Lords Sitting of 27 July 1976

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Derby.

TORTURE OF PRISONERS
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action has been taken to establish international supervision of the implementation of the Convention on Civil and Political Rights, Article 7, to prevent torture of prisoners, either through the Human Rights Committee of the United Nations or by authorising the International Red Cross to investigate and report.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, implementation of the Covenant on Civil and Political Rights will be supervised by the Committee on Human Rights which will be formed by election on 20th September. It is our firm intention to do all we can to ensure that the Covenant will be implemented effectively and that the process of implementation will be started without undue delay. To this end we wish to see the formation of a strong and impartial committee capable of making the Covenant an effective instrument against torture and other violations of human rights.
Lord BROCKWAY: My Lords, while appreciating that Answer, may I ask the Minister whether he can say, first, if it is likely that the United Kingdom will be represented on the United Nations Human Rights Committee? Secondly, will he say, if we are so represented, whether we shall press for investigation either directly, as on the European model, or through the International Red Cross?
Lord GORONWY-ROBERTS: My Lords, Sir Vincent Evans, the former Foreign and Commonwealth Office legal
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adviser, the principal legal adviser to the Secretary of State and an expert on the Covenant and other aspects of the international protection of human rights, has agreed to be the British nominee for this committee. We naturally hope that he will succeed in the elections which will be held on 20th September. As to the second supplementary question which my noble friend put to me, I do not rule out, and I am sure that Sir Vincent, if he is successful in the election, will not rule out, the two possibilities which my noble friend has put to us this afternoon.
Baroness EMMET of AMBERLEY: My Lords, while thanking the Minister for that answer, may I ask whether he is aware that those of us who have supported the United Nations, having been there, and the Red Cross in their humanitarian and international efforts, really cannot understand why, on this particular question which is of supreme importance and interest to everybody, the United Nations could not approach the Red Cross, who I am quite sure would respond, with a view to having some immediate attention given to this problem?
Lord GORONWY-ROBERTS: My Lords, I agree with the noble Baroness to the extent that the committee which will be set up under these arrangements will of course be free to consider means whereby the ICRC and any other organisation—one can think of a number of others—may be usefully engaged in the process of implementing the Covenant. I do not think it is possible for any member country, including our own, to overstrain its locus standi to the extent of pressing this point unduly, but I agree with the noble Baroness that the Committee is perfectly free to consider the way in which the ICRC and other organisations can be used, by agreement, to promote the objectives of the Covenant.
Lord PAGET of NORTHAMPTON: My Lords, in the light of all our experience, and particularly of our recent experience, does the Minister seriously envisage the possibility of the United Nations appointing an impartial committee?
Lord GORONWY-ROBERTS: Yes, my Lords.
Baroness ELLES: My Lords, would the Minister encourage our nominee, if he is elected, to get as many individual petitions as possible under the optional protocol, as that might be the only way, in fact, of dealing with this particular problem and of avoiding political backlashes by certain political Parties in various States?
Lord GORONWY-ROBERTS: Yes, indeed, my Lords. Assuming, of course, that Sir Vincent is in fact elected—and I am sure the noble Baroness and I would agree that, although he would be a nominee of this country, he would not represent this country—it would be a very strong suggestion from us that for the general purposes of the committee this would be a very good addition indeed. I am quite sure that Sir Vincent Evans, backed by the view of Her Majesty's Government, would have very much in mind what the noble Baroness has said.
Lord GEORGE-BROWN: My Lords, may I raise a point? Sir Vincent Evans I know very well—a reason, possibly, to put in a black ball—but since the present Government, a member of which is the Minister of State, who, alas!, as Minister of State when I was Secretary of State—
Several noble Lords: Question!
Lord GEORGE-BROWN: The Minister may like to recall that the present Government in this country are not really paying much regard for the rights of individuals—
Several noble Lords: Question!
Lord GEORGE-BROWN: My Lords, every question needs a preamble.
Several noble Lords: No!
Lord GEORGE-BROWN: My Lords, would the Minister please convey this question to the present Secretary of State? Since we do not ourselves regard the rights of individuals as pre-emptive, how is Sir Vincent Evans going to persuade this committee, if he ever gets elected?
Lord GORONWY-ROBERTS: My Lords, Sir Vincent Evans, if he is elected, will have at least as much power in the committee to persuade it on the appropriate modalities and decisions as any other member—rather more, I think, for he
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is internationally regarded as an outstanding expert on this type of question. I regret to note my noble friend's reference to our otherwise constructive co-operation at the Foreign Office. I restrain the temptation to translate his personal remark into one somewhat as follows: that he was Secretary of State, alas! when I was Minister of State.
Lord HAILSHAM of SAINT MARY-LEBONE: My Lords, is the noble Lord aware that Sir Vincent Evans is very highly regarded on this side of the House and in public? Is he also aware that, whatever our political differences may be, we have great respect and affection for the Minister himself?
Lord BROCKWAY: My Lords, while we all hope that the British nominee will be elected, could the Minister tell us something about the method of election to this committee: how many candidates there are, and who elect them?
Lord GORONWY-ROBERTS: My Lords, I should be very glad to impart this information to my noble friend if he would put down a separate Question. It is a very detailed answer that I have in mind to that question.
Lord SLATER: My Lords, is my noble friend aware that a number of questions have been asked in regard to this issue, and that the nominee who has been mentioned—he has not yet been elected, so we understand from the reply from the Minister—whoever he may be, shall have to take responsibility on that committee and to speak as an individual on the committee? Are we going to place him in shackles before he goes into the committee room to debate and discuss the major issues before that committee, which will have to arrive at some form of decision?
Lord GORONWY-ROBERTS: That, my Lords, would be exactly the position.
Lord CARADON: My Lords, would my noble friend agree that this is a much wider question than one of instructions to be given to a member of our committee, and that the essential question is that already raised; that is, the capacity of the United Nations to provide that there should be investigation for an established

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complaint from an individual as there is in Europe at the moment? Should it not be that our Government in this vital matter, with the evil of torture spreading through the world, should be prepared to take the lead on the main question of principle?
Lord GORONWY-ROBERTS: Yes, my Lords, I entirely agree that in so far as it is possible for the Member States to take an initiative on this matter above all others, there is much force in what my noble friend has said. I shall be conveying what he has said to the Secretary of State. If we are fortunate to have this eminent international jurist on the committee, I think that we shall be the better positioned perhaps to promote the objects which my noble friends have in mind.
Baroness ELLES: My Lords, despite the sentiments which the Minister has expressed—sentiments which, I am sure, are shared by the whole House—would he kindly confirm that the election of Sir Vincent Evans, if he succeeds, will be entirely in his own individual capacity and that he will not be under instructions from any Government?
Lord GORONWY-ROBERTS: Exactly, my Lords. It is a United Kingdom contribution in the form of, as I have said, an eminent jurist, one of great experience and great sympathy in these matters. We are very fortunate to be able to put forward his name. We recognise, of course, that although his background will be the British Foreign and Commonwealth Office, nevertheless he will act, as the noble Baroness has said, as a general member of this committee. Knowing that his background is so impeccable, we shall be completely satisfied if he acts in that capacity.

MEMBERS OF PARLIAMENT: PENSIONS
2.48 p.m.
Lord BOOTHBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have received any further recommendations from the Boyle Com
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mittee regarding pensions for ex-Members of the House of Commons; and, if so, what they were.
The LORD PRIVY SEAL (Lord Shepherd): My Lords, as my right honourable friend the Lord President of the Council announced in another place on 12th July, the Top Salaries Review Body has submitted a further report to the Prime Minister which should be published within the next few days. I think that it would be preferable to give all concerned the opportunity of studying the report.
Lord BOOTHBY: My Lords, arising out of that Answer, may I ask the noble Lord the Leader of the House whether he is aware that the House of Commons, during the last 10 years, has repeatedly raised the salaries and allowances of its Members—and, indeed, did so last week—whereas there are quite a number of people who served for many years in the House of Commons before 1964 at salaries which nothing like covered expenses, and with no allowances at all? Is he also aware that they get no pension at all and some of them are living in comparative penury? May I ask him whether he is further aware that I have had representations from Members on both sides of both Houses of Parliament asking me to do my best to bring this scandal to an end? Finally, may I ask whether he will ask Lord Boyle to hurry up? Otherwise we shall all be dead—which is what, I suppose, they want.
Lord SHEPHERD: My Lords, I am not too sure about that. The noble Lord has persistently carried out a campaign on behalf of many of his colleagues who served for many years in another place but who had left the other place before the pension arrangements came into force. This matter was once referred to Boyle. It was because of the pressures which were placed upon me by other colleagues in another place that the matter was again sent to Boyle. As I have said, the report has been received. It will be published in the next few days and then there might be an opportunity for considering it, either in your Lordships' House or in another place. I hope that the noble Lord, Lord Boothby, will recognise that this, at the end of the day, is a matter for the House of Commons.
Lord POPPLEWELL: My Lords, can my noble friend tell the House whether the Boyle report, which is to be submitted within the next two or three days, will affect Members of this House? For two years or so, Members have been promised that Boyle is considering matters affecting certain allowances for Members of this House, and each time an interim report has been issued by Boyle the membership of this House has been the missing link. Will we be included on this occasion?
Lord SHEPHERD: My Lords, if my noble friend is referring to the system of expense allowances, the answer is, No. That report has yet to be received. Clearly, any recommendations by Boyle regarding the pensions of ex-MPs will apply to those who are also Members of this House.
Lord JANNER: My Lords, returning to the Question asked by my noble friend Lord Boothby, if the report is coming out within the next few days, does not that mean we shall not be able to discuss it until after the Recess? Is there a possibility of some method being found whereby, if the report is in favour—most of us hope that it is—of pensions being given to those Members, something can be done before the House resumes?
Lord SHEPHERD: My Lords, I cannot anticipate the report. Clearly, this is a matter which would need to be considered by both Houses. We hope to rise for the Recess on Thursday; another place are sitting next week. I cannot believe that we shall be able to debate this report and take a decision by that time.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that I can well understand Boyle settling what any rate might be if any rate is settled? However, I should think that the principle of whether something ought to be done is a matter for the Government, not for Boyle.
Lord SHEPHERD: My Lords, of course it is a matter for the Government, and the reason why the Government sent it to Boyle was because there is a deep dilemma about this matter. If the principle were accepted that Members of Parliament who had left another place before the
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pension scheme became operative and had made no contribution, should suddenly be brought into the scheme, the ramifications would be immense throughout the country, or else Members of Parliament, whatever their experience or length of service, would be treated differently from the general public. If we get into a matter of principle, then things become difficult.
Lord DAVIES of PENRHYS: My Lords, could my noble friend tell me why a Member of Parliament is paid 11·8p per mile car allowance when a Member of the House of Lords, using the same car, has an allowance of 10·2p per mile?
Lord SHEPHERD: I could, my Lords, but I will not because it does not arise from the original Question on the Order Paper.
Lord BALFOUR of INCHRYE: My Lords, the Minister referred to those who have made no contribution. Can he explain to me what happened to the £30 a year which the noble Lord, Lord Boothby, and many other noble Lords, subscribed for many years towards Members' pensions? We have never seen any of it or heard anything more about it.
Lord SHEPHERD: My Lords, the noble Lord, having been in another place, has had a privilege I have not shared. He will be aware that the contribution which he and his noble friend made was to a fund which was set up to deal with hardship to Members and their widows and existed before the pension scheme was brought into operation. Therefore, I suggest to the noble Lord that he checks his figures before, if I may say so, a sense of allegation of unfairness is brought in.
Lord INGLEWOOD: My Lords, reverting to the reply to the previous question, regarding the contribution to the new scheme, may I ask whether the noble Lord can confirm that the contributions to the new scheme in no way pay for the pensions? The contributions are simply a small fraction. Can the noble Lord tell us to what extent it is funded as a result of these contributions, and how much is funded by direct contribution from the taxpayer?
Lord SHEPHERD: My Lords, I do not have those figures with me. I will communicate with the noble Lord on that. It is in line with what is normally contributed by persons in an occupational pension scheme. I will provide the necessary material for the noble Lord. My Lords, we have spent 18 minutes on two Questions.
Several noble Lords: Hear, hear!
Lord SHEPHERD: Fortunately, my Lords, for once I have your Lordships with me. Next Question!

BERMUDA AGREEMENT: RENEGOTIATION
2.55 p.m.
The Earl of LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they consulted the British air transport industry before calling for renegotiation of the Bermuda agreement.
Lord ORAM: My Lords, the decision to seek renegotiation was taken in the national interest to improve our balance of payments. The Government keep in close touch with the British air transport industry and, although it was not directly consulted, the airlines most concerned were informed prior to the announcement. Now that the need for confidentiality is passed, consultations have been held at senior level with both British Airways and British Caledonian.
The Earl of LAUDERDALE: My Lords, in thanking the noble Lord for that reply, may I ask whether he does not consider that very serious interests were at risk in the airlines being informed instead of being consulted before these negotiations were entered upon?
Lord ORAM: My Lords, the Government were in touch with the airlines concerned and the Government were fully informed of the problems and needs of the airlines in the North Atlantic market. It was the decisions on timing and tactics in
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relation to the renegotiation of the treaty which were essentially for the Government to take.
The EARL of LAUDERDALE: My Lords, in thanking the noble Lord for that answer may I ask a further question? Is he not aware that British Caledonian have made it clear that they were simply told 24 hours before the announcement, and that this announcement put at risk the licence they already had received from the Civil Aviation Authority to inaugurate a service to Houston and Atlanta next autumn?
Lord ORAM: My Lords, I know there is some dissatisfaction in the quarter to which the noble Earl refers. I think the principal need for us now is to have an eye on the future. British Caledonian are fully with the Government about the need for the renegotiation, and the Government are well aware of the needs and hopes of British Caledonian, so I hope the noble Earl will agree that we should look forward to the negotiations in a positive spirit.
The EARL of LAUDERDALE: My Lords, I appreciate the noble Lord's answer and the style in which it is given. Would he consider asking his right honourable friend to press that the question of the service to Atlanta and Houston might be treated outwith the renegotiation of the Bermuda agreement proper, otherwise that prospect will be at risk by the very fact of having the renegotiation?
Lord ORAM: My Lords, I doubt whether it could be taken as a separate issue. It is one of the main parts of the negotiation. I recognise that the year that lies ahead is a short period. Nevertheless, as I told the noble Earl last week, the preliminary meetings have been satisfactory and we feel that in the coming six months a good deal of isolating or identifying the issues will take place and we hope that the two routes can be negotiated in time for British Caledonian's plans to take effect.
Lord ORR-EWING: My Lords, is the noble Lord aware that there has been a recent Government statement that they believed in the mixed economy, and a mixed economy entails equal and fair

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treatment for those in the public sector as well as those in the private sector? Is he further aware that it is not fair and equal treatment if they consult British Airways and merely inform British Caledonian? This is not fair treatment as advocated in the recent statement; and there was the recent example in the case of Laker Airlines as well. The Government are very vulnerable on this point. I hope he will put it right at the earliest opportunity.
Lord ORAM: My Lords, in a mixed economy I accept the need for fair treatment of all sectors of it, But a point which I think the noble Lord misses in this connection is that the Bermuda agreement deals with scheduled flights and British Airways were the only airline operating scheduled flights. So there was a distinction in relation to the two airlines in that respect. But reverting to my point about looking to the future, the needs of both airlines are very much in the minds of the negotiators, and I hope that we can all use our efforts in the interests of both sectors of the airline industry.
Lord MERRIVALE: My Lords, will the Minister agree that the negotiations are likely to turn on the imbalance between the British and United States shares of traffic, the designation of more than one United States airline on a route and "beyond homeland" traffic rights? Also, in view of the contentious issues involved, will the noble Lord agree (I assure the noble Lord, Lord Shepherd, that I am not reading at the moment) that these negotiations are likely to be very protracted and it therefore seems highly unlikely that, as was laid down in the White Paper of February, British Caledonian will get these rights as from next autumn, so it would be better if the issues were taken separately?
Lord ORAM: My Lords, I accept that there are tough negotiations ahead, and I merely repeat that we fully intend to negotiate on behalf of British Caledonian in respect of the Houston and Atlanta routes. The agreement has been working to Britain's disadvantage, which is the reason why we believe it should be renegotiated. When I say "Britain's disadvantage", I mean the whole of our
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airline industry, and I do not see a possibility of separating out one interest in what the noble Lord himself agrees to be a complicated series of negotiations ahead.

DISABLED HOUSEHOLDERS AND RATING RELIEF
3.2 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will introduce the necessary amendments to the relevant Acts for England and Wales and for Scotland to allow appropriate rating relief through reduced assessments when disabled householders have had to make alterations to their dwellings, lowering their value, to suit wheelchairs or other essential equipment.
Baroness STEDMAN: My Lords, no amendment to rating legislation is needed to provide rating relief in the circumstances mentioned in the noble Lord's Question. If the works carried out by a disabled householder reduce the letting value of his dwelling, that reduced value would become the basis of the rating assessment.
Lord CAMPBELL of CROY: My Lords, I am grateful to the noble Baroness for that Answer. But is she aware that the interpretation of the present law proved exceedingly difficult in cases heard earlier this year? The Court of Appeal decided in one way and your Lordships' House, in its judicial capacity, decided in the other. Further, the noble and learned Lords concerned criticised the wording of Section 45 of the General Rate Act as ambiguous and labyrinthine. Since the costs of encouraging severely disabled persons to live in their own homes are infinitesimal compared with the costs of keeping them in hospitals or institutions, will the Government give high priority to short amending legislation to deal also with cases where the value is not reduced?
Baroness STEDMAN: My Lords, I accept all that the noble Lord has said about the recent judicial pronouncement, and it has certainly raised problems for

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the Department. The extent of the relief is the matter which was relevant to the decision of the House in the Van Dyke case. The Government are now examining the implications of the judgment to decide whether the existing position needs to be legislated for. This is a matter between the Inland Revenue and the Department of the Environment. Both Departments are now working together, are taking counsel's advice and my right honourable friend in another place has promised a Statement very shortly.
Lord WADE: My Lords, while it is true, in theory, that the lowering of value should lead to reduced assessments, will the noble Baroness agree that it is a very slow and hazardous process, and would it not be more helpful to disabled persons if some form of direct grant could be made in these cases?
Baroness STEDMAN: That, my Lords, is another question.
Lord CRAWSHAW: My Lords, can the Minister answer the second part of my noble friend's supplementary question, and take it from me that disabled people would be greatly encouraged and enabled to live in their own homes if they had some kind of relief in this direction, instead of being put in places maintained at public expense where they indirectly obtain rating relief?
Baroness STEDMAN: My Lords, Section 45 allows for certain relief on structures that are supplied for the accommodation of invalid chairs or other vehicles, for structures supplied to persons under the National Health Service for the prevention of illness, for structures supplied by local authorities for the welfare of the blind, deaf and dumb and structures of that kind. Section 45 also provides that even if the improvements enhance the rateable value, that is not taken into account when the assessment is made. But I would ask noble Lords whether they would wait for the review which is being carried out by the two Departments, and for my right honourable friend's Statement.
Lord GOODMAN: My Lords, in view of the inevitable delays before the administrative question is resolved, will the noble Baroness ensure that the local rating authority is encouraged to
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proceed on the basis of her first Answer, which is to give such allowances pending the question being resolved. I am sure she will agree that, as has already been said, it is of immense importance that disabled people should be encouraged to stay in their own homes. This is not only a question of economy; it is a question of humanity.
Baroness STEDMAN: Yes, my Lords.

PARLIAMENTARY AND OTHER PENSIONS AND SALARIES BILL
Brought from the Commons endorsed with the certificate of the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read 1ª, and to be printed.
RENT (AGRICULTURE) BILL
Brought from the Commons; read 1ª and to be printed.

TRINIDAD AND TOBAGO REPUBLIC BILL [H.L.]
Lord GORONWY-ROBERTS: 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.—(Lord Goronwy-Roberts.)
On Question, Motion agreed to.
Then, Standing Order No. 43 having been suspended, pursuant to the Resolution, Bill read 3ª, and passed, and sent to the Commons.

FINANCE BILL
3.8 p.m.
Lord JACQUES: My Lords, I beg to move that this Bill be now read a second time. The practice of the House in relation to the Finance Bill varies from year to year. More often, we take it formally and we have a Motion on the Order Paper which gives rise to a wide-ranging debate on economic affairs. On this occasion, we have had general debates on economic

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affairs in June and again in July, and no such Motion appears on the Order Paper. Another practice of the House is to deal with the Second Reading in the usual way rather than in the formal way, when there has been a fundamental change in taxation. For example, last year when the capital transfer tax was substituted for death duties there was a full-scale debate on that aspect of the Bill. On this occasion, I would say that the fundamental change in taxation is the development land tax. That is the subject of a separate Bill and it has already been debated by the House. Therefore, left with the assumption that the House, having heard the Statement of my right honourable friend last Thursday, wants an opportunity of discussing that Statement, and that tacking will be discussed incidentally, I shall try to lead the debate along those lines.
My right honourable friend the Chancellor of the Exchequer concluded that sufficient progress had been made with the annual survey of public expenditure to enable some conclusions to be reached, and having reached those conclusions he felt that it would be to the advantage of all concerned if an announcement were made before the Recess. The studies that have taken place since the Budget have shown that recovery, both worldwide and in the United Kingdom, is moving at a rather faster rate than was contemplated at the time of the Budget. For example, during the next 18 months it is anticipated that the gross domestic product of the United Kingdom will increase at something like 5 per cent. per annum; that exports will increase at 11 per cent. per annum; and that manufacturing production will increase at 9 per cent. per annum. All these figures are somewhat higher than those that were contemplated at the time of the Budget.
On the employment front, the number of vacancies continues to increase, although there have been fluctuations. Short time working is declining; overtime is increasing; and by reason of the facts that I have given we expect the unemployment figure to fall before the end of the year. The growth of the money supply has been kept under control, and during the year to mid-June M3s rose by only 9 per cent. The money supply continues to exert a downward pressure on prices. During the last year the rate of inflation
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has been reduced to one-half, thanks mainly to the pay agreement in the first year and the £6 limit. The restraint in the second year of an average pay agreement of 4½ per cent. is more severe and we expect an even greater effect.
In the meantime, however, the depreciation of sterling by 12 per cent. since March and a slight movement in the terms of trade against manufacturing countries are beginning to affect our retail price index. It is anticipated that instead of having a single figure rate of inflation by the end of the year, the rate is likely to be in the neighbourhood of 12 per cent. In 1975 the external current account deficit was halved, but it was still £1·7 billion. In the short term, the depreciation of sterling tends to increase our deficit; but in the long term, with the growth of exports and the substitution of our own goods for imports, it should greatly reduce our deficit. This, I believe, is the nub of the question. We must plan now in order drastically to reduce our external current account deficit next year.
By deficit budgeting and special grants we have saved 250,000 jobs or training places during the depression, but as recovery proceeds it is vital that we should gradually reduce our deficit on public expenditure. This must be reduced so that private savings are made increasingly available for stock building and investment by the private sector, otherwise we risk an excessive growth in the money supply. This we ought to avoid at all costs. An excessive growth in the money supply next year in order to finance private investment, even manufacturing investment, would refuel inflation and almost certainly lead to a sucking in of imports. Then we should be back to the well known pattern of "stop-go".
We have taken firm action in the current year to prevent public spending from exceeding the planned limits. At the time of the Budget it was expected that the amount of the deficit for the current year, 1976–77, would be £12 billion. We can now say that it will be somewhat less; namely, £11.5 billion. Recovery alone will reduce this deficit to £10.5 billion next year, but we consider that that is not enough. Accordingly, my right honourable friend in the other place made recommendations to Parliament in order to reduce the deficit to £9 billion.

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If we make a study of the Statement I think we can come to the following conclusions so far as the cuts are concerned. First, we have preferred selectivity rather than an automatic cut across the board. We believe that there must be a certain amount of flexibility in a manoeuvre of this kind. Secondly, in accordance with our often declared policy of giving the maximum protection to the least well off in the community, the main social benefits—for example, pensions—will remain untouched. In particular, the up-rating in November will take place. Thirdly, in keeping with the part we have taken in the Councils of Europe and in the Councils of the United Nations we shall not cut the aid to underdeveloped countries. Fourthly, the cuts are devised to have the minimum effect upon employment and prices. Fifthly, the cuts are so devised that our programmes, particularly the programmes in education, in the National Health Service and in defence are not seriously impaired. Finally, the cuts are designed to have the greatest effect upon those industries which are likely to benefit from investment by the private sector.
There are a number of points which are of special interest. I think that all Members of the House will be pleased to see that, despite the stringency, we plan to give further aid for the employment of young people and that an announcement will be made on this matter before the Recess. Secondly, the lady Members of the House will be glad to see that the regional employment premium rate is to be the same for both men and women. Thirdly, I am very pleased to see, and I am sure that the noble Baroness, Lady Seear, will also be pleased to see, that we have provided for a contribution to any scheme for the collective funding of apprenticeships. The noble Baroness may tell me that it is too little and too late; but I would point out that we have spent vast sums of money upon protecting apprenticeships during the depression, that we have more than doubled our provision for training in real terms, and that we have made increased contributions to the scheme which aids the mobility of labour. Therefore I suggest that it is not too little and that it is not too late; it is additional.
Fourthly, there will be a restriction of unemployment benefit for those who are
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in receipt of substantial occupational pensions. I am sure that noble Lords on this side of the House, and I hope noble Lords in other parts of the House, will be pleased to note that this change is being made. Unemployment benefit is to help temporarily those who are seeking work. Many of those who have retired early and who are in receipt of substantial occupational pensions are not seeking work and should not, in any fair system, have unemployment benefit. I am very glad that action has been taken to make it more difficult for them to get the benefit.
Lord DRUMALBYN: My Lords, if I may intervene I should like to ask the noble Lord whether it is not a condition of receiving unemployment benefit that they should be seeking work, and does this not mean that the rules are not being strictly applied?
Lord JACQUES: My Lords, it is sometimes easy to have rules and more difficult to apply them. This is one of those cases. I can pinpoint many cases where there was no excuse whatever for unemployment benefit being paid. I can even quote the case of a town clerk who retired early.
Lord HOUGHTON of SOWERBY: My Lords, if my noble friend will allow me, may I ask this question. For the same contributions, does not the person in receipt of an occupational pension have the same contractual right to unemployment benefit as anybody else?
Lord JACQUES: My Lords, unemployment benefit is intended for those who are genuinely seeking work. Many of these people are not genuinely seeking work and I am pleased that the contract is being changed so that they will not receive the benefit. This is the one thing I am prepared to defend with my life. I retired at 60 and between the ages of 60 and 65 I happily paid the contribution rather than claim any benefit because I would not genuinely have been seeking work, and what I can do other people can likewise do. Many of them are better off than I have ever been. The total saving as a result of these cuts is £1,012 million and this will reduce the public sector borrowing requirement by £800 million.
I come now to the second important factor in the package which was put forward by my right honourable friend

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and that is the increase of two percentage points in the employers' contribution to National Insurance. I think all experience has shown that when there is a general charge for the whole of industry it does not take long for that charge to be reflected in market prices. That is certainly my experience in managing a business. Therefore, I would expect that before long it would be the consumer who pays, and consequently we have said that we would expect this to affect the retail price index by something like 1 per cent. Secondly, I would point out that the 12 per cent. depreciation of sterling since March will give adequate protection against competition from imports and it will also protect our export competitiveness.
Next I would point out that this change will bring us more into line with the other Member States of the EEC. Almost without exception the other Member States have higher contributions and taxes on employers in proportion to their total taxation. This is another step to bring us into line with them. The total of this saving will be £910 million and will reduce the PSBR by £700 million, and the £700 million plus the £800 million which I have just mentioned gives the one and a half billion pounds required. The PSBR as a percentage of the gross domestic product was 10 per cent. in 1975–76. In the present year it is 9 per cent. As a result of this package, next year it will be 6 per cent., and if we exclude the on-lending to public corporations and to the private sector for their capital programmes then the percentage of the PSBR to the gross domestic product is only 6 per cent. in the current year and as a result of this package it will be reduced to 3 per cent. next year.
I wish also to point to some of the changes which are being made in the Price Code since we last considered it only a few weeks ago. The proposed allowance for investment, which was being raised from 20 per cent. to 35 per cent., is now going to be raised to 50 per cent. So that step by step this Government have increased the allowance for investment from nothing to 50 per cent. in the Price Code. There is a similar allowance in respect of depreciation. Your Lordships will remember that when we considered the White Paper, The Attack on Inflation earlier this month it was stated that, for
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the purposes of the Price Code, if a company had revalued its assets in its balance sheet then depreciation would be based upon the revaluation. If it had not so revalued and was taking depreciation at the historic cost it would, for the purposes of the Price Code, be increased by 30 per cent. It is now announced that it will be increased by 40 per cent.
I should like to say a word to those who feel that no action should be taken other than import control. First, I would point to the fact that the reduction in the PSBR from recovery alone would not be enough. We must have further saving than that if we are to be sure that private savings are going to be available for the financing of stockbuilding and for reinvestment, bearing in mind that it is the Government's intention under all circumstances to keep the growth of the money supply under control, because otherwise we believe it would refuel inflation and suck in imports.
Secondly, I would point out that when the exchange rate of the pound sterling was fixed there was a case for having some general control of imports in a time of depression. Now we have the floating pound which automatically gives some protection. There is therefore much less case for having general import control in a time of depression. Furthermore, it would invite retaliation in the way it has never done before if we were to have such control in addition to the automatic protection which the floating pound gives. With the floating pound any protection of imports must be on a selective basis and in this connection the present Government have a very good record. We have negotiated agreements which give selective protection against imports in textiles, in footwear, in wood and paper products, in printing machinery, clocks, pottery, portable radios, electrical components and so on. In all those cases we have negotiated agreements which will protect our industry. In addition, in his Statement my right honourable friend specifically said this:
"We are anxious to discuss with both sides of industry the need for any further action there may be."
Finally, I should like to say a word to those who believe that we should have taken much stronger action. I believe such people undervalue the Social Contract; I believe they undervalue the significance of the pay agreements which

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have flowed from the Social Contract. I believe also that they undervalue the better industrial relations which have accompanied the Social Contract. Without those this country would have been in a much more serious economic position than it is today. Do not let us sacrifice them. I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2ª—(Lord Jacques.)
3.29 p.m.
Lord CARR of HADLEY: My Lords, this debate is of course formally on the question of granting a Second Reading to the Finance Bill, but even before knowing about the Chancellor's measures we had indicated that we would like this debate to go somewhat wider. Of course, we think it even more important now, and so I strongly welcome and agree with the noble Lord's own speech in which he devoted himself almost entirely to these economic measures. I intend to do the same, but I want to say a few words first about the Finance Bill.
After 26 years in another place it seems strange to have a Finance Bill in front of me and not be able to get at it and seek to amend it. I do not know why we loved doing that because it was a painful and tedious process, but it was some sort of compulsive reaction that Members of Parliament have. On the other hand, when I cannot do that I realise that I am compelled to look at the Bill more as a whole. I am sorry to be rude about it, but when I look at the Bill as a whole the outstanding impression I get is one of sheer incompetence; in the way the Bill was prepared and put together and in the technical failure, "incompetence" is the only word for these initial proposals.
The original proposals outlined in the Finance Bill as introduced by the right honourable gentleman the Chancellor of the Exchequer now look as
though they have been hit by a bomb. True, the TUC clauses, which were originally contingent on a pay-deal agreement, have been passed in their original form. Personally, I welcome that, as I think does the great majority of people. Also, the capital transfer tax changes have gone through more or less in their original form. But I must remind the House that those capital transfer tax clauses were themselves
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evidence of the incompetence of last year's Finance Bill, because they are almost all implementing the changes which the Opposition pressed in last year's Finance Bill, which they were then told by the Chancellor of the Exchequer and his colleagues were either impossible or undesirable, or both.
The two principal appalling sections in which the Government deliberately set out to turn the screws of the tax system on the business sector and on the self-employed—namely, the fringe benefits and the investigation powers—have emerged as barely recognisable as a result of all the Parliamentary blasting they have received in another place. The changes in the fringe benefit proposals have been really beneficial. All I will say in passing is that it is both interesting and healthy that opposition to the original proposals came just as strongly from the trade unions as from the Institute of Directors.
The changes in the snooping powers have also been substantial but not, in our opinion, nearly substantial enough. We still object to them strongly, and I sympathise very much with the feelings of my noble friend Lord Harmar-Nicholls about them. I must not encroach on what will be a separate debate on the Motion of my noble friend Lord Harmar-Nicholls, but may I briefly say now that while I feel that, since the Speaker has given his ruling about the Bill I doubt that it would be wise to proceed against it in this Bill. So far as I understand the matter, I think my noble friend may possibly share that view with me. Nevertheless, I feel strongly, and want to say that I feel strongly, that this House should find an effective way, outside this Bill, of looking into the increase of arbitrary powers of inquiry into the private affairs of citizens in ways which are highly objectionable and dangerous, not just to privacy, but to personal liberty itself. I am not referring just to this Bill nor, let me assure the House, merely to clauses included in Bills introduced by Labour Governments. Both Governments have been slipping down the dangerous path here, and it is time that Parliament—and I hope this House will play a big part in this—brought an end to the process and reviewed how much we should take a step backwards before too much damage is done.
I now wish to leave the Finance Bill, and to turn to the economy in general.

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Before coming to what I wish to say principally, may I comment briefly on two points raised by the noble Lord, Lord Jacques. There is one point about which 1 think I must fire a strong warning shot across his bows. When he started talking about the comparability of the general Government deficit, to use the Chancellor's new phrase, with that in other countries, he said it was now comparable if you exclude our funding to nationalised industries and to private industry. But what an exclusion. To look at the financial arrangements of this country and the appropriate size of the public sector borrowing requirement and to think you can compare Britain with other countries when you have excluded that element—all I can say is, Heaven help us in the running of our economy in future if such an exclusion is to be made.
Lord JACQUES: My Lords, I was really suggesting that it should be excluded when compared with other countries where it is excluded.
Lord CARR of HADLEY: My Lords, what is the scale in other countries compared with the scale here? It is probably excluded in most other countries almost on de minimis grounds compared to here, and if the Chancellor is going to try to make this phoney comparison in future he will not be allowed to get away with it without a lot of comment.
The other thing I want to say, which is important, but which is less fundamental to our whole economy, is with regard to what the noble Lord said about the proposals to deal with people over 60 in receipt of substantial occupational pension schemes. We looked at this when in Government, and I have considerable sympathy with the general approach of the noble Lord, but he surprised me in one thing. I wonder whether he realised what a severe attack he made on the way in which this scheme is administered, because he said in effect that the officials administering this scheme were failing, hopelessly failing, to apply the rule that, in order to qualify for benefit, you should be genuinely seeking work. This is what this country wants to see. The country wants to see that rule applied. We want to see
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it applied, of course, to people over 60, and to everybody, because while this country wants to be generous in helping those who wish to seek work and cannot get it—and I should like to be more generous rather than less generous to those people—we increasingly suspect that we are spending a lot of money subsidising people who are not genuinely seeking work. This applies throughout the age scale, not simply to people over 60 who happen to have occupational pension schemes.
To come to the main issue of the proposals of the Chancellor of the Exchequer, when they were repeated to this House last Thursday I immediately welcomed them on behalf of the Opposition as a step in the right direction. I want to repeat that welcome today. It was becoming unbearable to watch this country's economic strength being allowed to bleed away while the Government stood by, refusing to apply the tourniquet whose use was so obviously necessary to everybody else but them. That is why the country's blood pressure, that is to say, the international value of the pound, has fallen to this terrible, dangerous and unnecessarily low level. Any action to stem the flow was to be welcomed; we do welcome it, and repeat our welcome. But after a few days in which to consider the measures in detail, it is right and necessary that we should judge them more critically. The more one looks at them, the more inadequate and inept they seem to be in the economic terms of both what is necessary to put our economy to rights and what is necessary to restore confidence abroad and for our capacity to do so. I do not want to be a Jeremiah but I am convinced that further action will be necessary; and this action which we have now, having been left to this late hour, is now on its own too late to be anything like sufficient. Moreover, the action is wrong-headed and perverse in several important respects.
In order to form a proper judgment necessary to establish the yardsticks by which to measure what is needed I want to speak simply about one or two certain basic principles. The economic problems facing Britain are, in many respects, very difficult and complex. I assure the House that I will not try to read an economic lecture; I was almost going to say that, thank goodness, I am incapable of doing so. But underlying the complexity there

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is a basic simplicity, which is that as a country we are living far beyond our means. The extent to which we are doing this is horrifying. I had thought that we were borrowing £1out of every £5 we were spending, and I found that terrifying enough. But last week the right honourable gentleman the Prime Minister said that in fact we were borrowing £1 out of every £4 that we were spending. This cannot go on. Every sensible person of whatever political Party in this county knows it cannot go on. To borrow for productive and essential public capital investment is one thing. But we are borrowing on this scale, to a large extent, simply to pay for our current level of consumption and to maintain normal public services at their present level, and this must stop, however painful it is in the short run.
So, my Lords, what do we have to do? Two things, I believe. First, urgently, in the short run we must cut our coat according to our cloth; that is, we must cut down our standard of living to what we can afford. That is the negative and harsh part of it. Secondly, for the longer term, we must take strong and urgent measures to increase our means for the future, so that we can afford to live within our means in the future at the standard we all desire. Action under both headings is necessary, and the Chancellor's measures need to satisfy both those tests. My submission is that they fail to do so.
If we are to meet the second test—that is, if we are to increase our means for the future and create the extra national wealth by which alone we can maintain, let alone improve in the future, our present standard of living—then we must devote more of our resources to exports and investment. It follows that in the short term we must make ends meet by cutting back on our consumption; that is on our everday standard of living. This can obviously be done in two ways, and it is very simple, but I believe we have to talk to the people of this country in rather simple terms if we are to get their backing and understanding. It can be done in two ways: first of all, by restraint on our demands for personal income spending; secondly, by cutting back on the services and benefits provided for us by the State; that is, cutting back what the Government like to call the social wage.
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Of course, our individual personal consumption must make its contribution. Hence the vital importance of restraint in pay increases and therefore of an incomes policy. I criticised severely the Government's irresponsibility in letting pay increases run wild—there was no other description—for their first 18 months in power. That is a direct cause of the present high levels of both unemployment and prices. But for the last 12 months the Government have been dealing with this matter in a serious way which deserves support, and I take this opportunity of reaffirming my strong support in principle for the present incomes policy. It is essential and will remain essential in some form indefinitely.
But restraint in personal consumption cannot bear the whole burden. It would neither be right to make it do so nor would it be practicable to try to make it do so. If we are to make ends meet and at the same time put more of our resources into productive investment and exports, a large part of the cutback must come from the public sector; that is, from what is called the social wage. This is a hard reality, but there is no easy way out, and I am afraid I feel the Chancellor is still trying to dodge it. The Chancellor proposes to reduce expenditure in 1977–78 by £952 million and to increase revenue by £910 million, thus making a crude cash saving on the borrowing requirement of £1,862 million. But out of this crude saving only about £550 million—that is, only about one-third—is in resources of manpower, goods or services absorbed by the Government, and the remaining £1,300 million, or roughly two-thirds, falls exclusively on the private sector, on its profits, incomes, spending, production and employment.
Look at the Chancellor's cuts another way and judge them by the Chancellor's own yardstick. In his Budget speech on 6th April this year the Chancellor said that we can achieve full employment together with external balance:
"…only if we produce a major shift in the use of our resources away from private and public consumption towards exports and investment". —[Official Report, Commons, 6/4/76; Col. 239.]
But the Chancellor's proposals cut over £400 million off public investment while cutting current public consumption by the much smaller figure of £136 million; in other words, the Chancellor in his make-up

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of this package stands utterly condemned by the very yardstick which he himself established only three months ago in his Budget speech.
I would ask you to look at the Chancellor's cuts in another way again; namely, in their effect on employment. The Chancellor estimates that the effect of his measures will add 60,000 to the number of people unemployed by early 1978. Some people say that it will be much more, but let me take the Chancellor's figure of 60,000. I want to ask the Government— and I hope the noble Lord the Leader of the House will deal with this in his reply—where will this unemployment fall, where will this extra 60,000 unemployed fall? I am going to suggest where I believe it will fall, but I specifically ask the Government to break this figure down sector by sector, particularly if they wish to disagree with the version I am going to give.
I do not want to make anyone unemployed in any sector if it can possibly be avoided, but if it is really unavoidable, surely we would all agree that this temporary, desperately sick-making and unpleasant hardship must have a constructive purpose behind it. That purpose must surely be a reduction of employment in the non-productive public sector and lead to an increase in jobs in productive work. That is not to say that work in the public sector is bad in itself; of course it is not. What I am saying is that we are doing more in that sector than we can afford at the moment, and we must get that transfer of resources. In fact, however, the Chancellor's expenditure cuts, so far as I can see, will leave the Civil Service and local government employment virtually untouched, while throwing far the greater part of this extra unemployment on the building and construction industries, which are already severely depressed, at least in terms of future orders.
I say to your Lordships that this is crazy in economic terms as well as being grossly unfair in social terms. Moreover, the other half of the Chancellor's proposals—that is the increase of £1,000 million a year in the taxes on industry—will also cause unemployment, mainly in the private productive sector. It is impossible to quantify, but it is bound to cause some
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unemployment, mainly in the private productive sector. Again I suggest that this is both socially unjust and economically crazy. This part of the Chancellor's proposals is, in our opinion, due to be severely condemned.
As I said earlier, we must now learn to live within our means and cut our coat according to our cloth. We must make the cuts which are necessary in the short term in a way which will encourage the creation of more national wealth in the longer term. To slap an extra £1,000 million a year in taxes on business costs at the present time will have an exactly opposite effect. It is bound to make industry's immediate investment lower than it would otherwise have been, because some of the extra cost is bound to come out of industry's profitability. It is bound to cause some loss of jobs in the productive sector. If we in Britain are to have full employment in the future and to enjoy a standard of living comparable to that in other industrial countries, we really must now make the creation of new national wealth our priority and drop our obsession with redistributing wealth which we have not got. The Chancellor, in my submission, is still failing to do this.
Before leaving the substance of the cuts, may I say in passing that I welcome the fact that there is to be no reduction in the overseas development budget. Although we are faced here at home with having to take cuts in our own standards of living, our own standards of living will still be unimaginably high by comparison with those in the poorest of the Third World countries. I believe on grounds of Christian morality, or any basic morality, but also in the long run on the grounds of our own self-interest as a country, that we must be prepared to make some sacrifice year by year in our own standard of living to try to help, however inadequately, the raising of standards in the Third World.
Finally, moving from the strictly economic impact of the measures, I want to say something about the almost equally important psychological impact on public opinion at home and on confidence abroad. First, on public opinion at home, I am convinced that the majority of people now realise that we cannot go on living beyond our means, that hard measures are necessary, and they will accept and support

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them provided that the Government speak, with complete honesty, and that, however hard the climb back for us may be, they believe that the sacrifice is being demanded and designed for a constructive, hopeful purpose in the long run.
I am afraid that I do not feel, nor do I believe that the country feels, that the Government have hitherto been speaking with complete honesty. It was not honest, for example, for the Chancellor to say so strongly earlier in the year, and in his Budget, that such further expenditure cuts as we are considering now were unnecessary for the next year, when he must have known that they were, or, if he did not actually know that they were, he must have known that the probability for their necessity was pretty high. But to have obtained the agreement of the TUC to Stage 2 of the pay policy on those terms, and then, within a week or two, to start preparing cuts of this size does not, I believe, appear to be talking to the country with true honesty. If some of those people feel instead that they have been the subject of a "con" trick, they are not, I think, altogether to be blamed.
Nor do I believe that large numbers of people will readily accept some of the cuts which will hurt them personally, when they see the Government still increasing expenditure in other ways which they do not want, which they know will not help them as individuals, and they do not believe will help the prosperity of the country as a whole. Take this vexed question of nationalisation. I disbelieve in it; I accept that noble Lords opposite believe in it. But whether you believe in it or not, is this the moment? The Community Land Act is expected to cost £350 million in a full year; the nationalisation of the shipbuilding and aerospace industries, £550 million, making a total of £900 million— almost the total cuts for which the Chancellor is now asking.
Move to smaller areas. In health and social services £20 million is now being cut from the capital spending of the NHS. But £40 million is being added to the cost of the NHS by the abolition of pay beds. Even those who want to get rid of pay beds might prefer to wait a little rather than suffer the capital cuts at the same time.
Lord BROWN: My Lords, may I interrupt the noble Lord? Surely he
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knows the difference between current and capital expenditure? To go on confusing the country by treating them both in the same voice is really as dishonest as he is suggesting the Chancellor is.
Lord CARR of HADLEY: My Lords, I do; it is the Chancellor who does not know the difference. The whole burden of my complaint is that the Chancellor is muddling up the two. The Chancellor is making £400 million of his cuts in capital expenditure and mixing those up with current expenditure, and it is therefore perfectly valid for me to mix the two up together, because if the Chancellor separates them 1 will separate them. I will put to the noble Lord, is it fair or is it not fair to regard as a capital item the cost of nationalisation?
Lord BROWN: Yes, it is.
Lord CARR of HADLEY: Will the noble Lord then admit that some people would rather make some saving on the capital side on nationalisation in order not to have to make some capital sacrifice on the National Health Service, on schools and the like? If we are comparing capital expenditure with capital expenditure, I am quite sure that the great majority of people in this country would rather have more capital expenditure on hospitals and schools, and facilities of that kind, which really matter in their lives, and less capital expenditure on nationalisation.
Lord SHEPHERD: My Lords, if I may intervene, would the noble Lord agree that we ought to square the box? If the noble Lord is right, and to some extent he is right about current and capital expenditure, would he not agree that if shipbuilding companies need to be bailed out by very many hundreds of millions of pounds in order that they be saved, then that would become current expenditure?
Lord CARR of HADLEY: My Lords, I will go so far with the noble Lord as to give him a preview of the speech I may have to make in September, to say that of course I accept that some of that £950 million will have to be spent in any case. But my case is that nothing like as much will have to be spent in order to achieve the necessary results if we did not embark on the full-scale nationalisation not just of the shipbuilding industry,

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which does need help with this money, but also the aircraft industry, which, in my view, does not.
Secondly, may I turn to the question of confidence abroad. The main cause of the collapse this year in the exchange value of the pound has been a chronic lack of confidence by those who have to hold and trade in sterling. I ask myself whether these measures will restore that confidence, and I am afraid I doubt it—at least not for long. I am afraid the early signs in the foreign exchange markets have not been all that encouraging. Why do I doubt it? Partly because of the critical analysis of the economic merits of the Chancellor's measures, which I have just given, and partly because confidence is an intangible asset which is affected greatly by attitudes and impressions as well as by individual acts of policy.
What our overseas creditors and all traders in sterling want is not so much dramatic measures; they do not demand sacrificial offerings from us for the sake of sacrifice. What they look for is evidence of a British Government whose deeds match their words, who know where they are going, and show the determination, willpower and stability of policy and purpose to get there. This is not the impression which has been created by this Government, nor is it being created now. The stubborn pretence for the first half of this year that these spending cuts were not needed, and would not be made, created the contrary impression. The emphasis on these cuts, now we have got them— on cuts in capital expenditure rather than public consumption—create the contrary impression. So does the imposition of a huge extra tax burden on industry. So does the Chancellor's failure to commit himself to a firm, longer-term programme for further reductions in the borrowing requirement beyond the next financial year.
Far from being steady and constant and firm in his policies and objectives, Mr. Healey, as Chancellor, has been a zig-zag Chancellor to exceed all other zig-zag Chancellors that there might have been in the past. Look at some of the examples of his zig-zagging. Take the jigging up and down of the VAT rates, with no stable or sustained industrial or economic purpose behind the changes.
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Take the severe strain on industry's financial resources which Mr. Healey imposed in March 1974, and then reversed eight months later after terrible damage had been done to industry's power to invest. Take the fact that in September 1974 Mr. Healey announced that the rate of inflation had already been cut to 8.4 per cent, and would certainly be within 10 per cent, at the end of 1975, when every informed observer abroad as well at home knew that this was nonsense.
Take, above all, the wild inconsistency of Mr. Healey's attitude towards the importance of the public sector borrowing requirement, which is the central subject of his latest measures. Two years ago he made a major plank of his first Budget his intention to make a major reduction in the previous year's borrowing requirement, which he criticised severely for being too large. But in practice, instead of nearly halving it, as he said he was going to do, he nearly doubled it to £7.6 billion. The following year he increased it again to almost £11 billion. This year he started the year by budgeting for it to be even larger at £12 billion. Now he comes along to reduce it with plans to cut it to a maximum of £9 billion. Of course he is now right, just as he was right in March 1974, but he has been terribly wrong in the interim.
How can people, particularly foreign holders of sterling, large traders of sterling, have confidence, in view of this past record, that this new policy is now to be firmly adhered to and followed through not only in 1977–78 but in subsequent years as well? Death-bed repentances seldom carry much conviction in this world however much they may command in the next, and if the Government really are to carry conviction at home and confidence abroad that they have changed their policy, that they really now are determined that Britain must live within its means, then I believe that the Chancellor—I do not by any means wish to belittle all that he has done or the courage he has shown on some occasions—should look deeply at the example set by his right honourable friend the Prime Minister in November 1967.
Then, too, a Chancellor had struggled hard but had to admit that there had to be a sea-change in economic policy, and he thought it right to resign the Chancellorship not only, or perhaps even mainly, as a

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matter of personal honour (because there was nothing to be ashamed of in what he had been trying to do) but, above all, in order to create confidence at home and abroad that the new policy was the real policy, and in the belief that one could not carry conviction by a new policy unless one also had new management. I say with regret, and not with any animosity, that I believe the Prime Minister and the Chancellor should consider that situation very carefully.
To sum up, my Lords, it seems to me that the cuts in public spending are to be welcomed as a step in the necessary direction but that they are insufficient in size and seriously wrong in their composition. Secondly, it seems to me that the imposition of an extra £1,000 million in tax on industrial and business costs is wrong and very damaging to investment confidence and to productive employment. Thirdly, it seems to me—and this answers the noble Lord's point about the severity— that while the reduction of £1½ billion in the public sector borrowing requirement is probably about as much as could be achieved, or ought to be achieved, in the next single financial year, this should all have been achieved by cuts in spending, without half of it coming from taxes, and also that the Chancellor should have committed himself irrevocably to further programmed reductions in the borrowing requirement in the years succeeding 1977–78.
For all these reasons I feel that the Chancellor's current package is unlikely to be sufficient on its own to re-create foreign confidence on a lasting basis. What we need is not necessarily a more savage cut in total in a single year, but the commitment to a firm programme which promises to reduce our borrowing requirement step by step over the next few years and to bring this about not by increases in taxation, not by cuts in investment, but by cuts in public consumption and by the transfer of manpower and other resources from the non-productive to the productive sector of our economy, accompanied by measures openly and deliberately designed to stimulate the creation of new wealth for the nation, including in particular cuts in our present punitive levels of personal taxation which now affect not just the people at the top of the salary scale but right through the salary scale in all forms and levels of employment.
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With such a firm programme for the next few years, Britain, I am convinced, would climb back steadily, even though slowly, to economic strength and prosperity, including full employment. But, I without it, I fear we shall continue to I slither from one crisis to the next, with high unemployment, a high rate of I inflation, and a standard of living for everyone steadily declining compared with that enjoyed in other major industrial countries. I beg the Government to follow up this first step, which we welcome with the kind of firm programme—an announced firm programme—for the next few years which I believe is essential.
4.4 p.m.
Baroness SEEAR: My Lords, the House will perhaps be relieved that in view of the fact that we have had a number of economic debates in recent weeks I do not intend to give an overall Liberal view of the economic scene, but rather to pick on certain specific points which have not been so greatly emphasised by either of the two noble Lords who have spoken this afternoon, and to ask the Government one or I two, I hope, pertinent questions. Before doing so, I should like to say that the suggestion which is coming perhaps as a Motion later from the noble Lord, Lord Harmar-Nicholls, raises an issue in which we on these Benches are also greatly interested. While we would not go along with the idea of sending this matter to the Committee of Privileges, we believe that it needs investigation, and as the noble Lord, Lord Carr of Hadley, has just said, we are not at all satisfied with the way in which matters of this kind have been developing over previous years.
Before raising the particular issues that I want to talk about this afternoon, I should like to say to the noble Lord, Lord Jacques, how relieved I was to hear today—as last week, when the question of cuts was first raised—that the Government are resisting the advice they have had from some more esoteric quarters of their advisers to bring in import controls. However, I was a little anxious when the noble Lord went on to justify what the Government had already done in the way of import controls as a reason for doing no more. That section of his speech seemed to me much to weaken his protestations that he disapproved of that

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line of advance. When he says that further matters in this area would be discussed with the TUC and with the CBI, I hope the noble Lord will remember that on this matter of import controls it is by no means only the producer interests in this country, be they employer producer interests or employee producer interests, that are concerned with matters of imports; it is also very much consumer interests which are concerned with matters of imports. Are there not a number of occasions, of which this is just an example, on which the consultations they have had with the producer interest should also have been extended to include what consumers wish to have done in this matter as well?
In looking at the Finance Bill in general and the economic issues which lie behind it, it is important to be certain that we are getting the right fundamental analysis as to what our problem really is. The temptation in these situations, all too easily fallen into, is to deal with symptoms of what is wrong with us without getting at the real causes. It seems to me that there are two matters with which we must deal. One of them has already been dealt with at some length by both speakers today— although I have a little I want to say on this matter—but the other has not so far been presented in the form in which I wish to present it.
The first matter is the obvious fact that expenditure in this country is gravely out of control and that action has to be taken to see that it comes within control. This is a situation in which we are not unique. The expenditure of other countries, including, for example, the United States of America, has become grossly out of control, and it is very easy in any democratic country for this to happen. The temptation to bribe the consumers, the voters, the big special interest groups with promises which require financial backing which is not in fact available, is a temptation to which all political Parties fall. So the need to bring public expenditure under control is of course the first and the obvious issue with which we are confronted. A very great deal has been said already by the noble Lords, Lord Jacques and Lord Carr of Hadley, in this regard.
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I want to make one or two points only, not because I do not think there are a great many other things to be said, but because we do not want the debate to go on too long and many of the points have been raised by previous speakers and many will be said by more than one of the speakers who are to follow me. In passing, I should like to say that it seems to me a pity that when the Government embark on a plan of economy they have to indulge in petty little meannesses which really make no difference worth speaking about to the sum total. I know that this in itself is a small matter, but why on earth, when the Government were going through the list of economies which they could make, did they see fit to delay for another 12 months the invalid housewives' allowance which they had promised to give? To have done this for a paltry saving seems to me quite extraordinary. One is tempted, perhaps unworthily, to believe that it is because there is no powerful, organised interest group to speak for that particular small group of persons whose savings will be lost in the general expending of money which goes on regardless. But that is in passing.
The major point I want to make reinforces and to some extent extends what has already been said about the need to look again, and to look far more fiercely, at both Whitehall and town hall. I do not believe that there is not still much room for further saving in both those directions. The percentage increase in white collar employees by Government since 1962 is 25, which is surely far too high. It is too high both in terms of the number of persons employed and the levels of pay. I know that this is a fiercely contended point, but I find my students going out to earn salaries which to me seem excessive; I am told by industrialists, who do not pay money away because they enjoy paying it away, that they are the kind of salaries that they have to pay to compete with what Whitehall is paying.
I cannot believe that this state of affairs is satisfactory. Nor do I disbelieve the industrialists. Why should I, when they tell me that Whitehall is pricing them out of the market? Why should I disbelieve them when, for example, I was told the other day on very good authority, who shall be nameless, that she had been present at a committee meeting—not a Whitehall meeting but a town hall one—at which a

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young woman of 25 was paid over £5,000 a year to be in charge of a department of needlework? I am not decrying needlework—I have no claim either to decry or praise it—but it seems to me that we are getting wildly out of proportion when salaries of that kind are flung about, and it is surely something that must be looked into. Noble Lords in all parts of the House appreciate what I am saying.
When it comes to town hall, I think we could adopt an approach that might in the end be very profitable, not only in economic but in political terms. I believe, with both noble Lords who have spoken, that at last the public as a whole realises that the big enemy is inflation. Indeed I believe that the general public, perhaps to a greater extent than the leaders, are aware of the threat with which they are faced; aware of the importance of solving this problem of overspending. For this reason, I say that if one talks to the ordinary ratepayers in the country one discovers that they know that there are all manner of excessive expenditures going on.
I believe, therefore, that if, at town hall level, a very tough limit was imposed—I applaud the fact that the Government are trying to be tough in this matter, and in my view the ratepayer is their ally against the official—and town hall was told to find ways in which economies could be made, and made in close consultation with ordinary ratepayers everywhere, economies would be made. After all, there are ward organisations of all the political Parties. If they were asked to come up with recommendations of how in their areas economies could be made, I believe that town hall would be weighed down with recommendations—some of them very foolish, no doubt—based on local knowledge.
We talk about participation. Let us get ratepayers in the wards, in the country, coming forward with their suggestions as to what economies could be made, for I am convinced that there is a very great deal of room for this. After all, the connection between expenditure in town hall and rates, even if it is not as close as some of us might like, is still very close indeed. And who knows better whether the services being rendered are really worth the money that is being paid for them than the, people in-those areas? I suggest that there is room here for a real participative
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exercise, which would have the benefit of being participative in itself and which could lead to some very substantial economies.
In discussing the question of Whitehall and town hall, I have not so far made any suggestions about the Whitehall end, and in this connection I wish to deal with one area. I have yet to meet anybody who disagrees with those who say that there is a layer too much in the Health Service. Some people say that we do not need the region, others that we do not need the area and some that we do not need either, but I have never met anybody who says that we need all the layers we have. I have not costed it, but there must be a considerable amount of waste money going into supporting an area in the Health Service which has no defenders. I do not know how it ever got in, but certainly nobody believes that it should stay in. I recognise that with all the disturbances there have been in the Health Service it would be a little much to disturb matters yet again, but when we are looking for economies we must not be too nervous about the way in which we stir up what might look to be hornets' nests but which may prove to contain hornets with very little sting when we come to ask the people in the country, who are benefiting but who are also paying for these services, what sort of economies they would like to see take place.
The task of finding ways to make both ends meet, of cutting excess spending, is an apparent and well accepted need, but the question that does not seem to me to be asked or answered sufficiently—the issue that does not seem to be met sufficiently—is the fact that when we in this country compare ourselves with what happens in other countries, it is not so much that our deficit is so appalling, it is not so much that we are over-spending or even that we are overtaxed. I think the way in which the incidence of taxation falls is open to criticism, but the total volume of tax collected in this country is not strikingly different from the total volume collected in other countries; obviously it varies from one country to another. Our real problem, it seems to me, is that we get such a poor return for our money, be it the money we have invested in industry or the money used by Government. Not only do we get a poor return but also—and of course this is linked to the

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question of a poor return—we get a poor return for our use of resources, including our human resources, both in Government and in the private sector.
It is to this question that we should primarily be directing our attention if we are to pull the country out of its terrible malaise. How can we get a better return on the resources we have? It is no good redeploying those resources, although I want to see them redeployed, if we continue to get such a poor return on them. As I say, it is to this question that we should be paying major attention. Of course, F agree that we need to have a greater wealth-producing sector and a smaller wealth-spending sector; I am putting it in that slightly pompous way because we must underline that wealth producing is not all done in the private sector. There is wealth producing in the public sector, too. Equally, we must remember that wealth producing does not apply only to manufacturing industry; there can be wealth producing in services as well. So that neat, over-simplified idea, that all wealth production is in manufacturing industry is too simple and should not pass without comment. But we need this shift out of wealth spending into wealth producing and I echo the comment made by a colleague of mine who said, "I am constantly meeting young people who want to devote their lives to the redistribution of wealth, but I hardly ever meet one who wants to produce the wealth in order to redistribute it."
Here, we have a basic problem of attitude, and unless it is checked we shall not achieve better use of our resources. In this connection, I feel that the Party opposite—understandably if one looks back 50 years—still has a considerable amount to answer for and, therefore, a very considerable job to do in bringing about this change of attitude towards the social importance of wealth producing. The idea that there is something rather indecent about being a wealth producer and something noble about being a wealth distributor, combined with the belief which is all too commonly held and fostered in some quarters which have given great support to the Government that it is quite easy to get available resources for the good schemes they want to support, must be dispelled. It is perhaps unfair of me to say it but I have, after all, spent
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a good deal of my working life in an atmosphere in which, for some sections at any rate, the idea that better social services can be had simply by passing an Act of Parliament is held with all too little regard for the source of the funds which are to pay for those better services. I have seen several generations of students sent out with that belief firmly implanted in their minds.
So this is a long-term problem and it will not be overcome just by another Budget or mini-Budget. However, unless we make a start on it, we shall not get the better return on the resources that we use and without which a mere redeployment will not help anybody much. Of course redeployment means a number of things. It means being selective with the use of the resources, and selection implies rejection. Selection means that there are some directions in which the Government are prepared to give support, to give money and to give encouragement, and that there are some directions in which they have to say, "No". I wonder whether the Government still have the toughness to say, No where people are asking for support because they are in a situation which confronts them with acute and serious difficulty and which will not be solved simply by bolstering them up.
Better use of resources brings us again to this question of the use we are making of manpower and the preparations we are making for its better use. The question came up earlier when we were talking about genuinely seeking employment. I should like to add here, picking up the point made by the noble Lord, Lord Houghton, that of course—and I know I made this point last week—we have not raised the question of people with occupational pensions because we think that they should not be allowed to draw unemployment benefit because they have an occupational benefit, but because they are not genuinely seeking employment. May I ask again, as I asked last week and the week before, that the interpretation throughout the whole spectrum of people drawing unemployment benefit and the interpretation of the phrase "genuinely seeking employment" and what is regarded as suitable employment should be reviewed, particularly for people under 45?
It was last December that the Manpower Services Commission produced a list of jobs for which it could not find people.

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I have repeatedly mentioned in your Lordships' House that we not only have inflation and full employment—which, 10 years ago, was considered to be an impossible combination—but we have unemployment, inflation and shortage of labour in some sections of industry. This is a ridiculous hat trick. The list of jobs for which it is difficult to find people came from the Manpower Services Commission seven months ago. I asked in a debate early in the year what steps were being taken to see that those shortages were filled. The list is there. I have never had an answer as to how far we have got in training people to fill those shortages.
There is another and equally pressing question: we are told, and there are signs that it is so, that the economic recovery is on its way. Every single time there has been economic recovery in this country we have run into acute shortages of labour. It will he inexcusable if this occurs once again because then we shall get this appalling misuse of resources. What is the good of putting money into new equipment if there are bottlenecks in the operating of the plant so that the equipment cannot be properly used? What next? Now, with well over I million unemployed, we are not getting people trained to fill the shortages which already exist and which will exist in much greater numbers as soon as recovery takes place. Can we have information from the Government as to what has been done in relation to the shortages which were identified last September and what has been done to identify what will be the shortages with recovery and what in numbers—and I should like this quantified—is being done to see that those shortages do not arise? This will mean once again that we put our capital into areas of growth and recovery and then we are held up with these absurd, wasteful bottlenecks because we had not the foresight to see that we were there. Foresight combined with some degree of toughness about genuinely seeking employment is what is needed.
If we really want to encourage the recovery of industry and to increase growth in the manufacturing sector and make good use of resources, we must look again at the kind of rewards which go to the wealth producers, particularly the middle managers. We all know that we
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are losing these people. People of the age of most of us in your Lordships' House would probably not he offered jobs overseas, but the young people under 35, as we must all know, are looking around, comparing their return with that for the same kind of job in other countries. The noble Lord, Lord Jacques, pointed out that the additional tax on employers—which I deplore—brought us more into line with European practice. Of course that is true but has the noble Lord looked at other aspects of European practice, particularly in relation to the kind of rewards which are given to the wealth producers? It is no good ducking the importance of the economic contribution that managers make.
After all, management is often criticised for having failed to make industry sufficiently effective. If it has been bad management which means that industry loses out, good management is of the greatest possible importance economically and it should be rewarded accordingly. We must look again at the tax levels as they hit those people. The Chancellor of the Exchequer spoke as if he understood that, but one has to look at the small print and I do not feel that the reflection of those remarks in the figures in the Finance Bill shows that he has adequately taken this point on board.
That brings me to the final point I want to make. If this recovery is to be sustained—and it has not yet got off the ground—what happens when the pay pause comes to an end next year will be of the greatest possible importance. It is very difficult because, on the one hand, we must encourage the people who need to be encouraged by the additional payments (which, after all, they earn if they are really delivering the goods) and, on the other hand, we must make certain, or else everything falls to the ground, that there is some overall control over pay.
My Lords, I know I said this last week, but I intend to continue saying it again and again; that is, that we should work out the institutional procedures for deciding how these decisions are to be made and, in doing this, we should look further than just the TUC and the CBI. These bodies are not representative, by far, of all employed people or of all the interests involved in the settling of pay. Can there not be a wider extension of

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consultation, of involvement, in what comes after August 1977? Because if we do not win that battle, then everything that we have been talking about today will be so much waste of time.
4.31 p.m.
Lord HARMAR-NICHOLLS: My Lords, it was to be expected, and is quite understandable, that this debate should become a discourse on the general economic problems of the nation, with more emphasis on last Thursday's announcement by the Chancellor than on the Finance Bill itself and the Budget that it is implementing. Indeed, the noble Lord, Lord Jacques, said that he wanted that to happen, and that was right. I was pleased to note that my noble friend Lord Carr and the noble Baroness, Lady Seear, recognised in passing that there was something other than the sheer econmic argument, which they have added to today. We are dealing with the Finance Bill, and I believe that there are good House of Lords reasons for remembering that today, quite apart from the important economic figures that have been bandied about by the speakers so far. We should be considering whether or not we ought to be giving it a Second Reading. We ought to take into account that there are things as important, and perhaps more important, as the economic strength of the country. There are things known as the freedom of the individual, and as being able to go on living in a free society—and marginally this Finance Bill embraces that thinking, too.
We all know that under the terms of the Parliament Act the House of Lords has no say at all in the levying or collection of taxes. That is the prerogative of the elected Parliament, and that is right. But we have our responsibilities in other spheres, and we must see that we do not ignore those responsibilities or run away from them. It is on the grounds of whether or not this Finance Bill is being inadvertently used in a way which may be weakening the future powers of your Lordships' House that we ought to examine it in some detail and consider whether or not we ought to reject it. The last time this power to reject was used by the House of Lords was in 1909, and that led to the constitutional crisis of 1911. The volcanic eruptions which came
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from that crisis mutilated many of the powers which the House of Lords had in those days, and so since then the House of Lords has been very cautious in the way it handles finance matters.
I want to suggest to your Lordships today that perhaps over recent years it has been too cautious; that it has been too cautious to the neglect of its own vital function of acting as a watchdog to safeguard the constitutional freedoms of the individual in this free society. On balance, I would say that that is a more important power to be used than merely having the monopoly to control the levying of taxes, and we should be very reluctant indeed to see this power, which we still have, whittled away. I would say to your Lordships that I do not think we ought to give a Second Reading to the Finance Bill today unless, at least, it has a warning notice attached to it. If it is to be allowed to go out as it now is, without such a warning notice attached to it, then I believe that we shall be being neglectfully cautious, and possibly infringing our own Standing Orders.
When the financial monopoly was given to the House of Commons they, in return, undertook to confine any Finance Bill purely to financial and tax matters. That was the agreement; that was what they understood and what they undertook to do; and they specifically agreed never to abuse their special financial prerogative by what is known as "tacking" on to a Finance Bill any matter that was not a tax matter or which in any way was likely to infringe the constitutional rights of the British citizen. That was the arrangement, that was the bargain—written, implied and well understood on all sides—and according to our own Standing Orders any such matter that is not to do with tax should not be easily passed through this House. The accepted procedure for things which are not tax matters is that they should be passed through both Houses, both having the power either to amend (which we have not got on a Finance Bill) or to reject—and if we reject this we can reject it for only one month, after which it automatically passes whatever we do.
That is in our Standing Orders, and I think it is right to have on the Record, as this is a continuation of an argument I have been putting to your Lordships

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individually for the last fortnight, the authority for saying that with such force. It is Erskine May, page 783. I quote:
"In former times, the Commons abused their right to grant supplies without interference from the Lords, by tacking to supply bills provisions which, in a bill that the Lords had no right to amend, must either have been accepted by them unconsidered, or have caused the rejection of a measure necessary for the public service. This practice infringed the privileges of the Lords, no less than their interference in matters of supply infringes the privileges of the Commons; and has been met by the Lords by standing orders …"
That is the authoritative confirmation of the point that I made about this bargain: that we, the nation, allowed them to have the full authority on tax matters, but in return for that they promised not to abuse a Finance Bill, which applies taxes, by bringing in something which was different from taxes and which may well be constitutional in its effect.
The Standing Order, which is on our procedural Table today, is Standing Order 49, which says this:
"The annexing of any clause or clauses to a Bill of Aid or Supply, the matter of which is foreign to and different from the matter of the said Bill of Aid or Supply, is un-parliamentary and tends to the destruction of constitutional Government".
My Lords, 1702 was the year in which that preventive provision was inserted into the procedures of both Houses. I want to suggest that the Finance Bill that we are dealing with today can be read so as to show that Schedule 6 to it is an infringement of the authorities that I have just quoted. Schedule 6, as it now stands, allows Inland Revenue investigators, after application to a court, to break in and enter private premises and to take away private papers which can be used to the detriment, tax-wise, of a private citizen. That, in my book, is clearly a constitutional change in the laws of trespass and of individual freedom. This is a section of law making which, in my view, is well outside the scope of a privileged Finance Bill. It is a law, this Schedule 6 provision, which should be enacted if at all, only after it has passed the full and separate examination of both Houses each of which has the power to reject or amend.
It was on these grounds that initially I was inclined to ask your Lordships to reject this Bill. It was on these grounds and it was certainly not with the idea of delaying the implementation of the Budget proposals as agreed by the other place.
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They have to be in operation before August 5th in order for the administration of the country to continue; it was not with the idea of delaying that. Originally I had the idea of asking your Lordships to consider rejecting it merely so that it could be returned to another place for them to correct; because if we rejected it and it was returned to another place then, within hours, perhaps within minutes, the offending Schedule 6 could have been removed, making this Finance Bill a clean Bill. Then, if they so wished, the terms of Schedule 6 could have been properly re-presented as a separate Bill which could go through the proper channels and, if found acceptable in both Houses, could have been made the law without infringing Erskine May ruling or Standing Order No. 49.
To have done that would have obstructed no one. There is no special date or special urgency behind Schedule 6 such as there is behind the Budget proposals which must be there by 5th August in order to grant the money to pay for the administration of the country. At least, I hope that there is no special urgency about Schedule 6. I hope there are not people lined up ready to have this freedom taken away from them and that there is no special urgency to get on with that job. I am presuming there is no urgency. We would not have delayed the real meaning of the Budget and we would have avoided what is a constitutional infringement of the freedom of the individual in a way that Parliament is there to see properly protected. That was initially what I intended to propose to your Lordships today.
But within the last week Mr. Speaker has taken certain action which I believe would cause the rejection to be misunderstood. I still think it would be right to do it; but since Mr. Speaker has taken the action that I shall now describe, I believe that there would be a real risk—and this I accept—of the action that your Lordships would be taking in rejecting it being misunderstood and of bringing in its train other things perhaps more harmful than letting it go through. In the last week, Mr. Speaker has officially certified this Finance Bill as a Money Bill. When he designates a Bill a Money Bill that, at first sight, conclusively implies that it is free from "tacking". I see that the noble Lord the Leader of the

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House nods his head. That may be a point that he will make if he feels that the points I am making are worth answering at all.
I am reluctant, and your Lordships will be equally reluctant, to appear to be in any way in conflict with Mr. Speaker because we know that his ruling, apart from being weighty, is unquestionably an objective one. It is for that reason I would not now propose to suggest that your Lordships vote against the acceptance of the Finance Bill. But I would say this: if new evidence could be produced, it would not be a slur on the dignity of Mr. Speaker or upon the supreme confidence that we have in his impartiality and his objectivity to ask him to take such evidence into account. It is within the recollection of all here that precisely this has been done within the last month; so that there is a precedent, and a very respectable one, which can show that even Mr. Speaker's ruling does not stand firm for all time if new evidence can show that an Amendment ought to be made.
On the question of whether or not a Bill was a hybrid Bill a week or two ago in another place, Mr. Speaker Thomas reversed a ruling given by his predecessor earlier in the same Session on the grounds that he had new evidence. He was right and it was applauded throughout the country. So it is because one does not want to give the impression of being in conflict, and in order to maintain the good and proper relations between the two Houses, that I would suggest that we ought not to reject it. I maintain that the precedent I have given of only a few weeks ago would show that if there was new evidence it could be taken into account.
I think it right that I ought to tell your Lordships what I think the new evidence is. I believe that the ruling was given to make this Bill a clean Money Bill on the proper grounds that it could be said that the elected Chamber has the sole power to levy taxes and it is right that they should have the power to see that those taxes are collected. That I would accept. But I wonder whether the noble Lord the Leader of the House could at some time get one of the Law Officers to confirm whether or not this power is just for the collection of taxes as agreed. This power that is taken
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in Schedule 6, after an application to a court, enables an individual house to be broken into and papers taken in order to arrive at the assessment of what he may have to pay. That, I would submit, is not in accordance with the collection as well as the levying of taxes. I believe that those new grounds may not have been put to Mr. Speaker when he gave the ruling on the Money Bill.
However, the grounds for giving clearance are, at best, hazy enough to suggest that this House should at least make some official move to remove any doubts as regards future Finance Bills. That is as far as I want to go today. To this end, your Lordships will see that I have put on the Order Paper today a Motion to the effect that the operation of Standing Order No. 49 he sent to the Committee for Privileges for them to examine and to strengthen for future years. If the noble Lord the Leader of the House when he speaks could give me some indication, I would prefer to do it this way in order to make it perfectly certain that there is no question of our wanting to be in conflict with the powers of another place. My noble friend Lord Carr and the noble Baroness, Lady Seear, seem to have indicated that they have some sort of sympathy with the Motion which I have just described and which I have on the Order Paper. If the noble Lord the Leader of the House could, with his even greater responsibilities and influence, show that he feels that, too, then, when we get to my Motion after this debate, I would beg leave to withdraw it with the idea of re-presenting it on the Order Paper in September so that we have given a gap which can remove any possible thinking of our wanting to be in conflict with another place.
The Privileges Committee may find it desirable, if they are allowed to examine it, to find some way of underlining the message contained in Standing Order No. 49 and so prevent the ancient powers and privileges of this House from falling into disuse—because that is what we have been allowing to happen over recent years. Half of the Finance Bills that have come before this House since 1911 have not even been designated as Money Bills. I believe that we must be on the alert. I hope that your Lordships in all parts of the House will find it prudent, at any rate, to be so.

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Having made that technical point, perhaps I may be allowed for a minute or so to make a point on the Bill itself. As regards the other parts of the Finance Bill and the economies announced last Thursday, I should like to say—merely as an extension of what I have already said to the noble Lord the Leader of the House at Question Times in the past—that if the measures that were accepted on all sides when announced last Thursday with the idea of wanting to re-establish world confidence had been taken two years ago, they would have re-established world confidence on the question of our solvency and our general economic health. If they had been taken 12 months ago they might have rescued the pound sterling from the disastrous slide in its value; but I believe that this type of medicine, even at double strength, will not alone do the trick today. The lack of world confidence now encompasses much more than mere over-spending or over-borrowing or fiscal ineptitude. That is the view I have formed from speaking to industrialists, diplomats and men of commerce in four continents over the past 12 months, a view that I pass on to your Lordships in all seriousness.
The world now questions our will to do these things and our ability to see them through. This questioning of whether we have the will and ability to see it through comes from our friends as well as those who are not so friendly with this nation. The doubts they want allaying today are summed up in the headline which appeared in an American newspaper 18 months ago when it asked the question, "Is Britain governable?". Our friends say today that we are at the stage where it can be said, "Yes, Britain is governable and capable of rescuing itself, but not under a Party Government". They have seen a Socialist Government unseated because they contemplated an Industrial Relations Bill entitled, In Place of Strife. They have seen a Conservative Government unseated because they introduced a similar Bill. They have seen a second Socialist Government only able to appease the extremists in the unions temporarily by agreeing to measures which can only cripple the private wealth-producing part of our economy.
The first essential in my view towards regaining world confidence is a political
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one. For a period, whether we like it or not, we must have a Coalition or National Government. We must have a sign as clear and as traumatic as that if we are going to tell the world that we recognise the magnitude of the task before us, a sign that a worthwhile proportion of the leaders of all political Parties are prepared to suspend sectional and doctrinaire aims, as they did in the war, long enough for us to win this war against the threats of economic collapse. If we do that, we shall win through and win through quickly. Without it, even the right and the normally adequate economic measures will be like pouring good medicine down the drain. I see no sign of this action, which I believe essential, being taken. It apparently is not on; but it is so essential and I still live in hope.
4.57 p.m.
Lord WIGG: My Lords, the noble Lord who has just spoken said in the first part of his speech all that I wanted to say and intended to say. He said it with much greater ability and considerably more clarity than I could have hoped to obtain. I support that part of what he said, but with one or two differences. He started by drawing the attention of your Lordships to the fact that this House should act as a watchdog. The trouble is not that it has failed as a watchdog; what it has become over the years is a lapdog. It has become a lapdog of the Tory Party carrying out the will—often the transient will—of Conservative Governments when they are in power, and embarrassing a Labour Government when, in the fullness of time, the Conservative Party find themselves on the Opposition Benches.
I will probably bore your Lordships in saying that for me the one act of your Lordships that forfeited my general support of this House as it is now constituted, was when, in pursuance of political needs of the Conservative Party, it failed to hold up our entry into the Common Market, and did not give the people of this country an opportunity to understand in detail and to hammer out in broad principle what was involved. It was very much more than passing a Bill which had been forced through the House of Commons without a single comma being altered; it was finding and telling the British people, "All you have to

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do to get everything under the sun is to go into Europe". I retain all the documents and speeches, including some of the speeches of the noble Lord the Leader of the House. It is very interesting reading, provided you have a strong stomach. If your stomach is at all weak, then you have a violent desire to go out and be sick. We were being promised by all sides of the House that the Common Market was going to deliver the goods. It has not, and it could not, deliver the goods. The only place from where Britain should be governed is London, not Brussels.
The only people who can save the British people are the British people. If we cannot find within our hearts and muscles the worth and strength to tackle our problems, inevitably we are going to fail, and we deserve to fail. The extent to which we have been mesmerised by easy solutions is also the extent to which we have failed to recognise the problem. I entirely agree with the noble Lord, Lord Harmar-Nicholls, in his protests about Clause 57 and Schedule 6 of the Finance Bill. It is a measure of fundamental importance which I support. It has been tacked on to a Finance Bill because the Government would find themselves in some difficulty if it was treated as it ought to be awed, on its merits, and brought to this House. The Conservative Opposition would unquestionably throw it out and that would be an embarrassment. The provisions in Schedule 6 are necessary. I have already said that.
I am a Socialist without prefix or suffix. My political faith today is that which I have held all my life. That means in political terms that I believe in planning. Planning in the modern world is necessary. You may not call it that. I also believe, because my belief in democracy is as strong as my conviction in the principle of Socialism, that there must be a check and a check again of powers exercised by the Executive in order to secure freedom, not as an academic exercise but because I believe the genius of the British people comes about through the exercise of the voluntary principle. When this nation, down the centuries, has recognised a problem, at that point we are one stage off finding its solution. Until the problems
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which face our country are recognised in depth, no solution will be found.
I believe we even underestimate our strength. Listening to the speeches today, one would think there has been calamity; everything is wrong. If we do not do this and that, then calamity is going to result. Not one single speaker—not even the speaker from the Government Dispatch Box—found much to cheer about. I do not share that view. I think the cause of our troubles is because we have not come to recognise our position in the world. For me Suez was a turning point. At that point "Great Britain" became "Little Britain". We no longer had effective power to influence events. We could—it was within our grasp if we wished—exercise great influence. But power in the sense that we exercised it in our heyday, or as we thought we could exercise it at Suez, was not a starter.
Shall I bore your Lordships once again by reminding you of this? When we talk about a saving of £400 million, £800 million, £2,000 million, I ask your Lordships to stop and think what has been spent on defence—£57,000 million. For what? What action could we possibly, in any circumstances whatever, undertake against anyone? There is no place for us in the world through the exercise of our defences. Our place is among the nonaligned countries. We are not in the first division any longer. What we should do is strive to be at the top of the second division. We should be alongside Yugoslavia and Algeria, exercising our influence through the 77 countries which comprise the non-aligned group in the world. They matter. Nobody takes any notice, in Washington, Moscow or even London, of a Commonwealth Conference. That is just a joke. But what happens when the non-aligned conference takes place very shortly is a matter of world importance, not in terms of the exercise of military strength, but of what will happen to commodity prices and of what those countries will ask of us, and if we do not give we shall find ourselves in a very weak position indeed.
Of course, the Budget and the statements that have been made are unacceptable. I suppose that if a man has been poisoned you have to do something about it. If you fetch in the doctor and he recognises a sign, he will prescribe the right remedy.

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At the moment—I think, through mistaken policies—the Government and the country find themselves in a very difficult position. So the Government have to come forward with proposals which I do not believe are likely to be very effective, and I do not think they are very acceptable, yet I support them. The mere fact that the country is faced with its present situation means that there has to be something of this kind, because our physical needs require it.
I am a little upset at the muddle-headedness of what is called the Tribune group, and of those whose views, in general, I share, because they are making the mistake of refusing to face up to their political responsibilities. If the patient has taken poison, you may have to give him an emetic. The emetic may not be very pleasant, but if you want to save his life it is essential. If somebody stands up and argues that the measures which have now to be taken do not measure up to the need, I should not like to be in the Chancellor's position. He has a very awkward furrow to hoe. This is indeed a problem. However, let me say—and let us cheer about this—that this Government have succeeded where the previous Government failed lamentably, because at the moment they have an incomes policy in very difficult circumstances indeed. I pay my tribute to Jack Jones and those of his colleagues who have carried it through in the first year, and again in the second year, because without it this country's position would indeed be difficult. But, very largely because of the carping attitude of the Party opposite, and the very subservient media that we have, which means the Press and the BBC, the position and strength of this country are written down all the time.
It is made to appear that the nostrums which have been prescribed, and which the Chancellor and the Government have decided are necessary, are not enough and have been forced down the Government's throat. I do not believe that. The trade union leaders here are in touch with opinion. They know what is. practical, and they also know that they are playing for very high stakes indeed. I believe that incomes policies are born to die, but in its present situation this country needs an incomes policy for this year and next year, and in order to have that it must
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stay on course so far as its social and economic policies are concerned. The Chancellor does what he does, because in his judgment the economic and political necessities require it.
In general—if I may say this without any damaging effect—I have a high regard for the noble Lord, Lord Carr. But in the concluding words of his speech he suggested to Mr. Healey that he should follow the example of the Prime Minister in November 1967. I have been in politics a fair time, and I also have a fair memory. I wonder what the noble Lord, Lord Carr, said to the then Mr. Barber in the heyday of the most disastrous economic policy that any Government has ever wished on a poor unsuspecting country. Did he go to him and say "Mr. Barber, go out and cut your political throat"? Of course he did not. He toed the line like the rest of the Tory Party. They toed the line and had the responsibility for the raging inflation which we inherited. We inherited it in 1964—do I not know it?—and we inherited it again after the departure of the last Conservative Government. The policies then were built for us. Addled eggs were hatched out for us by Conservative Administrations who hate the idea of planning. Of course, they hate planning partly because they want to preserve the quality of looking after a section of the community who think that their interests are best served without planning. Planning is a dirty word for them. But, obviously, in the kind of world that we have somebody has to take decisions.
I am one of those Socialists who believe in a mixed economy, and who also believe that Socialism requires the effective use of the pricing system. I realise only too well that either you will have hosts of civil servants taking detailed decisions about manpower supplies, raw material supplies, training and the like, or you will let the pricing system do it for you. I believe in overall planning. I am less enthusiastic than I was about nationalisation in the old sense. What matters in the modern world is less the ownership, and much more the purpose for which resources are used. This seems to me to be more effective. But the idea that at the present state of our society you can leave the shipbuilding industry, the aircraft industry, the mining industry or the steel industry

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to the higgling of private enterprise is absolute nonsense, and among the chief protagonists of the view that there ought to be over-planning are the great industrialists themselves.
The question in the modern world is not whether you plan or do not plan. The question is in whose interests the plan should be made, and how it should be administered, and for me this is the core of my Socialist belief. In the ultimate, I believe that private good must prevail. I also believe in the maximum amount of individual freedom and for that to happen, then, if there is to be a second Chamber it must see that it retains and uses effectively whatever powers it is given.
I should have thought that one of the lessons in this bicentennial year is to be learned from the Americans, who plan. They plan through the giant corporation, but they also see that it conforms to the rule that the freedom of the individual there is placed second to the public good. There are plenty of exceptions, but the result is overall planning allied to gigantic resources and the freedom of the individual. The result is an economic giant which produces the strongest economic power on earth at present.
While there is no place for us in that league, we have plenty to give and plenty to learn; but we have nothing to give and nothing to learn unless first we understand the problems which beset us. Very largely they are problems of our own making but they are not insurmountable. They can be tackled, but they will not be tackled and we shall not be saved by Common Markets or any other nostrum. We have to tackle our problems by an effective diagnosis and understanding of what we face. Then we have to plan; and when we have planned we have to carry out that plan effectively inside the framework of democracy.
I congratulate the noble Lord, Lord Harmar-Nicholls. It was his speech which provoked me to speak. I do not want to dot the i's and cross the t's, but simply to give my general support and at the same time to draw a lesson or two not only from the Budget but from the experience I have gained in your Lordships' House.
Viscount MASSEREENE and FERRARD: My Lords, before the noble Lord sits down may I ask him a question. I have been reading Schedule 6 while the noble Lord has been speaking. Why is the noble Lord so sure that if the Government introduced a Bill that incorporated all the sections in Schedule 6 the Conservative Opposition in this House would throw it out? I do not think that they would. An officer of the Board of Inland Revenue has to go before a circuit judge in England and Wales and the judge takes his evidence on oath. If the judge considers that there has been fraud he grants an order and the Inland Revenue is allowed to enter the premises where the fraud may have been perpetrated. I do not think that the Conservative Party holds any brief for fraud. I thought that my noble friend who is sitting behind me was objecting to the tacking on to the Finance Bill of a measure like Schedule 6, and I wholeheartedly agree with him. But for the noble Lord, Lord Wigg, to say that if the Government introduced a separate Bill incorporating Schedule 6 the Conservative Opposition in this House would throw it out, is surely nonsense.
Lord WIGG: My Lords, how can I be sure? But judging by the noises which have been made both in another place and in the Press, I should have thought that there would be considerable opposition to such a Bill. All I am arguing is that for some reason the Schedule was tacked on. I do not agree with the noble Lord, Lord Harmar-Nicholls, that it was tacked on inadvertently; Governments and their advisers do not do that. The Schedule was tacked on because it was much more convenient to do so; it had a much better chance of getting through if it were tacked on rather than if it went through under its own steam. If I am wrong—well, all right.
5.14 p.m.
The Earl of MANSFIELD: My Lords, I hope that the House will forgive me if I do not follow the path which was trod by the noble Lord, Lord Jacques, when he opened the debate. Still less do I intend to follow the byway trodden by the noble Lord, Lord Wigg, although, as always, I was fascinated by his contribution to the debate. My intention

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is to confine myself to the Motion which is before the House and to a rather small and technical part of the Finance Bill which is now before us. If I have to make excuses for so doing, they are two-fold: first, because I regard it as being an extremely important matter which should be ventilated in your Lordships' House and, secondly, because, owing to the haste with which the other place has to consider in particular the later stages of this Bill, ventilation of it is in my judgment desirable and, indeed, necessary.
I intend to confine myself to that part of the Bill which deals with the national heritage. Although in a geographical sense I am speaking from my normal position, I should make it plain that I am speaking personally and not necessarily as representing the Opposition opinion. Nevertheless, one is happy to say that to a very large degree the major Parties at least are in agreement that the financial problems which beset the national heritage deserve and should obtain special consideration and treatment.
When last year your Lordships debated the Finance Act, as it now is, during its Second Reading, I led for the Opposition and was immediately taken to task by the noble Earl, Lord Longford, for the language which I chose to employ on that occasion. I admit that on rereading what I then said I took, if I may use the expression, a good swipe at the Government for what I regarded and still regard as the malicious and thoroughly partisan manner in which at that stage they approached their task of raising revenue. It would be wrong of me not equally this afternoon to give a measure of congratulation to the Government who in this sense have come round, as I perceive, to recognising the problem, although again one has to say that this recognition is by no means disinterested.
Each year the tourist trade is worth several billion pounds in foreign exchange to Britain. The British Tourist Authority has estimated that 80 per cent. of all foreign visitors visit an historic building of one kind or another. It is the attraction of our heritage which to a very large degree draws tourists to our island in the first place. It is the appearance of our countryside and the buildings within both our countryside and our towns, and not least the treasures within those
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buildings, which are the envy of every other country with pretensions to civilisation.
Not the least part of the attraction is that so many of our historic homes or buildings are inhabited and are going concerns, in the sense that they are still fulfilling a need as a dwelling-house or habitation, for which reason they were first put up. It seems to be generally agreed that heritage properties, particularly historic homes, may best be maintained and looked after by their owners for the time being, because those owners generally regard themselves as mere trustees for their lifetime of the property which they happen to inherit. If it is necessary, I shall declare my interest, although it will be well known to some noble Lords at least.
The Government have recognised and have said through their spokesman on a number of occasions that it is not feasible for either a Government or a similar agency to run historic homes. The cost to the taxpayer, even if such a procedure were feasible, would be so enormous as to render it out of the question. Therefore the Government are to be congratulated on showing a degree of courage, particularly in view of the fact that some of their more extreme supporters remain convinced that any remedial steps which are taken to enable historic houses and their contents to be maintained in private hands will, in some measure or in some degree, confer large and unjustifiable fiscal privileges, I suppose one might call them, upon the owners.
With that measure of congratulation to the Government there go also many congratulations to my noble friend Lord Montagu of Beaulieu and his colleagues, both in the other place and in your Lordships' House, who have made such determined and sustained efforts to bring to the notice of both the Government and the civil servants who advise the Government the difficulties which these buildings are presently experiencing and to suggest measures which, when reviewed calmly and without rancour, may act to the benefit of the buildings, and indeed the nation as a whole.
The Bill which is presently before your Lordships contains a number of provisions relating to this subject, in Clauses 76 to 85. Indeed, in Clause 77 your Lordships will see the designation of the types of property which qualify for relief

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under this Bill, and to anybody who follows the subject the degree of property which can be the subject of relief has been to a welcome degree enlarged.
Apart from that clause, it is Clause 84 upon which I particularly want to comment, for the reasons which I have stated, and also because I want to ask the Government a question which I hope will be answered later, if not today, and also to point out the fallacy of certain arguments which flow from Clause 84. The clause reflects an attractive idea that by the setting aside of money a degree of relief from capital transfer tax may be obtained, and that money can be devoted to the maintenance of historic buildings, always provided that the public enjoys a certain measure of access to them. Indeed, at first blush it is an attractive idea which has much to commend it and I, for one, would be in sympathy with it if it could he made much more effective.
The difficulty is that there are a number of drawbacks to the scheme which, if not unattractive at the end, at least greatly detract from its attraction. First, the funds which are put into the fund are irrevocable. It is the same as an irrevocable trust, and if that were the only drawback I should have no complaint. The irrevocability, combined with some of the other drawbacks, in fact makes it unlikely that many owners of historic houses will transfer their funds into such a fund.
Secondly, the funds which are so transferred into this kind of trust are going to be taxed at the settlor's own rate so far as income tax is concerned, so that if the settler—who presumably is a person with some considerable funds or he would not be making the settlement in the first place—has a high rate of tax on the margin therefore the amount of money left to be devoted to the historic house at the end of the tax year will be minimal. Therefore, that again is a drawback and is something which I think may detract from the attraction to those who may wish to set up this kind of fund.
Thirdly, this provision separates the ownership of the building from the ownership of the money, or whatever the funds are, within the fund; and by providing no income tax relief for moneys
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within the fund which are spent on the building the relief which is now available for building supported, for instance, by agricultural estates under the Schedule A estate election, as I think it is called, will be lost on the settlor's death, so that the situation will be worse even than it is already. I draw that distinction because I think it is worth recording it.
Fourthly, and I am afraid even more technically, the fund which is settled, in England at any rate, will be subject to what is called the perpetuity rule which, in effect, means that after 80 years this irrevocable fund will pass away from the historic home in whose favour it has been settled and will have to go to a designated charity or some other similar fund.
I think the perpetuity rule is a drawback in two ways. First, the people who wish to provide for the continuance of their historic home are not likely to do so unless they have a very large amount of free capital which they are content should be dissipated over the next 80 years. Secondly, it will, above all, make it most unlikely that those who perhaps own agricultural land round the historic home will put that land into a fund, because at the end of the 80 years perhaps the income-producing farms, or whatever it happens to be, which will have provided the income for the historic home will inevitably pass into other ownership. So that the old concept of the historic home being the centre of an estate can no longer obtain with the perpetuity rule.
I wish to ask the noble Lord this question. In the way that I read this Bill I cannot see that any particular provision is made in respect of Scotland, where we do not have the perpetuity rule anyway; in which case as I read the Bill—and I may be talking nonsense but perhaps the noble Lord or someone could write to me in the future—it seems to me that a fund set up in Scotland would not be subject to the perpetuity rule but could go merrily on, which would indeed be a good thing. It arouses a happy idea that perhaps people in England might set up a fund in Scotland to finance for all time their English historic home. I merely throw that suggestion in.
Those then are a number of drawbacks. Another one—and I put this in fifthly and lastly—which is capable of being resolved

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by the Government in the next Finance Bill is that the funds which have been made the subject of a settlement can be devoted to the upkeep of the building but not to the contents within it. So we get the bizarre situation where the trustees can draw on the funds to mend the roof but not to mend the picture or whatever it happens to be within the building. That cannot really be the intent of the Government and I should have thought this is something which could be reconciled between now and when the Chancellor next comes to consider his Budget. It also appertains to gardens or any other amenity land round the historic home, unless that land is itself designated under the section which I have previously adumbrated. So, as I have said, one can use these funds to repair the house but not the contents and not to mow the grass round it. That surely is not very sensible.
Shortly after this Government came into power I made a speech in your Lordships' House to the effect that even at the then existing level of taxation the future of historic houses was bleak. The rates of income tax and the capital gains tax made it a fact that even if—as people then could—they took advantage to make over their historic home in good time so that no estate duty was paid, it was impossible either to save or to earn the sums of money which have to be provided from time to time for the expensive repairs which these old buildings need. I am afraid inflation has only magnified the problem and the introduction of the capital transfer tax has aggravated it still further. I draw the Government's attention to these drawbacks to their scheme only because the position is really not one that can be just left. To do them justice, I do not think that members of the Government believe that this is the end of the story. From reading Hansard as this Bill went through its tortuous course in the other place, I do not think that is so, but it is not right that anybody should think that this Bill will do anything much for the preservation of our historic houses in the future.
It remains a fact that if owners of these places are faced with bills for tax on what are unproductive assets, or bills for their repair which they cannot meet, they will sell those assets if they are saleable
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and leave them to deteriorate if they are not. The number of works of art leaving the country grows, apparently, every month. The noble Earl, Lord Perth, was in his place some time ago, and he has a number of agonising decisions to make in the course of the year. The number of historic houses which have tumbled down, literally, since the end of the Second World War now runs into hundreds. I do not think we want that situation to continue. I repeat what I said earlier on, that a number of us are grateful to the Government because we now consider that they realise the difficulties and are genuinely concerned to ameliorate the position. But the position will not wait for very long. I very much hope that the noble Lord, the Lord Privy Seal, when he comes to reply, will at least make encouraging noises to indicate that the position will be kept under continuous review.
5.31 p.m.
The Earl of LONGFORD: My Lords, I am in no way qualified to deal with the very interesting and knowledgeable remarks that fell from the lips of the noble Earl, Lord Mansfield. I might or might not be able to deal with the remarks of the noble Earl, Lord Gowrie, though I cannot hear them at the moment. The noble Earl, Lord Mansfield, at one moment announced that he might be talking nonsense. If so, that possibility had not occurred to me, but I must leave the Minister to reply to him when he winds up. The noble Earl made one generous reference to what the Government had sought to achieve, and at the earliest moment one should express thanks from this side of the House.
My Lords, the last time we debated economics I spoke for far too long, a fault from which one or two of the speakers today have not altogether been free. But I shall not myself, I hope, incur that blame today. That will prevent me from attempting to reply to most of the vigorous speeches to which we have listened. The noble Lord, Lord Wigg, dealt with some of the Conservative contentions in effective style, and has saved me from that responsibility. I should like to deal with an aspect of all this which so far has been ignored. I speak, as I suppose one could say, as a middle-of-the-road Socialist and from that point of view, of course, speaking from the middle of the Labour Party, one

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is bound to discuss the question of whether the Chancellor's cuts were necessary at all. Of course, the Conservatives say the cuts were quite inadequate, but in the Labour Party the argument is of a different character. I propose to spend my fairly short time dealing with that side of it.
I was so happy last week to feel that in these latter days I was not a member of the Cabinet. About now, I should probably have been talking of resignation, to the great irritation of my colleagues. I would have been in great doubt a week or so ago, if I had been in that exalted position, that I could have continued there. In this House a month or so ago I took the line that it would be quite wrong that the level of our social services should be determined by the state of foreign confidence, often a very irrational factor. About a week ago, or before that, we were told that owing to the state of foreign confidence, and owing to the need to reassure the foreigner, large cuts would be necessary. Large cuts have duly occurred, plus the taxation, which I have no time to deal with now. I have every bias in favour not only with the present Government, but with Mr. Healey in particular. He has many virtues not often found together. He is very tough, not that I think that toughness is necessarily a virtue in itself; it could be a curse rather than a blessing to mankind, but in this case it is coupled with a strong intellect, and I hope he will be Chancellor of the Exchequer for a long time to come, despite all the rumours one has heard.
For the reason I mentioned, in view of what I said only a month ago in this House, I awaited with intense anxiety the announcement of the Chancellor of the Exchequer, as did many other members of the Labour Party, including, I am sure, many who sit with me on these Benches. My anxiety was not diminished by a brilliant article in the Evening Standard of 20th July (before the cuts) by Professor Maurice Peston, who is an old pupil of Professor Robbins, although I am not holding either responsible for the other. The article was entitled, "Denis in a Dark World", and this sentence occurred:
"We might be obliged to act daft because we live in a daft world",
or, as the Professor says elsewhere, making the same point,
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"The Chancellor may be forced to do something which is economic nonsense because the key variable, foreign opinion, is not under his control."
That is what I was discussing when I spoke last in this House, the question of whether we have to obey the dictates of foreign opinion, however misconceived.
Then came the statement by the Chancellor last Thursday. Like other noble Lords, I have gone through it with a fine comb, reading between the lines as best I could. Admittedly, there is a reference in passing to the need, and I am now quoting from the words of the Chancellor of the Exchequer:
"to maintain the confidence of those from whom we may have to borrow to finance our external deficit".—[Official Report, Commons, 22/7/76; Col. 2011.]
Apart from that passing reference, the topic is passed over in virtual silence. The whole emphasis is on the need to cut back public spending to make room for prior claims on resources, particularly for exports and private sector investment. I am not saying that is in conflict with the desire to restore foreign confidence, but you can read the Chancellor of the Exchequer whichever way you like, this way up or that way up, and you will not find the factor of foreign confidence is stressed in any way.
If this is the true reason—and I believe the words of the Minister—for our policy, it is a much more telling one than the argument about the need to impress international financiers. But it opens up a very technical discussion and takes us into an area where a Back Bench Peer, even with some ministerial and banking experience, is very unwise to speak with dogmatism and even some Front Bench Peers might hesitate to rush in. But to quote Professor Peston again:
"Although one may disagree with the Chancellor, he is the man in charge. Having had a chance to argue a case, if one has failed to convince him, I feel obliged to defer to his and the Treasury's judgment".
The noble Lord, Lord Boothby, is not present, but we do not need him to tell us that the Treasury has often been wrong, so far as we can judge. Some of us are not as humble as Professor Peston when we think of all the Chancellors and their Treasury advisers who have proved so fallible in recent years, which is not to say that anyone here has any claim that he has done better.

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I could not help noticing, for example, that a well-known and much admired economist, Michael Stewart—not the former Foreign Secretary—in a powerful letter to The Times on 6th July argued the opposite case most effectively. He argued that there was no reason for cuts in order to liberate resources. So it is a matter of argument and very acute disagreement among those most qualified to judge on technical grounds.
Professor Robert Neild of Cambridge University, and Mr. Terry Ward, examined the whole question of the Budget deficit in The Times of 12th July. Their conclusion was a highly academic one, but I think one gets the general drift. They say:
"a general bias neither in favour of cuts in public expenditure, nor against increases in taxation, can be justified by a reference to levels in other Western European countries."
The general impression left on one after reading this article by Professor Neild and Mr. Ward is that large cuts would not be justified. Various expert assessments have reached me, which came to the same conclusion, the opposite conclusion to that of the Chancellor. For example, this is a very high-level Labour Party source:
"Constraints of plant capacity are no more a serious justification for public spending cuts than are future shortages of labour".
That may be right or wrong, but at any rate it is a view held by those who are well equipped with expertise. I try to give the Chancellor the benefit of the doubt, taking him on his own argument, not about the international financiers but about the resources, and I am left with a very large doubt indeed.
I hasten to say, however, that if he had to make cuts of this magnitude, in my eyes he set about it in the right way and reduced to the minimum the human distress resulting. Of course, I think the noble Lord, Lord Carr, would say that even if he was going to make those cuts he did not make them in the best way or did not level the wisest kind of cuts. The noble Lord, Lord Carr, did say one thing at least with which I agreed strongly: that he was delighted that overseas aid had not been cut. I think we can all take pleasure in that. However, for my own part, I would submit that if cuts of this size had to be made the Chancellor has made them in the
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least brutal manner available. I say that though I have not yet studied the implications of the cuts for some of the social services, and already before these cuts many of the social services were in very great difficulties. Therefore, on balance my vote, for what it is worth—I take it I will not be required to cast it—goes to the Chancellor, though only by a hair's breadth. I hope that is a clear if not very enthusiastic verdict.
In my speech of 9th June I pressed as strongly as I could the case for selective import controls. I did so in regard to the immediate future and because it seemed, and still seems, to me extraordinarily difficult without import controls to envisage a return at any point to genuine full employment without the trade balance going to pot straight away. I said that a month ago and I would say it again, but I will not develop that argument further this afternoon. The noble Lord who opened the debate had something to say about it, and we may hear more about it from the noble Lord the Leader of the House when he replies.
Tucked away in the Chancellor's speech there is this promise:
"…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."
The noble Lord quoted the next sentence:
"We have already taken action and we are anxious to discuss with both sides of industry the need for further action of this kind."—[Official Report, 22/7/76, col. 962.]
So I think one can fairly say that the door is left open and import controls have not been rejected for good. Here I am not as pessimistic as the noble Lord, Lord Carr, or as optimistic as the noble Lord, Lord Jacques, but, regretfully, I believe the Chancellor will sooner or later find himself driven more and more in this direction. If and when it happens, it will not be a matter for national congratulation but of economic survival. Equally, if the policy of import controls comes to be adopted I would not call it a policy of national selfishness. If only we could make ourselves more economically successful we could do far more for the rest of the world, and particularly the poorer countries, than at any previous time. That is, I am sure, the long-term objective

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of all of us. Meanwhile I am sure that the Government are utterly sincere in what they are doing and dedicated to the task in hand, and in that respect at least they have my unqualified approval.
5.44 p.m.
Lord MONTAGU of BEAULIEU: My Lords, I hope the House will forgive me if I say a few words on the same subject as my noble friend Lord Mansfield; namely, the clauses affecting the national heritage, Clauses 76 to 85. I should, first of all, say that I speak as President of the Historic Houses Association, and I should like to pay my tribute to the Government for the great help they have given the heritage both in the 1975 Act and also in the 1976 Bill which is before the House this afternoon. Indeed, it has been perhaps the biggest leap forward since the war, perhaps since the Labour Chancellor, Sir Stafford Cripps, accepted the Gowers Report in 1948. That certainly was the Bible so far as the heritage was concerned. But all these problems came up again at the time of the Select Committee on the wealth tax. In fact, this was a very good report so far as the heritage was concerned, because, for the first time I think, all three political Parties agreed what their attitude should be towards the heritage. It is indeed comforting that we have taken this out of the political arena as far as possible. What is now, I think, generally recognised is that conservation certainly does cost money, and that the Government know only too well, as they have several houses in their care which they have to look after.
Great and small historic houses are not refuges for the rich. They are now much more liabilities than assets. I think it may be interesting for us in this House to note this afternoon that only 60 out of the 400 houses open to the public are owned by Members of your Lordships' House. It has been through the efforts of the owners and their personal sacrifices that we are the envy of the whole world today, in a world where big houses have been allowed to fall down and decay. Therefore, I should particularly like to express the Historic Houses Association's welcome for the capital transfer tax exemptions, for the house and the contents and the gardens, subject to public access,
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and also for other land of scenic and scientific interest. This year this has been extended to lifetime gifts, which also is very welcome.
As Lord Mansfield said, the Bill contains one important new clause, Clause 84, about maintenance funds. I do not wish to go into this, as it has been done so ably by Lord Mansfield, but I would say that there is certainly a welcome on our part for the political will that persuaded the Treasury and the Inland Revenue to accept this new principle of exemption of maintenance funds. However, as the clause is at present drawn it is more than a disappointment; indeed, it is virtually useless as it stands. I am sure it would not be impossible to put that right perhaps in future years. I am sure the public at large would like to see owners encouraged to set up maintenance funds for their houses. These trust funds have to be administered by independent trustees, and I am sure we could trust them to spend the income free of tax on the house. The clause is not going to fulfil its purpose. It will only help perhaps one or two large houses, when it is today the smaller houses that desperately need that help.
All these concessions are tied to public access, and the Historic Houses Association certainly encourage their members to open as much as possible. Last year we had over 7 million visitors to our private houses and thus made a great contribution to tourism. There is no guaranteed profitability from access. Indeed even when one does open it is very difficult to make a profit, and even on the money spent on repairs VAT is charged. In view of these new exemptions, I am sure it will be realised that many new houses are going to be open to the public. Therefore, it is very important for guidelines or rules to be drawn up so that owners will know exactly where they stand. Also, do these exemptions apply to historic houses which are used as hotels or schools or community centres? The Historic Houses Association is at the moment in consultation with the Historic Buildings Council and we certainly welcome these consultations. It is most important that these rules should be flexible, because one cannot possibly lay down rules which will cover a large house near London and a small remote house in the depths of Wales or the North of Scotland. Therefore, the

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geography of the house, the ease of access to it, and other local conditions must be taken into considertaion. I should like to say that the Historic Houses Association certainly wishes to continue to fulfil its part in making the national heritage work.
Finally, my Lords, I would make one comment on a completely different subject, Clause 12, which is the clause which enables the Government to charge a great deal more for the transfer of number plates from one car to another. This, I hope noble Lords will agree, is a popular and harmless hobby, perhaps a bit snobbish. Nevertheless, many embassies and other people do have these number plates. Many of them have been handed down as heirlooms from one generation to another. I was speaking to a senior police officer recently and he said he welcomed these number plates. Not only did it make it easy to recognise who was driving, but it made people drive very much better, too. I think that those of us who like to have special number plates recognise that the £5 charge is not enough, and certainly something could be done there. However, I hope it will be possible for the Government to say that it is not their intention to make the transfer of such number plates impossible. We have too much conformity nowadays. Perhaps if people want to have one or two number plates, they should be allowed to have them.
5.51 p.m.
Lord HOUGHTON of SOWERBY: My Lords, I am very glad to hear from the last two speeches made from the Benches opposite some approval of what the Government are doing to preserve the heritage of our country and something of its historic buildings. I do not think that the approval should come solely from the Benches opposite, where it might be thought that vested interests exist. I have no vested interest, but I have always been very keen indeed on conservation, and the preservation of the beauty and the history of our country, because if we once lose it it will never be recovered. I think that the creation of wealth is for more than the expansion of consumer goods and the provision of greater entertainment of the people. Governments have a responsibility to keep a balance in public expenditure between what people are demanding
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and what history will approve of and future generations will endorse, and today we can all see the failure of our ancestors to discharge that responsibility as fully as we would have wished. Therefore, I am glad to give my small voice of approval to that aspect.
I am not very much in favour of power without responsibility, and I am not much in favour of responsibility without power. That is why I do not think I shall enter into the general debate on the expenditure cuts or of the general economic situation this afternoon. The elected Members of another place have still to debate these cuts, and I think perhaps they should have precedence in leading the public debate upon them. My noble friend Lord Longford, as he spoke, brought back to me reminiscences of our joint experience in the Labour Government of 1964 to 1967. We then saw cherished schemes of social welfare go out of the window much more brusquely, with far less consultation, than the present Chancellor has recently extended to various interests inside and outside Parliament. I remember the minimum income guarantee which was established as a pledge beyond economic reach; that went in 1966 because we were anxious to restore world confidence in British capacity for economic recovery. In fact, let us beware; perhaps there are no obeisances that we can think of that may not yet be made in order to maintain world confidence in Britain's capacity for recovery.
I do my best to be enthusiastic about membership of your Lordships' House, but I notice that not much public attention is given to what we say unless it is in a field in which we have some power, which is mostly in matters of legislation. Then of course there is an interest in whether we, in your Lordships' House, are going to pass, amend, or reject what comes to us for consideration. I acknowledge that there are occasions when our debates do excite a considerable amount of public interest, especially on the moral issues of the nation, when we become a kind of secular synod of the Church of England and dwell upon the moral decay of the country, and forget perhaps the strides that we have made in the lifetime of most of us in raising the standards of the people and uplifting a sense of moral obligation to the poor and the needy, the disabled and the old. However, that

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is for another day. We shall perhaps continue that some other time.
Of course, if the captains of industry were here to give their counsel to the nation, to point the way to this recovery which we are now hearing about, and here to tell us how we can forge ahead and turn the Chancellor's cuts in public expenditure into economic progress, then no doubt the people would listen. But they are not here. Those who command the heights of the private economy are not here; still less those who command the heights of the nationalised industries. So we have to manage without them. The truth of the matter is that nothing that the noble Lord, Lord Carr, or I, may say this afternoon is going to make anything like the impact upon public opinion that would come from some who are absent from our debate today.
However, I want to refer to a matter on which I interrupted my noble friend Lord Jacques, which was on one of the Chancellor's proposals; namely, to restrict the title to unemployment benefit of certain people who are enjoying substantial occupational pensions. He responded to my interjection with a warmth of feeling which moved us all. It enabled him to admit his virtue in not claiming for himself unemployment benefit when he was probably entitled to it. But let me remind my noble friend that this is old hat; it has been tried before. My noble friend Lord Collison, who I do not see on the Benches today, was surely a member of the National Insurance Advisory Committee which went into this matter years ago, and when proposals were made to curtail the right to unemployment benefit of the people we are talking about. But nothing came of it. Why? One reason was that the Trades Union Congress did not like it; another was that the Civil Service did not like it, another was that the Government could not find an acceptable way of carrying out the general principle. I should be very interested to see what comes of the Chancellor's reference to this matter again. We are, after all, dealing with men who are compulsorily retired before the age of 65.
Lord JACQUES: My Lords, would my noble friend give way? Not necessarily. In many cases they retire voluntarily.
Lord HOUGHTON of SOWERBY: My Lords, it is sometimes an open question as to whether you retire voluntarily or whether you go out with your honour and dignity. One can think of all sorts of people who are going "voluntarily", but their going is not so voluntary as it looks. However, I shall not dwell on that. I shall deal for a moment with those who are compulsorily retired before the age of 65 and who—and this is the rub—are required to pay quite substantial national insurance contributions in order to ensure their State pension. I can tell your Lordships that many of these people are much more concerned about getting their insurance contributions franked than they are in getting unemployment benefit. However it is something which I am sure we shall have to deal with later, because it will involve legislation and noble Lords will then have the opportunity of dealing with it.
I want to come now to the point which is of especial interest to this House, and which was raised by the noble Lord, Lord Harmar-Nicholls. I hope that it is no secret that he and I have had lengthy conversations about this matter. I am not dissuaded in my support of Lord Harmar-Nicholls because we are both supported by the noble Lord, Lord Wigg; there are some things even in this House that one has to put up with, and one of them is the support of Lord Wigg.
If we had a Privacy Act or a Bill of Rights I should hope that all the rights of the citizen would be embodied in a comprehensive protection clause of the rights of the citizen to be free of unnecessary intrusion or the breach of the threshold of his home. But as it is, we have these rights of coercion and of entry spread around the whole field of legislation, and sometimes I think that the citizen does not realise what nibbles have been made in one Act of Parliament after another at his inalienable rights to enjoy life free from the intrusion of police or bureaucracy. This proposal in Schedule 6 owes its existence as much as anything to the fact that similar rights, but in entirely different circumstances, were conceded at the time of the introduction of VAT, because I have heard Revenue people say, "We are asking for ourselves only what has already been conceded to the Customs and Excise in VAT" That shows the

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danger of legislation by the thin end of the wedge, and one has to be on guard against one thing being conceded because it will be taken as a precedent for another.
I pointed out in a letter to The Times on 21st May that VAT and income tax are two entirely different things. The truth of that is that Parliament decided to conscript large numbers of traders into the field of tax gatherers; they have become enforced tax gatherers for VAT. They receive money from those with whom they do business and it is their responsibility to hand that over to the State. They are unpaid, involuntary and in many cases are perhaps not as efficient or as willing as they should be. Thus, when the Revenue, the Customs and Excise, claim the right of enforced entry to look after VAT, in many cases they are looking for the money. They claim that somebody is sitting on money which has been deducted or received from other people which belongs to the Revenue and has not been handed over. But Schedule 6 is an entirely different thing, so we must look at the two issues separately. We should try to safeguard the erosion of our responsibilities in this House on matters of this kind.
Schedule 6 to the Finance Bill seeks to amend not the Income Tax Acts, not previous Finance Bills, but the Taxes Management Act 1970. Lord Harmar-Nicholls will recall that year after year in Finance Bill debates in another place I asked for administration to be brought into a separate Statute so that our debates on the Finance Bill were not crowded out with details of administration when we wished to debate at greater length matters of taxation.
Lord HARMAR-NICHOLLS: My Lords, until 1911 that is in fact what happened.
Lord HOUGHTON of SOWERBY: Lord Harmar-Nicholls took the words out of my mouth, my Lords. That is indeed what happened, and we now have the Taxes Management Act. The administration provisions are there and Schedule 6 is proposing to amend that Act, which is where the mischief comes. As we know, the proposal first of all was that, on the certificate of a justice of the peace, a right of enforced entry warrant could be given to an inspector of taxes who had declared on oath that he
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had reasonable grounds for suspecting that a fraud had been committed. I think that rights of enforced entry into people's premises, and especially into their homes, are bureaucracy, not police, and should be very cautiously granted because in many cases those concerned are not equipped for it and they are probably inexperienced in this manner of entry into other people's property.
The main question that Lord Harmar-Nicholls was discussing was whether, by this device of a Schedule to the Finance Bill to amend the Taxes Management Act 1970, matters of importance to us should be put beyond our reach. If we are not the guardians of the basic rights of the citizen, what purpose have we? Surely that is what must be conceded to this House, to both Houses jointly, when it comes to a matter of the invasion of the privacy of the citizen. It can be argued that, like the barmaid's child, it is only a little one; that it will be used only in a few cases and that they will be dreadful ones—that any person with any moral feeling about him will concede that we have the right not only to enter the man's home but to cast him into goal without very much ceremony. That argument has always been used far eroding the rights of the citizen—"We will do it only in the extremity". I believe there are some cases—I am not saying that this is one, although perhaps it is—where the cure is worse than the disease, and that it is far better to retain one's rights than to give them away because one is persuaded that there is a small number of cases which require that sort of treatment.
Before I resume my seat I wish to refer to a further possibility in this direction. Just recently we had the Report of a Royal Commission on standards of conduct in public life presided over by the noble and learned Lord, Lord Salmon. I was a member of that Commission, which has made some recommendations in the Majority Report and some in the Minority Report which impinge on the rights fo the citizen and which would propose to give new powers to the Inland Revenue; the power, in the case of the Minority Report, to take the initiative in transferring to the Director of Public Prosecutions genuine suspicions of corruption—nothing to do with taxation but with other walks of life.

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Would that be tacked on to a Finance Bill? Would that be regarded as the powers or the duties of the Tax Inspectorate, and also as a suitable item for inclusion in a Finance Bill? If so, would it, again, be put outside the power of this House to have something to say about it? Or would it be included in another Bill on which we should be free to express our point of view? I say no more about that, except that it shows the danger unless we take note of any tendency in this direction.
My Lords, while I am not in favour, nor is Lord Harmar-Nicholls, of impeding the progress of the Finance Bill on this occasion, it is as well that we have had our say. We hope that what we have said will be read in another place and that in future we shall have proper respect given to this aspect of our work. In the meantine, I hope that this matter can go for examination to the Committee for Privileges and that in due course we will have a report on this most important subject.
6.10 p.m.
The Earl of GOWRIE: My Lords, we have just listened to a remarkable speech, from a very informed source, about the defence of liberty, and I shall refer to one or two points that the noble Lord made later in my speech. I should like to start by apologising in a most heartfelt way to the noble Lord, Lord Jacques, for missing his opening speech. This was unpardonable in somebody who was due to wind up, but I had an engagement that I could not break unless those who do not wish to cut public expenditure choose to subsidise Opposition spokesmen rather than leave them to their own resources. As I am not one of those, I had, unfortunately, to be absent for a few minutes this afternoon.
There should, I feel, be a festive, end of term feeling in your Lordships' House at this time of year, but I cannot honestly say that I detect it. For the second year running, the Government's handling of its Parliamentary programme means that our plans for our holidays and—perhaps more important—our plans for getting on with our own work and earning our own living have been disrupted. If the House of Commons wants a full time professional
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House of Lords or Senate, it has only to say so. It has the power, subject to your Lordships' consent to create one and, knowing the effect which constant legislative changes have on the productive capacity of the country, perhaps the Government could get the International Monetary Fund to lend them the money to create one.
We in this country are really confusing policy with legislation. We are trying to do too much lawmaking in too little time and with far too little professionalism I feel that we should compare the European and American Parliamentary systems with our own in this regard. I know that we have a civil service to be proud of but, at a time in history when the involvement of Government authority in individual lives and livelihoods is greater than at any peacetime period in our history, we need a much more modern, up-to-date and efficient Parliamentary system than we have at present. It is strange that the persistent increase of public service manning at local and national levels has been accompanied in recent years by a persistent decrease in the effects of Parliamentary advice or scrutiny. Perhaps it is not so strange because the imbalance suits the Executive, whether it is struggling to put into effect a frequently irrelevant or outdated Manifesto or whether it is in hock to one pressure group or another.
When we were in Government, I thought that we were on occasion cavalier towards Parliament. But compare the parliamentary "going-over", if I may put it that way, which the Industrial Relations Bill received with the far more skimpy and desultory treatment that Bills of greater economic and structural import are receiving under the present Government. Consider the Dock Labour scheme alone in this regard. Of course, in some ways I welcome the scheme. It is furiously resented by other groups of workers and it will do wonders for the Tory vote among workers without which no Conservative Administration can or, in my view, should take office.
The progress of the Finance Bill in another place makes a fascinating case for Parliamentary reform and for the need for much wider consultations before a Bill is drawn up, as against the frantic scramblings and unscramblings while it is being pushed through. In this House, where Finance

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Bills are concerned, we have, as many speakers have said, a rather different role. I shall come to the very interesting points and proposals of my noble friend Lord Harmar-Nicholls at the end of my own brief contribution if I may. Conventionally, though not, I believe, constitutionally, we do not refuse Finance Bills a Second Reading, and we cannot amend Money Bills, dearly as we might like to. Instead, we use Second Reading as a general economic debate.
Your Lordships have heard a notable speech from my noble friend Lord Carr this afternoon and the House heard a notable speech on the general economy and the state of the nation from my noble friend Lord Carrington two weeks ago. In my role as a second violinist—I do not feel that one should talk about "second fiddle" where a Finance Bill is concerned—I have contributed, I believe, to all but two of the economic debates in your Lordships' House since February 1974.
So I do not want to make my old speech again, except to say that I believe that its general theme remains quite relevant. It is, in brief, that the economic problems and the economic opportunities of Britain are compounded and thwarted by British political life and by our political institutions, long and honourable though their history may be. The Conservatives learned—and learned the hard way—that their political aims in the industrial relations field—aims which I, for one, still find entirely reasonable, unrepressive and in line with the sensible practices of our competitors—were a stumbling block to their also reasonable desire to go for growth in the economy.
I contend that the Labour Government and, above all, the Labour Party have not learned and are not learning the same lesson. They believe that prosecuting in Parliament a series of political measures—whether dock labour, pay beds, community land, the nationalisation measures or the taxation clauses of the present Bill—will command such a measure of political assent from the unionised work force in the country that our poor industrial relations performance will improve, our productivity will increase, wage claims will proceed on an orderly basis and our national competitive position will get better. I do not see a whit of evidence that this is the case. When will we in
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Parliament learn that people are not idiots? As the noble Baroness, Lady Seear, said in her speech, the general public are aware of the effects of excessive expenditure. They do not need politicians to tell them that.
It is, it seems to me, part of the conventional wisdom of the Government that the present wage restraint policy or restrained prosecution of wage claims is engendered by the kind of legislative trafficking which I have mentioned. Surely it is not. When the Wilson Government abandoned the Heath Government's pay policy though not, of course, the threshold agreements nor the mechanism for price restrictions, wage inflation rose sharply because anyone with any sense—and that included the vast majority of working people in the country—knew perfectly well that a wage restraint policy was needed and would sooner or later be reimposed. Therefore, a scramble to re-establish differentials resulted and that at a time when we were still reeling under the effects of the oil crisis. That, too, at a time when the Government had committed themselves, in order to keep the Labour Party in good fettle for the October election, to a very expensive and damaging legislative programme.
If your Lordships think that I am being too partial, let me give another instance from our own side. Your Lordships will remember all the political fuss and brouhaha about property speculation. My noble friend Lord Barber brought in draconian measures to deal with property speculation late in 1973. The Wilson Government then added to them after March 1974. But property, in one form or another, is the underpinning of credit in Western economies. If you go and ask your bank manager for money to expand your productivity, nine times out of 10 he will take a lien on your factory, your office or your home. So the political attack on property speculation which was for the most part contained by the physical area of the City of London, I suggest, helped to undermine the entire credit stability of enterprises all over the country at a time when interest rates were rising very steeply because of the oil crisis. This did us incomparable damage at home and abroad. If, in the Federal Republic of Germany, say, you do not like a set of political attitudes or a group of people or

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certain practices in the economy, you say so; you draw upon public opinion to support you and you bring public pressure to bear. But you do not set fire to the stables by legislation after the horse has bolted. In any case, it is in the nature of speculators to be very fleet-footed indeed.
We must not think that our creditors overseas understand our Parliamentary and political ways quite as well as we do. We know perfectly well that, when the trade union leaders pledge implacable opposition to cuts in the social wage and threaten a free for all on the wages front if public expenditure is reduced, they do not really mean it. But foreigners do not know this. They see a Government legislating to please a small handful of union leaders, and so the normal cut and thrust of union politics makes them edgy about the pound. They see a Government laboriously leaking and educating its Party in proposed future cuts in its own expenditure.
Then the proposals are announced, no one resigns except two Scottish Members of Parliament (who do not really resign anyway) and the Government do not fall. Surely, the pound should then zoom upwards, in Mr. Jack Jones' excited phrase, but it does not because foreigners, in my contention, are no more idiots than the people of the country. They examine the cuts and see that they are simply a rerun of what we might call "1966 and all that"—better than nothing, but nothing very much. They do not see what they are looking for; not cuts for the sake of cuts, as my noble friend Lord Carr of Hadley said in his speech, but a restructuring of central and local expenditure so that it bears a less inflationary relation to national productivity and consumption. In better English this simply means paying your way and living within your means, including, for of course we do need credit, living within our overdraft facility.
My Lords, 1984, you will remember, was not only the year of Big Brother. It was also the year of double-think. Thank goodness the Chancellor is not yet Big Brother, but he is certainly a master of double-think! About half of his package of cuts turn out on inspection to be increases in company taxation. With 1½ million people unemployed he takes
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another whack at the employers—nearly £1,000 million in extra taxation on the corporate sector through National Insurance contributions. Yet the whole point of reducing public expenditure is simply to enable you not to increase taxation further with the damaging effects that that implies.
What effects do noble Lords opposite think that will have on our employment opportunities or on companies who might take on school-leavers, for instance? What effects will that have on investment and on those overseas who effectively promote investment by holding on to our currency? How do we think the double act of the Chancellor and the Prime Minister will go down?—I guess like the pound, unless we are lucky. The Prime Minister, with the economists Messrs. Bacon and Eltis at his elbow, talks of the need, and says that the unions echo the need, to shift resources into the producing sector. The Chancellor, to protect the consuming and service sectors, slaps £1,000 million on to the producers. If I were my noble friend Lord Watkinson I would go slow, or sit-in, or walk out. I think that this will have incredibly damaging effects on the investment agreements reached with the CBI.
Do we really think that our creditors do not notice the shambles of a policy which seeks to cut public spending, on the one hand, while not allowing people to contribute towards public services, as in the pay beds dispute, on the other? It is back, I agree, to my old theme, the old irreconcilable of politics. We are politicing rather than housekeeping. To control wages we have to control prices. The control of prices hits profits, hits investments, and therefore hits jobs. I just do not believe that working people on both sides of industry do not appreciate this. We must learn to trust them which is only to say that we must learn to regain the confidence to trust ourselves.
I want to make a final point about the notable speech by my noble friend Lord Harmar-Nicholls. I had the great interest and privilege some years ago to attend the Ditchley Conference run by the late Sir Kenneth Younger (to whom I pay every tribute in this regard) on the question of privacy in this part of our century and in our national life. I acknowledge that there is a very strong vein of feeling

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among noble Lords opposite that privacy and individual liberty must not be jeopardised. This was a vein which we heard in the speech of the noble Lord, Lord Houghton of Sowerby. I wish I could say that I felt that this feeling were echoed by some of their colleagues in another place.
I acknowledge the difficulties which we all, on both sides, have on the question of entering to pursue possible tax evasions. I do not shun the fact that it was a Conservative Government which introduced VAT entering on this level. I should say that there has been considerable pressure from the Opposition in another place to amend this into a half-way acceptable form, and my noble friend Lord Massereene and Ferrard spoke of this in his intervention. But I should also say that we must he extremely careful on all sides how far down the road of increasing powers of entry we should go. It seems to me that our police force is still the best force for being issued with powers of this kind.
We must also be watchful about evidence we have of the increasing "politicisation" of the Revenue service. But surely the most important thing to avoid these problems is to get our taxation back on to reasonable levels. My right honourable friend—I speak in a personal sense—Mr. Grimond made a remarkable speech on this subject on the Third Reading of the Finance Bill in another place when he attacked the way we were becoming a perk-led or fringe benefit economy.
I agree that it should be right that the House of Lords should be a watchdog in this regard. But it is also right, as my noble friend Lord Harmar-Nicholls acknowledged, that the position of the Speaker of the House of Commons, not just towards the House of Commons but towards the whole Parliamentary system, should be honoured and acknowledged. Certainly my noble friend Lord Harmar-Nicholls is not a lap-dog of the Tory Party or of Parliament, but a watchdog—to adapt the phrase of the noble Lord, Lord Wigg. However, I am glad that he has decided not to bite this afternoon, even if he has given us a good taste of his teeth, and I acknowledge his right to do so.
6.27 p.m.
Lord SHEPHERD: My Lords, today's debate has fallen into four parts: the Finance Bill; the cuts—whether they were right, whether they were needed, whether they have gone far enough; semi-philosophical discussion about the future of the country; and then the interesting point, raised by the noble Lord, Lord Harmar-Nicholls, on the question of "tacking", in relation to which I saw very strange support from my noble friend Lord Houghton of Sowerby and the noble Lord, Lord Wigg. This is a notable experience and raises severe qualms about what I should say at the end of the debate to the noble Lord, Lord Harmar-Nicholls.
So far as the Finance Bill is concerned the noble Lord, Lord Carr of Hadley, said (with some justification, I suppose) that the Bill, when initially introduced, was ill-formed. He used the word "incompetence", which I would not accept, but I would accept the term, "ill-formed". Whenever there is any major change in the finance field it takes many years of refinement to get it right, and I should have thought that it is no criticism of another place, or of the Government, that as a consequence of good, hard debate, not only in Parliament but outside, that one had succeeded in making a major improvement. I suspect that in relation to some of these taxes it will be a case of a number of years of continued refinement.
I can only say to the noble Lord, Lord Carr, that the Act which will be associated with him might in this way have avoided very many of the difficulties that it faced. At the end of the day I would accept that 80 to 90 per cent. of that Act was a good Act. It was that small 10 or 15 per cent. which damned it. If the House of Commons and the Government of the day had listened with a little more care to some who had vast experience in the trade union field, speaking in this House, not in a political sense, and if consideration had been given to what they said, I think we might have had a completely different reaction to that legislation. I take the view that this is what Parliament is about. It is debate, it is the improvement of legislation, and above all else it is the willingness of Government to listen and also for Parliament to recognise from

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time to time that there is an area beyond which the Government, for obvious, practical, political reasons, cannot go.
My Lords, I think the noble Lord, Lord Carr, did not have any deep criticism of the Finance Bill, except of Schedule 6, which he referred to as containing "snooping powers", and that I shall deal with later. The noble Earl, Lord Mansfield, and the noble Lord, Lord Montagu of Beaulieu, spoke about the national heritage and the improvements that the Government have provided in the Finance Bill. The noble Earl, Lord Mansfield, asked whether we would continue to keep this under review. The noble Earl should see what my right honourable friend Mr. Robert Sheldon said, as Financial Secretary at the Treasury, I think on 15th July, when he gave a very firm assurance that this would be kept under continual review. As regards perpetuities, I am advised that it does apply to Scotland. Certainly it does to England. I will check and write the noble Earl, but I am assured that it does apply to Scotland.
In regard to the cuts, my noble friend Lord Longford raised a question about whether the cuts were necessary. The noble Lord, Lord Carr, felt they were necessary, that they were a first step, though perhaps inadequate. I think the House ought to be reminded of the position of my right honourable friend the Chancellor of the Exchequer throughout his period of office in regard to public expenditure. There has been a continuing campaign by noble Lords opposite and by their Party for major cuts in public expenditure. We have taken the view that, in a period of deep recession such as that through which we have gone, it would be quite wrong to cut public expenditure, with all the traumatic consequences which would follow in the field of employment. We announced last year a cut in public expenditure of some £3 billion for the purpose of making resources available as industrial progress was made, but we took the view then that, so far as 1977 and 1978 were concerned, there was not a case on grounds of the movement of resources for a cut in public expenditure, My view is that that is still true. I do not myself believe that there is any pressure upon resources in this country at the moment;
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nor do I anticipate a strain on resources of such a character, at least, that there needs to be a shift from the public sector into private industry.
However, there is another factor which has borne very heavily upon us in recent months. The economy in the country has developed a good deal faster than we had anticipated earlier in the year. This therefore means that industry will be requiring further sums for investment. To achieve that, we have got to restrain the public area in order that the sums that are saved can be made available for private industry. So there is, I believe, an undoubted case for the cuts that were announced by the Chancellor last week. There is also another reason, and the noble Lord, Lord Carr, touched upon it himself. The public sector borrowing requirement is very high. In my view, it is unacceptably high. It has been left at that figure because we have sought to avoid all the consequences of recession. But I believe, and the Government believe, that steps should be taken to reduce the public sector borrowing requirement. We believe that we can see a reduction, through an upturn in the economy, of the order of some £1 billion, but the rest has to be found by restraint or by imposition through taxation.
I take the view—and I think most noble Lords would agree—that it would be quite wrong to look for such a change in the field of taxation. In fact, I do not believe that the taxation system would bear it. Certainly it would be counterproductive in the field of pay policy. I have also to say to the House, having gone through the exercise of finding this £950 million plus other savings, that it is one thing to talk about cutting public expenditure; it is another thing to do it, unless, of course—and I think the noble Lord, Lord Carr, was very close to it—you cut benefits. Then you can save money, you can save it dramatically and you can save it quickly, as the noble Lord, Lord Thorneycroft, I am sure, would agree. You can cut pensions, unemployment benefits and all that goes with it; but when you start to cut into the normal machinery of government, whether it is of central Government or of local government, then it is a very difficult task.
The noble Lord, Lord Carr, was quite right in saying that we anticipate that

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some 60,000 jobs will be lost through the cuts themselves. In the main, they will be in the construction and service industries; and there will be, I suspect, something of the order of 12,000 lost as a consequence of the 2 per cent. on National Insurance contribution. I shall come back to that in a moment. My Lords, in our view we went as far as we were justified in going. We sought to protect housing, we sought to protect the essential road building programme, and we deferred where we could; hut, my Lords, we took the view that a £9 billion public sector borrowing requirement was an essential target, and therefore we had to look in the field of taxation.
As I said on the Statement announcing the cuts, we looked closely into this. We had to have in our minds the effect on the RPI. If we had done it through VAT it would have made a considerable impact on prices. If we had done it on cigarettes or drink—for which there is a very strong case—that, too, would have made a major impact on prices. We took the view at the end that this was the best way of doing it. It would have a marginal and early effect on industry but taking into account the buoyancy of industry and commerce and what was being done in the Price Code field, the increase could be borne by industry without any serious consequences. I must say—and I hope that noble Lords opposite will convey it to the noble Viscount, Lord Watkinson—that I can understand his initial reaction and that of his colleagues at the CBI; but all sides in the country are being asked to bear a special burden here. The CBI and industry have not been isolated from the impact and the cuts that are going to affect them.
I hope very much that the spirit that existed—and which, I believe, still exists—between industry, Government and the trade union movement will be very quickly restored and that the plea for investment that the noble Viscount, Lord Watkinson, had in mind to make to industry will be made. I hope it will be responded to; because investment is the kernel of the economic development of this country.
My Lords, all sides are being asked to pay a heavy price. I agree with the noble Baroness very much when she referred in the course of the debate—as did the noble Lord, Lord Carr—to the need to maintain
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the degree of co-operation and confidence between the Government and the trade union movement. The noble Lord, Lord Carr, recognised the tremendous opportunities that have now been provided because of the new climate through pay restraint. I agree with the noble Baroness that the re-entry is going to be more difficult. We must certainly devise ways and means by which there are incentives and differentials and certainly, if it can be done, to meet the undoubted case so far as middle management is concerned.
However, we have got to maintain this climate of co-operation. This has been very much in the mind of Government throughout. We have need to maintain not only the spirit of co-operation of (shall we say?) management and the investor but also of the work force and their representatives. It is not always easy but I believe that we should carry on; although there has been criticism of the extent to which the Chancellor has gone out of his way to consult the various bodies before a decision was taken. But I believe that this is the only way—certainly at this time—in which this country can be governed. It creates difficulties for Parliament for it appears as though decisions are being taken and matters are being negotiated elsewhere which normally are done on the Floor of the House, but I believe that it is essential to bring the three pillars of the Estate together and in continuous consultation.
Lord CARR of HADLEY: My Lords, the noble Lord mentioned the care with which the Chancellor of the Exchequer consulted. Could he say whether the CBI were among those consulted since such a vast amount of the package fell on their members?
Lord SHEPHERD: My Lords, I understand the Chancellor did see the senior executive—I believe it is the Director General—of the CBI certainly before decisions were taken by Cabinet. That is my understanding.
My Lords, I do not think there is need to say a great deal more. We are going to return to this matter, no doubt, in the Recess and also to some of the alternatives which the noble Lord, Lord Carr, deployed about the use of public funds and the shipbuilding and aircraft industry. The

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noble Lord, Lord Carr, was free to acknowledge that whether we nationalised the shipbuilding industry or not, very large sums of money would have had to be found for that industry. I do not know whether noble Lords would dissent from it; but I, personally, when it comes to very large sums of money, would prefer to buy the equity and have some say in management rather than merely to provide large sums of money to the shareholders of companies who may fail to exercise their responsibilities in the conduct of those companies.
I now come to the noble Lord, Lord Harmar-Nicholls. If I may say so, this is one of the more interesting points on procedure raised during my period as Leader of your Lordships' House. The noble Lord has acknowledged that this Bill is now a Money Bill under the Parliament Act 1911. I think I ought to say a few words about what this means to this House. First, it means that the Bill can be given the Royal Assent at the end of one month, whether or not this House passes it. Secondly—and I hope the noble Lord, Lord Harmar-Nicholls, will agree with me—Mr. Speaker has, in effect, given his Certificate that there are no tacking provisions in this Bill. I would quote Section 1(2) of the Parliament Act at length because it lays down the conditions which must apply before the Speaker can give his Certificate:
"A Money Bill means a Public Bill which in the opinion of the Speaker of the House of Commons contains only provisions dealing with all or any of the following subjects, namely, the imposition, repeal, remission, alteration, or regulation of taxation; the imposition for the payment of debt or other financial purposes of charges on the Consolidated Fund, or on money provided by Parliament, or the variation or repeal of any such charges; supply; the appropriation, receipt, custody, issue or audit of accounts of public money; the raising or guarantee of any loan or the repayment thereof; or subordinate matters incidental to those subjects or any of them."
Section 3 of the Act says:
"Any certificate of the Speaker of the House of Commons given under this Act shall be conclusive for all purposes, and shall not be questioned in any court of law."
Mr. Speaker has certified that this Bill deals only with the items that I have mentioned; namely, taxation, supply, and subordinate matters incidental to those subjects. I am not suggesting it—I could
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not do so—but the way in which the noble Lord mentioned it in his earlier Motion could have been construed as a challenge to Mr. Speaker. What we are now dealing with is a Money Bill, whereas it could have come to us as a Supply Bill alone which would have produced a slightly different situation.
The real question is whether Schedule 6, that is, the investigatory powers of tax inspectors, is foreign to and different from the matter of the Bill. That is the kernel of it. First of all, it is within the Long Title of the Bill. The noble Lord will agree to that. It has been accepted by the authorities in the Commons to be within the scope of a Finance Bill. My Lords, if it had not been, and you wanted to put some foreign matter into the Bill, it could be done in the House of Commons quite responsibly and respectably. There is a procedure for including in Finance Bills provisions which are normally outside their scope. This is done by means of a procedural resolution; but in the case of Schedule 6 no such procedural resolution was considered necessary because what was in Schedule 6 was not thought to be outside the scope of the Bill.
Regarding the scope of a Finance Bill, Erskine May (page 791) says that it:
"is not limited to the imposition and alteration of taxes for the purpose of adjusting the revenue of the year. It … normally includes many provisions of a permanent character for the regulation of fiscal machinery and other purposes."
I think the noble Lord, Lord Harmar-Nicholls, agreed that the House of Commons has been scrupulous in avoiding tacking. There has been no successful accusation of tacking since 1807, and the Commons attitude is summarised in Erskine May (page 802) as follows:
"As for the modern equivalents of Bills of aids and supplies, namely, Consolidated Fund and Finance Bills, the rules of order of the House of Commons exclude the possibility of foreign matter being tacked to such Bills by way of amendment; and respect for constitutional practice prevents the inclusion of such matters among their original provisions."
The Schedule is well precedented by, for instance, Clause 37 of the Finance Act 1972 relating to the entry and search of the premises or persons in connection with VAT. There are other powers of entry in the Betting and Gaming Duties Act 1972 (consolidating earlier Finance Acts), and the Finance Act of 1967 on SET.

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I cannot help but feel that the distinction of the noble Lord, Lord Harmar-Nicholls, between assessment of taxes and the collection of taxes is, if I may say so, meaningless. The important point is that they are both concerned directly with taxes and are therefore not foreign to the matter of the Finance Bill. I could not do better—and it is a strange afternoon—than to refer to a rather unlikely authority, that of an Archbishop of York, who spoke on the notorious Finance Bill of 1909, when accusations of tacking were made. He said:
"I find it difficult to believe that the procedure for the assessing of a tax is foreign to that tax itself".
It seems to me that the noble Lord is trying to create a new definition of what tacking is. The rule originated from the procedure of putting together in the same Bill clauses that have no relation to each other and the subjects of which are entirely different. The kind of situation which the Standing Order was designed to meet was, for example, that of 1704 when the Tories—then rather different from the Tories of today, but Tories none the less—tried to tack clauses about Dissenters to a Land Tax Bill. The last occasion when tacking was successfully invoked, in 1807, involved a Malt Duty Bill to which a clause legalising Exchequer Bills charged on pension duties was added, and an Irish Customs Bill to which a clause on foreign compensation was added.
What we are proposing in this Bill has no real relationship to what Standing Order No. 49 was designed to prevent. I agree with my noble friend Lord Houghton and, in a lesser degree, with my noble friend Lord Wigg, that Parliament always ought to be watchful about the way the Executive may encroach upon individual freedom. It could be done accidentally and without intention. I am a little nervous about Standing Order No. 49 and what we should do about it in relationship to another place. I have no doubt at all that the question of tax, how taxes are raised, regulated and assessed, is a matter for the House of Commons. I would not wish this House to be put in a position of challenging that right. There is a risk therefore in going into Standing Order No. 49 that, by some strange quirk, we may well create a problem between the two Houses.
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When I discussed this matter informally with the noble Lord, Lord Harmar-Nicholls, I had at the back of my mind the idea of sending this to the Committee for Privileges because this is a matter of privilege. The more I thought about it the more I could see it impinging upon another place, and I came to the view that that would not be the correct Committee because it would be a Committee sitting (shall I say?) as the House of Lords in isolation.
If it is the wish of the House that Standing Order No. 49 and matters relating to it should be considered by a Committee, the new Committee which has been set up on Parliamentary Procedure would be the right one. I will tell the noble Lord, Lord Harmar-Nicholls, why: the House of Commons are setting up an identical Committee and both Committees have power to meet together, so this is a matter which can best be considered by the two Houses in that Committee. It does not restrict our later attitude to it.
I do not think a resolution is necessary. This matter can be referred immediately to the Chairman of our own Committee, so that it can be considered and proceeded with between the two Houses. In saying that, I want to make it absolutely clear that I do not believe there is any question whatsoever of tacking in this piece of legislation. I would not wish it to be thought that, by expressing a willingness for it to be considered, I am in any way accepting some of the things which have been said or written by certain noble Lords in this respect. I believe the position of Mr. Speaker needs to be protected, though in fact he is already protected because I believe he has acted on the best advice.
6.58 p.m.
Lord HARMAR-NICHOLLS: My Lords, the noble Lord has been generous and responsible. The suggestion that he has made is one we ought to consider and perhaps follow. From my point of view I should like to think about it; on the face of it it looks right. The only reason I rise again is because I still believe that both Houses have inadvertently run against their procedures. If the noble Lord looks at the matter again in detail he will find there is a difference between assessment and collection of taxes. None

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of the examples he gave as to the way it has been dealt with in the past referred to people's own money; it was only when they have been holding other people's money. I thank the noble Lord for the thought that he has given to this matter; the suggestion he has made certainly enables me not to move the Motion standing in my name on the Order Paper, and I should like to feel the outcome will be as he has suggested it might after consideration by the new Committee. my only concern is that our rights are properly preserved.
Lord SHEPHERD: My Lords, I thank the noble Lord. I am glad that I have met the concern of the noble Lord, but I hope that the conditions under which I have done so are clear. We have a lot more business yet to do, and I apologise for having spoken a great deal longer than I intended. I hope that the House will now give this Bill a Second Reading and allow all its remaining stages to be proceeded with.
On Question, Bill read 2ª: Committee negatived.
Then, Standing Order No. 43 having been suspended, pursuant to the Resolution, Bill read 3ª, and passed.
Lord HARMAR-NICHOLLS: My Lords, I do not intend to move the Motion standing in my name on the Order Paper; viz:
"To move, That the operation of Standing Order No. 49 (No Clause to be annexed to a Bill of Aid or Supply foreign to the matter) be referred to the Committee for Privileges."

DOCK WORK REGULATION BILL
Brought from the Commons; read 1ª and to be printed.

JUNIOR MINISTERS' AND OTHER SALARIES ORDER 1976
7.2 p.m.
Lord SHEPHERD Lord SHEPHERD rose to move, That the draft Junior Ministers' and other Salaries Order 1976, laid before the House on 14th July, be approved. The noble Lord said: My Lords, I beg to move the
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Motion standing in my name on the Order Paper. The House will be aware that my right honourable friend the Lord President announced in his Statement in the other place on 12th July about MPs' pay that the Government proposed that Junior Ministers and Office Holders in both Houses should receive a supplement of £6 a week under the current pay policy, if their total earnings from all sources do not exceed £8,500 per annum.
In the case of all eligible Members of the other place, the increase will be applied to Parliamentary salary. In the case of Peers, the increase has to be applied to salaries drawn as Ministers or Office Holders. The draft order now before this House is designed to achieve that end. A Peer holding any of the posts covered by this order will be eligible for the increase if his total earnings from all sources do not exceed £8,500. The payment of the increase will therefore be subject to confirmation that any other earnings he may receive—and I stress the word, "earnings", which can include income from, for example, directorships, salaries, appointments and professional fees—together with his existing salary under the Act do not exceed £8,500.
There are two points about the order which call for special comment. In the first place, it includes the Solicitor General for Scotland who is not a member of either House. His salary as a Law Officer of the Crown is, however, governed by the Ministerial and Other Salaries Act which this draft order seeks to amend, and must therefore be included in the order. The second point is that the order has to provide for an increase in salary for all Parliamentary Secretaries, including those in the other place. In practice, only the two Parliamentary Secretaries who sit in this House will be eligible for the increase; namely, my noble friends Lady Birk and Lord Melchett.
Those who sit in the other place also receive a Parliamentary salary which in total puts their income over the £8,500 limit, and so their Ministerial salary will remain at £5,500 under the power in Section 4(2) of the Ministerial and Other Salaries Act 1975 which enables Ministerial salaries to be restricted. The draft order is subject to approval by Resolution in each House of Parliament. Approval was given by the other place on 23rd July.

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Subject to the approval of this House, the effective date of the increases will now be the date on which the order is signed by Her Majesty.
The salaries of the Ministers and Office Holders in this House are now out of date, having been fixed as long ago as 1st April 1972. Although the report of the Top Salaries Review Body, which will be published very shortly, recommends substantial increases, the Government do not propose to take any action on the report until incomes policy permits. The Government are in no way committed to implementing the Review Body's recommendations. The proposed increase, which is the maximum permitted under the current policy, is a modest measure that does not do full justice to the Ministers and Office Holders concerned. But it nevertheless will serve at this time as a limited token of recompense for all the onerous duties which they perform. I commend the Motion to this House accordingly.
Moved, That the draft Junior Ministers' and other Salaries Order 1976, laid before the House on 14th July, be approved.—(Lord Shepherd.)
On Question, Motion agreed to.

STORNOWAY HARBOUR ORDER CONFIRMATION BILL:
Considered on Report.
Lord SHEPHERD: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Stornoway Harbour Order Confirmation Bill, has consented to place Her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Then, Standing Order No. 43 having been suspended, pursuant to the Resolution.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3ª.—(Lord Kirkhill.)
On Question, Bill read 3ª and passed.

VALUATION AND RATING (EXEMPTED CLASSES) (SCOTLAND) BILL [H.L.]
7.7. p.m.
Lord KIRKHILL: My Lords, I beg to move that this Bill be now read a second time. Your Lordships may have noticed that in another place questions have been asked about the liability to local rates of offshore oilfields and installations and of the Forth and Tay Road Bridges. The Government have made clear their view that the two bridges should continue to be exempt from rates, and that oil installations which lie far out to sea ought not to be liable to local rates. The Bill now before your Lordships' House will allow implementation of the Government's intentions. Let us first consider offshore oil installations.
In Scotland—and the Bill is concerned only with Scotland—rating valuation is entrusted to locally appointed officials; lands valuation assessors. The assessor is under a duty to value and enter in his valuation roll the lands and heritages which lie within his area. The Local Government (Scotland) Act 1973 which set up the present local authorities defined their boundaries clearly, save in one important respect. Their seaward limits are not defined.
The practice of the assessor is to enter in the valuation roll any seaward subjects which he thinks may fall within his area. If the occupier appeals against the entry the issue will be decided, probably by the Lands Valuation Appeal Court in Edinburgh. The Forth Railway Bridge and certain coal measures off the Ayrshire coast were by this process held to be properly assessed, and quite recently the rateability of yacht moorings was likewise upheld. Two of our Scottish assessors have made assessments on certain oilfields, all lying many miles offshore on the Continental Shelf. The oil companies have challenged the assessors' actions and litigation is in train.
It may be asked why, if the assessors' entries are thought to be unfounded, the question may not be left to the courts. There are two main reasons for this. The first is that the Government are advised that the Continental Shelf is probably not within the area of any assessor, but that only a decision by the

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court, or legislation, can resolve the question. If the courts found that the entries were competent, the Government would have to introduce legislation to remedy the situation, because of the consequences of a large rate burden falling upon these installations in addition to corporation tax and petroleum revenue tax.
Since it is the Government's policy that taxation on offshore petroleum exploitation should accrue nationally and not locally, it seems preferable to move now to legislation rather than to await the outcome of complex and expensive litigation following which legislation might in any case prove to be necessary. The second reason is that a decision by the courts on the fields which have been assessed might not settle the position of other offshore subjects, so that the whole business might start again over some other field. This Bill would empower the Secretary of State for Scotland, subject to Parliamentary approval, to settle this issue and other comparable issues as they arise.
My Lords, I turn now to the Forth and Tay Road Bridges. Each bridge is administered by a joint board of the local authorities whose areas it links and in each case the local Act providing for such administration conferred on the bridge an exemption from rates. But when local government was reorganised, the Local Government (Scotland) Act 1973 swept away a number of local valuation and rating provisions, often antiquated, which would have brought unfairness and great administrative difficulties into the new rating areas. But this measure also swept away the rating exemption afforded to the bridges by local Acts. This Bill provides a means of restoring the exemption with effect from 16th May 1975; that is, the date from which rates are alleged to be chargeable. I put the matter thus because the assessments made on the bridges are under appeal and I must take care to say nothing to prejudge the issues raised by the appeals.
We have today these two types of property against which claims to rates have been mounted, claims which may or may not succeed, and tomorrow we may have others, as technology opens new ways of exploiting offshore resources.
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The assessors, who are independent under the law and not instruments of Government policy, may again seek to enter offshore subjects, so the Bill will confer on the Secretary of State for Scotland the power to specify by order, subject to Affirmative Resolution procedure, classes or descriptions of subjects which are not to appear in the valuation roll. The power extends to properties which are wholly or partly on, over or under the bed of the sea, by which is meant anywhere below low-water mark. The exemption may be conferred on a prescribed part of any generally described class of subject following consultation with affected interests.
My Lords, it may be assumed that upon the enactment of the Bill an order will be laid prescribing by general description public toll bridges administered by local authorities and offshore petroleum fields and pipelines to whatever extent may be considered proper. Thus the subects which have so far been assessed for rates—the bridges and the offshore petroleum installations—would be taken out of the valuation rolls. Once a class or type of property has been prescribed, no valuation will be competent thereafter. We would prefer to avoid a belated provision exempting any such new class. So the Bill provides that the assessor shall, subject to exceptions, assess no offshore subjects until he has duly notified the Secretary of State for Scotland and been advised that it is not intended to make an exemption order. Quite clearly there will be numerous classes of property which the assessor must be at liberty to deal with without going through the notification procedure. The Bill therefore empowers the Secretary of State to specify descriptions of property for which notice is not required.
Thus, my Lords, from the enactment of this Bill all subjects to which it applies will fall into one of three categories: first, subjects of a description which is exempt from valuation; secondly, subjects of a description which by direction of the Secretary of State for Scotland may be entered in the valuation roll just as they are at present; and, thirdly, subjects which, because they fall into neither of the first two categories, must be notified to the Secretary of State for Scotland before any assessment is made.

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There would be full consultation directed towards a comprehensive list of classes which will by order be exempt, and an equally comprehensive list of classes respecting which the notification procedure need not be applied. Then the process of notifications followed either by the Secretary of State for Scotland intimating that no order will be made or by the making of an order will be necessary only when the assessor intends to value some class of subject hitherto unknown—or, as is possible, something of a description which had been overlooked 'When the first order was made. As I said earlier, the Bill requires that any such order made be first laid in draft and approved by resolution of your Lordships' House and in another place. The Bill will have no effect whatever upon the boundaries of an assessor's authority, or on those of a local authority for any purpose. When the assessor is told by the Secretary of State for Scotland that no order will be made in respect of a certain subject, his powers and his duty to assess the subject will be unchanged. The courts will rule on any dispute in the normal way.
So this measure will implement the Government's policy—and I do not believe that policy has been seriously challenged—that revenues from the exploitation of our offshore resources should benefit the nation as a whole and it will retrieve a legislative oversight in 1973 which would otherwise adversely affect the finances of the Forth and Tay Road Bridges. And it will allow the quick and simple solution of any problems of a like nature which may arise henceforward. My Lords, I commend this measure to your Lordships' House accordingly.
Moved, That the Bill be now read 2ª.—(Lord Kirkhill.)
7.17 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord, Lord Kirkhill, for his explanation of what must necessarily be a complicated subject. I understand that the Government decided to introduce the Bill into your Lordships' House at this late stage in the session because it is required urgently to clarify the situation, since we are dealing with a relatively new industry, the offshore oil industry, and with the Continental Shelf where there was much less activity before
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1970 than there has been in the last five years. I will say straight away that I do not regard this as a controversial Bill and that we, for our part, will try to assist the Government to pass the legislation, while examining it in detail to make sure that it is in as perfect a form as we can get it.
We were aware that local authorities in Scotland had been contemplating the rigs and platforms in the North Sea and eyeing them with a view to the rates which might be coming in. The noble Lord has told us that even the oilfields themselves have been regarded as possible subjects of assessment for rating. Certainly I agree that when the Oil Taxation Bill was passing through this House neither we nor the Government took into account the possibility of the oilfields also having to pay local government rates. Your Lordships will recall that the Oil Taxation Act introduced the petroleum revenue tax which is levied on each individual oilfield, not on the profits of companies. The Act takes into account the 12½ per cent. royalties which have to be paid on oil, but certainly it does not take rating into account. May I say in passing that we in Parliament considerably changed the original version of the petroleum revenue tax. Even in its final version our criticism from this Bench was that it was kind to the prolific oilfields which are fairly easy to work but that it would bear hardly on other marginal oilfields which the consortia might well find were not worth developing; that is, it would not be economic to get out the oil.
I should like to ask a question or two about the scope and policy. The noble Lord, Lord Kirkhill, indicated that the Secretary of State's present intention was to exempt the Forth and Tay road bridges, and I understood that this was one of the objects of the Bill, but when we come to other possible subjects I think there could be some difficulty about where the line is to be drawn. From what he said it seems that all the installations connected with the off shore oil industry are likely to be exempted from rates by the orders which the Secretary of State for Scotland would table. The noble Lord mentioned pipe-lines, and I think he mentioned rigs and platforms and the oilfields themselves, but what about terminals and jetties? What about platform construction?

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Last Wednesday, six days ago, I was at the inaugural ceremony concerning flooding the dock of the largest platform in the world at Kishorn in Wester Ross. That platform will move out into the loch considerably beyond the low-water line which is the important line so far as this Bill is concerned, and for about a year work will be continued to complete it where it is lying, a mile or two away from the coast. That is a construction job; that is nothing directly to do with the oil fields or winning the oil because eventually that platform, when completed, will be towed several hundred miles to an oilfield East of Shetland. Will that kind of platform construction and the various installations which are below the low-water mark also be exempted from rates, because they are connected with the oil industry although they are not, at that stage, more than a construction job being carried out by the building industry and the steel fabrication industry? Then there are other objects such as floating oil tanks. I think it would be helpful if the Minister could say whether it is the Secretary of State's intention to exempt in one of his first orders every kind of installational equipment which is connected with the off-shore oil industry.
Then, on policy, may I ask the noble Lord about other industries because, of course, there are jetties which are used by shipping and by fishing boats and for all I know some of these may already be the subject of rating where they extend beyond the low-water mark. I must also mention marine fish farming. I do not need to remind your Lordships that there has been considerable dismay, both in this House and in another place, that freshwater fish farms have not been exempted from rating although farming, agriculture, is so exempt. When we come to marine fish farming there are often cages below the low-water mark right out in sea lochs, containing many hundreds or thousands of salmon which are being fed and are growing. Are those cages and other installations connected with fish farming to be rated or are they to be exempted?
The Bill opens up a whole range of industrial and other subjects which might in future be categories which are to be exempted. So may I ask the Minister of State to tell us whether the Secretary of State is going to leave these matters for
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individual decision later? Is it his intention simply to exempt the Forth and Tay road bridges; to exempt (as I hope) everything connected with the off-shore oil industry and then to consider other categories or other individudual subjects as they arise?
Then I have another question, because accept what the Minister said: that the whole question of the Continental Shelf and its ownership and the control that a coastal State has over it, is changing. How far out will the Government in future expect the rating exemption or the rating to extend? At present our territorial waters extend for three miles. It is expected that the convention, when it is eventually agreed at the Law of the Sea Conference, will extend territorial waters to 12 miles. But from what the Minister said it sounded as though he was dealing with the whole Continental Shelf, and the Continental Shelf can extend even beyond the 200-mile economic zone, which again has been virtually agreed at the Law of the Sea Conference and is expected in a year or two to be ratified and put into effect by most, if not all, of the countries of the world.
So I entirely accept that legislation like this is needed because these changes are taking place, and when we have an economic zone of 200 miles which is internationally recognised the question of rating or exemption from rating may well arise in that area. Under the Geneva Convention by which the North Sea was divided up and allocated for mineral exploration, the seabed was not claimed, as I understand it, as part of the country. The arrangements by which frontiers were projected into the sea and median lines drawn and then drilling for oil and gas was to proceed in the North Sea, did not include claims for sovereignty over the seabed. It was simply the right to the substances lying in the seabed. Once Britain has a 200-mile economic zone presumably we shall have more control over installations and minerals in our part of the Continental Shelf.
Can the noble Lord tell us what will be the principles governing the allocation of subjects which are not exempted? How will it be decided within which local authority's area a subject will fall? For example, if there is some installation connected with—he mentioned yachts,

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but shall we say with vessels, and not connected with the oil industry, and it is some miles from the shore, there will presumably have to be a system by which the boundaries between local authorities are projected into the sea in order to decide in whose area the subjects lie; and there could well be disputes between local authorities on that matter. It could be done under the system between the countries bordering the North Sea by which the North Sea was divided up for the purposes of oil exploration. There is a formula and we could apply that. Alternatively, for dividing Scots law from English law in 1968 we simply drew a line eastwards from the Border. There will have to be some system if we are to settle disputes between local authorities as more and more activity takes place off our shores and on our Continental Shelf.
I was glad to see the Affirmative Resolution procedures covered in the Bill, because it is right that both Houses of Parliament should have the opportunity of considering the list of subjects which are to be exempted and deciding whether or not the categories are appropriate.
I would end by raising one other separate valuation subject. If the noble Lord, Lord Kirkhill, was here at Question Time today he will have heard me raising a matter which has been considered by the courts, which is the question of the assessment of wheelchair housing and other housing for the severely disabled, when houses have had to be adapted, in order that people can live in them who are in wheelchairs or are otherwise severely disabled. The position is that both in Scotland and in England cases came up earlier this year. The Appeal Court decided in favour of the disabled persons. But your Lordships' House, in its Judicial capacity, interpreted the law in the other sense, and in so doing, the noble and learned Lords concerned criticised the wording of the English Act—it was Section 45 of the General Rating Act—as being ambiguous and labyrinthine. Everyone has agreed, I think, that further legislation is needed.
My Lords, on 10th May in the other place, Mr. Barnett, the Minister concerned, said that the Government were examining the present legislation carefully in the light of the judgment which I have mentioned,
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and the criticism made of the ambiguity of Section 45. That, of course, applies to England and Wales. There has been a similar case in Scotland. I hope the Minister might be able to take the opportunity of this valuation Bill, a Scottish valuation Bill, going through Parliament to add a very short amending clause which would put right something that certainly needs to be put right in our valuation law in Scotland as regards the disabled; that is, not only making it clear so there is no difficulty of interpretation but also setting it quite definitely in favour of the severely disabled person.
My Lords, it is far cheaper for the Government and the taxpayer to encourage severely disabled people to live in their own homes than it is to keep them in hospitals or institutions. In hospitals, they are occupying valuable beds. Apart from that, of course, it is the best therapy and the best thing for the disabled themselves if they can be as independent as possible, living in the community rather than simply being in hospital or in an institution. So the change in the law, the amending legislation which would be short and non-controversial, far from adding to public expenditure would have the opposite effect. It would help to reduce public expenditure. I can give this assurance to the noble Lord; that is, if such a clause were added to this Bill, there would be no accusations from this side of the House of "tacking".
I understand that the later stages of this Bill will be taken in October, probably when we return, so there is plenty of time for the Government to continue their examination, which the noble Baroness who replied to me today said they had under review at the moment, of the legislation and the amending legislation that is needed. I hope that the Government will be able by October and the Committee stage of this Bill to produce an amending clause of the kind I have mentioned on this other subject. This is a miscellaneous Bill dealing with a great number of subjects, and I think it would be in place. If the noble Lord can use this Valuation and Rating Bill for that purpose, it will be greatly welcomed. I recognise the need for this, and we will otherwise do what we can to facilitate the passage of the Bill.
7.33 p.m.
Lord KIRKHILL: My Lords, I must confess at the outset that I was not present at Question Time earlier today, so that I was not privy to the discussions and deliberations which took place at that time. But I will certainly read Hansard tomorrow and make myself aware of the point which the noble Lord, Lord Campbell of Croy, raises with me. He might forgive me if I do not stray into the esoteric law of the line and area and extent of delineation of the Continental Shelf, a subject which I know is of particular interest to the noble Lord, and a subject on which I know he has considerable expertise and on which he has expressed, both in your Lordships' House and elsewhere, definite, clearly constructed and well thought out views. Rather, I would attempt to confine my remarks to replying to a number of specific points which the noble Lord, Lord Campbell of Croy, raises with me, as these relate to what, as he himself says, is a somewhat complicated Bill.
Of course, I welcome the very generous welcome of the Bill give by the noble Lord, and I confirm to your Lordships that certainly the Tay and Forth Road Bridges will be exempt, as will those oil installations, as I indicated in my earlier remarks. But the noble Lord has really asked of me how the expected course of events might move following enactment of the Bill. If I can be of some help to him in this regard, it might be appropriate for me to comment at this stage.
As I understand it, at this stage in our deliberations at least, the Secretary of State for Scotland will make an order under Clause 1 exempting from valuation and rating general descriptions of subjects. We have already mentioned the Tay and Forth Road Bridges and the oil installations which will dispose of existing valuation roll entries in respect of the two toll bridges and the oil installations. And thereafter no further subjects falling within the general descriptions, for example, any other offshore oil installations, may be entered in the valuation roll.
Clause 2(1) will prevent the assessor from making any valuation roll entry in respect of any subjects lying wholly or in part below low watermark until such time as he has notified to the Secretary of State for Scotland his intention to do so
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and has received intimation from the Secretary of State that the Secretary of State does not intend to make an order which would exempt the subject in question. There is an alternative possibility that an exempting order may be made. It is at this point that one immediately thinks of wave power, perhaps, or the new geological resources which are becoming more apparent, the whole new range of technology and, indeed, as the noble Lord, Lord Campbell of Croy, has mentioned, the construction platforms. It is at this point that we think of these things. As I understand the Bill, Clause 2(1) would give this cover to the Secretary of State to make his decision as the assessor intimates to him the assessor's intention.
Then, of course, there is the great bulk of coastal subjects which I mentioned earlier, which must remain liable, as they are at the moment. Clause 2(2) provides a means of dispensing with the assessor's duty to give notice before making a valuation roll entry. The subsection allows the Secretary of State to dispense with notices under subsection (1) in respect of such classes of subjects as he may direct. Thus—and here I touch on a point which the noble Lord, Lord Campbell of Croy, mentioned—for example, a direction could dispense with the need for notice of intention to assess any harbour, a pier or a jetty, or any bridge, or moorings, or a fish hatchery. The noble Lord also mentioned very explicitly the question of fish farming. I can advise the noble Lord that the Government have no present intention of exempting fish farms. Their rateability in Scotland recently has been confirmed by the courts, and any case for exemption would have to show why local taxation should not continue to be levied.
I am sensitive to the very interesting question which the noble Lord, Lord Campbell of Croy, posed to me on the question of house construction and renovation as they apply to the disabled. Of course, I am aware of the distinction between the English and Scottish positions. But I am bound to say to the noble Lord that it is probably outwith the scope of this Bill. However, I will at least undertake to read with great interest the remarks he made earlier this evening.
I was also asked by the noble Lord whether I could give some indication of

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definition of the seaward limits, as I understood him, of local authority jurisdiction. I have already indicated that I do not think I can comment adequately about the subtlety of the law as it applies to the Continental Shelf area. But as it applies seaward in terms of the limits of local authority jurisdiction I am advised there would be considerable advantages in a clear definition of boundaries, the very point the noble Lord has made, for all local government functions, and there are of course already very broad areas in other directions, as he knows. But it is very doubtful whether a single definition could be applied to all those functions. A great deal of consultation would be needed to clarify all the requirements, and I am advised it is not a task that could be undertaken quickly. As matters stand, it seems to me we have an immediate difficulty to which we must provide an immediate solution, and this Bill is an attempt in that direction.
Of course, I will return, with noble Lords, to discussing the matter at the next stage in October. Meantime, I would thank your Lordships for the welcome accorded to the Bill, and I will undertake to read very carefully all that has been said in a constructive way regarding the Government's latest measure before your Lordships this evening.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

RETIREMENT OF TEACHERS (SCOTLAND) BILL [H.L.]
7.41 p.m.
Lord KIRKHILL: My Lords, I beg to move that this Bill be now read a second time. The Bill which I seek to introduce to your Lordships' House today is commendably short, and my remarks will, I hope, be capable of a similar description. Before I describe the detailed provisions of the Bill, it may assist your Lordships' consideration if I set out some of the background to this measure. The employment prospects for newly-qualified teachers this summer have been raised on a number of occasions recently in another place, and your Lordships will have seen from Press reports that there is wide public concern about the matter. It is not possible to say precisely how many teachers may fail to
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obtain teaching posts next session, but there may well be as many as 2,000 or so out of the 5,500 who were expected to qualify this year. The Government hope that the number of unemployed will be less than that and that it will diminish as the school session proceeds.
My right honourable friend the Secretary of State for Scotland is doing all he can to reduce the problem. For example, at present the retirement ages of teachers in education authority and grant-aided schools are set out in Section 16 of the Education (Scotland) Act 1969. The ages are 65 for teachers in promoted posts, and 70 for the others, that is teachers in the basic grade. Under the Teachers Superannuation Scheme, however, teachers may retire at or after the age of 60 and draw their accrued pension rights. In practice, the majority of teachers retire before the age of 65, and I understand that in 1975, 90 per cent. of all the teachers who retired were aged 65 or under. At the beginning of the 1975–76 school session there were about 300 teachers aged 65 and over in full-time permanent posts in Scottish schools.
My Lords, the Government, by proposing to reduce the statutory retiring age for non-promoted teachers from 70 to 65, thus making a contribution to the reduction in unemployment in young teachers, are very far from taking the view that no teacher should be employed above the age of 65. The Bill before your Lordships' House provides that while the retiring age should be 65 the employing authority may, in certain circumstances, continue to employ a particular teacher. It is necessary to leave such possibilities open, to deal with, for example, circumstances where it is impossible otherwise to find a teacher able to teach a particular subject, or indeed to take account of personal circumstances which may justify some employment beyond the statutory retiring age. The essence of the change being made is that while at present an employer must employ a non-promoted teacher until 70 if the teacher wishes, the employer in future will be able to decide whether a teacher should be employed after 65.
I turn now to the clauses of the Bill, but I should make clear to your Lordships' House that none of its provisions will alter the present position whereby a teacher may choose to retire at any age after 60

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and draw the pension to which he or she is entitled. Clause 1 of the Bill removes Section 16 of the 1969 Act, which I have described earlier, and replaces it with a new section. The new section has the main effect of reducing the age of retirement for a non-promoted teacher from 70 to 65. The new retiring age will come into effect on 1st January 1977, and will apply to anyone reaching the age of 65 after that date. For teachers already aged 65 and over on 1st January 1977, that date will be their date of retirement. I will deal later with the reason for choosing 1st January. Subsection (2) introduces the element of flexibility to deal with the needs of individuals and of authorities which, as I said earlier, is, in the Government's view, so important. Paragraph (a) enables an education authority to reemploy a retired teacher, but in a basic grade post only and on a temporary basis.
There is the possibility that automatic retirement of promoted teachers on their 65th birthday could cause difficulty or disruption in a particular school. The retirement could, for example, fall halfway through a term, or in the middle of a period of preparing pupils for an examination. In many cases, of course, employing authorities and the individual concerned will have foreseen the problem and will have made arrangements to prevent difficulties or disruption. Nevertheless, in the Government's view it is important that there should be some flexibility allowed to employing authorities, and paragraph (b) therefore enables an education authority to re-employ a promoted teacher in the post from which he has retired for a period of up to 3 months from the date of retirement. This should enable the teacher to stay in that post for a sufficient time to permit a smooth handover of responsibilities. It is, of course, open to the education authority to re-employ that teacher for more than 3 months, but when the 3 months are up the re-employment must be in a basic grade post.
Subsection (3) defines a post of special responsibility. In effect it is a post above the basic grade. It may help your Lordships to put the matter in context if I say there are at present in Scottish schools and further education colleges some 60,000 teachers and of these about 35 per cent. occupy posts of special responsibility.
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Clause 2 contains the citation, commencement and extent. It is, in the Government's view, important that those affected, both individual teachers and education authorities, should have time to adjust to the new situation. The date of 1st January is, therefore, the earliest at which the new provision could reasonably come into force.
The reduction in retiring age of non-promoted teachers proposed in the Bill has been the subject of discussion with the education authorities and the three main teacher organisations. The basic principle is supported by the authorities and two of the teacher organisations, including the Educational Institute of Scotland, which is by far the largest union. One organisation however, the Scottish Secondary Teachers' Association, has criticised the proposal on the grounds that it is against the interests of teachers whose service in the profession is relatively short and those who have entered or returned to the profession in response to Government appeals.
I recognise that, as a result of the proposals in this Bill, some teachers may have their expectations about their period of employment reduced, but, as I have indicated, there is sufficient flexibility in the Bill to enable authorities to continue individual teachers in employment if they consider that the circumstances either of the school or of the individual make this desirable. Moreover, it cannot be said that 65 is an unusually low retiring age; it is in fact the statutory retiring age for all other fields of local government employment. In the Government's view this is an important measure, and I commend the Bill to your Lordships for Second Reading.
Moved, That the Bill be now read 2ª.—(Lord Kirkhill.)
7.49 p.m.
Lord CAMPBELL of CROY: My Lords, I would not ask the Minister to reply to any points on this Bill tonight, but I should like to make one or two comments. He has confirmed that the Bill has been brought in in order to provide more openings in the teaching profession for the young teachers who have just qualified. There is a shortage of teaching jobs in Scotland for those embarking on the profession. But why

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the Minister has felt it so urgent as to introduce the Bill so late in this Session is not absolutely clear, because I do not think that this Bill can be regarded as non-controversial in the way in which I think the last Bill we have considered will be.
The noble Lord said that there had been consultations, and we have seen from the Press that the SSTA (one of the teachers' associations) have registered their disapproval of the Bill; but I also noted in the Press, before the Bill was published, that the EIS, the largest teachers' association in Scotland, stated that they had reservations about the Bill. As the noble Lord mentioned, the objections appear to be related mainly to those who have come into the profession late in life, either through necessity or in response to an appeal from the Government, and those who might be affected by this would have small pension rights. They include teachers who, late in life, have been attracted by the special recruitment scheme to enter into the profession; women who responded to appeal from successive Secretaries of State—including, I suspect, myself—to return to the profession to assist pupils during the time of teacher shortage; and, thirdly, widows who were forced to re-enter the profession, sometimes late in life, to support themselves.
The noble Lord said that the Bill is flexible enough to deal with these cases, and clearly it lies with the local authority concerned to decide whether to re-employ teachers when they retire at 65 or not. Therefore, a great deal will depend upon the humanity of the local authority as well as the supply and demand for teachers in their area. We shall go into these matters more appropriately at later stages in the passage of the Bill.
I would not ask the Minister to try and reply to points now, but I wanted to register the fact that I do not think that this can be regarded as completely non-controversial. Although we shall ask for an explanation of these matters in this House, I feel sure that many points will be raised and there may indeed be some individual opposition to the Bill when it goes to another place.
7.52 p.m.
Lord KIRKHILL: My Lords, I must respond very briefly to the last remarks of
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the noble Lord, Lord Campbell of Croy. I cannot understand why he thinks that this Bill can in any way be considered to be controversial. I should explain to your Lordships' House that the reasoning behind the apparent Government urgency in introducing this measure is an attempt by Government to ameliorate the unemployment rate among young teachers on the Scottish scene. I have also to say that the Secretary of State for Scotland consulted very seriously with the Convention of Scottish Local Authorities in the presence of the teacher unions, and only—and I repeat "only"—the Scottish Secondary Teachers' Association have raised any objection. Indeed, the EIS gave their assent to the continuing discussions which took place at the COSLA meeting.
May I make one last point. In 1969 the promoted teacher could stay until he reached the age of 70. In that year a change was made, and thereafter he had to retire at 65. There is almost an analogous position developing in this new situation. Speaking personally, my view is that really 65 is an absolutely top age for anybody to be teaching the young in an age of ever-increasing excitement and awareness, with a new ethos developing almost by the year. I should have thought this is a sensible measure, which I certainly intend to continue to commend to your Lordships on future occasions.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

STATE SCHEME PREMIUMS (ACTUARIAL TABLES) REGULATIONS 1976
7.55 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL rose to move, That the draft State Scheme Premiums (Actuarial Tables) Regulations 1976, laid before the House on 12th July, be approved. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The regulations arise out of the Social Security Pensions Act 1975 which received Royal Assent almost a year ago. Your Lordships will recall that this Act establishes a new State pension scheme made up of

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two parts: a basic pension and an additional earnings-related pension. Members of good occupational pension schemes may be contracted-out of the additional pension and half the additional widow's pension, but the occupational pension scheme must provide at least an equivalent pension. This is known as the guaranteed minimum pension.
The Act provides for the guaranteed minimum pension of an employee who leaves contracted-out employment before his scheme's pension age to be preserved by the scheme and revalued in line with the movement in earnings generally, by 5 per cent. or 8½ per cent. per annum. If revaluation is at the 5 per cent. rate a limited revaluation premium has to be paid to the State scheme which will then provide any revaluation in excess of 5 per cent. If a pension scheme ceases to contract-out, responsibility for the guaranteed minimum pension may either be retained by the scheme or transferred to another contracted-out scheme if approval is given by the Occupational Pensions Board. Otherwise the guaranteed minimum pension or the accrued rights to guaranteed minimum pension must be transferred to the State scheme by payment of a pensioner's rights premium or an accrued rights premium. The regulations before us set out how limited revaluation premiums, pensioner's rights premiums, and accrued rights premiums are to be calculated.
During the passage of the Social Security Pensions Act through Parliament the great concern of the pensions interests was over what became known as the "open-ended commitment". They were concerned that if a scheme should have to cease contracting-out the full extent of the scheme's commitments should be known in advance. The Government made a number of important concessions to meet those fears and most of the concessions are embodied in these regulations. The Act requires that the regulations are to be made only after consultation with the Government Actuary. This has been done, and I am sure that your Lordships will agree that it is inconceivable that regulations as complex as these should be made without such expert guidance.
The very fact that we are here discussing the regulations results from the con
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cession made to make these regulations subject to the Affirmative Resolution procedure. The other concessions are that the actuarial tables must always be based upon the assumption of an average yield on investments not less than the assumed average increase in earnings; in other words, the assumption is that there will never be a negative yield situation. The premiums will vary to reflect current yields on investment. In this way the amount of premium payable is related to the money which a scheme would get by realising assets to pay the premiums. Finally, in calculating the amount of guaranteed minimum pension to which the premium relates, a revaluation rate of 12 per cent. may be taken in each of the last five years before contracting-out ceases instead of revaluation in line with the movement in earnings generally. Perhaps I should add that this applies to a firm which is going to withdraw from the contracting-out scheme.
These concessions were made by the Government in order to get a pensions scheme which had the general approval of the people of this country. There had been enough dispute about pensions and all concerned wanted a scheme which would get off the ground and which would last. The Pensions Act provides such a scheme and the Opposition, TUC, CBI and pensions interests have all played their part with the Government in getting a consensus on pensions based upon partnership between the State scheme and occupational pension schemes. I am sure that this same spirit will be seen in discussing these regulations.
There has indeed been very full consultation with the TUC, CBI and main pensions interests. In January a Consultative Document prepared by the Government Actuary was circulated. This explains the basis on which the actuarial tables would be set out. Draft regulations taking account of the comments made were circulated on 15th April. The regulations before us have, in turn, been prepared in the light of the helpful comments which the Government received. As a result of these consultations, the number of tables has been reduced from about 160 to 10 by having only one alternative table for each standard table and obtaining the other alternatives by a very simple formula—if anything in this is simple. This enables us to avoid

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having minimum and maximum market level indicators. Also, the market level indicator will be measured over the first five working days of the month in which contracting-out ceases so that the amount of premium will be known before a scheme ceases to be contracted-out.
The House will appreciate that these Regulations are very technical. They are; let me be frank. I have found, from bitter experience, that they are very difficult to understand. They set out the three elements needed for calculating a premium. First is the amount of guaranteed minimum pension to which a person is entitled at the time a premium has to be paid. This is converted to an annual figure called the "accrued rights factor". Secondly, there is the "market level indicator" which has to be calculated. This is the device for relating the premium to current yields on investments. The formula is set out in the regulations and is based upon figures compiled by the Financial Times (which I hope is an acceptable one) the Institute of Actuaries and the Faculty of Actuaries. Thirdly, there are the actuarial tables themselves which are set out in the schedules to the regulations. If the market level indicator is 100, a standard table is to be used. Otherwise, the alternative table is to be used. To calculate the premium, the amount is taken from the appropriate table according to the person's age and sex. The amount is multiplied by the market level indicator to give the premium for £100 of accrued rights factor and the result is then adjusted according to the actual amount of accrued rights factor involved.
A word about the timing of the regulations. The market level indicator is, in part, based upon the index number applicable to 20-year Government stocks. It is generally accepted that this index has shortcomings and I understand that a more suitable index is being prepared. The Government have decided to go ahead with these regulations now and to revise them when the new index is available so that employers and schemes know the kind of premiums they will have to pay. They need this information in order to decide whether or not to contract out and it would be wrong to delay the regulations for even a few months.
I therefore commend the regulations to your Lordships, having acknowledged
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373that they are complicated and very technical, but having pointed out that the CBI and the TUC, and various bodies including the Financial Times, the Institute of Actuaries and the Faculty of Actuaries have made a magnificent contribution to this Scheme. I therefore move that the regulations be approved.
Moved, That the draft State Scheme Premiums (Actuarial Tables) Regulations 1976, laid before the House on 12th July, be approved.—(Lord Wells-Pestell.)
8.6 p.m.
Lord LYELL: My Lords, the gratitude of the House is due to the noble Lord, Lord Wells-Pestell, for the very lucid and detailed manner in which he explained the provisions of these regulations and, indeed, for his own expert guidance through what I found to be a complete labyrinth of legal terms. As he explained, these regulations are very complicated indeed, but the tables in the schedules, I understand, have been requested by various pension funds and institutions so that their liabilities may be determined with a reasonable degree of certainty should various contributors to a contracted out pension scheme wish to rejoin the Government occupational pension scheme. I understand that the regulations before us meet the requests of all the pension funds and to that extent I believe that they would wish me to express thanks to the Minister and to the Government.
I do not think it is for me to attempt to discuss or comment on the many details of the regulations, nor on the tables nor schedules since we on these Benches are committed to a bipartisan policy on pensions, as outlined in the Social Security Pensions Act 1975, to which the noble Lord referred. However, two points give us slight concern. One deals with the representation of non-unionists on pension funds while the other is dealt with this evening; it is the improvement of the premiums payable to the Government scheme when a contributor rejoins it.
May I ask the Minister to confirm what we believe to be the case: that the upper and lower limits on the premium liability payable by pension funds when contributors leave to rejoin the State scheme have been removed? We understand that the noble Lord's honourable friend had written a letter in June of this year to

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one of my honourable friends in another place and we should be grateful if the noble Lord would confirm the contents of that letter. Perhaps the noble Lord would also say a few words on the standard and alternative tables in the schedules at the end of the regulations. I find them difficult to understand; at least, they appear to be relatively simple but I think there must be a nasty catch. Looking at them, it seems that the alternative tables are reminiscent of French currency regulations shortly after 1958, when, I understand, currency was in "heavy" and "light" francs. As I understand it, the alternative tables merely push the decimal point two or three places to the right or left, but doubtless the noble Lord will enlighten us later, if he is able to do so. We are grateful to the Government for producing these regulations because they will assist pension funds in determining their liabilities.
8.9 p.m.
Lord WELLS-PESTELL: My Lords, I am grateful to the noble Lord, Lord Lyell, for his comments and observations. I must say that I should have been in very serious difficulty had I not had the advice of my advisers and the help they have been able to give me because I must acknowledge that this is a very complex matter. The noble Lord referred to a letter which my right honourable friend the Minister for Social Security wrote to Mr. Kenneth Clarke. I believe that the noble Lord said that this was in June and, just for the Record, I should like to say that the letter was sent on 23rd July. It is perfectly true that we had asked for comments and observations from a very wide field. The main comments made on the draft regulations which were circulated were that there were far too many tables and that the regulations were far too complicated. It was also suggested that the alternative tables should be provided when the market level indicator was below 40 or above 139. We were able to concede the points made by Mr. Kenneth Clarke and they have been dealt with and were not pursued.
We have also met two other comments. The first was that the regulations should be delayed until a new fixed interest of security yields index is available—I dealt with that—and we were also asked about
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the period over which the market level indicator should be measured. That has also been dealt with and we have confirmed this, as the noble Lord pointed out, in a letter to Mr. Clarke.
The draft regulations circulated for comment provided that if the market level indicator dropped below 40 the appropriate tables should be used and that if the indicator went above 139 the tables appropriate to that level should be used. This was because we thought that indicators below 40 and above 139 were unlikely to arise and that it would avoid printing a lot of unnecessary tables over and above the 160 which were thought to be necessary. A number of pension interests were very concerned about this and felt strongly that the tables should be extended to cover the situation if the market level indicator fell below 40. This was because, when an extreme position has been reached, the protection afforded by the link with the market yield is most needed. We accepted the arguments put forward and have now made provision for the actual indicator to be used in all circumstances. The reduction in the number of tables and by using only one alternative table in each case makes this easier to operate.
The noble Lord asked me something about the five Schedules and I shall attempt to give him an answer. Schedules 1 and 2 are for use in calculating accrued rights premiums when a scheme ceases to be contracted out, the first where the guaranteed minimum pension is subject to revaluation in line with the general movement of earnings or where the pension is being preserved and revalued at the fixed 8½ per cent. rate, and the second where the guaranteed minimum pension is being preserved and revalued at the 5 per cent. rate, a limited revaluation premium having previously been paid. The State scheme thereafter accepts full responsibility for the pension rights.
Schedule 3 is for use in calculating limited revaluation premiums, mainly when a member leaves a contracted out scheme before having reached pension age and the scheme wishes to limit its own responsibility for revaluation of the guaranteed minimum pension to 5 per cent. Schedules 4 and 5 are for calculating the pensioners' rights premiums to be paid by schemes which cease to be contracted out and where the State scheme

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is to take over the continuing pensions payments. Schedule 4 is for members' own pensions, and Schedule 5 for widows' pensions of deceased members. In each case, the alternative tables are to be used instead of the standard tables whenever the market level indicator is not 100, which, as the noble Lord knows, will usually be the case.
On Question, Motion agreed to.

EUROPEAN COMMUNITIES (IRON AND STEEL EMPLOYEES RE-ADAPTATION BENEFITS SCHEME) (AMENDMENT) REGULATIONS 1976
8.15 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett)The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett) rose to move, That the draft European Communities (Iron and Steel Employees Re-adaptation Benefits Scheme) (Amendment) Regulations 1976, laid before the House on 15th July, be approved. The noble Lord said: My Lords, the steel industry is one of our most important heavy manufacturing industries. It is also a major employer, currently employing around a quarter of a million people in plants in every part of the country. In many towns the steel works is the major source of employment. This means that measures to improve the competitive strength of the industry can bear very heavily on the individual worker.
It was in recognition of the major part that the steel and coal industries must play in the future of Western economies that the ECSC was set up in 1951, to bring about such conditions in these industries as would ensure a rational distribution of production at the highest possible level of productivity. Since we joined the Community, both the NCB and the steel industry have been able to take advantage of ECSC aid in carrying forward their programme of rationalisation and modernisation which are cornerstones of the public ownership of these industries. The provisions of the Treaty of Paris setting up the ECSC are therefore at hand to assist our coal and steel industries with the modernisation and reconversion of the plant, and to cushion the blow of any necessary redundancy. Such provisions
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have already been used to great advantage by our coal and steel Community partners in equipping their industries to meet both domestic needs and exigencies of export trading.
Today, we are concerned with Article 56 of the Treaty of Paris, and particularly with the parts of that Article which allow for the provision of assistance to certain redundant steelworkers, the cost being supported jointly by the national Government and the funds of the ECSC. The forms of assistance which have for several years been available to redundant steelworkers include, first, tideover payments to bring earnings in new jobs up to a percentage of pre-redundancy earnings, and special unemployment benefits to men who are unable to find another job immediately; secondly, travelling and resettlement grants to encourage mobility both within the steel industry and away from it; and, thirdly and most importantly, payments during approved vocational retraining courses by which means the often highly skilled steelworker can aim to take his place at a similar level in another industry.
On these criteria, over 13,000 steelworkers from some 25 locations have become eligible for assistance. Not all have needed aid, but, to those who have drawn scheme benefits, we have paid some £4½ million in all over the last three years. The cost is borne jointly by the national Government and the ECSC, the latter using funds which have themselves been gathered in levies from the coal and steel industries of the member countries. It is generally agreed that such assistance has been very valuable, both to those steelworkers who have been made redundant and in helping to provide in-house training for redeployed workers.
We consulted both unions and management before the scheme was set up and, in its existing form, it takes account of the needs that could be forecast at the time. However, three years' experience of the scheme has thrown up several aspects which require some amendment, either to ensure that the scheme adheres more exactly both to current United Kingdom legislation and to the convention which authorises the European Commission to contribute towards the cost, or to improve certain aspects which have been found wanting. In the former category, there

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are some minor technical and consequential alterations. There are also some changes of some substance which the Government propose to make to the scheme and to which the European Commission have already agreed to contribute.
Foremost among these is the inclusion of an Article enabling the Secretary of State to adjust the weekly benefits to take account of changes in the cost of living. It is proposed to calculate this using as a basis changes in the Retail Price Index over the year after each individual comes to benefit, and again over two years if the person still qualifies for benefit. These increases will of course be contained within the present, and any future, pay policy agreements which may be instituted. This amendment brings the steel redundancy scheme in line with the redundant mine-workers schemes and it is expected to prove valuable in maintaining the present purchasing power of benefits.
The cost of living adjustment will not be applied to flat rate benefits, but it is proposed to increase present flat rate benefit of £5 to £9 to take account of changes since the scheme was introduced. This will particularly help, for the first year after redundancy, the younger unemployed who are, in the present economic climate, having considerable difficulties in finding jobs.
As I have already mentioned, one of the most important aspects of this scheme is the provision that it makes for the re-training of ex-steel workers. Two amendments are proposed here. The first widens the range of the training courses which steelworkers may attend under the scheme. In consequence people training, for example, as computer technologists, radiographers and for work with the mentally handicapped will now receive the benefits during the first year of the training course. The second amendment lists, with reference to the steelworkers' previous earnings in the steel industry, the actual amount the person can expect to receive while retraining, for a maximum time of one year with variations for the number of dependants. The table will give trainees very approximately an equivalent amount to their previous take-home pay as steel
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workers and will greatly simplify the previous complicated system of calculating training payments. The final amendment of substance is to include the self-employed in eligibility for benefit.
My Lords, these are in brief the major amendments which the Government are proposing to make to the existing Iron and Steel Employees Readaptation Benefits Scheme. The measures already available, with the substantial improvements provided by these amendments, will help to reduce the very grave social effects of the redundancies which are an unfortunate corollary of the modernisation of the steel industry in this country, so necessary for the future health of the United Kingdom engineering industry as a whole and for our position as a major manufacturing nation. I beg to move.
Moved, that the draft European Communities (Iron and Steel Employees Re-adaptation Benefits Scheme) (Amendment) Regulations 1976, laid before the House on 15th July, be approved.—(Lord Melchett.)
8.22 p.m.
Lord REDESDALE: My Lords, first I should like to thank the noble Lord, Lord Melchett, for giving such a clear exposition of this measure. I found it most helpful as no doubt the rest of your Lordships did, and obviously the noble Lord's long association with the steel industry helps him to assimilate this. This measure highlights one of the benefits of belonging to the ECSC under the Treaty of Paris in that it shows the amount of money that can soften the hardship incurred by closures which we were discussing in this Chamber the other day. I intended to ask the noble Lord one question, but he answered it half way through, although I did not quite catch the number of people who have benefited. I believe the figure given was 3,500, but I might have got a nought wrong on that.
However, I should like to ask the noble Lord the 64,000 dollar question; that is, how many people does he think will be benefitting over the next two years? That is obviously a hard question to answer. Another point which I should like him to confirm is whether Her

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Majesty's Government will be contributing on the same basis as the European Steel Community—on a 50–50 basis, on a basis which I believe is known as additionality.
Finally, there is one small point which I should be grateful if the noble Lord can clear up. It arises on page 9 of the Regulations. The final phrase in the Explanatory Note, under Regulation 14, states:
"…and render ineligible for benefit persons who are not ordinarily resident in the United Kingdom."
The question of residence seems to have different definitions with different bodies, from the Inland Revenue onwards, and I should be grateful if the noble Lord can clarify this. Otherwise we welcome the measure wholeheartedly.
8.25 p.m.
Lord MELCHETT: My Lords, I am very grateful to the noble Lord for his welcome to this scheme. As he said, I am sure that it is a very valuable contribution to the enormous hardship undoubtedly caused by major closures of steelworks in areas of the country where very often the steelworks provides the only source of jobs in a particular town because of historical reasons. In my opening remarks I said that 13,000 steelworkers had become eligible for assistance so far. Not all of those have needed to take up the aid, but we have paid out £4½ million in all over the past three years. With regard to the cost, my understanding is that this is borne 50–50 by the national Government and the ECSC, and I think that that will continue to be the case in the future.
As to the detailed definition of "residence", it would probably be most helpful both to myself and to the noble Lord if I wrote to him about that. I do not know what particular technical definition of "residence" is being used and I think that is the question which the noble Lord asked me. It is quite clear that the scheme should not provide benefits to people who are not normally resident in the country and I do not think there is any difference between us on that point, but if I may, I will write to him on it.
On Question, Motion agreed to.

INDUSTRIAL COMMON OWNERSHIP BILL
8.26 p.m.
Lord LEE of NEWTON: My Lords, I beg to move that this Bill be now read a second time. In a period of great monopolies, both private and public, and indeed at a time when we see the great international companies, with their huge economic power, coming more and more into our daily lives, it is a pleasure to me to be able to invite the House to review the activities of the small common ownership enterprises, numbers of which are now making a small mark in British industry. When my honourable friend Mr. David Watkins, the Member for Consett, introduced his Industrial Common Ownership Bill in another place he went to some pains to explain that a common ownership enterprise is a self-governing association productively engaged, and in which the association exists to enhance the quality of life of its working members and to serve the wider community. After payment of taxation and making provision for reinvestment, the remaining profits are used to provide a bonus for the working members or indeed for such purposes as they themselves desire.
The number of these firms has grown fairly rapidly in recent years. Some of them have been started as common owner ship enterprises while others have been converted from conventional small companies to common ownership companies. The Industrial Common Ownership Movement itself stemmed from the example set by a few owners of businesses who acted on their belief that control and ownership should be exercised by the people who work in this type of enterprise. We then had those who converted existing undertakings, or started new worker-owned ones, and this led to the name Common Ownership being adopted in, I think, 1971.
The pattern of these enterprises is extremely interesting. They vary enormously from those containing three or four members to the comparatively large Scott Bader Commonwealth Limited, which I understand now has 430 workers. I submit to your Lordships that of its very nature the common ownership idea contributes to a very high state of industrial democracy, and indeed to very

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good industrial relationships. When we consider these matters in their wider context, perhaps we could look at the examples we get in these small common ownership enterprises.
Noble Lords may be aware that there have been considerable changes in this Bill since it was first introduced. The original Bill, as introduced by Mr. Watkins, had among its aims that of providing financial help and encouraging enterprises to convert themselves to common ownership by simplifying the process for companies limited by shares, and by eliminating tax deterrents for shareholders by allowing reliefs in the event of their being converted. As I understand the position, the original aims of the sponsors were modified because of the understandable reluctance of the Government to change the existing principles in the Companies Acts affecting creditors' interests. The changes suggested were accepted by the sponsors. I believe that the changes made between the two Bills are only marginally significant in view of the existing facilities which come under the Friendly and Industrial and Provident Societies Act. For my part, I welcome very much the provisions which appear in the Finance Bill itself. These will give relief from capital transfer and capital gains tax in the event of a transfer of ownership to an employee trust.
I believe that the Bill, if it becomes an Act, will serve to stimulate the growth of such enterprises, and indeed will help in the establishment of an advisory service about the organisation of worker-controlled enterprises. I was at this stage going to go into a lot of detail about the clauses themselves. In view of the lateness of the hour I will refrain from doing that, especially as I do not doubt that noble Lords can read the Explanatory and Financial Memorandum as well as I can; so if we can take that part as read it may save all of us our patience and perhaps we can get to bed a little earlier.
I noticed in my review of the Committee stage in another place that one Government Amendment which attracted discussion was the one for statutory trade union representation on the body as a condition for receiving Government funds. Indeed, it was argued in Committee that
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this was unnecessary and would give the trade unions a privileged position. I have been in the trade union movement a long time, and I have never yet managed to find a privileged position. But the view of the Government, with which certainly the sponsors are in complete agreement, is that trade union representation is necessary in order to ensure that proper consultation takes place with the trade unions representing the workers in or affected by an enterprise seeking financial help from the body; and when one considers it, and considers perhaps the immature state of many of these companies when they make that application, I suggest to the House that it is not a bad thing to have on the body which will determine loans, and so on, representation of the appropriate trade unions whose members are expressing themselves by trying to form this kind of company. I hope that on balance the idea will commend itself to noble Lords.
Despite this, as I went through the Committee stage proceedings I felt that the contents of the Bill, the guts of the Bill, were really quite non-contentious. I felt, and still feel, that in all parts of the House, certainly in all parts of that Committee, they were very welcome. I believe from my readings of these industrial matters that certainly the three Parties represented here tonight have welcomed the development of this kind of enterprise. It seems to me, as I began by saying, that in this day and age, when we see the rather soulless kind of developments in our industry which are quite inevitable with the rise of huge combines, it is all to the good that men of ability lacking capital, as many of them do, can be provided with the facility to utilise their brains and their abilities in this way. It is also the case, of course, that in a great many areas these small associations, first, have been responsible for maintaining jobs when a company would otherwise have gone out of existence and, secondly, in a number of instances, have indeed succeeded in increasing quite substantially the number of people employed in the company as against the number previously employed.
My Lords, I have made reference to the time, and I will not trespass any further on your Lordships' patience. I hope that the House will agree that this is a very useful small measure which is very well

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worth our support and encouragement. I beg to move that it be now read a second time.
Moved, That the Bill be now read 2ª.—(Lord Lee of Newton.)
8.37 p.m.
Lord REDESDALE: My Lords, I should like to start off by congratulating the noble Lord, Lord Lee of Newton, on introducing this Bill so ably, and also state that we welcome the Bill although, rather naturally, we have a number of reservations, which I shall go into in some detail later. In another place the Second Reading debate took four hours; and with not such a large House, and in an area where so much emphasis has been laid on the fact that small is beautiful, I think that perhaps tonight the emphasis should be on "brief is beautiful".
I started off by saying that we welcome this Bill. The reasons why, in general, we welcome it are that there have been a number of successful practices, as was detailed in another place—in fact they were detailed at great length; every single example seems to have been discussed during the Second Reading debate—and on the Continent there have been even more successes. Most of these organisations started out in adversity, as has been said, but they fought their way through. Not all of them have come right through; some of them have considerable troubles to this day, and doubtless more that are set up will go through this same phase. But there is one matter that I feel we ought to look at, and that is that few of them have actually started from enthusiasm. They have been born out of necessity. I hope that this Bill will perhaps start more such enterprises on the basis of enthusiasm. They help the workforce to have a greater understanding of business principles and of what commerce is all about. As soon as one of these organisations is set up, the people concerned have an intimate knowledge of cash flows, like the rest of us.
In another place the debate ranged over the merits and demerits of the capitalist system. I think this is an excellent scheme when it works within the capitalist system. It also helps to break down the "them" and "us" situation which does exist, and has existed for a number of years, between
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workers and management, because when these operations are running they are all "us". But there are a number of points on that to which I shall return later.
Having dealt with the good news, I feel that one should also talk about the bad news. My reservations are these. These enterprises should not be used as an excuse for perhaps an over-idealistic Minister to waste public money on impractical ideological exercises; nor should they result in unfair competition with normal commercial concerns which do not have similar access to public funds for subsidies. I should like, if I may, to cover that point later.
The Industrial Common Ownership Bill itself still needs a great deal of scrutiny for two main reasons. These are that, first, it had only one effective stage in the Commons which was its Committee stage. Being denied a further Report stage because of a procedural device being used on the preceding Bill, in fact it had only a formal Third Reading. The second is that it was in any case substantially rewritten by the Government in Committee. Six clauses were deleted altogether and one, Clause I, was rewritten. At the Second Reading great play was made of the fact that Clause 1 is often the heart of the Bill. The Government carried out some major open-heart surgery on this Bill by totally rewriting it. I am not saying this is a bad thing. I think it is probably an excellent thing, but it was totally rewritten and, because of the Third Reading, we must look at it carefully when it comes to the Committee stage. We will move a number of constructive Amendments. These will he designed primarily to tighten up Parliamentary control, to lay down proper commercial criteria, to alter the Bill's provisions for assets on dissolution and to allow an enterprise maximum freedom and flexibility, particularly regarding voting rights. I should like to come to these points separately.
On Clause 1, I spoke about normal commercial terms and the criteria laid down. It would be quite wrong if these organisations were given unfair advantage over normal commercial operations. They will both probably be mainly small and therefore an advantage by a grant will be that much greater an advantage over the small commercial organisation.

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I wanted also to talk about the tightening up and, in Clause I as it stands in the Bill at the moment, the "relevant body" as it is referred to. If a grant to the body is made for its own expenses it does not appear to have to come before Parliament to justify this. This is an area in which something should be done at a later stage. Again, I do not think we should talk about grants and loans; we should talk about loans as in most organisations. Especially in view of the current expenditure cuts, I think this should be taken very seriously. There is another point in subsection (1) which states:
"grants made in pursuance of this subsection in any year shall not exceed £30,000."
Well, £30,000—if that is being put up—as these organisations will mainly operate with closed shops, perhaps the unions ought to match in areas this sort of money; because we are talking about two aspects, the advice section and the grant section.
Lord MELCHETT: My Lords, I am grateful to the noble Lord for giving way. I am listening very carefully. I do not follow from where he gets the idea that the enterprises will necessarily be closed shops. I would welcome the fact that they were, but I believe there is nothing in the Bill about that.
Lord REDESDALE: My Lords, I rather understood this from wading through the stages in the other place. That was the impression I gained. I am not saying it is in the Bill, but I understood that this was what the practice would be. It leads me on to another point further on where subsection (5) states:
"to include among its members one or more representatives of trade unions."
Presumably that would be the representatives, if they were closed shops—not necessarily, I am the first to agree; but this is the impression I gained. Perhaps I am wrong. It would be interesting to know what the noble Lord has to say on this subject.
To revert to Clause 1, I talked about normal commercial terms and I was a little alarmed by the phrase in subsection (1) where it refers to the Secretary of State and what he may give:
"on such terms as he thinks fit".
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This area is, I think, a little loose and could do with tightening up. When we come to the point about "relevant body" I am somewhat concerned that "body" is so loosely defined. I think it could at a later stage be defined more closely exactly what it is going to be. I appreciate that flexibility was probably shown as an advantage, but I think that this is too much flexibility.
I mentioned the point about trade unions being on the body. Frankly, I do not think it is necessary to lay down that they have to be there. I think that for the body to be functioning properly, it does not have to have by right members of trade unions on it; especially as one or two points came up in the other place where the trade unions, on occasions, may not be too much in favour of one of these organisations. This was stated on Second Reading as the noble Lord is, no doubt, aware. Therefore there are two sides to this case.
There is another aspect which worried me in Clause 2(1)(b): the point about deciding what the qualifications are. It states:
"other factors of any description".
This is another aspect to which I think a certain amount of consideration should be given later. Basically, as I said, brief is beautiful—and I will not go on too much longer. We will wish to bring in a number of these items.
I should be grateful for a little clarification on a few simple points. I could not see why in one part we talk about common ownership and in another part co-operative ownership. I do not see why we could not use the same phrase throughout. It would be consistent. The other point is about the role of the Registrar, where the Secretary of State does one thing and the Registrar another. I should have thought that the Registrar could act in both cases. There is also the question of limited guarantee. This is an area also at which we ought to look closely. I think there could be different meanings of "limited guarantee"—who is guaranteeing, and so on. Why has reference to the commencement been removed from the last clause of the Bill? It was in it in the original state. Perhaps this was an oversight. I do not know.

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There may be a good reason for it. I should be grateful if the noble Lord could tell us why.
We all from time to time must suffer from extraordinary Parliamentary ease, if that is an acceptable word. When we come to page 3, line 40, it has a distinctly Harry Lauder flavour when a body meets a body. The phrase there reads:
"for the purposes of this section a body is a subsidiary of another body if it is a subsidiary of the other body for the purposes of the Companies Act".
I do not think this quite comes up to the Guinness Book of Records and the ground nuts scheme which I think is immortalised there. Finally, on a more serious note, I query whether this is just a preliminary measure opening the door for a further major piece of legislation.
8.50 p.m.
Lord ROCHESTER: My Lords, we on these Benches should also like to thank the noble Lord, Lord Lee of Newton, for the clear way in which he introduced this Bill. Like the noble Lord, Lord Redesdale, we are in broad support of the principle underlying it. I must confess that until last weekend I knew very little indeed about the Bill. I am glad however to have done my homework because in reading the Official Reports of the Second Reading and the Committee stage of the Bill in another place, I learned a great deal about the basic concept of common ownership and to admire what was done by those who initiated the first enterprises in this field, and also about the devotion of the present members of the industrial common ownership movement to that cause.
A Member in another place had said that in his view it was not only imperative for the Government to support the Bill—that, incidentally, was when the Bill was in its original form—but if the Government did not go further, by introducing legislation in the next Session of Parliament which would establish a co-operative development agency, he and a number of his friends would seek to take all possible action to bring pressure to bear where it would hurt most. I wondered whether that threat related to the body politic or physical. Indeed, I felt some relief that I was not more closely associated with the co-operative development. if that is how it operates in practice.
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I should like to hasten to assure the noble Lord who is to speak for the Government that my noble friend—only one is present at this moment—and I have no action of this kind in mind. I was glad to note that members of the co-ownership movement in another place were most appreciative of the interest which had been displayed by the noble Lord in their movement. It may be therefore that in this respect at least the distinction between the co-operative development and common ownership will now be a little clearer to the noble Lord, Lord Redesdale.
I have already said that we on these Benches support the principle of common ownership, although we do not see it having much application—and neither does the noble Lord, Lord Lee, as I understood it—to large scale manufacturing industry. Relating the matter, as he did, to the question of industrial democracy and employee participation, now under such close examination by the committee chaired by the noble Lord, Lord Bullock, my feeling is that, subject only to enough money being available for this purpose, nothing but good can come from experimenting in the initiation of common ownership enterprises and the voluntary transfer of existing enterprises to common ownership as envisaged in the Bill.
Having said that, one is bound to question whether, given all the controversial legislation which your Lordships will shortly be having to consider, and the pressing need, as my noble friend Lady Seear was emphasising in the debate on the Finance Bill this afternoon, for the nation to achieve the best possible return on the capital it invests, this is the most opportune moment for the Government to require that valuable Parliamentary time should be spent on a Private Member's Bill of this kind. I believe that technically it still is a Private Member's Bill; but effectively the Government have taken over the Bill and have substantially redrafted the main clauses, as the noble Lord, Lord Redesdale, pointed out, and the noble Lord, Lord Lee of Newton, acknowledged.
This leads me to say that we on these Benches would think more highly of the Government if—I say this without dis-respect—they would state clearly what are

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their overall objectives and where their priorities lie in making money available to industry, whether under the Industry Act 1972, through the National Enterprise Board, or by means of Bills such as this one, rather than, as it appears to those not in the "know", that they should suddenly, as it were, take it into their head to dole out a few hundred million pounds to some car manufacturing company or make available small amounts, as in this Bill, in supporting causes that are no doubt worthy, such as common ownership.
Why is it apparently considered better to spend a few hundred thousand pounds on helping small common ownership enterprises in preference to other small companies which are based on some equally respectable form of ownership? That was a point on which the noble Lord, Lord Redesdale, touched. There are a few other questions that I have about the Bill on which I should welcome replies either from the noble Lord, Lord Melchett, or the noble Lord, Lord Lee of Newton, if only because, depending on their answers, my noble friends and I may wish to initiate or support certain Amendments at Committee stage. I will put these in interrogative form. To some extent the ground has been covered by the noble Lord, Lord Redesdale.
What are the precise criteria which will determine the amounts of grant and loan to be made by the Secretary of State to relevant bodies for the purposes set out in Clause 1 of the Bill? In particular, on what basis will the amount of £250,000, referred to in Clause 1(2), be made available, sometimes as a grant and sometimes as a loan? Why should not the money invariably be lent? Secondly, do the Government have in mind encouraging an experiment in common ownership in a field over which they already exercise a considerable degree of control and, if they have their way will soon exercise more, namely nationalised industry? For instance, will they soon be suggesting that some shipbuilding or shiprepair yard should be handed over to those employed in it?
Finally, I come to the point which has already been mentioned by the noble Lord, Lord Redesdale, though I should like to elaborate on it a little. This is a question which certainly troubles us a
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good deal. We should like to know why under Clause 1(5) the "relevant body" must always have on it not a few members of trade unions, but "one or more representatives of trade unions". One must ask: why representatives only of trade unions? Why not of employers or of consumers? Why is there this exclusive statutory requirement in the case of only trade unions? Who will appoint these representatives and under what precise procedure? What will be the ratio of trade union representatives to others on the relevant body? Why should not the body be self-constituted, with or without trade union representatives, as it sees fit?
I feel keenly on this question because, as the noble Lord, Lord Melchett, may recall from exchanges in our discussions on the Industry Bill a year ago, I sincerely wish to encourage as many people as possible to join trade unions, provided that they do not have to do so if they have conscientious objections against them. As I understand it, this requirement that the relevant body should include among its members one or more representatives of trade unions was not in the Bill when it was first moved in another place.
In the past, as the noble Lord, Lord Redesdale, has said, trade unions do not appear to have been notably enthusiastic supporters of common ownership, and the naughty thought has entered my head that support of the trade unions has now been obtained for this Bill by the expedient of tacking—and I am sorry, particularly after today's debate, to employ that word—these words onto the end of Clause 1. I hope that the noble Lord, Lord Melchett, will be able convincingly to dispel this suspicion, and indeed that the noble Lord, Lord Lee, will, on reflection, agree to amend the Bill by excluding these offending words.
What this country needs above everything else at the present time, if we are to overcome our economic and industrial problems, are policies to be followed by the Government of the day which command the broad support of the other Parties, and here is a glorious opportunity to make a move in that direction. I assure noble Lords opposite that it really does not help people like me, who are supporters of trade unions, to defend our position among our colleagues if this kind of thing is done. Therefore,

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I appeal to the Government and to the noble Lord, Lord Lee, at least to give very earnest further consideration to the point before the Committee stage. I hope that they will do that. May I, in conclusion, simply repeat that we on these Benches support the principle underlying this Bill, although we have doubts about it which we hope will be dispelled either now or in Committee.
Lord INGLEWOOD: My Lords, I do not rise to make anything as long as a speech, but simply to ask the sponsor of the Bill, the noble Lord, Lord Lee of Newton, when he comes to reply, to let us know a little more what is in his mind about what is called the "relevant body". Does he have in mind new organisations, or organisations which exist today? If he has in mind any new body which is not described in the Bill, may I ask him why, considering that most of these industrial common ownership ventures will be small, with many in rural areas? What is wrong with the Development Commissions, with their experience and organisation for channelling help to different kinds of small industrial enterprises, taking over this work? It is generally a mistake to set up new organisations when we have organisations in the country which can broadly do the job. So I think that the noble Lord might tell us a little more about what is in his mind, because that is a very important part of the Bill and at the moment it is entirely obscure.
9.5 p.m.
Lord MELCHETT: My Lords, like the noble Lord, Lord Redesdale, and the noble Lord, Lord Rochester, I should like to give this Bill a warm welcome on behalf of the Government. As has been made clear in another place, the Government warmly welcome the provisions of this Private Member's Bill. However, it is in no way a preliminary measure, as the noble Lord, Lord Redesdale, implied it might be, for some other Government legislation. It is a Private Member's Bill, introduced without any prompting at all on the part of the Government. It has nothing to do with our own legislative programme, but we, when the Bill was presented to the House of Commons, were quite happy to give it our full-hearted support. There are, of course, commitments in this Govern
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ment's Election Manifesto, as noble Lords, will know, about the Co-operative Development Agency, which was referred to in the debate in another place. While in some sense, this Bill covers the same ground as the Co-operative Development Agency, it is in no way a substitute for the Development Agency which will, after all, be considered in large part with the retail co-operative movement which this Bill, based on industrial co-operatives, does not touch on at all. So I really do not think that the CDA is particularly relevant to discussions on this Bill.
I have some sympathy with the noble Lord, Lord Rochester, and the noble Lord, Lord Redesdale, who have obviously read the Report of the Second Reading debate in another place, some of which I listened to. The proceedings in another place are a mystery to those of us who have not been there, but I have a feeling that the length of time taken over this Private Member's Bill may have had something to do with one of the measures which was immediately to follow it, rather than the merits or demerits of the Bill itself, and that may be one of the reasons why the debate at that time ranged very widely indeed.
The noble Lord, Lord Rochester, made one remark which I should like to correct about the Government requiring your Lordships and another place to spend legislative time on this measure. Of course, this measure and the legislative time that is spent on it has nothing to do with us. This is a Private Member's Bill and, whatever the Government's legislative programme, I am sure noble Lords on all sides of the House will welcome the fact that it is still possible for Private Member's legislation to be taken through to the Statute Book. The Government can occupy a great deal of time or very little, but Private Member's rights to get Bills into law are very important and are preserved, whatever happens. So I do not think the noble Lord, Lord Rochester, would suggest that the fact that we have a heavy legislative programme before us in the autumn is a reason why Private Member's legislation should not continue to be discussed by this House or by another place. This is a Private Member's Bill. I will in a moment say something about the redrafting which took place in Committee.

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I was glad that the noble Lord, Lord Redesdale, made the point that on the Continent a great deal more has been done than in this country. I am sure that is the case. We have a great deal to learn from our European partners, in particular France, so far as the development of cooperatives, particularly producer cooperatives, are concerned. While I agree with him that not many of the existing enterprises have been started through enthusiasm as opposed to the owner of the business deciding to change the structure himself or herself voluntarily, this is not entirely true. There are a number of common ownership enterprises, some of which I have had the privilege to visit, which have been started as a result of people's idealism and enthusiasm. Sunderlandia, a building firm in Sunderland, springs to mind where somebody set up the enterprise to give work to people in the building industry and in particular to provide training for apprentices. There are others. A number of producer cooperatives which were started around the turn of the century were set up when the retail co-operative movement was in its early days. Many of those enterprises still continue very successfully, particularly in some of the traditional industries like textiles, printing and footwear. However, I agree with the noble Lord, and certainly it is my hope that the passage of the Bill to the Statute Book will enable people with enthusiasm to start up new enterprises from scratch and provide much needed jobs in many areas.
Jobs are needed not only in rural areas—that may be the answer to the point made by the noble Lord, Lord Inglewood, about the Development Commission—but also in many areas of the country and it might be right to have a national body to disburse funds. However, perhaps I may come back to that point in a moment. The noble Lord, Lord Redesdale, suggested that this might be a waste of public money at a time when expenditure is under restraint. I can assure the noble Lord that the funds which the Government wish to make available under the Bill will come out of the existing budget of the Department of Industry. The sums are small compared with the total sums of money that the Department of Industry spends on private enterprise and nationalised industries, but it is no
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easy matter to get small sums of money out of any Department.
Lord REDESDALE: My Lords, I am grateful to the noble Lord for giving way. I made the point about grants, and if they are loans it does not matter so much.
Lord MELCHETT: Yes, my Lords, I was going to turn to that point in a moment. However, I should like to make the point that the Government give a massive amount of assistance to private industry in this country. Particular cases, such as Chrysler and the large investment programmes of the nationalised industries which we have discussed recently in your Lordships' House, sometimes mask the vast sums of money that are made available to private industry in the form of regional incentives, in particular the regional employment premium and the other standard regional incentives, and also in the form of tax concessions of one kind and another. The major tax concession recently has been stock appreciation relief.
One reason why we were happy to provide a very small amount of money compared with our total expenditure on private industry—a tiny amount of money, if one is being frank about it—to co-operatives is that they have considerable difficulty in making use of existing sources of finance for two reasons: first, because, as small enterprises on the whole, they are not eligible for much of the money which goes to private industry and they will not even be eligible in the future, because one of the characteristics of many co-operatives and common ownership enterprises is that they tend to remain at a certain size. This is very true of the enterprises which were started at the turn of the century—the producer co-operatives.
I went round one shoe manufacturers' which has been employing 70 people for the last 70 years, very successfully making a profit and providing very good shoes for many people to wear. There is no criticism that they have stayed at the same size, but at least a private company which is growing, looking to capital expansion and an eventual quotation on the Stock Exchange, sees itself as one day being eligible for a great deal of Government assistance for which small companies are not even eligible. And even in

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the case of those forms of assistance for which they are eligible, very often it is not practicable for a small enterprise to take up the assistance because of the amount of information that the Government must have at their disposal before they give away any public money even as a loan. Therefore, there cannot be any criticism that we are favouring one section of the economy in particular as opposed to another. The fact is that private industry gets a great deal of money; co-operatives on the whole do not receive any money from public funds except for one or two examples of larger enterprises recently: Meriden and Kirkby. However, on the whole the common ownership enterprises we are talking about have not received any public money to speak of.
The noble Lord also raised the question of grants and loans. The grants from the Government will be used only to pay the administrative expenses of the advisers who will be employed to give advice on setting up these enterprises: to provide people with advice on running them efficiently. That is the only form in which the grants from the Government will go direct to the advisers. Afterwards the Secretary of State has power to make grants or loans to the body who are then empowered only to on-lend to particular enterprises. Therefore enterprises receiving public money will get it only in the form of loans. The terms and conditions of those loans, as the noble Lord pointed out, quite usually are subject to the conditions laid down by the Secretary of State. Those will have to be brought before Parliament in a regulation, when both Houses will have a chance to discuss them—or at least another place will have a chance to discuss them, because I think financial matters would not come before your Lordships' House.
This is a perfectly normal arrangement which is provided for in many other Bills. There is nothing unusual in it. As I have said, the enterprises receiving money will only get the money in the form of loans. Of course public money is made available to industry on very favourable terms and often with interest-free periods of up to 18 months or more; so loans can be given on quite favourable terms, and already in many cases are so given to private industry.
Noble Lords have raised the question that this Bill was rewritten by the Govern
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ment in another place. I think that is a rather uncharitable suggestion. Only two major changes were made to the Bill between the Second Reading and the end of the Committee stage. One was that the provision for tax relief was dropped because the provisions of the Finance Bill achieved the same end. The other was to meet a point made by the noble Lord's colleagues on the Opposition Front Bench in another place who were concerned—as were the Government—with the conversion provisions for the extinguishment of shares in the enterprise.
Quite rightly, the Opposition in another place expressed concern about creditors' rights and liabilities and that, I am glad to say, with the sponsors' agreement was dropped from the Bill. Otherwise I think noble Lords will find that although the Bill was redrafted—which is quite usual with a Private Member's Bill—by Parliamentary Counsel who is responsible for the repetition of the word "body", no other major changes have been made.
Noble Lords may feel that the inclusion of the trade union representative on the body is a major change, but I honestly do not think it is, because it is quite obvious to anyone that there would have been some representative of the trade unions on the body whether or not the Bill laid down the fact that there should be. So I hope we can get away from the idea that this is either a Government Bill or something that the Government have dramatically altered between one stage and another in another place.
There is, of course, nothing in the Bill about the enterprises having had a closed shop. I understand that most common ownership enterprises do not have a closed shop, although some do. I welcome the fact of those who do, and I hope that more will in the future, but there is nothing in the Bill as to whether there has to be a closed shop or not and whether that makes it more or less eligible for the public money available.
The body which will he disbursing the funds has, quite deliberately, been left loosely defined in the Bill. I am myself extremely anxious that we should not find ourselves in the position of having to set up some new body. Here I agree with the noble Lord, Lord Inglewood, that we have enough bodies doing enough things already. In particular, there is

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already the Industrial Common Ownership Fund disbursing money to common ownership enterprises, and I think it is the Government's wish—which is shared by the sponsors of the Bill—that we should build on that Fund and the trustees of that Fund in disbursing the extra money that will become available under the Bill. The terms have been left loose because it is up to the Industrial Common Ownership Movement and others involved in producer co-operatives to present the Secretary of State with their own body of people. The Government do not want to lay down the people who should be on it. I should have thought that would be welcomed by noble Lords on all sides of the House as well. We do not envisage setting up a completely new body but making use of the existing resources of the Industrial Common Ownership Movement and others involved in producer co-operatives.
I should like briefly to say something about the distinction between common ownership enterprises and co-operatives, which the noble Lord asked me about. The point is that the Bill, sponsored as it is by the Industrial Common Ownership Movement, defines common ownerships in a particular way in Clause 2. It was the wish of everyone involved that the public money should go not only to people who were actually in common ownership enterprises but also to other producer co-operative industrial properties registered under the Industrial Provident Societies Acts. As I have said, some of those have been in existence since before the beginning of the century, and we saw no reason to exclude them from eligibility under the Bill.
So, in a way, Clause 2 contains a two-limb definition: first, of common ownerships and, secondly, that of other co-operative enterprises. Although the definition may seem a little vague, as there are in effect only about 20 common ownership enterprises and 20 other producer co-operatives, I do not think that a little vagueness does any harm. It would be a great pity to exclude one or two of the small number of enterprises currently existing because of some technical definition contained in the Bill. I think from what is in the Bill it is quite clear just what is meant, and that is after all the important thing.
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The noble Lord asked me a question about companies limited by guarantee. This is a normal form of existence. I understand that all golf clubs—although I am not a member of one—are companies limited by guarantee and it is something that appears in the Companies Act. I am surprised that the noble Lord, whom I suspect of being a golfer at least, has not come across this before.
My Lords, I think I have spoken long enough, particularly as I have to answer the Unstarred Question to come. I have been asked other questions, and, if there is anything I have not dealt with clearly, I should like to write to the noble Lords, Lord Rochester and Lord Redesdale, before we come to Committee stage. In conclusion, may I briefly pay tribute to David Watkins, the Member who introduced the Bill in another place, and, indeed, to all those outside the Houses of Parliament who have played a considerable role in promoting Private Members' Bills of this sort. They do an enormous amount of work, all unpaid, and largely unacknowledged by those of us who legislate. A great deal has been done on the Bill and credit should go to those who have done the work.
I have had the pleasure of visiting several producer co-operatives and common ownership enterprises, and it was a fascinating experience. Possibly on further stages of the Bill I will have a chance of telling your Lordships something about that. But there is no doubt about the dedication and often farsightedness of those involved in these enterprises, and those who have seen fit to convert their own private company into a firm controlled by everyone working in it. Personally, I feel that one day in the future, not too far ahead I hope, people will look back on the firms and the organisation of companies, both large and small, in our society now, in much the same way as we look back on the terms and conditions of employment in Victorian times, with children down the mines, which seems so odd to us nowadays, whereas it did not then. I daresay one day in the future people will look back and see as a very odd thing indeed companies with the people working in them having no say at all. The Bill seeks to work by common consent, and I hope your Lordships will give it a speedy passage.
9.22 p.m.
Lord LEE of NEWTON: My Lords, may I thank both noble Lords opposite for the constructive way in which they have dealt with the measure. There has been some slight controversy as to the part played by the original sponsors as distinct from the Government. As my sponsorship is of comparatively recent origin, and I was neither an original sponsor nor a member of the Government which suggested changes, I can pronounce with complete impartiality and neutrality that the Government were right to move the Amendment, and the sponsors were a thousand times right to accept it.
My Lords, there was also a little suspicion as to whether or not this is to blossom into something enormous. Indeed, I think the noble Lord, Lord Rochester, went so far as to wonder whether we were going to be handing over the shipbuilding industry to its employees. Quite frankly, I do not know any body of employees at present to whom I could sell the shipbuilding industry in its present form.
Lord ROCHESTER: My Lords, if I may intervene, for the record, may I assure the noble Lord that my reference was to a small shipbuilding or shiprepair yard rather than to the total industry.
Lord LEE of NEWTON: My Lords, I believe there is a little controversy going on about shiprepair yards and so on, but I will not venture into that. There was also the point that the granting of public moneys to this kind of enterprise seemed to be favouring them as against other forms of enterprise. I think my noble friend answered this one very well indeed. One of my Ministerial jobs in days gone by was in the Northern region. I would not care to tell your Lordships how much I spent on private enterprise up there, and the various ways in which one was distributing public money, which was money well spent. I am trying to show that the small amounts involved in this legislation are infinitesimal as compared with the money which both Parties in their periods in Government—very rightly in my opinion—have expended on trying to bring employment to areas which otherwise may have been quite derelict by now.
My noble friend answered the point made by the noble Lord, Lord Rochester, on the relevant body. Clause 1(5) goes
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into the detail of what the Bill means by "relevant body". The question of unequal voting rights was mentioned. I think the whole philosophy of common ownership is at variance with that kind of thing. Indeed the sponsors would argue that there could be a point at which a common ownership firm could be sold out for personal gain by those who had the advantage of unequal powers in that respect. I think my noble friend dealt very well indeed with practically all the questions asked, and as I understand that some of them may well be repeated in Committee I will not go any further. I merely conclude by thanking the House for the way in which it has received this Bill, and by saying I am sure the spirit in which all of us have approached this cannot fail to do a lot of good to a very young and enterprising movement.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

BRITISH AEROSPACE INDUSTRY
9.27 p.m.
The Earl of KIMBERLEY The Earl of KIMBERLEY rose to ask Her Majesty's Government what are their immediate plans for the British Aerospace Industry, particularly for the Anglo-French Concorde, prior to nationalisation. The noble Earl said: My Lords, first I should like to apologise for my non-appearance last Thursday and for any inconvenience it may have caused to noble Lords. I have for many months been trying to ascertain from Her Majesty's Government what their policy and plans are for the Concorde, whether or not the British aerospace industry is nationalised. I was not originally going to put down this Question, thinking, as many others did, that we would be having the Second Reading of the Aircraft and Shipbuilding Nationalisation Bill this month, but in view of the delay there are some matters that I am going to raise this evening that are so important that they cannot possibly wait till the autumn.
The facts are, one, BAC is closing down its activity as the only test airfield in England capable of supporting Concorde operations; two, in the autumn the civil section of BAC will have to decide whether to make redundant up to a further 4,000 of their workforce, and this out of a total manning level of approximately 11,500 men; three, Concorde 208 is blacked at Fairford with no apparent solution to

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resolve the dispute. I should like to come back to this later on.
On 4th February I put down an Unstarred Question on the future of BAC's flight test centre at Fairford. At that time I could not understand why BAC, backed by the civil servants of the Concorde management board, wanted to shut this vitally important facility, particularly at the very critical stage that Concorde had reached in both its development and sales. Basically, the answers given by the noble Lord, Lord Melchett, were, one, that Fairford cost £2.7 million a year and, therefore, it was too expensive; two, BAC had completed the development work on Concorde and as a result in conjunction with the British members of the Concorde management board it was decreed that there was no justification for letting Fairford remain open; three, any predicted testing and development that might arise in the future could and would be done from Filton; four, any other unpredicted tests or snags that might arise would be carried out and dealt with by the French aircraft 201 from Toulouse.
After much careful thought about these answers, I reached the following conclusions: very simply, that there was a very serious lack of policy and forward planning for the sale and/or lease of Concordes to foreign airlines. My second conclusion was that I could understand why Fairford should be closed if Concorde was a failure, but not only is Concorde not a failure, it is an outstanding and unqualified success. Only last week British Airways announced that it was a phenomenal success and one of the newspaper headlines said there are queues for tickets.
I think we must realise that here we possibly have two conflicting forces, BAC who are the contractors, and the British members of the Concorde management board. These two parties for some extraordinary reason in many instances do not seem to see eye to eye. Bear in mind that BAC do not even own the aircraft, but Her Majesty's Government do. When I say "Her Majesty's Government" it must be realised that the owners are you and I—in other words, the British taxpayers. It is we who have paid £600 million for this wonderful aircraft.
I would be the first to admit that if we were going to start off on a new project
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like this right now and that we realised perhaps what the final cost might be, it might be prudent if we did not start it. But Concorde is here, it is a success, and it has cost us £600 million. So surely any rational person cannot fail to agree that the project should now be exploited to the full, not only to justify the initial investment but also finally to get a profitable return on this money, which can be done if the right initiative and drive is injected into the programme. In other words, do not spoil the ship for a half-pennyworth of tar.
I decided that the only course open to me was to investigate these answers of 4th February in detail. As a result I found that the operating costs at Fairford were £1·2 million after the purchase of the ICL computer and not the figure of £2·7 million quoted and given by the Department of Industry. This figure has not so far been refuted by the Department. I found that Concorde meets its design specification, but in the light of present airline experience it would be a much more acceptable aircraft if both its payload and range could be improved.
Performance is the British design responsibility. In fact BAC have carried out a feasibility study which would necessitate a flying programme to incorporate and test these improvements and modifications. Filton's runway and facilities do not make it suitable for supporting Concorde operations. I consider it perhaps some small measure of my campaign that British Airways crew training and production flying is now, and for the near future will still take place, at Fairford. Furthermore, if the performance improvements of increasing the payload by about 20 per cent. are accepted, then they too will have to be tested from Fairford. I estimated that this method of operation will escalate costs by £1·1 million to £2·3 million a year, and once again the British members of the Concorde management board have not refuted this estimate.
With regard to the French aircraft, 201, to be used as the four company aircraft, it has been stated that BAC will be able to use this aircraft when required, but why has the British instrumentation been removed from this aircraft and French equipment installed? I can hazard a guess; so as to ensure that it is not practical to fly 201 from Britain, let alone

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to know which airfield would be used. Once again 50 per cent. of all costs of the French aircraft will be charged to the British taxpayer. Again my estimate of 20th March of £2·2 million per annum has not been refuted. Therefore, I think that most of your Lordships would agree with me that Fairford is not being closed because of expense reasons or because of lack of work, or because of the suitability of Filton. So I ask myself who is going to reap the benefit of its closure? It is certainly not going to be the British taxpayer who will be helping subsidise a foreign aircraft industry, and it is certainly not going to be the British worker who is going to be made redundant. So what is the reason? Why did the Department of Industry give these answers on 4th February?
I believe that the answer to this lies in a report produced by the unions at Fairford, and I will quote one short paragraph from it:
"In the aircraft industry Flight Test is all things to all men. To the designer it is the testing ground of his ideas and concepts; to the production engineer it is the department that accepts his aircraft; to the project office it is the last hurdle to the Certificate of Airworthiness and the aircraft's entry into service; to the sales team it is the company shop window where the product is demonstrated. To the financial staff it is an expensive department; it is the last obstacle to overcome before obtaining a return on invested capital, i.e., a new aircraft; and, finally, to the customer it is where he collects his new aircraft and his crews are trained."
I believe that if you destroy the flight test capability of an aircraft company you in effect destroy that company. This is endorsed by BAC having to consider its attitude for up to 4,000 more workers, the majority being made redundant at the Filton plant. These are skilled aircraft workers forced into redundancy and thereby destroying the civil capabilities of BAC, and once they have left they will never return to the industry.
I carried out a very small market survey on the attitudes of some of the world's airlines to Concorde and I can state categorically that the majority would buy or lease the aircraft if the range and payload were improved slightly. So I ask: why are we not building a Concorde with these improvements installed? I am sure that it would be more beneficial to Britain to build aircraft than to make Bristol an area of very high unemployment. I have said before that Concorde is a
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success. Why, therefore, does not Britain back it? The reply of the noble Lord, Lord Melchett, will probably be that these improvements would cost money, but President Marcos of the Philippines wants Concorde to transport the delegates to the IMF conference in Manila in October. What better shop window to demonstrate the aircraft, and what a boost for Concorde to carry this august body of people half way round the world! Alas, the only aircraft that might be available for this is 208, which is presently blacked at Fairford as a result of the withdrawal of funds for the support of the flight test centre.
One must ask, therefore, how this dispute can be resolved. BAC does not have the money or the authority to accede or negotiate to the workers' requests, since Concorde 208 is a wholly owned Ministry aircraft on a Ministry airfield and the BAC employees are paid by the Ministry. The noble Lord, Lord Beswick, does not have the power to intervene, since his Board will not have control until after nationalisation. The British members of the Concorde management board do not want to concede because if they did it would be an admission that they have not advised the Secretary of State for Industry wisely. The Department of Employment cannot intervene because there is no dispute with the BAC management.
Lord MELCHETT: My Lords, I am sorry to interrupt the noble Lord, but I think it would be helpful to noble Lords to know that British members of the Concorde management team advise the Ministers at the Department of Industry and if any criticism is to be levelled at anyone it should be levelled at those who take the decisions, who are the Ministers involved, and I am quite happy to have the criticism levelled at me.
The Earl of KIMBERLEY: I take the noble Lord's point, my Lords. In any event, the only way in which I can think that this dispute could be resolved would be by the Secretary of State, Mr. Varley, accepting that all is not well in the land of BAC. Aircraft 208 is now well behind its delivery date to British Airways and, as I have said, it is the only aeroplane that could be used for the IMF conference. Briefly, the workers' request at Fairford is

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that it should remain open until June 1977 to enable discussions to take place between Her Majesty's Government, BAC and the unions so that the possible dissipation of assets prior to nationalisation will not occur. Yesterday I endeavoured to see the Secretary of State or the Minister of State for Industry because I had a very humble proposal which might have helped to resolve the dispute at Fairford. Alas, I could see neither of the Ministers. However, I should like to say briefly what my solution was.
The closure of Fairford should be delayed until 30th June with Lord Beswick being given authority to negotiate on behalf of Mr. Varley to resolve the dispute between the CMB, BAC and the unions. The probability of success is high, the cost of the solution not high—a saving of up to £500,000 due to Concorde not having to fly from Filton and stage through Fairford.
I even thought of a proposed forward programme: from the beginning to the end of August, the aircraft would be on a test programme for British Airways acceptance; end of August to 27th September, crew training for British Airways; 27th September to 18th October a wet lease to Philippine Airlines for the IMF Conference and on the 19th October the aeroplane would be available for the London/New York flight. The image which would have resulted from this would have been good for Britain. It would have been valuable to fly a British Concorde to the conference at Manila and it would have been good for Lord Beswick to get credit for resolving the dispute and it would have been a very good start to the nationalisation of the aerospace industry to see the Government backing Lord Beswick. However, since that did not happen, we now have the situation that BAC has delivered an ultimatum to its workforce to unblack 208 or be removed from the payroll. I can see that this action will cause even more problems throughout the aircraft industry.
The trouble is that the decision to shut Fairford should never have been taken. The history of Government concerning aviation is a long, sad tale, not unlike the mouse's tail in Alice in Wonderland. It has been a chapter of disasters which could have been avoided if only those
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responsible had had the grace to admit that they had sometimes been wrong. It is not too late at this late hour for the Government, in conjunction with the CMB, to announce that, after careful thought, they will reconsider the situation. It has been said that great men admit their mistakes and learn by them, but, alas! small minded men do not have this magnanimity and grace.
In my search for information to try to obtain the truth, I have written many letters to the Secretary of State for Industry. I actually succeeded in having one meeting with him in person but, alas! most of the answers I have received have been misleading or prevaricating. I have been politely told that it was none of my business. I consider that, in this time of so-called open Government, it is my business, along with all the other British taxpayers, to know what is happening to our investment of £600 million.
To show your Lordships how the Department of Industry is trying to give me the brush-off, I shall read the last letter from Mr. Kaufman, the Minister of State. It is very short.
"Thank you for your further letter of 22nd June to Eric Varley about Concorde. This only serves to underline the wide differences of view between us on this topic, which persist in spite of repeated attempts to resolve them by correspondence and by discussion, as well as by replies in the House of Lords.
"I can therefore only suggest that we agree to differ and that you should regard Eric Varley's letter of 14th June as a definitive statement of our decision."
Lord MELCHETT: My Lords, I apologise for interrupting the noble Earl again, but it seems slightly misleading to read out the last of a long series of letters between the noble Earl and the Department without reading, for example, the letter which my honourable friend the Minister of State says the noble Earl should consider as the definitive reply. It is giving a slightly misleading view of a very long correspondence.
The Earl of KIMBERLEY: My Lords, I was in no way trying to mislead anybody, only to say that the Department of Industry and I so far disagree that nobody in the Department wishes to talk to me when I have tried to speak to them. As I said, I have had copious letters and correspondence and I believe that the noble Lord has had copies of that correspondence.

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No doubt your Lordships will remember that I put down a lot of Questions for Written Answer not long ago. When they were answered, it was implied that most of the Questions were not ones which required Ministerial answers but that they were company matters.
I beg to differ. I asked those questions in my search for the truth and also because I needed the information so that it might perhaps be possible for me to make some sort of constructive suggestions about the future of the project. I hasten to add here that, once again, the answers that I got were either negative or of very little help.
Why could my questions not be answered satisfactorily? I am forced to the unhappy conclusion that the Department of Industry has something to hide which would be very unpalatable to the British taxpayer. So I wish to ask Her Majesty's Government if they will agree—and, if not, why not?—the following point: would they agree that industry should be free of Ministerial interference over the supply of information, of cost estimate decisions, fare prospects and so on? For surely it is only by this method that the confidence of the public, the Press, Parliament and the unions will ever be achieved. Alas, even today freedom of information offends the Civil Service and causes flutterings of the Official Secret Act. I think that the one sector that needs the breath of fresh air to blow through it in this instance is the Department that deals with Concorde. If a Minister is asked for a detailed break-down of Goverment spending on civil aircraft and engines the answer is invariably negative, and further inquiries usually reveal that no such break-down exists.
I should like to ask the Government whether they would not agree that the Official Secrets Act be replaced by a Freedom of Information Act? Why can we not have the French approach in this country? The only kind of Government secrets they protect is information affecting national defence. The present Home Secretary is sympathetic towards more open Government. Perhaps now that he is leaving for Europe he could initiate this.
I should not be surprised if the Minister, when he answers for the Government, will say that I am a nuisance,
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that I have been given all the information that I require, and that I have upset foreign airlines. But I am also sure, regrettably, that he will say that there are no further orders for Concorde. So I ask, why is there no prospectus for the future of Concorde? Why are up to a further 4,000 workers probably to be made redundant? Why is Concorde 208 still blacked at Fairford? Why are Philippine Airlines, one of the hottest customer prospects for Concorde, being refused landing rights at London Airport by the Department of Trade? Here is an airline that has bought British aircraft for 20 years, against all the most high-powered and hot salesmanship from the United States. Why is the British taxpayer subsidising the French aircraft industry? Why will the Department of Industry not exploit the improvements of the existing aircraft by increasing the payload by about 20 per cent. at relatively small cost? At a time when public expenditure has to be cut by £1,000 million industry must be supported to improve our balance of payments. Air travel has a major impact on our balance of payments.
I have very nearly finished, but I should like to demonstrate how much the payload modifications can improve Concorde and British Airways' profitability. I have had these figures checked by Flight International and I must say that I do not think that they can therefore be very far out. It is absolutely pointless flying 20 or more empty seats to and from Washington or any other city. Let us assume that each Concorde should fly 3,000 hours a year and that each Concorde seat should return £100 per flying hour. Therefore 20 seats equals £6 million per aircraft per year, or for five aircraft £30 million a year. This more than justifies the relevant cost needed to improve the payload by 20 per cent. In fact within three years it justifies the cost of the Mark II Concorde.
How can the world's airlines ever have any confidence in the aircraft if we do not show any in this country, by refusing to build or set down the keels of more than the original 16 and/or carry out further improvements? Why is it necessary to withhold from the public information such as this? At this very moment there are plans to axe, as I have already mentioned, a further 4,000 jobs from BAC prior to nationalisation. I have suggested to the

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Secretary of State that possibly certain members of the Concorde Management Board might move on, because let it not be forgotten that it was these members who actually recommended the axing of Concorde in 1974—
Lord MELCHETT: My Lords, I am sorry to intervene again, but I think that the noble Earl is not sticking to the traditions of the House, as I understand the position. I am here to answer for the Government. The Government make these decisions—not our advisers. If the noble Earl wishes to criticise the decisions, I suggest that it would make his case more effective if he criticises the people who take the decisions; that is, Government Ministers.
The Earl of KIMBERLEY: My Lords, I apologise. But let it not be forgotten that there was a decision made to axe Concorde in 1974. But it was only through the enthusiasm and foresight of the then Secretary of State for Industry, Mr. Benn, that it was reprieved. I am sure the noble Lord, Lord Melchett, when he answers, will deny some of my allegations, but I will leave your Lordships to judge how correct is my assessment of the situation. My last question to the Government is: How can a Labour Government justify the action of making British workers redundant by transferring their work to France?
9.50 p.m.
Lord GAINFORD: My Lords, my support for the noble Earl is not going to be so much a recital of further facts about Concorde; I merely say that I am one of those British taxpayers for whom there seems to be some rather unpalatable news. Abroad, the British taxpayer seems to be considered quite a peculiar creature. It is considered that he must be a lover of paying his taxes because he pays up so quickly and without much murmuring; but he certainly likes to feel that he is helped in any scheme which shows success, and if it is threatened in any way he wants to know why. One might say that a row is a weak description of what he can rise to if he does not receive a satisfactory reply. I should also like to support the suggestion of the noble Earl about the possibility of replacing the Official Secrets Act by a Freedom of
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Information Act. I recall particularly during the last war, when we had the troops involved so much in censorship, that it was far easier to create the necessary atmosphere of security by telling people what they could say rather than trying to din into them a whole long list of what they could not.
Most of my speech on this Unstarred Question set down by the noble Earl is going to be about other parts of the British aerospace industry, or, rather, the possibilities; and some of it will certainly be echoing another speech of the noble Earl which he made on the 15th July on an Unstarred Question by my noble friend Lord Strathcona and Mount Royal about the policing of the proposed 200-mile Exclusive Economic Zone. In that, he made reference to Dirigibles and Blimps, including a reference to a subsidiary question raised by the noble Lord, Lord Balfour of Inchrye, about using such aircraft for reconnaissance over the oceans. That was in October 1975. On 15th July the noble Lord, Lord Winterbottom, answering for the Government, referred to the lighter-than-air craft, and said it was an interesting suggestion. A number of noble Lords in this House know my interest in this matter. I have spoken on it previously. The last time was about two years ago; and on the occasions when I raised the matter it was mostly in connection with theory. I wanted to wait until I had some facts before I spoke again.
The noble Earl remarked that the airship industry is making slow progress in this country. Perhaps better slow than none at all. In the last few years we have been visited by the Goodyear airship. In 1973 I was with a party of Members of your Lordships' House who were taken for a very pleasant ride in it—a very lovely way of flying, I found, and very pleasant travel. As regards airship construction in this country, I believe that at Cardington there is a company called Aerospace Development Company, and there was a notice in the Press that it had received an order from Venezuela for a number of lighter-than-air craft. The facts, I believe, are that so far one airship is being constructed, and if it proves to be successful further orders will follow. It seems that at least we have some form of export trade in that line.
One slightly fortunate result of the Unstarred Question having been delayed

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since last Thursday is the fact that last Friday there was a television programme about a man who constructed his own airship. I did not see all of it; but I arrived home to see the last ten minutes of it. I do not know whether any of your Lordships saw anything of it. The airship concerned was what I would call a blimp; and it was a form of flying which television described as "deliciously primitive". In fact, it was made a victim of wind variation, but it showed how safe it was because the helium did not catch fire when it crashed into trees; although after it had collapsed it was taken away, repaired and was soon in the air again.
But there are people at work in this country trying to develop and design a completely new form of lighter-than-air craft. This new design will have hardly any resemblance to the old airship, the very mention of which conjures up mental images of famous disasters of the 'thirties or the lurid destructions of some of the airships in World War 1. If the new design can become a fact, almost a door-to-door transport of freight could be achieved and indeed leisurely travel for passengers. If some of the derelict dock areas of London can be made into airship ports, taking into consideration that much of this area has been considered for the vital matter of housing, it could be possible to travel from central London to a point 200 miles away with about 2 hours' flying and a short time at each end for the necessary door-to-door travel. At present, I believe, it takes a good 4 hours to get from London to Paris.
On July 14th, this month, there was a Question asked by my noble friend Lady Emmet about the congestion at Heathrow. This resulted in ten minutes of lively subsidiary questions and answers. The Airship Transport Service which I mentioned is being attempted and designed to enable a considerable reduction of the pressures on present airports, and there is also the fact that the airship airport would not require as much space as do the present airports for modern aircraft.
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So, as the last words on that, I ask whether Her Majesty's Government could possibly consider an airship programme in their future policy. Finally, another reference to the speech of the noble Earl on the 15th July about our coastguard service. Could Her Majesty's Government possibly consider improving our security services, and possibly lifeboat and ambulance services, by the inauguration by a service similar to that in the USA called the Civil Air Patrol? This organisation is made up of private aviators who liaise with the authorities and have full recognition as a national service. Private aviation in this country is hampered not only by expense but by very stringent regulations, all of which are very necessary because this country has become one of the greatest international centres of commercial aviation. Private aviators would be only too happy to devote their skills to the service of their country.
There was an attempt some years ago by a private organisation to form such a service. It was called the National Air Guard. It did manage to carry out some work to help the police and the coastal and ambulance services. In fact, for a short period I was a member of that organisation. It died a death, not as a result of lack of support but because the authorities could not give it enough recognition. Personally, I can see their point of view. They would not wish to discourage the zeal and enthusiasm of the members. In fact they probably would say that they wished more people were so publicly spirited. But here was an organisation run almost on military lines. The chief organiser was at the time a foreigner, although he is now a naturalised Englishman. The great danger is if the wrong people get into it. If something similar to the Civil Air Patrol could be formed, it would not lack recruits. It could provide great assistance to the military and civil services. I am glad that we have been joined in this debate by the noble Earl, Lord Kinnoull, and I am sure that after we have heard him we shall welcome the comments of the noble Lord, Lord Melchett.
10 p.m.
The Earl of KINNOULL: My Lords, despite the late hour it was with eager anticipation that I took my seat this evening to listen to the noble Earl, Lord Kimberley, and I was relieved to see him in his place in order to ask the Question which had been put down on the Order Paper last Thursday. I am sure the whole House are grateful to the noble Earl for raising his Question and for the very energetic interest that he always takes in pursuing the welfare of the Aerospace Industry, even if perhaps tonight he has had to resort to what one might term a "verbal bashing". I am not sure whether it was at the BAC or at the Department of the noble Lord who will be replying, but I am sure he will be bashing back.
I pick two small quarrels with the noble Earl on his Question. First, his Question asks: what are the Government's immediate plans for the British Aerospace Industry prior to nationalisation? That must presuppose that what is taking place in another place at this moment, and what is due to take place tomorrow and the following day, is that the Bill will get through quite unharmed. Some of us feel from what we read about the majority of the present Government in another place, that the Bill may not get through at all. Possibly the timing of this subject tonight is not too happy.
The second quarrel that I raise with the noble Earl is that if one assumes that nationalisation will come, it will happen under the present Bill in two months. The noble Earl is restricting the reply of the Government to cover a period of two months when I am sure both he and the whole industry would like to see what the Government's plans are for the next 10 years. Knowing his skill and recognising what he has already been through earlier today, I hope the noble Lord, Lord Melchett, when he replies, will be able to say something about the general policy not only of the Concorde but also of other projects which are of interest.
I hope that the noble Lord, Lord Melchett, will be able to give two positive assurances this evening. Because, in the view of everyone, the industry has suffered
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far too long from the buffeting of un-certainty regarding its future, if the Government lose their Bill on nationalisation this Session, I hope that the noble Lord will be able to give us a categorical assurance that they understand the damage that can occur to the industry from this continuing uncertainty and that they will drop the Bill and not reintroduce it for yet a third year.
The second assurance I seek from the noble Lord is that, if the Bill succeeds and becomes an Act, the Government will do everything in their power to retain and encourage the impetus, drive and hard-earned successes of this magnificant industry and so continue to win the respect of the world and the gratitude of the many foreign customers. To achieve this second assurance, the noble Lord will need to add one further vital ingredient; that is, that the Government's policy towards the industry will not waiver or stray in the face of the occasional economic storm, and that their determination will be to retain a steady, workable flow of research and development investment to continue to sow the seed corn in new projects which may be harvested, one hopes, anything from 5, 10, 15 or 20 years' hence.
The noble Earl's Question tonight reminded me of a very similar debate some five years ago when one shrewd noble Lord, in referring to future projects, asked: what is in the shopping basket? Looking back at that debate, there was a certain luxury in those days which was clearly not appreciated at that time. There were then over five aircraft projects in the basket, which of course included Concorde. I suggest to the noble Lord, Lord Melchett, that tonight there is only one, although he may give me a different answer.
One major aircraft project is now in the pipeline. I refer of course to the MRCA, the cost of the programme for which is twice that of the Concorde. I should like to ask how this project is progressing. For example, have the first production orders yet been placed, and is the timescale of delivery to the three air forces

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still the same? Another project which was cancelled in 1974, at the time of the oil crisis and the inevitable air travel recession, was the HS.146. I understand that last February Hawker-Siddeley asked the Government for a design study to be set up again, in order to look at this project. I know that from time to time there have been questions on this subject in another place, but can the noble Lord, Lord Melchett, say what has happened to that request, what points are the Government still considering and will a decision soon be reached?
Again, looking at the other major company, BAC, I believe that for some time they have been studying a possible project for a 150-seater airbus; and I should like to ask whether the Government have been asked about research and development or any design studies for this.
Finally, on specific projects, I should like to ask the noble Lord about Rolls-Royce. I think that most of the House will have seen that, in a recent Press statement, the chairman of Rolls-Royce stressed what seemed to be an urgent need for further Government support towards the development of a medium-sized engine. I think it would be very helpful, even at this late hour, if the noble Lord could refer to that tonight.
Of course, the noble Earl referred in his Question, as well as in his speech, to Concorde. I think that the most convincing argument against the Concorde "knockers" is to look at the passenger response which British Airways are having on the two routes which they now operate, to Bahrein and Washington. If one looks at the passenger load factor between London and Washington alone—and here I mean both ways—one sees that it is as high as 93 per cent., and indeed is fully booked until September. This is despite the cost of the air fares that they have to charge, and despite the fact that Washington is not nearly so attractive as New York to many business people. I feel that that figure alone must encourage other airlines which are hovering on the point of making the decision to go supersonic.
I agree that every avenue should be explored to hasten the sales of Concorde, and one thing I always find it difficult to understand is why the Government have not as yet set up their own leasing system
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to would-be airline customers. Surely, it would pay them, even on terms which are more favourable to the airlines than to the Treasury, to set up a leasing system which would encourage both sales and getting Concorde further into service.
The noble Earl referred to the present "blacking" of BAC on the delivery of their Concorde III to British Airways. I do not know the ins and outs of this flatter at all, and I am not taking a stand on it. But what I do know is that this move may restrict British Airways' operations of Concorde and only do harm to their splendid flag carrying demonstration to world markets of both the potential and the success of Concorde. British Airways Concorde operations not only help to sell Concorde but also help its future production. Any question about aerospace that is raised in this House quickens the pulse of those who are interested in it, and I am only sorry that tonight there are so few people whose pulses are able to be quickened.
I should like to ask a final question of the noble Lord. It concerns Concorde's route to Australia. My noble friend Lord Orr-Ewing, who unfortunately could not be here tonight, has sought on a number of occasions to obtain information on the progress of the route to Australia. I hope that tonight the noble Lord will be able to tell us whether agreement has yet been reached and when the service is likely to go into operation.
I should like to thank the noble Earl for raising this Unstarred Question. I has indeed been a fascinating debate, which has ranged from Concorde to airships, and I look forward to listening to the inspiring reply of the noble Lord, Lord Melchett.
10.11 p.m.
Lord MELCHETT: My Lords, I am very grateful to the noble Earl, Lord Kinnoull, for that preliminary advertisement of my speech and I hope that I can live up to his expectations. Certainly the noble Earl is quite right in saying that it has been a very wide-ranging debate and I am grateful to him for mentioning some of the many future and current possibilities for British aerospace. If I may say so to the noble Earl, Lord Kimberley,

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he tended, rather against the terms of his own Unstarred Question, to concentrate exclusively on Concorde. One is in the difficulty when replying to Unstarred Questions of this kind of knowing whether to reply to the Unstarred Question on the Order Paper, or whether to reply to the speech of the person asking the Unstarred Question, or whether to reply to the speeches of everybody who has taken part in the debate. My understanding is that it is usual to reply to the Unstarred Question on the Order Paper. If, therefore, I make a speech that does not deal exclusively with Concorde, the noble Earl will understand why and will not, I hope, accuse me of attempting to dodge the issue or failing to answer some of his questions.
There can be no doubt about the Government's commitment to Concorde, a determination which we share with our French partners in this uniquely collaborative project. I was sorry that the noble Earl did not make more of the collaborative nature of the project and of the fact that any future developments and all the past successes are due not only to British aerospace and the British people involved but to our French partners as well. This determination to ensure Concorde's future was reaffirmed at the meeting between my honourable friend the Minister of State at the Department of Industry, Mr. Kaufman, and the French Transport Minister, M. Cavaille, on 29th March, when both Governments agreed that the key to the success of the project and the prospect of further orders lay in the profitable operation of the aircraft already sold.
We have always maintained that the acid test of Concorde will be on the North Atlantic route, where the load factors of over 90 per cent. achieved on the Washington route are proof of the attractiveness of Concorde to the traveller. Indeed, on many flights airlines have had to turn passengers away. The noble Earl, Lord Kinnoull, made particular reference to this point. I understand that on the London-Washington route the load factor has been about 93 per cent. and that on the Washington-London route it has been about 92 per cent. These are very encouraging figures. The London-Bahrein and Bahrein-London figures are considerably lower—34 per cent. and 63 per cent. respectively—but I think that we are
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all agreed that the London-Bahrein route has never been seen as a complete route in itself but merely one leg of a longer route.
The Earl of KIMBERLEY: My Lords, when the noble Lord says that the load factor is 93 per cent., it is 93 per cent., is it not, of 80, not 100, seats because of various conditions? The Americans will not allow it to fly out fully laden.
Lord MELCHETT: Yes, my Lords, the noble Earl is quite right. The figures I have given are a percentage of the seats available in practice, not the theoretical payload of 100 seats altogether. The Government are working vigorously to open up other routes for Concorde, and the most important of these routes is to New York. Mr. Kaufman personally attended the environmental hearing in January, after which Secretary Coleman gave permission for Concorde to operate to New York and Washington. Access to New York has been delayed by legal problems but the British and French Governments are assisting the airlines to overcome these. Noble Lords will also welcome the recent developments in Australia where, as a result of the Environmental Impact Statement prepared by British officials in association with British Airways and the British Aircraft Corporation, the Australian Government has decided that Concorde may fly into Melbourne.
In response to the question put by the noble Earl, Lord Kinnoull, about the route to Australia, I do not think there is anything I can add to what I said in response to his noble friend Lord Orr-Ewing when he asked me a question about that very point quite recently, but it is something to which the Government continue to attach the utmost importance.
The Earl of KINNOULL: My Lords, if, as I think, the noble Lord is now moving away from the subject of New York, I wonder whether he can advise us whether there are any further environmental inquiries to be held in New York or whether now, as I understand the position, it is a question of the United States Government taking the decision after this period of 18 months of operation to Washington?
Lord MELCHETT: My Lords, so far as I know there are no more environmental inquiries to be made, but of course it is a matter for the American Government and the City of New York and the other authorities concerned to make decisions about that and not for me. So it is not necessarily something that lies in my hands.
The Government are reinforcing the general support for Concorde with specific measures aimed at bringing the aircraft into service with other interested airlines. They are providing the strongest possible support to the negotiations in progress with Iran Air, where there is the prospect of the sale of two aircraft, and with Japan Airlines, who are actively interested in leasing two Concordes. I can assure noble Lords that any serious inquiry from airlines will be pursued with vigour if it offers the possibility of a fair and reasonable return in relation to the investment in the aircraft.
The Fairford flight test centre is having to be closed. As I informed your Lordships on the 4th February, the amount of testing still required on the Concorde is not sufficient to justify keeping this expensive facility in operation, nor are there any foreseeable new civil aircraft projects which will call for such a facility. I feel sure that noble Lords share my regret that the closure decision has led to the "blacking" of Concorde 208, which, whatever the reasons, is bound to be detrimental to Concorde's prospects, both with the airlines which have purchased it, and particularly of course as regards possible sales to other operators.
I do not intend to answer all the detailed questions asked by the noble Earl because I think that not only would I not have the opportunity to answer any of the other points mentioned by other noble Lords, but also I should keep the House here until well after midnight. But I should like to say to him that the suggestion that the Government are not taking all reasonable steps to exploit Concorde is one which I simply cannot accept. To state categorically, as the noble Earl has done, that airlines would purchase Concorde if it were to have a greater range than is now the case simply flies in the face of the reality of our problems. We are faced with the Coleman decision by which, until a 16-month trial period is ended at each of Dulles Airport, Washington and Kennedy Airport—and this will
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not be until late 1978 at the earliest—no airline other than British Airways and Air France will be allowed to fly into the United States. The airlines most interested in Concorde wish to fly to the United States or they wish to fly to Japan.
It is to cope with these, the real problems, that British and French Ministers on the 29th March expressed their determination to open routes. That is why we are working strenuously to open routes, with considerable success as is shown by the Australian decision. That is why my honourable friend the Minister of State took part in the Coleman hearing in January, again with considerable success as is shown by the decision reached by Mr. Coleman. That is why we are supporting British Airways in their legal argument for access to New York.
To suggest that nothing is being done to exploit Concorde other than—if I may say so with great respect—the noble Earl's letters to various airlines, is to belittle the great efforts being made by the British Aircraft Corporation to sell and lease the aircraft. All the airlines with an interest in Concorde, including Philippine Airlines, are visited. All possible means of exploiting the aircraft, sale and lease, are investigated. Discussions with Iranair are well advanced for a sale. A lease to Japan Airlines is under discussion, and leases with other Far Eastern airlines are being looked at.
As to further investment, whether in additional aircraft or in major modifications, the Government have made clear that this would have to be justified by the returns. We are at one with our French opposite numbers, who are adopting a similarly businesslike approach, that no convincing case has yet been made out for further major expenditure. Meanwhile developments continue to be scrutinised and authorised on strict cost effective criteria. I would hope that that approach, besides having the full support and agreement of our French partners, would be something to commend itself to all sides of this House.
The noble Lord, Lord Gainford, mentioned airships. I am certainly well aware of the interest shown in this form of air transport. I can assure the noble Lord that the Government are ready to consider all proposals from firms for the development and the production of commercially viable airships. We are in

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contact with aerospace developments on the issue he raised. Elsewhere on the civil side, the industry is faced with a severe shortage of work. This is common to manufacturers throughout the world. As a consequence of the 1974 fuel crisis and the recent world economic depression, the growth of air traffic is currently very slow and, pending the expected improvement, airlines are simply not buying new aircraft in any substantial numbers.
I regret to say that over the past few years, the major United Kingdom firms have failed in some instances to invest in improvements and further developments of their existing major aircraft, which might have strengthened their position in the present difficult market conditions. For example, although HSA are continuing to build HS.748s and planning to introduce a re-engined version of the HS.125 next year, both in anticipation of further orders, the only really new project in recent years has been the small commuter airliner, the SD.3–30, developed and now being produced by Short Brothers, a Government-owned company.
This lack of confidence by our firms cannot be fairly attributed to nationalisation. The Government are doing all they can to counteract the firms' timidity. They have enabled the BAC 1–11 line to stay open by underwriting production of a small order from Roumania and the manufacture of parts for a further five aircraft on a speculative basis. Following HSA's abandonment of the HS.146, which had been launched with major public assistance, the Government have kept open the option to restart the project wholly at public expense.
The noble Earl, Lord Kinnoull, asked about current proposals. The Government are currently giving urgent consideration to requests from BAC to extend the underwriting on the 1–11, and from HSA to increase the amount of work being done under the holding contract. Their decisions on these questions will have to take account of the public expenditure problems we are now facing, the willingness or otherwise of the proponents to show their confidence by sharing the risks and a realistic assessment of the market prospects. I should add that in the case of the HS.146, Hawker-Siddeley are not recommending a relaunch of the project precisely because of
1332
their uncertainty about the market prospects—and they have not volunteered to invest any of their own money in the project at this stage, notwithstanding the compensation provisions in the nationalisation Bill.
The Earl of KINNOULL: My Lords, I am grateful to the noble Lord for that reply. I thought he spoke about sharing the risk, and that was one of the reasons for the delay. Is it a risk that the companies who are about to be nationalised will be putting in risk capital? In which case, would the noble Lord really think that the directors of these companies would do this in the interests of their shareholders?
Lord MELCHETT: My Lords, I did not say that was one of the reasons for the delay; but obviously the Government, in reaching a decision about putting money into any of these projects, would look to see what attitude the companies themselves took, and their own estimates of the commercial viability and prospects of the projects under discussion. But continuing commercial investment by the shareholders in a company due to vest under the Bill is fully protected under the terms of the Bill. I look forward very shortly indeed to discussing the Bill with the noble Lord, and see absolutely no reason to give him any undertakings on the hypothetical questions he raised about the progress the Bill is currently making successfully in another place.
The Government are providing strenuous support for the companies in their efforts to sell their existing aircraft—both through the overseas Posts and at home, including maximum assistance through ECGD. There are possibilities for the sale of more Tridents to China and of BAC 1–11s in several different countries. Such orders are proving very difficult to secure, but I can assure noble Lords that the Government will not relax their efforts to do all they can to help the companies to land them.
As to future prospects, there is good reason to believe there will be a resumption of steady growth in airline traffic in the 1980s which will lead to substantial purchases of new aircraft. The precise kinds of aircraft which will be required are still not clear. The situation is fluid because the airlines cannot yet define their requirements with any precision.

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It is clear that the investment levels which will be required to launch any projects ranges from around £200 million for a small feeder aircraft to £1,000 million for a completely new 200-seater. Hence, with the possible exception of the smallest kind of aircraft, the Government are convinced that any of these possible projects will need to be undertaken collaboratively in order to share the very large investment required and to widen the market possibilities. Even with collaboration, the commitment of individual partners will be very high indeed. We must, therefore, seek out projects with a high potential for profit.
There are various possibilities for collaboration, both within Europe and between European companies and American companies. All possibilities are being fully explored. Pending nationalisation the Government are doing all they can to encourage and assist United Kingdom firms and the Organising Committee under my noble friend Lord Beswick to narrow down the options, and to examine all the possibilities for collaboration on a sound commercial basis, whether with the principal European firms or with American companies. The United Kingdom companies are engaged with the French, German and Dutch manufacturers (the Group of Seven), in joint studies and in various bilateral discussions on possible projects and collaboration. The Organising Committee are setting up studies with the French and Germans on the Airbus and with the French on the HS. 146 and the future 150-seat aircraft. Individual discussions are also taking place with the United States' manufacturers about possible transatlantic collaboration.
The Government are continuing to stimulate these industrial discussions, and their efforts over the last four months have included a discussion on future collaboration generally between my right honourable friend the Prime Minister and the French President during the latter's recent visit, a meeting between the Prime Minister and Mr. Wilson of Boeing at which my right honourable friend the Secretary of State for Industry was present, and two meetings in the last four months between the Minister of State, Mr. Kaufman, and his French counterpart on Anglo-French collaboration, including studies on a possible advanced supersonic transport.
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Officials of the Department of Industry are also engaged in ongoing discussions with their opposite numbers in France, Germany and Holland to monitor progress in the European industrial discussions.
The noble Earl, Lord Kinnoull, asked me about the MRCA project in particular, As he knows, a very substantial RAF requirement for the Tornado, as it is now called, has been announced. It is for my right honourable friend the Secretary of State for Defence to announce when production may start. I trust he will be able to do this soon. The Government look forward to a successful joint programme on this aircraft with the Germans and Italians, and fully recognise the importance of the programme for the United Kingdom industry.
My Lords, I hope I have said enough to indicate the wholehearted and unremitting efforts which the Government are putting into clearing the way for a profitable long-term future for the aircraft industry, but I should mention that with the transfer of Rolls-Royce (1971) Limited to the NEB the Government also look forward to a profitable long-term future for that sector of the industry. To conclude, the Government are committed to ensuring, so far as they possibly can, that the conditions exist for the United Kingdom aircraft industry to carve out a vigorous and successful future for itself, based on sound commercial projects. We are taking all the necessary action towards this end (the most important being nationalisation itself) in order to eliminate the wasteful competition and overlap of the past. The industry must pick up the challenge facing it, but the Government are continuing, and will continue, to do all they can to enable it to do so successfully.

LONDON TRANSPORT BILL
Brought from the Commons, read 1ª, and referred to the Examiners.
SUFFOLK COASTAL DISTRICT COUNCIL BILL
Returned from the Commons with the Amendments agreed to.
YORKSHIRE WATER AUTHORITY (RIVER DERWENT] BILL [H.L.]
Returned from the Commons with Amendments; the said Amendments considered and agreed to.