Lords Sitting of 22 July 1976

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Worcester.

MERIEUX RABIES VACCINE
Baroness MACLEOD of BORVE: 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 is the cost per injection of the MERIEUX rabies vaccine; which authorities have control of it; and when it is envisaged that it should be used.
Lord WELLS-PESTELL: My Lords, this vaccine is held centrally at the Public Health Laboratory Service, Colindale, and in a number of centres throughout the United Kingdom. This vaccine is licensed in the United Kingdom for pre-exposure prophylaxis only and at present is being used for this purpose in the case of certain categories of people who are at special risk of rabies by reason of their occupations. The extension of these categories is currently under consideration. Trials now in progress will provide evidence for the Committee on Safety of Medicines to consider its use for post-exposure cases.
As regards cost, I am sure the House will understand that I am unable to give details of Government contracts. I understand that, where private arrangements are made, the cost is about £13.50 per dose, and that that does not take administrative expenses into account.
Baroness MACLEOD of BORVE: My Lords, I thank the noble Lord for his reply. May I ask how many of the injections are held throughout the country, bearing in mind the fact that the main source is Colindale? How many injections are held here in total, and can the normal, private person go to a veterinary surgeon and ask for his or her pet to receive the injection? Can the Minister also tell me what animals are most likely to contract rabies?
Lord WELLS-PESTELL: My Lords, I am not in a position to answer any question at all with regard to the vaccine in relation to animals. I can only answer questions in respect of the vaccine which is used on humans for pre-exposure. That is the only information I have. There are certain categories of people, such as persons working in zoos and handling animals, who are treated by doctors. This can be done through the National Health Service.
Baroness MACLEOD of BORVE: My Lords, is it a fact that the noble Lord does not know that there are a considerable number of injections already held in this country for injection into animals? I understand that at the moment they are not able to be obtained by people wanting them for their own pets.
Lords WELLS-PESTELL: My Lords, I believe that we have interpreted the Question put down by the noble Baroness as referring to people who are handling animals rather than to animals themselves. If the noble Baroness wants that information, perhaps she would like to put down another Question.
Baroness SUMMERSKILL: My Lords, can my noble friend say what factors are responsible for making the cost of the vaccine so high?
Lord WELLS-PESTELL: My Lords, I cannot. I can only say that, if a person wants to be immunised with this vaccine and this is done in the private sector, the cost is about £13·50, but I cannot say why it is so high.
Lord DE CLIFFORD: My Lords, may I ask the Minister whether there are any side effects from the use of this vaccine on humans? There have been reports from certain kennel maids employed in quarantine kennels who have been vaccinated that they have had rather nasty side effects. I do not know whether it was the MERIEUX vaccine which was used, but it would be very helpful if they could be reassured that there were no side effects.
Lord WELLS-PESTELL: My Lords, there is another vaccine which is in fairly wide use—the duck embryo vaccine which produces various kinds of side

945
effect. My information is that, so far as the MERIEUX vaccine is concerned, reactions as yet are confined to redness and soreness and that, apart from that, the side effects are comparatively minor.

IMMIGRATION: ENTRY VOUCHERS
3.10 p.m.
Lord BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper and to thank the Minister for accepting the Question.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the apparent unreliability of available statistics, and the reported recommendation of the Archbishop of Canterbury, they will now consider suspension for a period, pending clarification, of the issue of entry vouchers for dependants of immigrants.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, the Government have no intention of suspending the grant of entry clearance for the dependants of people settled in this country who are lawfully entitled to come here. The reliability of the statistics of people who have been admitted and accepted for settlement is not in question: estimates of the numbers who might take up an entitlement to come here in future must necessarily be speculative and the Government do not intend to publish them. However, my right honourable friend the Home Secretary recently announced in another place that a group of three Members of Parliament—one from this House and two from the other place—is being appointed to study the feasibility and usefulness of a register of dependants as a guide to the scale of our future commitment.
Lord BARNBY: My Lords, do I understand the Minister to say that there are grounds for hope that there will be an early review and revision of the grounds on which right of entry can be claimed and that dependants will be more narrowly defined?
Lord HARRIS of GREENWICH: No, my Lords; the position of the Government
946
is that they are prepared—and indeed, as I have indicated, my right honourable friend has announced this—to set up this group of three Members of Parliament to study the feasibility and usefulness of a register. This has been pressed upon the Government by the right honourable gentleman the Deputy Leader of the Opposition and others. We hope to announce the names of those concerned in the fairly near future.
Baroness GAITSKELL: My Lords, in view of the fact that the statistics are unreliable, is it not possible that the numbers are exaggerated, rather than the opposite being the case?
Lord HARRIS of GREENWICH: My Lords, as my noble friend will be aware, this is one of the arguments for the existence of a register. However, it is only fair for me to point out that a register was tried in 1965 and did not then work; but we are perfectly prepared to re-examine the situation, and that is the Government's position.
The Lord BISHOP of WORCESTER: My Lords, as the most reverend Primate has been quoted on this occasion, may I ask whether the Minister is aware that the only request of the most reverend Primate was:
"… not in inveighing against the legislation. I was inveighing against the fudging of it—evasion of the legislation which I think sometimes takes place."
Is the Minister aware of the true context of His Grace's remarks?
Lord HARRIS of GREENWICH: Yes, my Lords, I am.
Lord BARNBY: My Lords, are the Government so without compassion for the possibility of an increase in unemployment that they would not give consideration to the plea of force majeure in invoking extraordinary measures with regard to a limitation of further entry?
Lord HARRIS of GREENWICH: No, my Lords. We considered very carefully the terms of this reply, and if the noble Lord examines it he will see that on this matter I have made the position of the Government quite clear.
Lord BRADWELL: My Lords, is it not a little unfortunate that the most reverend Primate should be quoted, or perhaps misquoted as has been suggested, in his absence through illness? Whether or not his remark was unfortunate, is my noble friend aware that he subsequently tried to explain what he meant so that his words could no longer be used or abused, as they have been, by racialists?
Lord HARRIS of GREENWICH: My Lords, the right reverend Prelate pointed out the views of the most reverend Primate on this matter, and I should prefer to leave the matter as it is.

EUSTON STATION AND YOUNG HOMELESS
3.16 p.m.
Lord JANNER: 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 steps can be taken to request British Rail to reverse their decision to refuse to allow an information booth for young homeless people on the concourse at Euston station.
Lord WELLS-PESTELL: My Lords, the British Railways Board wrote on 20th July—Tuesday of this week—to explain the reasons for their decision. These are being considered urgently by the Home Office in consultation with other interested Departments.
Lord JANNER: My Lords, I thank my noble friend for his reply. Is he aware that one of the lodges at the entrance to the old Euston station is already used as an advisory centre for girls alone in London, and will he press British Rail to make available the other lodge as an information centre for young homeless people? Is my noble friend aware that there is very serious concern about this matter and also at the delay in publishing the interdepartmental report which has been made for some time?
Lord WELLS-PESTELL: My Lords, we are aware that there are two lodges at Euston Station and that one of them is
948
being used by the organisation to which my noble friend refers. We have discussed this matter with British Rail. We did so some time ago, and the suggestion was considered very early in the discussions. It was rejected by the Home Office because it was felt that the building was too far from the station concourse and too difficult to locate for people unfamiliar with the Euston area. In support of that, the experience of the organisation GALS has been that many of the girls referred to it fail to find the bureau, even when they have been given directions, and so have to be referred back to GALS from the West End. In the circumstances, we feel that this particular lodge is not satisfactory.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, the noble Lord will be aware of the great concern felt in all quarters of the House about this matter. As we are likely to be going on holiday (we hope) fairly soon, will he in the first place make sure that we are kept informed of the results of what is going on with British Rail? Will he again bring to the attention of British Rail the appalling things which are going on at Euston Station concourse? Will he bring to the attention of British Rail how these young people are drifting from Glasgow and the North, being made the victims of predators of all kinds, and brought into the most appalling situations, one of which at any rate resulted in a cruel murder?
Lord WELLS-PESTELL: My Lords, I will give an undertaking that I shall see that what the noble and learned Lord has said is conveyed to my right honourable friend. I did so on the previous occasion when he raised this matter because it is one which not only he and the right reverend Prelate the Bishop of London feel very strongly about, but, I am sure, the whole House, too.
Lord JANNER: My Lords, with regard to the reply that my noble friend gave in respect of the lodges, would it not be important, for the time being, for this lodge to be used temporarily until some better accommodation is found? As the noble and learned Lord has said, people regard this as an extremely serious matter and they are very disturbed about the report not being published so that it may be considered.
Lord WELLS-PESTELL: My Lords, we are aware of the urgency of it, but if we are going to establish some kind of bureau where advice and help can be given I think we must see that it is located in a place which can be easily found and, therefore, adequately used.

FIRE SAFETY WEEK
3.21 p.m.
Lord CROOK: 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 they are taking in support of Fire Safety Week, 1st to 6th November next, now being organised by the Central Fire Liaison Panel.
Lord HARRIS of GREENWICH: My Lords, we understand that these activities, the object of which is to involve industry and commerce increasingly in fire safety, are being organised only on a modest scale this year. Local fire liaison panels will aim to concentrate some of their usual activities into the week rather than at other times. The Government will give what support they can, and we have already responded to requests from two panels to provide conference speakers.
Lord CROOK: My Lords, while thanking my noble friend for that reply, may I ask him whether he is aware of the great interest, on all sides of the House, in 1963 in securing co-operation to put through the Offices, Shops and Railway Premises Act, and of the worry of a large number of Members of this House during this past week on seeing the fire officers' report to his Department showing that there has been no significant reduction in the number of premises still in need of certification? After 13 years have gone by, there are still 33,604 offices and shops in need of certification, and, perhaps even more amazing, 838 railway premises.
Lord HARRIS of GREENWICH: Yes, my Lords, my noble friend is quite right; this is a serious matter. I do not think there is any occasion for any complacency when direct losses from fire amount to
950
over £200 million a year. Certainly we are well seized of the problem, and are doing what we can to assist in the matter.

ECONOMIC POLICY
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 my noble friend Lord Shepherd will repeat a Statement on economic policy.
LAND DRAINAGE BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

DEVELOPMENT LAND TAX BILL
3.24 p.m.
Lord JACQUES: My Lords, I beg to move that this Bill be read a third time. At the close of the debate on Second Reading, in addition to my general reply I was able to answer detailed questions of a technical nature of which I had had notice. Further detailed questions of a technical nature were raised, and I promised to reply to them at Third Reading. I now find that the answers are long and detailed. I have therefore sent a copy of the answers to both the noble Lords concerned, because I did not feel it would be for the convenience of the House to read them this afternoon.
Moved, That the Bill be now read 3a.—(Lord Jacques.)
Lord LEATHERLAND: My Lords, before this Bill passes to its final stage—
Several noble Lords: Order! Order!
Viscount COLVILLE of CULROSS: My Lords, I will not hold up the noble Lord, Lord Leatherland, for more than a moment. All I wanted to do was to say "Thank you" to the noble Lord, Lord Jacques, on behalf of my noble friend Lord Kinnoull and myself. We shall be greatly edified by reading his detailed explanations, and I am sure they will be very helpful to others who are also interested in this Bill.
Lord LEATHERLAND: My Lords, I apologise to the noble Viscount; it was my enthusiasm. Before this Bill leaves us for its final stages in this House, I feel that there are two irregularities which we ought to try to correct. Whether I can correct them by moving Amendments, I know not, but probably the authorities of the House will devise some method to put things right. If your Lordships will look to the back cover of the Bill, where the Title appears, your Lordships will see that it is inscribed as follows:
"Brought from the Lords 13th December 1976".
I have a feeling that it should be "Brought from the Commons", and that instead of "13th December 1976" it should be "13th July 1976".
This little irregularity may be due to a printer's error or it may be due to some clerical oversight, but is there not the possibility of some grave constitutional problem being involved here? May we not find, in years to come, that Erskine May will be recording that in this month in 1976 the House of Lords grabbed from the House of Commons the right to introduce a Bill dealing with taxation, and might that not be a very grave constitutional question? Then, may it not also be suggested that the House of Lords, having dealt with this Bill, having imposed this taxation and having then sent it to the Commons for their approval, post-dated it to the 13th December 1976, with the result that the Bill would not be able to pass into law during this Session but would be pitchforked into the next Session, and so Parliament was deprived of a whole Session's authority in respect of this Bill? I think this can easily be put right, my Lords. I suggest to my noble friend on the Front Bench that he has a word in the proper quarters.
Lord JACQUES: My Lords, my noble friend was kind enough to draw my attention to these printing errors yesterday. At Second Reading I apologised to the House for the printing errors, and I had a word in the right quarter, as he now suggests. Therefore, the constitutional crisis will not arise.
Bill read 3a, and passed.

EDUCATION BILL
Brought from the Commons; read 1a, and to be printed.

DROUGHT BILL [H.L.]
3.27 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT(Baroness Birk): My Lords, I understand that no Amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript Amendment or to speak in Committee. Therefore, unless any noble Lord objects I beg to move that the Order of Commitment be discharged.
Moved, That the Order of Commitment be discharged.—(Baroness Birk.)
Lord WIGG: My Lords, I am a novice in these matters, but I should like to know what rights the House is forfeiting in agreeing to this Motion, because, while I have refrained from putting down Amendments—and I did this in deference to the request of the Minister in charge of the Bill—there are some things, I think, that ought to be said. I am quite prepared to waive this occasion and to do it on Third Reading, but by passing this Bill—and nobody begrudges the facilities given to the Government—we are in fact giving a blank cheque. The week after next, when it has become law, orders will have been laid; most of your Lordships will have departed with your buckets and spades for more salubrious climes—
Baroness BIRK: My Lords, I wonder whether my noble friend would give way. As I understand it, he is not objecting to this Motion, hut, if he is, then I must move that the House resolves itself into Committee. If he wants to raise these points on Third Reading, 1 wonder whether he would wait until we get to that stage.
Lord WIGG: I am very sorry, my Lords. I was being inarticulate, and I am a bit stupid, but I did not make myself quite clear. That is exactly what I was trying to say. I was prepared to waive any right I had on Committee stage. What I wanted to find out was what I was giving away by not raising it on Committee stage. If it is in order for me to make the point that I want to make on Third Reading, then I will resume my seat.
Baroness BIRK: My Lords, the only right that my noble friend is forfeiting is that if the House resolves into Committee, he could speak more than once on each of the points or clauses. If he speaks on Third Reading he can speak only once.
Lord WIGG: My Lords, that satisfies me. I am obliged to my noble friend. May I apologise to the House for taking up their time at this stage.
On Question, Motion agreed to.
Then, Standing Order No. 43 having been suspended, pursuant to the Resolution:
Baroness BIRK: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a—(Baroness Birk.)
Lord WIGG: My Lords, I wish to offer one or two observations on the contents of the Bill. As I have already said, I do not regret for a moment having given the Government a blank cheque, but I think it not unimportant that we should recognise the nature and the contents of the cheque which may subquently be presented. Under Clause 1 of the Bill the Minister will be able to make orders and the orders made would affect those areas which are suffering from drought.
Lord DENHAM: My Lords, since it is difficult to hear will the noble Lord move towards the microphone?
Lord WIGG: My Lords, I beg the noble Lord's pardon. I would not want to deprive him of the wisdom conveyed in my remarks. The point that I have already made is that this House is being asked by its actions to give the Government a blank cheque. I do not in any way regret that being done but I think it necessary that we should understand what we are doing. The week after next this Bill will have become law; the Government will then make orders under Clause 1 and they will deal with those areas which are primarily affected—probably Northamptonshire, Southampton, South Wales; more than likely Wessex and perhaps South Yorkshire.
In those areas the water authorities will ask for powers; and only when they
954
ask for them can the Minister give them. The Minister is concerned only, and should be concerned only, so far as this Bill is concerned with the effects of drought, but there are other issues that arise. Let us assume for a moment that the worst happens and drought conditions continue into the autumn; that is to say, that the heat and lack of moisture continues. By Christmas we might be faced with a terrific crisis which the Government would then attempt to solve through the exercise of the powers contained in Clause 2. The Government are again in some difficulties; for if Clause 2 was invoked it could affect whole industries. The Government might be forced by circumstances to close down industries because water would be essential to others. This involves rough justice, and, let us be clear, it would be very rough justice indeed. No compensation would be payable. No compensation is payable either under Clause 1 for the very simple reason that while the Treasury could perhaps face up to the bill which might arise from action taken under Clause 1, it would break the Exchequer if they had to face the bill which may arise under Clause 2. Not paying compensation under Clause 2, they are not paying under Clause 1.
I do not dissent. What I ask is that the Minister consult perhaps the Prime Minister, but at any rate Ministers outside her own Department, against the possibility of the Clause 2 powers being invoked. For example, if I may deal with a subject dear to my heart, the question of racing, it is more than likely that some 19 racecourses which do not water might be required to stop racing in the immediate future not only because of the effect of the lack of moisture on the horses but because of the effect it might have on men if they fell from horses in those conditions. It seems to me not unreasonable that the Minister should go to the Minister for Sport or to the Home Secretary, who has not necessarily powers, but can use his influence to ask the Jockey Club and those concerned to draw up a scheme; so that those who are fortunate enough to race and get increased fixtures because of the cancellation of other fixtures, should put their hands into their pockets (and the Levy Board should put its hand into its pocket) to prevent the small courses—and they affect noble Lords all over the United Kingdom and

955
there are no fewer than 19 of them—from going broke. If these conditions arise, who knows how long they will continue?
My Lords, I mention racing because it is a sport—and, if noble Lords wish, it is a non-essential industry. But if Clause 2 powers are invoked, the need will arise for similar action—if the public purse is not to be used to do it—to save those men and industries from perhaps economic catastrophe. I should have thought that the Minister for Industry would have been brought in here so that if the worst happens—and we just do not know whether it will or not—those responsible would look at the situation which may arise. In other words, while we are all giving prayer—and I am all for a bit of prayer if it would help—there is no reason why we should not plan at the same time; and there should be planning against such a contingency.
May I remind noble Lords of the situation which faces us? There are records of moisture falling on these islands from about 1727. They are not exact records; but what we know through the work of the climatic research unit in East Anglia in examining the rings of old trees is that in the Middle Ages—certainly in the earlier part of the fifteenth century—there were conditions of the kind which we are now called upon to face. What has become clear is that the view that was held up to about 1960, that climate all over the world is constant, is probably not true. The records available from the earlier part of the eighteenth century to the present time were describing a picture which was not normal but abnormal.
In these circumstances I want to ask the Minister one specific question. I do not ask for an answer today—it is no trick question with easy answers. In the circumstances, as the climatic research unit at the University of East Anglia is the only institution of its kind in the world—and in this particular field once again men of our race are taking the lead—would it not be common sense for the Government to give that research unit their wholehearted support in order that we may ascertain the facts? I do not want to paint any alarmist picture, but I think it is clear that the situation in which we may find ourselves may continue in the short run. If it continues in the short
956
run the Government have my sympathy and my support in dealing with the situation which may arise under Clause 2 of the Bill.
On the other hand, let us hope that it is going to rain; but because it rains between now and Christmas and those conditions do not become operative, it does not rule out the possibility that those who think like Professor Lamb may be right—in which case, next year we may be in a difficult situation and we should, in my view, hope for the best but plan against the worst. That seems to be common sense. I hope in making these remarks that others in the House will give me their support.
Lord REDESDALE: My Lords, I should like briefly to thank the noble Baroness for the trouble she took in replying to our questions in the debate, and particularly on the question of damage sustained. I am personally grateful for her kind remarks.
3.40 p.m.
Baroness HORNSBY-SMITH: My Lords, it is a rare occasion for me to find myself in agreement with the noble Lord, Lord Wigg. Although my interest is not horseracing, I used to represent a county deeply concerned with papermaking. I should like to support the noble Lord, Lord Wigg. We should plan ahead because, unfortunately, the weather may be patchy and the provisions which are made for water supplies vary from area to area in the country. As the noble Baroness told us, there is acute shortage in some areas whereas the situation is less serious in others. It is of vital importance that we should plan ahead. The weather could provide very diverse situations for comparable and competing companies if they either happen to be in an area of acute drought or in an area receiving reasonable supplies of water.
If the drought should continue—and we hope that it will not—it could have the most appalling industrial effects on the worst drought-ridden areas where there are industries, such as papermaking and certain sections of the textile industry, where it is essential to have water supplies. I fully support the noble Lord, Lord Wigg. We should plan ahead, particularly

957
in consultation with the Ministry concerned with the industries of this country which are dependent upon water supplies.
Lord HAWKE: My Lords, I fully support the noble Baroness and the noble Lord, Lord Wigg, on this matter. The Water Resources Board prophesied years ago that the demand for water would exceed the storage capacity. The present emergency has awakened the general public to this. A great deal more information and publicity about the past climate and the possibility of further storage, and related matters of that kind, would be welcome. We are not being fed very much by the media at the moment; I think Her Majesty's Government might take some initiative in the matter. We must remember that we have to give up the old habit whereby when anybody suggests storing water anywhere various societies get up and say, "You can't build that there 'ere".
Lord RITCHIE-CALDER: My Lords, I should like to support my noble friend Lord Wigg in his demand for pre-planning. I want to quantify what he said about the research activities at East Anglia. Professor Lamb and his people deserve all credit; but there is a massive amount of significant work going on in climatology in other parts of the world. We should be doing more with the World Meterological Organisation, and others, in getting this matter into perspective. I would say categorically that this is not a "blip" on the chart, this is a serious phase in the change of climate of the Northern hemisphere. The sooner we face up to that, the better.
We as a country have been very remiss. I remember my late friend Aneurin Bevan saying that this country was a lump of coal entirely surrounded by fish, and anybody who could mismanage both coal and fish at the same time was pretty hopeless. If we can mismanage the weather in this country, in terms of not being able to cope with what we have got, then it is shocking. The resources and reserves of this country, which are not just local rainfall, precipitation, and so on, should be much more carefully studied.
Lord BARNBY: My Lords, it seems appropriate that I should raise the following
958
point to give support to what the noble Baroness, Lady Hornsby-Smith, said. The textile industry requires large amounts of water for its processes. At the present time the industry is imperilled because of the extravagant increases in water costs. Water costs have increased up to 400 per cent. in recent times. This is introducing costs into the textile industry which are far and away larger than are borne by any of our main Continental competitors in the EEC. It is for that reason that I think it is timely at this stage to draw attention to that aspect of the matter.

ECONOMIC POLICY
3.45 p.m.
The LORD PRIVY-SEAL (Lord Shepherd): My Lords, if the debate is to continue, it may be as well if I repeat a Statement which is now being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:
"With permission, Mr. Speaker, I shall make a Statement about measures which the Government have decided to take to secure our social and economic objectives.
"Our overriding priority is to restore the prosperity of the British economy through the regeneration of our industry and to provide the essential conditions to bring down, and to keep down, the intolerable level of unemployment. To do this we must ensure that manufacturing industry has sufficient resources available to take advantage of the exceptional opportunities open to us in the export field; we have got to get our rate of inflation down to the level of our competitors' and hold it there; and we have got to do both in a way which will protect the poorest and weakest of our people and retain the social consensus on which the success of all our policies depends.
"In my Budget speech last April I said that I expected our gross domestic product, which fell during 1975, to grow by about 4 per cent., and manufacturing output to grow by about 8 per cent., in the year to mid-1977. The increase in demand would come largely from exports and stockbuilding: little from consumption.
"In fact the recovery has proceeded faster than I then expected, led by a vigorous growth in exports. On present policies I would now expect GDP to increase over the 18 months from the first half of 1976 at an annual rate of 5 per cent. and exports of goods and services by 11 per cent. This could imply a very rapid rate of increase in manufacturing production, perhaps as much as 9 per cent. We must as usual expect a lag before these developments affect the present unacceptable figures of unemployment; but on current prospects I would expect unemployment to start falling before the end of the year. I shall have more to say about this later. Money supply (M3) has grown well within the guidelines I set at the time of the Budget.
The balance of payments on current account, however, remains in substantial deficit. The 12 per cent. depreciation of sterling since March will inevitably worsen the balance of payments in the short term, and make it more necessary than ever for us to maintain the confidence of those from whom we may have to borrow to finance our external deficit. On the other hand the increase in our exports and in import substitution deriving from our increased competitiveness will later bring a massive improvement.
In fact we now have a unique opportunity for export-led growth, something we have sought in vain ever since the Second World War.
There are two possible threats to our success. In the previous cycle an excessive rate of growth in manufacturing production led quickly to supply constraints and bottlenecks in many sectors of industry. We also suffered from an excessive growth of the money supply. We saw a price explosion and an unacceptable deficit on our balance of payments. We will not let this happen again. In tackling these problems the Government benefit greatly from the co-operation which has been established with both sides of industry; this has made possible an agreement on prices and incomes between the Government, the trade unions and industrial management, which in one year has halved the rate of price increases. It has also produced a dramatic improvement in industrial relations which has
960
greatly reduced the amount of disruption in the flow of industrial supplies. The days lost through strikes so far this year have been less than half last year's figure which was itself only a third of the figure for 1974. The same consensus has successfully launched the industrial strategy which is an essential element in this country's economic regeneration.
"My right honourable friend the Prime Minister and I have said many times that the Government stand ready to take whatever action may be necessary to make room for the growth in exports and productive investment on which this country's future depends. It remains my considered judgment that there is no call for major action in the current financial year. Firm action to break into the tendency for public expenditure to exceed planned levels has already been taken. In particular, our new techniques of control, notably cash limits, will ensure that expenditure in 1976/77 is strictly contained within the limits which the Government have published. But there is no economic or financial case for further reduction in public expenditure or the PSBR this year, which I now estimate will be about £11½ billion, about £½ billion less than the Budget estimate.
"It has been right for us, like other countries, to run a large fiscal deficit in the depths of the recession so as to keep unemployment lower than it would otherwise have been. It would, however, be wrong to do this through the period of recovery which is now beginning. Unless the deficit falls steadily over the next three years as expension proceeds, the financing of the public sector will pre-empt private savings which productive industry is likely to require on a substantial scale to finance stockbuilding and investment; or it will lead to an excessive growth of the money supply which would refuel inflation.
"Given the economic prospect as we now see it, we intend that the PSBR for 1977–78 shall be reduced to £9 billion or less.
"Next year the recovery of the economy is likely by itself to reduce the PSBR only by something like £1 billion to about £10½ billion. This alone will

961
not be enough. Fiscal action is needed in addition to achieve the objective which the Government set.
"I believe that it would be wrong in present conditions to load on to taxation anything approaching the whole burden of adjustment. In particular, a major increase in the burden of personal taxation would have unacceptable consequences for take-home pay. It could wreck our counter-inflation policy in the coming year.
"I must therefore look to public expenditure for a major contribution and I am announcing now, in advance of the usual White Paper, public expenditure reductions of £1 billion at 1976 Survey prices for 1977–78, which will be the crucial year for recovery.
"Since the February White Paper (Cmnd. 6393) was published the Government have approved a number of proposals which add to expenditure programmes in 1977–78. The main items are the various measures the Government have taken to relieve unemployment, the uprating of social security benefits from next November and the net cost to the Exchequer of the introduction of child benefits. These were announced as claims against the contingency reserve provided in the White Paper and have not therefore added to total planned expenditure.
"In deciding where the reductions of £1 billion should fall, the Government have avoided mechanical cuts across the board. We have deliberately decided to maintain the main social security benefits like pensions so as to provide the maximum support to those in need here at home. We have also decided to maintain, untouched, our aid programme to the Third World. I shall later be referring to further measures which the Government intend to take to assist employment among young people.
"The main purpose of our measures is to allow manufacturing industry to take the maximum advantage of the opportunities now presented to it. Because of the priority which the Government are giving to the industrial strategy, we have been concerned to avoid damaging the trade, industry and employment programmes.
"We intend to move towards putting emphasis on selective, as against general, assistance to industry. We plan therefore to increase significantly the resources available for selective assistance to industry through the NEB and the Scottish and Welsh Development Agencies, as well as from the Government direct, so as to support the work on the industrial strategy now under way in NEDC. Our experience shows that this is the most cost-effective way of helping to achieve the reversal of our post-war industrial decline. As part of this policy of selective support for industry, the Government will also watch vigilantly the need for any extension of their existing selective import restraints to provide temporary protection to viable industries faced with unfair foreign competition. We have already taken action and we are anxious to discuss with both sides of industry the need for further action of this kind in particular cases.
"In some areas we have already increased provision for public expenditure, especially for the Department of Employment's programme, including funds provided to the Manpower Services Commission for training. In addition, we are prepared to make provision, within the revised programme, for a possible Government contribution in 1977–78 to the collective funding of any scheme of apprentice training which may emerge from the public discussion of our recent Consultative Document on that subject. We shall be announcing before the Recess further measures to help with the serious problem of unemployment among young people.
"This shift of emphasis towards selective assistance to industry will require savings in expenditure of three kinds. First, Regional Employment Premium is at present £3 for men and £1·50 for women: in future it will be at a single rate of £2 for both. Secondly, we will introduce legislation to reduce the employer's rebate from the Redundancy Fund from 50 per cent. to 40 per cent. Thirdly, savings will be obtained on regional development grants by imposing a delay of some three months in payment of approved claims. We also propose to concentrate these grants in future on manufacturing investment by withdrawing eligibility from the

963
construction and private milling industries, the location of which for the most part is not determined by any incentive.
"Apart from further selective action still to be decided, the net effect of all these measures will be to reduce the trade, industry and employment programmes in 1977–78 by £105 million.
"Net savings of £157 million will be made on the capital investment programmes of the nationalised industries other than BNOC. These savings are spread between the industries and should not affect the main industrial objectives of any of them.
"We believe the time has now come to review the treatment of the nationalised industry programmes generally in our public expenditure figures so as to bring our practice more closely into line with that of other countries. The Expenditure Committee"—in the House of Commons—"will of course be consulted on this review. No general change will be made until it is completed. Meanwhile we are treating BNOC as a special case.
"There will be net savings of £87 million on roads and related expenditure.
"Net savings of £25 million will be obtained on existing agricultural and forestry programmes, largely by deferring the payment of capital grants, and ending the lime subsidy.
"Our existing plans envisaged that food subsidies would be largely phased out by 1978–79. This process will be accelerated, to save £80 million in 1977–78. The effect of this acceleration on the RPI will be only about 0·1 per cent.
"The Government have decided to save £5 million on overseas services other than aid in 1977–78.
"The planned defence budget for 1977–78 will be cut by £100 million. This will be achieved by rephasing the works programme and some deferrals.
"Approvals for new housebuilding by local authorities are running at a substantially higher level than allowed for in the estimates in the last Public Expenditure White Paper. It is therefore necessary to reintroduce control over this programme and to limit the rate of approvals so that overspending is
964
avoided. Reductions will not be imposed in areas where housing needs are greatest. In addition, net savings of £146 million will be achieved, principally by reductions in local authority mortgage lending. My right honourable friend has consulted the building societies, who have expressed their willingness to help fill this gap in mortgage lending and I understand that a press statement will be made later today by my right honourable friend and the Chairman of the Building Societies Association.
"Net savings of £81 million will be obtained on existing programmes for other environmental services.
"For 1976–77 we have agreed to postpone the 5p increase in the charge for school meals that was due this September but if the charge were kept at 15p in 1977–78, that would add £43 million to net expenditure on school meals in that year. We propose to limit this addition to £15 million by raising the charge by 10p in the autumn of 1977. We shall save £45 million on the rest of the education programme, mainly by curtailing capital expenditure on the universities and other educational building and reducing the budgets for science and the arts. The total net saving on this programme will therefore be £30 million.
"We have given high priority to the poorer members of our society and particularly to old age pensioners. We shall continue to honour our commitments to uprate the main social security benefits regularly and we shall maintain general social security expenditure in 1977–78. Furthermore, we propose to increase the rate of the new mobility allowance in November 1977. But we shall be introducing legislation to restrict the unemployment benefit entitlement of those with substantial occupational pensions; and non-contributory invalidity benefit for housewives will now be introduced in November 1977. Taking into account the increase in mobility allowance, these measures will save about £21 million net in 1977–78.
"Reductions of £70 million will be made in 1977–78 in the health and personal social services programme as a whole, but there will be no cuts in services for patients in the NHS. This

965
will consist of £20 million on capital expenditure on the NHS and on local authority personal social services; £20 million by way of extra receipts from increases in dental and ophthalmic charges and £10 million from savings on overheads and measures to curb the drugs bill; and it is proposed to save a further £20 million in 1977–78 (£40 million in a full year) by legislation to recoup mainly from insurance companies the full cost to the NHS of treating road accident cases. The Government will hold immediate consultations with the insurance companies and other interests concerned.
"A reduction of £10 million will be made mainly in expenditure on Government accommodation.
"A reduction of £35 million will he made in Northern Ireland. Some £3 million of this is the result of the new equalised rate of regional employment premium. The remainder of the cuts will be spread widely over the different Northern Ireland programmes.
"In those cases where the reductions I have announced fall on the spending of authorities other than central Government, the necessary consultations about the form of the savings will be initiated at once. Where Parliamentary authority is required, the necessary Bills or Orders will be introduced in due course.
"These savings do not include any reduction in local authority current expenditure below the provision in the public expenditure White Paper published in February (Cmnd. 6393). But it is essential that stringent economy should be exercised to avoid exceeding this provision. We shall be discussing this matter, and also the implications of the reduction in capital expenditure of the local authorities, with the Consultative Council on Local Government Finance and with the Convention of Scottish Local Authorities.
"I will circulate in the Official Report a table showing the effect of these measures on the main public expenditure programmes. Together with the saving of £60 million on debt interest which results in 1977–78 from the measures I am announcing this afternoon, the total public expenditure saving will be £1,012 million. This
966
will reduce the PSBR in 1977–78 by about £800 million.
"I turn next to taxation. I shall of course have to make my usual Budget judgment in nine months' time, next spring, when the course of the economy in the following year can be predicted more surely. However, in addition to the public expenditure measures which I have just announced, further action in the tax field is needed to reduce the PSBR to £9 billion. A massive increase in income tax or indirect taxation would be disastrous for our counter-inflation policy, particularly since the effects would be felt immediately in the middle of the next pay round. The Government have therefore decided instead to make an addition of two percentage points to the employers' national insurance contribution. This will accrue to the Exchequer. The Government will be introducing legislation early in the new Session, so that the addition can take effect from 6th April 1977. It will yield about £910 million in 1977–78 and about £1,030 million in a full year. Less than half of this will come from manufacturing industry. This sum will further reduce the PSBR in 1977–78 by about £700 million.
"The addition, like the existing contributions, will be an allowable cost for purposes of the Price Code and corporation tax. My right honourable friend the Secretary of State for Prices and Consumer Protection will be announcing today the Government's decisions on the Price Code to come into effect on 1st August. These will include a rate of 50 per cent. for investment relief instead of 35 per cent. proposed in the Consultative Document and an adjustment factor of 1.4 for depreciation instead of the earlier proposal of 1.3. These further changes should contribute to industrial expansion and in themselves make little difference to prices.
"The total estimated effect of the public expenditure and tax measures I have announced is to increase the price level by about 1 per cent. by March 1978, nearly two years from now.
"On current forecasts, these measures will suffice to achieve the Government's objective of getting PSBR down to £9 billion in 1977–78. £9 billion would be about 6 per cent. of GDP at current

967
market prices, compared with about 9 per cent. which we now forecast for this year, and nearly 10 per cent. last year. It thus represents a reduction of one-third in the PSBR in the first full year of recovery. The General Government Financial Deficit, which excludes on-lending to public corporations and the private sector, is the concept used by some other countries and is often quoted in international comparisons. The measures I have announced will reduce the General Government Deficit from just under 6 per cent. of GDP this year to 3 per cent. of GDP next year—a reduction of nearly a half.
"The Government's plans for the reduction of the PSBR will, of course, make it easier to finance the borrowing requirement without excessive growth of the money supply. It will mean less pressure on interest rates, to the benefit of industry, and of Government and local authority borrowing. In the current year, 1976–77, money supply has so far been growing at an annual rate of about 10 per cent. Because borrowing needs and gilt sales inevitably vary from quarter to quarter we must expect rates higher than this for some periods, especially towards the end of the financial year. It is a mistake to attach too much significance to such fluctuations. For the financial year as a whole money supply growth should amount to about 12 per cent. Such an outcome would be fully consistent with our objectives for reducing inflation. I repeat the assurances I have given that I do not intend to allow the growth of the money supply to fuel inflation, either this year or next. If inflation and output move as now forecast, I would expect the growth in money supply to be lower next year than this.
"There remains a risk that, even after the reduction in the PSBR, the necessary restraint in the growth of the money supply might result in industry being denied essential finance. I intend to ensure that that does not happen. It is essential that any increase in bank lending should be directed to priority borrowing in particular for exports, import saving, and investment and working capital for productive industry. This means that both lending and commitments for the future to
968
customers in all non-priority categories must now be strictly limited and we shall monitor carefully what happens in these categories. The Governor is issuing a notice to the banks emphasising the necessity of applying restraint in this extended form, in reinforcement of existing requirements.
"As a result of the measures which I have announced this afternoon, I now expect GDP to increase over the 18 months from the first half of 1976 at an annual rate of about 4½ per cent. and manufacturing production at a rate of about 8½ per cent. These are still better figures than I was expecting at the time of the Budget. Unemployment in early 1978 will still be lower than then expected, even though the measures may by then have reduced the fall in unemployment by about 60,000. With the help of a much better balance in the public sector's finances, we can look forward to the economic recovery over the next 18 months at a pace which is both vigorous and sustainable and which will not refuel inflation.
"The measures I have announced this afternoon have one overriding purpose—to make certain that this recovery can be sustained until full employment is achieved. This means that sufficient resources must be made available for manufacturing industry to take full advantage of the export opportunities which now present themselves. The modernisation and expansion of our manufacturing industry must remain our first priority. My right honourable friend the Prime Minister again emphasised the Government's commitment to it when he chaired the important meeting of NEDC earlier this month. I believe that these measures will enable both sides of industry to work closely together with the Government to achieve our common aim with full confidence that the remaining obstacles to our success are now removed."
My Lords, that completes the Statement.
Following are the Tables referred to:
Table A below indicates the effect on the main public expenditure programmes of the measures announced today and other changes since publication of Cmnd. 6393, including the allocation of expenditure to programmes

969
from the contingency reserve. Fuller details of the revised programmes, including any further policy or estimating changes made subsequently, will

TABLE A

1977–78: PUBLIC EXPENDITURE PROGRAMMES

£m at 1976 Survey prices

Cmnd 6393 revalued

Changes before Chancellor's statement

Total (1)+(2)

Changes announced on 22.7.76

Total (3)+(4)

(1)

(2)

(3)

(4)

(5)

1.

Defence

5,644

—

5,644

-100

5,544

2.

Overseas aid and other overseas services

1,126

+149*

1,275

-5

1,270

3.

Agriculture, fisheries, food and forestry

967

-116*

851

-105

746

4.

Trade, industry and employment

2,469

+132

2,601

-105

2,496

5.

Nationalised industries capital expenditure**

3,310

—

3,310

-157

3,153

6.

Roads and transport

2,500

-13

2,487

-87

2,400

7.

Housing

4,435

—

4,435

-146

4,289

8.

Other environmental services

2,481

-14

2,467

-81

2,386

9.

Law, order and protective services

1,822

+11

1,833

—

1,833

10.

Education and libraries, science and arts

7,386

-24

7,362

-30

7,332

11.

Health and personal social services

6,611

-3

6,608

-70

6,538

12.

Social Security

11,359

+200

11,559

-21

11,538

13.

Other public services

867

-32

835

—

835

14.

Common services

813

-6

807

-10

797

15.

Northern Ireland

1,599

-2

1,597

-35

1,562

Total programmed expenditure

53,389

+282

53,671

-952

52,719

Civil Service staff costs

-62

Total programmes

53,327

53,671

52,719

Contingency reserve

1,050

706

706

54,377

54,377

53,425

*See Note (2)(b) below. **Excluding BNOC.

NOTES TO TABLE A:
Column (1) of the above table gives the main programme totals in the February 1976 White Paper (Cmnd. 6393), revalued to 1976 Survey prices.
Column (2) indicates the changes due to—

(a) announced policy changes up to 21st July 1976 (details of these changes are given in Table B)

(b) some estimating changes on certain programmes, already identified during the course of the public expenditure Survey, including a revised estimate of EEC contributions in Programme 2, which is partly offset by a revised estimate of the cost of agricultural support in Programme 3;

(c) reductions in civil service staff costs (paragraph 32 of Cmnd. 6393).

Column (3) gives the sum of columns (1) and (2).
Column (4) indicates the net effect of the measures announced by the Chancellor of the Exchequer on 22nd July 1976.
Column (5) gives the sum of columns (3) and (4).
be included in the public expenditure White Paper to be published later in the year.

TABLE B

ANNOUNCED CHANGES UP TO 21 JULY 1976

Subject

Programmes affected

£ million at 1976 Survey Prices

Nature of Announcement

Employment measures

4, 15

56

By Chancellor of the Exchequer (OR 12 February, cols. 634–638)

Agricultural price review

3

12

By Minister of Agriculture, Fisheries and Food (OR 8 March, col. 28)

Extension of the Coal Industry Act 1973

4

16

By Under-Secretary of State for Energy (OR 25 March, cols. 717–722)

Assistance to the film industry

4

4

By Prime Minister (OR 29 March, Written Answers cols. 333–334)

Temporary employment subsidy, community industry and industrial schemes

4, 15

43

In Budget Statement on 6 April

Social security benefits

10, 12, 15

125

By Secretary of State for Social Services (OR 7 April, cols. 425–440)

Accommodation for Scottish and Welsh Assemblies

13

3

By Lord President of the Council (OR 14 April, col. 1382)

Pay policy: Employment measures

4

10

By Chancellor of the Exchequer (OR 5 May, col. 1304)

Child benefit scheme

12, 15

84*

By Secretary of State for Social Services (OR 25 May, col. 284)

Additional capital for the Radio-chemical Centre Ltd. (TRC)

4

3

Secretary of State for Energy (OR 2 July, Written Answers, cols. 318–319)

Total

356

*Net Exchequer cost.

Lord DAVIES of LEEK: My Lords, before the noble Lord sits down will he explain fully the esoteric phrase "PSBR", which occurred about 11 times in the Statement?
Lord SHEPHERD: My Lords, it means public sector borrowing requirement. However, I think that we should leave this matter, as our convention is that first there should be statements and questions from the Opposition Front Bench.
Lord DAVIES of LEEK: Yes, my Lords, but I asked the question just for the Record.
4.17 p.m.
Lord CARR of HADLEY: My Lords, we are grateful to the noble Lord the Leader of the House for repeating this
972
very long and complicated Statement. First, may I say that we on this side of the House welcome the decision to reduce the level of public spending for next year as an important, although belated, step in the right direction which we have been strongly urging for a very long time? However, is the noble Lord aware that the £1 billion cutback in spending which he has announced today on behalf of the Government has to be compared with the £20 billion increase which this Government have permitted over the last two years and that, had this huge increase not been permitted, both prices and unemployment would be much lower today and the international value of the pound much higher, to the benefit of every person in this country?
After such a long Statement I am sure that the noble Lord the Leader of the

973
House will understand that one cannot now go into the details and that a further opportunity will be needed to discuss them. Perhaps the debate next week on the Second Reading of the Finance Bill may provide such an opportunity. May I, therefore, limit my specific points to the noble Lord to three very brief ones?
First, on defence, is the noble Lord aware that the further reduction he has announced today, coming on top of the two major cuts in defence expenditure which his Government have already carried out, does, in our opinion, amount to playing fast and loose with the security of this country and our capacity to contribute to the collective security upon which world peace itself depends?
Secondly, is the noble Lord aware that the very serious increase in industrial and business costs which will be represented by the tax increases which he has foreshadowed—something like £1 billion a year—is on the same level as the savings in public spending? Therefore, will the noble Lord give a very firm undertaking that, despite this and any other events, industry will be allowed, through the price policy and other taxation policies, to make the increased levels of profit without which there is no hope of a return to prolonged full employment in this country?
Thirdly and lastly, may we ask the noble Lord why no contributions to these necessary economies have come from the Government's current legislative programme? Is he not aware that the five measures guillotined this week will contribute an extra £800 million to public expenditure, and is he also not aware that the people of this country would far rather see cuts in that area than some of the cuts which he has announced?
4.21 p.m.
Baroness SEEAR: My Lords, we on these Benches also would like very sincerely to thank the noble Lord the Leader of the House for repeating his long and no doubt somewhat exhausting, if not exhaustive, Statement of the Government's new economic policy. We wish to welcome it. It is almost too late and nearly, if not quite, too little but at least it is welcome that it should have taken place now. We should like also to say that in the broad
974
lines adopted by the Government they will have our support; that is to say in attempting to safeguard the position of those persons most in need and in maintaining the payment to pensioners, because it would have been disastrous if it had been necessary to make a further cut. We would also, however, like to doubt whether in all respects the proposals now being made are really going to be adequate for the major purpose of enabling manufacturing industry to proceed to expand profitably and with continuing profitability, so that the improvements which we are looking for will be continuous.
It is disappointing that the Government have found it necessary to put a 2 per cent. additional charge on the employers' social security contribution, which is of course a tax on industry and this underlines the very great importance of maintaining an incomes policy through 1977 and 1978. If there should be a rapid increase in earnings during that period then this additional tax on industry will become a very substantial amount since it is related to the actual amounts paid out to persons employed. The corollary of this whole policy is that there should be agreement on what happens after August of next year when the policy which has been entered into with the TUC and the CBI is due for renewal. Without that, the good intentions in this document could well ultimately be frustrated.
With the noble Lord, Lord Carr, we would like to know more about how the £100 million cut in defence expenditure is going to operate. It may well be that there is room for savings which will not affect our commitment and our standing with our allies, but when faced with the need to make reductions it is all too easy to make those reductions in the defence area, and although we would willingly have them made in that area if it can be done without any reduction in our influence in NATO and in the EEC, we should like to receive assurances on that point. We believe also that the reductions made by the Government in food subsidies is a move in the right direction—or, rather, the willingness to speed up the cuts, and that is something which we from these Benches have urged on the Government for a very long time.
The decision to cut housing expenditure subsidies is to be welcomed, but as we

975
have said on previous occasions a far more fundamental investigation into the financing of housing, which is an enormous absorber of public expenditure, is long overdue. Finally, we would urge the Government to maintain their stand against import controls. As the noble Lord read the document I wondered whether there was a sign of weakening in this direction. In this direction, no attempt at import controls beyond the present situation would meet with support from these Benches.
4.26 p.m.
Lord SHEPHERD: My Lords, I am grateful for the way in which the noble Lord, Lord Carr of Hadley, and the noble Baroness, Lady Seear, have received the Statement. The noble Baroness was quite right in saying that it was rather a long Statement, but I will leave it at that. I entirely agree with the noble Baroness that the crucial issue is the third round of a pay agreement between the Government, the trade union movement and industry. That is very much the core. It will be more difficult than the two previous ones, but I believe—to use the word that is in the Statement—that the maintenance, the growth, which will need to be cherished, of the social consensus is of paramount importance in the months that lie ahead. Therefore, when we were considering the way in which we could find opportunities for providing the necessary investment for industry we had to keep very much in our minds how any proposals would affect the social consensus. Some of these proposals will be hard to be borne by those in the trade union movement. If I may say so, I rather expected to hear something from the noble Lord, Lord Carr, to that effect, other than the question of costs and the consequences to industry.
In these proposals the 2 per cent. surcharge will represent some 1 per cent. on RPI by 1978. Our view of the present buoyancy in industry, and the great opportunities that are to be found in the export field, is that this proposal can be borne without too much difficulty in the long term although in the short term there may be difficulties in cash flow. But if you were to seek this £9 billion target it could not come solely from public expenditure cuts. It had to come from another field, and the Government's judgment and decision was that this
976
course bore less harshly upon the retail price index. If we were to take VAT and raise it by 2½ per cent, you would increase the RPI by 1¼ per cent., and if we were to increase (shall we say?) income tax by 3p in the pound this would be some £1·68 or £1·78 off the pay packet of a single person on average income. We had to look—and we have looked—at the best ways in which we can do least damage, not only to the social consensus but also to industry.
The noble Lord, Lord Carr, is quite right that we shall have plenty of opportunity to discuss the Government's proposals in regard to shipbuilding and the aircraft industry, and of course that is where much of the projected public sector borrowing will be required, as he said. But I should like the noble Lord, Lord Carr, to come to this House and say what future there would be for the 70,000 to 80,000 men working in the shipbuilding industry if that industry was not taken into national ownership.
In regard to defence, I agree with the noble Baroness, Lady Seear, that this is a matter on which one needs to act with care; and that I think we have done. There will be certain deferrals of equipment but not in any major degree. The bulk of it will be found by postponing for some 12 months some of the housing and building projects within the Defence Department, but when one sees the details of these proposals, I think the fears of the noble Lord, Lord Carr of Hadley, and the noble Baroness will be allayed. I agree with the noble Lord, Lord Carr of Hadley, that the Second Reading of the Finance Bill will give us an opportunity of discussing this matter after reflection. It is a very important Statement, and it is worthy of careful consideration. If I may say so, there should be no snap judgments.
4.31 p.m.
Lord SHINWELL: My Lords, may I ask my noble friend how soon we can expect a detailed statement of the proposed reduction in defence expenditure, so that we can ascertain whether the decision to reduce defence expenditure by £100 million was simply a concession to a section of the Labour Party in another place, or whether it was based on a careful study of what our defence requirements are? How soon can we expect a detailed

977
statement? May I ask my noble friend, further, whether he is aware that already in the last year there has been a reduction of around £250 million in defence expenditure? This additional £100 million would seem to indicate that defence is no longer a No. 1 priority but is at the very bottom of the list. This is regarded as a serious matter, particularly by those, apart from this country, who view with disfavour a reduction in defence expenditure, which will place our security in possible jeopardy.
Lord SHEPHERD: My Lords, I am most grateful to my noble friend Lord Shinwell for his helpful remarks. I will see that he is provided with the information. I hope that what he wants to find will be in the material that I will place in the Library. If not, I will see that it is provided to him, and that it is circulated. I would only say to my noble friend that at least in one respect I think he will be satisfied that there are no cuts; that this is mainly a deferral. But I hope my noble friend will understand that in an exercise of this sort we must strike a balance, taking all Departments as a whole. My noble friend may feel very strongly about defence, and I rather share his view, but there are others who see the poverty, and I nearly called it the shame, of some of our city centres who feel that perhaps we should have sought to relieve housing a little more than we have been able to do. I suggest to my noble friend that it is entirely a matter of judgment. I hope when he sees the material that he will feel we have exercised a true judgment.
Lord WIGG: My Lords, no doubt my noble friend has noticed that the noble Lord, Lord Carr of Hadley, in the course of his questions made a comparison between a cut of £1 billion against the increase in Government expenditure. May I make a similar comparison in relation to defence? The cut of £100 million needs to be related to the fact that since the end of the war we have spent £57 billion, and the effectiveness of defence cuts depends not so much on the cut, but on what remains, and the purpose of what remains, because the ultimate test of a defence policy, surely, is not the amount spent, but whether you have got the right amount of fire power in the right place at the right time. The bill that we now have is colossal. My noble friend Lord
978
Shinwell regards the cut as if it were a blow, but I can assure him that so far as I am concerned the cut is not savage enough, because a large part of our defence expenditure is largely on waste. The maximum contribution for the defence bill of this country, somewhere approximating £4,000 million a year, takes place annually at Trooping the Colour and the Royal Tournament at Olympia. This is the basic fact, and the reason for it lies primarily with the Conservative Party who introduced the 1957 White Paper.
Lord SHEPHERD: My Lords, I must say I do not share the opinion of my noble friend Lord Wigg in this matter, except to say that quality is the thing that counts, certainly for a country like ours which is a medium-sized Power. Again I say that when the details are known I believe the House will see that this is largely, if not entirely, a deferment, mainly in the field of accommodation.
Lord BOOTHBY: My Lords, is the noble Lord the Leader of the House aware that all these proposals, some of which are very welcome, will fail unless and until we can establish, with our friends abroad, a viable international monetary system, because the total collapse of the monetary system is the root cause of our predicament?
Lord SHEPHERD: My Lords, since the Second World War we have sought—have we not?—to establish a fairly stable international currency system. Until some three or four years ago it had served us very well. The strains, particularly of the last two years, of the international recession have placed that system in question, but I think today there is closer co-operation between the Finance Ministers of the major countries than perhaps ever before. It will be for countries to co-operate, to put aside (shall we say?) some of their national interests; but so far as this country is concerned we cannot really play a major role until we have placed our own house in order. That is what we must try to do. We cannot do it immediately, for it takes time. As I reminded the House in a debate some few days ago, the decline of this country has been a decline over very many years; a decline, perhaps, which we did not ourselves recognise,

979
but it was there, and we now see the depths of it. If recognition of this gets through to the people, as I believe it is doing, we can deal with our problems and put our own currency in order. That is an essential factor before we can play the role we ought to play in establishing a stable and long-term international currency base.
Lord DAVIES of LEEK: My Lords, while thanking my noble friend the Leader of the House for the Statement, may I ask him one question. It is all very well to talk about defence strength, but we are living in cloud-cuckoo land if our agriculture and our economy are weak. May I ask my noble friend whether the National Farmers' Union and other agricultural interests were fully taken into confidence over the question of the lime subsidy? As simple as it seems, those of us who know what farming on marginal land or hill farming means, know that with the weather we have had, money spent on the lime subsidy would be money well spent for the food of the future, particularly in view of the fact that when the Common Market comes to a decision in 1978, food prices naturally will be expected to go up because we shall have to join in the full Common Agricultural Policy programme in Europe.
Lord SHEPHERD: My Lords, I am not a farmer. All I know is that the previous Administration got rid of the lime subsidy, and I have a suspicion that they may well have been right and that we were wrong to bring it back. We looked at the contribution that agriculture can make, and it appeared to us—certainly from the advice that was given to me—that the lime subsidy was one that we could well do without, taking into account all the other calls being made upon the Exchequer by agriculture.
Baroness PHILLIPS: My Lords, I take it that we shall have an opportunity to debate the cuts. On a first superficial hearing—and I may have heard some of it incorrectly—some of it sounds to me like mathematical nonsense. If we are to give an increase in child benefit of £1, which, when taxed, is reduced to 70p, and if we add an extra 10p on child meals, I work it out that the woman, at the end of the week, will be exactly 20p better off. But the 20p will have been a very costly
980
operation, involving two Departments of Government. Surely there must be a more sensible way of dealing with this kind of thing.
Lord SHEPHERD: My Lords, mathematics was not one of my brighter subjects, but we had a look at this and we thought that it was about right. But perhaps my noble friend might like to raise this, I think most appropriately, on the Second Reading of the Finance Bill. Since she has given me notice of it, instead of relying upon matchsticks as a previous Prime Minister did, perhaps I may be able to give her a full and constructive answer.

DROUGHT BILL [H.L.]
4.41 p.m.
Third Reading debate resumed.
Lord NUGENT of GUILDFORD: My Lords, if we are now returning to the calmer subject of the Drought Bill, may I, before the Bill gets a Third Reading, which I hope it is shortly going to get, say a word or two in support of the noble Baroness. The comments this afternoon have been rather critical, and I think have been directed not so much to the Bill as to the surrounding circumstances of the water shortage itself. In fact the Bill is going to be entirely helpful. Its purpose is to provide a refinement of the existing controls. Here I declare again my interest as chairman of the National Water Council. This refinement of control will assist the water authorities in the acute shortage areas to share out the reduced supplies in the best way possible until fresh rainfall comes to relieve us. It is certainly to be welcomed in every way in that respect. Of course the Bill cannot produce any more water, and even the noble Baroness's outstanding efficiency cannot do that for us. Only the rainfall itself can do that.
The main criticisms which were voiced, I feel, had some validity. The point was made by my noble friend Lord Hawke that perhaps this will educate public opinion not to oppose building of new reservoirs. I would very much hope that it will. Certainly in some areas, particularly in the South-West, there is an urgent need for that. With regard to the more

981
esoteric comments about the meteorological forecasts, the noble Lord, Lord Wigg, and I have already had some exchanges on this, and I think the only thing we can agree on is that we really do not know. He has quoted Professor Lamb with qualified approval. The noble Lord, Lord Ritchie-Calder, referred to other people who make these researches, notably our Meteorological Office in Bracknell where there are first-rate meteorologists, and no doubt they will all be giving us the benefit of their advice.
Looking to the major problem to which noble Lords have been directing their comments today—that is, the security of future supplies—this is something we shall review in the greatest detail next winter in the light of the drought experience and in the light of the best advice that we can be given by the meteorologists. Having, as we have, a drought situation the like of which has not been seen in 250 years, we obviously must proceed with caution to try to find the right balance in the equation of security of supply on the one hand and cost on the other, because every additional million gallons that we provide in storage in order to secure supply will have to be paid for in future years in higher costs.
My noble friend Lord Barnby, who I am sorry to see is no longer in his place, complained about the high cost of water to industry. Well, of course, he is right; there has been an increase in cost. The more secure we make supplies the higher the cost will go. The fact is that we have still, even in a year like this, sufficient rainfall if we store more of it.
What we have to make up our minds about is this: do we have to store more, and if we do, how much more should it be? This is just what we shall be looking at. That is very simply stated, but, of course, it is a highly sophisticated judgment when we come to decide what should be done. I again thank the House for giving this Bill such a swift passage and thank the noble Baroness for her capable handling of it. It is going to be entirely helpful in enabling us for the next couple of months to share out the scarce supplies that remain.
Baroness BIRK: My Lords, I do not want to delay very long over this Bill, but there are one or two points I should take
982
up. Most of my critics are not in their places. My noble friend Lord Wigg raised a number of points. The first one, I think among the most important, was the one about consultation with other Departments and other Ministers. I can assure him that all the Departments concerned, Industry, Agriculture—Sport, as he knows, is located in my Department—are in close touch, both at national and local level, so there is no shortage of consultation, both interdepartmental and with the water authorities.
When we come to the question of industry, to which I think most noble Lords referred, including my noble friend Lord Wigg, there is, of course, the general anxiety about the shortage of water. The noble Lord, Lord Nugent of Guildford, dealt extremely well with this when he used the phrase "refinement of controls", which will be the object of this Bill. But having listened to the long Statement and the questions on it which interrupted this Bill, for anybody to feel that the Government are not acutely aware of the needs of industry and of promoting industry would be a complete misunderstanding of what we are trying to do.
An acute water shortage obviously can cause problems for industry. The powers in the Bill are designed to ensure that the burden falls as fairly as possible and also where the least damage will be done. This is why it must vary according to different areas and different authorities. Of course, if there is still a shortage of water this winter it is absolutely true that a new situation will arise, as the noble Lord, Lord Nugent, and others have said, and then we will have to look at new measures. But in the present situation the Government believe that this Bill can deal with it.
My noble friend Lord Wigg said that he hoped for the best but we should be planning for the worst. He is absolutely right. When we come to the long-term climatic research, there are no simple or quick answers. He said that he did not want any simple or quick answers. But what is absolutely true—I think the noble Lord, Lord Hawke, made this point—is that a situation like this pinpoints dramatically what can happen, and alerts both Government and public to the need for conservation of water and for long-term planning. We are closely in touch with and advised by the Meteorological Office, and

983
we are taking full account constantly of the work being done by Professor Lamb at East Anglia and also the work being done in other countries referred to by my noble friend Lord Ritchie-Calder.
The noble Lord, Lord Nugent of Guildford, was absolutely right when he mentioned some of the future problems, the need to look for supplies, and the questions of security of supply and cost. These are things that have to be weighed up. It is perfectly true that one can make elaborate contingency plans, perhaps in a more long-term manner, if cost is not a very relevant factor; but when cost is such a relevant factor we have to balance the possibilities or probabilities of emergency and try to get the right point. We believe we have got it right now, with this Bill. If the rains do not come, then we will have to look at the situation again. What the Bill does is to give the powers necessary, now and for the coming few months, and if the worst happens that will be the time when it does apply. This also gives us a basis for the sort of long-term planning to which noble Lords referred.
Lord WIGG: My Lords, before the noble Baroness sits down would she answer one question? As I understand it, the Government are giving full support, and quite rightly, to meteorological studies. What I am concerned about is that climatology should get similar support. I am not asking for a reply today, but would she consult with her colleagues to see that the work of Professor Lamb specifically, and others, is getting all the support needed in this situation?
Baroness BIRK: My Lords, what I intended to do was to write to my noble friend about this and go into it in more detail. I have dealt with it in a general way, both at Second Reading and now. I think it would be much better if I wrote to him and told him exactly what the relationships were.
On Question, Bill read 3a, and passed, and sent to the Commons.

IRON AND STEEL (AMENDMENT) BILL
4.51 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett):
984
My Lords, I beg to move that this Bill be now read a second time. This short Bill deals with the affairs, and particularly the finances, of the British Steel Corporation. The British Steel Corporation is one of the largest industrial enterprises in Europe and, before embarking on the detail of the Bill before us, it may be helpful if I remind your Lordships of some of the more important figures which describe this enterprise. It has a turnover of about £2,500 million, is currently investing between £500 million and £600 million a year and employs over 200,000 people. The main purpose of this Bill is to raise the statutory limit on the amount of external finance which the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing, and by the receipt of public dividend capital.
An increased limit is necessary mainly to finance fixed investment and working capital for increased production and sales; and also temporary operating losses. The present borrowing limit, taken together with the Corporation's internal cash flow, will be insufficient to provide the cash needed because of the scale of modernisation and expansion, low profitability resulting from inadequate past investment and working practices which have fallen behind international standards.
The Corporation's financial position has to be looked at over a number of years. The Corporation achieved a pretax profit of £56 million in the year of high steel demand in 1973–74 and a further profit of £89 million in 1974–75. The Corporation entered the recession of 1975–76 with sales diminished and customer confidence impaired because of operating problems, largely due to the aftermath of the three-day week and industrial relations difficulties. The depth of the recession was such that last autumn it looked as if the deficit on the financial year to 3rd April 1976 might be substantially in excess of £300 million. However, the Corporation has pursued a vigorous policy of cost savings covering the whole of its activities with the result that the actual deficit was approximately £255 million. Annual accounts for 1975–76 are due to be published by BSC on 29th July.
Demand for most products has been improving this year, with steel plate being the notable exception. The Corporation

985
is planning to break even in 1976–77 which will reduce its financing requirement, but the additional contribution from internally generated funds will be more than offset by increased working capital needs as business picks up. Substantial finance is being provided to increase the physical level of the Corporation's ordinary stocks and work in progress needed to provide reliability of supply. Consideration is being given to a further tranche of counter-cyclical stockbuilding.
We have reviewed with BSC its financial requirement for 1976–77 and examined likely requirements up to five years ahead. There is a considerable measure of uncertainty in attempting to forecast far ahead; over the four-year period from April 1976 to March 1980 BSC expect to invest some £4,000 million and to require approaching £1,000 million for increased working capital. It considers that nearly £2,000 million of these needs should come from self-generated funds in the form of retained profits, depreciation and development grants, leaving about £3,000 million to be raised by way of external borrowings and advances of public dividend capital.
In line with other nationalised industries, BSC is now subject to a cash limit which has been fixed for the current financial year at £950 million. This allows for a small element of self-financing by the Corporation in meeting the year's total financing requirement of approximately £1,000 million. Of this, some £650 million is accounted for by new fixed investment, nearly all in the United Kingdom, and the remainder by working capital.
The Corporation's borrowings and receipts of public dividend capital counted against the borrowing limit are approximately £1,700 million. A margin must be allowed to cover short-term borrowings and day-to-day fluctuations in the Corporation's cash balances. When these are taken into account, it appears likely that the Corporation will reach the present borrowing limit by the autumn so an increase will be needed by then. Running up against the limit would mean risking disruption to BSC's operations, investment and job opportunities.
The Bill seeks to amend certain provisions of the Iron and Steel Act 1975
986
Clause 2 provides for an immediate increase in the borrowing limit of £1,000 million and also allows for further increases of up to £1,000 million to be effected by order. Thus the maximum limit which would be established under the Bill is £4,000 million. Clauses 4 and 5 provide for technical changes to the borrowing powers of BSC and the publicly-owned companies (in effect the wholly-owned subsidiaries registered in the United Kingdom) to achieve two purposes. In the first place, borrowing between BSC and a publicly-owned company, and between publicly-owned companies, is freed from any restriction or need for Government consent. Such borrowing between members of the BSC group imposes no additional calls on public resources, and the Government have accepted representations from BSC that flexibility of group financing arrangements could with advantage be improved by removing unnecessary restrictions. The borrowing concerned will not count against the borrowing limit although borrowing by the publicly-owned companies from outside the group will count.
The second aim of the changes contained in these two clauses is to relax restrictions on the financing of BSC's wholly-owned subsidiaries. I should explain that BSC undertakes certain investments in the United Kingdom and overseas through two holding companies—BSC (United Kingdom) and BSC (International). These two companies, which are to become publicly-owned companies as defined by the 1975 Act, need to continue to be able to borrow long-term from sources other than BSC when this is advantageous both to the Corporation and the Government. Thus the proposed legislation provides for the publicly-owned companies to undertake such borrowing subject to the consent of the Secretary of State and the approval of the Treasury.
Finally, Clause 6 of the Bill proposes to update the requirements relating to accounts. The consolidated accounts of BSC and its subsidiaries, which are used by the Government and provide the main focus of public attention, are henceforth to become mandatory every year. The preparation of consolidated accounts of BSC and the publicly-owned companies, which are more restricted and appear to

987
be of very little interest, will cease to be mandatory. These latter accounts will be required only if the Secretary of State so directs; they will not be required for the year ended 3rd April 1976. The accounts of the individual publicly-owned companies must continue to be laid before Parliament.
In bringing forward this Bill we have very much in mind the need for supporting the very large programme of capital investment which the Corporation is now undertaking. As I have indicated, BSC foresee spending some £4,000 million in the period 1976–77 to 1979–80. Sir Monty Finniston has recently stated that the total cost of the 10 year development strategy could be as much as £9,000 million. These are of course the Corporation's own estimates based on its assumptions about inflation, which the Government believe will turn out to be too high.
Of course, such investment needs to be looked at very carefully in terms of overall national priorities. There are major considerations of resource use and public finance to be taken into account. Nevertheless, we consider it important that the BSC should press ahead with the modernisation and development of steel production capacity. There are vital implications for the balance of payments, for the Corporation's own commercial prospects, for the many industrial customers for steel, for employment, regional and social considerations, and for the United Kingdom plant and equipment manufacturers who are heavily dependent on orders from BSC.
The development strategy must not be regarded as a rigid schedule of events and priorities; a flexible approach is needed taking account of market developments, changes in capital costs and operating practices. As my right honourable friend the Secretary of State for Industry explained when introducing this Bill in another place, the basic aims of the development strategy are to reduce costs by producing on the right scale from modern equipment (and this also requires improvements in manpower productivity); to improve the quality of the products sold to customers where there have been signs of slipping behind world standards in recent years; to increase capacity, both to meet new home and export opportunities and to eliminate bottlenecks; and to reduce
988
the pollution which was for too long inseparable from the steel industry's image. En all these four areas—cost saving, quality improvement, capacity expansion and pollution control—many opportunities were missed in the 1950s and the early 1960s, when our main competitors were re-equipping themselves with modern plant. We are still suffering from the legacy of that chronic under-investment but are planning ahead on the proper scale, with bulk steelmaking in public ownership.
Government, management and unions alike share the responsibility for seeing that the best possible use is made of the enormous sums of public money invested in the Corporation. The economies which have been achieved during the last year show what can be achieved by all those concerned when they are faced with an immediate critical situation. The problem which now have to be tackled are of a longer-term nature, the maintenance and expansion of output and the operation of capital intensive plants in the most efficient and economic manner. At this stage it is easy to lose the sense of urgency, but this must be avoided if the industry is to have a secure future and our industrial economy as a whole is to prosper. Steel is a critical element in our economy because so much of our industrial effort depends on it. Because of this, an Iron and Steel Sector Working Party was set up under the NEDC auspices as part of the Government's industrial strategy programme. The Working Party's first task has been to look at the prospects for steel supplies and likely constraints on output during the current upturn in demand. A valuable report has been produced and published; it is now for all those concerned to consider the recommendations and take the necessary actions.
My Lords, in considering the Bill and the issues lying behind its principal provisions I am sure that noble Lords will be very well aware of the major problems facing the BSC. Increased output and improved efficiency and productivity are the most important objectives. The BSC must remain profitable and internationally competitive. Customers' needs must be met with supplies of steel in the right quantities and qualities at the right time and at the right place. Massive investment in modernisation is essential for longer-term success. The Corporation has to pursue

989
policies which are responsive to the wider national interest and to the needs and aspirations of its employees. None of this will be easy but, given the necessary support, of which the Bill is an essential part, I believe the outcome will be successful. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Melchett.)
5.4 p.m.
Lord CARR of HADLEY: My Lords, when one listens to the noble Lord's persuasive presentation of the Bill, its proposals all sound superficially reasonable, sensible and most worthy of their objectives. Indeed, many of them are. In particular, I think we all accept the need for a modern, well-equipped steel industry to be competitive in both cost and quality of its products with the industries of other countries. I think we also all recognise the necessity that if this is to be achieved, there must be a large injection of new finance, particularly for capital investment but also for some of the other purposes mentioned by the noble Lord.
So far, so good, and we are on common ground. It is when we start to look a little below the surface, to test the validity of the sums of money requested in the Bill in relation to the information available about how they are to be spent, particularly on fixed capital investment, and with what return on the money, that doubts arise. Indeed, the information and the arguments produced by the Government in support of the Bill are, in my opinion, deplorable in their sparseness and sloppiness. As an example of public and Parliamentary accountability, the Bill—at least the case presented in support of it, not just, or not mainly, by the noble Lord today but by Ministers in another place—really is a disgrace.
No private company wishing to raise money would have a chance of getting away with it. If it wished to raise equity finance it would have to produce a prospectus containing information and projections to a rigorous standard which each and every director would have to accept and back with a clear and solemn responsibility, both individual and collective. If a private company wished to raise its medium and long-term borrowing, it
990
would have to support its case with firm evidence of the nature of its need and undertake specific commitments and responsibilities. Why should a nationalised industry not have to meet comparable requirements? The sums of money which Parliament is being asked to authorise, however necessary, are huge, yet the evidence given to us on which to exercise our judgment is virtually useless in financial and industrial terms. So often we are told by the Party opposite that public accountability through Parliament is supposed to be one of the virtues of nationalisation.
As a general proposition, I am sure that nobody contests that the steel industry requires a large injection of new finance. The real question is how much and for what purpose. That is the question we should be discussing and answering before we grant these vast extra new financial powers. It is a question, I submit, which we are really powerless to answer in any meaningful way on the information with which we have been provided. Finance for capital investment is a scarce and precious commodity. There are many competing claims and certainly the total demand for capital expenditure in the public sector is far greater than can be satisfied. Indeed, we heard earlier today how at the same time as we are being asked to increase the borrowing requirement of the Steel Corporation by £2,000 million—by £2 billion—part of the Chancellor's cuts will be in public sector capital expenditure, emphasising the scarcity and preciousness of this resource. Thus, each claim should be fully and rigorously evaluated and the case for it presented to Parliament, and this is simply not being done.
I cannot believe that the highly able, responsible men who direct and manage the British Steel Corporation are unaware of the need for a proper prospectus or are incapable of producing it. Have they in fact produced it to the Government and are the Government hiding it from Parliament? Or—and this is what I fear is the situation—are the directors of the Corporation prevented from doing the sort of sums that should be done and presented to us because the Government will not make the strategic decisions without which a properly documented prospectus cannot be produced for the consideration of Parliament? That, I believe, is the real truth of the matter.

991
The suspicion that the fault lies with the Government because of the interminable delay in taking strategic decisions was confirmed and turned into near certainty by the Statement we had last Monday about the future of steelmaking in Wales. It was another non-event, another non-decision. I heard some noble Lords—for example, my noble friend Lord Selwyn-Lloyd and the noble Baroness, Lady White, both of whom have a long, deep knowledge of and interest in the Shotton area—welcome what they saw as a reprieve for the area. I had hoped that they would be here today, because I should like them to consider with us and with the Government whether they are right to be certain that this is a reprieve or whether it may not be just another cruel extension of the uncertainty that has already done damage to the long-term interests of the area, just as it has done damage to the economy of the whole country.
What we were given in Monday's announcement was a reconsideration of a reconsideration of a reconsideration. I hear the last Conservative Government criticised by Ministers in this House and in another place for prevarication and delay in coming to a decision about the strategic plan submitted by the Steel Corporation in 1969. I was a member of that Government, and I will say, yes, we did take a long time about coming to our decision. But why? Simply because the problems were very difficult. There is no denial about that. It was also because, in particular, on top of the complex industrial and economic issues, there were severe human and community problems involved in remodelling for the future such an old and basic industry as steel.
Shotton is a prime example of such a problem, though it is not the only one. I was a member of the Cabinet closely involved in much of that consideration and I remember how we wrestled long with the advantages and disadvantages and alternative plans of action, and in particular how we wrestled with their respective social implications, realising that if we moved the decision one way to relieve the social implications in one area we were increasing the social implications in another. I can remember in particular meeting at least once and, I believe, more, the late father of the noble Lord, Lord
992
Melchett, who was the chairman of the Corporation, and his senior colleagues. We discussed backwards and forwards face to face, this counter-balance between economic and industrial advantage on the one hand and the social implications for particular areas on the other.
While, therefore, I am sorry we took so long, I cannot really apologise for it for the reasons I have just given. But, if the Conservative Government are to be criticised for not announcing strategic decisions until the beginning of 1973, what is to be said of the present Government who put that decision in suspense and now, three and a half years later, have still failed either to confirm or to change it? I submit that that is a disastrous way of going on. It is disastrous for our economy and for our hopes of full employment and high prosperity. Of course, social considerations are important. They are crucial, because the economy is made for man, not man for the economy. But I beg the Government and the House to remember that our ability to restore and maintain full employment in Britain as a whole and, therefore, our ability to do our best for special problem areas depends on raising the efficiency and competitive power of British industry and, within that, the competitive power of the steel industry as a vital element. If we fail in that, we shall fail in our social duty as well in anything but the shortest of terms.
That is why it is so vital in an industry as basic to the whole economy as the steel industry that we should get the long-term investment strategy right in industrial terms. Having got it right in industrial terms, then let us be prepared to spend money and other resources generously, imaginatively and vigorously, to tackle effectively the community and individual problems which will inevitably be created in some areas, whatever we do. We have a very heavy duty to the men who are at present working in the steel industry in various parts of the country, to their families and to the communities which have grown up round the great centres of the industry. But we also have a duty to future generations, and that involves achieving a good and firm strategy for the industry as a whole. This continued delay makes that more and more difficult and puts future employment and prosperity further at risk because it is this firm, clear strategy—

993
which we were told was to be one of the great advantages of nationalisation—which we have not got and which we so urgently need, and which, I submit, the House ought to have before being asked to approve such a huge increase in the Corporation's borrowing powers.
To sum up, my case against the Government is that they ought not to be asking Parliament to approve the Bill before announcing their strategic decisions and before the presentation of a proper financial prospectus based on those decisions. I take what the noble Lord says about the need for a strategy to be flexible, not rigid; but flexibility is very different from the ad hoc, piecemeal approach which we are getting. This summary case against the Bill was, I submit, made strongly by last Monday's non-announcement.
So what can the House do about this? In theory, no doubt, we ought to reject the Bill and tell the Government to come back with it when they have made their decisions and done their sums or given the steel industry a chance to do its sums. Realistically, however, I do not believe that we can now seek to place further conditions on the granting of the first tranche of the extra finance requested in the Bill—that is, the increase from 2 billion to 3 billion in the Corporation's borrowing powers. I believe that, if we were to do that, we should cause more delay than could be sustained in the interests of the industry. Therefore, I do not recommend that we do that, but I believe that we should demand that the Government provide a much fuller prospectus before they come to Parliament under the Bill and ask for the consent of another place by Affirmative Resolution to the second tranche, which will put the Corporation's borrowing powers up from 3 billion to 4 billion.
I want to say to the noble Lord that this is a matter we shall seek to deal with at the Committee stage next week, and that we shall press the matter very hard indeed. We shall also seek to deal on Committee stage with another subsidiary though still very important matter—namely, some further control or definition of the Corporation's powers to indulge in overseas borrowing. I am not saying that that is wrong in all circumstances, but
994
we are saying that the Corporation's activities in that field need greater definition and control than they seem to be under at the moment. I believe that tackling those two matters will be the responsible way in which we can make the best of what is fundamentally a bad job.
So for the reasons I have given I believe that we must, though under protest, allow the Bill a Second Reading. But we must also seek next week to make important Amendments to increase the degree of accountability over the second tranche of money referred to in the Bill and to deal with the foreign borrowing element I have spoken of. On that basis, and having given notice to the Government of the main lines of the Amendments we shall seek to move next week, I say to the House that I believe it would be right to allow the Bill a Second Reading.
5.20 p.m.
Lord LLOYD of KILGERRAN: My Lords, on 8th July the noble Lord, Lord Melchett, repeated a very important Statement which was made in another place about the progress of plans for industrial strategy for the United Kingdom. The Statement appeared very shortly after an important meeting of the National Economic Development Council, presided over by the Prime Minister. The Statement pointed out how essential it was for the United Kingdom to develop an effective industrial strategy which would reverse the contraction of the industrial base of the United Kingdom and enable it—I use the words of the Minister—
"to create wealth through industrial production. Only in this way can we achieve the social improvements to which we must aspire."—[Official Report, 8/7/76; col. 1330.]
We have heard this afternoon an important Statement by the Leader of the House repeating what was said in the other place by the Chancellor, and throughout that Statement the theme relating to the necessity for an industrial strategy was perfectly clear. Therefore the discussion on this Bill this afternoon must be conducted in the context of industrial strategy, and the main purpose of the Bill must be considered in that context.
The main purpose of the Bill, as the noble Lord, Lord Melchett, so lucidly explained, is to increase enormously the

995
borrowing limits of the British Steel Corporation. There is no need for me to stress the importance of the steel industry to the rest of British industry as well as the desirability of infusing more capital into the steel industry. But there is a sense of frustration among businessmen, particularly in small and medium sized businesses of a. variety of kinds, not only because of the present performance of the British Steel Corporation itself but also because such enormous sums of money, comprising such a vast share of national resources, can be made available to this one industry, while so little so far is made available to many other viable exporting manufacturing industries.
This kind of action is something over which businessmen and indeed Parliament seem to have no adequate control. To businessmen in private industry the British Steel Corporation seems to be moving along, if not in an inefficient way then in a desultory way, with confrontations arising between management and politicians, whatever Government are in power. At present there seems to be no political framework to control or monitor these matters in relation to the British Steel Corporation. It seems to private industry and to the public that there is however some system that allows industries associated with public ownership to get a financial cushion every few years when the political climate is right, with small regard at the same time to operating efficiency and marketing success or the needs of other industries.
It also seems to many in industry that the British Steel Corporation at present is not producing that service which industry as a whole could reasonably expect, while on the other hand, if the Bill is passed, it is likely to continue to consume vast sums of public money. It has been said, for example, that the strategy of the British Steel Corporation has been leaning too heavily towards production concentrated in very large works in coastal areas. In this connection I should like to ask the Minister whether he is in a position to make a Statement about the progress being made to achieve the right balance between small or mini mills and medium sized plants, and whether money will be allocated for this purpose.
I realise that at this stage the Minister cannot perhaps make other than general
996
observations as to the industrial strategy associated with this increase in borrowing powers. He has been good enough today to hand to me some helpful documents which relate to the cash flow of the British Steel Corporation, but so far I have not had time to analyse these. But I am sure that he realises that it is essential to give as much information as possible about the British Steel Corporation's plans. For example, I should be interested to know whether it is proposed if at all specifically to control the power of the British Steel Corporation to borrow money from abroad. In regard to both questions which I have asked I fully realise that I gave only very short notice that I was proposing to ask them.
The present circumstances of the British Steel Corporation appear to call for more regular accounting and up-dating of information to be disclosed to the public and to Parliament so that the industry and the public can be reassured that the vast increase in borrowing power will be reflected in increased productivity, efficiency and profitability.
5.27 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, before the noble Lord replies, may I ask one question? Can he give this House any information about what is to happen to the Consett iron and steel industry. I followed with very great interest what my noble friend Lord Carr of Hadley said because I well remember in another place the complications about Shotton. We have also had complications, as I am sure the noble Lord knows, about the Consett iron and steel industry. At one time there were indications which were very worrying for those who worked in that very important company, isolated on the top of a hill in County Durham, as to whether Consett was to be retained.
I represented part of the area to which I now refer in another place for 38 years and I am often asked about the future of the Consett Iron and Steel Company. First, it looked as if it was in danger of being closed and this caused extreme anxiety. Then matters seemed to improve. I was there once when a new rolling mill or something similar was being introduced and it looked as if everything was well with Consett Iron and Steel Company for which all of us who live in my part of the world

997
were extremely grateful, and we felt reasonably happy about it. I am sorry that it did not occur to me earlier to deal with this matter, but I had hoped to hear something from the noble Lord, when he introduced the Bill, about what was to happen. I would find it very uncomfortable, coming from my part of the world, if I had not asked the question. I am hoping, and all of us are hoping, that the future of Consett is fair and reasonable, and that we shall have all the modern machinery that is necessary, because it is a very important iron and steel works, not only on the North-East coast but to the whole steel economy of the country.
As I say, I am sorry I was not able to let the noble Lord know that I was looking for an opportunity to ask about this, and, of course, if he cannot reply today I shall understand; but I would be very grateful if he will let me know exactly what the position is in a letter which I can have published, because I would find it very regrettable if the people who work in Consett and the iron and steel company thought (though I am sure most of them do not necessarily support me politically) that I did not even ask what was going to happen about that company. As I say, I know I ought to have let the noble Lord, Lord Melchett, know before I asked this question, and if he cannot reply I will accept that, but I should like to have the absolute detail before very long, even on Third Reading, so that we know what is the future of those men who have done such magnificent work. During the last war they could have been bombed at any time, because of course we could not damp the furnaces down and, as the planes came over, they could have been obliterated; but they went on working, and helped in our victory. So I felt it was up to me to speak on their behalf, in the same way as Shotton and other parts of the country West of the Pennines are being considered.
Perhaps the noble Lord will be kind enough to tell me what the position is, and if he cannot do so today perhaps he will be able to do so on Third Reading. I should be very grateful, and certainly those who work so adequately and magnificently in Consett will be glad to know that their future is secure. If any new machinery is necessary to bring Consett further up to date than it is—because I think it is a very modern iron and steel
998
works—I should like to know, and perhaps the noble Lord could tell me, at any rate on Third Reading. I am sorry to intervene at this stage, but I am not quite used to your Lordships' House yet and I always feel that I have got to get my word in if I want to get my word in.
5.33 p.m.
Lord MELCHETT: My Lords, the noble Baroness certainly achieves the end which she desires so far as getting her word in is concerned. My Lords, we have had an interesting short debate on the Steel Corporation, and particularly, of course, its financial record and financial needs for the future, which the Bill particularly covers. The noble Lord, Lord Lloyd of Kilgerran, made a brief aside about the feelings of private industry. If I heard him aright, I think he said that private industry felt that they were getting very little money from the Government. In fact, of course, private industry get massive sums of money from the Government in the form of tax allowances and, recently, stock appreciation relief, which has amounted to a very considerable sum. In some recent years most companies have not been paying any mainstream corporation tax at all because of stock appreciation relief.
But even apart from those fiscal incentives to industry very considerable sums of public money have been spent on private industry, both on regional incentives and on incentives to particular industries, either particular sectors of industry, like the ferrous foundry scheme and the paper and board scheme, and so on, or the extremely successful scheme to encourage manufacturing industry to invest in advance of the upturn, the accelerated project scheme. So to say that private industry is not getting any financial support from the Government I simply would not accept for a moment. Indeed, the criticism has been the reverse, that far too much money is being paid out to private industry without enough care being taken about what happens to it.
The noble Lord also raised two points of which he was kind enough to give me notice. The first concerned overseas borrowing. The British Steel Corporation's long-term borrowings include borrowings from overseas, which are subject to the statutory limit which Clause 2 of this Bill seeks to increase.

999
Under the provisions of Section 16(4) of the Iron and Steel Act 1975, overseas borrowings by the Corporation are subject to the consent of the Secretary of State and the approval of the Treasury, as I said when introducing the Bill. The Corporation's foreign borrowings at April 1976 totalled £483 million, of which roughly half was covered by the Government against foreign exchange losses.
Foreign currency borrowing by public sector bodies has made a major contribution to the financing of the United Kingdom's external deficit over the last three years. We still have a deficit on the current account of the balance of payments, albeit on a much reduced scale, and the Government see a continuing case for foreign currency borrowing in this situation. The money generally carries a lower rate of interest than domestically-raised finance, and exchange rate cover is available when requested. The borrower pays a charge for this cover. The BSC have estimated on a provisional basis that they may wish to seek some £700 million worth of foreign borrowings in the four-year period up to March 1980. I do not know if that answers the worries that the noble Lord, Lord Carr, has on this point, but as he gave notice that he would be returning to it at Committee stage no doubt we will be able to deal with any other points then.
The noble Lord, Lord Lloyd of Kilgerran, also asked me about small plants versus large plants. As he may know, I have special responsibility at the Department of Industry for small firms, and he has only to mention the word "small" to have my immediate sympathy. But, of course, the steel industry is not necessarily representative of the rest of industry in this matter, and however enthusiastic one may be about small firms—and I am—one has to accept that there are some industries in which smallness is not necessarily an advantage. Perhaps I could give the noble Lord a brief indication of how the Government see the advantages of large steel plants in relation to small ones. Let me say straight away that this is not a matter, of course, in which the Government expect to lay down general policy rules which the Steel Corporation is then expected to follow. There are a very large number of factors which have to be weighed in choosing the scale and location of steel
1000
works. In reaching decisions on projects of major significance submitted to the Government by the BSC, we would take full account of the Corporation's own very great knowledge and expertise. The Government's task is to weigh the wider, national considerations, such as the overall use of the United Kingdom's resources, the balance of employment and social factors, and so on.
There are undoubtedly economies of scale which it is possible to achieve in very large integrated plants. These relate not only to the cost of production but also other factors, such as the maintenance of consistently high quality standards over long production runs. Against these there are questions of operating flexibility, technical problems associated with very large units, logistical and other problems. Of particular importance, of course, are the human problems and human needs, which are not necessarily always best met by very large plants. The 1973 White Paper envisaged the concentration of bulk steelmaking at a few main sites, and the Corporation are continuing to plan on this basis. As I have emphasised, the strategy must be flexible, but the Government are in no way going back on it. This was made clear by the Secretary of State in another place when responding to questions on the 19th July about the Statement on the steel industry in Wales which I repeated in this House.
I wanted to go on to make a further reference to the development strategy, but first of all perhaps I could say something in response to the remarks of the noble Lord, Lord Carr, about the lack of information that was being made available to this House and to another place on the passage of this Bill. The Bill itself spent a considerable time being considered in another place—about nine hours in Committee—so that very detailed discussion has gone on on all aspects not only of the Bill itself but of the steel Corporation's record and future intentions. If that amount of time was spent on discussing the problem, I do not think that it could be said that the Government were not providing information.
The noble Lord made the point that private companies would have had to provide more information. If you look at the record of the steel industry before nationalisation, when it was in private

1001
hands, no information was being provided because no investment was being done. Whether or not one accepts what the noble Lord has said, at least we are in a better position than in the pre-nationalisation period when no modernisation and no investment was going on in the steel industry. That is one of the major reasons why the steel industry is not as competitive internationally as it should be and as we all believe it will be in the future.
I have made reference to the development strategy which was published in the White Paper in February 1973 and further details were given in January last year. I have already said today that the Government are in no way going back on the development strategy, so that the noble Lord, Lord Carr, does have available a clear statement of principle of the Steel Corporation's general policy and intentions for the future. We are not intending to go back on that in any way.
There are inevitably limitations on the publication of financial forecasts resulting from the need to preserve commercial confidentiality over sensitive aspects of the Corporation's plans. I think that noble Lords who are familiar with the accounts, reports and prospectuses of private sector companies will know that the extent to which these cover forecasts of the future is strictly limited. The Corporation, as a responsible public body, can be expected to be in the vanguard of disclosure; but there are limits to how far it can go in revealing information of a type not disclosed by its competitors without being put at a serious disadvantage. So far as public accounts are concerned, the Corporation's annual statements compare very favourably with the degree of disclosure by the private sector. A half-yearly statement is published which, I understand, conforms to the requirements imposed by the Stock Exchange on quoted public companies.
My honourable friend the Minister of State for Industry is now discussing with the Corporation the possibility of further adding to published information, including the scope for producing quarterly statements in addition to mid-year and yearend points. The Government firmly believe that there should be the maximum of disclosure consistent with the needs of commercial confidentiality and of
1002
avoiding placing an undue burden on BSC which would arise from requiring them to publish unnecessarily frequent and detailed statements. I would emphasise the need not to place industries that are absolutely and fundamentally vital to the economic wellbeing of this country at a commercial disadvantage with their competitors simply because they are nationalised.
My Lords, the noble Baroness asked about Consett. I can say that British Steel is investing in the enhancement of billet production at Consett. The Corporation proposes investing in a new plate mill at Redcar. This will involve the closure of the Consett plate mill. It may be those proposals at Consett which are of concern to the noble Baroness. This proposal is now being considered by the Government. I can assure the noble Baroness that an announcement will be made as soon as possible, but I am not in a position to say anything further at the moment. I should like to echo what the noble Baroness has said about the magnificent work that is being done by the people working in the steel industry—not just at Consett, although I take the point that that is her primary interest.
The noble Lord, Lord Lloyd of Kilgerran, raised the question of the efficiency and productivity of the Steel Corporation in particular with regard to the large sums of money that we are seeking to make available to them. From the beginning the Corporation had many very considerable problems to cope with and the increasing momentum of its investment programme before the "hiccup" of 1971–73 occurred was very encouraging. Over the last few years the rate of investment has been rising steadily in real terms, reaching a record of over £500 million in the last financial year, a record which will again be exceeded this year. Financial performance also began to improve with pre-tax profits of £56 million in 1973–74 and £89 million in 1974–75. The worst depression for 40 years has given rise to an enormous loss of some £250 million in 1975–76; but, as I have said, without the British Steel Corporation's energic programme of cutting costs and minimising losses the outcome would have been very much worse. As I mentioned in opening the debate, the Corporation are planning to break even this year and thereafter there are prospects

1003
for profits which should give BSC a strengthened base for future development.
Finally, my Lords in talking about the vigour with which the Corporation are tackling their problems, I should like to take this opportunity to pay tribute to the achievements of Sir Monty Finniston who, as your Lordships know, will be relinquishing the chairmanship of the Corporation in September. I know, particularly from my own personal knowledge, the enormous dedication and hard work which Sir Monty and his colleagues on the British Steel Corporation Board have put in to make the Corporation as successful as they could. I believe that in Sir Monty's time at BSC he has brought to the Corporation great qualities of leadership, technological vision and enormous energy. I believe that we owe him a considerable debt of gratitude.
I am grateful to the noble Lord, Lord Carr, for saying that he would not oppose a Second Reading. I hope that in spite of what he said about his intentions at Committee stage we shall be able to get the Bill through the House as quickly as possible so as to make this finance available for the British Steel Corporation.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

ROYAL ASSENT
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Development Land Tax Act 1976,

Fair Employment (Northern Ireland) Act 1976,

Explosives (Age of Purchase &c.) Act 1976,

Theatres Trust Act 1976,

Congenital Disabilities (Civil Liability) Act 1976,

Representation of the People (Armed Forces) Act 1976,

Fatal Accidents Act 1976,

Legitimacy Act 1976,

Lotteries and Amusements Act 1976,

Restrictive Practices Court Act 1976,

1004

Restrictive Trade Practices Act 1976,

Police Pensions Act 1976,

Adoption Act 1976,

Food and Drugs (Control of Food Premises) Act 1976,

Dangerous Wild Animals Act 1976,

Divorce (Scotland) Act 1976,

Edinburgh Merchant Company Order Confirmation Act 1976,

Strathclyde University and Mackintosh School of Architecture Order Confirmation Act 1976,

Lerwick Harbour Order Confirmation Act 1976,

Australian Agricultural Company and Subsidiary Companies Act 1976,

Nottingham City Council Act 1976,

Hove Borough Council Act 1976,

Scottish Amicable Life Assurance Society's Act 1976,

British Transport Docks Act 1976,

Foyle and Londonderry College Act 1976,

National Exhibition Centre and Birmingham Municipal Bank Act 1976,

Bucks Land and Building Company Act 1976.

NEW TOWNS (AMENDMENT) BILL
5.49 p.m.
Baroness STEDMAN: My Lords, I beg to move that this report be now considered.
Moved, That the Report be now considered—(Baroness Stedman)
On Question, Motion agreed to.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 1:
Page 5, line 4, at end insert:
("( ) Directions under this section shall specify a quota of wheelchair housing and mobility housing respectively to be included in any transfer scheme.")
The noble Lord said: My Lords, I think it would be for the convenience of the House if this Amendment were considered with Amendments Nos. 3, 6 and7 as they are all related. I beg to move Amendment No. 1 in the name of my noble friends Lady Young, Lord Sandys and myself. I would say at the outset that this Amendment, accompanied by

1005
the other three, is a probing Amendment. I have no intention of pressing the Amendment. Therefore the noble Baroness need not take up the time of the House by pointing out any imperfections there may be in the drafting of it.
There was put down in another place an Amendment in a similar sense to the Bill, but there was no opportunity for it to be considered. As the noble Baroness knows, this is a subject which the All-Party Group in Parliament on the disabled has had near to its heart and it was trying to get the matter discussed in the Commons. I am raising the matter today in order to give the Government an opportunity to state their views. I recognise that the Government may feel some difficulty in making a change of this kind in this Bill. It relates entirely to new towns and therefore this is the Bill in which it can be discussed.
Section 3 of the Chronically Sick and Disabled Persons Act of 1970 encourages local authorities to provide housing designed to be suitable for the severely disabled. But it does not apply to the new town corporations. In new towns it is the corporations which provide the housing, not the local authorities within whose areas the new towns are situated. These Amendments draw attention to the need for legislation to cover the new town corporations. We do not believe that it is enough to leave this matter to directives from the Department of the Environment, and this has been proved by the figures.
This Bill applies to England and Wales and the figures which I am about to give apply to England and Wales. On 14th April this year, in another place, one of the Ministers of the Department of the Environment gave figures in a Parliamentary reply. These indicated that about 200,000 houses have been completed or are now being built in the new towns in England and Wales. Of that number, only 53 have been built as wheel-chair housing. That is a very small proportion compared with the figures which have been given for local authorities. The local authorities have built many more—not nearly enough but, none the less, many more in proportion to the total number over the same period. That proves the point that it is not enough for this simply
1006
to be left to the new town corporations or for them to be jogged by the Department of the Environment.
I recognise that the new town corporations have always associated those who are coming in to the towns and who are offered houses, with the firms which are moving in, the firms they have encouraged or attracted to come to the new towns and provide employment. That means that even more special consideration has to be given to the disabled, not only the disabled worker—and firms are under an obligation to take a certain percentage of disabled among their workforce—but also where there are disabled persons in the family, not necessarily the breadwinner.
On expenditure, I can allay any disquiet that there might be on today of all days, when we have heard this recent Statement about expenditure, because almost everything proposed concerning the severely disabled and how one can help them leads to overall savings in public expenditure, not to additional public expenditure. There is a very simple reason for this: it is substantially cheaper for the taxpayer and ratepayer to enable the severely disabled to live in homes rather than them being "dumped" in hospitals or institutions, where it is very expensive for the community to keep them. I was one of those who started the Parliamentary campaign for the severely disabled 10 years ago in another place. I was lucky in winning two ballots. I and others were delighted later when Mr. Alf Morris came first in the ballot for Bills in November 1969 and decided to take up the subject of the disabled. He started by producing a Bill which applied only to England and Wales. We were able to put that right at Report stage and it eventually applied to Scotland, too.
In the meantime, the principal message had gone through that doing the thing being proposed for the severely disabled was saving public expenditure overall and not adding to it. That message did get through to the Government machine and was broadly accepted. As a result, since then we have had attendance and invalidity allowances and other benefits which are very small amounts per week compared with the cost of keeping a severely disabled person in hospital. Indeed, if he is in

1007
hospital he is occupying a bed which is probably badly needed by a Health Service patient. The former, unimaginative remedy, of simply consigning severely disabled persons to hospitals or institutions has been changed. The situation has been transformed in the past eight years. There are many severely disabled persons now living in the community who in the past would be in institutions.
It is good for them; it is therapy in itself. They want to be as independent as they can be with the help that they have to be given, and it is good for their morale. It helps to improve their medical situation generally. So we come to housing, and if one is going to get as many severely disabled people living in the community as can in fact with imagination circulate and live in the community, we must have housing which is suitable for wheelchairs, known as wheelchair housing. There has also to be the other category of housing, mobility housing, which suit other forms of disability.
I have seen Circular 92 of 2nd October 1975, about these two forms of housing for the severely disabled, which was sent out by the Department of the Environment and the Welsh Office. But that circular was sent only to the local authorities and the housing corporations. The housing corporations presumably would pass it on to the housing associations. But the new town development corporations were not recipients of that circular—at least, they were certainly not shown on the circular as having received it. So we hope that the Government will be able to give us their latest views on this matter. It is one which is of interest to the All-Party Parliamentary Committee, with Members of both your Lordships' House and in another place. There seems to be a gap in the legislation which needs to be filled. I hope that when the Minister is able to tell us something about how it is going to be filled for England and Wales, to whom this Bill applies, Scotland will not be forgotten.
5.59 p.m.
Baroness PHILLIPS: My Lords, your Lordships will recall that on Second Reading I gave notice to the noble Baroness that I would attempt to move an Amendment to the Bill. At that stage I did not see where it could be made. The noble Lord, Lord Campbell of Croy,
1008
has successfully found a spot where he can tuck it in, and he has asked for answers to certain questions. I had the pleasure of talking to the Minister after Second Reading. As a result of that, I was going to probe what had happened after the meeting with the chairmen of the new town corporations. I was frustrated since your Lordships' agenda each day already had the four starred Questions taken up, so I am using this opportunity to ask the Minister whether she can tell us what was the outcome of that meeting. Did they agree to what the noble Lord, Lord Campbell of Croy, the noble Baroness, Lady Young, the noble Lord, Lord Sandys, and, in my own small way, I hope I, are now asking should be part of the New Towns Act?
6 p.m.
Baroness STEDMAN: My Lords, may I first of all pay tribute to the noble Lord, Lord Campbell of Croy, for the work that he has done over the years and is still doing for the disabled. This rebounds to his credit. May I also thank him for his intimation that he is really seeking to clarify the Government's intentions at this point. I should like to assure him that what I have so say, so far as the Department is concerned, will apply to Scotland as well.
My noble friend Lady Phillips raised this subject, as she said, at an earlier stage of the Bill, and in reply I outlined the steps which the Government had taken following the issue of the Consultation Paper New Towns in England and Wales towards the end of 1974. During the Committee stage last week, I was able to inform your Lordships of the support of the new town chairmen for my right honourable friend's intention that the new towns should play a full part in housing the disabled. Noble Lords will therefore appreciate that there is really nothing between the noble Lord, Lord Campbell of Croy, my noble friend Lady Phillips and myself on the basic desire to see that suitable housing is available in our new towns for those who are physically handicapped.
In her remarks on Second Reading, my noble friend Lady Phillips suggested that in the new towns the Government had fallen badly behind in their provision for the disabled; and at first glance the figures

1009
which she quoted would give this impression. The noble Baroness also suggested that this was the result of relying on a Departmental directive rather than on legislation. My Lords, in so far as the first of these contentions is true, it is true of successive Governments; but I would not wish your Lordships to underestimate the quite considerable provision which has been made by development corporations, through the adaptation of existing dwellings, where they have been housing disabled people. This has not been shown in the figures which were quoted by my noble friend, but it is the present Government who have given recognition to the need to develop what I might term the social role of our new towns, and have provided the framework, through their Consultation Paper and revised tenancy allocation guidelines, for this to be done.
My noble friend has been critical of the effectiveness of the advice which has been given to the new towns, but I think it is perhaps too early to make this kind of judgment. It is at the design stage of a new housing scheme that the necessary steps must be taken to include mobility or wheelchair housing and in the nature of things there cannot be an immediate increase in provision, whether the impetus for that increase comes from a Departmental directive or from legislation. Many new housing schemes now being designed in the new towns do include suitable provision, and these will be converted into actual housing provision as the schemes come to fulfilment, but it takes some time to get from the pipeline to the completion of the building. As I informed your Lordships during the Second Reading debate, we shall be monitoring what is happening in each of the new towns to ensure that adequate provision is being made.
My Lords, I have said that there is nothing between noble Lords opposite, the noble Baroness and myself on the broad objective; but I am quite unable to accept that these Amendments are a suitable means of achieving, or even moving towards, that objective. The intention behind them seems to be that directions given by the Secretary of State are to specify a number of wheelchair and mobility houses to be included in the transfer scheme, and that to the extent that
1010
the reality falls short of that number, the Secretary of State shall make grants to the receiving district council of sums not less than, if I may quote: "the current allowances for such housing".
My Lords, there are a number of objections to these Amendments. Amendment No. 1, which requires that the Secretary of State's directions relating to what is to be included in a transfer scheme shall specify the quotas, is to form part of Clause 3(5) which, as noble Lords will appreciate, is at the moment permissive as to what may be included in such directions. Furthermore, the Amendment would appear to require the Secretary of State to specify a quota of housing of a particular type to be included in the transfer scheme notwithstanding that the dwellings required to meet the quota may not in fact exist. In any event, an Amendment of this kind, which deals with the transfer of dwellings to the district council, cannot by itself achieve any increase in the number of wheelchair and mobility houses provided by new town corporations.
Amendment No. 2 is at least realistic in that it simply requires a factual statement of what is transferred, presumably in order to place on record the extent of the shortfall from the quota. But, apart from the somewhat novel approach of Amendment No. 1, the whole concept of quotas is not, in the Government's view, appropriate to the provision of housing for disabled people. The Department's Occasional Paper Wheelchair Housing emphasised that:
"While the number of people who need wheelchair housing is small, it is also by definition a very variable population, making it impossible for there to be formula solutions which will be universally appropriate."
Upon what basis is the Secretary of State to determine the hypothetical and perhaps retrospective quota which the Amendment would require? It is not a matter of the numbers of disabled local residents, for these are the responsibility of the local authority; the new town's area of intake may, for example, be the whole of London. But neither, for obvious reasons, can the Secretary of State base the quota on the number of disabled Londoners. The fact is that this is not a matter which is susceptible to retrospective adjustment. The historic provision made by a particular new town will

1011
have been related to the tasks and objectives of that new town; and to argue that the provision or the objectives should have been different is likely to be unproductive. The local housing authorities, the local authorities within a new town area, do build, and have continued to build, houses and to cater for the needs of the disabled.
Although I am opposing these Amendments as now worded, I hope I have made it clear to noble Lords opposite and to my noble friend Lady Phillips that the Government are not in any way opposed to the view that new towns have an important role to play in relation to the disabled. On the contrary, we are committed to the view that opportunities and facilities of life in our new towns should be increasingly available to those who, because of their social and physical handicaps, often stand to derive the most benefit from them. We shall continue to progress towards that objective through tenancy allocation policies and by suitable provision in new building programmes.
At the Minister's meeting with the chairmen of new towns, as I reported on Committee stage, we had the full support of the new town chairmen to increase the amount of mobility and wheelchair accommodation within the new towns. I hope that noble Lords opposite will accept these explanations and also my assurances that we want this provision within our new town areas and within all our housing authority areas, and that our new towns are not going to be behind in providing it.
Lord SANDYS: My Lords, before my noble friend Lord Campbell of Croy carries out his expressed intention to seek to withdraw the Amendment, I should like to say that so far as this noble Lord is concerned, he is not satisfied with the reply given by the noble Baroness. She began by saying that there was very little between us. That may be so as regards the broad objective, but I believe there are real points at issue which were raised by my noble friend Lord Campbell of Croy. I must say that his quotation of the Minister's reply on 14th April, saying that only 53 wheelchair houses in 200,000 were completed, was a very convincing statement so far as these Amendments are concerned. I was interested to hear the noble Baroness say
1012
that she thought Amendment No. 2 was realistic, because we shall be coming to that Amendment shortly. I think perhaps the noble Baroness intended to refer to Amendment No. 3. She has not nodded, but perhaps she will do so in due course.
One of the basic reasons why we believe that the Government's policy is wrong at the moment is the fact that it is wasteful. Adaption of existing dwellings is far more costly than the inclusion at the design stage of satisfactory wheelchair housing. I am sure it goes without saying that we believe that this is an omission from the Bill.
Lord CAMPBELL of CROY: My Lords, this has been a brief debate, but it has given the Government an opportunity to speak on this subject which was denied in another place. I should like to start by thanking the noble Baroness, Lady Phillips, for her support. I know that she has been much concerned about this subject. Also, I accept what I think was her intended compliment about the ingenuity needed in order to get these Amendments into the right Part of the Bill.
I recognise the difficulties which the noble Baroness, Lady Stedman, indicated about the Amendments. I started by saying that myself, when I moved Amendment No. 1. I hope that the Government will seriously consider this point, and will consider whether there is some other way by which the new town corporations can be brought into the situation, as the local authorities are, because we cannot be content with the present situation. The noble Baroness told us that the position will improve in the not too distant future, but I do not think we can be satisfied, and I doubt whether other members of the all-Party group in all parts of the House will be satisfied. But we are glad that the noble Baroness has this evening given us a statement of the Government's position, and I now beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.12 p.m.
Baroness YOUNG Baroness YOUNG moved Amendment No. 2:
Page 5, line 5, after ("scheme") insert (",in addition to the matters referred to in section (Right of tenants to purchase dwelling-houses) of this Act,").
The noble Baroness said: My Lords, in moving this Amendment I should like to speak at the same time to Amendments Nos. 4, 8 and 9. I put down this series of Amendments, which I hope the noble Baroness will appreciate are now differently drafted, in the hope that this time she will look more favourably upon them. I have, of course, studied with very great care what she said in Committee, and I was particularly glad to note that she said at column 255:
"… the Government are in no way opposed to owner occupation".—[Official Report, 13/7/76.]
It is very encouraging, indeed, to see how far the Government have moved in this direction, especially in the course of the passage of this New Towns (Amendment) Bill. We on this side of the House do not put owner occupation on a kind of pedestal, as she suggested, but we believe that in a country in which 31 per cent. of the houses are now council houses those tenants should have the right to buy their houses if they so wish. Not only would this provide freedom of choice for a large number of people, but the fact is that no one would be obliged to buy and many would not choose to do so; and, of course, it is right and proper that there should always be rented accommodation available for whole varieties of people with very different means. But it seems to me that the sale of council houses makes economic sense today, particularly at a time of economic stringency such as we now have.
I listened with great care to the Statement this afternoon, but it was a very lengthy one and I have not yet seen it in writing. But I think I understood that £146 million is to be cut off the housing budget, which therefore gives all the more point to trying to get individuals to contribute much more to the cost of their own housing. It makes sense, when all the evidence shows that tenants want the opportunity to own their own homes. Furthermore, it has always been my belief that in a democracy it is the job and duty of the Government to try to provide the policies that people want, in order to provide the conditions in which people can live out their lives within the law. I see that the noble Baroness agrees with me on that point. She, too, has been in local government. She, too, must have canvassed on many council housing
1014
estates, as I have, and she must be well aware of the feelings of the tenants.
One of the criticisms that has been levelled at these Amendments—and I see the force of the argument—is that they apply only to limited numbers of tenants. But the fact is that this is not a suitable Bill for bringing in a statutory right for all council house tenants, whether they are living in a new town or under a local authority, to buy their own house. Even I see that that is well beyond the bounds of the Bill, so we can concentrate only on those areas where it is possible.
I have not the slightest doubt that my Amendments are defective. I have long come to the conclusion that any Amendment, unless it is drafted by a Parliamentary draftsman, is always defective; and it goes without saying that any Amendment drafted by myself is always defective. I am very sorry and I do my best, but I am not a lawyer. I regret to say that sometimes, when I have consulted a lawyer about drafting an Amendment, I have been told that it was too ingenious to be correct and one is left with the impression that one has been too clever by half—not a failing that I have. But it is very dispiriting when those who are said to be experts seem to have fallen into the same trap.
Nevertheless, I have tried to meet some of the points of objection raised by the noble Baroness in Committee. I hope she will agree that this time the Amendments do not tie the residential requirement to a particular house. We should clearly like to extend the Amendments to all local authority houses, but of course that is outside the terms of the Bill and I recognise its limitations. I hope that I have cleared up the matter of the maximum period of 30 years preceding the period of three years, when assessing the discount allowable under subsection (2) of Amendment No. 4.
I think, however—and I hope that the noble Baroness will agree with me—that if the Government do not accept the principle of these Amendments, tenants in new towns who wish to buy their houses will not find it amusing, clever or impressive to know that their cause was lost not because of the principle, but because of a technicality in the drafting which the Government could put right if

1015
they were minded so to do. So I hope that the Amendments will not fall on that score, because that would be very disturbing on an extremely serious issue about which thousands of people in this country feel very strongly. My Lords, I beg to move.
The Earl of KINNOULL: My Lords, very briefly, I should like to support my noble friend Lady Young, and to congratulate her on her skill and persistence in trying to move this very important principle into the Bill. As my noble friend said, one feels after reading the reports of the various stages of the Bill, both in another place and here, that the Government have become more and more sympathetic to this principle. The noble Baroness, Lady Stedman, smiles at that, for which I am grateful.
I support my noble friend's Amendment, and the principle behind it, for three reasons. First, it undoubtedly gives flexibility of movement, which my noble friend stressed very convincingly both today and at the last stage. I should like to ask the noble Baroness, Lady Stedman, whether she has any figures available which indicate how long council house tenants stay in the same house. We know that the average length of mortgage for those who buy houses is about seven years, and it would be very interesting to know how long council house tenants stay in the same house. The second reason why I support the Amendment is the economic one, to which the Statement today was very pertinent. The third reason is one which I am sure the noble Baroness, Lady Stedman, will accept. When houses are sold in a council house development area, that very much adds to the community spirit which is undoubtedly a good thing.
I should like to make two points on Amendment No. 4. In subsection (I) of the new clause, there is a condition of three years' occupation in order to qualify for a purchase. This is a very sensible period of time, which I should like to commend to the Government. I should also like to remind them that they themselves brought in a five-year period of occupation when they introduced the Leasehold Reform Act, and this is a very parallel condition of occupation. The second point which I should like to make on Amendment No. 4 is that in
1016
subsection (2) the noble Baroness quite properly spelled out the discount which has always been accepted for other council house sales; namely 20 per cent. However, what the noble Baroness does not include, for some reason, is a pre-emption clause or safeguard so far as the new towns are concerned to cover the writing down of the 20 per cent. discount over, say, a five year period if the owner decides to sell the house very soon after buying it. I hope that the noble Baroness will consider that point, perhaps at a later date.
Lord SANDYS: My Lords, I should like to support my noble friend Lady Young who has once more moved this Amendment. Like my noble friend Lord Kinnoull, I believe that this Amendment is of very great importance. On the day when we have listened with growing anxiety to the financial statement made by the Chancellor of the Exchequer, in the Daily Mail there has appeared an interesting statement by Mr. Raymond Potter, the Chairman of the Building Societies' Association. As the statement appears in quotation marks, I imagine that it may be correct and I hope that your Lordships will allow me to quote it. It is not so long as the financial Statement. Mr. Potter said this:
"It costs on average £875 to subsidise each council house and yet only £290 for the tax relief on mortgage".
This is certainly part of the argument. I believe that not only is this a beneficial and economic process for the nation as a whole but that its popularity is out of all proportion to what the Government believe it to be.
I have been searching for figures regarding the sale of houses in new towns, but I have not yet been able to find statistics which isolate the sale of houses in new towns from those owned by other local authorities. Nevertheless, I have looked at Cmnd. 5519—Public Expenditure 1977–78—and locked into Table C I discover that as long ago as 1970 the total number of sales stood at 7,659, rising only two years later, in 1972, to no fewer than 63,950. I must admit that that is an all-sales figure and includes those from other local authorities, apart from the new towns. But let us take it that the figure includes a proportion of the new town sales. It may be difficult to segregate these statistics but I have done my best,

1017
and I believe that the Amendment moved by my noble friend. Lady Young is of outstanding importance.
Baroness MACLEOD of BORVE: My Lords, very briefly may I also support my noble friend Lady Young. First, we are now talking about dwelling houses, but I prefer to call them homes because that is what they are to the people who now live in the new towns. I am particularly keen that a cross-section of society should live in the new towns. That is what makes a town an entity. I was delighted to hear what the noble Baroness had to say about making provision for the disabled. Homes are where we bring up children, and if father is putting what I have always called "money down the drain" in rent and getting nothing back at the end of the day, he resents it. I have run across this problem very often.
Also, in courts of law people from all walks of life have come before me and with very great pride have said that they live in council property and are buying their houses on mortgage. It is quite extraordinary to hear the pride in their voices. I feel also that if a man is enabled to buy his house he is more likely to stay in that house and bring up his children. This creates stability for the family and the children, and stability is what we need at this time for the future generation. Therefore I commend my noble friend's Amendment.
6.25 p.m.
Baroness STEDMAN: My Lords, if I may reply to some of the points which have been made by noble Lords opposite before I deal with the main Amendments, the noble Earl, Lord Kinnoull, asked whether we had figures showing how long tenants of council houses have held their tenancies. I understand that it is difficult to obtain details of this kind for the country as a whole and that no figures are kept by the Department. I regret that I am unable to help the noble Earl, but I think that I may be able to be of a little more help to the noble Lord, Lord Sandys. It may be possible to find out the number of sales of houses in the new towns, at least while they were selling houses before the recent clamp down. If that information is readily available I will write to the noble Lord.
1018
I take the point of the noble Baroness, Lady Macleod of Borve, on the importance of mixed social grouping within our new town areas. I can speak with absolute certainty only of the new town with which I was associated before I gained minor promotion to our Front Bench. In the new town of Peterborough the aim was to have 50 per cent. owner occupied and 50 per cent. rented accommodation, but because of the demand for rented accommodation we had to build more accommodation of that kind and less accommodation for sale. Therefore although our object was to have a completely mixed community we have not yet been able to achieve it. However, we are only half way through our development, so as time goes on we may be able to do so.
In Committee the noble Baroness, Lady Young, said that she was stimulated by my attack on the previous Amendments regarding this subject. I must acknowledge that the noble Baroness has attempted to remedy many of the drafting faults which I had to criticise at that time. Although she will not be surprised to learn that I am still advised that the Amendments which are now before us still contain some drafting defects, I do not propose to dwell upon them but to concentrate instead upon what we on the Government Benches see as the fundamental issues involved in this group of Amendments. I shall try to be as concise as possible, in view of the time that has already been devoted to this matter at every previous stage of the Bill, both in another place and in your Lordships' House.
First, we are not in favour of a statutory right for tenants to purchase their homes because we believe that that would destroy the essential flexibility needed to utilise the rented housing stock to the best advantage. Circumstances vary from place to place and from time to time, and a statutory right written into an Act of Parliament imposes a rigidity which cannot take account of what the rented housing position may be at any particular place or at any particular time. We believe that it is wrong to be doctrinaire about this and to give any statutory right to purchase a rented house, but tenants should not be discouraged from purchasing where the local circumstances permit. However, we believe that there should be an opportunity to discourage or prevent such purchases where there are long waiting lists for rented housing.

1019
Secondly, the Amendment would impose what we feel would be an unnecessary and undesirable rigidity with regard to the discounts that would be allowable on the purchase price. It surely cannot be right to seek to lay down in a Statute providing for transfers, some of which may not take place until the 1990s, the precise amount of discount which can be given on the purchase price. Can noble Lords opposite be really confident that the 20 per cent. plus discount which they specify in their proposed new clause will still be the appropriate discount to be offered in the year 1990 or thereafter? Surely it is better to leave the Government of the day, whatever its political complexion, to determine what shall be the discount. This can be done in the context of a consent procedure and without the need for fresh amending legislation to be introduced.
Thirdly, my Lords, as I said at Committee stage, we believe that it would be wrong to give such a right to purchase—as the Amendments do—to tenants in just those towns where transfer is imminent. Whatever the merits of the Opposition's arguments, surely this is unfair to the tenant in one of the third generation new towns where transfer—and hence his right to purchase—is unlikely to come about for a number of years? It may well be in some of those towns that the waiting period for rented housing is at its lowest, yet these tenants would not be given the statutory right to purchase. But tenants in towns where transfer is imminent would, under these Amendments, have just such a right, notwithstanding that they may be towns with very long waiting periods for rented housing.
I ask noble Lords opposite to think again and not to try to pre-empt the decision by the district council as to whether it would or would not be right to sell. Of course I appreciate that this Bill is the only vehicle the Opposition have for putting forward their policy on sales, and the scope of this Bill, as the noble Baroness, Lady Young, has said, does not permit them to give rights to tenants other than in the context of this transfer scheme. Obviously this is a real dilemma for them. But surely they have faith in the local authorities. Do noble Lords opposite really consider that
1020
the newly elected authorities in new town areas who might be expected to be sympathetic to the views of the Party opposite, are incapable of deciding whether or not it would be right for them to sell their houses?
The Government firmly believe that the local authority should have the right to manage the housing stock according to its perception of the housing needs in its district. The Opposition have said, both here and in another place, that they support the principles of the Bill. I ask them to show that support by not seeking to frustrate the district councils' powers to manage the housing stock to the best advantage of their district. This is particularly important, in the context of our efforts, in those towns nearing completion, to normalise our new towns and to create one community and remove the distinction between the new town tenant and the local authority tenant.
Yet there is another fundamental aspect of the Amendments to which I must refer. We are all aware that bureaucracies at national and at local level are prone to plead from time to time that some things should not be done because they are inconvenient administratively. I do not think I should allow this debate to be concluded without setting out some of the consequences of the exercise of an uninhibited right of certain tenants to begin the process of acquisition of the rented houses they occupy when a transfer scheme has been prepared. Here I would emphasise that the proposals in the Amendment only bite when the transfer scheme exists. We really must not underestimate, and certainly do not ignore, the immense amount of work which will need to be undertaken in the preparation of a transfer scheme. All the property that has to be transferred by the scheme must be specified in the scheme in order to ensure that good title is given to the property as from the date specified in the scheme. Not only must the property be specified in detail but it must be done by reference to a map. The calculation of the outstanding loan debt will be a complex task requiring great care. The consequences of the inclusion of the property—and we must remember that the property is not just rented houses but also assets, such as shops and meeting halls, which are related to the houses being transferred—in terms of any financial burden which might fall

1021
on the receiving authority must be assessed, not least to enable the calculation to be made of any grant which might be paid under Clause 10 of the Bill. Noble Lords opposite will not, I am sure, forget the concern expressed by their spokesmen in another place about the burden which might fall on the district councils after transfer of housing. The details which must be included in a transfer scheme by virtue of Clause 3(6) of the Bill must be settled during the period specified by the Secretary of State for the preparation of the scheme.
How then would the exercise of the statutory right to purchase fit into this picture of precise and accurate definition and the consequential problems of finance and even of staffing? At the very point in time when the detailed schedules and maps have been drawn up, then, if the Amendments are approved, we would have created a situation in which, while the Secretary of State is considering the scheme, individual families will be considering day by day, week by week, whether to take one of the most important decisions in their lives: whether to buy their house or to continue to rent it. On the day they decide and negotiations for purchase begin, steps would have to be taken to arrange for the removal of that property from the transfer scheme. What administrative chaos there would be if, as the Party opposite seem to believe, the number of such families was large.
The Amendment is concerned with a statutory right to be included in a transfer scheme and not one which exists before a transfer scheme exists. And what of the effect on the other aspects of the transfer scheme; the calculation of the outstanding loan debt; the assessment of the financial consequences? How could the district council make sensible provision for the re-deployment of resources both of manpower and finance to enable them to play their part in ensuring that an orderly transfer of houses takes place on the due date? And what would happen to the statutory right of tenants to purchase between the date the Secretary of State approves the scheme and the date it comes into effect? The House has already approved the provisions of Clause 6(4), which states that the power to vary an approved transfer scheme does not include a power to vary it so as to affect any title
1022
to land or any rights, liabilities or obligations relating to land. Local authorities have already indicated that they would hope that the period between approval of the scheme and its coming into effect should be long enough to enable them to complete all the formalities in an orderly way.
What would be the position if a tenant decides at a point during the negotiations that he wishes to withdraw from the purchase? Do we really want the processes of administration to provide for hurried adjustments to schedules and maps associated with the scheme so that reasonable deadlines can be met? I certainly do not suggest that we should deny any person the right to change his mind during the negotiations to purchase. For a number of reasons negotiations might be protracted and might not be completed in time. If the property were then to be included in the transfer scheme, then on the date specified in the scheme the tenant would cease to be a tenant of a dwelling house managed by a new town corporation and it would appear that, as a result, the statutory right to buy would no longer exist. If, on the other hand, the property were to have been excluded from the transfer scheme and the sale is not completed at all for any one of a number of reasons, the development corporation could be left with the ownership of a number of dwellings dotted here and there which would have to be held until a further transfer scheme passed that ownership to the local authority on outstanding loan debt terms.
I suspect that I could go on and on demonstrating that, even if the principle of a statutory right for tenants to buy houses provided for rent in the public sector were established by legislation, there would be a serious case for providing for the suspension of that right when a transfer scheme under the provisions of the legislation we are discussing was about to take place. I know how keenly the Party opposite feel about the right of tenants to buy their houses, and I do not criticise them for so obviously trying to make political capital out of the present opportunity to apply their philosophy to some tenants in some places from time to time. But I beg your Lordships to acknowledge that, in the context of a relatively complex procedure to secure the transfer to the district councils, on

1023
outstanding loan debt terms, of rented homes in new towns nearing completion, these Amendments cannot be accepted.
My Lords, I must emphasise once again that the Government do not deny that it is the very natural aim of many people to own their own homes. It is also our duty to see that those who do not wish to do so or cannot afford to do so are not deprived of a decent home to rent at a price they can afford. The Government are firmly convinced that the right way to go about increasing owner-occupation is not by an arbitrary statutory right to purchase for certain tenants in certain places at certain times, as these Amendments propose, but pragmatically, town by town, according to the balance of supply and demand.
I told your Lordships at Committee stage about my right honourable friend's discussions with the chairmen of new towns on 12th July and his proposals for the resumption of sales in new towns. These proposals—which were subsequently embodied in my right honourable friend's letter to the chairmen, to which I also referred in our earlier debate—have been welcomed by the chairmen of new towns, and we remain convinced that this is the right approach. I ask your Lordships to reject these Amendments and to let this Bill proceed as quickly as possible on to the Statute Book, so that the first transfers of our oldest new towns can go ahead.
6.41 p.m.
Baroness YOUNG: My Lords, by leave of the House, may I say that I am most grateful for the support of the noble Earl, Lord Kinnoull, the noble Baroness, Lady Macleod of Borve, and the noble Lord, Lord Sandys. I am very grateful to the noble Baroness, Lady Stedman, for the trouble she obviously has taken over my Amendments, and over this very important issue that has divided our Parties. I am glad, too, that she has not argued her case on drafting defects, which I accept, and to which my attention has been further drawn, for the fact is that if the Government wish to do what we wish to do, they would, indeed, draft their own Amendment, and it would be correct. I am always comforted at the number of times Governments have to correct their drafts, because it indicates that perhaps they did not get it right first time, either, but I shall not make a point of that.
1024
My Lords, I think it is only fair to the House to reply to the points made by the noble Baroness. We are not in favour of a statutory right because we think it will increase flexibility, although the only way, so far as I can see, of breaking the current housing log jam is to enable tenants to buy their houses. As I have indicated before, council tenancies are not a flexible arrangement. Once you are in a council house as a tenant, you simply cannot move to another one anywhere, unless you have the good luck to advertise and arrange a transfer. So it will not make any difference to the flexibility of council housing whether or not they are sold; if anything, it will be slightly less flexible, because those who have bought a house will be able to sell it and move somewhere else, and someone else will be able to move in. So it does not make any difference to the waiting list, which is a bogey we have had out many times. People who are tenants remain tenants, and the waiting list will not get shorter if houses are sold. The house is not lost; it simply means one less person on the waiting list when the house is sold. Nor will I accept the argument that we should not lay down in Statute amounts of discount. Of course, if I were in the position of drafting it correctly, I should think that much of this ought to be done by regulation, which could be effected in 1978, in 1980 and in 1985. However, I am not in a position to lay down regulation in this Amendment. That, of course, is the correct way, which the Government could do if they wanted.
My Lords, on the question of dates of transfer and the right to buy, the fact is that the local authority could sell the houses—and a good many local authorities which are Conservative-controlled will sell the houses, whether or not this Amendment finally finds its way into the Bill. I do not believe, therefore, that there will necessarily be two groups of tenants, those who can buy and those who cannot. Of course it makes it more complicated, but I have never believed that in political life administrative convenience should come before a matter of political right for individuals.
I believe that when the Government are capable of making the most complicated arrangements, as we have already heard, for the child benefit scheme, they could certainly work out how to deal

1025
with these council houses in new towns. I do not believe it would cause administrative chaos. I vividly recall that when my own authority first sold council houses, we were assured that it would produce utter chaos when there were a few houses that were sold on a large estate, and the rest were tenancies. It did not produce chaos at all. The new houses that were sold now look very nice indeed; people are pleased that they bought them, and more are queueing up to buy. The administrative chaos which was so confidently predicted did not come to pass, and with the administrators that we have I am certain that it will not come to pass in this case. I believe these are matters which could be dealt with.

CONTENTS

Aldenham, L.

Faithful, B.

Munster, E.

Amherst of Hackney, L.

Falmouth,V.

Newall, L.

Atholl, D.

Gainford, L.

Northchurch, B.

Auckland, L.

Goschen, V.

Northesk, E.

Belstead, L.

Greenway, L.

Nugent of Guildford, L.

Berkeley, B.

Grenfell, L.

O'Hagan, L.

Boothby, L.

Hailsham of Saint Marylebone, L.

Rankeillour, L.

Brougham and Vaux, L.

Hatherton, L.

Redesdale, L. [Teller.]

Caithness, E.

Hawke, L.

Rochdale, V.

Campbell of Croy, L.

Hereford, V.

Romney, E.

Carr of Hadiey, L.

Hunt of Fawley, L.

Ruthven of Freeland, Ly.

Carrington, L.

Hylton-Foster, B.

St. Aldwyn, E.

Cathcart, E.

Inglewood, L.

Salisbury, M.

Colwyn, L.

Kimberley, E.

Sandford, L.

Cork and Orrery, E.

Kinnoull, E.

Sandys, L.

Craigmyle, L.

Lauderdale, E.

Selkirk, E.

Cullen of Ashbourne, L.

Lindsey and Abingdon, E.

Sempill, Ly.

Daventry, V.

Long, V.

Shuttleworth, L.

de Clifford, L.

Lyell, L.

Somers, L.

de Freyne, L.

Macleod of Borve, B.

Strathclyde, L.

Denham, L. [Teller.]

Mancroft, L.

Strathcona and Mount Royal, L.

Digby, L.

Massereene and Ferrard, V.

Strathspey, L.

Dormer, L.

Merrivale, L.

Tenby, V.

Drumalbyn, L.

Monck, V.

Thorneycroft, L.

Elles, B.

Morris, L.

Vivian, L.

Elliot of Harwood, B.

Mottistone, L.

Wakefield of Kendal, L.

Elton, L.

Mowbray and Stourton, L.

Westbury, L.

Emmet of Amberley, B.

Moyne, L.

Young, B.

NOT-CONTENTS

Ardwick, L.

Gaitskell, B.

Pitt of Hampstead, L.

Aylestone, L.

Gordon-Walker, L.

Platt, L.

Beswick, L.

Goronwy-Roberts, L.

Rathcreedan, L.

Boston of Faversham, L.

Henderson, L.

Ritchie-Calder, L.

Bradwell, L.

Houghton of Sowerby, L.

Shepherd, L. (L. Privy Seal.)

Brimelow, L.

Hughes, L.

Shinwell, L.

Brockway, L.

Jacobson, L.

Stedman, B.

Castle, L.

Jacques, L.

Stewart of Alvechurch, B.

Champion, L.

Leatherland, L.

Stone, L.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Strabolgi, L. [Teller.]

Crook, L.

Longford, E.

Vaizey, L.

Davies of Leek, L.

Lovell-Davis, L.

Wallace of Coslany, L.

Elwyn-Jones, L. (L. Chancellor.)

Murray of Gravesend, L.

Walston, L.

Feather, L.

Oram, L.

Wells-Pestell, L. [Teller.]

Resolved in the affirmative, and Amendment agreed to accordingly.
My Lords, I was slightly surprised to hear the noble Baroness, Lady Stedman, criticise me, because we were only allowing a right to certain tenants at certain times and in certain places. I accept that. That is all we can do under the Bill. But she said that she would sell when the balance of supply and demand is right. What is that but selling to certain tenants at certain times and in certain places? In many ways we are in complete agreement, and that is why I feel that I must press this Amendment.
6.46 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 84; Non-Contents, 42.
Clause 3 [Preparation and contents of transfer schemes]:
6.54 p.m.
Baroness YOUNG Baroness YOUNG moved Amendment No. 4:
After Clause 3 insert the following new clause:
"Right of tenants to purchase dwelling-houses
.—(1) A transfer scheme shall include the statutory right for a tenant of a dwelling-house which is managed by a new town corporation, as defined in this Act, to purchase that dwelling-house provided he has been a tenant in a dwelling-house managed by that new town corporation for the three years immediately preceding the purchase.
(2) The purchase price of a dwelling-house mentioned in subsection (1) of this section shall be twenty per cent. below the current market value with vacant possession, a further one per cent. being allowed for each year of tenancy in that dwelling-house up to a maximum of thirty years preceding the period of three years mentioned in subsection (1) of this section, provided always that the purchase price would not be below cost."
Clause 9 [Financial arrangements]:
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 5:
Page 12, line 12, at end insert ("or (7)").
The noble Baroness said: My Lords, I rather hang my head in shame after comments about drafting. The Government have a drafting Amendment to put forward which is purely consequential upon the Amendment made in Committee to Clause 6, to incorporate a new subsection (6A), now subsection (7), into Clause 6. The new subsection makes the same provision in respect of installations which are transferred by a transfer scheme but are on land not transferred as subsection (6) makes in respect of land transferred by the scheme; that is, if they are of a kind which could have been provided under Part V of the Housing Act 1957, they are to be treated as having been so provided, unless the Secretary of State otherwise directs. I beg to move.
Baroness YOUNG: My Lords, we are very happy to accept this Amendment, and I should like to assure the noble Baroness that nobody is more understanding than myself of this alteration.
Clause 17 [Interpretation]:
Baroness YOUNG Baroness YOUNG moved Amendment No. 8:
Page 16, line 10, at end insert:
(" "dwelling-house" means any building or part of a building occupied, or available for occupation, as a separate dwelling").
In the Title:
Baroness YOUNG Baroness YOUNG moved Amendment No. 9:
Line 4, after ("obligations") insert ("to confer upon tenants of dwellings the interest in which is to be transferred, a right to purchase them").
Then, Standing Order No. 43 having been suspended, pursuant to the resolution:
Baroness STEDMAN: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Baroness Stedman.)
On Question, Bill read 3a, with the Amendments.
Baroness STEDMAN: My Lords, I beg to move that this Bill do now pass, and in doing so may I offer my appreciation and thanks to the noble Lords and the noble Baroness opposite for the courteous way in which they have dealt with us during the passage of this Bill.
Baroness YOUNG: My Lords, may I reciprocate that, and say that it has been not only a pleasure but instructive to be with the noble Baroness, who is so knowledgeable about new towns. I think we all appreciate that very much.
On Question, Bill passed, and returned to the Commons.

BRITISH RAILWAYS BILL
Reported from the Unopposed Bill Committee with Amendments.