulkes: This has been a well informed and extremely thoughtful debate. Once again, I was impressed by the usually well orchestrated orgy of congratulations from the Conservative Benches for the Minister. However, for once there has been some reason for that congratulation, and I must say that that is not often the case. That does not mean to say that no questions need to be asked about some aspects of the Bill, and I want to pick up some of the points that have been made this afternoon.
It is a particular pleasure for me as a member of the Labour party foreign affairs team to support my hon. Friend the Member for Eccles (Miss Lestor). She played such a distinguished role in her previous time in this House and is now the distinguished Member for Eccles and the Labour party spokesman on development. Her record in the One World organisation and her activities recently in Africa show her profound knowledge and experience in this matter. I am pleased to support her today.
The Minister took us through the Bill clause by clause in the second part of his speech. Perhaps he is not expecting too long a Committee stage. Nevertheless, I will take up his challenge and try to deal with some of his points.
As my hon. Friend the Member for Eccles said, the Opposition support the establishment of the Multilateral
184
Investment Guarantee Agency. I use the full title, as the hon. Member for Broxtowe (Mr. Lester) prefers it to the "meagre" acronym. However, we support it only as part of the measures necessary to stimulate growth in the developing countries. We welcome the Government's recognition of yet another area in which market forces work to the detriment and not to the advantage of orderly progress. We are glad that in this sector, if not in others, the Government support intervention to affect the decisions of multinational corporations.
However, questions must be asked, and I was pleased that, among others, the hon. Member for Battersea (Mr. Bowis) asked them. What guarantees are there for the host countries against, for example, low wages in multinational companies, against dangerous workplaces and safety problems in the workplace? My hon. Friend the Member for Eccles rightly mentioned negligence at Bhopal. What guarantees are there about the closure of plants, which suddenly creates havoc and problems far greater than those that existed before the plant was set up by the multinational? It is not only in developing countries that we have experienced those problems; we have experienced them particularly in Scotland—some people might think that it is a developing country. What guarantees are there with regard to transfer pricing?
Sadly, attempts to establish codes of conduct for foreign investment have been resisted by the major industrialised countries. In the 1970s, a little progress was made in establishing guiding principles to govern multinational investment. The Organisation for Economic Co-operation and Development prepared a set of guidelines, but they have no legal force. In the Common Market we had the Vredeling proposals, and similar negotiations to establish a United Nations code of conduct have been bogged down by argument about the seemingly unenforceable legal status of the codes.
While MIGA is a good, timely and appropriate initiative, it is disappointing that more progress on offering guarantees to developing countries has not been made. In the long run, more transparent and legally enforceable principles to govern foreign investment will be required. While regulation and control of multinationals might seem unfashionable to Conservative Members, it would build confidence between the investor and the host country, which in the long term would be to the advantage of both.
The hon. Member for Crawley (Mr. Soames) seemed to misunderstand the position when he said that private companies have had a bad deal. Some countries have been ripped off by multinationals, so it works both ways. The developing countries need some protection.
Sir Russell Johnston: The hon. Gentleman keeps talking about multinationals. With regard to the size of the funds that we are considering, are we talking about the activities of multinationals?
Mr. Foulkes: That may be the case with regard to the size of the fund. It is important, when talking about a general principle and a fund that can expand, to deal with that aspect.
My second question for the Minister concerns fraud. Those of us who study the European Community closely —it is not a most enthralling occupation, but, as I know to my cost; the hon. Member for Corby (Mr. Powell) has a particular passion for it—are aware that some

185
international funds have a tendency to be exploitable and open to fraud. The scheme is designed to assist investment from overseas. Article 13(c) of the convention allows investment by local persons and organisations to be covered as long as the money comes from outside the host country. Thus, there is potential for fraud.
I shall give an example that might help the Minister. Suppose Senor A has a bank account in the Cayman Islands, which is a pleasant place to go and a popular place to have a bank account to salt away this kind of money. Suppose he invests his money in a factory but General B, who may just happen to be his brother-in-law, commandeers the factory for army use. General B gets a free factory and Senor A gets his bank account replenished, courtesy of MIGA. Will MIGA be able to deal with it? Will it have the staff resources to detect that fraud? That may seem a far-fetched example, but if one considers the operation of not only the funds in the European Community but other international funds, one can foresee that arising.
My third question for the Minister is prompted by the remarks of the hon. Member for Inverness, Nairn and Lochaber, about the size of the fund. Exactly how much is the British contribution? The hon. Member for Inverness, Nairn and Lochaber said that it was about $10 million, but perhaps the Minister will confirm that. My question is not about the size of the fund but about where the budget for it will come from. I hope that it will not come out of the Overseas Development Administration budget and that it will not lead to a decrease in bilateral or multilateral aid.
My fourth question concerns the commercial operations that the fund will be able to support. Article 13 of the convention limits the guarantees to those operating "on a commercial basis." Will the Minister explain what that means? For example, are co-operatives, which are an important method of ensuring an appropriate level of development in some of the poorer developing countries, deemed to be operating "on a commercial basis"? Will they be available for assistance from MIGA? What about the trading arms of non-governmental organisations that involve themselves in these operations?
My final question—the Minister mentioned this in his introductory remarks but he did not clarify the position —relates to the Channel Islands and the Isle of Man. Article 66 covers territorial applications. It says that it applies to
"all territories under the jurisdiction of a member"—
the United Kingdom—
"including the territories for whose international relations a member is responsible, except those which are excluded by such member"—
in other words, the United Kingdom—
"by written notice".
That obviously brings in the Channel Islands and the Isle of Man.
Clause 9 requires an Order in Council, which is the usual method by which we deal with these matters, to extend it to the Channel Islands or any colony. It is strange to see the word "colony" in a British Government Bill. I did not think that we used that word any more. If the Minister consulted his colleagues in the Foreign Office, he might discover that a better formulation is "dependent territory".
186
Will the Government start with a blanket exclusion, which would stop these sham covert companies that are set up in the Channel Islands and Isle of Man benefiting from this convention? I hope that they will be excluded, because it could affect our companies and some of those of the independent territories. There are many other examples about which we could ask, but it may be more appropriate to leave some of them for the Committee stage.
I hope that such funds will not be able to establish, support or encourage the establishment of any arms factories. Again, we might explore that matter in Committee. I am sure that even some Conservative Members wish to explore the role of the South African Government, if they ratify the convention, in the operation of the agency.
I reinforce what my hon. Friend said. The most positive way of ensuring the safety of any commercial company's investment in the Third world is by making sure that the people are healthy and well-fed, that they have job opportunities with reasonable wages and conditions of service and that there are vibrant democracies in such countries. That is what Opposition Members are principally working towards. Until that is achieved, we shall need agencies such as MIGA. On that basis, the Bill has our general support, but we look forward to the day when we see healthy, vibrant democracies and economies in the developing world, so that such an agency is no longer necessary.
6.50 pm
Mr. Chris Patten: By leave of the House, I shall reply to the debate.
The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)—I have wanted to say that for many years—promised us a lively and lengthy consideration of the Bill in Committee. It is conceivable that we shall not need to timetable our proceedings, but I shall look forward to many detailed discussions with him at a later stage about Senor A, General B and the rest of the happy family whom he described.
The hon. Member for Eccles (Miss Lestor) led the debate for the Opposition with an interesting speech. I am sorry that she and I do not have more opportunities such as this to trouble the scorers. She referred to the financial prospects for the developing world and, with some justification, said that, in many cases, they are rather gloomy. She condemned the fall in foreign direct investment as an ungainly retreat. I must say—it follows what my hon. Friend the Member for Crawley (Mr. Soames) said—that I recently heard, with some appreciation, the Finance Minister of one developing country rather wistfully say that the foreign investment bird is an interesting, if rather predictable, creature; it does not care to land where it is likely to be shot at. That piece of folk wisdom is much more widely appreciated in developing countries than perhaps was the case a few years ago.
I am delighted that so many developing countries are running their economies in ways that encourage rather than discourage foreign private investment. When I visit developing countries, I am regularly asked to do what I can to stimulate private investment and to help in the development of the private sectors of recipient countries. I am sure that the hon. Member for Carrick, Cumnock and Doon Valley would be active on behalf of his constituents were they involved in such a case. I am often asked by hon.

187
Members to take up with the Governments in developing countries the issue of blocked remittances from British companies that have invested in such countries and might be keener to do so again were they not encountering difficulties in getting some of their investment profits out of the countries involved. I am also encouraged regularly to interest the Commonwealth Development Corporation in investments in aid recipient countries. That admirable institution, whose value is well recognised in the House, has played and continues to play an extremely important role in the development of the economies of aid recipient countries.
The hon. Member for Eccles referred to the United Nations aid target and the target for official flows. It is rare that people talk about the other Pearson target, the target for official and private flows. I am delighted that, under this Administration, we have surpassed that target in every year but one. Last year—1986—the figure was 1·34 per cent. I agree with what the hon. Lady said about the importance of ensuring that the social impact of structural adjustment programmes is taken into proper account when they are designed. As she knows, we have been advocating that matter in the World Bank and other multilateral institutions and have taken to heart the arguments that were put forward by Dr. Richard Jolly and others. Dr. Jolly's work in this respect was referred to by my hon. Friend the Member for Fylde (Mr. Jack).
The hon. Lady suggested that Dame Judith Hart was the real author of the Chancellor's debt initiative, which is of course a manifestation of the growing economic strength of this country. That observation stretched historical antecedents a trifle far. I hate to make partisan points on occasions such as this, but we were rather less convincing in taking debt initatives when we were a major debtor than we are now that we are the second largest investor in the world.
In a characteristically thoughtful speech, my hon. Friend the Member for Broxtowe (Mr. Lester) expressed pleasure at the fact that 75 per cent, of our aid programme goes to the poorest countries, but reminded us of the importance of playing a significant role in the discussions that are taking place and will take place next month on providing more assistance for the most debt-distressed countries in Africa. The House knows that we owe a good deal to him and to his colleagues for the all-party report on debt, which was released a few months ago. The Chancellor's debt initiative reflects many of the arguments that are set out in that paper.
My hon. Friend referred also to the enterpreneurial instinct that cannot be eliminated. I agree with him. It seems that Mr. Gorbachev also recognises that proposition.
The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) said that he was sorry that the Bill was not more exciting and that it did not move him to ecstasy. I hope that we were at least able to warm him up gently, even if we did not give him as torrid a time as he would have cared for. He said that he recently returned from Brazil. I am sure that he is delighted that Brazil has been one of the largest recipients of British direct foreign investment in the past few years.
My hon. Friends the Members for Crawley and for Fylde talked about the effectiveness and quality of our aid programme. In particular, my hon. Friend the Member for Fylde referred to his discussions at UNICEF, to which I have already referred. He asked me about the United
188
States of America. The United States of America has supported the establishment of the agency. It signed the MIGA convention on 19 June 1986. The United States Administration are seeking congressional approval of the appropriations that are needed to meet the cash share of their subscription, subject to this—I realise that "subject to this" can cover all sorts of eventualities—the United States is expected soon to ratify the convention.
My hon. Friend the Member for Corby (Mr. Powell) paid a wholly appropriate tribute to my right hon. Friend the Member for Aylesbury (Mr. Raison) and to officials in the ODA. Both tributes are richly deserved. My hon. Friend referred to the importance of non-governmental organisations in our aid and development efforts. He will be pleased that, recently, I was able to announce a 50 per cent, increase in the funds available for the joint funding scheme, which will, of course, help non-governmental organisations such as the ones that he mentioned to play an even more important role in developing countries.
My hon. Friend the Member for Battersea (Mr. Bowis) spoke about the importance of carrying public opinion with us, and I fully endorse that view. He also asked a number of specific questions about the Bill. He asked whether the risks covered by the Multilateral Investment Guarantee Agency included the risk of actions by neighbouring slates of the state in which the investment is made. That was a challenging question to which I am pleased to say I have the answer. In certain circumstances, the risk would be covered. For example, MIGA would cover the loss suffered as a result of military action or civil disturbance.
My hon. Friend also asked, as did the hon. Member for Carrick, Cumnock and Doon Valley, about losses suffered by firms through their own negligence or wrongdoing. My hon. Friend wanted to know whether the taxpayer would have to meet the cost of that negligence. I can assure him that the taxpayer will not have to pay, because the risks are not covered by the convention.
My hon. Friend the Member for Newark (Mr. Alexander) raised a number of points and perhaps I may write to him on them. Among other things, he noted the absence from our debate of the SDP, which may or may not still exist. My hon. Friend the Member for Banbury (Mr. Baldry) referred, not unreasonably, to the situation in Ethiopia being exacerbated by the civil war there. All of us who recall that only three weeks ago a convoy of trucks carrying food was shot up and burned out by members of the Eritrean People's Liberation From, will bear in mind what he said.
This small but immensely valuable Bill has had a warm welcome throughout the House. I am grateful that it has been endorsed, broadly speaking, by the Opposition Front Bench and I am sorry that that warm endorsement was not replicated by Labour Back Benchers, who I am sure had pressing engagements elsewhere. I look forward to further exchanges in Committee about the family mentioned by the hon. Member for Carrick, Cumnock and Doon Valley. I hope that the Bill will have as smooth a passage through Committee—however long that passage may be—as it has received this afternoon.
Question put and agreed to.
Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills.)

MULTILATERAL INVESTMENT GUARANTEE AGENCY BILL [MONEY]
Queen's Recommendation having been signified—
Resolved,
That, for the purposes of any Act resulting from the Multilateral Investment Guarantee Agency Bill, it is expedient to authorise—

(a)the payment out of money provided by Parliament of any sums required by the Secretary of State for making payments under the Convention referred to in that Act; and

(b)the payment into the Consolidated Fund of any sums received by the United Kingdom in pursuance of that Convention.—[Mr. Maclean.]

Common Agricultural Policy
7.2 pm
The Minister of Agriculture, Fisheries and Food (Mr. John MacGregor): I beg to move,
That this House takes note of European Community Documents Nos. 8250/87 on Common Agricultural Policy reform, 8761/87 and ADD 1 to ADD 4, and 9066/87, on implementation of agricultural stabilisers and 6116/1/87, on agricultural income aids; and endorses the Government's objective of securing effective control of Community agricultural expenditure which is in the interests of the farmers, the taxpayers and the consumer.
Our debate concerns a number of European Commission documents on agriculture—in particular on wide-ranging changes proposed to the existing operation of the CAP to make it subject to much tighter budgetary discipline. The debate is timely because we are in the middle of crucial discussions on the paper that is the most immediately important—the one dealing with agricultural stabilisers.
I shall endeavour to walk a tightrope between giving the House as much information as I can on the state of the negotiations and avoiding talking for too long. I hope that all hon. Members will be able to raise all the points that they wish to raise. If I can catch your eye, Mr. Speaker, I intend to wind up the debate—first, to enable me to respond to hon. Members' contributions, as I am very much involved in the negotiations, and secondly because my right hon. Friend the Minister of State is still in Brussels.
Let me begin with the background. The exercise in which we are currently engaged was effectively launched in June when the European Council called for a review of adjustments already made to the common agricultural policy and for the identification of further measures needed to complete the process of reform, including measures to ensure that budgetary discipline is fully observed. The Commission's report, document 8250/87, entitled "Review of action taken to control the agricultural markets and outlook for the common agricultural policy", which is before the House, formed the first step in its response to that request.
The report covers four main issues. On the first, which is the review of reforms, the Commission notes that the process of reform is only one of the factors influencing farm incomes. It points out, too, that the present exercise is a continuation of reform rather than a beginning. It is important that the House should note that the savings from reforms since 1984 will have risen to a figure for 1987 of 6·6 billion ecu or £4·2 billion. If the measures starting with dairy quotas in 1984 and the other steps taken since —in particular, steps taken in various price reviews and in the Council on dairy and beef products last December—had not been taken, agricultural expenditure would have been even more severely out of control. That suggests that reforms work.
Mr. Teddy Taylor: How much of that saving is the consequence of transfers of responsibility for spending from the Community to member states?
Mr. MacGregor: I shall endeavour to give my hon. Friend an answer at the end but, off the cuff, I should have thought that it was only a very small proportion.
Reforms are having their effect, but it remains true that guarantee expenditure has risen by more than 40 per cent.

191
in money terms in the same period. Therefore, although difficult measures have been taken, causing difficulties for our farmers and the farms elsewhere, guarantee expenditure continues to soar. While acknowledging that external factors such as the world market and the dollar can significantly influence budgetary expenditure, the Commission presses the firm need for further savings if we are to get proper budgetary discipline. Much remains to be done, and not just for budgetary reasons. If we do not take measures now, the risk is that agricultural expenditure next year will be £3 billion over the guideline.
The House and the farming community know that, in addition, there is the problem of surpluses. Unless we take action, the cereal surplus could reach over 100 million tonnes in a few years' time. Although butter stocks are decreasing, they still represent 223 days' supply throughout the Community and the figure for skimmed milk powder is 170 days. There are considerable problems with rapeseed, too, as production has increased by 65 per cent, this year alone, with large increases in support costs as a result.
On the second issue—the control of production and expenditure—the report notes the measures that have already been taken to reform the CAP, citing the introduction of milk quotas, restraint on prices of key commodities at recent reviews, the limitations on intervention buying, the introduction of guarantee thresholds in some sectors, and the application of co-responsibility levies, to which, of course, we were and remain opposed. These actions have had a marked effect on stock levels. For example, United Kingdom stocks of butter, although still high, have fallen by 20 per cent, in the past 12 months. Stocks of skimmed milk powder have fallen by as much as 85 per cent. The Commission outlines its plans for stabilisers in the various commodity sectors and I shall discuss the detailed proposals later.
On the third issue in the document—the preservation of the European pattern of agriculture and the outlook—the report acknowledges that account needs to be taken of the effects of CAP reform on the rural environment. That is becoming increasingly important and I am glad to say that the United Kingdom has been playing a leading role in persuading the Community and Council of Agriculture Ministers to recognise that CAP reform needs to be carried out in environmentally friendly ways and accompanied by measures to help farmers to adapt to the necessary changes. I recall that, as Minister of State, I took part in one of our first debates on the environment and agriculture when we were taking the lead in pushing the concept of what are now known as environmentally sensitive areas. That is increasingly a part of our discussions.
In addition, as the House knows, the Government are taking a range of actions along the lines set out in the documents on farming and rural enterprise published in the spring. We are following up those actions now in the Farmland and Rural Development Bill, the diversification scheme and in the further tranche of environmentally sensitive areas, the terms and conditions applying to which I hope to announce shortly. As a further example, the United Kingdom has been pressing for an additional study by the Commission on the utilisation of agricultural land—one of the key decisions that we succeeded in achieving in the price review earlier this year. There has been a great deal of discussion in the Council during the past few days on set-aside, to which I shall return.
192
Another issue covered in document 8250 is external relations. As hon. Members will be aware, a new round of multilateral trade negotiations is now under way in the GATT—the Uruguay round—and agriculture will be one of the key issues in those negotiations. As promised in document 8250, the Commission subsequently submitted an outline of the approach that it wishes to pursue in the GATT round.
Member states have, with inevitable differences of emphasis, endorsed the overall approach and the paper has been tabled in Geneva. It is not a mandate from the Council but a broad indication of approach, and we took the view, as did others, that it was important that the Community should have something on the table early for discussion in the GATT round. Although this is not the time to dwell on the detail of that approach, I underline the fact that it contains a clear commitment to reducing the level of support for agriculture. In the United Kingdom we broadly favour that approach. We will have reservations on details, but the approach will allow much greater play of market forces and will encourage the development of more rational policies for agriculture worldwide.
Document 9066/87 includes a rather detailed proposal to implement the agreement at this year's price-fixing to include Clementines and satsumas within the intervention system with guaranteed thresholds. The proposal would also include nectarines within the intervention system and it will establish a guaranteed threshold for mandarins, which are already covered by intervention arrangements. Broad agreement has already been reached on those proposals, subject, of course, to clearance by the House.
I wish to say a word about the present state of negotiations. As the House knows, in June the European Council gave a mandate to the Agriculture Council to draw up proposals on agricultural stabilisers, designed to ensure proper budgetary disciplines for introduction into the various commodity regimes. The starting point is document 8761. We have made it clear throughout—the Prime Minister has constantly stressed this—that we would be prepared to consider measures for the future financing of the Community only if an effective set of stabilisers could be agreed to prevent the continual overruns in agricultural spending.
Mr. David Heathcoat-Amory: Has my right hon. Friend seen the latest news sheet from the European Democratic group, of which the Conservative party is a member? It was published and sent out by Central Office and asserts in an unqualified way on page three that the VAT limit will rise to 1·6 per cent, in 1988. Will my right hon. Friend tell us whether the Conservative group in Europe knows something that we do not, or are the British Government still committed to 1·4 per cent, for the foreseeable future?
Mr. MacGregor: That is not a matter for me, but I think that I have made the position clear. At the forthcoming European summit, we will be prepared to consider measures for future financing only if we can achieve some of the other matters we have mentioned, including effective control over stabilisers.
Following earlier discussions, Agriculture Ministers met again on Monday last week with the aim of completing our discussions on the Commission paper on stabilisers and reaching decisions to be put to the

193
European summit at the beginning of December. After several rounds of discussions on the key issues and on the proposals for all the individual commodities, we adjourned around Wednesday lunchtime. While I recognised that some Ministers had inescapable commitments—I had plenty myself—during the the rest of the week, I was very critical of the decision not to return to Brussels until yesterday morning, because it seemed to me that this simply did not give us enough time to resolve our differences, and so it proved. I believe that we should have worked through the weekend at least.
On the basis of a presidency paper, we met almost continuously from yesterday morning until 7 am today, but failed to reach agreement. A report to that effect was put to the Foreign Affairs Council this morning by the Danish President, and Agriculture Ministers were given one last chance to see whether we could reach agreement. That discussion was resumed this afternoon and has been going on since. I felt it right to come back and report to the House so my right hon. Friend the Minister of State has stayed behind to continue the negotiations from our point of view. I heard a short while ago that those talks have broken up without any further progress and we will be resuming tomorrow evening, following a programme of work to be drawn up by a high level group tomorrow morning. I shall be returning tomorrow, and that is why this debate is so timely.
We have approached the discussions throughout in a constructive spirit, keen to reach conclusions. The talks have been detailed and we have certainly made some progress. However, there are still substantial disagreements and gaps. We continue to seek a successful outcome.
Mr. Geraint Howells: Is the Minister in a position to tell the House which countries are not willing to toe the line?
Mr. MacGregor: We are dealing with some complex matters and there are difficulties for some member states. There are items in the proposals that we do not like. Therefore, I do not wish to cast aspersions on individual member states. The talks are difficult and it is important for the future of the Community that we do everything we can to reach a conclusion, and that is what we are endeavouring to do.
In document 8250 the Commission urges the Council to adopt the package of proposals that it put forward in April on income aids. The aim of the system, as the Commission saw it, was to help those economically and structurally weaker farmers who would otherwise be unable to cope with the pressures put on them by the reform of CAP market regimes. The proposals consist of a part-European Community funded scheme, a nationally funded scheme and a scheme for paying farmers over 55 years of age to give up farming. In our view those proposals are not the best way to provide complementary measures to price restraint, not least because they are at best production-neutral, and there are other criticisms of them. They do not focus on the need to get some land out of production. They have been criticised from all parts of the Council for different reasons. It is now clear that the focus on appropriate complementary measures is moving towards set-aside.
I have made it clear for some time that, given the cereals surpluses, the potential for further increased production,
194
and the impracticability of achieving a reduction in price support sufficient to deal with that problem, complementary measures are necessary. I believe that a set-aside scheme, if we can devise an effective one that can apply across the Community, would be the best option. It would assist with the income pressures on farmers, particularly in marginal cereal areas, and it could have valuable and favourable environmental effects. The United Kingdom took the lead in getting this concept on to the Community agenda. The main focus of Community negotiations in respect of complementary measures in the cereal sector is now on set aside. We have had lengthy discussions, particularly during the past 10 days. As yet, there are no conclusions, so it is not possible to predict the outcome.
However, several important points are emerging. First, the Commission has not yet agreed a set-aside proposal, but it is actively discussing the matter. Secondly, it is likely that, with varying degrees of enthusiasm and interest, the Council of Ministers will decide in principle that a set-aside scheme should be drawn up for implementation in the coming year alongside proposals for cereals stabilisers.
In a sense, we are already committed to producing a set-aside scheme. Under the extensification proposals—another example of Community jargon—agreed earlier this year, every member State must produce a scheme for implementation by 1 April 1988, in the cereal sector, to provide payments for farmers who agree to set aside 20 per cent, of their land for cereals production. I have put a great deal of work into this, with a view to producing a consultative document for the possible United Kingdom scheme, which I had intended to publish next month. We shall have to see what progress is made in these wider set-aside discussions in the next few days, as they may affect this extensification scheme. It is important to draw a distinction between an extensification scheme for cereals, which is limited as I have described, and wider set-aside.
Thirdly, there is still a great uncertainty about the precise elements of a set-aside scheme. Some principles have been put before us in the president's paper which we have been discussing this week and I am concerned that they should not commit us to details which, as the scheme is worked out over the months ahead, we might wish to reject.
However, two points seem to be generally agreed. First, the set-aside scheme would be a complementary measure to the stabiliser proposals and not a substitute for it. That is a point on which we have insisted. Secondly, although it will be compulsory for member states, it will be optional for farmers.
One major development is that the new measures are intended to apply to all arable land. I have made it clear that this must be confined to land which is currently down to crops supported by Community subsidies. It will be crucial to have strong control arrangements to avoid abuse and to ensure that production is not increased elsewhere on the farm.
For the sake of completeness, I must tell the House that we are still considering one of the income aids to deal with early retirement of farmers. That is included in the package. I have made it clear that such a measure should go ahead only when the land comes out of agricultural production. In the original income aid proposals, there were other early retirement schemes for farmers which did not contain that condition.
Mr. Ralph Howell: I am interested to hear that so much serious discussion has taken place about set-aside, but will the Minister tell us whether the idea of a general set-aside has been fully explored? I find it difficult to see how it could be applied only to arable lands. I cannot agree that set-aside and stabilisers are complementary. If we set aside agricultural land, incomes to farmers throughout Europe will decrease and, therefore, producer prices will have to rise. Stabilisers would do exactly the opposite, so they are not complementary.
Mr. MacGregor: On the first point that my hon. Friend raises, I know exactly what he has in mind—the difficult problem which I think will increasingly exercise our minds about the impact on other areas as there is pressure to reduce production in some sectors. As I have just said, this is a point that we shall think about a great deal more over the next 10 years, but the answer is that at present it is not being discussed in the Council because, as I am sure my hon. Friend will recognise, to start having detailed discussions on set-aside for all arable land is a major advance compared with where we were a short time ago. We will have to move in that way.
I also thought it right to report to the House in detail on set-aside because it is an interesting development in the Community. I must repeat that we are still at an early stage and no decision has been taken. I cannot yet say in what shape, when or whether a set-aside scheme will come forward.
On the second point that my hon. Friend made, again I understand why he puts it forward, but he must see that the immediate and urgent need is to contain agricultural expenditure and the explosive growth, for a reason that I will come to. I do not think that set-aside will achieve that quickly enough. So we need stabilisers, for the reasons that I am about to give. On the other hand, I believe that we need this complementary measure. That is why we are working it up to deal with the problems that farmers face as there is downward pressure on incomes and production.
The Community document deals with stabilisers in particular and sets down the specific measures for their introduction into the various commodity regimes. I hope that it will be for the convenience of the House if I go through only the most important items, listing briefly the proposal and in each case the United Kingdom position. First I must say what our objectives are on stabilisers. It remains our firm objective in these negotiations that we should secure effective stabilisers. They are in the common interest of farmers, consumers and taxpayers. That means that they must be specific, workable and legally binding, they must apply to the full range of products, they must be fair and non-discriminatory, they must deal with the problems of surpluses and they must bring about greater budgetary discipline.
First, on cereals, despite a number of harvests of less than average size—we are all aware of the problems in many parts of the country on the harvest this year— Community stocks of cereals are still very substantial. About three quarters of the total support expenditure on cereals of about 3·7 billion ecu is spent on export refunds to enable sales on to the world market.
The proposals provide for the introduction of a maximum guaranteed quantity for cereals which, if exceeded, would trigger corrective measures. Under the Commission proposals—the presidency is suggesting
196
some variations—these would involve one or a combination of a price reduction, an increase in co-responsibility levy and a reduction in the intervention period. In the first year, the adjustment to prices and co-responsibility levy would be limited to 5 per cent, and thereafter in second and third years to 7·5 per cent. Both the Commission and the presidency are proposing a figure of 155 million tonnes for the maximum guaranteed quantity for 1988–89.
We are concerned that the limits on the extent to which prices are to be cut when there is over-production are too restrictive, particularly in relation to the limit in the third year. I say clearly that we are also opposed to the use of the co-responsibility levy as one of the corrective measures, but the problem—I must be honest with the House—is that we are very much in a minority in our opposition.
I have already drawn the attention of the House to the fact that production of rapeseed is up 65 per cent, this year. The Commission is putting forward a formula that, if production goes on rising at anything like that extent, would involve significant cuts in price support. There is considerable opposition amongst some member states, but that formula, or something very like it, is essential to effective expenditure stabilisation in this sector, given the current dramatic explosion of production. Even if the new Commission proposal were to be accepted, the support expenditure—the taxpayers' contribution—to the total oilseed sector next year would be 1·9 billion ecu, which is a very substantial advance on where it has been in recent years.
Still on oilseeds, there has been much less discussion of the oils and fats tax in recent days. Our opposition to that proposal remains firm.
For sugar, the Commission proposes the retention of the present arrangements, in particular the continuation of the special elimination levy which is designed to recoup the cost of surplus disposal on an annual basis. There is still a major dispute about where the levy should fall, with a number of member states wishing to see much more of it on A-quota sugar. We believe that the additional levy for recouping the cost of surplus should fall on the B quota. That is right, because the levy should fall on the countries and producers that are responsible for the surpluses. By and large, that is reflected in the B quota. So we have been strongly opposed to those who argue that it should be put on the A quota. I am pleased that so far we have got the Commission and the presidency both in line with our point of view.
On sheep, the documents before the House include both stabiliser proposals and the Commission's review of the regime. We are discussing only the former—stabilisers— in the Council at the moment, so I shall confine myself to them. The proposal is for the establishment of maximum guaranteed levels with proportionate reductions in price support taking effect if the flock size of ewes exceeds the 1987 level. I have been strongly opposed to two aspects of the proposals in this sector. First, the Commission and the presidency are proposing one mechanism for Great Britain and a different one for the rest of the Community. That is clear discrimination and is the only example of it in all the stabiliser measures. I have made it clear on many occasions that it is intolerable.
Secondly, the Commission has again proposed to limit eligibility for premium to the first 500 ewes on each farm or a headage limit of 1,000 in the less-favoured areas. I

197
have strongly opposed that, too. I am glad to say that, after many prolonged discussions we are now making headway in getting the Commission and presidency to accept that the proposal is not appropriate in a stabiliser mechanism. I was asked earlier what was causing some of the difficulties. There is a clear difficulty for us.
On milk, as everyone knows, we have had quotas since 1984, and the proposals include both stabiliser elements and a review of milk quotas. The Commission proposes the extension of quotas to 1991, the presidency to 1992, with continuing, but reducing, compensation. In common with the Netherlands, we believe that there should be further restrictions on the compensation measures beyond what the Commission and the presidency are proposing, not least because of the costs, and also because I think that it is a dangerous principle to suggest that farmers should be compensated regularly or continually for having to respond to the disciplines of the market that affect other economic activities.
There are two points not directly related to stabilisers on milk to which I should like to refer because, going round the country, I have found that there is a great deal of interest in them among farmers. The first is the proposal in the documents to have a change in the quota year for milk so that it would end in the August-September period. We have been very much opposed to that, because we think that it would have a very dangerous effect. It would mean that if people were running above their quotas in the trough there would be a further downward pressure on milk production. Therefore, at a time of the year when there is sometimes difficulty in milk supply and distribution, we would run the risk of reinforcing it. I am glad to say that it looks as though that is now coming out of the proposal.
Also, there was a proposal for compulsory national reserves of quota, which is also controversial among farmers and not really supported. Again, it looks as though that will disappear.
There are very major discussions going on on stabiliser proposals for wine and tobacco. In view of the time, I will not go into those in detail. They do not affect our producers; they are important to us as taxpayers, but not as consumers. We are talking about tobacco that nobody in this country smokes, and wine that nobody drinks, but they are important matters to us as taxpayers and therefore they are an important element of this discussion.
Finally, there are still a number of products, mainly Mediterranean products, where the proposals do not seem to us to be effective enough or where they lack precise figures or, indeed, where there are no proposals at all. I refer in particular to olive oil, cotton and rice. We remain of the view that there should be effective stabilisers across the board.
I have, of course, had to leave out a number of commodities because of the time factor, but I hope that I have covered the most essential ones. I would, of course, be happy to deal with any of the others if my hon. Friends or Opposition Members wish me to do so and if I am fortunate enough to catch your eye, Madam Deputy Speaker, towards the end of the debate.
I conclude with my remarks on stabilisers because they are at the heart of the debate. Everyone recognises that the current level of surpluses cannot be sustained, not least in the context of world surpluses. Everyone recognises the
198
costs to the taxpayer—I remind the House of the figure. We are currently spending in the Community £12·5 billion a year simply on the storage and disposal of surpluses. That cost to the taxpayer is a gross misuse of resources and does not benefit the consumer.
Everyone subscribes to the view that we need now to make a reality of our rhetoric about stabilising agricultural subsidies. All Ministers know in their hearts that we must correct this continued weakness of the CAP to ensure its future health. The Agriculture Council was asked by the last European Council meeting to take the additional measures necessary to keep the level of agricultural expenditure within the budget framework. It also stated that these measures must ensure that budgetary discipline is fully observed. To settle for sham stabilisers now would help no one. They certainly would not turn the key to success at the Copenhagan summit, which is very much in the interest of the whole Community.
It is important for our farmers, above all, that the stabilisers that we agree to fulfil the mandate that the European Council gave us. I feel strongly that it is not in our farmers' interests for the present uncertainty to continue. It is not in our farmers' interests for us to run the risk of having to take much tougher and unpredictable decisions months and years from now, if the budget blows apart and the money is not there any more because we did not get greater budgetary disciplines into the CAP quickly enough. That is why I ask the House to support the motion and to endorse the Government's objective of securing more effective control now of agricultural expenditure. We do so because, in the concluding words of the motion, it "is in the interests of the farmer, the taxpayer and the consumer."
Madam Deputy Speaker (Miss Betty Boothroyd): I should draw the attention of the House to the fact that Mr. Speaker has selected the amendment in the name of the Leader of the Opposition.
7.37 pm
Dr. David Clark: I beg to move, to leave out from 'aids' to the end of the Question and to add instead thereof:
'believes that the current expenditure on the Common Agricultural Policy which is currently costing the average household of four persons £ 11·50 per week is unsupportable; and accepts the concept of meaningful stabilisers as an interim measure to enable the Council of Ministers to work out a suitable means to reduce surpluses and to devise a lasting and rational agricultural policy for the European Community'.
I speak for the whole House when I thank the Minister for taking the trouble to fly from Brussels to brief us on this important issue. I know that I also speak for the House when I say that we doubly appreciate the fact that the Minister has been up all night and has a lot of work still to do.
From his report this evening, it appears that the right hon. Gentleman stood firm, and certainly as long as he stands firm, he will have the support of Opposition Members. I hope that that will give him reassurance and support when he goes back to conclude negotiations on behalf of the farmers, the consumers and the taxpayers of Britain.
Even to the uninitiated, the common agricultural policy is a farce. To those of us who follow the detailed machinations of the CAP, it is a ludicrous and highly expensive farce, and what is more, it is grossly unfair. The documents that we are debating and that the Minister has

199
discussed with his fellow Agriculture Ministers offer the best opportunity for the EEC to remove this farce once and for all and to replace it with a meaningful and sensible system of agriculture.
Before I go into the precise details of the documents that we are discussing, which are extremely wide-ranging, perhaps it would be helpful to remind ourselves of the cost of the agriculture policy, not only for the United Kingdom, but for Europe as a whole. Only when the true cost of the CAP is realised by the general public will demands for reform become unstoppable.
This year, the total cost of the CAP is a staggering £17·2 billion. I understand that it is proposed that that should be increased, unless we are successful in our reforms, to about £20 billion in the coming year. As we state in our amendment, the cost of the CAP to the average household of four persons in the United Kingdom is £11·50 per week. That is made up of £8·25 on the family food bill and £3·25 in tax. Calculated in another way, that means that, for every man, woman and child in the United Kingdom, we pay £149·50 per year in agricultural support.
Of course, the cost of the common agricultural policy is borne not only by this country but by other member countries, although not to the same extent because it must be remembered that we pay 40 per cent, of the net cost of the CAP. Indeed, it was recently pointed out in Germany that every dairy cow costs the Community £480 in subsidy.
Every person in the Community pays £34 per year for the disposal of surplus food. The overwhelming tragedy is that so much of what we produce is unwanted and unsold. As the Minister rightly said, we currently spend £12 billion on the storing and disposal of surplus food. That is two thirds of the total EEC agriculture budget and, staggeringly, half of the overall EEC budget. Those are not my figures, but the Government's and were put forward recently by the Foreign Secretary in a powerful address in Bonn. There is no dispute in the House about the cost of the CAP.
The fact that we spend so much on surpluses, storage and disposal means that nowadays farmers are not the sole beneficiaries of the CAP. The main gainers are those who run the intervention stores and arrange for the disposal of surpluses. We maintain that that is ridiculous. To make matters worse, we not only pay through the nose to produce the surpluses but then threaten to wreck the economies of many Third world agriculture producers by dumping our surpluses on the world market. We believe that that is unsustainable.
To go further, many of us find it ironic that we in the West pay large sums of money to support the CAP to ensure that any territorial ambitions of Warsaw pact countries are dissuaded, but at the same time we sustain their populations by selling them our surplus agricultural produce at knockdown prices. Last year, the European Commission sold more than 7 million tonnes of cereals to the Soviet Union at subsidised prices of £30 to £40 per tonne, whereas the intervention price for wheat in the United Kingdom in 1986–87 was £112. Similarly, European consumers paid more than £1 per pound for butter but the Soviets ate the same butter for 38p per pound. Therefore, we are not only providing Soviet citizens with bread, but are giving them the butter to put on it. That is completely ridiculous.
The CAP has been a failure in another sense. One prime objective of the treaty of Rome was to retain employment in agriculture and in rural areas, but it has manifestly
200
failed to do so. In the 25 years since 1960, agricultural employment in the nine longest-standing EEC member countries fell from 17 million to 7 million. In Britain alone, last year 13,000 jobs were lost in rural areas, mainly in agriculture. That is a terrible price to pay, but the position could be even more serious than that.
A recent study of the wider effects of the common agricultural policy by the Bureau of Agricultural Economics and the Centre of International Economics at Canberra suggested that 1 million jobs have been lost in other sectors of the European economy because of the common agricultural policy. In Britain alone, academics estimate that 450 jobs have been lost as a result of the CAP.
It is claimed that, overall, the CAP has reduced Britain's manufacturing output by 2·5 per cent., its services output by 3·1 per cent, and the total real income of the citizens of this country by 0·6 per cent. In essence, the experts are arguing that the removal of that £11·50 per week from each family budget reduces the opportunity cost of purchasing services and manufactured goods and, in turn, causes job losses. Furthermore, the £7 billion, which is the full cost to Britain of the CAP each year, has been diverted from more promising investment in manufacturing and servicing, thus adding to the job losses that I have already outlined.
I hope that the facts that I have given the House this evening show why the Labour party believes in the need for a fundamentally different approach to agriculture in the Common Market. It is reassuring that, at long last, our criticisms of the CAP have been recognised, not only by the Government but by increasing numbers of people in Europe. I only hope that those people, to whom the Minister rightly referred, are sincere in their realisation of what is achievable, because in Strasbourg last week I experienced fine rhetoric but little real determination to tackle the problems when national interests are at stake.
However, at least proposals are now before the Commission and the Council of Ministers which, however inadequate, state that something is fundamentally wrong and recognise that a change of direction is needed. As the Minister quite fairly elaborated, the chosen means that the Commission, and apparently the majority of member Governments, favour for tackling the problem is that of stabilisers. However, stabilisers are just another piece of European jargon which confuse the poor taxpayer. In essence, they are merely a mechanism that is designed automatically to reduce prices to farmers when production exceeds a certain level. In other words, they would in theory put a cap on agricultural expenditure.
It seems to us that that objective is correct. If stabilisers are not only a real mechanism to reduce the surpluses that are already in store, but also a meaningful way to reduce the production that has led to those surpluses, they have the support of the Labour party. However, many of us are still sceptical, and suspect that some of the Minister's European colleagues still regard stabilisers as merely cosmetic, to make the CAP more attractive to the consumer. There is a basic difference of approach, and we cannot accept the approach of those who argue for stabilisers as cosmetics. As the Minister stated, they must be real and effective.
I would be grateful if the Minister could give us some further information regarding the Government's position on stabilisers. On 13 November, in an article in Farmers Weekly, the Minister said that, although he had some

201
particular difficulties with some aspects of stabilisers, he supported their approach and believed that they meant a better chance of stability. In essence, he has repeated that sentiment today. Such sentiments were expressed by the Foreign Secretary in Bonn when he said in praise of the new proposals:
"quotas have enabled milk producers to plan their production. Stabilisers for other commodities, adapted for each production regime will do the same."
The Government appear to have faith in stabilisers.
However, we were all a little disconcerted—I was rather surprised that the Minister did not dwell on it— that the Prime Minister appears to have a novel idea. In the Financial Times on 23 November, she is reported as saying that she can support the system of stabilisers only if they are adopted in an enforceable way. Those sentiments have the support of the Labour Party. Her favoured scheme—we are led to believe that she put it to Mr. Chirac on 22 November—is what she calls the "clean slate approach". She described this approach very precisely:
"Each of you agrees on your national budget to take and accept the responsibility of a clean slate. Each of you writes down what we have got and takes responsibility for disposing of it without the writing down or costs of the disposal coming on to the CAP."
When the Minister replies, I hope that he will mention that complementary approach—that is how I see it—to stabilisers. The general theoretical approach adopted by the Prime Minister has merit in that it is a step towards the repatriation of a certain amount of agricultural responsibility to member nations. That has long been argued by the Labour Party and repeatedly advocated by my hon. Friend the Member for Pontypridd (Mr. John), my predecessor as Labour's agricultural spokesman.
The Prime Minister's proposals raise many issues that need to be answered. I wonder whether the Minister can tell us how his fellow Agriculture Ministers have reacted. Were any nations prepared to support us and, if so, which ones? I wonder whether the Minister can advise us what the total cost of the clean slate scheme would be to the United Kingdom. I understand that, globally within the EEC, the cost would be something between £4 billion and £5 billion. I would be interested to know how the Prime Minister costed the clean slate approach for Britain. I am certain that, as a result of the thoroughness with which the Prime Minister goes into these schemes, she knows the precise cost to Britain. It would be extemely helpful to the House to know the details of that particular scheme.
How does the Prime Minister envisage each nation disposing of its surplus stocks? Does the Prime Minister appreciate there would be deep resentment on Opposition Benches and, I trust, on Conservative Benches, if stocks were simply dumped on the Third world. We have wreaked enough havoc in their economies. There are all sorts of difficulties and I would be grateful if the Minister could help by explaining some of the Prime Minister's novel approaches to solving some of the problems.
I am prepared to give conditional support to stabilisers as long as they are effective, but primarily we recognise them as a budgetary device. In practical farming terms, stabilisers have at least two major shortcomings. First, we know that farmers need to plan ahead. I believe that the present proposals for stabilisers would not persuade many farmers to cut production in the short term. Indeed, it
202
would be nearly impossible for them to do so, because much of the seed for the coming year is already in the ground. Secondly, my fear is that the reaction of many farmers will simply be to increase production, to reduce their unit costs and to maximise their income. That is a particular problem in cereal farming—the Minister paid much attention to that problem.
Therefore, the Labour Party firmly believes that stabilisers are not the panacea for the CAP, but can only be part of an armoury of weapons to attack the problem of over-production and accompanying surpluses.
Mrs. Margaret Ewing: It has been generally agreed by many farmers that the quota system has been beneficial. Does the hon. Gentleman agree that there is a third disadvantage with the stabiliser system regarding farmers in the less-favoured areas? The application of across-the-board stabilisers would be disadvantageous to those farmers' interests. Does he agree that there is a case for looking at a variable application of a quota system within the EEC?
Dr. Clark: The hon. Member has raised a pertinent issue regarding income support for farmers in the upland areas and I shall consider that important matter later in my speech.
Let us consider a number of the proposals. We appreciate that sugar is perhaps one of the most sensitive regimes in the EEC. The Community is a massive over-producer of sugar, and we have a major impact on the world market. Furthermore, the Opposition—I must get this on record—are extremely conscious of our commitment to the developing nations and our agreement with the African, Caribbean and Pacific countries. Therefore, the Labour Party broadly supports the proposals to retain the current sugarbeet quotas in the United Kingdom and trust that the Government will ensure that the margins for the sugar cane refiners are sufficient for them to handle the ACP production. We believe that that is extremely important for both branches of sugar production.
Milk is an agricultural regime in which there has already been a serious attempt to tackle over-production, and with some success. We were extremely critical—I believe rightly so—of the way in which quotas were initially administered, but basically we support the concept. The manner in which the quota system has been applied on a national basis makes sense in Britain, where the Milk Marketing Board has an effective distribution network. However, we are aware that serious difficulties have occurred in the uniform supply of milk, with the result that various creameries and cheese-making plants have been forced to close.
Only this week, the Dairy Crest creamery in the constituency of my hon. Friend the Member for Carlisle (Mr. Martlew) had to stop production temporarily. My hon. Friend the Member for Cunninghame, North (Mr. Wilson) has, on a number of occasions, drawn the attention of the House and myself to the position of the cheese-making plant on the Isle of Arran. I do not need to spell out the irony of the difficulties experienced in Caerphilly regarding cheese making. However, I understand that cheese production is now going ahead in Caerphilly.
I believe that it should be possible for the Milk Marketing Board, the National Farmers Union, the

203
producers and the Ministry to get together to solve that particular problem. It is absolutely ludicrous that jobs are lost in areas where, often, there are no alternative jobs and milk is available. I urge the Minister to pay particular attention to the matter and try to do something to solve it—it may be solved even within the present regime. We support the present regime for milk quotas. We go further, because we believe that it should be extended for a further five years so that confidence can be built up in the dairy market and so that farmers can plan accordingly. We believe that that is a sensible approach.
Although we have endorsed milk quotas, we cannot, in any way, endorse the stabiliser proposal for sheepmeat. Indeed, the stabiliser proposal that causes us most concern is that for sheepmeat. We are conscious of the fact that sheep farming takes place on the lowlands as well as the uplands. We are also conscious that any set-aside scheme that would have the effect of moving sheep from the uplands to the lowlands would cause serious difficulties. I know that the Minister is aware of that and I hope he will take cognisance of it.
We are especially concerned about the upland areas, to which the hon. Member for Moray (Mrs. Ewing) rightly drew my attention. The upland farmers have benefited least from the common agricultural policy, and it is imperative that they are not penalised further. A recent letter in Farmers Weekly pointed out that some uplands farmers are on family income supplement, and that was confirmed in the answer to a parliamentary question that I tabled the other day.
We must ensure that the farmers who have done least well, and who often perform a very effective job for us, are not penalised. It should also be taken into account that many of the areas that they farm are greatly valued for their scenic and wildlife attractions, which they play a vital role in maintaining. I hope that the Minister will not completely rule out the notion of direct income support, although I note what he said, and I realise that he is in a negotiating position.
Let me return to the subject of sheepmeat, in which neither the United Kingdom nor the European Community is self-sufficient. We feel strongly that the attempt by British farmers, in particular, to meet the market requirements should not be penalised. The Minister has clearly said that there is straightforward, open discrimination against British sheep farmers in the stabiliser proposals. That discrimination must be resisted. I understand that, if stabilisers were applied, a reduction of roughly 7 per cent, in the income of sheep farmers would be required. The variable premium has allowed British farmers to produce lamb that has reached the market at high quality, and minimised the fluctuation of supply. That should be supported, rather than being phased out.
It is widely recognised on both sides of the House that cereal farmers, especially those farming extensively in eastern England, have been the principal beneficiaries of the common agricultural policy. They have also been the main destroyers of our countryside. It is they who have grubbed up the hedgerows, and who are applying the nitrogenised fertilisers which are storing up an environmental time bomb for the future. We can support, as an interim measure, the Commission's proposal for a production ceiling of 155 million tonnes throughout Europe. However, we are sceptical about the effect of any stabilisers in that sphere.
204
It is all too easy for farmers simply to maximise production, and thus maintain their profits in spite of the lower overall unit support. We appreciate that the large cereal farmers have had to capitalise very heavily, and we realise the pressures on them to follow that course. But we feel that there should be additional limits in the regime, certainly positive set-aside and probably compulsory; indeed, quotas may be necessary. As the Minister has pointed out, rapeseed production this year has increased by about 70 per cent, throughout Europe, in spite of considerable price reductions offered to the growers. That emphasises, if not proves, my point.
Can the Minister tell the House whether the global sum of 155 million, 160 million or 165 million tonnes will be broken down into national allocations? If not, what account has been taken of the variations in weather conditions between different nations? Weather conditions are often critical to the harvesting, as well as the growing, of cereal. For example, in 1986 a drought caused considerable difficulties in Spain, while we in northern Europe were able to produce a fairly good harvest.
I was pleased to hear the Minister say that there has been no real suggestion that the oil and fats tax will be introduced, and that the Government are opposed to it. The Labour party is utterly opposed to such an approach, and will support the Government in their opposition. As I am sure the Minister appreciates, the tax would put up the price of some margarines by nearly 60 per cent., and penalise the less well off members of our society. It would also be an added deterrent to those who are attempting to follow a more healthy diet.
Mr. MacGregor: For the sake of clarity, let me explain that, while we are absolutely opposed to the oil and fats tax, I did not say that it was being permanently excluded from the discussions. I said that it had not featured much in them recently. The proposal is still firmly established in the case of many other member states, although we remain opposed to it.
Dr. Clark: I thank the Minister for clarifying that point. I hope that he will return to fight the battle in the knowledge that he has the full support of every Opposition Member in opposing this particularly pernicious proposal.
Another document that we are discussing this evening deals with income aids, pre-pensions and the cessation of farming. This is an important aspect of the proposals for tackling agricultural problems in the years ahead. While I appreciate that these proposals are at an early stage of negotiation within the Commission, I wonder whether the Minister could deal with one or two points that arise from them.
I question the very concept of the proposals for the cessation of farming, as applied to Britain. Surely the objective should be to remove land from cultivation, and thus reduce surpluses, rather than removing farmers and farm workers from the population. Those of us who appreciate the beauty of the British countryside realise that much of it is the result of the work of farmers over many generations. We do not believe in a denuded countryside; we believe in a living countryside.
In some of the most scenic areas, we need the farmer working the land to retain the beauty and character that we appreciate so much, as well as retaining the viable rural communities with their schools, public transport and cottage hospitals. We reject the idea of encouraging people

205
to leave the land. That problem may have to be faced where there are very small units of production, but it is not a problem for us in the United Kingdom, and I hope that the Minister will not show much enthusiasm for such an approach.
If, however, an EC-wide scheme is agreed, will the Minister give the House a categorical assurance that not only farmers will be the beneficiaries, and that it will be remembered that agricultural workers may lose their jobs as well? They have been forgotten so often in the past. The Commission's proposals specifically mention that the cessation of farming is permissible, and I hope that the Minister will press the issue if he is forced to follow that route.
The Minister mentioned the environmentally sensitive areas scheme: indeed, he claimed that he was present when the notion was discussed here. I believe that it was originally discussed early in 1985, when we were discussing the Private Member's Bill that became the Wildlife and Countryside (Amendment) Act 1985, when we accepted the concept of paying farmers to farm in an environmentally sensitive manner, as is right and proper. We believe that there is considerable scope for not only increasing the number of ESAs, but also extending the concept to devise new and varied ways of supporting farmers who are prepared to follow low-imput farming practices. That would have the dual benefit of reducing production and making farming less harmful to the environment.
The idea can be extended further. Has the Minister considered the possibility of taking land out of production for longer than he is suggesting, to allow for the creation of new wildlife habitats and recreational areas? Bearing in mind the decimation that our countryside has suffered over the past 40 years from intensive agricultural practices, with a shift towards extensification, we now have a tremendous opportunity for redressing the balance between producing food on the one hand and farming in a more environmentally acceptable manner on the other.
The Agriculture Act 1986 requires the Minister of Agriculture, Fisheries and Food
"to…endeavour to achieve a reasonable balance between the …maintenance of a stable and efficient agricultural industry; the economic and social interests of rural areas; the conservation and enhancement of the …countryside…and the promotion of the enjoyment of the countryside by the public."
That is enshrined in statute and I hope that the Minister will take all that into account when he is devising his set-aside scheme.
We note that the Commission is devising a set-aside scheme which, as I understand it, is rather separate from the specific Government proposal on cereal set-aside. Would that effect the Government's proposal under their farm woodlands scheme, which is currently in another place?
The key to a set-aside plan is rather different from the Government's view. The Government seem to be following the path of a voluntary scheme and the Opposition are sceptical about the effectiveness of that voluntary approach. We are more inclined to the NFU's view that, for the scheme to be effective, it must be compulsory.
As I have said, the Community now has a tremendous opportunity fundamentally to reform the CAP. For too
206
long, the interests of the consumer have been ignored, although the consumer has paid heavily for the CAP. Michel Jacquot, the agricultural adviser to the President of the EC, recently said:
"European consumers must make their contribution to the support of the European producers."
The Opposition believe that the reverse is the case and the European producers have now to make their contribution towards the European consumers.
8.11 pm
Mr. Alick Buchanan-Smith: It is with some diffidence that I re-enter agriculture debates in the House after a period of absence. None the less, I assure my hon. Friends that during that time I did not entirely lose interest in, or concern for, what has been happening in the industry.
I confess, perhaps somewhat wryly, that, when I hear the hon. Member for South Shields (Dr. Clark) rightly complimenting my right hon. Friend the Minister on his fortitude in coming to the House to speak at both ends of a debate in the middle of negotiations, I can probably express sympathy with more feeling from actual experience. I join in complimenting my right hon. Friend not only on coming to the House but also on speaking with clarity and pointing out to us where the priorities lie in the crucial few days ahead.
We must remember that we are debating the CAP's future—my right hon. Friend touched on this—in the context of the present negotiations in the summit, but also against the background of the serious economic situation of British agriculture. I know that my right hon. Friend recognises that, and the House must also do so and make sure that that is put on the record on an occasion such as this.
The industry faces a difficult time economically, and has done so for several years. In some parts of Scotland, and in other parts of the United Kingdom as well, there has been an extremely bad harvest and I hope that in his negotiations my right hon. Friend will keep in mind the impact of that on ordinary average farmers, particularly those in the more difficult parts of the United Kingdom who are facing real problems.
I do not want to burden my right hon. Friend with problems that he knows and understands, but, in my part of Scotland, the North-East of Scotland college of agriculture has shown from a recent survey that more than half the farmers in the Grampian region of Scotland will not make a profit this year. We must also remember that that is against the background of a bad harvest in 1985, when 40 per cent, of farmers in that region also failed to make a profit and when 14 per cent, failed to make a profit last year.
One of the significant points to emerge from that survey is that many farms are surviving only as a result of the injection of outside cash. Perhaps I may wryly describe that as forced diversification. Often a wife takes another job or a part-time job or money is brought in from elsewhere. Therefore, there has been diversification, often as a result of necessity.
Mrs. Margaret Ewing: The right hon. Gentleman and I share similar concerns about the Grampian region and I am sure that he was as concerned as I was to read the report in yesterday's Aberdeen Evening Express that the National Australia bank is refusing to accept many

207
farmers' financial problems and to honour some of the debts involved. It reports that about five farmers in the north-east of Scotland have committed suicide because of their financial problems. I am sure that the right hon. Gentleman, like me, would ask the Minister, whom we greatly respect, to have discussions with those of his colleagues who deal with financial matters to ensure that appropriate steps are taken to enable our farmers to face their financial difficulties and to move forward with confidence.
Mr. Buchanan-Smith: The hon. Lady is drawing attention to a particular difficulty which has arisen because of the changes in banking groups. I hope that the Midland bank will deal sensitively with such matters, and that is a factor which needs to be taken into account. I rely not only on reports from colleges or anybody else, as my right hon. Friend knows, but on my first-hand experience and meetings with farmers and the NFU in the past 10 days.
I am grateful to my noble Friend Lord Sanderson for his visit to the north-east of Scotland, which shows the Government's understanding of the situation. I am also grateful to my right hon. Friend for his visit to Edinburgh on Friday, which the NFU of Scotland greatly appreciated.
We always come back, as my right hon. Friend did, to the fundamental problem of surplus. No one in the House or, indeed, in the industry—I compliment the industry on its responsible attitude towards the problem and its appreciation of the difficulties—would deny that we must tackle that problem. None the less, we must keep the matter in perspective.
It is always prudent, and it is in the interests of good housekeeping, to have some surplus for a rainy day. It is worth remembering that stocks are declining. As my right hon. Friend pointed out, if measures had not been taken, for example, on skimmed milk and butter since 1984, we would have been spending about £5 billion a year more. Therefore, progress has been made. The policy has not been a failure. The hon. Member for South Shields should talk to farmers in Europe to see how that has helped the standard of living in the countryside in Europe. There have been successes in that policy.
We must also remember that other countries, such as the United States, Japan and even Norway, to take one of the Scandinavian countries, support agriculture. Europe is not unique in supporting agriculture. I say that particularly to my hon. Friend the Member for Southend, East (Mr. Taylor), with whom I have debated this matter on many occasions. It is wrong to choose the CAP as an Aunt Sally to attack the concept of Europe, because as recent OECD and World bank studies have pointed out, many other areas support agriculture to an even greater extent than does Europe.
However, that does not help us to get away from the problems facing Europe in dealing with the surplus. We must make sure that other countries put their houses in order at the same time as us; otherwise we shall not achieve what we are seeking. I understand the policy that my right hon. Friend proposes to follow. Stabilisers relate the price to over-production. They bring home the message of what over-production means, and they influence farmers' decisions.
Turning to the point of the motion this evening, I hope that my right hon. Friend will keep the interests of farmers
208
in mind. They will not put up with any sense of unfairness. We must ensure that anything that is applied to control the surplus is applied fairly. Some of what happened with the green pound last year—it is rising again a little now— left farmers with a genuine sense of unfairness.
I hope that, in relation to the green pound or anything else, my right hon. Friend will ensure fairness throughout. I understand the frustrations that he must feel in the negotiations because he is seeking a solution that deals with some of the roots of the problem. Some countries, such as Germany and France, dwell far too much on the immediate political domestic issues, without dealing with the real problems that face the Community. They should pay tribute to my right hon. Friend for approaching the subject on a Communitywide basis, which is what Britain is trying to do in order to get to the root of the problems.
Equally, I say to my right hon. Friend that, despite our obsession with the budgetary problems—we are right to be obsessed with them domestically—for the sake of credibility we must keep in mind the longer-term problem of reducing the surplus. Merely solving the budget without dealing with surplus production will not properly and effectively reform the CAP.
I have three matters of concern. My first concern is that it is important to maintain a distinction, when attempting to reduce the surpluses, between price policy such as stabilisers, and other methods of policy such as production controls, extensification and so on. Here I refer to what my hon. Friend the Member for Norfolk, North (Mr. Howell) said earlier. Many farmers embraced milk quotas; they thought that, on the basis of the Canadian experience, there would be an improvement in price, but that has not happened. With the withdrawal of intervention from skimmed milk, and more restrictions on butter, a double policy has been applied—a production control in quotas, and price measures biting through changes in the intervention systems.
I agree with my right hon. Friend that stabilisers and all the other measures are complementary. He is right to use both types of measure, but it is important, when setting them out, to define which ones are for what purposes, so that farmers know what is happening and their expectations are not raised and then dashed. I know that my right hon. Friend will see to that, as he has done in the past.
Second, among a range of other measures, the hon. Member for South Shields (Dr. Clark) referred to income support. That is helpful and necessary in a period of adjustment. A number of suggestions have been made, such as alternative occupations and diversification grants of one sort or another for which, in Scotland, my noble Friend announced a £3 million injection. However, those grants provide only about 25 per cent, of what farmers may have to invest—they have to find the other 75 per cent.
Those farmers are in areas that are strapped for income anyway. Where will they find the 75 per cent, to take advantage of the diversification programmes that my right hon. Friend has mentioned? Do farmers have the necessary business skills or experience for other occupations? They must be careful about going into some of the schemes, because they could burn their fingers. Advice and help should be given as part of those schemes at a time when—to be slightly cynical—the Government

209
are withdrawing a lot of free advice to farmers. If my right hon. Friend is serious about trying to help, there must be more positive financial and advisory support.
Third, the concept of alternative uses for land—extensification—is not an easy panacea. Forestry or other uses for land require new skills and forms of management that not every farmer will have. I question whether the level of grants is high enough. The cereal price must be below £95 a tonne to make the grants a worthwhile incentive to take good land into forestry.
As regards set-aside, I say: watch carefully the experience of the United States. Set-aside was not the success that many have claimed. Production did not fall in the same proportion. Fifty-five per cent, of the benefit went to about 10 per cent, of the farmers. At the end of the day, we come to the crucial problem of what I call reentry. We still have that problem for quotas on milk, and no one has tackled it yet. We keep putting off the day when quotas may come to an end, and what do we do then? Quotas were introduced with no thought for the problems of re-entry. Similarly, I urge my right hon. Friend to recognise the problem of re-entry if set-aside is adopted. What do we do when the policy ends, and what will happen to the land then?
It is important in a debate such as this to explain what direction I believe we should go in. Many of the proposed measures are good, but my right hon. Friend and the House will realise that I feel they should be better directed and co-ordinated. Ultimately, we must reduce surplus and simplify the whole matter. To reduce surplus we must take good—not just marginal—land wholly out of production. That is the only way in which to reduce surpluses and it is why set-aside is not the answer that many believe it to be.
We must seriously examine how to take more good land out of production. At the Oxford farming conference in January this year, Maitland Wackie from Aberdeenshire made a speech on those lines. Many people ridiculed it in the press and subsequently, which was wrong of them. I urge my right hon. Friend to take that speech and read it again. If we could take more good land out of production, particularly around our cities, where it can be used in an extensive way for recreational and other purposes, that would deal effectively with the heart of the problem rather than only its manifestations.
There are political objections—but what could be more Socialist or interventionist than the present quota system? On this point, I have some sympathy with the hon. Member for South Shields; if we are to have set-aside, we should seriously consider making it compulsory if it is to be effective, and not rely on a voluntary scheme.
To simplify: putting a capital sum into bringing land out of production could yield great savings in revenue in future years. If, for instance, across Europe we agreed to spend £5 billion a year for several years to take good land right out of production, which is roughly a third of the CAP budget now, and if that good land were valued at £l,000-plus an acre, each year we could take about 4 to 5 million acres of land out of production. Set against that the cereal surplus, which is equivalent to 5 million to 7 million acres, and we have the germ of an idea—although I admit the figures may be simplistic. Nevertheless, I believe that the idea should be examined.
210
My right hon. Friend is tackling these problems much nearer the source than we have done in the past. I wish him well in the negotiations, and I beg him not to lose sight of the ultimate objectives—reducing production, being fair to British farmers and, by not using a broad range of measures and firing a lot of shot in the hope that some will hit the target, dealing with the fundamentals and not only the manifestations of the problem. I wish him luck.
8.29 pm
Mr. Geraint Howells: We are well aware that the young Minister is sincere in his deliberations. He is convincing at times and very persuasive in his approach. I thank him for coming back from Brussels to open this debate and, I hope, to make the winding-up speech. I hope that he will be enlightened by the comments of hon. Members and I wish him the best in his negotiations on his arrival back in Brussels. I am sure that he will agree that British farmers cannot be blamed for feeling that their industry is under siege.
In its determination to reduce surpluses and bring spending under control, in the past few years the EC has taken measures that have had a tremendous effect on British farmers. Those measures have rocked the agricultural establishment to its foundations. Agriculture has always prided itself on its efficiency and has tried to respond to the Government's encouragement to produce sufficient food from our own resources. It is now faced with penalties and by now most farmers have had to come to terms with a seriously reduced income. For many farmers it is now more a matter of survival than of making any kind of decent living. For many small producers—I include many Welsh farmers in that category—continuing decline will mean the end of the road for many, not only in Wales but in other parts of Britain.
In my discussions with the farming unions, I have found agreement that the weakening of support for the livestock sector will have a serious effect in hill farming areas. As a Welshman, that matter is of special concern to me. It is right that there should be some rationalisation of the present situation where production far exceeds demand, but my worry is that solutions not suited to British needs will be hurried through without enough thought for the consequences to the industry and to the rural communities that it supports. For example, I wonder whether enough consideration has been given to marketing and to reducing stores in intervention by using them to help the Third world.
I hope that in his wisdom the Minister will persuade the Leader of the House and others to have a debate on the intervention system and on the marketing of surpluses in the Community. We have not debated those topics for at least 10 years. If we improved our marketing from within the Community, we would not have the surpluses in many commodities that we have today.
Hon. Members were talking about beef in intervention. The amount of beef in British intervention stores has remained at about 52,000 tonnes each month this year, and the level has varied only slightly from month to month. The intervention people at Reading told me that all the beef in British intervention stocks is home-produced and of good quality. If we had done away with some of the intervention schemes that we have in Britain, all that beef would have been eaten by British consumers. We have been hoarding beef and other commodities for far too long

211
in the Community. I hope that we will have an opportunity to debate marketing, surpluses and the needs of the Third world in the near future.
I know that it is fashionable in a debate of this kind to criticise and deride the common agricultural policy. Hon. Members have made much of the excess expenditure on agriculture and have produced all kinds of statistics to underline their long-cherished prejudices. They give a distorted picture of the industry and of the effect of the common agricultural policy on our total national budget. Therefore, I feel perfectly justified in quoting some statistics that hon. Members may have read some time ago in the Farmers Weekly. Those statistics put the whole thing into the correct perspective.
One interesting quote says:
"The UK spends about £16 bn a year on education".
There is nothing wrong with that. It goes on to say that we spend
"£18 bn on defence".
That is debatable and arguable. It says that each year we spend
"£44·5 bn on social security".
I wonder whether that is due to Government policies that have led to a high level of unemployment. The quote says that we spend "just £2·2 bn on the CAP."
For that amount, the whole of Britain is sure of being fed.
I agree that the common agricultural policy must be reformed, but it must not be abolished or destroyed in the near future. America spends £6,500 in support for each of its farmers, in Japan, the amount is £2,400 but in the United Kingdom it is only £1,366. To put it another way, the United States pays out on agriculture £72 for every man, woman and child in the population; Japan pays £79 per person and the EC stumps up only £45 a head. I agree with the conclusion of the Farmers' Weekly that £45 a head is a price worth paying for a stable supply of food, employment for 10·6 million farmers within the Community, and support for a way of life that protects the environment and gives support to the rural community.
Sir Richard Body: There is a fallacy in those figures in the Farmers' Weekly. They take no account of the indirect support from import levies, and the European Commission says that that is worth £3,000 million.
Mr. Howells: I take heed of what the hon. Member for Holland with Boston (Sir R. Body) says. I know that he is an anti-Community man, but I admire the way in which he advances his point of view, and I respect what he has just said.
The Prime Minister is selling Britain's farming short when she attacks agricultural expenditure in the way she does. Her insistence on seeing a restriction placed on farm spending before any budget agreement could well lead to another crisis in British farming. I seriously question her intentions towards one of the most efficient industries in Britain. I fear that the imposition of the stabilisers, applied without efficient consideration, could easily disrupt the industry, without producing any beneficial effects. They are designed to drive farmers or producers out of business by drastic price cuts. No one can deny that that will inevitably lead to a depression in land values.
As the National Farmers Union correctly pointed out, this will encourage farmers still in business to purchase any land that becomes free and to continue to farm it at a lower
212
level of fixed costs. Production will continue at the same level, the measures will not have the desired effect, and many farmers will have suffered in the process.
Mr. Teddy Taylor: The hon. Gentleman says that the proposals are for drastic price cuts. Can he tell me where in the papers that are before us there is any evidence whatever of drastic price cuts?
Mr. Howells: The hon. Member for Southend, East (Mr. Taylor) will have to wait for only a few months to find out what the cuts are. I hope that the set-aside scheme mentioned by the Minister will be sucessful. I wish him well in his negotiations. The only two ways in which we can improve matters, apart from marketing, are to pay farmers for what they produce or to pay them for not producing. The set-aside scheme could prove workable and I hope that that will be the case in the years to come.
I am a sheep producer and I know that many sheep producers in various parts of Britain are delighted to hear the Minister's news. Many sheep farmers are worried that, unless grain growers' land is set aside, many more sheep will rear lambs in the lowlands and on the east coast. I believe that that is a step in the right direction.
We are fortunate that we have had a deficiency payments system for sheep for the past 40 years. Whatever views we hold, it has been successful and has returned a reasonable income to both lowland and hill farmers. I hope that the Minister, in his wisdom, will ensure that we retain that system. The only advantage that the annual premium system would appear to have for British sheepmeat producers is that, in the absence of a variable premium, there could be no clawback on sheepmeat exports to the continent and that the export trade would flourish, given unhindered access to markets such as France. Will the Minister give an assurance that French farmers are willing to abolish the clawback at the negotiations? 1 doubt that very much. If they are not, I ask the Minister not to give in to French requests.
I am also concerned about the suggestions and proposals to limit the payment of the annual ewe premium for the first 500 ewes on lowland farms and for the first 1,000 ewes on holdings in less-favoured areas. I know that the Minister will stand up to his counterparts in Europe and ensure that that clause is not agreed.
It is accepted that the United Kingdom has been a major beneficiary of the regime and that until recently the vast proportion of expenditure under the sheepmeat regime has been paid to the United Kingdom. Rightly so, as there are many more sheep in Britain than in other parts of Europe. The United Kingdom has by large the largest national flock to support. The percentage of support expenditure to the United Kingdom is declining. It must be put in perspective. In 1981, 97 per cent, of the sheepmeat regime expenditure was to the United Kingdom. By 1985, that had declined to just over 70 per cent. With the entry of Spain and Portugal into the Community, it is estimated that the level of expenditure to the United Kingdom will continue to decrease to around 40 per cent. That is a step in the right direction.
Were it not for the sheep industry, vast tracts of the hill and upland areas would become further depopulated and seasonal employment opportunities would greatly diminish. I hope that the Minister will heed the views of the Secretary of State for Wales, who is responsible for Welsh agriculture and who is in favour of retaining the

213
present sheepmeat regime. I hope that the Minister will be able to persuade others within the Community to continue with the present scheme. Is the Minister in favour of retaining the sheepmeat regime in its entirety?
After what we have heard tonight, I also hope that the Minister will give an assurance to farmers that their incomes will improve during the next 12 months. Finally, what are the Minister's views and plans to try to curb the intervention system?
8.43 pm
Mr. Robin Maxwell-Hyslop: Madam Deputy Speaker, I only want to cover some aspects of what the Minister has drawn to the attention of the House in his speech tonight. I preface that by saying how grateful I am as well that he has come back to the House, after extremely arduous negotiations, to open, listen to and conclude this debate. May I also say how much I appreciate the fact that, shortly after taking office, he made time to see representatives of Devon NFU, the largest county branch in England. That was greatly appreciated too.
The warning that I want to share with the House and with my right hon. Friend is a serious warning against believing that one changes cause and effect by giving something a different name. I was elected in 1960, and in the early 1960s we saw the utter failure of the policy which was described as a "standard quantity" policy. I have been unable to discern, but I would be grateful if my right hon. Friend can illuminate, any essential difference between the "standard quantity" policy which was such a failure in the early 1960s, and the "stabiliser" policy which is now to save us all from financial destruction. The essential fallacy of the standard quantity system was this: it did not bite at the individual producer and it was still advantageous to the individual producer to beggar his neighbour by increasing his output.
Mr. David Curry: There is no deficiency payment in a stabilised system. There was a deficiency payment in the central part of the old standard quantity.
Mr. Maxwell-Hyslop: No, the essential of the standard quantity system was not a deficiency payment. The essential ingredient of it was that the payments should decrease once a standard quantity had been exceeded. That was the essential. That there was a deficiency payment system is true whether or not one has standard quantities. Standard quantities were a quite separate item of policy, free-standing on their own. They did not depend for their existence on a deficiency payment system, nor does the stabiliser system, as it is now called, depend on the deficiency payment system, because it is not there. They are both, as I understand it, the same, and they do not depend on the deficiency payment system.
The problem is this: where one has a standard quantity system—and let us call it that because that is what it is—one is endeavouring to contain expenditure without containing output, because it still pays the individual producer to spread his costs over a greater number of units. That is the fallacy of it. It only reduces production at the moment when individual producers become insolvent and go out of business and nobody else takes over their productive resources and continues to produce
214
the same commodity from them. That is the fallacy of the standard quantity system. Do we have to suffer the disaster of learning the same lesson over again? This country, and now the EEC, ought to be able to have a long enough memory to remember when systems have demonstrably failed and why they demonstrably failed.
The hon. Member for South Shields (Dr. Clark) finished his speech from the Opposition Dispatch Box almost with a throwaway line by saying that, of course, at the end of the day we may have to come to quotas. Well, if we are going to come to quotas, why leave it until the end of the day? There has been a considerable success with the milk quotas. But how much greater a success it would have been if they had been brought in when some of us, myself included, were recommending them in the late 1970s, when producers could have had a quota of more than 100 per cent., and when the introduction of quotas would not then have produced disaster for those who were in the middle of expansion schemes, having committed the capital but being unable to generate the output, because of the truncation of that expansion, to service the capital that had been invested in it.
No, if the logic of events and the message of experience is that only a quota system can contain budgetary costs—which is one objective—sustain producer incomes rather than the incomes of those who are storing excess products—that is the second one—and thirdly prevent gross disruption of the sole source of income of many Third-world countries—I think that that is a third objective which we ought to sustain—if the lesson of experience and the logic of events is that, why wait until we are into even grosser over-supply before introducing quotas? They do not become easier to introduce by postponing the moment. If we have learnt nothing else from milk quotas from the fact that they do achieve their objectives, it is surely the earlier the better, not the later the better.
The other lesson that we surely ought to have learned is that, once one has put quotas on one type of output, it will have a knock-on effect into others. First we saw it from milk into beef. Then, when the profitability of beef was virtually nothing, as far as possible a knock-on into lamb for those who could. Britain will soon be self-sufficient in sheepmeat.
What then? Where do we go from there? Is it not readily observable that the price for pig products and the price for chicken meat is the resultant of the prices for prime red meat? When those are depressed, there is depression in the chicken market and depression in the pig market. Unless when introducing one quota which is thoroughly justified by its results, as anticipated, one rapidly spreads that system before there are destructive knock-on effects, one will make it ever more difficult to introduce quotas— although to quote the hon. Member for South Shields (Dr. Clark), at the end of the day it may be necessary. I would say at the end of the day it will be necessary.
There is one final word I want to leave on this subject. When it is perceived by many, if not by all, that quotas are inevitable, what happens? We have a cascade of extra production to provide the most favourable possible base for the individual, and for each country, under the quota system. We saw the massive increase in milk production in France and in Eire, for instance, which I do not believe was unconnected with the fact that they saw quotas coming—just as we saw massive new fishing in the south-west by the Belgians and the Danes, who were not

215
traditional fishermen in many cases. Why? Because they saw fish quotas coming, and they wanted to establish the best possible base years for themselves when quotas came in.
Mr. David Harris: As my hon. Friend looks around Devon and Cornwall, will he accept that many fields are presently being turned over to corn precisely for the reasons he outlined? People wonder whether quotas are coming and they are putting those fields into corn. That is happening in counties which are not by any stretch of the imagination natural corn counties. That is happening precisely because, if quotas come in, the farmers will receive a good share.
Mr. Maxwell-Hyslop: That is so, and that is another reason for going ahead. That is why my right hon. Friend the Minister is rightly enthusiastic about set-aside. That is all the more reason for going for massive set-aside as quickly as possible, to prevent the establishment of false bases before quota systems come in.
Many other hon. Members wish to contribute to the debate, so I will confine my remarks to those. May I again say how grateful I am to my right hon. Friend the Minister. I cannot remember before in an agricultural debate a Minister personally opening and closing a debate. That does him great credit.
8.55 pm
Mr. Win Griffiths: I suppose that the one thing that we can all agree on is that if we were trying to devise an agricultural policy for the European Community, we would not start from here. Unfortunately, we have to.
Perhaps the problem is illustrated by the way in which the cereal regime was devised in 1961. In effect, the price determined then had nothing to do with market conditions or world market prices. It was simply a compromise between the high prices in Germany and the low prices in France. In one fell swoop, that resulted in an average increase in cereal prices of 23 per cent. For the French farmer it meant an increase of 37 per cent, in one year. That is the kind of problem that we face.
The motion refers to
"the Government's objective of securing effective control of Community agricultural expenditure."
It is a pity that the Government have not been pursuing that policy since 1979. If we compare expenditure on agriculture in the 1980s with expenditure in the 1970s we find that the average annual rate of increase in the 1980s is 50 per cent, higher than it was in the 1970s when we joined the Community.
Further to that, Britain's receipts from the agricultural funds have been growing twice as fast in the 1980s as in the 1970s. The Government's expenditure on agriculture has been increasing rapidly during the 1980s and in every year except 1981–82, according to the Government's gross figures, the amount of money that the Government spent on agriculture was more than they spent on regional industrial assistance.
I shall give an example. In 1979–80 the Government spent about £801 million on agriculture, whereas on regional policy they spent £628 million. In 1985–86 they spent £1,589 million on agriculture and on regional assistance they spent £732 million. There has been a grave and great divergence between what the Government are prepared to spend on agriculture and on trying to develop
216
our industrial economy. Because of the different financial years of the Community and Britain, I had to make some calculations of my own, but I think that they are roughly right, and certainly the trend of increased expenditure is quite clear.
The Government have been unable to do anything to bring CAP expenditure under control. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) said that in the late 1970s he predicted what would happen to the CAP and to the runaway expenditure. Many people in many parties have been predicting the same thing since the mid-1970s. What has surprised me is that neither the Government nor the farming community has been prepared to face up lo the challenge.
The objectives of the CAP were to achieve sufficient production, sufficient income for farmers and an attractive price for consumers. On one count, euphemistically speaking, we have been over-successful and we are plagued by the problems of that success. With regard to farmers' incomes, we must say that across the Community as a whole the policy has failed lamentably. Recently, The Economist quoted figures that three quarters of CAP spending goes to 25 per cent, of farmers living in the north and one quarter goes to 75 per cent, of farmers who live in the south. On average, farmers in the north receive 10 times as much income from the CAP as farmers in the south.
We have turned to agricultural stabilisers as a possible solution. One thing that we can say about them is that at least it is politically possible for them to be agreed in some form. As the Minister explained, a great deal of discussion must take place across the range of agricultural products. Nevertheless, the possibility of success must be there. Last week, the European Parliament passed a resolution that backed proposals in terms that would have been unthinkable about five years ago. There are still many preconditions in the resolution that might make it impossible for agricultural stabilisers to work properly.
The proposals consisted of 29 pages and 22 pages of tables of explanation in an abbreviated form, and the Commission published a press statement that was over 15 pages long summarising them. We must admit that, whatever system is introduced, it will be extremely complex. However, we have an example of where it has been done—milk quotas. There is some form of control covering half of CAP products and about two thirds of CAP expenditure.
It is estimated that, in 1984, over 1,000 million ecu were saved, in 1985 nearly 3,000 million ecu were saved, and in 1986 over 4,000 million ecu were saved. Over the past: two years, that represents about a 10 per cent, reduction in the agricultural budget. There has been some success. In the short term, because we seem to be reasonably close to agreement, stabilisers offer us an answer, but they can never be answers in the medium or long terms.
One matter that has not been mentioned in the debate, and which has already contributed to the demise of the common agricultural policy, relates to the technological changes that have taken place in agriculture. For example, the industrialisation of dairy production brought about increases that were never envisaged when the CAP was first delivered. We are already reading about further technological changes that could multiply production by 10 or 20 times in many agricultural sectors. That is why it is essential that, gradually—I emphasise the word "gradually", because the farming community needs some

217
protection—there must be a reduction of prices so that Community prices approximate to those that are obtainable on world markets. While that process is going on and while, undoubtedly, more quotas will be introduced, the quota system must have built into it a variable factor to take account of smaller farms and poorer land, particularly in peripheral regions and areas such as my own in west Wales.
Last week, the hon. Member for Esher (Mr. Taylor) said that the Milk Marketing Board told him that it had no problem in introducing quotas and achieving the necessary cuts. The Milk Marketing Board might not have had a problem, but farmers in west Wales, for example, have had an incredible problem because of the decision to make an across-the-board cut. More than anything else, that shows the need for a variable quota of, say, 2 or 3 per cent, for smaller farmers, rising to 18 or even 20 per cent, for farmers who number their herds in the hundreds. We need a variable system.
In the context of quotas, and the move towards a reduction in prices, I hope that the Minister will ensure that we have a system of income aids, whereby national Governments can make their contributions, with Community support going to those countries whose agricultural income might be below the Community's average.
The tax on oils and fats is still under discussion. I am glad that the Minister intends to fight the matter to the very end. I hope that he will give a further assurance that he will not accept it as a quid pro quo for other changes that may help to improve the common agricultural policy. It has not only price implications for oils and fats within the United Kingdom, but significant implications for world trade agreements and the current GATT discussions affecting agricultural prices.
Although Opposition Members broadly support what the Government are trying to do, it is a pity that they did not address the problem much earlier. They must bring their agricultural spending under control. I urge the Minister to consider the longer-term solutions that will be needed, because the complexities of introducing agricultural stabilisers and quotas will make it possible after a few years to find a means of getting round the system and will eventually lead to a breakdown in the system because it will be so difficult to administer.
9.11 pm
Mr. Teddy Taylor: As someone who is not directly involved in these matters and who does not possess other hon. Members' knowledge of them, I should like to ask the Minister a few questions.
I listened carefully to every word that the Minister said. I should like to hear his opinion of how his speech relates to the reference in the motion to the effective control of Community agricultural expenditure. Quite honestly, I am not convinced that the proposals before us and the Government's additional proposals will reduce Community expenditure. Many of us will want to be convinced that all these measures, discussions and papers are not simply a ritual to be gone through before we increase the EEC's resources.
The Minister must bear in mind that we went through all this before. In 1984, we had non-stop discussions about the reform of the CAP and a lot of talk about the magic
218
of quotas and how they would reduce expenditure. We also had a firm commitment that agricultural spending would be restrained. The Minister will be aware—he has admitted this—that since then spending on agriculture has rocketed. We are now spending £185 million every week simply to dump cheap food on the world market and damage the Third world. That compares with a figure of only £26 million a week in 1977.
The Minister must accept that quotas have not saved money. If he examines the figures he will find that that is the case. He can certainly say, like the apologists in the Liberal party, that under the system of milk quotas we are producing less milk than would otherwise be the case. However, he must face up to what has happened to land formerly used for milk and to the cost of buying out the farmers. In some cases, the land has been switched to use for beef production for a period and in Scotland it has sometimes been switched to cereals and other uses. When we add everything together, is there the slightest suggestion that real savings have been made?
The in word now is "stabilisers". It seems that stabilisers are the answer to all our problems. However, the Minister must give us some idea how they will save Community expenditure. Unlike the Liberals, whose policy appears to be to give a blank cheque signed by the Government to every farmer and to talk about the need for reform, the Government claim to be interested in saving cash.
However, we have had experience of a system of stabilisers in sugar production for many years. We have had A and B and C quotas. The C quotas simply fetch the price available in the world. The Community has operated the system for years, yet in spite of that policy the Common Market is now the largest exporter—or dumper—of food in the world. That is utterly shameful when one bears in mind the effect that that exporting activity is having on the poor Third-world countries. When the Minister says that stabilisers may be the answer to our problems, he should bear it in mind that we are not talking about a responsible Community seeking to contain spending or production but about a Community that has a blatant disregard for the poorest countries of the world, and is dumping massive quantities of sugar at crazy prices on the world markets, causing starvation, distress, misery and death in some of those countries.
What guarantee have we that, when we fix the levels for the so-called stabilisers, the same principle will not occur? The Minister has not given us the slightest indication that stabiliser levels or so-called production levels will be fixed at a figure that will not involve massive dumping on the world market. When we talk about the price of food, we must bear it in mind that the gap between our prices and those in the world market has been growing. Therefore, according to the Common Market's own consumer unit, the average family in Britain is paying an extra £13 per week—rather than the £11·50 referred to in the Opposition's amendment—because of the CAP.
I should like the Minister to say how one saves money on stabilisers if one still has to have export rebates available for food that is not taken into intervention. As I understand it, the principle of the stabiliser is that, when a certain level of production is reached, we will either not take extra supplies into intervention or we will reduce prices. The percentage mentioned in the papers, as the Minister well knows, is a maximum of 5 per cent. How will that cut production? How will it reduce expenditure?

219
When we look at the current balance sheet, we see that every week the Common Market spends £185 million on export rebates, but spends only £17 million a week on storage. Therefore, the main problem is not storage: the problem is the export rebates. If we are to take slightly less food into intervention stores owned by public authorities, where is the saving if the other food is simply sent to traders and agents and dumped on the Third world with export rebates? The Minister may find that if he closes the intervention stores less milk and beef will be produced because that has to go into cold stores. However, that would simply mean a shift to another area.
I hope that the Minister will give us some idea of how he thinks cash will be saved. That is the object of the exercise. I should like to say that I have confidence in the Government's desire to do so. However, we should bear in mind the devices that the Government have agreed to, simply in order to go beyond the spending limits. They adopted the metric year for expenditure by paying out one month late and taking the money one month early and they have ignored reports by the Court of Auditors saying that they are overspending illegally by transferring the cost of butter dumping to other Governments. That makes me wonder.
Will the Minister please tell us how on earth, on the basis of these proposals, he thinks that stabilisers will reduce Common Market agricultural expenditure? We have had promises and pledges before, but they were not fulfilled. I suggest that we should say no to increased expenditure and accept the fact that a sensible reform of the CAP cannot come out of the arrangement of the EEC where 12 countries sit round together. We should press the case for repatriation of agricultural policy, which would at least mean that we could offer some stability to our farmers, but not offer them a projection of expansion.
9.17 pm
Mr. Seamus Mallon: I realise that the North of Ireland has a separate Department to deal with agriculture, and I shall confine my remarks to the broad areas at which the Minister should take a close look.
The North of Ireland is in a unique position, because its agricultural economy bears no relation to that which we have been discussing today. A small percentage of the economy in England, Scotland and Wales is involved in agriculture, whereas it is 30 per cent, the North of Ireland. One is consumer-oriented and the other is producer-oriented. The agricultural economy in the North of Ireland is concerned with the needs of the producer. Those needs are heightened by the fact that we are talking about the sector of the economy with the highest unemployment rate in England, Scotland, Wales and Northern Ireland and the highest unemployment rate among EEC countries. In the past year, when unemployment was going down everywhere else, it was increasing in the North of Ireland. The agricultural economy in the North of Ireland has a serious built-in structural problem which cannot be put right simply by dealing with the edges. That problem will remain because of the curious way in which agriculture differs from that in other regions.
It was said earlier that there are no units in England, Scotland and Wales small enough to cause concern, but the average size of a farm in the North of Ireland is 42 acres, so we are dealing with a different situation. Problems in relation to milk quotas, stabilisation and subsidies may not be intensified here, but they represent
220
a substantial factor in the depressed economy of Northern Ireland. We must consider the poor economic circumstances in Northern Ireland in the context of the economic situation in the United Kingdom. The circumstances in the North of Ireland are unique and will require unique treatment if we are to cater for the built-in structural defect. I hope that the Minister will be able to deal with the problem and translate words into action.
The economy in the North of Ireland is collapsing around our feet. A stable agricultural economy is being disadvantaged because it is categorised with the larger farm units in England, Scotland and Wales. Commendable efforts are being made to introduce other forms of employment and Government training schemes. I make a plea for a new approach towards the retraining of those who were involved in agriculture, but who cannot now make a living wage from it. I ask the Minister to proceed as quickly as possible with the integrated rural development programme for Northern Ireland, which has been considered favourably by the Council of Ministers and the European Parliament, but which has not yet been adopted by the Government. The genesis of the rejuvenation of the agribusiness lies in that integrated rural development programme.
9.23 pm
Ms. Joyce Quin: Most British people welcome attempts to curb agricultural expenditure in the European Community and want to see a much greater impetus towards a far-reaching reform of agricultural policy. However, the road to reform has been long and stony. I am well aware of that, having had the not entirely enviable experience of being a member of the European Parliament's Agriculture Committee from 1979 to 1984. I remember the long, and unfortunately rather circular, discussions which took place there.
Stabilisers seem to be the latest in a series of Euro-words used to describe attempts to reform the system. I remember that quantum was discussed as a hope for the future, then co-responsibility levies, quotas and what was called, rather coyly, a prudent pricing policy. I hope that stabilisers will be more successful than what can best be described as the patchy effects of previous attempts, which have not cured the problem of surpluses. Unfortunately, that problem is still very much with us.
I am very much aware—I hope the Minister is too— just how powerful the farming lobby is in the European Community and how many of the measures that have been tried in the past have subsequently been nullified by other unfortunate decisions. Often, attempts to impose budgetary discipline in the agricultural sector have subsequently been nullified by foolish increases in the annual price review. I hope that that will not happen in future.
I also worry about the compensatory measures that farmers may call for which might create even further problems. The right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith) referred to forestry as one area where we are still in deficit. Much of our forestry is not viable without unjustified tax concessions and also can have the negative effect of spoiling the environment by insensitive conifer plantations in places which we hoped would remain areas of outstanding natural beauty. So that is not an easy answer to the problems of surpluses.
We have seen, of course, the problems now being created by too many farmers going into rapeseed

221
production, which has also had an effect on the countryside. We need to consider carefully what the deficit sectors are and look cautiously at the possibilities of expansion in those sectors in future.
The Minister should strongly resist any attempts to make countries outside the EEC scapegoats for problems which are of our making. I do not want to see further penalties imposed on New Zealand, for example. Obviously, we do not want developing countries to suffer even more from the problems of dumping on the Third world, which has been mentioned several times in the debate. We need a positive discussion with Third-world countries about stabilising world markets. We should not take action which will harm those countries further when they are still suffering from irresponsible decisions taken by the European Community in the past.
The way that agricultural policy has operated up to the present has had detrimental effects on many groups. Consumers have had to pay dearly because of the common agricultural policy, despite the fact that, as my hon. Friend the Member for Bridgend (Mr. Griffiths) mentioned, under article 39 of the treaty of Rome, reasonable prices to consumers were supposed to be one of the cardinal principles on which the common agricultural policy was founded. We have also seen the negative regional effects of the common agricultural policy, whereby wealthy agricultural areas have become even better off and poorer agricultural areas have seen their problems become even more grave.
While stabilisers are helpful, they should not be seen as an end in themselves. That is the purpose of the amendment tabled by my hon. Friends. We do not want stabilisers simply to crystallise the position. We also believe that they may be complicated to administer. We wonder whether the Minister will deal with that problem.
As has been mentioned by my hon. Friends the Members for South Shields (Dr. Clark) and for Bridgend, (Mr. Griffiths), we want to make progress towards longer-term and more fundamental reform, moving away from the guaranteed price system towards direct income aids to those who need aid and working towards a system which will benefit the Community as a whole.
Those are the long-term aims that we want to work for. It is impossible to describe them in more detail, given the time restrictions. While stabilisers may help, the Minister should not lose sight of the long-term fundamental reform which we still believe is as necessary as ever.
9.30 pm
Mr. David Curry: Tempting as it would be to meander through the mandarins, saunter through the satsumas or linger in the lemon groves to which my right hon. Friend the Minister referred at the beginning of his remarks, we must recognise that he has to go back to difficult negotiations. The terms of what he can do are defined by those negotiations. Reminiscences about the origins of the CAP will not help him. The House must give him a clear message about what he must take back to Brussels and what we hope he will bring from those negotiations.
Stabilisers may not be much, but to quote the cartoonist, they are the only hole we have at the moment, and we must exploit it to the best advantage. It is essential that stabilisers must first operate predominantly on price.
222
There is no point in suggesting that stabilisers are there directly to control production. If they were, I might be against them. I do not want yet more dirigiste measures to direct production introduced into the CAP. Hon. Members who laud quotas have forgotten the immense difficulties which brought quotas into existence and in making them work.
Those who talk about a compulsory set-aside must answer such questions as how the tenant-landlord relationship will work in that extremely difficult situation. We must first ensure that we are dealing predominantly with price and that any incidental effects upon the direct control of production are beneficial. They are not the essential purpose, because budgetary cost is the object of the exercise.
Secondly, the system must be designed to restore intervention to its role as a safety net, because the use of intervention as a market of first resort is at the root of many of the problems experienced in agricultural production. Thirdly, stabilisers must be nondiscriminatory against the United Kingdom, as I am sure that the Ministers from other countries will be equally determined that they are not discriminatory against their countries. That means that the policy is one of the lowest common denominator. My constituents and those of right hon. and hon. Members will not forgive us if we come back with a policy that is effective but deeply discriminatory.
Finally, stabilisers must avoid revenue-raising devices which bear upon the consumer or on our GATT obligations. That would be entirely wrong. The trouble is that, at the moment, there is no mechanism to control agricultural policy outside the annual farm prices review. Stabilisers must operate automatically and predictably. The farmers must be certain that they will apply. They must be applied by the Commission in the year in which the problem arises. If they operate in those circumstances, they will at least take us along the road to reform, as compared with the old policy of guaranteed thresholds in which the punishment applied a year after the event and was dependent upon the Minister's approval of the punishment—a measure which there was a singular lack of enthusiasm for accomplishing.
In regard to the cereal sector, the threshold is low; it is high compared to consumption because it includes £25 million-worth of exports, but it is probably the best we can do. It is essential that we reject co-responsibility levies and bear most hard upon prices. If we can get more out of the intervention system, we should try to restrict it further.
I notice that you, Mr. Deputy Speaker, have one eye on me and one on the clock. I appreciate that the debate is due to be wound up shortly. My last point closely affects my constituency. It is an upland area which depends heavily upon sheep. If sheep go from those hills, there will be very little left. We must look for a regime which continues to support sheep production. We must bear in mind that we do not want the wholesale migration to the lowlands of what is a vocation of the uplands in the United Kingdom, and consider the reforms in that light. I am grateful for your indulgence, Mr. Deputy Speaker, and look forward to listening to what my right hon. Friend has to say. I wish him luck in his negotiations.
9.34 pm
Dr. Norman A. Godman: First of all, may I say that I had a great deal of sympathy with the Minister's comments this afternoon, and

223
especially with his observations about the complementar-ity of the set-aside scheme with that of the stabiliser scheme, although I have some doubt about the efficacy of stabilisers. I was also sympathetic to the reservations offered in his usual way by the hon. Member for Southend, East (Mr. Taylor). The set-aside scheme should be compulsory rather than voluntary, because if it were the former everyone would be treated in a similar fashion.
Every hon. Member who has spoken has expressed a compassionate and sincere concern about agriculture. The present circumstances, and indeed the future of the industry, are of considerable interest to us all. Our rural economy is tied tightly to the well-being of the industry, its farmers and, I hope, its farm workers. That relationship is plain to see, and can be seen elsewhere. For example, the well-being of our smaller maritime communities is, or in some regrettable cases was, determined by the vitality and success of the local fishermen. In terms of income aids and the documents on income aids, there are some parallels between the two indigenous industries, to which I shall refer later.
I have a great deal of sympathy for the Minister in his attempts to solve the severe problem of massive expenditure while seeking to defend the interests of the farming industry. It might be that the Commission, and the Danish, Dutch and United Kingdom Governments are willing to accept reality, but what about our other partners? Given that the Minister is in the middle of tough negotiations, unlike some hon. Members I shall not ask him to cast a single aspersion on any member state. However, I need not be so diplomatic.
In my view, there is ample evidence that the West Germans, with their less than efficient farming, will refuse to accept any proposals that might harm their farming constituents. It is almost inevitable that the Commission's proposals will be weakened because of that chauvinistic concern with domestic politics.
Bridget Bloom's article in today's Financial Times states:
"The West German Government…has the strongest objection to the latest proposals designed to curb the Community's spiralling farm budget, on which negotiations resume in Brussells today.
Bonn finds politically unacceptable the reforms envisaged by the European Commission, which would inevitably result in lower prices for farmers. The family farm, from Bavaria in the south to Schleswig-Holstein in the north, has long been seen as the bastion of social stability in the rural areas. Politicians seem to fear that reform of the CAP would threaten that stability."
I wonder how much financial support German farmers obtain from German contributions to the CAP, which would otherwise have to come through the budget of the federal republic. I suspect that that internal subsidy explains the German fondness for the status quo. That traditionalism and conservatism will diminish the effectiveness of the proposals.
Therefore, while the Community's agricultural system is a little more flexible and a little less monolithic than some would have us believe, it is still enormously difficult to bring about fundamental change, but change there must be. There can be no greater absurdity in the world today than massively subsidised food surpluses. If budgetary discipline and savings could be achieved, the money saved could be used to create jobs in rural areas and small market towns.
I should like to ask the Secretary of State what might be a simplistic question about the imbalance between CAP
224
contributions and benefits. Am I correct in assuming that a reduction in the imbalance would reduce our net contribution and would, in turn, reduce our rebate?
Let us consider the more detailed elements and proposals of the negotiations. As my hon. Friend the Member for South Shields (Dr. Clark) pointed out, it is absolutely essential that, as regards sugar, the Minister continues to defend the interests of the cane sugar producers in the CAP countries. Such defence would be in line with two House of Commons resolutions passed by different Administrations. I must say that I have a constituency interest because the last remaining cane sugar refinery in Scotland is in my constituency and it is extremely important to the Scottish food industry.
It has already been noted that the implementation of milk quotas has diminished the production of milk throughout the Community—so much so that the Danes are now considering whether to import milk from other EEC states to meet their export market in cheese. Some compensation is provided in the circumstances to farmers, but not to their dairymen, some of whom are, unfortunately, made redundant. I believe that is a matter for deep regret and I shall return to it later in my speech.
The hon. Members for Dumfries (Sir H. Munro) and for Rutland and Melton (Mr. Latham) pointed out in last Thursday's agriculture and fisheries Question Time that, as regards milk production, we are moving from ridiculous surpluses to possible shortage. I make a plea for the cheese industry in Scotland and elsewhere, because that industry is experiencing severe problems because of the quota system. Is it possible for the Minister to ensure that that element of the dairy industry is given access to the Community's reserve, which I believe at the moment stands at 443,000 tonnes? It is vital that the cheese manufacturers are given access to an all-year-round supply of milk.
I believe that it is possible to introduce a flexible scheme —a scheme that is sensitive to demand throughout the year—and it would benefit cheese makers throughout the United Kingdom. I am sure that all hon. Members would agree with me that we do not want to see creameries closing down anywhere in the United Kingdom because, apart from anything else, they provide much-needed jobs in small towns and villages.
In conclusion I wish to consider the proposals regarding income aids and what I would call the "decommissioning grants" for farmers leaving the industry. The explanatory memorandum to document 6116/87 states:
"A community system for aids to farm incomes"
will provide
"a framework for national aids to farm incomes…a 'pre-pension' system".
I believe that such considerations should include the interests and needs of farm workers. In that respect, Victor Robertson of he Scotsman agreed with me when he said:
"It would seem logical that if farmers are to get pensions of one sort or another then their employees should be entitled to some parity of treatment".
Surely no one in this House would challenge that parity of treatment. It is also the case that article 39 of the treaty of Rome says, inter alia, regarding farm workers that the objective is
to ensure a first standard of living for the agriculture community, in particular by increasing the individual earnings of persons engaged in agriculture".
That must surely mean employees as well as employers.

225
In relation to that document and with regard to the Agricultural Wages Act 1948 and the Agricultural Wages (Scotland) Act 1949, have the wages boards the power to order that, as part of the minimum wages conditions for the industry, there shall be paid a certain contribution towards the pensions for the workers in that industry? Will the Minister consider that question, and write to me about it? I am not concerned here with the traditional pensions scheme. At the very least, I am seeking a minimum standard of pension cover.
I do not believe that the Commission's proposals on income aid are anywhere near adequate for those who work on small family farms. The right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith) said that about 50 per cent, of the farmers in the Grampian region would not enjoy any profit this year. If that is the case, the proposals are even less adequate for the employees of the farms concerned. Family farms often cannot support the family, which may extend to three or four generations. What is the point of talking about pre-pension schemes without planning a system of adequate pension cover for the small farmer?
Let me say one last word about farm workers. I hope that, under the income aid scheme, they do not suffer the same fate as the fishermen employees of the trawler companies that received decommissioning grants to leave the fishing industry.
I wish the Minister well. He has a formidable task, but I believe that the overwhelming majority of right hon. and hon. Members also wish him well.
9.45 pm
Mr. MacGregor: By leave of the House, I shall reply to the debate. I am sure that the House will understand that I have left myself comparatively little time to cover all the points that have been raised, and that I therefore cannot cover them all. I think that that is right, because it was important that as many hon. Members as possible should be able to express their views at this stage of the negotiations, and I have listened very carefully to what they have said.
I am grateful to the hon. Member for South Shields (Dr. Clark) for his broad support on stabilisers. I was also extremely pleased to hear his recognition that it was, and is, most of all our farming community that keeps our countryside attractive and well maintained. It is important to keep making that point to all who criticise our farmers, most unfairly, on environmental grounds. It is also important to remember that farming subsidies, particularly in the hills and the less-favoured areas, make an environmental contribution. They mean that farmers and their wives are working, one might almost say, 24 hours a day for a small income, keeping the countryside attractive and, at the same time, a tourist attraction.
The hon. Gentleman described the common agricultural policy as a failure. Only recently has that been so, in that it has produced the surpluses and the subsidy costs that have accompanied them. However, I agree with my right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith) that we should also consider the important successes that the CAP has brought, and in particular the considerable contribution made to the nation by our farmers through their efficiency, their
226
capacity to innovate and to take advantage of opportunities, and their consequent provision of food at a reasonable cost.
The hon. Gentleman criticised the CAP when he referred to the job losses in the agricultural and rural communities since the war, but I do not think that the CAP can be judged on that basis. First, as with every other aspect of economic activity, it is vital that our agricultural industry remains competitive and takes advantage of technological improvements. That has been very much in my mind in the negotiations. However, it will of course mean job losses. Secondly, the hon. Gentleman asked me to take firm action to deal with surpluses. He must realise that that would mean further job losses, especially in other member states whose farming structures are less efficient than ours. That is the other side of dealing with surpluses.
The hon. Member for South Shields also mentioned the problem of job losses in the dairy creameries, where supply had outstripped demand. That is due to a readjustment to market needs, which happens in the same way in other economic activities. If we are bringing pressure on the surpluses, we must accept that as a problem at the same time.
The hon. Gentleman referred to a separate problem in relation to dairy creameries—the problem of cheese manufacturers. He recognised that it was not a quota problem, but primarily one of pricing, marketing and distribution. It does not seem sensible to the general public, or to me, that where there is a market and a product that can be bought by the consumer, there should be a shortage of supply at a time when some of the same product is going into intervention and so being financed by the taxpayer. That is not a sensible system and I and my noble Friend Lord Sanderson are having talks with individual milk marketing boards to see whether we can find a solution to that problem.
The hon. Gentleman asked me to comment on the clean slate proposal. The Financial Times report was somewhat condensed and may have given a misleading impression in implying that my right hon. Friend the Prime Minister saw the clean slate proposal as an alternative to stabilisers. That is certainly not so. It was clear from the interview that she, as always, sees effective stabilisers as an important part of the CAP. The clean slate proposal was really in relation to the disposal and depreciation of stocks, which is different. That has not been discussed in the Agriculture Council as we have been concentrating on stabilisers, but I believe that a discussion did take place in today's Foreign Affairs Council.
I also want to stress that my right hon. Friend made it clear that that proposal is one possibility in relation to stocks. She acknowledged the fact that other member states may not be ready to accept it and she put forward other ways of dealing with the disposal and depreciation of stocks. We put that proposition on the table because we think that it should be explored.
Costs will depend on a variety of factors, depending on the type of scheme that we eventually come up with and the market situation in relation to the disposals. Therefore, I cannot give a clear figure on that point tonight.
The hon. Member for South Shields asked about the 155 million tonnes maximum guaranteed quantity for cereals. That is not a national figure; it is a Community figure for the total Community cereal production. It triggers off a Community mechanism and reaction. Therefore, it would apply Communitywide. It is important

227
that that should be so, because we are efficient cereal producers. Where one is talking about a mechanism that bears down on price support, it is the efficient producers —here I take up a point made by my hon. Friend the Member for Skipton and Ripon (Mr. Curry) and I agree that stabilisers should deal with price support—which will benefit from such an application so long as they remain competitive.
I was not clear whether the hon. Gentleman wanted a national figure, but, for the reason that I have just given, it would have a disadvantage for us. That is one of the difficulties of proposals that some people put forward for national quotas. Such proposals do not benefit the most competitive and efficient.
My right hon. Friend the Member for Kincardine and Deeside made many salient points, as I would expect, given his knowledge and experience. I recognise his point about farm incomes and the impact of the painful adjustments on the ordinary average farmer—I think that those were his words—that we are having to make. It is salutary and important that all of us concerned with the farming community and its welfare should continue to stress that point.I sometimes get the feeling that there is a misguided impression—often on the Opposition Benches, if I may say so—that farmers are feather-bedded and well off. That may be because some members of the general public think that all subsidies go to farmers. I am conscious of my right hon. Friend's point. I constantly bear it in mind and I know precisely how farm incomes have dropped over recent years.
The hon. Member for Ceredigion and Pembroke, North (Mr. Howells), too, made the point that, in the less-favoured areas of the hills, incomes are modest, particularly when related to the hours that people work. That needs to be continually stressed. I am constantly trying to put over that fact to the public, in addition to the point that I made earlier about farmers' contribution to the environment.
My right hon. Friend the Member for Kincardine and Deeside also raised the issue of income support. One should distinguish between all the measures that we are pursuing, including set-aside and the extensification scheme, which are, in one sense, income support, and the direct income aid measures in the Commission proposals which have a number of disadvantages, to one of which I alluded at the beginning of the debate.
The hon. Member for Ceredigion and Pembroke, North also referred to farm incomes and the problems in the hills. I am sure that he will accept that we increased the suckler cow premium by 35 per cent, in the past year. He will also have heard of my anxiety to remove the discriminatory elements in the sheepmeat stabiliser proposals that are before us. There is a great deal to examine in the wider sheepmeat regime proposals, to which I have not yet been able 'to refer.
Our overriding aim is to achieve a balanced series of reforms. We must resist discrimination against United Kingdom interests and work for arrangements that yield freer competition as well as fair and affordable support for the sector, so enabling the United Kingdom to capitalise, as the hon. Gentleman said, on its natural advantages. There will be a most complex set of negotiations, because there are wide varieties of different systems in sheepmeat throughout the Community, but that is certainly my aim.
228
We are not likely to be able to negotiate clawback out if the variable premium remains. I am sure that the hon. Gentleman recognises that. Finally, I agree with him about the importance of marketing.
I always listen to what my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) says. I shall not have time to deal in as much length as I should like with his interesting points. He will recognise that one big difference between the early sixties and now is that we now have large surpluses, or ever-rising support costs—a problem which must be tackled. A stabiliser mechanism would significantly reduce the cost of supporting cereals production in excess of the maximum guaranteed quantity, including reducing the costs of export refunds which are such a large part today. I make that point especially to my hon. Friend the Member for Southend, East (Mr. Taylor). That would therefore tend to reduce the incentive to increase the production of cereals. I am also seeking complementary measures such as a set-aside scheme, and other options.
As I listened to my hon. Friend discussing the problem of quotas for cereals, I wanted to ask him what alternatives he would advance. The problem is that we have 4 million cereal producers in the Community, which includes member states that do not have quite the same administrative machinery to ensure that a quota system could operate as well, fairly and effectively as one that we might have to build up here. That would be difficult enough for us. For that, and a number of other reasons, a cereals quota is strongly resisted in the Commission and Council.
I must say to my hon. Friend the Member for Southend, East (Mr. Taylor) that the process of trying (o achieve effective stabilisers is not only a matter of papers and rituals. I recognise that stabilisers are not a panacea—nothing is. However, no one could be more aware than Agriculture Ministers that grappling with the issues that we face is a monumental task. We are seeking effective stabilisers that may not have an immediate impact, but, because they build up, I assure my hon. Friend that they would have one.
We do not yet have firm figures, because we do not have firm agreement on particular mechanisms, but the estimates that I have seen will build up substantially by the third year if we get what we want. I remind my hon. Friend that the reforms carried through in the past three years—mainly milk quotas, the co-responsibility levy and beef intervention price reductions—have produced overall savings compared with what would have happened without them of £4·2 billion, or 6 billion ecu. I think I said earlier—in haste—6·6 billion ecu, but I should have said 6 billion ecu.
I have listened carefully to all that was said by the hon. Members for South Shields and for Greenock and Port Glasgow (Dr. Godman). I have also noted the content of their amendment and have some reservations about it. I certainly dispute the figure of £11·50 a week, but do not have time to go into that. Stabilisers are much more fundamental than just an interim measure and I do not wish to accept all the prescriptions of the hon. Member for Greenock and Port Glasgow.
We have seen from the mood, tone and spirit of what the Opposition said that the House is very much in line with the Government recognition of the need for CAP reform and for what we are trying to do to achieve effective stabilisers. In recognising that, I am prepared to accept the

229
Opposition amendment, but, as is clear from the debate, that acceptance is on the basis that the part of the Government motion endorsing our objectives outlined in the Order Paper is essential. Therefore, in moving towards effective stabilisers we are acting in the interests of the farmer, the taxpayer and the consumer. I am grateful for the support in all parts of the House for what we are doing and for the objectives that we are seeking to achieve.
Amendment agreed to.
Main Question, as amended, agreed to.
Resolved,
That this House takes note of European Community Documents Nos. 8250/87 on Common Agricultural Policy reform, 8761/87 and ADD 1 to ADD 4, and 9066/87, on implementation of agricultural stabilisers and 6116/1/87, on agricultural income aids; believes that the current expenditure on the Common Agricultural Policy which is currently costing the average household of four persons £11·50 per week is insupportable: and accepts the concept of meaningful stabilisers as an interim measure to enable the Council of Ministers to work out a suitable means to reduce surpluses and to devise a lasting and rational agricultural policy for the European Community.

Statutory Instruments, &c.
Mr. Deputy Speaker (Mr. Harold Walker): With the leave of the House, I shall put together the Questions on motions 4 to 9 on the Order Paper.
Motion made, and Question put forthwith pursuant to Standing Order No. 101 (Standing Committees on Statutory Instruments, &c.).

INCOME TAX
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Bulgaria) Order 1987 be made in the form of the draft laid before this House on 21st October.
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (France) (No. 2) Order 1987 be made in the form of the draft laid before this House on 21st October.
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Nigeria) Order 1987 be made in the form of the draft laid before this House on 23rd July.
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Pakistan) Order 1987 be made in the form of the draft laid before this House on 23rd July.
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Belgium) Order 1987 be made in the form of the draft laid before this House on 23rd July.
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Malaysia) Order 1987 be made in the form of the draft laid before this House on 21st October.—[Mr. Dorrell.]
Addresses to be presented to Her Majesty by such Members of this House as are of Her Majesty's Most Honourable Privy Council or of Her Majesty's Household.

Select Committees

  AGRICULTURE
  Question proposed,
  That Mr. Tim Boswell, Mr. John Carlisle, Mr. David Curry, Mr. Martyn Jones, Mr. Calum A. Macdonald, Mr. Seamus Mallon, Mr. Paul Marland, Mr. Eric Martlew, Mr.
  230
  Elliot Morley, Mr. Jerry Wiggin and Mrs. Ann Winterton be members of the Agriculture Committee.—[Sir Marcus Fox, on behalf of the Committee of Selection.]
  Hon. Members: Object.
  Mr. Deputy Speaker: Do I understand that objection will be taken to all the subsequent motions proposed on behalf of the Committee of Selection?
  Mr. Nicholas Winterton: I intend to object to all of them except the motion on the Treasury and Civil Service Select Committee.

  DEFENCE
  Question proposed,
  That Mr. John Cartwright, Mr. Churchill, Mr. Dick Douglas, Mr. John Evans, Mr. Bruce George, Sir Barney Hayhoe, Mr. John McWilliam, Mr. Michael Mates, Mr. Jonathan Sayeed, Mr. Neil Thorne and Mr. John Wilkinson be members of the Defence Committee.

  EDUCATION, SCIENCE AND ARTS
  That Mr. David Evennett, Mr. Martin Flannery, Mr. Harry Greenway, Mr. Win Griffiths, Mrs. Maureen Hicks, Mr. Michael McNair-Wilson, Mr. Timothy Raison, Mr. Gerry Steinberg, Mr. Jack Thompson, Mr. Malcolm Thornton and Sir Gerard Vaughan be members of the Education, Science and Arts Committee.
  EMPLOYMENT
  That Mr. Simon Coombs, Mr. Ken Eastham, Sir Philip Goodhart, Mr. Greville Janner, Mr. Ron Leighton, Mr. Iain Mills, Mr. James Paice, Mr. Ernie Ross, Mr. Andrew Rowe, Mr. Lewis Stevens and Mr. David Young be members of the Employment Committee.
  ENERGY
  That Mr. Michael Brown, Dr. Michael Clark, Mr. Geoffrey Dickens, Mr. Eric Illsley, Mr. Ted Leadbitter, Sir Ian Lloyd, Mr. Geoffrey Lofthouse, Mr. Rhodri Morgan, Mr. Peter Rost, Mr. Alex Salmond and Mr. Tony Speller be members of the Energy Committee.
  ENVIRONMENT
  That Mr. Henry Bellingham, Mr. Paul Boateng, Mr. John Cummings, Mr. Richard Holt, Mr. Andrew Hunter, Mr. Robert B. Jones, Mr. Keith Mans, Mr. Tom Pendry, Mr. Peter Pike, Sir Hugh Rossi and Mr. Robin Squire be members of the Environment Committee.
  FOREIGN AFFAIRS
  That Mr. Dennis Canavan, Mr. Michael Jopling, Mr. David Howell, Mr. Ivan Lawrence, Mr. Jim Lester, Mr. Ted Rowlands, Mr. Peter Shore, Mr. Ian Taylor, Mr. Peter Temple-Morris, Mr. Bowen Wells and Mr. Michael Welsh be members of the Foreign Affairs Committee.
  HOME AFFAIRS
  That Mr. David Ashby, Mr. Gerald Bermingham, Mr. David Clelland, Miss Janet Fookes, Mr. Roger Gale, Mr. John Greenway, Mr. Ivor Stanbrook, Mr. Keith Vaz, Mr. John Wheeler and Mr. Tony Worthington be members of the Home Affairs Committee.
  SOCIAL SERVICES
  That Mr. Jerry Hayes, Dr. Lewis Moonie, Marjorie Mowlam, Mr. Terry Patchett, Sir David Price, Mrs. Gillian Shephard, Mr. Roger Sims, the Reverend Martin Smyth, Audrey Wise, Mr. Nicholas Winterton and Mr. Tim Yeo be members of the Social Services Committee.

  TRADE AND INDUSTRY
  That Mr. Joe Ashton, Mr. Malcolm Bruce, Mr. James Cran, Mr. Stan Crowther, Dr. John Gilbert, Sir Anthony

  231
  Grant, Dr. Keith Hampson, Mr. Doug Hoyle, Mr. Robin Maxwell-Hyslop, Mr. Barry Porter and Mr. Kenneth Warren be members of the Trade and Industry Committee.

  TRANSPORT
  That Mr. David Gilroy Bevan, Mr. Sydney Bidwell, Mr. Jim Callaghan, Mr. Derek Conway, Mr. Terry Dicks, Mrs. Gwyneth Dunwoody, Mr. Peter Fry, Mr. David Marshall, Mr. David Mudd and Mr. Neville Trotter be members of the Transport Committee.—[Sir Marcus Fox, on behalf of the Committee of Selection.]
  Hon. Members: Object.

  TREASURY AND CIVIL SERVICE
  Resolved,
  That Mr. Anthony Beaumont-Dark, Mr. A. J. Beith, Mr. Nicholas Budgen, Mr. Neil Hamilton, Mr. Terence L. Higgins, Ms. Joyce Quin, Mr. Giles Radice, Mr. Brian Sedgemore, Mr. John Townend, Mr. John Watts and Mr. David Winnick be members of the Treasury and Civil Service Committee.—[Sir Marcus Fox, on behalf of the Committee of Selection.]

  WELSH AFFAIRS
  Question proposed,
  That Mr. Nicholas Bennett, Sir Raymond Gower, Mr. Gwilym Jones, Mr. Richard Livsey, Sir Anthony Meyer, Mr. Paul Murphy, Mr. Keith Raffan, Sir John Stradling Thomas, Mr. Dafydd Elis Thomas, Mr. Gareth Wardell and Mr. Alan W. Williams be members of the Welsh Affairs Committee.—[Sir Marcus Fox, on behalf of the Committee of Selection.]
  Hon. Members: Object.

PETITION

  Poll Tax
  10.2 pm
  Mr. Jimmy Dunnachie (Glasgow, Pollock): With your permission, Mr. Deputy Speaker, and that of the House, I beg leave to submit this humble petition against the poll tax on behalf of the people in my constituency. They reject the regressive system of taxation which is unrelated to ability to pay, which will be expensive to administer and which will bring hardship to the poorest people in Scotland.
  Your petitioners pray that your honourable House repeal the Abolition of Domestic Rates Etc. (Scotland) Act 1987.
  To lie upon the Table.

  Mental Health (Special Hospitals)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Alan Howarth.]
  10.3 pm
  Mrs. Gillian Shephard: Hon. Members will be aware that the second biennial report of the Mental Health Act Commission was laid before Parliament at the end of October. The commission, of which I was a member until April, is a special health authority set up by the Mental Health Act 1983 and it has a range of powers, duties and responsibilities with regard to detained and restricted psychiatric patients.
  The second biennial report, which I commend to the House, describes the commission's work in the past two years and raises a number of concerns. I shall draw the attention of the House to some of these concerns about the special hospitals at Broadmoor, Rampton, Moss Side and Park Lane which between them have about 1,700 detained patients at any one time. These patients are among the most disturbed and difficult people in the country. Many of them will have to remain in secure hospitals for the rest of their lives.
  To care for such patients is one of the most demanding tasks in the whole of the health care field, and our society is indebted to the doctors, nurses and other staff who undertake the work, not least because society is at best ambivalent about its expectations of the special hospitals. Public opinion, as we all know, veers from the shock-horror treatment of so-called revelations of abuses—[Interruption.]
  Mr. Deputy Speaker (Mr. Harold Walker): Order. I must tell the House that the Chair cannot tolerate hon. Members approaching the Chair and seeking to debate the selection of speakers in the debate. If hon. Members persist in doing that, the Chair will have no alternative but to exercise the disciplinary powers vested in it. I apologise to the hon. Lady.
  Mrs. Shephard: I repeat that public opinion veers from the shock-horror treatment of so-called revelation of abuses in the special hospitals to baying condemnation when a patient absconds or is discharged, only to reoffend. Frankly, the public would prefer that the problem did not exist and that the staff were left to cope with keeping the difficult balance between security and care. Precisely because the public has that ambivalence, because the problems of working with those patients are so great and because the patients—[Interruption.]
  Mr. Deputy Speaker: Order. I must instruct the hon. Member for Caernarfon (Mr. Wigley) to leave the Chamber for the remainder of this day's sitting. As the hon. Member refuses to obey my instruction, I have no alternative but to name him.
  Motion made, and Question,
  That Mr. Dafydd Wigley be suspended from the service of the House.—[Mr. Alan Howarth.]
  put and agreed to.
  Mrs. Shephard: The public would prefer that the problem of the special hospitals and those in them did not exist and that the staff were left to cope with the difficult balance between security and care.
  Mr. Deputy Speaker: Order. I have to tell the House that the hon. Member refuses to withdraw from the House

  233
  in accordance with the decision and wishes of the House. I must, therefore, ask the Serjeant at Arms to escort him from the House.
  Mrs. Shephard: I hope that I get a bit of injury time.
  Because the public are ambivalent, because the problems of working with those patients are so great, and because those patients are particularly vulnerable, being ill and disturbed and liable to long years of detention, I wish to draw the attention of the House to some of the issues that are raised in the report. They can be summed up in the word "management".
  I will deal with two aspects of management—in the Griffiths sense of running the hospitals, and in the technical sense as defined in the Mental Health Act 1983 as to the powers and duties of managers. Until recently, the day-to-day management responsibility for the special hospitals lay with the DHSS special hospitals office committee, which to all intents and purposes delegated it to the local hospital management teams. For the past few years, Rampton has had a management board.
  The DHSS special hospitals office committee on behalf of the Secretary of State for Social Services has acted as manager in the technical sense of the word under the Mental Health Act 1983. Since 1 January of this year, new hospital boards have come into being at Broadmoor, Park Lane and Moss Side, bringing them into line with Rampton. Why have the Secretary of State and the DHSS chosen not to apply the Griffiths principles of management to the special hospitals with general and unit managers that they introduced in the rest of the Health Service and which have been very successful?
  Let us recall why the Griffiths reforms were introduced. They were introduced to sweep away the accretions of decades of half-reorganisations in the National Health Service and introduce the concept of accountability at regional, district and unit level to enable effective decisions to be made at local level with a minimum of bureaucratic fuss and ensure that the public, and above all the patients, knew where the buck stopped.
  What is the position now at the special hospitals? We have an interesting palimpsest of all forms of organisation known to the NHS since its inception and in some respects dating back even earlier, possibly to the Boer war. In each hospital there is a medical director. His Boer war predecessor was known as a medical superintendent. What are his duties and responsibilities? Does he operate on the 1968 cog-wheel principle of co-operation with his consultant colleagues or on the consensus management principle introduced in 1974? Each hospital has a hospital management team consisting of doctor, nurse and administrator.
  New hospital boards have the status of special health authorities. What does that involve? Are they any more than a giant leap back to 1948? How helpful will they be in solving the acute problems of those hospitals? Will they speed up decision-making? Can they hire and fire? How will they help patients and staff? It is certain that the boards add an extra layer. The answer to those questions will be that the boards are in their early days. My reply to that is that there is no time to waste and some of the problems highlighted in the commission's report illustrate my point. In passing, it is interesting to note that the
  234
  statutory instrument setting up the boards which was laid before the House is innocent of any mention of the word "management".
  Some of the issues raised in the report, as I have said, illustrate the problem of management. One of the problems which looms large involves the investigation of complaints. Procedures for investigating complaints, including those made by and on behalf of detained patients, are set out in memorandum HC(81)5. That circular, as I understand it, does not apply to special hospitals and neither does the clinical complaints procedure set out in circular HN(83)31.
  The statutory instrument covering the boards gives them
  "functions in relation to the operation of an adequate procedure for the investigation of complaints made by, or on behalf of any person who is a patient in the hospital in respect of any service provided at the hospital."
  Those functions may have as their aim the bringing into line of the special hospitals under the Hospital Complaints Procedure Act 1985.I do not know whether that is so, but if so it would not be before time. There is no agreed procedure for dealing with serious complaints at any of the four special hospitals. That point was made as long ago as 1980 in the report of the review of Rampton hospital which was presented to the House.
  The Mental Health Act Commission has been very concerned about what appears to be uneven practice and policy on patient complaints at the special hospitals. For a complaints procedure to work, it is essential that patients and their relatives should know what the procedure consists of and how it works and that they should regard it as fair. There is as yet no definitive written complaints procedure for the special hospitals. The commission has experienced consistent difficulties in establishing the procedures. Consider then how much worse it must be for the patient, who may well feel not only that it is useless to make a complaint, but that to make one might jeopardize his progress in the hospital.
  The difficulties of dealing with complaints from very disturbed and ill patients are obvious. The very fact of their illness may cast doubt on the quality of their evidence. Nevertheless, they have the right of access to a fair, impartial and respected complaints procedure. They have the right to be interviewed in private and the right to feel that they can make a complaint with impunity. That is not the current position, as the commission report makes plain. I would welcome clarification from my hon. Friend the Minister about the progress or otherwise of the DHSS scrutiny of the draft procedure submitted by the special hospitals. I would like clarification on the likely time scale and the degree to which the new boards will be empowered to act on complaints that are upheld.
  I refer the House to the draft code of practice for the Mental Health Act 1983, which was issued by the DHSS in August 1987. Section 171 laid down that health authorities should set up procedures for dealing with complaints from patients, that they must be in accordance with DHSS advice in the famous health circular (81)85, and that they should be explained clearly to patients, relatives and staff. I hope that that advice will be implemented with the utmost speed for the sake of all patients in the special hospitals, who are presently the only people who do not benefit from such procedures.
  The Mental Health Act Commission's report cites in its complaints section an example called case B of a patient's

  235
  complaint and the unsatisfactory way in which it was dealt with. The patient was not interviewed by the hospital management team; the nursing staff concerned eventually, after a delay of seven months, declined to be interviewed, and it therefore proved impossible to reach any firm conclusions on whether the original complaints were justified. However, the commission was able to uphold the patient's dissatisfaction with the hospital investigation.
  That case clearly illustrates the need for strong local management that is able to grasp and deal with a difficult problem. I should welcome any assurance from my hon. Friend that the new hospital boards will improve that highly anomalous problem. The DHSS as manager, in the technical sense of the word, under the Act does not observe the guidance on complaints procedures that it issues to others and expects them to observe.
  The complexities of running a large residential unit, which must be as secure as a prison, where some patients will have to remain for life and which is nevertheless a hospital with expectations of carrying out rehabilitation work, are immense. Let us consider, for example, the apparently very simple problem of patients' possessions and how and where they are stored and accounted for. In theory, on admission, a patient might own a house full of furniture with some valuable items—perhaps a grand piano, a car and so on. Those items cannot be disposed of if there is any expectation that the patient might be discharged. If he has no relatives, or they are unable or unwilling to take responsibility for the items, the hospital has to dispose of such items. On occasion some of the possessions might be returned to the patient—obviously not the grand piano—for use on the ward. The bureaucratic nightmare of dockets, records and interim storage places is made more difficult because the patient, due to his illness or medication, may forget or mislay his property. The problem is compounded because the management responsibility is diffused over several fronts.
  Special hospitals, with their combination of problems and complexities, should have the benefit of the general management principles that have been introduced elsewhere in the Health Service. I apply a simple test of accountability whether in the private or public sector— who does one telephone when one wants to know something? In the case of the National Health Service, the health authorities, Marks and Spencer or Sainsburys, one rings up the manager. However, is it so clear in special hospitals? Does one ring the medical director or his Boer War predecessor, the superintendent, the nursing officer, the secretary of the Prison Officers' Association, the chairman of the hospital board, the office committee—if so, which member—or does one ring the porter's lodge, which would be most likely to give you the answer?
  I hope that the hospital boards will do a good job, but I question, for the sake of patients and staff in special hospitals, the decision that has applied to this management problem a solution that is more appropriate to the early 20th century, when the 1980s solution—which is already working well in the National Health Service—might have brought better results for all concerned.
  Mr. Timothy Kirkhope rose——
  Mr. Deputy Speaker: Order. Does the hon. Gentleman have the leave of the hon. Member for Norfolk, South-West (Mrs. Shephard) and of the Minister?
  10.18 pm
  Mr. Kirkhope: Yes, Mr. Deputy Speaker. I shall not detain the House. I know that the Minister is pressed for time.
  I support everything said by my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard). As a colleague of hers on the Mental Health Act Commission during its early years I can say that the concern of many of us, which is shown in the second biennial report, is that there should be complete consistency when dealing with complaints in special hospitals. I am sure that the Minister will have that matter in mind.
  The only other issue that I shall mention, which is related to what my hon. Friend said, refers to the provisions of section 120 of the Mental Health Act 1983. I urge the Minister to consider the possibility of an amendment to allow a friend or relative of a mentally ill patient to be able to assist more fully in a complaint on behalf of the patient. Such actions would greatly assist those who, perhaps, are particularly disadvantaged through illness and perhaps need the extra help that would be available to them in such circumstances.
  10.20 pm
  The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): I congratulate my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard) on her success in the ballot and on raising with such intelligence and lucidity this important topic for debate. The House will also wish to mark her dignity and forbearance in the alarums earlier this evening, which must have been an unpleasant experience for a new hon. Member.
  I thank also my hon. Friend the Member for Leeds, North-East (Mr. Kirkhope) for his remarks.
  The mental health legislation was updated in 1983 for the first time in nearly a quarter of a century. Its objective was to protect the rights of patients who had been detained under the existing legislation. Much of the emphasis was on patients' civil liberties. It would be fair to say that, by the early 1980s there was concern that patients' interests had perhaps been somewhat neglected. The Act clarified the procedures for consent to treatment, and the Mental Health Act Commission was charged with the statutory task of monitoring the powers under the Act. It was set up as my hon. Friend the Member for Norfolk, South-West described. It has been chaired with great distinction from the beginning by Lord Colville, to whom the nation owes a considerable debt of gratitude. My hon. Friend was appointed as one of the first Mental Health Act commissioners—one of about 90 in England and Wales—and served until her adoption and election to the House.
  I should like to put on record the deepest and most heartfelt thanks to my hon. Friend and all her colleagues for the painstaking and professional work that they have done. As a result, our mental health institutions are certainly that much more civilised, humane, and, I hope, successful than they might otherwise have been.
  The commissioners have the following key tasks: to protect the interests of patients who are detained in hospital under the Mental Health Act, by visiting and interviewing them, by investigating complaints—a large section of their current report reflects that work—by

  237
  keeping under review the way in which the Act operates, and by requiring the second opinions that the Act requires before certain types of treatment can be given to patients.
  The commission also prepared the first draft of a code of practice on admission to hospital and treatment of mentally disordered patients, which is described in section 8 of its report. The final version of the code will be laid before Parliament next year, following consultation with statutory professional and voluntary bodies. That is part of the answer to one of my hon. Friend's questions.
  The commission is required to publish a report every two years, and the Secretary of State is required to lay it before Parliament. I have it here. My hon. Friend referred to the commission's second biannual report, which was laid before the House on 28 October. The reports are a mine of information on the practice and treatment of our most seriously ill mental patients who, without our care and control, would be a danger to themselves and the public. They are also written in a sensible manner that is comprehensible to the lay public, and I commend them to the House. They make interesting reading. The report raises many important issues. Obviously, it goes much wider than special hospitals. We are studying it closely and we shall discuss many of the detailed points that it raises with the commission.
  My hon. Friend raised some specific points relating to special hospitals. As she knows, the Mental Health Act Commission covers all detained mental patients, wherever they are. Those who require special security are found in the four special hospitals—Broadmoor, Rampton, Park Lane and Moss Side. I share her considerable admiration for the staff who work in those hospitals, notwithstanding recent difficulties at Moss Side. They have a most difficult job to do.
  My hon. Friend spoke about changes in management and asked some pertinent questions about some management issues, which we shall take into account. She will know of the commission's unqualified welcome for local management boards, which is most encouraging.
  Since the beginning of this year local boards have been placed at all the hospitals, with a single board for Moss Side and Park Lane hospitals. The boards now have delegated responsibility for the management of the hospitals and we are extremely fortunate in having for each of the boards a chairman and members with a wide range of background experience drawn from the local community and the professions.
  Before the boards were set up—the first was set up in Rampton in 1981—the special hospitals were managed directly by the Department of Health and Social Security. Ministers now see the boards as providing strengthened local leadership and achieving precisely the kind of improved management efficiency and effectiveness and the improved patient care that my hon. Friends seek. The boards do not have an employment function, because the staff are civil servants and they do not control admission which is still done centrally by the DHSS admissions panel, which deals with about 200 admissions per year.
  Nevertheless, the local boards exercise four important functions. First, they are responsible for the provision of all services at the hospitals, including professional services. In practice, that means giving support and advice as
  238
  required to hospital staff at all levels and developing policies and programmes to maintain and improve the care of patients.
  Secondly, the boards will determine priorities in relation to the use of manpower resources, revenue and capital funds. In essence, that means that they decide how the available money can best be spent, and I shall come to the sum that is available in a moment. It is the boards' job to ensure that value for money is obtained by improving efficiency wherever possible. That was also the major purpose behind the Griffiths management reforms.
  Thirdly, the boards are charged specifically with ensuring that adequate procedures for the investigation of complaints made by or on behalf of patients are indeed in operation. Fourthly, the boards will act as managers of the hospitals in the context of the Mental Health Act 1983—for example, in carrying out the requirement in respect of renewals of detention.
  On all the matters that have been delegated to them, the local management boards, with the support of the hospital management teams, will be directly accountable to Ministers. I am sure that that will be a firm basis on which to meet the challenges to come, and I hope that my hon. Friend will allow the boards just a little more time, given that they have had only a few months, before passing judgment on them. Nevertheless, my hon. Friend's comments were most useful.
  My hon. Friend asked about the complaints procedure. As she will know, we are now well advanced with draft proposals for a standard policy and procedure for the handling of patients' complaints, and these are currently the subject of consultations with the local management boards. The proposals reflect the key requirements laid on the Health Service by the Hospital Complaints Procedure Act 1985. They also take into account the fundamental principles that are now outlined in the commissioners' report, including the need to interview patients—a point upon which the commissioners' report laid particular emphasis. The Department's draft—it is the responsibility of the Secretary of State alone to produce the draft—also takes account of the local procedure currently being operated in each of the four hospitals. That is why we have not formally endorsed the procedure drawn up by the Broadmoor hospital ethics committee.
  Local management boards will be responsible for ensuring that the policy and procedure that is finally negotiated and agreed with the hospitals and the staff side representatives is operated properly. The fact that the DHSS retains the employment function should not affect the boards' ability to exercise those responsibilities.
  The Prison Officers Association, which represents a large part of the staff concerned, has repeatedly made clear its view that complaints leading to allegations of a criminal nature against staff should be referred to the police and that no pre-emptive action should be taken by management against the member of staff involved. That view has never been accepted by my Department or local management, which will continue to exercise its right to take action in advance of the outcome of police inquiries if the facts of the case make that appropriate.
  Any staff member who is charged by the police is suspended from duty until the outcome of a police investigation and any subsequent prosecution that might take place is known. We agree with the commission that nothing should stand in the way of management pursuing its own disciplinary action if necessary, and this is done.

  239
  If management issues alone are involved, my Department expects the hospitals to mount their own management inquiry.
  My hon. Friend cited an illustrative case study—that of patient B. I would not wish to say whether the facts as given were right or wrong, but we would have to agree that for anyone to have to wait for such an extraordinarily long time to be told the outcome is indefensible.
  I turn to money and manpower. Psychiatry in general is a priority service for development money and has been for some time. There have been substantial increases in staff but, nevertheless, mental illness is the second biggest burden on the Health Service after heart disease. Recognition by successive Ministers of the need to improve and develop patient treatment and care has led to a substantial build-up in resources for the special hospitals in recent years. Annual increases in revenue funding have been consistently higher than those of the Health Service as a whole. Since 1980–81 actual spending has increased from £28 million to £54·6 million in 1986–87—an increase of 95 per cent, in cash, as compared with Health Service growth as a whole of 57 per cent, over the same period. After allowing for pay and price movements, the comparable figures are 23·9 per cent, and 11·5 per cent, respectively. Therefore, special hospitals funding has grown twice as fast.
  Spending per patient has increased in the special hospitals from £14,461 a year to £32,257 a year. Since 1980, staffing levels have increased from 2,604 to 3,249 currently, an increase of just under 25 per cent. At the same time, there has been a reduction in patient numbers from 1,937 to just over 1,700. Those trends have combined to result in a notable improvement in patient-staff ratios from 1·3 staff per patient to two staff per patient. Regional secure units are even more generous in their funding. In
  240
  the past two years, the rate of growth in revenue funding in real terms has slowed down, reflecting the progress that has already been made in improving levels of staffing and service. The current year has seen a modest further increase in staffing of about 27 posts.
  There is also an extensive building programme that is managed directly by DHSS headquarters and represents a substantial investment in redeveloping and modernising the hospitals. The current spend is in excess of £10 million a year and that level of spending is projected well into the 1990s. As an illustration, stage one of the Broadmoor rebuild has cost us £30 million and the current estimated total cost of the four-stage development at that one hospital is £69 million. Completion is expected within about 10 years.
  As well as the Broadmoor rebuild, the programme provides for extensive upgrading of the infrastructure at Rampton, and there are extensive works at Park Lane. The new Park Lane hospital in Liverpool has been built to provide up-to-date single room accommodation with modern supporting facilities for up to 400 patients. In that way, patients who may well spend the rest of their lives in hospital at least may have some privacy and some individuality, and working conditions for staff can be noticeably improved. However, it is an expensive business.
  I hope that what I have said has shown that Ministers and officials are addressing themselves to the concerns raised by my hon. Friends. I will write to them in more detail, if I may, on some of the other points raised and I am pleased to have had an opportunity to air this important subject.
  Question put and agreed to.
  Adjourned accordingly at twenty-eight minutes to eleven o 'clock.