Lords Sitting of 22 November 1972

Preamble
The House met at half past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Chichester):
The LORD CHANCELLOR on the Woolsack.

S.E.A.T.O. MEMBERSHIP AND FUNCTION
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government which Governments, following the withdrawal of Pakistan, retain membership of SEATO and whether, in view of the alternative association of South-East Asian and Australasian Governments for defence purposes, the maintenance of SEATO has not become superfluous.
THE MARQUESS OF LOTHIAN: My Lords, the answer to the first part of the Question is that the Governments of Australia, France, New Zealand, the Philippines, Thailand, the United States and the United Kingdom retain their membership of SEATO. On November 8 Pakistan gave formal notice of her intention to withdraw from the Organisation. She will accordingly cease to be a member on November 7, 1973. The answer to the second part of the Question is, No.
LORD BROCKWAY: My Lords, does not the Minister think that in the changed situation there should be some reconsideration of the value of the SEATO alliance? Is it not the case that the nations in South-East Asia have joined in their own defence association; and has not the whole political situation changed there as a result of the indication by the U.S.A. of its intention to withdraw its personnel from South-East
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Asia, the new role of China and its détente with the U.S.A., and the good will which has been shown by this country? Does not that make SEATO out of date now?
THE MARQUESS OF LOTHIAN: My Lords, of course we recognise that there is a change in the situation, but Her Majesty's Government still feel that the SEATO organisation has a part to play, not only in counter-subversion activities in the area but in support of economic progress and the protection of peace and freedom, all of which, I think, are aims which noble Lords support.
LORD CLIFFORD OF CHUDLEIGH: My Lords, is the noble Marquess aware that this Question (I speak as an Australian-born Member of your Lordships' House) is tantamount to suggesting that we should leave Australia and New Zealand, who have come to our assistance three times without strings attached, out on a limb?
THE MARQUESS OF LOTHIAN; My Lords, I am grateful to the noble Lord for that intervention. It is, of course, one of the reasons why we still support SEATO.
LORD BROCKWAY: My Lords, while the Minister may be grateful for that intervention, is it not the case that it entirely misrepresents the position? Is it not a fact that Australia and New Zealand have entered otherwise into defence arrangements and therefore SEATO is less relevant? Is the Minister also aware of the trend of opinion which may be shown in the coming General Elections, both in Australia and in New Zealand, to limit SEATO to economic activities.
THE MARQUESS OF LOTHIAN: My Lords, I cannot possibly prognosticate about what will happen in the General Elections in New Zealand and Australia. Of course it is true that there is another defence organisation to which both those countries belong, but at the same time I must repeat my original Answer: that we feel that the SEATO organisation still has a relevance in keeping world peace and we intend to go on supporting it.

ARMAMENT SALES TO MIDDLE EAST COUNTRIES
2.34 p.m.
LORD SHINWELL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government the total value in money terms of armaments sold to Middle East countries in the years 1970–71 and 1972 respectively and the names of the countries concerned.
THE SECRETARY OF STATE FOR DEFENCE (LORD CARRINGTON): My Lords, details of sales of British defence equipment to individual countries and groups of countries are confidential and it has been the policy of successive Governments for many years not to dislose them.
LORD SHINWELL: My Lords, may I ask the noble Lord, Lord Carrington, whether he feels any pride in making a profit from the sale of arms to Middle East countries, and whether he regards it as a contribution to peace?
LORD CARRINGTON: My Lords, that seems to be rather wide of the Question.
LORD SHINWELL: My Lords, why does the noble Lord say that it is wide of the Question? It has a bearing on the Question. What is the purpose of selling arms to the Middle East, apart from making a profit?
LORD CARRINGTON: My Lords, perhaps the noble Lord would like to put down a Question about that.
LORD SHINWELL: My Lords, the noble Lord, Lord Carrington, must not be evasive, because it will not do him any good. It is a fair question. If the noble Lord, Lord Carrington, finds it impossible to disclose the actual sales of arms to the respective countries which receive them and what profit is derived from them, he may be justified in refusing information on that ground. But surely we are entitled to know what is the general principle behind it. Do I understand that the noble Lord, Lord Carrington, refuses to answer the question?
LORD CARRINGTON: My Lords, I think there should be rules of order in this House. I was asked to answer the Question which the noble Lord has on the Order Paper, and I have answered it.
THE EARL OF ARRAN: My Lords, referring to the year 1972, may I ask whether it remains the policy of Her Majesty's Government to supply £100 million worth of arms to Egypt?
LORD CARRINGTON: My Lords, the policy of Her Majesty's Government with regard to arms supplies to the Middle East is to consider all applications on their merits, and in making individual decisions account is taken of the prevailing military balance in the region and the balance in the supply of arms.
LORD BESWICK: My Lords, may I ask the noble Lord this question? While I agree with him that there are rules, and that rules have to be kept, would he not agree that there are ways of keeping those rules? Some are in keeping with the amiability of this House and some are not, and would not the noble Lord agree that the way in which he is keeping them is not really in line with the smooth running of the House?
LORD CARRINGTON: My Lords, if I was unamiable in refusing to answer Lord Shinwell's supplementary question, I apologise. It is the last thing I wanted to be; but it is very difficult to say, "No" without saying, "No"
LORD SHINWELL: My Lords, is the noble Lord aware that it does not display a high level of intelligence to reply in the negative?
LORD GLADWYN: My Lords, on a point of information, do other members of the Western Alliance publish any details in regard to their supply of arms to other countries?
LORD CARRINGTON: My Lords, I do not think there is a general rule. Some do and some do not, but it has been the general practice of all Governments in this country not to do so.

TURNHOUSE AIRPORT
2.39 p.m.
LORD HOY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what decision they have reached regarding the provision of a second runway at Turnhouse Airport.
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD POLWARTH): My Lords, my right honourable friend the Secretary of State for Scotland is considering the report of the public inquiry on this matter and will announce his decision as soon as possible.
LORD HOY: My Lords, while thanking the noble Lord for that Answer, may I ask him whether he realises how disappointing it is? This inquiry has been concluded for a very long time now and the second runway has been under negotiation for many years. Would the noble Lord tell your Lordships when it is expected that we shall get the result of the inquiry, which concluded a very long time ago?
LORD POLWARTH: My Lords, I should point out to your Lordships that the inquiry took 38 days, ending in February. The evidence led was very detailed and complex. The reporter submitted his report to my right honourable friend in September, and that report is being urgently considered by my right honourable friend. He will announce his decision as soon as possible, but I think it would be rash of me to try to forecast the date of that decision.
LORD BESWICK: My Lords, is the noble Lord aware that we agree with him that it would be rash to use the word "urgent", since it was in 1951, if I remember rightly, that I went to Turn-house and said that the runway was inadequate? Does he not think that in the intervening years there has been time to assess the needs there?
LORD POLWARTH: My Lords, I have been familiar with Turnhouse for about the same length of time as the noble Lord opposite. I would only say that, as frequent users of the services to and from Turnhouse, no one is more aware than my right honourable friend and I of the need for a speedy decision; but with a problem of this size and importance the first consideration must be that the decision reached should be
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reached only after the most thorough study of all the factors involved.
LORD BALFOUR OF INCHRYE: My Lords, arising out of that answer, may I ask whether, if the Minister decides to go forward with this runway, we can have an assurance that the administrative machinery is now preparing to start work as soon as a positive decision is come to?
LORD POLWARTH: My Lords, I think that it would be wrong of me to anticipate an action by an outside body dependent on the outcome of this inquiry.
LORD BALFOUR OF INCHRYE: My Lords, how long will it be after a decision before work is likely to start?
LORD POLWARTH: My Lords, I think that is a matter for the authority concerned with the running of the airport.
LORD HOY: My Lords, inasmuch as this inquiry took some six months, so that the matter was all properly inquired into, and the Secretary of State has had the reporter's report for three months, surely it is not asking too much at this stage that the work should be gone ahead with?
LORD POLWARTH: My Lords, I should first point out that the Secretary of State has not had this report for three months; he received it in September. Secondly, the complexity of the report, arising from the length of the inquiry, means that the issues involved require correspondingly extensive examination before a decision is reached.
VISCOUNT MONCK: My Lords, would my noble friend be kind enough to inform me where Turnhouse is, or whether this is possibly a misprint for Foulness?

HOME OFFICE RESEARCH REPORT WORDING
2.42 p.m.
LORD BROOKE OF CUMNOR: My Lords, on behalf of my noble friend Lord Conesford, who unfortunately is down with 'flu, I beg leave to ask the Question standing in his name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have studied Home Office

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Research Studies No. 15; and what meaning they attach to the expression "randomisation of subjects" in line 1 of the Introduction.
THE MINISTER OF STATE, HOME OFFICE (VISCOUNT COLVILLE OF CULROSS): My Lords, the phrase "randomisation of subjects" in the first sentence of the Introduction has the same meaning as "random allocation", which occurs in the next sentence and elsewhere in the report. The concept is that, to test the relative effectiveness of different forms of treatment, subjects are assigned to one form or another randomly and the results assessed. The research project upon which The Controlled Trial in Institutional Research is a commentary was conducted at Kingswood Training School, an approved school for boys. Boys who were assessed as being suitable for an experimental house, which set out to provide a therapeutic community, were randomly allocated either to that house or to a house with a more orthodox approach.
LORD BROOKE OF CUMNOR: My Lords, may I, on behalf of my noble friend, thank the Minister for that Answer, which I am sure will assist Lord Conesford in his convalescence.
LORD MAYBRAY-KING: My Lords, is the noble Viscount aware that the noble Lord, Lord Conesford, by his "interrot,xisation" has rendered a service to the House?
LORD WYNNE-JONES: My Lords, has the noble Viscount, in finding out the meaning of this word, consulted the Random House Dictionary, which is probably most used in the United States? If he does, he will find that there is no such word as "randomisation". It would be interesting if the noble Viscount could say where he managed to get his interpretation of a word which apparently does not exist.
VISCOUNT COLVILLE OF CULROSS: My Lords, I am to a certain extent a newcomer to the world of statistics, and I have not looked at that book. I draw on the immortal words of the research team for the Roskill Commission in the sentence that I enjoyed most:
"The multiple correlation coefficients obtained varied from 0·49 to 0·61 but because
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of the high cross-correlation between the explanatory variables these coefficients were of doubtful significance."
I do not know precisely what is the meaning of any of those words; all I know is that we understood, in the end, what the Commission were talking about.
LORD WYNNE-JONES: My Lords, surely the noble Viscount is well aware that each one of those words occurs in the dictionary, whereas the word referred to here does not occur in any reputable dictionary. Perhaps the noble Viscount would also explain why it is the subjects who are "randomised" and not the houses?
VISCOUNT COLVILLE OF CULROSS: My Lords, to answer that question I think I have to go back to the celebrated phrase "the defenestration of Prague", where in fact it was not the town that was thrown out of the window.
LORD KENNET: My Lords, when the noble Viscount said in his Answer that certain things were done randomly, what did he mean by that? Did he mean at random? If so, is it the custom in this educational institution to ask the boys to stand not at ease but easily?
VISCOUNT COLVILLE OF CULROSS: Yes, my Lords, and no; and anyway this particular experiment is now stopped.
LORD BURNTWOOD: My Lords, did not William Shakespeare himself always invent words where he thought it might be mellifluous so to do, and may not such questions as this have been considered by him to an incarnadine nuisance?
VISCOUNT COLVILLE OF CULROSS: My Lords, I have no doubt that the Home Office Research Unit will now be encouraged to go forward with further experiments.

PENSIONERS' INCOMES AND UNDATED GOVERNMENT STOCK
2.46 p.m.
LORD HALE LORD HALE rose to call attention to the economic problems of retirement pensioners and of retired persons mainly dependent upon the income from long dated or undated Government securities; and to move for Papers. The noble Lord said: My Lords, with permission, I propose to "randomise" to the extent of

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taking the second half of the Motion first. There are, of course, two separate points, closely allied. I ventured to put down a Question on the Order Paper some days ago about the position of persons of 65. It has been said that man never really recovers from the shock of his birth, and I remember myself, when I came into the world, feeling some annoyance at finding that I had been born in a year with a £50 million deficit and called upon to bear not only the sins of my forbears but their improvidence to the extent of a national debt of £750 million, and that I should therefore be called upon in due course to pay the costs of the Boer War.
Those who survived two World Wars and the invention of the internal combustion engine and reach the age of 65, arrive at a point of some very real financial shocks which can endanger the health of the unwary man who, whether by folly, patriotism, or earnestness, undertakes to continue to work in the interests of the country. The Question I put down was answered by the noble Baroness, Lady Young, presumably because of her wholly unblemished political past, and she was good enough to come clean and blow the whole gaff so far as the Question permitted. So far as the self-employed person is concerned, at 65 this is what happens: he has fully and over-contributed because he does not, and indeed cannot, derive from the National Insurance Fund some of the benefits which are available to the worker; he has fully and wholly contributed to provide for himself a pension of approximately £10 a week, which over the five-year period, if he works until he is 70, amounts to roughly £2,500. He loses every penny of that. Quite frankly, he is robbed of it.
I do not propose to make any Party points in the course of this debate. My impression is that no Government has a very healthy record in relation to the old-age pensioners, and if the noble Lord, Lord Aberdare, wishes to claim some credit to this Government for one or two decisions they have taken, I give him the credit. But the pensioner loses the whole of his £2,500 pension. He contributes a little over £1 a week—something like 25s. or 26s. a week—to get increments. So during those five years he also contributes some £320, and then starts at the age of
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70, with a much reduced expectation of life, to draw increments for himself and his wife, if both have survived the period, of about £2 a week, a sum which bears no relation to the actuarial value of his contributions. That is not all, and that is why I develop this matter further. He is called upon to pay income tax and surtax on the earnings which he is getting, so he is making a contribution to the national finances all through that period in addition to the contributions which I have mentioned, and when he finally relinquishes work he finds that, because it is alleged that surtax is paid in arrears, he will go on paying surtax for 18 months after he has retired, and indeed may literally be called upon to pay in tax and surtax in the final year more than his total income.
That is not the whole story, because there is the question of capital: and on that subject I ventured to put down a Question for Written Answer which was dealt with a few days ago. On the matter of Government investments, I took what was perhaps one of the largest financial operations ever performed by a Government; it was the refloating, or the redemption on re-issue, of the 5 per cent. National War Bonds which were issued during the First War. The sacrifice of life which that war involved might well have justified at that time calling upon the whole community to bear infinitely greater sacrifices than that of money. But the Government of 1918 is not my pigeon to-day. The whole House rejoices that we have among us, and in the Chamber to-day, the noble Lord the former honourable Member for Bradford, South, who is an asset to the House, both personally and politically, and who can answer for the deeds of that Government.
I come to December 1, 1932, when the new flotation took place by a Government which was called a National Government. If the House will forgive me, I will take a metaphor from the terminology of turf-cutting and say that I always think of it as the Government of odds and ends—a lot of squares and not many triangles. The operation was to float a title over £1,900 million of former 5 per cent. stock and to reduce the interest to £3½ per cent. That was satisfactory enough at the time and no one would grumble, but they used a phrase which certainly meant nothing to the trustees

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who, on bank advice, invested their money. They said that the stock was redeemable in 1952 and after. It was a very sinister phrase, because of course it means that it will never be redeemed at all, unless the Government buy up their own stock at present rates; and the figure at present rates is so surprising that I shall not dwell upon it.
It is a matter of common knowledge that around 1946 or 1947 that stock was standing above par. It was standing at £2,000 million. I think I am right in saying that the value to-day, in terms of relation to par, is about £600 million. The actual value in terms of purchasing power is 7·14p per £, and I doubt whether, in the whole history of crime, a more disgraceful financial operation was ever effected. When I raised the matter in another place the Minister used to say, "But nobody has held it all that time." In point of fact, of course, trustees do hold it. Trustees who see their stocks going down hang on in the hope that they will get them back, and then there comes a credit squeeze which means that the banks say, "This stock is no longer worth enough to cover the mortgage." Accordingly it is sold at a complete loss, and the tragedies connected with that are very serious indeed.
There is one other aspect of this matter which I should like to mention. It is a strange thing that when a man has paid tax and, if he is liable, surtax for 40 years and has managed to accumulate modest funds for investment, the moment those sums are invested the Government say, "That is unearned income" and he may be taxed a very substantial sum, because over the years the difference between earned income and unearned income from the limited savings which have already been taxed and over-taxed for so many years, has widened. The position of the man who remains in this country, who tries to support Government investments and who tries to do a bit of work—often he has to work—is really very serious indeed.
I turn now to the even more serious problem of the old-age pensioner. I remember that when the original old age pension of 26s. a week, which I think was 6s. better than the Beveridge recommendation, was introduced, I used to make perfectly sincere speeches in my
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constituency—because I was always a financial "sap"—saying, "Of course the country is burdened with £25 million of national debt and we are doing our best. We have done what we promised. We hope to increase the pension but, first of all, we must reduce the national debt. We really must face the enormous financial problems of rebuilding destroyed houses and so on, which this war has left." I turned the other day to see how much of the national debt we have paid off and found that we have increased it by £8,000 million. That is a crime the responsibility for which bears on all Parties since about 1948. Year by year, more money has been allowed to accumulate in the form of debt, and the result has been that when the Government have wanted to borrow money they have had to offer more interest. I know that many considerations affect the rate of interest, but I think that the last flotation of Government stock was at 9½ per cent. Of course the Chap who has retired cannot benefit from that, because if he wants to sell his 3 per cent. Gas stock—words which are written upon my heart—he finds that the price has gone down so much that not only will he lose a substantial amount of his original investment, but the ultimate return from a reinvestment will be a slight loss. That is the main financial structure which has applied.
My Lords, I promised to deal with old-age pensioners, but I am afraid that I have wandered a moment: I have "randomised" again. In 1954 my wife and I tried the experiment of living on the diet lived on by old-age pensioners; and I am happy to find that at least the calculations we made are those now adopted by the Government. The pension then was £2 19s. 0d. a week, and we said that roughly 50 per cent. of that went on food. We made it quite clear that we enjoyed many advantages, living in a well-furnished flat with a cooking stove, and so on; but we did try to do it honestly, and we were wise enough to say that we should do it for only four weeks because I do not think we could have stood much more. Some of the discoveries we made were rather surprising. The first, of course, was that the cheapest meat is nearly always the most expensive. Breast of mutton contains so much wholly inedible matter that it

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works out expensive; and it was even then. I remember that the first week's diet included a sheep's head at 1s. 6d. But our calculations were that, buying a minimum of bread, potatoes, margarine (1 1b. a week), and so on, the cost, for the two of us, was 13s. 7½d. a week out of the 30s.—and that 30s. was for two.
My Lords, I do not want to weary the House. We had a solemn repast of tripe and onions—a dish which, if properly cooked, still remains one of the best known. But some of the others have gone. It is impossible to buy pig's fry now. Pigs have become animals which do not appear in their entirety in the butcher's shops. I am told that it has been worked out by computer that a large modern Frigidaire in a butcher's shop costs so much to run that you just cannot afford to put the skirt of pig's fry in a Frigidaire at all; the cost is ruinous. Expert medical advisers, expert veterinary surgeons and so on have now perfected the pig's health and the pigs housing to such an extent that, despite the complete absence in most of England of pork butchers, the pig has become a noble animal. It always was a noble animal. I agree with Mr. Stanley Baldwin when he said there is no happier, contemplative procedure than scratching the back of your own pig, or cooking it with mushrooms grown in your own cellar.
My Lords, I have taken the present Government figures about the cost of the diet of the old-age pensioner. As I can never use notes—I prefer to try to commit them to memory—I took the figures from the Monthly Digest of Statistics, but I found when I got here that they were dated May, 1952, which gives a slight advantage to the Government. I do not know whether later figures have been published since, but I thought I had brought the latest ones. The figures they give now show again, that about 50 per cent. of the pension goes on food—£2·80 a week each for an old-age pensioner couple living alone. The figure they give in a separate column for two people under 55 living alone comes to well over £3 a week. This is quite a substantial difference, because of course, those two people under 55 will do a good deal of eating out; they will probably benefit from a works canteen; and, of course, they may well consume
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commodities like alcohol, and so on, which are not included in the figures. My Lords, £2·80 is to-day the amount which is available to a retirement pensioner—less than £6 for two people living together. Those of your Lordships who do the shopping will know how difficult it is to deal with such a sum. I notice that one of the items listed is 7 oz. of fish a week. Another is 14s. 8d., I think, on all kinds of meat, including bacon. The task of simply trying to live on that diet is considerable.
My Lords, I sought to find out what are the comparable figures in other countries, because we have been lulled into the illusion that we are rather well off. I was rather attracted to this. I have not sought any controversial matter, but in the Nouvel Observateur last week I found an article on the general problems of inflation in relation to Common Market countries. They say that in France, of course, as nobody pays taxes—and they quote the French Budget Commission for saying it—as there is complete dishonesty about the arrangements for collecting taxes, they have to do more by way of a V.A.T. tax and place it on the individual. They say that the industrialist is largely exempt from some of the consequences of inflation because he pays back his loans in deflated money, and that he avoids paying income tax and similar taxes. They also say, in a single pregnant phrase, that the only people who really suffer are retirement pensioners and rentiers. They are the only two—and why should we worry about them? They say that we have to worry about them now because the United States has managed to control its economy, and once you find the United States on a 3 per cent. control then the result of this inflation will spread.
So, my Lords, I saw the House of Commons expert on the Common Market yesterday to try to get some figures which would give us the comparable positions. Figures are never wholly and fairly comparable—and one must admit that—but I will conclude with some figures, and I will put the position as fairly as I can. The two systems are not fairly comparable; we have some extra allowances, and so do the other countries. But from the House of Commons I obtained a copy of a social survey which has only just come in and in which a private research

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organisation has tried to give, in pounds and new pence, the normal retirement pension figures for a man who, at the age of retirement, was earning £30 a week, and was a single person. The figures they give are surprising. Italy, which we are told is hopelessly bankrupt—and where, incidentally, the retirement age is 60—heads the list with £1,000 a year; and I should add that I believe that in Italy there is no additional pension for a wife, if there is a wife. The same applies to the next country, Austria, for which the figure of £900 a year is given.
The figure for West Germany is £650, as is that of Luxembourg. Switzerland is quite low at £375 but they have a canton system of supplements, which means that in different cantons the figures vary considerably. Bottom but one is the United Kingdom with a basic pension of £312 a year. I doubt whether many people will be surprised to find—and it may be of importance to those taking part in the plebiscite in Northern Ireland—that the Republic of Ireland is the lowest with £260 a year, just about a quarter of the figure for Italy and far lower than any other figure. It is time that something was done.
My Lords, in conclusion, and I am sorry if I have been a long time, may I say that much of my political training came from Aneurin Bevan who, I think, had the most well stored, almost card index, mind of financial reforms that I know. He was a man to whom justice was done, as so often happens in political life, only in his obituary notice. But he used to say that if you are going to try to deal with inflation then the first thing you must protect is small savings and old-age pensions. They must be payable in terms of the cost of living. By fixing a rate of pension in terms of the cost of living you have done two things. You have made it impossible for the Chancellor to perpetrate these reckless expenditures the burden of which bears so greatly upon us; because the Chancellor, in order to make his Budget figures balance, will be compelled to have regard to the cost of living since the cost of living will be showing the way to an imbalance of the Budget. Guarantee the people who put money in the Post Office Savings
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Bank and those holding National Savings Certificates—the people who draw less purchasing money at the end of their investment than they put in at the beginning—their investment; guarantee retirement pensioners at least the value of their pension in real terms, and you will have made a substantial step towards dealing with inflation and towards doing justice, or (shall I say?) some sort of justice, to the most overburdened section of the community. My Lords, I beg to move for Papers.
3.12 p.m.
LORD TANLAW: My Lords, I am sure that we are all grateful to the noble Lord, Lord Hale, who by this Motion has drawn attention to the economic plight of the retirement pensioner. I feel, after what the noble Lord has said, that there is nothing much that I can add to the first part of his Motion. I hope that he will allow me to concentrate on the more technical side of the second half of his Motion because there is, I believe, a relatively simple answer to this perennial problem raised by the noble Lord. First, may I say a short word about long-dated and undated Government securities. With regard to long-dated securities, this is where perhaps I am in slight disagreement with the words of the Motion. I do not see long-dated securities presenting much of a problem to those retirement pensioners who still hold them; because (shall I say?) unsophisticated investors can obtain both income and capital appreciation, perhaps in an undramatic fashion as the years go by, simply by hanging on. By this I mean that they cannot lose the book value of their investment in the end whatever happens. They can also switch, with relative ease but only after proper advice, into equities or nearer dated stocks.
If I understand the motivation behind Lord Hale's Motion—and I think I do—our concern should be, as his was, for those who invested for patriotic or other reasons in War Loan or similar undated stock and who have seen their capital, not their income, diminish over the years. It is these people who are faced with an economic problem to-day, as they may be unaware of how to improve their position.
Before offering a simple solution to alleviate this category of investor, I think

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it may be worth while reminding, beside myself, some other noble Lords about the position of undated stock in general. The Government of the day, besides being the country's largest employer and largest spender, are also the largest borrower. In a free capitalist society the Government have to raise their money on the open market at the most economical rate they can. They do so by issuing paper, including gilt edged securities. In times of war, which the noble Lord, Lord Hale, mentioned, when the future is uncertain or when interest rates are low, the Government have issued such undated stock as 3½ per cent. War Loan, 2½ per cent. Consols, 3½ per cent. Treasury Bond, and so on. These stocks in these conditions offered a good running yield and were considered good securities—good enough for the Trustee Investments Act 1961, if I understood it correctly, to restrict investments in stocks in this category.
My Lords, what has gone wrong that these stocks are now the subject of the debate this afternoon? Two things, Interest rates have risen; and, of course, inflation. The Government of the day, whatever they may say, now have little control over these two factors and are unable to raise money by issuing more undated stock for the simple reason that no one would take it up because of the falling value of money. My only contribution to this debate is to advise anybody covered by the terms of Lord Hale's Motion to get out of undated stock, regardless of what its value is to-day, into something not subject to the pressures of inflation. For instance, War Loan could be switched into 7¾ per cent. Treasury Bond 2012–15, with a minimum loss of income; and capital appreciation would begin in about five years from now.
Some noble Lords, I am sure, are aware that War Loan stock could be exchanged for high income unit trusts, as can other undated stock in the category that we are discussing this afternoon. But as it is most unlikely that retirement pensioners take their financial advice from the columns of Hansard or that they have a tame stockbroker or a friendly bank manager, I suggest that the Government can at small cost put this matter to rights for this forgotten section of the community. The Public Trustee, which
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the present Government wish to wind up for reasons which are most obscure to me, would really be fulfilling the function for which it was created by producing a special pamphlet to advise those holders of these stocks who are uncertain what to do. An explanatory pamphlet, which would cost virtually nothing in terms of Government spending, could be distributed by the Ministry of Social Security to reach all those in need. I feel that if this were done this particular ghost which caused the Motion to be raised could be laid once and for all. The Government have an opportunity of proving that they have a heart, that they do care; and, what is more, they would become the first Government since the First World War to take positive action on this problem. I hope to hear this afternoon that they are going to do so.
3.20 p.m.
LORD DAVIES OF LEEK: My Lords, I wish to congratulate my noble friend, Lord Hale, on having raised this vital issue. I am also grateful for the speech of the noble Lord, Lord Tanlaw, because, while his advice is excellent, I must say, from my practical experience extending over 25 or 26 years when I had to deal with constituents when I was a Member of another place, this was one of the problems which came before me at my weekend interviews, or "surgeries" as we call them. The trouble was that many of the people who were involved—I do not say this in any derogatory sense—were not at home with the language of finance or familiar with expressions like "randomisation" or the arithmetic of rates of interest. Consequently I was delighted with the constructive suggestion made by the noble Lord, Lord Tanlaw, about the possibility of using the Public Trustee. Some of us are talking too quickly about abandoning the Public Trustee.
Your Lordships will remember that I asked a Question about the future of this Office some months ago, and one of the subjects in my mind was these stocks. My noble friend and also the noble Lord, Lord Tanlaw, have given us enough information to cause concern about these loans, which were made with a patriotic motive. The whole gamut of our finance, particularly when we go into Europe and the entire system of our national debt will be looked at from a different

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viewpoint. In 1926 we were still paying for the Battle of Waterloo at the rate of 6d. in the pound; in fact, Waterloo has not yet been paid for. One of the miracles of finance is the power of the tomb over the living, the power of the dead over the unborn. In 1900, at the time of the Boer War, the debt per head of the population was about £40. This thing does not work in arithmetical progression—Oh, No!; it works in beautiful geometrical progression: it multiplies itself. On the eve of World War I the debt per head of every man, every woman and every child with bonny blue eyes, or eyes of any other colour, was about £150. After World War II the figure had reached something in the neighbourhood of £500. Now we have reached a pitch—with "Concorde" and other things—when the figure is many thousands of pounds per head.
Here we see one of the paradoxes of high finance: that we shall have generations born who will be millions of pounds in debt before they draw one drop of their mother's milk. That may sound funny, but it is one of the secrets of high finance that the present generation throw the burden resulting from the mismanagement of their day-to-day affairs on to the unborn. They could not fight a war if they had to pay for it on the nail. It is time that someone saw through the power of print. It is one of the actual riddles of the modern industrial and financial world which no economist likes to face. Do not ask me for the answers; no one has found them yet. But the day will come when the whole world will have to discuss this problem, because the national debts of all the nations of the world are moving in the same direction.
What are the implications of all this to the pensioner? We have reached the pitch where we must go beyond Beveridge. Because I think that my noble friend Lord Brockway intends to speak I will not quote the figures that my noble friend Lord Hale was good enough to give me as a result of his researches about, for instance, the Italian pensioners who retire at 60 with a pension of £1,000, compared with our rate of £330-odd. When I was a Minister at the Ministry of Pensions I remember reading an excellent little book by David Marsh entitled The Future of
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the Welfare State. It is time that Britain knew the facts. David Marsh wrote:
"There are in our own country today people in high places and at the seats of power who believe that the burden of social service expenditure in Britain is heavier than it is in any other country, and yet numerous official reports from international governmental organizations, and even articles in reputable national newspapers, have shown conclusively that the financial burden is in fact far less here than it is in many other countries. Equally it has been shown that social service benefits are often provided at a higher level in other countries than they are here, and that employers abroad bear a heavier burden of the share in financing social security than they do in this country. Yet the Labour Party spokesman on social security could say publicly, in an interview on B.B.C. sound radio on 2 April, 1963, when giving his views on Labour's New Frontiers for Social Security, that ' he had been surprised to find how much employers abroad contributed'."
My Lords, I knew this as a Minister because it was my duty to know it.
"Politicians cannot be expected to read all that is published, but surely they ought to be aware of what goes on elsewhere…Thus Conservative politicians who persist in their belief that the welfare state in Britain imposes intolerable burdens on the nation's economic effort and is responsible for our slow rate of economic growth would at least have been given food for thought in an article by Mr. Andrew Shonfield in the Observer on Sunday, 22 January, 1961. After having examined comparative data on labour costs Mr. Shonfield stated categorically, so much for the myth that it is the sheer volume of taxation in Britain required for the support of the namby-pamby welfare state which is responsible for our lack of competitive power and the slow growth of the nation's wealth. Germany, which has the record for growing fast, carries a bigger social burden—and does not seem to be slowed down…'"
That quotation speaks volumes. For years now generations have been told, in the vicious propaganda which has been used (it may be sometimes not politically but in supposedly economic lectures and high theories on economics advanced even by professors of economics) that the burden of the Social Welfare State is slowing down our progress. This is a myth. Are we going to leap out of it in the 20th century? I have taken both sides, I have put the Labour and the Conservative points of view. All of us have been misled for too long. It is our duty, a part of living, to see that the people in old age do not suffer from the economic misery that many of them have had to suffer and are still suffering.

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In September, 1935, The Times, in one of its euphoric but nevertheless thunderous leaders, said:
"We are well in sight of the time when every person in this country will look forward to an old age free from harassing cares."
That is a long way off yet, and as inflation increases, whatever Government are in power, these people will suffer in their old age. Since doctors have discovered how to make us live longer and nutritionists have told our mothers how to cook better, men are living longer and, God help me!, women are living longer still; and one of the troubles about all this—
BARONESS PHILLIPS: God help you?
LORD DAVIES OF LEEK: Yes, my Lords, He must help me. He must help me to leave enough for my widow to live on.
BARONESS SUMMERSKILL: The noble Lord should be buried after this speech!
LORD DAVIES OF LEEK: What is our concept of the future? Is it for social insurance or security? Because there is an economic and social difference between them. There is the difference of being prepared to bear the social security of the nation, or we can enter into economics and the accountancy of old-age pensions and social security. Any nation that can raise with a stroke of a pen another £600 million or £700 million to build Concorde can easily find £10 for a lump sum at Christmas without noticing it, because it can print the money. It must be careful how it prints it, of course, because of the inflation possibilities.
The old are more reluctant to die. The doctors who have made efforts to raise us from a C3 nation have been successful, despite our moaning. We are better fed and better nourished. Nevertheless, the loneliness of old age to-day, because the family is breaking down as a unit, is part of the problem. I believe that loneliness now is greater than I knew it as a child in the 1920s, and in the First World War. The family then felt a responsibility for its aged. We passed the old man around the sons; my uncles took the old grandfather and grand-
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mother. That is not done to-day. We had not, like the Eskimoes, to "Oslerise" the old—to finish them off quietly by coldness of heart. When I was a Minister I went round an old folks' home in Nelson and Colne. I could see the chimney pot of one old man's house not 500 yards away (I think I have told this story to your Lordships before), and the matron told me that the son had not put his foot inside that home for two years. We have to try, apart from the economics, to deal with the loneliness of the old without being condescending towards them.
In their Annual Report for 1931 the London Advisory Council said:
"One in every ten girls becomes a servant, and when they become grey they move from the status of servants to charwomen."
In the 1931 Census, one woman in four in London was a charwoman because there was no other way to earn a living. Now that is not undignified. But these charladies were then in their late 50s or 60s, and they were considered old ladies. That was a favoured profession in the hungry 'thirties. To-day the charwoman has a more dignified place in our social accountancy and makes a contribution, but in those days she was a domestic navvy. The widow of to-day has not had the square deal that she should have had in her loneliness and from the accounts of this nation. I hope that we shall go beyond Beveridge so far as the widow is concerned.
The time has come for me to finish this speech with these points. First, there is no truth in the assertion that the Welfare State is responsible for our slow rate of economic growth. Second, my noble friend Lord Hale has raised one of the important points: the yardstick of a civilised nation to-day is not only how it treats its children but how it treats its old people. I hope that in this House to-day, without trying to make any Party political point, we shall seriously bear in mind our duty to those who are old in a society that is brittle, hard and growing more and more materialistic. If there is one thing for which at one time Britain was considered great it was its sense of neighbourliness. Do not let us lose that sense of neighbourliness when we tend our old, our sick and those who are unfortunate in their economic circumstances.
3.34 p.m.
LORD MAYBRAY-KING: My Lords, I would begin by congratulating the noble Lord, Lord Hale, on initiating this debate. Some years ago I went to Oldham, his old constituency, to express the gratitude of Parliament for a lifetime of service that the then Mr. Hale had given in human causes in the House of Commons. To-day we have heard the noble Lord speak with his characteristic wit, humour and emotion on the bitter problems of old age pensioners.
I welcome that at last there is to be an automatic annual increase of pensions, including public service pensions. When I was a Back-Bencher in the House of Commons, and free to speak, I was one of a group, the redoubtable Dame Irene Ward among them—indeed she was the leader of them—who pressed constantly the claims of those who live on fixed incomes, and with the Old Age Pensioners' Association and the Public Service Pensioners' Council we constantly asked for an annual review of pensions, instead of the long, humiliating campaign that we had to run for two or three years to get a Public Service (Pensions Increase) Act or to get an increase in the old-age pension. I remember in this connection some splendid work done by the 1922 Committee, with the former Attorney-General, Sir Lionel Heald, on one side of the House, and Mr. Douglas Houghton and some of his colleagues on the other side, always pressing the claims of the pensioner faced with a fixed income against an inflationary society.
I am delighted to know, my Lords, that the old age pensioners this year are to receive a Christmas gift. In my days as a Back-Bencher in the other place every year we asked for this Christmas box for old-age pensioners, without success. I congratulate the Government on carrying out the spirit of A Christmas Carol in this gift that they are providing for the old-age pensioners this year.
It is the pensioner who feels most the rise in the cost of living. Other groups can offset inflation by wage increases, by increasing the prices of the goods they sell or the profits that they make. As an utter non-Party man, I cannot enter into the merits of the Government's present attempts, or those of the last Government, to control inflation. I only know that waiting on the side-lines anxi
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ously are those with fixed incomes. I know that to-day old-age pensioners are outside the Houses of Parliament demonstrating against their present condition and against the inadequacy of the income they receive.
One of the great problems of old age is loneliness. I would pay tribute to those who take care of their ageing parents, some of them at great sacrifice to themselves. Others find it impossible to do so for various reasons, and some do not care to look after their parents. One of the sad experiences that I have when I visit old peoples' homes is to find old folk there whom nobody visits. In the matter of the treatment of old age, I remember what we have achieved in my lifetime. When I was born there was no old age pension, and there were plenty of workhouses. When Lloyd George introduced the first old-age pension of 5s. a week at the age of 70 some people thought that this would sap the thrift of the working class. Indeed, in this House on that occasion in 1908 Lord Rosebery said:
"It might be dealing a blow at the Empire almost mortal."
Those days have long gone. In an earlier debate I suggested to your Lordships that there is a pattern of social progress: first, voluntary help; then State recognition of the need; and then—and this is where we are now in this field, as in so many—State help, plus voluntary help. For example, round the National Health State hospitals every hospital has its group of friends doing wonderful work.
In the field of the handicapped, people like the noble Lord, Lord Grenfell, and the noble Baroness, Lady Elliot of Harwood, call attention to a need, the State comes in, and the voluntary help goes on supplementing what is done by the State. This is true, my Lords, about the aged. All over the country to-day are Darby and Joan clubs or senior citizens clubs. In my city, there are such clubs founded by a war-time Mayor of the city, Mr. Stranger. They are usually housed by a church, and here I should like to pay tribute to the churches and chapels of Britain for the facilities they provide for the old folks' clubs in every corner of the country. Sometimes these clubs are lucky enough to have a club room of their own. We have three such

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clubs in their own premises in Southampton where not only are they able to meet and be entertained but hot meals are provided at cost price by voluntary workers. It is impossible to speak too highly of the good work that goes on in Darby and Joan Clubs. And what is inspiring is the way in which the old folk help themselves, often providing their own concert parties and often—as I have noticed in my own city—seeming to have their own marriage bureaux. The number of marriages that take place between widowers and widows belonging to these clubs is quite significant. They themselves visit their own lonely old folk and they appoint someone to visit the lonely old folk who are sick.
Then we have special housing for the aged, and I want to say a word about its various aspects. Most local authorities (with the exception of some thirty, I understand) are providing some of their old folk with a home of their own, the pattern of which is a room of one's own for the old person or old couple with certain communal services provided. The old workhouse has indeed gone. I have visited buildings which were at one time workhouses and have seen how they have been transformed. They have wardens and they provide comfort and security for the old person. It has been my joy also to visit such local authority homes in places as far apart as Northumberland and Hampshire. There are also homes provided by voluntary organisations.
Some of your Lordships may have seen references to the Help The Aged Fund, which raised over £1 million last year for old folk. This Fund was founded by Mr. Jackson Cole. And of the million pounds raised last year, my noble friend Lord Soper will be delighted to know—indeed, he probably knows already—that £100,000 was raised by Christian Youth for the Help The Aged campaign. This group has provided already special housing: what they call sheltered housing. The pattern is the same. There is the individual flat, the individual home, the individual room, but with certain communal services and the services of a warden. There are already over 2,000 units for needy and aged folk who cannot afford the expense of the nursing homes I will refer to in a moment. They provide clothing and blankets not only for old
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folk in Britain but for old folk all over the world. Help the Aged has an illustrious patron, one of the greatest ladies living to-day, Dame Sybil Thorndike, and in her name we shall be making the Christmas Appeal to 100,000 voluntary donors this coming Christmastide.
There are also the Methodists, the Anglicans, the Catholics, the Church Army, the Salvation Army and the Jewish community—all providing old folks' homes. My father was a Methodist. He spent the last part of his life in a Methodist home for the aged, and I know how much it meant to him. Last year I opened a home for retired teachers, the average age being between 84 and 85. This home was provided by gifts of members of the teaching profession. Similarly, last year I opened a home provided by 2 million members of the Club and Institute Union, representing the working men's clubs of this country. At the opening, the group who invited me described the home as "a Hilton Hotel for the aged". Then there is BLESMA, the British Limbless Ex-Servicemen's Association, who maintain homes for aged and limbless ex-Servicemen.
In my own district of Christchurch, as my noble friend Lord Monck will know, there is a Mr. Kermode who since the war has devoted himself to providing flats for old people. He has built some 500 of them at cost price and he also maintains, together with a group of volunteers, what we might call, "halfway" homes—three homes which keep people out of hospital: those who are not yet weak or ill enough to be in hospital, yet need a little nursing. These people are accommodated in a "halfway" home. Again, I recently opened in Hampshire a voluntary home for old folk provided by another voluntary body, the Hampshire Old Folks' Housing Association. Some days ago, I saw with not a little distress a television programme on private nursing homes for the aged, where old people were paying from £20 to £25 a week in conditions providing little care and comfort. I have no doubt that that programme was factually accurate and that it did something to spotlight the perilous condition of some old folk who are paying up to £25 a week and getting very little for it. I wish there could be another programme showing the wonderful work that is going

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on in this country now in a hundred ways in caring for old folk. Two weeks ago I visited a great psychiatric hospital in West Sussex, in Grayling. There I saw a thousand old folk, most of them senile or terribly physically handicapped, being cared for with a love, devotion and skill that moved me very deeply.
In geriatrics we are making tremendous progress, here and abroad. For example, this summer I visited a place in America called Moosehaven, which is a city of old folk. Here, there are people living again in a community with a room of their own, communal services, a warden, and one of the finest geriatric hospitals in the world—all provided by voluntary gifts from an American organisation called The Loyal Order of the Moose. In our own hospitals and geriatric wards many of us who know hospital work realise what progress we are making, thanks to geriatric physicians and the care of devoted nurses.
My Lords, the number of old folk is increasing. This is one of the triumphs of the Welfare State. My grandfather died an old man at the age of 56. But this prolongation of the life of old people makes for ever and ever increasing demands. I pay tribute to the work of all who care professionally for the old: to the social service workers, to the doctors and nurses, to the volunteers who provide Meals on Wheels—a wonderful service. I pay tribute also to those who visit lonely old people. In my own city, the Young Samaritans go round to lonely old people, doing odd jobs in the house.
I also wish to pay a tribute to the local authorities who are providing special, housing. One of the earliest of these authorities was a little urban district in Hampshire called Eastleigh, which provided its first special housing for old folk more than fifty years ago. I pay tribute to all who, by giving, make the expansion of this work possible. But, after all, Britain and all that Britain enjoys to-day depends to a large extent on the labours of the past two generations, who worked and lived in much harder times and who now have to struggle to maintain even a small share in the increasing affluence of this society of ours. We have done much. Nobody, however, can be complacent: so much more has to be done—by Governments, by local authorities and by men
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and women of good will who will supplement what the State provides. My Lords, I am indeed grateful to the noble Lord, Lord Hale, for having given me the opportunity to speak in this debate.
3.50 p.m.
LORD BROCKWAY: My Lords, as an old-age pensioner I must express my appreciation to my noble friend Lord Hale for initiating this debate. I suppose that I must also declare my interest to this House: on Monday mornings I stand in a queue to draw my old-age pension at the post office. I am very much relieved by what my noble friend Lord Hale said, that those who have contributed to our retirement pensions over a period of years have met its current cost, because I have been contributing ever since the contributions began. I am relieved because of this fact: when I stand in that queue I have tended to be a little ashamed that I should be drawing an old-age pension when I know the conditions of many others in the queue. Not only from our reading of social surveys which have been carried out, but in our personal experience nearly all of us must know the wretchedness of many old-age pensioners to-day. They suffer in two ways: first, from sheer physical need for food, clothing, housing and amenities. Secondly, as my noble friends who have previously spoken have emphasised, there is their personal loneliness, and their need for nursing care as they grow older.
I welcome the fact that there is to be this Christmas box to old-age pensioners. I hope that it will not be regarded as an alternative to a substantial increase in the old-age pension rate in this coming year and later years, equivalent to, and progressively more than, the increase in the cost of living. Old-age pensioners, like all others, are human, and it is very likely that at Christmas time especially a large proportion of that welcome bonus will be expended. But their permanent needs will remain very deep.
I want to refer to a table from which my noble friend Lord Hale quoted regarding a comparison of our payments to old-age pensioners compared with other countries. This is a social survey that was distributed by Charles Barker City Limited who carry out research work of this character. So far as I know, they are

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a reputable firm—they certainly have reputable directors—and this is the latest information which can be obtained from the House of Commons Library on the subject.
I want to make it clear that the comparisons are not equal and must not be accepted as the last word. As the noble Lord, Lord Hale, said, they refer only to single men after 40 years' employment; and in the case of a number of countries no pension is paid to the wife of the pensioner. Thus it is that the figures are not always comparable. The cases of the two countries with the highest pensions, Italy and Austria, are those when no pension is paid to the wife. I remind your Lordships that this table refers to single men. Nevertheless, I should like to see an examination of these figures, for this is the disheartening fact: that of 16 nations, the United Kingdom is the second lowest in the rate of pensions which it pays. In percentages of the final pay of the recipient before he obtains a pension, our figure is only 21 per cent., while in a large number of cases it rises above 40 per cent., and even 50 per cent. It would be of value if this table were sent to the Ministry so that there could be a more accurate and detailed analysis of it.
I went through the Lobbies of the House just now to the House of Commons Library. The Lobbies are crowded with old-age pensioners. It is extraordinarily appropriate that my noble friend Lord Hale should have introduced this Motion to-day. I went into the Inner Lobby and there the pensioners surrounded their Members of Parliament. In the corner of the Inner lobby is a statue to Keir Hardie, the founder of our Labour Movement. I am not more proud of anything in my life than the fact that I presented that statue to the House of Commons. Keir Hardie used to say that after the needs of the general population were met, before a halfpenny was spent upon luxury, the national income should be devoted to children, the sick and the old-aged. I say to the Government that we shall fail terribly, if we are to be regarded as a civilised society, if we do not ensure that all those of old age have the means by which they can live not merely in comfort but in happiness in their last days.
I want particularly to refer to the problems of loneliness, and of the nursing
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needs of the older folk. I appreciate very much the tribute which the noble Lord, Lord Maybray-King, paid to the Churches' charitable organisations, and to voluntary workers for what they are doing. I was particularly interested in his tribute to the British Limbless Ex-Servicemen's Association. I was associated with this society in Slough when I was a Member there; it was contributing very much to the home which I believe is in Southampton.
LORD MAYBRAY-KING: Portsmouth.
LORD BROCKWAY: Portsmouth. I know of its value. Yet it is extraordinary that, with all this voluntary service, there are still thousands of old-age pensioners who live not merely in physical want but in want of human companionship. Sometimes their only visitor is someone bringing meals-on-wheels. I feel that a great deal still has to be done through the Churches and through all kinds of humanitarian organisations, through trade unions for their older members, to see that this loneliness, which makes those last days so wearisome, shall be eased.
I recognise, too, that much has been done by voluntary societies in providing bungalows and housing. But here we begin to enter the field of public activity which must supplement voluntarly service. I have seen some of the bungalows for single people which local authorities have built on their housing estates, and they are delightful, particularly when they are supplemented by a woman officer who visits the tenants and ensures that their needs are dealt with. But there is also the problem of homes for the aged. This is becoming an increasing problem. It used to be said that young people should look after their parents as they grow old. The problem now is that we are all growing old and continuing to live so long, and that often it is quite impossible for those who are younger to maintain their aged folk.
It may be (I can think of such a case at this moment) that the wife becomes ill and the old lady has to be removed to a home. I saw that television picture. I have not had experience of homes where they exploit old-age pensioners as that picture showed, but there are some

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homes where conditions are very wearisome. There are also some splendid homes provided by local authorities as well as those provided by voluntary organisations. I would suggest to the Minister, first, that there ought to be a more adequate inspection of these homes, to ensure that minimum conditions which are humane in every respect, apply to the old people. Secondly, I want to suggest to Her Majesty's Government that it is desirable that there should be added to the monetary increase in pension some grant to local authorities who carry out these services in an adequate and humane way.
My Lords, I conclude by saying this. As one looks at the problem of the old one sees two opposite philosophies. There was the philosophy of Hitler, who took the view that the old were a burden on society and that society should get rid of them. In his institutions in Germany he quite deliberately starved those of old age so that they should die. I went into Germany immediately after the war and visited one of those homes. I was shown into a room where old men and women stood. I could not bear to see their starved, haggard, suffering faces; and I turned and left. That is the Hitler philosophy of the old. The other philosophy is that, not merely because of family affections, not merely because the old have over the years done some of the hardest work in our society, but also because their human personalities are precious and sacred, it should be the first duty of the community to ensure that in their last days old people are able to pass on without the suffering brought about by poverty, loneliness and lack of attention. I thank my noble friend Lord Hale for initiating this debate. I hope that it will have some value in improving the conditions of the old in our country.
4.5 p.m.
BARONESS PHILLIPS: My Lords, we are indeed all grateful to my noble friend Lord Hale for introducing this debate to-day and for doing it in such a splendid fashion. He drew attention in a quite brilliant way to some of the financial rearrangements which are far reaching in their long-term effects. I have several times raised in this House the question of the self-employed, because not only do they suffer, as he so rightly said, when
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the point of time arrives when they want to draw some of their money, but they also suffer during their working life. A small shopkeeper, as we know, cannot collect some of the normal benefits which other workers do, although he is of course part of the contributory scheme. Unfortunately, many citizens now are beginning to consider that there is no inducement to save, particularly in the State. This is what I feel, and this is something we should be looking at if we are to encourage long-term investment as well as the use of some of the savings movements.
In a brilliant and practical speech the noble Lord, Lord Tanlaw, gave us a number of ideas of how the elderly could cope with some of their difficulties. I have made a note of some of those suggestions which I shall certainly pass on to those who are in the situation we are discussing to-day. I was interested in the reference of my noble friend Lord Davies of Leek to the fact that the family "passed around the old man". They probably also passed around the old woman. I think we should overstate the case if we suggested that this was necessarily an ideal circumstance. A son or daughter forced to care for his or her parents is not likely to do this with any great love or affection. Surely what we aim to do is what several noble Lords have emphasised: to enable every human being to live out his life in dignity, surrounded by some comforts and certainly by love and affection. This does not necessarily come, I would suggest, from the family circle unless it is the right family circle.
I well remember a leaflet which was published by the National Council of Social Service entitled No One Came. One old lady sent us a little letter which said, "No one came—thank God!" Perhaps she has been suffering from some "do-gooders" who were not all we should want. I liked the phrase of my noble friend Lord Davies which epitomises what we are talking about to-day: what we have to be concerned with in old age is social security and not social insurance. I believe we have become bedevilled by a scheme which is now so complicated, and all Governments—I do not exempt the Government of which I was a member; I think we were preparing an even more complicated

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scheme than that of the present Government—seem to have added more and more complex ways of controlling the money and stipulating the various needs which the elderly will have to try to meet.
The noble Lord, Lord Maybray-King, in a sensitive and compassionate speech, drew attention to the work of the voluntary and statutory social services, and I am delighted that he did. I am delighted, too, that he made reference to the fact that the elderly can of course help themselves. When I saw that dreadful film to which the noble Lord has referred, the first thing that struck me was that people complained bitterly of the shortage of staff in the old people's homes but at the same time they did not allow the old ladies to do something for themselves. To me, the great point is that we all want to be independent and to look after ourselves, and we should not be forced, either by some arbitrary age limit or for some other reason, to have that right taken away from us.
I agree with my noble friend Lord Brockway on the question of loneliness. Loneliness sometimes stems from something within ourselves. If we want to be surrounded by people who love us when we are older, perhaps we should pay all due attention to this when we are younger. I am never quite certain how far one seeks to have everybody running to see one when elderly, although one has not sought to attract people when younger.
To-day is the day when the pensioners are rallying, and I am delighted, as are other noble Lords, that the noble Lord, Lord Hale, chose this day for his debate, even though it meant that some of us were unable to get into the Palace of Westminster because of the pensioners' enthusiasm. I had to point out to some of them that I was on their side and I was going in to make a speech for them; otherwise I think I should have been debarred from entering the building. In the last five years between October, 1967, and October, 1972, the basic State pension has been raised in three steps, and I think it works out at about 50 per cent. This sounds impressive until one realises that in the same period average earnings have increased by something like 58 per cent. I note that one of the demands of the campaigners to-day will be for old-
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age pensioners to have seven good meals a week. Seven good meals per week; one meal per day. How do we feel in this year of grace, 1972, that people have to make just a simple demand in order to live in some degree of dignity?
I realise more and more that we have to look at this question—and several noble Lords have underlined this—as about what we are prepared to give; and when I say "we" I mean those of us who are still lucky enough to be able to work. We must be prepared to give, not only to the elderly but to anyone who is not in a working bracket, a much greater share of the national cake. I have said before that we no longer give tithes of what we get to anyone except waiters and possibly cab drivers, but it was a basic rule in the Old Testament to give a tithe of what one received. I think we must look carefully and solemnly at whether we are really allocating a big enough share of the national income to those who can no longer work for themselves.
I do not wish in any way to pre-empt the discussion on the two Bills that are to come before us, other than to say—and I hate to sound ungenerous in this regard, since the noble Lord, Lord Maybray-King, referred to a "Christmas gift"—that I find that the gift of £10 has an ominous ring. To me it signifies that prices are going to rise dramatically in January. I hope I am wrong in this. Apart from that (and I am no economist), I cannot quite follow the logic of putting £80 million into the economy when we are supposed to be doing a counter-inflation manoeuvre. I can think only of the analogy of a tyre and it seems to me that if you want to deflate it you do not pump air into it. However, as I have said, I am not an economist and no doubt the Government have found some way in which they can deal with this apparently contradictory way of handling the situation.
We have discussed the retirement pension before. This is a generation of proud people; this is a generation who have been through two world wars, periods of depression, and have contributed to our community in a way which possibly those who are young to-day will not be called upon to do; and this generation will accept offers only if they are made in the right way. Last week I met an ex-member of my staff who I

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think is a splendid example of the kind of people we are discussing. She is a woman of 67 and I would say to the noble Lord who is going to reply to the debate that she is a supporter of his Government and not of my own Party. She receives the State pension and a small pension from her husband's firm; therefore she comes just above the figure where she would be likely to receive any supplementary benefit. She wants and tries to live in dignity. She recently had to go to hospital and now has to go three days a week, her fares being about £1·20. She was told that she could get her fares paid. She said to me, "I went to ask and I was told—quite politely—that I had too much money; and I shall never, never, ask again".
I am appealing for the way in which people can get their rights made simpler. You can get concessions on your fares only if you live in certain boroughs, and this is not fully understood. You can get concessions for television licences if you have a scheme of wardenship. Your rents may be higher in one place than another—certainly in London—and they may even be above the limits at which assistance is available. Electricity, gas, heat all cost the same for the millionaire as for the elderly pensioner. To get your prescriptions free you have to be over 65, and I cannot miss the opportunity of mentioning again that the single woman retires at 60 but still has to pay for her prescriptions. If you are an outpatient needing special things—let us say support hose or something of that kind—if you receive supplementary benefit you will equally receive all these things free. But thinking of the kind of woman about whom I am speaking and the kind of people we are thinking about to-day, the people who have saved and who have just a little above the basic figure—how do they find out what they can get? I note this marvellous phrase—and we have been speaking about phrases—
"if your income, after paying rent and rates, is less than £1·50 above supplementary benefit level".
This applies also to optical, dental and other services. It presupposes, first, that you have the necessary leaflet in your possession and, second, that you can work all these things out. My experience of the elderly is that, above all, they do
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not find it easy to work these things out, nor indeed do they find it easy to read the very small print in which it seems to be found necessary to print these leaflets. Nor indeed do they find it easy to go from one office to another in order to get the necessary information.
I have a letter from a director of social services, in which he says
"In my opinion there is a tremendous shortage of opportunity for retired people to know their rights."
I myself, having been involved in work for the elderly for more years than I sometimes care to remember, find considerable difficulty in interpreting official information. If we are to help not only those who are living on their basic State pension and supplementary benefit but the other people about whom we are talking to-day, those who are just a little above it, let us see to it that they do not have the humiliation of having to go from one place to another and then in the end of being refused. We are deeply grateful to the noble Lord, Lord Hale, for having introduced this debate to-day, and if we can do anything to make a little happier the lot of many of the people I know—splendid people—then I feel sure that this debate will not have been in vain.
4.19 p.m.
LORD ABERDARE: My Lords, I should like to echo what has been said by other noble Lords in congratulating the noble Lord, Lord Hale, on having chosen a most appropriate day to move this particular Motion. I would also, with respect, like to say how much I appreciated the attitude that he took to the debate, which has been followed by other speakers throughout the afternoon. We have not turned it into a statistical debate, with figures being hurled from one side to the other and nothing but Party points being made. I am sure it is right that we should criticise each other for the kind of provision that we are making for retirement pensioners and those who are living on fixed incomes. Obviously, it is up to any Opposition to criticise and to any Government to defend their record. I think we have approached this particular debate in a constructive fashion, and I am grateful for that.
The noble Lord has always taken a great interest in the self-employed man

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and he referred again to the rule governing deferred retirement, which he mentioned in a Starred Question the other day. I was glad, as he was, that the Question was answered by my noble friend Lady Young. He referred to her "unblemished political record", and I hope that he was not intending to suggest that my political record was therefore blemished. These matters of deferment of retirement pension and other matters that have been raised in this debate we shall of course have an opportunity of discussing when the new Social Security Bill reaches this House. This Government, like their predecessors—and I include all their predecessors—are anxious to do everything they can to help retirement pensioners. After all, they include among them some of our most worthy citizens, one of them having spoken to-day—namely, the noble Lord, Lord Brockway—and certainly we should like to see them well provided for in their old age.
The noble Lord, Lord Hale, has drawn attention to their difficulties, in particular at a time of severe inflation, and this goes to underline the first priority of our policy, which must be to cure inflation. We have no need to be ashamed of what we have already done to help retirement pensioners—I will say more about that shortly—but we should like to do still more. What we can do will depend very much on the economic situation of the country. If we can control inflation and obtain a 5 per cent. rate of economic growth we shall then be able to devote more resources to help the pensioners and it is as an earnest of our wish to do just this that we are making a £10 lump-sum payment to pensioners this Christmas.
Pensioners are, of course, individual human beings who must be treated as such. I was very grateful to hear what the noble Lord, Lord Maybray-King, had to say about the very many services, both voluntary and statutory, which try to meet individual need. However, in treating the whole problem, as a Government must, we are bound to deal in overall statistics. On taking office it was our commitment to review basic pensions and related benefits every two years and to increase them by amounts sufficient at least to maintain their purchasing power.
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In September, 1971, the standard rates of retirement pensions, widows' benefit, sickness and unemployment benefits were increased by the largest amount ever. The single rate of pension was increased by £1 from £5 to £6 a week and that of a married couple by £1·60 from £8·10 to £9·70. These increases fully met the effect of rising prices and not only restored pensions to their level when they were previously increased, in November, 1969, but gave a small real improvement of 3 per cent. as well.
In December last year we decided that the best way to reassure pensioners and other people in receipt of Social Security benefits that their living standards would be adequately protected, and wherever possible improved, would be a definite commitment to an annual review of pensions and related benefits in future. This is something that no previous Government have felt able to concede. Again, I was grateful to the noble Lord, Lord Maybray-King, for mentioning this. The first of these annual upratings took place last month, when the single rate of retirement pension was raised by 12½ per cent., from £6 to £6·75, and the married rate from £9·70 to £10·90. On this occasion the increases were tax free. They do more than compensate for price rises between September, 1971, and October, 1972, despite the increase in prices in October. The increase in the pension rate was 12½ per cent., whereas prices rose by 8½ per cent. This represents an improvement of pension purchasing power of 3·7 per cent. I am sure that this is the answer to the noble Lord, Lord Hale, in following the advice of Mr. Aneurin Bevan, that we should keep the pensioners' retirement pension in line with the cost of living.
The noble Lord, Lord Maybray-King, pointed out that things had improved over the years, and certainly, if one looks back to 1948, to the beginning of the National Pension Scheme, this is so. The single person's pension has increased between 1948 and the new rate in October by 419 per cent. Against this, the rise in prices over the period up to October, 1972, was 182 per cent. As regards earnings, the latest figure we have shows, for average industrial earnings less tax and National Insurance contributions, an increase of 282 per cent. up to October, 1971, and even the increases since then would make

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the current figure still much less than the percentage pension increase.
Furthermore, since we have been in power there have already been three increases in the rates of supplementary benefit. Not only have we increased the basic level but in the case of pensioners and some other long-term claimants there has been a long-term addition of 60p to cover the extra expenses they are likely to incur, and a further 25p to the over-80s, making a total for them of 85p for the long-term addition; and we have also increased the rates for extra heating by 20 per cent. Also to help the elderly and indeed to help some of those whom the noble Baroness, Lady Phillips, has in mind—those who are just above the supplementary benefit level and who may be liable for tax—we have made substantial improvements in the special tax reliefs for the elderly with modest incomes. The limit of the age exemption relief which gives those aged 65 or over a higher starting point for tax than younger people has been increased since 1970 from £475 to £634 for a single person and from £740 to £929 for a married couple. This means that an elderly married couple can now have a total income, including pension, of up to £18 a week and an elderly single person up to £12 a week without having to pay any tax. Moreover, we have made pensions available for all people over 80 even though they do not qualify for a contributory pension. I hope that these figures will convince your Lordships that it is simply not true that we have neglected the needs of retirement pensioners and we hope very much to make further improvements once the economic situation is more favourable.
Several noble Lords drew comparisons with other European countries and I was interested in what they said. It was freely acknowledged by all of them—I was grateful to the noble Lord, Lord Brockway, for being fair about this—that it is extremely difficult for all sorts of reasons to make comparisons between this country and other European countries. The conditions are so very different. Noble Lords referred to one such difference—that in certain cases the payment is made regardless of whether or not the pensioner is married. I have studied the figures, though I will carefully look at any figures that the noble
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Lord, Lord Brockway, cares to give me. Having looked at the figures, my general impression of the situation on the Continent of Europe—and it is difficult to generalise here—particularly in the health service but also in their social security system, is that they work very much more to the arrangements we had before 1948, of an insurance system, than to the national system we have now. In other words, contributions, very often much higher than ours, are made by the man at work and by his employer, but the benefits go to the employed man. Very often these may be higher than ours but this does not cover, in many cases, the wife who is not working or other people in the population who do not get a sufficient earnings record in their employment. If one were to get figures for the average pension paid in those countries, I believe that we should not find ourselves as low down in the league as has been suggested by the figures we have heard this afternoon. The fact of the matter is that in this country 95 per cent. of all our pensioners get the standard rate of pension. I do not believe that would be so in Europe.
LORD DAVIES OF LEEK: My Lords, I am grateful to the Minister for giving way. I have followed him attentively. But in using those European figures which my noble friend Lord Hale and my noble friend Lord Brockway gave, may I say that my emphasis was in trying not to over-emphasise the cost of the Welfare State in relation to our search for markets. On both sides of the House we have accepted the idea that the burden of the Welfare State impedes our economic and competitive position. I agree that it may be looked at, but we must not over-emphasise it. That was the point I wanted to use the figures to emphasise.
LORD ABERDARE: My Lords, I understood that perfectly well from the noble Lord when he was speaking, but that is not the attitude of the Government. We are anxious to do as much as we can to improve these benefits as the general economic situation of the country improves. The point I am trying to make is that our system is a more national system. The systems in other countries depend much more on the man in employment and his insurance record.

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Certainly this is true of the Health Service. There is no equivalent to our Health Service. When it comes to the supplementary benefit system, so far as I know there is no exact equivalent in a European country; no safety net, such as we have, to prevent anybody falling below a certain level.
LORD DOUGLASS OF CLEVELAND: My Lords, is that because there is no need for supplementary benefits in those countries because they have higher benefits under their system than we have in this country?
LORD ABERDARE: No, my Lords, I would not say that that was so at all. I would say that there are certain other reliefs given to people: more of a local system of relief. The whole system is more like the system to which we were used before there was a national system. I would suggest to the three noble Lords who raised this matter that if they really think that conditions are so very much better on the Continent of Europe, they might be welcoming the fact that we are shortly to join the European Community.
LORD DAVIES OF LEEK: My Lords, I thought the noble Lord was going to tell us to go and live there!
LORD ABERDARE: As for the future we have now introduced in another place a Bill to make improved provision for retirement pensioners on the lines of the White Paper entitled Strategy for Pensions under which employees will have two pensions: a flat-rate basic State pension which will be reviewed annually to keep up with rises in prices; and an earnings-related pension, earned preferably through an occupational scheme, but failing that, a new State Reserve Pensions Scheme. We shall have plenty of opportunity to discuss that Bill when it reaches us.
I listened with great interest to what the noble Baroness, Lady Phillips, said on the subject of people knowing what their rights are under these various schemes and we have indeed done our utmost to publicise them all. We have also done our utmost to simplify them. The fact is that certainly those on supplementary benefit or on family income supplement have a passport to all the other benefits. We are equally well aware
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of the difficulties of people living just above the supplementary benefit level, but one simply cannot do everything at once and we are trying to improve matters as best we can within the limits of the resources available.
May I quickly turn now to the other part of the noble Lord's Motion on those who have money invested in undated Government stock. The Government have a great deal of sympathy with those who have suffered from the depreciation of their investment in certain types of Government stock, but there is no course that we can take which does not pose insuperable difficulties. It is clearly a vital national interest to preserve a sound and workable market in all Government stocks in order to finance the Government's requirements and manage the economy. Like all orderly markets, this depends on the sanctity of contracts and on people being able to buy and sell in the full knowledge of the facts. Therefore, the very last thing any Government can do is unilaterally to change the terms of a stock once it has been issued. Thus, we cannot change interest rates, bring in obligations about maintaining market values at certain levels, convert undated stocks into dated ones, redeem at less than par, or arrange partial and discriminatory redemptions of undated stock if the terms of the original issue make no allowance for such changes. Such actions would be rightly resented by the people who had bought the stocks concerned on the understanding that their terms were fixed and would upset the whole of the gilt-edged market by implying that the terms of other Government stocks could likewise be unilaterally altered.
It may not be legally binding upon the Government to treat all the holders of one of its securities alike. But this has always been an unquestioned assumption and a firm principle of all Government borrowing. Preferential treatment for a special class of holder, however defined, means discriminating against other holders. Discriminatory action breaches the accepted principle of parity of treatment. Once the market value of a Government stock was changed by altering the terms upon which it was issued, people might expect that such action could be repeated on future occasions.

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With regard to war loans, it is true that in the case of the major block of undated stock—3½ per cent. War Loan—the terms of issue allow redemption to be spread over a period of time. We have looked at this very carefully, with the position of the elderly long-term holders very much in mind, but we have concluded that we could not discriminate in favour of any particular group. It would be inequitable. If we did it, we should be bound to repay some who were in no sense suffering hardship, while excluding many others in real need. It would create as much injustice and anomaly as it was designed to correct. Moreover, we should face demands for compensation from the many who have sold their holdings at considerable loss in the past on the assumption that no such action would be taken. The only possible course, therefore, would be full redemption at par. Together with other undated stocks which we should be obliged to treat in the same way, this would make it necessary to raise about £3,000 million, and such an operation cannot be contemplated at the present time.
The Government's inability to act in this matter of undated stocks does not result from lack of concern nor from detailed study. War Loan in particular has occupied the attention of Governments of both major Parties for almost twenty years, but all Governments have come to the same conclusion that there is nothing that can be done in fairness. I listened with interest to Lord Tanlaw's suggestion and I will certainly see that it is passed on. I had some hesitation at first, I must say, in any Government giving investment advice but I shall certainly see that this is looked at. The best service that the Government can render to the holders of Government securities—and indeed to all sections of the community—is to do everything in their power to maintain stability of the currency both at home and abroad. It is to be hoped, therefore, that the important measures we are now taking will succeed: if we can get the better of inflation, not only will the purchasing power of the interest on all gilt-edged stock be stabilised, but we could also hope to see a sustained improvement in the gilt-edged market which would do far more for the holders mentioned by
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the noble Lord than any direct action in favour of a particular group. I hope that I have answered both parts of his Question to the best of my ability, and that the noble Lord will feel able to withdraw his Motion.
LORD BROCKWAY: My Lords, before the noble Lord sits down, could he take the two suggestions I made: the first was that there should be standard inspection of old people's homes, and the second was that Her Majesty's Government should make a special grant to local authorities in regard to the provision of homes and other amenities for the aged.
LORD ABERDARE: Yes, my Lords, I am sorry not to have mentioned those points; they were slightly outside the main course of the debate. Certainly local authorities have powers, I believe, with regard to old people's homes that are voluntarily run; I will confirm and make sure that that is so. On the second point, we have already made greatly increased sums of money available to local authorities through the rate support grant, which is the only way in which it can be got to them.
LORD TANLAW: My Lords, I wonder whether the noble Lord could clarify one point. The Public Trustee Department surely has a duty to advise the public of small means as to how to invest their money. The suggestion I tried to put forward to the Minister was the suggestion of alternatives, not any form of direction. I think the Public Trustee Department has a duty to advise people, and I hope the Minister will say something about it.
LORD ABERDARE: My Lords, I can only say that I will most certainly see that the suggestion is brought to the attention of my right honourable friend the Chancellor of the Exchequer. I should not like to give a direct answer.
4.42 p.m.
LORD HALE: My Lords. I do not think it is necessary for me, I having had the good fortune to provoke so many better speeches than my own, either to comment upon them, which might seem presumptuous for me as a new Member, or to prolong this debate. The noble Lord, Lord Tanlaw, to whom I am grateful for a most constructive speech,

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made a point about holders of long-dated securities, a perfectly fair point and 90 per cent. correct in its application. I had intended to say that they are limited to the rate of interest prevailing at the time of their investment, and if they have to face a new problem of life—the seeking of a home on the coast or something like that—they have to dispose of part of their investment, possibly at a very considerable loss.
I would say to the noble Lord, Lord Aberdare, that with a name like that, I did not intend to impute anything to his personal character; I merely suggested, perhaps incorrectly, that, because of the authority and distinction with which he speaks he has probably been on the Front Bench for a longer period than the noble Baroness and therefore has had the possibility of political experience which has not been open to her. One expects anyone of his name to play a straight bat, and he has done so. The only comment I would make is that on the whole in relation to the words "1952 and after" I think the words "sanctity of contract" are not precisely the mots justes. Of course I recognise the enormous problems which would confront the Government in this connection.
Two of the speakers on this side are old and valued friends of mine; for over thirty years I have enjoyed the benefit of their eloquence, their assistance and their comradeship. So indeed is the noble Lord who spoke from the Cross Benches and who occupied with distinction the Chair of the House of Commons; I was particularly grateful for his speech and the honour he did me in his personal references. I ought to say one word of apology. There have not been any speeches from the other side. Many Members on the other side have expressed their interest and their regret that they did not know sooner about the terms of this debate. I believe some blame for that falls on me. I am told that I ought to have been rousting up a few speeches—no easy task for a young and unassuming Member. I am particularly grateful to the noble Baroness, Lady Phillips, who deputised at the last minute. I owe her an apology for not having discussed with her the terms of the debate, because I had discussed it with the distinguished noble Lord for whom she deputised.
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My Lords, I am grateful for your Lordships' courtesy and attention and for having provoked a useful discussion. I think one can say, in view of 600 Amendments accepted in the last few weeks, that what this House says to-day another place may well say to-morrow. Therefore I hope that this discussion will bear a little more fruit and will be borne in mind by the Chancellor of the Exchequer when he produces his next Finance Bill. With those comments I beg the leave of the House to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

MANPOWER SERVICES COMMISSION
4.45 p.m.
LORD CHAMPION: My Lords, I wonder whether I may put a question. I understood that we were to have a Statement in this House, following one made in the other place, on the Manpower Services Commission. I gather that, owing to some error, this is not to be done. I regard the Statement as a very important one, and I think it is one that ought to be printed in Hansard. Can I prevail upon the Government to ensure that this Statement is in fact printed in Hansard, so that it will be available to all Members of this House who do not normally read the Commons Hansard? I raise the matter because this Statement very much follows what we were urging in the debate that we had some time ago on training for the future. A large number of Members of this House participated in that debate, which obviously aroused very great interest. If the Minister can see that this Statement is printed in Hansard—and I imagine that this could be done under the arrangement which was made some little time ago—I am sure the House will be grateful.
LORD ABERDARE: My Lords, I am afraid I was not aware of this matter. I have been sitting here answering the previous debate. I gather that there may have been a misunderstanding in this matter, and if we have made an error of some kind I apologise for it. I will certainly see that, if it is possible, the Statement is repeated in the House of Lords Hansard.
LORD CHAMPION: I thank the noble Lord.
Following is the Statement referred to, which had been given in the House of Commons by the Secretary of State for Employment:
"With permission, Mr. Speaker, I wish to make a Statement on my proposals for establishing a Manpower Services Commission.
"In my statement on August 8 I said that I proposed to have further talks with the T.U.C. and the C.B.I. before coming to any final conclusion on the ultimate form of organisation of the employment and training services, with the purpose of co-ordinating these services and of involving employers and employees in both activities.
"I must retain general responsibility for manpower policy, but I am proposing to set up a Manpower Services Commission representative of employers, trade unions and other interests which would have direct responsibility to me for the employment and training services. The T.U.C. and C.B.I. agree with this proposal.
"The Commission would take over responsibility for the Employment Service Agency we have set up within my Department and the Training Services Agency we are setting up now. Its main functions would be: planning, developing and operating the public employment services; carrying out the broad range of functions set out for the proposed National Training Agency in Training for the Future; and advising me on manpower questions.
"The Commission and the Agencies would be a source of manpower intelligence and statistics and would join in governmental discussion of manpower issues as appropriate. They would have close relations with the Education Departments and the education service, and would consult with other interested Departments and bodies as necessary.
"The Commission would operate within such broad policy objectives as were set out in the legislation and in any general guidance given to them by the Government from time to time. With the assistance of the Agencies, the Commission would prepare a five-year rolling programme, and a detailed annual programme of work and budget, for submission to me. When these had been approved the Commission and the Agencies would be responsible for operating within them. They would be financed by grant-in-aid from my Department. I would remain responsible to Parliament for the general level of resources made available but the Commission would be responsible to me for their efficient use. I would retain power to direct the Commission to take action which the Government considered urgently necessary in the manpower field.
"If the Commission is to assume effective responsibility—as I fully intend—it must be kept small. I think it should consist of no more than about 10 members, mostly part-time. In appointing members I should wish to secure representation of local authority and education interests, though the majority would be drawn from the T.U.C. and C.B.I. The T.U.C. and
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C.B.I. have welcomed the proposal for a Commission and have agreed to co-operate in it.
"The implementation of these proposals as announced in the gracious Speech, will require legislation.
"This Statement gives an outline of the new arrangements: many important questions will need further discussion—the Commission's relationships with the industrial training boards, relations with the education service, their part in providing services to disabled people, the position of the staff of the Agencies, and many others. My colleagues and I will be conducting urgent consultations with all those concerned."

OIL AND GAS EXPLORATION LICENCES
4.48 p.m.
LORD BALOGH LORD BALOGH rose to call attention to the desirability of withholding further exploration or exploitation licences or leases unless the grantee consortium consists of at least 50 per cent. British public sector bodies; and to move for Papers. The noble Lord said: My Lords, I think that in a debate of this nature noble Lords ought to declare their interest, just as in a previous debate my noble friend declared his. I may say that I am neither interested as a shareholder nor interested as a consultant.
I do not believe I need go over at length the history of this affair, because only 5½ months have passed since I last raised this question in the House. But what a 5½ months they have been! A veritable and beneficent—at least for the oil companies—inflation of prospects; additional gas in the Viking field; oil in the Brent field; doubling of the Ekofisk estimates; upward revision of gas and oil estimates, and the confirmation that the Northern fields will yield plentiful gas. All this constitutes a wonderful 5½ months for the oil companies, and therefore from this point of view I am in no way apologetic. I am also delighted to see that, after a brief excursion to Limerick, I am confronted to-day by the Minister without Portfolio; and I hope that he has put this little affair into his portfolio, because it will fill it, even if he has not got one.
In these 5½ months we have had some very interesting happenings. One of the most interesting was that the Chairman of the Conservative Party in Scotland came out in full support of me. This is almost miraculous, and I am sure it has

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not earned him a great deal of approbation in the highest quarters. I also think that there has at last been—and perhaps I may claim a little credit for it—some Ministerial action. In fact, the House Bulletin of the Department of Trade and Industry even had an article on this subject in which it was acknowledged that the whole supply needs of the oil industry in the North Sea will top the £1,500 million mark, and that perhaps a little of this will drop into our laps. From this viewpoint I must acknowledge that progress has been made; a little too late, a little too little; but, one must be fair, progress.
This is a very abstruse subject, and I dare to bring it before your Lordships' House only because it is a very important one. The debate is really about a figure which is far bigger than the whole cost of our entry into the Common Market. Maybe that will give noble Lords on this and the other side of the House some insight into the urgency and importance of the matter. Perhaps the Minister who has spoken previously would also note that on the Ministerial side, too, there has to be some learning if we are to make headway not only against the oil companies but also against the French Civil Service.
I fear that on the most important front—the front of the specific conditions under which this tremendous gift of Nature to Britain, and more specifically to Scotland, is being handed over to foreigners—we have missed, and continue obstinately and stupidly to waste, the heritage of the country; and this at a time when our entry into the Common Market, and our unresolved social problems, plague us and cry out for the utmost efforts at good stewardship. The Ministry, I think with an obstinacy which is so characteristic of this Government, go on defending the indefensible. As in so many other fields, such as squeeze and freeze, they plough on towards complete bankruptcy, when the example of others—for instance, Mr. Nixon, in the matter of freezes and squeezes and, in the question under discussion, the Norwegians—should make a change of policy obligatory.
What are the present best estimates of the importance of the Shelf? We saw the Government steadfastly refuse to amend their estimates. But we squeezed some figures out in an indirect way. They are
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still, of course, acknowledging only a fraction of what is now probable. According to Professor Odell, whose calculation is not only much the most up to date but also prepared by one of the few independent experts in this field, consumption of oil in 1970 by Western Europe was 1,475 million tons coal equivalent, of which 880 million tons were met by imported oil, 25 million tons by European oil, and 95 million tons by European natural gas. Professor Odell estimates that in 1980 consumption will be 2,300 million tons—that is to say, almost double—coal equivalent, of which 1,000 million will be met by indigenous gas and oil in equal parts, and 775 million tons by imported oil.
Mr. Birk, a Director of B.P., estimates that the immediately exploitable fields contain some 1 billion tons of oil, and the proven reserves of other fields up to another 250 million tons of oil. He thinks, however, that on the basis of the remaining unexplored sectors, from what we know about them, one might expect another 2 billion tons of oil; that is £20,000 million worth of oil at present prices, which are likely to rise. Therefore it is not improbable that British oil production will attain 150 million tons, and perhaps rise to as much as 200 million tons, per annum. At to-day's prices this is equivalent to some £2,200 million per annum for 20 years; that is to say, some £44,000 million. Moreover, of course, as I shall show, prices are likely to rise quite considerably, apart from the general inflation. The value of gas is of a lower order altogether but, even so, will represent between £5,000 million and £6,000 million over the lifetime of the fields. It should be noted that experience suggests—indeed, more than suggests—both in the North Sea and elsewhere, that oil and gas fields of this enormous size prove to be much more fruitful than was originally estimated. It is therefore more than probable that we shall get an even higher off-take than is now estimated by Professor Odell, and of course a multiple of that hoped for by the Ministry.
Two things need to be said at this point on the economics of this conclusion. Though the proportionate contribution of the European fields will rise in a formidable proportion from 8 per cent. in 1970 to 44 per cent. in 1980, in absolute terms

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almost as much oil will have to be imported in 1980 from the Middle East as is now imported; that is to say, 775 million tons against 880 million tons. This, of course, is due to the sharply rising total demand for energy, and has very vital implications on price and therefore on our policy. The second point is one that I have already made, and therefore shall not make again: that in the case of gas the privileged market is limited. The privileged market is the domestic use and petrochemicals, and with the sort of quantities that are now likely to come out of the North Sea—perhaps 6,000 million, 8,000 million, or perhaps 10,000 million cubic feet per day, we are in a situation in which the non-privileged market ought to dictate the policy of the Government.
Let us have a look at the strategy of the Ministry in the last six months. They have put forward four points. The first and most important was their insistence that there must be the fastest possible exploration of these fields, in very difficult circumstances in an unproven field under difficult climatic and physical conditions at high risk. This is what they say. Thus, exceptionally good conditions would have to be granted to the companies, otherwise they would run away. Subject to this, the Ministry said that they tried to get—and they claim succeeded in getting—the maximum possible revenue for Britain and for the British Exchequer by securing favourable conditions for Britain.
Thirdly, and obviously inspired by the Foreign Office (though I am sure that the Ministry of Fuel and Power and its monster successor took this up with great alacrity), no precedents were to be set for the Arabs and others to exact worse conditions from our companies operating in those countries, or for them to discriminate against us in licensing. But the majority of the licensees at the moment in this country are foreigners, which so far as I know is not the case in any of the major territories operating oilfields. It is certainly not true in North Africa or America, and it is not true even in Venezuela. And, of course (this is particularly interesting, and it will have certain consequences to which I shall come in a minute), they count Royal Dutch Shell as a British company, though we know very well that it is no such thing. In fact, 60 per cent. is Royal Dutch and
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40 per cent. is Shell, and both Shell and B.P. shares are now very widely held on the Continent and in Arabia. The Arab sheiks, not knowing what to do with the money they get, have invested to a very large extent in oil shares of one kind or another.
To clear up any misunderstanding, I must say at this point that I do not in any way blame the oil companies and the tycoons for having, from time to time, released alarmist views predicting shortages, which have obviously influenced the Ministry. In a difficult world situation, with Arab participation in companies, with high posted prices in the Gulf, and with large taxes combined with extreme political instability in their most important area of operations, they want to do their best for their shareholders in England and Scotland. Those shareholders have not been doing so well lately, and by acting in this way the high oil executives have been doing no more than their duty, and they have done it very well indeed. No blame should attach to them.
What is reprehensible is that the Ministry has still not reconsidered its posture. It obstinately refuses to learn from what is so clear a case as not to be paralleled in economic history, and continues to give away the national heritage of Britain, and especially of Scotland, to no purpose whatsoever. Let me quickly turn to the question of how Britain could benefit from the oil and gas on the Shelf.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, before the noble Lord turns to that, I wonder whether he would explain what he means by "continues to give away". He has just said that the Ministry has continued to give away the resources of Britain since June, or words to that effect.
LORD BALOGH: My Lords, I said that because, first of all, we have not even raised the question of re-negotiation; and, secondly, because there has been no indication that at the next round of licensing the Ministry is contemplating a completely new policy, which ought to have been made plain long ago. Britain can benefit from the oil in several ways. First of all, it might be able to obtain fuel at specially cheap prices. So far as oil is concerned, this is ruled out by the Rome Treaty in conjunction with the fact that, as we have seen, Europe will have to import oil from elsewhere and the Western

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European price will be dominated by the Middle East posted price. It is of course true that, so far as gas is concerned, there are some clauses which would allow the Minister to interfere between the Gas Council and the oil companies, and to obtain better prices than those for other people. To some extent, I must again admit here that there has certainly been progress (although it is very difficult to be clear about this because we are surrounded by secrecy) in that the inflation escalator clause in the gas contracts has not been invoked. I think we should have heard if it had been invoked. I can perhaps claim a little credit for the fact that the Ministry's non-existent vertebrae have been stiffened up.
Secondly, the discovery of indigenous fuel might put the country into a better bargaining position vis-à-vis other oil producing countries. This is a bogus argument because, as we have seen, we are still dependent on Middle East oil. The discovery of oil will not influence the Middle East price at all. Thirdly, Britain can benefit by substituting indigenous for imported oil and thus save on the balance of payments. All writers on this subject have been bandying about figures reaching into hundreds if not thousands of millions. There was a special supplement to the Sunday Times, there was a special supplement to the Financial Times and there have been inlaid pages in The Times. We have had a spate of not quite accurate information in all these papers. Given the arrangements that have been made, this assertion is wholly misleading. The net saving to the balance of payments is in respect only of that part of the visible import saving which does not lead to an increasing debit on invisibles; that is to say, the cash flow and the profit flow which the foreign oil companies bring in. Even in the case of the British companies, it is not quite accurate to say that there is a complete saving. Inasmuch as the profits accruing to them from the North Sea oil are used to finance other exploration elsewhere, Britain will benefit only as regards the salaries paid and the supplies bought from this country, and we know very well that that has not been much.
In this respect, of course, the persistent underestimating by the Ministry of the importance of the gas and oil fields had
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fatal results, because they did not alert the British firms to the need to speed up supplies. Even the British Steel Corporation, another part of the public sector, cannot be excluded because, according to my information, it is still quite unable to supply certain types of pipes. It was the Japanese, the Dutch, the French and the Americans who benefited most. From this point of view, at any rate, the tactic of the Government in underestimating the importance of the volume of available resources while at the same time insisting on very rapid exploration was the very opposite of the policy that was required. British Petroleum will benefit us, and so will the Gas Council and the Coal Board; but the participation of the public sector in Britain was said to be decreased. It is now only 21 per cent., and represents a decline of almost 60 per cent. from what was agreed under the Labour Government. Moreover, the Labour Government entirely reserved the Irish Sea to public enterprise and public exploitation, and that will now be taken over almost entirely by foreign private firms without public sector participation.
Whether or not Britain will get an advantage from the oil will also depend on what happens to the proceeds. From this point of view, Britain could benefit by taxation, by direct British public participation, by the share of British as against foreign private companies (excluding Royal Dutch), by the share of British industry in supplying the capital and current production needs, and by the use to which the cash flow is put. As we have seen, on all these counts the policy of the Government was grievously mistaken and, despite all our efforts, remains grievously mistaken. The British share in the total is not really as high as the Ministry avers, because the Ministry's figures are largely irrelevant. They are irrelevant not only because Shell is counted as a British company, which is bad enough, but because they are based on the size of the territory granted and not on the prospective yield of oil. Therefore, as the Brent is now, to a very large extent, foreign and we have only the Forties field, a much larger proportion will accrue to foreigners.
Equally silly is to claim that to have acted otherwise would have encouraged

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the Arabs to squeeze the British companies more. First of all, there are not many British companies which are squeezable. In Libya, most of them have been expropriated, and in Iraq they have been expropriated; so, on the whole, there cannot be very much risk. Moreover, this feeling is a remainder of the Imperial syndrome which holds that our behaviour influences other people against their own interests, and that they ate unable to realise, and stupid enough not to realise, what is in their interest. It should be said that the OPEC experts are among the world's foremost experts on these questions, and have proven to be superb negotiators. I only wish that we had at the Ministry experts with similar knowledge and similar tenacity.
Given the fact of continuous political trouble in the Middle East and in Nigeria, any condition granted to British and foreign companies in the North Sea better than the OPEC terms tanto quanto reduces the British take, and is a wanton act against the best British interests. In fact, soft terms in the North Sea, combined with the peculiar system of taxation, only makes the oil companies less resistant to demands by the Arabs—the very opposite to what is needed. Moreover, so far as taxation is concerned, the double taxation agreements and the reform of the corporation tax are likely to make it possible to offset tax payments and participation payments to Arab sheikhs against British corporation tax and income tax. It is therefore wholly illegitimate, when calculating the tax revenue of the British Exchequer from the oil, to include corporation tax at the full rate.
Then, as to the riskiness, it is said that the horrible climatic conditions create great riskiness. The industry claims a 1 in 20 success ratio. That was Mr. MacFadzean's estimate. According to the Ministry, out of 195 exploration wells that were driven 29 were found to have substantial yields. Of these, 7 were in very large fields indeed. The Petroleum Handbook itself confirms that this is the sort of success ratio, not 1 in 20, that ought to be expected when there are scientific explorations, geological and otherwise. Moreover, it is the Ministry itself which ridicules this argument. If it was justified in granting unusually
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favourable terms at the beginning of the exploration process on account of the risk attached to the unknown, it follows that each successive well, whether successful or not, increases knowledge and diminishes risk. Thus, the policy of the British Government in granting more and not less favourable terms after the exploration has been made, after wells have been dug, after the geological structures in the North Sea have been explored, either gives the lie to their arguments or is further proof of their complete incompetence. From every point of view the Ministry's statements and claims have been unfounded, and their refusal to revise their attitude is contrary to their duties as trustees for the nation.
I now turn to the consequences. As I said, the British share in the oil under the North Sea is likely to turn out to be worth at least between £20,000 million and £30,000 million. What sort of profits will arise? The answer to this question is extremely difficult, as the Ministry has not compelled oil companies to open their books. We have only some indications. I am not going over the case of gas because I have already spoken for too long and it is a complicated subject; but in the case of oil the oil companies have made a great play of the superhuman feats which the oil-prospecting crews are performing in the northern North Sea in conditions which are, for human life, perhaps the worst in the world. This is completely true, but it is completely irrelevant to the calculation of profits.
The magazine Ocean Industry, in their March, 1972, issue, reported that the development cost of Ekofisk will amount to some 1,000 million dollars; that is to say, about £420 million; whereas the yearly output of oil alone, without gas—which might yield another £50 million to £60 million—is estimated to be worth £450 million a year. That is to say, there is an output per capital ratio of 1 to 1. No other industry can claim that. Sir David Barren has given £250 million as the average development cost of a 12·5 million-ton oil field, a ratio of 1 to 2. Even that is tremendously low, and Ekofisk has already much improved on it. We know that B.P. raised £360 million for North Sea exploration. It is by no

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means certain that the whole of this £360 million will be expended on the Forties field, but suppose it were. The Forties field is now expected to yield 20 million tons a year, worth £220 million; that is to say, a capital output ratio of 1 to 1½. This will give tremendous profits, but tremendous profits!
Let me finally deal with the central argument of the oil companies and the Ministry, which is that extreme speed in developing the area was required, though the same experts predict a growing oil shortage with very much higher prices due to American shortages—and there can be no doubt that the demand for oil is increasing at a pace which must raise anxieties in the minds of even disinterested people like myself. If that is so, surely it would have been in the British interest to rely at the moment on relatively cheap supplies from the Middle East and to develop the North Sea slowly, with due regard to our future needs—needs which might be very onerous indeed for the balance of payments later. Instead of following this reasonable policy, we have handed over one of the greatest natural resources of the country to mainly foreign exploitation, an act made worse by the fact that the determination of the degree of our exploitation is handed over to the Arabs. This is so because we have allowed oil companies to exact the market price from us for North Sea oil without due sharing of the resultant super-profits. This market price, of course, is set by the OPEC countries, and bears no relation whatever to the cost of getting oil from the North Sea, which is much less than the price exacted by OPEC. My Lords, a more ludicrous policy has never been witnessed in the history of an industry in which Governmental incompetence and company excellence are indeed the hallmarks of the two sides. I beg to move for Papers.
5.18 p.m.
LORD TANLAW: My Lords, I think the noble Lord, Lord Balogh, will agree with me that under the law of averages a gusher is sometimes followed by a dry hole, in oil parlance. I do not want to be a dry hole in this very short debate, but I must say that I really cannot speak on the level of the noble Lord, Lord Balogh, or with the knowledge that he brings to bear on this subject. But I
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should like to say one thing to the noble Lord, Lord Balogh, and that is that, in his wording of the Motion, I should have liked to see what I believe to be the very necessary distinction between exploration and exploitation of our oil reserves around our coasts. These are two entirely separate operations, my Lords, with different capital requirements and different technologies. The capital need for exploration is negligible compared with the development capital and its constitution, once workable quantities of oil, gas or minerals have been discovered.
This leads me on to inquire from the Government whether there is a proper assessment of British energy reserves and requirements between now and the end of the century. If there is one, I have not read it. In any case, I cannot see how there can be an accurate one until we know the real quantities of oil and natural gas that lie off our shores. It is surely madness to try to withhold exploration licences at this juncture, because such a policy must delay the drawing up of an energy plan for Britain and the part that it has to play in the overall European energy market. There are also major political implications to be considered in drawing up such a plan, not least of which is the future role of the coal industry. Although this does not come into the wording of the Motion before the House, a great deal of unnecessary human hardship will be created unless the coal industry is allocated a place in the expanded energy market of Europe. If the experts are right, and for once I think that they are, Europe will need every lump of coal, every whiff of gas and every drop of oil it can produce to satisfy the future energy requirements of its industry and population.
I believe that the need for a national energy plan is pressing and as urgent as to-morrow. The whole economic future of this country rests on it. For that reason, I want to make a plea to noble Lords who sit on both sides of the Chamber that such a plan should be made on the basis that there will be not only Conservative but Labour and Liberal Governments between now and the turn of the century. I say this because the ideological undertones (with which the

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noble Lord, Lord Balogh, knows that I disagree) in the wording of his Motion worry me. They imply that there could be a major change of policy towards oil if there were a change in Government. Besides scaring off potentially-interested foreign investors without whom the development of the reserves cannot be fully realised, a basic change in Government policy will make forward planning virtually impossible, both for the oil and gas industry and the national economy as well. The near destruction of the British steel industry by this chop and change policy must surely be a lesson that must not be lost.
I am therefore advocating that a national energy plan should be formulated by a body with all-Party representation, with full representation by the energy producers and by the Government Departments concerned, plus those representing regional and environmental interests. I was pleased to note that the noble Lord, Lord Balogh, referred to Scotland in his speech—and very valid references they were. In short, I am saying that if a national energy plan is to have continuity and if it is to work at all, it must be taken out of day-to-day politics.
I now come to my second and last point, and this is where I draw closer to Lord Balogh's concept of State participation in the development of the oil industry. As I said earlier, larger amounts of capital are required and there is, I believe, a case for the State's subscribing some of it. However, the timing of such development is important, and once the reserves are known through exploration I see no point in rushing to develop them. The development of these reserves must tie in with a national energy plan and the general market conditions prevailing in Europe. For instance, if the oil companies or future planners are right and there is going to be a shortage of oil, prices presumably will go up; therefore I feel that it can only be beneficial to our national interests to leave the oil where it is, at the bottom of the sea, until toward the end of the century. There is an added advantage in waiting for improvement in the very sophisticated development technology necessary for operations in North Sea conditions. Any
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advances in this field through practical experience must make exploration more economic and therefore more profitable to the developers.
Just as it is impossible to formulate a national energy plan without full knowledge of available fossil fuel reserves, so it is equally impossible to match regional development with oil discovery without a guaranteed phased allocation of funds and a representative body with powers to utilise them. The Standing Committee for North Sea Oil, formed by the Secretary of State for Scotland, has fulfilled a need at this stage for co-ordination of the various interests in Scottish regional development including oil interests and so on; but a body of this kind, however well intentioned, however proper that it should exist and operate at this time, can do nothing without power and money. The time has now come for something more substantial to carry on the good work on a permanent basis. It is for this reason that the Scottish Liberal Party and others have called for the establishment of a Scottish Oil Development Corporation. This body would have all-Party representation, including the unions, the oil companies, bankers and the Civil Service Departments concerned. I must emphasise that the motivation behind this suggestion is not Scottish nationalism but sound common sense. How else are the Government going to prepare regions such as Scotland to take advantage of these new discoveries? We have not heard from them about their ideas. This air of mystery referred to by Lord Balogh I can understand when it comes to figures but when it comes to policy, be it an energy plan or how it is going to be developed on the ground, there is no need for secrecy, either from the point of view of the oil companies and interested parties or from that of every person in Scotland.
My Lords, I return to the Scottish Oil Corporation. It would have a regular supply of funds allocated from a Scottish development bank which would be funded by oil revenues and thus would be enabled to plan ahead on businesslike lines. The present system of waiting each year for an unspecified sum to be allocated by the Treasury and then watching it dissipated by various Government Departments is a blueprint for failure, if

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ever I saw one. When the noble Lord, Lord Balogh, advocates the involvement of public sector bodies, it is bodies such as the ones I have outlined which I would support rather than the State monopolies which we have in other sectors of the energy market.
I want to conclude with an illustration of what can happen in a small community if full advantage is taken of the opportunities offered by the local discovery of oil. I take this example from the excellent report on North Sea oil produced by Cazenove and Co., the stockbrokers. The place in question is Morgan City on the Gulf of Mexico which had, in 1945, a population of about 4,000 people. After 26 years of off-shore activity, the population has grown to 25,000 and the number of jobs created by September this year in the city and in its environs amounted to 18,750. Out of a total number of 1,023 commercial boats registered, only 297 are commercial fishing boats; the remainder are in service to the oil industry. The transformation that has taken place in Morgan City can take place in a number of locations in Scotland where conditions are similar. I conclude by saying that this transformation cannot be achieved without planning, without funds and without the will to develop the benefits of a new-found oil industry for the benefit of the local community.
5.29 p.m.
LORD HUGHES: My Lords, I do not intend to speak for any length of time during this debate because my purpose in being here is more to have a watching brief, having regard to the fact that three weeks from to-day we are to have a debate on the Scottish economy with particular reference to the effect on that economy of North Sea oil. But having heard my noble friend Lord Balogh before on the subject of North Sea oil, I was certain that it would be eminently worth my while to be here to-day to listen to what he had to say on this matter. I certainly have not been disappointed, particularly as I had the advantage, for which the rest of your Lordships will have to wait until to-morrow, of having a copy of his notes in advance which made it easier to follow the mass of statistics with which he favoured us. I should certainly wish
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to stress strongly that anyone who has any interest at all in this subject should take the opportunity of reading at leisure and of digesting the information which my noble friend has given to the House to-day.
It is not without significance that of the five noble Lords who are down to speak in this debate, four are Scots—although probably the Minister is not allowed to plead that, because the Government are not Scottish and he speaks for the Government and not necessarily for Scotland in this matter. We have noticed from time to time that they do not necessarily mean the same thing. In fact, when I was talking to my noble friend Lord Diamond briefly during the debate I slipped into what most of your Lordships would regard as an error, but which most of us in Scotland are beginning to accept as a proper statement of the position, by referring not to "North Sea oil" but to "Scottish oil". There is no subject at present which is of greater interest to the people of Scotland than this one. It is affecting so many aspects of life in Scotland. I do not want to anticipate the forthcoming debate by referring to this subject in any detail, but the location of industry; the way in which house prices and land prices are being affected, not only in Aberdeen but also over almost the whole of the East of Scotland; the effect it is going to have on our road pattern—all of these are very much the concern of the people of Scotland at the present time. It would be a great advantage to us to know the extent to which we are to participate in the revenues which are to come from the exploitation of this oil.
In the Scotsman this week, and I do not supposed that this week is the only one (I happened to be reading the Scotsman on Tuesday morning when I came down to London on the sleeper train; I do not know whether it is by courtesy of British Rail or the Scotsman that we get a free copy on the way down) I read correspondence in connection with Scottish oil. I would ask the Minister whether it is possible to give us some elucidation of the figures which are being used. Apparently the Secretary of State for Scotland said recently that by 1980 the revenue from North Sea oil will be of the order of £100 million a year. It was suggested in this correspondence, by

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someone writing on behalf of the Scottish National Party, that a more correct figure would be £800 million a year. Another writer on the same day made a comparison with a potential production from North Sea oil of 3 million barrels per day, which he compares with a production of 2·7 million barrels per day in Libya; and the Government of Libya collect a revenue of £771 million from that oil. So £800 million would appear to be nearer the mark than £100 million.
My noble friend Lord Balogh referred to the secrecy which surrounds so much of this subject. Can the noble Lord, Lord Drumalbyn, give us some enlightenment about where the figure of £100 million in 1980 comes from and the sort of basis on which it has been worked out? The people of Scotland will not readily forgive the Government if they are misled by the Government's understating the possibilities of this development. Or it may be that what the Secretary of State has said is correct; in which case it justifies the statement of my noble friend Lord Balogh that the Government are throwing away opportunities of which they ought to be taking advantage; that they are not extracting from this asset the proper share for the people of this country. I should like to have some information which would help us to find out exactly where truth lies. I do not intend to say any more at this stage, but I look forward to what the Minister will have to say in due course. I am certain he will accept that so far as the Scottish debate on December 13 is concerned this debate will be regarded as a rather useful curtain raiser, and I am most grateful to my noble friend Lord Balogh for having given us this opportunity.
5.35 p.m.
THE EARL OF LAUDERDALE: My Lords, I should like to join the noble Lord, Lord Hughes, in expressing the thanks of your Lordships' House to the noble Lord, Lord Balogh, for raising this subject. His Magyar persistence, that of the Danubian plainsman, would do credit to any Highlander, even if we have as a result been exposed to a familiar hindsight rhapsody about the disposal and throwing away of natural resources from the brilliant author of S.E.T. which worked out in such a surprising fashion. I am
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very grateful—we all are—to the noble Lord, Lord Balogh, for his—
LORD BALOGH: My Lords, may I remark to the noble Earl, Lord Lauderdale, that I am not the author of S.E.T.; he mixes me up with another one. Secondly, it was not from any hindsight. All this has been foresight.
THE EARL OF LAUDERDALE: My Lords, I am so glad to have been able to bring to his feet the noble Lord whom I always regard as a friend. His interventions are always stimulating; they are very often enlightening, especially when one has the chance either to read them beforehand or to read them afterwards. But I am grateful to the noble Lord, and I apologise if I gave credit for S.E.T. when it was not due. I am grateful to him for raising this subject and giving the opportunity, in my case, to declare an interest, which is that of a long-suffering shareholder who has not yet sold out his 200 Shell Transport and Trading shares but who is watching their flotation downwards with a good deal of apprehension.
My Lords, first, is there an energy crisis in the industrial Western World? The National Union of Mineworkers, who have some knowledge of energy, say there is. The National Coal Board through their Chairman who has a right to be heard, say there is. Broadly, the major oil companies say there is. Broadly, The Energy Directorate of the Common Market Commission say there is. So the next question is whether or not it is tin Britain's interests to obtain maximum exploration and development, not only of the Continental Shelf but also of the Continental Slope, and that as soon as possible.
I was much interested in the thoughtful speech of the noble Lord, Lord Tanlaw, and I went along with so much that he said, not least his plea, which I would endorse wholeheartedly, for an inter-Party, as it were a non-Party—a supra-Party—review of energy policy, looking many years ahead; something that can give confidence to the energy industry. But I did not quite follow how he hoped that exploration could be encouraged if exploitation was to be discouraged. But no doubt when we come to our debate

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on Scotland we shall each have an opportunity to return to that. At any rate, I submit that our interest is to get maximum exploration and development both of the Shelf and also of the Slope as soon as possible.
Nor, my Lords, are the Norwegian, Dutch, Danish and German examples of caution altogether relevant. Germany, Holland, Denmark, and for that matter France and Italy, gladly turn, directly or otherwise, either to indigenous or to East European sources of natural gas. Norway has a relatively small domestic energy demand and already has hydro in abundance. Delay in the publication of their terms for their third round of licences is no doubt due to the politics of their forthcoming negotiations for a trade agreement with the Common Market. Though I share many of Lord Balogh's apprehensions about E.E.C.—we have walked arm in arm through the same Lobby on a number of occasions on that subject—I note Dr. Haverkamp's famous 46 points: the main current source document on Common Market energy policy entitled Progress Required in Community Energy Policy 1975–85 (COM (72) 1200 Final) which was addressed on October 4 by the Commission to the Council of Ministers. This document insists that ensuring long-term security of energy sources is more important than member countries' extraction of the maximum financial profit from them—that comes in subsection (3)(1)(a). That judgment bears out my own view, but still more important supports that of Mr. Boardman, the Minister responsible, which is that Britain needs to do two things: to sustain the momentum of exploration and development, but to keep a balance between the share which the State should enjoy and the share for the entrepreneur, which shall still be sufficient to sustain his own incentives.
The noble Lord, Lord Balogh, believes that it would be of advantage if the public sector, which, as I understand it, now has about 20 per cent. of the licensed areas overall, were lifted to 50 per cent. If we are to have State intervention on a larger and larger scale, as this Government's yoga-like somersaults suggest, then I must say that I would rather it came about through the abrasive disciplines of a canny scrutiny by a critical and reluctant investor—even
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a Tory Government—than through a policy which indulges in intervention for its own sake.
The financial risks off-shore are quite extraordinary. It is not easy to get an exact, or even an average, well-head cost of oil on-shore in the Middle East, but it is somewhere between 6 and 25 cents a barrel; delivered to Northern Europe, it is something like 3 dollars 37 cents. On-shore exploration costs, as against off-shore in shallow waters—and they have been going on all over the world for years—are as 1 to 4: off-shore exploration in shallow waters is about four times more expensive and difficult than it is on land. But in deep waters the difference is not 4 to 1, but 10 to 1. And when we are talking about "deep waters", we are still talking about the Continental Shelf. God knows what the cost is going to be like when we start going down the slope into the Atlantic.
As the noble Lord, Lord Balogh, knows well from the reply given to him last June by my noble friend Lord Limerick, only 29 out of 195 exploration wells sunk in the British sector up to that date showed any sign of oil or gas. Only 7 in 195 wells—that is, 1 in 28—led to an oil or gas field development. These proportions speak for themselves. The oil companies' own recent financial reports scarcely suggest that there is a ripe picking to be had here. Rather, surely, we should regard the oil and the oil companies in Milton's phrase, applying it to our industrial society,
"Through the porch and inlet of each sense, Drop't in ambrosial oils till she revive."
The oil companies' recent performance has been analysed by the Chase Manhattan Bank, who lately published a study of the world's 30 major oil companies and their world-wide performance. It reached these conclusions, having regard to their off-shore, as well as their onshore, operations. First, their recent earnings growth has been too low worldwide to sustain the expansion of capital investment required now. In 1971, overall net profits, at not more than 7·4 per cent. of gross revenue, were the smallest proportion on record. Their second conclusion was that if tax burdens had simply kept pace with gross revenue, instead of rising faster, net profits in 1971 over 1970 would have been some 28 per cent. higher.

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Their third point was that, because tax burdens of one sort or another are rising steadily everywhere, and faster than gross revenues, the oil industry itself cannot finance more than 60 per cent. of its 1970 to 1985 investment in expansion out of earnings, capital recovery provisions, depreciation, depletion allowances and the rest. That is probably why the Common Market's Dr. Haverkamp's document so strongly urges aid to the oil companies by way of subsidy, by way of soft loan (in Section 15), by way of tax incentives (in Sections 18 and 24) and in terms of regional development considerations (in Sections 15 and 24). I will not ask my noble friend Lord Drumalbyn to answer now, because I have more questions coming. But would he find an opportunity, either in public or in a letter to me, to let me know what are this Government's views on these of Dr. Haverkamp's suggestions in this major Common Market energy policy document?
My Lords, anyone who believes in the social need for regional policies must accept artificial distortions of the free flow of market forces. I do: and that is why I am a Tory and not a Whig. So if distortions are acceptable, I should like to put these questions about the next round of licences to be issued—and once again I look for the Minister's reply at leisure, no doubt in one of those splendid letters that I always enjoy receiving. First of all, British refinery capacity, both present and now projected, is notably lower, in proportion, than British oil firms' contribution to West European supplies. Will the Government include among desirable qualifications for future licensees a pledge that they will refine in the United Kingdom so much per cent. of any crude oil that they eventually develop? The noble Lord will know very well, as I do, that such a requirement would riot be greeted with whoops of joy by the oil companies; but it could be a serious factor in promoting regional development.
Then, in the event of further natural gas being discovered will the Government require the landing of it on the British mainland, where liquefaction for export and/or use as feed stock for power generation or petrochemicals, or both,
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could again be a major contribution to regional industrial development?—and here I have in mind the Cromarty Firth. Perhaps I may just say, in parenthesis, that there is great anxiety in certain quarters of that corner of Scotland about the rather narrow margin of power supplies currently available from the grid. And of course we know, for example, that British Aluminium have suffered considerably from cut-backs and trips of power.
I should like to ask the Government this further question: will they, in considering the next round of licences, require evidence that the potential licensees have contributed to research under either of the following two headings? The first is sea-bed operations and habitats, inasmuch as current platforms are likely to be impossible when the time comes to develop the Continental Slope. Sea-bed habitats may take their place. The second subject would be research on offshore platform power generation as perhaps. later on, the cheapest conversion system likely to be able to assist both our desperate need for cheaper industrial power and the very great problem of bringing the product of oil or gas discovery to land.
Lest my noble friend should think that the questions are over, let me warn him that I am not going to miss this opportunity of putting another four, about which I have no doubt he will wish to write to me in due time. First, will the Government think again about the projected Ship and Marine Technology Requirements Board? The sub-sea habitats of to-morrow have nothing whatever in common with ships and very little in common with submarines, for the latter are things that move and the former are things that are designed to stay put. Our underwater technology pioneers are seriously disturbed, and indeed disappointed, at the Government's decision on the kind of Ship and Marine Technology Requirements Board which they have announced they are setting up. Then, do the Government intend to establish fatigue standards for the building of offshore structures; and, if so, how and when? I also have a more general question: have the Government yet repudiated, and, if not, when will they do so,

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the crude if not condescending implications of the declarations of Mr. Fernand Spaak, speaking as the E.E.C. Commission's Energy Director-General, when he suggested that we should forgo a measure of our sovereignty in licensing policy and forswear a fully national policy in that field?
My last question is this: can the noble Lord tell us, either now or on some convenient occasion, something about the state of play on negotiations to extend the median line in the North Sea North of the 62nd parallel, North of Scotland, between our own country and the Danish Faroes, and with France in the Western Approaches? As the noble Lord, Lord Tanlaw, so rightly pointed out, there is a very great difference between exploiting and developing the offshore. The one is a great deal more expensive than the other. So I could not help feeling about the noble Lord, Lord Balogh, something of the "sweet converse of an innocent mind" when he put down his Motion about these two quite different functions. Our interest, my Lords, is surely to assist both exploration and development. It will assist our energy policy far more both to ease fiscal burdens of every kind and to treat these operations as special development area undertakings qualifying for maximum aid. I ask the Government to look at this, too.
May our policy be ever subject to the keenest discipline of private enterprise scrutiny of investment projects for maximum reward to the citizen as a risk-taking investor but for the minimum cost to him as the overburdened client of the apparently invincible Inland Revenue! Let it not be said of the taxpayers of our advanced industrial society of to-day—
"They that die by famine die by inches"!
5.55 p.m.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, first of all I should like to thank the noble Lord, Lord Balogh, for raising this matter to-day. As he said, it is not so very long since we last discussed it, and I am sure that he would not expect me to go over the same ground again, although I am bound to refer to some of the matters in order to make clear, so far as I can, the attitude of the Government. The noble Lord, Lord Balogh, is always a very challenging debater. I sometimes wish
1018
that I could have the good fortune of the noble Lord, Lord Hughes, of reading what the noble Lord, Lord Balogh, had to say in advance, because it is not easy to follow all the detailed arguments and statistics that he puts up—perhaps partly because he couches them in a fairly polemical way. May I suggest, with deference, that he might perhaps take a lesson from my noble friend Lord Lauderdale, who is often exceedingly critical of the Government but who manages to put his questions in such a way as to make them sound reasonable? I am not suggesting that they are not always reasonable, but at any rate it is a very good start when one is listening to a debate.
LORD HUGHES: My Lords, if I may interrupt the noble Lord for one moment, does he not find also that the speeches of the noble Earl, Lord Lauderdale, are very much better when one reads them the next day?
LORD DRUMALBYN: My Lords, I am sure one enjoys speeches the more when one reads them the following day. However, I should like to make the point—and I am sure that noble Lords will sympathise with me in this—that on a highly technical subject of this kind it is very difficult to give immediate answers. In any case, one does not want to be too long. But may I say right away that what has been said in this debate, as usual—especially in view of the fact that it has been a debate of very high calibre—will be particularly carefully studied, and the fact that I do not reply to everything, even by letter afterwards, must not be taken to mean that what has been said has been ignored.
The Question on the Order Paper is a relatively narrow one. I do not complain of the width, but when in connection with an Unstarred Question the debate ranges widely, and wider than what is on the Order Paper, one has at least some excuse for not replying to every point that is made. To some extent this discussion was, I thought, deliberately used by noble Lords who share my nationality as a curtain-raiser for the debate which we are to have (as the noble Lord, Lord Hughes, said) in the middle of next month. So I do not think I should be justified in detaining your Lordships too long on matters

1019
relating to Scotland, however dear they may be to our hearts.
The noble Lord, Lord Balogh, has again criticised the offshore licensing policy that has been followed by successive Governments, but I may say that one thing that is remarkable is the degree of continuity that we have had in licensing policy between successive Governments. I agree with the noble Lord, Lord Tanlaw, that it would be a great pity if we were to have a rapid or a very wide swing from one kind of policy to another. One would expect, perhaps, minor adjustments of policy, but I quite understand his argument there. I am not quite so certain that it will be possible to have an all-Party study of the energy policy, although I am sure we shall have opportunities to debate this matter as time goes on. I should not like to comment further on that: at the moment.
The noble Lord, Lord Balogh, has suggested that it is desirable that to be eligible for a production licence any consortium applying should be able to show that 50 per cent. of the equity—if I understand him correctly—is held by British public sector bodies. Before considering whether it is desirable that there should be such a condition, I would say something in justification of the policy followed so far—a policy which has been supported in a valuable measure by my noble friend Lord Lauderdale. I submit that the policy has been extremely successful in achieving its main object. The main object has been the rapid discovery and development of the United Kingdom Continental Shelf. This object has been achieved more successfully than anybody could have foreseen in 1964 when serious exploration started.
If we take gas, for example, in a few years the position of the gas industry has been transformed. Already 90 per cent. of the country's gas now comes from the North Sea, and total gas sales have doubled since 1967. Gas has penetrated into new markets, especially in industry; and the point my noble friend Lord Lauderdale has made about landings in this country will be very carefully looked at indeed. I would say that our resources in the North Sea are national assets and will be treated as such. The first commercial oil find in
1020
United Kingdom waters was made only in 1970. The first oil should be landed in quantity in 1974. By 1980 some 75 million tons—half our total demand—should be coming from the North Sea. Production may well be higher—several noble Lords have made this point—still later in the 1980s. The figure of 75 million tons may not be the end of the story, but that is the best estimate that we can make at the present time. Others may make different estimates based on different data. If we saw that data no doubt we should be able to reconcile the two.
Critics of past policy should remember that these successes were achieved in an area where petroleum resources were virtually unknown in 1964 when exploration started. Listening to the debate to-day, one almost had the impression that the oil was rolling in at a vast speed now in an area which has been proved to contain large quantities of oil only in the past few months; yet the oil companies have spent some £450 million to £500 million in the United Kingdom sector since that year. They have drilled over 400 exploration and production wells—more than twice the total drilled in the rest of the North Sea: the Norwegian, Netherlands, Danish and West German sectors. It will be surprising if the United Kingdom sector does not produce more oil in 1980 than all the others put together. The companies' willingness to commit such substantial resources to work in United Kingdom waters, with its consequent effect on the pace of development, was one of the great benefits that flowed from Government policy. This effort was, moreover, achieved with substantial British participation. The noble Lord is quite right in saying that we have treated Shell as a British asset; the difference that is made in the overall proportions of course is substantial, if one allows for the Dutch content of Shell, but that does not invalidate the statement that there has been a substantial British content in the exploration and, as I prefer to call it, production.
LORD BALOGH: My Lords, would the Minister then correct the 41 per cent., or is it the 41 per cent.? Would he confirm or deny that the 41 per cent. refers not merely to Royal Dutch, but also on the basis of territorial licences?—That

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is, it is based not on probable production but on the territory held by the licensee.
LORD DRUMALBYN: My Lords, I think that is so; I should like to check that it is based on the territorial allocation. One would expect that to be so, in view of the fact that the estimates of reserves are somewhat uncertain.
To answer the other question, I understand that the overall figure would be of the order of some 32 per cent. if the Dutch element is excluded. This effort was achieved with substantial British participation, as I said; and including the Dutch element, about 40 per cent. of the area licences are held by United Kingdom licensees. British industry also has benefited more than one would think from listening to the critics, although I know that more remains to be done. Of the £450 million to £500 million expenditure which I mentioned, about half was paid to firms resident in the United Kingdom; that is to say, firms which are resident in the United Kingdom, whatever their ownership. Past policy has therefore been extremely successful in what it set out to do. But in determining policy in future we shall need to take account of changing circumstances. One very important change that has taken place this summer is that the United Kingdom sector of the North Sea has been established as a substantial petroleum province. Other recent changes have also confirmed the attractiveness of United Kingdom North Sea oil, in particular the sharp increase in the OPEC take in 1970–71 and the prospect of further changes, difficult to foresee, in conditions in OPEC countries.
What the terms of any future licence round will be I shall not attempt to-night to predict. There is no round immediately in prospect, and circumstances may change before the next one takes place. I confess I had a little difficulty in following the noble Lord, Lord Balogh, at one point, because I was not clear whether he was chastising us for being slow in developing, or whether he was advocating the slower depletion of our oil fields. I thought he did both together at one time. If we were to slow down the depletion of our oil fields it would mean postponing the balance of payments advantages; it could also increase our
1022
dependence on OPEC oil—and I should like to make this very clear—at a most dangerous time. Nuclear power and other alternatives will provide an increasing share of the market in the distant future. We want to use North Sea oil to bridge the gulf. I hope that makes the policy of the Government clear in that respect.
May I once again state the three main principles which the Government will have in mind in developing future policy? They are, first, the need to maximise oil and gas production from the United Kingdom Shelf; secondly, the need to ensure a proper return to the Exchequer, and, thirdly, the need to ensure that British industry gets a full and fair opportunity to win orders for goods and services for the North Sea. The noble Lord may feel that to some extent these are considerations pulling in different directions, but considerations frequently do so, and one has to reconcile them.
I should like to say a word about each of these in turn. First the need to maximise oil and gas production from the United Kingdom Shelf. This must continue to be a prime object of policy. Recent events have underlined its importance to us. We are at present dependent for about half our total energy needs on oil, most of which comes from the Middle East. We have to take into account the risk to security of supply, to which my noble friend Lord Lauderdale referred, and also the cost to the balance of payments. In 1971 our net oil imports cost us £1,000 million, although the foreign exchange cost was rather less, as the noble Lord, Lord Balogh, said, because of the sterling element in our import costs. This already heavy cost may rise in future as costs in the producing countries rise. The exact saving to the balance of payments from development of the North Sea will depend on a wide variety of circumstances, including the future of oil prices, but by the end of the decade it will clearly amount to several hundred million pounds a year—I do not think we differ in this at all. The object of maximising oil and gas production is more important for us than for Norway whose potential supply is very much larger than her demand, especially in view of the point that they are hydro-electric producers as my noble friend mentioned. Norwegian policies are of course well suited to Norway's

1023
needs, and we can certainly learn from her experience—all countries can learn from the experience of others in offshore licensing policy. But the fact remains that, for such a big energy consumer as the United Kingdom, early and rapid development of the resources of the Shelf is of special importance, particularly in view of the considerations I have mentioned.
Secondly, there is the need to ensure a proper return to the Exchequer. That of course is related to the size of production: the greater the production, obviously, the greater the payment of royalties and tax. This is another reason for attaching special importance to getting a high rate of production. The Exchequer will clearly get substantial benefit from the North Sea, with rent and royalties alone accounting for some £100 million a year in 1980, according to present estimates. But the Government will continue to be concerned to see that what is called the "total take" is adequate.
May I refer in passing to the point made by the noble Lord, Lord Hughes, about the revenue from North Sea oil? I am not certain that he was comparing like with like. Total revenue on all oil and gas from rents and royalties alone will be about £100 million in 1980, assuming no rise in prices. If there is a rise, as there may well be, then revenue will be higher. The producers will also be liable to corporation tax. Liability to tax depends, of course, on the circumstances of individual producers—capital allowances and the like—and cannot be forecast in detail; but it will not be near the £800 million figure quoted. The figure of £800 million may be based on production of—I am sorry; I am defeated by a note that I have received from the Box here: I think it is 3 million barrels a day and 150 million tons a year, twice our estimate.
LORD HUGHES: I am sorry, my Lords. Would the noble Lord repeat that?
LORD DRUMALBYN: My Lords, I am told that the figure of £800 million is anyway based on production of 3 million barrels a day or 150 million tons a year, which is twice our estimate. The noble Lord, Lord Balogh, has suggested—
LORD HUGHES: My Lords, is the noble Lord about to depart from that point?
LORD DRUMALBYN: Yes, my Lords.
LORD HUGHES: May I point out then that if correspondence in the Press is correct (and of course I am not guaranteeing that it is) the Secretary of State would appear to have said that the revenue from oil in 1980 would be £100 million. The noble Lord, Lord Drumalbyn, is now saying that the royalties will be £100 million; and therefore the revenue, when one takes the other things into account, will be appreciably greater. By how much greater than £100 million would he expect it to be? Would it become £200 million or £300 million or £400 million?
LORD DRUMALBYN: My Lords, I should think it would be more like getting in the region of £800 million at that stage.
LORD HUGHES: My Lords, even on the 75 million figure rather than the 150 million?
LORD DRUMALBYN: My Lords, I should like to look at this question. It is a little difficult to have these figures thrown at one and to be asked to make calculations. I think there is a confusion on the use of the word "revenue". I think it is revenue to the Revenue that is intended here.
LORD HUGHES: My Lords, I agree with the noble Lord that it is much too difficult to try to argue this point across the Floor, particularly when I am relying on what he is saying, and he is relying on sometimes difficult-to-read notes coming along the Chamber. Would the noble Lord be good enough in due course to write to me—preferably before our debate on December 13? And, if he is writing, will he send a copy of any letter that he sends to me to the others who have taken part in the debate? And if he is writing to the noble Earl, Lord Lauderdale, would he send copies of that letter to the rest of us, because I think we are all equally interested in the replies to the various questions?
LORD DIAMOND: My Lords, I hesitate to interrupt but I am sure my noble friend will forgive me for saying

1025
that, in view of the fact that these two figures—the gross take and revenue coming to the Exchequer—are crucially important, it would be very helpful if a Question for Written Answer could be put down and an Answer given, because in that way everybody would be able to see it.
LORD DRUMALBYN: My Lords, that is a very useful suggestion. Perhaps the noble Lord will allow me a little time to explore the situation, and then perhaps we could agree to a time to put down a Question.
THE EARL OF LAUDERDALE: My Lords, may I support what the noble Lord has just said? If the Minister is good enough to write to me in reply to half the questions I have asked, I shall be very happy if conies of his letters to me also go to other Members who have taken part in the debate. If he can answer half the questions I shall be very happy—though I naturally hope that he can answer them all.
LORD DRUMALBYN: My Lords, I was very careful not to promise to answer them all in correspondence, but I will certainly do my best to answer those which seem to be susceptible of an answer. Before I leave the point of the question, it is worth while considering whether this should be a Question for Written Answer or an oral Question. If it is a detailed one, it will probably be better in the form of a Written Answer.
My Lords, I was going on to say that the noble Lord, Lord Balogh, suggested a new way of ensuring adequate Government take; namely, to require all new licensees to have at least a 50 per cent. public sector interest. As I mentioned earlier, I cannot say to-day what the terms of the next licensing round will be, and certainly it is desirable that the public interest should continue to be represented on a substantial scale. The noble Lord's Motion suggests one way of achieving that result. But, of course, as he well knows, it is not the only way. Another interesting way, close to the noble Lord's approval, is by the Norwegian system of carried interest.
Under the Norwegian system the State reserves the right, when a commercial find is proved, to take up a specified
1026
share of profits, meeting the same share of costs; but it should also be recognised that all such suggestions would have not inconsiderable disadvantages. They would involve the public sector in finding very large sums of capital. Some indication of the sums at stake is given by the estimate that the industry will need to spend some £2,000 million by the end of the decade on exploration and production in the North Sea. I know that there again the figure has been put higher. But what the noble Lord's suggestion implies is that up to a half of that would fall on the public sector. Such a big public sector stake would also mean heavy involvement in management and decision-taking in the oil industry. There is much to be said for the view that this is a risky and speculative business, of which Government have little operating knowledge, and that oil matters are therefore best left to the oil industry, so long as the public interest is protected in the way that I have described. But that is not to say that the Government are not concerned whether British companies get a fair share of any future licences allocated or not, or whether the Exchequer, directly or indirectly gets a fair return or not. The Government are very much concerned about both.
Another way that has been suggested of increasing Government take is to allocate blocks to the highest bidder. Allocation by tender certainly brings in extra immediate revenue for the Exchequer. But it also makes it more difficult to ensure that a fair share of the benefits of North Sea oil goes to British oil companies and British supplying industry. British participation in the competitive tender part of the last round amounted to 22 per cent. as compared with almost double in the discretionary part. There is also a risk that the cost to industry of acquiring licences by auction will reduce the funds available for exploration and development—and of course the point made by my noble friend Lord Lauderdale about the resources available for development is a very important one indeed, and I was aware of the figures that he quoted. But the Government will certainly consider carefully the full results of the experimental auction round in 1971 before deciding on future licensing terms.

1027
The third object of policy which I mentioned was that British industry should have a full and fair opportunity to compete for orders. The market at stake is very large. During the next few years the companies could be spending £200 million to £300 million a year on goods and services for the North Sea. If British industry can establish itself in this market it can become a strong competitor in the world offshore market. May I say that British industry is having to establish itself into one of the most difficult areas in which oil is being sought, and if it succeeds there it will probably do well in any part of the world. As I have said, the share of past orders placed in this country is higher than one would expect from what the critics say. But the Government have always recognised that they have a responsibility to do as much as a Government can do to encourage British industry to get a bigger share of orders in the future.
The Government are now reconsidering policy on this, following the report of the consultants, International Management and Engineering Group of Great Britain, on the opportunities for British industry, which they have recently received. My noble friend Lord Lauderdale asked my noble friend Lord Limerick whether this report would be published. We hope next month to publish a summary of the report (it is very voluminous) but we have already said that we shall see that British firms are given a full and fair opportunity to compete and that we shall take account of the performance of oil companies in this respect in allocating future licences.
The Department of Trade and Industry are working out, in consultation with the offshore producers, an arrangement for quarterly returns to be made voluntarily by the producers. In this way the Government can be kept informed of the nationality of orders placed, and can also be given an indication of the orders to be placed. I hope that this will go quite a long way to meet the criticism that we have not exercised sufficient foresight. I think both the proportion of orders so far placed in Britain and the steps now being taken go a long way to refute that.
Of course there is a limit to what the Government can do. The responsibility
1028
for selling goods and services must rest ultimately with the British supplying industry itself. We cannot expect the oil companies to subsidise the industry. But certainly our oil industry will hot be able to break into the international market unless its products are fully competitive in price, quality and delivery. But if they are, I should like to make it quite plain that British suppliers have the prospect of supplying one of the fastest growing and most advanced markets in the world. It is one of the finest opportunities to open up before British industry for many years. I am confident that they can and will grasp it.
I have dealt with as many points as I can in the time available but I would say once again that what noble Lords have said will be carefully studied before the next round of allocations, although I must say that in our view it would be wrong at this stage to commit ourselves to any particular system or to any particular amount or manner of public sector participation. Therefore, while this has been a splendid debate I am afraid that I cannot accept the Motion of the noble Lord in the terms in which he has moved it.
LORD HUGHES: My Lords, before the noble Lord finally sits down may I ask, in reference to what he said about the Government giving the maximum encouragement for the placing of orders for the exploitation of these fuels for British manufacturers, whether they will take into account any element of subsidy which is given from other countries in this direction? Because it has been stated, for instance, that oil companies buying in America are able to buy at prices where the labour element is, to some extent if not entirely, subsidised.
LORD DRUMALBYN: My Lords, again I should like to look at that point. It is one that will have to be taken carefully into account.
6.26 p.m.
LORD BALOGH: My Lords, before I withdraw the Motion, which unfortunately I have to do, may I thank those noble Lords who participated, and may I also apologise to the noble Lord the Minister that I have not yet thanked him for his kind letter to me—various letters in fact—which really were very informative?

1029
Obviously I should have thanked him, but I was rather busy. I shall try to submit to him my next speech in good time so that he can perhaps do his homework. I fear that I do not altogether feel that his present brief has shown that quite the right homework was done.
He said that there were three considerations which actuated the Government in deciding their policy, but surely out of those three considerations only the speed was achieved. Here I must confess that I am baffled by both the Minister and the noble Earl, Lord Lauderdale, when they say that there is a tremendous urgency about this affair. This would indicate a complete misreading of the time horizon about which we are now speaking. Whether the Dutch or the Germans or the Danish or the Norwegians will be first to exploit the North Sea is really a minor question. The problem is whether we should exploit it without making a profit nationally; and I must say that the attitude of the noble Earl and the Minister reminds me of a very funny story. When I was a young secretary in the League of Nations there was a sort of "boy scout"—an Englishman—who ran round the building 50 times every morning in a négligée. There was a Frenchman living in our pension opposite to that old hotel and this Frenchman asked my English friend, Mr. Evans, why he did this every morning, come snow, come hail. The Englishman said, "To keep fit". So the Frenchman said, "For what?" and the Englishman said "To keep fit". The Frenchman said, "For what?" and the Englishman could only repeat, "To keep fit". You do not exploit a natural resource because you want to exploit it. You exploit it in order to achieve a purpose—for example, to give a leg up to Scotland.
The figures which my noble friend Lord Hughes quoted are very interesting because they coincide with the figures published by Mr. Waddams, who was the Shell adviser in Libya. The figures are of the same order of magnitude. In other words, we should get £70 million, he said, and the Libyans could get £700 million. That was before the upgrading. Why should we develop for £70 million when we could get £700 million by waiting a little while? I have the same sort of horrible feeling about this affair as I have about the appointment of Mr.
1030
George Thomson as our representative in Brussels. Surely one should not appoint someone who is enthusiastic for the idea. Such a person is bound to fail in the job of diplomatic representation. For example, Mr. Thomson obviously wants to make Europe go rather than Britain go, and on the whole the French will not take the same attitude. If we cannot stand up against the marvellous negotiators of the oil companies, what will happen to us when we are faced with the Cassius Clays of the French civil service? It is to be feared that all this will end in miserable failure. We shall not get a "due take". We shall be the suckers about whom all the others will say, "Here come the suckers. Let us sell them something for a high price."
The same can be said of the industrial policy. Nobody can claim that British industry got a due share, and certainly British industry was not assisted by the Government to get that share. The Ministry, and afterwards the Department, deprecated every estimate we made, and they did not notify the people concerned in due time. The fact is that if they had accepted the sort of figures we put forward in 1969–70 matters would have been different. I agree that on the whole officials rather than Ministers make the policy in this field, but Ministers accept that policy. However, the Labour Government, at any rate, got 50 per cent., and I dare say that there were terrific rows over that. Perhaps the noble Lord, Lord Rothschild, should have come in and raised the figure of our take, in the way I tried, against the Ministry.
Next we have the question of a heavy public involvement. It is surprising that the Minister adopted this line or argument when the Government own B.P. Is there no heavy involvement of Britain in B.P.? Did this entail so much investment? We are the only country with such an involvement. It is 49 per cent. It was 51 per cent. before the present Government sold out our majority shareholding. Originally, B.P. cost £3 million, and now it is worth a couple of thousand million. For a British Minister to say that a heavy involvement should prevent us from participating when we already participate in that way is extraordinary. We decided to participate because of a laissez faire Liberal First Lord of the Admiralty, Winston Churchill. He was

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not a Whig but a Tory, and a good Tory at that. When he was with the Whigs he bought up the holding and secured for the nation a major share in B.P. The Minister is trying to tell us that we cannot do now what we did in 1911. That is absolutely ridiculous.
LORD DRUMALBYN: My Lords, I hope the noble Lord, Lord Balogh, will give due weight to the fact that we should in that case have to put up a great deal of money for investment in the meantime, and as my noble friend Lord Lauderdale made clear, oil companies are finding it very difficult to find the money needed for investment out of their own resources.
LORD BALOGH: My Lords, the Minister's argument counts for little. After all, a Government who give away £2,500 million by way of taxation relief per annum should not adduce arguments of the sort that the noble Lord put forward. The return at the production stage would be a multiple; the capital output ratio shows that the money would come back in one or two years. Anybody who refuses to participate in such a venture should not be in business, and I always thought that the Tory Cabinet was recruited from the City. I fear that my original estimate of the City may not have been all that I had hoped for.
It is said that the revenue on royalties in terms of corporation tax is 40 per cent. and one noble Lord quoted Cazenove in this context. How much corporation tax will in fact be paid, bearing in mind that taxes paid in Arabia as well as development expenditure incurred there can be offset against "Scottish" revenue? It seems that the Minister is saying that Scottish "suckers" should subsidise exploration in Nigeria, and that seems to put a new light on the story of the Scotsman and his pennies.
I quoted certain figures and I have never said that I wanted precipitate development. My whole argument was based on the need for our not to be precipitate—that we should sit back, look at the problem and decide at our leisure. After all, the worse the deal we get from OPEC the more we must pay the Americans. If that is not silly, I do not know what is. I should have thought that
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there was an important issue to be considered here. In other words, Ministerial command should be reasserted.
There is a point I wish to make to the noble Lord, Lord Tanlaw. I am in agreement with the noble Earl, Lord Lauderdale, that we cannot separate exploration from exploitation. In any event, why should we? Why should anyone bore holes in the middle of the ocean if he is not permitted to exploit the results of his exploration?
THE EARL OF LAUDERDALE: My Lords, I made that point because the terms of the Motion referred to exploration and exploitation. It seemed, therefore, that the noble Lord was drawing a distinction. I naturally take his word that he was not.
LORD BALOGH: Either, and both, I think. I agree with the Minister that it would be better to do it in the Norwegian way, but I wanted to be forthcoming. I went a long way towards the Minister in the hope that he would come a little way towards me, but he rose to new heights of not telling us what we wanted to know. However, I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

NORTHERN IRELAND (FINANCIAL PROVISIONS) BILL
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read 1a, and to be printed.

REDUNDANCY PAYMENTS EXCLUSION OF MERCHANT SEAMEN ORDER 1973
THE EARL OF GOWRIE: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Draft Redundancy Payments Exclusion of Merchant Seamen Order 1973, laid before the House on October 31, be approved.—(The Earl of Gowrie.)
On Question, Motion agreed to.

COYPUS (KEEPING) ORDER 1972
EARL FERRERS: My Lords, this Order, like the one following, merely follows the present system of licensing for keeping both mink and coypus. I beg to move.
Moved, That the Coypus (Keeping) Order 1972, be approved.—(Earl Ferrers.)
On Question, Motion agreed to.

MINK (KEEPING) ORDER 1972
EARL FERRERS: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Mink (Keeping) Order 1972, be approved.—(Earl Ferrers.)
On Question, Motion agreed to.