Lords Sitting of 27 March 1974

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 Liverpool):
The LORD CHANCELLOR on the Woolsack.

LORD GREENHILL OF HARROW
Sir Denis Arthur Greenhill, G.C.M.G., O.B.E., having been created Baron Greenhill of Harrow, of the Royal Borough of Kensington and Chelsea, for life—Was, in his robes, introduced between the Lord Mancroft and the Lord Gore-Booth.

LORD TREND
The Right Honourable Sir Burke St. John Trend, G.C.B., C.V.O., having been created Baron Trend, of Greenwich in Greater London, for life—Was, in his robes, introduced between the Lord Zuckerman and the Lord Adeane.
Several Lords—Took the Oath.

"HISTORY OF THE KING'S WORKS"
2.52 p.m.
LORD SUDELEY: 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 whether Her Majesty's Stationery Office will publish another volume of The History of the King's Works, which will continue the history from 1852 onwards.
LORD GARNSWORTHY: My Lords, as I understand the position, it has always been considered that the story of the King's Works ends in 1851, when the duties were taken over by a Government Department subject to full Parliamentary control and the history then becomes different in both character and scale. But I would add for the benefit of the noble Lord, Lord Sudeley, that three more volumes are to be published to cover the
582
period between 1485 and 1782. I hope that he will find that information helpful.
LORD SUDELEY: My Lords, I thank the Minister very much for that Answer. May I ask whether Her Majesty's Stationery Office might be persuaded to make better efforts to display and sell Volume VI of The History of the King's Works, published last November, bearing in mind the great inefficiency of Her Majesty's Stationery Office in disposing of whatever stocks they possess.
LORD GARNSWORTHY: My Lords, I am sure that note will be taken of what the noble Lord has said. He will appreciate that we have had very little opportunity of late to do very much about such matters.
LORD MOWBRAY AND STOURTON: My Lords, is the noble Lord aware that many of us on this side are highly grateful to Her Majesty's Stationery Office and the Department of the Environment for the work they have done? In my opinion it is a most instructive work. I should like to know whether the noble Lord agrees with me.
LORD GARNSWORTHY: My Lords, I agree with what the noble Lord, Lord Mowbray and Stourton, has said, and I am quite sure that what he has said will be balanced against what the noble Lord, Lord Sudeley, has said.

SCHOOL MILK
LORD BOOTHBY: 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 whether they propose to restore milk in our schools.
LORD GARNSWORTHY: My Lords, the possibility of restoring free school milk to the pupils from whom it was withdrawn in 1971 by the Education (Milk) Act is among the many matters which the Government are considering, but no decision has yet been reached.
LORD BOOTHBY: My Lords, is it not rather unfortunate that no decision has yet been reached, because the national milk scheme which I had the honour of introducing in another place in 1940 has

583
been the foundation of the health of our new population, I believe, over the last thirty years or so? Does the noble Lord not think it is time that the Government took a decisison to restore milk to our schools?
LORD GARNSWORTHY: My Lords, I appreciate that the noble Lord, Lord Boothby, thinks that this Government are capable of taking a vast number of decisions in a very short period, but I feel that a period of some three weeks is perhaps a little too short to make all the decisions that have to be made. I would suggest that my right honourable friend the Chancellor of the Exchequer did not make a bad beginning yesterday with regard to the consumption of milk.
LORD SEGAL: My Lords, does the noble Lord realise that it would cost far less now to restore this facility than it would have done prior to the General Election?
LORD MAYBRAY-KING: My Lords, is the noble Lord aware that the restoration of milk to schoolchildren is one of the most important minor reforms that could be introduced by Her Majesty's Government at this moment?
LORD GARNSWORTHY: My Lords, I agree very much with my noble friend Lord Maybray-King and I will see that the attention of my right honourable friend is drawn to what has been said.
LORD BELSTEAD: My Lords, in three weeks the noble Lord may have had time to check upon two things, and perhaps I may ask him about both of them. First, is the noble Lord aware that in 1970 the committee dealing with the medical aspects of food said that they would undertake to investigate a variety of different ways of monitoring the methods by which nutritional standards were achieved for children? Have Her Majesty's Government any reason to be concerned about nutritional standards? Secondly, may I ask the noble Lord about the findings of a very widely based Working Party which was set up by my right honourable friend the former Secretary of State to look into the school meals service? Have the findings of that Working Party any relevance to the Question which the noble Lord, Lord Boothby, has asked to-day?
LORD GARNSWORTHY: My Lords, I made particular inquiries about the first matter which has been raised by the noble Lord, and have been informed that it is too early yet to draw any conclusions. With regard to the second matter, concerning the Working Party, I have no information that I can give to the House.
LORD WYNNE-JONES: My Lords, would my noble friend bear in mind that all of us sitting on these Benches have always wished to have milk provided for our children in schools? Surely my noble friend would agree that this is a subject which should not wait for a long period of analysis: the school milk ought to be restored at once.
LORD GARNSWORTHY: My Lords, I am sure the whole House will know my views on this matter. I took a fairly active role in our proceedings when the Bill was before the House, and I shall be very pleased to draw the attention of my right honourable friend to what has just been said.
LORD BOOTHBY: My Lords, would it be possible for the noble Lord to suggest to me a date on which I might put down another but similiar Question?
LORD GARNSWORTHY: My Lords, I am quite sure that the noble Lord, Lord Boothby, does not expect me to reply in the affirmative.
BARONESS BROOKE OF YSTRADFELLTE: My Lords, would the noble Lord ask his right honourable friend, when he is considering the reintroduction of free milk in schools, also to consider ways of avoiding the wastage of just that commodity? When it was free previously a considerable amount of milk was wasted in schools. Much of it was not taken up, but it was not allowed to be sent to the homes of the children who might have benefited by it.
LORD GARNSWORTHY: My Lords, while I am quite sure the my right honourable friend is well aware of that matter, again I will draw his attention to what has been said.
LORD COLERAINE: My Lords, is it not the fact that the great majority of parents in this country could themselves well provide the milk for their children?
LORD GARNSWORTHY: My Lords, I think the answer is, Yes. Undoubtedly, since yesterday still more parents will be in that happy position.
LORD TREFGARNE: My Lords, can the noble Lord tell us which children are at present still entitled to free milk?
LORD GARNSWORTHY: Those, my Lords, who are certified by the medical officer of health as having a health need.
LORD BELSTEAD: My Lords, is the noble Lord aware that the answer he has just given is not strictly accurate? The entitlement also includes all children in special schools, which adds a very great number of children to those mentioned by the noble Lord across the Floor of the House.
LORD GARNSWORTHY: My Lords, I agree; but I should not have thought there was any need for confusion on this point.
BARONESS SUMMERSKILL: My Lords, is the noble Lord aware that we are somewhat confused on this side of the House, and are wondering why noble Lords are so interested in this matter in view of the fact that they withdrew the milk from the children?
LORD TREFGARNE: My Lords, could the noble Lord say why my son gets free milk? He is not specially certified by the doctor, and does not, so far as I know, go to a special school.
LORD GARNSWORTHY: My Lords, not having the precise details of the information the noble Lord requires, I am unable to provide the answer he desires. I will have inquiries made and write to him on the matter.

E.E.C.: UNITED KINGDOM AND TREATY OBLIGATIONS
3.0 p.m.
LORD GLADWYN: 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 whether, pending any formally negotiated change in the terms of accession of the United Kingdom to the
586
European Economic Community, they will abide by all their existing Treaty obligations.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD GORONWY-ROBERTS): My Lords, my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs has made it clear that Her Majesty's Government will certainly fulfil their international obligations.
LORD GLADWYN: My Lords, I hope that I am not embarrassing the Government in any way when I say that I find that Answer extremely satisfactory.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, may I ask why the Foreign Secretary said in another place last week that the Treaty was the main obstacle?
LORD GORONWY-ROBERTS: My Lords, if the noble Baroness will look at the speech in its entirety she will find there the kind of assurance that I have given to the noble Lord, Lord Gladwyn. My right honourable friend's speech, and that of my right honourable friend the Prime Minister, made it absolutely clear that the commitments already entered into will be fulfilled.
LORD SHINWELL: My Lords, can my noble friend explain how it is possible to fulfil all the obligations of the Treaty and at the same time renegotiate the terms of the Treaty?
LORD GORONWY-ROBERTS: My Lords, it was made absolutely clear last week in another place, on more than one occasion, that obligations already entered into would be fulfilled, but that we would expect our friends and allies in Europe to understand that we could not proceed, pending renegotiation, to further commitments.
LORD SHINWELL: My Lords, is my noble friend aware that only the other day his right honourable friend the Minister of Agriculture and Fisheries (and he is also my right honourable friend and is still my right honourable friend), who was renegotiating some aspects of food policy, declared that he was not in favour at any time of the Common Agricultural Policy. Is there

587
some confusion in the mind of my noble friend?
LORD GORONWY-ROBERTS: No, my Lords. The Common Agricultural Policy is one major aspect of the terms on which we entered the E.E.C. which we consider ought to be radically renegotiated. What my right honourable friend the Minister of Agriculture and Fisheries quite properly said was that, while he was entirely against the terms as they now stand, nevertheless, like the Government, he wished to see radical renegotiation in the spirit and at the pace which my right honourable friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs have described.
LORD O'HAGAN: My Lords, would it not assist the Government in the difficult process mentioned by the noble Lord, Lord Shinwell, in his first supplementary question, if they were to send Labour Members to the European Parliament soon?
LORD GORONWY-ROBERTS: My Lords, that is a somewhat different question, but I will say to the noble Lord now that the situation as it obtained before the General Election will continue, pending renegotiation, and that this, like other aspects of the terms on which we entered the Common Market, will be part of the comprehensive consideration leading to the renegotiation that the present Government will undertake.

ETHIOPIA: FAMINE RELIEF AID
3.4 p.m.
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 what action is proposed to help relieve the famine in Ethiopia.
THE Loan PRIVY SEAL (LORD SHEPHERD): My Lords, Her Majesty's Government have allocated £350,000 to Ethiopia for famine relief projects which include road construction and irrigation programmes. This is in addition to the normal development aid programme in
588
Ethiopia, amounting to nearly £2 million annually, a substantial part of which is devoted to rural development—the best safeguard against a repetition of this disaster. My right honourable friend is urgently considering, in consultation with the voluntary agencies, further measures to improve transport facilities for the distribution of grain, a project to restock the depleted herds of the Afar nomads, and the possible need for further emergency relief aid in the event of any worsening in the situation.
LORD BROCKWAY: My Lords, while greatly welcoming that reply, may I ask my noble friend whether, in their consideration of further relief measures, Her Majesty's Government will consider making the proposal to the United Nations that they should establish a permanent relief agency which could act in time of famine or natural disaster?
LORD SHEPHERD: My Lords, this is a view that I personally have held, which has been held within Parliament and, particularly, within our Party. It is a matter to which I know my right honourable friend will be giving the most careful attention.
BARONESS GAITSKELL: My Lords, would it be a good idea that my noble friend Lord Brockway should put his Question to the heads of the oil-producing countries whose main problem seems to be what to do with the wealth that they possess at this moment, which is not our problem? I noticed about a week ago that Emperor Haile Selassie, who went to Saudi Arabia to ask for help, was sent away with very little satisfaction.
LORD SHEPHERD: My Lords, it is the normal practice to direct questions to a Minister, in the expectation that he may be able to do something. I can only suggest to my noble friend Lord Brockway that he takes note of what my noble friend Lady Gaitskell has said.
LORD DAVIES OF LEEK: My Lords, would my noble friend please try to ensure, if aid is distributed to Ethiopia, that it is not given on any biased, theocratic basis, but that the aborigines in the South, who are not Ethiopian Christians, should get exactly the same chance of aid as the theorcratic Ethiopians?
LORD SHEPHERD: My Lords, the aid is being given to people in distressed areas.
LORD BROCKWAY: My Lords, while not wishing to comment on the question which has been put to me by my noble friend, Lady Gaitskell—to which I have a complete answer in my own actions—may I ask the Lord Privy Seal whether, arising from the question she has put, the Government will support the proposal at the United Nations on April 9 that there should be a discussion between the oil and the other producing nations, and representatives of the developed nations, to try to reach a balanced solution on this problem?
LORD SHEPHERD: My Lords, I am sure we shall.
LORD BOWDEN: My Lords, is the noble Lord the Lord Privy Seal aware that in concentrating efforts on road building he will solve only a small part of the problem? More than half the population of Ethiopia lives fifty miles from a road. Other techniques will have to be devised since the tracks are impassable. I beg to suggest that the complications are far greater than seem to have been envisaged in the reply given by the Lord Privy Seal.
LORD SHEPHERD: My Lords, the road building project was initiated to deal with the immediate situation, in order that food could be distributed. The capital aid and technical aid that we are now providing is concentrated in the field of irrigation and crop development.
SEVERAL NOBLE LORDS: Order ! Order !
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, is the noble Lord aware that we like to see his face as well as hearing his voice?
LORD SHEPHERD: I beg your Lordship's pardon for turning my head away. I thought my voice was loud enough for all noble Lords to hear me.
LORD SLATER: My Lords, is my noble friend in a position to state whether any support for Ethiopia is coming from the rest of East Africa, particularly from Kenya, which is on the Ethiopian border?
LORD SHEPHERD: My Lords, I have no information upon that matter. I suppose it must be recognised that many of those territories are experiencing drought conditions; but aid is at present coming from Europe.

SOCIAL SECURITY: BENEFIT AND CONTRIBUTION RATES
3.8 p.m.
LORD SHEPHERD: My Lords, my right honourable friend the Secretary of State for Social Services is making a Statement in another place on the up-rating of national insurance benefits. It has been agreed through the usual channels that, in view of the complex nature of this Statement, it should not be repeated here, but with the leave of the House I will arrange for it to be circulated in the OFFICIAL REPORT.
The Statement was as follows:
"With permission, Mr. Speaker, I should like to make a Statement about increases in social security benefits and contributions. My right honourable friend the Chancellor of the Exchequer yesterday announced the main proposals. The increases in benefits will take effect in the week beginning July 22. This means 17 weeks from now—and in the last three years the shortest timetable achieved has been 25 weeks. The 17-week timetable can only be met at a risk that some beneficiaries may not receive their increase until shortly after the operative date. We will do our best to avoid this happening but, given our overriding objective of introducing the increases at the earliest possible date, I am sure the House will agree that it is a risk we should be prepared to take.
"The standard rate of pensions, that is of retirement pensions, invalidity pensions and widow's pensions, will go up by £2·25 for single persons. Married couples will get an increase of £3·50. Thus our pledge to increase pensions to the levels of £10 for single persons and £16 for married couples will be honoured. Old persons' pensions will go up from £2·85 to £3·70 for wives and from £4·65 to £6 for other people.
"Short-term benefits, namely, unemployment benefit and sickness benefit, will be increased by £1·25 for a single person and £2 for a married couple, making the single person's rate £8·60 and the married couple's £13·90 a week. Maternity allowance and injury benefit will go up by the same amounts.
"We are thus giving the highest priority to the long-term beneficiaries—the pensioners, the chronic sick and the widows. Nevertheless, the increase in the short-term benefits will be more than sufficient to maintain their purchasing power, and I should remind the House that short-term beneficiaries can receive an earnings-related supplement Which can itself

591
bring their benefits up to levels in excess of £10 or £16.
"Attendance allowance where attendance is required both by day and by night will go up from £6·20 to £8; and where attendance is required by day or by night the rate will go from £4·15 to £5·35.
"The 100 per cent. war and industrial injuries disablement pension will go up from £12·80 to £16·40. The standard war widow's pension will be increased from £10·10 to £13 and the industrial injuries widow's pension from £8·30 to £10·55.
"For the older war disabled and war widows we propose a further improvement, in addition to the increases in the basic pensions themselves. The age allowances, which a war widow receives at the rates of 65p at the age of 65 and £1·30 at the age of 70, and which a disabled man with an assessment of 40 per cent. or more receives at the age of 65 at rates varying from 60p to £1·80, will all be doubled. Thus war widows will receive an age allowance of £1·30 at the age of 65 and £2·60 at the age of 70; and a disabled man with an assessment of 100 per cent. will get an allowance of £3·60 at the age of 65. Over 40,000 disablement pensioners and over 50,000 war widows will benefit from this special help. The net cost will be £4·5 million in a full year.
"The earnings rule will be relaxed as part of the uprating so as to increase the amount at which the rule starts to operate from the present £9·50 to £13 a week.
"I turn now to supplementary benefit. The increases in the main scale rates will be the same as, and will come into force at the same time as, the increases in the related national insurance benefits. The increase of £3·50 for a married couple—proposed for retirement pensioners—will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term rates. The increase of £2·25 proposed for single retirement pensioners will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term scale rates, where they live alone. Thus a supplementary pensioner living alone will become entitled to at least £10·40 a week plus rent and rates—£10·65 plus rent and rates if he is over 80. A supplementary pensioner couple will become entitled to at least £16·35 plus rents and rates, or £16·60 plus rent and rates if one of them is over 80.
"The supplementary benefit ordinary rates—for persons who are neither of pension age nor qualify for the long-term rates—will go up by £2 for a married couple and £1·25 for a person living alone, to match the increases in the short-term national insurance benefits.
"The prescribed amounts which govern title to family income supplement will also be increased.
"The cost of all these increases in social security benefits will be over £1,250 million in
592
1975–76. Over £1,100 million of this cost will fall on the National Insurance Funds.
"Next I come to national insurance contributions. My right honourable friend explained to the House yesterday how we are proposing to allocate the extra contribution burden so as to put most of it on the employer and, in particular, to help the lower paid. The net effect of our proposals is that men earning £20 a week will pay 3p less than they do now and that, in general, no man earning less than £27 a week will have to pay more than he does at present, while the highest increases in contributions will fall on those earning £62 a week or more. These men will pay an extra 57p a week; and men earning £40 a week will pay an extra 7p a week. Women's contributions will be changed correspondingly. All the contribution changes are proposed to come into effect on August 5. The Treasury contribution will continue at about 18 per cent. of the income from contributions.
"For the convenience of the House I am circulating details of the new rates of benefits and contributions in the OFFICIAL REPORT. These, with copies of my Statement, are available in the Vote Office. I should add that I shall shortly be presenting the necessary Bill, which will be accompanied by the Government's Actuary's Report.
"Before I end I should say a word about financing after the end of the 1974–75 financial year. The proposed contribution rates, together with the associated Treasury supplement, will provide sufficient income to cover the cost of benefits at the new levels whilst the present national insurance scheme lasts. However, if the new structure and level of contributions provided by the Social Security Act 1973 were to come into force in April, 1975, the income of the National Insurance Fund would not be sufficient to finance an uprating of the basic pension on the generous scale we propose. We have not yet decided precisely how we are going to deal with all the interim problems raised by the Social Security Act, but I can say now that we intend to introduce legislation later in the year to secure income to the National Insurance Fund which will still be adequate to the new levels of benefit after April, 1975.
"I conclude by reminding the House that we are pledged to work for a greater measure of social justice. The proposals I am putting before the House will take us along that road. The increases in pensions will be the largest ever within the national insurance scheme, both in money and in real terms. The Government intend to build on this founlation by ensuring that in future pensions will be increased annually in proportion to increases in average national earnings. This is a pledge never before given to the most vulnerable members of our society. It is a pledge long overdue."
Following are the details of the new rates of benefits and contributions referred to in the Statement:

593

MAIN INCREASED NATIONAL INSURANCE BENEFIT RATES:

Proposed Weekly Rate £

Existing Rate £

Standard rate of invalidity, widows' and retirement pensions and widowed mothers' allowances:

Single person

10·00

7·75

Wife or other adult dependant

6·00

4·75

Standard rate of unemployment and sickness benefits:

Single person

8·60

7·35

Wife or other adult dependant

5·30

4·55

Married woman (normal rate)

6·05

5·15

Persons under 18

4·75

4·05

Widow's allowance (first 26 weeks of widowhood)

14·00

10·85

Widow's basic pension

3·00

2·33

Maternity allowance

8·60

7·35

Invalidity allowance payable with invalidity pension, when incapacity began before age:

35

2·05

1·60

45

1·30

1·00

60 for men or 55 for women

0·65

0·50

Attendance allowance:

Higher rate

8·00

6·20

Lower rate

5·35

4·15

Old persons' pensions:

Wife

3·70

2·85

Any other person

6·00

4·65

Guardian's allowance

4.90

3.80

Child's special allowance and increases for children of widows,invalidity and retirement pensioners:

First child

4·90

3·80

Second child*

4·00

2·90

Any other child*

3·90

2·80

Increases for children of all other beneficiaries:

First child

2·70

2·30

Second child*

1·80

1·40

Any other child*

1·70

1·30

* Family allowances are payable for second and subsequent children.

Injury benefit*†

11·35

10·10

Disablement benefit (100 per cent assessment)*

16·40

12·80

Unemployability supplement‡

10·00

7·75

Special hardship allowance (maximum)

6·56

5·12

Constant attendance allowance (normal maximum)

6·60

5·15

Exceptionally severe disablement allowance

6·60

5·15

Industrial death benefit:

Widow's pension during first first 26 weeks of widowhood

14·00

10·85

Widow's pension now payable at £8·30 rate

10·55

8·30

Widow's pension now payable at £2·33 rate

3·00

2·33

* Increases will also be made in the juvenile rates.

†Increases for adult dependants and children will be the same as those for unemployment and sickness benefit—see National Insurance table.

‡Invalidity allowances and increases for adult dependants and children will be the same as those for invalidity pensions—see National Insurance table.

MAIN INCREASED WAR PENSION RATES:

All ranks receive the same increases, officers' rates being expressed in pounds per annum.

PART I: DISABLEMENT BENEFITS:

…

…

…

Proposed Weekly Rate £

Existing Rate £

Disablement pension for private at 100 per cent rate

…

…

…

16·40

12·80

Unemployability allowances*:

Personal allowance

…

…

…

10·75

8·40

Increase for wife or adult dependant

…

…

…

6·00

4·75

Comforts allowance:

Higher rate

…

…

…

2·80

2·20

Lower rate

…

…

…

1·40

1·10

Allowance for lower standard of occupation (maximum)

…

…

…

6·56

5·12

Constant attendance allowance:

Special maximum

…

…

…

13·20

10·30

Special intermediate

…

…

…

9·90

7·75

Normal maximum

…

…

…

6·60

5·15

Half and Quarter day

…

…

…

3·30

2·60

Age allowance with assessments of:

40 and 50 per cent

…

…

…

1·20

0·60

60 and 70 per cent

…

…

…

1·80

0·90

80 and 90 per cent

…

…

…

2·60

1·30

100 per cent

…

…

…

3·60

1·80

Exceptionally severe disablement allowance

…

…

…

6·60

5·15

Severe disablement occupational allowance

…

…

…

3·30

2·60

MAIN INCREASED SUPPLEMENTARY BENEFIT RATES:

Proposed Ordinary Weekly Rate £

Proposed Long-Term Weekly Rate* £

Existing Ordinary Rate £

Existing Long-Term Rate* £

Ordinary scale:

Husband and wife

13·65

16·35

11·65

12·85

Persons living alone

8·40

10·40

7·15

8·15

Any other person aged:

Not less than 18

6·70

8·40

5·70

6·60

Less than 18 but not less than 16

5·15

—

4·40

—

Less than 16 but not less than 13

4·35

—

3·70

—

Less than 13 but not less than 11

3·55

—

3·00

—

Less than 11 but not less than 5

2·90

—

2·45

—

Less than 5

2·40

—

2·05

—

Blind scale:

Husband and wife:

If one of them is blind

14·90

17·60

12·90

14·10

If both of them are blind

15·70

18·40

13·70

14·90

Any other blind person aged:

Not less than 18

9·65

11·65

8·40

9·40

Less than 18 but not less than 16

6·05

—

5·30

—

Less than 16 but not less than 13

4·35

—

3·70

—

Less than 13 but not less than 11

3·55

—

3·00

—

Less than 11 but not less than 5

2·90

—

2·45

—

Less than 5

2·40

—

2·05

—

Class 1—EMPLOYED PERSONS—INSURED PERSON (including N.H.S. contribution):

Earnings

Present Rate Total £

Decrease Flat Rate £

Increase Graduated £

Flat Rate £

New Rate Graduated £

Total £

Employed Man:

Contracted-Out

£15

1·02

0·09

0·02

0·87

0·08

0·95

£20

1·15

0·09

0·06

0·87

0·25

1·12

£30

1·65

0·09

0·11

0·87

0·80

1·67

£40

2·15

0·09

0·16

0·87

1·35

2·22

£50

2·65

0·09

0·21

0·87

1·90

2·77

£60

2·83

0·09

0·58

0·87

2·45

3·32

£62

2·83

0·09

0·66

0·87

2·53

3·40

Not Contracted-Out

£15

1·15

0·09

0·03

0·75

0·34

1·09

£20

1·41

0·09

0·06

0·75

0·63

1·38

£30

1·91

0·09

0·11

0·75

1·18

1·93

£40

2·41

0·09

0·16

0·75

1·73

2·48

£50

2·91

0·09

0·21

0·75

2·28

3·03

£60

3·09

0·09

0·58

0·75

2·83

3·58

£62

3·09

0·09

0·66

0·75

2·91

3·66

Employed Woman:

Contracted-Out

£15

0·85

0·09

0·02

0·70

0·08

0·78

£20

0·98

0·09

0·06

0·70

0·25

0·95

£30

1·48

0·09

0·11

0·70

0·80

1·50

£40

1·98

0·09

0·16

0·70

1·35

2·05

£50

2·48

0·09

0·21

0·70

1·90

2·60

£60

2·66

0·09

0·58

0·70

2·45

3·15

£62

2·66

0·09

0·66

0·70

2·53

3·23

Not Contracted-Out

£15

1·02

0·09

0·03

0·62

0·34

0·96

£20

1·28

0·09

0·06

0·62

0·63

1·25

£30

1·78

0·09

0·11

0·62

1·18

1·80

£40

2·28

0·09

0·16

0·62

1·73

2·35

£50

2·78

0·09

0·21

0·62

2·28

2·90

£60

2·96

0·09

0·58

0·62

2·83

3·45

£62

2·96

0·09

0·66

0·62

2·91

3·53

BEAVERBROOK NEWSPAPERS IN SCOTLAND
LORD SHEPHERD: My Lords, with the leave of the House my noble friend Lord Hughes will be making a Statement at a convenient moment after 3.30 p.m. on the Beaverbrook newspapers in Scotland.

INDUSTRY AND COMMERCE: NEED FOR ENCOURAGEMENT
3.9 p.m.
LORD ERROLL OF HALE LORD ERROLL OF HALE rose to call attention to the urgent need for the policies of the new Government to give full encouragement to British industry and commerce; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion which stands in my name on the Order Paper. I think it is clear that a new Government, whether it be a Conservative or Labour Government, in the first few weeks of its formation is very sensitive to the views which may be expressed to it. Although it will be very

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busy with programmes and proposals, it is also prepared to listen. I therefore tabled this Motion last week because it seemed to me that it would provide an opportunity of putting to Her Majesty's Government points of view regarding the encouragement of British industry and commerce which are of great importance at a time when the Government might be prepared to listen. As a Government moves into a longer period of office—and again this applies to whichever Party it may be—there comes a certain hardening of the arteries, a certain inflexibility of point of view as commitments are honoured and others are undertaken. So this seemed to me to be a very valuable opportunity of making points to Her Majesty's Government at a time when they might have some effect.
All of what I have just been saying has, unfortunately, been overtaken by the speech of the Chancellor of the Exchequer in another place yesterday which, from the point of view of my Motion, shows that Her Majesty's Government have already arrived at a rigid point of view. I appreciate that this debate is not a debate on the Budget, although I understand that it is quite proper to make some reference to various parts of the Budget speech—I am glad to see the noble Lord the Leader of the House acknowledging that this is in order. So I will deal with certain aspects of yesterday's Budget speech which particularly affect the topic of my Motion.
In that long and very skilful speech by the Chancellor of the Exchequer there was, disappointingly, very little reference to the wealth-creating activities of our island. There was a great deal that was said, and is to be enacted, for the benefit of the old and infirm; for the sick and the weak; and there are to be considerable hand-outs to those who are in need. I am not quarrelling with all this; indeed, there is a measure of justice in what is proposed. But all of this has to be earned. I was surprised to find that very little reference was made in that speech to productive industry and commerce. Here I would include, of course, the nationalised industries as well as the industries in the private sector, because in their own way the nationalised industries, too, are able to contribute to our national wealth. This omission from the Chancellor's Budget strikes me as most
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extraordinary, because unless industry and commerce are to be encouraged to do that little bit extra there will not be the wealth to distribute under the Budget proposals; it will be a country that will be becoming progressively poorer instead of progressively richer.
The urgent need to-day is to maximise our resources, to put them to the most profitable uses, and particularly to do that everywhere in the world. The Budget speech does nothing to give encouragement to industry and commerce. After all, industry and commerce, at all levels, are a matter of people; whether they be represented by trade unions or, at the other end of the scale, by the Institute of Directors. They are all people, all wanting to do better for themselves and their families, and to do well for the companies or the businesses with which they are associated, in whatever capacity. Only if this effort can be maximised can we hope to generate the increasing wealth that Britain needs, and also the increase in foreign currency earnings. All this was glossed over. I for one, am very sad that a Chancellor, who may have shown some promise yesterday, should have ignored the real source of Britain's wealth. I hope, therefore, that Her Majesty's Government will pay some heed to what I am going to say to-day.
My Lords, I think we all accept that a measure of cutting back in personal consumption, personal ambitions and improvements for our families and our social life are necessary at all levels. But I think that it was particularly unfair to hit so hard those in middle management, those earning from about £2,000 to £6,000 a year upon whom the future of British industry and commerce, managerially, is particularly dependent. I think they have been hit harder than any other section. On percentage points and the like, it may be that the very rich have been hit proportionately harder, but I am not going to plead their case to-day. It is the young middle manager and his family who are going to feel the Budget impositions harder than any other group. It is on the young and enterprising managers that the prosperity of British industry and commerce depends.
I feel particularly sad that in this great speech by the Chancellor of the Exchequer there was no reference, or

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virtually no reference, to the wealth-creating elements of our society. Could that have been because the Government do not understand what it is all about? Would it not be possible for them to try to learn? It was interesting to note that in the interview which Mr. Benn gave to Mr. Groser, reported in The Times about W days ago, Mr. Benn said that the Labour Party had been having a considerable dialogue with the trade union leaders over the past two years. Excellent! I wish he had also had a similar dialogue with industry and commerce—not just with the established bodies, such as the Confederation of British Industry, but with the management and directors of individual business and companies. I would put to Her Majesty's Government: Please, first, understand the point of view of the businessman; and then, please, have some regard for it, for it is in the private sector that the greatest opportunities exist for increasing our resources and increasing the wealth which the Government wish to distribute.
I should like to develop this theme briefly. Let us take the hardest question of all first; namely, the profits. I know that for many people on the other side of your Lordships' House the word "profits" is an emotive word; but it is profits which in fact must be secured by any enterprise if that enterprise is to continue to exist. Indeed, it is the profits which provide most of the additional capital for further investment and expansion. If there is a failure to generate profits the business suffers and probably collapses, and that leads to further unemployment. I was going to make a rather more detailed reference to the problems of the Express newspapers, where failure to generate profits is causing the closure of important plants and the unemployment of 1,500 or more people in Scotland. That illustrates that the first call is to have an efficient business which can make, and continue to make, a profit. Let us be quite clear about the importance of profits in the private sector. I hope that Her Majesty's Government will realise that the ability to produce profits is of the first importance in any business. Pure profit seeking on its own is not enough, of course. Profits come when other things are right as well; when the business is efficiently
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run, when the employees are contented and keen, and when good service is given to the customers. Profit is merely the end product of all the other things which a successful business should achieve.
Then comes the question of the disposal of those profits: the question of how much should be reinvested in the business and how much distributed. A certain distribution, of course, is right if further risk capital is to be attracted into the business. I hope, therefore, that Her Majesty's Government will bear in mind the importance of a business being profitable; and the importance, too, at the right time, of permitting proper distribution of dividends when the company so decides. In connection with the running of a business, I hope that Her Majesty's Government will realise that what is entailed is a co-operative effort at all levels. It is not just the workers on the shop floor; managers, too, have their responsibilities, and in particular the directors have theirs: because, while the managers may have many responsibilities, it is the directors who are the custodians of capital invested in the business and it is they who have responsibility for deciding to what use the profits will be put, when profits can be earned. But the difficulty to-day, apart from the few fortunate exceptions, is for a company to earn the profits which are needed.
I thought it was typical but unfortunate that Mrs. Shirley Williams (I think it was) should say that she was going to stop businesses in the retail trade from selling old stock at the new prices. I know this is a good example of a misunderstanding of the importance of capital and profits, because if one sells the old stock at the old prices there is not enough money to buy the new stock at the higher prices, and so in the event the capital is handed out to the customers and is lost to the business. This is a point which is not widely understood or appreciated, but I thought it worth making to-day to demonstrate the great gulf there can be between those who are in business and those who prefer to attack and sneer at it from the outside.
I referred to the hard position of middle management. It is important to appreciate that salaries are high in business because of the responsibilities which are carried. A playwright or an author may not make a great deal of money, but that

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person is not carrying the day in and day out responsibility of those who are in the top echelons of business and industry. It is responsibility which wears people, and it is responsibility which should be rewarded. The reward is not at a high level in Britain. One has only to look across the Channel—ignore what is paid in America—to see that the rewards are considerably greater, after tax, in mainland Europe than they are in this country; and the growth rates in mainland Europe are correspondingly greater as well.
I want now to turn to one or two specific items which I hope Her Majesty's Government will consider in the course of the coming months. I urge Her Majesty's Government particularly to have regard to the position of small businesses, those which are proprietor-owned. A great deal of good work was done by the last Government in providing meaningful help for small businesses which are beset by the complexities of modern government and modern intervention from Whitehall. The small businesses of this country have a very important part to play in creating the wealth which this Government seek to redistribute. Do not ignore, I suggest to Her Majesty's Government, the important part that small businesses can play if given the chance. I know that my noble friend Lord Strathcona and Mount Royal, who is going to wind up for our side, will say rather more about this topic than I, but it is a subject of great importance since so many small businesses become large businesses, and very successful ones as well.
I should like to urge on Her Majesty's Government the proposals for the reform of company law which already appeared in another place before the Election. There are many sensible proposals in the Bill that existed up to the Dissolution which could well be enacted on a non-controversial basis. But, unfortunately, I read that the Under-Secretary in another place was not very interested in that Bill because he said that it was concerned only with the interests of shareholders and creditors and barely dealt with the responsibilities of a company to its employees and to the community. I am sorry that thinking of that kind should have already started to generate itself in the minds of Her Majesty's Government. Creditors are very important people, as
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anyone who has been a creditor to a business that has gone bust will fully realise. Her Majesty's Government may well be finding in the course of the coming months there will be a number of businesses which are going bust through the policies and attitudes of Her Majesty's Government.
THE MINISTER OF STATE, DEPARTMENT OF INDUSTRY (LORD BESWICK): My Lords, if I may interrupt the noble Lord, since he has been good enough to read Hansard of another place. I wonder whether he would also read Hansard of this House. He would then see that last week his noble friend Lord Limerick raised this point and I did my best to answer it.
LORD ERROLL OF HALE: My Lords, I apologise to the noble Lord because it has not been possible for me to read the enormous stream of material which has been coming out in the last few days. That particular reply of the noble Lord I will certainly read, and if I have made the wrong point I will gladly withdraw. Nevertheless, I hope that a non-controversial Companies Bill can be introduced in order to clear up certain technical matters which could be improved by fresh legislation.
LORD RAGLAN: My Lords, if the noble Lord will allow me to intervene, before he begins to be controversial and to blame one side or another, may I ask whether he is aware that more small firms are on the edge of bankruptcy because of the three-day week than because of anything the present Government have yet done or have said they are going to do?
LORD ERROLL OF HALE: My Lords, that is a point which has been made a number of times. My information is very much to the contrary: that small firms were in fact able to cope with the problems caused by the three-day week far better than was expected. Indeed, I know some cynics have called it, not the three-day week but the four-day weekend, which was very congenial to many people, since so much additional work was done in the three working days that it surprised everybody, including the workers themselves. The problem for the small business is much more the problem of finding sufficient working capital to finance the higher cost of raw

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materials, to finance pay increases, to finance fuel and electricity increases, which all have to be paid for before the goods, having been manufactured, are themselves paid for. The real strain for small companies and big ones alike will be in the coming months, not in tidying up the short disruption caused by the period of the three-day week.
In the one or two other points I wish to make in the course of my opening speech I would ask Her Majesty's Government to make up their minds about the nuclear energy programme. The previous Administration were taking a long time about it. This action Government of ours might take a little action here as well. The postponement of a decision on the grounds that the 30 per cent. increase in electricity prices will damp down demand for electricity and so reduce the need for new stations is tempting, but many companies, particularly in development areas, would be enormously benefited if they knew what system was going to be decided upon by Her Majesty's Government and the Central Electricity Generating Board. This is not a controversial matter. I am sure that the new Minister for Energy will have access to all the documents of the previous Administration at official level, so none of the earlier work will be wasted. A decision of this kind made quickly could do a great deal to help engineering and other companies which are wondering how their order books are going to be filled in the coming years.
Another matter, which again is of a non-controversial nature, but well worth looking into, would be to review the policy of investigating proposed mergers. This has been a very clumsy operation in the past. It was introduced by the former Labour Administration and continued by the Conservative Administration. A clean-up here is clearly required, and an opportunity arises from the early retirement of the existing Chairman of the Monopolies and Mergers Commission to have a face-lift in this aspect of procedure, which does so much to slow down, and indeed possibly negate altogether, useful and desirable mergers which would improve the efficiency of British industry.
In a more general way, I urge Her Majesty's Government, before hardening
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of the arteries finally sets in, to try to look at the economy of Britain from the point of view of setting general guidelines and avoiding detailed intervention. The will to create wealth is there; the desire is there; the potential is there; but if decisions are delayed, if there is to be petty detailed interventionism in individual companies no good will be done but a great deal of damage may be caused. I suggest to Her Majesty's Government that British industry and commerce are very willing for a dialogue to start and to continue at all levels with individual firms, and not always with institutions, about what should be done and how it should be done. This is an opportunity for Her Majesty's Government to show themselves as fully understanding the importance of the private sector of industry and commerce, the importance of profits, the importance of dividends, too, when the time comes to increase them, to rise above narrow Party sectarianism and to be what they could be, a great Government. Alas! the speech made yesterday gives me very slender grounds for hope. My Lords, I beg to move for Papers.
3.31 p.m.
LORD BESWICK: My Lords, I do not exactly enjoy making a speech and certainly not twice on the same subject, in the same House, within practically the same week. As I still have the same views that I held last week, and as the Government's policy remains the same, there may well be an element of repetition in what I have to say. But as this time I am speaking early instead of winding-up I thought it might be useful if I spelled out, in response to the noble Lord's Motion—rather than getting involved in a debate on the Budget—some general lines of approach inherent in this Government's industrial policy. Then if the noble Lord, Lord Erroll of Hale, will agree, I shall take up some of the more specific points he made when I come to wind up. Again, I fear, I have to inflict a second speech on your Lordships.
My Lords, one undoubted bonus of having this second debate is that it enables me to welcome back to our deliberations the noble Lord, Lord Erroll of Hale. I have no doubt that he has been using his time well, and we all welcome him back to this House. The noble Lord always has a most conciliatory approach to our political discussions,

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even though he usually contrives to conceal it beneath a veneer of agreeable controversy. He started off, I thought, as if he was going to abandon his controversial posture when he spoke of the open-mindedness of this and other Governments, but then, after about the first sentence and a half, he was accusing us of premature hardening of the arteries, that we did not know what we were talking about and—I do not really think he meant this, and I take it in a friendly fashion from him though I would not from anyone else—that some Members of the Government were sneering from the outside at the efforts of industry. I am sure he does not really mean that.
May I tell the noble Lord about small firms, though I am going to say something more about them later on? He really should not say that this Government ignore small firms, when after all it was my right honourable friend Mr. Crosland who appointed the Bolton Committee. Much has been done since that Committee reported although the work was taken on by another Government. I assure the noble Lord, Lord Erroll, and the House, that we start off to-day with an agreed proposition, that industry—and I mean "industry" in every sense of what I regard as a good solid sound English word—is to be encouraged. I absolutely agree with him about that. There is no future for this country unless we can establish—or should I say "reestablish"—this industrial base. That, my Lords, is common ground. The question is, how do we go about it?
Let me first deal with two general anxieties expressed by the noble Lord. Of course there has to be consultation, genuine consultation, with all those involved—employed and employers alike. I know that some noble Lords opposite are concerned—and the noble Lord himself expressed this anxiety—that we on this side may underrate the contribution of directors and managers. I admit that the caricature of the fat cigar-smoking director still exists, in the same way as certain noble Lords opposite seem to think that all workers are agitators or spend their time driving up to the local social security office in a taxi to draw some immense uncovenanted sum in social benefits. Neither picture truly reflects the facts, and I should like to
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think that in this House at any rate we can do something about that process of mutual understanding which we said in last week's debate was absolutely essential if this country is to take a path of really effective social and economic progress. I can assure the noble Lord, Lord Erroll, that there will be intensive consultation with all those concerned on all sides of industry, and that it will be carried out in the spirit I have tried to indicate.
My Lords, there is then the question of profits. In general, I would say that those people who declare, as did the noble Lord to-day, that the Labour Government are against profits as such are just being old-fashioned. I come from a generation and from an area where certainly there was, to use the term employed by the noble Earl, Lord Limerick, last week, a hatred of profits. When there was a controversy between the miners and the mine owners then it was a question of the division between one lot of people who owned and managed a company and those who worked for them. Those days are gone. Political thinking has got beyond that stage. Of course some profits may be criticised as being excessive. Of course some profit margins should be cut. But a sophisticated discussion about profits really raises the question as to how they are allocated. I beg the noble Lord to think that there are some on our side (I am not including myself, but some of the younger people coming along) who are just as sophisticated as anyone on the opposite Benches, who discuss this subject in a completely different way. They are concerned not with attacking profits but with deciding what the allocation should be between one use and another. So, my Lords, despite what some may be disposed to say about an emergency Budget to deal with an emergency situation not created by the present Government, the fact remains that we believe that there must be a partnership with industry and we hope and intend to do our utmost to encourage and guide the expansion of industry.
The noble Lord asked how the guidance should take place. An essential tool of this expansion policy will be a new Industry Bill. This was stated in our Election Manifesto and it was specified in the Queen's Speech. I cannot give

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details of that Bill at this stage, and in any case we must have further consultation with the C.B.I., with the T.U.C. and with other interested parties. Broadly, however, we shall want to develop the powers in the present. Industry Act and, in addition, we shall want to set up a system of planning agreements and a National Enterprise Board. A good deal of preparatory work has been done; some exciting prospects are open and I would tell the noble Lord that the enthusiasm and the deeply informed nature of the leadership given by my right honourable friend Mr. Wedgwood Benn is truly exhilarating in this matter. I hope that the noble Lord will come along some time and take part in the discussion; I am sure that he too would find it exciting. This work has started, but much further study and consultation has to take place.
My Lords, the planning agreements system is intended to help British industry to make its maximum contribution to strengthening our economy. The basic idea is a simple one. It is to give the leading firms in this country, on whom our prosperity depends—and here I agree with the noble Lord—a better opportunity to contribute to the attainment of certain economic objectives. These objectives may be an increase in exports, replacement of imports, an increase in investment, or an acceleration of technological development in some key sectors.
It is intended to be a constructive partnership. The leading firms will give information about how they see the future in their particular sectors and about the plans which they are making for the future. The Government, with the general economic information at their disposal, which will be reinforced by the flow of information from leading firms, will seek to give these firms clearer guidance on how they can help the attainment of economic objectives. The approach will not be one of detailed interference. The aim will be to ensure that there is a greater consistency between the strategies of the major firms and the strategy for the economy generally. If the firms are willing and able to help in the way the Government suggest, it will be for the Government in turn to smooth their path in whatever ways are
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open. It is of course an important feature of our proposals that there should be appropriate participation by the trade unions. They indeed have a major contribution to make to the success of these proposals.
It may be said that although the idea is attractive, all past experience of attempts at economic planning in Britain suggest that it will not work in practice. My answer to a criticism of that kind is the answer that was once given by Robert the Bruce. Arrangements of this kind have operated successfuly in several European countries. A system of this kind, called the "programme contracts system" was introduced in France in 1965 and is still operating. Similar systems were introduced in Belgium and Italy in 1969. I think it is generally recognised that in France considerable industrial progress has been made over the past decade, and there are many who believe that a major factor in this has been the way in which the Government, management and the unions have been able to co-ordinate plans for the future development of particular sectors of industry. The system certainly seems to work there, and there seems to be no reason why it should not work in Britain. At any rate we have to try, and we intend to try.
I may be asked whether this involves an element of compulsion. I may be asked what sanctions the Government intend to introduce. We have recognised that there may well be a need for reserve powers to make a planning agreements system fully effective. The Secretary of State, my right honourable friend, has referred to powers to obtain information and to intervene temporarily in the management of a particular company. There are certainly precedents for this. For example, I believe the last Government were taking similar powers to regulate insurance companies. The view might be taken that some reserve powers are needed if only to ensure that companies who co-operate have some reassurance that they will not suffer at the hands of their competitors by doing so. But the point here is that if the planning agreements system is to work properly it can do so only in a co-operative spirit, and it is voluntary agreements which the Government will be seeking.

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Fears may be expressed that the National Enterprise Board proposal implies a massive extension of public ownership. The Government certainly contemplate some extension of public ownership. But the previous Government also, despite their philosophical attitude, found it necessary to extend public ownership. I have only to recall the setting up of Rolls-Royce (1971) Limited and Govan Shipbuilders Limited. It is surely recognised by now that public ownership is sometimes the only way of ensuring that some particular sector of the national economy develops in a way consistent with the national interest. And there remains the argument that we ought to aim at more equality of ownership of important assets in our nation, and that is an argument which should not be underestimated.
The National Enterprise Board proposal recognises that nationalisation of whole industries on the traditional pattern is less likely to be appropriate in the future. It is more likely that a need will arise to take into public ownership a particular enterprise of national importance. Where such individual enterprises are taken over, it is clearly desirable to have proper machinery for managing these publicly owned assets in the national interest. That is where the National Enterprise Board proposal would come in. It is too early to go into details about the kind of organisation which will be thought appropriate or to forecast which enterprises will be brought within its sphere of responsibility. In certain cases, however—and the Labour Party Manifesto details those cases—we have set out our objective of full public ownership in certain industries.
My Lords, in all this I am of course looking to the medium and long-term future. It is unlikely that the impact of a new Industry Bill will be felt within the lifetime of the present Parliament. While we are working upon a new systematic approach to this crucial problem of investment in the manufacturing and service industries, it is important to ensure that there is no let-up now in our efforts towards recovery. There is much that we can do now towards achieving a high—and this time a sustainable—growth of our economy. Equally, we have to maintain, and indeed intensify, efforts to eliminate the disparities in employment and development that have built up over the
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years in Scotland, Wales and the English assisted areas. Our broad intention, therefore, is to maintain the priority which those areas receive over the whole field of Government policy and to continue and develop financial and other incentives now available for the location of new industry and the expansion of existing industry in those areas. The need for continuity is accepted, but there must be no doubt that this support will require a wider, more active and, we hope, more fruitful role for the Government.
I hope there will be no disposition to say that we should not try a new or more developed form of partnership. I hope there will be no attempt to point to the past as an example for policies of the future. I am not going to quote again the figures that I used last week about the budgetary deficit and the balance-of-payments failures of the previous Administration. But probably it is worth bearing in mind—all of us—one figure that I quoted last week. I have myself spent some little time brooding over it. I said then that our manufactured imports now amount to 90 per cent. of our manufactured exports. And this for a country which made its name and owed its position in the world as a leading industrial nation!
I make no Party point of it when I say that in 1968 the ratio was one of 67 per cent. If one goes further back, we find that at one time manufactured imports were only 50 per cent. of our manufactured exports, and thus we had 50 per cent. of our manufactures helping to pay for our raw materials and essential foodstuffs. The fact is that a deterioration which has been taking place over the years has to be reversed. Clearly some new attempt has to be made; some new methods have to be tried. I suggest that the case for trying some new form of partnership within industry is obvious. I say to the noble Lord that it will be a partnership resulting from full, genuine consultation. Where additional public ownership is indicated, the right of Parliament to say "yea" or "nay" will be completely respected. I end by saying I should like to think that in all the discussion and controversy which the Government's policy will inevitably involve, this House will play a full and constructive part.
3.50 p.m.
BARONESS SEEAR: My Lords, may I begin by apologising for the fact that, owing to an engagement this evening from which I am unable to escape, I shall be unable to be in the Chamber to listen to the winding-up. As I say, I apologise, but it is inevitable.
My Lords, I should like to repeat what the noble Lord, Lord Beswick, has said, in that a great deal of the ground to be covered to-day was gone over in our debate last week. I do not intend to waste the time of the House by repeating the arguments and facts advanced in that debate, but after listening to what the noble Lord has said, I would pick up one point that he made at the very beginning of his speech—and I hope that it was more than a throw-away line. He said that perhaps at least in this House it would be possible for all of us, in all parts of the House, who are deeply concerned with these questions of economic development, industrial efficiency and relationships in industry to work together in the closest possible way. If this is in any sense an invitation to collaborate on these matters, I am sure (although I have not consulted all my colleagues) we shall be delighted to take part in any consultation in any way that it is possible for us so to do.
Since the debate last week, there have been two events which underline, though I do not think they basically change, what was said in the previous debate. There have been the worst ever balance of payments figures for the month, and there has been the Government's statement of policy in the Budget Statement in another place yesterday. To me, of course, and to Members on these Benches, there are certain aspects of that Budget speech which we greatly welcome. We welcome, as I am sure noble Lords opposite knew we should, the increase in pensions and the extent to which some of the worst-off sections of the community have been safeguarded by the provisions of the Budget. I will repeat, but not elaborate, what was said last week: that we do not think the way in which the money is being used to redress and avoid hardship is the wisest. It would have cost something like £340 million to give family allowances for the first child. The Government have chosen instead to spend £500 million on food subsidies.
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I am fully aware of the argument that using the money for food subsidies helps to keep down the retail price index and therefore postpones—though only for a short period of time—the moment at which the threshold agreements are brought into operation, and therefore a considerable inflationary influx of money is put into people's pockets. But this is only a very temporary and superficial way of dealing with the problem of inflation, which needs a far more drastic effort to deal with it than merely holding back for a few weeks what is, in our view, an extremely wasteful use of subsidies by paying them to all people for their food, whether they need the subsidies or not. We discussed this last week, and I do not intend to go into the matter at any length.
My Lords, another matter in the Budget speech yesterday, and indeed in what we have heard so far to-day, which I find of deep concern is the absence of any sense of urgency to deal with the really critical situation in which we find ourselves at present. We must increase our export trade, and increase it very quickly. We are living "on tick", and we are doing so to a most alarming extent. We have become so accustomed to living "on tick" that our balance-of-payments loss for one month, which in previous years, if it had been for a whole year we should have found of the greatest concern, is passed by as if it is something that we can live with, given that we have been able to work out how many noughts there are on the end of the sums that we are talking about when told of the size of the loss. I ask the Government a direct question: what are the Government proposing to do?—because I do not find it in the Budget speech. What are the Government proposing to do now—not in some middle-term or long-term, distant future, but now—to increase exports? Something on a really drastic scale is needed if no other increase is to take place from this present moment on.
The second sense of urgency which seems to be lacking in the Budget speech—and here in some ways I am echoing what the noble Lord, Lord Erroll of Hale, said, but with, I hope, a slightly different emphasis—is a sense of urgency in the need to increase the total volume of production in this country, and to increase productivity and efficiency in industry.

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To do this (and I am sure we were all agreed about this last week) we have to stimulate investment. What is there in the Budget proposals to encourage investment in industry? We are presented with the 52 per cent. corporation tax; we are presented with a rigid, and in the minds of many people very ill-understood, control over price increases. I am all for controlling price increases where it can generally be done without restricting the amount of money available for investment. But there is considerable discouragement in the Budget to save, and therefore to invest.
A great many of us over a number of years have been pressing for savings from the small saver. I know that this represents only a relatively small proportion of the total saving to be done, but it is a matter of getting the right proportion. What is there in the Budget to do anything other than discourage saving—particularly by the small saver, who has been hideously "clobbered" both from saving in Government securities and in the attempt to get into equities over recent years? Will the Government do anything about this? Industry must invest more. We all know that the proportion invested in the gross national product has gone down and down, and compares very un-favourably with our competitors. We all know that our growth rates are deplorable in relation to our competitors. We are in a situation that our balance of payments and prosperity at home will be in a very sorry state indeed unless somehow or other we manage to get a large share of contracting world trade; and this will be done only by an increasingly efficient industry.
We are entitled to receive from the Government precise answers to our questions, not just schemes for planning, systems of collaboration with industry in a middle and distant future, but answers as to what is being done now to restore the confidence of industry. We all know companies which are cutting planned investment programmes because of the present state of the economy. What has the Budget done to reverse the attitude that has grown up over recent weeks, and which is disastrous from the point of view of the general economy? What are the Government proposing to do?
There is also the huge increase in prices of commodities coming through the
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nationalised industries. Maybe it is necessary, but all the way round industry is being "clobbered". I know that the noble Lord, Lord Beswick, speaks so that we are persuaded that he understands as well as any managing director the necessities of industry, but that understanding is not reflected in the Budget. It is not reflected in the speeches of many of his supporters, and the mood engendered in the country is that the future of industry is very bleak indeed. My Lords, may I close by saying,
"Thou shalt not muzzle the ox when he treadeth out the corn."
That is what the Government are doing.
LORD SHINWELL: My Lords, before the noble Baroness resumes her seat, may I ask her a question? I found her observations on the constructive side intensely interesting. For example, I accept 100 per cent. what she said about the need to boost exports. That seems to me the pièce de résistance of the whole subject. The two points she emphasised were the need to boost exports and stimulate investment. I noted what she said earlier on, following the very fine speech of my noble friend Lord Beswick, that the Liberal Party would like to be consulted in this dialogue. Would it not be even more interesting if she could tell us, in a sentence or two, how to boost exports and how to stimulate investment, instead of asking what the Government are going to do?—because I tell her quite frankly that I do not believe the Government themselves know what should be done. If she could tell us, it would be most interesting.
BARONESS SEEAR: My Lords, the noble Lord, Lord Shinwell, has made very well the point that I was making. I do not think the Government do know; but we are entitled to hear whether they know or not. It is, after all, their responsibility.

BEAVERBROOK NEWSPAPERS IN SCOTLAND
4.2 p.m.
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD HUGHES): My Lords, with permission, I would like now to repeat a Statement which is being made by my right honourable friend the

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Secretary of State for Trade in another place. His words are as follows:
"In my Statement of March 19, I promised to keep the House informed of the discussions I was having with Beaverbrook's Scottish newspapers. Since then my colleagues and I have talked to the various interests concerned.
"On the question of the transfer of Beaverbrook's Glasgow Citizen to the proprietors of the Glasgow Evening Times, my right honourable friend, the Secretary of State for Prices and Consumer Protection, has satisfied herself under the terms of the Fair Trading Act that the Glasgow Citizen is not economic as a going concern and as a separate newspaper. She has, therefore, today granted her consent, as under the Act she was bound to do, to the proposed acquisition.
"The House will recall it was when this application had been lodged with the then Department of Trade and Industry on February 19 of this year that the larger problem of the future printing arrangements for the Scottish Daily Express and the Scottish Sunday Express became apparent. Labour Ministers met the Beaverbrook management on March 13, and they impressed on us their view that the transfer of the arrangements for printing their two Scottish newspapers to Manchester had become essential to the financial viability of the group. We requested that the whole Beaverbrook group should look again urgently at its position, in the light of the number of jobs that would be lost, and against the background of the Government's Development Area policy and the special assistance available to firms in them.
"That was the position when I made my last Statement. Immediately afterwards the Prime Minister, together with the Secretary of State for Scotland and myself, met the Scottish T.U.C. at their request. My colleagues and I then met a strong deputation from the trade unions concerned. This was followed on the same day by a long and detailed discussion with the Beaverbrook management, when we put to them the suggestions and criticisms that had arisen from our talks with the trade
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unions and our own concern about the implications of their decision. It became clear at that meeting that there was only a slim prospect of arrangements being made to safeguard employment for the Albion Street labour force. This was contingent upon a satisfactory agreement between Beaverbrook's and Sir Hugh Fraser under which the latter would, on contract, continue printing the Scottish Express papers in Glasgow.
"We then met Sir Hugh and his management team to explore further the possibilities of these arrangements. From this it emerged that it was not physically possible for him to print the two Express papers in Albion Street and at the same time print there the two Glasgow papers for which he is responsible—a view with which the Beaverbrook group concurred.
"We then looked at further possibilities, including that of the Fraser Group printing the two Scottish Express newspapers at Albion Street while retaining its own two papers at Buchanan Street, and the proposal made by Sir Hugh to buy the two Scottish Express papers. Sir Hugh informed me that the latter proposal had been rejected by Beaverbrook's. So far as the first proposal was concerned, he expressed willingness to consider this carefully but doubted whether a contract could be made that would be economic for both parties.
"I saw the Beaverbrook management again yesterday to press them further to consider both these possibilities. Late last night, after further contact between the two groups, Sir Max Aitken informed me that neither of these possibilities was practicable.
"As the House will see, throughout these discussions we have been concerned with two objectives: first, to explore all possibilities of avoiding the grievous loss of jobs in hard-pressed Glasgow, and, second, to try to find an alternative solution based upon a Scottish newspaper group. It is with profound regret that we have been forced to the conclusion that no solution could be found.
"Many factors, over many years, have contributed to the situation. But it is clear to me that Beaverbrook's

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decision is based upon a serious concern about the future of their group as a whole and that the immediacy of their action, with all its deplorable consequences for unemployment, is greatly influenced by the financial need to defend the group as a whole and the need to find substantial funds to meet their redundancy commitments to the workers involved.
"As to the future, I can only say this. First, a substantial printing capacity remains in being in Albion Street; and we shall certainly be ready to discuss any serious proposal that may still emerge. Second, the whole unhappy sequence of events re-emphasises the point made by my right honourable friend the Prime Minister last Thursday when he said that he was urgently considering the possibility of some form of inquiry into the newspaper industry."
My Lords, that completes the Statement.
LORD POLWARTH: My Lords, as I think this is probably the first piece of Scottish business (if we can call it "Scottish business") to come before your Lordships in this Parliament, I am sure that your Lordships, certainly those behind me, would join me in congratulating the noble Lord, Lord Hughes, on his return to what was a former position of his, though I think we must commiserate with him on being given such a sorry Statement to make as his first contribution.
This is sad news indeed, though not entirely unexpected. The Beaverbrook papers in Scotland are something of a national institution. Many of us have suffered from the whips and scourges of their writers. We have at times had their encouragement and support. But, whatever we have felt about them individually, they have been a vital force on the Scottish scene, lusty, robust and, above all, for Scotland all the time. They have done much to create a conscious awareness in Scotland of the important issues facing us, and therefore the prospective loss of these papers, their removal to production further South, is something that we must all lament very deeply. That said, I am bound to agree with the noble Lord that there seems little more, if anything, that can be done to save the
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situation. These papers have been the victims of the pressures of rising costs which we strove so hard when in power to contain.
There are, I think, two wider aspects of this matter that must create worry beyond the immediate one of this particular group. One is the whole future of the newspaper industry itself, which must be under threat as a result of these same forces. Therefore, I am sure we are all delighted to hear that some form of inquiry into that industry is under consideration, and I hope that a decision will be made quickly. The second worrying matter is that this is an example of the situation that arises when a major national concern finds itself the victim of pressures of this kind, many of them not the responsibility or the fault of management; when in difficulty it will retrench on the operations furthest from the centre. In this case the blow falls first on Scotland; in other cases it may fall on Wales, the North of England or other remoter parts of the country. So I think we can but receive this Statement with profound regret.
LORD BYERS: My Lords, as one who was closely associated with the News Chronicle in its final days, I find what has taken place in Scotland a most distressing event. All of us would deplore the loss of any newspaper, no matter what its political views, in this country or indeed elsewhere. We are short of newspapers. This is a distressing and deplorable situation. I want to ask only two questions of the noble Lord, Lord Hughes. First of all, what are to be the redundancy arrangements? In asking that question, I should like to express our sympathy with the 2,000 people who are going to find themselves without a job in the very near future. Secondly, what is the position of the pensioners, and the future pensions of those who will become redundant in the very near future? Are these fully protected and, if not, what is going to be done about the situation?
4.11 p.m.
LORD HUGHES: My Lords, I must first of all express thanks to the noble Lord, Lord Polwarth, for his remarks, and to both the noble Lord and the noble Lord, Lord Byers, for the sympathetic way in which they have received

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this rather lamentable story. I could certainly have wished for something much more pleasing to be my first Statement on Scottish affairs. The noble Lord, Lord Polwarth, expressed the hope that the inquiry into the newspaper industry which was mentioned as a possibility would in fact become a reality. I shall certainly ensure that these remarks are brought to the notice of my right honourable friend the Prime Minister, because I sense that this would probably be the wish of the House as a whole.
With regard to the two questions asked by the noble Lord, Lord Byers, I am sorry I cannot answer the question about the pensioners because, although the admirable officials tried to anticipate all possible inquiries, with his usual accuracy the noble Lord has managed to pitch on one they had not thought of. It is a point of considerable importance, and I shall make certain that the noble Lord is given the answer as speedily as possible. So far as the redundancy payments are concerned, first of all the basic statutory requirements will be met, but Beaverbrook are offering substantially more. The details are for negotiation between them and their employees, but I understand that what they have offered as a first stage is made up of two weeks' pay for each year of set-Vice in addition to payment in lieu of notice and holiday money, and these together will cost £3·9 million. They hope to be able to make a second payment in January, 1975, of one week's pay, which would cost £1·4 million. Having said that these are the arrangements which Beaverbrook hope to make in supplementation of redundancy, I do not think that I am sticking my neck out unduly when I say that I think they would probably regard as an equal charge upon their resources the safeguarding of the pensions position, but I do not have any specific right to answer that problem. However, as I said, I shall try to find out.
LORD SHINWELL: My Lords, I would inform my noble friend that I was in Glasgow last Thursday attending a function organised by Beaverbrook newspapers, and I am bound to tell him that the redundancy payments, however adequate they are likely to be—although, in the opinion of the journalists and
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those engaged in the printing side they are far from adequate—and even if they are improved, would be quite unable to remove the depression that exists in Glasgow at the present time because of the closing down of the Albion Street Works. In view of what I have heard, I should like to ask whether it is likely that the Beaverbrook firm will be able to liquidate some of the vast properties they possess, thereby ensuring the availability of more adequate redundancy payments?
I should also like to ask whether my noble friend has any information to the effect that there were three items responsible for the closure: first, which seemed to me remarkable and I cannot vouch for the truth of it, that payments made both to journalists and printing operatives were far in excess of what ought to have been paid; secondly, the reduction in advertising revenue because there were two evening newspapers in Glasgow, the Evening Times and the Citizen (mention of the Citizen I understand, because of suggestions made by Sir Hugh Fraser, that it was likely to be merged in the Evening Times); thirdly, the cost of newsprint. I should have thought that the cost of newsprint would have affected papers generally. Why is the suggestion made in Glasgow that the cost of newsprint is one of the items that has caused this adverse situation?
LORD HUGHES: My Lords, first of all on the question of redundancy, as I stated in reply to the question about redundancy payments this is a matter for discussion between the two sides. I indicated what the Beaverbrook organisation had offered. I can only add to that, that what will eventually emerge will depend very largely on these discussions, and say that of course no amount of redundancy payment, no matter how extraordinarily generous it might be possible to make it at the end of the day, can be anything but a poor substitute for the loss of 2,000 jobs in the newspaper industry in Scotland, for which in the foreseeable future there can be no alternative source of employment. Therefore, one can well understand the feeling of depression of these 2,000 people.
So far as the suggestions as to how this situation has come about are concerned, I have no doubt that there will be many

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ideas put forward by different people as to the contributory causes. Without having an exhaustive investigation into the finances and organisation of this particular group it would be quite impossible for me or, I would suggest, possibly any other Minister, to say which of these factors had the greatest contributory effect. All I can say is, that if in fact the excess of payments to journalists was a contributory factor, no journalist had suggested hitherto that he was being paid too much. On the question of the cost of newsprint, this is a complaint that is being made by newspapers throughout the country. It is undoubtedly a factor which increases their costs considerably. While it may not be any more expensive to the Beaverbrook group in Glasgow than it is to anybody else, if it comes on top of another set of adverse circumstances it may turn out to be the straw that breaks the camel's back. Unfortunately, although I wrote down very quickly the noble Lord's second point, I wrote it so quickly that I cannot now read it. Would my noble friend be good enough to repeat it for me?
LORD SHINWELL: My Lords, it was the question of the reduction of advertising revenue because of the existence of the two evening papers, and whether the disposal of one of them would not have made a vast difference.
LORD HUGHES: My Lords, when there are two evening newspapers, or sometimes two morning newspapers, circulating in a particular area, one of them inevitably grows stronger at the expense of the other, and it then attracts a larger share of revenue. Presumably there is a reasonably successful future for one evening newspaper in Glasgow, and this is why the alternative newspaper proprietor has found it advantageous to pay a very considerable sum—I gather approaching £3 million—merely for the right to have the title of the evening newspaper that is being closed down.
LORD BYERS: My Lords, must not we also recognise that here there was a history of industrial disputes and industrial action, no matter who was responsible for it? This is a prime fact in this situation.
THE EARL OF ONSLOW: My Lords, first may I congratulate the noble Lord, Lord Hughes, most sincerely on his
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appointment; and, secondly, say how sorry one feels about people losing their jobs? Can the noble Lord tell us how many industrial disputes there have been in the past year in the Beaverbrook newspapers in Scotland? Also, I find it a little difficult to gather from the figures what are the average gross earnings of the people operating the newspapers in Scotland. Can the noble Lord tell us what these were?
LORD HUGHES: My Lords, I find the noble Earl twice as difficult to answer as the noble Lord, Lord Byers, because he has asked two questions to which I do not have the answers. However, they are questions of very real importance and I shall do my best to get the answers for him as quickly as possible. What I would say is that I have not heard it suggested—and I think that what I am now saying can be taken in part as a reply to the noble Lord, Lord Byers—that industrial disputes in the Express group in Glasgow have been a major contributory factor to the present situation.
LORD DRUMALBYN: My Lords, does the noble Lord know whether any talks took place between management and employees about such possibilities as might have been open? For example, the noble Lord, Lord Shinwell, suggested that the rates of pay were above the normal. Was it suggested that it might be possible for the printing to go on in Glasgow if lower rates were acceptable? I take it that the Scottish Daily Express will continue to circulate in Scotland but will be printed in Manchester. That means there will be a considerable journalistic staff remaining in Scotland, so am I right in thinking that not all of the employees of the Scottish Daily Express will have to be paid off?
LORD HUGHES: My Lords, it is correct that there will remain a journalistic staff in Scotland, although I do not know what proportion that will be of the total journalists employed at the present time. I understand that the figure remaining will be approximately 50 and when that is set off against the total number of jobs involved in the printing of the newspaper it will be seen that it is a very small part. So only time will tell what will be the effect of printing in Manchester, and to what extent the

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newspaper will continue to be sold in Scotland. What was the noble Lord's first question?
LORD DRUMALBYN: My Lords, I asked whether the alternatives had been considered.
LORD HUGHES: My Lords, I do not know anything specific about that aspect, but having regard to the negotiations which have taken place between management and staff, between management and Sir Hugh Fraser and between management—when I say "management" I mean the Beaverbrook management—and Ministers, I am quite certain that every possibility, including the one mentioned by the noble Lord, Lord Drumalbyn, has been gone into most exhaustively. But I think that the nature of the financial catastrophe which the group are meeting is such that, in their opinion, none of these suggestions is of value in restoring a viable operation in Glasgow.
LORD BESWICK: My Lords, may I suggest that it might now be appropriate if the noble Lord, Lord Polwarth, resumed the debate on industry and commerce?

INDUSTRY AND COMMERCE: NEED FOR ENCOURAGEMENT
4.24 p.m.
Debate resumed.
LORD POLWARTH: My Lords, I must admit that it had not been my intention to take part in a debate in your Lordships' House quite so soon after the events of the last few weeks. But having returned only three days ago from a short sojourn abroad and seeing the terms of the Motion down in the name of my noble friend Lord Erroll of Hale I felt bound to say a few words, however ill-prepared they might be. I had certainly not expected to speak from this Bench, nor indeed to be asked to reply to the earlier Statement, and I can only plead the fact that I was hijacked in the Princes' Chamber by my noble friend the Opposition Chief Whip.
It is about two years since, as a result of a bit of arm-twisting, I left business for a sojourn in this place in my former capacity, "when"—to adapt the words of Hilaire Belloc—"approaching 56 they pushed me into politics"; although I
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have always regarded my activities more as the business of government than of politics. Having served my term I can associate myself with what my noble friend Lord Windlesham said last week in the debate on the Address about the joys of freedom from office, and at the same time I can sympathise with the noble Lord, Lord Hughes, who has now left us, on now being subjected to the restraints of office instead of having the freedom which he exercised in a most friendly and fair manner when he sat on this side.
I think that I can express my joy at my freedom even more than some of my colleagues who, I am quite certain, will be finding themselves before very long—views on how long may differ—back in office because, as I have made to clear to them with much regret, and as I think I should make clear to all of your Lordships, I am not a candidate for a further spell of ministerial office, for, I believe, much the same reasons that the noble Lord, Lord Shackleton, was unable to take a place on the Front Bench opposite, to the regret of all of us. One can break off an existing career once for the purpose of taking office, but it is quite unfair to do it more than once and then expect to be welcomed back into the business world.
I can support wholeheartedly everything that my noble friend Lord Erroll said in opening the debate, which was most timely on the day after the introduction of the Budget. I want to comment on one aspect only of his speech, and that is the vital importance of giving encouragement to the development of industry and commerce in the regions, particularly in Scotland. I am glad that the noble Lord, Lord Beswick, mentioned this point a few minutes ago and told us that a new Industry Bill will be introduced. Naturally he was not able to tell us very much about it, but we shall look forward with great interest to its proposals. I have never regarded the regions—I know that we do not like Scotland being called a "region", but generically I think we must call it that—as a liability to the country. I regard them as an asset, because they have space for development, there are people to assist in the development—we still have a higher figure of unemployment than we should like; and I must apologise to noble Lords opposite for the fact that I have

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temporarily increased the figure in Scotland by one—and we have resources of skills. So that the regions are a real asset, provided that they are given the necessary encouragement.
I was sad that nothing in the Budget speech appeared to offer specific encouragement to industrial investment which is so badly needed, particularly in the regions. As the noble Baroness, Lady Seear, said, industry is burdened with higher corporation tax, and with increased costs for fuel, power, transport, posts, telephones and national insurance contributions. Almost the only compensation that one could see in the Budget was the promise that the regional employment premium would not yet be withdrawn. I should make it clear that even when we were in power there was no question of withdrawing it immediately, and plans were well advanced for a phased withdrawal of it. But in the present circumstances I think it is wise that it should be continued and, indeed, I think that many companies, particularly in the regions, would find themselves in severe financial difficulty if it were not.
There was one other possible burden in the speech which struck me and about which, perhaps, the noble Lord who is to wind up for the Government, may be able to enlighten us. It may be my fault for not studying the speech sufficiently closely, but in the passage about the disallowance of overdraft interest for tax, mention was made that whereas previously it had been allowed for qualifying purposes, there were loopholes and it was too easily got around, and that in future it would apply only to loans for particular purposes. I should point out to your Lordships that, particularly in Scotland, it is the normal practice of industries to finance themselves through fluctuating overdrafts rather than through fixed loans. My Lords, I think that we should like to have an assurance that this disallowance of overdraft interest will not apply to overdrafts genuinely incurred for the purposes of businesses of all kinds.
My Lords, before the recent upheavals from the fuel crisis and the miners' troubles in the winter, I believe that industry in Scotland, and many other regions, was probably better poised for a real breakthrough than it had been for many years. There were all the signs:
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unemployment had been coming down continuously for about eighteen to twenty months, until those sudden winter events; unfilled vacancies had been rising and there were indeed shortages of labour in individual places and categories. I think that we were all set for a big advance. I believe that once the present immediate difficulties are removed that advance can be resumed.
There are many causes. First and foremost are the very strenuous efforts made by industrialists in Scotland and others interested in the development of industry there, to achieve this. One must attribute some of the reasons to the impact of North Sea oil, and, my Lords, that is another subject on which I would rather not touch to-day because we shall undoubtedly have another opportunity before long to concentrate on it, although I must take the opportunity of congratulating the noble Lord, Lord Balogh, on turning from poacher to gamekeeper: we shall watch his performance in the new role with intense interest. I hope that, whatever new arrangements are made for handling North Sea oil, those responsible, in whichever Ministries, will take note of what I think is the extremely effective team that has been built up within the Scottish Office for handling oil matters, There is a considerable amount of expertise, knowledge and understanding in that office of the impact of North Sea oil, in its broadest sense and I hope that that will continue to be made full use of in whatever way the new Administration evolves.
The opportunities exist for maintaining this impetus. I am glad to hear from friends in recent days that the prospects for the capital goods industry in Scotland are basically good and that on the whole order books are good if they can deliver the goods, and we must help them to keep this up. That is why I think the maintenance of an effective regional policy is so immensely important. I was glad to hear the noble Lord say that they intended to develop these policies in new ways. I hope that that is so and that it does not mean a wholesale uprooting and change because in the past one of the difficulties with which industry has been faced has been the frequency of change in the forms of inducement and encouragement within the regions. This is where consistency and continuity are so important.

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My Lords, I believe that the measures introduced in our Industry Act almost two years ago have been for the better. One of the most important factors was that for the first time there was a genuine measure of devolution of their administration to the regions. Certainly my own experience has been that this has worked extremely well in Scotland. It has worked well because we have had an admirable Scottish Industrial Development Board made up of industrialists, bankers and all sorts of people who have given a great deal of time and trouble to handling the cases, and because we have been fortunate in having behind them (if I am allowed to say this) an extremely effective administration of the Department of Trade and Industry in its Glasgow office. I hope, therefore, that changes will be a development of policy rather than a wholesale rooting up and renewal.
If I could carry that to a more particular line, I should like to say something about the future of the steel industry in Scotland because this is one of our basic industries. Unlike other parts of the country, which are mainly related to one specific form of steel production according to region, we have in Scotland almost a microcosm of the steel industry, with a variety of products, which is vitally important to us in terms of employment and in the supply of basic materials for our engineering industry.
My Lords, as we all know, the engineering industry has suffered greatly, particularly in its investment plans, from political uncertainties for many years past. During 1972, as your Lordships will remember, there was a very thoroughgoing review of its investment plans between itself and the Government, and eventually, at the end of 1972, its forward plans for the next steel generation—if you can call it that—were agreed and publicised. While at the time I know that there was a good deal of concern at the number of closures and the reduction in the total numbers to be employed in the industry, particularly so within Wales, more than in Scotland, there was a general realisation that if the steel industry was to be competitive it simply had to trim and modernise itself and that a smaller industry with greater production would give much
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greater job security to those continuing to be employed in it.
My Lords, at the end of the day I believe that Scotland came remarkably well out of those plans, rather better than at one time it looked like doing. I was a little concerned, therefore, to see that Mr. Wedgwood Benn in, I think, the interview previously referred to, had talked about reviewing closures with the British Steel Corporation and indicating that possibly there might be another review. I beseech the Government not to have another thoroughgoing review of the steel industry's investment plans because I believe, certainly in Scotland, that we have broad acceptance of what was planned at all levels, including the trade unions, who have been very co-operative.
What is more, I know from my own visits within the last few months that we have a good and enthusiastic management in the plants and good leadership on the plant floors, too. The worst possible thing would be to introduce fresh elements of uncertainty at this time when there is general agreement about those plans. We have gone a long way in plans for finding alternative employment for those who inevitably would lose it in the steel industry and, under me, we had working in the Scottish Office a reconstruction team bringing together the steel industry, the trade unions and the local authorities to see what could be done. With their help we had already earmarked surplus British Steel Corporation land in the Clyde Valley for the possible creation of a major new industrial estate, extremely favourably sited, which I believe would be a great attraction to new industries. I sincerely hope that that scheme will be allowed to be continued. We also had plans for the Glengarnock area in Ayrshire. We had plans for giving a great facelift to this area, with the rundown of the steel industry in it. I hope that these will be allowed to continue.
My Lords, I think the great thing here, and the final point I would make, is: let us not root everything up for the sake of new theories and new ideas, however anxious new Ministers may be to leave their particular imprint on these new fields. Industry cannot survive if its roots are going to be pulled up and inspected every two or three years.

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Investment plans are essentially long term. It may often be anything from five to ten years, or in some cases even 15 years, from the genesis of the idea to when the investment is completed and the finished product comes off. Therefore, I make a plea for continuity and for support and encouragement.
I am bound to say that this first, interim Budget does not contain anything much that I can see by way of encouragement. I only hope that the second, autumnal Budget, if it is introduced in due course (I say "if it is introduced" because I noticed that the Chancellor took the precaution of saying, I think, "If the House and the country agree", and I think that was a wise precaution to take), will not be concerned solely with the discomfiture and discouragement of certain sections—those who, while they may be considered to be enemies of society, in many cases are simply people who are using the normal instincts of working hard, of enterprise and of wishing to see some material results from their efforts in leading industry and commerce, and if I may say so, the not totally reprehensible motive of passing on some of those results to their heirs and successors—but will be very much concerned with the encouragement of our industry and commerce, and of those who carry the very heavy burdens of its management.
4.42 p.m.
LORD MAIS: My Lords, I am grateful to the noble Lord, Lord Erroll of Hale, for giving us the opportunity to discuss this matter at such an opportune moment. On the other hand, I cannot help feeling that, opportune though the debate may be, it is a little ironical to ask this Government their intentions so early in their tenure of office, bearing in mind the general state of industry when we took over only a matter of three weeks ago—a state which I believe was largely produced as a result of the Industrial Relations Act and the inflexible manner in which it was applied. I think there were few of us in your Lordships' House when that Bill passed this way some time ago who did not go away with some concern as to the final outcome. I mention this merely because I believe that before one can consider what is required in order to give full encouragement to industry and commerce it is necessary to give some
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thought to some of the problems which are facing industry at the moment.
What industry and commerce require, what is in fact a prerequisite to their success, is not only encouragement but confidence. Confidence in industry and commerce has been badly shaken over the last four months. By that I do not mean only in the boardrooms, but on the factory floor and the shop floor as well. Without confidence industry will not attract the money it requires to operate, whether that money comes from shareholders, from the banks or from the finance houses. Without confidence industry will not be prepared to invest money in research and development, in the exploration of markets at home and overseas or in the expansion and improved efficiency of their companies. Without confidence they will hesitate to recruit labour. They will find it difficult to retain that labour, or to satisfy it. But, principally, without confidence industry will inevitably slow down. It has already been slowed down. To draw a parallel, an aircraft requires a certain amount of speed in order to stay in flight. Industry requires confidence and the facilities to enable it to operate and to expand; otherwise it also loses flying speed, and sooner or later, as the aircraft will crash, so will industry.
The noble Lord, Lord Erroll of Hale, referred to the rather vexed word "profits", and perhaps I may be allowed to do the same. My Lords, all industry and commerce must ultimately depend on the profit element, for without profits and a good profit record you cannot attract adequate funds into your business in order to operate efficiently. Without profit you cannot take steps which are necessary to expand your business or your business activities. Without profit there is not very much you can do to improve the conditions of those who work for you; and it is very little use anybody submitting a wage claim to a firm that is losing money.
I remember—and I shall never forget—what happened back in the late 1940s or early 1950s, when I was engineering director of a company of which I later became chairman and which was building an experimental atomic plant. It was so experimental that those designing it had not much idea what was going to happen at the end, and certainly those of us who, were building it were even less well

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informed. It was very much a hand-to-mouth existence, with the result that we were negotiating, or were trying to negotiate, how we were to be paid for it as we went along; and, as so often happens in these cases, it was not a very satisfactory business. One day one of those stalwarts from the trade unions, the late Sir Luke Fawcett, came to see me. His first question was, "Are you making a profit?" I told him I was not, and that in fact I was losing very heavily. He pondered for a moment and then, being the man he was, he said, "You know, I do not like companies which do not make profits because it is not the slightest good my submitting to you a claim on behalf of those I represent if you have no money to pay it." What did he do? He then threw his influence in on our side in order to get negotiations finalised rather quickly, with the result that in a few weeks we were happy, and so were the trade unions. I refer to that only for two reasons: first, to show that profit is necessary, and, secondly, to show what can be achieved if there is a good rapport between the senior management and the senior officials of a trade union. We should never have got that matter settled had it not been for their support.
It is necessary, my Lords, that we stop thinking of the word "profit" as a dirty word. Without profit industry cannot survive, and there is little hope of happy industrial relations unless we can achieve it. The real problem is that profit in itself will always be suspect. What we have to be careful about is the amount of that profit and the use to which it is put. Therefore it is essential that whatever Government are in power they must give every possible encouragement to industry and commerce. What I find difficult to understand at times is why anyone should expect or anticipate that the present Government, and those of us who sit on this side of the House, are any less alive to this fact than the previous Government and those who sit on the other side. If a firm falls upon bad times, then it is often the case that it is the lower-income groups and the men on the shop floor who feel the bite first. Therefore, so far as this Government are concerned, we have certainly as much, if not perhaps a little more, interest in ensuring that industry and commerce are profitable and that they are given every possible encouragement.
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There was a time when British goods were admired throughout the world for their quality and for our delivery. Many of your Lordships may have travelled around the world as much as I have during the last fifteen months, and I regret to say that our quality is now in many cases suspect, and our delivery dates deplorable. My noble friend Lord Beswick referred to the closing gap between our exports and imports of manufactured goods. I believe that our problem is due largely to two things. We all know that we have a problem with regard to essential materials, but, secondly, I believe that one of our principal problems is the present state of industrial relations. In 40 years in industry I do not remember when industrial relations have been quite so bad as they are or have been during the past twelve months. The Industrial Relations Act created a great deal of ill-will between the operatives—or employees—and management. I should be the last to advocate a free-for-all, but we are at this moment in a serious economic state. We have rising prices, in fact we have an escalation of prices in almost every direction. What is necessary—and it is a matter of great urgency—is that we should have a wages and incomes policy which is seen to be fair, and which we hope will be acceptable to all concerned, if not in perpetuity at least for the period of this crisis, or for a limited period. Personally, I hope that it will be in perpetuity. But if that is to be so it must be a flexible arrangement and one that is kept constantly under review.
I have already referred to the shortage and rising costs of raw materials. We sometimes overlook the fact that almost all our troubles, or a very large proportion of our troubles to-day, are entirely due to this factor rather than to internal ones. I do not imagine for a moment that it is possible for us to have any form of import control, nor may it be necessary in fact, but I should like to see consideration given to directing that limited supply of raw materials to those industries which are most closely connected with export. If that means cutting back on the output in less important fields, then so be it.
There are of course a number of rather ridiculous situations existing at the moment. They are small in comparison with the whole but they make one wonder

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what is happening. Three or four times in recent months we have had projects held up because of shortage of steel, principally reinforcing steel and light sections, and we have had to buy from abroad. You may think it ridiculous, but it is true, that my company had a delivery, in fact we had several deliveries, that arrived on the site after having left a works not more than 40 miles away eight days before. They had crossed the Channel and had been delivered back on the same lorry. The only difference was that the delivery had been exported at the control price for steel and bought back at £50 a ton more. For every ton of steel that goes that way we have a £50 per ton deficit on our export/import. Surely it is not beyond the wit of Government and industry to see that that does not happen.
My Lords, I ask you also to consider whether there is as close a relationship as there should be between very senior union officials and the senior people—by that I mean the chairman and managing director level of companies. I started my life a good many years ago on the equivalent of the shop floor as a young engineer working on engineering sites, and I had a very close relationship then with the junior union officials with whom I had to do business. I kept that relationship for quite a while, but as I moved up the ladder and by the time I reached the Chair I found that that relationship had gradually been whittled away and did not exist to the same extent. That is a matter which requires careful consideration, and I sincerely hope that Her Majesty's Government will see what they can do about it. It is one thing to have a close relationship between the trade unions as a whole and industry as a whole, but that is not at the bottom of things. Where the trouble starts is in the individual company and on the shop floor, and unless management of companies and senior union officials with whom they deal are not only in close contact but also, if you like, have some understanding of each other's problems, then you are in for serious trouble.
Undoubtedly industry is going to be hit with the additional taxation, although perhaps they may consider that it is not so bad as they were expecting. But I would hope that the Government would give very serious consideration to some
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relief on taxation as soon as the economic situation improves. In the meanwhile, I sincerely hope that they will also consider whether relief cannot be improved, or allowances cannot be improved, in order to encourage firms to invest in new machines and new plant, new factories, to spend money on research and development and also on looking into markets at home and overseas. Let us face it, searching out new markets is an expensive business. If the Government could in some way give an indication that this matter will be considered, then I believe that it will go a long way towards restoring confidence in industry. Confidence is badly needed at the moment.
It has been said many times before, my Lords, that this country exports or dies. I am sure that the dying would be a very painful process and would last a long time. The lowering of our standard of living would be very painful. It is important to any Government—and I am sure this Government will appreciate this probably more than any other—that industry and commerce must be encouraged. They must be supported. What they need at the moment, probably more than anything else, is to be given some indication as to the future. I should very much like to see discussions open up as a matter of urgency between the Government and individual industries. I think it was the noble Lord, Lord Erroll of Hale, who said that it was better to talk to the industries individually than to the large associations because each industry has its particular problems. I strongly support that view. It is very nice to have words of encouragement but they do not solve difficulties. Industry at the moment lacks confidence. That lack of confidence, with all respect, can hardly be laid at the door of this Government. We, I regret to say, to a large extent inherited it.
My Lords, this is a very important debate. Once again may I thank the noble Lord, Lord Erroll of Hale, for giving us the opportunity to spend some time on it this afternoon. I would thank noble Lords for listening to me with patience. I have had a constant eye on that clock above me and I hope I have not transgressed. I have in fact gone only one minute beyond the time that I set myself.
4.59 p.m.
LORD KINGS NORTON: My Lords, I do not intend to follow noble Lords down any of the paths which they have trodden except to follow a rather narrow path on which the noble Lord, Lord Erroll of Hale, put no more than a somewhat critical foot, the path of mergers and takeovers.
The merging and taking over of companies is part of our pattern of industrial and commercial development, and short of a revolutionary change in our system it is likely to continue. It is one of the means we use for producing more efficient units and for creating enterprises big enough to engage in the major projects which are more and more characteristic, as time goes on, of our technological and industrial progress.
In this country we have refined the processes of merger and takeover in such a way that they are reasonably controlled in the national interest, and I think it is important that the means we have developed should continue to be refined and improved. While, if they are, industrial and commercial concerns will, I suppose, not feel any particular measure of encouragement—and encouragement is the nub of the Motion which the noble Lord, Lord Erroll, has moved to-day—there is little doubt that if the processes at present applicable to our commerce and industry are depreciated they will soon feel a positive discouragement; and there is a serious possibility of this happening.
Until recently, the Government Department concerned was the D.T.I., and the work it did will presumably in future be done by one of the Departments now formed out of it. I believe the duty will fall to the Department of Mrs. Shirley Williams, but perhaps the noble Lord, Lord Beswick, will confirm this when he comes to wind up. Formerly, when a merger or takeover was intended the D.T.I. took two or three weeks to decide whether it should be referred to the Monopolies Commission. If it were not to be, the arrangements for the merger terms, or the bid, went ahead. If it had to be referred, then the Monopolies Commission took two or three months perhaps—in complex cases sometimes a little longer—to decide whether or not to allow the deal to proceed. In any case, by the Fair Trading Act 1973, they were not
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allowed to take more than six months; and when the deal did go ahead the takeover panel kept a critical eye on the proceedings.
Noble Lords who read the financial Press in some detail will be aware that on June 19 last year G.K.N. notified the Commission of their intention to bid for the steel stockist company, Miles Druce. My Lords, that was nine months ago! The proposed takeover was referred to the European Court at Luxembourg. On March 20, the court gave a ruling and the decision was such that the matter is far from finished. There is more argument to come. In the Financial Times yesterday a Miles Druce shareholder was reported as prophesying another 12 months' jousting in the European courts.
Some of your Lordships may wonder why the possible merging of two British companies is a matter for a European court. It is because when we acceded to the Treaty of Rome we also acceded to the Treaty of Paris, which deals with the European Coal and Steel Community; and the intention to bring together two companies in the steel business, even if both are of the same nationality, is the business of the Community. I do not intend to argue whether or not that is a good thing; nor do I intend to argue the merits of the G.K.N. bid for Miles Druce. I do, however, intend to argue that the delay in reaching a conclusion is intolerable: it is expensive for those involved and is engaging talents which would be better employed in developing the businesses concerned.
There is yet a further reason for disquiet, my Lords. The Commission in Brussels has in draft a regulation which, if it passed the Council of Ministers, would extend the powers which Brussels and Luxembourg have at present over mergers and takeovers in the field of coal and steel over a vastly greater industrial and commercial field, so that an intended merger or takeover involving two important British companies would be liable to intolerable delays of the kind exemplified in the G.K.N./Miles Druce affair. This, I submit, is an appalling prospect.
The Motion which is before us to-day urges the Government to encourage British industry and commerce. As I said, I am assuming that one form of

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encouragement is the prevention of positive discouragement. Most certainly, if the development of mergers and takeovers here were to be further frustrated in the way I have indicated, very great discouragement and demoralisation indeed would result.
While I feel strongly about the importation of slow-motion European Community methods into industrial affairs here, I do see that there is some justification for the sort of control which we have got used to here, in the shape of the D.T.I. Monopolies Commission and takeover panel system, being applied when mergers across European frontiers are proposed. So I hope that the Foreign Secretary will include in his intended renegotiating package two proposals. One would be that mergers and takeovers in a country are left to the legal and financial processes of that country, and the other would be that the European Community processes for controlling international mergers and takeovers are modelled on our own.
I have stated those objectives in very simple terms. Inevitably, I know well that any agreement within the Community to improve the situation which I have described, and to avoid the situation which I fear, would be in more complex terms. But I am convinced that steps should be taken in the direction I have indicated, and I take some encouragement from the fact that the matter I have raised with your Lordships must have been one of the subjects discussed yesterday when M. Borschette and Dr. Schlieder from the Commission in Brussels visited the C.B.I. I hope that further encouragement will be forthcoming when the noble Lord, Lord Beswick, winds up.
I sincerely hope that noble Lords will not regard the matter I have raised as being wide of the Motion put forward by the noble Lord, Lord Erroll. I believe that industrial progress, here and in the Nine, depends on the collaboration of scientific, technological and industrial organisations, and that international industrial mergers will prove to be one of the most important means of knitting together the interests of the Nine. Procedures which stand in the way of this concentration of interests and of industrial efficiency, should, I suggest, be amended.
5.7 p.m.
LORD BERNSTEIN: My Lords, I too, must apologise to your Lordships for the fact that I shall have to leave shortly, because I am involved in a lecture at the Guildhall; but I shall read with interest later the points which are raised.
Having read about your Lordships' House in the colour supplement of the Observer last Sunday, I feel rather inhibited. I am not sure what class I fit into and what behaviour pattern I should adopt to-day. I am not one of the "young people" of whom the noble Lord, Lord Beswick, spoke; I am a Back-Bencher. But how to start? I suppose I could say "this is an argument which would not apply to your Lordships"; or I could say "with the greatest respect". The Observer said Members had to have politeness around them.
I have no complaint about the politeness I have received in your Lordships' House. I have met courtesy on all sides and I am delighted to be here. But politeness does not include avoiding the truth. It is generally and regretfully accepted that what counts is the impression of the truth and not the truth itself. I do not quite know from the point of view of a Back-Bencher where this debate fits into the responsibilities of your Lordships' House. I will try to speak in terms of the moderation which is now so fashionable, although there was not much moderation shown by the noble Lord, Lord Erroll.
The noble Lord, Lord Erroll of Hale, did not approach the debate in a moderate way. His approach seemed to me, talking about the hardening of the arteries—I have always been afraid of hardening my social arteries because that could be a serious matter—one of saying that the Government were on probation, had a rigid point of view, knew nothing about business and that a profit to them was an emotional word. I do not agree with any of that. The people I know in the Government and the Labour Party acknowledge that profits from business, honourably made and properly spent and used for development, are acceptable and worthy of respect.
The noble Lord, Lord Erroll of Hale, spoke as if everything in British industry and commerce was running on a planned

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level until about three weeks ago, and then it all changed when the Labour Government took office. The noble Lord did not give credit to the late Conservative Government for the catastrophic results achieved by them under their policies. No credit was given to the Labour Government for what they did in the two periods when they were in Office. The noble Lord, Lord Mais, made the points that I wanted to put to your Lordships.
I again ask, with respect: where does this debate fit in? The word "urgent" made me think of the debates on economic policies and economic affairs that have taken place in your Lordships' House over the past two or three years, when warnings of the storms to come were given by my noble friends Lord Diamond, Lord Beswick and Lord Balogh, to mention but a few. They pointed out that British industry could make no real progress under the Conservative Government in formulating an overall policy to deal with the problems. Who now remembers the lame ducks? Nobody on the other side mentioned them to-day. Who remembers the problems of the Upper Clyde Shipping Company? Who remembers how that matter was dealt with? A Statement was brought from the other place and read to your Lordships; it stated that the men in the shipyards were to be fired immediately. Three "Wise Men" issued a report which was not debated. It was accepted as urgent. The closedown of a great British industry of importance was a matter for urgent action. Alas for history! one of the "Wise Men" headed a company which lost £1 million in the same year. Some of the men in the shipyard, fortunately, doubted the wisdom of the three "Wise Men" and took action, and the shipyard is still operating.
Should this debate have been part of the debate that followed the Queen's Speech? Was it timed to follow yesterday's Budget? When did the noble Lord, Lord Erroll, decide that there was need for urgent policies to give encouragement to British industry? Was it three weeks ago, when a new Government was formed? The urgent need of policies to give encouragement has been suggested for years. The noble Lord, Lord Mais, said that industry requires encourage-
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ment. Industry has not had encouragement for 3½ years. It has certainly not had encouragement over the past few months. It was not only industry that decided that the Conservative Government did not have a policy; it was also the voters who decided by an overwhelming vote that they did not agree their policies.
The last Government made fatal mistakes; they also forgot Disraeli, and even Baldwin. Baldwin told everybody never to get involved with the Vatican; never to start a fight with the Treasury; and never to take on the miners. The Conservative Party should remember that; hence the votes against them. They inherited "power" from the Labour Government with every opportunity to go forward to greater success. The balance of payments were right. Industry was doing very well.
I remember the Industrial Relations Act going through this House. I had to stay up many nights because it was being fought tooth and nail by the Conservative Party here. I cannot remember any industrialist of any quality on this side of the House ever speaking on behalf of the Act. It is true that when the Division bells rang they crowded out of the bars, the Library, and so on, and swept those of us on the Opposition Benches off our feet, and they had an overwhelming majority. I remember people on the Cross-Benches warning the Government that they could not settle industrial relations by legal methods, but the Government took no notice. I remember one night three Members on the Cross-Benches, all lawyers, urging the Government to support an Amendment that they could understand if troubles arose and the clause came before them, but they did not succeed.
I am not worried about the future of industry as perhaps are some industrialists opposite. I do not think that the noble Lord, Lord Mais, is very worried, either. A few days ago the Financial Tunes reported that the London Chamber of Commerce and Industry said there existed a general confidence and that order books were much healthier than anticipated. This was after the miners' strike had been settled.
The noble Lord, Lord Polwarth, mentioned that the rates of interest affecting

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industry would not be chargeable. As I read the Chancellor's speech—and perhaps my noble friend Lord Beswick will confirm this—industry which uses borrowed money for the development of their businesses will be allowed to set normal interest charges against their profits. What the Budget has done (I always understood that we were not allowed to speak about the Budget, but it seems to be accepted that we can) is not to grant the benefits of deducting interest from income by people who use that money, as they have done for some years, as speculators in stocks, shares and commodities.
The Conservative Government, about 18 months before the last mini-Budget, decided that hire-purchase goods and rental goods should be freed from the controls that then existed. Three of the industries involved urged the Government to do this over a period of some months so that factories and distributive organisations could have stocks ready to deal with the problem. But they did it overnight. Good politics! Eighteen months later the minimum period for rentals and hire-purchase was raised to 42 weeks, again upsetting the plans of those who planned work in the factories and distribution. The present Government may not be in an invincible position, but they have in three weeks shown that they intend to carry out effective policies of meeting the challenges. I believe that their programme will appeal to the broad spectrum of sensible people in British industry and commerce. It may not appeal to the commodity speculators, the Stock Exchange and other speculators, but it will appeal to those proud to be a part of British industry and commerce, especially those who have built up their own businesses.
5.19 p.m.
LORD ORR-EWING: My Lords, I am glad that I am following the noble Lord, Lord Bernstein, because I am one of those people who pioneered Independent Television through the House of Commons, against tremendous Labour Opposition. I reflect that if he had not had the chance, through my actions, to build up his business with such great success, he might not be sitting on the Benches opposite, and we might not have had his wonderful wisdom—
LORD BERNSTEIN: My Lords, television is only one part of my business interests.
LORD ORR-EWING: My Lords, the noble Lord would be the first to say that it is a profitable part—but perhaps he is saying that it is not profitable. I sympathise with him if his Independent Television company has not been profitable over the years. I did not invest in it because I felt, having played a part in the creation of Independent Television, that I should not invest in an Independent Television company.
We are all grateful to the noble Lord, Lord Erroll of Hale, for raising a matter of considerable interest. As the noble Lord, Lord Mais, has made clear, wherever we sit in this House industrial efficiency must be of concern to us. We are equally grateful to the noble Lord, Lord Beswick, in opening when, talking of the policy of this Government, he said unite clearly that "British industry is to be encouraged." I took down those words.
My Lords, I want to say something quite shortly on three points: first, on the incentives for British industry and the need for investment; secondly, on the social contract; and thirdly, a word on one of the most important engineering enterprises which our country has ever undertaken from the point of view of prestige, and I think eventually earnings, and that is Concorde. I mention the last only because I believe the Government are still thinking about the future of this aircraft.
I think everyone will agree that over the years the United Kingdom profits from our manufacturing companies have not really been sufficient to allow for adequate reinvestment, modernisation and our resultant competition throughout the world. There is one fact which I have noticed during my Parliamentary life and that is that if there is a turndown in the profits of our industrial companies, almost inevitably about one year later there is a turndown in investment and after two years an increase in unemployment. This happened after the Selwyn Lloyd freeze of 1961, when we had unemployment in 1963. It happened when profit turned down in the 1964–66 period. More recently it has happened

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in the last five years. In 1968 the financial surplus of our industrial companies was just positive. In 1969 there was a £500 million loss. In 1970, there was a one billion pound loss. Incidentally, it is now common in this country to accept the American definition of "billion", and I refer to one thousand million. When I was in school a billion was a million million in this country, and a thousand million in the United States. I am using the U.S.A. term which seems to have become universal. By 1972 that loss had turned into a profit of £500 million. In 1973 we are told profits were buoyant, although I think that those profits may be rather false because there was considerable wage inflation towards the end. Prices were rigidly controlled, raw materials certainly had very high import prices—they had increased by 100 per cent., or 400 per cent. in the case of oil.
I cannot help believing that if we had inflationary accounting in our companies it would have given a rather different picture. I know the present Government have said that they were going to carry on the previous Government's intention of looking at inflation accounting and seeing whether accounting should not, on the recommendation of the professional institutions, go over to this method as giving a more realistic picture of the position and profits of our companies. Certainly the industrial costs in recent months, and last year, have been inflated by wage and salary rises and by the raw material price increases; and have been somewhat disrupted by late deliveries of sub-contractors and of components. It is true to say that two years after the last turndown in profits, unemployment began. If we are going to have a turndown of profits in the present climate, then I think we are going to have unemployment rising in this country at a quite serious pace.
I have been in touch with the Central Statistical Office because I wanted to get some idea of the increase in profits as compared with the increase in wages and salaries. I find that in the 1962–72 period wages and salaries in manufacturing industries went up from just under £6,000 million to nearly £12,000 million. In fact, it was just a 106 per cent. increase. If you take the increase in wages and
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salaries, the 15 per cent. increase on that 1972 figure—because the 1973 figure is not available—then it has gone from £12,000 million to nearly £13,500 million. If one looks at the profits for the same period one will find that they have increased in the ten years; that they are up by £2,000 million while salaries and wages are up by £6,000 million. So there is positively a lesser increase in both percentage and in real terms in profits. One has only to look at company records (which now give 10 years summaries fairly universally) to see how small the increase in dividends has been over that same period. A typical increase one finds is 6 per cent to 6¼ per cent. or 6.20 per cent., while profits were controlled; then one has perhaps an increase to 7 per cent. or 8 per cent. of dividend paid. So, as compared with our competitor countries we are not making big enough profits, we are not ploughing, back enough in investment. These matters have to be attended to.
I listened to the new Chancellor's speech in another place yesterday, and he said towards the end (OFFICIAL REPORT, col. 327) that he hoped his Budget would
"foster the confidence necessary for industrial investment."
My Lords, I hope he is right. But I cannot help feeling that some of the measures in that Budget are going to do the reverse. I will enumerate some. Corporation tax is to be increased from what had been proposed at 50 per cent. to 52 per cent. Moreover, industrial companies will have to pay half their corporation tax in advance. Secondly, industrial companies have to pay an increase in the stamp of 44p a week for every person they employ. This may not sound much, my Lords, but for a company of only 5,000 people, this means another £125,000 a year in labour costs.
Thirdly, there is to be a swingeing increase—I do not in any way object to this because I think you have to have reality in your nationalised industries accounts—in electricity charges of 30 per cent. This will fall as a charge on British industry. Steel is to go up yet again, this time by 25 per cent., and industrial coal is to go up by 48 per cent. That is a reflection, of course, on the miners' settlement. Above all, in addition to other taxes, we are to pay an extra tax

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of 5p per gallon on petrol. One would have thought that petrol, which is such an important factor in distribution costs for industry, had gone up enough without attracting an extra tax, but it is to go up by another 5p.
So prices are to be held down and profits squeezed. That was the policy of Her Majesty's Government, and it was stated and restated yesterday. In a question of confidence it tends to be a little uncertain for those of us who have to consider whether we are to invest in the future that there is to be yet another Budget in six months' or less time. We do not know whether that is to be further deflationary or inflationary. At the same time, I think it is sad that there are to be reduced incentives; in particular, that extra taxes are to be levied, as my noble friend Lord Erroll of Hale said, on those people who are so vitaly important in the management and leadership of industry. I refer to the skilled men, the foremen, the chargehands and the junior managers. These are very important if we are to meet our high standard of product punctually, and to give the deliveries our export customers expect.
Lastly (and I thought this was unnecessary because so much has been said during the Election campaign of the need to build bridges between management and the shop floor) all share incentive schemes, which reach down now to very junior management, are to be made null and void, and ruled out. So all these items, I submit, will be a drain on the cash resources and profit margins and must reduce investment. I reiterate that if investment is reduced, in the long term it must have repercussions on our competitive position and on our employment.
The noble Lord, Lord Mais, said in his speech that he wanted the maximum co-operation between trade unions and management, and he gave some illustrations of what could be done. The three-day week brought on by the miners' strike taught us, if anything, just what can be done in industry with co-operation at all levels. It really was wonderful to see what people did. The British are unique in this way: when they have a challenge of that kind they get down to solving problems and manage to turn out far more than anyone expects. I remember reading a C.B.I. statement saying that
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there was going to be a huge slash in industrial output. I remember the British Steel Corporation saying just before the Election that they expected only 50 per cent. of normal steel output. When the figures came out it was shown that steel output had in fact been cut by only 28 per cent. So almost in every way what happened in industry during the three-clay week period showed what cooperation can do.
I now come to the social contract—I see that the noble Lord, Lord Bernstein, has now unfortunately left us. On this question I am the first to say that I wish the Labour Government well. Every democratic nation that I have studied has some legal framework for its industrial relations. The previous Labour Government did their best to contrive some form of legal framework when they introduced In Place of Strife. They were pushed off this intention by the Left Wing and the trade union movement. I am sorry they were dissuaded. We in our turn made another effort. We took many of their clauses—about half of them, I think—and incorporated them in our Bill; and again that was a failure. Now we are to have a third effort by the Government, which was mentioned in their Manifesto—for greater clarification I carry a copy of it with me during this period of political life. We are to have a Social Contract.
But can we be sure that the contract will be honoured? I am sure that the wish to honour it is there, or can be there, so far as the T.U.C. are concerned. Certainly this Budget has given them all they have asked for, but are we now going to have the corollary? Are we going to have an acceptance, not just by the T.U.C. (because I am sure that that would probably be forthcoming) but by the unions under the T.U.C., the constituent members of the T.U.C.? Will they all honour this agreement? Will the A.U.E.W., which has about half of its National Committee of the extreme Left persuasion, or the N.U.M., which also has about half its National Executive Council on the extreme Left? Certainly the former of those two, under Mr. Hugh Scanlon, is already showing signs of restlessness to break out of the agreement and has threatened further bans on overtime working in the engineering industry. And if the agreement is honoured at that

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level, is it going to be honoured at district level; and if it is honoured at district level, is it going to be honoured at plant level? This is a tremendous problem and I admire the courage—because it is essential it should be so—of the Labour Government in taking it on. If the attempted solution is not successful, then I do not see how our nation is going to survive and remain competitive. If the present Government fail on this issue, I wonder whether we shall not have to await in a few years' time the formation of some National Government on an all-Party basis to tackle this desperately difficult problem.
For my third and last point I turn to Concorde. A statement was issued by the British Aircraft Corporation earlier to-day. It was sent to the Minister, Mr. Wedgwood Benn, and it says that the financial figures published in Hansard on Monday of last week do not line up with their estimates; in fact, they suggest that those figures are very pessimistic indeed. But even if those figures are taken, it is said that the cancellation of Concorde at this stage would cost £80 million. I am sure that this is too low an estimate. In the United States the S.S.T. was cancelled at a much earlier stage in its life—that was their supersonic transport and it had not reached a prototype stage—and that cost them not £80 million, which is our forecast for Concorde, but £290 million. When we look at the costs of the T.S.R.2 cancellation I think we realise that £80 million must be a gross underestimate. Have the claims of a thousand sub-contractors been taken into account? My company—and here I declare an interest; in my instance it is a small black box—and many engineering companies, many electronics companies, are concerned to furnish some supplies for Concorde. We are making small numbers off for the 16 aircraft under construction. Are we going to be compensated if all those products have to be thrown away? And what about the redundancy which will result?
The alternative, so we are told in the words of the Minister, is to go on to produce the 16 aircraft now under construction at a cost of £35 million extra, compared with cancellation. My Lords, it surely must be good business to go ahead with this venture. So many times
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in our industrial history since the war we have reached the very brink; we have carried out the research and development and produced a prototype. Then, somehow we lack the courage or the money, or the resolution or guts, and we drop it. Here we have an opportunity of sticking to something which is worth while. I would urge the Government, when they are considering this matter, as they have said they are going to reconsider it, not to be pushed off it by the United States. The United States aerospace industry is a highly competitive industry. They have a near monopoly of civil aircraft supply worldwide. They would like to have a supersonic transport, too. It has been published in a book, and confirmed by Mr. Julian Amery, that in the last case when a Labour Government came to power in 1964 they went to the United States and asked for favourable financial borrowing terms, and the United States reasonably said: "We do not really see why we should give you money to help finance competitive products to those we have on the stocks ourselves"—a perfectly arguable point. So as a result of that Concorde was written into the first White Paper which the Labour Government produced (I think it is more colloquially known as the Brown Paper because of its author's name) that this was a "prestige symbol" which should be cancelled. I would urge the Government on this occasion not to be persuaded by the United States into cancellation.
My Lords, a Rolls-Royce has become throughout the world, and remains, a symbol of British engineering perfection; and it is recognised as such. I believe that the Concorde can be a symbol, as it spans the oceans and arrives in the capitals of the world, of the vision of British engineering; a symbol of Anglo-French co-operation and of our ability, not only to conceive something which is first-rate, but to produce it, and to have the courage to do so. My Lords, I hope that the Government will carry on with Concorde.
5.38 p.m.
LORD BOWDEN: My Lords, after the rather gloomy forebodings of the noble Lord who has just sat down, I wonder whether the House would bear with me if I were to read a few remarks made by an eminent scientist whose name

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must be known to most of your Lordships. He said:
"We are entering now upon the most serious struggle for existence to which this country was ever committed. The latter years in this century will see us in an industrial war which is far more serious than the military wars which took place in the first part of the century. The situation is very grave."
The scientist was Thomas Henry Huxley, and the date 1878. We have in fact been here before.
I am extremely grateful to the noble Lord, Lord Erroll of Hale, for allowing us an opportunity to discuss these matters. And I want, with the permission of the House, to fly a rather curious kite. I want to persuade the Government that one of the most important tasks they could perform would be to send a mission to Brazil to discover how the accounts are cast there and how their Treasury operates its tax rules. Your Lordships may think this an extraordinary suggestion to make, but the reason is simple, and it is this. We have been thinking for many years that inflation is a curious anomaly which we have to struggle against and that if we wait long enough it will perhaps go away. We have never come properly to terms with the task of handling implications. The Brazilians, for several years now, have taken it for granted that inflation is here to stay. It has fluctuated in Brazil from 100 per cent. in one awful year to 50 per cent. Last year it was down to about 18 per cent., and it is still falling—in fact, this year the rate may well be lower than our own. The point I am making is that they have come to terms with it and they have devised a fiscal system which allows them to cope with it; we pretend it is not really here, that it is not part of our system and we ought to try to forget it, so we are suffering to an alarming extent from its consequences.
I should like to make a few observations which will I hope persuade your Lordships that this apparently extraordinary suggestion is in fact entirely reasonable. May I therefore make a few points about the consequences of inflation which have been noticeable in the last two years? It is currently and commonly said that the primary cause of inflation is the rise in wages and the rise in prices. I believe that this is only partially true, and I believe that what began as a defence
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against inflation has become a primary cause of it. I refer first of all to the extraordinary inflation in the price of houses. I will simply say that in the year which ended last December an ordinary Englishman living in his house earned more by doing so than he did by taking home his taxed income. To put the matter another way, the inflation in the book value of houses in this country—there are about 18 million of them—was in round figures about as great as the gross domestic product in its entirety. When one discusses this subject people say, "But of course people living in their houses are no better off." That is quite true. But when one is dealing with sums which are comparable to the nominal value of the gross domestic product these arguments cease to be tenable. As a result of inflation and our hedging against inflation we have in fact succeeded in what I can only call the ultimate economic miracle. We now find it possible to buy German motor cars, German machine tools, and anything else you care to name, and pay for them by increasing the price of houses in Richmond. This, as an economic enterprise, is not likely to be sustained for long.
I think we are, and have been for the last 20 years or more, engaging in a process fundamentally similar to that which created the enormous and feverish prosperity of the United States in the twenties. Your Lordships will remember that in those days America became enormously prosperous by inflating the price of common stock. People expected to buy and sell and make a profit continuously, and they thought that they had achieved the secret of universal inevitable prosperity. Furthermore, they developed a special system for doing it—buying and selling stock on margins and subsequently using the stock which had been bought as security for another loan.
We have achieved the same kind of feverish prosperity by inflating the price of practically everything except equities. By this I mean everything from houses to old wine, old masters—anything you care to name. And in my own village I find that almost every little shop has gone out of business and been replaced by someone selling either antiques or real estate. It is here that the money is being made. It is being made because

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we have never really come to terms with this process of inflation, which now dominates everything we do.
I find in my university, for example, that very few students want to come to the university to study those subjects which fit them for a place in productive industry. They will not study mechanical engineering; they know perfectly well that the jobs to be had in mechanical engineering are few and not very well paid. Chemical engineering has suffered even worse. We used to have in my university the largest department of chemical engineering in Europe. We used to admit 110 students every year: last year we admitted 37. Every major undergraduate university department of chemistry in this country is half empty to-day. The reason is simple: everyone realises that chemists do not do as well as property speculators. If I go to schools, as I frequently do to talk to headmasters they say. "Our students know that they do better outside universities and away from the conventional professions than they do in them. If they are ambitious they go into totally non-productive enterprises which happen to make money".
This, I think, is due in large measure to our fiscal system and our accounting system and it could be changed by the Chancellor of the Exchequer without, I believe, the intervention of Parliament simply by changing the conventions upon which people have to cast their accounts. May I take one particular example. One of my own staff did an analysis of the effect of installing a piece of substantial machine tool in one factory six years ago. The accounts which the firm produced this year show a 30 per cent. return on the capital invested. On the other hand, if they allowed properly inflated cost for the replacement of the tool when it wears out it is clear that the real profit made was zero. It is upon the 30 per cent. that taxes are levied it is, furthermore, upon the 30 per cent. that profits are paid. But the 30 per cent. is totally unreal.
There was a meeting in my office a month ago of many of the most eminent members of the machine tool trade. The machine tool trade is a very vital industry which of late has suffered from evil times. I asked them all what they
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paid on their stock. The figures were small. I then went round the room again and asked, "Is there any man here who would have made a profit at all if he had worked out the accounts on the replacement instead of on historical costs?" And the answer was, "No". In other words, my Lords, we are in a position in which British industry is being compelled by the Treasury regulations to pay out its capital assets as dividends and taxes. This has been going on for a very long time and I believe it is the real reason why British industry is bereft of the capital resources that it needs to replace machines which are wearing out. As the noble Lord, Lord Orr-Ewing, said a moment ago, inflation accounting is being discussed—
LORD ORR-EWING: I think it is now permissibly to do inflation accounting. In fact Tube Investments announced their results this very week in inflation accounting terms. Although it should not be encouraged from the Treasury, it is not at the moment prohibited by the Treasury.
LORD BOWDEN: I was coming to that point, but I thank the noble Lord very much for making it for me. May I come back for a moment, because it is crucially important, to my argument. As a result of this failure to invest over many years the profits made on ordinary common stock in big firms are extraordinarily I think that I.C.I. made 5½ per cent on its invested capital last year. The machine tool trade made about 3 per cent. the paper trade made about 2 per cent. This was at a time when one could get 15 per cent. or 20 per cent. by investing in short-term loans or even in Manchester Corporation stock.
Who is going to put money into industry if he can get three times as much by putting it into building societies or into gilt edge stock, which is absolutely guaranteed and which is paying 15 or 20 per cent.? In fact it has turned out, my Lords, that because of the inflation it has been possible to borrow money for mortgages at negative rates of interest. If you allow for taxation you made more on inflation than you paid on your mortgage. It has been quite impossible to persuade people to put money into industry on the scale necessary at a time

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when all the funds are going elsewhere. In fact, many large firms have sold off their assets, acquired a vast pool of liquid resources and used them on short-term loans to keep the manufacturing enterprises alive. You can hardly conceive of a more extraordinary and foolish way of doing business; yet several firms have survived for this and for no other reason.
There are other matters connected with this problem which are of vital importance. I was speaking the other day to the chairman of one of the largest manufacturers of textiles in the world. He told me that throughout the greater part of his business life he had decided that the best thing to do was to look after his men, to re-equip his firm and, generally speaking, to do what every good business man is in principle expected (hopefully) to do. He then discovered—and he said that he lay awake all night worrying about it—that as a result of this the dividends he had paid had been small and the capital assets of his firm were very much greater than its Stock Exchange valuation which was related solely to the dividends he was paying. He realised that he was ripe for a takeover bid which he could not have resisted. Someone might have made an enormous fortune at the expense of the total ruin of a large part of the textile trade of Lancashire. This is due to the impossibility of making allowance for the appreciation of the fixed assets and the other parts of the ordinary balance sheet of a company.
If a businessman does his accounts according to the present basis it does not pay to modernise a firm. Many a big firm has computed whether or not it should re-equip itself with new apparatus and new machines, and far too many have found that once they have written off old machines completely they cannot afford to re-equip with new. That is why many big factories in England are so ill-equipped; the costing system makes it pay to go on using equipment which logically should have been written off, and not re-equip with modern and sophisticated equipment. That is why accountants can ruin a firm.
All of these things are a consequence of the same failure and the same problem—the fact that we do not accept as a matter of course that inflation is with
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us to stay. We still assume that it is a minor aberration and that we can ignore it and shall then be able to forget it. In fact it has become the principal motivating force of a great deal of the financial world. Takeover bids depend upon it. The ill equipment of British industry is due to it. The enormous profits made by housing speculators are due to it. The plea I make to Her Majesty's Government is that we should attempt most urgently to consider not merely the system of inflation accounting which has been recommended to us by the chartered accountants but the far more sophisticated and far more highly developed and more effective system which is currently in use in Brazil. I have read the papers which our accountants have produced and they seem to me to be an admirable first step, but they did not seem to me in any way to cope with the problems as they really exist.
The best system in Europe, which is probably known to many noble Lords, is that currently in use by the Phillips company in Eindhoven, who have a most sophisticated way of handling their accounts. But no British firm has ever been able to introduce a totally different system of evaluating its assets so that it pays it to invest, to treat its men properly and to build up the resources which are needed for manufacture.
At the moment we have the most elaborate disincentive for doing all these things which could be devised. The rigidity of the Treasury's rulings and the fact of inflation can destroy us. I believe that the new change, which is towards inflation-accounting, and is tremendously to be welcomed, will not cope with the problems in their present form.
We must do more than we have hitherto done to allow for the proper assessment in the balance sheets of our great companies of their true wealth, both fixed assets and work in progress, which is extremely important, as well as the machine tools which are wearing out. The particular problem of work in progress is viciously difficult to handle in those concerns which manufacture capital goods, or anything which lakes a long time to build, for example Rolls-Royce aero engines or turbo-alternator

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sets, which may be in the shop two or three years.
The value of the work in progress is reassessed every year and a company which has six engines under construction this year and had six under construction last year in effect pays tax on the difference between the value to-day and last year. It is paying tax as a householder would pay were his house reassessed every year and were he required to pay income tax on the difference between the value this year and last. I repeat, the average Englishman nearly doubles his income in a curiously meaningless but nevertheless very important sense by living in his house, and one can imagine just what would happen if industrial conventions applied to ordinary householders.
We are in an extraordinary situation, and we have devised a fiscal system which almost inevitably bleeds industry of its precious capital resources. At the same time we are pumping money back into British industry via the Department of Trade and Industry, as it was once called (heaven knows what it will be in future!). It is interesting to discover that the total sum which is fed back into industry is about equal to the yield from Corporation tax. The Corporation tax is paid by people who make a profit and who would like to spend it on building up their industry. After going through the Treasury it is redistributed by civil servants, dedicated, hard-working men, none of whom really understand the problems of industry—they cannot hope to do so by the very nature of their training and their experience. I sometimes wonder, in a very sombre mood, whether we would not do better to abolish Corporation tax and the whole Department of Trade and Industry, balance our books and leave a large number of civil servants free for more profitable enterprises.
However, this was not the point I wished to make. I believe we are in fact in the position of a surgeon having a patient on the operating table who, having severed the patient's artery finds he is bleeding to death and is now force feeding him. We must do something very different and I really believe—and I repeat it—that odd though it may seem
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to us the most important lesson to be learned may come from Brazil.
5.57 p.m.
LORD HEWLETT: My Lords, in company with many other noble Lords I feel a real sense of appreciation towards my noble friend Lord Erroll of Hale for raising this subject of the Government's attitude to industry, and I congratulate him further on his impeccable timing. Many of us recall the noble Lord in another place as a most successful Minister of State at the Board of Trade, and later the President of the Board of Trade.
I wish also to make reference to the contribution of the noble Lord, Lord Beswick, the Deputy Leader of the House, who made a most conciliatory speech regarding the profits of industry. But, with respect, those of a very Left Wing persuasion in another place appointed to the Industry and Trade Ministries are the ones who cause alarm in the country and in industry at large. Certainly the noble Lord, Lord Beswick, by the assurances he gave last week, and this, caused just that sense of stability and confidence for which industry is looking. But, alas! this is not the guiding Chamber: it is the other Chamber which takes the decisions: and those who have been appointed to those offices frankly have to be remembered more for what they said from the Back Benches and from the country outside than what they may have been tempted to say in the last three weeks as brand new Ministers. I hope they will prove themselves wiser in office than they have been as Back-Benchers.
Yesterday there was afforded to the Chancellor of the Exchequer in another place the opportunity of superseding what he had said in an utterly divisive and disruptive speech at the Labour Party Conference in Blackpool last October. In my opinion we could have done with a far less partisan and a much more unifying Budget than he has in fact put forward. Above all, I would have begged him to consider giving some more serious incentive for industrial investment and increased productivity. I am not speaking of the interests of the shareholders alone, but of those who aspire to positions of greater responsibility on the shop floor, or in middle

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management. Quite frankly, I do not care where their efforts are; they ought to be channelled and encouraged in a positive manner.
My Lords, what do we see in this particular Socialist Budget? It aims, alas! almost wholly at redistribution instead of creation of wealth. When we need confidence born of stability we are informed that we can wait another six months for another Budget. This must be endured as a sort of second dose of medicine, and it will be administered at that time without any indication of why this should be necessary, other than for the creation of a wealth and a gift tax. But pity the poor patient, Great Britain Limited, who is waiting to know what else is in the medicine. It may be highly deflationary; it may be terribly inflationary. It may be neutral; there may be nothing there. But heavens above! once a year is enough to go through this turmoil of disorganisation and lack of confidence throughout industrial society. An emergency Budget is bad enough, but to have a scheduled emergency Budget for six months hence is a positive disincentive for industry to take a decision.
I would think more of the comments of the noble Lord, Lord Beswick, if he had been able to persuade his colleagues that this type of nervous approach to the whole problem is inhibiting the very progress that all of us in this Chamber, and I am sure in the other place, wish to achieve for this country.
THE MINISTER OF STATE, DEPARTMENT OF ENERGY (LORD BALOGH): My Lords, may I ask the noble Lord what particularly influential and persuasive incentives were given to British industry under the Conservative Government, especially in the last six months?
LORD HEWLETT: My Lords, in the last Budget—not the November emergency Budget which only affected public expenditure, but for industry itself—there were considerable investment allowances, a reduction of direct taxation, full benefit and accord and much encouragement given through the various Government Ministries towards exports, help in training in regard to export matters, something I seriously believe we have to
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achieve. One of the institutes of which I hear almost nothing said is the Institute of Export. I would strongly answer the noble Lord, Lord Shinwell, that here again I do not want the Government to run the institutes, but I do wish that serious encouragement could be given by Government Departments to see that there is better training in industrial exporting from this country. With respect to the noble Lord, Lord Balogh, what we least received from the Conservative Government was positive financial encouragement and incentive; what we received yesterday was two-thirds of four-fifths of the square root of—I must be careful, and say very little. Absolutely nothing in fact was given by way of incentive or encouragement to industry.
My Lords, in the course of my further remarks I will show why in my opinion there were positive disincentives given yesterday. Adjusted, encouraged additional investment—how right the noble Lord, Lord Bowden, was in the comments he has just concluded! In the presence of the noble Lord, Lord Balogh, I would say I hope we will not go to Hungary, on the past experience we have had from the economists, but maybe we should go to Brazil. I have been to Brazil on industrial work and must confess that I was very impressed with the manner in which they have been able to cope with phenomenal inflation. It really has been colossal. On one occasion I inquired what was the going interest rate (it was my first visit to Sao Paulo) and I was told "6 per cent.", which I thought was reasonable; but they added "per month". This is the kind of experience through which they have been, as the noble Lord, Lord Bowden, knows: Inflation rates at colossal percentages, far more than we could contemplate being able to tolerate. But I strongly support (if I may interpose remarks from my own speech to comment on his) the idea that we have much to learn from a country that has been able to cope with such hyper-inflation.
This is no Party political point. No matter which Government are in power, let us not be too proud to see whether a complete revolution in terms of our industrial accounting, and therefore in terms of the fiscal incidence of such things as a new Budget, may not create the wholly different set of values which, as the noble Lord was right to point out,

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is required. We must find a system which will not only give incentives, but will make it pay for industry to invest in new capital equipment, and not be proud of the clapped-out, longest lasting, broken down old things they have got, which they are still living off and which have been written down God knows how many times. This is not progress, but is merely tempting competition to put one out of business once and for all.
My Lords, I wonder why there has been such a lack of appreciation of the need for increased industrial investment in some sectors in this House. Frankly, I cannot see why, because the growth in the economy was so necessary as to cause it to be the one subject on which the T.U.C. pressed the last Government so strongly, and in my opinion so rightly. Only if we get positive, actual growth, and not simple accounting growth in its present form will we achieve the type of prosperity which would allow us to have far better standards of living, rates of pay, investment in industry, and so on. But certainly some Socialists, and certainly not the noble Lord, Lord Mais, who has just left the Chamber, feel that, like profit, the word "investment", and even the concept of risk-bearing, are not things to be admired or undertaken. This does apply.
I have only been in politics for 25 years and have always paid more attention to what the Opposition have said than to what has been said on my own side, because that is the only way to learn something. There has been this concept of anti-profit, and it is not so long ago that it was almost a household attitude of the Party of Her Majesty's present Government that profit as such is not desirable. But it is highly desirable; indeed, it is essential, and so is risk-bearing. One will not have risk-bearing unless one can offer adequate reward for the risk taken. In some cases, to some people's minds, this must be colossal: but if the risk is really large—and I am not speaking in speculative terms in commodities, but in terms of actual manufacturing risk, undertaking new processes for new industries—then there must be proper reward for the enterprise.
Those companies who have recently invested heavily have been told, if the Financial Times of the day before
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yesterday is to be believed, that there is pending an announcement that the profits of companies should be reduced not only in the distributive, but also in the manufacturing industries. Seriously, having followed, whether it be of one Party or the other I care not, Government policy of heavy investment in industry, are we to accept that the reward for this should be that automatically you are cut in terms of the profit? If that is the case, clearly it is a positive disincentive to invest.
My Lords, in yesterday's Budget we had not an S.E.T., but an E.T., an employment tax, or a poll tax if you like, the additional 44p per employee. This will look a sick thing indeed if, as has been predicted in many quarters, and not least in the United States, the world is threatened with widespread trade recession this autumn. I know the benefits of increased old-age pension and so on must be paid for, but I cannot for the life of me see why it should be industry which is "nobbled". It seems to me very much better that either we accept it in terms of indirect taxation, and V.A.T. adjustment, or even in terms of direct personal taxation. But to "clobber" industry at the time when it has undergone such a traumatic experience and come through so exceptionally well, seems to me to be foolish.
I echo the sentiments of my noble friend, who spoke, in my opinion, so well upon not only the aspects of Concorde but also the achievements of free enterprise in the three-day working week. My own experience was that we made 80 per cent. manufacture in 60 per cent. time—probably a little more. I know that some cynics would say that that just shows that nobody had been working hard when officially they were working 100 per cent., but I do not put that construction upon it. I take exactly the line of the noble Lord, Lord Orr-Ewing, in saying that this demonstrates that there is a fund of good will on all sides and in all parts of industry, and that if only we stopped messing industry about politically we would achieve a great deal more.
I do not myself believe that Government interference in the affairs and conduct of industry should be more than to set the parameters and then allow industry to make a success in its own way. I would put it this way: that I think the true duties of Government are

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to defend the nation and its interests, both at home and abroad; to try to maintain the value of its money, and to protect the aged and sick and those in need. From the positive standpoint Government ought to create the conditions in which industry and agriculture can prosper, not to try to do it for them but to create the very conditions; and that includes, in my opinion, not doing some of the things that were done yesterday. A fat lot of encouragement it is if you increase corporation tax, increase employer contributions by 44p, continue with restriction of dividends, enforce reductions of price, and a moratorium on price increases, which cannot now be made before intervals of one to three months! Do this Government or any other seriously believe that those of us who may work fifteen or seventeen hours a day in industry, more from a sense of pride and self-respect than for the actual reward, can be expected to do so indefinitely irrespective of positive disincentives?
I am sorry that the noble Lord, Lord Balogh, has gone from the Chamber because I promised I would deal with incentives, and I think that when he conies to read Hansard he will realise that I have not just touched on the matter. Would you believe it! there is now even to be a higher tax upon savings income, which is called unearned income. In many instances, the capital on which this interest is received represents the savings of a person in the whole of his or her lifetime. Yet, derogatorily, it is called "unearned income", as though it were the result of some swindle or hand-out. There is to be a gift tax and a wealth tax. For heaven's sake! what else will they think of in order to try to hit down the people who want to make a positive contribution, be it on the shop floor, in the management section, in the boardroom—I care not where. The whole attitude is so utterly negative. By September, with the wealth and gift tax, one may indeed feel that the voice was the voice of Denis Healey but the hand the hand of Karl Marx.
How right my noble friend Lord Erroll of Hale was to show how badly hit is the younger middle management in this Budget! For heaven's sake, this is the one section that we need to look to: younger management, on the shop floor
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as well as in the offices, the drawing offices, research or development departments, or wherever it may be. Those are the people who are going to make the future for industry in this country; upon whom we, in our dotage, are going to rely; for we are going one day to be the pensioners, and they had better do a better job than we are doing if we are to have any sort of existence. To say that it will be essential to have savings is so right. What will be the result of this confounded Budget for the younger man in industry, the highly qualified young executive type, management type? Alas! it will be the usual, the upsurge of the brain-drain which accompanies almost every Socialist Government Budget.
And, my Lords, the poor are not really benefiting. There are increased pensions and certain concessions, but we have the massive increases in electricity prices and coal prices to come. North Sea gas is to come up perhaps to the tune of 70 per cent. Surely we know that these are the very death knell of encouragement and happiness for the old-age pensioners. How much better it would have been if, instead of the overall totally unselective food price subsidy, there had been more positive actual help in large term to those genuinely in need! There is nothing improper about such a suggestion. The old phrase of "means test", and so forth, is frankly "old hat". We have a means test in income tax we have a means test in almost every tax we have to face.
As the noble Baroness, Lady Seear, said, it is yet again the fact that the true intention of the Budget has not been achieved. Its effect will not be to help the poor, still less to help industry; rather will it "clobber" it. Massive increases in taxation, raw material costs up, and we are still under the threat of an engineers' overtime ban and other major disruptions. Sometimes I feel almost desperate at the woeful lack of industrial knowledge and experience by the so-called professional politicians. Would that they had actually been employed in industry! I wonder if they could now be employed by industry. Frankly, I doubt it.
With the vast increases—and I am speaking only of the chemical industry; the petrochemical raw material prices inevitably following the huge upsurge in feedstock costs—who could be seriously suggesting the viability of a minimum

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three-month interval between manufacturing price increases? Do the Government want to shut plant and half industry altogether, at this of all times? I think not.
Constituents of some of our manufactures—and we are only a small company in business—include the following products: phenol, the price of which was in January, 1974, £103 per 1,000 kilos; in February, £130, in March £203; methyl oxitol, January to March, £190, £192, £233; xylene, £177, £185, £201. Or, take this for a beauty: aniline, early February, £166; late February, £170; early March, £224. In April?—God knows! Frankly, who on earth is going to say we can hold prices for three months and go on manufacturing with these increased raw material prices? How can an industry or an individual company do that? The answer is that it puts up the shutters on that particular plant until the new price period is allowed to start. The result is to force outside purchase, probably from abroad, with a loss of foreign currency, to keep one's customers going because one cannot afford to keep the plant going oneself.
Lest your Lordships think I am dealing purely with hard organic chemicals, let us deal with some natural products. In September 1973, the price of rape oil was £210 a thousand kilos; its price to-day is £410—an increase of £200 on £210. Flow on earth can any Government seriously suggest that industry can go on absorbing costs at that sort of rate, and accept at the same time increased taxation, increased Government costs and increased nationalisation supply costs in just the following little list: rail freight, steel, coal, electricity, and even postage; and crippling interest charges to boot? Come off it! my Lords, we cannot start making suggestions that a three-month interval between price increases is viable; it may be desirable, but that is Cloud Cuckoo-land. Let us get down to the realities. Some of us have actually to run a business and not just talk about it.
There had better be a degree of flexibility which allows a person as an industry to make a reasonable return on capital. There has to be positive incentive to invest money in industry, as the noble Lord, Lord Bowden, has emphasised very strongly, and many other noble
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Lords, too. Unless we get ourselves into such a situation as to not only encourage but actually effect large-scale industrial investment it will be too late. A far more enlightened attitude must be displayed by Her Majesty's Government towards both industry and agriculture. Britain cannot prosper unless this is shown. In such a disastrous situation of lowering investment rates, diminution of profits, there can be little or no "cake" about which to squabble.
6.20 p.m.
LORD SNOW: My Lords, I think that I had better lower the temperature a bit. I have not inflicted myself on your Lordships' House for a long time, partly because I was personally committed to other things and partly, I confess, because I found myself totally out of sympathy with the general air of optimism which I found surrounding me, for I have viewed the situation for years, and certainly as much now as ever, with the utmost sombreness. I have no doubt that we are in a desperate situation. I am using the word "desperate" deliberately.
We are a special case in a general way that is true of almost the whole of what we call the advanced, rich or industrial world. For various technical reasons we happen to be in a much more precarious situation than any other of the rich industrial nations. They all have inflation, they are all living with a kind of strange complex of inflationary recession, but we are at the most vulnerable, perhaps along with Italy and, I sometimes think, Japan. We are really under threat. By this I do not mean that the entire population of this island is going to be wiped out or have no means of earning a living; what I mean is that I find it extraordinarily hard to believe that Parliamentary democracy, as we know it, can conceivably survive ten years at the rate of inflation under which we are now living. I think that that is absolutely unthinkable. I agree with my noble friend Lord Bowden that we could probably learn something from Brazil, but if we do I am almost sure that we should learn that you would have to have a type of Brazilian Government to cope with the situation as well as the gimmicks of accountancy. I cannot conceive that Parliamentary democracy, in any form that is known in the world, is going to

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survive for long with an inflationary rate as it is at present. Hence my gloom, and the gloom that I have been feeling for several years.
I do not wish to give your Lordships the impression that I think that this Government are not the most suitable to try to tackle this set of problems. In fact, I believe that they are the only type of government which would stand the remotest chance. They are a very able Government, an exceptionally able Government. When I hear the noble Lord, Lord Hewlett, I confess that I think that he is not living on the same planet as most of his fellow countrymen. This is a Government of high intelligence, high ability, and from those I know, of very good judgment. Though I think that all those of your Lordships who know me know that I am comparatively capable of detachment, I must say that when some noble Lords opposite come and address us as though they have been supporters of a highly successful Government with an incomparable record for judgment, I really wonder what they can conceivably be intoxicated by. No Government in English history have ever made more misjudgments in three and a half years. It is not possible. An ordinary set of men, normally in any sort of Government, tend to guess or judge right about 50 per cent. of the time—that is about as good as statistical chance. It takes something like negative genius to be wrong about 95 per cent. of the time.
However, the time is too serious for this sort of Parliamentary ping-pong, and I should like to talk about the fears that I possess and to which I see no real answer. Obviously we have to try anything—any kind of gimmickry of the accountants' kind that my noble friend Lord Bowden suggests, and anything else. But the danger is that we are living in a very strange world; we are living in a sort of economic tempest, and at the same time a social tempest outside the frontiers of the rich world. This is going to make immense complications, at the best, for all of us, and probably something much more serious than complications. Remember that some of the predictions which some of us have made are coming only too true. The poor world is really growing, as we said it would grow, in population, and it is having the famines which, with
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deep regret, we have talked about for years. That is now happening in India and Ethiopia, and it will go on.
Some parts of the world which have recently been poor are also beginning to realise their power. If you listen to the statements of say, Sheikh Yamani, or the Shah of Persia, you can see how we are being regarded by people no longer poor—who in fact in certain strata have suddenly become immeasurably rich, but are still speaking like the underprivileged world—and they are going to exact their price. It is perfectly reasonable. Remember we talk of equality, and I am entirely for it. It is clearly part of a society which can begin to live together in peace. But remember equality does not stop at the frontiers of the rich world. Other people are beginning to talk about equality. The poor of India and Africa are beginning to say, "Fine, your unions object to a differential of, perhaps, ten times between skilled workers and management, but remember there is a differential of ten times between skilled workers and the ordinary Indian workers, and this disparity cannot exist for long."
There is going to be another kind of equality demanded by the overwhelming population of the world before very long. That will mean that ultimately the whole of the rich world is going to live very much more simply than it is living now. I cannot believe that in 50 years our descendants will not begin to think that the middle classes, and most of the working class in the rich world, lived more prosperously than large populations are ever going to live again. I should think that that is far more likely than not. When Mr. Harold Macmillan said, "You have never had it so good", he might also have changed the tense and said, "You will never have it so good again". It is a temporary phase in human history. It is awkward for us, we have had to live through it, but we have had materially not too bad a time. In fact, I believe that the real prescription for this country is a far more austere life, and far more effective work. If any politician really wanted to stir this country he would have to do another Churchillian adaptation of Garibaldi's, "Blood, toil, sweat and tears". That is the only maxim that has any conceivable meaning in the situation as I see it.

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Finally, we have become intoxicated with money. It is no reproach to any of us; it is part of the climate of our time and our society. But though we are rather prudish in talking about it, it is at the back of our minds to an extent which in other societies seems as abnormal as complete preoccupation with sex. We are obsessive about money in all sorts of ways, and we cannot really believe that there is any other motive which makes men perform at all. I was dis-stressed during the Election to hear almost exactly the same point made by the then Prime Minister as was made by the noble Lord, Lord Erroll of Hale, about the necessity of giving incentives to people at the top of large companies; that a chairman who was receiving £55,000 a year was about to receive £65,000 a year, and that this was a necessary reward for responsibility. This is sheer nonsense. People do these jobs, on the whole, because they like them. Does anyone in this House believe that if the Prime Minister's salary was reduced by half, reduced to, say, £10,000 or £8.000 a year, there would be any shortage of applicants from the House of Commons? It is a great reproach to our official life, a great reproach to people in high places, that they willingly accept this kind of argument for increasing their own salary. This is a kind of corruption that of course inflation brings. It is a very natural consequence of inflation, and it has done us great harm.
On the other side, it is extremely foolish that it should be regarded as a natural right of man that everyone's standard of living so-called—meaning their purchasing power—should automatically advance year by year. No such extraordinary axiom has ever been thought of by comparatively rational man in the whole of human society; it is utterly new. It would not have occurred even forty years ago, but now it is regarded as a right of man. Unless we break this obsession, this preoccupation and this lack of reality, we shall get nowhere.
In conclusion, there are immense political rewards for anyone with imagination who can suggest to a population like ourselves that there may be a purpose and a driving force other than money. This is what great revolutions produce. It is what Hitler produced: it is what the
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Russian revolution produced, and it is, above all, what the Chinese revolution produced. Anyone who can do that will give us a purpose which has been lost for a long time, because of the chances of history and the extreme materialism into which our sort of society has descended. If that purpose could be achieved, it might allow us to look more respectable than we are now.
LORD HEWLETT: My Lords, before the noble Lord sits down perhaps I may ask a question. He made a reference to me at the opening of his speech and said that I appeared to be living on another planet. I do not know whether there is anything more earthly than the chemical industry or Manchester. The noble Lord did not reply to any of the points that I made. I wonder whether he can elucidate on how I can be from another planet, or did he just not understand what I said?
LORD SNOW: My Lords, I believe that I understood the noble Lord very well. That is why I said that he might be living on another planet. He has absolutely no idea of what the majority of people in this country, as they proved by their votes, think of the kind of views that he expressed.
LORD HEWLETT: No, my Lords—
SEVERAL NOBLE LORDS: Order!
6.32 p.m.
LORD GRANVILLE OF EYE: My Lords, I shall not attempt to follow the very interesting speech of my noble friend Lord Snow, with many of whose arguments I found myself in agreement on the very broad canvas which he painted. We are indebted to the noble Lord, Lord Erroll of Hale, for introducing this subject although we debated it last week. I always listen with the greatest interest to my noble friend the Deputy Leader of the House on this subject, and I thought he threw out a challenge to the manufacturing industries of this country to try to help our balance of payments position by exporting more, particularly to the Continent.
I hope very much that the manufacturing industries of this country, which are complex and quite varied, will take notice of this challenge and will attempt to meet it. I say that because when we entered the E.E.C. we gave the United

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Kingdom consumers' market to the Continent on a plate. The E.E.C. countries were ready but we were not, and in consequence they have a head start and have been exporting very large quantities of consumer goods to the retail markets of this country, as is shown by the number of container lorries on the roads.
I am not a pessimist about our future, but I was a little surprised at the complacency which was shown in the debate and in the Press, and which one has met in the country. I do not wish to go back to last week's debate in this House, but there seems to be an inexplicable complacency about the results of the three-day week, about the miners' stoppage and about the oil price increases. As the noble Lord, Lord Hewlett, said, not only are there fantastic increases in the prices of essential raw materials for industry; they are also in short supply. Industries which would like to get back in full swing after the three-day week are finding it extremely difficult to get the vital raw materials which they need for the manufacture of their end-products.
Many people say, "We have these industrial upsets, we have strikes and so on, but we quickly recover." But, my Lords, you cannot allow a jugular vein to be cut for three months without results. These have yet to be seen. Somebody, at some time, will have to pick up the bill, be it industry, consumers, the Government or the Treasury. We have not yet seen the effects in industry, but when we do there will not be so much complacency in the country. I do not ponder so much on why we go in for industrial suicide in this desperate and tragic period, as about how we are to get over it and, one hopes, prevent it from happening again in all its worst aspects, because we in this island just cannot go on behaving like this and still exist.
I should like to make just one reference to the mining dispute, which I feel was a tragedy. Anyone who has had anything to do with the mining industry and with the mechanisation of it, as I have, will realise that for long the mines have been mechanised, and I think that the previous Government intended to invest a further £1,000 million in the final mechanisation of some of them. I should have treated the miners as mechanics. I should have used that sum of money to
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mechanise this industry completely, and I should have introduced incentive schemes and paid the miners by results, as is done with car workers. If they earned £90 or £100 a week, what would it matter? The mining industry is a vital basic industry of this country which must be efficient, and we must modernise it very quickly if we are to succeed in that respect.
As many noble Lords have said, our recovery from this unfortunate stoppage will depend very much on productivity. If we cannot get increased productivity from the industries of this country and export a great proportion of it, we shall never get over our problem. One of the great disappointments is that the previous Government could not get investment in industry. I have no idea why that was. I do not know whether the City did not have confidence in the set-up or what it was, but, as the noble Lord, Lord Bowden, suggested, there was a lack of investment in industry. We cannot as a nation go on living beyond our means, which is what we have been doing. We have grossly swollen, exaggerated overheads as running costs against our exports.
If I may use a crude colloquialism, there are still too many chasing the fast buck and quick results, and I regret to say that certain sections of our industry have too big a burden of pilferage and stock losses. One asks oneself why this happens. In some industries this burden amounts to 1·5 per cent. of costs. I believe that one of the reasons for it is that the media have created a new universal taste. They have created consumer demand and, naturally, everyone wants more.
I emphasise that as a nation we can afford this standard of living, this refinement of living, only if we can export more of our manufactured goods. If we cannot, we shall have to reduce our standard of living. There is no alternative. All Governments consult the T.U.C. and the C.B.I., and I was glad to note that my noble friend the Deputy Leader of the House referred to-day to the small and medium-sized businesses (I think there was also a reference by the Chancellor of the Exchequer in his Budget speech) because these smaller businesses have had a difficult time as a result of the three-day week. Although it is necessary for Governments to talk

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to the C.B.I. and the T.U.C. in matters of negotiation, the bulk of the industry of this country comprises medium-sized and small businesses, and these people are wondering when they are to be consulted. We have headlines of the trade unions saying this and the T.U.C. saying that, with Ministers adding their own comments, and these people wonder when they are to be consulted. They are the majority of the manufacturing interests of this country and are, therefore, our business backbone. This leads me to suggest that if we are to establish a revival we must have incentives for middle management. One cannot exist in competition with the great industrial countries of the world unless middle management is right. It is fine to have the top men and the senior executives—they go to schools and to the Financial Times symposium, but the people who carry the heat and burden of the day in British industry are those in middle management.
I regret very much the lack of tax incentive schemes in the Budget. These incentive schemes were taken up not only by senior and middle management but even by workers on the floor. So, my Lords, we in industry always come back to this problem of industrial relations. Every year I attend the European managerial symposium at Davos. I meet overseas managers, industrialists, and economists, and there are two things they will always mention. One is "the English disease", and the other is: "What about your boardroom and shop floor co-operation?". They say, in the most friendly way, "It is too bad that you have a union and management setup that produces spasmodic industrial war. Why don't you do something about it?". That is their view. They say that we have to take the shop floor to the boardroom and not leave it to the personnel managers who must become the new élite in industry. We had also better look at what the "back-room boys" are doing about "holidays from growth". If you discuss this and listen to the debates in Brussels, and to some of the Commissioners, you find that research and discussions have been going on for a long time and have reached an advanced state of whether or not there should be a "holiday from growth", whether we can do with three or four
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working days a week, and whether we should call a halt in the rat race, sit back and take a "holiday from growth" and enjoy what we have already. This is beginning to get into the thinking of the "backroom boys", and it is a subject that will be transferred to the boardroom tables before long. It may be that it is a fait accompli already and we do not realise it. It may be that we had a revolution and never noticed it. It may be that people have already made up their minds that they do not want to work hard or so long, or that their wives are making up their minds for them.
My Lords, I have no idea when this country will be facing another General Election, but the worst influence (I think the noble Lord, Lord Hewlett, referred to this) in industry is uncertainty. No-one can plan ahead in an atmosphere and conditions of uncertainty. The best stimulus for revival in this country to enable it to meet its future is an injection of confidence, the word you cannot replace with anything else, as we found throughout the difficult days of 1930 to 1931. The worst fear is that of uncontrolled inflation or, what some of us remember, deflation, which you cannot stop or do anything about, and unemployment when nobody invests and nobody spends. As many speakers in the debate have suggested, I believe there is little time left to us to try to bridge the gap at the present time. Everyone says, "Well, if we can exist until the North Sea renaissance comes along and we have a Klondyke bonanza, that is all we have to do." But we have to face the next year and the next two years. It has been remarked that this is perhaps the best Government suited to tackle such a problem. In the tremendous job that the Government have ahead of them, I believe that we should all wish them well.
6.47 p.m.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, I must start by thanking my noble friend Lord Erroll of Hale, who moved his Motion with the clarity and conviction we might expect of somebody with his experience and involvement in industry. However, I do not think I can possibly comment on the number of distinguished speeches we have heard this afternoon. I shall try to confine myself to restating some of

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the principles which I believe govern our approach to the difficult situation in which we find ourselves, although I must also say that I think almost everything has been stated probably better and certainly by people who know more about this than I.
We are an industrial country, hence the importance of the debate. My noble friend Lord Erroll gave us a vigorous defence of profit. In this he was rather surprisingly supported from the other side of the House by the distinguished noble Lord, Lord Mais. At this juncture, I might point out that the recent profits made by industry, which some people have thought excessive, are the result of investment made two years ago, because that period is the lag of the profit arriving from the investment made in anticipation. The corollary of this point was made by the noble Lord, Lord Orr-Ewing. Investment has been said by many noble Lords to be the key to our industrial success. Without investment we cannot have increased productivity and growth on which to finance the welfare and the rising standard of living to which everybody aspires—in a word, the prosperity of this country. I am not in any way disputing the gloomy forecast made by the noble Lord, Lord Snow; indeed I think it is fair to say that there is a movement abroad of a number of people who feel that we would be better off if we lived simpler lives.
LORD SNOW: My Lords, may I interrupt the noble Lord? I stand by what I said in that respect, but this does not mean that, for instance, I think industry ought not to make profits. I think it is quite essential that they should; but that is rather a different point from the top managers of industry rewarding themselves extremely handsomely. The actual operations must make a profit. Let us realise that in some ways we have to be very tough-minded even if we ride about on bicycles.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, the point I had in mind was that I thought the noble Lord was questioning whether we were right to go on aspiring towards growth and increased welfare across the land.
LORD SNOW: No, not at all.
LORD STRATHCONA AND MOUNT ROYAL: I thank the noble Lord.
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Many noble Lords have said that the prerequisite for investment is confidence, so the touchstone by which we must judge the Government's actions will be whether these will engender confidence which will produce investment. This was the point made so eloquently by the noble Baroness, Lady Seear, and, again, by the noble Lord, Lord Mais. Many noble Lords touched on the terrifying problem of inflation. There was a wonderful moment when I envisaged the noble Lord, Lord Bowden, I think it was, sending Mr. Wedgwood Benn for what I hoped might be a prolonged study of the situation in Brazil, and I am not really deterred from this suggestion one iota by the misgivings expressed by the noble Lord, Lord Snow, about the type of Government you would have to have.
The worry about this Budget is the fear that an attempt is being made to disguise the effects of inflation by keeping down costs to the consumer by means of subsidies, at least in the short term. Again, this was a point admirably made by the noble Baroness, Lady Seear. Indeed, we have had a great deal of help from the Liberal Benches this afternoon. Furthermore, let us make no mistake: taxing the rich and attacking capital will aggravate matters, simply by transferring the spending power from the saver to the spender—and I do not think one has to be an economist, which I certainly would not claim to be, to understand that. One must therefore ask the Government: have the anti-inflation measures been swept under the carpet? There has been a total silence on this issue since the miners received more money; that is, there has been a silence apart from the announcement of increased prices for coal, oil and electricity. After all, my Lords, this was the issue on which we went to the country and which landed us into the situation in which we now find ourselves.
At this point, perhaps I may say a word or two about industrial relations, to which a number of noble Lords have referred. It would be ridiculous, f think, not to acknowledge that the Industrial Relations Act 1971 was hampered in its operation—indeed, it was emasculated—by the refusal of the powerful trade unions to talk about amending the Act when they found it wanting, even when they were making very full use of the provisions that suited them. At the same time they lost no opportunity to represent the

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Act, not as a legal framework for the conduct of disputes but as an attack on their legitimacy and their interests. I believe this was also absurd. Indeed, I believe it would be a great pity, as my noble friend and Leader expressed it to me, to treat the Act like King Charles's head—Away with it! What we want now in this new Parliament is to cooperate with any Bill which ensures a framework of law for the fair and orderly conduct of industrial relations.
We have always acknowledged the value of the last Labour Government's work in this field. Indeed, as one noble Lord said, a number of the clauses in our Bill were taken direct from their Bill, even though we deplored their taking to their heels at the first whiff of opposition fire from the unions. But we should add that the proposed legislation as we understand it so far contains some very worrying items. I am thinking in particular of the proposed restoration of legal immunity for those inducing breaches of contract; and I hope I am wrong in thinking that it was suggested that there was to be an extension of picketing rights into areas which would raise grave legal problems and, I should have thought, could not help involving intimidation on a scale which we had never seen before. We are worried that the Government's pursuit of their social contract, which we applaud, may not only dictate inflationary economic decisions but also make them turn a blind eye to the responsibilities, as against the powers, of organised groups in our society. That would be unfair to the vast majority who were not so organised or so protected. Indeed, some of the activities of these groups have to be recognised as being antagonistic to the cherished rights of the individual. These proposals would be partial in law and inflationary in the economy. Obviously, we shall maintain an open mind, but we shall have to look most carefully at any proposals brought before this House which lead us in this direction.
My Lords, this leads me on to a favourite hobbyhorse of mine, because I believe that the one area where industrial relations are handled so much better than anywhere else is in the smaller firms. We have always had a nagging suspicion that Labour Governments have little love for smaller firms because the
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trade unions have no affection for them since they, the trade unions, are poorly represented in those sort of undertakings. I was therefore very encouraged to see a quote from an article in The Times by Mr. Wedgwood Benn, which has already been referred to on more than one occasion this evening, when he said:
"I recognise small companies do very well."
That is a promising start from someone who has always been identified in the past with what I might call the "bigger is better" syndrome.
In connection with small companies, I think it is worth repeating statistics which have been mentioned before in this House. Something like 93 per cent. of companies are, as defined by Bolton, small firms. They produce one-fifth of the G.N.P., employing one-third of the workforce—some 6 million people. This is more than twice the number employed in the public sector. They also produce a higher return on investment across the board than their larger compatriots. The last Government showed their concern for these companies by appointing a special Minister, who the other day made a speech in another place in the debate on the Queen's Speech. So far, my Lords, I am not aware that this Government have announced the appointment of a successor to the Minister for small firms, and this is perhaps something which the Minister will be able to deal with when he comes to reply. The last Government went a long way towards instituting the reforms suggested by Bolton; and may I here applaud the noble Lord, Lord Beswick, and agree totally with him, when he pointed out that it was the previous Labour Government which called for the Bolton Report.
The last Government eased the problems of non-disclosure under the Companies Act, and the underlying thought here is that the legal requirements of a large company with a number of totally separated shareholders is totally different from the information required in a comparatively small unit where many of the shareholders will be members of the family. There was an attempt to reduce the impact of form-filling and mitigation of tax at the lower levels.
This Budget does positive harm to all industry. A number of noble Lords, including my noble friend Lord Hewlett, had a long list of impositions which

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this Government are going to impose upon industry. At least, we should be thankful that the increase of corporation tax will be reduced for the smaller firms and I shall be interested to hear whether the Minister can tell us how small firms in this connection will be defined. It is not always an easy problem. It is also worth remembering (perhaps a somewhat jingoistic point) that big business is international and small business is essentially British. I do not suppose that very many small firms pay their directors in the Cayman Islands.
Once again we return to the point that investment in the end has to come from profits, and this is most particularly true of the small firms who do not have ready access to the borrowings available for their larger competitors. The Chancellor said that he is aware of the cash flow and credit problems which will arise from the delayed effects of the three-day week as they work through the economy. I hope that in this connection he will look sympathetically at the proposal which has been put forward by the Smaller Businesses Association for a credit guarantee scheme, analogous to the arrangements which are made for the export credit guarantee. That would help to alleviate the needs of some of the small firms and above all would ensure them continuity in their investment plans. As a number of noble Lords have said, the resilience of the small companies was shown by the remarkable way in which they reacted to the three-day week.
There are a couple of other points upon which I should like to touch. The noble Lord, Lord Beswick, mentioned in his speech what he called the "planning agreement with the laudable aim of giving firms a better opportunity. I am not quite clear, my Lords, how this planning agreement is related to the existing organisations such as Neddy. The other point which the noble Lord, Lord Beswick, mentioned was the Companies Act and his exchange with the noble Earl, Lord Limerick. He did indeed give a rather disappointing reply to my noble friend on that occasion. I must regret that there is no intention to reorganise some necessary workmanlike and broadly uncontroversial measures on which so much effort and Government time had already been spent.
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My Lords, I think we can say that so far as industry is concerned the Budget speech was far from reassuring. The expression of the noble Baroness, Lady Seear, that industry had been "clobbered", has been taken up by a number of other noble Lords. The C.B.I. has gone on record as saying that already the Stage 3 control of prices is biting very hard. In spite of that, I feel sure that the attitude of industry is still, as was said by Paul Chambers in 1964:
"So we … greet the new Government certainly without hostility, and with every desire to co-operate in measures designed to raise productivity, improve living standards and to achieve progress with long-term stability. Where we disagree we will say so, I hope plainly and constructively."
There is much common ground and to the extent that the Government devote their efforts to tilling this fertile area to yield the maximum industrial crop they will command support from these Benches. Let us therefore hope that they will not be lured by some of the signposts erected by some of their wilder men, which I fear might lead us over Government-erected barriers to progress to the and lands of negative egalitarianism.
7.6 p.m.
LORD BESWICK: My Lords, with the permission of the House, if I have it, I shall try to answer some of the points which have been raised, although I am sure that noble Lords, looking at the clock, will not expect me to answer all the many questions which have been posed. I hope that my noble friend—and I hope I can call him that—the noble Lord, Lord Erroll of Hale, is satisfied with the response that he has had to the debate which he has initiated. It has been extraordinarily interesting.
I said to him that in winding up I would answer some of the points which he raised, and the first point concerned small firms, a question which was amplified by the noble Lord, Lord Strathcona and Mount Royal. May I say that apart from the last four words I wholly agreed with the last sentence with which the noble Lord wound up and I appreciated the spirit contained in that last sentence. Now as for small firms, I was asked by the noble Lord, Lord Strathcona and Mount Royal, what were the Ministerial responsibilities in the present Department

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of Industry. If he turns to the Hansard of the House of Commons of March 25, columns 39 and 40 in the Written Answers, he will find there spelled out that, under my right honourable friend the Secretary of State, I am responsible, with the Under-Secretary of State, Mr. Meacher, for specific industries including iron and steel, aerospace and shipping. The Minister of State, Mr. Heffer, will take responsibility for the Industry Act, regional industrial policy, and small firms; and the Under-Secretary of State, Mr. MacKenzie, will be working with him. The answer to his question therefore is that Mr. Heffer and Mr. MacKenzie will have that direct responsibility that he thinks should be set out.
I am glad that the noble Lord acknowledged that it was a Labour Government which set up the Bolton Committee. I do not know why certain noble Lords should think that there is on the part of the Labour Government or Labour Party people an antagonism towards small firms. I suppose that if there was a count we would probably have as many people working in small firms as there are in large firms. I agree with him that in some of these small firms there is often a wonderful spirit of industrial relations. Following the Report of the Bolton Committee Small Firms Information Centres were set up, and it is interesting to observe the use that has been made of those Centres. Since they were set up they have helped 11,700 inquirers with over 20,000 inquiries, and even though publicity for their work has recently dropped off they are continuing to receive some 500 inquiries a week, ranging over management problems, financial and control problems, technical problems, and help needed with Government regulations, policies and State agencies.
Moreover, it is not simply the action that was taken by the last Labour Government. The noble Lord will no doubt recall that in the Budget my right honourable friend made a specific reference to the relief which he has given to small companies, and I think the noble Lord, Lord Strathcona and Mount Royal, referred to this. A company whose profits do not exceed £15,000 pays tax at a special rate—42 per cent. as against the normal rate of 52 per cent.—and there is a marginal relief given on profits
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up to £25,000. Therefore I hope we shall hear no more at all about the conflict between the Labour Government and small firms.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, is the noble Lord correct in saying that the small firms bureaux were set up by the Labour Government? I rather thought they were set up by the last Conservative Government; but of course I stand to be corrected.
LORD BESWICK: My Lords, I did not say that: there is no conflict between us. What I said was that the Bolton Committee was set up by the Labour Government and it was following the report made by that Committee that the centres were established.
I was asked by the noble Lords, Lord Erroll and Lord Kings Norton, about the situation in the nuclear energy industry. I am going to read what I am advised is the position, but the language is not mine. We can expect the contribution of nuclear power to our energy needs to increase further in the coming years. Provided safety and reliability can be assured, it will pay us to rely more on nuclear power for electricity generation. We need to decide on the size and shape of our nuclear programme and, interlinking with this, on which thermal reactors should form the basis of that programme. The need for early decisions is balanced by the need to get the decisions right. I have tried to find out when that decision will be made. I am afraid I have not succeeded, but I am told that it will be in the comparatively near future.
I was asked by the noble Lord, Lord Kings Norton, and I think by the noble Lord, Lord Erroll, about the situation on mergers. The position at the moment is clearly unsatisfactory. The Commission's powers in this field are set out in the Treaty of Paris; and to the noble Lord who asked why British companies are now regulated by a body on the Continent I must answer that neither the noble Lord, Lord Kings Norton, nor I was able to set aside or stop certain legislation which passed through this House under the previous Government. That legislation means that Article 66 gives the Commission certain powers to regulate mergers. It is true that, by comparison with the system used in the

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United Kingdom, the procedure appears to work slowly. Even recognising that it is frequently difficult to reach a fair and balanced view in such cases, and that there may be special procedural difficulties (such as the need to translate documents into other languages), there is still unaccountable delay. This point, among others, has been kept very much in mind when considering the more general draft Regulation for controlling mergers which the Commission have recently issued.
Representative groups from industry, the C.B.I. and the City have voiced their concern about it. Consultation will be widened, I promise noble Lords, to ensure that the United Kingdom will be able to present a representative view on all the issues raised by this draft Regulation in forthcoming discussions with the Commission. I will see that in the general discussions about renegotiation account is taken of the point made by the noble Lord, Lord Kings Norton. As he said, Commissioner Borschette and the Director-General of Competition visited London yesterday at the C.B.I.s invitation to hear at first hand a presentation on the British system for regulating mergers. They have well in mind the need for decisions to be reached as quickly and responsibly as is possible. I say that about the general position. I think the noble Lord will accept that it would be difficult for me to say more about the proposed merger of G.K.N. and Miles Druce.
The noble Lord, Lord Bernstein, I was pleased to hear, asked noble Lords opposite whether they realised when they were criticising the Government for the present situation, that we had been in power for only three weeks. It is quite true that the Chancellor's decision to withdraw tax relief on interest on private loans is not directed against industry. It is a fact that those private loans have been a material factor in the money supply of this country. If we are serious in our campaign against inflation, it is inevitable that tax relief for those loans should be stopped.
My noble friend Lord Bowden suggested that we might have a lot to learn from Brazil. I have a great delight in watching Brazilian footballers when the opportunity arises, but I am not absolutely sure that we can learn a lot from Brazil so far as our own inflationary problems are concerned. There are cer-
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tain differences between that country and our own—for example, I gather they devalue their currency roughly every forty days; they are not averse to revolutions; they have more material resources and more manpower, and their political system is distinctly different from ours. Though it has advantages in some respects it has disadvantages in others, and I would not have thought that we should necessarily copy what they do.
I was fascinated by what my noble friend said concerning the difficulties of the manufacturers of machine tools who went to see him; but. I do feel, with the noble Lord, Lord Orr-Ewing, that he would do well to advise them to consult their accountants again, because there are now methods of inflationary accounting which would obviate the kinds of difficulties that he mentioned.
LORD BOWDEN: My Lords, may I interrupt for one moment? I hope I did not give my noble friend the impression that I admired the Brazilian political system. What I said was that they have learned to live with inflation and they accept it as inevitable. Our problem is that we regard it as a temporary aberration and suppose that it will eventually go away again. We have never learned to cope with it. I believe that is true. As for the machine tool trade, the people there, as you know, are in very deep trouble and, in fact, they could not pay a dividend at all if they kept accounts properly.
LORD BESWICK: My Lords, I am much obliged to my noble friend. I was glad to agree with the noble Lord, Lord Polwarth, when he said that Scotland was an asset and not a liability; but I was surprised to hear him say that nothing was said in the Chancellor's speech about regional problems—because the Chancellor did go out of his way to say that the Regional Employment Premium was being maintained. I was grateful to the noble Lord for paying a tribute to what was being done by officials of the Department of Industry in Glasgow at the present time.
LORD POLWARTH: My Lords, I feel that perhaps the noble Lord misunderstood me slightly. I do not think I said that nothing had been mentioned in the Chancellor's speech about the continuation of regional policies but that nothing

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in the speech seemed to offer much encouragement to industry as a whole.
LORD BESWICK: My Lords, I shall refer to that point again later. I may have been mistaken, but I thought the noble Lord made a special point that we had not put sufficient emphasis on the regional problem. The noble Lord went on to speak about the investment plans of the British Steel Corporation. There is a problem here. They have a most important plan and it is essential that they get on with it. Nevertheless, if we are concerned about regional problems, there are cases where the proposed closures do seem to bear particularly severely upon certain regions. It is essential, therefore, that in particular cases we have a look again at what it is proposed to do to alleviate the unemployment problem which might otherwise be created.
The noble Lord, Lord Orr-Ewing, spoke about figures which had been published regarding the Concorde aircraft. I heard what he said with great interest, and read what he wrote in the Daily Telegraph. He may well be right about that figure of £80 million. It is being looked at again in the light of the many comments which have been made since the figure was published, and what he said about it will also be taken into account. I was interested in what he said about profits, and he will not expect me to repeat what I said at the beginning. I agree with him in so far as he said that if there were an inflationary technique of accounting some of the balance sheets of companies would present a very different picture indeed. I could not understand what he meant when he spoke about the tax on petrol. Here again noble Lords opposite are, I fear, too ready to believe that the Labour Government is out to hit industry. The V.A.T. on petrol will make no difference either to industrial lorries or to buses and bus fares.
My noble friend Lord Mais spoke about steel imported into this country, and about steel which had possibly previously been exported at a greatly lower figure from this country. This is a problem about which we have heard a good deal. I gather when we come down to getting individual cases it is much more difficult to establish the facts. If the noble Lord has any particular facts I
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shall be glad to hear from him about them; and if there are any importers who are overcharging, the Price Commission will come into the matter. It would be a good thing to put the facts before that Commission. The noble Lord will probably agree that some of the problems to which he referred will disappear now that there is this increase in the list prices of the British Steel Corporation's products.
The noble Lord, Lord Snow, spoke about a desperate situation that was facing us, and I and my noble friends on this side of the House are immensely grateful that he emphasised that this desperate situation, despite what was said by the noble Lord, Lord Hewlett, had not been brought about by Her Majesty's present Government. With his infinitely better grasp of the English language, he put the facts better than I ever could and said that the solution to our problems lies in industry, and in hard work, and not until we accept that are we on the way to recovery. He knows I agreed with him when he spoke of the obsession about economic growth. There is a problem here which human beings in this country and elsewhere are beginning to understand: we need a little more genuine human sympathy than we have hitherto displayed in a mad rush for material possessions.
The noble Lord, Lord Granville of Eye, with his practical experience of industry, complemented what was said by the noble Lord, Lord Snow. He too insisted on the truth that productive industry rather than the slick speculator is where our encouragement should go, I agree with what my noble friend Lord Mais said about confidence and genuine consultation, and the contribution which can be made by the workers in a company if they are given an opportunity to make that contribution. It was good to have the benefit of his practical experience. The noble Lord, Lord Granville of Eye, again complemented what was said by his noble friend.
The noble Baroness, Lady Seear, and several noble Lords, the Lords Erroll of Hale, Polwarth, Orr-Ewing and Hewlett, seemed to think that the taxation announced by the Chancellor of the Exchequer was going to be almost suffocating in its incidence. I think they are exaggerating the effect of the 2 per cent. increase in corporation tax, for

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example. I cannot think that they are looking at this problem with an objective mind. After all, I am entitled to say that the previous Government tried cutting taxation. What happened then? When taxes were cut, was the money then made available to the private individual always spent in investment? Are noble Lords absolutely satisfied that the savings of the people to whom they referred went in productive industrial investment? I think my noble friend Lord Bowden had much more of the truth when he said that too many of those people were concerned with things like Georgian silver teapots, or vintage wines, or land, or real estate of one kind and another. Too much of the money that was saved was going into those directions. I cannot think that it can be claimed that under a more benign Chancellor of the Exchequer everything was all right. The last Government had as a target for industrial investment an increase of between 12 per cent. and 14 per cent. for the current year. That figure will not be reached—even without the three day week it would scarcely have been reached. Even if it had been reached, it would only have brought us back to the figure which the Labour Government achieved in 1970–71.
Let us look at the other vital issue in this problem—the balance of payments and the gap between what we sell and what we bring in from abroad. When there was a Conservative Chancellor of the Exchequer, when they were cutting taxes, were we narrowing the gap between imports and exports? The fact is that we were not. What we were doing with this money was buying motor cars, possibly foreign motor cars, colour television sets, buying luxuries of one kind and another from abroad. That policy did not help; it brought us to the position where we had to take unpopular measures. I listened to what noble Lords said last week. Almost everyone was saying that the social policies of this Government were not being paid for; we were not taking enough out of the economy. They were afraid that demand would build up and inflationary pressure would not be released. We have done something and now in every case we are told that we are doing the wrong thing. Someone said, "To tax and to please is not given to mankind." One has to recognise that. Nevertheless, I ask noble Lords to see
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sometimes that the problems that are confronting us are not the making of the present Government. If the noble Lord, Lord Hewlett, wishes to interrupt—
LORD HEWLETT: No, I am transfixed; I could not get up.
LORD BESWICK: My Lords, I finish by saying this. The noble Lord, Lord Snow, touched on something in which I believe very deeply: incentives need not always be considered in terms of material goods. There are many fine things that are done, some of the finest things in human affairs, that are not done for material gain at all. One has only to look back at one's own war experiences to realise how true that is. We are trying a "social compact" as it has been called. We have said we are trying to do certain things and, on the other side, we expect certain things to be done for us. Whether it is going to work out in the way we hope, we do not know. But all I can say is the other way did not work out too well, either. So we are going to try. If we are to succeed it will be on the basis that everybody—members of the trade unions and members of the boardroom, all of us—will have to think a little more about what we can give as well as what we can take. It is in that spirit again that I hope this House will conduct its discussions in the future.
7.30 p.m.
LORD ERROLL OF HALE: My Lords, since there is further business before your Lordships' House, I will be very brief. I should like to thank those noble Lords who have taken part in this debate which I initiated, both for the excellence of their speeches and for their kind references to me for having introduced the topic. In particular, I should like to thank my noble friend for making two very interesting speeches and also for welcoming me back to the debates here after an absence of several years. I should say that I think the debate has proved of great value to those of us who have taken part in it, as showing how much thinking the Government are doing on the matters which we have raised. Of course one could not expect full answers to every point raised. For my part, I was very impressed with the amount of detailed information which my noble friend was able to give to your Lordships. For that I should like to extend to him

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my personal thanks; and to all of my colleagues, my thanks, too, for having taken part in what has been a most interesting afternoon. I therefore beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

THE CASE OF MR. LUKE DOUGHERTY
7.32 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE LORD HAILSHAM OF SAINT MARYLEBONE rose to ask Her Majesty's Government: Whether they will make a Statement on the action they propose to take as the result of the successful appeal against conviction of Mr. Luke Clement Dougherty. The noble Lord said: My Lords, I rise to ask the Question which stands in my name on the Order Paper relating to the case of Mr. Dougherty. I do so in no critical spirit because, of course, none of the events to which it relates happened during the tenure of office of the present Administration. Though the case in question raises, as I shall seek to show, some questions of principle which I think call for some statement from Her Majesty's Government, they did in fact take place without any action either of this Government or of the Government of which I was a Member. I ventured to put down an Unstarred Question because I felt that a little further probing than one could do at the beginning of your Lordships' proceedings was necessary.
My Lords, the simple fact which gives rise to the question I have raised, and which the Lord Chief Justice described as, disturbing", is that Mr. Dougherty spent nine months in gaol for a crime which he did not commit. It sometimes happens, and perhaps not infrequently, that a guilty man gets off on appeal owing to some technicality, a loophole in the law or some misdirection by the trial judge; or that he gets off on appeal originally because there is some doubt as to whether or not he is guilty. But this is not one of these cases. At least, I hope that the noble and learned Lord on the Woolsack, who I understand is likely to reply, will confirm what I say, that this is not one of these cases. Mr. Dougherty was innocent, and his inno-
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cence has been established, I believe, beyond doubt.
The crime of which Mr. Dougherty was accused was shoplifting. It sometimes happens that persons accused of shoplifting bring the accusation on themselves by foolish conduct or by foolish words before or during the event which are the subject matter of the charge. This again was not one of those cases, as I understand it. Mr. Dougherty was not present at all at the scene and time of the alleged offence. I understand that the offence was at Durham; he was in fact enjoying an innocent outing at Whitley Bay with a coach-load of other people. He was therefore not in any way responsible for bringing the prosecution on himself.
Mr. Dougherty's defence was therefore an alibi. It is fair to say that all alibis are suspect. They are, I suppose, more frequently the subject of concerted perjury than any other defence. Some people who put them forward justly incurred suspicion by withholding them until the last possible moment. Indeed, as the noble and learned Lord knows, Parliament thought it necessary to legislate against the production of an alibi at the last moment, popularly known in the profession as the "sprung alibi". But again this was not, as I understand it, one of those cases. Mr. Dougherty put forward his alibi at the earliest possible moment and said exactly what he had been doing. I must emphasise, my Lords, that so far as I can see—and again I stand subject to correction by the noble and learned Lord—it was open to the prosecution to check that alibi before taking the matter to trial. If they had done so, there were a whole coachload of people who could have confirmed it—or, at any rate, most of them could have confirmed it.
The first question I should like to put to the noble and learned Lord is why the prosecution did not check that alibi. What is the good of Parliament legislating that "sprung alibis" are not to be produced if, in fact, when the prosecution is told what the defence is, and the defence is an alibi and that the alibi is such-and-such, the prosecution do not bother to check it? Perhaps the noble and learned Lord will tell me that. I am bound to point out (I do not know if the noble and learned Lord will agree) that if in England and in Wales we had a prosecution system of

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professional prosecutors, like the sheriff, substitute in Scotland, or the district attorney in the United States, it is possible that the alibi would have been checked by a professional prosecutor. I should like to know whether the Government have any comment on the suggestions which have been made from time to time that we should look again at our system of prosecution in this country.
Instead of checking the alibi, as I personally would have thought they ought to have done, the prosecution asked the store detectives, who had made the complaint, to identify the alleged criminal from the criminal record photos. Mr. Dougherty, as it happened, had a record and so his photo was there. It was there, I should suspect (although again I put this interrogatively), in black and white. Unfortunately, the store detectives identified this photograph as that of the offender. I should like to know whether it has ever been considered whether C.R.O. photographs should be in colour. I understand that the real criminal, if there was one, had ginger hair and that Mr. Dougherty has black hair, or vice-versa. So if there had been a coloured photograph of him, it would certainly, I should have thought, made it more easy to identify correctly than was possible with a black and white photograph.
The prosecution then arranged, at the request, I understand, of Mr. Dougherty, for an identity parade. Unfortunately, for reasons which I understand were perfectly adequate, Mr. Dougherty was not able to attend the appointment. Instead of arranging another appointment, the prosecutors simply went to trial and made arrangements for identification by seating Mr. Dougherty among the jury. I should have thought that that action in itself was open to criticism as a method of identification—and as practised, because one does not want the accused, as a rule, to be seated in the jury box among the jurors who are to try him. It is inconvenient for the jurors, and may lend itself to abuse. Yet that is what was done.
My Lords, what rendered the situation much worse, so I understand, was that the whole process of identification by this means was in fact a charade, because the two store detectives were allowed to watch the seating of the defendant
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through a glass panel in the court door, They were thus in no difficulty in providing the identification. I should like to ask: how did that happen? Did anyone tell the court or the jury that this extraordinary impropriety had taken place? One does not want to animadvert either on the conduct of the prosecution or on the conduct of the store detectives, but how can that have been proper? The object of the exercise was to let the jury think that there was a proper method of identification taking place and that the store detectives were trying to find the real man, not knowing where he was. Did the store detectives give evidence? Did they tell the court that the whole thing had been stultified by their seeing the man put in the jury box so that they knew exactly who was under suspicion? And, if not, were they not in some way guilty of really a contempt of court, of almost a conspiracy to defeat the ends of justice? When did the authorities first learn that this extraordinary thing had happened, and what did they do when they had found out? These are questions which I feel I am bound to ask. Somebody must have known sooner or later that the court had been misled. Why did the prosecution let it happen in the first place? Was it negligence, or what was it?
Then comes a series of events for which I do not think the prosecution can be blamed. The accused had, I believe, given a list of five potential alibi witnesses, and in the event he called and it may have been that he was able to call, only two. These were respectively, I understand, his mistress and his best friend, who also had a criminal record. It is not perhaps surprising that in face of the positive identification the jury believed—
LORD GARDINER: My Lords, I am sure the noble and learned Lord will excuse me if I say that the friend had no criminal record; he is thinking of another witness.
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, I am very much obliged to the noble and learned Lord; I am glad to be put right on such an important point. It is very important that it should be put right. But the point I am making is still the same: that the only witnesses that the accused man was

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able to call were witnesses who might be thought to have an interest in the result of the case, a bias in favour of the accused. This of course was not the fault of the prosecution, and it no doubt assisted the jury to accept the evidence of identification at its face value. At any rate, the result was that Mr. Dougherty was convicted and sentenced for an offence which he did not commit and a suspended sentence which had been imposed upon him, I gather, for an earlier offence, which I believe he did commit, was activated against him. This situation can only give rise to a demand for a statement as to what is going to be done about it.
The prosecution were in a position to have known the truth from the start, for the reasons I have given. I understand that he appealed against conviction and that that appeal was in the first place turned down. I think I can understand how that happened, owing to the difficulty of upsetting a jury verdict by fresh evidence in cases where the evidence could have been provided by greater diligence on the original trial. But I think it probably unfortunate, if I am correctly informed, that the legal aid certificate which was granted for the first appeal allowed for counsel only and not for solicitors and counsel; because where fresh evidence is the issue, and where, as in this case, it would have been necessary to interview at any rate a substantial number of those who were present at Whitley Bay from the coachload, I should have thought a solicitor's intervention was almost essential; and I should have thought it ought to be a general rule that solicitors are instructed in such cases as well as counsel.
The end of it was that the organisation known as Justice took the matter up with great public spirit—and I see in his place the noble and learned Lord, Lord Gardiner, who I know has a great interest in the work of Justice—and instructed solicitors and counsel for what I think was the second and subsequent appeal. They did a public service and I hope at least they have been indemnified. I notice that the Lord Chief Justice said in the course of the appeal that this was a disturbing case and that some sort of inquiry as to the situation on appeal is taking place internally in the Judiciary.
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This is not specifically the noble and learned Lord's ministerial responsibility, but if he could tell us more about that inquiry, and if he could tell us whether the result will be known, how it will be known, and when it is likely to be known, I should of course be grateful.
Lastly, there is the question of compensation. I assume that Mr. Dougherty will be compensated, or has been compensated, but I should like the noble and learned Lord to tell us what the position is and the kind of scale upon which compensation in these cases is contemplated. One hopes they are very rare. My Lords, this is a late hour. I had other things I wanted to say, but I felt quite clear in my own mind when I read the account of this case in the paper both that the Government ought to make a statement and that this House, with the noble and learned Lord on the Woolsack, was probably the best place where they should be asked to do so. I hope that I have not taken up the time of the House too long.
7.46 p.m.
LORD GARDINER: My Lords, may I first very respectfully congratulate my noble and learned friend on the Woolsack on his speech in the debate in reply to the gracious Speech from the Throne. Those who took part in the debate took advantage of the opportunity to offer their congratulations. For the first time I think in ten years. I did not take part on the Home Affairs day and was therefore deprived of that opportunity.
My Lords, may I first say this, as Chairman of Justice? Justice is an all-Party body of lawyers whose function it is to make recommendations for what they consider would be improvements in the administration of justice. They do not and cannot ordinarily take on individual cases. They have not the money and they have not the staff. We have an admirable secretary and assistant secretary and, when we can afford it and can get one, a typist. That is the staff. Their function is to serve the council, the executive committee, and the many committees of Justice, which are always at work. I venture to ask permission to say this because in this exceptional case, where we found someone in prison who it was clear to us could not have committed the crime, and who had no one to advise him or to help him, naturally men of good

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conscience could do nothing else than to put their hand into their personal pocket and say: "We will guarantee the cost and take the staff off their ordinary work to help." But since this happened, both Justice and I have been absolutely inundated with letters from all over the country from people who say they were wrongly convicted; and I am grateful for the opportunity to make it plain that ordinarily we cannot take on individual cases.
The importance of the Dougherty case I think is simply this. A great many things went wrong and nearly all these things are matters in the field of the administration of the criminal law upon which Justice has already published reports or got out memoranda, and made recommendations, which, if they had been accepted and implemented, would have prevented these matters from arising.
May I first take legal aid? The system of criminal legal aid always seems to me vastly inferior to civil legal aid. In the first place, there is no unified scheme for allocating solicitors in a case of criminal legal aid. A number of solicitors have complained fairly recently that, having intimated to the local court that they are prepared to take legal aid cases, the cases all seem to go to other solicitors. There seems to be no unified practice. Justice has discussed this matter with the Law Society. Nothing in particular has been done. In some cases the clerk of the court gives the man who has been granted legal aid a list of local solicitors from which to choose, sometimes with advice, sometimes without advice. In this case, Mr. Dougherty was simply told, "This is your legal aid solicitor", and he had no alternative.
The next difficulty under this head (and I do not in the least blame him for this) was that the solicitor, when Mr. Dougherty said that he wanted all the 20 adults on this coach (it was a children's outing to the sea and Mr. Dougherty and one other man were the only fathers; all the rest were mums) said, "I will call this a legal aid case; it is public money and I shall be criticised if I call 20 witnesses, you had better choose your best five." No guidance seems to have been given to Mr. Dougherty about the five. Of course he would have done better to find out from the parent who organised the outing the names and addresses of
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those he had not previously met and who would have been more convincing as witnesses; but that did not happen. He was not told to make sure that those he called were of good character. He was told to choose his best five, and so he did.
There were no proofs taken from these witnesses. The proofs (if that is the right word) supplied to counsel were merely Mr. Dougherty's account of what tile witnesses would say; and we all know the dangers of that. No witness summonses were sent to the witnesses. Mr. Dougherty was left to bring them to court. In the result, he chose five. One of them did not come because she was afraid, having a conviction herself. As your Lordships will remember from our discussions on my Rehabilitation of Offenders Bill, it is the law that in any case, criminal or civil, any witness can be asked about any conviction h or she has, however old and however irrelevant.
In the Report of the Committee of which I had the honour to be Chairman we pointed out in how many cases the truth was not given in evidence because people were afraid to go into the witness box. The woman who organised the coach outing wanted to take her husband to the hospital that day, and she was told by the police that if she made a statement she need not go to court. So only three of the five attended. Of these, one woman had a previous conviction, so counsel said, "I cannot call her"—the same point again. That left him with only two, the other father and the woman with whom he is now living. He is a man who is separated from his wife. They have six children, and by amicable agreement his wife has charge of three and he looks after the other three. Of course, to call the woman with whom he was living is not very impressive from a jury point of view.
So, my Lords, I suggest two remedies arising out of this. First, ought not encouragement to be given, perhaps by the noble and learned Lord on the Woolsack, to the Society of Clerks to Justices and the Law Society to get together and work out some uniform scheme as to the method by which solicitors are selected in criminal legal aid cases. Number two, and better still, ought we not to do what Justice has advocated for a long time; that is, provide that in every court there

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should be a duty solicitor. This is the practice in Scotland. Under their Legal Aid Scheme every sheriff court is attended by a duty solicitor, drawn from a rota of the local solicitors, and anybody who may walk in at the front door of the court and who has not a lawyer is at once asked to see the duty solicitor. Very often such people have never been in court before; they do not understand the procedure; they do not know what is going on, and under this system they can immediately get advice from the duty solicitor. The system has already been tried in one or two towns in England where I am told that it works extremely well. Would the Government consider whether we should not have such a system here?
Regarding the police, anything I say about the police conduct is subject to an inquiry which is being undertaken by an independent chief constable, the Chief Constable of Northumberland. The information which Justice has is that the Chief Constable of Northumberland is carrying out a wholly independent and very careful investigation, so anything I say is subject to that. I make the following points. First, there was no identification parade, for whatever reason, although Mr. Dougherty asked for one. Secondly, as to police photographs, the Home Office advisory memorandum was not complied with. That document says in paragraph 18:
"Photographs of suspects should never be shown to witnesses for the purpose of identification if circumstances allow of a personal identification."
And then, in paragraph 20:
"If a witness makes a positive identification from photographs, other witnesses should not be shown photographs but should be asked to attend an identification parade."
In this case, as I understand it, photographs were shown to both witnesses in the same room on the same occasion. Thirdly, as I understand it, the original statements from the two store detectives, or the two employees at the shop, were to the effect that the theft (it was not a complete theft: a roll of coating material was lifted and was later thrown down on the ground) was carried out by a group of three, of whom an old lady with a stick was one. When the police decided that it was Mr. Dougherty, these statements were withdrawn and there were
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substituted statements in which the witnesses of the shop spoke about only one man, Mr. Dougherty.
Then, my Lords, I agree with the noble and learned Lord, Lord Hailsham of Saint Marylebone, that there was no adequate inquiry into the alibi. They did, I think, see two or three of those on the coach who corroborated Mr. Dougherty. They never, I think, saw any others, and in spite of the fact that those they did see corroborated Mr. Dougherty, they went ahead and prosecuted.
As to the remedies here, No. 3 (I say "No. 3" because I am collecting points with which I hope the noble and learned Lord on the Woolsack may choose to deal, and under the heading of legal aid I have already raised two) is not the right remedy—what Justice has been pressing for for years, in their Report called The Prosecution Process in England and Wales. Our police are in some ways the least controlled and the most powerful in Europe—and when I say that what I have in mind is this. First, as to their being the least controlled, I do not know any police force in Europe, other than ours, which is not under the control of a Minister responsible to Parliament. I believe I am right in saying that it was simply because of the excesses of the French police at the time of the French Revolution that when we decided to have a police force we thought we would create a hundred or two hundred separate police forces. I do not mean to say that they are not highly disciplined, but they are responsible only to their chief constable, except to the extent that the Home Secretary through the Commissioner of the Metropolitan Police, has some influence on the Metropolitan Police; otherwise they are independent.
I remember when I was a member of the Committee of which the noble and learned Lord, Lord Evershed, was Chairman, on the Practice and Procedure of the Supreme Court, we found a great many things wasted in actions for damages for personal injuries on the roads because the policeman would not produce his notebook until he was subpoenaed at the trial. In a traffic accident case, of course, he is a completely independent witness, and very often if only both parties had known from the start what the policeman had in his notebook as to the position of the vehicles

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and what the drivers said to him immediately after the accident the action would never have been brought. We suggested to the Home Secretary that the police should produce the notebook to both parties immediately after the issue of the writ. But naturally the Home Secretary has said, "I do not control the police. All I can do is to put your recommendation to the next meeting of chief constables, and every chief constable will have to decide for himself." As I have said, I think this situation obtains nowhere else.
Then, my Lords, when I said that our police are the most powerful what I had in mind was simply that in this country the police investigate a crime reported to them; they interrogate suspects; they decide whether or not there is to be a prosecution; if there is to be a prosecution who is to be prosecuted and—most important—what the charge is to be; who will be called as witnesses. And, except for those relatively few cases undertaken by the Director of Public Prosecutions, they prosecute. So far as I know, this does not happen anywhere else. The very well reasoned report by Justice on the prosecution process gives a detailed account of the independent prosecuting authority in Germany, of the independent prosecuting authority in Holland; and there came to London at our request a distinguished French judge to explain to us that although under the Napoleonic law they have not an independent prosecuting authority, as soon as the prosecution starts the police are under the direct instructions of the juge d'instruction who decides all these matters—whether bail is to be opposed, and so on.
In Scotland of course the police make inquiries into a crime reported to them and they interrogate suspects, but they do not decide whether there is to be a prosecution; they do not decide who is to be prosecuted or what the charge is to be, and they do not prosecute. All that is done by the Procurator-Fiscal, an entirely independent prosecuting authority. Your Lordships may remember that since this report was published—and it was published between three and four years ago, when the noble and learned Lord, Lord Shawcross, was the Chairman of Justice—the committee of which the noble Lord, Lord Hunt, was chairman recommended that the Scot-
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tish system should be applied to Northern Ireland; and the last Government complied with that recommendation, except for very small cases. So I think we remain the only country in Europe in which the police have these enormous powers in certain cases being not only the prosecutors but also the principal witnesses.
About once a year I have tabled a Question on this matter to the noble and learned Lord, Lord Hailsham of Saint Marylebone, who said either that the Government were considering the matter or that they did not propose to make this change at the present time. I express the hope that the Justice report may be more sympathetically considered (particularly after the Dougherty case) by the present Government, and I should like to inquire what the views of the noble and learned Lord, the Lord Chancellor, may be.
I would suggest that the next remedy in relation to the police is that we must try to persuade the Home Office, not only on this point but on others, that we live under the rule of law. If we live under the rule of law then either there is a law about something or there is not: if there is a law then it ought to be obeyed and enforced; if there is not, it is a matter for our own judgment. This applies not only in the field of the law of immigration. I have expressed the view before that our immigration law is the most illiberal immigration law in Europe; but this is really because the Home Office like everything to be decided at the discretion of officials, immigration officers or civil servants, as indeed nearly the whole of the practical side of our immigration law is, and they have an absolute passion for advisory circulars. I do not know how many of your Lordships may have seen a two and a half hour programme on the B.B.C. dealing among other things with legal aid, in which one of the points that transpired and was the subject of research work was the astonishing difference between the chance of getting legal aid in one magistrates' court or another. There are magistrates' courts in which the chance of getting legal aid may be 70 or 80 per cent., whereas there are other courts in which the chance of getting legal aid is less than 5 per cent.
Your Lordships may remember that the noble and learned Lord, Lord Widgery, was chairman of a committee

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which recommended that certain criteria for deciding criminal legal aid should be set out. I remember in connection with the Criminal Justice Bill of the last Government that some of my noble colleagues and I tried to get these criteria incorporated into the Act because we said if there are to be these criteria they ought to be put into an Act. The Home Office as usual said, "You leave it to us; we will do it by means of an advisory memorandum". The difficulty about that is that the Home Secretary cannot make the law. These Home Office advisory memoranda to justices of the peace meet with a different fate in different courts. In some courts the clerk gives the justices on that bench a copy; in other courts the clerk gives each justice his own summary of what he thinks the Home Office memorandum amounts to, and I am afraid that in a few courts they never leave the clerk's table. But what must be clearly recognised is that any bench of magistrates, and indeed any magistrate sitting in any court anywhere in the country, is entitled to say, "I have read this Home Office advisory memorandum. I entirely disagree with it and I do not propose to do anything of the kind".
There is no sanction, and indeed according to the Home Office document itself the sanction is dealt with on the front of the document, where it says:
"The memorandum has been prepared in consultation with the Lord Chief Justice and the Secretary of State understands that failure to observe its provisions may well result"—
in what?—
"in the judge, in his summing up to the jury, commenting on the reliability of the evidence obtained".
Of course, that is not likely to deter any police officer. There ought to be rules, both as to identification parades and as to police photographs, and when they have been decided then in my view they ought to be passed into law.
I will not trouble your Lordships with the details of the many Justice proposals about this. They put in two separate memoranda to the Criminal Law Revision Committee dealing with the whole question of the conditions which should obtain on identification parades and police photographs. Even the Criminal Law Revision Committee have expressed the opinion that mistaken identification is" by far the greatest cause of actual or
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possible wrong conviction", notwithstanding that their report did not cover any of the recommendations which had been made by Justice.
The other point in relation to the police is this: there is no clear law as to whether or not whoever is prosecuting and has in his possession a statement which he does not propose to use himself but which is helpful to the defence, should produce that statement to the defence. There is a dictum which I believe is obiter by the noble and learned Lord, Lord Denning, that this is a requirement of the law. There is a decision of the Court of Appeal that it is not. Certainly when I was brought up and, I hope, properly trained at the Bar, I was told that if I was prosecuting it was my duty to see that any information which the prosecution had and was not going to use was passed to the defence, and I should like to ask the noble and learned Lord on the Woolsack whether at least that ought to be clarified so that we know the position.
It was said in the second appeal that the case had never been committed by the justices. As this has given rise to some misunderstanding and I observe from a letter in The Times that the Bench of magistrates in question felt that this was a reflection on them, may I say that I understand that counsel intended no such thing. He was not attributing blame to anyone. It was a consequence of the Section 1 procedure. Although Mr. Dougherty was at the magistrates' court, witnesses were not asked to identify him there. So strictly speaking there was no evidence, on committal for trial, that Mr. Dougherty was the man who committed the crime, because there was no identification. Apparently it was a consequence of the Section 1 procedure; no objection was taken by Mr. Dougherty's solicitors.
My Lords, may we now turn to the trial. This raised again the whole question on which Justice has expressed many views, the dock identification. One has to distinguish between different cases. Of course, if the accused is the brother-in-law of the witness and has known him for twenty years, there is no objection to his being identified in court. But as every practitioner knows, in the ordinary way if the witness has been describing something which was supposed to have been done by some man whose face she

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has glimpsed and then she is asked, "Would you look round the court to see if you can see him there", of course she looks straight at the dock and says, "That's him" because, among other things, she reckons he would not be in the dock being prosecuted by the police if it were not him. This is completely unsatisfactory, as everyone realises.
The course taken in this case is not at all unusual. It is not unusual for counsel, in the absence of the jury and witnesses, to ask the judge to agree to the accused leaving the dock and sitting somewhere else. In this case, the judge acceded to that request, and the accused was put to sit among the jury. The trouble was—and I do not think it was bad faith by the witnesses or anyone else—the solicitor's clerk noticed that in the room in which the witnesses were there was a glass window separating that room from the court, and the witnesses, as they readily agreed as soon as asked, had seen Mr. Dougherty sitting in the dock, had seen him taken out of the dock and put among the jury. So the whole thing was really rather a farce. It was submitted to the judge that in these circumstances the case could not go on.
My Lords, what is unsatisfactory about this. I think, is this. Although this was the main argument on the first appeal, the Court of Appeal has never laid down how far, or in what circumstances, an identification which is simply a dock identification ought or ought not to result in a conviction being allowed to stand. This is really part of the whole problem of identification. Therefore, No. 6 on my list for the noble and learned Lord on the Woolsack is to say that this is not, as we all know, a very easy question. As I have said, there are some cases in which there can be no reasonable objection to a dock identification, but the whole problem of identity parades and their conditions, the production of police photographs and their conditions, and of dock identification ought to be considered by a committee; not, please, a committee of all judges, but representing one or two ordinary people.
The danger of identification is that anyone in this country may be wrongly convicted on the evidence of a witness who is perfectly sincere, perfectly convinced that the accused is the man they saw, and whose sincerity communicates
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itself to the members of the jury who therefore accept the evidence. It is not an easy field, but I submit it is unsatisfactory that there is no clear authority from the Court of Appeal as to what is the law about dock identification. It may be that the noble and learned Lord the Lord Chief Justice may feel that it is a difficult subject which really ought to be dealt with by legislation rather than by decision of the Court of Appeal. One can understand that, but one way or the other, the time has at last come when these problems of identification should be seriously considered by a committee.
My Lords, lastly I turn to the Court of Appeal. The first trouble here (there is nothing new about it; Justice has been complaining about it for a considerable time) is the difficulty in getting the Court, when it grants legal aid, not to say "Counsel only". Here was a case in which not only Mr. Dougherty's lawyers but Justice itself pressed the Court to give legal aid. I would hope that some representations might be made so that the Court may be more liberal in its practice. This is a point already taken up by the noble and learned Lord, Lord Hail-sham of Saint Marylebone.
My Lords, I regret to say that there was an unfortunate letter written by the office of the Registrar of the Court of Appeal. I have deliberately said "by the office of", because I am well aware that the letter was not written by the Registrar himself. He did not see it. Indeed, I should like to say publicly that Justice, with all its experience, has a very high regard indeed for the Registrar of the Court of Appeal and his manifest desire that justice should be done. What happened was this. Counsel advised about an appeal. Counsel's advice was, in my opinion, perfectly proper. He said: "There are here two entirely different cases. One is what happened about the dock identification. I think we have got a run on that. It may depend on which judges are sitting, but I think we have an arguable case. If Mr. Dougherty also wants to take the point that he was on this coach at the time, and this could be proved by independent witnesses, then I ought not to appear for him, because clearly in that case he may be asked, 'Why were not these witnesses called at the trial?' and he may want, as he is quite entitled

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to do, to say that the blame is really with his counsel and solicitors at the trial. Or if he wants to take this point, then I think on this he ought to be separately advised." My Lords, in my opinion that is a perfectly proper opinion to give.
A letter was then sent to Mr. Dougherty from the Court of Appeal which said in substance: You will be glad to hear that your appeal can be heard before the end of July, but that will only be so if you are content to rely simply on the question of the dock identification. Of course, if you insist on wanting to call witnesses who were on the coach, well, first of all the Court will have to agree to your having a solicitor as well as counsel. Counsel and solicitors will have to be appointed. We shall have to get a full transcript of all the evidence of the trial (and goodness knows how long that will take) and it may take months. Now you decide. Mr. Dougherty had by then practically completed the whole of his sentence for this particular offence. Of course, he thought: "Well, what is the good, if I serve the whole of my sentence in relation to this offence before the appeal is heard?" In those circumstances—I think under a good deal of pressure—he consented only to take the point about the dock identification.
My Lords, I think the third thing that went wrong was that the court is much too reluctant to let in fresh evidence. Let me be clear. The rule that ordinarily they will not allow evidence to be called which could have been called at the trial is perfectly sensible, as otherwise one might get counsel and solicitors saying: "Well, we need not call all our witnesses at the trial because if anything goes wrong, we can always call them in the Court of Appeal." That would obviously be wrong. But while I approve of the rule in general, it is, I think, applied far too rigidly. The second Court of Appeal agreed that the first Court of Appeal, which said they had no power to call fresh evidence, was wrong in law. What I find difficult to understand is this. Justice had forwarded to the Court short statements from ten of the people on the coach. The Court of Appeal knew that. They still dismissed the appeal.
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My Lords, I agree with the noble and learned Lord, Lord Hailsham of Saint Marylebone, that of course there are cases in which a conviction has to be set aside because a judge made a mistake in summing up, or went wrong in the law and the man who is in fact obviously guilty, gets off. But I should have thought that the Court of Appeal ought to draw a sharp distinction between those cases and cases in which the basis of appeal is: "It was not me at all; it was somebody else." I still think it surprising that all they said about these statements was that counsel had not pressed the point. But they had got the letter from the registrar, too, and they did not follow up at all the question why counsel, being in a position to call 10 witnesses to prove the man was somewhere else, was not pressing the point.
The remedy for this is the suggestion that the Court of Appeal are far too rigid; they always seem terrified of being involved in an argument as to whether it was the client's fault that the witnesses were not called at the trial or whether it was perhaps the solicitor's fault. As Justice has observed before, the practical outcome is that a man who is wrongfully convicted because his solicitor was negligent has, at present, to bear the brunt of it.
My last question for the noble and learned Lord on the Woolsack is also one raised by the noble and learned Lord, Lord Hailsham of Saint Marylebone, and that is the question of compensation. There is no law about this. As always with the Home Office, it is to be decided by a civil servant, and it is purely discretionary and it is ex gratia. If whoever decides says £500, it is £500. I think this is wrong. It is, I agree, arguable that the Home Office should say whether in all the circumstances they consider it a case for compensation or not, but if it is a case for compensation then I should have thought it should be assessed on the basis of common law damages. It could be very well assessed, I think, by the Criminal Injuries Compensation Board. They are used to assessing money of this kind on a common law basis, and they do it, I think, to everybody's satisfaction. There are always many things to be taken into account, but it is for them to say which factors in which case. Mr. Dougherty's three children had to be

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taken into care. In many cases, of course, the man loses his job.
I should like to ask the noble and learned Lord on the Woolsack whether he thinks there is a case for saying, even if the compensation is to be purely ex gratia, it should not be left to an official to assess, against whose decision there is no appeal. It should be assessed by some independent body which is used to assessing damages on a common law footing, according to the circumstances of the case.
I venture to end as I began. There is nothing really which happened and which went wrong in this case which has not gone wrong before in circumstances of which Justice is well aware. Most of these points have been the subject of repeated reports by Justice, memoranda to committees. It is hoped that, in view of the publicity which this case has attached to it, the attitude towards these recommendations may be reconsidered, and such as are thought fit to be implemented may be implemented.
8.24 p.m.
VISCOUNT BARRINGTON: My Lords, persons who live in glass houses should not throw stones, and Liberal Back-Benchers who are laymen should not intervene on an Unstarred Question between two Lord Chancellors, and particularly between three Lord Chancellors, or ex-Lord Chancellors, without knowing enough about the subject. But if I may be allowed, for only two minutes, to put a point of view, not of this Liberal Party but of one Liberal Back-Bencher, it is that this is an extremely important subject and it would be a great pity if no views on it were heard from these Benches. We on these Benches were complimented by the noble Lord, Lord Strathcona and Mount Royal, on giving some support to the Party on my left on the question of not sweeping inflation under the carpet. This is a question of sweeping not inflation but injustice under the carpet, as it might be if it were not fully debated, as it is being tonight; and I believe that that is really the ony thing that can be said about it by anyone who does not know a great deal of the legal difficulties.
It is clear that there has been, through nobody's fault or anybody's fault, a multiple, apparent miscarriage of justice. What the compensation suitable for that
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is, I do not know. But I do suggest—and I hope and believe that the noble and learned Lord on the Woolsack will support me here—that if there is doubt there should be liberal compensation, that in a case where so many things have gone wrong unexpectedly the compensation should err, if anything, in the direction of liberality. I mention this only because the word "liberal" has been used quite often in this debate—of course, as usual, with a small "1".
8.27 p.m.
THE LORD CHANCELLOR (LORD ELWYN-JONES): My Lords, I am sure that the House will be most grateful to the noble and learned Lord, Lord Hailsham of Saint Marylebone, for having taken this early opportunity to raise the critically important issues which the Dougherty case requires us, and all who are interested in the administration of justice, to consider. I am sure also that noble Lords would wish to compliment my noble and learned friend Lord Gardiner and his colleagues in Justice for the fact that, thanks to their initiative, at any rate at the end of the day, something could be done to remedy, or at any rate mitigate, the miscarriage of justice which admittedly arose in this case.
May I say at the outset, in relation to what has just been said by the noble Viscount, Lord Barrington, and by both noble and learned Lords in regard to the question of compensation, that as the noble and learned Lord who opened the debate said, it was unhappily the case that this man was wrongly kept in prison for nine months. My right honourable friend the Home Secretary has considered the circumstances of the case very carefully, and I am glad to tell the House that it has been decided to grant an ex gratia payment to Mr. Dougherty out of public funds in consideration of the hardship that he has suffered. Before deciding on the amount of the payment my right honourable friend will, in accordance with the normal practice which is followed where such payments are made, refer the case to an independent assessor for advice. Those who will be acting for Mr. Dougherty will have the opportunity of putting matters to the assessor and providing any information which they may deem to be relevant. It will take a little time before a payment can be made, but I can assure the House

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that no avoidable delay will take place in regard to remedying this aspect of the matter.
In relation to what my noble and learned friend Lord Gardiner has said, while the matter will not necessarily be considered in accordance with the principles under which the Criminal Injuries Compensation Board operates, he will, I know, be reassured to know that the assessor who is to make the assessment in this case is Sir Walker Carter, who, as your Lordships will know, was a distinguished Official Referee of the Supreme Court for many years, and has been Chairman of the Criminal Injuries Compensation Board since it was set up in 1964. There is, therefore, little room for doubt that an appropriate assessment will be made.
A multiplicity of questions has been raised in the course of this debate. I shall do my best to answer as many of them as I can, and I shall have to ask for forbearance as to the time that this will take and as to any omissions for which I may, by inadvertence, be responsible. Perhaps I should start with the handling of the case by the Durham police. I do not need to say that the decision whether to prosecute Mr. Dougherty had nothing to do with the Home Secretary or, in this case, with the Director of Public Prosecutions; it was a decision of the chief constable. I shall have a word to say in a moment about the matters that have been raised in regard to the role of the police in the general overseeing of prosecutions.
When my noble and learned friend Lord Gardiner drew the attention of the then Home Secretary to the fact that a miscarriage of justice might have occurred in this case, the material which was forwarded was sent to the chief constable and he quickly arranged for a senior officer of the Northumberland Constabulary to make a full inquiry into the matter. I was grateful for the tribute which fell from the noble and learned Lord to the independence and efficiency of that inquiry. That inquiry took place, and it clearly revealed unsatisfactory features which have been described in detail to your Lordships.
There is in America a law known as "Murphy's Law", which says that if
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anything can go wrong, it will, and Murphy's Law appears to have operated, I fear, in many aspects of this unhappy case. First of all, there was the question of identification from photographs. This was not in accordance with the general guidance that has been given to the police, as my noble and learned friend said. There were two witnesses—the store witnesses—and both were shown photographs. Whether the matter would be simplified by colour photographs being made available, I know not. It will certainly be looked into. It will be more expensive, and it may not be easy for a criminal to change his colour. I remember a famous case of one gentleman who appeared in a dock with—or was it without?—a wig, and transformed his appearance thereby; so I am not giving any assurance that a colour photograph will be particularly helpful.
What is important is that both witnesses—the key prosecution witnesses—were shown photographs. The practice which is recommended by the Home Office, and indeed is reflected in the Durham Force instructions, is that when one witness makes an identification from a photograph, the other witness, or indeed witnesses, should not be shown photographs but should be asked to attend an identification parade. Mr. Dougherty was not required to take part in an identification parade. A parade was arranged on one occasion, but unfortunately, owing to some misunderstanding about the date of it, Mr. Dougherty did not arrive. I fear that that probably was certainly the fons, if not the origo, of all the misfortune that flowed thereafter. If he had attended the identification parade, the subsequent difficulties of identification in the Crown Court may well not have arisen.
My noble and learned friend Lord Gardiner has raised the difficult problem of identifications, especially dock identifications. These are regarded as undesirable and to be avoided if possible, but when one looks at the learning from the judges who have dealt with these matters there have been cases where convictions have been upheld following such identifications. It is a difficult field, and I have little doubt that the Home Secretary will give attention to the suggestions that have been made about the state of the law in this field.

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Turning back again to the police action in this case, it is true that at the time when Mr. Dougherty was charged there was still opportunity, and room, for further police inquiries to be made. With regard to the alibi point that was raised, notice of alibi was not, I am told, given until after the original hearing and the committal proceedings. The police did interview four of the five people named as witnesses. One witness could not be traced, and the remaining four refused to make written statements. There is one suggestion that has been made (I do not quite know how far it goes) that the police dissuaded a witness who could have given evidence—namely, the lady who organised the coach outing—from coming to court. This, the chief constable is satisfied, has no basis in truth. Indeed, it would be a serious matter if there were any truth in it.
There has also been a suggestion that the original statements made to the police by the two crucially important store witnesses described the offence as having been committed by three people—a man, a woman, and a youth. My information is that at no time before the trial did either of the store witnesses refer to more than one person being responsible for taking the curtains, and it was only when the investigation was made by the Northumberland police, and further statements were taken from witnesses, that they mentioned having seen a woman and a youth as well. So that although faults occurred, I know your Lordships will want to be meticulously careful and fair in the pursuit of any matters which are alleged which may, in fact, not be well founded. Suffice it to say that all aspects of the matter from the police angle are now being investigated, and any lessons that are to be learned will, of course, be taken to heart and will be applied by the police force. In addition, the chief constable is considering whether any disciplinary action is required and should be taken in respect of the officers who handled this case. That of course is entirely a matter for him, and your Lordships would not expect me to make further comment on that aspect of the case.
An important suggestion that has been made in the course of the debate is that Mr. Dougherty's case illustrates the need for us to have in England and Wales a
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separate authority (rather like that in Scotland of the Procurator-Fiscal) to take all responsibility for prosecutions. I confess—and I trust that I shall not get into any trouble for making the confession—that I have some personal sympathy for this point of view. But noble Lords will recognise that that would be a very far-reaching change indeed, with considerable problems of staffing and of finance up and down the country, and I am sure that your Lordships will not expect me to pursue the matter in any further detail to-day. Clearly, such a fundamental change would need very detailed examination by the many people who would be involved, but I will see that my right honourable friend's attention is drawn to what has been said here to-day.
Many anxious questions have been raised about indentification evideace, and my noble and learned friend Lord Gardiner has referred to the discussions which the Criminal Law Revision Committee had on this subject. There is very interesting reading indeed in the 11th Report where, as the House has been told, the Committee stated:
"…we regard mistaken identification as by far the greatest cause of actual or possible wrong convictions".
Those of your Lordships who have had judicial or professional experience in the criminal courts will readily concur. The Committee considered possible ways of minimising the risk. They thought that there should be a statutory requirement that the judge should warn the jury of the need for care in convicting on disputed evidence of identification. They also considered whether, in some circumstances, there should be a need for corroboration of identification evidence, but that suggestion was rejected for reasons which seemed to me to be sound. Where a single householder, with abundant opportunity of seeing men burgling and doing violence to him, might be unable to see that justice was done because there was no one else there to corroborate the story, public indignation would be very considerable. These matters present grave difficulties. But it is only right that I should say that in the Dougherty case the learned trial judge gave "the most explicit and detailed warning", as the Court of Appeal put it, "of the dangers of identification evidence in the form

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in which it had taken place". It is really in the clearest way, one of the sad features of the case that although the summing-up was impeccable, at the end of the day a miscarriage of justice took place. As to the matter of the glass door which was raised, I am happy to tell your Lordships that that has now been covered over with some object or material which makes it impossible for that situation to arise again.
LORD GARDINER: My Lords, I do not know whether the noble and learned Lord is aware that by a species of irony of history one of the workmen who did the conversion was Mr. Dougherty.
THE LORD CHANCELLOR: I am sure that that must have given Mr. Dougherty a great deal of personal satisfaction.
A problem which arises in the case is that it appears that the defendant and the prosecution witnesses were in the same waiting room; and that is clearly unsatisfactory. As your Lordships know, the noble and learned Lord, Lord Hailsham, made great efforts to create or find court accommodation, but it is clearly necessary that separate accommodation should be provided where defendants on bail can wait until they surrender to it. A pilot scheme has been carried out at two London Courts to remedy this deplorable situation, where it exists, and I am now examining the position at all court centres with a view to making similar arrangements where that is practicable.
It was reassuring to hear from my noble and learned friend that no criticism is made of the committal proceedings themselves. This was a case under Section 1 where the committing magistrates were not called upon at all to consider the evidence, and I am sure that they will be gratified to be wholly acquitted—if "acquitted" is the right word—of any fault or responsibility for what went wrong. The matter which has perhaps most dominated the discussion in the House has been the working of the provisions for legal aid in this case. The suggestion has been made that Mr. Dougherty had second-rate treatment because he was legally aided, but my right honourable friend and I are not satisfied that that was so. While it is of
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course regrettable that, as matters turned out, there was insufficient testimony to satisfy the jury about Mr. Dougherty's alibi, that did not in my view result from any fault in the statutory provisions.
With regard to the calling of witnesses, the position of a solicitor acting under a legal aid order is no different from that of a privately engaged solicitor, and it is a matter for his discretion—subject of course to the instructions he may get from his client—to call whatever and as many witnesses as he thinks necessary in support of his client's case. Suggestions have been made which will no doubt be considered about the allocation of solicitors. I have noted what has been said—and indeed in another place I expressed concern about the matter myself—about the apparently different standards that are applied in the response to applications for legal aid in one court as compared with another, even in the same geographical area. That is clearly a matter which needs further investigation. I was also asked about the provision of duty solicitors. This is very much in the mind of the Home Office. Indeed, as has been said, there are a number of experimental schemes already being tried in some of the larger cities and they are being tried successfully. The Home Office would welcome an extension of those schemes, but the matter is one for local law societies in connection with justices' clerks. I am informed that Mr. Dougherty already had his own solicitor when he first appeared at the Sunderland magistrates' court.
With regard to the practice of the Court of Appeal in granting legal aid, which was one of the matters raised, it is the case that when Mr. Dougherty gave notice of appeal against conviction and applied for legal aid he was granted it for "counsel only". As the Lord Chief Justice explained, this was because the single judge who considered the matter thought that the only point to be argued was a technical one as to the nature of the evidence on identification that had been given. In the absence of a solicitor, there was consequently no one to interview additional alibi witnesses, and I am told that although this aspect of the case was raised in correspondence it was barely pursued by counsel in the Court of Appeal.
The House will know that under the Criminal Justice Act 1967 the Court of

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Appeal has power to grant full legal aid in the Court of Appeal consisting of representation by both solicitor and counsel, but it also has a discretion to limit the legal aid to counsel only. In practice, the services of a solicitor are often unnecessary and in those circumstances, and for the obvious saving of public funds, the Court limits representation to "counsel only". The Widgery Committee on Legal Aid in Criminal Proceedings stated in its 1966 Report:
"… in the many cases where the whole of the relevant material is contained in the transcript and counsel does not require further instructions, we cannot justify the expense to public funds which would be involved by assigning a solicitor in addition."
But the Committee did point out that if additional evidence was required a solicitor would be needed to obtain it, and they expressed the hope that the effect of providing legal advice in the preparation of grounds of appeal—as has now become the practice—would be to enable the Court to recognise more readily those cases where fresh evidence might have to be obtained. And the Committee added:
"The Court has not been slow to assign a solicitor when these cases appear or when counsel requests it to do so and we recommend no change of practice in this respect."
It is unhappily the case that these arrangements did not work in Mr. Dougherty's case, but I can assure the House that the Lord Chief Justice (and this point was expressly raised by the noble and learned Lord, Lord Hailsham of Saint Marylebone) is now considering whether any change of practice is desirable and has asked the judges for their views. No decision has yet been reached, but I have no doubt that the Lord Chief Justice will give information about this matter before long.
My noble and learned friend Lord Gardiner raised some questions as to the perhaps excessive reluctance of the Court of Appeal to admit fresh evidence. I do not think that it is a matter of powers or of the inadequacy of powers. The powers under Section 23 of the Criminal Appeal Act 1968 are indeed quite explicit. The section requires the Court of Appeal to receive any evidence tendered, unless they are satisfied that it would not afford any ground for allowing the appeal, and provided that, first, it appears to them that the evidence is likely to be credible and would have been admissible at the trial, and, secondly, that they are satisfied that
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there is a reasonable explanation for the failure to adduce the evidence at the trial, and it is for the Court to decide in each case whether those conditions are satisfied.
It is the case that when Mr. Dougherty's application for leave to appeal was considered last July, the Court did not grant his application to call further evidence, but I understand that in the circumstances which arose that that part of the application was not pursued by counsel. When the previous Home Secretary referred the case to the Court the Court was able to exercise powers under Section 23 to order the examination of the witnesses whom Mr. Dougherty wished to call to establish the alibi. That examination took place, and it was then found, of course, that the conviction of Mr. Dougherty was wrong. I do not think any weakness lies in the inadequacy of the statutory powers which are available to the Court. My noble and learned friend raised a question about the supply to the defence of statements taken by the prosecution. This is a matter which the Home Office has under review, in consultation with the interested parties. With regard to the Dougherty case, however, as I understand it, all the statements were provided to the defence, so that does not appear to have been one of the factors which led to the miscarriage of justice.
Then questions were raised about the letter from the Criminal Appeal Office. If I may say so, I was grateful for the tribute paid to the Criminal Appeal Office for its dedication, and particularly that of Master Thompson. Those of your Lordships who are, or were not so long ago, in practice at the Bar, will have abundant reason for gratitude to him for the immense dedication which he gave to the job of seeing that fairness is done. But, so far as the letter itself is concerned, which has been criticised perhaps in excessive language, it is a long factual statement which explained to Mr. Dougherty the situation resulting from the Court's decision not to assign a solicitor. It also sets out, perhaps with undue emphasis, the disadvantages which could arise if Mr. Dougherty insisted on applying for fresh counsel to be assigned in order that the question of calling further evidence could be argued. The letter

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concluded by saying that if Mr. Dougherty decided to retain counsel there was a chance that the appeal might be heard before July, but that otherwise it was feared there might be long delay. So to designate the letter as improper is, in my respectful submission, a misuse of language. It was not the language used here; but it may well be that the letter can be criticised on the ground that it was slanted in Favour of Mr. Dougherty's taking a certain course and did not make it sufficiently clear that the decision was entirely for him to take.
My Lords, I do not know whether I have covered the whole of the ground. Your Lordships may think that this was an important case. Whenever a miscarriage of justice of this kind occurs, it is right that the circumstances which led to it should be fully examined and exposed, and that steps should be taken, so far as human frailty can go, to prevent a repetition. I hope that your Lordships may think that the Government have taken a properly serious view of the situation and have done their best to remedy it.
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, perhaps the House will allow me to thank the noble and learned Lord the Lord Chancellor for his careful exposition. At this hour I should not wish to say more except that we shall reflect on what he said.