Commons Sitting of 19 May 1988

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

Royal Assent
Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Licensing Act 1988.

2. Matrimonial Proceedings (Transfers) Act 1988.

3. Felixstowe Dock and Railway Act 1988.

Royal Assent
  PRIVATE BUSINESS

    LONDON REGIONAL TRANSPORT BILL (By Order)
    Order read for resuming adjourned debate on Question [10 December], That the Bill he now considered.
    Debate further adjourned till Thursday 26 May.
    TEIGNMOUTH QUAY COMPANY BILL (By Order)
    YORK CITY COUNCIL BILL [Lords] (By Order)
    CARDIFF BAY BARRAGE BILL (By Order)
    FALMOUTH CONTAINER TERMINAL BILL (By Order)

    NORTH KILLINGHOLME CARGO TERMINAL BILL (By Order)
    Orders for Second Reading read.
    To be read a Second time upon Thursday 26 May.

    ST. GEORGE'S HILL, WEYBRIDGE, ESTATE BILL (By Order)
    Read a Second time and referred to the Examiners of Petitions for Private Bills.

    NEWCASTLE UPON TYNE TOWN MOOR BILL [Lords] (By Order)
    Order for Second Reading read.
    To be read a Second time upon Thursday 26 May.

    ASSOCIATED BRITISH PORTS (No. 2) BILL (By Order)
    Order read for resuming adjourned debate on Question [11 May], That the Bill be now read a Second time.
    Debate further adjourned till Thursday 26 May

Oral Answers to Questions
  HOME DEPARTMENT

    Nationality Applications
    Mr. Hanley: To ask the Secretary of State for the Home Department what progress has now been made on clearing the backlog of nationality applications at Lunar house; and if he will make a statement.
    Mr. Turner: To ask the Secretary of State for the Home Department if he will make a statement on the present backlog of applications for British nationality.
    The Minister of State, Home Office (Mr. Tim Renton): Good progress is being made. All applications received before 31 December have been acknowledged and passports and other documents returned to applicants.
    We still face a formidable task in dealing with some 268,000 outstanding citizenship applications. They include over 80,000 naturalisation applications and 187,000 for registration as British citizens. To deal with the latter we have decided to establish a new nationality office in Liverpool, where we will create over 100 new jobs. Suitable accommodation has been identified and negotiations for its lease are in hand.
    It will not be practicable to reach decisions on all the registration applications by the end of the year, as the Select Committee on Home Affairs has recommended, but I am confident that a substantial proportion will be decided by April 1989 and the remainder during the following 12 months.
    Mr. Hanley: I congratulate my hon. Friend on the progress that has been made and the staff at Lunar house on meeting their immense task. Does my hon. Friend agree that the heavy work load at Lunar house was the result of more than 250,000 people leaving it until the last minute, having been given seven years within which they could have applied? Does my hon. Friend also agree that publicity should be given earlier to help not only the staff at Lunar house but those who have made applications? Would it not be sensible to do that with passports, where early application is always sensible?
    Mr. Renton: I thank my hon. Friend for his kind remarks. I shall pass his congratulations on to the staff and management at Lunar house, who have worked hard to deal with the great mountain of work that arrived, particularly in the last weeks of December.
    Active publicity to remind people that registration for citizenship applications had to be in by the end of last year started fairly early in 1987. I was pressed to increase the advertising and the number of leaflets to ensure that everyone knew, and that was done. Such was the success of the advertising campaign that we received a great many nationalisation applications—more than usual—even though there was no deadline.
    Mr. Turner: Will the Minister show some humility, in view of the answer that he has just given, to the plight of those 280,000 people who are suffering indignity, frustration and anxiety as a result of the Government's incompetence? Irrespective of his announcement about the

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    100 new jobs, when will he reach out to those who at present believe themselves to be stateless, respond to their requirements and do the necessary and honourable thing?
    Mr. Renton: As the House will know, I am a naturally humble person. However, most of the people who applied—100,000 in December alone—had waited five years before the deadline was announced before submitting their applications. They were in no hurry to apply. The hon. Gentleman must realise that application for British citizenship is important and should not be decided in a great hurry. In the intervening period, while their applications are being processed, we have told them many times that they will lose nothing by way of social security, pension, housing benefits or voting rights, so they have nothing to worry about. Perhaps the hon. Gentleman will pass that message on to his constituents.
    Mr. Budgen: Does my hon. Friend realise that those hon. Members who represent constituencies which contain many immigrants could have told him that there would be a flood of applications? We recognise that those applications should be dealt with properly, if necessary, by employing a large number of temporary assistants.
    Mr. Renton: My hon. Friend's expertise on this matter is very different from that of officials in the immigration and nationality department at Lunar house. They took advice from a number of people in 1986 and were advised that most of the people who wanted British citizenship under the registration procedures had already applied in previous years.
    The Department has increased its administrative divisions by 300 posts in the past three years. One hundred and eighty clerical staff were recruited last year, and over 300 applications for clerical posts are being processed at present. I assure my hon. Friend that we are making every effort to increase the staff complement.
    Mr. Madden: Why did the Minister reject the urgent advice given to him by senior members of his own staff last summer that the arrangements for dealing with the inevitable number of applications were wholly insufficient? He is also the victim of justified criticism from the Select Committee on Home Affairs which roundly criticised him for presiding over an administrative shambles when the Government had several years to plan for this. The hon. Gentleman should have appointed the necessary staff to deal with the applications. He has failed and he should resign.
    Mr. Renton: The hon. Gentleman has again made his Second Reading speech on the Immigration Bill. There is no record of the trade union side at Lunar house having given officials and management such advice. When I met trade union officials at Lunar house in early February, they did not wish to recommend the staff at Lunar house even to do overtime. The management had to work extremely hard to persuade the staff to do overtime.
    Mr. Churchill: Is it not clear that, if present trends continue, accommodation will have to be found in this country over the next 10 years for about 500,000 new immigrants? What provision are the Government making in their costings for assisting those areas of the country, to which the immigrants are likely to come, to provide additional housing, schools and hospitals?
    Mr. Renton: As my hon. Friend will realise, that is a matter not so much for the Home Office as for the Department of the Environment. However, we are actively engaged in a number of initiatives—for example, an inner cities initiative to help those who have recently arrived in this country to become involved in their own small businesses. Last year the number arriving here for permanent settlement was 45,000—the lowest for many years and only about half of what it was in the 1970s.
    Mr. Randall: Is the Minister aware that 60 per cent. of telephone calls coming into Lunar house are wholly ignored, not even being received on a telephone answering machine? How does he justify that policy?
    Mr. Renton: The hon. Gentleman's remarks are out of date. The telephone inquiry bureau has shown a marked improvement in recent weeks, and an improvement was certainly needed.
    Mr. Randall: Since I have been there.
    Mr. Renton: A few weeks ago the hon. Gentleman and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) visited Lunar house, and they spent the greater part of their time, according to the Observer, looking for a photo opportunity in front of the mail bags. That may have been of great help to becoming a political tennis star, but it did nothing to help the problems of Lunar house.
    Several Hon. Members rose—
    Mr. Speaker: Order. This is an important matter, but I hope that we can now proceed more rapidly.

    IBA and BBC (Chairmen)
    Mr. Gerald Howarth: To ask the Secretary of State for the Home Department when he last met the chairman of the Independent Broadcasting Authority and the chairman of the British Broadcasting Corporation; and what matters were discussed.
    The Secretary of State for the Home Department (Mr. Douglas Hurd): I am in regular touch with both chairmen on a wide range of broadcasting matters.
    Mr. Howarth: Next time my right hon. Friend meets the two gentlemen concerned, will he remind them that those who broadcast to the nation are part of the nation, not an elitist super race apart? Will he further remind them that it is they who act as censors and that the new Broadcasting Standards Council will serve as a vital test of accountability towards the viewer, which is badly needed? Does my right hon. Friend consider that one best suited to serve that accountability purpose may be Mrs. Mary Whitehouse?
    Mr. Hurd: Mrs. Whitehouse's role in this matter has been well recognised. The truth is that it has been difficult to portray Sir William Rees-Mogg convincingly either as a gauleiter or as a vandal. I hope that as the waves subside on this matter he can get on with the broadcasting authorities and work out how the new council will operate in practice. We can judge a little later what the statutory definition and power should be.
    Several Hon. Members rose—
    Mr. Speaker: Order. I remind hon. Members that there is a further question about the Broadcasting Standards Council.
    Mr. Menzies Campbell: When the Secretary of State next meets the chairmen of the IBA and BBC, will he congratulate them on the continuing high standard of broadcasting in the United Kingdom and assure them of his support to ensure that their independence is not compromised?
    Mr. Hurd: Indeed, Sir. When we publish a White Paper on television, which will probably not be until the autumn, the hon. and learned Gentleman will see the huge change that will come over television in the form of greatly expanded choice for viewers, going well beyond the present scope of the BBC and IBA. We must deregulate to make that wider choice available, while keeping a grip on standards.
    Mr. Stanbrook: In the light of the decision by the two authorities to allow a television broadcast giving a one-sided account of the Gibraltar incident, is my right hon. Friend satisfied that those two authorities serve the public interest? Should there not be a review of who is to determine public interest, rather than leave it to a group of nominated people and programme makers who are not elected to that capacity?
    Mr. Hurd: My right hon. and learned Friend the Foreign Secretary made it clear to both chairmen, in his letters about showing the programmes on Gibraltar, that he was appealing to them on grounds of responsibility rather than law. My view is that it is for the broadcasting authorities to discharge their duties in this area and that they are helped rather than hindered by a robust give-and-take between broadcasters and politicians.
    Mr. Winnick: Leaving aside the obvious and continuous vendetta by many Tories against the broadcasting authorities, in his talks with the chairmen of those authorities did the Home Secretary mention that he would make it far more difficult for retired people to get a concessionary television licence? Does the Secretary of State realise that his statement in his written answer that appears in yesterday's Hansard will be greeted with disgust by many retired people who will now find it more difficult to obtain a concessionary television licence fee? Why should not all pensioners be able to claim a concessionary television licence fee on the lines that I proposed in my Bill that was defeated?
    Mr. Hurd: If we did what the hon. Gentleman suggests, the cost to other licence holders, many of whom are worse off than pensioners, would he substantial. The hon. Gentleman has not thought the matter through. We had to deal with the unsatisfactory 5p concessionary licence. We could not abolish it without substantial grievance and hardship. The solution that I outlined yesterday is sensible and fair in the circumstances.

    Terrorism
    Mr. McLoughlin: To ask the Secretary of State for the Home Department what further measures he is taking to co-ordinate action against terrorism, in the light of recent events.
    Mr. Hurd: The Government have taken and will continue to take a leading role in international co-operation to prevent and fight terrorism. I shall be meeting Interior and Justice Ministers of the Trevi Group on 3 June at Munich and we shall take stock of a number of recent improvements in European co-operation in this area and, I dare say, discuss further proposals. Within the United Kingdom I believe that there is effective co-operation between the police and other agencies concerned.
    Mr. McLoughlin: Does my right hon. Friend agree that the Prevention of Terrorism (Temporary Provisions) Act 1984 is important? Is it not a great shame, bearing in mind the important fight against terrorism, that the official Opposition refused to support the Act although they supported it when they were in office? They have opposed it only since they have become the Opposition.
    Mr. Hurd: The Opposition not only supported the Prevention of Terrorism (Temporary Provisions) Act 1984; they invented it. We will have to produce and put before the House a new Prevention of Terrorism Bill because the old one is coming towards the end of its five-year life. That will give the Opposition a chance to reflect and take stock. Reinforcing my hon. Friend's comments, it would considerably strengthen the nation's efforts against terrorism if Opposition Members could bring themselves to change their position yet again and support a robust measure.
    Mr. McCusker: Does the Secretary of State agree that sentencing policy should play a major part in the fight against terrorism? In the Secretary of State's view, what conditions should a convicted terrorist have to meet to qualify for remission of sentence?
    Mr. Hurd: That depends on the offence for which the terrorist was convicted. If the hon. Gentleman wants to draw specific cases or instances to my attention or to that of my right hon. Friend the Secretary of State for Northern Ireland, I hope that he will do so.
    Mr. Burt: As regards international terrorism, will my right hon. Friend assure the House that he and his international colleagues will bend their minds to the difficult question of press and television coverage of incidents like the recent hijacking? Does he agree that the considerable publicity given to hijackers' demands can sometimes contribute to the problems of terrorism? Will he consider the difficult area of censorship associated with that problem?
    Mr. Hurd: I agree that it is a difficult and sensitive area. It is a matter not so much of censorship as of responsibility. Obviously the broadcasting media in any free society need to report the news with some calculation of the consequences of their actions in what they do and do not show. That matter needs consideration.
    Mr. Cryer: Does the Home Secretary accept that pressure from the Common Market will mean the removal of all internal barriers by 1992? Is he satisfied that adequate precautions will be taken to scrutinise people to detect terrorists and the movement of drugs after 1992? Does he further accept that while he may have reservations about this, many member states want the complete removal of barriers, whatever the consequences for the increase of international drug trafficking and terrorism?
    Mr. Hurd: The hon. Gentleman has made a very important point. Fortunately, we are not alone in stressing its importance. The Single European Act, from which the movement towards 1992 flowed, made it clear that member states must be free to continue to take effective measures against terrorists and drug traffickers. In all our detailed discussions on the movement towards 1992—for example, regarding the Channel tunnel—it will be important to maintain effective controls for those purposes.
    Mr. Marlow: What is the media's role in the fight against terrorism? It would seem that they compete with each other in providing entertainment for the public rather than an objective review of the facts. What can be done to prevent the media from providing gratuitous support for acts of terrorism?
    Mr. Hurd: The media need to consider carefully, whether in Northern Ireland or elsewhere, the distinction between reporting the news—letting the citizen know what is happening, without disguising the fact that we live in a brutal and violent world—and adding gratuitously to scenes of violence, thus providing, according to Lord Annan's description when he discussed this matter, additional publicity which serves the terrorist without actually adding in any way to the information of the citizen.

    Broadcasting Standards Council
    Mr. Morley: To ask the Secretary of State for the Home Department if he has yet decided on the terms of reference for the Broadcasting Standards Council.
    Mr. Renton: My right hon. Friend the Secretary of State set out the terms of reference for the Broadcasting Standards Council in his statement to the House on 16 May.
    Mr. Morley: Is the Minister aware that on 16 May the Secretary of State failed to give an assurance to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that the Broadcasting Standards Council would not interfere with the political and current affairs contents of programmes and would restrict itself to standards of decency? Is he further aware that there is a great deal of anxiety that the council will duplicate what already exists simply so that the Government can manipulate it? The Government already have the press in their pocket. Can the Minister give the House a categorical assurance that the broadcasting authorities will be free to comment as they see fit?
    Mr. Renton: Of course broadcasting authorities will be free to comment as they see fit. They have already commented and made known their views on the setting up of the Broadcasting Standards Council. Doubtless it is right that they should have that democratic right, and that will continue.
    On his first point, the hon. Gentleman is wrong. When my right hon. Friend announced the setting up of the council, he described its remit and said that it was strictly confined to questions of sex, violence and standards of taste and decency. When asked whether it would be possible for those powers to be added to or diminished, he made the point that the council's role will be debated in the House—for example, in the course of future legislation. I
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    have no doubt that at that time hon. Members on both sides of the House will seek to add to or diminish its powers.
    Mr. Lawrence: Is my hon. Friend aware that many parents in Britain are angry about the steady diet of pornography, near-pornography and violence that is fed to their children on practically a nightly basis and fed up with the whining and whingeing of the broadcasting authorities which have been given plenty of opportunities to put their house in order, but have deliberately refused to do so?
    Mr. Renton: I agree with my hon. the learned Friend. It was because of that anxiety that, in our election manifesto a year ago, we committed ourselves to bringing forward proposals for stronger and more effective arrangements. That is what we are now doing. I hope that the Broadcasting Standards Council will prove the cure to the disease. If so, its setting up will prove a worthwhile exercise.
    Mr. Tony Banks: I am sure that the Prime Minister wants to make the BBC as fair and impartial as The Sun and the Daily Mail. How long will the Broadcasting Standards Council exist on a non-statutory basis, and how much will Sir William Rees-Mogg be paid as chairman of that censorship body?
    Mr. Renton: The hon. Gentleman is wrong to refer to the council as a censorship body. Its purpose to reflect the views of and receive complaints from the public on programme content and decency. I am sure that the hon. Gentleman has constituents, as I have, who will be pleased that an outside body is now looking at such complaints.
    Sir William Rees-Mogg will receive a salary at the outset of £30,000 a year. We are setting up the council on a non-statutory basis so that it can get on with its work straight away. If legislation is needed to reinforce its work, that will be incorporated in the major broadcasting Bill that we shall bring before Parliament in due course.

    Electronic Tagging
    Mrs. Virginia Bottomley: To ask the Secretary of State for the Home Department what representations he has received on proposals to use electronic tagging for remand prisoners.
    The Minister of State, Home Office (Mr. John Patten): We have received correspondence from interested bodies suggesting various uses for electronic tagging, including its use for people remanded on bail. We are making inquiries into the systems which are available and considering what applications they might usefully have.
    Mrs. Bottomley: I thank my hon. Friend for his open-minded response. Does he agree that when one fifth of the prison population are on remand, and when two thirds of the women and one third of the men on remand do not subsequently receive custodial sentences, in the interests of civil liberty, cost saving and public confidence it is right that the tagging option should be explored? Will he join me in condemning the knee-jerk reaction of the Labour party, which is only too anxious to complain about the size of the remand population, but which looks with a closed mind at any prospect of tackling it?
    Mr. Patten: I agree with my hon. Friend that the Opposition do not have an idea between them about dealing with the remand problem. Electronic tagging, subject to many safeguards, may be extremely useful in enabling people to be kept on remand outside the prison system. I am sure that that would be welcomed by all Members.
    Mr. Alex Carlile: Does the Minister agree that some courts may be less willing than others to have people tagged by the attachment of an object, either voluntarily or compulsorily, to their arms or legs? Will the Home Office consider alternatives, including the provision of the equivalent of a paging device in the accused's home, which would allow the police to make spot checks on a remanded person's whereabouts?
    Mr. Patten: The hon. and learned Gentleman, unlike many of the hon. Gentlemen surrounding him, is extremely open-minded and is at least prepared to examine proposals aimed at achieving a reduction in the prison population. He may agree with me that asking people to carry an electronic tag or a paging device would be less of an intrusion into civil liberties than putting them in gaol.
    Mr Wheeler: Does my hon. Friend agree that technological developments now make it possible for a variety of strategies to be considered under the general umbrella of tagging? Does he agree also that, as this debate continues, even probation officers are beginning to recognise the advantage of keeping people out of prison, and perhaps some people out of remand centres, by the adoption of such technology?
    Mr. Patten: The technologies are developing rapidly and I agree with my hon. Friend that the probation service now has a golden opportunity to move centre stage in dealing with remand prisoners and with others who might otherwise be sent to gaol for committing non-violent, non-serious crimes.

    Remand Centre (North Wales)
    Mr. Ieuan Wyn Jones: To ask the Secretary of State for the Home Department what plans his Department has to establish a remand centre in north Wales.
    The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): None at present. Last month the Prisons Building Board invited the private sector to submit outline proposals for the construction of urban remand centres. The responses are still being evaluated, but any new remand centres are likely to be sited in the main conurbations.
    Mr. Jones: Is the Minister aware that the majority of remand prisoners in north Wales are held at Risley remand centre, which is a considerable distance from that region's rural areas? There is also concern about the conditions at Risley. Is the Minister not worried about the terrible inconvenience caused to the families of remand prisoners in having to travel the distances involved, as well as that caused to their solicitors and to the prisoners themselves? Will he review his decision and consider providing remand facilities in north Wales?
    Mr. Hogg: There is a place in the building programme for a prison at Wrexham. Unfortunately, that proposal
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    has not been received with complete enthusiasm by the local representatives. I hope that the point made by the hon. Gentleman will be considered by local residents.

    Criminal Cases (Right to Silence)
    Mr. Flynn: To ask the Secretary of State for the Home Department if he has any plans to seek to alter the present right to silence of suspects and defendants in criminal cases.
    Mr. John Patten: I refer the hon. Member to the reply given to my hon. Friend the Member for Lancashire, West (Mr. Hind) yesterday.
    Mr. Flynn: Does the Minister agree that, while the mass of police interrogations are carried out in an exemplary manner, there have been worrying cases of alleged confessions that have afterwards been found to he false? This can be seen in the conclusions of the Mars-Jones inquiry. Examples are the Timothy Evans case and the Confait case, in which several youths, one mentally retarded, were alleged to have made confessions which were afterwards found to be false. Does the Minister not consider that any decision on ending the right to silence is premature, and that in attempting to create a law to deal with hardened criminals he is putting at grave peril the interests of the weak, the inadequate and the innocent?
    Mr. Patten: The weak, the inadequate and the innocent are well covered by the codes of practice in the Police and Criminal Evidence Act 1984. The hon. Gentleman is right. This is a complex subject, and that is why my right hon. Friend the Home Secretary announced an inquiry yesterday.
    Mr. Hind: I am very grateful to my right hon. Friend the Home Secretary for the comprehensive answer that he gave to my written question yesterday. When my hon. Friend assesses this problem, will he look very carefully at the Criminal Law Revision Committee report of 1972, bearing in mind that when the right to silence was introduced there were no solicitors in police stations or at interviews, or any tape recordings? We must keep pace with the new advances in technology and the changes in the laws of evidence.
    Mr. Patten: My hon. Friend is right. Since the CLRC reported in 1972 many changes have taken place, both in legislation, such as the Police and Criminal Evidence Act, and in technology, such as the universal introduction of tape recording in police stations, which we hope to have in place by 1991. These are complex issues, however, and that is why my right hon. Friend said in answer to my hon. Friend's question yesterday that he would look into the matter as soon as possible.
    Mrs. Taylor: Does the Minister not realise that there is widespread concern about the proposed erosion of the principle that someone is innocent until proved guilty? Why is the Home Secretary going ahead with the abolition of the right to silence before the results of the Government-funded research are published? Is it not irresponsible to make such a fundamental change to our criminal procedures without first obtaining all the evidence that is available? If the Government are willing to spend money on research, why are they not willing to wait until the findings of that research are forthcoming?
    Mr. Patten: The hon. Lady is a little confused about the issues. My right hon. and learned Friend is not proposing to abolish the right to silence. He is proposing to set up a committee to look into the possibilities of abolishing the "right to ambush", by which I mean a defendant introducing into a trial at the last minute a line of defence that has not been previously disclosed. This often means that a prosecution case collapses, and sometimes people with a case to answer go free.

    Remand System
    Mr. Sackville: To ask the Secretary of State for the Home Department when he expects to publish his Green Paper on plans to introduce the private sector into the remand system.
    Mr. Hurd: Before the summer recess. We are also moving forward with the selection and appointment of management consultants to help in examining the practical issues.
    Mr. Sackville: Does my right hon. Friend agree that because of overcrowding, drug abuse and other serious problems affecting our prisons it is unwise and inappropriate to expose unconvicted men and women to such a system? We have a lot to learn from certain American states about the treatment of remand prisoners.
    Mr. Hurd: I think that my hon. Friend is probably right. I believe that the new bail hostels that I have announced will help, but I hope that we can bring the private sector into the business of not only constructing, but possibly managing, remand centres. We have asked the private sector for ideas on design and on quick methods of constructing open prisons and remand centres. We have had 30 responses, which I find encouraging. The Prisons Building Board will go through the responses and work out the proposals in greater detail.
    Mr. Ashby: Will my right hon. Friend consider very carefully the close involvement of the private sector in the design and building of special remand centres? Will he also consider the smaller, localised remand centre, perhaps attached to or close to a court, or group of courts, so that there can be speedy access to people in custody and they can be remanded without the problem of having to go to distant police stations or prisons?
    Mr. Hurd: The answer to my hon. Friend's first question is yes. His second suggestion is well worth considering in the Green Paper that we are preparing.

    Police Officers (Prosecutions)
    Mr. Wray: To ask the Secretary of State for the Home Department how many members of police forces have, for each year since 1974, been (a) tried and (b) convicted for conspiring to pervert the cause of justice.
    Mr. Douglas Hogg: The available information about criminal charges brought against police officers does not identify separately charges of conspiracy to pervert the course of justice, and I regret that the information requested could be obtained only at disproportionate cost.
    Mr. Wray: Does the Minister agree that there has been much anxiety about a number of cases over the years, culminating in two recent cases, the Chelsea gang case, and
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    the Stirton case, where the dubious fabricated evidence has cost the taxpayer money? Will the Home Secretary review the present arrangements, by bringing out a Green Paper?
    Mr. Hogg: There is absolutely no need.
    Mr. Nicholas Bennett: Does my hon. Friend agree that the very small proportion of police officers who attempt to pervert the course of justice is symptomatic of what a good police force we have? Does he agree also that it compares favourably with police forces abroad, and that we should be concerned about the number of police officers who are injured?
    Mr. Hogg: Absolutely.
    Mr. Campbell-Savours: Why is the Police Federation so reluctant to give legal support to Inspector Woollard? Does the federation believe that if he were to go to court some police officers would be prosecuted for offences?
    Mr. Hogg: I should be inclined to ask the chairman of the Police Federation.

    Double Parking Offences
    Mr. Harry Greenway: To ask the Secretary of State for the Home Department how many vehicle owners have been convicted of double parking in London in the past 12 months; and if he will make a statement.
    Mr. Douglas Hogg: Drivers who double park may be charged with the offences of breaching waiting restrictions, unnecessary obstruction or leaving a vehicle in a dangerous position. In the Metropolitan and City police force areas there were over 11,500 convictions for these offences and nearly 2·7 million fixed penalty notices were issued. These offences may also be committed by persons who have not double parked, and I regret that it is not possible to identify double parking cases within these total figures.
    Mr. Greenway: Is my hon. Friend aware of the serious shortage of parking spaces in London and the increase in double parking for that reason? What view does he take of parking tickets being issued at 4 am and 5 am when people have double parked for short periods because no other parking is available? Will he take steps to see that more parking is made available, so that double parking may cease?
    Mr. Hogg: I suspect that the case to which my hon. Friend is referring reinforces his belief that it is best to travel to work on a horse.

    Firearms
    Mr. Boswell: To ask the Secretary of State for the Home Department if he will make it his policy to break down future statistics for the use of firearms in the commission of crimes between those that are, or are not, held on firearm or shotgun certificates.
    Mr. Douglas Hogg: It is not practicable, because many firearms used in offences are either not recovered or have had their serial numbers or distinguishing marks removed. There is no way of telling, therefore, whether they were originally held on a firearm or on a shotgun certificate.
    Mr. Boswell: Given the considerable burdens that the new legislation will impose on legitimate shooters, will my hon. Friend reconsider whether he could publish as much as possible about the difference between guns which are held legally and those which are not known to be held legally, and whether he can measure as far as possible the leakage of legitimate guns, badly stored, into the illegitimate sector?
    Mr. Hogg: My hon. Friend will find two provisions in the Bill which will reassure him: first, the requirement for shotgun owners to identify and list their guns; and, secondly, the additional obligation on dealers to keep their registers for five years.

    Official Secrets Act
    Mr. Caborn: To ask the Secretary of State for the Home Department when he expects to make a statement on his proposals for the reform of the Official Secrets Acts.
    Mr. Hurd: I hope, as already stated, to lay before Parliament next month a White Paper setting out the Government's proposals for the reform of section 2 of the Official Secrets Act 1911.
    Mr. Caborn: Can the Home Secretary give precise details of the timetable? Reform has been promised for eight or nine years. He was party to the punishing of his own Back Benchers some weeks ago, and precisely laid out on BBC radio some days after that what the White Paper would contain. Can he set out a timetable for the Bill after the White Paper and what consultations are likely?
    Mr. Hurd: The hon. Gentleman has got the history wrong. We restarted work on this in April of last year. I said, I think for the first time in December last year when my hon. Friend's Bill was debated, that we intended to lay before Parliament next month a White Paper. That is still our intention.

    Law and Order Budget
    Mr. Sumberg: To ask the Secretary of State for the Home Department what is the law and order budget within his Department for 1988–89; what was the comparable budget for the last 10 years; and what proportion of the budget is devoted to police manpower costs.
    Mr. Hurd: The Home Office law and order budget for 1988–89 is £5,098 million, of which 61 per cent, is devoted to police manpower costs. I will, with permission, circulate in the Official Report the figures for the Home Office law and order budget for previous years.
    Mr. Sumberg: Are not those figures proof-positive of the Government's commitment to the police force? Will my right hon. Friend join me in condemning those Left-wing Labour councils throughout the country which knock the police constantly, spend ratepayers' resources on that and thus destroy the safety of law-abiding citizens whom they are supposed to represent?
    Mr. Hurd: My hon. Friend is perfectly right. There are still too many snipers of the police about, and unfortunately some of them are still on the Opposition Benches.
    The figures are as follows:
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    £ million

    1978–79

    1,556

    1979–80

    1,971

    1980–81

    2,412

    1981–82

    2,855

    1982–83

    3,166

    1983–84

    3,462

    1984–85

    3,921

    1985–86

    3,967

    1986–87

    4,308

    1987–88

    14,832

    1988–89

    5,098

    1 Estimated outturn.

    This is the gross expenditure in England and Wales on police, prisons, the magistrates' courts, the probation service and the criminal injuries compensation scheme.

  PRIME MINISTER

    Engagements
    Mr. Ray Powell: To ask the Prime Minister if she will list her official engagements for Thursday 19 May.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.
    Mr. Powell: Will the Prime Minister reflect on the reception that she received last Saturday at Hampden park? Does she now realise that some of her decisions are even worse than the referee's? Last Tuesday, when she replied to my hon. Friend the Member for Ealing, Southall (Mr. Bidwell), she stated that everyone in the country had enjoyed increased prosperity. Will she explain why, in 1979, my constituents in Ogmore were employed in the steel works and in the mines and were earning £150 to £240 a week, whereas many are now on the dole and have been unemployed for five years, as have 2 million others? How can she say that they are enjoying increased prosperity?
    The Prime Minister: The answers to the parts of the question that I was able to hear are, first, that I very much enjoyed the game at Hampden park and the visit to the flower festival in the morning, and we had an excellent conference the night before. Secondly, everyone has participated in the increased prosperity. Average earnings are very much up, taxation is very much down, personal allowances are very much increased, social security benefits have increased enormously and so have the health services.
    Mr. Stokes: Will my right hon. Friend consider whether any action can be taken against the BBC and ITV for their attitude towards the security forces in the fight against terrorism? Would any other country tolerate such behaviour, and is not their action a stab in the back for the nation?
    The Prime Minister: As my hon. Friend is very well aware, if there are any complaints they should be made, not to me, but to the BBC complaints authority or to the chairman.
    Mr. Kinnock: Is the Prime Minister satisfied with the effect on the pound/deutschmark rate of the interest rate—[Interruption.]
    Mr. Speaker: Order. It takes up a lot of time.
    Mr. Kinnock: Is the Prime Minister satisfied with the effect on the pound/deutschmark rate of the interest rate cut on Tuesday?
    The Prime Minister: I made a very comprehensive statement on Tuesday. If the right hon. Gentleman wants to know the unwisdom of asking direct questions about the exchange rate, he should see what happened when certain Labour Back Benchers, who later became Front Benchers, asked such questions of—as they are now—Lord Wilson and Lord Callaghan. It was absolutely catastrophic. I have nothing to add to the statement that I made on Tuesday.
    Mr. Kinnock: Now perhaps the Prime Minister will give us the answer. Is she satisfied that D 3·17 to the pound is sustainable, or unsustainable?
    The Prime Minister: I have nothing further to add. I commend to the right hon. Gentleman the references that I made. He will learn a great deal from them.
    Mr. William Powell: Now that we have seen yet another substantial fall in unemployment as a result of the Government's policies, will my right hon. Friend reflect on the fact that it was in March 1979 that the closure of Corby steel works was announced and 8,000 people lost their jobs in my constituency? Today, the number of people out of work and claiming benefit in Corby town has fallen below 2,000 for the first time.
    The Prime Minister: I agree with my hon. Friend. Corby is an excellent example of a town undergoing the necessary reconstruction of a major industry and having the enterprise to find new jobs for the people there, and a new prosperity. I congratulate my hon. Friend.
    Mr. Fisher: To ask the Prime Minister if she will list her official engagements for Thursday 19 May.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Fisher: In reply to my hon. Friend the Member for Ogmore (Mr. Powell) the Prime Minister referred to income tax being very much lower. How does she justify the fact that as a direct result of the tax loopholes and tax advantages that her Government have created, a 51-year-old man earning £1 million a year can apparently pay no income tax? How is that a fair tax system, and what will she do to close those loopholes?
    The Prime Minister: Under the new tax system those at the top of the scale pay a bigger proportion of the total amount than they did previously. I commend to the hon. Gentleman the speech of the New Zealand Socialist Minister for Finance, who has now made the top rate of tax 33p in the pound. One of the reasons for that is that he believes it is good for the people at the bottom of the pile to have a higher standard of living.

    New Zealand Butter
    Mr. Teddy Taylor: To ask the Prime Minister if the next meeting of the European Council will discuss the special arrangements for the import of New Zealand butter; and if she will make a statement.
    The Prime Minister: I am not aware of any plans to do so.
    Mr. Taylor: Will my right hon. Friend fight hard to prevent the EEC further cutting New Zealand butter imports and depriving British housewives of freedom of choice, particularly as New Zealand has never let Britain down when we have been in trouble? Will she bear in mind the massive damage being done to New Zealand, Australia and the Third world by the Common Market spending over £200 million of taxpayers' money every week dumping butter on the world market at 6p a pound?
    The Prime Minister: As my hon. Friend is aware, we have done more than any other Government to get the surpluses under control in the Common Market, in particular at the last meeting that we had, because we were very much aware of the truth of what my hon. Friend said. The surpluses affect other countries which depend to a considerable extent upon the export of agricultural products. The New Zealand butter agreement will come up again shortly for examination and we expect the Commission to make proposals. New Zealand exports far less butter to Britain than it used to do, but it is an important part of its economy and many people in this country wish to continue to be able to buy that butter, and I assume that they will be able to do so.
    Mr. Rees: Will the Prime Minister recall the speed with which the New Zealanders came to our support in 1939? Will she consider visiting the airfields in Lincolnshire and the war graves all the way from El Alamein to the Austrian border and reflect on the price that New Zealanders paid while supporting us, and support the New Zealanders in the EEC?
    The Prime Minister: I thought that I was doing just that in my reply, because butter exports are very much a part of the New Zealand economy. People here still wish to purchase that country's butter—and lamb—and I am very much aware that the import quotas have been reduced steadily from 165,000 tonnes in 1973 to 74,000 tonnes this year. A new agreement will be negotiated, which I hope will be satisfactory to all concerned.
    Dame Elaine Kellett-Bowman: Will my right hon. Friend reflect on the fact that, although many people agree that the older generations of New Zealanders, in the first and second world wars, supported us superbly, as they did in the Falklands, the present New Zealand Government, under Labour, have reneged on their duty to contribute to the defence of the free world and the position has radically changed?
    The Prime Minister: I am very much aware that our ships are not able to go to New Zealand at the moment—which I think is a great tragedy both for our Navy and for many people in New Zealand—because the New Zealand Government insists on the ships not having any nuclear weapons or on asking questions about that, and of course we cannot say whether they have because of our obligations to NATO. Nevertheless, I do not think that

    1095
    that would warrant taking it out of the New Zealand people by not doing everything that we can to see that they have a thoroughly satisfactory arrangement for the continued sale of butter to the Common Market.
    Mr. Wilson: Having used the un-word "unwisdom", and having called in aid the good example of the New Zealand Socialist Government, will the Prime Minister now give an assurance that there will be no cruise missiles on the Clyde?
    The Prime Minister: I shall give the hon. Gentleman the assurance that we shall take whatever measures are necessary to keep a continued effective nuclear deterrent and to carry out our obligations to NATO.
    Mr. Dykes: Will my right hon. Friend accept, though, that fairminded New Zealanders agree that the arrangement for New Zealand, which is very welcome in all parts of the House, has been a very good one for that country, but that that does not gainsay the need for New Zealand to find other markets, including the Soviet Union, because New Zealanders sell more butter there than the EEC does?
    The Prime Minister: Yes, but I hope my hon. Friend will appreciate that when they have a drop in quota from 165,000 tonnes in 1973 to 74,000 tonnes this year they have had to be very active in finding other markets, particularly those in the Pacific basin.

    Engagements
    Mr. Livingstone: To ask the Prime Minister if she will list her official engagements for Thursday 19 May.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Livingstone: In the Prime Minister's busy day, will she find time to consider the conviction for murder of Mr. Robert McConnell, a Unionist paramilitary, and investigate who authorised the decision of the RUC to destroy its case notes rather than bring prosecutions against two members of the SAS, Sergeant Aitken and Corporal McGow, who supplied the sub-machine gun used in the murder? Will she therefore report urgently to the House on who authorises SAS operations at political and operational levels at home and abroad?
    The Prime Minister: As the hon. Gentleman is aware, decisions about prosecutions are not for me. They are for the prosecuting authorities. If the hon. Gentleman has any evidence, I suggest that he puts it to those authorities, rather than give it under privilege. We do not discuss matters relating to the SAS, and no one would want us to do so unless he wished to undermine the security of this country.
    Mr. Couchman: To ask the Prime Minister if she will list her official engagements for Thursday 19 May.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Couchman: Does my right hon. Friend agree that today's most heartening unemployment and employment statistics underscore our burgeoning economy? Should we
    1096
    not now be placing the greatest emphasis on training our young people in the skills that will be needed in the 21st century, the shortage of which is beginning to worry successful employers?
    The Prime Minister: Yes, I agree with my hon. Friend that the figures today are very encouraging indeed. Unemployment has fallen for 21 months in succession and over the last year by about half a million. I agree with him also that we shall need more and more skilled people for the jobs that are available. I hope that everyone, including the trade unions, will support the new adult training scheme, which is intended to give skills to about 600,000 unemployed people to enable them to get the jobs that employers are ready to offer.
    Mr. Battle: Will the Prime Minister explain how 200 of my constituents, who are skilled workers and who received their redundancy notices from Courtaulds last week, have participated in the new prosperity that she says is for everyone?
    The Prime Minister: Yes it is difficult for anyone who suddenly faces redundancy, but most people understand that there must be a restructuring of industry. There has to be change. One cannot go on making goods for which there is no demand. The many people, from both sides of the House, who come to see me fully understand that these things have to happen and they set about trying to find companies to go to the area or people who will take up the enterprise allowance to create the jobs and work of the future.
    Mr. Stanbrook: To ask the Prime Minister if she will list her official engagements for Thursday 19 May.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Stanbrook: Will my right hon. Friend give some thought this afternoon to the constitutional difficulty that has been exposed by the fate of the Abortion (Amendment) Bill? When the Government are apparently neutral on an important moral issue it is quite impossible for that issue to be settled by means of a private Member's Bill, however meritorious is may be and however much support it may get in this place. Is there not therefore a duty on my right hon. Friend to change her mind about this single constitutional issue? Matters of this sort ultimately depend for decision on the Government giving the opportunity for them to be settled in Government time. It will take only a few minutes one evening at the end of business to settle this one way or the other.
    The Prime Minister: I would not necessarily accept that there is a constitutional difficulty of the kind that my hon. Friend describes. Many of us have had to take through private Member's Bills that started by being very controversial, and some of us handled them in very different ways. A great deal depends on that, and I do not accept that there is a constitutional difficulty just because this Bill has not got through. I think that the decision we took not to provide time for private Member's Bills was correct.

Business of the House
3.31 pm
Mr. Frank Dobson: Will the Leader of the House state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham): Yes, Sir. The business for next week will be as follows:
MONDAY 23 MAY—Opposition Day (12th Alloted Day) (2nd part). Until seven o'clock there will be a debate on an Opposition motion entitled "The Crisis in Housing".
Remaining stages of the Firearms (Amendment) Bill.
TUESDAY 24 MAY—Consideration of Lords Amendments to the Employment Bill.
WEDNESDAY 25 MAY—Motion to take note of the White Paper on developments in the European Community July-December 1987 (Cm. 336).
THURSDAY 26 MAY—Motion for the spring Adjournment.
Motions on short speeches and public petitions.
Motion on the Lord Chancellor's Salary Order.
FRIDAY 27 MAY—Adjournment motions.
Mr. Dobson: I thank the Leader of the House. In view of the revelation earlier this week that decisions have been taken in principle and in secret about the replacement of one category of nuclear weapons, can we expect an early debate on defence?
May we expect a debate on competition policy before control of Rowntree Mackintosh is transferred from York to Switzerland?
When can we expect a debate on foreign affairs—the debate that the right hon. Gentleman has been promising for some months now?
Finally, in view of the need to improve and update communications in the House, will the right hon. Gentleman tell us when the Services Committee can expect to receive the reports from the Property Services Agency on the replacement of the annunciator system, and from British Telecom on the electronic mailing experiment, both of which have been outstanding for more than a year?
Mr. Wakeham: The hon. Member for Holborn and St. Pancras (Mr. Dobson) has asked me four questions about next week's business. The first was about a debate on the defence White Paper. In due course there will be an opportunity for a debate on that. I understand that the Select Committee on Defence will be taking evidence and producing a report, and it would be better to wait for that before we arrange a debate.
The next question was about competition policy and the matter of Rowntree. I answered a question on this last week when I said that my right hon. and noble Friend was awaiting a report from the Office of Fair Trading. There is nothing that I can add to what I said then.
The hon. Gentleman asked about a foreign affairs debate. I recognise that there is concern about and a need for a debate on foreign affairs, and I shall seek to arrange that as soon as possible.
The hon. Gentleman asked me about the annunciator screen report and British Telecom's electronic mailing system report. The hon. Gentleman kindly gave me notice that he would be asking about these matters. I understand that both reports will shortly be submitted to the Computer Sub-Committee. The consultants' final report
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on the annunciator screen was recently received by the Parliamentary Works Officer, who is now considering it. A draft report on the British Telecom electronic mailing system prepared by the Central Computer and Telecommunications Agency is with the working party involved in the trial of this system.
Several Hon. Members rose—
Mr. Speaker: Order. This is an Opposition day. May I remind the House that business questions should be confined to business for next week and should not be on general topics?
Mr. James Wallace: The Leader of the House said that there would ultimately be a debate on the defence Estimates. Does he accept that it would be preferable for the Secretary of State for Defence to make a statement about any new nuclear weapons system to this House and not on "Panorama"? Will he have an opportunity to make that statement next week? Now that the motion about the Select Committee on Procedure is on the Order Paper, does the Leader of the House have any proposals to bring that motion to the House so that the Select Committee on Procedure can now be set up?
Mr. Wakeham: I will obviously refer the point about defence to my right hon. Friend, but the defence White Paper debate is probably the best time to deal with these matters. The House will have noted that the motion to re-establish the Select Committee on Procedure is on the Order Paper, and I hope that it will be agreed before Whitsun.
Sir Bernard Braine: Has my right hon. Friend seen the report in The Independent that the deputy Leader of the Opposition has tried to persuade Mr. Speaker not to select the new clause on abortion put down for debate on the Criminal Justice Bill, which I understand must be debated very soon? In view of this and the disgraceful ploys which prevented the House from coming to a decision on this matter last Friday week, will my right hon. Friend give an assurance, first, that there will be a free vote on the amendment—assuming that Mr. Speaker selects it? Secondly, if there is any attempt at obstruction to prevent the House arriving at a decision, will he give us an assurance that the Government will not hesitate to move a motion in accordance with precedent?
Mr. Wakeham: My right hon. Friend raises the question of the selection of amendments on the Criminal Justice Bill. Of course, the selection of amendments on that Bill is a matter not for me but for you, Mr. Speaker. He also makes the point, which I would expect him to make, about the desirability of a structured debate on these matters. Obviously, we shall address our minds to that when we see the selection. At one time, matters of whipping were my responsibility, but I am glad to say that it is one of the responsibilities that I no longer have.
Ms. Joan Ruddock: When the Leader of the House answered the question about a debate on the defence Estimates, I fear that he misunderstood the point that was made by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson). There has been a revelation through the media—[HON. MEMBERS: "Where?"] There has been a revelation that new nuclear weapons decisions have been taken. Can the Leader of the House tell us whether it is therefore right that the House

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should he informed about this matter, and that there should be a proper debate? These decisions are being taken in secret and it is against the interests of the House that that should be done in this way.
Mr. Wakeham: The hon. Lady should not necessarily believe everything that she reads in the newspapers. I have said that I shall refer the matter to my right hon. Friend the Secretary of State for Defence. If he thought it appropriate to make a statement to the House, of course he would do so; but I said that probably the best way to proceed was to have the annual defence debate in the normal course.
Mr. Ian Gow: Will my right hon. Friend reconsider the answer he has just given? Would it not he of great advantage to the House and to the nation if there were to be a debate on nuclear defence policy, so that the Labour party could expose its differences on the matter?
Mr. Wakeham: My hon. Friend tempts me, because that would be an important debate, but there are many other important debates, and much important legislation that I should like passed through the House as soon as possible.
Rev. Martin Smyth: The Leader of the House is aware that I have been pressing on different occasions for a debate on devolution. In the light of the Prime Minister's statement in Scotland last week, could we have a debate in the near future? Alternatively—this might be more practicable could Northern Ireland be allowed into the benefits of that unitary state?
Mr. Wakeham: I recognise the hon. Gentleman's persistence in raising these matters, which are very important to him. I cannot promise a debate in the immediate future, but I will bear his representations in mind.
Mr. James Kilfedder: The Home Secretary is thinking about the introduction of electronic tagging for prisoners. Would the Leader of the House think of introducing it for right hon. and hon. Members, as it would be interesting to know where some of our distinguished colleagues are when they are not in the Palace of Westminster?
Mr. Wakeham: No, Sir. I have no plans to do such a thing. Quite a number of hon Members could go a long way away and I should not miss them.
Mr. Harry Cohen: Will the Leader of the House reconsider having a statement or debate on the new nuclear weapons matter, which the Secretary of State for Defence has announced? It has not been just in the press, as the Secretary of State has announced it to the Select Committee and on "Panorama". Many people will think that the Government have something to hide if they do not have a debate on this important matter. Will the Leader of the House ensure, at the same time, that there will be an early transcript of what the Secretary of State said to the Select Committee so that we can see the way in which he has been deceiving the House on this matter over a number of years?
Mr. Wakeham: I am not sure whether the hon. Gentleman's logic adds much to the debate. As i understand it, he says that my right hon. Friend the Secretary of State has announced this to a Select
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Committee, but is also trying to conceal it. Giving evidence to a Select Committee is not the most obvious way to conceal something.
Sir Peter Emery: On Thursday next week we are to have a debate on the spring Adjournment, and then on one of the procedure motions, which is to be on short speeches, as I understand it. It should come on between 7 pm and 7.30 pm, as the Adjournment debate will last for three hours. Has the Leader of the House considered any of the other motions brought forward by the Procedure Committee, because some matters other than short speeches could be dealt with if the debate is brief?
Mr. Wakeham: I recognise my hon. Friend's interest in these matters. The motion that I shall bring forward for debate next Thursday will be on short speeches and public petitions, dealing with two matters that I hope we can dispose of. I hope to arrange a further debate shortly in which we can discuss the other matters that I know are of concern, on which my hon. Friend knows I shall be having talks.
Mr. Bob Cryer: Could we have a statement on lobbying next week as a matter of urgency? The Leader of the House will recall that I raised with him the position of Mr. Peter Luff, who is employed by "Good Relations" yet is an adviser to the Secretary of State for Trade and Industry. The Secretary of State is not even a Member of the House; therefore he is not directly accountable. "Good Relations" is being investigated by that Department over the Guinness affair. This is highly unsatisfactory. Lobbying is spawning around this place and it is about time that we had a debate on it, or a statement at the very least.
Mr. Wakeham: Mr. Luff, and indeed all special advisers, are employed on agreed and proper terms, in accordance with Civil Service practice. I do not believe that there is a need for a debate on that matter. I notice the Select Committee's proposals about changes, and a further look at lobbying, but I do not foresee the need for a debate.
Mr. William Cash: Will my right hon. Friend note that the Companies (Audit Committees) Bill was yesterday thrown out of the other place? That legislation was introduced by the late Member for Kensington and was quickly passed in this House a few weeks ago. Will my right hon. Friend consider the possibility of that legislation coming back later in the year in the form of a Companies Bill? Many hon. Members and people outside the House would be grateful for that.
Mr. Wakeham: I am sure that the whole House would want me to say how much we shall miss Sir Brandon Rhys Williams. He did not always, over many years, make himself comfortable with the Government—he had views of his own—but I shall certainly miss his lively intellect and his contributions to our debates. I cannot promise, however, that there will be such legislation. Whether the Government decide to introduce a Bill containing these or similar proposals is a matter not for me but for my right hon. Friend the Secretary of State for Trade and Industry.
Mr. Tam Dalyell: Has the Leader of the House noticed that, on Tuesday, there is to be a reachable oral question—one of the few, I am told, ever to have been tabled in this way and allowed—on the role of the SAS?

1101
Will the right hon. Gentleman take on board the fact that, whatever is said by my hon. Friend the Member for Brent, East (Mr. Livingstone), there are serious Members on both sides of the House who are increasingly worried about under what authority and on whose authority the SAS operates? What are its rules of engagement? This question extends to cases such as that of Michael Tighe. Is there not a case for the Government making a statement on this matter—this would possibly be to their advantage—to clarify suspicions? There are certainly suspicions about the use in this connection of the royal prerogative.
Mr. Wakeham: I recognise the hon. Gentleman's persistence. I cannot possibly anticipate any answers to questions next week. Although the hon. Gentleman puts forward his view with all seriousness, there are others of us, on the Conservative Benches particularly, who would say that the security of the state requires that some things cannot be the subject of the to and fro of political debate in the House.
Mr. Andrew MacKay: I do not wish to prejudge any decisions that you, Mr. Speaker, will have to make on selecting new clauses to be considered in the debate on the Criminal Justice Bill. As more than 120 right hon. and hon. Members on both sides of the House signed an amendment reducing to 24 weeks the time limit for abortion when the Abortion Bill was considered in the House, does my right hon. Friend think that it would be helpful for a new clause to be introduced into the Criminal Justice Bill which would incorporate Lord Houghton's Bill—the Infant Life (Preservation) Bill—which would amend the Infant Life (Preservation) Act 1929?
Mr. Wakeham: Not surprisingly, the new clauses that I wish to see introduced into the Criminal Justice Bill are those introduced by my right hon. Friend the Home Secretary. My purpose is to get the Bill passed. As I have already said, the selection of amendments is not a matter for me.
Mr. Dennis Skinner: Does the Leader of the House recall that in the summer recess I wrote to him about what was to happen to the Short money for the Opposition parties? The delay has been exaggerated once again, after all these months, because of the leadership crisis in the SLD. Although we in the Labour party fully understand that we might have to wait for the money—[Interruption.]—none of it will come to me; it is for the Front Bench. [HON. MEMBERS: "What about your leadership crisis?"]. When will there be a debate? Will the Division be along the lines of representation in the House? How will the right hon. Gentleman manage to figure out the arithmetic? Is the right hon. Gentleman aware that some members of the Liberal party want to go to the television studios, get dressed up ready for when the cameras come into this place and buy their pink shirts and all the rest of it, and they need this money? When will they get it?
Mr. Wakeham: As I told the hon. Gentleman, among my souvenirs is the handwritten letter that he wrote to me setting out the problems of the allocation of Short money in the new Parliament. The hon. Gentleman was right to say that it was not as simple as some people thought. He knows that I have been struggling with this matter for
1102
many months, but I think that I see some light at the end of the tunnel. I hope to emerge in the fairly near future into the public gaze with my proposals. I can forecast one thing—they will not be accepted by everyone, and probably not by the hon. Gentleman.
Mr. Teddy Taylor: Could there be a statement next week on the EEC's remarkable decision last week, without the British Government being consulted in any way, to impose a ban on imports of apples to Britain? If consumers in Britain are to be deprived of the right to buy the apples that they want and are forced to buy year-old apples from intervention produced in other countries, is it not sensible that there should at least be a statement or a discussion in Parliament about what is happening?
Mr. Wakeham: I recognise my hon. Friend's concern about these matters. The decision to impose quotas on the import of apples from a number of countries, including New Zealand, was taken by the EC Commission, within whose competence it lies, without consultation with member states. The quota of 115,000 tonnes allocated to New Zealand is higher than sendings in any previous year and compares with the import in 1987 of 102,500 tonnes. A shortage of those excellent apples therefore appears unlikely.
Mr. Robert Maclennan: Is the Leader of the House aware that, in his answer to the hon. Member for Linlithgow (Mr. Dalyell), he enunciated a novel and unacceptable constitutional doctrine—that there are matters that about which the House may not question the Government because his hon. Friends think that it is not suitable that they should be questioned about such matters? If there are security matters that are not to be made the subject matter of question in this House, they had better be finely defined and there should be independent scrutiny of such matters by a committee of Privy Councillors.
Mr. Wakeham: If the hon. Gentleman would listen, he might make a little progress in these matters. I did not say that no one could ask questions. I said that there were some things that Ministers should not answer on and I will maintain that from the Dispatch Box for as long as I am here. There are some security matters that I am not prepared to have discussed across the Dispatch Box, even if the hon. Gentleman asks me.
Mr. Harry Greenway: May we have a debate next week on what can be done to help people whose homes are damaged by severe freak storms, such as that in Northolt, Greenford and parts of Hanwell and Ealing last week, as a result of which many poor people have been devastated? They have had walls knocked down by heavy water and their ground floor carpeting and furnishings have been destroyed. Finding themselves without any money, they do not know what to do. Their case should be brought to this House and answered.
Mr. Wakeham: That sounds a very distressing state of affairs and I am not sure whether I can give my hon. Friend an adequate answer. Perhaps he should take advantage of the Adjournment debate next week and see whether he can bring the matter before the House on that occasion.
Mr. Michael Foot: Referring to the right hon. Gentleman's answers about the suggestion that a new clause might be moved on Report to the Criminal Justice Bill, he is right in saying that any selection would be a matter for Mr. Speaker and not for him. If new clauses of such a far-reaching character on such different matters were to be introduced into the Bill on Report, it would have grave consequences for the Government, and every other piece of legislation that they are seeking to introduce might be subject to the same kind of interpolations. I hope that the right hon. Gentleman will take that into account when he considers the matter and gives advice to the Home Secretary, who may be interested in his advice and that of the House.
Mr. Wakeham: The points made by the right hon. Gentleman, who is very experienced in these matters and is a former Leader of the House, are properly for the Home Secretary and me to consider from the Government's point of view, although questions of selection are matters for the Speaker.
Mr. Roger Knapman: Some months ago, the hon. Member for Brent, East (Mr. Livingstone) made allegations in this House concerning the late Captain Nairac, whose family lives in my constituency. Did my right hon. Friend notice today that the hon. Gentleman has again named people—
Mr. Speaker: Order. The hon. Gentleman should relate his question to next week's business.
Mr. Knapman: May I ask my right hon. Friend whether this matter can be debated in the course of the next week or so, and how, if Parliament is to be televised, such privileges can be maintained in future?
Mr. Wakeham: I see no prospect of arranging a debate on that matter next week or any future week on the basis of that point. My right hon. Friend the Prime Minister deplored the use of parliamentary privilege to make allegations which are properly a matter for the prosecuting authorities. Anybody with information of that sort who wishes to pursue the matter has a clear duty: he should give the matter in confidence to the prosecuting authorities, rather than seek to make statements in the House.
Mr. David Blunkett: Among the debates that the Leader of the House said he would have liked to fit in next week, would he consider including a debate which we should be having on the 500 per cent. increase in the cost of concessionary television licences and the considerable suspicion in the minds of pensioners who are receiving it that this increase from 5p to £5 is the beginning of a move to phase them out completely?
Mr. Wakeham: The concessionary licence scheme for pensioners in residential homes has been in existence for many years. The changes announced yesterday by my right hon. Friend the Home Secretary will enable it to continue and will ensure that the scheme benefits those whom it was intended to benefit. As we have made clear on many occasions, it would not be right or sensible to give free or concessionary licences to all pensioners.
Mr. Peter Thurnham: If we are not to have a debate next week on the Criminal Justice Bill because of attempts to hijack it, does my right hon. Friend agree that careful consideration should be given to how to
1104
structure a debate on new clauses which formed no part of the title of the Bill and were not debated on Second Reading or in Committee?
Mr. Wakeham: I hear what my hon. Friend says. We are not having a debate next week because we have other important business that we intend to get through. We shall have debates on the Criminal justice Bill in the near future, when I shall bear my hon. Friend's point in mind.
Mr. David Alton: When the Leader of the House considers how to handle the Criminal Justice Bill, will he consider the precedent set in 1980 when the right hon. Member for Blaenau, Gwent (Mr. Foot) was Leader of the Opposition and amendments to the Criminal Justice (Scotland) Bill which had not been considered m Committee were incorporated on Report after being moved by the Opposition Front Bench? Since 1975, every pro-life Bill has received a Second Reading majority. If 15 attempts to introduce pro-life Bills have all been foiled by extended speeches, points of order and hon. Members deploying the mechanisms of this House, how does the right hon. Gentleman envisage this issue being properly settled? Does he regard it as a matter for private Members' legislation or to be settled in some other way? If in another way, what way?
Mr. Wakeham: The hon. Gentleman knows that I do not fully accept his analysis of the failure of Bills on this subject to reach the statute book by private Member's legislation, but I recognise the force of his arguments. I further recognise that there is an amendment to the Criminal Justice Bill, but I do not have anything more to add to what I have already said on what is clearly a difficult decision for you, Mr. Speaker.
Mr. Bill Walker: Will my right hon. Friend reconsider his views on a defence debate? It is essential to hold one soon because it will show the enormous differences of view on the Opposition Benches. More important, it would expose the fact that Royal Air Force pilots would be expected to enter the next war, if it ever took place, at great risk, and that the lessons of 1939, when the British Expeditionary Force went to France to fight Hitler's tanks with rifles, had been forgotten.
Mr. Wakeham: I recognise the desire for an early defence debate, but I cannot promise one. I know that my hon. Friend is aware that defence questions will be answered next Tuesday, 24 May, and he may find an opportunity to make some points then.
Mr. Michael J. Martin: During the next week, would it be possible for the Leader of the House to speak to his right hon. Friend the Secretary of State for Social Services about tribunal appeal claims? I am increasingly receiving complaints from constituents who are claiming attendance allowance that at these appeals they are being asked questions which I consider to be insensitive. The latest case involved a girl who is only 3ft 7in tall who was seeking a mobility allowance because her height meant that she had difficulty getting on and off buses. She was asked why she was wearing rings. I received another complaint from a woman suffering from alopecia, who was asked why she was wearing an expensive wig. Surely a medical appeal tribunal should not ask such questions of people with those difficulties.
Mr. Wakeham: I recognise the hon. Gentleman's concern for his constituents. If he is concerned that improper questions are being asked, perhaps the right course would be for him to take the matter up directly with my right hon. Friend the Secretary of State for Social Services, who will decide whether there is anything to be looked into.
Mr. John M. Taylor: Will my right hon. Friend take time to have a word with his right hon. Friend the Secretary of State for Transport and ask him to come to the House early next week to make a statement about the near miss that occurred yesterday afternoon on the flight-path into Birmingham airport? Many people who use that airport will want to be assured about its absolute safety. The airport is crucial to the welfare of the midlands.
Mr. Wakeham: The incident to which my hon. Friend referred will be investigated by the independent joint air miss working group, whose report will be publshed. The Civil Aviation Authority is responsible for taking any necessary safety action arising from the incident. That action need not wait until the report is published. However, there is no evidence of any deterioration in the safety in the air over the United Kingdom. Despite a massive increase in traffic, the figures for risk-bearing air misses involving commercial aircraft in recent years have shown a downward trend, from 45 in 1977 to 16 in 1986.
Mr. Nigel Spearing: The Leader of the House has announced that a debate on EEC matters for the last six months of 1987 will take place next Wednesday. Will that debate last for five hours, six hours or less? Whatever the length of time, is the Leader of the House not in danger of getting his priorities wrong? Is he not aware that the June meeting of the Council of Ministers in the EEC will have to consider many matters which have not yet been debated by the House although they have been recommended for debate by the Scrutiny Committee? Would it not be better to ensure that those matters are properly debated in respect of future legislation rather than spend time on retrospective matters over which the House can have no influence?
Mr. Wakeham: I recognise the hon. Gentleman's knowledge and experience in those matters and I always listen carefully to what he says. I believe that the debate that I have announced for next week is for the general convenience of the House; it was discussed through the usual channels before I announced it. However, I take note of what the hon. Gentleman has said, and I will have further discussions.
Mr. Tony Favell: My right hon. Friend will be aware that Manchester city council has been blocking an inquiry into its anti-racism policy in schools. It is said that the report is now on its way to my right hon. Friend the Secretary of State for Education and Science—at least, an expurgated version is on its way. When that is received, will my right hon. Friend the Leader of the House ask his right hon. Friend the Secretary of State for Education and Science to make a statement to the House? Many Conservative Members are worried that such policies, far from promoting racial harmony, actually discourage it?
Mr. Wakeham: My hon. Friend makes his point very well and I will refer the matter to my right hon. Friend the
1106
Secretary of State for Education and Science who will no doubt take whatever action he feels is appropriate in the circumstances.
Mr. Ray Powell: Can the Leader of the House arrange a debate next week on my early-day motion 792 about grandparents' rights?
[That this House deplores the increasing frequency of grandparents being deprived of the right of access to, care, fostering or adoption of their grandchildren; notes with alarm the attitude of some social services employees; and calls on Her Majesty's Government to introduce early legislation to give legal rights to grandparents providing immeidate right of access before children are taken into care and the right to be present or legally represented at any official hearing or inquiry regarding future access to, care, fostering and adoption of their grandchild or grandchildren.]
Is he aware that it has received the signatures of 266 hon. Members from both sides of the House? It is covered by a petition that I presented to the House signed by 8,000 grandparents across the country. Is the Leader of the House also aware that my motion has received the greatest number of supporting signatures of the 1,127 early-day motions that have been tabled this Session? Is it not time that he gave priority for a debate on this very emotive subject?
Mr. Wakeham: I agree that it is an important subject, and I congratulate the hon. Gentleman on the support that he has received. With regard to the early-day motion, grandparents may already be made the party to adoption proceedings. Further rights are provided for in amending legislation to be implemented this year. The Government will give careful consideration to the proposals in the motion when framing the legislation on child care and the family services provided for in the White Paper published in January 1987. I hope that that is some comfort to the hon. Gentleman, but I cannot find time for a debate next week.
Mr. Julian Brazier: May I put it to my right hon. Friend that there is a way this week whereby he could get you, Mr. Speaker, out of a very difficult decision, and allow the Government to maintain their principle of not giving Government time to private Members' Bills while allowing the country to see the verdict that it expects from Parliament? Quite simply, we could have a business motion to allow the House to vote on whether it chose to use some of its own private Members' time on a Friday to finish the Alton Bill.
Mr. Wakeham: Would that all these things were quite as simple as my hon. Friend suggests. The Government table motions with regard to the allocation of private Members' time in the House. We gave extra time over and above that laid down in the Standing Orders for private Members' Bills. Those were approved by the House and I do not believe that it would be right to make a change in that regard.
Mr. Greville Janner: Would the Leader of the House himself make a statement next week on the extraordinary revelation that an honorary British knighthood has been awarded to none other than one Kurt Waldheim? If that is not a matter for the right hon. Gentleman, will he undertake to refer it to his appropriate

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colleague who can advise the House as to this obviously offensive and iniquitous use of an ancient order of British chivalry?
Mr. Wakeham: I am pretty certain that it is not for me to answer questions in the House on those matters. However, I will investigate to see whether there is any responsibility that involves answering questions.
Miss Ann Widdecombe: With reference to the various answers that my right hon. Friend the Leader of the House has given this afternoon on the amendment tabled to the Criminal Justice Bill, while I respect entirely his position and the courtesy that he has shown when dealing with those queries, when the Government have been able to show consistently over a period that they expected an amendment on capital punishment to be discussed, why can they not give a similar sign in the case of the amendment on abortion?
Mr. Wakeham: Even the undertaking about capital punishment depends on Mr. Speaker selecting the amendments. I recognise that my hon. Friend has worked very hard for the cause which she believes to be important. I thank her for her kind remarks. but it would not be right for me to add anything further to the remarks that I have made already.
Several Hon. Members rose—
Mr. Speaker: Order. I repeat that this is an Opposition day; I ask hon. Members to be brief.
Mr. D. N. Campbell-Savours: When I table my early-day motion requiring that Privy Councillors be not given priority in the selection of speakers in debate, may I have an assurance that Government Whips will not exert pressure on Government Back Benchers not to sign the motion? May I have an assurance that all hon. Members will have an unconditional right to sign my motion without pressure?
Mr. Wakeham: Knowing the hon. Gentleman as well as I do, I should be able to acquit him of charges of arrogance. However, if he continues to ask such questions, demanding that I support his early-day motion before he has tabled it, he will receive a rather dusty answer.
Mr. Harold McCusker: Has the Leader of the House noticed how easy it has been for the Government to apply large segments of the Firearms (Amendment) Bill to Northern Ireland and how simple it was for a Conservative Member to apply the Motor Vehicles (Wearing of Rear Seat Belts by Children) Bill to Northern Ireland? Bearing in mind what the Prime Minister said in Perth last Friday about legislative devolution, when will the Government govern Northern Ireland like the rest of the country?
Mr. Wakeham: I shall not anticipate at the Dispatch Box the debate on the Firearms (Amendment) Bill or any debates on seat belts. I know that the hon. Gentleman is considering wider issues and wants to see changes in the way in which the House considers matters relating to Northern Ireland. I recognise those concerns and I have had talks with several of his hon. Friends about that. However, I am afraid that I have no proposals at the moment to make any changes.
Mr. Jeremy Corbyn: Will the Leader of the House consider that it is now important that there be an early debate on the situation facing the people of London in respect of the housing crisis and the shortage of housing for rent, the high unemployment that many inner-city places face, the cuts in the Health Service and the amalgamation of health authorities, and the growing chaos in traffic and transport throughout London? Since the House destroyed the governance of London through the GLC and since most inner-London boroughs are rate-capped or short of money, is it not important that we should debate the plight of the poorest people of London at an early date? On previous occasions, the Leader of the House has said that there would be a debate in the near future. Can he now give us a date for that?
Mr. Wakeham: No, I cannot give a date. I have said that that is a suitable subject for a debate and, if I can find time for it, it would be a proper subject on which to have a debate. The more the hon. Gentleman raises such questions, the more encouraged I am, because much of what he says is highly contentious and such a debate would be a suitable opportunity for him and for some of his hon. Friends to explain, for example, why so many council houses in London are unoccupied where Socialist councils are in charge.
Mr. Pat Wall: In view of the manifest failure of the EEC code of conduct for firms doing business in South Africa, emphasised by yesterday's annual general meeting of the BTR company, when shareholders asked questions about the dispute which has lasted for three years and which clearly shows that company to be in breach of the three main provisions of those guidelines, will it be possible in the EEC debate next week to discuss the conduct of British firms in South Africa under the EEC provisions, and the whole issue of trade with that country?
Mr. Wakeham: What is in order in a debate is not a matter for me, but for you, Mr. Speaker. On the face of it, I would have thought that if the hon. Gentleman used some ingenuity he might be able to make some of the points that he wants to.
Mr. John Home Robertson: Since the Leader of the House and his colleagues have failed to establish a Select Committee on Scottish Affairs. is he aware that Members of the Scottish majority party have resolved to establish their own investigative committee, which may well have support from other parties in the House? Since funds have been made available to support an investigative committee to monitor the work of the Scottish Office, will the Leader of the House make a statement next week to ensure that those hon. Members who are prepared to do their duty in scrutinising the work of the Scottish Office will have access to those funds?
Mr. Wakeham: I shall not be making a statement next week, but I am prepared to make a statement now on the Select Committee on Scottish Affairs, if that will he any help to the hon. Gentleman.
I have been anxious for a considerable time to set up the Select Committee on Scottish Affairs on a basis acceptable to all parts of the House. During that period, the Labour party's position has changed on a number of occasion
That has been helpful. The proposal that I have recently put to all parties is for the Select Committee on Scottish

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Affairs to be set up with mainly Scottish Members but with some English Members, and my proposal includes a place for the Social and Liberal Democratic party and the Scottish National party.
In order to achieve that objective, I have asked for some greater flexibility in the composition of the Scottish Standing Committee, which could involve a slight increase in the number of English members. I understand that my proposals are not acceptable to the Labour party, which I greatly regret. I have not yet had a formal view from the Social and Liberal Democratic party and the Scottish National party. That is the position at the moment.

Business of the House

  Whitsun Adjournment
  4.13 pm
  Mr. Speaker: I remind hon. Members that, on the motion for the Adjournment of the House on Friday 27 May, up to eight Members may raise with Ministers subjects of their own choice. Applications should reach my office by 10 pm on Monday next. A ballot will be held on Tuesday morning and the result made known as soon as possible thereafter.

Debates (Selection of Speakers)
4.14 pm
Mr. Ian Bruce: On a point of order, Mr. Speaker. May I have your guidance for future reference? You will know of my interest in Scottish affairs, coming, as I do, from Scotland. I am sure that when regulations on the community charge for students are brought before the House in a year or so, the experience of hon. Members who sit for Scottish constituencies will be valuable. As you know, I have been selected to serve on the Committee that is considering the School Boards (Scotland) Bill. I attempted to speak in yesterday's debate on the community charge for students and various points that I wished to make on education, and so on, would have been valuable. However, there seems to be a way of selecting Members that rightly gives priority—
Mr. Speaker: Order. I think that that is a reflection upon the Chair. It is the duty of for the occupant of the Chair to take into account the specific interests of hon. Members. English Members have some interest in Scottish affairs, just as Scottish Members have an interest in English affairs, because this is a United Kingdom Parliament. However, I hope that the hon. Gentleman will not challenge the selection of the Chair. I understand that he intervened a great deal last night.
Mr. Bruce rose—
Mr. George Foulkes: Further to that point of order, Mr. Speaker.
Mr. Speaker: Points of order only delay the Opposition day. However, I call Mr. Foulkes.
Mr. Foulkes: Further to that point of order, Mr. Speaker. I would be willing to meet the hon. Member for Dorset, South (Mr. Bruce) to give him the long list of Scottish debates in which I have tried, unsuccessfully, to speak, and I do represent a Scottish constituency.
Mr. Nicholas Bennett: Further to that point of order, Mr. Speaker. The selection of Members from the Government and Opposition Benches is a matter of obvious importance to me as a Welsh member. I have no wish to challenge Mr. Deputy Speaker's decision last night, but it would be useful to have some guidance on whether the Chair seeks to choose hon. Members from both sides of the House in order to have a balanced debate—or not, as happened last night, when four Opposition Members in a row spoke despite the fact that Conservative Members wished to speak.
That has obvious implications for other debates. A similar situation arose in the Welsh Grand Committee on 15 July last year, when Opposition Members took up the majority of debating time. Last night, in the 71 minutes of debate, Government Back Benchers had nine minutes and the remainder of the time, apart from the Minister winding up for 12 minutes, went to the Opposition. Such debates could be unbalanced as a result.
Mr. Speaker: I must bear in mind what the hon. Gentleman says when we have a Welsh debate, because he is frequently, perhaps over-frequently, called in Welsh debates.
Mr. Tim Devlin: Further to that point of order, Mr. Speaker. As a matter of principle, is it correct that there is nothing to prevent English Members from being called to speak in debates relating either to Scotland or Wales?
Mr. Speaker: That is absolutely correct. I know that the hon. Gentleman is not making a complaint, because we discussed that matter last night.

Opposition Day
[I2TH ALLOTTED DAY] [IST PART]
Opposition Day

  Shipbuilding
  Mr. Speaker: I have selected the amendment in the name of the Prime Minister.
  4.17 pm
  Mr. Brian Gould: I beg to move,
  That this House, deeply concerned at reports that Her Majesty's Government intends to withdraw all financial support from British Shipbuilders, and aware of the grave threat to British merchant shipbuilding posed by the contractual problems of NES'. and the uncertain future of Govan yard, calls upon Her Majesty's Government to affirm its commitment to British merchant shipbuilding and provide the support needed to sustain this essential British industry.
  We have drafted, the motion because we believe that a once great and still vital British industry is in mortal danger. There have been many occasions in the past when that claim has been made in respect of British shipbuilding. There have been many debates in the House in recent years in which grave fears have been expressed about the survival of that industry, but I truly believe that on this occasion the claim is justified, that this really is crunch time for British merchant shipbuilding, and that there is an axe poised over the industry which, in a sense, only the Minister can remove.
  The purpose of the debate and the motion is to invite the Minister to make it clear that he sees, as we do, an important future for this essential British industry. We intend—I am sure that the Chancellor of the Duchy of Lancaster will understand this—to use the debate to seek answers to questions, and to ask him to allay fears, Lo dispel rumours, to remove doubts and to make clear his commitment, and that of the Government, to the future of British shipbuilding.
  No one disputes that British shipbuilding has gone through an extremely difficult period. Shipbuilding worldwide has had a difficult time because of the depressed state of demand for shipping, but the current problems that have arisen in respect of North East Shipbuilders—the Govan and Appledore yards—arise not just in the context of that difficult worldwide situation, but as the direct consequence of steps that the Government have failed to take. It is the Government who have raised those question marks; that is why we ask the Government to remove them.
  The Government are exhibiting their now-familiar predilection for the triumph of ideology over the future of an important British industrial sector, together with their preoccupation with raising cash by disposing of those parts of the industry which can be sold off, accompanied by a willingness—at least implicit and increasingly clear—to junk those parts which cannot be sold off. That attitude threatens the taxpayers' investment, jobs, the regional economy of the north-east and the south-west, and the continued survival of an essential component in our industrial future.
  The current problems are the obvious, inevitable and possibly even intentional consequence of the

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  Government's attitude in the past, with their determination to dismember British Shipbuilders. They set sail on that course four or five years ago, when they began privatising the naval warship yards. It was always on the cards that, as the more viable parts of British Shipbuilders were disposed of, the increasingly small number remaining would face the growing threat of non-viability.
  When the Chancellor of the Duchy of Lancaster made his statement in the House on 18 April, and in statements that he has made elsewhere in recent days, there were hints that the Government's argument was that it was somehow inevitable, and a logical consequence of the process of dismemberment, that those parts of British Shipbuilders which remain cannot be sustained; that buyers or recipients must be found for them and that the rest must go to the wall. The Chancellor will not be surprised if I give him notice that we reject the inevitability of such an outcome. We will use this debate and future occasions to make clear our commitment to the industry and our belief that it would be wrong, not to say active industrial sabotage, to allow what remains of British merchant shipbuilding to go to the wall in the way that the Government contemplate.
  When the Minister replies, I hope that the first matter to which he will address himself is the uncertainty which exists in respect of the Govan yard in particular. On 18 April, the House was told that someone—I am tempted to say a buyer, but I am not sure that is the right term—had been found to take the Govan shipyard off the Government's hands, and that the lucky candidate was the Norwegian gas ship firm of Kvaerner Industries. The House was informed that it was to take over rather than purchase the company; as we understand it, it is more a matter of a giveaway than a sale. As my hon. Friend the Member for Great Grimsby (Mr. Mitchell) has often said, it is rather like saying, "You like the ships? Have the yard as well."
  If the yard is a viable proposition for a Norwegian gas ship builder, and if that company believes it can make the yard a going concern, why cannot the Government accept that the yard can be made viable and have a future? This seems to be another example of the Government's willingness to get shot of a public asset at almost any price.
  No one begrudges the Govan shipyard and all who work there the chance of a viable future. We on this side of the Chamber will take great care not to say anything that would in any way jeopardise that future. We understand the precarious nature of the situation and the importance of guaranteeing, so far as a guarantee can be given, the jobs in that part of the industry. However, we must have further information, assurances and guarantees as to exactly what is proposed.
  A month has gone by since we first heard the Minister's statement, and presumably the negotiations have made some progress. We hope that the Chancellor of the Duchy will be able to tell the House more about the outcome. His answers are of crucial importance to the British shipbuilding industry and to all those who work in Govan.
  We should like to know, for example, what exactly the Minister meant when he used the cryptic phrase "some restructuring" in his statement on 18 April. What does that mean in terms of existing jobs, future employment, the pensions of those who remain and of those who leave,
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  long-term investment, and so on? What does Kvaerner have in mind for the Govan shipyard? One can understand why it is that, having closed down its own yard and made hundreds of its own workers unemployed, the company now needs, at least in the short term, some cheaper—perhaps temporarily cheaper—capacity. It may be that, in the short term, some future exists for the Govan yard.
  We need to know what will be the future of the yard after Kvaerner's immediate objectives have been met. Will it be closed down, in the same way that the Norwegian yard was closed, and will Kvaerner then move on to another knockdown, giveaway yard in some other part of the world? What guarantee for the future is being offered to the Govan workers as a consequence of the deal? I hope that the Minister will provide answers to those questions.
  Another cryptic remark was contained in the Chancellor of the Duchy's relatively short statement on 18 April, relating to the transfer of the Appledore yard. The right hon. and learned Gentleman made it clear that there were buyers in the offing for that yard as well. On 18 April, my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) pointed out that Appledore includes not just the north Devon yard but also the Ferguson yard in Port Glasgow. It is a substantial operation employing hundreds of people at the two sites, and it is essential that those workers be given some information at this stage, a month after the statement, about who is the prospective purchaser and what are its intentions.
  Many people in north Devon who depend upon Appledore for their employment are extremely alarmed. I am sure that the same is true of the workers at Port Glasgow. They are concerned that a private purchaser may use the acquisition and the assets of the yard not for shipbuilding but for property speculation. I hope that the Chancellor of the Duchy will dispel any fears that the workers may have. Four weeks after the right hon. and learned Gentleman's statement, both the House and those whose livelihood depends on those yards are entitled to more information.
  Although this subject is not strictly within the terms of the motion I have moved, I hope that the Minister will say something about Harland and Wolff, which is an important part of the British shipbuilding industry. He will know that there is in hand a project for the building of a major liner known as the Ultimate Dream, which will require substantial Government support. That support ought to be given because of the importance of Harland and Wolff to the Northern Ireland economy. I do not need to labour that point, because it is well understood.
  Less well understood is the reason why a substantial proportion of the work involved in building that massive liner—perhaps as much as 70 per cent. of it—will be undertaken by mainland suppliers and contractors. My hon. Friends and I have received many representations on that point, including those from Senior Green of Wakefield, which is competing for an order for two oil-fired boilers, five exhaust boilers and ancillary equipment; and Industrial and Marine Switchgear of Hull, which is competing for the order to supply switchgear.
  That makes a point to which I may return later. While the initial order for a ship is of course of great importance to the shipyard that is fortunate enough to get it, it has major implications for the back-up industry, the

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  hinterland of industrial activity that goes to support shipbuilding. In the case of Harland and Wolff, much of that benefit will be felt in mainland industry.
  The really urgent problem, however, and one which now demands a clear answer from the Chancellor of the Duchy, arises in respect of the most important remaining part of British Shipbuilders. Assuming that Govan and Appledore go, what will remain is North East Shipbuilders Ltd. The danger is that it will be left in a non-viable, certainly vulnerable and exposed, position.
  The fears arise not only because of the inevitable consequences of this process of dismemberment—this death by a thousand cuts—but because the position of the yard, which is of such importance to the regional economy, has unfortunately been exacerbated by the contractual difficulties that have arisen on the one remaining major order on which the yard is working.
  On 18 April, the Minister broke the news to the House that those difficulties had arisen. I hope and expect that in the ensuing four weeks he and his advisers, particularly his legal advisers, have been thoroughly involved in trying to sort out what appears to be a legal argument. I hope that he will be able to tell the House today that the difficulties have been resolved, or are well on the way to resolution.
  It is time for the Government to establish the truth of the matter. We have heard and continue to hear—this was stated in a television programme on which the Minister and I appeared together this morning—that the problems arose because of unsatisfactory work being done by the yard. That is a very prejudicial statement; it is prejudicial both to the good name of the yard and those who work in it, and to the proper resolution of the contractual problems.
  I hope that the Minister will take the chance to make it clear—as I believe to be the case—that the contractual problems have arisen not because of any unsatisfactory work done in Sunderland, but because the Danish customer is having difficulty either in finding the money to pay or in finding customers to whom to sell the ferries on. If either explanation is correct, I hope that the Minister will say so, but if the position is as I believe it to be, I feel that we are entitled to ask further questions.
  We shall need to know what the status of the order is, how much of it is to be carried out and how much of it is covered by the Export Credits Guarantee Department guarantee—which, after all, is offered by a part of the Minister's Department, and for which he must therefore take some responsibility. When I spoke to him some time ago about the matter, he did not know exactly what the effect or scope of the ECGD guarantee would be. I hope that by now he has informed himself and can tell us what would happen if—in the worst case—the Danish customer was unwilling or unable to pay, and the guarantee had to be applied in its fullest possible form. I hope that he will he able to explain how many ferries would then be built, and what that would mean for the continuing work programme on Wearside. That is the minimal information that is decently and properly required by those who are still busily engaged in building the ferries. They need to know what their future is to be.
  There is a further question. If the Danes drop out of the picture and the ECGD guarantee is not adequate to ensure the continued performance of the full contract, what are the prospects of finding other customers? The Minister will know that there is a strong belief in Sunderland, particularly on the part of the management at the yard,
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  that there is a real prospect—I am not competent to judge, but this is their belief—that the Cubans may be interested in buying at least some of the ferries. When my hon. Friend the Member for Sunderland, North (Mr. Clay) and I, along with others, spoke to the Minister a couple of weeks ago, he professed ignorance—or at least, considerable doubts—about the possibilities. I hope that he will now be able to tell us what the chances are, and what efforts he and his Department will make to bring them to fruition.
  These are real questions. We certainly do not intend to use the debate to rant and rave or score political points. We want to hear the truth—the facts—from the Minister, because that is what the work force needs to hear. We also hope for an answer to a much wider question. The question that we wish most of all to be answered, because the answer will provide the context in which all these matters are to be resolved, is this: are the Government still committed to the survival of the industry?
  We know, and the Minister knows as well, that there have been repeated reports—I am tempted to say authoritative reports—that the Government have made up their mind to pull the plug on British Shipbuilders, arid that they are looking for an opportunity later this year to announce that they will no longer provide the financial support that is still required if the industry is to be maintained. I hope that the Minister will make it clear that those reports are ill founded. I hope that he will say that the short-term contractual problems of North East Shipbuilders are simply that, and not an occasion or pretext for announcing that that part of British Shipbuilders, which is an important component of British merchant shipbuilding, is to be allowed to go to the wall.
  Mr. Eric S. Heffer: Surely, if the Government decide to withdraw financial aid from the shipbuilding industry—which seems likely—and to turn it over entirely to private enterprise, that is a political question. The Government's entire policy on shipbuilding over the years has been political. They have deliberately allowed the industry to run down for political, sectarian reasons related to their outmoded and outdated philosophy.
  Mr. Gould: My hon. Friend is right. I made the same point in my opening remarks. I believe that the Government's attitude to the industry has typically been dictated by exactly the political and ideological questions to which my hon. Friend refers. In fact, as I look for the point that I have reached in my speech, I see that my next remark was to be that unless the Government gave the commitment that we demand, we would be forced to conclude that this was yet another part of the British industrial steel base that was to be sacrificed on the altar of ideology.
  Of course no one wants subsidies for their own sake. No one would be more delighted than all the thousands of people whose jobs still depend on merchant shipbuilding if it were possible to say that they had a viable future without subsidy. But if the present Government are to take the high-handed view that nothing is to survive if it requires subsidy—I suspect that there are powerful voices, if not in the Department of Trade and Industry at least on the Tory Back-Benches, who would say exactly that—we must face

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  the fact that the worldwide problems of shipbuilding over the past decade have dictated that no shipbuilding industry in the world would have survived without subsidy.
  We are not in a unique position. We are not even in a position that applies to Europe but from which the far east is exempt. The Koreans and the Japanese are also subsidising massively. They are doing so because they know that that is the only way to maintain the capacity in that important industry, which they have decided for political reasons—my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) is right; they have made a political judgment—they want to survive.
  Therefore, the industries which survive this admittedly difficult period will not necessarily be the industries which pass the commercial test, because none of them would survive according to that test. The survivors will be those which are supported by Governments who make the political decision that they want to see national shipbuilding preserved because they recognise its importance to the national economy. That is what we ask and expect to hear from the Government. We want that political commitment so that we can be sure that the Government recognise the importance of the survival of the industry.
  When we turn to competitive matters, we are also entitled to say that British Shipbuilders and British merchant shipbuilding generally have done amazingly well; they have taken huge strides to improve their competitiveness and efficiency. When British Shipbuilders has slimmed down at the cost of many tens of thousands of jobs, when it has improved the flexibility of its work practices, and when taxpayers have contributed hundreds of millions of pounds of investment to the point where British Shipbuilders and NESL are so advanced technologically that even the Japanese visit them to see how things are done, how remarkable it would be if at that time the Government said, "This is the point at which we pull the plug, destroy all that has been achieved, and thank and reward those who have made these substantial efforts by telling them that their industry is no longer required."
  How ironic it would be if that step were taken, after such a difficult decade, just when for the first time there is a glimmer of a possibility—some would say a likelihood—of an upturn in world demand. The evidence is there in the fact that the proportion of laid-up shipping is at its lowest level for 10 years, now just 4 per cent. of the world fleet. The evidence is also there in the fact that the price of secondhand ships has doubled in the last year and that the price being fetched for new ships has also risen substantially. How ironic it would be if this were the time that the Government, for ideological reasons, were to decide to wield the axe and chop our industry down just when it is poised to take advantage of the upturn in world demand.
  How ridiculous it would be if a great maritime and trading nation, which, despite the Government's worst efforts, still accounts for 8 per cent. of world trade, were unable to take advantage of improved circumstances. At one time, this nation built half the world's shipping output; 30 years ago it built more than a quarter of the output; now it builds only 1·5 per cent. of total output. How ludicrous it would be if we no longer had any merchant shipbuilding capacity. We would be dependent
  1118
  on foreigners who had had more faith in their shipbuilding industries and who had understood the commercial, strategic and industrial advantages of retaining that capacity.
  Mr. David Porter: Will the hon. Gentleman confirm that in his last statement he ignored completely the private sector shipbuilding yards and concentrated totally on the nationalised industry?
  Mr. Gould: As the motion makes clear, I am concentrating on merchant shipbuilding. That is the element of the industry which we believe is strategically important.
  Sometimes the Chancellor of the Duchy and his ministerial colleague disagree with me on the meaning of "strategic". Sometimes they argue that "strategic" has a solely military connotation. Let us accept that its military connotation is strong. I have had calls today from naval architects and specialists who said that, unless we maintained the capacity to build merchant ships, not just in the mixed yards but in the specialist merchant shipbuilding yards which could undertake the range required, we would be incapable of mounting any sustained naval operation, particularly of the sort which we saw at the time of the Falklands war. All the experts agree that without that capacity, we would be unable to mount a Falklands operation again.
  The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): If all merchant shipbuilding went, that would be right. But does the hon. Gentleman recall that he started his speech in a statesmanlike manner by claiming that he would do nothing to raise fears and spread rumours? He is now working himself up to a peroration in which he accuses the Government of being about to close down our entire merchant shipbuilding industry for ideological reasons, a statement for which he has no basis of fact. He is making that accusation against a Government who have so far put £1·8 billion into supporting the losses of British Shipbuilders. Does he not think that he is trying to raise fears in shipbuilding towns purely for political purposes?
  Mr. Gould: Nothing would please me, my hon. Friends and the hundreds of shipyard workers who have come to London today to lobby for their industry today more than if the Chancellor were able in two or three minutes to give us the answers to the questions which we have posed and to give us the commitment which we seek to the future of British merchant shipbuilding. He will have every opportunity to convince us of his good intentions and good faith in these matters. I hope that he will, but on the basis of what he has told the House and what he has said outside, I am sorry to say that there is room for grave doubt and real fear about what the Government have in mind for this essential industry.
  It is not just the strategic importance of the industry which matters; it is the impact on the local and regional economy if the NESL yards were to be lost. No doubt my hon. Friends from Sunderland and elsewhere will make that point. It is not just shipbuilding which would be affected. Other industries in marine engineering depend on shipbuilding for their survival. I think of enterprises such as Clark Kincaid, which is making engines for the ships

  1119
  being built in the Govan yard. My hon. Friend the Member for Greenock and Port Glasgow will have something to say about that.
  The ramifications of the Government's decision are important; on that I think the Chancellor of the Duchy and I agree. We now provide him with an opportunity to give us the assurances on Govan, Appledore and North East Shipbuilders, and to tell us the truth and what the Government intend to do. We expect answers to those questions. We expect the right hon. and learned Gentleman to make clear his commitment to this vital industry. Nothing less will do.
  4.47 pm
  The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
  'recognises the support that Her Majesty's Government has given to the shipbuilding industry; and welcomes the prospect of returning British Shipbuilders' yards to the private sector.'.
  I came to the House on 18 April to give hon. Members the earliest possible information about two items of news that were of great importance to shipbuilding areas. The first was that British Shipbuilders had received approaches—unsolicited approaches which the Government did not know were coming—for the disposal and sale of two yards, Govan on the Clyde and Appledore in Devon. I made it clear that we would welcome further interest from people wishing to take over business in all the corporation's facilities. I also told the House of the contractual difficulties that had arisen at North East Shipbuilders Ltd. in Sunderland. Those difficulties were already known to the work force and were about to become public, and it was important that the House should be aware of them.
  I made that statement to the House because I and the Government realise the importance of shipbuilding yards to the communities in which they are sited. We are all concerned about the prospects for the local economy in Clydeside, Wearside, north Devon and other parts of the country. As my hon. Friend the Member for Waveney (Mr. Porter) said, there are other yards as well. What we are talking about is how best to sustain economic activity, including shipyards if possible, and employment in all those places.
  We need to take advantage of the opportunity to look to the future of the economy in all those places and to keep up to date everyone who is understandably concerned about the facts, so that everyone may know where we are. I am not sure that this early debate, or the approach of Opposition Members on the Front and Back Benches, is altogether helpful. It is all very well for the hon. Member for Dagenham (Mr. Gould) to say that he wishes to do nothing to raise doubt and rumour, but he concluded by constructing an argument that contained the proposition that some deliberate attempt is being made to close down the yard. That hardly reassures the worried people in Glasgow, Sunderland or anywhere else.
  I have had similar experience elsewhere. I have had several meetings with the hon. Member for Sunderland, North (Mr. Clay). I mention him only because I see him in his place, as I would expect during such a debate. I have tried to be helpful and forthcoming when I have spoken to him, although sometimes I have had to be reserved to avoid jeopardising negotiations on the Clyde and
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  elsewhere. His way of recounting to local newspapers what I have said seems aimed more at local politics than at helping the situation.
  There is an important lobby today of people from the shipbuilding towns who are concerned about future employment levels in those towns. They have lobbied today largely because of speeches such as we have just heard, which have made people increasingly worried about where we are going. We ought to provide some answers. I shall certainly attempt to explain clearly where we are.
  Mr. Bruce Millan: Show us where we are.
  Mr. Clarke: The Opposition's explanation of where we are is hopelessly political. The hon. Member for Dagenham was listened to with care. The Opposition are now confirming my feeling that their concern is to create a row, rather than to discuss the issue sensibly.
  The hon. Member for Dagenham, in describing what had happened, said that the Government had created the situation. The two things that I have mentioned, the Kvaerner bid for Govan, and the difficulties over the contract at Sunderland, are nothing to do with the Government. We did absolutely nothing to provoke them. The hon. Gentleman did not mention the underlying difficulty that has to be understood when considering shipbuildin—where are the orders coming from, and where is the work coming from? It is astonishing that he made a speech about the history of shipbuilding over the last 10 years. He dealt with the past at great length, without mentioning the slight difficulty that at the moment there are no orders from anybody who wishes to buy ships beyond the existing work on the Clyde.
  The problem is getting orders. The existing work in Govan is for China, and in Sunderland it is for the Danish ferries. We are looking beyond that. We are talking about the future. It is absurd to say that the Government have caused all the problems. We just do not know where the next orders are likely to come from or at what price. Like most shipyards around the world, we are trying to cope with that.
  Mr. Gould rose—
  Mr. Clarke: I shall give way just once. I do not wish to give way to the Labour party before I have really got under way.
  Mr. Gould: The Chancellor is right to say that winning orders is a problem. We accept that. Does he accept that one essential condition for winning orders is the assurance that the Government intend to maintain a viable British merchant shipping industry? Will he now take the opportunity to assure the House that that is the Government's intention and that they will provide all the support required to achieve that objective?
  Mr. Clarke: The prospects of having a viable shipbuilding industry, which we all would like to see, remain extremely uncertain because of the condition of world markets. Having listened to the hon. Gentleman's speech, one would not believe that the Government have committed substantial sums to intervention fund support, and more to British Shipbuilders' yards. The bulk of the money that has gone to British Shipbuilders has been invested during the lifetime of this Government a total of £1·8 billion of taxpayers' money has gone into a business

  1121
  that now employs 6,500 people. It is absurd for the hon. Gentleman to try to make use of today's debate to say that somehow we have shown a lack of commitment to the industry during these difficult times.
  Mr. Heffer rose—
  Mr. James Wallace rose—
  Mr. Clarke: Let me take the factual basis a little further, as I have been pressed to do.
  I made the announcement on 18 April, and as a result there has been a great deal of interest from people making approaches for a variety of the yards. It is quite right that I am asked to bring the House up to date. The news about Govan and Appledore has brought two main responses. There has been a wealth of inquiries from the private sector about the corporation's yards. Obviously we welcome those inquiries, as we welcome the prospect of returning the yards to the private sector if they have a future there.
  I announced Kvaerner's letter of intent on 18 April. I am glad to say that talks have continued to go well. Not only is Kvaerner engaged in detailed negotiations with British Shipbuilders—which it would not be right for me to relate because difficult negotiations have to be concluded if we are to reach a successful solution—but it has had a very useful first meeting with the work force.
  I listened to what the hon. Gentleman said about the possibility of a sale to Kvaerner. I think that I judged him correctly when I thought he would not oppose the sale to Kvaerner. I do not think that the local work force will drive away the approach from Kvaerner. I think that they welcome it, and I commend all those in Glasgow who are taking a responsible and realistic attitude.
  More talks are planned for next week between British Shipbuilders and Kvaerner. I cannot anticipate where they will go, but I can point out to the House that not only has Kvaerner made it clear that it would contemplate placing two orders for gas-carrying ships in the yard—and there must be hopes of more orders—but that it wants to make west Scotland the centre of its gas technology business. If that were to happen, there would be prospects for many more jobs on the Clyde.
  I am still being asked why we have to sell to Kvaerner and why we cannot simply take the orders. I have tried to explain this before, and I do not know whether Opposition Members have tried to raise that question with Kvaerner. Kvaerner is well established and has considerable expertise in this niche market—not all of it in shipping. Its gas technology business extends beyond shipping. It has recently been placing orders on licence around the world on a price basis. Its business intention is to acquire a yard and find a new base, and I think that we all should be hoping that negotiations will reach a successful conclusion so that that very important base is established on the Clyde.
  The future for Govan and for what was Upper Clyde lies best in the conclusion of such negotiations. If it does not happen with Kvaerner, we would be interested in anyone else who offered a reasonable prospect for the area. As things stand, Govan is completing two ships for China. Nobody knows what it will do beyond that as a nationalised yard. It is all very well for the hon. Gentleman to read declarations about his ideological commitment to
  1122
  the future of British shipbuilding, but he did not say a word about what it will build in Govan and what will happen when the Chinese ships are completed and the work force in Govan starts being laid off if there is no movement towards the Kvaerner sale to which I have referred.
  We have received several written expressions of interest in Appledore. It depends on how seriously one takes them—some are more serious than others—but there have been a number of inquiries about the purchase of the Appledore yard. Some are interested in Appledore, some are interested in Ferguson and some are interested in Appledore and Ferguson as an entity. Negotiations have yet to get very far, but the interest, especially in Appledore, is very strong. I do not want to raise excessive hopes, but I am optimistic about a successful conclusion.
  British Shipbuilders has businesses beyond merchant shipbuilding. Its engine building facility at Greenock, Clark Kincaid, builds large diesel engines for use at sea and in land-based power generation. We have received four expressions of interest in the acquisition of Clark Kincaid, including one from the management team, and negotiations for the sale of that shipyard have begun.
  Finally, British Shipbuilders has a design and computer service business, Marine Design Consultants, which is based in Sunderland and in Dundee. MDC has attracted a particularly high level of interest. Again, I do not take all expressions of interest as commitment, but I have received a huge list of people who have expressed some interest, and I am confident that it will successfully be returned to the private sector, where it can broaden the range of its work.
  I accept that there are questions about the future of British Shipbuilders because a number of the yards are now the subject of negotiations between British Shipbuilders and companies which have a serious continuing interest in maintaining them in business and maintaining a level of employment. On balance, that is good news. In fact, the approach from the Norwegians has reminded people at home and abroad of the Government's preparedness to dispose of the yards to those interested in acquiring them as a business. That has produced good news for Clydeside, north Devon and elsewhere.
  I was asked about Harland and Wolff. I cannot go into that because it is the responsibility of my right hon. Friend the Secretary of State for Northern Ireland. The hon. Member for Dagenham spoke about an order, or about the campaigning that is taking place because of the interest of Mr. Ravi Tikkoo in buying a large cruise ship. That is a matter for my right hon. Friend the Secretary of State for Northern Ireland. I do not believe that at present he has any indication of the cost or the level of support required. I am sure that everybody in Northern Ireland, including the taxpayer, would be interested in receiving those details and evaluating them as early as possible.
  Mr. Elliot Morley: I want to draw the Minister's attention to what people are looking for in the order at Harland and Wolff. They want some enthusiasm and support from the Government. I accept the right hon. and learned Gentleman's point that the details are not known, but for many constituencies such as mine, which produces steel plate, and for firms such as CMR Electronics, which has submitted a major tender for the order, it will have great benefits.
  Mr. Clarke: I am astonished if tenders are being submitted. It is not for me to answer on behalf of my right hon. Friend the Secretary of State for Northern Ireland, but my understanding is that the Government do not yet have estimates of cost, support or anything of that sort. If there is enthusiasm for the order, the sooner we move away from everybody being told through the newspapers about what an attractive proposition it is, and the sooner we get down to costs and estimates of how much the taxpayer is expected to contribute, the better it will be and the more likely we are to make progress. I can see that I am being drawn into a Northern Ireland debate. I touched on Harland and Wolff simply out of courtesy in response to the hon. Member for Dagenham.
  The Government are explaining as carefully as we can where we stand with the yards in England. There is a good future in prospect for the bulk of the yards where there is interest in purchasing them, and we cannot be accused of a lack of commitment or of shirking our responsibilities. I shall repeat for the last time the figure of £1,800 million for 6,500 workers still employed. Last year, each job in British Shipbuilders cost the taxpayer nearly £20,000 to sustain through the support for the orders we had acquired and the subsidy for the losses that the yard was making over and above the intervention fund support. That is a commitment to one part of merchant shipping.
  To return to the point made by my hon. Friend the Member for Waveney, we should not proceed with this debate on the basis that British Shipbuilders makes up the bulk of shipbuilding in this country. That is not readily appreciated by people away from the shipbuilding areas. British Shipbuilders, the nationalised industry, employs 6,500 people. In Britain—I shall leave Northern Ireland out of my figures for a moment—26,000 people are working in other yards. The total number of shipbuilding jobs in Britain is 32,500. Our £1,800 million has been used to sustain the jobs of 6,500 out of that total. That certainly means that we cannot be accused of a lack of commitment. There is no point in saying, as the Opposition seem to imply, that the only policy is to continue to throw money of that scale at the problem, particularly when they do not address themselves to the question of what they will do about new orders.
  Intervention fund support has not been the major cost of British Shipbuilders. The amount of intervention fund support—the subsidy that Europeans give for orders—has amounted during our period of office to about £250 million. The rest, over £1·4 billion, has largely been spent in supporting the losses over and above the intervention fund support, and in supporting spare capacity costs when there were no new orders to cover those overheads. Every time we have taken an order the Government have given a 28 per cent. level of support. That has happened every time there has been an order from China, Denmark or wherever. The history of British Shipbuilders is that, on top of the intervention fund support, it has lost an average of about 20 per cent. more on the contract with cost overruns and delays before the ships are delivered.
  The respective sales will result in new management and, in the case of Kvaerner, new forms of business. There will be people who believe that they can turn those chronically loss-making yards, some of which have been limping along in recent years, into businesses with a real future that can be put on to a commercial footing. That has to be better for the work force and for the communities that depend upon them.
  Mr. Wallace: The right hon. and learned Gentleman has mentioned orders on several occasions. Is he aware that the Orkney Islands council wants to place six orders for new vessels in the near future? It found that when it wished to place an order with a British shipbuilding firm the intervention fund assistance would not necessarily be forthcoming, and it has been compelled to look abroad, where it has found that our foreign competitors are being subsidised, including one country where the subsidy will be increased threefold. How does the Minister think that that policy will help British shipbuilding?
  Mr. Clarke: Intervention fund support has never been available for all yards in the United Kingdom, and most people have agreed with that. If one starts extending intervention fund support to yards that are not traditionally merchant shipbuilding yards, one simply increases the problems of excess capacity. The mood of Opposition Members on this occasion seems to be that the details of the Orkney contract would be better pursued on some other occasion.
  Mr. Michael Grylls: Are not the figures that my right hon. and learned Friend has given of four times as many people working in firms that have been returned to the private sector a vindication of the Government's policy of returning the yards to the private sector step by step? Will my right hon. and learned Friend take encouragement and move further in the way in which he is describing? The record of the Northern Ireland Office in backing winners is not very high. I hope that it will pause before it puts more money into another dream project.
  Mr. Clarke: On the first point, some of the privatised yards have been hugely successful and are doing better now than would have been the case had they remained nationalised. On the second point, I am sure that my right hon. Friend the Secretary of State for Northern Ireland would not dream of putting before the House any proposition for public support for a major industrial order that was not well-judged, based on costs and a serious assessment of what it would be likely to cost the taxpayer. That is a matter for my right hon. Friend, not for me.
  I want to deal with the last point raised by the hon. Member for Dagenham, when he said that I must reaffirm the Government's commitment to the industry and so on. Nobody can quibble about our record of support for British Shipbuilders, and we shall continue to fund the corporation. We have laid an order before the House to raise the corporation's borrowing limit yet again. This will be debated in the near future on the Floor of the House. I made it clear that I no longer expect dividends to be proposed by or required of the corporation in respect of further payments of public dividend capital. Just to prove my point on the current stewardship of the Government, we shall be paying a further £24 million to the corporation this week.
  I shall move on to talk about the problems at North East Shipbuilders Ltd., the problems of the orders that we have and the contractual difficulties. Hon. Members on both sides of the Chamber are concerned about the state of the ferry programme at North East Shipbuilders, and I am sure that that is why many people from the north-east have come here today. We all know that there has been a dispute between British Shipbuilders and its Danish customer. I cannot intervene in that. My hope is that the

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  dispute will be resolved. British Shipbuilders strongly denies any suggestion that the ferries are inadequate, or that there are defects in them. Counter-allegations are being made by the customer. We hope that the dispute will be resolved and that the contract will continue.
  That contract is heavily supported by the Government. A total of £1 million-worth of intervention fund support is going into every ferry built. The contract price to Mr. Johansen is £4 million. The intervention fund support does not include the soft loans, and so on, which have also gone in to help this order, which is potentially for 24 ferries. At the moment the customer is in default on a number of the contracts, with the result that only two ferries have been delivered, and, as anybody who goes to Wearside is, unfortunately, able to see, there is a growing row of fine ferries moored there. In the opinion of British Shipbuilders these are potentially available for other customers. I think that there are seven ferries now on the river.
  We are still waiting for negotiations, and I do not believe that it would be helpful for me to go into a blow-by-blow account of where the parties think they are at the moment. I accept that there has to be some doubt about whether the programme will be completed, but for the time being it is continuing. For so long as it is continuing, for so long as the ECGD has not declared the customer to be in default under his loans, and for so long as neither party has declared any intention of shortening the contract, we proceed with laying the keels and the customer keeps being declared in default under the contract. Everybody is hoping that this matter can be sorted out satisfactorily but, with the possibility of the programme not being completed, we are looking to the possible future in Sunderland.
  Everybody accepts that any termination of orders in Sunderland would be a great blow to the local economy. Only as events unfold will we know whether Sunderland's future lies in continued support for the Danish ferries or any other kind of order or in looking for other, alternatives ways of stimulating employment in the town.
  There will be talk of Cuban orders. I do not believe that the Cubans have any intention of taking the ferries, which are of a particular design intended for the Scandinavian waters. The hon. Member for Sunderland, North is always talking to me about the Cuban order, and the Cubans do, indeed, appear to be contemplating the possibility of building freighters, but no proposition has yet come in. Remembering the history of orders of this kind over the years—Polish ships, Chinese ships—we must look very carefully at these orders. The purchaser is very heavily subsidised, so one has to look very carefully at the financial basis of what is proposed.
  We are making it clear to all prospective purchasers of British Shipbuilders' yards that we will discuss with them support for new orders and the basis upon which we might contemplate continued support of an intervention fund kind for the future. I should be inclined to consider requests for support from British Shipbuilders with considerable care, if not scepticism, in the light of the very heavy losses over and above the intervention support that British Shipbuilders has consistently made in the past.
  People from Sunderland obviously want to know what the immediate outlook is. At the moment we have this contract under negotiation. First, it is a small source of
  1126
  comfort, but very relevant, that no scenario—if I may use that awful word—that can be contemplated for the outcome of the Danish ferry dispute means that the yard will close tomorrow, or anything like it. There are months of work that is bound to continue, including work in hand, contractual obligations, and so on. We are not facing a disaster that will lead to an overnight shutdown. Secondly, other things are happening in Sunderland. The Government have helped Nissan cars to go into Washington new town, and there is the potential for a huge amount of extra employment there in the early 1990s.
  In any event, unemployment is falling rapidly in Sunderland. This morning's news is extremely good. Unemployment in Sunderland has fallen by 4,500 over the last 11 months. Unemployment in the Sunderland travel-to-work area has fallen faster than the average for the northern region as a whole, where unemployment has fallen faster than in any other region of the country except the west midlands.
  We are not talking about a no-hope town. We are talking about a town in which the economy is coming back very strongly. I fully expect that the hon. Members for Sunderland, North and for Sunderland, South (Mr. Mullin) will get up and say that everything is dreadful in Sunderland. I do not think that they do their town a service, because it is engaged in a great revival of activity and they should be lobbying me about the shortage of factory space for people who want to invest in alternative employment.
  Things have moved a little since my last statement, but I believe that the Opposition have rushed too soon into this debate. Negotiations are continuing with Kvaerner. There are more potential customers who wish to acquire other yards—Appledore, Ferguson, and so on—with a continuing interest. The dispute over the Danish ferries is not resolved yet, but work is continuing and there is no imminent threat of all work coming to an end.
  We are not talking about the end of British shipbuilding. We have had all this talk about a strategic industry and how a great maritime nation can go forward without a shipbuilding capacity. The great bulk of the industry is outside British Shipbuilders' merchant yards. We retain a great shipbuilding capacity for purposes of war or other purposes. British Shipbuilders' warship yards are already there and we have the private sector merchant yards that were never nationalised. Their employment may be modest in total, but it now approaches one sixth of that of British Shipbuilders.
  I am pleased to say that there is a substantial amount of work in progress on warship building. Vickers and Cammell Laird have submarine programmes stretching well into the 1990s. Swan Hunter has two type 22 frigates and one type 23, and a second auxiliary oiler replenishment vessel under construction. Yarrow has one type 22 and three type 23 frigates. Vosper Thornycroft has work on smaller vessels until 1993.
  There are good prospects of a substantial amount of new work in the shape of further type 23 frigate orders. Four companies have already tendered: Swan Hunter, Vickers, Vosper Thornycroft and Yarrow. We cannot say at this stage how many frigates will be ordered and when, but they are very important prospects. All these companies are thriving. They are the companies that the hon. Member for Dagenham was dismissing a few moments ago as failed companies in the private sector. As my hon.

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  Friend the Member for Surrey, North-West (Mr. Grylls) pointed out they are all extremely successful warship builders.
  Warship builders can and do build merchant ships as well, although they do not get intervention fund support to do so. Swan Hunter is building a cable ship at the moment. Hall Russell is building a replacement vessel for St. Helens. The small private yards that I mentioned are building a range of vessels, including tugs and fishing boats. Further orders have been announced for, among other things, chemical tankers, a ferry and vessels for the Ministry of Defence. All that is shipbuilding. The Government are not in any way indifferent to the fate of shipbuilding in this country. Large sections of the shipbuilding industry are doing well and quite a number of the British Shipbuilders yards that we are talking about this afternoon are likely to do well if they go into the hands of companies such as Kvaerner and get into specialist markets in the future.
  I do not for a moment deny that we are at a somewhat difficult crossroads with British Shipbuilders with the news that I have had to report on different yards where events vary from case to case. There is a limit to the information that I can give until negotiations and disputes have been resolved.
  Having put in all this money to sustain the industry through a difficult time, the Government are looking to the future of the yards and the economy on Wearside and Clydeside, at where the modern jobs, the next jobs, are to come from and at the continuing, and we hope rising, employment in those towns. That is what matters most of all. I hope that the future will include shipbuilding in most of, if not all, the places with which we are primarily concerned today. We cannot be faulted for the support that we have given to shipbuilding in the past, or that we are giving to it now, which is generous to excess compared to any other industry in the country.
  We shall continue to handle the problems of Govan, NESL, Ferguson and Clark Kincaid on the same pragmatic basis, case by case, and try to reach a successful conclusion. We shall handle them in a sensitive fashion, but we are not helped by the Opposition seeing the prospect of fanning a few fears and winning a few quick political points, and spreading a few unjustified rumours in the hope that they will get some advantage out of the present changing situation in the British shipbuilding world.
  5.19 pm
  Mr. Ted Garrett: It is 25 years since I made my first speech in the House on shipbuilding. Since then I have seen the nationalisation and denationalisation of the industry and served on the Committee that examined the relevant Bill in long and controversial proceedings.
  I am cautious when it comes to predicting the total demise of the British shipbuilding industry. There are historical reasons for its present position and we should not spend much time in this short debate analysing them. We should look not backwards, but forwards to what is likely to happen.
  I am pleased that the Minister mentioned Swan Hunter which is in my constituency. It was nationalised and then denationalised. When it was nationalised it spent some of the money given to it in the form of subsidy on modernising the yard and making it more efficient. The
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  benefits of increasing its efficiency and of modernisation have been seen since it was denationalised, so the money was not wasted.
  In the past two years the Swan Hunter group has made tremendous improvements in its efficiency and in cost reduction. Overheads have fallen by over 30 per cent. and productivity has improved by 25 per cent. Those are good, aggressive moves to keep the company in international shipbuilding. In some ways the taxpayer is now beginning to receive value for money.
  The shipbuilding industry is now tightening up and making more aggressive its purchasing from local suppliers and from British industry in general. That had to come. In the past, the industry was rather slothful; it did not shop around widely enough to make its sub-contractors keen and competitive.
  Recently, the result of this efficiency was shown when HMS Sheffield was handed over to the Ministry of Defence ahead of time. We should give credit for that to the shipbuilding workers and management on Tyneside. The ship was handed over with no defects or work outstanding, and the captain expressed complete satisfaction with his mastery of the ship. Such news was well received in the district, but not in the national press, in which one never hears about the good side of the business. All the national press ever does is knock the shipbuilding industry, and that has had an effect on morale.
  Some companies are beginning to fight their way out of this position and adopt a more positive attitude. But I warn the Minister that this progress towards efficiency by companies such as Swan Hunter can be maintained only against a background of continuing work. Unless that is guaranteed, companies will have to make substantial cuts in their work forces. We are nearing the threshold of further cuts because of reductions in the volume of work.
  The mix at Swan Hunter's yard should serve as an example to others. It consists of Ministry of Defence and merchant contracts. The company has tightened up its marketing, and its maintenance of overseas sales drives has brought an order from Ghana and a possible order from India. Above all, the company has won a substantial order, worth £40 million from Cable and Wireless, in the teeth of intense competition. Cable and Wireless did not hand over the contract—it had to be fought for.
  The Government's philosophy of a hands-off approach to massive subsidy will have to change. A time is coming when we shall have to put in some money for social reasons. The company will need a social input of cash to maintain the initiative and incentive that it is now developing. It will need that to remain in the international market and as a large contractor for the Ministry of Defence.
  We hope that when the contracts for the four frigates are announced, Tyneside will get a substantial share of the work. If it is successful, it will be based on a completely costed contract. The Ministry of Defence wants value for money, and it will get that from companies such as Swan Hunter.
  The Conservative party's blind spot—it was evident in the Minister's speech—relates to the £20,000 per job that the British shipbuilding sector costs. How does that square with the amount it costs to keep a British farmer in a job? If we had that figure we would have a reasonable basis for comparison.
  Mr. Philip Oppenheim: It costs £3,500 a year.
  Mr. Garrett: I am not opposed to subsidies to the farming industry if they are kept within reason, but the Conservative party is usually silent about subsidies to British farmers—
  Mr. Oppenheim rose—
  Mr. Garrett: I have nearly finished.
  The Conservatives create mayhem about the costs of subsidising shipbuilding. I am not stupid enough to think that every shipbuilding yard should remain open if that is impossible for various reasons. My hon. Friend the Member for Sunderland, North (Mr. Clay) will, I am sure, have his say about this later. Sometimes, for social reasons, a shipyard should be kept open in the short term until work comes along, and it will, because of the efficiency measures that management is introducing and because the work force realises that do-or-die efforts lie ahead.
  I conclude by asking the Minister—who, I know, will not budge if I mention massive subsidies—to bear in mind in future discussions in Cabinet and with senior colleagues that there is a case for a short social fund payment to tide British shipbuilding over until orders are obtained. If he will give some sign that he thinks there is merit in my point of view, I shall be satisfied.
  5.28 pm
  Mr. Barry Porter: I hope the hon. Member for Wallsend (Mr. Garrett) will forgive me for not following his argument about the north-east. As always, his speech was reasonable, save in one respect. From listening to him and the hon. Member for Dagenham (Mr. Gould), one would think that the Government had been wholly indifferent to the fate of British shipbuilding over the past nine years. I hate to repeat the figures—repetition is a form of flattery; but perhaps this is meant to be that—but the Government have spent £1·8 billion in that period to ensure that the industry is supported in one way or another. That is not indifference.
  Mr. Gould: As the figure of £1·8 billion has been cited so frequently, it is perhaps worth making it clear that a substantial proportion of that money went to the much touted privatised yards, and another large proportion has gone on the costs of restructuring and redundancies in British Shipbuilders. The money has not gone entirely to British Shipbuilders' present operations.
  Mr. Porter: A large proportion of it was used to pay for some restructuring in the industry, and it is right that that was done. Whatever way one looks at it, a substantial tranche of public money has gone to the British shipbuilding industry; that cannot be gainsaid.
  I shall speak about my own area. My earliest memory of the shipbuilding industry was watching the launch of the Ark Royal in about 1950–51, when Cammell Laird employed about 20,000 people and was the hub of the town in which I was born. [Interruption.] This was a bigger and better one. It was difficult for me to watch the decline of a town that depended upon shipbuilding and had its heart in the shipyard. I still live in that town and I am pleased to see in the Chamber listening to my speech the hon. Member for Birkenhead (Mr. Field).
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  The hon. Member for Dagenham concentrated on the problems of merchant shipbuilding, but problems also exist in the warship market. They are not as critical as those in the merchant sector, but there is very keen competition between the yards. The hon. Member seemed to ignore the obvious reason for that, excess capacity, and to hope that it would go away. It is obvious that a yard such as Cammell Laird depends greatly on the Ministry of Defence and on the Government's warship procurement programme.
  I was delighted to hear my right hon. and learned Friend the Minister say that an order for another four type 23 frigates will be placed some time this year. I trust that the orders will be placed sensibly and that their placing will be based upon the philosophy that underlay the privatisation of the warship yards.
  I do not want to give the House a long and detailed history of the problems of Cammell Laird. I am sorry to see that the hon. Member for Liverpool, Walton (Mr. Heffer) is not here, because many years ago he worked, no doubt expertly, as a joiner with Cammell Laird. By 1984 Cammell Laird was nearly on its knees. Nobody cared or worked very much, and that was part of the Merseyside malaise. The yard had no future and was making a loss. There was a politically and industrially motivated sit-in, and without doubt the yard was within a week or so of being shut. With the help of some hon. Members from the area, about 1,250 shipyard workers walked past the pickets. They passed the jeering bully boys, and that was a significant turning point for the town and for Merseyside. The realism shown by the work force was an important British industrial landmark and ensured the survival of the yard.
  I hope that I shall not destroy the political career of the hon. Member for Birkenhead any more than I have already done by paying tribute to him for his realistic response at that time. It was realism that obtained the order for the first frigate. The first and second frigates were delivered on time and in good order, and I have no doubt that when we get an order for a third frigate it will also be delivered on time and in good order.
  The thrust of my argument is that Cammell Laird went along with the Government's policy of privatisation. It accepted that the Government had the right to do that, and it made itself efficient. It has now increased its work force from its low point of about 1,200 or 1,300 to about 2,000. That is significant. It would be wrong if that yard, having gone through that change, did not get orders. It does not expect them through saying that it is wonderful and marvellous and that it is Cammell Laird's turn. Similarly, it would be quite wrong if other yards got orders on the basis that it was Buggins's turn. The Buggins philosophy is purposeless.
  Yards such as Cammell Laird, which have proved their efficiency and shown that they can build these ships, should be given orders on the basis of efficiency, cost and quality. If that does not happen, the whole privatisation programme will make no sense at all. Buggins must not have his turn. On the basis of efficiency, Cammell Laird must have the orders that it deserves. I am quite certain that hon. Members with constituencies on the Wirral peninsula as a whole, and in Birkenhead in particular, will do everything in their power to ensure that Cammell Laird gets what it deserves.
  5.35 pm
  Mrs. Ray Michie: I have some justification for being happy to take part in the debate, because I have a shipyard in my constituency. It builds excellent fishing vessels and is a very thrusting and enterprising yard. However, that is not the type of yard that we are discussing.
  All previous speakers have highlighted the fact that, certainly in terms of production, British shipbuilding is a sad story of decline. The over-capacity in the world's shipping industry has led to a chronic dearth of orders for new ships. It is clear that world production capacity far exceeds future demand in the medium and long term. The fall has not been uniform. In the European Community, for example, the reduction has been about 45 per cent. In Japan, which is the world's main producer, production has fallen by about one third, whereas in eastern Europe it has remained stable. Korea, which is a relative newcomer to shipbuilding, now produces about 15 to 20 per cent. of the world's ships, but the United Kingdom's share has fallen to 2 per cent.
  We know that nearly every shipbuilding nation subsidises its shipbuilders, either directly or indirectly. The Minister made much of the support given by the Government. I wonder if he will give some reply to the European Community Council's sixth directive on shipbuilding, which took effect from the beginning of 1987. As I understand it, the Council agreed that the aid ceiling should be set at 20 per cent. for smaller ships costing less than approximately £4·2 million.
  The Government decided that the full value of the permitted aid ceiling should not be applied to ships costing £10 million or less to build. Instead, they applied a sliding ceiling under which the amount of assistance available is set at a maximum of 20 per cent. for a £10 million ship, reducing on a straight line basis by 0·75 per cent. for each £1 million drop in shipbuilding cost.
  I hope that the Minister will tell us why the Government have cut this level of aid, thus damaging our yards in their efforts to win new orders. It is extraordinary that the Government, having concluded a Community agreement on the level of aid permitted, should then refuse to take full advantage of that agreement.
  The decline goes on. It was said in the merchant shipping debate and it should be said again that in 1975 there were over 1,600 British ships. Now we have less than 650. Of course our fleet, like others, has been subject to changing world trade patterns and to innovations such as containerisation. The Government's 1984 Budget which removed incentives to capital investment in shipping was a great blow. I shall speak briefly about Govan.
  Dr. Norman A. Godman: I hope that the hon. Lady will be brief.
  Mrs. Michie: I want to say something about Govan because, like the hon. Member for Greenock and Port Glasgow (Dr. Godman), I come from Scotland.
  The Government intend to sell off the Govan shipyard to the Norwegian firm. Any additional work and the potential for future orders is to be welcomed, but I do not think we have been told about guarantees that the Norwegians will not just build these ships and then walk away. What hopes are there for more orders? The Minister said in his original statement that the company would be making conditions, but I do not think that he said
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  anything about the Government asking for guarantees for workers or orders. I still do not understand—I ask the Minister again—why the Govan shipyard does not build ships for the Norwegian company. It has the expertise. Are we saying that we could not do it? Alternatively, is there not the possibility of a joint venture or the formation of a partnership?
  Hon. Members have referred briefly to Harland and Wolff and the Yarrow shipyard, and to the hope that the type 24 frigates will go there. But the lack of civilian orders is crucial for our yards. We understand that British Shipbuilders—I believe this is true—would prefer to order in our yards, provided that they can compete on price and delivery, and great strides have been made in this direction. It is much more costly for a British company to spend time and money to send someone to Taiwan or Korea than to send him up to have a look at a ship in Govan. I believe that our companies want to build ships here.
  The truth is that shipping companies will order ships only if the rate of return on a massive capital investment is at least as good as other investments. Any lack of Government encouragement means that this money goes elsewhere, to the detriment of shipbuilders. We all accept that shipping operates in a very competitive environment. It is not regulated like the airlines. Foreign shipowners can buy cheaper ships because of aid from their Governments, whether by subsidised building, protective trade or assistance with crew costs, and the stark reality is that British owners will not buy ships.
  The Government policy means that British yards will not even be at the starting blocks to compete for work; that is bad for shipbuilding and repair, and bad for the national interest. Surely we should be supporting an industrial strategy instead of what seems to be a policy of sell, sell, sell.
  I want to draw attention again to the fluctuating exchange rates, which can do more to damage ship-building than almost anything else.
  We need a strong merchant fleet to carry our own trade and ensure control, as an island nation, of those vital lines. We need to send clear signals that we can reinforce and resupply our industry and population in times of tension or war. Have we reached the point where that can no longer be certain? It is increasingly clear that merchant shipping will dwindle further unless there is action now.
  We have been asked, "Where are the ships and the orders?" Here are the orders. The fleet is aging. Today's ships average 12 years old, and 48 per cent. of container ships are more than 15 years old, so the crucial time for investing in British ships is immediately ahead; indeed, it is now. The Government seem content to let the ships go, and with the ships what remains of the great contribution to engineering skills from the shipbuilding industry, especially in Scotland.
  We must take action now. The means are readily available. I heard the Chancellor of the Duchy of Lancaster say this morning on the radio that he wanted somebody to come forward with ideas. I have a list of ideas here, which I will send him rather than take the time of the House now.
  Many solutions are on offer in relation to crew costs and investment. The Government need to seize them, and to find the political will to look at the future of our island seafaring nation, and the shipbuilding skills and expertise

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  of our men, so that we have a merchant fleet of which we can be proud, which is British built and crewed by British merchant seamen.
  5.45 pm
  Mr. David Porter: I have been impressed since I came to the House last year by the golden opportunities missed by the Opposition in their choice of subject for Supply days and their treatment of them. I thought for a while that shipbuilding might be a different case, but I am relieved to hear that it is not.
  My hon. Friend and namesake, the Member for Wirral, South (Mr. Porter) stressed realism in his speech. Realism is missing from what the Opposition say, not just about the market place but, amazingly for the Labour party, about the shop floor.
  The hon. Member for Dagenham (Mr. Gould) who is no longer in his place, I am sorry to see, admitted that he was concerned only with the nationalised industries and yards. I have an independent yard in Waveney, Richards of Lowestoft, which was founded in 1876. It is a living, breathing, vibrant and private yard. I also have Brooke Yachts, which until recently was part of the internationally known Brooke Marine, the famous warship builders. I am concerned with Richards in this debate.
  The men on the shop floor at Richards know the reality—that shipowners go to the cheapest source of supply. There is no customer loyalty, as shipping is an international concern. They know it every day, because if they forget it for one minute they will be out of work. They also know that British Shipbuilders makes substantial losses, something which passed virtually without comment until recently. The shop floor workers do not understand why that should be, and neither do I.
  I was present when the Chancellor of the Duchy of Lancaster assured Richards last July that he would not allow British Shipbuilders' yards to carry on putting in loss-making bids, thereby damaging the private sector at the taxpayer's expense. I have had a letter from a private secretary in 10 Downing street since then to confirm that it is Government policy. The Government attach particular importance to BS only bidding for contracts in competition with United Kingdom private sector yards, provided that it does so on a realistic basis.
  I must ask a variant of the question posed by the hon. Member for Dagenham: do the Government want a small-yard, independent shipbuilding sector? The work force at Richards are incredulous sometimes at the speed of response from the "enterprise" Department. I raised with our noble Friend the Secretary of State for Trade and Industry the case of an application for two tank vessels submitted by Richards in March. It will go abroad unless something moves fairly quickly.
  The general point remains. When pressed, the official response from the Department is often on the lines that these applications for intervention fund support are being considered in the normal way. That is not, and should not be, good enough. Surely, of all the leviathans of the state, DTI should know that speed is of the essence.
  On the operation of the intervention fund, an impression persists sometimes in dialogue with officials of a slightly negative approach to using the assistance available in the manner for which it is intended.
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  Shipowners will not wait while shipyards and the Department, and the Commission in Europe, argue the toss about applications in a protracted way. Both sides need, not a long-awaited grace and favour decision but the offer of a firm amount, so that shipowners could decide their financial liability and shipbuilders quote a firm price. Our partners and competitors in other European countries have a certain amount of flexibility, which we once had. Let us have it back.
  Three or four years ago, these decisions were speedy; let us have that back, too, with the confidence in the IF system that the industry needs. I do not think that I can vouch for it at the moment. We have heard of orders tonight, such as for Danish ferries. Another was required by the Government of Mauritius. There was also the Ministry of Defence range mooring vessel order, which Richards finally won. All show in different ways that something is wrong with the present system.
  To defend my hon. Friends, I am aware that this is not entirely in their hands. We are dealing with an army of bureaucrats who have failed to solve the problem, many of them in Brussels and Strasbourg. We are dealing also with almost kamikaze survival tactics from Japan, Brazil and South Korea. It is a global problem. There is a dearth of new building orders. But, as the Opposition admit, there is a glimmer of hope and a definite increase in optimism about demand prospects.
  To be equally fair, some of the problems are inter-departmental. There is one skipper who would order at least two new trawlers to be built at Richards in Lowestoft but for problems with intervention and fishing licences. Interdepartmental, international or intercontinental—the noise made by the Opposition at any suggestion of subsidies being removed from British Shipbuilders is head-in-the-sand stuff.
  The hon. Member for Dagenham is quoted in Lloyd's List in April as saying that it is crazy for the United Kingdom to pull out of shipbuilding when the market is picking up and United Kingdom companies are returning to competitiveness. If he is talking about BS, that remark sticks in the throat, but he misses the point—that, with a vibrant private sector, the United Kingdom will not pull out of the world market.
  Shipbuilding may no longer be fashionable, but the updated private sector can offer places to graduates, craft apprentices and youth trainees. Surely that contributes to what we are all trying to achieve in respect of traditional attitudes, good behaviour and honest endeavour. The private sector must have an eye on dividends. In Richards's case, the parent company let it retain dividends while rationalising working practices. But where there is profit, there is substantial tax. How much tax has British Shipbuilders paid?
  5.51 pm
  Mr. Bob Clay: The hon. Member for Waveney (Mr. Porter) said that there is a glimmer of hope for an upturn in orders, "as the Opposition admit." We have trumpeted the fact that an upturn is coming and that there are orders to be secured. The difficulty is that the Government do not have the will to sustain the industry, to secure those orders and to continue to do so until the upturn comes. Once again, the Minister's speech was complacent, and I make no apology for saying that. As the right hon. and learned Gentleman acknowledged, the area

  1135
  which I represent faces—perhaps not overnight but certainly within months—closures and the loss of 3,000 jobs—with perhaps another 6,000 or 7,000 dependent on them—if the Danish ferry contract finishes and other orders are not secured.
  I make no apology for being appalled by the Minister's complacency and at the incompetent muddle of his speech. His speech was permeated by the idea that there was great enthusiasm for buying British Shipbuilders' yards. I do not understand why so many people want to buy Appledore, Govan, the Clark Kincaid engine works or Ferguson-Ailsa if there are not orders in Britain or elsewhere. Perhaps people may want to buy those yards for property speculation, which would be disgraceful. The Minister has not yet answered that point, which was made by my hon. Friend the Member for Dagenham (Mr. Gould).
  At stake are not just the thousands of jobs at NESL, but the pride of a community which at one time built and launched more than half the world's tonnage of ships, which has suffered tens of thousands of job losses since the Conservative party came to power and which now has its back to the wall, seeing perhaps the end of a tradition going back decades.
  For all that unemployment may be falling slightly, it is still 21 per cent. in the area as a whole. Because of tradition, history and many other factors, two thirds of the work force live within a mile of the yards on the river. There are pockets and estates where unemployment is still 30 or 35 per cent. There is no need for us to face this crisis. The Opposition have argued long enough.
  Korea and Japan subsidise their yards far more than the Government have been prepared to subsidise ours. Now our Government talk about "no further loss making." It is absurd. I am sure that the Minister has had placed in front of him by his civil servants—if they have any competence—figures showing the age profiles of the merchant fleets around the world. By the end of the 1990s, unless there is substantial new building, there will not be ships. They will have sunk, so old and unseaworthy is much of the merchant ship capacity. It is a question not whether there are orders and when they are coming—there will be an upturn—but whether the ships will be built in this country and whether they will be built in Sunderland—the point that concerns me.
  It was an insult to shipbuilding, and to Sunderland in particular, for the Minister to say, "If we cannot sustain shipbuilding, perhaps we should look at something else."
  As ever, Nissan was mentioned. We all know that we shall need another three Nissans just to replace the job losses if NESL closes. Shipbuilding is a high-tech industry. Does the Minister not understand that? The ships that NESL builds are among the most superb advanced ships in the world.
  I have a suggestion for the Minister. Around the country there are great big billboards, paid for by the Department of Trade and Industry, which show the heavy features of Sir John Harvey-Jones, the former chairman of ICI, who advises British business men to get ready for 1992. A few weeks ago, the same Sir John Harvey-Jones was in Sunderland for the radio programme "Down Your Way." He chose to go on one of those Danish super-flex ferries with John Lister, the chairman of the corporation. They had an interesting conversation about the superb technological advance that those ferries represented, how they were doing what had not been done before and what an advance in building they were.
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  As Sir John Harvey-Jones seems to have great enthusiasm for those ferries and as everyone in the town, the management and the work force stand by the standards of those ferries aid refute any accusation of bad workmanship in Sunderland, instead of taking a stand-off attitude of "wait and see", why does the Minister not ask Sir John Harvey-Jones with his great commercial and industrial experience, or someone of his ilk, to step in and, on behalf of the Department of Trade and Industry and British Shipbuilders, promote those ferries on which payments have been defaulted?
  The Minister should be able to say that we shall build all 24 and that, whether or not the Danes buy them, we shall find other purchasers. It is a disgrace, because the borough of Sunderland, which is hard-pressed with penalties, and threatened with rate capping, has done more to defend those ferries and to find purchasers than the Minister and the Department.
  Whatever happens with the Danish ferries, we must recognise that by the end of the year, even if the contract is completed—as we pray it will be—we shall be coming to the cyclical crisis of where the next order will come from. The Minister says that there are no orders. I have a suggestion. Yesterday, for the third time, a report was issued showing that roll-on/roll-off ferries—not the Danish ferries being built in Sunderland but those crossing the Channel and other seaways—are unsafe. The Royal Institution of Naval Architects has recommended that work be done on those ferries to make them seaworthy and safe. It is a disgrace that that has not been done already. That work could be done in British ship repair yards with Government grants, if necessary. That essential work, on which the Government should insist, would provide a good breathing space before more orders are placed.
  I am appalled that the Minister was so complacent about Cuba. I had never seen such a gap in beliefs. British Shipbuilders believes that it is dealing with a real prospect. If the Minister does not believe that, he should call BS in and accuse it of wasting public money. People have been going to Cuba, no longer at the initiative of British Shipbuilders but at the request of the Cubans who want to buy ships, and technical discussions have taken place. The Minister says that there has been talk of these orders for long enough. I cannot believe that he does not know that these orders are the hottest prospect of substantial orders for British Shipbuilders for a long time. The Department should he saying to British Shipbuilders, "What kind of financial arrangements shall we need to clinch the order? What kind of loans, period of grace, interest rates and package shall we need? Let's get on with that so that there is work in the yards and orders are signed."
  Having denied that there are orders to be won and having dismissed the Cuban order, the Minister then says, "If there is an order, we shall have to consider it carefully. We are not sure whether we can carry on putting in money." I hope that he will at least have the decency to acknowledge that, if British Shipbuilders managed to clinch that substantial order, it would save NESL for a long time to come. We should not then have the final sabotage of the Department refusing to put together the necessary cover and financial package. That would really give the lie to everything else that he has said.
  The Minister should face another fact. With all the talk about private yards, one would think that it was a great success story for the private sector and failure for the public sector. Let us consider some of the losses to which

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  the Minister frequently refers in respect of British Shipbuilders. The assets of the privatised yards were virtually written off, and that shows up as part of the allegedly huge losses that British Shipbuilders has made.
  Let me bring matters a little closer to home. The ITM Challenger, whose owner defaulted and went bankrupt, was ordered by the private sector. There are two sides to the private sector—the builders and the people who buy the ships. The £47 million for the ITM Challenger showed up as part of the loss put down to Sunderland. That was due to the failure not of public enterprise, but of the entrepreneurial system about which the Government are so enthusiastic.
  The Danish ferries are not being ordered by the British Government, by British Shipbuilders or, indeed, by anyone in the public sector. Those ferries, whose owners now appear unable to pay for them and are attacking the standards of British Shipbuilders to cover up for that, were ordered by private entrepreneurs. I should have thought that when such a scheme fails, and that failure jeopardises thousands of jobs and threatens to end a community's history of shipbuilding, the Government, who are so enthusiastic about such schemes, would step in and do something to save the situation.
  I conclude by quoting some of the Prime Minister's remarks when she named the Stena Seawell in my constituency on 25 April 1986. She said:
  "This is a very proud day for Sunderland shipbuilders and for Britain and I am proud to be a part of it. You, Mr. Olsen, and your people designed the most modern ship with the latest technology that could be built anywhere in the world and you chose this shipyard and you chose this management and you chose this work force to to it and they've done it, and they've done it superbly. It has been a tremendous boost for us that we can achieve this in our country. It teaches us that we can do the latest technology and that we can do it well. We have the skills, the enterprise, the inspiration to do it. Thank you. Congratulations. I hope we'll be able to do a repeat performance by virtue of the tremendous advertisement we can blazon across the world with what we've done on this ship the Stena Seawell."
  For the people of Sunderland, the next few weeks will determine whether that was flag-waving, empty rhetoric and hypocrisy or whether the Prime Minister is now prepared to put her money where her mouth is.
  6.4 pm
  Miss Emma Nicholson: I am immensely grateful for the chance to speak briefly in the debate, because I am concerned about the future of Appledore Ferguson which has been discussed in detail today. Like the hon. Member for Wallsend (Mr. Garrett), I made my maiden speech on shipbuilding because of my concern about the matter, although I do not have as many years' experience of such matters as the hon. Gentleman. Nevertheless, I share his concern for the individual yards.
  There have been grand speeches today about the future of British shipbuilding. We are talking about individual yards and jobs. I am concerned because Appledore Ferguson is a large employer in my constituency. There are 530 jobs in that yard and my task is to protect them because the yard puts £10 million into the Torridgeside economy. That may not sound a great deal to some hon. Members, but the Torridgeside area has historically been short of work and incomes have been low in comparison
  1138
  with other areas. Every shipyard job creates in the area at least five other jobs, which must also be protected and expanded.
  It is not a single-industry economy in my area, but a mixed economy with many other factors depending on the large employers. The many people who come to see the shipyard and do business there attract other work to the area. They may add to our burgeoning tourist industry and they also visit our farms. The hon. Member for Wallsend mentioned the problem of support for farms and price support for farmers, but I am happy to tell him that, in the recent agriculture debate, Opposition Members committed themselves to supporting farming and to price support in that respect.
  We have to eat, and we must grow as much food of our own as it is economically possible to do. I would be deeply concerned if, as an island, we ever stopped making ships, but it is a question of balance, as in so many other areas of political life. Flow much money do we want to pump into shipbuilding and farming, and how much should go into other sectors, such as social benefits? It must be a right and proper principle for private funding to be attracted by the Government and to come into the shipbuilding industry in every way possible, so as to release funds for other socially important matters.
  I was therefore delighted to hear the Minister say that the Government were committed to sustaining economic activity in shipyard areas. I welcome that crucial commitment, but, following his statement of a few weeks ago, the workers at Appledore Ferguson are intensely worried about their future. Theirs is a right and proper concern, because job uncertainty has implications for families and the future. Above all, I seek from the Minister an understanding about and guarantees for the future of jobs in the yard. I know that it is difficult to ask him to look into a crystal ball, but, as the future of the yard's employees was undefined when he made his last statement, perhaps he can tell us a little more today.
  I am pleased that a large lobby has come from the yard to the House today. I have paid two visits to the yard since I have lived in the area and I have another visit planned at the invitation of the convener, Dick Mathews, and his colleagues. I have been a little late in accepting it, but I am looking forward to making the visit shortly.
  The Minister will recall that I have raised with him my concerns about Appledore several times, both in debate and privately. My concerns today can be stated very briefly, but they are none the less strong concerns. First, and most important, we should retain Appledore Ferguson as a shipbuilding unit. If we consider the examples of other former shipyards, we see that part of Falmouth has become a marina under Vosper Shiprepairers Ltd. Lowestoft is halfway to being a marina under Brooke Marine and Robb Caledon Shipbuilders at Dundee has gone into luxury flats. Much nearer home, Richmond yard, Appledore, cannot be used any more for shipbuilding and has gone to become luxury flats, and Bideford shipyard is now overrun by houses.
  I can accept that those may be right and proper uses for those unneeded yards, although I would have preferred Richmond and Bideford to go a different way but, as the Minister well knows, Appledore is needed in the shipbuilding world and must not go that way. It is crucial that I obtain the Minister's commitment that the Government will do their best in that respect.

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  In the event of a sale, it is important that every effort should be made to keep the men and management fully in the picture, because so much shipyard knowledge is contained within the yard. It has perhaps the best union-management relationship in the business, and it is important that the track record on involving the work force in policy formation should be retained during this exceptionally difficult period. I accept that commercial constraints make that sort of commitment nigh impossible to give, but I put it on the record so that it can be carefully considered as buyers come out of the shadows and become potential bids. Appledore shipyard has a unique track record on union-management relationships.
  It would be difficult even for a yard with the pre-eminence of Appledore Ferguson to survive on the open market without any support. Hard work cannot win against unfair competition, and by that I mean some of the competition from the far east which is so heavily subsidised. Appledore excels in making small dredgers, but it could make any sort of ship up to 10,000 tonnes. Support of about 20 per cent. or 28 per cent.—the figure is perhaps higher than the one given by the hon. Member for Argyll and Bute (Mrs. Michie)—is necessary, even for making dredgers. I cannot help thinking that those interested in the yard will also be interested in a continuing commitment to some form of support by the Government or European Community.
  Appledore has a bright future and I ask the Government to help, not hinder, the yard's development.
  6.12 pm
  Mr. Bruce Milian: I agree with a good deal of what the hon. Member for Torridge and Devon, West (Miss Nicholson) said. Unfortunately, she is one of the few Conservative Members who takes a keen interest in the shipbuilding industry. It is a pity that more Conservative Members do not take that interest in this extremely important industry.
  I do not know whether the Minister thought that anything he said would reassure those involved in the industry who are extremely worried about the future, but I can tell him that nothing he said will provide reassurance. He told us little that we did not already know and the one or two pieces of information were rather detrimental to the interests of the industry and will certainly cause more rather than less anxiety.
  The Minister did not answer some basic questions, one of which relates to the takeover of my yard at Govan by Kvaerner Industries, and the continuation of the subsidies under the sixth directive. That is a five-year commitment, started on 1 January 1987. It has been renewed at the present level of a maximum of 28 per cent. for 1988, as it was for 1987, hut, as far as I am aware, there is no commitment for the Government that there will be that level of subsidy or any other beyond 1988. There have been all these stories in the press, some of which have undoubtedly been leaked from the Department—
  Mr. Kenneth Clarke rose—
  Mr. Milian: With respect, if the Minister had wanted to give that assurance, he should have done so at the beginning of the debate. He spoke for a long time and told us very little, and a Minister will reply, so I have no intention of giving way to him now.
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  What will happen in the next three years? The Secretary of State for Scotland can give an assurance when he replies, if there is one to be given. The Minister said absolutely nothing about the level of subsidy beyond 1988. The hon. Lady has just made a similar plea, that we want to know what will happen about EEC subsidies over this five-year period and, indeed, over a longer period.
  The idea that the Government have had a genuine commitment to shipbuilding over the past eight years does not bear serious examination. They have looked on British Shipbuilders as an embarrassment. They have already dismembered it by selling the naval yards and now they are hellbent on selling the rest. I do not accept that they have had any commitment to or faith in the future of British shipbuilding, certainly not on the merchant side.
  Govan is an excellent yard and the facilities there are first class, as has been acknowledged by Ministers. The management is good and there is excellent co-operation with the work force. I acknowledge immediately that there has been a problem with orders in the past three or four years. Anyone who knows the yard and is worried about its future is anxious to see that it gets new work when the Chinese orders, which it is building now, run out in 1989.
  Nevertheless, the announcement about Kvaerner, or rather the leak in The Daily Telegraph, of all papers, about the Kvaerner interest in purchasing Govan, has caused considerable upset and anxiety, particularly as shop stewards were specifically assured only two days previously that rumours about a Norwegian buyer were absolutely groundless. Therefore, there is some anxiety to overcome for that reason alone.
  Today we have been told nothing about the progress of negotiations. The Minister keeps saying that the negotiations are with British Shipbuilders, but his Department is involved. I do not complain about that—it is absolutely right that it is involved—but an official from his Department is to be present at the meetings which he mentioned were to take place next week in Norway, so the Government have a direct interest and we are entitled to more information than we have had so far about exactly what is going on. In a foolish statement on television a couple of weeks ago, the Minister said that there was no question of the Government laying down conditions in these negotiations. In other words, the Norwegians or anybody else can take over the yard, regardless of circumstances. They can take it off our hands, as it were. Conditions must be laid down if the yard is to be sold or, as it seems, given away.
  The Govan yard, like all other merchant shipbuilding yards, has had all its assets written down to nil, apart from land, in the 1986–87 accounts. Incidentally, that is a reason for the huge figures of subsidy which the Minister quoted. If the Government give away the yard at a bargain price, which is almost inevitable given their attitude, there should be understandings, and as far as possible legal conditions should be laid down, about its future.
  Two gas-carrying ships are to come to the yard and that is extremely welcome. That work will be invaluable. But what happens after that? There is no definite commitment, although there are hopes, aspirations and vague promises. We do not know what the Norwegians intend to do about building other types of ships at the yard. We do not know whether they intend in due course—I hope that they do if the negotiations succeed—to put LNG carriers as well as LPG carriers into the yard. We learned very little by way of detail from the Minister today about the transfer of gas

  1141
  technology. There is also the question of more investment in the yard, widening the berths and so on. All those are crucial issues for the long-term future of the yard. Answers to those queries will be very important and will show whether the Norwegian company considers the yard to be a long-term commitment.
  We know that there is another side to the picture. Apart from any investment, there is talk about a significant number of redundancies. The Minister did not even mention that this afternoon. We know that if the Norwegian company becomes the owner of the yard, it intends to operate with a core work force of about 450 men and women less than the present work force. There have been no discussions or negotiations with the trade unions. One of the directors of Kvaerner visited the yard and had informal conversations with the shop steward. However, I checked yesterday and there have been no official discussions with the trade unions on the future labour force, conditions and working practices in the yard. It is absolutely essential from the Minister's and Kvaerner's point of view that the discussions take place. Unless there is a proper understanding on those matters, the yard cannot possibly be successful.
  There is a long way to go yet. The workers in the yard will be extremely disappointed by the Minister's comments this afternoon. They have made it clear that although, like me, they oppose privatisation, and would like the yard to remain with British Shipbuilders, if the Government are determined to dispose of it, they will make the best of things and co-operate with the new owners.
  I met Mr. Gronner a senior director from Kvaerner at an informal meeting a few days ago. I recognise that Kvaerner is a reputable shipping company with wide interests in engineering and shipping as well as shipbuilding. If the negotiations succeed, I believe that the company intends to try to make a real go of the yard. Kvaerner has more faith in the future of shipping and shipbuilding than the Government. That is one of the problems that we must deal with. If the Government had the same faith as Kvaerner about an upturn in the shipping and shipbuilding industry, the yard could successfully remain under the present ownership.
  The Government have said that we should he flattered—I believe that Ministers used the word "flattered"—that someone is willing to purchase the Govan yard. What an absolute recognition of defeat. The Government are saying that we should be pleased that someone is going to take the yard off their hands and make a go of it. Why can we not make a go of it ourselves? That question was asked when the news was leaked and we are still asking it, because it has not been answered satisfactorily.
  We could have attracted the orders for the gas-carrying ships into Govan without disposing of the yard. I do not believe what the Minister said this afternoon about Kvaerner wanting to build those ships in that yard. We could have attracted the orders—or similar orders—into the Govan yard without disposing of the yard. As an alternative, we could have had a joint venture arrangement between British Shipbuilders and Kvaerner. However, the Government have dismissed those possibilities. We are left with the alternative of purchase, which may hold out some hopes for the future of Govan in the short term. However, I am concerned about the longer-term interest.
  1142
  It would be absolutely tragic for Govan if a deal was struck with Kvaerner or anyone else which was good for the short term, but led in the long term to the ultimate demise of the yard. I am interested in the yard's long-term prospects; that is why I want to see the firmest commitment from the Kvaerner management in the process of negotiations. After all, we are selling to a foreign firm. We know how difficult it is to have decisions reversed if a closure happens in a factory or establishment under British ownership. The difficulties will be all the greater if we are dealing with a foreign firm.
  I am not claiming that Kvaerner does not have good intentions for Govan: I believe that its intentions are good. I hope that those intentions are fulfilled. We can be more certain that they will be fulfilled if we lay down conditions now. Unfortunately, from what the Minister has said today and from his general attitude on this matter, it seems that the Government will not bother to try to lay down those conditions.
  6.24 pm
  Mr. Neville Trotter: The hon. Member for Wallsend (Mr. Garrett) and my hon. Friend the Member for Wirral, South (Mr. Porter) have rightly drawn attention to the successful state of affairs in our naval yards. I am sure that more export orders will arrive in the near future. The potential for the Canadian nuclear submarine order is gigantic and we must all hope that Vickers is successful in receiving that order.
  My hon. Friend the Member for Wirral, South did not mention the submarine work carried out by Cammell Laird. It is fortunate to be one of the few specialist submarine builders in this country, and it has assured work through its initiative with Vickers. If we had more time tonight, I should have wanted to consider the refit work of the Royal Navy which is vital to the future of the repair yards on the Tyne. No doubt we will be able to return to that subject in future.
  The main subject for debate tonight is clearly the future of merchant shipbuilding in this country. I believe that the House regards it as inconceivable that our island should not have some Merchant Navy shipbuilding capability. It is not simply a matter of our long island history; it is a question of looking to our future strategic needs. I remain convinced that we will continue to build merchant ships in future, although obviously on a far smaller scale than we would all have liked.
  I remind the House that for a long time I have advised the marine equipment industry. I want to draw the attention of the House to the widespread nature of employment in the equipment industry. Many of the factories producing parts for ships are nationally and historically situated near ports and dockyards. However, many of the firms are in the midlands, miles from the sea. It is essential to remember that while the industry has done very well in exporting parts to foreign shipyards, it requires a healthy home base if it is to continue to do that in future.
  The Ultimate Dream was referred to briefly. I appreciate that my right hon. and learned Friend the Chancellor of the Duchy of Lancaster was right to say that that gigantic project for a 160,000-tonne cruise liner, which will be twice the size of the QE2, is basically a subject for the Northern Ireland Office, as the discussions involve Harland and Wolff. More than half the cost of the ship

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  would go in parts that would be constructed mostly on the mainland of Great Britain. No doubt many of those parts would he built on Tyneside and, I hope, Wearside.
  I want to consider the sombre scene facing the merchant shipping yards. The present position has not come about suddenly. It is not a sudden development, apart from the crisis at Sunderland Shipbuilders. We have debated the shipbuilding scene for many years against a background of lack of orders and ridiculously low-cost competition from the far east.
  My right hon. and learned Friend the Chancellor of the Duchy of Lancaster reminded us of the significant amount of aid given to the industry by the Government since 1979. I believe that talking about billions of pounds is almost meaningless to the man in the street. However, if we divide the commitment provided by the Government in terms of financial aid, it works out at £1 million for every working day since the Government came to office in 1979. I congratulate the Government on having provided that support for the industry and on having recognised its importance to the country.
  I also want to draw the attention of the House to the enormous efforts made by British Shipbuilders management to modernise the yards and revolutionise working practices. In the past two years £2 million has been spent on research and development and £3 million on product development. Many new designs have been offered to the Sunderland yard and the other yards and an enormous effort has been made worldwide to find orders. That has not produced the number of orders that we would have wished, but it is not for lack of trying. It is the result of the gross over-capacity worldwide. In particular, it is the result of the development of the industry in South Korea. That country now has an order book bigger than that of Japan, and the small country of Korea now builds more ships than Europe.
  At present, there are 75 tankers on Korea's order book. No tanker is building in Britain and I doubt whether one is building in Europe. We, like the other European countries, are left running around the world desperately trying to obtain orders for one or two ships at a time.
  Korea decides the world prices. My inquiries there suggest that, allowing for the long hours of work, its wage rates are about one quarter of those that Britain pays. Industry leaders from Britain who were in Korea a few months ago suggest that the labour costs overall, allowing for the lack of national insurance contributions, and so on, are about 20 per cent. of European labour costs. It is not surprising that it has been difficult for European countries to compete against such figures.
  A recent EEC study shows that the cost of building a tanker in Europe is $43 million. In Korea, an equivalent ship sells for $24 million. The cost of building a bulk carrier in Europe is $21 million, and such a ship in the far east would be sold for $12 million. I could go on with other examples. It is against such competition that we have a serious lack of orders.
  The situation at Sunderland is not the fault of British Shipbuilders, and it is certainly not the Government's fault. However, there is a genuine and great worry in that area about the shipyard's future. It is hard to see what assurances the Government can give in present circumstances. The Government seem to be doing all that they can to sort out the sorry situation that has developed over the Danish order, but I am sure that my right hon.
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  and learned Friend the Chancellor can understand the need for a message of hope to come out of tonight's debate.
  It is extremely hard to see how the Danes can be justified. The yard is capable and experienced, with a well-respected managing director and a skilled work force. The reasons for the trouble are very much those suggested by the hon. Member for Sunderland, North (Mr. Clay) in his comments about the customer. It is interesting to reflect that the ECGD has not branded the customer as being at fault, and I find that rather surprising.
  The ships for Cuba might produce salvation in the short term. We are looking at the long-term future for the industry in the rest of the country, but we must face the fact that in Sunderland we are talking about the short-term solution and salvation. We must all hope that something will come from the strenuous marketing efforts being made over those Cuban ships.
  The intervention fund, which matches the aid given by our Western competitors in Europe, must continue. I believe that the Government accept that, and it should be spelt out. There will be an opportunity to do that as the discussions on the Cuban order proceed.
  We are talking about an industry that has an important future for Britain, and hon. Members should do all that they can to ensure that future.
  6.33 pm
  Mr. Ken Maginnis: There is one simple and direct question about shipbuilding that the Government must ask themselves and to which they must provide an unequivocal answer. Are we in the United Kingdom to retain a merchant shipbuilding capability, or do we intend for all time to surrender our traditional and proven skills in that area to foreign yards?
  In recent times merchant shipbuilding has suffered cruelly at the hands of those who look for sensational negatives. Both inside and outside Government there are those whose purpose in life appears to be to demoralise and dismantle the industry.
  I am disappointed by the apparent lack of understanding of the commercial realities—the need for intervention funding for our merchant shipbuilders. It evokes much ill-informed comment, and that must be a matter for regret. It should be fairly acknowledged that privatisation, even if one is convinced of the attractions for the management of the companies concerned, is not in itself an automatic panacea. It does not alter the international pricing level for ships which makes intervention funding a necessity—a commercial reality of life for all EC countries. The United Kingdom cannot isolate itself from that reality if it is to maintain a core of merchant shipbuilding capability in line with the majority of European nations.
  Kvaerner, on entering talks on the sale of Govan, made it clear that it will go forward with a deal only on the understanding that there will be access to intervention funding. That is not surprising, because it is the agreed and accepted way in which other European shipbuilding nations operate to match far east competition.
  I listened to the Minister on the radio this morning when he spoke of shipbuilding in terms of what is happening at North East Shipbuilders Ltd. I agree that it is a matter of regret that the company is in difficulty with

  1145
  clients over the future of a valuable ferry order. It is to be sincerely hoped that that can be completed as originally ordered.
  However, in the present situation it cannot be surprising that North East Shipbuilders Ltd. does not have customers tied up and willing to place an order. Without a customer, the whole question of intervention funding becomes irrelevant. But surely, in current market conditions, the Government's policy on shipbuilding and intervention funding in the United Kingdom cannot be based on that one yard. Is it the Government's wish to allow a situation where such is the doubt created in the minds of those who would order ships that they automatically look away from British yards to those on the continent or in the far east?
  That is not how it has to be. Everything points to an upturn in overall market conditions within the next two to three years. Whereas in 1983 there was a laid-up 90 million tonnes, or 15 per cent. of the world fleet, that figure has dropped dramatically to around only 3 per cent. today. That usage, combined with the comparative obsolescence of a large part of the world's fleet, shows that much new build must occur in the early 1990s.
  I have seen the Harland and Wolff yard in my region come through a traumatic six-year period during which it has cut its work force by over 60 per cent. It has just completed negotiations which will produce a degree of flexibility within the remaining work force which is unparalleled in the United Kingdom and will match the best in Europe, and it has adapted itself to the market demand for high-tech ships. That, and the massive dry dock and other capital resources that Harland and Wolff possesses, puts it in a position to compete on virtually equal terms with European opposition.
  Nor did the cost of that rationalisation come anywhere near the £20,000 per job that I heard the Minister quote on radio this morning and in the House this afternoon. With the exception of the last year, when there was a one-off situation, the average annual cost per job has been about one third of that figure.
  I was surprised to hear the Minister refer to extra costs as loss costs. They are the costs of restructuring—restructuring to enable shipbuilding to move forward to the 1990s. We could not produce new jobs which would impact throughout the United Kingdom, as shipbuilding does, for anything like that cost.
  What a pitiful surrender it would be if, with brighter prospects ahead, the Government were now to implement a stringent unilateral policy on intervention funding, completely out of line with our EEC partners. It would sound the death-knell for our merchant shipbuilding industry.
  At Harland and Wolff one finds a different situation from that at North East Shipbuilders Ltd. Harland and Wolff has customers who are willing to place orders which would bring the United Kingdom back to the very forefront of the cruise liner market. Yet every sort of innuendo, damaging criticism and abuse is levelled not only at Harland an Wolff, but at their biggest potential customer.
  Are we really trying to create a situation where we hand over to a foreign yard the work and prestige connected with that project, and probably further similar orders?
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  Further, is every shipowner, particularly shipowners with proven track records, to be treated as fair game for totally unjustified criticism when expressing a desire to have a vessel built in Northern Ireland? That is hardly the way for the United Kingdom to go about winning major export contracts.
  Some sections of the press appear to have got it wrong, too. It was not a proven industrialist, such as John Parker, who brought De Lorean to Ulster; it was the Government of the day. Leaders of industry and respected customers should not have to live for ever under that cloud. Must that spectre be permitted to crush all potential for initiative and creativity in the Province?
  I am concerned that, just as we have lost virtually all our merchant fleet since 1982, so we may be losing our potential to rebuild it, if and when the opportunity or need arises. One must also consider the domino effect that any further contraction of the shipbuilding industry will have—not only in areas of shipbuilding but throughout the country. The vital knock-on effect of a large proportion of any shipbuilding contract being sub-contracted throughout Northern Ireland and the rest of the United Kingdom has already been described. Letters have been sent to my hon. Friends the Members for Upper Bann (Mr. McCusker) and for Antrim, East (Mr. Beggs) from Ulster Carpets and from CM R Electronics, which wish the Ultimate Dream contract to go ahead because it will create work for those companies. The Minister really should have understood that if Harland and Wolff is to arrive at a contract price, inquiries must go out to the companies that will be involved in sub-contracting.
  Is there not every justification for the United Kingdom to retain a core merchant shipbuilding industry so that it may at least compete on equal terms with other European yards? Both the Minister and the House know the answer to that question. I hope that sensible decisions will be taken which will give back hope and confidence to both our merchant shipbuilding industry and its potential customers.
  6.42 pm
  Mr. Donald Dewar: The Chancellor of the Duchy opened with the implicit criticism of our action in originating this debate. The suggestion was that it came too early. It was necessary to have this debate now because of the anxiety which exists over the uncertainty and problems facing the shipbuilding industry. That uncertainty will undoubtedly affect morale and confidence, and it is right that we should push the Government for an up-to-date report. If the House is not entitled to such a report, certainly those whose livelihoods depend on the industry are entitled to know what progress has been made. My one regret is that the House has learned disappointingly little as a result of this exercise. However, that does not invalidate our attempt, and certainly we shall be returning to press the Minister again and again.
  Much depends on the Government's attitudes. Because it is not the main subject of the debate, I shall make only a passing reference to the major frigate shipbuilding company of Yarrow, which is located on my constituency boundary. The Chancellor of the Duchy made only a very casual reference to the type 23 orders, and could not say what they would total or when they would be forthcoming. I recognise that it may be difficult for the Minister to give

  1147
  that information, but it is essential that Yarrow receives an early order for four type 23s. As the right hon. and learned Gentleman knows, it has been promised only a variation of between one and four orders. All the yards are gasping for those orders. In the case of Yarrow, there have already been some redundancies, and if no orders are received there will be substantial job losses by the end of the year. Those orders are as important to Swan Hunter, Vickers and Vosper as they are to Yarrow. That is one area of the shipbuilding industry where immediate salvation lies entirely within the confines of the Government's ordering policy and is in the hands of Ministers.
  It is interesting that the Minister feels that the talks concerning Govan are progressing well. He was being optimistic when he said that the work force there welcomed what was happening. That is not a very accurate description of the situation. There may be recognition that, sadly, the sale of Govan may be the only way forward. If that is so, everyone in the yard, in Glasgow, and in the shipbuilding industry generally will want to make a success of that development. However, it would be wrong if Ministers—as has occasionally been the case in similar circumstances previously—presented that situation as some kind of triumph and a major advance. It is a retreat for the British shipbuilding industry, now that a very important yard will be flying a foreign flag.
  I have considerable sympathy with the point made by my right hon. Friend the Member for Glasgow, Govan (Mr. Millian), who questioned whether it was necessary for the yard to go with the orders. The Minister said that it was a fine prospect that Kvaerner was setting up its gas technology industry on the Clyde. I am not clear what that means, beyond the two orders which have been pledged to the yard. If there is a wider prospect, and if there will be a larger spread of jobs, perhaps the Secretary of State for Scotland, who must be following these matters closely, will say a word or two about them. He will appreciate that the phrase "some restructuring", which has taken on a somewhat sinister air, is one in which we are all entitled to take an interest.
  I underline the point about early consultation with the work force and with the shop stewards. Whether or not rumours about 450 job losses are correct, it is important that we look for long-term guarantees and that the Government involve themselves not just in providing two orders in the short term but also in creating the kind of base which will allow the yard to continue flourishing.
  The House was told that there was a wealth of inquiries for some smaller yards. I was glad at least that there was mention of Clark Kincaid and of Ferguson. My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman), who has sat patiently throughout this debate but who has not managed to catch Mr. Speaker's eye, has pressed the Minister in the past on that subject. It seemed as though Ferguson was far from the Minister's mind on that occasion. I hope that the right solution will be found for that yard and for Appledore, whose future was eloquently defended by the hon. Member for Torridge and Devon, West (Miss Nicholson). We shall be looking for further details of the Government's plans at an early stage.
  NESL faces a difficult and tragic situation. It is depressing to see the way in which Ministers approach it. I was angry at the way we were accused of scaremongering and of presenting a gloomy scenario that could not he justified. However, almost everything said by the Minister could be described in exactly those terms.
  Mr. Chris Mullin: Does my hon. Friend agree that it is extremely difficult for the management and the work force of NESL to secure orders against the background of the black propaganda emanating from the Department of Trade and Industry, seen most noticeably in The Guardian' front page leader on 4 March?
  Mr. Dewar: It was certainly rich of the Government to accuse us of being defeatist about the industry's prospects when the Minister could only tell the House that he was unable to intervene in any way and could only stand by and hope that everything 'would be all right with the Danish contract. He acknowledged that it might be a great blow for the local economy, and the nearest thing to good news he could manage was that if a shutdown was necessary, it would not be made overnight—that there was no imminent threat of all work coming to an end: no imminent threat, but presumably a medium-term threat.
  The Minister went on—I thought, suggestively—to speak of other prospects in the area, such as Nissan, and about the general level of unemployment. I do not know what is the Minister's idea of defeatism, but such remarks will not put a spring into the step of anyone working for NESL or living in Sunderland. I hope that he will take a more positive approach and will recognise that he has a duty to that yard, as he has to the other sectors of the British shipbuilding industry which have been in public ownership.
  The Government resent the suggestion that they lack commitment, but there were real signs of that in what the Chancellor of the Duchy had to say. We distrust ministerial motives and believe that there is a real danger, as anyone who studies the Government's track record will understand, that the Government will privatise and shove the yards out of the public sector and then walk away from the problem without a backward glance. I do not believe that a responsible Government should do that, or that we should in any way encourage them or give them an easy passage if that is what is in their mind.
  I believe that the shipbuilding industry has a future. There has been much talk about some recovery in the market, which can be seen in the amount of tonnage laid up, in charter rates and so on. It will be a long haul; it will be a difficult market for a very long time. But there is room for a specialist shipbuilding industry in this country, with all the skills and engineering excellence that it represents.
  The Government should recognise that. They should look at the areas where public sector orders may arise and perhaps can be advanced. They should give realistic commitments about the level of support and their willingness to abide by at least the EEC level of 28 per cent. It is important that they put themselves out to help the industry through what is undoubtedly a very difficult period. It is all too convenient to say that part of it could be sold and the rest could be industrial scrap. That means putting on the scrap heap many people with real skill who have given a lifetime of service to that industry, or hoped to do so.
  The Minister said, in a phrase that I thought rather quaint, that the industry was at a somewhat difficult crossroads. I thought it quaint because it so understated the evident danger that faces almost every yard and every part of the industry. We are determined that, if the industry is at a crossroads, the Government should at least make the right choices. We will do all that we can to

  1149
  concentrate the Minister's mind on that, because we feel that if he is left to himself there may well be an abdication of responsibility, with tragic consequences.
  6.51 pm
  The Secretary of State for Scotland (Mr. Malcolm Rifkind): We have had a very serious and constructive debate. It is perhaps significant that a substantial proportion of those who have contributed have a deep and personal constituency interest in the future of shipbuilding. I pay tribute to my hon. Friends the Members for Torridge and Devon, West (Miss Nicholson) and for Waveney (Mr. Porter), to the hon. Member for Sunderland, North (Mr. Clay) and to the right hon. Member for Glasgow, Govan (Mr. Milian), whose passionate speeches clearly showed their concern for their local communities—as have those of other hon. Members who have caught your eye, Mr. Speaker.
  The debate takes place at a time when there is a feeling on both sides of the House that we wish to maximise the prospects for shipbuilding in the United Kingdom, but on a basis that is healthy and viable. We are conscious that over the past few years the prospects for shipbuilding throughout western Europe have been very grim. Sweden, for example, has closed its last major merchant shipbuilding yard. The French have run down their yards from five to only one, and the Spanish have reduced their capacity by some 50 per cent. The Germans, the Danes and even the Japanese have been closing yards. This is not a problem peculiar to the United Kingdom, and it is not sufficient simply to have good will or good intent. As my right hon. and learned Friend the Chancellor of the Duchy rightly pointed out, in the absence of orders there is a grim future for any industry.
  Over the past 10 years, the Government have made their commitment very clear. The £1,800 million that we have made available has not simply been support through the intervention fund; that has been a relatively small proportion of the total, becuse of the limits that are required. A substantial amount has been used to cover the trading losses of companies that obtained orders. That is one of the saddest facts about the shipbuilding industry; even when orders have been obtained, many companies have sustained massive losses.
  The right hon. Member for Govan said that he was concerned that my right hon. and learned Friend had, as he claimed, given no indication of the Government's view about the future of support for the industry. I ask him to read tomorrow what my right hon. and learned Friend said. Perhaps I can remind him. He said that, with regard to support for new orders, we have made it clear to all who have inquired in connection with the present disclosures that we are prepared to discuss support for new orders with them.
  Dr. Godman: The Secretary of State knows that I have been present throughout the debate. May I point out that I sincerely hope that, if the Norwegian firm is successful in its bid for Govan, the Government will impress on it the need to order the engines for the liquefied petroleum gas carriers from Clark Kincaid in my constituency? May I also plead for the Secretary of State to keep a tight weather eye out for Ferguson, also in my constituency? Both, as he well knows, are very important to the local economy.
  Mr. Rifkind: I entirely agree with the hon. Gentleman. He is right to express concern for both establishments, and it is encouraging that there has been interest in both as a result of the Government's recent announcement.
  It is important to remember a number of important considerations about Govan. First, as the right hon. Member for Govan well knows, the Government did not simply go out looking for a purchaser. Kvaerner made the first approach, expressing an interest in acquiring the yard. The Government then responded to that interest.
  Secondly, it is not a speculative interest. We are all aware that, occasionally, companies buy yards and then hope to find orders. What is most encouraging and welcome about Kvaerner's interest is that, far from wishing to look for orders, it has orders, and has already said that, if it is successful in acquiring the yard, there are at least two liquefied petroleum gas carriers that it wishes to build in the yard, and further orders for similar vessels are likely. Of particular importance is the firm's suggestion that, apart from the shipbuilding role that it sees for Govan, it wishes the centre of its gas-handling technology to be transferred there. That is not only important from a technological point of view, but could lead to a significant number of jobs in the Glasgow area.
  One of the curious things said by the right hon. Member for Govan was his repetition of what has been said in other quarters, concerning his personal belief that Kvaerner could have been persuaded, or could be required, not to acquire the yard but simply to place orders, while British Shipbuilders retained ownership of the yard. The House will have noted that the right hon. Gentleman did not produce an iota of evidence to substantiate that view. He informed the House that he had had recent discussions with senior management of Kvaerner. Presumably he raised this issue with them. If he has reason to believe that the firm is interested in doing as he suggests, it is surprising that he made no such reference in that respect to the House.
  I must tell the right hon. Gentleman, and the hon. Member for Glasgow, Garscadden (Mr. Dewar). that the simple fact is that Kvaerner made it clear that its interest is in acquiring the yard, not in placing orders. If it does not acquire the yard, there is no guarantee or even likelihood that orders will necessarily come to Govan. They might go to many other shipyards around the world. The right hon. Gentleman must take that into account, for I know that he is as concerned as the rest of us for the future of employment in the yard. Kvaerner's present interest is the best prospect for the yard that has emerged for some considerable time.
  As the right hon. Gentleman knows, once the Chinese ferry orders are complete, there are no other orders on the order book, and the prospects for Govan—whatever the view or policy of Government—could have been very serious. The fact that Kvaerner is not only interested in acquiring the yard but has ships to build there may explain the constructive approach of the unions at Govan.
  When Mr. Sammy Gilmore, the shop steward at Govan, was asked whether the unions would be obstructive and seek to oppose Kvaerner's interest, he replied:
  "We are shipbuilders, not anarchists … The name of the game is employment."
  He rightly went on to say that the trade unions would naturally wish to discuss in detail the consequences for the work force, saying with his customary humour:

  1151
  "There will be no Vikings sailing up the Clyde until after the Glasgow Fair."
  That may be a prediction about timing, but it also demonstrates a desire for the negotiations to succeed, which is very welcome.
  Mr. Milian: What I was trying to find out from the Ministers—I have not done so yet—was what understandings and undertakings they are attempting to obtain from Kvaerner in the negotiations.
  Mr. Rifkind: These are delicate matters of negotiation. Our main interest is that Govan should have not a short-term but a long-term future. Kvaerner is not only talking about two immediate orders for liquefied petroleum gas carriers, but is also suggesting that future orders are likely for the same kind of vessel. Moreover, it would not be suggesting publicly that it wishes to transfer the whole of its gas-handling technology to Govan if its interests were only short-term. There was no need for it to say that. It does not relate directly to the shipbuilding activities at the yard itself. It is a sign of the serious intent of the firm to establish a long-term presence.
  With regard to shipbuilding as it involves British Shipbuilders as a whole, there is a common interest on both sides of the House to try to ensure a long-term future for the shipbuilding industry. We believe that, with a return to the private sector and with the interest currently shown by the private sector, that is realisable. It is on that basis that I invite the House to oppose the motion and to approve the amendment.
  Question put, That the original words stand part of the Question:—
  The House divided: Ayes 187, Noes 261.

  Division No. 314]

  [7 pm

  AYES

  Abbott, Ms Diane

  Coleman, Donald

  Adams, Allen (Paisley N)

  Corbett, Robin

  Alton, David

  Corbyn, Jeremy

  Archer, Rt Hon Peter

  Cousins, Jim

  Ashley, Rt Hon Jack

  Crowther, Stan

  Ashton, Joe

  Cryer, Bob

  Banks, Tony (Newham NW)

  Cummings, John

  Barnes, Harry (Derbyshire NE)

  Cunningham, Dr John

  Barron, Kevin

  Dalyell, Tam

  Battle, John

  Davies, Rt Hon Denzil (Llanelli)

  Beckett, Margaret

  Dewar, Donald

  Bell, Stuart

  Dixon, Don

  Benn, Rt Hon Tony

  Dobson, Frank

  Bermingham, Gerald

  Doran, Frank

  Blair, Tony

  Douglas, Dick

  Blunkett, David

  Dunnachie, Jimmy

  Boateng, Paul

  Dunwoody, Hon Mrs Gwyneth

  Boyes, Roland

  Eadie, Alexander

  Bradley, Keith

  Ewing, Mrs Margaret (Moray)

  Bray, Dr Jeremy

  Fatchett, Derek

  Brown, Gordon (D'mline E)

  Faulds, Andrew

  Brown, Nicholas (Newcastle E)

  Field, Frank (Birkenhead)

  Brown, Ron (Edinburgh Leith)

  Fields, Terry (L'pool B G'n)

  Bruce, Malcolm (Gordon)

  Fisher, Mark

  Buchan, Norman

  Flannery, Martin

  Buckley, George J.

  Foot, Rt Hon Michael

  Caborn, Richard

  Foster, Derek

  Campbell, Menzies (Fife NE)

  Foulkes, George

  Campbell, Ron (Blyth Valley)

  Fraser, John

  Campbell-Savours, D. N.

  Galbraith, Sam

  Canavan, Dennis

  Galloway, George

  Carlile, Alex (Mont'g)

  Garrett, John (Norwich South)

  Clark, Dr David (S Shields)

  Garrett, Ted (Wallsend)

  Clarke, Tom (Monklands W)

  George, Bruce

  Clay, Bob

  Gilbert, Rt Hon Dr John

  Clwyd, Mrs Ann

  Godman, Dr Norman A.

  Cohen, Harry

  Golding, Mrs Llin

  1152

  Gordon, Mildred

  Morley, Elliott

  Gould, Bryan

  Morris, Rt Hon A. (W'shawe)

  Graham, Thomas

  Morris, Rt Hon J. (Aberavon)

  Grant, Bernie (Tottenham)

  Mowlam, Marjorie

  Griffiths, Win (Bridgend)

  Mullin, Chris

  Grocott, Bruce

  Nellist, Dave

  Hardy, Peter

  O'Brien, William

  Healey, Rt Hon Denis

  O'Neill, Martin

  Heffer, Eric S.

  Orme, Rt Hon Stanley

  Henderson, Doug

  Parry, Robert

  Hogg, N. (C'nauld & Kilsyth)

  Patchett, Terry

  Holland, Stuart

  Pendry, Tom

  Home Robertson, John

  Pike, Peter L.

  Hood, Jimmy

  Powell, Ray (Ogmore)

  Howarth, George (Knowsley N)

  Quin, Ms Joyce

  Howells, Geraint

  Radice, Giles

  Hoyle, Doug

  Randall, Stuart

  Hughes, John (Coventry NE)

  Redmond, Martin

  Hughes, Robert (Aberdeen N)

  Rees, Rt Hon Merlyn

  Hughes, Sean (Knowsley S)

  Reid, Dr John

  Hughes, Simon (Southwark)

  Richardson, Jo

  Illsley, Eric

  Roberts, Allan (Bootle)

  Ingram, Adam

  Robinson, Peter (Belfast E)

  Janner, Greville

  Rogers, Allan

  John, Brynmor

  Ruddock, Joan

  Jones, Barry (Alyn & Deeside)

  Sedgemore, Brian

  Jones, Martyn (Clwyd S W)

  Sheerman, Barry

  Kaufman, Rt Hon Gerald

  Sheldon, Rt Hon Robert

  Kirkwood, Archy

  Short, Clare

  Lamond, James

  Skinner, Dennis

  Leighton, Ron

  Smith, Andrew (Oxford E)

  Lestor, Joan (Eccles)

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

  Livsey, Richard

  Snape, Peter

  Lloyd, Tony (Stretford)

  Soley, Clive

  Lofthouse, Geoffrey

  Spearing, Nigel

  Loyden, Eddie

  Steinberg, Gerry

  McAllion, John

  Stott, Roger

  McAvoy, Thomas

  Strang, Gavin

  McCartney, Ian

  Straw, Jack

  Macdonald, Calum A.

  Taylor, Mrs Ann (Dewsbury)

  McFall, John

  Taylor, Matthew (Truro)

  McKay, Allen (Barnsley West)

  Turner, Dennis

  McKelvey, William

  Wall, Pat

  McLeish, Henry

  Wallace, James

  Maclennan, Robert

  Walley, Joan

  McNamara, Kevin

  Wardell, Gareth (Gower)

  McTaggart, Bob

  Wareing, Robert N.

  Madden, Max

  Welsh, Andrew (Angus E)

  Maginnis, Ken

  Welsh, Michael (Doncaster N)

  Marek, Dr John

  Wilson, Brian

  Marshall, Jim (Leicester S)

  Winnick, David

  Martin, Michael J. (Springburn)

  Worthington, Tony

  Martlew, Eric

  Wray, Jimmy

  Maxton, John

  Young, David (Bolton SE)

  Meale, Alan

  Michie, Bill (Sheffield Heeley)

  Tellers for the Ayes:

  Millan, Rt Hon Bruce

  Mr. Frank Haynes and

  Moonie, Dr Lewis

  Mr. Ken Eastham.

  Morgan, Rhodri

  NOES

  Aitken, Jonathan

  Brooke, Rt Hon Peter

  Alexander, Richard

  Burt, Alistair

  Alison, Rt Hon Michael

  Butler, Chris

  Arbuthnot, James

  Butterfill, John

  Arnold, Jacques (Gravesham)

  Carlisle, John, (Luton N)

  Atkinson, David

  Carlisle, Kenneth (Lincoln)

  Baker, Rt Hon K. (Mole Valley)

  Carrington, Matthew

  Baker, Nicholas (Dorset N)

  Cash, William

  Banks, Robert (Harrogate)

  Channon, Rt Hon Paul

  Bennett, Nicholas (Pembroke)

  Chapman, Sydney

  Biffen, Rt Hon John

  Chope, Christopher

  Biggs-Davison, Sir John

  Churchill, Mr

  Body, Sir Richard

  Clark, Sir W. (Croydon S)

  Boscawen, Hon Robert

  Clarke, Rt Hon K. (Rushcliffe)

  Boswell, Tim

  Conway, Derek

  Bottomley, Mrs Virginia

  Coombs, Anthony (Wyre F'rest)

  Bowis, John

  Cope, John

  Braine, Rt Hon Sir Bernard

  Cormack, Patrick

  Bright, Graham

  Cran, James

  1153

  Currie, Mrs Edwina

  Hicks, Robert (Cornwall SE)

  Curry, David

  Higgins, Rt Hon Terence L.

  Davies, Q. (Stamf'd & Spald'g)

  Hill, James

  Davis, David (Boothferry)

  Hind, Kenneth

  Dickens, Geoffrey

  Hogg, Hon Douglas (Gr'th'm)

  Dorrell, Stephen

  Holt, Richard

  Douglas-Hamilton, Lord James

  Howard, Michael

  Dover, Den

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

  Dunn, Bob

  Howarth, G. (Cannock & B'wd)

  Durant, Tony

  Howell, Ralph (North Norfolk)

  Dykes, Hugh

  Hughes, Robert G. (Harrow W)

  Eggar, Tim

  Hunt, David (Wirral W)

  Emery, Sir Peter

  Hunt, John (Ravensbourne)

  Evans, David (Welwyn Hatf'd)

  Hunter, Andrew

  Evennett, David

  Hurd, Rt Hon Douglas

  Farr, Sir John

  Irvine, Michael

  Favell, Tony

  Irving, Charles

  Fenner, Dame Peggy

  Jack, Michael

  Field, Barry (Isle of Wight)

  Janman, Tim

  Finsberg, Sir Geoffrey

  Johnson Smith, Sir Geoffrey

  Fookes, Miss Janet

  Jones, Gwilym (Cardiff N)

  Forsyth, Michael (Stirling)

  Jones, Robert B (Herts W)

  Forth, Eric

  Jopling, Rt Hon Michael

  Fowler, Rt Hon Norman

  Key, Robert

  Fox, Sir Marcus

  Kirkhope, Timothy

  Franks, Cecil

  Knapman, Roger

  Freeman, Roger

  Knight, Greg (Derby North)

  French, Douglas

  Knight, Dame Jill (Edgbaston)

  Gale, Roger

  Knowles, Michael

  Gardiner, George

  Knox, David

  Garel-Jones, Tristan

  Lamont, Rt Hon Norman

  Gilmour, Rt Hon Sir Ian

  Lang, Ian

  Goodhart, Sir Philip

  Lawrence, Ivan

  Goodlad, Alastair

  Lawson, Rt Hon Nigel

  Goodson-Wickes, Dr Charles

  Lennox-Boyd, Hon Mark

  Gorst, John

  Lilley, Peter

  Gow, Ian

  Lloyd, Sir Ian (Havant)

  Gower, Sir Raymond

  Luce, Rt Hon Richard

  Grant, Sir Anthony (CambsSW)

  Lyell, Sir Nicholas

  Greenway, Harry (Eating N)

  McCrindle, Robert

  Greenway, John (Ryedale)

  Macfarlane, Sir Neil

  Gregory, Conal

  MacGregor, Rt Hon John

  Griffiths, Sir Eldon (Bury St E')

  MacKay, Andrew (E Berkshire)

  Griffiths, Peter (Portsmouth N)

  Maclean, David

  Grist, Ian

  McLoughlin, Patrick

  Ground, Patrick

  McNair-Wilson, M. (Newbury)

  Grylls, Michael

  McNair-Wilson, P. (New Forest)

  Gummer, Rt Hon John Selwyn

  Madel, David

  Hamilton, Hon Archie (Epsom)

  Major, Rt Hon John

  Hamilton, Neil (Tatton)

  Malins, Humfrey

  Hampson, Dr Keith

  Mans, Keith

  Hanley, Jeremy

  Marland, Paul

  Hannam, John

  Marshall, Michael (Arundel)

  Hargreaves, A. (B'ham H'll Gr')

  Martin, David (Portsmouth S)

  Hargreaves, Ken (Hyndburn)

  Mates, Michael

  Harris, David

  Mawhinney, Dr Brian

  Haselhurst, Alan

  Maxwell-Hyslop, Robin

  Hawkins, Christopher

  Mayhew, Rt Hon Sir Patrick

  Hayes, Jerry

  Meyer, Sir Anthony

  Hayhoe, Rt Hon Sir Barney

  Miller, Hal

  Hayward, Robert

  Mills, Iain

  Heathcoat-Amory, David

  Miscampbell, Norman

  Heddle, John

  Mitchell, Andrew (Gedling)

  Heseltine, Rt Hon Michael

  Moate, Roger

  1154

  Monro, Sir Hector

  Speed, Keith

  Montgomery, Sir Fergus

  Speller, Tony

  Morris, M (N'hampton S)

  Spicer, Michael (S Worcs)

  Morrison, Hon Sir Charles

  Squire, Robin

  Morrison, Hon P (Chester)

  Stanbrook, Ivor

  Moss, Malcolm

  Stanley, Rt Hon John

  Neale, Gerrard

  Steen, Anthony

  Nelson, Anthony

  Stern, Michael

  Neubert, Michael

  Stevens, Lewis

  Nicholson, David (Taunton)

  Stewart, Andy (Sherwood)

  Nicholson, Emma (Devon West)

  Stradling Thomas, Sir John

  Onslow, Rt Hon Cranley

  Summerson, Hugo

  Oppenheim, Phillip

  Taylor, John M (Solihull)

  Page, Richard

  Taylor, Teddy (S'end E)

  Patnick, Irvine

  Temple-Morris, Peter

  Patten, Chris (Bath)

  Thompson, D. (Calder Valley)

  Pattie, Rt Hon Sir Geoffrey

  Thompson, Patrick (Norwich N)

  Pawsey, James

  Thornton, Malcolm

  Peacock, Mrs Elizabeth

  Thurnham, Peter

  Porter, David (Waveney)

  Townend, John (Bridlington)

  Portillo, Michael

  Tracey, Richard

  Powell, William (Corby)

  Tredinnick, David

  Price, Sir David

  Trippier, David

  Raison, Rt Hon Timothy

  Twinn, Dr Ian

  Rathbone, Tim

  Vaughan, Sir Gerard

  Redwood, John

  Viggers, Peter

  Renton, Tim

  Waddington, Rt Hon David

  Rhodes James, Robert

  Waldegrave, Hon William

  Ridley, Rt Hon Nicholas

  Walden, George

  Ridsdale, Sir Julian

  Walker, Bill (T'side North)

  Rifkind, Rt Hon Malcolm

  Walters, Dennis

  Roe, Mrs Marion

  Ward, John

  Rossi, Sir Hugh

  Wardle, Charles (Bexhill)

  Rost, Peter

  Warren, Kenneth

  Rowe, Andrew

  Watts, John

  Rumbold, Mrs Angela

  Wheeler, John

  Ryder, Richard

  Widdecombe, Ann

  Sackville, Hon Tom

  Wiggin, Jerry

  Sainsbury, Hon Tim

  Wilkinson, John

  Shaw, David (Dover)

  Wilshire, David

  Shaw, Sir Giles (Pudsey)

  Winterton, Mrs Ann

  Shaw, Sir Michael (Scarb')

  Winterton, Nicholas

  Shelton, William (Streatham)

  Wood, Timothy

  Shephard, Mrs G. (Norfolk SW)

  Woodcock, Mike

  Shepherd, Richard (Aldridge)

  Young, Sir George (Acton)

  Shersby, Michael

  Sims, Roger

  Tellers for the Noes:

  Skeet, Sir Trevor

  Mr. Peter Lloyd and

  Smith, Tim (Beaconsfield)

  Mr. David Lightbown.

  Soames, Hon Nicholas

  Question accordingly negatived.
  Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.
  MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House recognises the support that Her Majesty's Government has given to the shipbuilding industry; and welcomes the prospect of returning British Shipbuilders' yards to the private sector.

European Community (Finance)
Mr. Speaker: I must announce to the House that I have selected the amendment in the name of the Leader of the Opposition.
7.13 pm
The Paymaster General (Mr. Peter Brooke): I beg to move,
That this House takes note of European Community Documents Nos. 10552/86 and the un-numbered Explanatory Memorandum submitted by the Treasury on 18th March 1987 on the 1987 Community Budget, the un-numbered Explanatory Memorandum submitted by the Treasury on 18th March 1987 on carry-over of appropriations from 1986 to 1987, 6037/87 on the 1987 Budget situation, 6822/87 and 7552/87 on Supplementary and Amending Budget No. 1 for 1987, 6048/87, 7211/87, COM(87)240, COM(87)677 and COM(88)81 on the 1988 Preliminary Draft Budget, 4766/88 on the 1988 Draft Budget, 4051/87 on financial engineering, 5266/88 on Own Resources, 5282/88 on amendments to the Financial Regulation and the un-numbered Explanatory Memorandum submitted by the Treasury on 10th May 1988 on budgetary discipline; and endorses the Government's objectives of securing effective and binding control of Community expenditure.
I am delighted that the House has the opportunity this evening to debate the unfinished business of the Brussels European Council and the 1988 Community budget, ahead of the decisions which the Council of Ministers and the European Parliament are likely to reach over the next month or so.
The motion mentions a number of documents, deposited with the House, which the Scrutiny Committee has recommended for debate. I pay tribute to the Scrutiny Committee for its clear, concise and conscientious reports on these documents. I pay tribute also to the Treasury and Civil Service Committee, which has been monitoring developments in Brussels with all the diligence and understanding that we have come to expect from that Committee.
Mr. Teddy Taylor: As my right hon. Friend said that the Council and the Parliament are likely to agree these matters within a month, will he explain how that is possible under article 199, when this Parliament and other Parliaments have not approved the increase in resources that would match the expenditure under article 199?
Mr. Brooke: If my hon. Friend will be content to know that I was going to deal with those matters at some length, it might be more sensible if I took them in logical order.
The House may find it helpful if I begin by saying a little about the likely timetable of events in Brussels, the Community's financing needs and the procedures for obtaining Parliament's approval for the Community's new own resources decisions and the 1988 intergovernmental agreement, or IGA. The House may like to be reminded that the Heads of Government agreed at the Brussels European Council in February on a new own resources ceiling and system for the Community. They also agreed that it should take effect for the current year by means of an agreement between the member states that they will provide supplementary contributions to the 1988 Community budget in the form of non-reimbursable advances against the newly agreed own resources, pending ratification of the new own resources decision.
1156
To begin then, with the likely timetable, we learned from Strasbourg last night that the European Parliament had reached agreement with the President of the Budget Council on the 1988 Community budget, though it is not yet clear whether the President of the Parliament, Lord Plumb, will declare the budget adopted until final agreement has been reached on the other unfinished business of the Brussels European Council.
The Community has still to reach final agreement on all the other main documents implementing the European Council conclusions, including the new decisions on own resources and budget discipline and the 1988 IGA. Also unfinished are the negotiations with the European Parliament on an inter-institutional agreement about implementation of the Community's expenditure policies over the next five years. There now seems a good chance that all this unfinished business will be resolved over the next three or four weeks, but I cannot, of course promise the House that that timetable will be fulfilled.
If I may turn next to the Community's financing needs and the question of seeking the House's approval for the Community's new financing agreements, I want to say first that the Government will not pay any contribution to the Community under the new own resources decision or the intergovernmental agreement until the House has signified its approval. I have made that point already to the Treasury and Civil Service Committee, and I am glad to repeat it in the House now.
The Commission will, however, have an urgent cash-flow problem over the next few weeks. It has calculated that this will arise in any case as a result of the Community's existing obligations, whether the 1988 budget is formally adopted or not. The cash requirement has nothing to do with adoption of the budget or the IGA, but simply reflects the fact that the level of spending to which the Community is committed, in particular on agriculture, is running faster than the limited revenues which are available, month by month, under the present provisional twelfths regime. Earlier in the year the Commission's cash position was strong and this enabled it to make ends meet. This month, however, it has had to call for an advance payment of traditional own resources under article 10(2) of regulation 2891/77. I shall be providing details of this in a written answer tomorrow.
Mr. Eric Forth: The House might be slightly puzzled, as I confess to being, at hearing my right hon. Friend say that there are problems of expenditure outrunning resources. My right hon. Friend will recall that when Fontainebleau was concluded we were told that effective measures had been put in place to control expenditure. If I am not mistaken, we shall probably be told something similar in a few moments. How can my right hon. Friend square the fact that the Parliament and the Community have run out of money and are in crisis with the fact that Fontainebleau was supposed to provide the answers some two or three years ago?
Mr. Brooke: My hon. Friend will be familiar with the answer. In the current year the Community is operating on provisional twelfths. Provisional twelfths quite clearly do not represent the level of resources that would otherwise have been adopted, because no budget has been adopted. That is why the Commission has a cash flow problem.
Mr. Terence L. Higgins: Is it quite accurate for my right hon. Friend to say that the Commission has a cash flow problem? Would I be wrong in supposing that if the House does not agree to an IGA or to the increase in own resources, the Commission does not have a cash flow problem; it quite simply does not have the money?
Mr. Brooke: The provisional twelfths amounts come through on a monthly basis. It is a current month problem that the Commission has asked us to address. The nature of a 10(2) overdraft request is simply to ask for own resources to be brought forward and to be paid at a slightly earlier date than they otherwise would be.
Mr. Nigel Spearing: I am grateful to the right hon. Gentleman for giving way at this point, because it helps to bring about a rational debate. He may have said something that he did not intend. He said that the new IGA would not be approved by the Government unless it had been endorsed by the House. That has to happen through a Bill or an Estimate. Can he assure the House that the Government would not assent to that in the initial stages, before it was endorsed by the House, unless and until there had been agreement in the institutions of the EEC to the British rebate formula and the disciplinary documents? Surely the former depends upon the acceptance of the latter.
Mr. Brooke: The hon. Gentleman is perfectly correct in identifying that as a subject that came up when I gave evidence to the Treasury and Civil Sevice Select Committee last week. If the hon. Gentleman will bear with me I shall come to the issue and deal with it within the logical framework of my speech.
Next month the Commission expects to have to call for overdraft facilities under article 12(2) of the same regulation, although on a much smaller scale than would be implied by a six-monthly slice of IGA contribution.
When the 1988 budget is finally adopted, the Commission will need further funding without too much delay to enable it to fulfil its responsibility to implement the budget. It has suggested that it is likely to call up contributions from member states in the form of IGA contributions or of overdraft advances under article 12(2) of the regulation to which I have referred, depending on what has been agreed in the Council and what is possible for the member state concerned. Initially, these requests for the funds will be needed to cover cash flow requirements which would have arisen in any case. The IGA cannot be finally crystallised until we have agreement on all the relevant provisions of the Community's new own resources decision, including the United Kingdom abatement provisions.
Member states are obliged to comply with overdraft requests by the Commission under article 12(2) of the regulation, provided that these are genuinely needed to cover a prospective cash deficit, and provided that they would not involve exceeding the own resources known to be available for the year. The Government stand ready, therefore, to meet such overdraft requests, before or after adoption of the budget, and before or after final agreement on the IGA, provided that these conditions are fulfilled. We would charge such overdrafts directly against the Consolidated Fund, like all other Community obligations, while keeping the House fully informed. The Government would not, however, intend to meet demands for overdraft contributions, to the extent that these were in effect
1158
requests for IGA contributions, without first seeking the House's approval for the necessary supplementary financing.
As we cannot be sure when the supplementary financing will first be needed, we may well find that we have to seek Parliament's approval on a somewhat accelerated timetable, though the overdraft facility will continue to be available in the way that I have described. If that happens, I am sure that the House will understand the reasons why.
As to the means by which Parliament's approval will be sought, there are in principle two main options. One will be to seek approval my means of a composite Bill, covering both the new own resources decision and the IGA. This would follow the precedent of the European Communities (Finance) Act 1985. The Bill would be introduced as soon as possible after the IGA and the new own resources decision have been formally agreed and the 1988 budget adopted. The initial instalment or instalments of the IGA would be financed as necessary from the Contingencies Fund if and when Parliament has given the Bill a Second Reading.
The other option would be to decouple the own resources decision and the IGA. On this approach we would seek approval for the own resources decision through a Bill while separately presenting a special Estimate and Consolidated Fund Bill to cover our IGA contributions. The procedure for approval of the 1984 IGA would provide a precedent for that.
I imagine that most hon. Members would feel, as I do, that the composite Bill approach would be preferable to the decoupled approach.—[HON. MEMBERS: "No."] I shall stick by the observation I have made. If hon. Members wish to disagree during the debate, I shall look forward to replying later.
Mr. Spearing: This is a Committee-style exchange because Committee-style detail is required. Surely the right hon. Gentleman appreciates that the IGA is outside the treaties and is an agreement between Governments not within the treaty of Rome. The draft decision, which has also to be ratified by the House and which has not yet been completed in Brussels, will have to be ratified to cover the new financial structure for the next five years. Surely it would be quite wrong to put the two together—one intra-treaty and one extra-treaty—in the same piece of legislation.
Mr. Brooke: I have offended the purist instincts of the House in suggesting that they should be taken together. I did not hold the office for which I am currently responsible during 1984 and 1985. My understanding of the affairs of that time was that Parliament in general, and the Treasury and Civil Service Select Committee in particular, had shown a preference for the linked approach and the composite Bill. It is the case—I am now referring to Parliament's convenience—that one would be taking through the entire complicated matter in a single tranche rather than as separate measures. No doubt other hon. Members who registered a negative a moment ago will want to enlarge on that when they speak.
The final choice will have to depend on the timing of agreement in Brussels on the various elements in the total package. If the final agreement on the own resources decision, or even on the IGA, should be delayed, the composite Bill route might not be available and, as I

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understand it, would not be to the liking of the hon. Member for Newham, South (Mr. Spearing). Decoupling might then be the only solution.
Before leaving this important subject I should emphasise again that the timetable in Brussels remains uncertain and we do not yet have final decisions on how the Commission will handle these somewhat complicated financing issues. The Government's own proposals on procedure must likewise, therefore, remain provisional for the time being. I shall keep the House informed about developments.
The documents that appear in today's motion fall into four categories: documents relating to the 1987 and 1988 budgets; a document on the Community's "financial engineering" proposals; the Commission's proposal for a new own resources decision; and documents on budget discipline and management.
With the House's permission, I shall say a few words about each of those subjects. First, I shall deal with the 1988 budget. The documents in today's motion have been largely overtaken by the developments in Strasbourg last night. which I mentioned earlier. Although precise details are not yet clear, it seems that the European Parliament voted yesterday evening to reinstate all its first reading budget proposals, thus creating, on present indications, an excess of 200 mecu in commitments over the statutory margin that the treaty allows the Parliament to add to the Council's proposals for non-obligatory expenditure, while using up all the margin for payments.
In response to this, the President of the Budget Council announced that he had authority from the Budget Council to negotiate a new maximum rate of increase for commitments and would therefore agree to the Parliament's proposals on the Council's behalf. The result is that we now have agreement between the Council and the Parliament on the 1988 budget.
It remains uncertain when the President of the Parliament, Lord Plumb, will declare the budget adopted. He said last night that he would take time to consider—
Mr. Stuart Holland: I hesitated for a moment before pointing this out, but I think the right hon. Gentleman will find that he has already made these points to the House this evening.
Mr. Brooke: I will, if I may, continue my speech.
Mr. David Curry: I wonder whether it would assist the House if I told my right hon. Friend what happened in the European Parliament yesterday, because I was there. The Parliament voted through a budget that went beyond what the Council regards as the margin of commitments and the President of the Council, Mr. Tietmeyer, signalled his consent to that higher amount by fixing a new maximum rate. Therefore, the situation is that the budget is now in a condition to be signed by the President of the Parliament. He has said that he will sign the budget after he has studied it, and the event upon which he is waiting is the next round of discussions on the inter-institutional agreement, to which my right hon. Friend referred, and which represents the Parliament's desire to be associated with the longer-term framework of budgetary discipline over a five-year period. What has not yet happened, as my right hon. Friend said, is any vote in the Parliament on the financial regulation or the own resources decision.
Mr. Brooke: By some process of serendipity, my hon. Friend has anticipated with absolute precision the remarks that I was about to make. I shall enlarge upon what I said earlier about Lord Plumb before the hon. Member for Vauxhall (Mr. Holland) intervened.
Lord Plumb said last night, as my hon. Friend the Member for Skipton and Ripon (Mr. Curry) mentioned, that he would take time to consider whether the budget had a secure revenue base, and also the state of play on the inter-institutional agreement about the development of the Community's programmes over the next five years, which the Council and the Parliament are trying to negotiate. Some members of the Parliament are arguing that, in the absense of agreement on the new own resources decision and the IGA, the budget has no secure revenue base. We have considerable sympathy with that view. The decision, however, is for Lord Plumb. Here, too, I undertake to keep the House informed about developments.
As to the magnitudes involved, we do not yet have the detailed figures from Strasbourg. Our own provisional calculations suggest, however, that the budget as now agreed will provide for total commitment appropriations of 45·3 becu and total payment appropriations of 43·8 becu. Compared with the final budget for 1987, the percentage increases are 20·9 per cent. for commitments and 21 per cent. for payments.
Within the totals, the level of agricultural guarantee expenditure is exactly as agreed at the Brussels European Council. The percentage increase in non-obligatory payments is 9·5 per cent.
Mr. Ron Leighton: I am trying to understand what is going on. It seems that we are in a rather humiliating position in that we do not know what we have to pay. All we know is that it is continually more each year and each time the Paymaster comes along. That is a singularly appropriate nomenclature. He is the paymaster of the Common Market. Whatever it says we have to pay, he coughs up the money. He is not sure what we have to pay, but we have a helpful intervention from a member of a slightly alien institution who gives him helpful advice as to how much we have to pay. Whatever it is, he gives us the bill and we pay it. Is that what the British Parliament has come to?
Mr. Brooke: If the hon. Gentleman will excuse me, I think that that was a largely rhetorical intervention. I can assure him that when I became Paymaster General I informed my friends in the Budget Council that my attitude towards them had not changed at all and that my title did not indicate any change in my attitude.
I was referring to the level of agricultural guarantee expenditure. The increase in non-obligatory payments is 9·5 per cent. This, too, is broadly in line with the level of expenditure envisaged at the Brussels European Council, although the increase of 12·6 per cent., in non-obligatory commitments is somewhat higher than I would have wished. I argued at the last Budget Council, with French support, that the Council should not agree to any excess over the statutory margin which the Parliament is entitled to add to the Council's non-obligatory expenditure proposals. The prevailing view was, however, that the President of the Council should have a certain flexibility to negotiate with the European Parliament.
I turn briefly to the document on the Order Paper, No. 4051/87, which introduces the Commission's ideas on

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financial engineering. "Financial engineering" is a term of art in the Community—if art is the right word—which refers to the mobilisation of funding for investment. The Government share the Commission's views on the importance of the spirit of enterprise, the working of market forces and productive investment.
We are not convinced, however, that new Community funding mechanisms are necessary. In most of the Community countries we already have highly developed private sector mechanisms for funding investment programmes, and the Community itself already has a major institution, the European Investment Bank, for the funding of investment projects in Europe. The member states will no doubt wish to examine the Commission's idea carefully with these points in mind.
Mr. Curry: Does my right hon. Friend agree that if the British Government's ideas on reducing the number of commissioners had been adopted, so that there was one per country, we might have rather fewer policies, because it would not be necessary to find policies for every commissioner to manage?
Mr. Brooke: I am familiar with the application of Parkinson's law in all areas of human endeavour, and in the Commission in particular.
Mr. Teddy Taylor: Before my right hon. Friend leaves document COM(87)150, as he has referred to the percentage increase in agriculture, could he explain why on page 16 of that document, which seems to be the fundamental page setting out the figures, according to the Commission and according to those who published it, there is a proposal to increase expenditure on agriculture by 16·03 per cent., and not the figure that he mentioned, particularly as this seems to be an extravagant figure well beyond what was mentioned in his speech or in the discussions in the European Council?
Mr. Brooke: As that is a rather detailed statistical point and I do not have the document readily at hand, I shall respond to my hon. Friend at the close of the debate.
I turn now to the new own resources decision. Document 5266/88 in the motion contains the Commission's proposal for this important new decision, which the Council and official Committees in Brussels have been debating for several weeks. The purpose of the new decision is to give effect to the agreements on own resources which the Heads of Government reached in February at the Brussels European Council. In keeping with this, the decision provides for: a new own resources ceiling of 1·2 per cent. of the Community's GNP, with a corresponding 1·3 per cent. of GNP ceiling on commitment appropriations; limitation of VAT contributions to 1·4 per cent. of the VAT base, which is similar to consumer expenditure; a redefinition of the VAT base, known as "capping", such that in future the assessable VAT base of each individual member state may no longer exceed 55 per cent. of its GNP; the introduction of a fourth own resource, based on GNP shares, which will take its place alongside the existing levies and duties and VAT own resources and serve as the Community's residual source of finance; and new provisions to ensure that the Fontainebleau abatement system for the United Kingdom remains intact within the new system of own resources.
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For the United Kingdom the effect of these provisions wil be that for any given level of the Community budget our gross contribution will be lower in the first instance than under the existing own resources system, because of the provisions for VAT capping and the new fourth resource; but we shall receive correspondingly less abatement in the following year. The overall effect on the United Kingdom will thus be neutral, except that there will be a timing advantage.
The Commission's draft of the own resources decision makes no provision for sub-ceilings on own resources: that is to say, intermediate own resources ceilings for the years between now and 1992 below the overall 1·2 per cent. of GNP ceiling. However, the Brussels European Council made explicit provision for such sub-ceilings and the Council has been considering how they should be incorporated within the own resources decision.
There are, in addition, certain other arguments over the text of the own resources decision which have still to be resolved in the Council. The largest of these is the so-called Italian problem. The Italians claim that the Commission's proposals for financing the United Kingdom abatement will result in too much of the budget being financed from the new fourth resource and too little from VAT own resources. Since the Italians' share of the Community's GNP is considerably larger than their share of the Community's VAT base, the Italians would be better off under a different system, which provided for more VAT and less GNP-shared financing.
We remain hopeful that these and other problems will be finally settled over the next two or three weeks. The Government have, however, made clear throughout that the United Kingdom will not finally and formally agree in the Council to the new own resources decision until there has been agreement to the other elements in the Brussels package, notably the decision on budget descipline.
The last two papers listed in the motion deal with the important subjects of budget discipline and management. On budget management, the Commission proposal in document 5282/88 for amendments to Community's financial regulations is concerned with giving legal force to changes for which the United Kingdom pressed hard in the future financing negotiations. The first is a provision whereby the traditional Community practice of carrying over unused budget appropriations from one year to the next should become the exception rather than the rule. The second is a provision limiting any negative reserves which may be entered into the budget to 200 mecu.
So far as budget discipline is concerned, the explanatory memorandum, which is the last document listed in the motion, summarises the proposal for a council decision on budget discipline for obligatory expenditure, and in particular for agricultural guarantee expenditure. As hon. Members will recall, the United Kingdom fought long and hard in the months before the Brussels European Council for improved discipline over agricultural spending. That is reflected in the draft decision.
As I explained to the Treasury and Civil Service Committee last week, there are five critical areas in which the controls on agricultural spending have been strengthened. First, the guideline limit for this spending will in future be enshrined in a legal instrument which will be binding on the Council.
Secondly, the notorious provision in the 1984 budget discipline conclusions for exceeding the guideline in "exceptional circumstances" has been scrapped. In its

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place we are to have a symmetrical monetary reserve arrangement to deal with the budgetary effects of substantial movements in the ecu/dollar exchange rate in either direction within a limit of 1 becu a year.
Thirdly, the Commission has undertaken to put forward price proposals which are consistent with the guideline limit; to insist on a joint meeting of Finance Ministers and Agriculture Ministers if the latter seem likely to take decisions which would involve exceeding the expenditure implied by the Commission's original proposals; and to manage the agricultural budget chapter by chapter—or, in other words, major commodity by major commodity—not globally as in the past. The Commission has undertaken to monitor expenditure and take remedial action if it threatens to exceed the budgetary provision, either by using its own management powers or by making proposals to the Council on which the Council will be committed to act within two months.
Fourthly, the instruments for controlling spending on individual commodities have been greatly strengthened by the introduction of automatic stabiliser mechanisms in all the main product regimes.
Finally, there are new arrangements for systematic depreciation of new agricultural stocks, with special provision earmarked for the cost of depreciating existing stocks.
Mr. Forth: My right hon. Friend was not in his present position at the time of Fontainebleau, and cannot therefore take any credit for it, but having looked back at it and at what was said in the House after it, when a number of us were accused of being unhelpful and cynical for suggesting that Fontainebleau was not all that it had been cracked up to be, will he assure me that he and our right hon. Friend the Chancellor of the Exchequer are satisfied that we have got it right this time? By conceding an interest in the Community's resources, will we get the effective discipline that we emphatically did not get after Fontainebleau?
Mr. Brooke: I assure my hon. Friend that the narrative of the Fountainebleau debates is well known to me, and I am aware that several of my hon. Friends made such comments at the time. The position today is greatly improved, but my hon. Friend and I belong to a party that has always believed that this is an imperfect world, so I cannot promise him everything.
Mr. Curry: Does my right hon. Friend accept that one of the important things that has happened since Fontainebleau in the changing budgetary arithmetic of the Community is that France is moving into the position of being a net contributor rather than a recipient and so has a greater vested interest in the control of expenditure? Equally, Spain stands to make no great gain out of agriculture and therefore has an interest in limiting agricultural spending to create resources for the funds from which she would benefit. Is that geographic change not as politically important as formal guarantees about agricultural expenditure in determining what happens?
Mr. Brooke: I am grateful for my hon. Friend's comment, although some of it might have come in a speech at a later stage. On the first day of the international cricket season, I have no desire to bat all day and I shall seek now to bring my speech to an end.
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For non-obligatory expenditure, there appears to be no scope for a legal instrument, based on treaty, comparable to that proposed for obligatory expenditure. The problem is that such an instrument would fetter powers which the treaty itself confers on the Parliament. The Brussels European Council agreed accordingly to seek an inter-institutional agreement with the Parliament over the development of non-obligatory expenditure during the next five years and, failing such agreement, to adopt on its own initiative internal rules for restraining the growth of such expenditure.
The Council's proposals, which were enshrined in the Brussels European Council conclusions, provide for specific additions each year to commitments for the structural funds, confirmation of existing multi-annual commitments for research and development and integrated Mediterranean programmes, and containment of commitment appropriations for the rest of non-obligatory expenditure within the statistical maximum rate of increase laid down in the treaty.
Although the provisions for budget discipline over non-obligatory expenditure cannot be enshrined in a legal instrument of the same kind as for obligatory expenditure, the political commitment to this element in budget discipline is every bit as binding as for agricultural expenditure. In addition, the sub-ceilings on own resources which I mentioned earlier, taken together with the guideline limit on agricultural guarantee expenditure, will indirectly provide an overall and binding limit on the scope for increases in non-obligatory expenditure.
I apologise if this speech has been a little protracted by interventions. Some hon. Members may feel that I have raced with indecent haste through a labyrinth of complex issues. If they do, I ask their forgiveness. The Government will continue their efforts to put the Community's finances on a sound basis, and we hope that hon. Members of all parties will support us in that.
7.47 pm
Mr. Stuart Holland: I beg to move, to leave out from "discipline" to the end of the Question and to add instead thereof:
'views with concern the proposals of government to conclude an agreement to provide payments to the European Community prior to final adoption of instruments authorising own new resources and discipline; and calls on Her Majesty's Government to give notice to the Council of Ministers that its agreement to the draft budget and the proposals for own resources is dependent on rapid agreement on new financial disciplines, particularly those related to the Common Agricultural Policy, and on the formula for the United Kingdom rebate as agreed at the last European Council in Brussels, on adoption of a genuine and expeditious programme for a substantial reduction of Common Agricultural Policy spending, on a corresponding increase in other budget allocations, not only for the social regional funds, but also for the environment, and for assistance to developing countries, on recognition that a harmonisation of VAT rates is not necessary for achievement of a common internal market by 1992, on international governmental action for a recovery of employment, income and trade in the Community, including re-establishment of a major role for the Medium Term Economic Policy Committee, and on new accounting procedures to gain transparency on the market behaviour and abuse of dominant positions by bigger business in the Community.'
Some things bear repetition—music is a case in point—and I must repeat that the Government's record of failure in the matter of budget and own resources is deplorable by the standards that they have set themselves.

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I am sure that we shall shortly benefit from a contribution by the right hon. Member for Worthing (Mr. Higgins) who, in the Treasury and Civil Service Select Committee on 11 May, put the following question to the Paymaster
General:
"We were told some years ago, were we not, when the original budgetary package on this came through, that the proportion spent on agriculture would fall?"
The Paymaster General replied:
"I think it is a matter of common knowledge between us that the arrangements which were secured in 1984 for the restraining of agricultural expenditure were not as effective as they should have been."
That, I suggest, is the understatement of the month.
In the same Select Committee—in passing, I congratulate it on the work that it has done—the right hon. Member for Worthing said:
"If we go, as the Michelin Guide would say, for a little history, the Government's position originally was that there would be effective budget discipline. This Committee at that time expressed extreme scepticism as to whether that would be effective. That indeed turned out to be the case: that it was not effective. We were then told by the Prime Minister that she would not go along with any further arrangements for increasing own resources until the whole thing was tied up in a legally binding way. I do not recollect her saying 'except for non-obligatory expenditure.'"
This is typical of the overruns that we have had time and again in the Community. It is clear that Fontainebleau has not stuck and that the fundamental problems have not been resolved. The overwhelming share of the overruns will still go to agriculture, although a sizeable share goes to the regional fund. The situation is clearly out of hand.
Mr. Curry: The general secretary of the Labour party was in Strasbourg earlier this week. Did the general secretary advise the members of the British Labour group to vote against the increase in non-obligatory expenditure in the budget?
Mr. Holland: That is a fascinating intervention. I have not spoken to the general secretary of the Labour party
since he was in Strasbourg. There will be a vote in the House tonight. If the hon. Gentleman cares to pay attention, as I am sure he will, to what I am saying or to the terms of the amendment, he will see that the amendment is constructive. It proposes that the framework of expenditure in the Community could well be put to useful purposes. That is not happening at present because the common agricultural policy is simply out of control.
One of the reasons for that is precisely the whole strategy adopted by the Government towards the budget. It is common knowledge that in an exchange between the then Prime Minister of France and our Prime Minister at the last summit an untranslatable French word employed by the French Prime Minister provoked a response from our Prime Minister. I am perfectly aware of what the word means and the hon. Member for Skipton and Ripon (Mr. Curry) may also know what it means. I do not propose to translate it here.
Governments of the Left, Right or Centre in the European Community are sick and tired of this Government approaching the question of the budget only in terms of the rebate. The rebate is very important, as my hon. Friends will quite rightly stress, but the Government have failed to adopt a constructive attitude towards what
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the Community might well do in common in a range of areas where the budget is allocating funds between and within member states.
It is quite clear that we need a square deal from the Common Market. All hon. Members agree on that. We also need a new deal from the European Community. We need a new deal for Europe that will enable us to address matters of urgent and pressing importance affecting our joint economies. We need to be able to address the role that Europe plays in the OECD and the kind of economic difficulties into which the world economy is moving with, for example, the potential slowing down of the United States economy. We should be able to address the question of target exchange rates and the attitude of the Government and other Governments towards the European monetary system. These matters very much affect the feasible kinds of expenditure that can be undertaken by member states and not simply by the budget itself.
Our amendment stresses that there should be a substantial reduction in spending on the common agricultural policy and not just a slowing in the rate of increase of CAP spending. There should be a corresponding increase not only in the social and regional funds, but in spending on the environment and on assistance to developing countries.
Mr. Teddy Taylor: The hon. Gentleman said that there will be a slowing down of the rate of increase in agricultural spending. Can he find anywhere in the mountain of documents with which we have been supplied any evidence that there will be a slowing down in the rate of that increase?
Mr. Holland: No; and one of the points that I shall deal with in summing up is that the stabilisers appear to be not declining but inclining and that we are not actually getting the reduction that we should be getting.
The budget, the "take note" motion before the House and the documents to which it refers cover the social and regional funds, the environment and, as it happens, assistance to developing countries. These are all brought within the terms of reference of the Commission's consultative document 4051/87 which is referred to on the Order Paper and in the Commission's document as "financial engineering." I have not had a chance to consult whoever is responsible for translating this document either in the Commission or in the Foreign Office. Financial engineering is not at all what the document is about. That suggests to me that whoever found the French term for financial mechanisms translated it into the English equivalent of mechanique, which is engineering. This document is not about engineering in any way; it is about financial mechanisms.
When the Paymaster General gets to his feet and says, "We have considered this document and looked in depth at all the proposals that it makes on a range of issues," I have to ask the House whether that can possibly be the case when the very title of the document makes no sense whatever. Financial engineering there may be in the European Community or in the common agricultural policy, but that is clearly not the intent of the document. Moreover, the document contains many useful proposals on the renewal and strengthening of industry and the

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industrial base in the Community and on the very imaginative possibility of joint ventures with, for example, developing countries.
The Paymaster General says that there is no evidence of a gap. The Treasury memorandum says:
"The Commission assumes, but does not demonstrate, that there are gaps in the financing of viable projects left by the private market."
This is yet another area, as on the budget rebate, that preoccupied the whole summit agenda and on which the Government are totally out of step with every other Government in the Community. All those Governments have medium to long-term credit institutions and regional development agencies focused especially on the promotion of small and medium enterprises, precisely because they recognise, as did the Macmillan report in the 1930s in this country, that there is a financing gap for small and medium firms because they face problems in raising funds on equal terms with larger businesses. Larger firms have a larger volume of borrowing, so they gain lower interest rates.
Therefore, intervening in the market to give, for example, an interest rate advantage in regional or structural funds to small and medium firms is not a distortion of the market but an equalisation of competition in the market. However, I do not expect the Paymaster General to be following that argument in this paper with much attention because he has not even managed to realise that the title of the paper is mistranslated.
I would not expect the Paymaster General, given his opening speech in the debate, to realise that if the Government do not support these new proposals for financial mechanisms in the Community, they may find themselves out of line with Council decision 87/307 and amending Council decision 83/624 87, known in less numerate terms as the SPRINT programme. If we look at annex III to the SPRINT programme, in the document to which I have referred, we see that we had agreement by the Council for priority action on
"Organisation of pilot activities, transnational in aim or in nature, relating to the training of technology transfer specialists on the management and financing of innovation and related fields".
There is even
"Establishment of liaison mechanisms between local authorities"—
I stress that to my hon. Friends—
"as agents in the innovation process, as regards both the possibility of fostering innovation through co-operation on procurement and their role, or that of equivalent bodies responsible for innovation".
This, again, is an example of the Government's bias against mixed economy intervention at local authority level. It is to the credit of the Commission, in bringing forward proposals such as it has brought forward in the document that is mistitled "financial engineering", that it realises that there is a need for joint action and joint policies between Governments to strengthen and equalise the competitive opportunities for small and medium firms. That has a major relation to the feasibility of effective regional development, which itself concerns the spending of regional funds.
Sir Anthony Meyer: I am listening to the hon. Member for Vauxhall (Mr. Holland) with great interest and a certain amount of encouragement. The hon. Gentleman talks about the need for more
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common action, but is what he says compatible with the passage in the amendment that he is moving, which seems to regard any movement towards harmonisation of VAT as
"not necessary for the achievement of a common internal market"?
Perhaps the hon. Gentleman will cover that point, as I should like to hear his views on it.
Mr. Holland: As the Paymaster General might say, I am indeed coming to that point. I am sure that the hon. Member for Clwyd, North-West (Sir A. Meyer) would not wish me to break the logic of my exposition.
On the social fund, I should like to raise a matter that was brought to the attention of my hon. Friend the Member for Barking (Mr. Richardson), by the Glamorgan women's workshop for high technology. [Interruption.] The project is jointly funded by South Glamorgan county council, the European social fund and Cardiff city council. Before Conservative Members show further that they regard this as a derisory matter not worthy of discussion in the House, they might pay attention.
The arguments made on behalf of the workshop are:
"It is clear from studies Europe-wide that women are still vastly under-represented in certain traditionally male occupations."
They continue:
"We are particularly disturbed that the guideline under which most women's training projects are funded has been amended from a general priority for training women—in areas where they are under-represented—to a priority in the first year of operation only."
They point out:
"This will exclude all training projects in the women's training network which have already been in operation for over one year."
We share the view:
"It is crucial that the European social fund confirms its commitment to women's training by retaining the specific guidelines relating to women. There is no adequate provision for women under the other guidelines, and for a small operation like us, the restriction of priority status to projects concerning over 1,000 people certainly excludes all women's training projects."
I see that the Paymaster General is expressing interest in the matter. Part of the nature of the Community in its decision-making is that we cannot expect an assurance tonight from the Dispatch Box, but we take the matter seriously. It is another way in which lipservice is paid to the rhetoric of promoting small and medium enterprises in the Community when, as Conservative Members well know, any enterprise employing more than 1,000 people is no longer a small enterprise, but a larger medium-sized firm.
The hon. Member for Clwyd, North-West asked about harmonisation of VAT rates, and our call that agreement should depend on
"recognition that a harmonisation of VAT rates is not necessary for achievement of a common internal market by 1992".
The hon. Gentleman may not have been present when last I raised the matter from the Dispatch Box in relation to the internal market in the United States.
This is not a new area of interest for me. I shall not detain the House with a personal history, but I spent some time in 1970 at the Brookings Institution in Washington, looking precisely into the extent to which features of the common internal market of the United States depended upon integration and harmonisation of tax rates and other provisions, rather than the sheer size of the market, and

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the chance to achieve economies of scale within that market. Frankly, having studied the matter then and having looked at differences between corporate tax rates and local and state taxes in the United States, I could not find any commentator in the United States who thought that harmonisation of state and local taxation, or even harmonisation of corporation tax, was essential for economies of scale inside the United States. I suggest that the Commission and many of those who service it and those in the think tanks have got it wrong.
There is no more a need for us to have completely aligned VAT rates than to have completely aligned social security or Health Service provisions. One of the problems of the Community is its failure to address priority issues such as joint action to ensure a regaining of the industrial competitiveness of firms in Europe. Joint action could counter a continuing risk—despite what is reported by OECD—of a world economic recession, ending in a slump. We should tackle structural and technological unemployment. Instead, we have harmonisation of rear-view mirrors, rubber products, passport covers and number plates. Those have as great a role in stimulating economic growth as the harmonisation of VAT rates. They are all of secondary importance. They verge on the trivial. This is the problem with the Community's agenda.
The sort of agenda that we are asked to address in the debate tonight, in the achievement of an effective Commmunity budget, does not depend on harmonisation. The imperative of the European Comunity today is not to integrate but to co-operate. It is failing even to agree to co-operate on measures for integration of VAT. However, I do not particularly want to hammer the Government on this matter, because they have said already that they have reservations about it. Perhaps we could have a cross-Bench alliance on this matter, as well as reconsideration of the Commission's proposals on financial mechanism, rather than engineering. That could have beneficial effects locally and regionally.
Moreover, in answer to the hon. Gentleman's point, fiscal differentiation might be beneficial rather than a disadvantage or an obstacle to integration. Unequal integration has been admitted right from the report by the founding fathers of the European Community at the Messina conference. It was admitted then, unlike the terms of the treaty of Rome, that free working of the free market mechanism aggravated structural, social and regional disparities within the member states, which needed to be offset by the regional and social funds that we are debating tonight. Fiscal policy has a positive role to play, if that is the case, as it could equalise terms of competition.
There are certainly some cross-border problems. The hon. Member for Clwyd, North-West referred to this with regard to VAT harmonisation. In the case of Luxembourg and neighbouring states, differing VAT rates may promote cross-border shopping trips. But on the major issue, whether we must have VAT on food, clothing, children's clothes, books and publications and reading material in this country, which is the greater priority—the problem in some border areas of shopping sprees, or a taxation measure that would penalise everybody who eats, every child, and everybody who reads? We ought to get the priorities right.
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We have drawn attention to the fact that cross-border exchanges between the Republic of Ireland and Northern Ireland have been promoted because there are different tax regimes for goods. In another context, no doubt we would all welcome that. But if we are all to be good Europeans, perhaps we should have differing VAT rates for promoting co-operation.
I am keeping an eye on the clock, Mr. Deputy Speaker, for the sake of Conservative Members and my hon. Friends who wish to speak in the debate.
On the further matter referred to in our amendment, we believe that the real priority agenda should be joint international economic action. That concerns less all Community Europe expenditure passing through the eye of the needle in Brussels, and more the Commission, the Community and Parliament playing a bigger role in sponsoring encounters between those who want change in the industrial structure of Europe and joint economic programmes for recovery to take the strain off the dollar and stabilise world currencies, and more give some reality to the negotiating triad of the Japanese, Americans and European Finance Ministers, which lies behind the Group of Seven, or any other major group, in terms of summit economic policy.
In that context, we have chosen to refer to the role of the medium term economic policy committee, with which at least Treasury officials should be familiar in its renamed form, the economic policy committee. It is not surprising that the words "medium term" have been dropped. I mean no discredit to those who serve on it, but increasingly this committee, which used to have a powerful role and was a useful forum for intergovernmental co-operation within the Community, has been reduced to the role of a forecasting unit. It is no more effective than an inner OECD working party.
When the committee was set up by Marjolin in 1964 and produced its first report in 1966. it was a major forum enabling member Governments to address at Community level what, in their view, was their important agenda, rather than simply react to Commission proposals and act within the terms of reference of the treaty of Rome, which is now 30 years out of date. Member Governments were able to set their own agenda on comparisons of the consistency of their macroeconomic policies and structural, social and regional policies. It is important that the committee should play such a role and important that its actions are reported to the House.
Our amendment states that there should be
"new accounting procedures to gain transparency on the market behaviour and abuse of dominant positions by bigger business in the Community."
This relates to what much of Community budget spending is about. There is much rhetoric and many measures concerning the budget and structural funds and about promoting a dynamic of small and medium-sized firms. The reality—I gave some illustrative figures earlier—is that bigger businesses dominate an increasing share of the Community's markets. Between 1963 and 1982, which was the last year for which figures were available, the top 100 firms increased their share of the Community's GDP from over one fifth to nearly two fifths. The top 10 non-agricultural firms in the EEC have as big a share of the Community's GDP as does the whole of the agriculture that is supported by the common agricultural policy.

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Behind this lies a sorry tale of the Community's failure to develop, on a joint governmental basis, effective mechanisms for industrial intervention and industrial policy. We shall not get it as long as we do not know what is going on. Articles 85 and 86 are full of claims for transparency and alleged concern about abuse of dominant position. While we are talking of the Single European Act and a larger and larger market, the debates in the House on spending and budgetary policy should include reference to the obligation on the Commission to ensure that an effective accounting is undertaken of these larger businesses. I believe that research programmes should be supported on that basis. If they want any help, I am perfectly willing to give it.
There is an imbalance between the peripheral agenda and the central issues affecting Community Europe. This budget debate is stuck in the mud of the common agricultural policy. Agriculture is the last sector in Europe that one should seek to integrate because of its phenomenal efficiency differences—15:1 between Denmark and Portugal in terms of milk products. It is impossible to integrate and have a common price system for such a sector without reinforcing those who are already rich in multinational agribusiness while still giving no more than a marginal income to peasant farmers.
When we look at the quality of services—housing, health, education, and so on—the Government and the Treasury have one policy: "If at first you don't succeed, cut, cut and cut again." When it comes to the common agricultural policy, it is: "If at first you don't succeed, pay, pay and pay again," without effective accountability and benefits to consumers and with vast profits to agri-business firms and stabilisers which appear to be on the incline rather than the decline.
With due respect for the fact that the Paymaster General gave way several times, and therefore perhaps lost track of the argument, his was a sorry speech, covering a sorry deal. It is time that the House gained redress.
8.15 pm
Mr. Terence L. Higgins: I gladly join my right hon. Friend the Paymaster General in the tribute that he paid to the Scrutiny Committee, which has done an extremely good job. When one considers the fact that the papers that we are debating form a stack 5 or 6 in thick of closely typed foolscap, the motion that the House should "take note" of those documents has a certain irony. The Scrutiny Committee's work is of considerable help in enabling the House to give some sense of priorities to assessing these various documents.
My right hon. Friend the Paymaster General was kind enough to express appreciation to the Select Committee on the Treasury and Civil Service, which I have the honour to chair. In return, I am bound to say that the help that he and his officials have given our Committee has been of considerable value. As often happens with our reports, the evidence is more important than the report. I hope that we have managed to set out some of the dilemmas that confront the House.
It is difficult for the House to debate these matters in the present form. In a sense, we would be much better off with a Committee stage procedure, when there could be more orderly interventions—I say that despite the generosity of my right hon. Friend the Paymaster General in giving way
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—and hon. Members could speak more than once. It is difficult in this form of debate to come to grips with some of these difficult and complicated issues.
The fact that we have a debate ahead of the Foreign Ministers' meeting enables the House to express a firm opinion on some points. As has been pointed out, the House will not come to a decision—in whatever format is decided upon—until later. This is not exactly a preliminary, but it is an interim, run round the course.
Mr. Spearing: The Scrutiny Committee is one of the best staffed Select Committees. The right hon. Gentleman is correct in saying that the House should be able to consider more legislation to approve decisions on the new financial structure. Does he agree that this is our last opportunity to discuss approval of next year's budget?
Mr. Higgins: I hope to turn to that point. That may turn out to be true. I hope that my right hon. Friend the Paymaster General will clarify the precise position. To say the least, it is obscure. If one were less charitable, one might say that it is chaotic. My right hon. Friend the Prime Minister returned to the House on 15 February and made a statement about her meeting in Brussels between 11 and 13 February. The impression was created that, although big changes were envisaged in terms of increasing own resources by 25 per cent. and strengthening budgetary discipline and so on, somehow this was a matter that could be decided and we would then move forward to 1992. I certainly welcome progress in that direction.
In the course of our analysis of what has been devoloping, we discovered that, far from the matter being cut and dried, there are serious procedural problems and timing difficulties. There are proposals for paying more money to the Community in the form of an intergovernmental agreement and an increase in own resources. We are setting those proposals against guarantees on budgetary discipline on the one hand and effective implementation of the United Kingdom's rebate on the other.
It is important to get the sequence of events right, lest we agree to paying more money to the Community without obtaining those things that my right hon. Friend the Prime Minister believes that she has negotiated. We need only consider the experience of the Fontainebleau agreement which, as my right hon. Friend the Prime Minister now recognises, has broken down as an effective form of budgetary restraint, to realise the considerable dangers.
I wish to deal with a point raised by my right hon. Friend the Paymaster General about our obligation to meet overdraft demands from the Community. He referred to that as a cash flow problem, but I am doubtful whether it is a cash flow problem. It is euphemistic to describe as a cash flow problem a situation in which, unless one receives additional money from another source, one finds oneself bankrupt. As I understand it, if we do not agree to an intergovernmental agreement and to an increase in own resources, it is not a cash flow problem, but a situation in which we simply run out of money.
I wish to deal now with the question whether we are obliged to go along with the overdraft agreement. My right hon. Friend, in an interesting passage in his speech, appeared to imply that we were obliged to do so if the overdraft requested did not exceed the amount that we were obliged to provide sooner or later under the existing

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own resources agreement. I hope that we shall not go beyond that, and I see no reason why we should. That would put us in danger of finding that our bargaining position had disappeared and that we had not secured what we wanted to secure.
I do not wish to deal here with the question of the composite or own resources bill. We shall have to consider that matter carefully, depending on how it develops, but the question of the budget, which was apparently agreed yesterday, is important in this context. It shows clearly how the Community is continuing to increase its expenditure all the time. My right hon. Friend said that Parliament had gone along with that, although Lord Plumb had not yet finalised matters. As I understand it, the President of the Council said that he was prepared to go along with the increase in the figure originally thought to be appropriate, although I am not sure by what authority he did that.
Perhaps my right hon. Friend would clarify the position. The crucial question is whether to go along with a proposal for an intergovernmental agreement after the budget has been approved. My right hon. Friend said, in evidence to the Select Committee, that we would not do so until everything that we wanted had been agreed. I hope that he will make it clear that that is the position.
I turn now to the difficult question of rebate. On 15 February, my right hon. Friend the Prime Minister gave the impression that our rebate was completely protected, but there is now the so-called Italian question. I am not clear on what basis the objections are being raised, as they clearly appear to contravene what was thought to be agreed at the summit. We have experienced this problem before. We go along with these ideas in broad outline, but, when settling the details, we find that the matter is not as cut and dried as we thought it to be.
My right hon. Friend did not mention the change in principle from a VAT-based own resources to a GNP-based own resources. The Select Committee commented on that and my right hon. Friend gave evidence on that point in Committee. The Committee has had occasion, in its recent report, to point out that the United Kingdom's calculation of GNP is extremely difficult because one can calculate it in various ways—for example, by the expenditure method or the income method—and obtain different answers. It is worrying if, in the light of that, the Chancellor of the Exchequer does not have a good basis upon which to react in terms of economic policy.
However, something different is involved in this change. We are relying on the GNP calculations to decide how much money we pay over in terms of taxpayers' hard cash. If our GNP figures are as suspect as they now appear to be, I wonder what the GNP figures are like in other countries. We should not go along with the proposal until we are satisfied with the statistical basis for the calculation.
I wish to say a few words about budgetary discipline. It has been suggested that the move towards stabilisers in relation to the common agricultural policy is a great advance. My right hon. Friend the Prime Minister, in her statement on 15 February, said that the stabilisers on agricultural products would be very important and that, if the output were too great, there would be a price cut of 3 per cent. a year on the whole crop. It is important that that
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should relate to the crop as a whole, but, nevertheless, the cuts are cumulative and, if harvests continue to exceed the threshold, there will be a huge 12 per cent. price cut by the fourth year. The idea that that will have a dramatic effect in reducing surpluses, even over the four-year period, is absurd, but I view with scepticism the idea that it will have an immediate effect when the surpluses continue to increase.
Similarly, we have been told that agricultural expenditure will not continue to increase as quickly as it has been doing and will increase only at three quarters of the rate of the Community's GNP. I have yet to be convinced that there is any case for increase of expenditure on agriculture when we have those surpluses. The idea that budgetary discipline is effective in that respect is therefore very doubtful.
Mr. Teddy Taylor: Does my right hon. Friend agree that, apart from those nonsensical percentage estimates, a considerable amount of expenditure has been added on to budgets for 1989 and the future, instead of being included in the 1988 budget? In addition, some expenditure previously carried by the Community in 1987 is being carried this year by member states.
Mr. Higgins: Those two points reflect the loopholes through which increasing amounts of money are pouring into the sector. However, I do not understand why the agricultural community alone should be protected against fluctuations in the exchange rate. No other industry is put in that extraordinary position. We have not tackled that problem and it severely weakens budgetary discipline.
In the light of experience after Fontainebleau, the Prime Minister told the House, "It didn't work, but we shall have it made legally binding in future. Don't worry—the arrangements that we make on budgetary discipline will be legally enforceable." However, we now discover that that applies only to certain aspects of the budget; it will not be legally enforceable overall. It will apply to obligatory expenditure but not to non-obligatory expenditure.
In that context, we shall have an "inter-institutional agreement". As I understand it, that will not in any sense be legally binding. Therefore, the idea that we shall have overall legally binding budgetary discipline is not the case. Yet that was certainly the impression created in the House at the time of my right hon. Friend's previous statements. It remains doubtful whether the measures which will be legally binding will in reality impose the kind of restraint on Community spending that we would normally mean when we say that there is effective control of public expenditure.
I well understand the difficulties which my right hon. Friend the Paymaster General and his ministerial colleagues are having, but it seems absolutely crucial that we should not go along with an IGA or with proposals for an increase in own resources by whatever parliamentary mechanism may be agreed, until such time as the rebate is effectively imposed and guaranteed and we have an effective degree of budgetary discipline. I regret to say that that has not been achieved.
I hope that I can encourage my right hon. Friend and his colleagues to do everything possible to achieve effective financial management in the Community, which so far has most certainly been lacking. Unless we do that, those of us

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who wish to see further progress, as I certainly do, in the run-up to 1992 and all that that implies will be seriously compromised.
Mr. Curry: Before my right hon. Friend sits down—
Mr. Deputy Speaker: (Mr. Harold Walker): Order. I think that the right hon. Gentleman has sat down.
Mr. Leighton: I think that the right hon. Gentleman was just hesitating. He has made an absolutely unanswerable case and we are indebted to him and his Committee for the way in which they have monitored this matter over the years. What moral does he draw from this? There is no financial discipline on the CAP and there will not be. The whole question of reform is nonsensical. The CAP will never be satisfactorily reformed. Can the right hon. Gentleman see any advantage to the United Kingdom in having a CAP? Is not the moral that we should extricate ourselves—
Mr. Deputy Speaker: Order. I thought that the hon. Gentleman was seeking to make an intervention. I call Mr. Higgins.
Mr. Higgins: Having argued for a more Committee-stage approach to these problems, it would be churlish of me to insist that I had sat down.
The reality is that we are making considerable progress towards some control over the problem. Many political pressures are impinging on this. The argument that we shall get more discipline from countries which are net contributors turned out to be a delusion, and that argument was put strongly at one time. We must work hard to get the structure right, and we must all press for that. In terms of practical politics, we cannot say that this is the end of the matter and we shall withdraw. We must work as hard as we can and encourage my right hon. and hon. Friends to do all that they can to bring some sanity into the proceedings.
8.33 pm
Dr. John Reid: My hon. Friend the Member for Vauxhall (Mr. Holland) referred to a mistranslation from the French of the phrase rendered in English as "financial engineering". No doubt that was unwittingly mistranslated. For someone like me who does not have experience of these matters to the extent of some hon. Friends and hon. Gentlemen, it seems, although ironic, a fitting mistranslation. That phrase conjures up phrases such as "creative accounting" and "economic truths". In retrospect, the phrase "economic truths" seems to be a fitting description of some of the budget proposals and discussions that have taken place in the EEC during the past few years. Perhaps that is what gave rise to the motion that was tabled by the Socialist Group last night questioning the legality of the EEC budget.
As I have less experience of these matters than have many hon. Members, I read through the debate of 2 March on the European Court of Auditors and noted, among other things, the excellent contribution of my hon. Friend the Member for Vauxhall. He made some crucial points which merited being aired at a more civilised time. To make a speech at 1.30 am when the press has gone to bed and the Chamber is virtually empty does not reflect the importance of these matters.
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The Paymaster General also expressed some anxieties about the budget, and they should be aired again. Three points have not been clarified tonight: the imbalance between expense and revenue, the excess growth of agriculture expenditure, and the burden of past budget management—what would almost be called fraud in other quarters.
The right hon. Gentleman referred to what he called "cash flow problems". It is not a cash-flow problem, but a cash problem. There continues to be an imbalance between expenditure and revenue, and this is what lies at the heart of the Community's financial mess. The imbalance has two main causes: first, the failure of budgetary discipline to control excessive expenditure, especially agriculture expenditure; and, secondly, revenue ceilings which the Court believed were artificial and took insufficient account of the Community's financing needs. The Court of Auditors unfortunately felt that that would continue, particularly in view of the mountains of surplus produce waiting to be disposed of or depreciate.
On the previous occasion the Paymaster General told us that we had the machinery for change—in the context of the Community, that must at least be speculation—and that if it worked we should see a legally binding guideline on agricultural expenditure, which should grow more slowly than the Community's GNP. The Government's message, couched in more equivocal language tonight, is that the days of automatic, unlimited price support are over. I hope that that does not prove to be Government rhetoric, but on the evidence of the past few years our suspicions must be aroused that yet again that will be more rhetorical than substantial.
We have waited long enough for a serious move towards the limitation of CAP expenditure to a progressively smaller share of the budget, reaching, I hope, 50 per cent. by 1992, as opposed to the present staggering figure of 70 per cent. Surely we and the Government must consider our priorities in approaching the whole matter. The provision of increased resources for the structural arid social funds are politically and socially essential for the real success of any common internal market.
We are told by the Department of Trade and Industry—or the "Department of Advertising" as it is rapidly becoming known—that 1992 will provide a historic opportunity for British business. If that opportunity merely puts money in the hands of the likes of Amstrad's Alan Suger, instead of breathing life into a crippled economy, it may satisfy the Government and a few of their City friends, but it will not satisfy Labour Members or British industry generally.
The social fund should be increased substantially if we are to pay more than lip service to the problems of the inner cities. I represent a steel-making constituency. Having learnt, over the last two days, that Ravenscraig, one of the most highly productive steel plants in the world, let alone Europe, is in danger of closure, the Community's preoccupation with agricultural spending becomes a sick joke to my constituents. Those priorities should be ordered not only to support our industry, but to help Portugal and Greece, where political and social measures are vital to the cohesion of the Community.
We have heard much about the Government's commitment to reductions in agricultural spending, and we witnessed an entertaining sabre-rattling performance from the Prime Minister in the European skirmishes. However, the March memorandum from the Select

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Committee on Treasury and Civil Service reveals that the 27·5 becu of agricultural guarantee expenditure now proposed for the 1988 budget represents no less than a 19·6 per cent. increase compared with the 23 becu provision in the 1987 Community budget.
The 1988 budget will, in addition, include 1·24 becu towards the cost of depreciation and disposal of existing excess stocks. If that additional amount is taken into consideration, the real percentage increase in agricultural spending from 1987 to 1988 rises to 25 per cent. on a budget which the Government constantly tell us should be, and will be, reduced.
In respect of that, the Paymaster General gave us resolute guarantees that the timetable, the cash flow and even the legality are uncertain. Tonight, in line with Churchill's famous phrase, he was "resolute in his equivocation." The efforts to gain control and reduce agricultural spending, and to maintain the system of budgetary control agreed at Fontainebleau, have been a dismal failure and all hon. Members are aware of that.
It is vital that the House and the Government realise the full extent of the failures. My hon. Friend the Member for Vauxhall explained the anomalies and lack of logic in the present position on 2 March. When the treaty of Rome was signed in 1957, one in four of the working population in the Community were employed in agriculture. That is no longer the case; in fact, far from it. The total working population in agriculture of the original six members of the Community is now down to about 5 per cent. For the Community of Ten—before the accession of the Mediterranean countries—that is down to about 7 or 7·5 per cent. It is now feasible to apply a deficiency payments system to the Community. We believe that that relates to the kind of analysis that the European Court of Auditors has made of the social and regional funds.
In the recent debates on this issue, we have heard guarantees from the Prime Minister and the Government that there would be a standstill on, or reduction of, the agricultural budget in due course. I do not agree with much that the hon. Member for Mid-Worcestershire (Mr. Forth) says in the Chamber, but I agreed with his use of the word "cynicism". Perhaps we should have regarded the statements with a little more cynicism. Since the statements were made, the binding controls that were promised have proved not to be binding and the budget is not under control. Spending has rocketed well beyond the ceiling of 1·4 per cent. In fact, it has gone far beyond the 1·6 per cent. which was never agreed to be binding on anyone.
My hon. Friend the Member for Vauxhall said that, instead of adopting a supranational approach to these issues, it would be better if the Community and its member states sometimes tried an international approach. If we cannot achieve co-operation we cannot force integration, and we cannot force integration even on the minor issues—the flood of transcendental minutiae—which have obsessed the Community and in which it appears we are now in great danger of drowning.
If we cannot deal with the minor issues highlighted by my hon. Friend the Member for Vauxhall, we cannot integrate on major issues unless we co-operate. It would be a tragedy, even for those hon. Members who are greater supporters of the Community than I am, if the vision of the
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founding fathers of the Community—eventual integration—were to become, not a spur, but an obstacle to further co-operation within the European Community.
I regret that the Paymaster General's statement tonight did not enlighten us on any of the problems that have been raised or promise any greater effectiveness from the Government. His statement was bad for the House. In the long run it will be bad for Britain and, I fear, for the rest of the European Community.
8.45 pm
Sir Anthony Meyer: These debates are usually depressingly familiar affairs. However, I am bound to say that so far this debate has taken a somewhat different pattern. We have heard two speeches from Opposition Members which started out being very interesting and appeared to face the real issues, but shied away from the fundamentals at the last minute. Neither the hon. Member for Vauxhall (Mr. Holland) nor the hon. Member for Motherwell, North (Dr. Reid) would accept that the further co-operation that they called for in those areas where the Community should be operating, where it should be stimulating new industry and creating new jobs, requires a very much more substantial degree of integration than either were prepared to admit.
The Labour party amendment reminds me of the News of the World calling for a moral revival. It clearly does not square with itself or the proclaimed attitude of the Labour party.
I had intended to say some severe things about the Government and my right hon. Friends on the Government Front Bench. However, I find it almost impossible, because my right hon. Friend the Paymaster General, with his transparent honesty and good will and the tremendous reputation that he has built up in Europe for his knowledge of the subject, is sitting on the Front Bench. He is ready to consider these questions very carefully.
However, I believe that Ministers are not facing the situation as it is and, above all, they are not obliging the House to face the situation as it is. There is general support, which was well articulated by my right hon. Friend the Member for Worthing (Mr. Higgins), for the need to contain the Community's ever-growing expenditure, particularly in the areas where further expenditure will lead only to ever greater surpluses.
There is widespread agreement on both sides of the House that something must be done about that problem. However, the agreement falls short—and I believe that the Government are guilty of allowing it to fall short—in the contemplation of the action that will be necessary to check that growth. It is not enough for the British Government to say, "This is what ought to be done. We all ought to adopt the same kind of rigorous system of financial control as is common practice in the House." At least, we like to think that it is common practice and we flatter ourselves to a large extent about that. It is not enough for the Government to say that other nations must pull their socks up, obey the rules and behave as if they were British. In a 12-nation Community, that simply does not happen.
When we debated the Single European Act, a Minister told us that the proposal for the Act was not only unnecessary, superfluous and bureaucratic, but would threaten our liberties. Would it be possible even to contemplate moving towards a single market—the aim for

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1992—without the Single European Act which introduced the notion of majority voting at any rate in those areas where vital national interests were not at stake? That Act was fought tooth and nail, denigrated and had scorn poured on it.
Lord Cockfield was sent to Brussels to achieve an objective. Ever since he has been there, Ministers have constantly decried his efforts and attempted to undermine him. Yet without the single-minded impulsion—the bloody-mindedness—that Lord Cockfield brought to the process, we would not be on the road down which we are substantially travelling today.
The same thing is liable to happen with fiscal approximation. We hear Ministers declaring from the Front Bench that it is unnecessary to move in any direction down the road of fiscal approximation. I take the point made by the hon. Member for Vauxhall, that the American market works well with substantial differences in levels of excise duty and sales tax in different states. But that is a single market, using a single language, with a single Administration. It is one country. It can afford to have different levels of sales tax. Indeed, there are different levels of sales tax in different towns within France. Nobody will call for total fiscal identity throughout the Community. None the less, there must be inexorable progress in the direction of diminishing the substantial discrepancies in border taxes.
Mr. Holland: That is a non sequitur. The large companies, whose activities are so untransparent, already dominate all our markets. It is like the researcher who, before the first application to join the Common Market, asked Pilkington what the effect would be, to which the reply was, "In float glass, we are the Common Market." The hon. Gentleman really cannot see the wood for the trees.
Sir Anthony Meyer: The hon. Gentleman is making my point for me. The supranational companies are not inhibited in their activities by different levels of taxation, but that is preventing smaller firms from growing into major European firms which can transcend frontiers. That is where I take issue with the hon. Gentleman.
The Government are clearly resolute in their determination to get to 1992 to eliminate the tariffs, and at the same time to achieve a Community in which there is reasonable control over soaring levels of expenditure, but we shall not get there until they confront the country and the House with the painful choices that will be involved.
The requirements imposed on the Government and on the House in order to achieve those objectives must transcend the pledges given in the heat of the moment in the course of an election campaign because somebody accuses the Government of wanting to bring in VAT on children's shoes, and so on. Bigger obligations than those are involved here. If we really want to achieve the advantages of a full Common Market, which is not an extravagantly bloated bureaucratic affair, we must give overriding priority to our international requirements and a much lower priority to domestic political ones.
8.52 pm
Mr. Matthew Taylor: Our proceedings are made difficult, as hon. Members have said, by the need to debate such matters on the Floor of the House. With documents 4 or 5 in thick, we cannot be expected to make
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detailed comments on what is happening. In many ways it is a pity that we cannot deal with this in Committee, as has been suggested.
However, even if such a change were to he made for budgetary proposals of this sort, there can be precious little United Kingdom parliamentary control of the budget. The dual system in the EC—the Council of Ministers and the European Parliament, particularly the Council of Ministers—means that there will always be an element of negotiation after anything that the House has said and done. We cannot instruct Ministers in any detail on what is to be done, because there will have to be negotiation. We cannot give the final negotiating position to the Minister, because that would give the game away. We cannot give the upfront starting position to the Minister, because then he has no position from which to negotiate.
Mr. Spearing: There is always contiuous negotiation, and we would not expect the Government to reveal their hand, but does the hon. Gentleman agree that the House is perfectly capable of telling the Minister the point beyond which he should not go or the point at which he should start? Is he aware that the Danish Folketing does that every week within the terms of the treaty of Rome, so why should not we?
Mr. Taylor: Any negotiators who begin by announcing their starting and finishing positions will not get far. However, this is a relatively small point and I make it only by way of comment on what has been said earlier.
There are serious anxieties about the Government's ability, with the European partners, to keep control of the CAP, and, indeed, the European budget as a whole. We can see that they have not brought those under full control. Whether our Parliament sets down rules on that will not make any substantial difference. However, the problem with debates such as this and the way in which the EC currently goes about matters, is that we become obsessed with overall figures, the techniques for controlling them and the techniques for dealing with what are clearly, in many areas within the EC, spending controls that simply have not worked. We have forgotten how I he matter relates much more directly to the individuals in each country—the little people—who bear the brunt of many of the decisions that we are taking. We are looking at overall macroeconomic figures, but those people suffer the microeconomic impact when it comes.
That, more than anything, is true of the CAP. Typically, the Labour party takes a particular interest in the overall cost of the CAP. I take a particular interest in its effect on the smaller farming units, particularly the effect of the controls on the 'CAP on smaller farmers such as those in my part of the country.
The problem with the way in which we deal with such matters at the moment, and the problem with the overall budgetary details in these documents, is that, when we talk about controlling the CAP, because everyone cannot get together to agree a sensible policy to take account of the individuals who are affected by it, we impose it overall., and that has a disastrous impact on those who are most in need of help from the EC.
When we debate budgets and policies, we sometimes forget what the CAP should be about, which is helping

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those who need help. We should endeavour to ensure that we are not causing greater problems. The House, Ministers and the EC have not successfully tackled that problem.
If we look, in particular, at the way in which the system works, the real problem is that we only consider the macroeconomics and the levels at which budgets should be set, not how they will work in detail. On the CAP, we have no policy to allow maximum control for the smaller communities within the EC to generate policies that are relevant to them. What we do is too much on a macro scale.
Similarly, on fishing, decisions are taken to control the overall budget and we then attempt to implement them in a bureaucratic way, which is about saving money, not about relating policies sufficiently to the particular communities concerned. We feel the impact of that at a local level. Fishermen have no local control over quotas, and MAFF botches it time after time. We talk about the macroeconomic control of the EC's budget but we end up neither controlling that budget nor assisting the very people we are meant to be helping by the spending of that money.
The Labour party's amendment has properly highlighted the fact that, while concentrating on solving the problems of the CAP, we are not putting sufficient effort into the social fund. The Government are under a particular obligation to do so, but they fail to consider how the fund relates to people. They are interested in the cost of the EC—as they should be—but they ignore the benefits we could obtain from the Community by taking advantage of its ability to devise a social and economic policy which will respond to problems in certain parts of this country and to certain parts of the Community as a whole.
The current situation is one almost of farce, in which the Government have said in response to the EC's offer of money to dual the A30 through Cornwall that they will take the money but cut their own budget so that there is no increase in total spending on dualling that road. They appear to have completely lost sight of the potential offered by the Community and of the reasons for our membership of it. The ways in which it can help local communities are being overlooked. Instead, we appear to be focusing only on a general budget document and on making economies. Although the Labour party is right in its analysis, we would like to see the Government do far more.
On the other hand, the Labour party offers the prospect of a new corporatism. Instead of tea and biscuits at No. 10, the idea is to have sandwiches at Strasbourg. There is the notion of "intergovernmental action" rather than integration. That will solve nothing. While ensuring that the European Community generates funds and encourages integration and the breaking down of barriers so that people can take advantage of the opportunities which Europe offers, we must also make sure that that process is not run from the centre by means of a giant corporate strategy perceived in Europe. We must devise a structure that will allow for local control. If we can grasp the opportunity for Community action in that way, we shall gain some advantage from it.
We are having this debate almost as though hardly anyone is affected by the matters being discussed. The
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small number of hon. Members present in the Chamber shows how few Members of Parliament believe that the Community relates to their contituencies or believe in its ability to tackle local problems. That is a failing of the Community and of the Government.
Integration of the kind I have mentioned need not be inflexible. It need not be on a macro scale or follow the "biggest is best" principle—that the same must apply to all. That is particularly so in respect of VAT rates. I was pleased to hear the Government say that they are not seeking a universal VAT rate. There is no evidence that such is needed. Certainly the American experience does not suggest otherwise. It may be that wildly differing rates in different countries could cause problems, but we are concerned with the ability of our country to react to the problems of the individual and to devise social policies to meet those problems.
We have social policies which meet the problems of children or pensioners, and which ensure that people are equally able to buy books and newspapers. Those policies do not need to change because of our membership of the Community and the wish to break down tariff barriers. It is crucial that we recognise that truth, and that the Minister stands by it.
Mr. Brooke: I infer from the hon. Gentleman's remarks that he is turning his back on the position taken by the Liberal party in respect of VAT in a peculiar debacle earlier this year.
Mr. Taylor: The Liberal party did not take such a position—[HON MEMBERS: "Oh."] I was among those of my hon. Friends who ensured that it never will take such a position. I am happy to confirm that we do not stand by the commitment to which the right hon. Gentleman referred. [Interruption.] I refer instead to our wider commitment to ensuring that the Community is about allowing individuals the freedom to do what they want, in making their own way and in overcoming their own difficulties at a local level. That is the emphasis we place on the European Community. It will be interesting for the Conservative Members who are commenting to see what the Government do in practice. We have heard the Government say that they do not want that; I think that we may well find that it is the Government, not we, who introduce it. It will be interesting to see whether the smiles on the faces of Conservative Members are as broad when that time comes.
9.4 pm
Mr. David Curry: Fifteen years ago, I was a Financial Times correspondent in Brussels. It fell to our office to monitor one of the early renegotiations of British membership of the European Community, that conducted by the Labour party when it was in office. I have no doubt that some right hon. and hon. Members will recall that perfunctory and self-satisfied performance, which left the entire fisheries agreement untouched and led to the referendum in the United Kingdom.
If we are to hear criticisms of this Government's performance in reforming the European Community, we must be clear about the yardstick against which it is measured. That performance—now, mercifully, a long time ago, as it is a long time since the Labour party was in Government—is the only yardstick that we have, and it was a dismal performance.

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One of my responsibilities was to monitor agriculture. The Labour Ministers of the day had an amazing reputation for conceding high increases in farm prices—once, I recall, a rise of 14 per cent. The problems of the common agricultural policy are not recent; they go back to the origins of that policy. I readily concede that some fundamental mistakes were made at that point. I think, however, that it will make for a more candid debate if we recognise that all parties have faced identical problems in trying to bring reason into some of the Community policies, and that all parties have had to compromise in that pursuit because of the nature of the dynamism within the institutions in the Community.
I note that the hon. Member for Vauxhall (Mr. Holland) appears to be enunciating a new Labour policy towards Europe—I am glad that it is a new Labour policy—that we are looking for a sort of Continentwide intervention via mechanisms such as the social fund and, no doubt, the regional fund, to which I am sure he is equally attached. If that means that we can now argue about Europe not in terms of being in or out, but against the background of the free-market, single market approach to interventionism, at least we put the debate on a sensible, rational footing. I am happy to fight my corner if that is the Opposition's argument.
I also noted several references to the need to attempt to bind the Government when they go into negotiations with the Community. Last week, a Labour amendment was tabled to the discussion on tax approximation and, if memory serves me right, only 91 hon. Members voted for it. Clearly, there is a certain amount of conversion to be done—even on the Conservative Benches—in relation to that thesis. I have to say, however, that the Folketing has not proved outstandingly successful. It has managed only to create enormous embarrassment for its Government, who have spent considerable time and a number of general elections trying to sort the matter out.
Mr. Holland: Does the hon. Gentleman mean that he does not approve of elections as a means for voters to express their will in this matter? Does he not recognise that there is a role for the democratic process in national Governments, rather than their being overridden by supranational institutions?
Mr. Curry: I know that successive Governments in Denmark have found themselves forced into elections almost by accident rather than by design. That sort of haphazard democratic process may not necesarily commend itself to the House.
We have three important documents before us: the proposal on own resources, with the new fourth resource; the proposals for budgetary discipline; and the amendments to the financial regulation. I want to begin with the Cinderella, the amendments to the financial regulations. It is easy to talk in grand terms about controlling this or that, but we have to make sure that the nitty-gritty is right. If we are not in charge of the management of what is happening on a day-to-day basis, we do not stand a chance of getting the big problems put right.
There are three important elements in the financial regulations. The first is the provision which makes it difficult for unused appropriations to be carried over to the following year. Opposition Members talked about the social fund. Its functions are important, but it has a poor
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record of managing to spend its appropriations. Its efficiency in terms of rate of spend is poor. Opposition Members should recognise that if they want to demand greater resources for it. Up to 1 billion ecu of expenditure has been handed over automatically in the past. That is not a good way to run a railway. In the interests of transparency and the annuality of the budget—because it is an annual budget—it is important that that practice should be changed.
The second measure is the change in agricultural finance, which converts the advances into reimbursement but describes them still as advances. The invention of the retrospective advance is one of the less felicitous inventions of the Community vocabulary. It has now been made permanent, with a two-and-a-half month delay before member states are reimbursed for their expenditure.
This is a positive move, but it would be unwise to attach too much importance to it. Certainly it is better for monitoring and control if the Commission can see expenditure before it has to disburse its resources rather than simply hand out cash in advance. Up to now, the correction to the account has been done in March of the following year, so there is a further useful gain in that, but it is important not to exaggerate its extent.
Certain amendments will be proposed when the measure goes through the European Parliament. I ask my right hon. Friend to do his best to sustain them. At the moment the Commission dishes money out from a general kitty and it goes to wherever it is needed. I think that the Parliament will attempt to establish a series of kitties so that there is a chapter-by-chapter monitoring of expenditure. Again, this would be a management gain in the efficiency of the operation.
The important element of the financial regulations is the attempt to sort out the dreadful business of clearance of the accounts. It has taken five to seven years after the end of a financial year for the Commission to get legal clearance for the money which has been spent. The time is now down to about three years—hardly a brilliant performance. The trouble is that some people have moved on; probably some documents have moved on as well. When there are political problems, such as the way the French implement co-responsibility or, dare one say, the Milk Marketing Board its payments, it is difficult to obtain redress.
There should be much quicker clearance. The Commission is offering to clear the accounts by, if I recall rightly, mid-September of the second year after the closure of the accounts. I urge my right hon. Friend to argue the case for clearance, except in the most exceptional circumstances, one year after the end of the accounts. That should be an adequate period if we are to have effective scrutiny and management of expenditure.
As to own resources and budgetary discipline, I take to heart the comments of my right hon Friend the Member for Worthing (Mr. Higgins) and other hon. Members about the necessary imprecision of certain proposals arid the fact that to some extent one has to take things on trust. In a sense, that is the nature of the organisation.
I want to enumerate some of the bull points. I choose my words with care. We have a legally expressed discipline of farm spending which is linked to new and restructured own resources operating through the stabilisers, and we have renewal of the rebate system, an important achievement which was difficult to get. I agree that the old Fontainebleau system was not as effective as we had

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hoped, but there is a further strengthening in the mechanism. I urge hon. Members to consider the trend of what has been happening rather than the absolute. We will be disappointed if we always seek absolutes.
With the new system of own resources, based on gross national product, there should be no need for a further increase in Community resources while the present policy mix exists. Provided that no major new policy is introduced, there should be no requirement for further increase. At least that provides a more dynamic basis for a budget than we have had in the past. That gain is worth having.
It is also worth remembering that any system based on GNP helps the United Kingdom, as the United Kingdom's share of GNP is smaller than its share of VAT. We could have done without the 55 per cent. cut-off, but even with that, we benefit from the system. The monetary reserve is better than the exceptional circumstances provision that we had in the past and, as my right hon. Friend said, it works both ways and is specific to the ecu-dollar relationship.
Also important is the year-on-year overall limit on expenditure which was written into the Brussels summit—the sub-ceiling. That is likely to bite quite severely. For example, agricultural expenditure is at a ceiling of 27·5 billion ecu. A number of member states are now pressing for the devaluation of their green currencies in the course of the present farm price fixing, which is at a big round zero, as it has been for a number of years.
The Commission is holding out against that, because a 1 per cent. devaluation of the French franc, which is a major agricultural currency, would add about 120 million ecu to the budget in a full year, and the Commission cannot go beyond the ceiling. The ceiling will start to cause dilemmas, and the United Kingdom has been one of the most insistent countries calling for devaluation of the green pound for its farmers.
Will the stabilisers work? My right hon. Friend the Member for Worthing has pointed out some of the difficulties of the cereals stabiliser. I agree with him that the 160 million tonnes ceiling was too high. It is true that if the 3 per cent. cut applies year on year, it will accumulate to 12 per cent. and eventually will lead to a cut of one third between 1983 and 1993. One is certainly entitled to be doubtful about the long-term effect of such a cut, particularly with an underlying yield increase of between 1·5 per cent. and 2 per cent. and the changes in the green rate which we are demanding and which will counterbalance the cuts as they come into effect.
The wine stabiliser is also important because the price has been cut very severely. The conclusion is that certain countries now have to recognise that they must live in the world market place. A country such as France does not have the option of treating its farmers simply as a sort of social therapy, which some member states seem to consider desirable. It is committed to finding outlets on the world market and therefore has to apply agricultural disciplines.
May I also point out the importance of the depreciation of stocks, and mention one or two brief figures which illustrate some of the effects of the stabiliser mechanism. I have done some research into the level of stocks. The butter stocks are down significantly. The £2 billion specially earmarked for disposals was an extremely
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expensive operation, but butter stocks are now down to 580,000 tonnes against 1·2 million tonnes a year ago; skimmed milk powder is down to 320,000 tonnes against nearly 800,000 tonnes a year ago, and fewer than 25,000 tonnes of new butter has gone into intervention in the past 11 months.
There is no new accumulation of stock at the moment. More important is the level of world prices which affect the budget. Butter has just been edged up to $1,100 a tonne under the general agreement on tariffs and trade minimum price of $1,000 and there is no reason why that cannot start moving back to the $2,400 per tonne which it occupied some years ago. Skimmed milk powder has moved from $700 to $1,550 a tonne on the world market since June last year and whole milk powder has risen from $800 to $1,500 dollars a tonne on the world market since June last year. Cheese has risen by $400.
Mr. Teddy Taylor: Will my hon. Friend, who understands these things, explain why, in view of the new minimum price, the EEC sold 240,000 tonnes of butter to the Soviet Union at 6p a pound last month?
Mr. Curry: That is because there was a special derogation under the GATT agreement approved by the other major performer on the world market, New Zealand, as some of us heard Mr. Jim Graham, chairman of the New Zealand dairy board, explain about a week ago at the Back-Bench committee. That permitted the Community to sell old butter at a severely discounted price—about one tenth of the $2,400 a tonne which butter has reached as a historical high in the world market. My hon. Friend is correct to say that there was a special discount price for old butter to the Soviet Union. My point is that firmness in world market prices is the best chance of bringing some control to agricultural expenditure.
There are reasons for increasing the structural funds, provided that the money is well spent. At present, it is poor quality expenditure. There is no reason to assume that because agriculture is "bad", the other expenditure is necessarily "good". We need to apply just as firm scrutiny to those funds to ensure that the money is well spent and that it does not simply replace money that has often already been spent by member Governments. The need for scrutiny goes across the entire Community budget.
I hope that when the matter comes to the House fully, hon. Members will feel able to approve the decisions taken at Brussels. They were important decisions and they represent a trend that is going firmly in the direction of budgetary common sense. I hope that I shall have the opportunity of commending them to the House then.
9.20 pm
Mr. Nigel Spearing: One of the reasons why attendance is perhaps not as great as it might be considering the importance of these matters is the complexity with which we are confronted. There are 14 documents and 16 Committee reports. It is no wonder that the Paymaster General, to use a cricketing analogy, kept a straight bat but did not try to make any runs. If he had tried to do so, the real position, which I find alarming, would be plain for all to see.
I shall attempt the almost impossible. There are about 14 reports from the Scrutiny Committee and, in 10 or 12 minutes, I shall attempt to summarise the summaries.

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Unless we try to do that, I do not think that we will understand what is happening. If I am wrong on any point, I am sure that the Paymaster General will correct me.
As I understand it, we are discussing four issues. We are discussing a new tax structure for the EEC and, in particular, a new resource. We are discussing whether we can have real budget discipline. We are discussing the budget for 1988 and seeing how, if we wish, we can fund the deficit for this year in the interim. There are other small subsidiary matters, such as keeping our own rebate system in case the Italians upset it. But that is a small matter which we can no doubt get over. I shall take the four major issues in turn.
On the new tax, we keep the old system. All the taxes coming into the country under customs duties are the common Community tariff and are own resources. The same applies to the food levies and the VAT-related payments up to the old 1·4 per cent., which is the Fontainebleau formula. All that stays. In addition, we have the GNP-related tax that will be the increase. According to EEC publication SW3 ABT, published at the time of the Brussels summit, it is going up from about 37,000 mecu in the 1987 budget to a maximum of 52,000 mecu by 1992 on current prices. That is an increase of about 30 per cent.
That will not be achieved in one go. We know that it is going up in different stages. The note issued by the presidency at the end of the Brussels summit—document SN, 461/1/88—says:
"(d) the application of a rate to be determined under the budgetary procedure in the light of the total of all other revenue to an additional base representing the sum of the gross national product at market prices."
On what basis will that percentage be determined? Will it be by a qualified majority vote or will it have to be unanimous? That will determine the extent to which there will be raids upon the tax in years to come.
How much of that is being used up already in the 1988 budget? My calculation is that a great big chunk of it is, but perhaps the Paymaster General will be able to tell us.
What is the new tax to be spent on? First, the structural funds are to be doubled. We start off our discipline by doubling expenditure on one fund. I quote from that same document:
"The contributions of the Structural Funds to the regions covered by Objective No. 1 will be doubled by 1992."
Therefore, we are going to spend double on the European regional development fund, the European social fund and the agricultural guidance and guarantee fund.
That brings us to where the production is coming from and to my second heading—discipline. As the right hon. Member for Worthing (Mr. Higgins) pointed out, it is not going to be much. I summarise the stabilisers programme, which was issued as a great triumph, as at best a means of reducing the rate of increase that would otherwise occur. That is the best way to sum it up. The hon. Member for Norfolk, North (Mr. Howell), a farmer boldly said in the House that he was going to sow more. The stabilisers, of course, will only come into effect a year after the figures are calculated; then there will be a reduction of 3 per cent. on prices for the next year. Even the Minister of Agriculture, giving evidence to the Select Committee, could not put his hand on his heart and say that this would work. He shared the doubts, I think, of those who were questioning him.
Before I come to the 1988 budget, I want to revert briefly to the question, which I rather pooh-poohed, of the importance to the United Kingdom Budget of the Italian
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question raised by the right hon. Member for Worthing. This is very important. People do not realise how enormous our net contributions would be but for this rebate. Figures provided by the Library show that our contributions for 1987 were something like £4,740 million—over £4 billion—of which the VAT-related contribution was £3,000 million. That is not 1·4 per cent. but 12 to 13 per cent. of the Exchequer income from VAT.
We got back from the agricultural fund £1,422 million, and the net payments before refunds amounted to £2,473 million. We did not get back anything like the amount that we put in. We got another £1,126 million in rebates and had a net contribution of £1,347 million. That shows that an enormous amount of our net payment is relieved by our rebate, and we understand that we may not get it. That is why it is absolutely essential that that rebate mechanism is in place before we agree to any IGAs or any increased tax at all, because power to control that will be power to control the finance that we get from the EEC in future.
I submit that we should not be discussing the 1988 budget with the mechanism. We ought to be discussing the new mechanism, the new discipline and the new tax separately. The only reason why we are discussing them together is that the EEC has run out of money before it has got the new structure in place. In effect, we are being asked in this debate, and may be asked in the future, to approve an estimate before we have approved the tax. That is the essence of the position in which the EEC now finds itself; and, of course, that is quite wrong.
The 21st report of the Select Committee—House of Commons 43 XXI—reproduces the comprehensive table that the Government placed in the explanatory memorandum. The last line states that the budget for 1987 was £25 billion. The draft budget for 1988 is £30 billion—an increase of £5 billion in one year. Is that not about 25 per cent? It also assumes that we shall have the money to pay for the increase and that the taxes will be approved. If not, the money will not be there. The Government want to bridge that £5 billion gap partly by the pre-payments about which we have already heard but whose amounts I do not know. Originally the idea was to bridge the gap with an intergovernmental agreement of £5 billion, of which our contribution was to be about £800 million—a controversial matter.
Today, the Paymaster General revealed new information. He said that we might approve such an intergovernmental agreement in a composite Bill that also approved the draft decision authorising the new taxes. After my intervention in his speech, he went on to justify such a move by saying that there were precedents for it. I do not recall them. The Government got into trouble a few years ago when trying to get through an IGA under the treaty. There was a court case about it and they had to introduce a Consolidated Fund Bill solely for that purpose. This is most controversial because the treaty of Rome says that the EEC should not spend more than its income; but the whole point of the intergovernmental agreement is to enable it to spend more than its legal income. That is illegal under the treaty of Rome. If it were done, any citizen could take the EEC to court.
In this all too brief three hours of debate we are being asked to approve a complex mechanism for a new tax and budget that is, at the moment, illegal. I see no way out of the EEC tangle. Clearly, the commitments to payment rapidly and increasingly exceed the tax that we are being asked to approve. It will bring in up to 30 per cent. more

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revenue, but the calls on that revenue will not be controlled because the nature of the common agricultural policy and of the politics of the member states of the EEC makes the equation impossible.
9.33 pm
Mr. Teddy Taylor: I hope that my right hon. Friend the Paymaster General will be able to answer the few questions that I can ask in the brief time that I have.
The small attendance at this debate is due not only to hon. Members finding the subject too complicated, but to a growing realisation that the views of the Government, of Parliament and of hon. Members on European matters are of limited importance. The views that we express have little impact on the amount of money that we shall pour out, and they will have no relevance to what is decided by the House. That is probably one of the main reasons why these important debates are attended by only a handful of people.
Another reason is that in these European debates, which are faithfully attended by the small number of hon. Members who are present tonight, we have been given a series of unfulfilled promises and expectations. I can remember hearing an almost identical debate at the time of Fontainebleau about how the problems were being solved. Yet in one of the many documents before us tonight, the preliminary draft budget, we read:
"This clearly shows that the Fontainebleau arrangement is hopelessly outdated and that it would be illusory and contrary to the resolve to impose a realism in budgetary matters to seek to adhere to it come what may".
In other words, the EC itself says that Fontainebleau was useless and pointless.
I think of the Government's repeated expectations and estimates of our current net contribution. I think of the financial year just ended. Official Government documents show that the estimate for the year just ended was £600 million net. It was then revised to £900 million net, and revised again to £1,500 million net. Most recently, the Prime Minister advised us that it would probably increase by £200 million to £300 million because of the arrangements at the Council just completed. We have had a whole series of disappointments.
I should like to ask the Minister five questions. First, what is the view of the Government or their advisers on the legality of this budget? It seems to me that under article 199 it is just not possible for the agreement arrived at between the President of the Council and the Parliament to proceed, because resources are not there. They have not been agreed or approved by the various Parliaments. What is the Government's view of the legality of the budget, and what can they do about it?
Secondly, can the Government give any estimate of the amount that has been excluded from the figures in the budget because of the special arrangements that were made recently? I refer in particular to the special butter disposal programme. The document says:
"This is a massive programme costing vast sums of money but has been excluded from the 1988 budget because of a special directive task called 801/87 of 16 March 1987."
We know that a whole series of such devices have been introduced to make spending appear to be less than it is. One of the most interesting was the decisions taken 10 days ago by the European Commission to approve without any
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consultation with Britain a ban on the import of apples. That could result in consumers being forced to eat last year's apple mountain, which is unwanted. This is an important consideration, bearing in mind that this year over 100,000 tonnes of Community apples were disposed of or destroyed at vast expense.
Thirdly, can the Government tell us why, despite the steps that have been taken to reduce surpluses, the estimate for their destruction and disposal has increased to £221 million per week? We have been told about the emergency disposal of stocks and about stabilisers. I cannot understand why the budget should contain an estimate of over £220 million per week, the highest ever, for disposing of butter and other surpluses.
Is my right hon. Friend prepared to put on record his estimate of the percentage increase in the 1988 budget compared with the 1987 budget? What is his estimate of the increase in expenditure on agriculture in the 1988 budget compared with the 1987 budget? What does he think the net contribution of the United Kingdom will be in the forthcoming year? Although we know that my right hon. Friend is an honest and prudent man, he must be aware that the estimates and forecasts given to the House, have all, sadly, proved to be inaccurate, and always in the wrong direction.
The budget and the resources approved by the Government, subject to certain Council considerations, are genuinely disappointing. They are a disaster. They will not cut agricultural production; nor will they stem the increase in spending, which is out of control. Most sadly of all, there is nothing in these measures that will stop the EC from continuing to inflict hardship and damage on Third-world countries by wrecking world food prices.
We have heard many times about the Government's aspirations and expectations, but they must be well aware that by increasing so substantially the resources of the Community, and in the absence of any legal control over about half the budget, they are simply allowing the Common Market to carry on as before—wasting money, inflicting damage on the Third world and having expenditure that is almost wholly out of control.
9.39 pm
Mr. George Foulkes: On behalf of the Opposition, I put on record our disappointment at the lack of involvement, and indeed lack of presence, of a Foreign Office Minister. Some of us remember with fondness the way in which the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) led the debates, when he was a Foreign Office Minister, with a panache that is now sadly and sorely missing. The Government, and the Paymaster General in particular, have an increasing credibility gap to fill in these European Community budget debates.
I am not up to continuing the cricketing analogies. The Paymaster General started the debate with a long and complicated, even repetitious, description that seemed more designed to obfuscate than to clarify the issue for the House. The right hon. Gentleman used Euro-jargon and referred to articles and regulations and the technicalities of whether the matter should be dealt with as a composite Bill or through the decoupled approach.
My objective, in the last few minutes of the debate, is to try to simplify the issues. Some of us have been attending these European budget debates for many years. My hon.

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Friend the Member for Newham, South (Mr. Spearing), and the hon. Members for Southend, East (Mr. Taylor) and for Clwyd, North-West (Sir A. Meyer) have sat through all those debates.
EC budget debates have become like Oliver Twist, always asking for more, be it non-reimbursable advances—my hon. Friend the Member for Newham, South will remember that phrase—or what are now called inter-governmental agreements, which have been sanitised as IGAs.
The hon. Member for Skipton and Rippon (Mr. Curry) asked for a yardstick. The Opposition's yardstick is not that used by previous Governments, but is based on the promises and guarantees that have been given by this Government. The Prime Minister said on 1 July 1987:
"We have made it clear throughout the discussions that it is necessary, before that question is addressed, to have agreement on effective and binding control over Community spending, including, in particular, agricultural spending."—[Official Report, 1 July 1987; Vol. 118, c. 493.]
The right hon. Lady repeated the assurance on 15 February 1988.
The Minister of State, Foreign and Commonwealth Office in one of the most telling and, as is usual for the right hon. Lady, frank interventions, said:
"Our central goal is the achievement of binding controls over spending. Runaway agricultural spending has squeezed all other expenditure. It is now accepted by our partners that the operation of the CAP has been of declining benefit to the very farmers it was meant to help".—[Official Report, 18 November 1987; Vol. 122, c. 1100.]
That is what some hon. Members have been saying today. The themes of guarantees and promises constantly come through statements from Government during EC budget debates. First, they say that there should be effective and binding control on expenditure before agreement is reached on the extra spending and funds voted by the House. Secondly, they say that there should be a switch from agricultural expenditure to structural funds and other non-compulsory areas of the budget. It is a pity that Foreign Office Ministers are not with us.
The Foreign Secretary was quoted in The Independent on 25 November 1987 as saying that the Government would block a summit agreement on extra revenue for the Community
"unless we make a reality of our rhetoric about stabilising expenditure."
We must examine today whether the objectives set by the Government, not by the Opposition, have been achieved and whether they have made a reality of their rhetoric, to quote the Foreign Secretary. The question is whether we should be contemplating providing further resources, for whatever it is called and however it is described, or whether, later in our discussions, perhaps next month, the matter will be dealt with by a composite Bill or a de-coupled arrangement. The Government's motion asks the House merely to endorse
"the Government's objectives of securing effective and binding control of Community expenditure."
It still remains only an objective after all these years, including my four or five years of personal involvement in these debates.
Has that objective been achieved? I shall use, not my criteria, but the judgment of the Select Committee on the Treasury and Civil Service, so ably chaired by the right hon. Member for Worthing (Mr. Higgins). On page 6 of its report, the Committee quoted the Prime Minister's statement on the Brussels meeting. She said:
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"the United Kingdom had made clear, first, that any further increase in Community resources must be accompanied by effective and legally binding controls on expenditure".
The Committee went on to examine whether that had been achieved. In paragraph 10, on page 7, the Committee said:
"We pressed the Paymaster General on the question of the legal enforceability of budgetary discipline."
On pages 8 and 9, the Committee concluded:
"We are not convinced that an inter-institutional agreement is the equivalent of a firm and legally binding text … we believe there are still grounds for remaining sceptical about the prospects for budgetary control in the future."
That is the control—control dominated by Members of the Conservative party. On page 5, the Select Committee concluded:
"As yet neither the own resources decision, nor the arrangements for budgetary discipline are in place."
There is none of the promised budgetary discipline. That is why the House should support our amendment.
The report says that budgetary discipline and own resources are "inextricably linked" with the
"provision to preserve the UK's abatement."
A number of right hon. and hon. Members, including the right hon. Member for Worthing, said that the Italian question posed a threat to the United Kingdom's abatement. It puts our rebate at risk. The Paymaster General must answer that question, which has been posed by hon. Members on both sides of the House.
As for switching from agricultural expenditure to spending on other aspects, we see that agricultural spending is still out of control. The Paymaster General was asked at the beginning of the debate to give the percentage, but could not. He was asked again. The answer is in the minutes of evidence to the Select Committee, which show that agricultural expenditure has increased by 19·6 per cent. over the 1987 budget. Expenditure on other aspects has not increased substantially, if at all. Far from being increased, the expenditure which we should like on the social and regional funds, overseas aid and research and development has sometimes been cut.
The hon. Member for Skipton and Ripon challenged the efficacy of some of the expenditure, but he should know that the director of the regional fund has produced a report on new structural funds. Any new structure has had to be postponed because of this budgetary problem and the inadequacy of resources. We want money to be put in to help the declining areas, not just of Britain—for example, in the steel industry, which was described by my hon. Friend the Member for Motherwell, North (Dr. Reid)—but of other parts of the Community. Instead of declining, the budget has increased. Instead of being a smaller percentage of the Community's resources, agricultural spending is larger.
In an excellent speech, ray hon. Friend the Member for Motherwell, North said that the vision of the founding fathers of the Community was being lost in such debates. The vision of the potential for political co-operation between Community members is being lost. The potential for improving the employment situation, through an integrated expansion of our economy, is being lost as a result of the detailed debates on these issues.
The United Kingdom Parliament will be asked to contribute more to a budget of doubtful legality. It will be asked to pay more when agricultural expenditure is clearly out of control. We will be asked to pay more when the British rebate is still in danger, the Government's promises remain unfulfilled and the pledges are seen to be hollow. I hope that Conservative Members, including the hon.

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Member for Southend, East and the right hon. Member for Worthing, who have criticised the Government and their failure to fulfil those promises, will take their courage in their hands, as they have done on previous occasions, and join us tonight in the Lobby to support our amendment.
9.50 pm
Mr. Brooke: It may be a sign of masochism, but, as ever, I have enjoyed this evening's debate. I am grateful to my hon. Friend the Member for Skipton and Ripon (Mr. Curry) for reminding us of the performance of the Labour party when it was in power. I was constantly reminded of that during the speech of the hon. Member for Vauxhall (Mr. Holland).
My hon. Friend the Member for Skipton and Ripon asked a question which caused me to remember the application of Parkinson's law to the Commission's behaviour. This was reflected by the hon. Member for Vauxhall, who disregarded the documents that we are considering this evening and constructed his own agenda. He was also following the other principle of Professor Parkinson—that the nuclear device goes through on the nod and one then has a long argument about the bicycle shed.
The whole of the hon. Gentleman's argument was devoted to the document on financial engineering. I do not want to decry that document. It was put in front of us at ECOFIN in May 1987 and included in translation the words "financial engineering". The hon. Gentleman said that there was adequate provision throughout the Community, but plenty of Community countries disagreed with the proposition relating to financial engineering when it was brought forward.
Whenever I read about the Labour party's attitude towards social engineering in future, I shall seek to substitute the words "social mechanisms" and see whether they work. As to the remarks of the hon. Member for Vauxhall about the Glamorgan woman's workshop, I assure him that I shall bring that matter to the attention of my right hon. Friend the Secretary of State for Employment.
The hon. Member for Vauxhall gave his King Charles head of a multinational company another good airing. He criticised the logic of my speech—and I was grateful to the hon. Member for Newham, South (Mr. Spearing) for disagreeing with him about that. The hon. Gentleman frequently contributes to these debates and is familiar with the issues with which we have to deal. I was addressing the evening's business as set down on the Order Paper while the hon. Member for Vauxhall rambled around his well-loved prejudices.
My right hon. Friend the Member for Worthing (Mr. Higgins) asked me a number of questions. He asked whether the prospective demand for a 12(2) overdraft was due solely to cash flow problems. We have not received a 12(2) request so I cannot give a definitive reply, but the Commission's cash forecasts clearly show a cash flow problem arising from normal transactions over the next few weeks. I acknowledge the rules that we must observe in considering that overdraft and assure him that we shall continue to observe them.
1194
My right hon. Friend asked on what basis the presidency agreed to the budget in Strasbourg last night. Herr Tietmeyer, the president of the Budget Council, agreed to a commitment about 2 per cent. above the limit set by the Parliament's statutory margin, on the basis of his interpretation of a mandate, which he was given at the Budget Council on 28 April, and to which the British Government did not subscribe. My right hon. Friend asked about the question raised by the Italians on the United Kingdom's abatement. The size of our abatement is not at stake. The point raised by Italy was how the other member states would finance the United Kingdom's abatement.
Finally, my right hon. Friend asked about GNP statistics—a question which he also raised with me in the Select Committee. I agree with him, and the European Council agreed that there should be a directive ensuring that the same definition of GNP is applied in all member states for own resources purposes. A draft directive has now been proposed and is under discussion in the Community.
The hon. Member for Newham, North-East (Mr. Leighton) intervened briefly with the word "never", which he repeated on several occasions. My experience, particularly of these debates, is that that is a dangerous word to use.
The hon. Member for Motherwell, North (Dr. Reid) showed a welcome interest in the Court of Auditors, but, given his preoccupation with it, perhaps he had not noticed the expansion of the social fund which was agreed in the Brussels Council's conclusions. He and my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) suggested that so-called cash flow problems are a euphemism for overspending. There is a genuine distinction. For any level of overall annual spending, cash needs are bound to fluctuate from month to month as payments become due on different items at different times. That is why there are routine arrangements for managing own resources contributions in this way.
My hon. Friend the Member for Southend, East (Mr. Taylor) and others asked about agricultural expenditure being 25 per cent. higher in 1988 than in 1987. I wholly agree with them about the need to control agricultural spending, but it is somewhat misleading to talk of a 25 per cent. increase in 1988. Because of the introduction of delayed payments, 1987 was in effect a 10-month agricultural year. Taking account of that, the underlying increase in 1988 is less than 7·5 per cent.
Mr. Foulkes: Does that mean that the Minister can give a clear and categorical guarantee that agricultural expenditure for 1989 will not increase over that for 1988?
Mr. Brooke: The hon. Gentleman, who has studied these matters, knows perfectly well that there is a provision that the agricultural guideline will rise by 74 per cent. of the growth in Community GNP—and that is calculated to run at 2 per cent.
The hon Member for Truro (Mr. Taylor) betrayed the whole thesis of the Liberal party when, in response to an intervention from me about the Liberal party's attitude to VAT, he said that it had to have an ability to adjust. Many of us have watched the Liberal party adjusting literally between morning and afternoon.
I thank my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) for his kind words. Our noble

1195
Friend Lord Cockfield introduced the proposals on fiscal harmonisation. Where Council Ministers have not disagreed with them in principle, they have found massive disagreements in detail. If my hon. Friend is counselling us to countenance reality, he must study the reactions to these proposals throughout the Community.
My hon. Friend the Member for Skipton and Ripon, in a knowledgeable speech, drew attention to what happened under the Labour Government. Given our success in securing the abatement, it is worth remembering that the result of the 1975 financial mechanism was not a single ecu. My hon. Friend referred to VAT being capped at 55 per cent. of GNP as being to the disadvantage of the United Kingdom. It is in fact of further benefit to the United Kingdom, as is the introduction of the fourth resource based on GNP, because it reduces the contribution before abatement which we would otherwise have paid.
The hon. Member for Newham, South asked how the rate of the fourth resource would be set. The rate of GNP-related contributions required to balance the budget will reflect the expenditure decisions taken by qualified majority voting in the annual budgetary process, just as the annual rate of VAT contributions is determined under the present system.
The hon. Member for Newham, South asked how much of the new GNP-based own resource will be used up in 1988. The 1988 draft budget involves an intergovernmental agreement corresponding to the amount that would be raised this year from the new fourth resource. This implies a rate for the new fourth resource of around 0·2 per cent. of Community GNP. Total own resources in the 1988 draft budget are equivalent to around 1·1 per cent. of Community GNP. The hon. Member for Newham, South said that we might not get our abatement. There are no grounds for that belief. Our 1988 abatement is in the 1988 budget agreed yesterday. Our new abatement mechanism agreed at the Brussels European Council has not been challenged and is fairly incorporated in the proposed own resources decision.
The hon. Member for Newham, South and my hon. Friend the Member for Southend, East said that the 1988 budget was illegal. It is true that the treaty requires that the budget should balance. That was why it was agreed at the European Council that member states would make non-repayable advances, in order to balance the budget. So long as there is an IGA in place to balance the budget, the budget is valid.
My hon. Friend the Member for Southend, East asked whether there were any documents to suggest that the rate of growth of agricultural expenditure—
Mr. Teddy Taylor: When did the European Council agree the IGA?
Mr. Brooke: The European Council and the Budget Council following upon it agreed to agree in principle an IGA. It is perfectly true that an IGA must still be agreed, and the question of the 1988 budget will continue to be open until it is confirmed that an IGA has been finally agreed.
Mr. Taylor: It has not been agreed, then?
Mr. Brooke: Having regard to the enthusiasm of the House to bring these matters to a conclusion, I shall respond to my hon. Friend the Member for Southend, East at a later stage.
1196
In conclusion, I want to refer to the speech made by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). There is no pleasing the Opposition. I well recall Mr. Deakins, a former Member of this House—we miss him from these debates—constantly criticising Foreign Office Ministers for not allowing a Treasury Minister to take part in a debate. I thought that the speech made by the hon. Member for Carrick, Cumnock and Doon Valley was noisy—perhaps to cover the weakness of some of his arguments and to take us away from the experience of the Labour Government. I would agree with the hon. Gentleman and the Select Committee on Treasury and Civil Service that an inter-institutional agreement is not the equivalent of a legally binding instrument, but the proof of the pudding will be in the eating as we see how the arrangements secured at the Brussels Council evolve in future.
Question put, That the amendment be made:—
The House divided: Ayes 157, Noes 213.

Division No. 315]

[10.12 pm

AYES

Abbott, Ms Diane

Foster, Derek

Adams, Allen (Paisley N)

Foulkes, George

Archer, Rt Hon Peter

Fraser, John

Ashley, Rt Hon Jack

Galbraith, Sam

Ashton, Joe

Galloway, George

Banks, Tony (Newham NW)

Garrett, John (Norwich South)

Barnes, Harry (Derbyshire NE)

Garrett, Ted (Wallsend)

Barron, Kevin

George, Bruce

Battle, John

Gilbert, Rt Hon Dr John

Beckett, Margaret

Godman, Dr Norman A.

Bell, Stuart

Golding, Mrs Llin

Benn, Rt Hon Tony

Gordon, Mildred

Bermingham, Gerald

Gould, Bryan

Blair, Tony

Graham, Thomas

Blunkett, David

Grant, Bernie (Tottenham)

Boateng, Paul

Griffiths, Win (Bridgend)

Boyes, Roland

Hardy, Peter

Bradley, Keith

Healey, Rt Hon Denis

Bray, Dr Jeremy

Heffer, Eric S.

Brown, Gordon (D'mline E)

Henderson, Doug

Brown, Nicholas (Newcastle E)

Hogg, N (C'nauld & Kilsyth)

Brown, Ron (Edinburgh Leith)

Holland, Stuart

Buchan, Norman

Home Robertson, John

Buckley, George J.

Hood, Jimmy

Caborn, Richard

Howarth, George (Knowsley N)

Campbell, Ron (Blyth Valley)

Hoyle, Doug

Campbell-Savours, D. N.

Hughes, John (Coventry NE)

Canavan, Dennis

Hughes, Robert (Aberdeen N)

Clark, Dr David (S Shields)

Illsley, Eric

Clarke, Tom (Monklands W)

Ingram, Adam

Clay, Bob

John, Brynmor

Clwyd, Mrs Ann

Jones, Martyn (Clwyd S W)

Cohen, Harry

Kaufman, Rt Hon Gerald

Cook, Robin (Livingston)

Lamond, James

Corbyn, Jeremy

Leighton, Ron

Cousins, Jim

Lestor, Joan (Eccles)

Cox, Tom

Lloyd, Tony (Stretford)

Crowther, Stan

Lofthouse, Geoffrey

Cryer, Bob

Loyden, Eddie

Cummings, John

McAllion, John

Davies, Rt Hon Denzil (Llanelli)

McAvoy, Thomas

Dewar, Donald

McCartney, Ian

Dixon, Don

Macdonald, Calum A.

Doran, Frank

McFall, John

Dunnachie, Jimmy

McKelvey, William

Dunwoody, Hon Mrs Gwyneth

McLeish, Henry

Eadie, Alexander

McNamara, Kevin

Eastham, Ken

McTaggart, Bob

Fatchett, Derek

Madden, Max

Faulds, Andrew

Marek, Dr John

Field, Frank (Birkenhead)

Martin, Michael J. (Springburn)

Fields, Terry (L'pool B G'n)

Martlew, Eric

Fisher, Mark

Maxton, John

Flannery, Martin

Meale, Alan

1197

Michie, Bill (Sheffield Heeley)

Short, Clare

Millan, Rt Hon Bruce

Skinner, Dennis

Moonie, Dr Lewis

Smith, Andrew (Oxford E)

Morgan, Rhodri

Smith, C. (lsl'ton & F'bury)

Morley, Elliott

Snape, Peter

Morris, Rt Hon A. (W'shawe)

Soley, Clive

Morris, Rt Hon J. (Aberavon)

Spearing, Nigel

Mowlam, Marjorie

Steinberg, Gerry

Nellist, Dave

Stott, Roger

O'Brien, William

Strang, Gavin

O'Neill, Martin

Straw, Jack

Parry, Robert

Turner, Dennis

Pendry, Tom

Wall, Pat

Pike, Peter L.

Walley, Joan

Powell, Ray (Ogmore)

Wardell, Gareth (Gower)

Prescott, John

Wareing, Robert N.

Quin, Ms Joyce

Welsh, Michael (Doncaster N)

Radice, Giles

Wilson, Brian

Randall, Stuart

Winnick, David

Redmond, Martin

Worthington, Tony

Rees, Rt Hon Merlyn

Wray, Jimmy

Reid, Dr John

Young, David (Bolton SE)

Richardson, Jo

Roberts, Allan (Bootle)

Tellers for the Ayes:

Ruddock, Joan

Mr. Frank Haynes and

Sheerman, Barry

Mr. Allen McKay.

Sheldon, Rt Hon Robert

NOES

Alexander, Richard

Gilmour, Rt Hon Sir Ian

Arbuthnot, James

Goodhart, Sir Philip

Arnold, Jacques (Gravesham)

Goodlad, Alastair

Baker, Nicholas (Dorset N)

Goodson-Wickes, Dr Charles

Bitten, Rt Hon John

Gorman, Mrs Teresa

Boscawen, Hon Robert

Gower, Sir Raymond

Boswell, Tim

Grant, Sir Anthony (CambsSW)

Braine, Rt Hon Sir Bernard

Greenway, John (Ryedale)

Bright, Graham

Gregory, Conal

Brooke, Rt Hon Peter

Grist, Ian

Butler, Chris

Ground, Patrick

Buttertill, John

Grylls, Michael

Campbell, Menzies (Fife NE)

Gummer, Rt Hon John Selwyn

Carlisle, John, (Luton N)

Hamilton, Hon Archie (Epsom)

Carlisle, Kenneth (Lincoln)

Hamilton, Neil (Tatton)

Carrington, Matthew

Hampson, Dr Keith

Chapman, Sydney

Hanley, Jeremy

Chope, Christopher

Hannam, John

Churchill, Mr

Hargreaves, A. (B'ham H'll Gr')

Clark, Dr Michael (Rochford)

Hargreaves, Ken (Hyndburn)

Clarke, Rt Hon K. (Rushcliffe)

Harris, David

Coombs, Anthony (Wyre F'rest)

Haselhurst, Alan

Cope, John

Hawkins, Christopher

Cran, James

Hayhoe, Rt Hon Sir Barney

Currie, Mrs Edwina

Hayward, Robert

Curry, David

Heathcoat-Amory, David

Davies, Q. (Stamf'd & Spald'g)

Heddle, John

Davis, David (Boothferry)

Heseltine, Rt Hon Michael

Devlin, Tim

Hicks, Robert (Cornwall SE)

Douglas-Hamilton, Lord James

Higgins, Rt Hon Terence L.

Dunn, Bob

Hind, Kenneth

Durant, Tony

Hogg, Hon Douglas (Gr'th'm)

Dykes, Hugh

Holt, Richard

Eggar, Tim

Howard, Michael

Evans, David (Welwyn Hatf'd)

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

Evennett, David

Howarth, G. (Cannock & B'wd)

Favell, Tony

Howell, Ralph (North Norfolk)

Fenner, Dame Peggy

Howells, Geraint

Field, Barry (Isle of Wight)

Hughes, Robert G. (Harrow W)

Finsberg, Sir Geoffrey

Hunt, David (Wirral W)

Fookes, Miss Janet

Hunt, John (Ravensbourne)

Forsyth, Michael (Stirling)

Hunter, Andrew

Forth, Eric

Irvine, Michael

Fowler, Rt Hon Norman

Jack, Michael

Franks, Cecil

Johnson Smith, Sir Geoffrey

Freeman, Roger

Jones, Robert B (Herts W)

French, Douglas

Jopling, Rt Hon Michael

Gale, Roger

Key, Robert

Gardiner, George

King, Roger (B'ham N'thfield)

Garel-Jones, Tristan

King, Rt Hon Tom (Bridgwater)

1198

Kirkhope, Timothy

Renton, Tim

Knapman, Roger

Rhodes James, Robert

Knight, Greg (Derby North)

Ridley, Rt Hon Nicholas

Knowles, Michael

Ridsdale, Sir Julian

Knox, David

Rifkind, Rt Hon Malcolm

Lamont, Rt Hon Norman

Roe, Mrs Marion

Lang, Ian

Rowe, Andrew

Lawson, Rt Hon Nigel

Rumbold, Mrs Angela

Lennox-Boyd, Hon Mark

Sackville, Hon Tom

Lightbown, David

Sainsbury, Hon Tim

Lilley, Peter

Shaw, David (Dover)

Lloyd, Sir Ian (Havant)

Shaw, Sir Michael (Scarb')

Lloyd, Peter (Fareham)

Shelton, William (Streatham)

Luce, Rt Hon Richard

Shepherd, Colin (Hereford)

Lyell, Sir Nicholas

Shersby, Michael

Macfarlane, Sir Neil

Sims, Roger

MacKay, Andrew (E Berkshire)

Smith, Tim (Beaconsfield)

Maclean, David

Soames, Hon Nicholas

McLoughlin, Patrick

Speed, Keith

McNair-Wilson, M. (Newbury)

Spicer, Michael (S Worcs)

McNair-Wilson, P. (New Forest)

Squire, Robin

Major, Rt Hon John

Stanbrook, lvor

Malins, Humfrey

Stanley, Rt Hon John

Mans, Keith

Steen, Anthony

Marshall, Michael (Arundel)

Stern, Michael

Martin, David (Portsmouth S)

Stevens, Lewis

Mawhinney, Dr Brian

Stewart, Andy (Sherwood)

Mayhew, Rt Hon Sir Patrick

Stradling Thomas, Sir John

Meyer, Sir Anthony

Summerson, Hugo

Miller, Hal

Taylor, John M (Solihull)

Mills, Iain

Temple-Morris, Peter

Mitchell, Andrew (Gedling)

Thompson, D. (Calder Valley)

Monro, Sir Hector

Thompson, Patrick (Norwich N)

Montgomery, Sir Fergus

Thurnham, Peter

Moore, Rt Hon John

Townend, John (Bridlington)

Morris, M (N'hampton S)

Tracey, Richard

Morrison, Hon Sir Charles

Tredinnick, David

Morrison, Hon P (Chester)

Trippier, David

Moss, Malcolm

Vaughan, Sir Gerard

Neale, Gerrard

Waddington, Rt Hon David

Needham, Richard

Waldegrave, Hon William

Nelson, Anthony

Walker, Bill (T'side North)

Neubert, Michael

Ward, John

Nicholson, David (Taunton)

Wardle, Charles (Bexhill)

Onslow, Rt Hon Cranley

Warren, Kenneth

Oppenheim, Phillip

Watts, John

Page, Richard

Wheeler, John

Patnick, Irvine

Widdecombe, Ann

Patten, Chris (Bath)

Wiggin, Jerry

Pawsey, James

Wilkinson, John

Peacock, Mrs Elizabeth

Wilshire, David

Porter, David (Waveney)

Wood, Timothy

Portillo, Michael

Woodcock, Mike

Powell, William (Corby)

Young, Sir George (Acton)

Price, Sir David

Raison, Rt Hon Timothy

Tellers for the Noes:

Rathbone, Tim

Mr. Richard Ryder and

Redwood, John

Mr. Stephen Dorrell.

Question accordingly negatived.
Main Question put and agreed to.
Resolved,
That this House takes note of European Community Documents Nos. 10552/86 and the un-numbered Explanatory Memorandum submitted by the Treasury on 18th March 1987 on the 1987 Community Budget, the un-numbered Explanatory Memorandum submitted by the Treasury on 18th March 1987 on carry-over of appropriations from 1986 to 1987, 6037/87 on the 1987 Budget situation, 6822/87 and 7552/87 on Supplementary and Amending Budget No. 1 for 1987, 6048/87, 7211/87, COM(87)240, COM(87)677 and COM(88)81 on the 1988 Preliminary Draft Budget, 4766/88 on the 1988 Draft Budget, 4051/87 on financial engineering, 5266/88 on Own Resources 5282/88 on amendments to the Financial Regulation and the un-numbered Explanatory Memorandum submitted by the Treasury on 10th May 1988 on budgetary discipline; and endorses the Government's objectives of securing effective and binding control of Community expenditure.

Anglo-Polish Relations
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lennox-Boyd.]
10.16 pm
Mr. Anthony Coombs: Let me say first how grateful 1 am, as are a number of other hon. Members, for the opportunity to raise matters concerning the affairs of Poland and its relations with the United Kingdom—not only because I know that these matters are of interest in particular to you, Mr. Speaker, and to a number of other distinguished Members of the House, as evidenced in various early-day motions and an Adjournment debate in January, and not only because I know that they are of great interest to Poles in this country and of course in Poland, but because the debate deals with the future of Poland. the Polish people and the principles of freedom in Poland. That, of course, has an impact on the future stability of central Europe, and on East-West relations in general.
The tragedy of Poland is the tragedy of a proud and independent people who are ruled without their consent. Although they have a great cultural and artistic tradition, despite their intellectual achievements and abilities and although they have a land rich in minerals and a large industrial base, they have been so stifled, oppressed and bureaucratised by the machinery of a Communist state that their democratic freedoms have vanished. Law, instead of becoming an instrument of civilised values, has become an instrument of oppression. Now we hear that even the official trade unions—excluding Solidarity—have had their activities outlawed, and the standard of living has sadly fallen to what can only be described as Third-world levels.
Infant mortality in Poland is the highest in Europe, and life expectancy is the lowest. The prices of food have risen by some 40 per cent. in the past two months alone. Essentials such as meat, cotton wool and even razor blades are rationed, and it has been calculated that the residual monthly income, after basic housing expenses, of a family of four with both parents working would not even cover the cost of one pair of winter shoes.
Most irresponsible of all—and most serious of all—so bad has been the organisation of Poland's mineral resources and its industry that no less than one third of the country is now classed as an area of ecological emergency. The very soil of the country is being slowly poisoned.
Why is this? The simple answer is that the economy is being ossified under an archaic and arthritic Communist system. Subsidies, price controls and a nomenclature system mean that three-quarters of the country's managers care more for their party perks than the efficiency of the enterprise they are charged to run.
The results are plain. The Centre for Research into Communist Economies shows that inflation is running at 60 per cent., that coal resources are being heavily wasted and that the external debt is £37,000 million, which is not only 50 per cent. of the gross domestic product but second only to Russia in the Communist world. Possibly most damning of all, despite the fact that there is 25 per cent. more industrial equipment in the country than there was in 1980, industrial productivity per man has fallen by one fifth. It is small wonder that, since 1980, no fewer than 700,000 Poles have decided to leave their homeland.
1200
What is the Polish Government's response? Officially they talk of democratisation, of economic reform and of the need to reduce subsidies and encourage private enterprise, but the reality is that, because they do that without the basic consent of the people, the system is only kept in place by oppression, by a denial of basic freedom and human rights, and by arbitrary surveillance and imprisonment of those who dare to question the regime and even of their children.
I am pleased to inform the House of the release of Hanna Lukowska-Karniej, Andrzej Kolodziej, Jan Andrzej Gorny and Kornel Morawiecki, all Solidarity supporters. However, all those people were imprisoned on trumped-up charges ranging from non-payment of maintenance through misappropriation of identity cards to completely fictitious acts of terrorism.
Despite this, the events of the last month show us that, if anything, the duplicity and political violence of the Communist regime in Poland have intensified. Despite assurances which were given to the Church.Mr. Morawiecki has not been allowed back from exile into his own country. No fewer than 70 Solidarity leaders and two thirds of its executive committee have been arrested. Students at Cracow university and eleswhere have been brutally beaten. Probably most heinous of all, the Communist authorities merely use the Catholic Church as a convenient intermediary for trying to settle, in its words, "a peaceful strike" at the Nova Huta steelworks in Cracow. Then, without justification or notice, they attacked the steelworks with stun grenades, tear gas and clubs in a horrifying and gratuitous display of violence. If anything demonstrates the cynicism, duplicity and contempt for democratic argument of the Polish regime, it was those events.
What can the British Government do to help reverse the position in Poland and the dangers it undoubtedly possesses for central European stability, especially in view of the Prime Minister's intended visit to Poland in October? The first thing to remember is that, although it is important, in the words of the Minister of State at the Foreign Office recently,
"to express our views strongly to the Polish authorities on human rights and to deplore the use of political violence",
and although it is important to use channels like the British Council in Warsaw, the World Service and organisations such as Medical Aid for Poland and the Jagiellonian Trust in this country, mere exhortation is not enough to produce reform within the Polish Government.
Secondly, whatever the public position of the Polish Government may be—and there are signs that certain Politburo members, especially the newer ones, are becoming aware of that—they must recognise that perestroika and attempts to reform in Russia make Mr. Gorbachev more sensitive and vulnerable to unrest in Soviet satellite countries than he has ever been before.
There are two reasons for that. First, he knows that any need for direct intervention in those countries by the Soviet Union would kill detente, which is so vital to his economic reform programme. Secondly, any need to do so would give the hardliners in Moscow precisely the arguments they want to make sure that the perestroika programme no longer takes place.
Equally, the Polish Government must inwardly he sensitive to the same issues. If they are to carry through a programme of economic reform, including the abolition of subsidies, freeing up the supply system by introducing

1201
more private sector businesses and restructuring the economy, the Polish Government and opposition recognise that that will involve a necessary austerity. The short-term effects of that austerity, if it is to be peacefully carried forward, must be mitigated. If they are to be mitigated, the Polish Government urgently need foreign credits, and that means a successful restructuring of their official foreign debts—on which they have paid no interest since 1982—more foreign investment, and more aid.
That presents the British Government with a unique opportunity to persuade its EEC, American and other partners in finance that there can be credits and there can be aid in generous quantities for Poland, but that it will be possible only on certain conditions. Those conditions must be made absolutely plain.
The first condition is that the Polish Government must ensure freedom of association and political opinion within Poland and from without into Poland. Secondly, all political prisoners must be released, and those who are presently in exile must be allowed to return home. Thirdly, the legitimate rights of trade unions and other opposition activists must be recognised and respected. Fourthly, and possibly most important, a genuine and continuing dialogue on economic and political reform must be started and continued with Polish people.
Such a course of action is realistic and imaginative. It would help to restore freedom to the Polish people, and prosperity for their country, inevitably it would mean that relations between Britain and Poland would quickly improve, and I believe that it is a course of action which the Government ought to follow, as it would offer hope for the Polish people who so desperately seek it.
10.27 pm
Sir Bernard Braine: I am grateful to my hon. Friend the Member for Wyre Forest (Mr. Coombs) for providing me with an opportunity to say a few words about our relations with Poland.
The Minister will know of my interest and involvement. I am of the generation that had good reason to be grateful for Polish courage and sacrifice during the second world war. I am of the generation that felt and still feels ashamed of the way in which our Polish comrades were abandoned by the West in 1945. I hold to the view most strongly that there can be no lasting detente between East and West until Poland, Czechoslovakia, Hungary and all the captive nations of Eastern Europe are free to determine their own destiny. That was put so eloquently by my hon. Friend that I need not say anything more about it.
It is safe to say, however, that I thought that it was also the view of Her Majesty's Government. I applauded the robust way in which my right hon. and learned Friend the Foreign Secretary earlier condemned the brutal suppression of Solidarity and the imposition of military rule. However, of late that seems to have changed somewhat. I was astonished to learn from The Sunday Times of 8 May that my right hon. and learned Friend has greater sympathy with General Jaruzelski in the Polish crisis than with the Solidarity movement. He believes, we were told, that Jaruzelski should be regarded as a patriot for safeguarding his country against Russian military intervention. Really—I thought that the Afghans had
1202
more to do with it than that. The Soviets could hardly wage war on two fronts or suppress two nations at the same time.
I am deeply concerned about that statement. The recent wave of unrest in Poland was brutally suppressed by the police. There were numerous arrests, serious injuries, heavy fines and dismissals from work, and Solidarity itself remains suppressed. I suggest that there is only one way forward for the Polish authorities, and Western Governments should be urging it repeatedly—namely, to borrow a little glasnost and perestroika from Mr. Gorbachev, who sees more openness as the means of securing real reconstruction. They should recognise that there is no way out of the mess that Communist rule has made of Poland except by recognising the natural aspirations of the Polish people to be masters in their own house.
There are two things that Her Majesty's Government can do. First, they can make it absolutely plain, as my hon. Friend the Member for Wyre Forest has done in his own way, that economic aid will be forthcoming only if the Polish Government seek a genuine partnership with Solidarity and the opposition. Secondly, they should make it plain that the inhumane treatment of Polish leaders—such as Kornel Morawiecki, who, after long imprisonment without trial, was deported without the right to return to his country—must end if the Polish Administration are to be treated as civilised. I beg my hon. Friend the Minister to make it absolutely clear that the West is ready to help the long-suffering Polish people, but only on the condition that their just aspirations are met and that the persecution ceases.
10.31 pm
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar): This is the second time in less than six months that Poland has been chosen as the subject for an Adjournment debate. Poland is never far from the centre of international events. During recent weeks it has once again occupied the headlines in unhappy circumstances.
I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on his choice of subject for the debate, which is of real and continuing importance. I am delighted that my right hon. Friend the Member for Castle Point (Sir B. Braine) has once again joined in the debate on Poland. Everybody in the House very much respects his long-term commitment to the Polish people and we recognise the considerable amount of time that he devotes to the interests of the Polish people. I recognise that because I know that he was in contact with my office last week on behalf of Mr. Morawiecki. We are delighted to say that we have been able to grant him a visa to come from Vienna to the United Kingdom in what I think my right hon. Friend will agree was rapid time.
In the House on 11 January, my hon. and learned Friend the Member for Putney (Mr. Mellor) reviewed Britian's relations with Poland and developments since the emergence of Solidarity in 1980 and 1981. He acknowledged the importance of Poland in East-West relations and the breadth and significance of links between our two countries. Those links are deep and lasting. Their origins lie in distant and recent wartime history. They are

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strengthened by commercial, cultural and personal ties that set our relations with Poland apart, in many repects, from those with other countries in eastern Europe.
The political and economic conditions in Poland are not, for hon. Members or for many of their constituents, matters of cold theory. They are matters of immediate practical concern. I class myself as one who is affected by that, because until recently I had the benefit of a Polish uncle.
As my hon. and learned Friend said in the debate in January, we were glad to welcome the Polish Foreign Minister, Professor Orzechowski, to London in December. That visit acknowledged what seemed like a new and welcome approach by the Polish authorities: a more resolute attitude towards the many challenges that confronted their country. All those in prison on clearly political charges had been released in September 1986. Plans for economic reform had taken more coherent shape and the need for political reform was at last officially acknowledged.
I should like now to say a few words about the Polish economy and about the Government's approach to Poland's economic difficulties. The Polish economy is burdened with a growing external debt that now amounts to about $39 billion. It is also burdened with low productivity, as my hon. Friend the Member for Wyre Forest said, and by excess demand. Recovery of the economy will come about only through a determined attack on the economic causes of those problems. It will also come about only if the Polish people can be brought to understand the need for sacrifices and can be persuaded that those sacrifices are worth while.
Our long-standing trade links and the sizeable Polish community in Britain provide a solid base for further expansion of trade between our two countries. Despite Poland's current financial difficulties, worthwhile opportunities exist for increasing trade in a number of sectors. But future trade prospects must depend on the scale and direction of Poland's economic recovery. A Polish economy restored to vigour and success is in British, as well as Polish, interests.
We recognise that long-term Western assistance will be needed for this recovery. Britain strongly supports the principle of an IMF programme for Poland, subject to that programme's terms being satisfactory. Once an IMF programme is in place, it is possible to envisage new forms of co-operation—for instance, International Bank for Reconstruction and Development co-financing schemes and fresh medium and long-term credits, targeted on export-earning projects—but we first need the assurance that sound economic policies will be pursued with the IMF's seal of approval. Ambitious plans for massive Western economic assistance to Poland, in the absence of these conditions, are not realistic.
Hon. Members have suggested, tonight and on previous occasions, that political conditions should be attached to decisions in these economic areas. Frankly, I do not agree. Polish economic recovery will come about only as a result of motivation and persuasion, not of coercion. The same vital principle applies to relations between Western countries and the Polish authorities. It would be an error to prescribe persuasion as a solution to Poland's internal problems, and to seek by contrast to use political coercion as a means of solving Poland's economic difficulties. Thus, Western official debt relief for Poland is
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negotiated in the Paris Club on technical, rather than political, grounds. Those are the same criteria as are applied to non-Communist countries.
Political factors do not determine the Government's approach to new credits, either. We favour a step-by-step approach to the normalisation of financial and credit relations with Poland, starting with the resumption of short-term credit cover. After that, progress will depend upon Polish performance in honouring existing debt-restructuring agreements. A steady but critical dialogue with the Polish authorities is needed, from within and outside Poland.
My hon. Friend the Member for Castle Point spoke about an article in the Sunday Times on 8 May. That article was not an accurate reflection of the views of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs. To learn about those views it is necessary to refer to the Foreign and Commonwealth Office statement of 6 May, which commented on what were then recent events. That statement deplored the use of police violence in pursuing the objective of reform and called upon the Polish authorities to recognise the importance of individual liberties and freedom of association.
That national statement of 6 May was followed on 10 May by a statement on behalf of the Twelve by the Federal Republic of Germany in its capacity as current President of the European Community. That statement reminded the Polish authorities of their international commitments to human rights and called for the release of those arrested during the recent strikes.
My right hon. and learned Friend the Foreign Secretary made clear in yet another statement on 12 May. which is available in the Library, his view that the Polish Government's plans for economic reform deserved support because they offered the prospect of a better life for the Polish people. Those economic plans involve short-term sacrifices but, of course, they will have little effect unless the Polish people are prepared and willing to support them.
Those statements show the extent to which The Daily Telegraph was in error when, on 13 May, in a leading article, it accused the Foreign and Commonwealth Office of failing to encourage dissident groups in eastern Europe and of maintaining—it is almost unbelievable that The Daily Telegraph said this—a "stony silence" during the recent crisis in Poland.
That leading article was a deplorable distortion of the Government's policy. Getting the Soviet Union and its allies to live up to their human rights commitments is fundamental to the Government's policy. As my hon. and learned Friend the Minister of State, Foreign and Commonwealth Office said in a speech at the CSCE review meeting in Vienna last month, we are not prepared to leave the Vienna conference without real progress on human rights. My hon. and learned Friend made it clear that what our Soviet colleagues have called a "common European home" could not be achieved with barbed wire in the garden and secret policemen in the cellar.
The Government are worried that once again prisoners should be held in Poland for political reasons. As my right hon. and hon. Friends have said, recent arrests and sentences have included senior members of Solidarity. Some of those imprisoned have been released, and that is welcome. As my hon. and learned Friend said in January,

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there are some people in prison in Poland on criminal charges, but arguably there is a political element in the charges.
The Government share the concern that my right hon. and hon. Friends have expressed about imprisonment in Poland for political reasons and on many occasions we have made those concerns clear to the Polish authorities. Such imprisonments cannot but damage prospects for improved relations between Britain and Poland. They are an obstacle to Poland's plans for effective economic reform. They represent a return to the discredited policies of the past.
As the House knows, my right hon. Friend the Prime Minister has accepted an invitation to visit Poland. She hopes that circumstances will make it possible for the visit to take place before the end of the year. In her discussions with General Jaruzelski and the Polish leadership, as well as with Mr. Lech Walesa and representatives of independent opinion, she will, I am sure, wish to reflect the concerns that have been expressed in this debate. In
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particular, she will wish to refer to the essential relationship between political and economic reform, and I am positive that she will stress the need for human rights to be respected in Poland.
The pressures within Polish society have once again burst to the surface in recent weeks. There is no lack of energy, talent and commitment in Poland, if only they can be harnessed, but the Polish people have shown again and again that they will not put their shoulders to the wheel unless their interests are taken into account. For the reasons that I have given, I do not believe that Governments outside Poland should set political conditions for economic or financial help, but Poland's leaders must recognise that they will never get Poland's economy back on its feet without consultation, dialogue, and respect for individual freedom and initiative. I hope that the events of recent weeks will convince those leaders that that is the only path to the economic revival that we in this country most earnestly wish to see.
Question put and agreed to.
Adjourned accordingly at Fifteen minutes to Eleven o'clock.