Lords Sitting of 14 July 1977

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

CATHEDRALS ADVISORY COMMITTEE
Lord SUDELEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will consider introducing legislation to establish the Cathedrals Advisory Committee as a statutory body, certain members of which would be nominated by a Minister; and to provide that deans and chapters must consult this body before disposing of the books and valuables, or altering the furnishings and fabrics of their cathedrals.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk): No, my Lords. This is in the first instance a matter for the General Synod of the Church of England.
Lord SUDELEY: My Lords, while thanking the Minister for her flexibility in answering the Question even though it concerns a Church matter, may I ask whether she is aware that, although Wells Cathedral is very much in the public mind, the Dean of Wells is not a member of the Synod? As a circular, following the Civic Amenities Act 1967, requires that planning authorities should consult the Cathedrals Advisory Committee on applications concerning the close neighbourhood of cathedrals, would it not be appropriate for the Cathedrals Advisory Committee to be consulted on the cathedrals, and does the Minister not think that the deans and chapters of cathedrals should be—
Several noble Lords: Speech!
Lord SUDELEY: —subordinated to some kind of State control, even though they do not receive any State aid in return?
Baroness BIRK: My Lords, I will do my best to wind up on that. The Cathedrals Advisory Committee is a Church body set up by the Church of England to meet its own needs. The only way in which the Government could do anything to meet the noble Lord's point would be to set up an entirely new body which would have authority over cathedrals. That we certainly would not want to do without the co-operation of deans and chapters, and until the Synod has debated this question we cannot attempt to assess the views of the deans and chapters on this matter.
The noble Lord also raised the point of the advice taken by cathedrals. I am given to understand that, on the whole, cathedrals do consult with the Cathedrals Advisory Committee, and when it comes to any question of planning or local government control I understand that the circular that was put out is being closely adhered to, certainly by most cathedrals; and the planning authorities do approach the Cathedrals Advisory Committee in order to obtain their expert advice. Finally, this really is a matter for the General Synod and at this point it is not a matter for either this House or another place.
Lord SUDELEY: My Lords, I should like to ask the noble Baroness a further question, especially as this is intertwined with the question of State aid and the Government have already undertaken to give State aid to some ecclesiastical buildings. Would she not agree that, because the Cathedrals Advisory Committee was not consulted and the cathedrals are exempt from the faculty jurisdiction which governs parish churches, Caxton's and other books have been sold from ecclesiastical libraries in breach of the trust of benefactors who thought that their gifts would be treasured for all time, and unfortunately restorations and changes have been made, for example —
Several noble Lords: Speech!
The LORD PRIVY SEAL (Lord Peart): My Lords, I think the noble Lord should really keep his remarks a little shorter.
Baroness BIRK: My Lords, it is true that a few years ago Ely Cathedral disposed of the majority of its library, but this was an isolated case. On the whole, the cathedrals have taken advice; they have their own experts and I think that from an architectural point of view, and with regard to the guardianship of their fabrics and books, they behave quite admirably. It is also true that cathedrals are outside the scheme for proposed State aid because it is felt they are able to provide funds for themselves by voluntary effort. I think that covers both the points raised. So far as books are concerned, the Government have no control over the sale of books from anybody, but when it comes to the export of objects of value the cathedrals are under the same constraints as apply to anyone else.

ARMED FORCES: COMBAT EFFECTIVENESS
3.12 p.m.
Lord ORR-EWING: 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 plans have been put in hand to restore the fighting capability of our Armed Forces in accordance with the amended Motion which they accepted on 12th May.
Lord WINTERBOTTOM: My Lords, as we have stated on many occasions, we will continue to maintain the effectiveness of the Forces we contribute to NATO. Indeed, we do not accept that the fighting capability of our Forces assigned to NATO has been significantly impaired.
Lord ORR-EWING: My Lords, will the Minister take this opportunity of repudiating the plan of the Labour Party Defence Committee to cut a further 28 per cent. off the defence budget? Since the Government accepted the Motion as worded, can the noble Lord tell us what action they have put in hand in the last two months? Can he tell us, also, what action has been put in hand as a result of the NATO Ministerial meeting on the 17th and 18th May, when members agreed to add 3 per cent. in real terms to their defence budgets in order to try to
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narrow the gap in strength which exists between the Warsaw Pact and NATO?
Lord WINTERBOTTOM: My Lords, I cannot strengthen what my right honourable friend the Secretary of State said on the subject of the proposed cuts mentioned by the noble Lord. I thought his repudiation was emphatic. The other point raised by the noble Lord is of course an important one, but is not as immediate as the first point. The figure of 3 per cent. which we are discussing is for the period 1979–84. Our own planning figures for the defence budget, which are published, are for the year 1978–79, and these have been discussed with our colleagues in NATO.
Lord PARGITER: My Lords, would not my noble friend agree that it is unfortunate that Questions are put in this form, which does nothing for the morale of our Forces and can only give comfort to any potential enemy?
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend.
Lord CHELWOOD: My Lords, is the noble Lord aware that lie has unintentionally misled the House about the 3 per cent. increase in real terms requested by the NATO Defence Planning Committee, by relating this to the period 1979–84? In fact it was a request for an annual increase of 3 per cent. in real terms. I am sure the noble Lord did not intend to mislead the House. May I ask him, secondly, whether he will say why two Cabinet Ministers, Mr. Booth and Mr. Dell, and two junior Defence Ministers who belong to the Labour Party's Defence Committee—which has made the request for this colossal and irresponsible cut of 28 per cent.— have not dissociated themselves from this demand?
Lord WINTERBOTTOM: My Lords, so far as the second point is concerned, of course, junior Ministers played their advisory role, but the Secretary of State has spoken and I have mentioned what he has said. That is the final statement on this matter. Of course, the noble Lord is right. We are not talking about 3 per cent. over the period 1979–84; we are talking about 3 per cent. per annum. So far as the present situation is concerned, may I

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point out that the only change has been in a positive direction; namely, the retention of the No. 41 Commando.
Earl CATHCART: My Lords, is the Minister aware that there is already considerable anxiety in the Armed Forces because military salaries are so obviously falling behind other people's salaries and wages, and that this document, produced by the Labour Party's own Defence Committee, can only add considerably to this anxiety, and affect, as the noble Lord opposite has already said, the morale of the Armed Forces? Does the Minister realise that it is imperative for this Government to deny, and allay the anxiety caused by, these findings in a proper manner, and not in the half-hearted manner as was done in the other place recently?
Lord WINTERBOTTOM: My Lords, I thought it was emphatic, not half-hearted.
Lord BROCKWAY: My Lords, is the Minister aware that many of us on these Benches have the greatest sympathy with the proposals which have been made by this Labour Party committee? Has his attention been drawn to the letter in The Times this morning from Mr. Reginald Maudling, M.P., which reduces to its ultimate absurdity the present expenditure on armaments?
Lord LEATHERLAND: My Lords, is my noble friend aware of the fact that not all of us on this side of the House share the views of my noble friend who has just spoken? May I, as an old company sergeant-major of the First World War, draw attention to the phraseology of this Question, which talks about restoring the "fighting capability of our Armed Forces." Does not the Minister find that wording rather offensive?
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend for both comments on our discussion.
Lord ORR-EWING: My Lords, will the Minister bear in mind that one cannot quite lightly set aside the findings of the National Executive Committee of the Labour Party, even if they are to some extent repudiated by the Prime Minister.
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They generally find their way on to the agenda of the Labour Party's national conference; they are then endorsed and become Manifesto policy. There is a real danger that this will happen. Can the noble Lord not say that the Government are now planning to increase the defence of our country, in the light of the desperate risks which have been taken and which have so recently been underlined by General Haig in our newspapers?
Lord WINTERBOTTOM: My Lords, first, the noble Lord has got it wrong. A sub-committee has made proposals. The National Executive Committee has not as yet commented. In any case, the National Executive Committee of the Labour Party is not the Government of this country. It has a view, but it is not necessarily followed.
Lord LOVAT: My Lords, would the Minister say that, if he is supporting the pacifists sitting behind him, he is unsuitably dressed wearing a Guards' tie?
Lord CLITHEROE: My Lords, does the noble Lord agree that credibility is of great importance?
Lord WINTERBOTTOM: My Lords, I think that this Government has great credibility.
Lord SHEPHERD: My Lords, would my noble friend not agree that, though there may be dispute about the quantity of our Forces, there can be no question about their quality? Therefore, any Question that throws doubt upon the quality of our Forces is unfair to the Forces themselves and is only an aid to our enemies.
Viscount MASSEREENE and FERRARD: My Lords, would not the noble Lord agree that to cut defence five times, as the present Government have done, is bad for the morale of our Forces?
Lord WINTERBOTTOM: My Lords, I know that sacred cows are important animals, and I am very strongly in favour of this particular sacred cow. But you cannot overfeed the animal. The Conservatives have cut defence expenditure, we have cut defence expenditure. What I am saying is that the operational power

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of the defence Forces has not been damaged in the process. We are securing a more efficient use of our money. The noble Lord may have noted the comment, made after the Spithead Review, that the Navy of today, though smaller, is carrying a very much greater punch than at the time of the Coronation.
Lord THORNEYCROFT: My Lords, whatever any sub-committee may have said, does the noble Lord, Lord Winter-bottom, recognise that we appreciate the blunt terms in which he has reiterated the view accepted by the Government on 12th May that no further cuts should be made in the fighting Forces; that, as repeated in the Question, the fighting capability of our Forces should be restored as a matter of priority and that that remains the settled view of Her Majesty's Government?
Lord WINTERBOTTOM: My Lords, I thought that I had just said that.

WATER CHARGES
3.21 p.m.
Lord BOYD-CARPENTER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps or appeal are open to a consumer of water supplied by a water authority who objects to a decision by that authority that he should be charged on a metered rather than a rateable value basis.
Baroness BIRK: My Lords, it is for individual water authorities to decide upon and justify the basis of charges to individual consumers.
Lord BOYD-CARPENTER: My Lords, I thank the noble Baroness, Lady Birk, for her succinct reply, but may I ask whether she does not thereby acknowledge that she was wrong to dispute, as she did in her letter to me of 28th June, that this was an arbitrary decision? Given that we are dealing with monopoly supplies that are necessary to life, would it not be better to have, as we have in respect of the nationalised industries, some machinery for determining disputes between these bodies and their customers?
Baroness BIRK: My Lords, I do not agree that I was wrong when I wrote to the noble Lord, Lord Boyd-Carpenter. I do not consider that it is arbitrary when something is worked out on rational grounds, is explained to people and they have a right to take it up, even though it is not the sort of right of appeal to which the noble Lord, Lord Boyd-Carpenter is referring. There is no right of appeal to the Secretary of State, but it is, of course, open to the noble Lord to seek to persuade the water authority to charge him on rateable value rather than on a metered basis. Frankly, I think that the noble Lord keeps aiming his bullets at the wrong person. I imagine that the attitude of the water authority would be governed by the amount of water used in relation to the rateable value of the property.
Viscount MASSEREENE and FERRARD: My Lords, is the noble Baroness, Lady Birk, aware that pipes are not rational and often burst, and that therefore it would be far fairer if everybody were charged on a rateable value? If someone is on a metered value and a pipe bursts, the water authority is sometimes extremely tardy in coming to the help of the consumer and ensuring that the burst is located. One might lose hundreds of thousands of gallons if one were on a meter. It is most unfair.
Baroness BIRK: My Lords, that is really a quite different question.
The Earl of KINNOULL: My Lords, will the noble Baroness, Lady Birk, say what is wrong with the old system of rateable value? Why have the various areas of the Water Council decided to change? Also, what difference does it make to the consumer?
Baroness BIRK: My Lords, most domestic consumers are on a rateable value. It is mostly industrial consumers or domestic consumers who are consuming large quantities of water who are metered. Nothing has been considered wrong with this situation. Indeed, in many countries, domestic consumers are metered.
Lord HARMAR-NICHOLLS: My Lords, is the noble Baroness, Lady Birk, aware that there is nothing wrong if there is a genuine appeal against the possibility of an act of God, as my noble friend

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Viscount Massereene and Ferrard has just pointed out? It is the ineffectiveness of the appeal system which makes this an arbitrary decision and it could be an unfair one.
Baroness BIRK: I have had to explain on previous occasions in this House that there is no appeal against an act of God. To whom would one appeal?

HUGO SOFIA
3.24 p.m.
Lord AVEBURY: 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 for what purpose an Argentine citizen using the name Hugo Sofia, a former officer who was employed at the Escuela de la Mecanica Armada, in the Libertador suburb of Buenos Aires, a place frequently cited by the victims as an unofficial detention centre where torture is practised, has been admitted to the United Kingdom.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, on the information so far provided by the noble Lord, Lord Avebury, it has not proved possible to identify Hugo Sofia.
Lord AVEBURY: My Lords, is the noble Lord, Lord Harris of Greenwich, aware that a gentleman calling himself by this name went to the offices of the Argentine Human Rights Committee in London and asked a number of questions which excited the suspicions of the people there, until finally he was identified by a young lady who had, herself, been tortured in this institution and who recognised him because she had been interrogated by the so-called Hugo Sofia for a period of no less than five hours? Would the noble Lord not agree that it is a matter for strong objection that the Argentine Government should send spies to the United Kingdom to investigate the activities of exiles from their country? Would the noble Lord consider making representations to the Argentine Government against this practice?
Lord HARRIS of GREENWICH: My Lords, although obviously we should take into consideration anything that the noble Lord, Lord Avebury, might say to us, I think, with great respect to him, that what he has said would be a rather fragile basis upon which to make representations to the Argentinian authorities. If we have any more details about Mr. Sofia, we shall certainly go into the matter. If the allegations made by the noble Lord are shown to be justified, there are circumstances in which this gentleman could be deported from this country. However, that would require far more information than has so far been made available to us.
Lord AVEBURY: My Lords, would the Minister agree that if, in fact, this gentleman came to this country under a false passport, he would be committing a criminal offence in view of the ruling of the Divisional Court in the case of Maqbool Hussein in May 1976? Further, would the Minister be prepared to consider evidence supplied by the young lady to whom I have made reference already if I were to submit it to him?
Lord HARRIS of GREENWICH: My Lords, we should be glad to look at any information made available to us by the noble Lord, Lord Avebury. The present problem is that we have not had such information. If it were made available to us, we should be glad to look at it.

SUMMER RECESS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, I shall make an announcement about the Summer Recess. Subject to the progress of business, it is proposed that the House should rise not later than Friday, 29th July, and I hope to be in a position to give further details shortly.
LONDON HYDRAULIC POWER BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.

NATIONAL HEALTH SERVICE BILL [H.L.]
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
On Question, Bill read 2a, and referred to the Joint Committee on Consolidation Bills.

NEW TOWNS BILL
Read 3a, and passed.

REDUNDANCY REBATES BILL
3.28 p.m.
Lord WALLACE of COSLANY: My Lords, I beg to move that the Commons Reason for disagreeing to the Lords Amendments be now considered.
Moved accordingly and, on Question, Motion agreed to.
COMMONS REASON FOR DISAGREEING TO THE LORDS AMENDMENTS
LORDS AMENDMENTS
Clause 1, page 2, line 12, at end insert—
1 "() No order shall be made under subsection (1) above unless the Secretary of State thinks it expedient to do so with a view to adjusting the level at which the Redundancy Fund stands for the time being and having regard to the sums which may be expected to be paid from that Fund in any future period."
Clause 2, page 3, line 3, at end insert—
2 "() No order shall be made under subsection (1) above unless the Department of Manpower Services for Northern Ireland thinks it expedient to do so with a view to adjusting the level at which the Northern Ireland Redundancy Fund stands for the time being and having regard to the sums which may be expected to be paid from that Fund in any future period."
The Commons disagreed to these Amendments for the following Reason:—
3 Because they would unduly restrict the exercise of the powers conferred by the Bill on the Secretary of State or, as the case may be, the Department of Manpower Services for Northern Ireland.
Lord WALLACE of COSLANY: My Lords, I beg to move that the House doth not insist on their Amendments Nos. 1 and 2 to which the Commons have disagreed for the Reason numbered 3
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—namely, because they would unduly restrict the exercise of the powers conferred by the Bill on the Secretary of State or, as the case might be, the Department of Manpower Services for Northern Ireland.
Moved, That this House doth not insist on the said Amendments to which the Commons have disagreed for the Reason numbered 3—(Lord Wallace of Coslany.)
Lord LYELL: My Lords, we have heard from the noble Lord, Lord Wallace of Coslany, the brief explanation of the Reason for another place wishing to disagree with us and insisting on the Bill in its present form. Our opinion is that the reasons which have been given by the other place seem, on the Order Paper that we have today, rather pusillanimous, as indeed do the arguments which have been advanced by the Government at each stage of the Bill. Not only were these arguments fallible but we believe they were inconsistent.
The noble Lord, Lord Wallace of Coslany, when he was speaking at an earlier stage, and particularly at Second Reading of the Bill, mentioned that the Bill was purely and simply an enabling Bill. I do not propose to enter into an argument on the semantic side of this, but what concerns me, and I believe many of us on these Benches, is the number of points raised by the noble Lord and by other Members of the Government at earlier stages of the Bill; for example, the full year effect from the proposed and swift reduction in the rebate from 50 per cent. to 41 per cent. The noble Lord gave the figure clearly as £1.35 million per month, and he hoped that in a full year that would be £16.2 million.
He considered that figure to be small beer on a national scale. But this is not the only parameter for considering this particular Bill, nor indeed this measure. The noble Lord, Lord Wallace, referred to the beneficial effect upon the public sector borrowing requirement. Indeed, the Fund is intended to be self-supporting and it is intended to finance the redundancy pay of those employees who, for very good reasons, or perhaps not good reasons, may lose their jobs. Let no one forget that the Fund is composed of employers' contributions which are administered by

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the Government, and indeed the Government are paid out of the Fund to administer it.
The noble Lord pointed out that, whenever the Redundancy Fund is in deficit, the Government charges interest on any topping-up which may be necessary, yet no interest accrues to the employers when the Fund is in credit, and this is the normal and intended state of affairs. Whether or not the noble Lord intended to become involved in discussions about the public sector borrowing requirement, he made references to the measures which were outlined in another place on 22nd July last year.
Could the noble Lord confirm that the intended order which he says will follow the completion of this Bill through Parliament, and which will reduce the employers' rebate from 50 per cent. to 41 per cent., is solely to enable the Fund to remain in credit? I can hardly think so, for two reasons. First, the Fund is already in credit by approximately £12.7 million—that was the figure given by the noble Lord at an earlier stage. He believed that there were what he called minor adjustments, which we accept, but nevertheless the figure he gave of an addition of £16.2 million in one particular year during the first full year of the new scale of the rebate will push up the level of the Fund by an enormous amount, and indeed far too much for its declared purposes.
Secondly, the declared purpose of the Bill, which has been spelled out many times by the noble Lord and his colleagues in another place, is to enable the Secretary of State to vary the rebate which is paid to employers. We do not argue with this purpose, but we consider that the Government should not use this Fund as any factor in the public sector borrowing requirement.
There are one or two further small points. Can the noble Lord confirm for us that the figure which was mentioned by my noble friend Lady Elles at an earlier stage of approximately £8 million, which was an extraordinary item of income which came into the Fund during the first week of December 1976, was an adjustment by the Government Actuary? I think that the House would absolutely accept that a large swing of this nature
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in one particular week is utterly exceptional, but the figure of the Fund's total at present is around £13 million, and thus the effect of the noble Lord's proposed order will add, he estimates, £16·2 million in a full year. Can he give us any indication of what size the Fund would be allowed to reach? There is the major point that, the larger the Fund becomes, the greater will be the effect on the public sector borrowing requirement, and indeed the far greater and more harmful effect on the employers, who would be happy to see any relief from the contributions they have to make.
Certainly I have said quite enough to indicate that we are very unhappy with what we call the unfettered power which is to be given to the Secretary of State with regard to this particular Fund. All the more so when the Fund is at present in credit, and is likely to go more into credit with the rebates at their current level, let alone at the level of 41 per cent. which, as the noble Lord indicated, the order will reduce these rebates to. I do not believe that we could be justified in automatically passing any order which would reach us in this respect if it does not lie in accordance with our very modest and reasoned Amendment, which we believe was cravenly rejected by the Government in another place.
3.35 p.m.
Lord ROCHESTER: My Lords, I do not think that I can let this opportunity pass without saying a few words from these Benches in the way of reinforcing what the noble Lord, Lord Lyell, has just said. Having read the Official Report of the proceedings in another place, when our own Amendment to this Bill was considered, I am bound to say that I was no more impressed by the arguments against it put forward by the Government there than I was by the arguments adduced by the noble Lord, Lord Wallace of Coslany, in this House.
In our view this Bill, particularly in its unamended form, remains a bad Bill for reasons of principle which I endeavoured to express both at Second Reading and in Committee in this House, and I shall not repeat them now. I am glad, however, that the protest that we then made was made not simply from the Conservative Front Bench and from these Benches but

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also from the Cross-Benches in the person of the noble Lord, Lord George-Brown. Having said that, I do not think that there is anything more that we can do about it at this stage, but I, for one, acquiesce in the position with the greatest reluctance.
Lord WALLACE of COSLANY: My Lords, the noble Lord raised a point about this mysterious £8 million, over which I issued the slight reprimand to the noble Baroness that this was something that should not be raised in this Chamber. I would advise the noble Lord that allocations of the Fund by the Department of Health and Social Security are made weekly on the basis of estimates prepared by the Government's Actuary's Department—the GAD, as some Departments refer to it. These payments are occasionally supplemented by adjusting payments.
Prior to the introduction of earnings related contributions in April 1975 only relatively minor adjustments were necessary because the contribution income was stable. In other words, it was possible to estimate it accurately at so much per head of the working population. Since that date a certain number of adjustments have been made. I shall not give them in detail, but I could if required. I can give the noble Lord the details if he requires, but that is the reason. We have certainly had a debate where misgivings were expressed on one side and reassurances given on another. This is an enabling Bill, and I would suggest, possibly with some trepidation, that when the order is made it is subject to Affirmative Resolution and can be challenged in both Houses. I think that the House would be well advised to leave it at that and to accept the Motion.
On Question, Motion agreed to.

POST OFFICE BILL
3.40 p.m.
Lord WINTERBOTTOM: My Lords, I beg to move that this Bill be now read a second time. We have before us today a short and simple Bill whose very brevity will, I am sure, be welcomed by the House. Its effect is to increase the maximum number of members of the
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Post Office—in other words, the Board—from 12 to 19, in each case excluding the chairman. This new arrangement will be for an initial period of slightly more than two years, after which the permitted size of the Board will revert to 12 unless the Secretary of State orders otherwise, with the approval of both Houses of Parliament.
The purpose of this two-year enlargement of the Board is to enable the Government to give effect to agreed proposals from the Post Office and the Council of Post Office Unions for an experiment in industrial democracy in the Post Office. It might be helpful if I were first to outline the history of those proposals.
In 1974, the Government asked the Post Office management and unions to consider all aspects of industrial democracy in the Post Office and to produce agreed proposals for its extension. Following this initiative, my honourable friend the Minister of State for Industry, Mr. Kaufman, invited the Post Office and its unions to a tripartite meeting last July to discuss the way forward. It was then agreed that the Post Office and its unions should seek to negotiate agreed proposals for an experiment in industrial democracy in the Post Office. After much hard and dedicated work by those concerned, they submitted a joint report to the Government earlier this year. The report forms the basis of the proposals which this Bill will accommodate and I have accordingly seen that copies have been placed in the Library of the House.
This Joint Study Group's report recommended that there should be a two-year experiment in industrial democracy in the Post Office. At the end of that period, the working of the experiment should be subject to a thorough and detailed review by the Post Office, the unions and the Goverment. It proposed that there should be an enlarged Post Office Board, consisting of an equal number of full-time executive management members and employee members, with a smaller number of independent members. On this basis, there would be 16 seats plus a chairman, with six management, six employee and four independent members. The chairman would be independent of all three groups unless he also had a specific and titular management role, in which case he would count as one of the management group.

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The Government welcome these proposals. They represent a significant and constructive contribution to the extension of industrial democracy in the Post Office. But, after consultation with interested parties, the Government concluded that there existed a strong feeling that the consumer should have a more specific voice on the Board and that the proposals should be modified to accommodate this. The new Board structure will, therefore, consist of 19 members plus a chairman, with seven management members, seven employee members and five independents. Two of the independent members will be chosen specifically for their experience of consumer affairs and will be able to speak from a consumer viewpoint. Such a Board structure will allow for adequate employee representation as well as a strong and widely experienced independent membership. It cannot of course be contained within the present statutory maximum of 12 members, and that is why the Bill is before us today.
But the Bill is not in quite the same form as when it was originally introduced in another place. It was the intention of the Post Office Management/Union Joint Study Group that the experiment should last for a period of two years. It was accordingly the intention of my right honourable friend the Secretary of State for Industry to appoint the members of the new Board for a period of two years only; any extension of the experiment was then to be considered in the light of the review which all parties considered an essential feature of the experiment. However, honourable Members in another place proposed to write the two-year limit into the Statute, and this Amendment was made with the wholehearted consent of the Government. The Bill now states that the maximum of 19 members shall remain in force initially until 31st March 1980. This allows for an experiment lasting two years plus three or four months in which the experiment can be reviewed.
Essentially, this review will take place in two parts. First, the Secretary of State will ask the chairman of the Post Office to provide, in consultation with his Board and with the Post Office unions, a report on the experiment. This will enable the Government fully to review the progress that has been made. If it
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is considered that the experiment has been a success, then it may be the wish of all those involved to make the new arrangements permanent. To do so will require the approval of both Houses of Parliament; this will be the second and equally important part of the review. Ann, to enable Parliament to be properly informed when it comes to consider this question, my honourable friend the Minister of State has undertaken in another place to ensure that the report on the experiment is made available to Parliament. The Government and the participants want to see the fullest possible review of this experiment and I think the House will agree with me that the arrangements I have described will certainly achieve that end.
The House will be aware that, under the Post Office Act 1969, the power of appointment of the members of the Post Office lies with the Secretary of State, in consultation with the chairman of the Post Office. This experiment will not alter this situation and complete responsibility will remain with my right honourable friend. But he will of course take reasonable and sensible steps to ensure that he appoints the right people for the job. He intends to invite nominations for the seven worker director posts from the Council of Post Office Unions. The unions will arrange to allocate the seven seats among themselves and will choose their nominees by the same machinery that is used for the election of national officials.
The Unions/Management Study Group Report, on which, as I have explained, these proposals are based, envisages that union members will be of the standing of Executive Council members or full-time officials of the unions. They will not be mandated by the unions but will be expected to report back to their membership by a procedure to be agreed by the new Board. Noble Lords will agree that it can only be to the advantage of the Post Office that employee members of such experience and standing should be nominated.
In accepting these arrangements as right and appropriate for the Post Office, the Government have borne in mind the very high degree of union membership in the Post Office, which is well over 90 per cent., and most of the unions of which Post Office employees are members

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have no membership outside the Post Office. The Government thus concluded that the particular circumstances of the Post Office make the existing union machinery wholly appropriate for the nomination of the employee members. My right honourable friend will of course not be obliged to accept the union nominations he receives. He will, however, normally expect to be able to do so and, if a problem arises, he will attempt to resolve it in consultation with the union concerned.
When choosing the independent members, my right honourable friend will bear in mind both that they must be truly independent of the other two groups and that they must be able to make a significant and wide-ranging contribution to the work of the Board, bringing with them considerable skill and experience from outside the Post Office. I have already said that two of the independent members will be chosen for their experience of consumer affairs. The Secretary of State will of course consult the Secretary of State for Prices and Consumer Protection in making these appointments. He is also prepared to consider for these five independent posts suitable people nominated by the Post Office or its unions, although he will not confine his considerations to such nominees or feel bound to accept them. He will also be prepared to consider reasonable objections to any candidate from either management or unions, but the final decision will, of course, remain his.
During discussion of the Bill in another place, concern was expressed that the employee members of the Board, as representatives of the workforce, might be unable to accept the normal responsibilities of a Board member. Let me clarify this by quoting the Secretary of State during the Second Reading debate on the Bill in another place:
"All members of the Board, to whichever category they are appointed, will share full corporate responsibility for the running of the Post Office, and will be expected to play their full part as Board members. There will be no restricted category of membership".—[Official Report, Commons; 16/5/77; col. 111.]
I should also like to make quite clear to the House that this experiment is unique to the Post Office. It arises, as I have said, from proposals produced by the
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management and unions of the Post Office. It is a one-off experiment, and the Government's endorsement of these arrangements in no way prejudices any more general decisions, or policies, which might arise from the Bullock Report on industrial democracy. It is, of course, completely in line with the Government's stated policy to encourage agreed industrial democracy schemes wherever they arise in industry.
While this Bill has been progressing through Parliament, those actually involved in the experiment have gone ahead with appropriate preparations in the hope that it will be passed, and that the experiment will be able to go ahead. Two of the unions, the Union of Post Office Workers, and the Post Office Engineering Union, have ratified the proposals at their annual conferences, and I understand that the other unions have chosen to hold special conferences to consider these proposals later this year. Noble Lords will appreciate the keenness with which these unions view the experiment and their enthusiasm to get on with the job.
Before I close, I hope the House will permit me to echo my right honourable friend the Secretary of State in paying tribute to those in the Post Office management and unions who have worked so hard, and so fruitfully, to produce the agreed proposals. And it is no small matter to which they have devoted so much time and energy; it is a matter of very great importance. The Post Office, the largest employer in the country, has decided that it wishes to embark on an experiment in industrial democracy. It is the first experiment on such a scale in this country, and it will be closely watched, not only by proponents of industrial democracy, but by its enemies as well. It will be an open experiment, whose results will be subject to close scrutiny, both here and outside these walls.
We have heard much of late from many Parties on the subject of industrial democracy. We have before us today legislation which will enable the Post Office to embark on a great experiment in this field—one which management and workforce are agreed is the right course for the Post Office. I commend this legislation to the House, not only as of great importance to the future of the Post Office, but also as an opportunity to move out of

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the theory of industrial democracy into its practice. The Government have moved as quickly as possible to introduce this Bill, and to assist its passage through Parliament. I hope that your Lordships' House will join with another place in giving this experiment the opportunity to go ahead and succeed, and that noble Lords will give their wholehearted support to these proposals. My Lords, I beg to move.
Moved, That the Bill he now read 2a.—(Lord Winterbottom.)
3.52 p.m.
Lord TREFGARNE: My Lords, the House will be grateful to the noble Lord, Lord Winterbottom, for introducing this Bill this afternoon, and many of your Lordships will also be grateful to him for stating quite clearly that the Bill does not predispose any decision, or policy, by the Government in respect of industrial democracy generally and, in particular, the recommendations of the Bullock Report which, alas! have not found favour with very many of your Lordships, and upon which we have yet to hear the Government's definitive view, at any rate so far as future legislation is concerned.
The Bill, limited as it is in scope to the Post Office, receives a guarded welcome from my noble friends and myself. I am assuming that there will be no Committee stage on the Bill, although that depends upon whether any noble Lords put down Amendments, but, so far as I know, it is not expected that there will be a Committee stage. Therefore, I propose to take this opportunity of putting one or two points to the noble Lord, and if he cannot answer them today, perhaps he will be able to do so at Third Reading, or in correspondence.
As the noble Lord said, this is an experiment, and we on this side of the House are happy that it should be so. We really have no criteria by which to judge any operation of this nature, and we shall be looking at the results of this exercise carefully, and no doubt, critically. We shall want to examine any White Paper or other document that comes forward at the expiry of this experiment and I am happy to hear, and to read in the
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Bill, that the extension of the experiment will need a Resolution of both Houses of Parliament.
I believe that the Government's reluctance to give the Post Office a carte blanche in this matter is good and, as I have said, we shall be happy to join in the scrutiny come the day. I want to ask about the selection of the five independent members of the newly-formulated Post Office Board. We know that two of these will come from the consumer lobby, and I wonder whether the noble Lord can be a little more specific. Will they be members of any of the consumer bodies and, in particular, what will be the position of the Post Office Users' National Council, which is presently under the chairmanship of the noble Lord, Lord Peddie? It may be that the noble Lord, Lord Peddie, himself, or at least the chairman of the Post Office Users' National Council, will have an ex-officio place on the newly-constituted Board. I hope that the noble Lord will be able to tell me whether or not that is the case.
I also want to ask about the position of the seven worker directors. As the noble Lord has explained, these are to be union nominees. The noble Lord told us that they are to be of high calibre, and of the same standing—I think he said—as the officials of the Post Office unions. I am not aware what procedures are used in the major Post Office unions for the selection of officials, but it would be helpful and interesting to know whether the Post Office unions, for example, have provision for postal ballots, or at least secret ballots of some kind. The selection of union officials is a matter which has exercised noble Lords on this side of the House, as well as our honourable and right honourable friends in another place, because we have sometimes found that, in some of the unions, the officials are elected by such a tiny percentage of the membership, due to the fact that the elections are conducted at meetings of the unions which are not always attended by more than a small percentage of those entitled to do so.
If it follows, therefore, that the worker directors of the Post Office are elected by a similarly tiny percentage of the membership of the union, I hardly think that it would be a very valid experiment in industrial democracy. I hope that the

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Government will at least use their influence to secure some form of electoral system within the Post Office union, which will bring about a wider percentage of votes when these worker directors are elected.
We would not normally seek to interfere in the internal workings of the Post Office union, or any other union, but in this case, where the union procedures are being used to appoint directors to the Post Office Board, I believe that we have a right at least to inquire into the system which will be used, and to make our comments on it. Of course I recognise that the Secretary of State is not bound to accept the nominations of the Post Office union, but clearly he will have to produce very good reasons for not accepting any nomination, and I think that he would find it difficult to reject a nomination simply on the grounds that the system of election was unsatisfactory.
My Lords, I am also wondering whether the worker directors will be part-time or whole-time directors, and whether they will be salaried as whole-time or part-time directors, because there is a very real difference. There is also, of course, the question that the salaries themselves have to be approved, as I understand it, by the Secretary of State. I should be interested to know what procedure he will use when considering salary proposals, or whether they will simply be implemented in accordance with the standing arrangements in these matters, which we have debated in your Lordships' House quite recently. My Lords, this is an interesting Bill which we shall all, I know, watch with care and interest. I hope that, when the time comes for its review, which I see is in 1980, whoever may be the Minister responsible for initiating that review, we shall conduct it sympathetically and thoroughly. I hope your Lordships will approve this Bill.
4.1 p.m.
Baroness SEEAR: My Lords, we on these Benches give support to this Bill with certain reservations, and perhaps I may deal with the reservations before dealing with the reasons for support. The first point I should like to make is greatly to regret that this reorganisation is taking place before we have had the opportunity to read the Carter Report.
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It seems a peculiar method of procedure that, a report having been commissioned and a great deal of work having been done, a very important side of reorganisation takes place without any of us having the benefit of knowing what the Carter Committee is going to say. Indeed, presumably the Carter Report will shortly be published, and not only the Government but all of us who have given support to this reorganisation are going to look somewhat foolish if it is then found that what the Carter Committee recommend has very considerable bearing on the changes which are taking place under this Bill. It surely should have been possible for us to synchronise the proposed changes with our knowledge of what the Carter Committee has found. I would say also that it seems curious to ask expert and very busy people to prepare a report of this kind and then apparently not to take it into account, in the way in which this reorganisation has not taken the report into account since it has gone ahead before the recommendations have been made public.
My second reservation has to do with the method whereby the employee representatives find their way on to the Board. This is, in this case, a somewhat academic point since, as the noble Lord, Lord Winterbottom, pointed out, well over 90 per cent. of all employees in the Post Office are in fact members of the trade union. My honourable friends in another place have accepted this arrangement, but I should like to make it quite clear that this is not to be regarded as in any way confirming the principle that appointments to boards in industrial democracy schemes should be handled through the single channel of the trade union.
As I think your Lordships may be aware, the Liberal Party is strongly of the view that industrial democracy should develop through the direct election, by all employees, of the people who are to serve as employee representatives on the Board, and in our view any other method is indeed normally a contradiction of the idea of democracy. It is only the fact that so high a proportion of the employees —virtually the total number of the employees—are trade union members which makes it possible for us to accept this way of proceeding in finding employee representatives.

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Having said that, we are glad that this experiment is going forward, with the accent on the word "experiment". The noble Lord, Lord Winterbottom, referred to the theory of industrial democracy. It is a very murky theory. Nobody really knows what it means—let us be frank about that—and the more we proceed on the assumption that everybody understands what it means, the more trouble we shall get ourselves into. What we need is experiment and the review of experiment, to get ourselves into learning situations and to be prepared to learn from the experiments which we try; and because this is such an experiment it can indeed be very valuable in furthering our knowledge of how to make industrial democracy work. It is the experimental character of this which recommends itself to us very strongly indeed.
It was also good to hear the noble Lord, Lord Winterbottom, say that the worker directors would not be mandated and would accept the same responsibilities as other members of the Board. Can we underline our belief that an industrial democracy board with employee representatives on it, or indeed the representatives of any other interest, must be able to act as a unified board, and that any idea that a board which has on it representatives of various interests is simply going to be a negotiating body raised to the highest possible level in the organisation can spell only disaster.
Finally, we welcome it very strongly because of the inclusion of consumer and independent members on the Board, for two reasons. It is quite obvious that, in a monopoly situation such as that of the Post Office and of nearly all the nationalised industries, it is of the greatest importance that the consumer interests should be adequately protected. The market simply does not protect the consumer in industries of this kind, and we urgently need some more effective mechanism for seeing that the consumer is properly protected. It remains to be seen whether the presence on the Board of five independents, two of them specifically selected to represent consumer interests, is an adequate way to look after consumer interests, threatened as they undoubtedly are by what can so easily become a "gang-up" of the producer interests against the consumer, however
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nicely this is smothered by kind words. This is one of the things we hope we shall learn in the course of this experiment.
If I read the Official Report of another place correctly, it is interesting to see that the way in which the consumer representatives and the independents are to be appointed is somewhat novel. Perhaps the noble Lord, Lord Winter-bottom, can tell us a little more about this when he replies. But I gather that the list of the great and the good is to be abandoned for once, and that there is to be access to these positions on the Board by a much wider range of people than has been common in the past. This is in itself, I think, very interesting, and part of the experiment that we shall all watch with the greatest possible interest.
For these reasons, my Lords, we are glad that this experiment is being made. We are particularly glad that the consumer and independent interest is to find its way on to the Board. We hope that this is a precedent for seeing that the nationalised industries will be more concerned with consumer affairs and with the needs of the consumer, and that the consumer voice will be heard far more effectively than it has been possible for it to be heard in the past.
4.8 p.m.
Lord CLITHEROE: My Lords, may I intervene for two minutes, perhaps, to ask the noble Lord, Lord Winterbottom, two questions? One is: will any of the independent members come from country districts? Because, as many noble Lords must know, there are several country districts in England which are now suffering terribly from the changes which have recently been made in the system of deliveries. Deliveries are in many cases made much later; and in certain cases sub-post offices have been closed and old-age pensioners and others have to travel miles and miles under the most difficult circumstances. So the first question I want to ask is: Will the independent members include some people representing country areas? The second question I want to ask is this. Will sub-postmasters be represented among the union members? I may be wrong, but I think the sub-postmasters have a union different from that of others. If the noble Lord, Lord Winterbottom, would be good

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enough to answer those two questions, I should be very grateful.
4.9 p.m.
Lord BOYD-CARPENTER: My Lords, may I also ask the noble Lord to answer one question when he replies? What remuneration is it proposed to pay to the members of the new Post Office Board? We are told that this is an experiment. I would respectfully suggest to him that if this is to be a real experiment it is necessary to follow what I believe to be the good trade union principle of paying the rate for the job. As the noble Lord will be aware, what was the rate for this particular job in December 1974 was recommended by the Top Salaries Review Board presided over by my noble friend Lord Boyle. As the noble Lord will also recall, the Government of which he is a distinguished member have done absolutely nothing to implement those recommendations.
I should be grateful if he could tell the House whether, in conducting this experiment, the Government intend not to go as far as to pay a fair rate as independently assessed today but, at least, to compromise to the extent of paying to the gentlemen they appoint what was thought to be a fair rate three years ago. I suggest to the noble Lord that, apart from the injustice to individuals of doing otherwise, he will not get a satisfactory experiment if he ignores that very important element in the experiment.
4.12 p.m.
Lord WINTERBOTTOM: My Lords, I am grateful to the noble Lords who have spoken, for their guarded support for this measure. I think the noble Baroness, Lady Seear, was right to underline what I had said; namely, that this is an experiment and, as many of us know, one never knows quite how an experiment is going to work out. I think that this measure is receiving a comparatively easy passage through both Houses because noble Lords here and Members of another place realise clearly that we are not trying to impose something of a permanent nature upon our industrial system; we are doing, in fact, what was suggested to me several times during the discussions on the Shipbuilding and Aircraft nationalisation measure when we
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were talking about organic industrial democracy.
Noble Lords asked me, "Why not try an experiment in an existing nationalised industry?" I think that they were entirely right to ask that question. This is just what we are doing. I think that the choice of the Post Office is a particularly happy one because its birth was not brought about in an atmosphere of controversy. It is not really a nationalised industry but a national industry, because it was, I suppose, one of the first created State industries which was born under State control and which has developed into the sort of administration common to the other nationalised industries. It is also fortunate in so far as its unions are, so to speak, in-house unions, so that the conflicts that might have arisen if another general workers' union involved in industries other than the Post Office were involved are not likely to arise for the reason that the Post Office unions are of long standing, of great responsibility and are greatly loyal to the organisation in which they are working.
I note what the noble Baroness said: that she welcomed the fact that they were not mandated—and I think this is of great importance—and that the attitudes and methods of work of all the directors on the new Board will be of a normal directoral nature. No one is coming mandated, but all are bringing, one hopes, a specialised knowledge of the industry and of the society which they have to serve to the deliberations of the highest management body of the Post Office which, as I have said, is the largest employer of labour in the whole country. The noble Lord, Lord Trefgarne, raised a number of points which I thought were the right ones to pick upon. I think that I can answer all of them. If not, I shall make certain that an answer is given at Third Reading. I hope that the noble Lord, Lord Clitheroe, will forgive me if I do not answer him today, but I will undertake to answer the two points he made, which I think are important ones, at a later stage of the Bill, presumably at Third Reading.
May I first turn to the important point of the allocation of union seats and the arrangements for nominations which, I think, was the first point that the noble Lord opposite raised. The Government feel that the allocation of union seats, like

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the arrangements for arriving at employee nominations, should remain a matter for the unions themselves. This view has received the support of the Council of Post Office Unions and the Government have no intention of interfering in any way with either the allocation of seats or the arrangements that the unions will make for nominating members. The Government have been assured that efforts will be made to involve the membership of all the relevant unions. The ultimate decison on whether or not to appoint any nominee, from whichever quarter, will, of course, continue to rest with my right honourable friend the Secretary of State. This is to repeat what I have said earlier. Ultimately, the acceptance of the appointment must lie with the Secretary of State.
Lord TREFGARNE: My Lords, I am obliged to the noble Lord. I agree that the approval of the nomination lies with the Secretary of State. What I am anxious to know is whether the electoral system in the Post Office Union is one that involves a great majority of the members and not, as so unhappily happens in many trade unions, involves only a very tiny percentage of members in what is sometimes thought a rather unsatisfactory way.
Lord WINTERBOTTOM: My Lords. I was coming on to answer that point, I am not certain that it is absolutely satisfactory, but it is factual and perhaps the noble Lord may like to think about it and comment on it later. The practices of the various unions in the Post Office are not identical hut, in the main unions, branch representatives elect national officials at annual delegate conferences. This is a practice of long standing to ensure the participation of individual members through their branches. If the noble Lord wants that view to be expanded, I shall try to do so at the Third Reading. At the moment, the branches send their delegates to the national conference of their union mandated presumably to support Mr. A or Mr. B, the decision having been reached at branch level.
May I turn now to the question of the selection of members with consumer experience. The role of POUNC in the new circumstances of the rearranged board—and the noble Lord, Lord Trefgarne,
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is right to put his finger on it—is a matter of great interest. I have already explained that two of the independent members will be chosen for their experience of consumer affairs, and there have been suggestions that one of these two should also be a member of POUNC. Perhaps consumer affairs should include, in particular, the consumer affairs of country members. That is a point that I have undertaken to answer at a later stage. The consumer members must be able to make a full contribution to all Board discussions and not just consumer matters, and accept all the obligations of Board membership and be full Board members in every sense. It is important that they should not feel bound by the views expressed or the conclusions reached by an outside body. Presumably, in this case, an "outside body" means POUNC. That is why I have referred to the appointment of two persons experienced in consumer matters and able to express a consumer view rather than representatives or delegates of consumer organisations.
I should not like to give the impression that the Government have reached any hard and fast conclusions on the recruitment of two consumer members; but the choice will be made on the basis that I have described. The Secretary of State has undertaken to consult the Secretary of State for Prices and Consumer Protection in appointing the two consumer members and I am confident that they will find members fully qualified to put across the consumer point of view. The Carter Report was raised by the noble Baroness. Frankly we could not wait for it; it was going to take two years to implement any decision on that basis and we wanted to get on with this matter straight away.
May I touch upon the remuneration of worker directors and all directors. This is still an open question. I am certain that the views of the noble Lord, Lord Boyd-Carpenter, will be noted by my right honourable friend the Secretary of State. It is a rather complicated issue because of the position of worker directors, and I should like to say a word about that. Worker directors will be paid for their work as Board members. They will be eligible for the normal salary of a part-time member of the Post Office. Whether they should collect it or not, however, is a matter for each worker director and his union to decide.

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The general secretary of the Post Office Engineering Union is on record as saying at his union's recent conference that there should be no payment other than for loss of pay and expenses.
That is the only firm statement that I can make on this subject. I appreciate the point that the noble Lord has made: we are conducting an experiment, we want the people taking part in the experiments to be as competent as can be recruited—and there is a North Country saying, "You get nowt for nowt, and precious little for sixpence". You have to pay for what you want. That must apply to this particular experiment.
My Lords, I have done my best to answer the points which have been raised in a very short, valuable debate. I regret that we could not have more of a set piece on this most interesting subject. I hope that I have satisfied noble Lords and, if not, I shall try to cover any missing points at a later stage of the Bill.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

PASSENGER VEHICLES (EXPERIMENTAL AREAS) BILL [H.L.]
4.22 p.m.
Baroness STEDMAN: My Lords, I beg to move that the House do now consider the Commons Amendments.
Moved accordingly, and, on Question, Motion agreed to.

COMMONS AMENDMENTS
[References are to Bill [94] as first printed for the Commons].
1 Clause 1, page 1, line 8, leave out `within' and insert in 'relation to'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 1. I should like, with the House's permission, to speak also to Amendments Nos. 5, 6, 9, 10, 11, 12, 14, 15 and 28. Of these No. 6 is the substantive Amendment and the rest, including Amendment No. 1, are minor consequential drafting changes. The substantive Amendment, No. 6, would give the local authority
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concerned—that is, a county council or, in Scotland, a regional or islands council—power to grant authorisations in respect of the use of certain vehicles for the carriage of passengers for hire or reward, not only within the whole or one or more parts of the experimental area, as your Lordships' copy of the Bill provides, but also on journeys falling partly within and partly outside that area, including journeys falling partly within the area of another local authority. These Amendments would make the task of running experiments which rely on the Bill more straightforward, and would also make the experiments themselves more useful as a means of gaining additional hard facts on rural transport problems. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Baroness Stedman.)
Lord MOWBRAY and STOURTON: My Lords, when I spoke originally during Second Reading I said that, although we on this side of the House would support the Bill, we only did so with some reluctance. We regretted that the Government had taken so long to do so little about the urgent problems of mobility in rural areas. I have said that the problems are urgent although car ownership is widespread in rural areas. Significant minorities are generally without private transport. These, as the noble Baroness admits, include the old, young and disabled. Public transport services leave much to be desired in many rural areas.
During the time of the last Government we introduced a Bill, the Road Traffic Bill of 1973, which contained clauses to solve this very problem. Regrettably this Government cut these out and did not proceed with our Bill. In its stead little was done in the next three years until this Bill was introduced. And after so long what a timorous little Bill it is!—a mouse of a Bill, as it has been described in another place. However, I am glad to say that in its present form, as returned to us from another place, it is much improved. It may not be a lion of a Bill but it is something a little bigger than a mouse, or perhaps a mouse with sharp teeth. This is largely, I suggest, the result of Conservative Amendments which greatly widened the scope of the Bill.

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Lest I seem churlish to the noble Baroness, I should like to say that not all of the good Amendments stem from our side of the House. I particularly welcome Amendment No. 6. A problem of the Bill, as originally framed, was that many journeys did not solely take place within the confines of an experimental area. County boundaries can be a nuisance. I am glad to see that in this Amendment journeys which fall partly outside the area are allowed. They are going to be included in the experiment. I thank the noble Baroness for her explanations.
The Earl of KIMBERLEY: My Lords, the Amendments to which the noble Baroness referred, particularly Nos. 1 and 6, are sensible and allow a much greater degree of flexibility to the administration of the experiment. One question concerns Amendment No. 13 which we shall be discussing shortly, but it also comes in under this umbrella. It deals with the same problem. What right does an area not in the experiment have in regulating the experimental traffic that is passing through on its way to another experimental area, hospital or other place?
When Amendment No. 13 was being discussed in Standing Committee F the Minister said that in the case of special authorisations co-ordinated control would be maintained over the granting of cross-boundary authorisations. Any other local authority involved would have to give its consent to any such authorisation. The Amendment that we are discussing also deals with cross-boundary authorisations. Can the noble Baroness tell us what will happen if the "unexperimental" area fails to agree with its fellow local authorities who might be running out of these schemes, about what traffic can pass to and fro across its borders? In the case of disagreement, will it be the steering committee which will intervene or will it be left to the local authorities to sort it out among themselves? I should very much like to have an undertaking from the Government, if possible, that, in the event of disagreement, they will not wade into the dispute but will leave it to the local authorities to deal with the problems themselves.
Baroness STEDMAN: My Lords, as the noble Earl, Lord Kimberley, said,
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this matter comes under Amendment No. 13, but the problem was raised of having a very tight prescribed area for our experiments, with perhaps hospital, special shopping facilities or other special facilities being outside that local authority area. The Amendments we are now discussing enable local authorities to have consultations. If one wants to go into another local authority's area, I am sure it will be amicably resolved between the two authorities.
I know that local authorities are sometimes made the whipping post for not being able to agree with each other. But I am sure that, if within one area there is no hospital and in another there is, we are going to have no difficulty with the second area which has the hospital, although it is not part of the experimental area, in enabling the authorisation to be given for people to be taken on their special journeys to hospital. The noble Earl can be satisfied that our steering committee and the officials at the Department will be at the disposal of the authorities, and if they run into any trouble we will give them all the advice and help that we can.
Viscount AMORY: My Lords, I studied these Amendments in absolute detail. Two essential characteristics of this Bill are common sense and flexibility. It seems to me that these Amendments are going to be in line with the principle of those two characteristics. Therefore, I should have thought they were to be welcomed.
On Question, Motion agreed to.
4.31 p.m.

COMMONS AMENDMENTS
2 Page 1, line 11, at end insert 'The Secretary of State, if requested to do so as regards any such area by the local authority concerned, shall so designate the area in question.'
3 Page 1, line 20, after 'State' insert '(a)'.
4 Page 2, line 1, after 'effect' insert'; and
(b) if requested by the local authority whose area is or contains the experimental area designated by such an order to extend or further extend the period for which the order is to have effect, shall so extend or further extend that period accordingly'
Baroness STEDMAN: My Lords, with the permission of the House, I beg to

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move that this House doth agree with the Commons in their Amendments Nos. 2 to 4 en bloc. I think, from the discussions which took place on this Bill in your Lordships' House, that your Lordships will agree that these provisions are, in a sense, unnecessary. As I made clear at the Committee stage, the Secretary of State would be prepared to consider designating experimental areas at the request of any local authority concerned which had proposals for experiments which fitted in with the basis on which we are working. Similarly, the Secretary of State would consider extending the period of an experiment, particularly one that is succeeding, at the local authority's request. However, the Government are disposed to accept the views expressed in another place about inserting these Amendments into the Bill. Your Lordships will appreciate that the Secretary of State retains control over the detail of experiments, since all authorisations under Clause 2(7) require his approval.
As I have explained previously, we ourselves have no proposals for further experiments of the present kind beyond those which will emerge from the studies that are going on in the four areas of the Government programme. As I said during Third Reading, we have not the resources to monitor and control a larger programme of experiments in depth. But, if any county council wishes to apply its resources to experiments of this kind in order to complement our own, we shall certainly be prepared to facilitate that, always providing that the proposed experiments would genuinely add to the kind of evidence that the Government programme has been set up to collect. As I explained during Third Reading, this Bill is not designed to bring about random patchwork modifications of licensing law right across the country, but to enable certain kinds of experiment to be carried out under carefully controlled conditions, to provide hard evidence that cannot otherwise be obtained. If any other county council not included in the experimental area wishes so to apply its resources and makes application to carry out similar experiments, we shall do all we can to get them off the ground.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
Lord MOWBRAY and STOURTON: My Lords, as the noble Baroness has kindly explained to us, the Bill originally allowed experiments in only four areas. It was never made clear how those areas were decided and why their number was limited to four. The constraints on public expenditure were mentioned in this connection, but I know of councils—for example, Oxfordshire—which have devised schemes which, although experimental, would actually save the ratepayers money and yet provide effective services to those who need them.
Be that as it may, Amendments Nos. 2 and 4 allow any council to establish an experimental area if it wishes to do so. I do not understand the quibble of the noble Baroness when she says that the Minister may perhaps do so. It states quite categorically in Amendment No. 2 that—
"The Secretary of State, if requested to do so as regards any such area by the local authority concerned, shall so designate the area in question."
I notice that a Member in another place also seemed to have a slight quibble over this point. In addition, I should like to mention that my noble friend Lord Ridley and the Northumberland County Council were also interested in the possibility of using this sort of scheme.
These Amendments were, of course, the direct result of an Opposition victory in Committee in another place. The noble Baroness will recall that I raised the subject not only on Third Reading but just the other day on the White Paper. I welcome the fact that the Government have had the grace to accept this Opposition victory and have seen the force of our arguments. I hope that the noble Baroness will guarantee that the Government will be as good as their word and will speedily allow any council to set up an experimental area if it wishes to do so. The noble Baroness has said "Yes", but there seems to be a sort of caveat. I do not quite understand that, because, in the Bill, it appears to be absolutely clear and definite. Is the noble Baroness saying in effect, "Yes, they may have experimental areas, but totally at their own expense"? Where does it say that in the Bill, my Lords? I do not quite understand the quibble.
Baroness STEDMAN: My Lords, I am sorry if the noble Lord opposite felt

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that I was quibbling. I was trying to explain that we have a limited budget on which to carry out these experiments. That budget will be absorbed by the four experiments detailed in the Bill; but, as a result of the action taken in another place, it has now been extended. It is possible for other counties to apply to have an experiment within their area, and we should welcome such experiments. What we want to make quite clear is that, at this stage, we have no money to assist them in such schemes and that we are not in a position, from this House, to offer more money for them.
The Earl of KIMBERLEY: My Lords, no doubt your Lordships will remember that, when we debated this Bill in Committee, I moved an Amendment very similar to the one which was passed in another place. I am only too happy that it was passed. I fully understand that, as the noble Baroness says, if there is no money it cannot be done; but it is nice to know that, as and when money is available, it will be possible to do these things. I strongly believe that the less control Whitehall has over local authorities, the better. In this connection, I should like to quote my honourable friend Mr. Penhaligon from Cornwall. He hit the nail on the head when he said in another place on 27th April, at column 1437 of the Official Report:
"With all respect to the Minister, I cannot believe that sorting out the bus services to Luxulyan, Tywardreath and other parts of my constituency, is what he is best qualified to do, while representing Gateshead and commuting to this place".
My Lords, I very much welcome the present Amendments.
On Question, Motion agreed to.

COMMONS AMENDMENTS
5 Page 2, line 20, leave out from 'vehicles' to 'for' in line 21.
6 Page 2, line 22, at end insert—

'(a) within the experimental area or within one or more parts of that area; or

(b) within the experimental area and also on journeys falling partly within the experimental area and partly outside that area including, subject to subsection (5) below, journeys falling partly within the area of another local authority.'

Baroness STEDMAN: My Lords, I beg to move that this House doth agree
1004
with the Commons in their Amendments Nos. 5 and 6. I spoke to these Amendments when I spoke to Amendment No. 1.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENT
7 Page 2, line 29, leave out 'twelve' and insert 'sixteen'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 7. I should like, with permission of the House, to speak to the linked Amendment No. 16. As was made clear during proceedings in another place, minibuses with larger seating capacities than 12 passengers are now readily available and are becoming increasingly widely used. The Government therefore agree with the view that this type of vehicle, if private, should be covered by the Bill. The figure of 16 passenger seats has been chosen as the new upper limit partly because this seems to cover most of the vehicles concerned, and partly in the interests of clarity and consistency, as this is the figure adopted for the Minibus Bill which recently passed through your Lordships' House.
Moved, That this House doth agree with the Commons in the said Amendment—(Baroness Stedman.)
Lord MOWBRAY and STOURTON: My Lords, again I thank the noble Baroness for her explanation and again I am able, smugly, to say that it originates from the Government Benches in another place as a concession to the arguments of the Opposition in Committee there. As the noble Baroness has explained, the Amendment allows the common sense facility of using the fuller capacity of the new minibuses (16) instead of the doctrinaire figure of 12, as previously. I congratulate the Government on their good sense in incorporating the Amendment.
On Question, Motion agreed to.
4.40 p.m.

COMMONS AMENDMENT
8 Page 2, line 32, leave out from 'to' to end of line 33 and insert 'such one or more private vehicles or commercial vehicles as may be specified in the authorisation'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 8. This Amendment is a minor drafting change which renders this subsection quite unambiguous, by making it clear that a special authorisation applies to one or more specified private vehicles or one or more specified commercial vehicles. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment. —(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
9 Page 2, line 34, after 'section' insert shall specify the experimental area to which it relates and'
10 Page 2, line 35, leave out 'the experimental' and insert 'that'
11 Page 2, line 37, leave out second 'the' and insert 'that'
12 Page 2, line 37, leave out second 'the' and at end insert 'or'
(c) state that it applies to the whole of that area and also covers journeys of the kind mentioned in subsection (2)(b) above.'
Baroness STEDMAN: My Lords, I beg to move that the House doth agree with the Commons in their Amendments Nos. 9 to 12 en bloc. I spoke to these Amendments when dealing with Amendment No. 1.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENT
13 Page 2, line 38, leave out subsections (5) and (6) and insert—
'(5) A special authorisation granted by a local authority which is expressed to cover journeys of the kind mentioned in subsection (2) (b) above shall be of no effect within the area of another local authority unless granted with that other authority's consent.'
Baroness STEDMAN: My Lords, I beg to move that the House doth agree with the Commons in their Amendment No. 13. It is linked with Amendments Nos. 23 and 24 and, with the permission of the House, I should also like to speak to these. Previous Amendments, which I discussed in moving Amendment No. 1, provide for new and more flexible arrangements in that they would allow local authorities to grant authorisations for journeys partly within and partly outside experimental
1006
areas. A local authority may thus wish to grant a special authorisation for a journey that is in part outside its own area.
To ensure proper co-ordinated control, the new subsection in Clause 2 therefore provides that, in the case of such a special authorisation, the consent of any other local authority involved to the grant of the authorisation would be required. Otherwise, the authorisation would be of no effect outside the area of the granting authority.
The new subsection therefore follows the same approach as was embodied in the two subsections which are now being deleted, in adapting the Bill to meet the new circumstances of journeys outside a designated area. Because of the way it works, there is no longer any need to make special provision to cover the case where there might be contiguous experimental areas. This new subsection will mean that such a situation will automatically be covered by precisely the same kind of requirement as applied under the original provision. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment— (Baroness Stedman.)
On Question, Motion agreed to.
4.42 p.m.

COMMONS AMENDMENTS
14 Page 3, line 17, after 'area' insert or on any particular journey'
15 Page 3, line 19, leave out 'there' and insert 'in that area or on that journey'
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 14 and 15. I spoke to them when moving Amendment No. 1.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENT
16 Page 4, line 2, leave out 'twelve' and insert 'sixteen'
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 16. I spoke to this on Amendment No. 7.
Moved, That this House doth agree with the Commons in the said Amendment—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENT
17 In the Schedule, page 5, line 24, after 'applies' insert 'in relation'
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 17 and, with the permission of the House, I should also like to speak to Amendments Nos. 19 to 22 and 25 to 27. The main substantive Amendment here is No. 25; Amendment No. 27 defines the "relevant newspaper", and the rest, including No. 17, are minor consequential Amendments.
These Amendments have their genesis in discussion of the Bill in your Lordships' House. They would ensure that in relation to authorisations the intentions of a local authority received advance publicity, and that the people affected could make their views known and have them taken into account. No provision is made for this procedure to apply to variations of the conditions attached to a special authorisation; these would cover simply the operational details, and it is desirable to retain as much flexibility as possible for adjusting these in the light of experience.
During the Committee stage in your Lordships' House, the noble Lord, Lord Mowbray, moved an Amendment which would have required a local authority to give not less than 21 days' notice in local newspapers of their intention to consider the granting, varying or revocation of a general authorisation and to take into account any representations received. I undertook to consult on the principle underlying this with the Steering Committee, which is overseeing the programme of experiments and which is made up of representatives of all interested parties. The view of that Committee was that some such arrangements should be made, and should apply to special as well as general authorisations. I accordingly gave an undertaking at Third Reading that such an Amendment would be introduced in another place. During the proceedings in another place, it was felt that longer notice should be given in the case of the revocation of a special authorisation, and that
1008
positive steps should be taken to bring a proposal for such a revocation directly to the notice of the elected local councils affected. The Government have accepted this view and have incorporated it in these Amendments.
In the copy of the Bill which your Lordships have reference is made to " local newspapers circulating in the experimental area However, there may be good reason for giving notice in a local newspaper circulating elsewhere, particularly in the case of a special authorisation covering journeys partly within and partly outside the area of the local authority concerned. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Baroness Stedman.)
Lord MOWBRAY and STOURTON: My Lords, I should like to thank the noble Baroness very much for her kind remarks; and for so fully explaining the background and genesis of these Amendments, I am more than grateful to her. Before we move to the next set of Amendments, I should like to thank her specifically for her kindness, and for the way in which she and her office have helped me with papers. It has been a great help to those of us on this side of the House.
The Earl of KIMBERLEY: My Lords, I should like to join in the sentiments expressed by the noble Lord, Lord Mowbray, but I have one small reservation on this last batch of Amendments. Is it still not possible for a local authority to put notices in existing public transport, so that people who would be using the new transport could see them in the buses on which they travel at present? I agree that it is only a very small point, but it might be helpful.
I should also like to acid that we welcome this Bill and are optimistic about the future of our transport system, not just because of this Bill, but because there seem to be a number of other indications, not least the recent White Paper which seems to show that the Government are thinking about transport from the bottom up, and not from the top down.
Baroness STEDMAN: My Lords, I am grateful to both noble Lords for their

1009
comments. As regards advertising in existing local transport, I am sure that this is something of which the Department will take note, and when we are giving guidance to the authorities concerned it is something which I am sure we can incorporate. I am grateful to the noble Earl for his suggestion.
On Question, Motion agreed to.
4.47 p.m.

COMMONS AMENDMENT
18 Page 5, leave out ,lines 30 to 33 and insert (b) in the case of an authorisation which does not apply to the whole of an experimental area, add one or more other parts of the experimental area to that or those previously specified in accordance with section 2(4) of this Act, or make the authorisation apply to the whole of the experimental area'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 18. This is a minor drafting Amendment, which is included simply to clarify the meaning of this sub-paragraph and to correct a minor printing error.
Moved, That this House doth agree with the Commons in the said Amendment—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
19 Page 5, line 34, after 'applies' insert 'in relation '
20 Page 6, line 15, at end insert—
'(2) Paragraph 13 below applies in relation to the grant of a special authorisation'.
21 Page 7, line 12, after 'applies' insert 'in relation'
22 Page 7, line 12, leave out from 'to' to end of line 13 and insert 'the revocation of a general authorisation or special authorisation'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 19 to 22 en bloc. I spoke to these Amendments when dealing with Amendment No. 17.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
23 Page 7, line 15, leave out from beginning to 'with' in line 23 and insert—
'11. Every special authorisation granted'
24 Page 7 line 26, after 'any' insert 'special'.
Baroness STEDMAN: My Lords, beg to move that this House doth agree with the Commons in their Amendments Nos. 23 and 24. I spoke to these when moving Amendment No. 13.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
25 Page 7, line 33, leave out from beginning to end of line 1 on page 8 and insert
'13(1) A local authority shall before—

(a) passing any resolution in pursuance of paragraph 2, 3 or 10(1) above for the purpose of granting, varying or revoking a general authorisation; or

(b) granting or revoking a special authorisation,

give the appropriate notice in one or more relevant newspapers; and where a local authority intend to revoke a special authorisation they shall also give the appropriate notice in writing to every district council, London borough council, parish council and, in Scotland or Wales, community council who may in the opinion of the local authority be affected by the revocation of the authorisation.
(1A) In sub-paragraph (1) above 'the appropriate notice' means—

(a) not less than 21 days notice of intention to consider a resolution or grant a special authorisation; and

(b) not less than 56 days notice of intention to revoke a special authorisation.

(1B) Before passing the resolution or granting or revoking the special authorisation in question the local authority shall take account of any representations received by them in relation to it.
(1C) The local authority may—

(a) pass any resolution; or

(b) grant any special authorisation,
in respect of which notice has been given under sub-paragraph (1) above either with or without modifications.

(2) As soon as may be after—

(a) a local authority have passed any such resolution as is mentioned in sub-paragraph (1)(a) above; or

(b) the Secretary of State has made an order under paragraph 10(3)(a) above for the purpose of revoking a general authorisation,

the local authority or the Secretary of State, as the case may be, shall give notice of its having been passed or made in one or more relevant newspapers;'
26 Page 8, line 9, leave out 'that sub-paragraph' and insert 'this paragraph'
27 Page 8, line 10, at end insert—
'(4) For the purposes of any notice under this paragraph a 'relevant newspaper' is any local newspaper which the local authority or the Secretary of State, as the case may be, may consider appropriate.'
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 25 to 27. I spoke to these when dealing with Amendment No. 17.
Moved, That this House doth agree with the Commons in the said Amendments.—(Baroness Stedman.)
On Question, Motion agreed to.

COMMONS AMENDMENT
28 In the Title, line 4, after 'in' insert 'relation to'.
Baroness STEDMAN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 28. This is the last Amendment before us, and may I first express from the Government Benches our thanks to the noble Lord, Lord Mowbray, and the noble Earl, Lord Kimberley, for the help which they have given us in the passage of the Bill. We have been grateful for the support which we have had. I know that the noble Lord, Lord Mowbray, thinks that we have been a little tardy and, perhaps, a little niggardly. But it is nice to know that we are at least on the way to rural transport experiments, and I am sure that all Members of the House would wish the Bill well. So far as Amendment No. 28 is concerned, I spoke to it with Amendment No. 1. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Baroness Stedman.)
On Question, Motion agreed to.

LOCATION OF OFFICES BUREAU (AMENDMENT) ORDER 1977
4.50 p.m.
Baroness STEDMAN Baroness STEDMAN rose to move, That the draft Location of Offices Bureau (Amendment) Order 1977, laid before the House on 23rd June, be approved. The
1012
noble Baroness said: My Lords, this order makes three amendments to the order made in 1963 which constituted the Location of Offices Bureau. The main amendment changes the description of the functions of the Bureau; the second increases the membership of the Bureau from four to five; and the third extends the period for which members serve from two to three years.
I am sure your Lordships need little reminding of the function of the Bureau. There can be few of us who have not seen those striking advertisements, particularly on the London Underground, advising firms of the savings to be made by moving their offices away from central London. When the Bureau was established in 1963, congestion in central London, particularly congestion of offices, was seen as a great problem. Indeed, until one looks back at old papers one is inclined to forget just how much of a problem it was. As a result, the "general duty" which the Bureau was given and which is defined in the order under which it is constituted is:
"To encourage decentralisation and diversion of office employment from congested areas in central London to suitable centres elsewhere".
It is this part of the definition which the order before us today seeks to amend. The definition continues:
"…and to take such steps as may be necessary for this purpose including without prejudice to the generality of the foregoing the provision of information and publicity and the promotion of research".
The present order does not seek to amend this part of the definition.
I think it is beyond dispute that the Bureau has been very successful in carrying out its appointed task. When it was established in 1963, the general opinion among the majority of firms was that it was essential for the whole of their office operations to be concentrated in central London. Many firms could not conceive of any other form of organisation serving them successfully. In its early years, the Bureau undoubtedly played a big part in changing the climate of opinion to one which was favourable to office location outside London. Some firms were able to accept that their whole organisation could operate equally well from elsewhere; some moved practically all of their staff while retaining a small base in central London; some identified

1013
blocks of work which could be devolved from the main part of the organisation.
The Bureau's part in this, in numerical terms, is shown in its annual reports. The latest published report is that for the year ended 31st March 1976. This year's report is due to be published in a week's time, but I have been able to furnish a copy of it in advance to the noble Baroness opposite. I regret that there is the embargo upon it that it cannot be quoted or spoken about until after 20th July, but at least the noble Baroness has had an opportunity to check the figures in this year's report against those in the previous one. The earlier report shows that in the 13 years of the Bureau's existence clients had moved, or were moving, over 150,000 jobs. I should not want anybody to jump to the conclusion that all these jobs have been lost to London. Over 50,000 of them were moved within the GLC area—for example, from central to inner and outer London.
This has been achieved not only by successful advertising campaigns but also by the thoroughly comprehensive information service which the Bureau has built up over the years for the benefit of its clients—a service which has, moreover, been provided free. Anybody who is interested in building or setting up offices outside central London, whether or not they have decided where they wish to go, can make use of this service. The Bureau can provide details of vacant office accommodation in towns all over Great Britain and corresponding information about the rents which are being asked. Information about the planning policies of local authorities can be given to those wishing to build, and a fund of essential supplementary information is available about Government assistance towards moves, the availability of staff, housing, transport, post office communications and anything else that a person who is moving office needs to know. Indeed, I think it is true to say that in no other sphere of commercial activity—for example, in industry or shopping—is a corresponding service so readily available.
My purpose in giving this brief account of the capabilities of the Bureau has been to explain why the Government wish it to carry on, albeit, as I shall explain, with a rather different emphasis. However, I am mindful of the kind words which the noble
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Lord, Lord Sandys, had to say about the Bureau during the debate on the Second Reading of the Control of Office Development Bill and the welcome he gave to its continuance, and I will now turn to its future role.
The Government recognise that the terms of reference of the Bureau are no longer appropriate and that they clearly need to be revised. On the one hand, congestion is no longer a major problem in central London, as the decline in the number of people who commute daily within the area shows. On the other hand, a better distribution of office employment in Great Britain is a major objective of the Government. It is an objective with which we feel the Bureau is ideally fitted to assist.
Consequently, as my right honourable friend the Secretary of State for the Environment announced in another place on 17th May, the Government propose that the terms of reference of the Bureau should be amended to give it a less restrictive role, and that is the purpose of the draft order which is before your Lordships. The order replaces the passage I quoted earlier with the words:
"It shall be the general duty of the Bureau to promote the better distribution of office employment in England and Wales".
This is a very widely drawn remit and it is right that I should give some indication of how we expect it to be fulfilled. I will therefore return to my right honourable friend's announcement. He was, he said, giving the Bureau two new tasks: first, to attract international concerns to the location of offices in Great Britain, including London; and, secondly, to give particularly attention to the promotion of office employment in inner urban areas, again including London. He went on to explain that the Bureau would retain its general duty of assisting in the mobility and efficiency of office employment and that in carrying out its wider role it would be extending and giving a new emphasis to its past and present one.
In the light of my right honourable friend's remarks, I was somewhat surprised at the extent to which the Press received his announcement as indicating a reversal of the former role of the Bureau. This may have arisen partly from confusion over the use of the terms "central London" and "inner London". "Central

1015
London" is defined precisely for statistical purposes. Broadly, it is the area bounded by a line joining the main line railway termini. Inner London, for office control purposes, is the area immediately beyond that, which will be defined more precisely as the Government's work on ways of helping inner London progresses.
Consequently, if the Bureau seek in future to attract firms to inner London it is by no means seeking to draw them back to the same areas from which it once sought to decentralise firms. As your Lordships will appreciate, the two tasks could co-exist quite comfortably by the Bureau promoting the dispersal of firms from central to inner London where, as has been explained in the debates on the Control of Office Development Bill, additional employment would often be extremely welcome.
Moreover, your Lordships will also appreciate that the other new task which the Bureau has been given could further complement this situation. To the extent that firms coining from abroad wish to he located in central London, rather than in inner London, there will be opportunities for them to take over any office space vacated by firms being relocated in London but outside the central area. I should like to make one other point about the Bureau's new role. It would be a mistake to expect a sudden change in its work. I have explained how one task complements the other, and I think your Lordships will see that this implies the Bureau's new role will come about by evolution rather than by the sudden revolution which the Press appears to expect.
I will deal very briefly with the two other amendments which the order makes. One increases the number of members of the Bureau from four to five. The present membership of the Bureau represents a wide range of experience—local government, commerce, the academic world and the Civil Service. We would not wish to lose any of this expertise, but we feel that the Bureau would be strengthened by having a member with trade union experience who could help with the advice which firms might expect to get about the effects on their staff of a move. To get this additional advice we propose to increase the size of the Bureau, rather than to sacrifice any of the experience already available. The final amendment increases the period
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for which members serve from two to three years. This is being done to give members greater certainty in office and to avoid the need for frequent renewal of appointments.
My Lords, I hope you agree with me that the Location of Offices Bureau has a vital role to play in the Government's policy for office employment, that this role can only be properly fulfilled if it is given fresh terms of reference, and that to this end you will approve the draft order which now lies before the House. I beg to move.
Moved, That the draft Location of Offices Bureau (Amendment) Order 1977, laid before the House on 23rd June, be approved.—(Baroness Stedman.)
5.2 p.m.
Baroness YOUNG: My Lords, I should like to thank the noble Baroness, Lady Stedman, for explaining this draft order to us so clearly. As she has indicated, it makes three changes from the original order and I should like to comment on all of them, but first I should like to thank her for sending me a copy of the new report of the Location of Offices Bureau. She will understand as well as I do that it is very frustrating to have a report that one has read but cannot discuss; furthermore, it would be invaluable to have it for discussion when we come to the Report stage of the Office Development Bill because this Statutory Instrument and that Bill are intimately connected. So I feel it is unfortunate that, although printed, the report is not available for discussion; because on these serious matters it is useful to have the basic information. Not having it also makes it somewhat more difficult to frame one's remarks without revealing that one has in fact read the report and can say nothing about it.
I think everyone will welcome the fact that the terms of reference of the Location of Offices Bureau have been altered and, if I may put it this way, have been put in a more general fashion. No doubt there has been considerable concern in London that the policy of the decentralisation of offices has affected employment in Greater London and has come at a time when employment in industry is falling and when London is suffering from a great many of

1017
the problems so well defined in the Government's own White Paper on the Inner Cities. It is helpful for the noble Baroness to have explained the difference between central London and inner London. For the benefit of others who may be looking at this question I can only say that it would be helpful sometimes to have a map, and I wonder whether it has ever been considered that a map might be included.
London itself is very concerned that, despite the altered terms in the order before us, the Location of Offices Bureau will continue its work, quite particularly its advertising, in encouraging firms to move out. Only today, as I got out of the Underground at Westminster Station, I happened to notice a brand new advertisement suggesting that firms should move out of what I suppose must be inner London, and I really wondered whether this was in the best interests of the inhabitants. It is certainly a very splendid advertisement of a crossword puzzle and as I am rather keen on crossword puzzles it caught my eye at once. But is this really in the best interests of London?
As I understand it, the intention behind this policy of moving offices out is to help assisted areas, but I believe that until the end of 1973–74 only 6 per cent. of firms from central London actually moved out into the assisted areas, and although the proportion increased to 22 per cent. and 20 per cent. in the two subsequent years, my guess is that it was not so much the efforts of either ODPs or even the Location of Offices Bureau, but the very heavy grants given to firms to move out. These incentives may well be adequate to find firms for assisted areas throughout the country; so that, in considering this review, in my view the Greater London Council was quite right to believe that the decentralisation from London should cease and that the Location of Offices Bureau should concentrate largely on helping to carry out a proper distribution of offices within London itself.
As I understand it, this is one of the things which the present order will allow. I hope I am right in thinking that, because I looked again at paragraph 56 of the White Paper on Policy for the Inner Cities in which it says that the functions of the Location of Offices Bureau have been reviewed and part of its new role will be
1018
to give particular attention to the promotion of office employment in inner urban areas, including London. So I should like to believe that at least part of the concern of London is being met.
I think, too, it is important that the Secretary of State believes that London should be used to attract international firms from overseas; but again I hope very much that the Location of Offices Bureau will pay attention to its advertising. I think it must be discouraging to a firm to contemplate setting up in London and then, every time anyone moves anywhere by public transport, to see these large advertisements urging everybody to move out. I fear that a great many overseas places will not have appreciated the subtle distinction between central and inner London which I am sure has escaped most of the population, and they will find it somewhat disconcerting.
I should like to comment on the fact that there is to be an extra member to serve on the Bureau. I was pleased to see this and I had hoped very much that that extra member might be a representative of the Greater London Council. I heard the noble Baroness say that there was local authority representation on the Bureau. Perhaps she will tell us who is represented, how they are chosen, and why, as I understand it, the Greater-London Council has in fact been excluded from this, as it is so important a factor in the work of the Location of Offices Bureau; and why it has been decided to have a trade unionist. I should have thought it would be useful possibly to have some representatives of employees, if that is the purpose of it; but whether in encouraging firms to move to different places this is the most valuable membership, I am not quite so sure.
I entirely accept that it is a valuable amendment to suggest that members should serve for three years rather than two. Two years is a very short time to serve on any body, and I think it is valuable to have the service extended to three years. As I indicated, I think it represents some improvement on the position which existed before the order. I give it a partial welcome because I think it could be helpful in releasing some office accommodation in inner London where it is needed. I much regret that the Government have not felt able to go

1019
further than they have, and I wish they would reconsider the point about a GLC member for the Location of Offices Bureau itself.
5.8 p.m.
Baroness STEDMAN: My Lords, I am grateful to the noble Baroness for her perhaps slightly qualified welcome to the new role of the Location of Offices Bureau. I am only too ready to agree with her that if we could only have a map which would explain, even to those of us in this House, which areas were actually inner London, which were central London and which were outer London, it would be extremely helpful. I hope that when the various officials who are now looking at the inner cities and trying to decide on the appropriate areas, have taken their decisions, such a map will be available. If it is available I will certainly ensure that the noble Baroness has a copy, or that there is a copy from which we may refresh our memories somewhere within the confines of this House.
The noble Baroness referred to the new poster which one sees on coming out of Westminster station. I have also seen this. I take her point that when we are trying to encourage international and multinational companies to come into central London it may be a little disconcerting, not knowing the strange ways in which we define the various areas of London, to find themselves exhorted to leave London before they have even got here.
This is a point which I will bring to the notice of my right honourable friend. We can perhaps take it up with the Location of Offices Bureau, whose advertising has certainly been first-class up till now, but we would not want to do anything to detract from the purpose of this order. The noble Baroness is quite right in saying that the first duty of the LOB is still to help the assisted areas, but with a very strong priority for the inner urban areas, and particularly London. This ties up with the help that we are hoping we can now give to the inner cities, and again particularly to the inner areas of London.
With regard to her comments about the extra member, it is very useful in cases like this to have a trade unionist member.
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Whether that can also be combined with a member of the GLC, I would not know. I can only speak from my own personal experience as a member, until recently, of a development corporation. When we had a large firm moving into the area the appropriate official of the union that was going to be responsible for the workforce there was usually called into consultation. I know this was very much appreciated by one of the larger firms that moved in. We were able to put them in touch with the district officer of one of the large unions, who was able to give them advice about conditions appertaining in other firms and other factories, to help to deal with problems of the people making the move, help to reassure them about the rates of pay and the cost of living in the area, the sort of housing that was available and at what cost to them. I am sure that this would be interesting.
I am afraid I cannot tell the noble Baroness the places from which the members come. They are all detailed in the front of the famous report, but, unfortunately, it does not say which one of them represents which point. I will find out and will let the noble Baroness know which of them represents which part of the local authorities, industry, commerce and so on. I will write to her about that. I will certainly take up her point about the GLC. I will confer with my right honourable friend to see whether the local authority representative can really answer for the GLC or for the other assisted areas in London which we are hoping to help. I welcome her support for the order.
On Question, Motion agreed to.

DETONATORS BILL [H.L.]
5.13 p.m.
Report received.
Clause 1 [Marking of detonators]:
Viscount BROOKEBOROUGH Viscount BROOKEBOROUGH moved Amendment No. 1:
Page 1, line 9, leave out ("intended").
On Question, Amendment agreed to.
Viscount BROOKEBOROUGH Viscount BROOKEBOROUGH moved Amendment No. 2:
Page 2, line 38, leave out subsection (3) and insert
("(3) The duty to produce detonators for inspection shall not extend to a detonator or cosignment of detonators carried by sea as part of a ship's cargo while on board the ship or during the course of the loading or unloading thereof.")
The noble Viscount said: My Lords, I beg to move Amendment No. 2. The object of this Amendment is to counteract problems which were raised by the noble Lord, Lord Harris, at Committee stage. I hope this Amendment meets the objections.
On Question, Amendment agreed to.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 13th July), Bill read 3a, and passed, and sent to the Commons.

AGRICULTURE (MISCELLANEOUS PROVISIONS) (NORTHERN IRELAND) ORDER 1977
5.15 p.m.
The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett)The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett) rose to move, That the draft Agriculture (Miscellaneous Provisions) (Northern Ireland) Order 1977, laid before the House on 14th June, be approved. The noble Lord said: My Lords, I beg to move that this draft order be approved. It amends and extends various Acts dealing with agricultural matters and provides the legislative basis for the substitution of metric units for non-metric units and expressions in certain enactments. The amendments proposed are concerned in the main with correcting deficiencies and clarifying ambiguities which have become apparent as a result of the Department of Agriculture's experience in administering the Acts concerned. All interested parties were consulted about the provisions of the draft order before it was laid.
As noble Lords will no doubt have noticed, many of the provisions in this order bring Northern Ireland legislation into line with similar legislation in Great Britain. For example, Article 3 gives the Department the power to make hull licensing optional rather than mandatory. Articles 10 and 11 amend the Diseases of
1022
Animals Act (Northern Ireland) 1958, and give the Department the authority to bring about the destruction of wildlife in order to prevent spread of disease to farm animals, and also give the right of entry of an authorised officer to any place where there are reasonable grounds for supposing that a dangerous animal pathogen exists. All these powers are already held by the Ministry of Agriculture, Fisheries and Food, and indeed I was one of the Ministers responsible for the Agriculture (Miscellaneous Provisions) Bill which contained many of these provisions, which was passed by your Lordships' House last year.
One of the articles in the order which has been the subject of representation is Article 9. This extends to slaughterhouses operated by district councils the obligation—which already applies to commercial slaughterhouses—to slaughter animals at the request of local butchers. In this case the Government have tried to allay the fears expressed by providing that any butchers exercising their rights under this article must abide by the by-laws applying to the slaughterhouse involved. My Lords, I beg to move.
Moved, That the draft Agriculture (Miscellaneous Provisions) (Northern Ireland) Order 1977, laid before the House on 14th June, be approved.—(Lord Melchett.)
5.17 p.m.
Lord BELSTEAD: My Lords, I am grateful to the noble Lord, Lord Melchett, for introducing, briefly but clearly to us, what is in fact a very long order, almost like a Parliamentary Bill. I should like to confine my comments on the order to the amendment which is contained in Article 17 to the Pig Production Development Act (Northern Ireland) 1964. As I understand it, Northern Ireland pig farmers at the moment pay a levy on each pig which they sell to the Pig Marketing Board, and the effect of this article is to replace this levy by a fixed percentage of each farmer's financial return from pigs sold to the Board. I am not quite clear whether that is to be a percentage of the gross or the net return which the farmer receives. I assume it is the gross return, but I am not sure. At the moment pig farmers in Great Britain, and presumably

1023
also in Northern Ireland—even more so there, as their feed costs are higher—are making a loss on each pig sold, so this seems to me an absolutely fundamental question.
What is to be the position of the Pig Production Development Fund in all this? In another place the Parliamentary Under-Secretary of State, when introducing this order, said:
"The change is intended to reduce the fluctuations in the revenue of the Fund which now occur when marketing of pigs falls substantially, by linking the contribution to producer returns, since these will normally be maintained by higher prices when pigs are scarce".
The question I want to ask is, what is going to happen when—as indeed is happening today—both the level of the pig herd and the prices farmers are getting are falling? Presumably the Development Fund will then also suffer. As things are at the moment, I fail to see how this new system which is embodied in Article 17 of this order will be any improvement so far as the Development Fund is concerned.
When the noble Lord replies he may perhaps be able to take the opportunity to tell me the amount by which the size of the Northern Ireland pig herd has fallen during the last year or so. I believe there has been quite a substantial fall. If the noble Lord could go so far outside the order as to indicate what plans the Government have to put Northern Ireland pig farmers back on their feet, I should welcome that information also. That is a feature of the order which I find worrying, but otherwise I welcome and support the order.
5.20 p.m.
Lord MELCHETT: My Lords, first of all, I shall take the point about gross or net return. It is the percentage of the gross return that is affected. The noble Lord, Lord Belstead, raised various questions about the pig breeding herd in Northern Ireland, not all of which I am necessarily entirely competent to answer. However, I shall do my best to cover some of the points that the noble Lord raised, and as regards any others the noble Lord will perhaps allow me to write to him.
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I am sure that the noble Lord, Lord Belstead, will be pleased to hear that the size of the pig breeding herd is not falling dramatically. Indeed, since this Government have been in office it has remained reasonably steady, or has even slightly increased in size. It is currently 75,100. The size is not expected to alter greatly in the near future. I think that to some extent that answers the noble Lord's worries about the Pig Production Development Fund. As the noble Lord, Lord Belstead, said, my honourable friend when introducing the order in another place, pointed out that the changes in the way that the contribution to the Fund is now levied are intended to allow the Fund to have contributions which will rise with inflation; and that, it was hoped, would be the case even if the number of pigs that were actually marketed was falling, because hopefully the price would then increase. However, at present, with the size of the herd remaining reasonably constant, I should hope that the number of pigs actually being marketed is not falling. If I can give the noble Lord further information about that I shall be happy to do so.
The general situation of the pig industry throughout the United Kingdom is a matter for concern and something with which my right honourable friend the Minister of State for Agriculture, Fisheries and Food is particularly concerned. His plans for the United Kingdom pig industry will obviously substantially affect the Northern Ireland industry. As the noble Lord, Lord Belstead, knows, the Northern Ireland pig industry is currently receiving Government support in the form of payments under the Meat Industry Employment Scheme and the Feed Price Allowance Scheme. As I have told the noble Lord when we have debated previous orders, we shall certainly be looking very carefully at the future of any such schemes, with a view to doing everything we possibly can to help the pig industry in Northern Ireland. I hope that I have covered the main points raised by the noble Lord, Lord Belstead. If there are any matters that I have not covered I shall endeavour to obtain the relevant information and write to him. I am grateful for his general welcome for the order.
On Question, Motion agreed to.

FATAL ACCIDENTS (NORTHERN IRELAND) ORDER 1977
5.23 p.m.
Lord MELCHETT Lord MELCHETT rose to move, That the draft Fatal Accidents (Northern Ireland) Order 1977, laid before the House on 24th May, be approved. The noble Lord said: My Lords, the purpose of this order is to consolidate the law in Northern Ireland which gives the dependants of a person whose death is caused by the wrongful act, neglect or default of another, the right to recover damages. The order also makes one amendment to the existing legislation which would have the effect of bringing the law in Northern Ireland into line with the law in England and Wales.
The order largely consolidates the Fatal Accidents Acts of 1846 and 1864, and the Fatal Accidents Act (Northern Ireland) 1959. The one amendment which this order contains would prevent a widow's prospects of remarriage from reducing her damages. The law was changed in this respect for England and Wales in 1971 by the Law Reform (Miscellaneous Provisions) Act, and Article 5(3) of this order will make the change for Northern Ireland. My Lords, I beg to move.
Moved, That the draft Fatal Accidents (Northern Ireland) Order 1977, laid before the House on 24th May, be approved.—(Lord Melchett.)
On Question, Motion agreed to.

CRIMINAL INJURIES (COMPENSATION) (NORTHERN IRELAND) ORDER 1977
5.25 p.m.
Lord MELCHETT Lord MELCHETT rose to move, That the draft Criminal Injuries (Compensation) (Northern Ireland) Order 1977, laid before the House on 21st June, be approved. The noble Lord said: My Lords, the proposal for this order was published in January. It attracted comments from professional and other interested bodies and was fully debated by the Northern Ireland Committee in another place. Having considered all these comments my right honourable friend, the Secretary of State has changed the originally proposed draft in several important respects.
The order has three main purposes. First, it will improve the handling of claims by allowing compensation to be paid, if acceptable, on the Secretary of State's determination, while preserving an applicant's right to challenge any decision of the Secretary of State in the courts, on appeal. Second, it will remove certain abuses or stop their possible growth, and ensure, as far as possible, that compensation is not paid to those who have themselves contributed to terrorism. Third, it will ensure a minimum level of compensation for widows and dependent children whose awards are affected by the necessary deduction of benefits.
The order follows a review of the Criminal Injuries to Persons (Compensation) Act (Northern Ireland) 1968, and the general effect of the order is to amend the provisions of the 1968 Act in the light of experience. I should like briefly to draw noble Lord's attention to the most important provisions contained in the order. Article 2 provides that in future an "unlawful association" will be defined to include not only proscribed organisations hut also others engaged in terrorism.
Article 3 provides that the Secretary of State will pay compensation on application, where it is justified under the order; at present he may pay only on the determination of a court. Article 5 requires the Secretary of State to take account of all relevant circumstances, including any negligence or provocation by the victim, and to reduce compensation by the amount of any pensions and other benefits payable. Article 6 applies an upper limit of twice the average industrial wage to compensation for pecuniary loss, unless the injury was caused by a terrorist organisation. Paragraph (3) provides that compensation will not be payable to a member of a terrorist association or to anyone who has been involved in acts of terrorism. Whether in fact the person concerned has been a terrorist in this sense may be a matter for the court to decide on appeal.
There may, however, be cases where this provision will clearly be unreasonably severe. Article 8 therefore allows the Secretary of State to make discretionary payments where he considers it in the public interest to do so. Paragraphs (4) and (5) of Article 6 deal with minimum payments of compensation. To prevent

1027
the proliferation of minor claims for nervous shock the Article provides that where a claim is made for pain and suffering arising from nervous shock it must be sufficiently serious to justify at least £1,000 compensation. The existing £50 minimum for all claims has been up-dated to £150 in line with changes in the value of money and the present minimum of the Criminal Injuries Compensation Scheme in Great Britain. Article 6 also provides that the Secretary of State may withhold payment of compensation until an applicant has given all reasonable help to the police towards identifying and apprehending the offender.
Article 8 enables the Secretary of State to make discretionary payments to widows and dependent children whose compensation has been reduced by the deduction of pensions and other benefits: to bring the amounts payable in such circumstances up to a maximum of £5,000 for a widow and £500 for each child. Article 15 is another new provision. It allows applicants, who feel after six months that they have given the Secretary of State enough information and enough time to determine the claim, the right to seek a declaration to that effect from the county court. If the court gives a declaration, then the Secretary of State must determine the claim within the next two months or the applicant will be able to have it determined by the court. This is an important order, and I have only attempted to draw attention to the most significant provisions contained in it. I should, of course, be happy to do my best to answer any questions that noble Lords have on any part of the order. I beg to move.
Moved, That the draft Criminal Injuries (Compensation) (Northern Ireland) Order 1977, laid before the House on 21st June, be approved.—(Lord Melchett.)
Lord BELSTEAD: I warmly welcome the order because it will end, as the noble Lord, Lord Melchett, has explained, the possibility of payment of compensation for criminal injuries to terrorists and to anyone connected with terrorism. That is something which has seemed to be not only totally unfair but burdensome to the British taxpayer. The order is most timely and will be widely welcomed.
1028
However, I wonder whether the noble Lord, Lord Melchett, could tell me the amount which has already been paid out in criminal injury cases during the present troubled years in Northern Ireland and how many cases are pending. I know that the sums involved for payment out for criminal injuries run into many tens of millions of pounds. If the noble Lord has the statistics it would be interesting to know the amount to date.
Will legal aid be available for those who need to approach the court, either perhaps to appeal if a claim for criminal injuries is refused by the Secretary of State under the new procedure, or for any other reason? There is the provision for approach to the county court under Article 16, as the noble Lord explained. There is also the occasion which could arise if a victim dies. I understand that his dependants may claim for expenses incurred in connection with the victim's injury though his claim for compensation does not pass to his estate. Once again this would presumably mean approaching the court and, I imagine, being legally represented.
It must surely be right to deal with cases of nervous shock in the way that the order does; namely, there must be a minimum claim for £1,000 compensation if you are going to be able to get a nervous shock claim paid out. It was made clear in another place by the noble Lord's colleagues that many of these claims now had become a way of getting small sums of money which, in total, run into very large sums of money, and this was a practice which had to be stopped.
I should like to say—and this is an experience which the noble Lord, who has been in Northern Ireland now for such a considerable length of time, must have had on many occasions—that I remember very well in, I think it was, 1973 there was a line of cottages in a small village on the North Antrim coast which was blown up one weekend. It was I who had to go and see what damage had been done. The last four or five of the cottages had been reduced to rubble and the rest of the cottages, three or four in number, remained standing.
Somewhat naturally, as I am sure the noble Lord would have done, I went to the house—they were all semi-detached houses—which was nearest to the cottages

1029
which had been destroyed. I knocked on the door. The house was still standing but there were no windows there at all and a considerable amount of damage was done. An elderly lady came to the door. I asked her how she was and she said that she was all right. We both looked at the appalling scene to the right of her house and agreed what a terrible thing it was, and began to talk of this and that. Then quite suddenly, without any warning, she burst into tears, and one realised then the really appalling shock which there is for perfectly ordinary people living in Northern Ireland.
Therefore, when I say that I welcome the fact that the order deals in the way that it does with nervous shock, I am in no way saying that I do not think that the ordinary good hearted people in Northern Ireland should be compensated for the terrible time they have gone through, and the way the order deals with this will provide for that. I am strongly in favour of the way that this order has been drafted. It does what has been long overdue; namely, prevent payments being made out to terrorists for injuries to themselves. Otherwise it deals very fairly with the other matters with which it is concerned, and I warmly welcome and support the order.
Lord MELCHETT: My Lords, I am again grateful for the noble Lord's support. I entirely agree with everything he said about nervous shock. It is true that the large amount of money that has been paid out up to now in compensation has been disproportionately composed of very small sums for minor nervous shock, but nevertheless it is important to remember the very serious effect that this can have on some people. The order, it is now generally felt, strikes the right balance in making compensation of £1,000 or more available to those people who have suffered very seriously in that way, but preventing the proliferation of very small minor claims, of which there were an increasingly large number.
The noble Lord asked me how many claims and what sum of money had been paid out. Up to the end of May 34,633 claims had been received under the Criminal Injuries to Persons (Compensation) Act (Northern Ireland) 1968, of which 20,859—somewhat over half—had been settled. Compensation totaling
1030
£28,273,849 had been paid out. The noble Lord can see that very considerable sums of money are involved.
The noble Lord asked me about legal aid for those persons who wish to approach the county court either on appeal or to seek determination under Article 15 of the order. Legal aid is available for those who take criminal injury claims to court on appeal under this order, subject to the normal criteria for eligibility for legal aid. In addition, I am glad to say that legal assistance up to £25 will also be available to allow an injured person to consult a solicitor about making a claim, even if it does not go to court, under the Draft Legal Aid, Advice and Assistance (Northern Ireland) Order 1977, which I think your Lordships' House will be debating next week and which I hope will shortly become law. That will be an important extension of the availability of legal advice to Northern Ireland which of course is already available in this country. Once again, I am grateful to the noble Lord for his support for the order.
On Question, Motion agreed to.

NORTHERN IRELAND (EMERGENCY PROVISIONS) (AMENDMENT) BILL
5.36 p.m.
Lord MELCHETT: My Lords, I beg to move that this Bill be now read a second time. Noble Lords will recall that only last week we discussed the Emergency Provisions legislation and approved its renewal for six months. In view of this I do not think I need repeat what I said about the Government's security policy beyond restating our belief that our general strategy is the right one. This short Bill is one proof of our stated determination to reinforce that policy when necessary.
The Bill will increase the maximum penalties for three offences under the existing Emergency Provisions legislation from five to 10 years' imprisonment. The main offence, contained in Section 19 of the 1973 Emergency Provisions Act, is the offence of membership of a proscribed organisation. At present it carries maximum penalties on summary conviction of six months or £400 fine or both, and on indictment of five years or a fine or both.

1031
The Government have been awaiting a suitable legislative opportunity to increase the penalty in accordance with the recommendation in another place last July of my right honourable and learned friend the Attorney General.
There are two other Emergency Provisions offences which at present carry maximum penalties of five years' imprisonment. These are found in Section 20 of the 1973 Act, which deals with unlawful collection of information about the security forces, and Section 13 of the 1975 Act, which creates the offence of unlawful training in firearms or explosives. Although prosecutions are brought less frequently for these offences than for membership, they are serious offences. If we were to leave their penalties unchanged, we would create an anomaly, in that simple membership could result in a higher penalty than the active involvement in terrorism which these offences cover. The Government therefore propose that the maximum penalties for all three offences should be increased to 10 years' imprisonment.
Sentences imposed over the past 18 months in cases where the Section 19 offence of membership was the sole conviction range from fines or suspended sentences to the five years' maximum. Noble Lords will be aware of recent calls for minimum penalties for certain offences which some people consider to be so serious that light sentences can never be justified. However, the Government feel strongly that the discretion of the courts to impose a sentence that fits the circumstances of the offender and the crime should not be closely circumscribed. My Lords, the Government have brought forward this Bill to ensure that those involved in one way or another with serious acts of violence may be liable to long sentences. It represents a minor contribution to our overall policy, but its provisions are important and I commend it to the House.
Moved, That the Bill be read 2a.—(Lord Melchett.)
5.40 p.m.
Lord BELSTEAD: My Lords, there is no question hut that the three increases in maximum penalties for the three different kinds of offence, taken together
1032
with the security initiatives which the Secretary of State for Northern Ireland has taken recently, will be a deterrent against those young men and women who have been influenced to become involved in terrorist organisations, and certainly should be a deterrent against the hardened terrorist. So far as the young terrorist is concerned, I am convinced that the increased penalties will influence many of them to try to escape from involvement with violence, violence which has no justification and which, as we all know, is cruel to all sections of the Northern Ireland community.
In regard to hardened terrorists. I should be interested to know how many people have been charged with being members of proscribed organisations in, say, the last year, the period which the noble Lord, Lord Melchett, mentioned in this context. I appreciate that membership of a proscribed organisation is not always an easy charge to bring home, but the Government will be aware that in the past—this has happened over the Border when different Governments were in power—there have been occasions when IRA leaders have been seen in Belfast, sometimes on public occasions, and could reasonably have been expected to be apprehended but have in fact gone free.
With that one criticism, I welcome the Bill because, as I say, there is no question but that the Secretary of State has set in train recently a whole series of measures to increase the effectiveness of the Security Forces—we had our opportunity to debate that on an order about a month ago—and I think this Bill will support the effectiveness of their operations.
5.43 p.m.
Viscount BROOKEBOROUGH: My Lords, I too welcome the Bill. Unfortunately I was not able to be here last week, because I had a bad back, and I would have liked then and I should like now to congratulate the Secretary of State and his team on the impression which they have given in Northern Ireland of their determination to win. The Secretary of State's statements have a language which is fully understood by everybody in Ireland; when he says something it is said bluntly and clearly and in a way that has not been used for many a year, certainly since this terrorist

1033
attack started. That is a tremendous help in the battle of the will to win and the Secretary of State has understood and demonstrated more clearly that this is a battle of wills, that we are going to win this battle and that the terrorists will not win. I consider that this Bill is a further piece of legislative support to all the other pieces of legislation we have had and is a further support to the Secretary of State in his attitude.
I am, however, disappointed—I should like to have tabled an Amendment, but I feel it is important that we should speed the Bill through as fast as we can—that the Secretary of State has not taken power in the Bill to schedule all offences committed in Northern Ireland; that is, to allow the DPP, subject to safeguards, to be able to schedule alleged offences so that they can be tried in front of non-jury courts. Despite tremendous misgivings, non-jury courts have turned out to he extremely good and there have been very few criticisms of the justice which they administer.
The present trend of the terrorist campaign is that they are misusing or using legitimate businesses to get their funds and it is almost impossible in Northern Ireland to find any alleged crime which could not, under some circumstances, have a terrorist connotation and connection. I believe that that is a power which the Secretary of State should take at the earliest possible lime. For instance, black taxis—there are some 200 of them in the West Belfast area—are (many of them, at any rate) are running on red petrol. That crime could, in a big way, go in front of a jury court, but that jury, would definitely be intimidated or there would be attempts to intimidate it. There are butchers shops owned by terrorist organisations and pubs which are owned or manipulated by terrorist organisations, and it is to deal with that kind of thing that I believe the DPP should be given those powers, and given them rapidly.
I should like the noble Lord to make it clear, especially after we have increased the penalties, that the question of an amnesty will never be in the Government's mind. There has been a time in the last six years when people have been locked up, let out, given political status, had that political status removed, with complete
1034
change from one place to another. It is vitally important for the Secretary of State to make it clear time and again that people who have committed these foul crimes cannot expect amnesty. I welcome the Bill.
5.46 p.m.
Lord MELCHETT: My Lords, I am grateful for the welcome the House has given the Bill and to the noble Viscount Lord Brookeborough for his remarks about my right honourable friend the Secretary of State which I will ensure are conveyed to him. The noble Viscount raised the question of the scheduling of offences. Of course, the range of scheduled offences in Northern Ireland is already very comprehensive and all serious crime of any kind is comprehended within scheduled offences. This is also a matter about which the Government would be keeping in close contact with the RUC and others concerned and I am not aware of any requests from the RUC to increase the scope of scheduled offences or that they have raised with us any problems they have in enforcing the law as it currently stands. But as the noble Viscount knows these matters are kept under constant review and the Bill shows that we are prepared to make changes when there is a clear need to do so.
The noble Viscount also raised the question of amnesty and my right honourable friend the Secretary of State has made clear, as did his predecessors, on many occasions that there is no question of an amnesty in the future. In case anybody should misinterpret what the noble Viscount said, he mentioned that some people had been locked up and then let out again. I think he was referring to people who had been detained—
Viscount BROOKEBOROUGH: That is so, my Lords.
Lord MELCHETT:—and not to people who, as with everyone currently in prison in Northern Ireland, have been taken through the courts, charged with an offence, tried and found guilty by the courts and sentenced by the courts. It is firmly the Government's policy that people who commit crimes of any sort in Northern Ireland should be taken before the courts, proved to be guilty and sentenced by the courts to imprisonment

1035
or whatever penalty the courts see fit to give, and that will remain the position.
The noble Lord, Lord Belstead, asked about the number of charges for the offence of membership. As the noble Lord knows, the charge of membership may often be brought as part of a wider series of more serious or less serious charges, but I have with me the figures of convictions solely for the offence of membership; in 1976 there were 31 charges and convictions while in the first three months of 1977 there have been 21 convictions solely for membership. So the noble Lord can see that the number of convictions is increasing quite substantially, certainly in the first part of this year, and indeed I am glad to say that that is in line with the general trend of convictions for serious offences in Northern Ireland in the last six months. Again, I am grateful to noble Lords for the welcome they have given the Bill and to the noble Viscount for his determination to see it passed into law as quickly as possible.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

GREATER LONDON COUNCIL (MONEY) BILL
5.49 p.m.
Lord BOYD-CARPENTER: My Lords, I beg to move that this Bill be now read a second time. These GLC Money Bills are annual Bills which have to be brought forward as the result of the provisions of paragraph 25 of the Second Schedule to the London Government Act 1963. I was a member of the Cabinet at that time, but I do not recall the reasons why we inserted this curious provision which applies only to the Greater London Council and does not affect the expenditure of any other local authority in the United Kingdom. But it is the law and we have therefore to consider each year a GLC Money Bill. It runs for a financial year, ending 31st March, with, for obvious reasons, a carry-over for six months. This means—and I think that this may be very material to the debate we are beginning—that if the present Bill does not receive the Royal Assent by 30th September, the Greater London Council will have no
1036
powers to incur, or to make payments in incurring, capital expenditure, or to be so involved by way of loans.
Some of us who have looked with a certain apprehension at levels of local government expenditure may think that that would be no had thing. But when one comes to consider seriously what is involved for the greatest local authority in the country one appreciates what a serious matter this would be. It would mean that it would be impossible, for example, to make payments to contractors in respect of the council's very substantial house building programme, and in human terms, perhaps even more unfortunate, would be the fact that it would be impossible for the council to lend money to assist individuals to buy their own homes.
I hope, therefore, that in considering this issue and the proposed Instruction put down on the Order Paper by the noble Lord, Lord Henley, the House will bear in mind the background that we are dealing here with a measure which, it' not in receipt of the Royal Assent by 30th September, would create a very difficult situation. The Bill has been passed in the Commons, and I think that in the present economic state of the country your Lordships will be glad to know that it makes provision for £.481/2 million less than did the Bill last year, and so it is, though I speak subject to correction of the noble Lord on the Government Bench, fully in accordance with the directions of the Government, and of the Department of the Environment in particular, as to the scale of capital expenditure by local authorities. I think that in this inflationary situation your Lordships may well feel that a reduction of £481/2 million in capital expenditure represents extremely good work by the Greater London Council and its devoted and efficient staffs.
I understand that it would be convenient and in order if at this stage I were to make one or two comments on the proposed Instruction which the noble Lord. Lord Henley, has put down on the Order Paper. Your Lordships w ill observe that it is of somewhat unusual form in as much as it asks the Select Committee to which, if the House gives a Second Reading to the Bill, it being a Private Bill, it will be committed, to satisfy itself of a negative.

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It will be asked to satisfy itself that throughout the many and complex planning procedures to which the particular matter concerned—the development of the St. Paul's playing field site—has been subjected, no "fallacious" information was given at any stage; "fallacious" being the word selected by the noble Lord.
The noble Lord will develop that point if he thinks fit, but I believe that I am entitled to make the following preliminary comment. If the House, in its wisdom, agrees to that Instruction, it is surely evident that the Bill cannot be back in this house before we rise for the summer Recess. However expeditious the Select Committee may be, it could not discharge this task—involving, as it does, the giving of due notice and the dealing with Petitions to be heard, and so on—in that time. We heard earlier today from the noble Baroness the Captain of the Gentlemen-at-Arms that it is intended that this House should rise on 29th July. We were not told when we are likely to resume, but if normal procedures are followed, we shall be unlikely to resume until the latter half of October, by which time, as I have already told the House, the Greater London Council's powers to spend money on capital account would have expired. Furthermore, there is the possibility—and perhaps noble Lords on the Liberal Benches are here better informed than any of us—that the present Parliament may never return at all, in which case we would be concerned, I suppose, with the State Opening of the new Parliament in November, and there would then be an even longer period before this authority would have the right to incur capital expenditure.
This is the background to the question raised by the proposed Instruction. As I understand it, noble Lords opposite may be prepared to deal with the aspect of it that concerns the Inner London Education Authority, with w Rich they are particularly concerned. But in moving the Second Reading of the Bill, I am concerned particularly with the practical problems for the Greater London Council as a whole, with the risk of this authority being put in the degrading position of being unable to pay its hills, with the hardship involved for those who, in good faith, have done work on contract for it, or who have even supplied materials to it. Perhaps here I should declare a potential
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interest as the chairman of a cement manufacturing company. In this respect there is also the question of home buyers who are thwarted because no funds are available to enable them to buy their homes.
However, I should make one further point before I come to the question of the procedure which is proposed, and it is as follows. It cannot be argued in favour of the Instruction that the House is, among other things, being asked to give, as it were, financial approval to the St. Paul's development, because it is the fact that two preceding Bills—last year's Bill, and that of the year before—which both Houses of Parliament passed, have approved expenditures in favour of this scheme. All that the current Bill does is to include further expenditures under this heading. I will not weary the House by reading out the actual expenditures proposed, but they are contained in the Schedule to the Bill, which is available to noble Lords.
I want to come now to what I regard as the important point of the procedure used, but before doing so I wish to make two confessions. Many years ago, when I was Minister of Transport and Civil Aviation, I was involved with this particular site, and I will confess to the House that, as Minister, I was responsible for taking a piece off the St. Paul's playing field for what was then called the Cromwell Road extension, the road leading to the M4. The House may think that I was sufficiently punished if I recount that, as a result of that, I was involved in the ceremony of inaugurating the work on that road which involved manipulating one of those infernal machines, a pneumatic drill. I do not know how many noble Lords have actually handled one of those machines. Ordinary men who earn their living by so doing are properly equipped, and indeed armoured with protecting clothing. But a Minister of the Crown is attired only in his shiny black suit, and as such I was compelled to operate one of those machines to inaugurate the scheme, under the eyes of the television and Press cameras. So your Lordships may feel that I was sufficiently punished. I was also involved last year, in supporting a Motion for an Instruction to a Committee, moved from the Bench here by the noble Baroness, Lady Young.

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That leads me to the very important point of procedure. That Instruction was carried, and in due course our Select Committee reported. Although it is rather long, I hope that the House will allow me—because it is very germane to our discussions—to read the final paragraph, paragraph 12, of the Special Report from the Select Committee on the Greater London Council (Money) Bill, ordered to be printed 26th July, 1976. The paragraph reads:
"The Committee are obliged to observe that they have some anxiety about the procedure adopted in this case. The Greater London Council is the only local authority whose expenditure requires Parliamentary approval. The Petitions against the Bill and the Instruction created an anomalous situation since the need for the Council's expenditure to be justified in this context has enabled a question of town planning to he submitted to another review over and above such safeguards as are laid down in planning legislation. The real objection of the Petitioners was to planning procedure and not to any of the provisions of the Bill, and indeed, apart from the choice of the St. Paul's site, the proposed expenditure in building a unified West London College was not by itself raised as an objection to the Bill. The Committee cannot believe that petitioning procedure is intended to operate in this way, and do not think it right that it should do so. If Parliament wishes to review individual planning decisions, then it ought to do so at an earlier stage, and not at the last moment when all that remains is for the necessary expenditure to be sanctioned or even, as in the present case, where some expenditure, albeit not very great, has already been sanctioned by Parliament. Moreover, the Committee can see no justification for submitting proposals for developments by the Greater London Council to risks of intervention which, if arbitrary or belated, could prove much more onerous than those which proposals for developments by other authorities must undergo."
That is from the report of our own Select Committee.
On the present Bill, a somewhat similar line was taken by the Select Committee in another place. I have the minutes of that Select Committee of 15th June 1977, in which that Committee took broadly the same view as our Select Committee took last year. The Commons Select Committee said:
"It is the Committee's view that the amendment, by seeking to prevent the GLC from spending further money on works on the St. Paul's Playing Field site, would introduce a new non-monetary element into the Bill. Moreover, the inclusion of an obligation to provide an alternative site as an open space if building is to continue on the site introduces a new power …
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"They note that the planning powers, the exercise of which the Petitioners complain, are derived from general public legislation and are not derived from the Money Bill"
They go on to say, therefore:
"The Committee have decided that the amendments are not within the scope of the Bill and that the redress sought by the Petitioners accordingly is not proper for the Committee on the Money Bill to grant"
It is therefore a substantial point in the views of the Select Committees of both Houses as to this kind of procedure.
I am not seeking to argue—and your Lordships would not accept it if I did—that it is outside the power of this House to give any direction it likes to one of its own Select Committees. But what I am arguing, in the light of the views of the Select Committees of both Houses which have actually dealt with these issues, is that this is an inappropriate exercise of our powers and introduces, as the Select Committee itself says, a new and separate stage, applicable only to activities by the Greater London Council, and to no other local authority, into the normal elaborate planning machinery. My submission to the House is that in this case, as in others, the planning procedures are there; they have, as I think the House knows, been very fully exercised; and if those involved are not content they have indeed access to the High Court if the planning machinery has gone wrong. Indeed, I can add that, in point of fact, last year some of the objectors in this case did go to the High Court and challenge the planning procedures used, but the High Court found that their complaint was not justified and refused them the remedies that they sought.
Having said that, I want to make it clear—and here I speak on behalf of the present administration at County Hall—that they have very great sympathy with the objectors in this case; and I think many of us who have followed this issue would not, if we were starting afresh, feel that these particular developments represented the best use of the site. It is no part of my argument to the House to suggest that. On the other hand, I think the House must realistically accept that, now that building work has been going on upon the site for a year and very substantial expenditures have been incurred, the situation is quite different from that in which the House decided to give an Instruction to the Select Committee last year. Last year.

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building had hardly started. We have now a year's building behind us.
Figures can be argued, but my information is that, if it were decided to scrap this scheme and restore the site to its original (as it were) green field use, we should be talking in terms of demolition costs of something of the order of £3 million with, in addition, heavy payments by way of compensation to contractors for breach of contract. And, at the end of the day—this is more for the noble Lords who speak for the Inner London Education Authority—on top of that they would then have to incur whatever expenditure was necessary to develop another site and another building for the college. There is now a structure in respect of the college, and I understand that the framework for six storeys is already erected. A great deal of building work has gone on upon the site; and, speaking for myself as a ratepayer in London, I would regard it as horrifying if the London ratepayers were to be called upon now, as the result of a reversal of these decisions taken over the years, to incur the heavy nugatory expenditure involved in reversing the decisions of previous administrations, either at County Hall or in respect of the Inner London Education Authority.
The present administration at County Hall, I think, take a more practical line. They sympathise very much with those who are anxious about the diminution in the available open spaces in this crowded area of West London. They have instructed their planning committee to institute a close investigation as to possible alternative open spaces which could be used. I am told—I was told as recently as yesterday—that there seems to be good reason to believe that two or three promising candidates for this use can be found. Here, again, I suggest to the House that as a practical consideration (although I am here going a little beyond what is the necessary part of my argument) it is very much better to accept that, development having reached this stage, it should proceed as economically as possible, and that what everybody wishes to see—that is, adequate provision of open spaces in the area—should he provided otherwise and more economically.
I return to the main points I wish to make on moving the Bill. I believe that I have a right of reply should it be
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necessary, and I will endeavour, if I can, to deal with any point that arises on the Instruction or on the Bill itself. But I would leave these main points, if I may, with the House: that it would be a very drastic and unwise step to create a situation in which, quite inevitably, the greatest local authority in the country would be unable to pay its bills on capital account after the 30th September—a situation paralleled in the modern world only by what happened to New York, which is not a precedent which any of us, I think, would like to see followed in this great city. I ask the House also to bear in mind the views of its own Select Committee on the previous version of this very Bill, on last year's Bill, under a similar Instruction: that this was not an appropriate procedure, that it was wrong to use a Money Bill as an additional stage in planning procedures, and that if there have been, as I understand is suggested, irregularities in any stage of the planning procedures, then the courts of law are open and are the proper place to which those who are dissatisfied should take their grievances.
Then I add, as I have been asked to do, the good will of the present administration at County Hall and their desire to meet what I think is the real point of the objectors; that is, the desirability to provide as much open space for the people of West London as possible, and to do it, of course, in the most economical way. My Lords, I very much hope that, in the light of this explanation, the noble Lord, Lord Henley, will not feel it necessary to press his Instruction, and I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Boyd-Carpenter.)
6.9 p.m.
Lord HENLEY: My Lords, it may be for the convenience of your Lordships if I speak immediately after the noble Lord who has moved the Second Reading of this Bill, and that I move my Instruction formally at the end. I shall move it; I shall not withdraw it; but I will not necessarily press it to a Division unless I feel that I have fairly substantial support. If I feel I have not got substantial support, I may well allow it to be negatived, although in the hope that

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the Select Committee which will inevitably be examining this Bill (because there is a Petition against it) will take note of what has been said in the course of the debate.
The noble Lord, Lord Boyd-Carpenter, made very much the same sort of speech as the noble Lord, Lord Pitt, made in similar circumstances last year. It was perhaps five minutes shorter, but as we have been over this thing so many times I think that that was very suitable. Nevertheless, it was much the same speech. The only difference was that the noble Lord, Lord Boyd-Carpenter, clearly has been involved physically in this problem with his compressors—or whatever it is one calls them—which I understand the noble Lord, Lord Pitt, was not.
My Lords, I should like first to say that we are debating this matter only because of the objectors, because of the Petition against it; that all of us who take part in this debate know virtually all that there is to know so far as debating points are concerned and I do not propose to go over it in detail for those in the House who do not know what it is all about. I would refer them instead to the Second Reading debate last year, to the Third Reading debate and leave it at that. I see, however, that the Greater London Council have brought their heaviest guns to bear to browbeat me; so I shall have to try to meet some of the points that have been made.
First, I should like to touch on whether it is or is not suitable that the G LC should, unlike any other local authority, be subject to the Private Bill procedure. It may well be that it should not. It may well be, also, that there is an element of bringing another dimension into planning which should not be there. I would concede both these things at once. It may be that they are inappropriate both so far as the Greater London Council are concerned and in relation to our concept of planning.
Nevertheless the gravamen of the charge that the objectors have been making all along (and which I seek to make again today) is that they have never been able to make their case; they have been frustrated. There is no question of their being able to go to law because there was an illegality. There has been no illegality.
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We know that. In the High Court it was shown that there was no illegality. This point has never been open to the objectors. At every stage they have been frustrated in one way or the other. It seems to me that, inappropriate or not, it w as the only course open to the Petitioners. I am glad that the noble Lord, Lord Boyd-Carpenter, has had the grace to admit that, fundamentally, he believes that the objectors may well have been right.
Lord BOYD-CARPENTER: My Lords, if the noble Lord would allow me, I prefer the words that came out of my mouth to those he is putting into it. I stand on them. I think on reflection that he will find that they are not identical.
Lord HENLEY: All right, my Lords, they were not the same. The implication is not very different. In view of the fact that last year the noble Lord supported his noble friend Lady Young in the Division Lobby. I should have thought that he must, at any rate, have a great deal of sympathy with them.
My Lords, if I were to concede everything that the noble Lord has said in his speech today, there still remains a chain of events which, added together, does not look very well. A pattern emerges which I can only call misrepresentation. I have said before that there has been no illegality; but every formal decision which the project was advanced—and I am talking about the ILEAs project to build a college of further education—was taken on the basis of information which, it appears, was fallacious and not all the parts of which were made available either to the Committee last year or to your Lordships. I take as examples one or two of those points which I regard as being misrepresentations.
I think the first is the muddle over whether the Greater London Council had power to acquire land for open spaces or whether they did not, but that Hammersmith Borough Council did. I know that planning procedures are extremely complicated, but they are not so complicated as all that. Why was this issue obfuscated? On the face of it, it means nothing; but, when added to various points, then the chain of events, as I have said, does not look well. The

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next is the suggestion that the borough council could do nothing because the cost would be £6 million.
When this point was brought up in the Select Committee—I think this was the first Select Committee in the House of Commons—the Promoters' counsel suggested that this was mere gossip. It only emerged later that, far from it being mere gossip, it was a minute, formally minuted, of the council to the effect that the cost of £6 million was more than the council could afford, and therefore that was enough to stop it in its tracks, anyway. In fact, it was not £6 million; it was something like £1·2 million, and the cost that it had escalated to at the moment when £6 million was suggested was about £11/2 million. I feel that that was a reckless statement, if, indeed, it was made by counsel, at the Select Committee. How did it come about? Who put it about?
My Lords, I shall be told again that I am wasting money or that the Petitioners are wasting money by bringing this matter forward yet again—so many millions of pounds on the rates. The noble Lord himself said that he would be feeling sour at having his rates increased. This is what is said all the time. Whenever anybody makes an attempt to delay something, he is told that it is going to be costly. Here is an example of a reckless statement being made with regard to costs which was totally untrue, and known to be untrue at the time. Why was it put about? Why was a public inquiry refused? It was refused in some measure because it was thought that there was no point in going into it at all if it was to cost £6 million.
Then, my Lords, there was the question of the misleading advertisement. Why was it not disclosed at the time of the advertisement that the council had changed their mind and that permission was going to he given for building a college of further education on the land? The advertisement is misleading; some of your Lordships may have seen it. Why was it put about? Was there any significance in this? Why was it put out in August, at a time when nobody reads these sort of things at all? Why did the Secretary of State refuse to intervene on the grounds that the land had never been a public open space? Of course it had never been a public open space;
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but it had been bought and held specifically from 1964 to, I think, 1968 for the express purpose of making it into a public open space.
Lastly, my Lords, another thing, small in itself: nobody queried, certainly not at Second Reading last year, the question of the housing development. But there was very severe criticism of the building of the school. Why did the bulldozers and the excavators rush in to clear the ground for the school, but did not start on the houses? Why rush in so quickly before the Select Committee could have a look at it? This is the pattern right through. This is what the objectors feel so strongly about: that at every stage either they have been misinformed or the information has been withheld from them. They feel, whether rightly or wrongly, that there has been a certain deviousness throughout; that everything has been pushed ahead to get the college by hook or by crook, and at every stage the objectors feel they have been frustrated.
They have been told they were too late, and their argument is that they were caused to he too late by the fact that the information was withheld from them; that it was not they who caused the lateness in their objection, it was the devious information and the denial of the facts or the misleading facts. I accept that it may well be too late, and the Petitioners, I think, probably may feel the same. Nevertheless, I think they feel that if the project must go forward, then it should be allowed to go forward only on the basis that it is recognised that this whole affair has been based on decisions which have been come to on seriously false information.
Regarding my own Instruction, Instructions, anyway, are not very meaningful. After all, what is one doing by way of an Instruction? One is telling a Select Committee to do what they are charged to do anyway; to do their business properly. In nearly every case I think that that is true. Its only advantage is to try to draw attention by means of an Instruction in your Lordships' House as to what one feels. I will not say it is a chain of events which is improper, and I used the phrase "does not look very well" before. That is almost all one can do. Of course the Committee can do everything asked of it, where it considers it fit to do so. The noble Lord, Lord

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Aberdare, will be telling us so, I expect, in virtually the same words as the noble Earl, Lord Listowel, told us last year.
My Lords, unless I get overwhelming support, I shall not be so foolish as to press my Motion. I shall see what happens when I move it, and hope that I get some sympathy. From the list of speakers, I do not think I shall get much sympathy. But I felt that this matter needed yet one more airing, partly because this chain, this chapter of accidents as they appear to be, ought to be brought to the attention of your Lordships, and the Select Committee ought to have one more look at it. I do not believe that this will seriously impede the passage of the Bill. Having said that, I will leave the subject now to those heavy guns which are pointing in my direction.
6.22 p.m.
Lord PONSONBY of SHULBREDE: My Lords, may I start by supporting the noble Lord, Lord Boyd-Carpenter, in moving the Second Reading of the Bill. He probably had a very difficult task with his conscience in view of the past history of this matter which we debated almost a year ago today. It is a difficult case, I am sure, for Members on the Benches opposite to square their consciences today with what they said last year. Let me support him very strongly in what he said; that is, that it would be a very serious matter if the GLC Money Bill is not enacted in this Session. It will have very serious consequences for the Council.
Last year, when we were debating the Bill, the noble Baroness, Lady Young, said that it was a unique occasion. Unfortunately, it is not unique this year as we have been through this debate before and have little to add to what was said last year. Speaking last year, the noble Baroness, Lady Young, said that she had examined the matter and felt that political responsibility for the events lay equally with both the main political Parties.
I had some responsibility for this matter during its tortuous course of 13 years since the site was first acquired by the LCC in 1964. I was amazed at a number of the remarks made by the noble Lord, Lord Henley. He claimed that the
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objectors were frustrated in that they had never been able to make their case. I thought this the most extraordinary statement that I have heard in this House for a long time. He well knows that the objectors to the Bill not only came to County Hall on numerous occasions—and I saw them on a number of those occasions—not only went to the High Court, where they had their case thrown out, not only appeared before your Lordships' Select Committee last year and made their case there, but I have no doubt that a number of noble Lords present have had the case personally put to them by various objectors.
Lord HENLEY: My Lords, if the noble Lord will allow me, in both cases when they appeared before the Select Commitee, it was under rather frustrating circumstances. When they appeared before the Lords their locus was challenged and they were refused permission to present their case as such. Out of the kindness of their heart, the Select Committee heard them but this meant that they were unable to cross-examine anybody. Regarding the Select Committee in the Commons, their locus was not challenged—I am not sure why not—and their case was not heard. It was dismissed unheard on the grounds that it was outside the scope of the Bill.
Lord PONSONBY of SHULBREDE: My Lords, I thank the noble Lord for his remarks. They bear out the position that there has been tremendous opportunity for them to make their case, although not perhaps as fully on some occasions as they would have wished. The other comment made by the noble Lord was what he referred to as the fallacious argument about a statement made that the GLC had no power to acquire land for open space purposes. Up to 1974 this was the case: there was no power for the Council to acquire open space in these circumstances. Since 1974 that power has existed by an Amendment which resulted from the Local Government Act 1972. Having said that, it is also clear that on policy grounds the GLC would not have intervened in the duties of individual London Boroughs to provide local open spaces within their boroughs. At the time the original arrangements were drawn up the responsibilities for the provision of

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open spaces were dealt with in such a way that it was accepted that it was the duty of individual boroughs to provide local open spaces. The open space referred to here would have been local open space in the terms of the original arrangements which were made.
As the noble Lord, Lord Boyd-Carpenter, has said, the GLC have said that they will use their best endeavours to try to find additional open space in the area, though I remind your Lordships that in the site itself there is a certain amount of open space. There is 1½ acres around where the old high master's house exists and there is 1½ acres in the middle of the site largely arising as a result of the decision of the GLC to decrease the amount of housing in that part of the site. Then of course there is the adventure playground and the tennis courts on the Southern part of the site. To suggest that that open space was being completely removed from the area is fallacious.
I understand that the protesters do not contest any more the need for educational facilities in the area. The noble Lord, Lord Henley, went hack a long time in the history of this case. All the remarks that he made came back to me because I have heard them all before: the question of the advertisements appearing in August and that therefore they were not really valid; that it was some underhand work on behalf of the GLC that they should place them in August so that people could not see them. This is quite wrong. Your Lordships know that the GLC is a large organisation and Government is a large organisation. Advertisements of this kind, actions taken by Government, emerge at particular points in time. They are not timed in this way at all.
He also made a comment about the headlong rush of the bulldozers to the site last year. The fact was that the ILEA had gone out to tender and it had accepted a particular tender. The contractors were anxious to get on with the work; the question of the housing development I believe, at that particular time had not proceeded so far as to decide on who was to be the contractor. Therefore, that was a separate contract and that was why the bulldozers did not move into that particular site.
I think that we have been over this matter thoroughly and it has been dealt
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with by the Select Committee. I do not think that we should burden the Select Committee with this additional Instruction to go over the whole matter again. That would seem to me to be unnecessary, because in fact what the objectors have been asking of us today, and what they have been asking of those involved again and again, is to come to a different decision. They have failed all along. Every move they have made has made those responsible for the developments feel that their decisions were right.
I think the greatest tragedy about this situation is that the housing and educational buildings are not already built and in use. That is the indictment which I would level against the authorities in this case: that it should take 13 years to get a site developed is a situation which really should not be tolerated. Therefore, I hope that without more ado your Lordships will decline to include the proposed Instruction which the noble Lord, Lord Henley, would like us to put to the Select Committee.
Baroness PHILLIPS: My Lords, before the noble Lord sits down, I wonder whether I might intervene just for the record—because I must say that I am completely confused by his remark. If I understood him correctly, he seemed to be saying that prior to 1974 the GLC did not have the power to acquire land. That is what I understood him to say. If I am wrong, perhaps he will correct met.
Lord HENLEY: For open spaces.
Baroness PHILLIPS: For open spaces. Bearing in mind that a piece of land not very far from St. Paul's field—Winslow Road—which, after some 17 years, has finally been made into a small park, was originally owned by the LCC and passed to Hammersmith Borough Council, I cannot understand why they could not acquire land if in fact they did so in the same borough.
Lord BOYD-CARPENTER: My Lords, perhaps I can assist the noble Baroness. The position as I understand it, under the London Government Act 1963, was that the Greater London Council, which took over from the London County Council, was not given

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powers to acquire land for small public open spaces. The power had been in the old LCC and, as the noble Lord, Lord Ponsonby, has said, it was given to the new GLC by a provision in the Schedule to the 1972 Local Government Act which came into force in 1974.
Lord PONSONBY of SHULBREDE: My Lords, I have not a great deal to add to what the noble Lord, Lord Boyd-Carpenter, has said. The Statute of 1963 did not give the Council any powers to provide local open spaces: that was the phrase used in the 1963 Act. As the noble Lord, Lord Boyd-Carpenter, has said, a provision in the Schedule to the 1972 Local Government Act gave that power to the Greater London Council. If the noble Baroness is talking about the provision of a public open space prior to the creation of the GLC, different provisions applied.
Baroness PHILLIPS: My Lords, I do not want to prolong this, but the point is that nothing happened with this land and I just feel that, for the record, it ought to be said that there is an area of confusion here.
6.34 p.m.
Lord PITT of HAMPSTEAD: My Lords, perhaps I might add to the confusion. The noble Baroness in fact has answered herself. The London County Council had wide powers, including powers to provide open spaces all over—and it did—
Baroness PHILLIPS: It did not.
Lord PITT of HAMPSTEAD:—But it did. I am sorry; there are a lot of open spaces. The noble Baroness may not have got that particular point, but there are a lot of open spaces in London which exist because they were provided by the London County Council. When the London Government Act was passed, the Greater London Council was given power to provide open spaces that were for London as a whole—of significant value to London as a whole—whereas all the powers to provide local open spaces reverted to the local authorities, in other words, to the borough councils, because the borough councils were the primary
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local authorities in London. That was the change that was made in 1963. As a consequence it was, and still is, Hammersmith which ought to develop this piece of land, in other words, which should have developed the St. Paul's field site. Hammersmith said they could not afford it; and that is where the whole argument really started because, had Hammersmith said at the time they were going to do it, it would have been done.
What happened was that in 1972, somehow or other—it seems to have happened inadvertently—a Schedule was included in the Bill. As a consequence, if the Greater London Council now want to provide a local open space it would in fact have the power. But the truth is that even that, as the noble Lord, Lord Ponsonby, pointed out, would be contrary to the whole spirit of the London Government Act, because that Act gave primary local authority powers to the boroughs and it created the Greater London Council as a strategic authority for Greater London. Therefore, we must stop insisting that the Greater London Council must do the job of the local borough councils.
I would again ask your Lordships to remember that there are 32 London boroughs, and not only the Borough of Hammersmith. If the GLC started to provide local open spaces—and I was very interested to hear what the noble Lord, Lord Boyd-Carpenter, said—in Hammersmith, they would probably have to provide similar spaces in Tower Hamlets, in Hackney and in Islington. I cannot see the other borough councils sitting idly by while their ratepayers—because anything the GLC does is paid for by London as a whole—pay for local parks in one area without asking for reciprocal treatment. Once we start on that road, I am not sure where we shall end. That is the point so far as the provision of local open spaces is concerned. Power to provide local open spaces and the responsibility to do so rests squarely on the shoulders of the local borough councils. The Greater London Council is expected to provide open spaces that are significant in London terms.
The only other point I wanted to make—I put my name down to speak merely in case any point needed clarification and I should therefore be able to talk upon it—is the point made by the noble Lord,

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Lord Henley, about the £6 million. At no stage did the Greater London Council say that it would cost £6 million. The statement about £6 million was made by the director of finance of the London Borough of Hammersmith. That was his estimate of what it would cost his council to acquire that land. It was estimated that £4.5 million would be for land acquisition and £1.5 million for demolition, site clearance and layout as a public open space. That was his estimate. Although there is no doubt that discussions took place between the officers of the two authorities, at no stage did the Greater London Council, as a council, say that it would cost £6 million. What happened was that the Director of Finance of the London Borough of Hammersmith advised his council that, according to his estimate, it would cost £6 million, £4.5 million of which would be for land acquisition, and £1.5 million for demolition, site clearance and layout as a public open space. The figure of £6 million came from there.
Finally, I want to say something that I did not say last year. It was probably not so appropriate last year as it is now. We are in the process of making ourselves look ridiculous. The Money Bill from the Greater London Council will come to us every year, and every year there will be items that are continuous and for which we have voted years before, but for which additional expenditure has to be incurred. Last year, I gave the example of the Thames Barrier. That is a good example because it will go on for several years; every Money Bill in the next few years will contain something to do with the Thames Barrier. Obviously, that is not something with which Members disagree. But there will always be items with which Members disagree. There must be a stage where enough is enough, and in terms of the St. Paul's School site we have already passed that stage.
In 1975, this House included in the GLC Money Bill money for the development of that site. Last year, after an extensive debate and consideration by a Select Committee, it did the same. We must stop at some stage. Are we to go over the same ground every year? Are we to pick up some other item and debate it in that way? It is worth noting that, although the other place debates the GLC Money Bill every year, it does not debate it in this way. It uses the occasion for attacking
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some of the policies of the GLC, and it is a perfectly good opportunity for doing that. There are usually very good debates in the House of Commons on GLC policy, based on their power to debate the Money Bill. If we are to debate the GLC Money Bill—and I see no reason why we should not—I hope that our debates will be of that character. To sit together, and merely use the opportunity of the GLC Money Bill to have an additional appeal over some planning matter, seems to me to be an abuse.
I hope that this Bill will be given a Second Reading, that there will be no Instruction, that what happened to the GLC last year will not happen again, and that we shall not have people, particularly people trying to purchase a house—because they were the people who suffered most last year—finding themselves in a position where the Council has to tell them that it does not have authority to lend them money, and they must therefore either wait before signing the contract or even have it cancelled. I hope we do not have that. That is not the way for a House of the importance of this House to behave, over a matter of this kind.
6.45 p.m.
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords it would be inappropriate of me to comment on the merits of the Bill, or of the Instruction that stands in the name of the noble Lord, Lord Henley, but I think I should say something about the procedural aspects of the Bill and of the Instruction. I hope to do so in somewhat different terms from those used by my predecessor last year, because a certain amount has changed since then.
As the House has heard, the Bill is the usual annual Money Bill of the Greater London Council promoted in accordance with the London Government Act 1963, which, among other things, regulates the expenditure on capital account by the Greater London Council; in this case, during the financial period from 1st April 1977 to 30th September 1978. Of course, the Bill is not a Money Bill in the technical sense of this expression, and there is no constitutional reason why this House, or one of its Committees, should not amend a Money Bill promoted by the Greater London Council if it wishes to do so.

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My predecessor, the noble Earl, Lord Listowel, pointed out in the debate on the Second Reading of the Bill in the last Session, in connection with which an Instruction had also been put down, that it is possible by suitable amendment both to limit or reduce the expenditure on any item set out in the Schedules to the Bill, and also to amend the purpose for which the expenditure is allocated. So that there is nothing procedurally improper in this course, though it would be unusual in the case of this annual Bill which, with the exception of the Bill last year, has always been passed by your Lordships without debate or amendment.
The present position is that a Petition has been deposited against the Bill by the Hammersmith Society—and I have to declare an interest as a member of the Hammersmith Society, whose aims I support in general—the Fulham Society and the West Kensington Environment Campaign. The Bill will therefore go to a Select Committee and the Petition will be considered there in the usual way. I understand that the Promoters have challenged the locus standi of the Petitioners against the Bill. If this challenge is sustained, as was the case last year with those who petitioned against the Bill, the result would be that the Committee would not be able to consider the matters raised in the Petition. Incidentally, our Standing Orders also provide for the Select Committee itself to consider the locus standi of a Petitioner, even if it is not objected to by the Promoters. However, if the Instruction that the noble Lord, Lord Henley, has on the Order Paper was agreed to by the House, it would also fall to be considered by the Select Committee, and in that event I would propose on a subsequent Motion that the Select Committee should be given authority to hear evidence other than that tendered by the parties.
The Money Bill of last Session had five Petitions against it which, on being challenged by the Promoters, were found by the Committee to have no locus standi. The Committee then went on to consider the Instruction of the House of last year. They sat for five days, and visited the site of the proposed development. With the authority of the House, they then chose to hear three witnesses who were opposed to the development of St. Paul's playing field. Those witnesses
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were Mr. Stephen Fry, who had acted as agent for four of the unsuccessful Petitions; Mr. Patrick Ground, the chairman of the Fulham Society and Lieutenant-Colonel Dickson Burnaby, a local resident and another unsuccessful Petitioner. It is Colonel Burnaby who is now acting as agent for the three societies I have mentioned, and who has deposited their Petition against the Bill.
Lastly, I think I should reinforce what was said in his opening speech by the noble Lord, Lord Boyd-Carpenter, in drawing attention to the general observations in their final paragraph of the Select Committee that considered this matter last year. I think it is of the highest importance that we pay close attention to what our own Committee said on that occasion, and as the noble Lord has read it out in full I do not need to repeat it. But I hope your Lordships will keep it in mind when deciding what to do about the Instruction.
6.50 p.m.
Lord BOYD-CARPENTER: My Lords, there are only two matters with which I should deal in reply, although if any noble Lord wishes to put any other point to me I shall endeavour, subject to my own limitations, to deal with it.
First, may I assure the noble Lord, Lord Ponsonby of Shulbrede, that I have experienced no strain upon my conscience in moving this Bill. Nor do I believe, as he has suggested, that it would be a mistake to give an Instruction to the Select Committee. As I am sure the noble Lord appreciates, the position has changed radically since last year when building had hardly begun. As the noble Lord knows—and indeed said—this year building has proceeded to a very considerable extent. Six floors of the college—at least the framework—and a great many foundations are now on the site. From every practical point of view the situation has wholly changed.
I am authorised by my noble friend Lady Young, who spoke to me before the debate, to say that not only had she no intention this year of moving such an Instruction but that she would not think it appropriate to do so. Therefore I should like to point out to the noble Lord that in my case there is no strain upon my conscience, although I have, no

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doubt, strained it on many other occasions, but simply a realisation of the practical fact that the situation has completely changed, from the point of view of not only the work which has been done on the site but also—turning to the point about which the noble Lord, Lord Aberdare, with his unique authority as the Chairman of Committees reminded us—the attitude of our own Select Committee. We have now received their guidance, which is that they do not regard this as a useful method of proceeding. We are not bound by their guidance but we should require very strong grounds indeed to disregard it and to give them this year another Instruction.
I need to take up only one of the observations made by the noble Lord, Lord Henley. He suggested that it would be useful to have the Instruction in order to tell our Select Committee to do its duty.
Lord HENLEY: My Lords, the noble Lord misunderstands me. I said that in some measure an Instruction is always nugatory, because one is merely telling a Select Committee to do what it is charged with doing, anyway.
Lord BOYD-CARPENTER: My Lords, I have never heard a stronger argument against the noble Lord's own case than that. Now he is telling the House that his proposed Directive will be nugatory, anyhow. This seems to me to be a powerful argument for not pressing it. To suggest that we should tell one of our Select Committees to do what it will do, anyhow, is, I suggest, to treat it with insufficient respect. It will do its duty. This is a Private Bill. As we have heard, Petitions have been submitted and the Select Committee will do its duty. I suggest that it will not find that it is necessary to do what the noble Lord suggests it ought to do: to review, as an additional planning inquiry, the question of the evidence tendered during the planning proceedings. It is for the Select Committee to decide, but it would seem to be a considerable departure from the normal practice of this House were it to turn itself into an additional planning inquiry.
Finally, as I have said—and I know that the noble Lord, Lord Henley, accepts it—not only I but the Greater London Council, on whose behalf I have moved
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the Second Reading, have very considerable sympathy with the objectors. They are trying to meet the substance of their case, given the facts as they now stand. One can understand that an unsuccessful party to any proceedings always feels aggrieved and frustrated. Those of us who have been engaged professionally always felt aggrieved and frustrated when, from time to time, we were beaten. This is the natural, human feeling of the loser. However, it is not true to say, as the noble Lord has said, that the objectors have not had a chance to state their case. The noble Lord, Lord Ponsonby of Shulbrede, completely demolished that argument with his account of the very considerable number of occasions on which that case has been stated.
The objectors' problem is not that they have not had the chance to state their case but that all their planning arguments, both to the Greater London Council and to the High Court, have been unsuccessful. In these circumstances, I hope that the noble Lord will allow, as I am sure he will, the Bill to be read a second time but that he will not seek to attach to it a direction which would have very serious practical consequences for expenditure by the Greater London Council, a point which I ventured to outline when I moved the Second Reading of the Bill. Having made the protest and having once more given these gentlemen a most eloquent airing of their feelings and grievances, I hope that the noble Lord will allow this House and our Select Committee to proceed in the normal way.
On Question, Bill read 2a, and committed to a Select Committee.
Lord HENLEY Lord HENLEY rose to move that it be an Instruction to the Committee to whom it is committed that they shall not authorise so much of the expenditure on capital account proposed in the Bill as relates to the development by the ILEA of St. Paul's playing field unless they are satisfied that this project has not been allowed to go forward based on information which is fallacious. The noble Lord said: My Lords, I should be out of order if I attempted to answer any of the points which have been made by the three noble Lords who have spoken against me. I can do no more than move my Instruction. I said that I should not withdraw it hut

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that I would move it and that if I received any support I might press it, although if I received no support I should merely allow it to be negatived. My Lords, I beg to move.
Moved, That it be an Instruction to the Committee to whom it is committed that they shall not authorise so much of the expenditure on capital account proposed in the Bill as relates to the development by the ILEA of St. Paul's playing field unless they are satisfied that this project has not been allowed to go forward based on information which is fallacious.—(Lord Henley.)
On Question, Motion negatived.

SURRENDER RULE: INTERNATIONAL SECURITIES
6.57 p.m.
Lord TERRINGTON Lord TERRINGTON rose to ask Her Majesty's Government whether they will now reconsider their position regarding the 25 per cent. Surrender Rule, hearing in mind the importance, in the national interest, of maintaining London as a major centre for the international securities industry. The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. This is by no means the first time that I have raised this matter in your Lordships' House. As recently as July of last year, the noble Lord, Lord Cullen of Ashbourne, and I gave notice during the Second Reading of the Stock Exchange (Completion of Bargains) Bill that we intended to return to the subject in due course. In the past, I have sought a relaxation of the 25 per cent. Surrender Rule for the sole purpose of encouraging more effective management of the United Kingdom portfolio of foreign securities and, although this remains an important matter, my purpose in asking this Question today is to draw attention to the much wider issue of London's future in the international securities industry. What really concerns me—and here I must, of course, declare my interest as a member of a City partnership—is the growing evidence that the existing London market in foreign currency securities is in such a precarious state that some form of early relaxation in the rules is necessary to ensure its continued existence.
I feel sure that it is not difficult to appreciate that to be successful an international market must be large, liquid, continuous and readily accessible to all potential investors, and my aim during my brief speech this evening is to show that the present Surrender Rules are operating against these important prerequisites. Perhaps the simplest way of making my point would be, first, to say something about the present market situation in foreign currency securities and then to describe in some detail the adverse implications of the Surrender Rule as it now operates.
Naturally, the bulk of the business transacted in the Stock Exchange is in domestic securities, although outside the Stock Exchange there are more than 60 overseas firms dealing mainly in foreign securities. They transact most of their business for clients resident outside the United Kingdom. These firms operate in London because of the attraction of the City as a major financial centre with its pool of skilled labour and excellent communications. Moreover, they produce considerable benefits for us in the form of employment, services and prestige as well as some benefit to foreign currency earnings.
The first point I want to make, therefore, is the danger that any significant sign of a change in the attractions of the City as an international centre could well result in these firms moving their operations closer to their clients—in other words, to one of the Continental centres. My second point, which is closely related to my first, concerns the possibility of expanding business here in London in foreign currency securities by developing an active market for Europe centralised in London in these particular stocks. The object of doing this would be to provide a credible facility in the European time zone for business to be executed while the domestic markets are closed. In this way the United Kingdom could attract to itself some of the substantial currency earnings from the handling of this business.
The achievement of this however, has been shown to be impossible in the present circumstances. Those who have been examining the subject for a long time have determined that, unless the enormous untapped potential business in

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the home market is in some way freed to provide the basis of a European market, then such a market will not be established at least not in London. When I say "untapped potential business in the home market", I am of course referring to the United Kingdom's holdings of foreign portfolio investments, which I claim are largely sterilised by the present surrender requirements of 25 per cent. Surveys have shown that over 75 per cent. of the trading in US stocks in Europe is already executed in Switzerland. This is business which used to be done in London and might, if the Government act quickly, be done in London again. But if there are any further delays, then I am afraid that the Government will be responsible for exporting permanently earnings, jobs and prestige to our Continental competitors.
So, my Lords, we come to the 25 per cent. Surrender Rule itself, which over the years has so seriously reduced the domestic turnover in foreign securities and has resulted in a major decline in market-making capacity and a considerable worsening in service capability in London. This surrender requirement was first introduced in 1965, as a so-called temporary measure. During the last few years neither successive Governments nor the Treasury have suffered from any lack of advice and exhortation on the subject.
I myself have raised the matter on two occasions during debates in your Lordships' House on invisible exports, as well as by Questions for Written Answers. Various interested bodies have frequently pointed out the extent to which the surrender requirement militates against the proper management of our overseas portfolios. Some recognition of this fact appeared when the authorities allowed institutional fund managers to arrange what are known as "back to back" loans, but even this well-intentioned concession proved to be a disaster for those who chose to use it at the then level of sterling. The fact remains that the surrender requirement is still with us in its original form, and it is quite clearly not a tax but a confiscation of assets. What bothers me, my Lords—and I choose my words carefully here—is that this does not appear to cause any great moral disquiet in official circles.
Now as to the future, which is really the purpose of my Question. It seems
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to me that we either accept a continuation of the present unfortunate trend and recognise that London's position will be further undermined—possibly at an accelerating pace—or we do something to help to form the required home base on which to develop what will essentially be an "exporting" central market in Europe. I believe there are a number of alternatives worthy of examination for ameliorating the surrender requirement while at the same time protecting the contribution to the reserves.
I should now like briefly to put forward one specific suggestion for consideration by Her Majesty's Government. Of course I realise that certain complications arise in establishing the benefit to the reserves, since the transfer of currency is simply a function of the total sales of premium-worthy assets, or, to put it another way, the sale of 100 million premium dollars will produce 25 million dollars for the reserves, irrespective of the amount of the premium or the exchange rate of the currency involved.
On the other hand, translated into sterling, the exchange rate into the currency sold becomes vital. Whereas the 25 million dollars transferred in 1976 at an exchange rate of, say, 1·60 dollars to the pound would add £15½ million to the reserves, a similar transaction in 1972 at 2·60 dollars to the pound would have added only £9½ million. However, ignoring the exceptional year of 1974, when the sales of overseas sterling area stocks—cum the newly introduced premium—greatly inflated the surrender, it would seem that the benefit to the reserves falls within the 250 million to 350 million dollar bracket on an annual basis, and the average since 1971, even including 1974, is around £174 million.
These figures have been arrived at by using the published figures for transfers to the reserves factored by an average of prevailing exchange rates against the dollar, and they provide a useful basis for considering an alternative scheme. The first point I would stress is that, in my view, a sizeable reduction in the surrender requirement would quite obviously stimulate the volume of business executed and thus bring in sufficient additional overseas earnings to help preserve the benefit to the reserves.
Furthermore, I would point out that, whether investors switch or sell, the reserves still benefit, and naturally this benefit is related to the level of activity. I would therefore submit that from the point of view of the authorities greater benefit is derived from a greater volume of business; but from the investors' point of view activity is determined by the level of the premium since the 25 per cent. surrender is a direct function of this level.
Before leaving this point, my Lords, I can assure the House that I speak with many years' experience as a manager of American portfolios when I say that an impost of up to 10 per cent. of an investment on realisation so inhibits new investment (as well as switching) that it really makes it impossible to manage our foreign investments to the best advantage. At the present time I understand that the turnover in United Kingdom securities subject to stamp duty is of the order of 40 per cent. of market capitalisation, whereas in Government securities free of stamp duty the turnover is more than 200 per cent. of capitalisation. Against this, in foreign securities, where the penalty is the Surrender Rule, the turnover is only some 20 per cent.
What I am now going to suggest therefore is that a reduction in the surrender requirement from 25 per cent. to, say, 10 per cent. could well double the volume of business carried out in the United Kingdom overseas portfolio, and my inquiries in well-informed quarters strongly support this view. The indications are that the volume of business in the overseas portfolio could amount to some 40 per cent. of market capitalisation, or, based on the 1976 estimate of the total of overseas investments, a turnover of some £3,200 million. If half the volume is sales and all sales were subject to only 10 per cent. surrender, this would provide somewhere around £160 million for the reserve.
But, my Lords, that is only part of the story. First of all, this reduction would certainly encourage more efficient and active management of United Kingdom foreign portfolios, resulting in the much needed increase in market liquidity. Secondly, this much improved home market would attract business from overseas investors buying securities from, or selling them to, United Kingdom investors.
with a consequent increase in the volume of business in London to the advantage of our invisible exports. Indeed, unofficial estimates are that this would result in potential earnings, fees and services from the international market to show an increase of some £30 million a year. If we add this figure to the £160 million referred to earlier, we are in fact in a position to earn more than the £174 million at the present time.
This is one suggestion for dealing with an urgent problem and I believe it to be a perfectly feasible proposition, although there may well be other possibilities which could be discussed between the Treasury and the appropriate City organisations. The important thing is to get some discussions going. Of one thing I am quite sure, and that is that we can no longer afford to sit around and do nothing if we wish, as I do, to see London's position maintained as a major centre for the international securities industry, to the advantage of the national economy. All I am asking for is the help of the Government to bring this about before it is too late, and I hope that I am not once again going to he disappointed in the reply I receive from the Government Front Bench.
7.9 p.m.
Lord CULLEN of ASHBOURNE: My Lords, I believe this is the first time this subject has been debated, either in your Lordships' House or in another place, in isolation. It has been raised by the noble Lord, Lord Terrington, and other noble Lords in debates about invisible earnings, first in 1968, when no reply was forthcoming from the Minister, and secondly in 1973 in a debate about the importance of invisible earnings in the EEC, when the reply from the Government was as follows:
"I can remind the House of the time-scale which governs our transitional arrangements. It is this, in accordance with our treaty undertakings: that by the end of 1974 there will be an end to the premium on direct investment; by the middle of 1975 there will be an end to it as regards personal capital movements; and by the end of 1977 there will be an end to it in regard to portfolio investment. These dates are final dates".—[Official Report, 16/5/73; col. 898.]
This statement was relatively encouraging. There was to be a definite time limit.
But what has happened since then? A start was made in the 1972 Budget and

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controls on direct investment below £1 million were lifted. But in March 1974 not only were these controls reimposed but the EEC Commission agreed to an application for postponement of the deadline. Then it agreed to a further extension in 1976, and earlier this month yet again agreed to a continuation of the controls. However, this time it stressed that it would take another look before the end of 1977. This may perhaps be significant as it is then that controls on portfolio investment are due to come to an end. Perhaps when the noble and learned Lord comes to reply he will be able to say what really is going to happen.
It would seem from remarks made by the Prime Minister that we can look forward to a surplus on our balance of payments next year, continuing for a period of years. Others take a similar view, as the following extract from an article from Brussels in last week's Economist confirms:
"Britain is doing nicely on the external payments front. Its official reserves in June rose by 1,671 million dollars to a record 11,572 million dollars and its balance of payments is moving into the black as North Sea oil begins to flow. The trouble is that all this rather undermines Britain's case for keeping on its controls on capital outflows to other EEC countries. By the end of 1977 the other eight may put pressure on Britain to liberalise its present rules. If they succeed British shareholders will be able to invest anywhere in the EEC without paying the dollar premium".
If the dollar premium does come to an end in the EEC it really would be an extraordinary position if it were still to be maintained in the overseas sterling area, and even more extraordinary if the surrender rule continued there.
Noble Lords will remember that the dollar premium was imposed on OSA securities in 1972 and the Surrender Rule was further imposed in 1974. These impositions took place suddenly owing to serious national economic difficulties. Now that the position looks so much bettter, does the noble and learned Lord not think that these crisis measures should be rescinded, or is it intended that investment in the sterling area should be especially penalised?
Reverting to the much wider question raised by the noble Lord, Lord Terrington, is not this the perfect opportunity of doing something about the 25 per cent.
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surrender on all overseas investments? It is widely recognised that our developments in the North Sea provide a wonderful opportunity to invest in up-to-date plant and equipment for manufacturing industry. Is it not also an opportunity to do all that we can to remove shackles on our service industries, which have been responsible for the outstanding record of the invisible earnings of the country over the last 200 years? Does it make sense to put any obstacles in the path of those who produce over a third of our total foreign earnings, equivalent to nearly half of our import bill? All these earnings are absolutely vital for a nation which has to import, among many other things, half of its food.
The noble Lord, Lord Terrington, has made out a strong case for the reduction from 25 per cent. to 10 per cent. in the Surrender Rule. This I wish to support, but I do so as a halfway house towards abolition and I cannot help thinking that abolition would he preferable. I hope, therefore, that the Government will either decide in favour of abolition or agree to a reduction to 10 per cent. at this stage followed by abolition when a further improvement in the economy of the country has taken place. I know for a fact that the Association of Investment Trusts, who are by far the biggest managers of overseas portfolios, have pressed for many years for total abolition and continue to do so. Surely, it is high time that some notice is taken of the opinion of these professional people.
Perhaps it would be helpful at this stage if I gave an example of the inhibiting effect of the Surrender Rule on the making of decisions by institutional investors. Let us say that an institution invests half a million dollars in a US dollar stock. Having held it for two or three years the value of the investment increases to 1 million dollars. Before the Surrender Rule was introduced the investment would have been sold at a profit of half a million dollars, capital gains tax of 150,000 dollars would have been paid and 850,000 dollars reinvested. However, because of the Surrender Rule—costing 80,000 dollars—no action is taken and in due course the profit disappears. So the Revenue does not receive 150,000 dollars and the stock of investment dollars does not increase by half a million dollars.

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I wonder to what extent the Government, or for that matter the Treasury, are aware of the crippling influence of the Surrender Rule on the volume of transactions in overseas securities in London. Personally I have no doubt that a reduction in the rate to 10 per cent. would double the volume, as Lord Terrington suggested, and this could well be a conservative judgment. So great has been the decline in activity that United Kingdom brokers have no incentive to spend money on research and dealing facilities since the rewards are so low. Nor is there any incentive to open offices in the USA, though some 30 firms of US brokers have opened offices in London and have captured almost all the institutional business in US securities. The noble Lord, Lord Terrington, has painted, quite fairly, a depressing picture of the present state of overseas securities business and the likelihood of its demise in the near future unless something is quickly done. Not just a patching up operation, but to clear away obstacles to the development of an international market which could be very large indeed, as I shall hope to show.
Recently the New York Stock Exchange released some staggering figures on overseas turnover in US stocks. Foreign purchases and sales account for about 9 per cent. of the value of all shares traded on the US exchanges. In 1976 the gross foreign transactions totalled 33·6 billion dollars, nearly 50 per cent. of which came from Germany, France, the Netherlands and Switzerland. Foreign source commissions to US brokers totalled 144 million dollars in 1975. In addition, a further 6.6 per cent. of turnover of the New York Stock Exchange took place in non-US exchanges. The point I am trying to make is that this huge volume of business is almost all done by non-United Kingdom firms, many of them with offices in London; so United Kingdom firms could and would compete for this business if their hands were not tied behind their backs. United Kingdom holdings of US stocks amount to some 8·7 billion dollars, or about 90 per cent. of the Swiss holdings of 9.7 billion dollars. The United Kingdom volume is negligible and no longer profitable. The Swiss volume is vast. So unless the Treasury or the Government prefer for some obscure reason that all this business and the invisible earnings resulting should go
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elsewhere, let us have an end to this Surrender Rule, or at least a major reduction in the rate.
The noble Lord, Lord Terrington, reminded us, not for the first time, that the Surrender Rule was introduced in 1965 as a temporary measure. It has now survived for 12 years during both Socialist and Conservative Administrations, so this is no Party matter. Evidently the Treasury has dug its toes in and I suspect that it blinded with science succeeding Ministers and persuaded them that this method of confiscation is necessary. I hope, therefore, that the noble and learned Lord, Lord McCluskey, will take a longer-term view than his predecessors have taken, and that he will be able today to give encouragement to those who are concerned with dealing in overseas securities.
I earnestly ask the noble and learned Lord to make the position clear. If, to our chagrin, it is intended that the Surrender Rule is to be permanent, would he kindly say so? If it is to be reduced or abolished in the near future, would he indicate when that is likely to be? I know that he will appreciate how important this information will be for those concerned, to make their longer-term plans with respect to staff and staff training, accommodation, communications, the sophisticated equipment that is necessary, and so on.
In case it should be thought that my noble friend Lord Terrington and I are exaggerating, noble Lords may be interested to know that Merrill Lynch, that exceedingly large firm of United States brokers commonly known as the "Thundering Herd", is in process of moving its administrative operations from London to Dublin where it proposes to engage 600 people. It will be even more disturbing if firms move their whole operations to other financial centres in the EEC. It is also true, unfortunately, that there is clear evidence that business in South African securities has suffered a similar fate to that of American securities. In less than four years since the Surrender Rule was extended to South African securities, business has declined by 80 per cent. and has been lost to New York, Johannesburg and Paris. Perhaps nobody will shed tears over the loss of business concerned with

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South Africa, but that is an example of what has been happening and it may well extend to Australian, Hong Kong and other overseas sterling area securities. We must keep a sense of proportion over this matter. On the one hand, we are talking about a mere £174 million even if the Surrender Rule were totally abolished. On the other hand, on the reduced scale proposed by my noble friend, Lord Terrington, it is probable that no loss at all to the reserves will take place.
Finally, I well remember that when we debated the pros and cons of joining the EEC, one of the aspects on which there was universal agreement was that there would be a great opportunity to increase our invisible earnings. There exists in the City a unique concentration of facilities and skills which have attracted many foreign banks to open branches here. Let those who think unimportant the demise of foreign security business, ponder the effect of chipping off even a small component part of that structure. Surely it would be better to remove all constraints on our service industries and to build on the foundations of the past, expanding international markets of every kind. There may be a difference of opinion as to the proper treatment of lame ducks, but surely we have all been taught not to kill the goose that lays the golden eggs.
I have asked the noble and learned Lord, Lord McCluskey, several questions and I gave him a note of them before the debate. First of all, is the premium on portfolio investment in the EEC to end on 31st December 1977, as stated in column 898 of Hansard of 16th May 1973? Secondly, in view of the rapidly improving balance of payments, can we not now dispense with the Surrender Rule altogether? If not, can we now reduce it to 10 per cent. and abolish it, say, 12 months later? Furthermore, can we now abolish it in respect of OSA securities on which it was suddenly imposed at a time of crisis in 1974? Lastly, is it, in fact, intended that the Surrender Rule should be permanent or semi-permanent? If not, when is it intended that it should be abolished or reduced?
It will not surprise me if the noble and learned Lord, Lord McCluskey, is unable to give precise answers to all
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those questions, but I earnestly hope that the outcome of this short debate today will be that Her Majesty's Government will consult with the appropriate organisations in the City and seriously listen to the arguments that they, much better than I, will be able to put forward on this complex subject. After that, I trust that the Treasury will, at long last, surrender.
7.26 p.m.
Lord DAVIES of LEEK: My Lords, I am delighted that the noble Lord, Lord Terrington, has given us the opportunity to discuss the issue of the Surrender Rule. The noble Lord, Lord Cullen of Ashbourne, and the noble Lord, Lord Terrington, who have spoken tonight, with the noble Earl, Lord Limerick, who has not yet spoken, but who spoke in the 1968 debate and other debates which I have read, have, between them, succinctly raised some cogent questions. As the Minister wishes to go to Scotland tonight I shall cut my speech in half, because there is no point in repeating the cogency of experts. However, I also have something to contribute. I must declare an interest because I am interested in the platinum market and I know how it works. I am chairman of a small group, and there are probably only three of us in the London Platinum market. Having declared my interest, I shall link it to this debate as pregnantly and cogently as I can in the short time that I have allotted myself.
My Lords, what are we talking about? How can we make the issue of the Surrender Rule more clear to the layman? Let us look for a moment at the history between 1939 and 1945, when this country, sometimes alone, courageously sold its assets overseas and asked those investors who had dollar and hard currency overseas to sell those assets to win the War, which we did. I hope that many people will realise that our so-called difficulties were created by that terrific struggle. Having done all that, it was necessary for the Government to hold as much of their hard currencies as possible. Both during and after the war British subjects, including famous companies, were asked to get rid of their remaining dollar investments and pass them over to the Government. Nevertheless, in the interim—and I must pay a tribute here—by astute management and know-how, as exemplified by noble

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Lords in the Chamber tonight and by men who have been in the business for years, we have been recouping.
I should like to draw an analogy with coal mining. If one were talking of digging a new pit in Selby, or trying to find a new seam of coal in Kent and elsewhere, one would need thousands of miners. However, if the mining industry dwindles, so will the families of miners, and one will not find men with the physique, know-how and courage needed for that type of employment. It may seem far-fetched, but if the money market and the City with all its know-how and practical knowledge outside books on industrial history, economics or anything else, dies, these people may emigrate and Britain will lose a great asset. The asset, and its size, I shall explain in a moment.
It is just over 50 years since Winston Churchill raided the Road Fund. All Governments, not just Labour Governments, have raided the funds when they have been in power, and I can see former Chancellors of the Exchequer spreading themselves comfortably here in the Chamber. It had to be done. What has happened to us now? A rule ultimately was made that when a holder of an investment bought with premium dollars, sold it, one quarter of the proceeds had to be exchanged into sterling to help our balance of payments. That is simply the advantage there. That is simplified. But what are the consequences? The first is that one quarter of the premium is surrendered, and the arithmetic of it was explained. But it hampered portfolio management; it hampered the liquidity and the freedom of investment; and therefore it hampered our balance of payments.
Now I will go a little broader. It is really astonishing. There was a letter in The Times the day before yesterday from Mr. N. O. Taube dealing with this.
He says, after other securities were mentioned, that
"… governmental securities totalling a further £9,277 million …"
were issued. That money has helped our trading. Everybody in this House knows the Stock Exchange report of 1968, and knows that all our trading has been balanced through the years by 35 per cent. to 40 per cent. through the work of the City balancing with vast sums like that.
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Let me show the vastness of that. I have a little computer here. I have been working on it. If at the day of the Norman Conquest we had a cricketer knocking one run a minute, and rich Members opposite plus poor ones on this side of the House decided to give him £1 a minute for every run he ran up, and he ran that run up one a minute for 1,000 years as from then, the days of the Norman Conquest, my little computer, while noble Lords were speaking, tells me that today we should have to give him £52,560,000. People do not know what a million means. They talk about a million, but they have no concept of it. It is £52,560,000 that would have to be paid to that Welsh cricketer. It could only be a Welsh cricketer who would do it, who would be daft enough to try it.
Compare that with the £9,000 million odd earned in one way and another by the City, and the people in and around the City, in one year. Whatever kind of Government are in power, be it Liberal, Labour, Conservative or whatever, that type of machinery is needed for Britain to live in the modern world. The Treasury must realise it, and Governments must realise it. It was the noble Earl, Lord Limerick, who said in 1968 that he seemed to be the Cinderella never invited to the ball. But it is not quite like that. I think now we have been a little too lugubrious. We are mourning a little too much. I think, like the wise virgins, our lamps are gradually getting filled with oil and we can go to the wedding feast smiling. It is worth the Treasury, and whatever Government, taking a little risk that way.
I will put in a warning, and I do not want to make a Party point to spoil this constructive atmosphere. The Reddaway Report said that we must look at Government overseas expenditure. Whatever Government are in power, our problems are not going to be solved if we think that we can live like Imperial Britain up to the war or in Victorian times. We must adjust ourselves. I have not the slightest doubt that once again we can recapture leadership. I have been speaking for eight minutes. I think I will take about two minutes more.
Most Members of this Chamber know that only seven times in 170 years have

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we ever balanced our physical trade. In other words, we have depended upon the City, and the men and women working in the City with know-how and investment and on banking, insurance, shipping, tourism, and hotels to balance our trade. Looking around London this week I should think that all the world is coming here. If we are that depressed and miserable, I do not know why so many holidaymakers come here. The official figures are that last year 10,100,000 overseas visitors came to Britain; that is 14 per cent. more than in 1975. When those who went out to Spain and those who came in to spend here were all balanced up, we made £620 million surplus on our tourist trade. People do not come to a country that is dead; people do not come to a country that is finished. They come to a country because there is something there attracting them. Despite the Common Market, and despite some of the setbacks, I have not the slightest doubt that we can recapture our position.
I am going to finish with this example in my own field. We have three firms, more or less: Ayrton Metals, Montagu's, and Argos, in which I am interested—three small firms which, on three or four occasions in the last four or five years, have brought to Britain from all over the world people dealing only in platinum. Today, by the way, it is £86 an ounce. We brought them from all over the world and established a certain leadership. When we had a meeting not so very long ago in one of the famous hotels here, we learned the importance of London, which has been built up in three years as one of the centres of the platinum market. We now have warrants; we now have a hallmark; and we have twice daily quotes, and of course the possibility is growing for dealing in futures in this metal.
To finish with, Milton F. Rosenthal, President of Engelhard Minerals and Chemicals Corporation, paid a tribute to British enterprise. He said:
"It is beyond dispute, however, that here in England Dr. William Brownrigg, Charles Wood and Sir William Watson carried out the first constructive investigations of"
the properties of platinum. Today platinum is known in the chemical industry, and is a great catalyst against pollution in the car industry. That is just a small group of firms. There are
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many small enterprises making that kind of contribution.
I must make my last point, and omit the other good ones because of the time factor. It is a pity, but we rush these debates. No, you have got to get home, boy! Today I put down a Question, to ask the Minister what has happened with Sir Harold Wilson's Committee. This was to be a high-powered committee. I looked at the members, and anybody here can find them without me reading them out. Sir Harold Wilson's Committee is dealing with financial institutions. The Wilson Committee is deeply concerned with Britain's industrial investment. It should be as much concerned with the City and invisible exports. I should like to know what chances there are of an interim report, and what place will the City and this question of the 25 per cent. surrender take in its assessments. If there is any possibility of an interim report, I hope that we can get it.
Those who read the exchange control documents by Jordan and Sons Limited will read on page 20:
"If the movement towards budgetary balance continues, and if the balance of payments swings into a continuing and increasing surplus sufficient to start repaying some of the massive existing external debt, it can be expected that there will he a fairly rapid programme of exchange control relaxation, beginning with EEC transactions".
I hope that note will be taken of this important little debate, and I am grateful to the noble Lord for raising these issues. I had now better bow to wisdom and sit down, despite the tendency to talk longer.
7.41 p.m.
The Earl of LIMERICK: My Lords, it is always a pleasure to speak following the noble Lord, Lord Davies of Leek. One always learns something from him; for example, I was quite unaware that the Welsh were playing cricket in 1066.
Lord DAVIES of LEEK: That was a bit imaginary, my Lords.
The Earl of LIMERICK: Evidently that is where it all started, my Lords. However, I will not yield to the temptation to follow him down his delightful Welsh byways and I think that even he would admit that if his batsmen had suffered confiscation of £1 in every £4 he might

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have been less inclined to proceed with the business of making runs. I have a slightly unusual interest to declare in this debate. Already my remarks have been twice quoted to me, first from 1966, when I made my maiden speech in a debate on invisible exports, and on a second occasion—reported in Hansard at col. 898 of 16th May 1973, when I could no longer describe myself as a maiden—when I was replying for the Government, again in a debate on invisible exports. I wish to associate myself with the first of the questions asked by my noble friend Lord Cullen of Ashbourne; namely, when it is we may look to an end to control on portfolio investment.
The information which I gave to the House in May 1973 concerning our Treaty obligations has already, I regret to say, failed to be realised in two of its three particulars, and the noble and learned Lord, Lord McCluskey, will understand well if I am inclined to press him rather hard, as the author of that statement, on the intentions of the Government concerning the third of these matters; namely, the liberalisation of portfolio investment which is due at the end of this year.
After the very well-researched speeches of the noble Lord, Lord Terrington, to whom we are greatly indebted for introducing this important subject this evening, and my noble friend Lord Cullen, I need not go into the background. However, I think it would be legitimate, while resisting the temptation to widen the debate and to speak about the City at large, to say a word about the place of invisibles and why this dollar premium matters so much in that context.
Broadly speaking, £1 in every £3 of our gross receipts from overseas trading in 1976 was derived from the invisible sector; to be precise, £12,856 million of invisibles as against £25.296 million of visibles. The net yield from these private invisibles in 1976 was £4,364 million. Even after deducting the public sector invisibles deficit, £2·2 billion, there remained a favourable balance of £2·2 billion, the same figure. I pause there to make a plea which has been made many times before, but which will persist until something happens; that in the statistics which are published there should be a distinction of the private from the public
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sector invisibles. Nobody argues about the necessity of the Government to spend money overseas maintaining Embassies, paying interest on debts and the other necessary expenditures, but those who are responsible for these private earnings are entitled to have them shown gross and before offset for the public invisible deficit.
This afternoon the figures were published for our trading in the month of June and these showed that there was a deficit on visible trade of £287 million. In the same month there was an estimated invisible surplus of £220 million, so the deficit on current account was £67 million. This is a slightly improving trend which we are all happy to see, but it underlines the place which invisibles play in this matter. In 1975 the earnings of the City were £1,218 million net. The reason I stress this is because the City of London is a complex of interlocking, international financial markets. It has held its pre-eminent position among international centres despite a decline, now a near eclipse, in the pound sterling as a reserve currency for a number of reasons. The first of these I continue to believe is the reliability and integrity of its dealings with those who have affairs with it; the second is the excellence of its communications; the third is its convenience; and the fourth is its completeness. It is a system in which each market depends in some way on the other markets; if you weaken one you weaken the whole. Therefore the strength of our securities market and its continuing pre-eminence among the securities markets of the world is of central importance to the functioning and efficiency of the City of London as a whole.
What then is the rationale of the dollar premium? Its intention was and is to limit the funds available for private outward investment by creating a closed pool and for reasons which we well understand. Within this limit it serves the purpose of rationing available currency between would-be users by a market price mechanism the dollar premium reflecting the balance of supply and demand between British buyers and British sellers of dollars which are available for this purpose and currently its level as has been mentioned is about 40 per cent. There would anyway be a steady upward pressure on that premium level even if the pool were of constant size, because the same volume

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as assets is made yearly more costly to maintain in dollar terms by the ravages of inflation. But the pool is not constant. It is subject to the drain of the 25 per cent. surrender and it is drained in this way every time a realisation takes place.
As to the surrender itself, what does it achieve? What it does not achieve is any extra revenue for the Treasury. When the holder of a foreign asset sells it, 75 per cent. of the dollars go to a buyer who is buying them at a premium rate for use for a comparable purpose, and 25 per cent. under this rules goes to another buyer, who is an official dealer in exchange at the official rate, and not to the Government. So the effect is that on each transaction 25 per cent. of the dollars compulsorily so surrendered at the official rate go to swell the United Kingdom reserves. What does it yield? I will quote the figures from 1970. In that year it was £87 million; in 1971, £128 million; 1972, £138 million; 1973, £158 million; 1974, £265 million; and in 1975 it was £180 million.
Do our reserves need this small annual addition? In the past, successive Governments thought that they did. But now, I would submit, the position is different. Reserves are at a record level of 11½ billion dollars, which my noble friend Lord Cullen of Ashbourne has already mentioned, and with forecasts of increasing balance-of-payments surpluses from North Sea oil it is hardly credible that this annual addition to the reserves is needed. Even if it is not needed, does it matter that it is taking place? Yes, my Lords, it does matter. Naturally, we are anxious to repay our crushing foreign debt as fast as we can but not, please not, at the price of impairing our ability to earn invisible income. I thought that the case made by the noble Lord, Lord Terrington, on the possible outcome of a reduction, or abolition, of this surrender was interesting and persuasive. I am sure that this would repay careful study. That is the effect that the 25 per cent. rule now has.
It has been pointed out that the surrender also inhibits the freedom of management discretion of those who are in charge of our portfolio funds, and it is a striking fact that for most of these funds the dollar premium, typically, is their largest single asset. So, faced with this
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constraint on the management of that largest single asset, it follows that their funds cannot be efficiently managed. Furthermore, when there is a rule of this kind there is always a temptation to find means of avoiding submitting to it. I have no evidence, and I wish to make no suggestion, that this is widespread, or indeed that it is happening at all, but evidently there must be a temptation to try to deal outside the rules of the surrender when it has such a penal effect.
The point, though, on which I should like to rely, and which has already been alluded to by others speaking before me, is the effect upon the institutions of the City of London. Certain institutions are being driven away, and certain types of dealing in certain markets are being driven away, and I might elaborate on an example which I think my noble friend Lord Cullen of Ashbourne may have had in mind regarding foreign share dealings. An association has grown up, the Association of International Bond Dealers, which is taking the opportunity of restrictions on dealing in London to deal in securities which are listed in more than one country. It happened recently that two of the London jobbers, who had been dealing over very many years in South African markets, gave up dealing in those securities because of the Treasury restrictions. If that tendency is multiplied it means not only that our traditional business conducted in London in shares of other countries—South Africa was the example here, but it would apply also, as my noble friend Lord Cullen mentioned, to Australian, Hong Kong, and American shares, which are responsible for a very large turnover —would leave London, but also that overseas business at present concentrated in London, in such internationally traded securities as BP, Shell, Unilever, Rank, EMI, to name some examples, could well drain away from our Stock Exchange.
The recent findings of the Association of International Bond Dealers were that more transactions in South African shares now take place outside the Stock Exchange than inside. That is a direct loss to our invisible earnings. The market in securities will always lie where those securities are held. The reason why the market in South African shares was in London was that the mining finance houses in the City were large holders of those shares. The 25 per cent. Surrender Rule has made it

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virtually impossible for United Kingdom holders to switch, and has driven the market away from London. That, my Lords, is an example of what I mean.
In reiterating my question to the noble and learned Lord who is to reply as to whether he can guide us on the timetable here, I should say that we would dearly love to know what is the future for the dollar premium in relation to investment portfolio transactions. We should also like to know—and we are, I believe, entitled to know—what is the intention in regard to the Surrender Rule. I suggest to the noble and learned Lord that, although I cannot pretend that a reduction from 25 per cent. to 10 per cent. would be unwelcome, it is not the answer. If there is a reduction, one is left with the same amount of administrative work for a much smaller benefit, and, with the strength of our reserves, surely the time has come when this 25 per cent. surrender could be done away with root and branch.
7.55 p.m.
Lord HARMAR-NICHOLLS: My Lords, it will have been noted that all the speakers in the debate so far have had an interest to declare. That means that they know what they are talking about. That means that they have experience outside merely being an advocate for a point of view in your Lordships' House. I hope that their expert opinion, which has been put in very clear terms, particularly by the noble Lord, Lord Terrington, and my noble friend Lord Cullen of Ashbourne, will be taken into account. I was rather interested in the declaration of interest. We even had the noble Lord, Lord Davies of Leek, with the humility of saying that the rich men are on this side of the Chamber and the poor on the other, having admitted little more than a second earlier being one of the three platinum tycoons who still exist.
The interest that I want to declare is in preserving a vital part of this country's economy at a time when the health of our economy means more than ever before, and is in a greater danger than ever before. Although the points that I want to put will be addressed to the noble and learned Lord, they are really points to be put to the Chancellor and to the Treasury, and I know that the noble and learned Lord will
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accept what I say in that spirit. Having heard the expert evidence, and the points of view from noble Lords who have spent a lifetime in amassing the expertise which they have shared with us, I want to ask at once whether the Chancellor of the Exchequer will view the appeal which has been made as just another Parliamentary moan from people who are arguing purely out of self-interest? Will that be his reaction, or will he recognise that he has had a warning from experts who are truly concerned at the increasing possiblility that the Treasury attitude as it exists at the moment—the attitude, in this instance, of grabbing the quick buck—is adding to the real risk that the City of London, and all that it means, will be losing its place in the financial world?
Those are the two choices, and I hope that it is the second one with which the noble and learned Lord, and the Chancellor, for whom he is speaking, will view the situation when they look at what has been said in the debate. As has already been made clear, we are not here talking about peanuts. We are talking about a very significant and important segment of this nation's wealth producing capacity. Other figures have been given, and I should like to give mine which seem to be slightly different from others mentioned. I take them from Annex 4 of the data on the United Kingdom balance of payments 1965–75, in which the details show that the City's overseas earnings for the last available six years period operate between £600 million and £980 million net. It is that part of our wealth producing capacity that we are talking about.
When I was thinking about what contribution I could make to the debate, I wondered whether I might be accused of exaggerating by speaking about this bigger framework in what is really a very narrow debate; it is technical, and expert, and important, but it is narrow. Does the existence of this 25 per cent. surrender carry the kind of risk that I have just been describing? I mean the risk of undermining the very existence of the City of London itself. I was comforted when I realised that it is not only me who thinks this. I found that the financial section of The Times dating back to 1976 stated:
"The Chancellor's assertion that he cannot accept that the decline in the gold share market weakens London's position as an international

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financial centre simply does not hold weight. To cut off one limb must ultimately weaken the whole body.
"Already there are growing fears that London's pivotal position in the commodity markets has been weakened … Confidence is extremely fragile in all the London financial markets at the moment and some easing of the surrender rule—which, after all, only brings in some £180 million to me balance of payments—would have been a welcome indication of the Government's intentions".
I do not think I am exaggerating when I can produce evidence like that.
In addition to that impressive expression of opinion, we also have factual evidence which backs it up: factual evidence which shows that, as a result of the 25 per cent. surrender policy, both business and influence have been driven from London to New York. There is no argument about it; it has happened. Since the 1974 Budget which extended the dollar premium surrender rule, the volume of dealings in gold mining finance shares has slumped to a sickening level in this country, as was pointed out by my noble friend Lord Limerick. At the minute, it is only 20 per cent. of what it was in 1973–74; and if this loss of four-fifths of the business—important, profitable business—is not sufficient to cause the Treasury to change their mind, then perhaps they will be impressed by the more important fact that we have seen the New York business overtaking the London market in the very areas that we originated and developed in the early stages. We invented it, we developed it, it was being made successful and worth while; and, because of this interference, which I think was a pointless interference, we now see that we as the inventors and the originators are very much below what New York is doing. We all know that New York has had aspirations for tens of years for the power, the influence and the wealth of the City of London to be taken there. They felt it ought to be there because they are so big. We shall ignore at our peril this clear indication that in this important field it is happening; and if we do not do something about it, then we shall be neglecting our duty.
If that is not sufficient as evidence—first of all, the expression of view on the financial page of The Times; secondly, the fact that we literally have lost business; and, thirdly, that we have seen New York overtaking London—perhaps the noble and learned Lord and the Chancellor
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will be swayed by the even more significant fact, again referred to by my noble friend Lord Limerick, as regards it affecting our long-term projects, that we have seen the withdrawal from the scene of leading jobbers in this field. They have made up their minds that the situation is such and the deterrents put in their way are so strong that they cannot carry on, and they have withdrawn from the field; and at a time when our jobbers are withdrawing, we have had, as my noble friend Lord Cullen has pointed out, others coming in, opening offices in London itself and taking on business that our rules have made it impossible for our own people to conduct. It is no wonder that the chairman of the Stock Exchange felt constrained to warn everyone not very long ago in very doleful terms indeed. The chairman of the Stock Exchange said:
"People wonder if London has the stature it once had".
What words to have to come from the chairman of the Stock Exchange, doing his duty in saying them! He then added:
"I am not gloomy about London as a financial centre but you are chipping away at the edifice".
My Lords, this example brought forward by the noble Lord, Lord Terrington, and my noble friend Lord Cullen is making it crystal clear that, unless we stop chipping away at the edifice by such rules as this 25 per cent. surrender, then whether or not the chairman of the Stock Exchange is gloomy about the future, I am, and many other people in a better position to form a judgment are gloomy indeed. Because we know that the City depends upon world confidence in order to exist at all. That is why it is there; that is why we have been the centre of finance in the world for so long—because of the confidence. Such confiscation—and this 25 per cent. surrender is confiscation; it takes away 25 per cent. of something which, under the normal contractual transaction, belongs to somebody else—is a certain way of exploding the vital confidence that the world must continue to have if the City is to remain the centre of things as it has been in the past.
It does not need anyone as insignificant as I am to say that confidence is a commodity which it is much harder to create than it is to destroy. It has taken

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centuries to build up the confidence that has put us in the position of such strength. It could be that a mistake of this sort, allowed to continue beyond a point where there is even the remotest excuse for it, could play a big part in destroying something which has been built up over the centuries.
Perhaps the factor most damaging to confidence—and this is a point which I should like the noble and learned Lord to keep in mind when he replies, if he can—is the transparent naivity of the reasons given by the Treasury in the past to justify this confiscation in the first place. It was supposed to be done to strengthen our national reserves, but this is a nonsense. The compulsory 25 per cent. surrender creates nothing new. So far as the nation's reserves are concerned, it was always there and it still remains. They are part of the nation's reserves whether they are privately owned or whether they are publicly owned.
I think it is worth having on the record the very telling words of the late Lord Tangley when he spoke in the debate in this House on the 11th December 1963, at cols. 561 and 562 of the Official Report. I think they ought to be repeated on this question. This is what the late Lord Tangley said:
"If this money goes into the reserves, the monthly statement of which, of course, is awaited all over the world with baited breath, all that has happened is what a trader would do if he took stock off his shelves in his storeroom and put them in the shop window. That is no addition to the stock. The trader would be guilty of self-delusion if he valued his stock in that way and thought that he had added to his assets"
by merely altering where it was placed.
"Certainly if he added to the value of his stock in that way for the purposes of a prospectus. I am afraid that the Director of Public Prosecutions would look upon him with a very jaundiced eye. If the Treasury utilises these sums for the repayment of debt, then they are using what is virtually confiscated capital to repay current debts. This, to echo the words of the noble Lord, Lord Cromer —repeated here today by the noble Viscount, Lord Watkinson—is eating the seed corn'";
and that is the result of practising such confiscation in this way.
In that quote from the late Lord Tangley, the name of Lord Cromer is mentioned. Lord Cromer is an ex-Governor of the Bank of England—and now I come to the one question of which I should like the noble and learned Lord
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to make a note. If he can give me a reply, I should like it. It is a presumptuous question, but I think it could be helpful. The question I want to put to the noble and learned Lord is: is he in a position tonight to deny that the Bank of England, which has to operate this manoeuvre for the Treasury, has not itself recommended to the Chancellor that this iniquitous confiscation should now be ended, or at any rate mitigated? Can he deny that the advice tendered to the Treasury by the Bank of England itself is that what the noble Lord, Lord Terrington, is asking for is what, in its opinion, ought to be done?
I, personally, have reason to believe that that advice from the Bank of England has been given to the Treasury. It is advice which, no doubt, would have been given publicly if it had remained a free agent. This is perhaps another example of the danger which arises from nationalisation. It can have the effect of muzzling your watchdogs and stopping them from barking. This advice, which I suggest has been given privately, is sound advice. It is based on the type of evidence which has been produced by experts in this House tonight. It is advice which should be acted upon without delay; and we all ought to pray that in the meantime too much damage has not been done already.
8.10 p.m.
Viscount AMORY: My Lords, the noble Lord, Lord Davies of Leek, father of platinum, the Andrew Carnegie of the platinum industry, said in the earlier part of his speech that, looking around the House, he could see former Chancellors of the Exchequer "scattered over the Benches". In my extreme old age my eyes are dim, but, peer as I might, I could not identify any of my ghostly colleagues here this evening.
The noble Lord, Lord Terrington, is an expert in these matters and, very properly, he declared an interest in the matter. My noble friend Lord Cullen of Ashbourne is another expert and my noble friend Lord Limerick is a third. I agree with what my noble friend Lord Harmar-Nicholls said when he said how fortunate we are in having numbers of people in this House who can speak from their own first-hand, expert knowledge on these complicated technical subjects. I hope

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very much that the Government will listen carefully to the cogent arguments and the cogent case that has been made for the abolition or, at the very least, the diminution of the level of the 25 per cent. Surrender Rule.
Have I an interest to declare myself? I suppose that, in a way, I have. I have a modest number of dollar investments. I only want to emphasise two aspects of this matter, quite briefly. First, this rule, a very rigid restriction, was imposed, as was said, as a temporary necessity at a time of severe dollar-sterling exchange trouble. It could only be justified by such circumstances. I cannot believe that the current condition of the sterling exchange any longer justifies such a relic of a siege economy. Indeed. I consider its existence must, in the long run, be counter-productive to the strengthening of sterling and of our reserves.
The second point I want to emphasise is the damage that such restrictions cause to the overseas currency earning capacity of the City of London. I thought that the tribute paid by the noble Lord, Lord Davies of Leek, was a very well-earned one. The City is vitally important to this country. It has a marvellous record of invisible export earnings. I thought that the figures quoted by my noble friend Lord Limerick were deeply impressive. But surely it is right to reinforce success, and with active encouragement the City could earn still more.
But if London is to be the most acceptable and the most utilised of international markets, it must be seen not to be handicapped in any way in relation to its international competitors who are only too keen to take advantage of any such handicaps from which the London market may be suffering. It is no good in these matters to attempt an arithmetical computation of the effects of any one restriction of this kind. It varies so tremendously according to the circumstances at the moment. But the existence of any restrictions are psychologically a barrier to the competitive success of London.
I remember once when I was at the Treasury—and the mention of the word "Treasury" reminds me of the one thing, and only thing, that my noble friend Lord Cullen of Ashborne said with which I did not agree. It was when he cried out, "Let the Treasury surrender !"
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My Lords, the Treasury never surrender. They do not know the meaning of that word. They adjust their views to changing circumstances. I am sure that my noble friend will take the point that I am making.
When I was at the Treasury, years ago, admittedly, I remember trying to make up my mind whether our balance of payments enabled us to afford the removal of a particular restriction on the sterling exchange. It was quite a severe one. With some apprehension, we decided to end the restriction; and to our relief the balance of payments gained because our action enhanced the prestige of sterling. If restrictions are kept on unnecessarily, overseas holders will conclude that it has been done because Her Majesty's Government are apprehensive.
Now here we have a handicap from which our competitors are free. We are in no position to be reckless with our balance of payments or our reserves. I may say that by nature I am not a reckless character; but justifiable self-confidence breeds confidence in others. I think that in this case there is a very strong ground for this enforced Surrender Rule to be terminated—I would say absolutely terminated, but, at the very least, progressively reduced.
In this matter I think that the onus of proof is on the Government to explain why that is not possible. If it is not possible, then I hope that the noble and learned Lord will tell us under what conditions it would be possible, and why it is not possible at this present time. If the noble and learned Lord is going to tell us that the restrictions must remain, then I hope he will give his reasons very clearly indeed. Otherwise one must be tempted to feel that the Government are keeping it on because somehow they believe it is not doing any harm or even because they welcome it. For these reasons, I strongly support the case made by my noble friend Lord Terrington for the abolition of this Surrender Rule.
8.19 p.m.
Lord BARNBY: My Lords, following a speaker who has previously held a high Ministerial post fills one always with a spirit of elation because one feels that one is temporarily elevated into a higher realm of reasoning. So I listened with the greatest interest to what my

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noble friend Lord Amory had to say. My intervention will be short, and intentionally so, because it is merely to add one more voice to the pleas which have been made following the speech of my noble friend Lord Terrington, who was timely in asking this Question now. He put it forward with lucidity and reasoning and with a wealth of figures. I feel that if anything could influence the situation, that, together with the reasoning by my noble friend Lord Cullen of Ashbourne and his supply of figures, should certainly ensure that the Minister is not short of figures as well as reasoning.
I have been bitterly against this Surrender Rule for a long time. When I read the Question on the Order Paper, I determined to attend and listen to what further, if any, new reasonings could be advanced for a plea to the Minister to accept a total abolition or at least a partial one. My noble friend Lord Cullen of Ashbourne suggested a temporary abolition until a complete abolition was made. Apart from what amounts to a disincentive, one is concerned whether the Government really are ready yet to make this obvious concession, or whether they are in the realm of things like the stupidity from many angles of their reasoning against profits. Without profits we all know that there can be no relief to unemployment. There are absurd policies, such as are recommended in some quarters, that there should be cessation of investment in South Africa. The one thing that would do harm and be a disservice to the African native would be to stop the flow of capital into South Africa.
I mention those matters because I recollect my own feelings on this subject when it was first instituted. I lived and was in business for quite a while in the United States. I went there for the purpose of making a profit, doubtless hoping it would ultimately come back to this country. This Surrender Rule of 25 per cent. is a disincentive. We know that it had good purpose in that it aimed to increase the reserves; but I feel that it added greatly to the disincentive. I suppose that the consideration was that there would be as little harm done to actual investment and the balance of payments as to building up the reserves.
There is an angle that I particularly want to speak to, and it involves capital
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gains. When it was first instituted we had a currency which was low compared with my recollection of getting more than six dollars to the pound in trade; but the pound has been debased with real force by the present Government. There is a loss of the withholding amount. There is the capital gains tax. It goes farther than that: in the case of a private firm, which had made profits and had obtained equities, if just before 1965 substantial losses occurred (which of course carried the tax loss carry forward advantage) and, for purposes of internal equity shareholder adjustments, there was a substantial writing down of assets, though they retained the tax loss carry forward advantage, there would be a calculation of profit attracting tax on the amounts by which ultimately the business, if it continued, would recapture the capital that had been written down by the tax loss carry forward, but it would involve a further capital gains calculation. That amounts factually to confiscation.
If the noble and learned Lord is not in a position to concede what the noble Lord, Lord Terrington, has asked for tonight, I hope that he will at least leave this Chamber convinced by the arguments that have been put forward on this matter, and will feel that there is substance in the reasoning that the rule amounts virtually to confiscation. It acts as a disincentive as against giving encouragement. One could go out of the country and make money which could be sent back to this country and our reserves could be built up in this way. But there are disincentives like this. I hope that the noble and learned Lord will leave this Chamber, having heard the figures which have been given and the other interesting, forceful speeches, with reason to give the matter greater consideration, and I hope he will do so.
8.26 p.m.
Lord LYELL: My Lords, after the many distinguished voices that we have heard this evening, I feel that I am going to play the part of that small and quiet wind that followed the storm, the fire and flood that we read so much about in the Old Testament. The whole House, and many thousands outside the House, will be grateful to the noble Lord, Lord Terrington, for raising this very vexed question once again tonight. I wish to add my plea to those of all the other

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speakers that the Government should reconsider both the level and the method in which the Surrender Rule is operating. Clearly it is intended to discourage investment in foreign securities by United Kingdom citizens. But the House will agree that 12 years is far too long for such a measure which was only intended to be temporary. During this time the United Kingdom have entered the EEC, and we heard from my noble friend Lord Limerick that the existence of the Surrender Rule is a breach of the Treaty of Rome. But this is tolerated by our European partners on a short-term basis. What concerns us on these Benches is the harm and hindrance provided by the rule to the jobs and prospects of those concerned with overseas securities.
Prior to 1965 many more institutions, banks, brokerage firms and dealers, took an active part in trading in overseas stocks. But after 12 years many of these concerns have run down their services to clients so far as these foreign securities are concerned. If the United Kingdom resident feels that for the time being a sure source of growth is to be found in foreign securities, as well as for reasons of overall portfolio balance, he has, in almost all cases, to deal with a London branch of an overseas firm which will specialise in such securities. Granted that any London branch will employ United Kingdom citizens, but, as with many branch operations, the full research capabilities are often away, outside the United Kingdom. Gradually and imperceptibly the business of investing in any securities other than United Kingdom stocks is more easily—or possibly more efficiently—performed abroad at any one of a number of financial centres, which would do much to take business from the City of London.
We believe it is already clear that almost all the firms which were prepared to give advice and do research on behalf of United Kingdom citizens can no longer carry out either of these tasks efficiently. It is still something of a mystery to many that the Government do not necessarily ban overseas investments for United Kingdom citizens, but merely place the Surrender Rule barrier in the way of allowing those citizens to invest in what to the rest of the Free World is indeed still a free market. Let us also remember
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that investment is carried out to the extent of approximately 85 per cent. in the London market by pension funds and similar institutions. The Surrender Rule of course inhibits their investment decisions far more than those of the private investor. I wonder whether the noble and learned Lord could tell us whether he considers that the present policy provides for efficiency in the security markets, with all the additional administrative work which is required? Also, does he not agree with the noble Earl, Lord Limerick, that when a small slice of the securities market has been lost to London, the whole of London's financial community is the loser?
The argument that the reserves benefited by £175 million, or the equivalent in dollars, is one that is normally quoted and it has been quoted tonight by the noble Lord, Lord Terrington. It is normally quoted in support of the rule's continuance. We wonder whether the Government continue to believe that no more efficient method of obtaining a similar sum exists without this continuing inhibiting effect of the Surrender Rule. It seems that once an investor has purchased dollars and made his investment, he is locked into that particular stock, for if he switches into a similar stock or another foreign stock he is penalised in exactly the same way as if he were to repatriate his funds for further investment in the United Kingdom.
The continuing saga of the investment rule has been very clearly and skilfully debated this evening. We are all looking forward to hearing the Government's case from the noble and learned Lord, Lord McCluskey, and we are all very grateful to the noble Lord, Lord Terrington, for once again raising the point this evening.
8.32 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, the question of abolishing the so-called 25 per cent. Surrender Rule is by no means unfamiliar to this House. The noble Lord, Lord Terrington, has been a pertinacious champion of the abolitionists and has taken several opportunities, as he has reminded us, to raise the matter in recent years. Tonight I would agree at once that he gave a new and forceful emphasis to his arguments. This is not the first time, either, that he has had the

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support of the noble Lord, Lord Cullen of Ashbourne; and I am grateful to both noble Lords, and indeed also to my noble friend Lord Davies of Leek, for having given me advance notice of the points they were going to make and of the questions they were going to ask.
We have had on at least one previous occasion the support of the noble Earl, Lord Limerick, who, in the course of the years, has undergone a slight transmogrification from being a poacher at the beginning to a kind of diffident gamekeeper in the middle, and has now returned to the role in which he is obviously happier. I also at breakfast-time read The Times newspaper. I usually start off with the sports pages, where I do not want to read about Welsh cricketers—I am sure if one had scored one run a minute since 1066 I would have discovered that there! But my breakfast-time reading has been somewhat distorted during the last few days by finding letters on this topic even before I got to the office. I shall refer to Mr. Taube's moderate and very interesting letter when I come to deal with that particular point.
The case for reconsidering the rule has been put tonight with great force, skill, passion and ingenuity. I would ask your Lordships' indulgence if I do not deal with the questions strictly in the order in which they have been raised. However, your Lordships may be sure that what I have to say is the fruit of careful consideration, and indeed the wording has been carefully chosen. I would not wish to say anything in an unguarded way which might have unfortunate effects in financial markets.
The 25 per cent. rule, as I shall call it, was introduced, as your Lordships know, under powers available in the Exchange Control Act 1947, at the time of the 1965 Budget, in order to help to strengthen sterling. It has been referred to repeatedly tonight as being a rule which was introduced as a temporary measure. If your Lordships care to look at the Budget Statement in 1965 you will find that no time limit was set for this measure when it was introduced; but it would be a rash prophet who would have said then, or who would say now, that it must inevitably remain a permanent feature of our financial landscape.
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All aspects of exchange control are kept under continuous review. Successive Governments have reviewed this rule from time to time, taking account of representations such as have been made this evening. In that connection, I should like to say that reference has been made to the expertise which this House can bring to bear on such a problem. I freely acknowledge that: I have seen it in other debates, and again in this one. But I should not like outsiders to believe that it is only in this House that expertise exists on these matters. The Treasury, also, as I am sure the noble Viscount, Lord Amory, would confirm, has expertise in these matters, and I regret that the noble Lord, Lord Barnby, saw fit to use the word "stupidity" in this context. There is no stupidity in this context, but a balancing of the arguments; and I want to look at that balance.
Your Lordships have heard that since 1965 the total yield to the country's reserves—not to the revenue, because of course we are not talking about a tax—has been over £1½ billion. Since 1971 the average yield annually, including the year 1974—perhaps a higher than usual year—has been about £175 million. During a period when the country has seldom been free from balance-of-payments difficulties, that has been the crucial factor, regarded as outweighing the disadvantages of the rule. Indeed, it has been represented to the Government that the percentage should be increased in order to benefit the reserves even more. That is the principal reason. It is not a secret, and I hope that the noble Lord, Lord Cullen of Ashbourne, will permit me to say that it is not an obscure reason but a real and tangible one.
I must tell your Lordships without further delay that, having considered the matter, in present circumstances the Government do not judge it right at this stage to give up any of the yield to the reserves which is obtainable from the 25 per cent. rule. It has been urged that our balance of payments is now improving well enough for that benefit to be forgone. It is true that our current account is coming into healthy surplus, largely because of North Sea oil, but we are not there yet. I would emphasise that we are not yet out of our difficulties, and we have to consider the balance of payments as a whole,

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including the capital account. Noble Lords will need no reminder that there are large external debts to be repaid: not just large reserves, but large external debts. The difficulties as regards our balance of payments will not disappear just as soon as we move into surplus on current account.
It was suggested tonight by the noble Lord, Lord Terrington, that the same yield, or a comparable yield to the reserves, could be secured through an increase in turnover as a result of reducing the figure below 25 per cent. I ackknowledge that the size of the yield is indeed a function of the volume of sales, but it is necessarily very much a matter of subjective judgment as to how far a particular cut in percentage will increase turnover. It is impossible, therefore, to confirm or indeed to controvert the figures which the noble Lord, Lord Terrington, put before the House as estimates in this regard.
The Earl of LIMERICK: My Lords, would the noble and learned Lord permit me to raise one quick point there? It is a fact, and one comes up against it constantly, that people are inhibited in making decisions currently because of the payment of premium on the assets they currently hold. There is a pent-up demand for switching investments which I should have thought, on any calculation, in the short term must yield a higher return from a lower rate of tax. I agree that once it has been done it cannot be repeated annually, but it might be looked at if there is a problem of bridging the time before we are in real balance-of-payments surplus.
Lord MCCLUSKEY: My Lords, in relation to that, may I first respectfully correct the noble Earl? Of course, it is not a tax, and I am sure that that was an unguarded word on his part. Secondly, I acknowledge the force of what he said, and indeed of what the noble Lord, Lord Terrington, said, that one would expect a rise in volume, and because of the rise in volume there would be an increase in yield—not an absolute increase in yield, but the increase in volume would tend to raise the yield. What I was trying to say as precisely as I could was that one does not have evidence at the moment of exactly how far a particular cut in the
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percentage would increase the turnover. In the discussions which have taken place between the Treasury and the Bank of England, on the one hand, and Stock Exchange representatives on the other, convincing evidence on this point has not been produced. So one cannot say that there would be certainty of maintaining the yield that we think necessary.
Again, acknowledging the force of some of the arguments, the Government do not dispute the fact that the 25 per cent. rule probably does, to some extent, which I would not attempt to measure, inhibit the efficient management of overseas portfolios. It may, unfortunately, also have some adverse effect on the development of the London market in international securities. I acknowledge that as well. It operates gradually, as has been said, to deplete the overseas portfolio pool and to keep the investment currency premium higher than it might otherwise be.
But to look at some of the other arguments, reference was made to jobbers withdrawing from this field, and to a firm going to Ireland. But there are many complex factors at work in these areas of activity, and there is perhaps a tendency to put too much of the blame on to one single exchange control rule. In any case, so far as portfolio management is concerned, there is no impediment to switching between foreign currency securities where purchase has been allowed to be financed by foreign currency borrowing, under what are known as the "loan portfolio" arrangements for professional managers of securities. The estimated amount of such borrowing now outstanding is about £1,000 million.
Among the ideas which have been discussed—although it is not an idea which was developed tonight—with representatives of the Stock Exchange, is that switching free of the 25 per cent. rule should be permitted to professional managers of securities within a very limited period, such as, for example, 24 hours. The exchange control authorities, however, have not been satisfied that such a concession could be prevented from opening the door to avoiding the rule for virtually all transactions. More generally, I have to add that we have not been convinced that abolishing the rule would result over time in a sufficient increase in invisible earnings.

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As to the wider effects on London as an international financial centre, there is clearly scope for the adaptability often shown by the City in the past. For example, I understand that bargains in certain OSA gold shares have lately started to be marked in dollars and exclusive of the investment currency premium. It is hard to believe that the problems created by the 25 per cent. rule are entirely beyond the expertise and skill of the City. More particularly, it is hard to believe that they are likely to have a serious "domino" effect, or an erosion effect, on the wide range of financial services which together do so much to help the country's invisible earnings.
In view of what has been said about the erosion of the City as a financial centre, it surely would not be inappropriate for me to quote a little from the letter which Mr. Taube wrote to The Times on Tuesday. I refer to the second paragraph of it where he said—and I will read it shortly—
"What is perhaps overlooked is that London has recaptured a position of preeminence as the world's most important market for most commodities."
He went on,
"and that London is the most important international foreign exchange market, the most important insurance market and the central shipping market of the world."
I accept that these are separate markets from the precise one about which we are talking, but I suggest he was right in his presentation and that picture is not quite consistent with London as a financial centre being eroded by such restrictions as exist within this comparatively limited market.
Lord HARMAR-NICHOLLS: My Lords, one accepts that the figures reflect that it is still alive and very significant. But does not the noble and learned Lord take into account the growth in competitor cities which have been trying for years to get in on this? Their growth has been so much more than ours in an expanding situation.
Lord McCLUSKEY: Yes my Lords; I take that into account and I acknowledge it. But the point I was dealing with, and I think it was made by the noble Lord, Lord Harmar-Nicholls, was the suggestion that, because of a restriction in that sector
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that somehow spreads and has a debilitating effect upon other markets. I think one can meet that point in the way I have done.
The noble Lord, Lord Cullen of Ashbourne, has asked particularly whether the 25 per cent. rule could be abolished, at least in respect of OSA securities. Of course, the rule was not applied to them when exchange control was first extended to cover OSA transactions in June, 1972, but it has applied to them since March, 1974. The Government believe that, in general, the more favourable arrangements initially allowed in respect of the OSA are no longer justifiable. Investment in all foreign currency securities will therefore continue to be treated on the same basis, subject to our relevant EEC obligations. I am sorry if that is a dusty and disappointing answer, but it is an answer to one of the questions which the noble Lord asked me.
The noble Lord, Lord Cullen, also asked specifically about the position after 31st December, 1977, and of course many other noble Lords are interested in that matter. The noble Lord was referring to the time-scale governing our transitional arrangements in respect of capital movements under Article 124 of the Treaty of Accession to the EEC. This House was, as he said, reminded of these arrangements during a debate in which the subject of the 25 per cent. rule was raised in May 1973. Your Lordships have been informed accurately by the noble Lord, Lord Cullen, that, because of our balance of payments difficulties, the European Commission have given us authorisation under Article 108 of the EEC Treaty itself to maintain existing restrictions on outward direct investment and certain personal capital movements. As to the liberalisation of outward portfolio investment to the EEC, due from 1st January 1978 under Article 124 of the Accession Treaty, the Government will be consulting later this year with the Commission on whether the balance of payments safeguards in the EEC Treaty will need to be invoked in that respect. But I very much regret that at this stage there is nothing that I can say either way about what will happen after 31st December, 1977.
Before I leave that matter, may I just make this comment in relation to what the noble Lord, Lord Lyell, said?

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There is no breach of the Treaty of Rome. There is a provision in the Treaty of Rome, and there are provisions which allow derogation from the appropriate articles, and we have derogation. There is therefore no breach, and I am sure that the noble Lord is acknowledging the accuracy of what I say in relation to that. We have had an appeal from the noble Lord, Lord Cullen, and from the noble Viscount, Lord Amory, that the Government and the Treasury should consult and listen. I can certainly say that the Government have consulted, the Government have listened, the Government will continue to consult, the Government will read the report of this debate and will continue to listen to representations that fall to be made. I can assure your Lordships on that.
I know that noble Lords who have spoken and who have attended this debate may well be disappointed by my reply. The Government will not regard this debate as a moan. The Government will regard this debate as an informed contribution to their consideration of this matter. I have tried to show to the House that the Government are not blind to the problems, but have, as in the past, had to make a balancing judgment and the judgment at the moment is that the 25 per cent. rule cannot at present be abolished, nor the percentage reduced. But I can assure the House that the question will be kept under review. Meantime, I can say no more, except to thank noble Lords for the courtesy and moderation with which their case has been pressed. One of the later speakers suggested that I should leave the House a little wiser. I am reminded of Lord Birkenhead, who as counsel addressed a judge for some time, at the end of which the judge said to him, "I am afraid, Mr. Smith, I am no wiser". F. E. Smith replied: "Not wiser perhaps, my Lord, but at least better informed". I cannot leave the House wiser, but certainly I leave the House better informed.
May I deal with two points which I omitted to mention. First, the Wilson Committee on Financial Institutions, which was chaired by Sir Harold Wilson, have yet to decide whether or not to issue an interim report. We cannot know what any report will contain, but the committee have announced their intention of concentrating in the first instance upon the supply of finance for industry and trade.
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Secondly, I was asked specifically by the noble Lord, Lord Harmar-Nicholls, whether or not I could deny that the Bank of England had made a certain recommendation to the Treasury. I cannot disclose to the House what advice has been given to the Treasury by the Bank of England, and I should be surprised, frankly, if the Bank had disclosed any advice given to the Chancellor of the Exchequer on any matter of exchange control.
Viscount AMORY: My Lords, before the noble and learned Lord sits down, I wonder whether he could assure us that he and his colleagues have given sufficient consideration to the attitude of foreigners when a restriction is taken off. When that is done, foreigners so often say, "Those fellows have confidence in themselves".
Lord McCLUSKEY: My Lords, the noble Viscount, in both his question to me and his speech, has made a sound point. Certainly it is one which the Government will take away from this debate.