Lords Sitting of 18 July 1977

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

OLD PALACE YARD: TRAFFIC RESTRICTIONS
Lord AMULREE: 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 are sure that the GLC enforces the Greater London (Restriction of Commercial Vehicles) Traffic Order 1975 in relation to the passage of heavy lorries past Old Palace Yard, the number of which seems to have increased during the past few months.
Lord WELLS-PESTELL: My Lords, the enforcement of this order in respect of the road past Old Palace Yard is a matter for the Commissioner of Police
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of the Metropolis. The Commissioner assures my right honourable friend that he devotes as much enforcement effort in this area as manpower resources and other police commitments permit.
Lord AMULREE: My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, for his reply, which is satisfactory as far as it goes. However, can the noble Lord tell me whether the police ever do a series of spot checks, especially upon heavy lorries coming from Europe and abroad in general?
Lord WELLS-PESTELL: My Lords, I think that the police do rather better than that, in the sense that there are a regular number of police on duty in the areas concerned. The evidence available shows that there have been fewer contraventions in recent months than in the previous periods. The difficulty that the police have as regards foreign lorries is, first of all, the language problem because the lorry drivers are often not aware that they are contravening one of our regulations. Secondly, when they are told, they are unable to understand it. Thirdly, if proceedings are contemplated, there is the difficulty of summoning a person who is non-resident in your Lordships' country.
Lord REIGATE: My Lords, is not some instruction given to drivers of vehicles arriving in this country as to the type of restrictions which they have to obey?
Lord WELLS-PESTELL: My Lords, there should be. We really have no way of telling whether it is given, but it is certainly required of them.
Lord AMULREE: My Lords, I should like to ask one further question. Does the problem concerning lorries arriving with goods arise as regards coaches bringing tourists here? The number of coaches seems to have diminished in the past few weeks.
Lord WELLS-PESTELL: My Lords, I was aware when I saw the Question of the noble Lord, Lord Amulree, that he had asked a Question about coaches some time ago. I have looked into the matter and I find that, under the Traffic Management Order 1975, coaches are exempt, as are all passenger carrying vehicles. Therefore, they are not subject to the order.

POSTAL SERVICE: LONDON/PARIS
2.38 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 whether, in order to facilitate business within the EEC, they will take any steps which are necessary to secure the provision of an adequate, punctual and speedy postal service between London and Paris.
Lord WINTERBOTTOM: My Lords, that is a matter for the Post Office and the noble Lord, Lord Boyd-Carpenter, should write to the chairman of the Corporation on it.
Lord BOYD-CARPENTER: My Lords, yes; but is the noble Lord, Lord Winterbottom, aware that properly stamped and correctly addressed correspondence between London and Paris
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is now taking between 12 and 13 days for delivery? Is the noble Lord aware of the fact that that is twice the time that postage took before the French Revolution? In the light of that, if the Post Office is unable or unwilling to provide a proper and punctual service, is it not up to Her Majesty's Government to suspend its monopoly and let somebody else have a try?
Lord WINTERBOTTOM: My Lords, the Post Office tell me that the service has been affected by labour disagreements, almost all of them on the other side of the Channel.
Lord CAMPBELL of CROY: My Lords, will the Government take any steps necessary to secure an adequate, speedy and successful postal service between London and London?
Lord BRUCE of DONINGTON: My Lords, is my noble friend Lord Winter-bottom aware that, if he compares the performance of the British Post Office with that of any other leading Continental or trans-Atlantic country, he will find that, in terms of time, our British postal services are roughly twice as efficient as those of our nearest competitor?
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend Lord Bruce of Donington, who has stated the facts.
Lord GLENKINGLAS: My Lords, though I agree that the position as represented by the noble Lord, Lord Bruce of Donington, was accurate a few years ago, will the noble Lord, Lord Winterbottom, bear in mind, in view of the question of my noble friend Lord Campbell of Croy, that it is now regularly taking five days for a ninepenny letter to get from one address in London to another? If that is so, then 12 days to Paris may, I suppose, he regarded as rather quick.
Lord BRUCE of DONINGTON: My Lords, I should like to ask a further question which arises from the supplementary that has just been addressed to my noble friend. May I inform him—
Several noble Lords: No!
Lord BRUCE of DONINGTON: My Lords, may I ask the noble Lord whether he is aware that the figures that I provided to the House were for 1976 and that they were published in the national Press a fortnight ago?
Earl ALEXANDER of TUNIS: My Lords, will the Minister reconsider the two-tier postal system, as the first-class system is taking just as long as the second-class?
Lord WINTERBOTTOM: That is an entirely different question.

AGRICULTURE/HORTICULTURE CAREER STRUCTURE
2.41 p.m.
Baroness VICKERS: 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 encouragement is given to school-leavers to take up careers in agriculture and horticulture and what are the arrangements for their training.
Lord WALLACE of COSLANY: My Lords, the Careers Service aims to present the widest possible range of careers to children. Careers programmes in schools commonly include talks, films, and visits to places of employment in agriculture and horticulture. Excellent booklets and wall charts are available in the school libraries. Boys and girls who are suitable for, and interested in, agriculture or horticulture are encouraged to take advantage of available opportunities. Training is by way of apprenticeship under conditions administered and supervised by the Agricultural Training Board or by full-time and sandwich courses leading to the Ordinary or Higher National Diploma, National Certificate or degree courses in agriculture.
Baroness VICKERS: My Lords, I thank the noble Lord for that reply. How many vacancies are there in these two industries, and what is the number of young people who have recently gone into them? In view of the fact that the Government are shortly to print a new version of Food from our own Resources,
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will the noble Lord include a special chapter in it pointing out the advisability for young people to take up this career?
Lord WALLACE of COSLANY: My Lords, perhaps I could first reply to the latter question asked by the noble Baroness. Most certainly I shall ensure that the information is passed on to the responsible Department, which of course is not the Department of Employment. I cannot readily, without notice, give the number of vacancies. However, I would draw the attention of the noble Baroness, Lady Vickers, and noble Lords to the fact that there is an increasingly wide choice of careers in the world of agriculture. In 1977–78 over 500 non-advanced and advanced courses which are run by the Department of Education and Science are listed, compared with 272 in 1967–68 when the first edition of the booklet was published.
Lord LEATHERLAND: My Lords, does not my noble friend think that more young people would go in for agriculture if the pay was better?
Lord WALLACE of COSLANY: My Lords, it entirely depends into what section of agriculture a young person goes and on the qualifications of the person concerned. There are some well-paid posts for well-qualified people, but the rate of wages for agricultural workers generally is a matter for negotiation by the responsible unions. Of course, it has been said in the past that one reason for the drift from the land is low pay, but I do not think that that necessarily applies today.
The Earl of ONSLOW: My Lords, as the Government are encouraging ICI to increase its fertiliser costs, how can that not reduce the pay to agricultural workers and thus make their jobs less attractive to school-leavers?
Lord WALLACE of COSLANY: My Lords, with due respect to the noble Earl, that is an entirely different question.
Lord MACKIE of BENSHIE: My Lords, does the noble Lord appreciate that we employ the smallest percentage of people in Europe on the land, aid that in farming we receive the lowest return in Europe? Does he agree that in Germany 1 million more people are employed on the

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land and that from less arable land they produce much more of their food than we produce for ourselves here? Does the Minister agree that there is some relationship between the return to farming generally, the small number of people employed in it and the increasing use of so-called labour-saving weedkillers in this country, the long-term results of which we know nothing about? Does he not perhaps agree that some revaluation of the Green Pound might make more jobs available for school-leavers?
Lord WALLACE of COSLANY: My Lords, having done a certain amount of backaching weeding this weekend, I am all in favour of an efficient weedkiller. Many of the noble Lord's questions do not come within the province of the Department for which I am answering, which is the Department of Employment. I would suggest that, taken by and large, British agriculture is far more efficient than that of many other countries, even in Europe.
Baroness EMMET of AMBERLEY: My Lords, as well as encouraging young people to go in for agriculture, would the noble Lord encourage them to go in for aquaculture? And what facilities are available for that?
Lord WALLACE of COSLANY: My Lords, I would entirely agree with the noble Baroness.

DUMBARTON COUNCIL: HOUSING FINANCE POLICY
2.47 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they propose to take upon the report of the Commission for Local Authority Accounts on the failure of Dumbarton District Council, as constituted before the last council elections, to pursue a responsible housing finance policy.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): My Lords,
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my right honourable friend the Secretary of State for Scotland has received the findings and recommendations of the Commission for Local Authority Accounts in Scotland on the subject of Dumbarton District Council housing rents. In this case the Commission recommended to my right honourable friend that he should not make a order under Section 104 of the Local Government (Scotland) Act 1973. My right honourable friend has accepted the recommendation of the Commission.
Lord CAMPBELL of CROY: My Lords, I thank the noble Lord for that reply. Is not the most glaring case in the country of rent irresponsibility by a council confirmed by this report? An intolerable burden has been placed on ratepayers because the council's conduct disqualified them from receiving substantial subsidy. As 10 individual councillors have been held responsible and seven of them are no longer on the council, will the Government ensure that the ratepayers are not financially penalised and that an opportunity is provided for these shortcomings to be redeemed?
Lord KIRKHILL: My Lords, I do not dissent from the earlier part of the noble Lord's remarks. I tend to agree that an error of judgment was made by the councillors to whom he referred. I cannot respond with confidence to the second part of his question. I do not think that, under Section 104 of the Local Government (Scotland) Act 1973, there is provision for the Secretary of State to take the kind of action which the noble Lord suggests.
Lord GLENKINGLAS: My Lords, will the noble Lord bear in mind that what my noble friend has described as an error of judgment has been going on in that area for the last 20 years, and it has been done quite deliberately for perfectly obvious reasons? I hope that the Secretary of State can take some action.
Lord KIRKHILL: My Lords, I can advise your Lordships' House that, as from 1st April 1977, the beginnings of a new rent structure have been under way in that particular district.
Lord STRATHCLYDE: My Lords, will the noble Lord ensure that something is

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done to remedy the injustice which has been done to the ratepayers of this part of the country through no fault of their own, except, I suppose, that they elected the wrong people to represent them?
Lord CAMPBELL of CROY: They will soon put that right, my Lords.
Lord KIRKHILL: My Lords, I can only stand on the reply I gave to the noble Lord, Lord Campbell of Croy: no part of Section 104 is capable of being interpreted as the noble Lord might wish.

POWER PLANT INDUSTRY
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Strabolgi will repeat a Statement on the Power Plant Industry.

PRICE COMMISSION BILL
2.51 p.m.
Report received.
The Earl of MANSFIELD The Earl of MANSFIELD moved manuscript Amendment No. 1A:
After Clause 4, insert the following new clause:
Twelve month rule
"In the event that no resolution in effect continuing the twelve month interval between major pay increases is passed at the Trades Union Congress in September 1977, the provisions in section 4(2)(b) and section 5(2)(a) of this Act and all other provisions in this Act directly consequent upon them shall be in abeyance until such a resolution has been passed at a subsequent meeting, or until an order or document to such effect has been laid before Parliament by command of Her Majesty".
The noble Earl said: My Lords, I appreciate that it is not considered wholly desirable to have manuscript Amendments at this stage of a Bill's passage, and in many ways this Amendment would have been better tabled on Third Reading, after a reasonable period for pause and reflection in which we may all take stock of the events of the last few days. But as it has been agreed that Report and Third Reading should be taken on the same day—in other words today—and as it was thought desirable that this arrangement should be adhered
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to and not disturbed, this is the only way in which the developments which have taken place can be ventilated in your Lordships' House before the Bill goes back to the other place.
There most certainly have been developments, and it would appear that they crowd upon each other too fast for the Government and certainly far too fast for the Bill; I say that against the background of the Government's Social Contract which, as I understand it, has always been the cornerstone of their efforts to contain inflation. The fact of the matter is that these efforts have not entirely been crowned with success. Each year prominent members of the Cabinet confidently go on record as forecasting a rate of inflation in single figures or thereabouts in the not too distant future, but the rate of inflation remains obstinately in the teens and one rather supposes that it is likely to do so for some period in the future.
The causes of the continuing failure to brine down inflation are outside the scope of the Bill and this debate, but in the ruins of the Social Contract much of the justification for the provisions of the Bill deserve even greater scrutiny than perhaps they did before. Both the miners and the railway workers have now gone on record to state what they regard as proper wage settlements in their respective cases during the next round, and it is safe to say that a forecast that wage settlements or increases will be of the order of a maximum of 10 per cent. would be optimistic rather than realistic.
I say all this because companies and undertakings which will have the duty of trying to make bargains with the unions over pay will now not only have to do so without a meaningful set of guidelines but they will still have to operate within the terms of this Bill. To take one example, Clause 17 of the Bill purports to extend the operation of Section 1 of the Remuneration, Charges and Grants Act 1975, and that section is of course dependent on pay limits set out in a White Paper. In his Statement in the other place last Friday this point was reinforced by the Chancellor of the Exchequer when he said:
"It is necessary to continue the provisions in relation to employers in the Remuneration, Charges and Grants Act 1975 to the extent needed to support and enforce the TUC guidance on

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the 12 month rule. An order will be required under that Act to achieve all these purposes ".—[Official Report (Commons), 15/7/77; col. 990].
Previously, of course, Section 1 was always dependent on pay limits which were set out in a White Paper, so unless we are to have a White Paper and unless, as I understand it, that White Paper deals with limits, Section 1 cannot be renewed. Therefore I ask the Government to tell the House, and more importantly to tell those outside who are trying to rethink their lives and how they propose to run them, how they propose to deal with the situation. If a White Paper containing what I might call the 12 month rule is produced, that will scarcely suffice in my estimation; if any reference is made to 10 per cent. as a maximum, that, I suggest, will be greeted with cries of derision by those trade unions which have already voted at their conferences to obtain much more for their members if they can do so. One is therefore faced with that immediate question in relation to this Bill and this clause within it.
I come to the question of sanctions, where there seems to have been a great deal of confusion, and I wish to give the Government an opportunity to deal with the matter today if the noble Lord, Lord Oram, is in a position to do so. When I talk about sanctions I refer, of course, to firms which, probably through no desire of their own, are compelled, if that is the right word, to give in to demands which are outside the policy either as regards the size of a settlement or its frequency.
It is not difficult to envisage what I might call a Scylla and Charybdis situation. A firm will be squeezed between the Scylla of a powerful union which wishes, in terms of a perfectly properly conducted meeting or conference, to press for a wage claim which it considers is desirable and deserved, and the Charybdis, the whirlpool of the possible sanctions which will be imposed against a company or undertaking by the Government if it gives in to the wage demand which has been put forward by the union concerned.
What is Government policy likely to be in such a situation? If I may say so, the Chancellor of the Exchequer was extremely vague. He said in effect that the Government would take into account
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such bargains or wage settlements which are outside whatever policy is left; the Government would take that into account in public purchasing policy and the placing of contracts, and in the consideration of industrial assistance.
The newspapers, on which one places as much or as little reliance according to one's political position and inclination, have taken this to be twofold so far as possible Government action is concerned. First, it is said that if a company has "sinned" the Price Commission will be instructed to refuse to allow the company to claw back whatever it has paid out by way of the unjustified increase by curtailing its next price increase which will come about after the wage settlement. If that is so—and a great many respected commentators, at least in the Sunday Press, were saying that it was—it makes a nonsence of the often-repeated assurances, which we have been given in this House and in the other place, that the Price Commission will be a wholly independent body in that it will not take orders from the Secretary of State, except where enjoined to do so by Statute, its chairman will be like Caesar's wife, it will try to do justice as between the company and the consumer, and will be independent in terms of the public interest. If, as I say, a company is to be punished in this way, it will make nonsense of all the assurances we have been given until now, and it will be a matter which we shall want to consider very carefully in the short time the Bill remains in this House.
On the other hand, it may be that nothing so sinister is to be read into it, and that the Government will invoke no sanction other than in the two matters to which the Chancellor referred directly: public purchasing policy and the placing of contracts, and the consideration of industrial assistance. As many companies are quite outside that field in both limbs, it is difficult to see that any meaningful sanction at all is placed in their way, if they take the easy way out.
I appreciate that all kinds of points regarding drafting and semantics might be hurled at the Amendment—though the noble Lord shakes his head, and for that I am obliged, if not grateful. In the Amendment we have tried to give the Government an opportunity of stating—I was going to say the "form", but that

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is much too frivolous a word. We are concerned with the idea with regard to the Bill. The noble Lord knows very well, and those Members of your Lordships' House who have read the Bill will divine, that Clauses 4 and 5 place sanctions against firms whose activities in the form of a price increase, or margins, are being investigated. We have tried to say to the Government—not altogether successfully, I feel—that the one thing about which many firms are anxious is the freeze which will be the inevitable outcome of such a notification, or investigation, by the Commission.
In one sense we are all in agreement that if there is no norm, or no 10 per cent. maximum to be imposed, the only way in which there will not be galloping inflation will be by the 12 months' rule. Members of the Government have repeated their commitment to it fairly recently. At the same time, I believe it is realised, at any rate at the moment, even by the Government, that one cannot just pay lip-service. I have here a quotation of what the Chancellor said at a union conference on 24th April:
"It is no good relying just on vague expressions of good will to deal with the pay policy problem. We tried that 10 years ago with the famous solemn and binding declaration. It melted away like butter in the sun".
The Prime Minister himself said on 18th May this year:
"I beg all trade unionists, let us not have productivity agreements that are just cosmetic. That will merely disguise the true increase. They will only give the Government a fig leaf, which I do not want. I do not want to deceive people".
That last sentence must be the most famous under-statement of the year.
The Amendment proposes that unless and until the Trades Union Congress, which is the means by which the whole trade union movement expresses its intentions for a coming period, comes down and reinforces what the Government tell us should be done, the penal provisions included in Clauses 4 and 5 of the Bill will not come into effect. I shall be interested in what the Government have to say, and in what our Liberal colleagues have to say. They have gone on record, quite rightly, as saying that they are as determined as any other Party that there should be a meaningful prices, but also an incomes, policy for this country.
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I suggest that at the moment the incomes policy is in ruins, and it would be useful to know their reaction to it.
3.7 p.m.
Lord ORAM: My Lords, it has been said that a week is a long time in politics, and the noble Earl, Lord Mansfield, was quite right to point to last week as having been a little unusually long in terms of negotiations about pay policy, and so on. But I think that it will become clear that important, indeed dramatic, though some of the developments of last week were, the effect on the Bill now before your Lordships' House is much less dramatic than might appear at first blush. The noble Earl quite understandably, prefaced his moving of the Amendment with a number of observations about economic policy in general, referring to the history of the Social Contract. On that point I would urge him to consider his own dictum that the causes of inflation over the past two years have been outside the parameters of the Bill and, indeed, to a large extent, outside the operations of the Social Contract.
I would say that any fair assessment of the past two years must acknowledge that restraint on the part of the trade union movement in fulfilment of its part of the Social Contract has been commendable. As we well know, there have been factors causing inflation outside trade union demands, but there can be no doubt that the Social Contract has made a major contribution to the economic situation over the past two years. It is true that the events of last week begin to point to a change of emphasis and a change of direction, and that, as the Statement of my right honourable friend the Chancellor of the Exchequer made clear, we now see ourselves moving into a new phase, which we characterise in the phrase, "the ordered return to collective bargaining". But, although I make no complaint that the noble Earl introduced these general considerations into his speech, I would remind him and your Lordships that in two days' time we are to have a major economic debate, and I would suggest that we can turn our thoughts to the particular provisions of the Amendments before us and leave more general economic considerations to that debate, to which I am sure we are all looking forward with eagerness.

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The noble Earl, Lord Mansfield, then went on, taking as his starting point Clause 17 and the reference therein to the Remuneration, Charges and Grants Act. He pointed out, quite rightly, that that refers to pay limits; and he wondered what was the Government's position in respect to this. He was asking about the White Paper, in particular. He quoted (and I shall therefore not need to do so) the significant phrase from the Chancellor of the Exchequer's Statement on Friday, indicating that an order will be necessary. I can go on to indicate, in direct answer to the noble Earl, that a White Paper will be issued and an order will be made, and that this will be done within the next two weeks, before we go into Recess. That information, of course, could have been understood from the statement that the noble Earl read out, but I have now put it more certainly on the record; and it seems to me, if I may say so, to a large extent to invalidate at least the opening phrases of the Amendment that we are now considering.
My Lords, the Amendment and the speech from the noble Earl to which we have listened link the "freeze" power which is provided in the Bill almost exclusively to the immediate pay situation. I shook my head when the noble Earl thought that I might be going into technical drafting matters. I do not propose to do that, but there is one small slip that I think he would wish me to point out. I believe that the reference in the Amendment to Section 5(2)(a) should in fact be to Section 5(3)(a), but that is an understandable slip. As I was saying, the Amendment links the freeze powers of the Bill to the immediate pay situation; but the Government have made it clear many times in another place—and I recall that I tried to do so at the Committee stage last week—that this freeze power contained in Clause 4(2)(b) and Clause 5(3)(a) is an important part of the permanent investigatory powers, which have a long-term purpose connected with competition policy as well as the shorter-term role in counter-inflation policy. The power must be seen as having the two purposes, and I would say that the first, long-term purpose connected with competition policy is, in this context, the more significant. For that reason alone, the Amendment cannot
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be accepted by the Government. The removal of the freeze powers would completely undermine the effectiveness of investigation because, again as we were saying last week, there would not even be a roll-back power which would be available after investigations in order to cut back unjustified price increases.
The noble Earl went on to deal with the question of the pay sanction, and I hope now to make that position clear in response to his inquiries. The position of companies which breach the guidelines for the next 12 months which were announced last week was, as I have said, clearly stated in the announcement from which the noble Earl quoted and which I also mentioned. A White Paper will be published very shortly, and, by means of an order under Section 1 of the Remuneration, Charges and Grants Act, will enable the continuation of the 12 month interval between pay settlements to be supported by sanctions against companies which breach the 12 month rule. The sanction in the price controls will be the disallowance of the full cost of the relevant settlement in calculations made of the margin controls in the Price Code, and this sanction—and this is a point in which I think the noble Earl was particularly interested—will not be used to support other aspects of the Statement on pay policy. Nor will it involve the use of the freeze power in the Bill, which will continue to be governed by the requirement on the Price Commission to have regard to the criteria in Clause 2. Therefore, my Lords, the Amendment is unnecessary because the 12 month rule will, as I have said, be promulgated in a White Paper which will be laid before both Houses in a draft order under the Remuneration, Charges and Grants Act. It will be debated before the end of the month. Of course, in reference to the opening words of the Amendment, it is clear that that will be well before the TUC meets in September.
Surely we all recognise that we are in a very delicate situation economically, and I think that we are all anxious—the CBI and the TUC have made it clear—not to have a wage explosion. This means that we shall all have to play our part in avoiding such a wage explosion. As I have indicated in respect to the 12 month rule, the CBI has made its position clear;

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the TUC has made its position clear; and the Government have made their position clear, as I have spelt out several times already this afternoon. I would urge that, in facing this delicate economic situation, all of us should play our part to avoid a wage explosion.
Baroness SEEAR: My Lords, as the noble Earl has said, we on these Benches have always been, and still are, strongly in favour of a policy to exercise control over both pay and prices. Therefore, we attach the greatest importance to the continuation of the 12 month rule. This was why I raised the issue of the 12 month rule after the Statement had been read last Friday by the noble Lord the Leader of the House. I received a reply in writing—a very courteous reply, if I may say so—from the noble Lord, Lord Oram, confirming, as he has again confirmed today, that the 12 month rule stands.
Of course, if you are going to have a return to something like free collective bargaining—and we understand that the Tory Front Bench wants a return to free collective bargaining—and are at the same time going to have some control exercised by Government over excessive pay claims and, particularly in this case, over abuse of the 12 months' rule, it follows inevitably that employers entering into negotiation are in the front line. That is the position in which, I believe, they choose to put themselves if they favour a return to free collective bargaining. They will have to stand to the problems which arise when they are caught, as they see themselves caught, between the pressures of the trade unions pushing to breach the 12 months' rule (if, and in so far as, they do so) and the absolute necessity of the Government maintaining the control of prices.
There is no way out of this. Therefore, we warmly welcome the Minister's reaffirmation that the 12 months' rule holds. If employers in negotiation are unable to resist the pressures of trade unions—and in collective bargaining it is part of their role to do this, part of what they are paid to do as managers in resisting excessive wage claims—it inevitably follows that some sanctions will have to be exercised through the price control system.
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Even if this were not so, in our view the Amendment as it stands is inappropriate. It is not the right way in which it should be worded to require that a statement should come from the TUC over which this House has no direct jurisdiction in any way. What we want, and what I understand we have got from the Government, is affirmation that the Government will enforce the 12 months' rule. We want to see the Government strong in their determination to ensure that there are effective controls over pay increases. One instrument here is, and must remain, that of setting price controls. May I say that we go along with the Minister in saying that the power to investigate is part, not of establishing the pay policy alone, although this is important, but part of getting a more effective competition policy, and it must be maintained for those reasons. It also stands to reason in this extremely delicate situation, in which so much depends on the public recognising the importance of not having a wage explosion, that it must be seen that there are to be, where necessary, controls of prices. We cannot support this Amendment.
3.23 p.m.
Lord LEE of NEWTON: It seems to me that the Opposition have not quite made up their mind whether we are again debating their Amendment of last week or anticipating the debate of Wednesday next. We debated this principle last week and I ventured to ask whether the Opposition do or do not want an incomes policy. The noble Lord who is now sitting on the Front Bench opposite told us that, on balance, he preferred an incomes policy. I was reading of where his right honourable Leader was sneering at the effects that the incomes policy had had over the last two years. They must make up their minds. People like me are in the clear. I want an incomes policy. I have wanted one for over 30 years. I believe that it is a retrograde step to go away from one. Will somebody opposite get up and say that?
I listened to the noble Earl, Lord Mansfield, who first based himself on his fears which were acute because of what the miners had said, what the T. & G. had said and what the engineers had said. All those fears would be at once assuaged, he said, if the TUC tell

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us not to take any notice of them. The noble Earl should know that the TUC has no executive powers over its components. Therefore, to say that one would be satisfied with a declaration from the TUC is either very naive or very hypocritical. One cannot have it both ways.
The noble Earl said that he was afraid that the employers were going to be squeezed between militant trade unions and the Government which would penalise them. I do not want to go too far back, but years ago when we had the Prices and Incomes Board (which the Tories obliterated) we used to take care of this. We had the early warning system and when employers told us that they were to ask for increases in their prices, if they referred to foodstuffs or products of that kind the matter went to the Ministry of Agriculture who did an absolutely first-class job in assisting the employers either to modernise their structure in order that they could diminish the amount of increase that they were claiming, or to wipe out the need for the increase at all.
Had not the Party opposite been so keen to wipe out Mr. Aubrey Jones and his board, that position could have maintained until now and this dilemma in which the noble Earl finds himself would not occur at all. I understand his apprehension—I share it—on the 12 months' rule. I was pleased to hear my noble friend say what he said. But one fine day all of us, either in this House or in the other place, will have to get around to the fact that the time factor is not the important one in this respect. Productivity is the important factor. We reached the stage not long ago where we were paying ourselves 30 per cent. increases while the GNP was falling. If we do not have the 12 months' factor (which I accept as a minimum) Heaven only knows where we would finish. We must begin to bend our minds to a different proposition of the time factor. If you are in an inflationary situation in which Governments dare not expand the economy, how can you possibly say that in 12 months from now we can all go for another x per cent. and we shall be all right?
I am pleased to hear that the time factor will stay, that the 12 months' rule will maintain; but I do not think it is the
20
kind of assurance which the nation would want to hear. At this moment I am still a seeker after knowledge. I want to know whether the Tory Front Bench in another place is right or the Tory Front Bench in this House is right. They cannot both be right. I should like it if the noble Earl were to grant me the privilege of letting me know which attitude in the end the Tory Party is going to take. I should be grateful.
Lord BOYD-CARPENTER: I should like also to ask a question, but to ask it more appropriately of the Minister responsible. I am bound to say that I am inclined to agree with Lord Oram's criticisms of the exact terminology of the Amendment which we are debating, but he has such an agreeable "Box-side", almost bedside, manner that I think perhaps he did lull some of us into not concentrating on what seems to me to be the most important practical point behind this Amendment. That point, it seems to me, is the position in which private employers now stand in view of the fact that the right honourable gentleman the Chancellor of the Exchequer virtually said last Friday that wage control goes and price control—and, for that matter, dividend control—remains.
We have been told—indeed the Chancellor of the Exchequer told us on Friday—of the dire and terrible penalties which would be inflicted on employers who give way to wage demands which were in excess of the guidelines which the Government have indicated. The noble Baroness on the Liberal Benches seemed to think that on the whole it would be a rather wholesome discipline for employers to be exposed to this situation. With respect, the matter cannot be brushed off as easily or as lightly as that. There are industries, especially of a capital intensive nature, where a continuous process is required or where grave loss is suffered from stopping plant, in which, particularly in view of the limited number of men employed in relation to the capital employed, it is obviously in the ultimate interests of the company and its shareholders to go quite a long way in response to wage demands. It is not all that easy without some help from the Government to deal with the situation in which the management of such a company—particularly a continuous process, high capital

21
intensive industry with a limited amount of labour—is placed when it has to choose between a total addition to the wage bill which, though it will outrage the Government's guidelines, will be comparatively small in relation to the turnover of the company and the appalling loss which a halt to its productive process, and the putting of all its expensive capital equipment into silence, will produce.
We have heard of the penalties which the Government will impose. I should like to ask the noble Lord what help they will give to a company which, having a high sense of public duty and fully accepting what the noble Lord himself has said as to the delicacy and difficulty of the situation, despite its own economic interests, and despite the interests of its shareholders, none the less resists such a claim? This thought is tied up with and lies behind the phraseology of this Amendment. As things stand, we have the penalties spelt out, either by the Chancellor or under the Bill before us. We have not heard what help is to be given. We have heard a great deal about the stick, but not even a nuance of mousse of carrot has been dangled in front of us.
If the Government are, as I hope, to have the support of the private industrial sector on this, from the point of view of the future of our nation's economy, gravest of national issues, they must first take account of the very different circumstances of different types of industry. They must recognise that labour intensive industry and capital intensive industry are in a totally different position in respect of these matters. They must show some understanding, particularly of the needs of the capital-intensive section, and give some indication that if, contrary to the apparent interests of their shareholders, the management of such a company stands firm, the Government will see to it that, at the end, the company does not suffer for it.
3.33 p.m.
Lord KALDOR: My Lords, I wish to question some of the remarks that the noble Lord has made. On the train a short while ago I read the Chancellor's Statement to the House last Friday. It would not be correct to say that a company which breaks the rules of guidelines is threatened with dire and terrible
22
punishment. I believe that those were the words that the noble Lord used. On the contrary, I thought that the measures were rather mild. They mean that a company which does not follow the guidelines but gives a wage increase in excess of them, may be put at a disadvantage in the award of Government contracts. That is about as far as the Statement went. That was very far short of the demands of many people, particularly the Liberal Party, that the company which does this should have the excess payments taken out of its profits, either through price control or some other instrument. The Government were rather mild.
When one takes the other part of the question—concerning the help which the Government give to firms which try to follow the guidelines—the Chancellor made it clear that it would not be possible for the Government to give positive help other than ensuring that a company will be favourably treated in Government contracts, and so on. It was said that the employers' organisations were discussing the possibility of providing such help. I do not think that it would be right to say that dire or terrible punishments are proposed: nor would I agree that capital-intensive industry is under greater danger here than a labour-intensive one. It is precisely the capital-intensive industry which provides little labour and, therefore, can afford to pay high wages without much disadvantage to itself. It is the labour-intensive industries who face the threat of going out of business.
Lord BOYD-CARPENTER: My Lords, would the noble Lord allow me to speak? I must have failed to make myself clear, because I agree with him on that point. It is the capital-intensive industry which, because it can so easily afford to pay increased wages, is under the greatest temptation, in the interests of its own prosperity, to accept excessive wage claims.
3.36 p.m.
Lord MOTTISTONE: My Lords, if I may suggest it, we are drifting a little from the Bill. The purpose of this Amendment is to modify, if not remove the effects of the freeze in the event of there being no declared policy which is capable of implementation, either on the

23
part of the Trades Union Congress—and I know that there are objections and the noble Lord, Lord Lee of Newton, made this point earlier—being called upon to exercise authority because its position is not one which enables it to do that easily, or on the part of the Government. We were promised a White Paper last Friday, if one is to believe the newspapers, and we did not get one. I forget whether there was any public statement to this effect. We received a Statement from the Chancellor.
The Statement from the Chancellor said many things, but it did not have the authority of a White Paper document or even the laying of a draft order, and so it seems therefore that one needs to have another look. The game has changed since the Committee stage last Monday and Tuesday; we have a new picture. Whereas last Monday and Tuesday we were arguing in relation to this subject of the price freeze for four months or three months, depending on which clause applies, under conditions in which there might have been some pay restraint—whether imposed by the TUC, as it has been in the past couple of years, or by the Government is of no import—we now have a picture in which this price freeze is liable to be imposed when there is not a corresponding restraint on pay.
To put it simply, this is unfair; but of course that is by the way. In this environment, perhaps fairness is not the issue which would claim your Lordships' greatest consideration. But, apart from that, we argued very strongly on Monday last about why the question of a freeze can be so damaging to companies and, indeed, can in its turn lead to the smaller companies for sure, and probably some of the bigger companies as well, going out of business because of the increases in costs which may come their way during the course of the four months. I admit that then and, I think, now the main increase in cost to which we are addressing our thoughts is that caused by costs of overseas raw materials.
In that area we are particularly worried, because the experience of the past two or three years has from time to time shown that there can be a cost increase of an order which would wipe out the possible price increase of which somebody had
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given notification which would lead to an investigation in the short period of four months. It is that situation against which we ought to be safeguarding companies which would find themselves in such difficulties that they caused the very situation we want to avoid—increased unemployment—due to the necessity to reduce their activities considerably because of the effects of this four month period.
Your Lordships will have seen last week that, after I think three years, the Monopolies Commission reported on the bread industry. They found that the low profits of the industry were caused entirely by Government interference and not by a misuse of power by the three big bread-making concerns of this country. That bears out the fact that any increases people are going to apply during the immediate future in any competitive industry are not going to be applied because people are going to misuse their powers, but because the market requires it of them. Therefore, if people apply for a price increase and need to have it in order to make their business competitive, they are applying for purely business reasons and not because they are wicked, cruel, unkind or any of those other things. So it seems quite unreasonable for there to be built into this Bill the ability to freeze prices—because people will be asking for increases only because they need them and not because they want to take advantage of the situation, or something of that nature.
For that reason, it seems to me that we need to consider very carefully what we are dealing with in this Amendment. We are dealing with the fact, as I suspect it to be, that the Government's reason for putting in a price freeze was as a bargaining counter to ensure that they got a viable, meaningful and enforceable form of pay restraint. Indeed, in another place the Secretary of State said as much, although in other words. But they have not got a viable, enforceable pay restraint as things stand at the moment.
I was delighted that the noble Lord, Lord Oram, said there would be a White Paper before Parliament went into Recess. That may be what we are seeking: if so, well and good. In that case the Amendment, as phrased, is more than covered. There will be every reason for saying that this Amendment should be agreed

25
to by your Lordships because it says that if there is a viable document which takes care of the situation within the Amendment, then there will be no need to put these things into abeyance.
I personally have doubts about the wisdom of that because, as I tried to indicate, I believe this price freeze section is misconceived in the first place; but if it is purely a bargaining counter, let us treat it as such—in which case, though there may well be all sorts of technical faults in my noble friend's Amendment, for heavens sake! let us treat it as a bargaining counter, put it in the Bill and, if the Government come up with a White Paper, that will be jolly good and the effects of this Amendment will not be realised. I would say to my noble friends that if they felt it right to press this Amendment I should be happy to support them.

POWER PLANT INDUSTRY
3.44 p.m.
Lord STRABOLGI: My Lords, with the leave of the House I should like to repeat a Statement at present being made in another place by my right honourable friend the Secretary of State for Energy. The Statement is as follows:
"The Secretary of State for Industry has informed the House that it has not at this stage proved possible to find an acceptable basis for restructuring the power plant industry. At the same time the Government recognise that the current lack of home orders, together with the relative lack of export opportunities in present economic circumstances, has led to a pressing short-term need for work in sections of the industry. To help with these short-term problems the Government have now decided that it would be right for the Central Electricity Generating Board to place an order for Drax 'B' coal-fired power station and that the order for turbo-generators should be negotiated with C. A. Parsons.
"The Central Electricity Generating Board had not planned to place an order for the station before 1979 and the Government have agreed in principle to the payment of compensation to the Board in respect of costs incurred in bringing forward the order.
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"The Government further anticipate that, as soon as possible following the thermal reactor decision, an order will be placed for a nuclear station. The power plant industry will also benefit from ongoing repair and maintenance programmes.
"The Government believe that the order for Drax 'B', in addition to benefiting the power plant industry, is a further mark of confidence in the United Kingdom coal industry."
My Lords, that concludes the Statement.
3.46 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord for repeating the Statement being made in another place. The Secretary of State for Industry, Mr. Varley, has, at Question Time in another place earlier this after-noon, fully supported the main recommendation of the report of the CPRS, the "think tank", that rationalisation of this sector of the industry is essential if it is to remain competitive in the world market—and it is a world market.
That report was published and has been widely read by competitors all over the world. As the CPRS recommended that there should in the meantime be no orders placed until that rationalisation had been decided upon, there must be grave doubts about the decision announced today. It is contrary to the known views of the Central Electricity Generating Board, the National Enterprise Board, which was recently set up by the Government, and the Department of Industry itself.
I should like to ask the noble Lord this first question: When do the Government expect the rationalisation or, as the Statement calls it, the restructuring, to be started? Do the Government agree with the suggestion of the CPRS that the placing of an order could lead to a dangerous postponement of the changes that are needed? The decision has clearly been taken as one of immediate expediency in order to save some jobs now, but there is a danger that it could well jeopardise many more jobs in the industry in the longer term.
My second question to the noble Lord is this: is the Drax "B" power station still open to competitive tender?—because there is a limit to the extent that Ministers

27
can intervene in these matters. As the noble Lord will have surmised, we on this Bench have more than a suspicion that the Government have not handled this matter at all well or with any great wisdom.
3.48 p.m.
Lord AVEBURY: My Lords, is the noble Lord aware that we are pleased that the Government have accepted the recommendation which, on behalf of our Party, I made in the debate on 22nd December last, that an order should be placed during the course of this year for a 1,320 megawatt power station?—not for the reasons given by the Government, of short-term expediency, but because the CPRS report, to which the noble Lord has just referred, shows that even if there is no growth in demand for electricity at all, the programmes to replace existing plant would require ordering at the rate of 2,000 megawatts a year. If that is so, would not the noble Lord agree that an order for a nuclear station in 1977 on top of Drax "B" would more than allow for the retirement of existing plant? Moreover, would the noble Lord not agree that if the CEGB is going to be compensated for bringing forward the order for a nuclear plant, it is likely to be extremely expensive, whereas the order for Drax "B" can be offset by the decline in projected unemployment in the North-East?
Baroness WARD of NORTH TYNESIDE: My Lords—
3.50 p.m.
Lord STRABOLGI: My Lords, I wonder whether I might answer the two noble Lords who spoke for the Opposition and the Liberal Party, before the noble Baroness intervenes. Yes, I agree with the noble Lord, Lord Avebury, about the question of unemployment. I am grateful to him also for what he said. With regard to the questions of the noble Lord, Lord Campbell of Croy—and I appreciate the moderate way in which he posed these—he asked me first about the Secretary of State for Industry. It is quite correct that my right honourable friend the Secretary of State for Industry informed the House at Question Time that the Government accepted the recommendation of the Central Policy Review
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Staff, supported by the National Enterprise Board, that it would be in the long-term interests of the country and those employed in the industry if restructuring took place. The Government have certainly not abandoned this objective, but although considerable progress has been made it has not at this stage proved possible to find an acceptable basis for restructuring.
The noble Lord also asked whether the Drax "B" was still open to competitive tendering. Because of the present short-term need for work at C. A. Parsons, the Government decided that a turbo-generator order should be placed with them. I may say that I think we had an excellent precedent for this, since the previous Administration thought it right not to go for competitive tendering in very similar circumstances over the Ince power station order, which they placed in 1972 with Parsons.
Baroness WARD of NORTH TYNESIDE: My Lords, I should be very unwise if I got myself involved in this controversy. But I am bound to say, when my noble friend Lord Campbell of Croy says what the opinion is on this side of the House, that that does not mean that I am going to support him. I am entirely entitled to have my own opinion. I do not in the least like the policy of Her Majesty's Government in many directions, but I am very grateful to know that for once the North-East coast is being considered suitable, and I should like to congratulate whichever Ministers in another place took the decision. We shall be very grateful. We have a higher level of unemployment in my part of the world, and it was my policy when I was in another place to try to support my part of the world, if possible. So I am delighted on this occasion to be able to support my part of the world.
Therefore, if my noble friend Lord Campbell of Croy does not mind, perhaps he will not get up and say that the whole opinion—even if I am only one person—on our side of the House is against what the Government have done. On this occasion, we in the North-East are very glad, and we in the North-East will continue to be glad, because it is very rarely that we get a decision which supports us. I just wanted to put that on the record. I shall not argue the technical details, but that is that.
Lord STRABOLGI: My Lords, I do not want to come between the noble Baroness and her own Front Bench. I have always had the greatest admiration for the common sense of the noble Baroness, and for the way she speaks up for her part of the world, and that admiration increased today. The noble Baroness is quite right and, if I may, I should like very briefly to state the reasons why the Government have made this decision. First, the Government have no power to compel a merger of two private firms, and no agreement could be reached. Secondly, the Government then acted to save jobs, in the same way as I said the previous Administration acted—which was absolutely right, in our opinion—over the Ince contract. Indeed, nearly 3,000 jobs will be saved at the main contractors only, to say nothing of the sub-contractors. Thirdly—and this is very important—Drax "B" is a coal-burning station and, in our view, this makes good fuel policy, especially in connection with the new Selby coalfield.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that, while it is easy to understand both the Party political and the compassionate reasons for the decision which he has just announced, it is blatantly against the economics as stated by people who understand these matters? I should like to ask the noble Lord whether he has an understanding—I will not say "approval", because one does not want him to be in a position to say that—with the International Monetary Fund, because he may remember that the facilities which we negotiated some time ago to get us over a great crisis were to be in three instalments, which was obviously to take into account any deviation from sound economics in future Government policies. Does he have the kind of clearance which will make it certain that both the Party political reasons and the compassionate reasons that have been announced do not interfere with the fundamental economic strength of this country to overcome the problems that are facing it?
Lord STRABOLGI: My Lords, it is our policy to have a steady ordering programme, and we anticipate that beyond Drax a nuclear order will be placed as soon as possible following the thermal reactor decision. The question of orders
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beyond this is one that we shall, of course, continue to discuss with the Central Electricity Generating Board.
Lord CARRINGTON: My Lords, would it be right to sum up the Government's position in these words, that they have decided to spend £600 million in ordering a power station which is not necessary and which the Central Electricty Generating Board do not want, in order to bolster up an industry which their own advisers have said should be restructured, and that their decision may in consequence ruin that industry?
Lord STRABOLGI: No, my Lords, it would not be so at all. But I think that this is a debating point, and we should be getting into the field of debate if I answered it in any detail.
Lord WYNNE-JONES: My Lords, neglecting the political arguments that have been put forward from the other side, and agreeing with the attitude, if not the arguments, put forward by the noble Baroness, Lady Ward, may I ask Her Majesty's Government whether they appreciate that what has now been done is something which keeps a very excellent firm in existence and, furthermore, enables a very important trained force in the North-East to continue in employment? Would Her Majesty's Government say whether any progress is likely to be made towards a co-ordination of the turbo-generator building industry, whether the firm of GEC is likely to show any more consideration in the future than it has shown in the past to the firm of Reyrolle Parsons, and whether there is any likelihood of our getting a unified industry in this field?
Lord STRABOLGI: My Lords, I am very grateful for what my noble friend has said, with his unrivalled experience and knowledge in this field. It is the Government's purpose to create a viable power plant industry, but we have, of course, given this order to Parsons. My noble friend asked about possible mergers. Of course, there are discussions under way about a possible merger between Babcock and Wilcox and Clarke Chapman, the boilermakers. I cannot say anything about this at this stage, but of course a Statement will be made later if it is found necessary to make one.
The Earl of ONSLOW: My Lords, may I ask the noble Lord whether I am right in understanding that the Government are spending £600 million to save 1,600 jobs? I am certainly not in any way advocating sacking people, or anything like that—I think that I am far too humane a person to do that—but it seems economic madness to do this, when it would be much better to get those people employed in making something else which would make a profit, as opposed to subsidising them to make a loss by producing something which is unnecessary and not wanted.
Lord KALDOR: My Lords, may I suggest that this last argument depends entirely upon the quite unfounded assumption that the people who would be displaced in the North-East would find alternative employment, either in the North-East or anywhere else. It would simply reduce the amount of employment. Therefore the interests of this industry cannot be regarded in isolation. There is a very heavy external cost to the nation as a whole which invalidates a great deal of the argument which the noble Lord, Lord Carrington, put forward.
Lord STRABOLGI: My Lords, on costs I can say that the Secretary of State for Energy said last January that the effect on prices of advancing Drax "B" would vary according to the rate of growth in electricity peak demand and other factors. With regard to Drax "B", however, there is no question of its not being built; it has been in the CEGB's programme since the late 1960s. It is not a question of whether the station should be built, but when.
Baroness PHILLIPS: My Lords, may I compliment the noble Baroness, Lady Ward of North Tyneside, on her loyalty to the North-East and say that she can take some comfort from the fact that this year they have had visits from the Queen, the President of the United States and Mohammed Ali. So they are on the map!
Lord CAMPBELL of CROY: My Lords, since the noble Lord has tried to draw a parallel between Drax and the Ince order, is he aware that that action
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was taken after consultations with the industry at a time when the industry, in happier days, was busy with heavier order books?
Lord STRABOLGI: My Lords, I should not have thought that one could call the years 1970 to 1974 very happy days.
Several noble Lords: They were better than these!
Lord STRABOLGI: But, my Lords, with regard to consultations, there were full consultations with the industry. Unfortunately, the companies concerned could not reach agreement.
Lord DOUGLASS of CLEVELAND: My Lords, it will be remembered that in the steel industry a decision was made, on similar grounds of efficiency, to close down the Shotton steelworks. I am wondering how much money is being spent in order to avoid the reactions which resulted from the closing down of the Shotton steelworks. Is there not a similar set of circumstances today where, in the interests of efficiency and size, the suggestion is to close down not a neighbourhood like Shotton but a large part of the North-East coast?
If a large part of the North-East coast were to be closed down, how much money would we spend upon trying to put that right from a social standpoint, and how would it affect some of the big international and multinational firms which are working very well there and which have a good relationship with the workers on the North-East coast? This good feeling would be soured by action of this kind. Therefore, is it not better to foresee the social consequences, which are tied to the economic consequences, for at the end of the day these would prove to be more disastrous than anybody in this House at present seems to be able to foresee?
Lord STRABOLGI: Yes, my Lords. I am very grateful to my noble friend Lord Douglass of Cleveland for stressing the importance of the social consequences. We are, after all, dealing with human beings.

PRICE COMMISSION BILL
4.5 p.m.
Debate on Amendment No. 1A, on Report, resumed.
Lord ORAM: My Lords, perhaps I should reply briefly to the points which have been made by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Mottistone, on the Amendment which we are considering.
The Earl of MANSFIELD: My Lords, may I ask the noble Lord whether he has asked for the leave of the House to make a second intervention?
Lord ORAM: My Lords, I apologise if I have omitted to do so. If I have not the leave of the House I shall gladly sit down. I take it that I have that leave and I apologise to the House for any discourtesy. I was suggesting that the two speeches about which I needed to comment were those made by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Mottistone. I acknowledge that the noble Baroness, Lady Seear, my noble friend Lord Lee of Newton and my noble friend Lord Kaldor made important contributions, but it seemed that they were not directed at me in particular.
The noble Lord, Lord Boyd-Carpenter, started by offering a neat summing up of the position as he saw it: pay control goes, price control remains. If I may say so, his summing up was neat but tinged with a degree of exaggeration which often make the interventions of the noble Lord so attractive. Pay control does not go. I agree that it is very different, in view of the events of last week, but, as I indicated, there is to be an order continuing pay control, in particular the 12 month rule. Indeed, firms will be in the same general position under the new White Paper as under the existing one. The only difference is that the current White Paper goes in detail into the level of wage settlements which are permitted, whereas the new one, as I indicated several times, will provide a sanction merely against breach of the 12 month rule. So it is not true simply to say that pay control goes.
Lord BOYD-CARPENTER: My Lords, surely what the noble Lord has said is that
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pay control in general in respect of the specific amount of increase permitted goes and that what remains is the 12 month rule itself—a diminishing asset.
Lord ORAM: My Lords, f did say that there are radical differences but, so far as the Amendment which we are now considering is concerned, the important feature is that the pay control which continues is sufficient to bring into effect the pay sanction that we were speaking of. Again, it is true when the noble Lord says that price control remains, but may I ask him to recognise that the kind of price control which we are bringing in through this Bill is—and in a year's time will be very much more so—a different kind of price control from that which has applied hitherto? These are important differences that I wish to comment upon regarding the noble Lord's rather over-simplified summing up of the present position.
The essential feature of price control is that the Price Commission will undertake investigations into carefully selected price increases. This is very different from the across-the-board controls through the Price Code. If the noble Lord studies Clause 2 (2) in particular, he will note that a series of criteria are there set out. These are designed exactly to take account of the different circumstances in the various kinds of firm to which he referred. The noble Lord instanced in particular a firm which is capital intensive and which might, for that reason, be all the more tempted, for the sake of a quiet life, to give way to an improper wage demand. I suggest that Clause 2 is designed very carefully and very specially to take account of the differing circumstances of different firms.
The noble Lord asked how the Government would help a firm to resist an improper wage demand, one which is out of time and in breach of the 12 month rule. If a firm properly resists such an improper demand, then it will know that no certificate will be issued by the Secretary of State for Employment. This firm will therefore not be referred for investigation to the Price Commission and its pricing policy will be unaffected. It will be for the firm to determine its pricing policy. On the other hand, the firm would know that if a competitor gave way to an improper wage demand the certificate

35
would be issued which would cause my right honourable friend the Secretary of State for Prices and Consumer Protection to require the Price Commission to investigate under the margin controls the affairs of the firm which improperly gave way to such a wage demand. In that way I think the Government would be behind a firm such as the noble Lord has instanced.
Lord DRUMALBYN: My Lords, I am obliged to the noble Lord for giving way. Is not the sanction on the competitor who gives way that he would be less able to compete because his prices would go up? Why should he have a still further sanction imposed upon him?
Lord ORAM: My Lords, the firm would come under scrutiny and it would suffer the penalty of having its margin reduced. The improper wage increase would not be allowed to the company in the calculation of the allowable price, so it would be under a disadvantage in that respect.
Lord HARMAR-HICHOLLS: My Lords, if while they are going through the procedures just outlined by the noble Lord—and we know that such procedures can be protracted—considerable losses are incurred (which was the point raised by my noble friend), can they claim any sort of compensation from any source?
4.12 p.m.
Lord ORAM: My Lords, we discussed this at Committee stage and interim price increases would be allowed even during the period of investigation—indeed more than one, if needed—so the losses would not occur. That is quite apart from the safeguards provided under Clause 9. I was about to reply to the noble Lord, Lord Mottistone—not to all his points, as he will recognise, but particularly to the point that he made, that things are different now as compared with a week ago. I entirely accept that and indeed I acknowledged it in my opening remarks. But he suggested that because they are different now we need to review the situation again. To some extent we are doing that now, but I would suggest that since I have already indicated that there will be an order needing the affirma-
36
tion of both Houses of Parliament, and that will come within the next two weeks, that will provide the opportunity to review the situation.
Then the noble Lord disappointed me because he recalled that I had said that the White Paper and an order would be before Parliament, and he said, "If that is so, jolly good show!"; and I thought he was then going to on say, "And that obviously makes it unnecessary to rely on the TUC meeting in September". But then, disappointingly and rather tamely, at the end the noble Lord said that nevertheless he proposed to support his noble friend's Amendment.
Lord MOTTISTONE: My Lords, if the noble Lord will allow me to interrupt on that point, the fact is that a White Paper was promised for last Friday, which would have been substantive. Because that did not come forward, is it not reasonable to have doubts about the solidity and firmness and all-embracing covering of any White Paper that might come out in a fortnight's time? Therefore it is important to have coverage in the Bill to make sure that we are dealing with the situation.
Lord ORAM: No, my Lords. The point is that in order to continue the powers existing at the moment under the legislation referred to in this Bill, an order is necessary. I can only give the noble Lord my undertaking that that order is on the way, and I can only ask him to accept that such is the position. I believe he will then find his opportunity to say what he wants to say more fully.
The Earl of MANSFIELD: My Lords, before the noble Lord sits down, he said quite a lot about sanctions for breaches of what he described as the "12 months' rule". Will the sanctions be brought against firms who also give wage settlements which are above the 10 per cent. maximum?
Lord ORAM: My Lords, the order to which I referred—and I made this clear in my opening remarks—will apply only to the 12 months' rule and not to other aspects of pay policy that were announced by my right honourable friend the Chancellor of the Exchequer.
The Earl of MANSFIELD: My Lords, the emperor's clothes grow more diaphanous by the second. I think we have had a useful debate. Most noble Lords realise that this Amendment was tabled in the light of swiftly changing circumstances. Certainly the drafting was not meant to be taken very seriously, particularly as I drafted it myself, and therefore it was used as a peg for one or two arguments to which hopefully it was thought the Government might reply.
It seems to me that what we are left with is the Government saying, "We think that the maximum level of settlements should be no more than 10 per cent. If a trade union or any other body of workers is able to use its industrial muscle and get a far larger settlement then we, the Government, do not propose to intervene. The company which gives it will not be helped to resist such a claim, but equally it will not be penalised for having given in." I hope this is a fair way of putting the Government's argument. They say, "What we, the Government, are adamant about is our 12 months' rule. In other words, if that rule is breached then we shall use both of the arms; that is to say the arm of general Government dissatisfaction which the Chancellor mentioned in his Statement in the other place last Friday and also, as the noble Lord, Lord Oram, has said, sanctions will be imposed against the company by means of the Price Commission. That was the matter which I wanted to find out. It then becomes plain and paramount that the Price Commission is going to be used as a political arm of the Government to help impose its policy upon companies. I think that is the situation to which we now come.
Lord ORAM: My Lords, I am grateful to the noble Earl for giving way. In that respect the situation is as it has been for the last two years.
The Earl of MANSFIELD: My Lords, if the noble Lord is saying that the Social Contract has really been a figment of the Government's imagination for the last two years, that is something which others have been saying all along, but I do not believe he means that.
Lord ORAM: No, my Lords, I do not. I must make this clear. As I understood
38
it, the noble Earl was referring to the pay sanction provision and it is that which has existed these last two years in the same form as it will now exist. It has not had to be invoked, but no change is being effected by what we are now discussing.
The Earl of MANSFIELD: My Lords, the fact of the matter is that there will be no moral argument. As I understand the position, there will be the invocation of powers only if the 12 months' rule is breached. I see the noble Lord is, nodding his head. One asks what protection the company is to have, in so far as protection may be needed. I cannot say I was surprised. I was a little disappointed by the attitude of the noble Baroness, Lady Seear, who said—I trust I am being fair and reasonably accurate—that that is something which companies have to work out for themselves. The managers are there to manage and they will have to get on and do their best. That is a robust point of view, but I am not sure that industry will regard it as exactly helpful.
Then the noble Lord, Lord Lee of Newton, asked, "What is policy?" in regard to incomes policy. Of course, a question like that can be mentioned in a number of different ways. It is rather like asking somebody if he believes in heaven: most of us have our ideas of heaven but they do not usually coincide with the ideas of other people. It is not an easy question to ask and it is certainly not an easy question to answer. My grandmother, aged 90 at the end of the war, who had been deaf for 36 years, said that her idea of heaven was to go to a tropical island and die of a surfeit of pineapples. Apparently that was something that was pleasurable to an old lady at the end of the war. It may be that in the economic debate on Wednesday one might come back to the noble Lord's question, but I do not think it has really got very much to do with the Amendment or the debate this afternoon.
Lord LEE of NEWTON: My Lords, if the noble Earl will allow me to intervene, I was not referring to an old lady of 90. I was referring to the Leader of the Opposition.
The Earl of MANSFIELD: My Lords, we are both referring to desirable existences.

39
It is just that our ideas about them do not coincide. I think we should get on. We have had a good debate. In the circumstances, I am sure we shall all read, and our colleagues in the other place may well read with interest, what has been said on behalf of the Government this afternoon. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 5 [Proposals to investigate prices or margins]:
4.21 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 1:
Page 7, line 9, after ("margin") insert ("not being a net margin as provided for in regulations made under subsection (6) of this section").
The noble Lord said: My Lords, I trust that the discussion on this Amendment will be short because, as I said in Committee, the purpose behind it, which I then endeavoured to establish, is a tidying up operation. I hope it is helpful to the Government to tidy it up. It is certainly helpful to business to know where they stand. As the Government will be aware, there is more than one sort of margin which might be covered by the phrase which the Amendment seeks to correct. Taking into account what was said at Committee, and also what was in the note which the noble Lord, Lord Wallace, very kindly sent to me to clarify a point which he had made, I hope this Amendment will take care of what the Government wished to modify within my original Amendment. I beg to move.
Lord WALLACE of COSLANY: My Lords, I gave an undertaking in Committee that we would look at the general principle of the previous Amendment and the one which we have before us today. I would say that the problem with any attempt to specify in the Bill the margin to be investigated is that, to be successful, it would require an extensive definition of "margin". Such definition would be out of place in the main legislation. That is why we have left the problem of definition to regulations which will be made under Clause 5(6).
40
We have, however, looked at the idea of including in the Bill a provision that will make clear that investigations are to be made into gross percentage margins, but we cannot do so without either including a somewhat lengthy definition or leaving the definitional problem to the regulations. This latter method would mean that we do not really solve the problem. I am afraid the present Amendment poses the same difficulties. We have concluded that the definition of "margin" has to be left in Clause 5(6) regulations.
However, I should like to give a very clear undertaking that investigations will relate to gross percentage margins. We will achieve this by suitably defining distributors' margins under the regulations. In this way we will meet the intention behind the Amendment. The regulations will make it immediately obvious to the distributive trade that any investigation will be into the gross and not the net margin. In the light of that undertaking I hope the noble Lord will feel able to withdraw his Amendment.
Lord MOTTISTONE: My Lords, I am slightly disappointed because I had rather hoped that the phraseology of the Amendment, to which the noble Lord's reply did not directly relate, took care of exactly what he was saying and underpinned his assurances. I entirely accept the noble Lord's assurances, and I am sure that people who are interested in this Amendment will read the Official Report and take comfort therefrom. The difficulty is that, quite apart from Governments changing—which, God help us, they may soon—Ministers change and even Ministries get swept away, while Acts of Parliament go on for ever. It is a little difficult to have a matter of importance like this left on an assurance within the record. But this is not an important enough point to take any punitive action against the Government and so, with your Lordships' permission, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 6 [Investigations]:
4.26 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 2:
Page 8, line 43, at end insert—
("(aa) to complete the investigation and to make available to the relevant person any evidence or information relied upon by the Commission during the investigation.
Provided that the Commission shall not make available such evidence or informaton as aforesaid if the provision thereof would be prejudicial to any legitimate commercial interest.")
The noble Lord said: My Lords, on behalf of my noble friends Lord Mansfield and Lord Mottistone, I rise to move Amendment No. 2, which is an Amendment to Clause 6. My noble friend Lord Mansfield spoke at length, as indeed did the noble Lord, Lord Oram, during the Committee stage to Amendments Nos. 20, 21 and 22, which were debated together at that time. The point which we are seeking to make al this moment, and one which we regard as of particular importance, is related to the provisions in the Bill for consultation between the Corn-mission and firms whose affairs are under investigation.
My noble friend Lord Mansfield was at pains to explain to your Lordships that under the Bill as drafted it was quite open for the Commission to produce reports, and indeed for the Secretary of State to take action upon them, with the most inadequate provisions, as we thought, for consultation with firms whose affairs were being looked at, and non-existent provision indeed for any rectification of defects which may only be apparent to the firm under investigation when the report appears, or indeed in the deliberations of the Commission before the report itself finally comes before the Secretary of State. We on this side of the House find this unacceptable.
The noble Lord, Lord Oram, in replying to the points we made at Committee stage, said, first of all, that firms were entitled to make representations to the Secretary of State between the publication of the report and action by the Secretary of State. We agree that that is possible, but we think that that provision is in no way adequate to meet the problem that we see before us. The noble Lord, Lord Oram, also said that there was a problem of time; he said there would be no time, if the Commission were to produce their reports promptly, for them to consult with firms to check the accuracy of the information upon which they were relying. The noble Lord also said that some consultation
42
would in any event take place. So I am not at all persuaded by that point, and I hope your Lordships will not attach too much importance to it.
Finally, the noble Lord, Lord Oram, said that there were considerations of commercial confidentiality. I believe that the noble Lord had a point there. Under the Amendments we proposed at Committee there may have been some difficulty about the Commission revealing information that they had received from third parties. We have accordingly adjusted our Amendment on this occasion to have regard to that point which the noble Lord made.
My Lords, the problem is that firms feel that when the Commission are reaching conclusions which may be very disadvantageous commercially to firms, they should rely upon accurate information; that the Commission should not be reaching conclusions upon information produced perhaps by aggrieved third parties and which might never come to light unless the Commission have a statutory obligation to bring this information to the attention of firms under investigation. I beg to move.
Lord ORAM: My Lords, as the noble Lord, Lord Trefgarne, has explained, during the Committee stage we discussed similar Amendments to the one that he has just moved. I acknowledge that the noble Lord, Lord Trefgarne, obviously listened to, and no doubt has studied since the Committee stage, what I said in reply to the Amendment at that time. As he has explained, the present Amendment is similar in intention to those that we discussed a week ago. He has pointed out that he has carefully taken care of a main point that I raised on that occasion about the disclosure of commercial information where disclosure could damage a third party, and I acknowledge that his Amendment seeks to take care of that matter. However, he will recall, and he has said so this afternoon, that that was not the only point that I put before your Lordships in resisting the Amendment, as I am afraid I must continue to resist it today.
I undertook to look at the matter and I have done so. However, I made it clear during the Committee stage that I did not expect to be able to come back

43
to the House with any suggestion about how the Bill could be improved in this respect. I am afraid that that is still the position. It is not the case that I do not recognise the real fear among noble Lords opposite that the Commission might inadvertently rely upon some erroneous fact with damaging results to the firm concerned; it is simply that in practice we feel that these fears are misplaced. Perhaps I may repeat two or three of the reasons why we have reached that conclusion.
First, there are the safeguards to protect the firm. Clause 6(8) requires the Commission to exclude from reports, so far as practicable, matters which could seriously and prejudicially affect the interest of a person or a firm. The Commission are permitted to include such matters only if they are necessary for the purposes of their report. Under Clause 6(9), the Secretary of State can, before he publishes the report, exclude any finding of fact, the publication of which would be against the public interest. The Commission are required under Clause 6(1)(c) to give a copy of their report to the firm concerned as soon as they give it to the Secretary of State. Therefore, as the noble Lord, Lord Trefgarne, acknowledged, the firm will be able to make representations to the Secretary of State about any possible errors before he takes action on the basis of the report. I have quoted the noble Lord, Lord Trefgarne, and I should also acknowledge that he indicated that that does not satisfy him. It is still the same argument, but I believe that it needs to be put on record.
I should, perhaps, rest my case more on another point which I remember stressing last week. The Commission, in practice, can be expected to check matters of fact with the firm concerned as they carry out their investigation. Although it is not laid down in the Bill, I believe that that is, in practice, the real safeguard against the inclusion of errors in their report. I accept that there can be two judgments as to whether the factors that I have mentioned are sufficient. Our judgment is very distinctly that the practical outcome of the Bill will avoid any difficulties such as those to which the noble Lord, Lord Trefgarne, has pointed. I believe that the various safeguards and other provisions built into the Bill are such that
44
certainly there is no need to introduce an Amendment of the kind proposed. Therefore, I assure the noble Lord, Lord Trefgarne, that, having given further thought to the matter since we discussed it a week ago, I have reached the same conclusion, and must ask him not to press the Amendment.
Lord MOTTISTONE: My Lords, I am most unhappy at the reply the noble Lord, Lord Oram, has given to my noble friend Lord Trefgarne. If one looks at the Official Report of the Committee stage, one sees that the noble Lord made great play of the commercial interest which we have endeavoured, as he admits, to remove. He has now produced some other points to draw to our attention, one of which is Clause 6(8) which, as I read it, refers strictly to individuals, and quite rightly so. It is most important that individuals should be protected in this way and the Government are to be commended for including Clause 6(8) in the Bill. However, that does not get around the question of the company.
The noble Lord, Lord Oram, then directed our attention to Clause 6(9), in which there is reference to the public interest. However, that is the other end of the scale. Between the individual and the public interest is the company. It is the company which is liable to be misrepresented. It seems to me that it is unreasonable to rely on either of those provisions. I suggest to the noble Lord that perhaps his argument is not as strong as he was trying to make it out to be, because he finished by saying that the third and most important matter is that, as regards the practical workings, the Commission will have to consult with the firm as the information is collected. That may well be so, but if it were satisfactory for what might be supposed to be the practical workings—I do not dissent that this might be so—then there are many other safeguards which have been built into the Bill by the Government and which, probably, would have been taken care of just as well by what would happen practically.
After all, when we pass Acts of Parliament we must always make a judgment. Indeed, it arose on my last Amendment. We must make a judgment about what might be promises from this Government or that Government, what might be practical

45
considerations and what is required in order to safeguard not just the individual but the individual organisation like a company, trade union, or some such body of people, against the irrational action of a public body like a Commission or even a Minister. One must be sure that what is rational today will be rational in the future. Therefore, provisions must be built into the Act, indeed, any Act, to provide protections.
The fact of the matter is that in this case the noble Lord, Lord Oram, although producing many arguments as to why he thinks the Bill or the possible practice of the Commission will provide the protections which we are seeking, has not actually said what is harmful in this particular proposed Amendment, to the principles of the Bill or what is inaccurate or bad wording. He has not said anything which, to my mind, makes this Amendment not a very sensible one. The Amendment provides an extra safeguard which is very reasonable for a company to expect. I, therefore, strongly support my noble friends in this Amendment.
Viscount SIMON: My Lords, during the Committee stage of the Bill, my noble friend Lady Seear and I expressed some doubts about the Government's attitude to Amendments which were then numbered 20, 21 and 22. I am a little disappointed at the Government's reaction. There is one point on which, perhaps, the noble Lord, Lord Oram, will be able to clarify the position when he comes to wind up. He referred to the fact that a copy of the Commision's report would be made available to the "relevant party" at the same time as it was sent to the Minister. However, it is not clear to me whether the report would, in fact, contain any statement of the facts or alleged facts upon which recommendations are based.
It seems to me that the report has merely reached a recommendation. Unless the facts are disclosed, there is no opportunity for the "relevant party" to make representations to the Secretary of State before action is taken. The noble Lord repeated what he said in Committee; that the Commission can be expected to check matters of fact as they go along. That seems to be a reasonable assumption. But it seems curious that there is no provision that they must disclose to the
46
"relevant party", not necessarily the name or the source of the information, but the fact that some information has been put before the Commission.
I wonder what noble Lords on the Benches behind the noble Lord, Lord Oram, apart from those in other quarters of the House, would say if it were proposed that any other quasi-judicial body should make recommendations for action based on facts which were not disclosed to the party concerned. It struck me at the time—and it still strikes me—that we have not provided an adequate opportunity for the party concerned to defend himself against allegations which, in certain circumstances, might even be malicious. Therefore, I hope that it is not too late—though it must be getting very late—to ask the noble Lord to have one more think about this.
4.42 p.m.
The Earl of MANSFIELD: My Lords, with respect, it is really missing the point to quote Clause 6(8) and to pray that in aid as being a reason for resisting this Amendment. That is not the point of the Amendment at all. May I say that, a fortiori, subsection (9) also misses the point? The object of this Amendment is really two-fold and it has taken into account in its redrafting such objections as the noble Lord ventilated to me on the last occasion the matter was debated.
First, the Amendment provides a check so that a firm which is the subject of an investigtaion can, as it were, point out errors of fact. I know that the noble Lord, Lord Oram, says that, in the normal course of events, the Commission will check the facts as they go along, but the trouble is that, with any organisation—whether it is governmental or nongovernmental—errors creep in. Any statutory investigation, whether it is carried out by a court of law or a body such as this, should, in the normal course of events, write in what I might describe as a "safeguards" clause to prevent errors of fact and injustices, if such can be written into the Bill without obvious disadvantage.
The other matter which I suggested to the noble Lord in Committee occurs in the event of representations being made by third parties which may or may not be known to the firm or undertaking

47
whose activities are under review. The noble Lord said that in such circumstances it might be very undesirable to let the company being investigated know too much about the reports which are being made and about their source; it might be a matter of company or commercial confidentiality. This Amendment has been redrafted with precisely that point in mind, and the discretion which is given to the Commission is really profound, if I may so describe it, because the Commission are allowed to be the judge in their own cause as to when they should withhold information under the terms of this Amendment, because they believe that to reveal it would not be in the public interest or in the interests of whoever gave the information.
I do not think that the noble Lord, Lord Oram, has put forward any convincingreason why this Amendment should be resisted. From first to last one of the unsatisfactory features of the Bill has been the lack of the Government's awareness that, unless we think about it, there will be injustices. I was very heartened by what the noble Viscount, Lord Simon, said. Unfortunately there is not time for the Government to think again. We are on the penultimate stage of the Bill, and the ultimate stage so far as Parliament is concerned, except for the consideration of Lords' Amendments, will be in an hour or two's time. It must be done now. I am not entirely sure what my noble friend Lord Trefgarne will decide to do because I have not spoken to him, but if I were him I should be strongly tempted to press the Amendment.
Lord ORAM: My Lords, perhaps I may address the House again in order to take up one or two points that have been raised. First, the noble Lord, Lord Mottistone, said that in Clause 6(8)(a) there is reference to "individual" and that later on there is reference to "the Secretary of State". He suggested that in between the individual and the Secretary of State there are some most important bodies and he instanced firms and trade unions.
Lord MOTTISTONE: My Lords, I apologise for interrupting the noble Lord, Lord Oram, but that is not so. I said that in subsection (9) there is a reference to
48
"public interest" and that between the individual within a firm and the public interest—I did not mention the Secretary of State in this context—there is the firm whose interests as a corporate body are not looked after in the Bill as it stands.
Lord ORAM: My Lords, I apologise for having misunderstood that point. However, it makes little difference to the point I am about to make. In subsection (8)(b) there is reference to a "particular person", and "person" comprehends the kind of bodies, firms and trade unions about which the noble Lord, Lord Mottistone, was a little anxious. So I think he will find that they are covered.
The noble Viscount, Lord Simon, asked me even at this late hour to think again because of the need for the facts to be presented. There is no need for me to think again because it is already firmly included in the Bill. He will see that Clause 6(5)(a) reads that a report must include:
"a statement of the findings of fact made by the Commission in the course of the investigation to which the report relates".
I see the noble Viscount nodding. I think that that meets the point he made.
There was one other point which I did not make in my opening remarks but which is important—in fact, I recall that I made it in Committee. The time-scale to which we hope the Price Commission will work does not afford time for too much exchange of documents, periods of correction and so on. I believe that all noble Lords are anxious that the matter should proceed as quickly as possible, and I urge that that is a practical consideration to be taken into account.
Baroness HORNSBY-SMITH: My Lords, may I take up the point about the time-scale? Surely that exercise will be a highly statistical one, with the Commission deciding between the cost of the product and the justifiable price at which it is sold. Therefore, it will involve a company in producing a vast amount of statistical evidence. Surely it would be much quicker if such a company knew the claims against it first and could come with the relevant evidence, instead of having to ask for time in order to amplify that it thought the charges are unjustified.
Lord ORAM: My Lords, I agree with the description of the noble Baroness, Lady Hornsby-Smith, about the kind of investigation that is involved here. Therefore, it is all the more important not to have a stage that will use up other time. The kind of point she had in mind will in practice be taken fully into account in the normal exchange of question and answer and consultation between the Commission and the firm whose affairs are being investigated.
I was about to make the point, in reply to the noble Earl, Lord Mansfield, that I had agreed that the Amendment sought to deal with the confidentiality point I made last week. I did not wish to rest on the question of drafting. The noble Lord, Lord Mottistone, said that I had not raised any drafting points, and I did not wish to do so, but as the point has been raised it is only right that I should point out that "legitimate commercial interest" would be too vague a phrase to insert in just that fashion and it would be necessary to have some such phrase as, "in the opinion of the Commission prejudicial to any legitimate commercial interest". As I say, I do not press my case on any drafting point and I make it only because the matter was raised. I rest my main case on the practicalities of the situation which I indicated both in. Committee and earlier when I dealt with the Amendment.
Lord TREFGARNE: My Lords, the practicalities of the situation are that there would be an injustice if we agreed to the proposals in the Bill. I cannot believe that it would be right to agree to such proposals if we felt they would lead to in-justice.
If, in order to ensure an element at least of cough justice—and even that seems to be missing as the Bill is drafted—we must somewhat extend the time the Commission may take to produce its report, so be it. The noble Lord, Lord Oram, spoke about confidentiality, and acknowledged that the Amendment went some way towards meeting that, although he complained about the words "legitimate commercial interest", saying they were too vague. He thought we should have written in words to the effect that "in the view of the Commission" a commercial interest was violated. I do not think that would be a good idea.
If we rely on the view of the Commission as to what constitutes or does not constitute a legitimate commercial interest, we should be giving it more power than would be appropriate. I use the word "power", but perhaps that is the wrong word to use. Certainly we should be imposing a burden on the Commission in asking it to consider what was or was not a legitimate commercial interest; that should be left to the courts when and if any dispute arises. The noble Lord, Lord Oram, has not persuaded me. The emphasis of his arguments have changed on this occasion from those he advanced in Committee and I believe it would be right for me to ask your Lordships to reach a view.
4.53 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 97; Not-Contents, 108.

CONTENTS

Alexander of Tunis, E.

Cullen of Ashbourne, L.

Halsbury, E.

Alport, L.

Daventry, V.

Hanworth, V.

Ampthill, L.

Davidson, V.

Harding of Petherton, L.

Auckland, L.

de Clifford, L.

Harmar-Nicholls, L.

Avon, E.

Denham, L. [Teller]

Hawke, L.

Barnby, L.

Derwent, L.

Home of the Hirsel, L.

Berkeley, B.

Digby, L.

Hornsby-Smith, B.

Blake, L.

Drumalbyn, L.

Hylton-Foster, B.

Boyd-Carpenter, L.

Ebbisham, L.

Ilchester, E.

Camoys, L.

Effingham, E.

Jessel, L.

Campbell of Croy, L.

Ellenborough, L.

Killearn, L.

Carr of Hadley, L.

Elliot of Harwood, B.

Kinnaird, L.

Carrington, L.

Exeter, M.

Kinnoull, E.

Clancarty, E.

Fraser of Kilmorack, L.

Long, V.

Clitheroe, L.

Glasgow, E.

Loudoun, C.

Clwyd, L.

Glenkinglas, L.

Lucas of Chilworth, L.

Cobham, V.

Gridley, L.

Lyell, L.

Cornwallis, L.

Hailsham of Saint Marylebone, L.

Macleod of Borve, B.

Mansfield, E.

O'Hagan, L.

Stamp, L.

Margadale, L.

Onslow, E.

Strathclyde, L.

Marley, L.

Rankeillour, L.

Strathspey, L.

Massereene and Ferrard, V.

Redesdale, L.

Teynham, L.

Merrivale, L.

Reigate, L.

Trefgarne, L.

Mersey, V.

Rochdale, V.

Trenchard, V.

Monck, V.

Romney, E.

Tweedsmuir, L.

Monk Bretton, L.

Sackville, L.

Vickers, B.

Montgomery of Alamein, V.

St. Aldwyn, E. [Teller]

Vivian, L.

Morris, L.

St. Davids, V.

Wakefield of Kendal, L.

Mottistone, L.

Sandys, L.

Ward of North Tyneside, B.

Mowbray and Stourton, L.

Sharples, B.

Ward of Witley, V.

Newall, L.

Sligo, M.

Westbury, L.

Northchurch, B.

Spens, L.

Young, B.

Nunburnholme, L.

NOT-CONTENTS

Airedale, L.

Gardiner, L.

Pannell, L.

Allen of Fallowfield, L.

Gladwyn, L.

Pargiter, L.

Amherst, E.

Gordon-Walker, L.

Peart, L. (L. Privy Seal.)

Ardwick, L.

Greene of Harrow Weald, L.

Peddie, L.

Avebury, L.

Greenwood of Rossendale, L.

Phillips, B.

Aylestone, L.

Gregson, L.

Pitt of Hampstead, L.

Bacon, B.

Grey, E.

Platt, L.

Balogh, L.

Hale, L.

Robson of Kiddington, B.

Banks, L.

Hamnett, L.

Rochester, L.

Beaumont of Whitley, L.

Hampton, L.

Rusholme, L.

Beswick, L.

Harris of Greenwich, L.

Sainsbury, L.

Birk, B.

Henderson, L.

Samuel, V.

Boston of Faversham, L.

Houghton of Sowerby, L.

Seear, B.

Brock way, L.

Hughes, L.

Segal, L.

Bruce of Donington, L.

Jacobson, L.

Shepherd, L.

Buckinghamshire, E.

Jacques, L.

Shinwell, L.

Burntwood, L.

Janner, L.

Snow, L.

Burton of Coventry, B.

Kaldor, L.

Soper, L.

Byers, L.

Kirkhill, L.

Stedman, B.

Campbell of Eskan, L.

Leatherland, L.

Stewart of Alvechurch, B.

Caradon, L.

Lee of Newton, L.

Stone, L.

Castle, L.

Listowel, E.

Stow Hill, L.

Champion, L.

Llewelyn-Davies, L.

Strabolgi, L. [Teller]

Collison, L.

Llewelyn-Davies of Hastoe, B. [Teller]

Swaythling, L.

Cooper of Stockton Heath, L.

Taylor of Mansfield, L.

Crook L.

Lloyd of Kilgerran, L.

Thomson of Monifieth, L.

Cudlipp, L.

Longford, E.

Wade, L.

Darling of Hillsborough, L.

McCarthy, L.

Wall, L.

Davies of Leek, L.

McCluskey, L.

Wallace of Coslany, L.

Delacourt-Smith of Alteryn, B.

Mackie of Benshie, L.

Wells-Pestell, L.

Diamond, L.

Maybray-King, L.

Wigoder, L.

Donaldson of Kingsbridge, L.

Morris of Grasmere, L.

Wilson of High Wray, L.

Douglass of Cleveland, L.

Morris of Kenwood, L.

Winterbottom, L.

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

Murray of Gravesend, L.

Wise, L.

Fisher of Camden, L.

Ogmore, L.

Wootton of Abinger, B.

Foot, L.

Oram, L.

Wynne-Jones, L.

Gaitskell, B.

Resolved in the negative, and Amendment disagreed to accordingly.

[Amendment No. 3 not moved.]
5.1 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 4:
Page 10, line 10, at end insert ("including an indication as to which of the matters listed in section 2(2) of this Act they have in particular had regard in making the recommendations.")
The noble Lord said: My Lords, I beg to move Amendment No. 4. This is the
52
Amendment which I moved at the Committee stage as Amendment No. 23. I thought at that time, and again when I read the official record, that the noble Lord who was replying for the Government was not taking up the terms of the Amendment as they were put, because most of the burden of his argument related to Clause 2(1), not Clause 2(2). I would agree with the noble Lord that if the Amendment had been written in terms including an indication of the matters listed in Clause 2(1), that would not have been sensible, because sub-

53
section (1) is a general introductory subsection, whereas subsection (2) contains many serious and different aspects which need to be taken into account by the Commission when they are conducting their investigation. It would be of very great interest to any firm being investigated to know the different matters which the Commission have felt are the most important matters for the purposes of the investigation and the subsequent report, so that, as I said in Committee, the firm can know where it went wrong and how it can avoid so doing in the future. Furthermore, the firm can also protect against certain matters, if it feels so emboldened, for which there is ample provision in the Bill.
The Amendment, does nothing but strengthen the Bill, as I felt before, and I thought that noble Lords opposite, having had an opportunity to consider the matter further, might be able to address their comments to the question of the items in subsection (2) rather than subsection (1), as they did when replying to me previously.
Lord ORAM: My Lords, as the noble Lord, Lord Mottistone, indicated, this Amendment has exactly the same wording as an Amendment which he moved last week. I rather felt that he was making a little too much of my references to Clause 2(1) as against Clause 2(2), and I had hoped, even last week, that I had indicated that there is a relationship between the two. I was addressing my remarks equally to both because, as I pointed out, they are linked. I am afraid that I have reached the same conclusion about the Amendment a week later because, in carrying out and preparing their reports, the Commission are required to have regard to the matters referred to in Clause 2. It is unnecessary to impose a further requirement on the Commission to specify which of the criteria have influenced their conclusions, although—and I believe I made this point last week—they will normally emerge from the Commission's reports because they have to give reasons for their recommendations. Therefore, in giving reasons they would need to indicate the criteria to which they had had particular reference.
Under the provisions of Clause 2(1), the Commission, while being required to have particular regard to the criteria, are also required to have regard to all matters
54
which appear to them to be relevant, with a view to restraining prices of goods and charges for services, so far as that appears to them to be consistent with the making of adequate profits by efficient suppliers of goods and services. That is a point which I recall quoting last week, and I believe it is important to quote it again. In my view, it would detract from the generality of this provision and upset the relationship between subsections (1) and (2) if the Commission were required to specify in all their reports which criteria had influenced their conclusions. I believe that the criteria would emerge from a reading of the report, as well as the reasons for the Commission's report, and therefore I see no necessity to write this into the Bill.
Lord MOTTISTONE: My Lords, this is not sufficiently important an event that I should do very much about it, but I must confess that I found that an unsatisfactory reply, and a rather sad one, evidencing a certain determination on the part of the Government not to try to help people who are being investigated. If, as the noble Lord, Lord Oram, says, in the event the report which comes out of an investigation will inevitably cover the points which I seek to have included by Statute, then jolly good show! But if that is to be the case, why could not this Amendment be included? If it is inevitable, let us help it along by having the Amendment. This situation gives one cause to think that perhaps there is a subtle reason against giving this kind of information to people. I find that hard to imagine, but one is made suspicious. I feel that it is an unsatisfactory situation; but on the other hand it is not a very important issue, and so I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 9 [Safeguard for basic profits]:
5.7 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 5:
Page 14, line 38 after ("fit") insert ("taking into account the matters listed in section 2(2) and in particular the need to ensure that companies are not handicapped financially by increases in any costs beyond their control,").
The noble Lord said: My Lords, bloody, but unbowed, I rise to move

55
Amendment No. 5, which is set down in the names of my noble friends Lord Mansfield and Lord Mottistone, as well as my own. On this side of the House we have been at pains to protect the legitimate interests of the producers and firms, at whose affairs the Commission may seek to look, and this Amendment is a further attempt to do just that. To us the Bill fails to provide for the cost increases which these days all too often affect companies, and for which the provisions, or the protections, of Clause 2 (2) really are inadequate. For example, firms can be affected by dramatic and almost instantaneous changes in currency values. We all know how last autumn the pound and the dollar reacted very sharply and very quickly. We know how often in the past, at least, oil prices have been raised, sometimes at very short notice, and very sharply; and we know how other commodity prices have changed very rapidly. We remember that sugar prices, for example, escalated very sharply at one stage a year or so ago. I remember there was a fairly short-lived but sharp increase in salt prices at one stage, and the rumour went about that there had been a strike in the salt mines in Siberia.
But, seriously, perhaps the most important change in costs, which may not happen overnight but which often happens at short notice, is the change in wage and salary costs. Unhappily, the Government have not included in this Bill, or indeed in any of the guidance documents which we have received so far, any statutory wage policy. While we on this side of the House have been twitted by various Members on other Benches as to whether we agree with this or that form of wage control, what we can say is that, with cost control or price control as draconian (which is the only word I can think of) as that contained in this Bill, then some form of protection against sharp changes in wage rates ought to be included in the Bill. It is for that purpose that we have tabled this Amendment, to which we invite your Lordships to agree. I beg to move.
Lord ORAM: My Lords, as the noble Lord has recalled, this is an Amendment which was dealt with at Committee stage. We dealt with it at some length, and I recall saying quite a bit about it. However,
56
I make no apology if this afternoon, as well, my remarks are somewhat lengthy (though I hope not too lengthy) because this is an important Amendment that noble Lords have brought forward. May I say that I was a little surprised to see it set down, since it was a matter upon which your Lordships' opinion was expressed in the Division Lobbies last time. While I have been in your Lordships' House I have noticed that the Party opposite has been frequently willing to use the majority to which it is accustomed to reverse a decision of another place, but I was not aware that it was anxious to reverse decisions of your Lordships' House, which is presumably what it is proposing to try to do now.
Lord DRUMALBYN: My Lords, if the noble Lord will forgive me, this is, after all, Report stage. What is happening is that the Committee may have reached one decision; the House might reach another.
Lord ORAM: My Lords, I was not in any way suggesting that noble Lords were out of order in bringing this forward, and I am glad to welcome to the Report stage the same people who were here at Committee stage. That is the nature of proceedings in your Lordships' House. But if I may deal, as I indicated, with the rather important question of substance raised by this Amendment, it gives me an opportunity to explain, in perhaps a different way, the points with which I had hoped to convince your Lordships last week. I explained on that occasion why the Government could not accept the Amendment, and I tried to set the Government's proposals for the Clause 9 safeguard regulations in their wider context, taking account of the many other checks and balances which are established by the Bill to limit the powers of the Price Commission and of the Secretary of State, and to prevent the imposition of unreasonable restrictions on companies. I explained that we needed to see the Amendment against the background of more general safeguards.
I do not want to go over the same ground, but I should like to make three important points. The first is the relationship between the criteria in Clause 2 of the Bill and the safeguard regulations under the Bill. Noble Lords opposite have noted that the Bill does not require the Secretary of

57
State to have regard to the Clause 2 criteria when he makes the safeguard regulations, and it is to fill this apparent gap, presumably, that they have tabled this Amendment. But these two parts of the Bill cannot be linked together in this way without changing the whole basis of the new system.
The Clause 2 criteria are a set of general principles which are meant to be applied with flexibility to individual cases according to the particular circumstances; and a study of the matters specified in Clause 2(2) shows that they can be applied to the circumstances of an individual firm or industry, but are quite inappropriate for devising across-the-board regulations applying to every sector of industry and commerce. For example—and here I quote from Clause 2(2)(a):
"the need to recover costs incurred in efficiently supplying goods and services …",
I suggest cannot be met by a blanket definition of costs which every supplier is entitled to pass on to his customers. It is relevant to a particular inquiry into a particular firm, but not across the board.
Moreover—and, if I may, I quote from Clause 2(2)(c)—a return on capital sufficient,
"to defray the cost of the capital (including compensation for the risk involved in producing the profits), and … to provide money for, and to encourage the promotion of, innovations and technical improvements …",
will of course depend upon the cost of the capital, the business risk and the investment needs of each firm or sector. Another important criterion is in paragraph (f), which refers to the need to safeguard consumers' interests by restricting prices or charges where competition cannot be promoted; for example, because certain suppliers control a substantial share of the relevant market. Whilst this criterion will be a helpful guide to the Price Commission in their individual investigations or examinations, I suggest it would provide no sort of basis on which to frame generally applicable regulations.
But, my Lords, even if it were possible to use the Clause 2 criteria to draw up safeguard regulations, the effect would be to negate the whole concept, which I have tried to explain several times, of a flexible system of price investigations based on judgments rather than rigid rules. The safeguard regulations, instead
58
of providing a floor beneath the criteria which protects firms' viabilities but allows the flexible element to operate, would almost entirely replace investigations and examinations. On the one hand, they would provide an entitlement to price increases irrespective of any Price Commission scrutiny; and, on the other hand, there would be a presumption that any price increase in excess of the safeguard entitlement should automatically be cut back, since the Secretary of State would have had regard to the Clause 2 criteria in drawing up the safeguard regulations. The whole point of changing from a rigid price code to a more flexible policy is that a detailed and universally applicable set of rules and regulations should not be the major determinant of pricing decisions in future.
My second point relates to the reference in the Amendment to costs beyond companies' control. In fact, of course, it is extremely difficult to decide, even in an individual case, whether a cost is really within a company's control. Many industries would be able to argue that almost all their costs—including labour and overheads such as rent and rates—are imposed on them by external forces over which they have little or no influence. On the other hand, there are some firms where one could argue that even their raw material costs are to some extent within their control, because they could change their manufacturing processes or stocking practices so as to use their materials more efficiently. If, as I have indicated, this question is difficult enough in the individual case, how many times more difficult it would be to translate it into generally applicable regulations.
Attempts to influence the form of the Clause 9 regulations by inserting additional words and concepts into that clause are, I suggest, inappropriate for enabling legislation of this kind—and we are dealing with enabling legislation. Such attempts are no more likely to help the cause espoused by noble Lords opposite than they are to make the Secretary of State's task any easier.
My Lords, my third point follows from that, but is also linked with the concern expressed by the noble Lord, Lord Mottistone, when this Amendment was debated last week. I replied to him then, but I will, if I may, comment again

59
on it. His argument was that industry needed figures on which to plan and the only figures to be thrown up by the new prices policy would be those in the safeguard regulations. I do not see how, on that basis, the noble Lord could defend his own Party's introduction of the Price Code some years ago. Even when the figures used in the Code had been amended to give greater satisfaction to most of industry than they did in 1973, industry could not plan for the future on the basis of those figures with absolute certainty because the Code could be changed, with very little notice, to impose however stringent a régime was desired by the Government of the day. Industry must, therefore, have looked behind the figures and relied on what it believed to be the intentions of the Government.
There is no reason why it should not do the same in the case of the safeguard regulations. The Government have made it clear that the figures in the safeguard regulations have the strictly limited purpose of acting as the floor for the new system and that they in no way represent a view of what is a reasonable profit for the average firm. The safeguard regulations will be relevant only to the small number of firms and the sectors which are investigated or examined; these firms and sectors will, in any case, have their pricing and profitability judged against the Clause 2 criteria and not against the safeguard regulations. Unlike the contents of the Price Code, the Clause 2 criteria are to be permanently enshrined in legislation. The noble Lord, Lord Mottistone, said that Acts of Parliament go on for ever. This is not literally true. I know what he meant and he will accept that these criteria will be, as I have said, permanently enshrined in legislation. They will, therefore, provide a better basis for planning ahead than any of the ad hoc expedients we have had in the field of price control over the last decade or more.
In conclusion, I should like to give three assurances. First, those companies which are worried about the prospect of large increases in costs while their prices are frozen have nothing to fear because the safeguard regulations will give them an entitlement to more than one interim price increase during an investigation if cost increases cause their profit margins to fall below safeguard level. The regulations
60
will have a similar effect after investigations, in that price increases may be made at any time to restore profit margins to the safeguard level.
Secondly, the consultative period on the draft safeguard regulations ends today. I can undertake that all the representations made by industry and the points made in our debates on the safeguards will be taken fully into account by my right honourable friend before the regulations are made. Thirdly, the Government have always made it clear that the safeguard regulations will be subject to review in the light of experience. If experience shows that the safeguard levels can be raised without undermining the effectiveness of the general policy, this possibility will certainly be considered. I have given those three undertakings in the hope that, in addition to what I spelled out at some length last week, noble Lords, will consider that there is this distinction between the criteria, on the one hand, and the Clause 9 regulations, on the other, and that they will not feel it necessary to press this Amendment.
Lord DRUMALBYN: My Lords, the House will be obliged to the noble Lord for that very full explanation of what the Government are after in this provision. He spoke of this clause acting as a floor so far as profits were concerned. There is always the danger that what is put forward as a floor will come to be treated as a normal base. I think that this is what inspires the fear about this provision. At the same time I think that what the noble Lord has said should go some way to dispel that fear.
It all depends very much on the attitudes of the various groups of the Commission which may or may not be similar; each may take different views. I think that we should have been happier—or, at least, I should have been happier—if it had been possible to relate the floor to some more specific formula as to what would be expected from an efficient producer, which is one of the safeguards. I wonder whether that is not the reason why my noble friend Lord Mottistone has included the safeguards from Clause 2 in this Amendment.
My Lords, it seems to me that there is a great deal to be said for ensuring that the Secretary of State will have regard

61
to the safeguards where appropriate. But this is exactly what the Commission are doing in other cases. They are not going to have regard to all the safeguards, for not all will be necessarily appropriate to any particular case. If the noble Lord will look at them again, he will see that some of them will not be appropriate in particular cases. I think that it is just as easy, and just as difficult, to apply norms or minima of this kind to one firm as it is to a whole group of firms in an industry, having particular regard to the efficiency test.
To go to the opposite extreme, it might be that a minimum profit margin as specified in these regulations would not be appropriate for a firm, which was not, in fact, efficient. On the other hand, there is the opposite danger that firms which are efficient and an industry which is efficient may be held down to an unduly low minimum. One would expect to see—and I do not know whether the noble Lord can comment on this—wide differences in the rate of minimum profit to be provided under this clause. The different circumstances are allowed for in the clause. It seems extremely difficult to envisage any way in which the Secretary of State is going to be able to fix these minima in such a way as to ensure that companies—to quote the Amendment:
"are not handicapped financially by increases in any costs beyond their control".
This seems to be the main burden of this Amendment. It is absolutely essential to make it clear that the minima are constant minima and therefore the prices should be able to be altered in accordance. with the needs. I do not know whether this is what is intended. If the minima are to be constant, it has to be possible for the prices to move rapidly in certain cases.
The noble Lord said that even within the period of investigation it will be possible to vary the prices from time to time. It is not only the period of investigation; it is a question of which firms, or which groups of firms, are to be examined. From that point of view, the minimum profit will be very much one that will be looked to all the time. We have in our minds—I have, at any rate—that this will loom far too large in the minds of the Commission and, in the case of this particular clause, of the Secre-
62
tary of State. The Amendment will alleviate that situation, even if it does not wholly cure it.
5.32 p.m.
Lord MOTTISTONE: My Lords, it is unfortunate that the Government do not seem to have been able to absorb that we were trying to say at Committee stage and are still firmly putting forward the concept that the criteria in Clause 2(2) are only suitable for guidance for the Commission and are not suitable for guidance to the Secretary of State and his Department in pursuing a parallel action. The various criteria in Clause 2(2) are excellent, and I have heard nobody criticise them. In another place there were various efforts to improve them, but even that was not really worth pursuing to any great extent because they are a very good, basic set of criteria for a pricing policy.
All of them are not applicable to each and every case, and I am sure that the Government are as aware of that as anybody else is, because they are a total compendium of the likely factors which need to be taken into account when producing a pricing policy. The fact that they are suitable for the Commission on which to examine a pricing policy does not mean that they are not appropriate for the Secretary of State and his Department to use as guidelines for producing the safeguards. As I said in Committee, if the safeguards were more realistic—and this comes back to the point that I was making earlier on which the noble Lord, Lord Oram, was kind enough to comment—these criteria within the safeguards seem to be aimed at the below-average efficient firm to make sure that it is not too protected. This is a rational point of view, if that is all it is.
As I endeavoured to show, these figures, which are the only figures within the Bill and its subordinate regulations, are the only ones that people have on which to plan. The noble Lord, Lord Oram, reminded me of earlier pricing policies introduced by my right honourable friends from the Party which I have the honour to try to serve, but what we are talking about now is that any threatened price control, which may be implemented by a Price Commission, or by a Secretary of State, is inhibiting to people who want to plan in the long term.

63
If one wants to build a new factory of any sizeable proportions, one has to start thinking about it 10 years ahead. In order to do that, one collects in all the facts from all over the world, including whether or not the business is liable to prosper in the interim. Ever since we forced ourselves into a position of having to have price control, we have introduced one method of discouraging people from planning for the future and from conducting the investment which all of us would like to do. It is therefore unreasonable to refer us back to 1973, when price regulations were beginning, saying that we should not have learned from the shortcomings of any form of regulation in the meantime. It would therefore be sensible if, in constructing their safeguard regulations, the Government were to look more widely than the present regulations indicate.
I will not spell out what is defective about the regulations because the regulations are not the subject of debate of this Amendment. In any case, the Secretary of State must be well aware of the deficiencies because many people have written to him to point them out. He has seen fit so far to ignore the most important shortcomings. As the safeguard regulations are still in draft form, and as the noble Lord, Lord Oram, tells us that today is the last day for submitting Amendments to them, perhaps we could end at this point in time with a strong plea to the Secretary of State to think much more widely than he has hitherto about what he is doing with the safeguard regulations and let him be guided by his own particular items within Clause 2(2) of this Bill when he comes to consider how he might amend his safeguard regulations. If we could be sure that that was happening there would be no need for an Amendment, but we cannot be sure because the Secretary of State has given us every indication that he is most unlikely to pay attention to the wise counsel which has been given him from outside.
The Earl of HALSBURY: My Lords, may I ask a question on this Amendment and the Bill as unamended? Will either the Minister in charge of the Bill or the sponsors of the Amendment say how it is proposed to cover the needs of a company
64
for increased working capital in a period of rising prices to finance debtors and stocks? This is done in two ways: either out of the margin of profitability or by borrowing from the bank. At intervals, of course, what you borrow you have to repay, so you have to fund it with a rights issue in due course. Nothing is more exasperating than trying to run an industry with a Price Commissioner, or somebody like that, breathing down your neck and telling you that you have to do it one way, when your bankers are telling you that, to please them, you have to do it another. I should like to know whether this Amendment improves that state of affairs or leaves it unchanged. I do not see much reference to it in the Bill, except obliquely.
5.40 p.m.
Lord TREFGARNE: My Lords, I am not sure that I am in a position to clarify or answer the question advanced by the noble Earl on the Cross-Benches. Speaking off the cuff, the problem to which the noble Earl referred might possibly be amenable of some solution if this Amendment is agreed to, but certainly is not if the Amendment is not carried. I might have been wiser to consider this matter and answer the noble Earl in due course, but unhappily there will be no opportunity for that because there will be no further stage of this Bill after today.
If we look at the Bill, as presently drafted in Clause 9, we find that the regulations which the Secretary of State is to make shall be made only:
"by reference to such matters as he thinks fit",
and in this Amendment we seek quite simply to guide the mind and the hand of the Secretary of State so that some, at least, of the matters which he has to regard as "fit" are defined and laid down in the Bill. We strongly believe that firms which will be bound by the regulations, as indeed will be the Commission, ought to have some basic guidance, even if only of a somewhat general nature, as provided, for example, in Section 2(2). This is referred to in the Amendment, and the general provision that we have included aims to ensure that:
"companies are not handicapped financially by increases in any costs beyond their control".
I listened with care to what the noble Lord, Lord Oram, had to say. There was

65
nothing really very new from what he said at the previous stage when we considered this matter before. I really do not think I can allow this matter to be settled simply by the assurances that the noble Lord gave. He has claimed that the provisions of section 2(2) are to be enshrined, as he put it, in the Bill, and he was rather proud of that word. I would use another word. I would suggest "entombed" rather than "enshrined", but I hope the noble Lord will not take me amiss in saying that. I believe that it is essential to include this provision in the Bill because the safeguards which are provided, and on which the noble Lord invites us to rely, are really of a very general nature.
The other great point advanced by the noble Lord concerned the provision for interim price rises. As I believe my noble friend Lord Drumalbyn said, the effect of these regulations will dictate whether firms are to be subject to investigation; and, until they are declared to be so subject, the question of interim price rises does not apply. We would say that, by including this Amendment in the Bill, we should raise the threshold—if that is the right word—at which an investigation
would be initiated; and I believe that that would be highly desirable.
The noble Lord made another point relating to the position of consumers in a monopoly or near-monopoly situation. I pointed out, in relation to another Amendment at Committee Stage, that there is more than one sort of consumer. A good many consumers work in firms which will be subject to investigation and, if the rules are too rigid and the controls are too strong, those consumers will suffer—because, where profits are inadequate, employment drops or at least does not increase, and in the very worst situations a company may cease to trade and close down altogether.
For all those reasons, I believe that this Amendment should be included in the Bill and I hope that your Lordships will agree with me.
5.45 p.m.
On Question, Whether the said Amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 111.

CONTENTS

Alexander of Tunis, E.

Fraser of Kilmorack, L.

Mottistone, L.

Alport, L.

Gainford, L.

Mowbray and Stourton, L.

Amory, V.

Glasgow, E.

Nelson of Stafford, L.

Ampthill, L.

Gridley, L.

Newall, L.

Auckland, L.

Hailsham of Saint Marylebone,
L.

Northchurch, B.

Avon, E.

Halsbury, E.

Nunburnholme, L.

Barnby, L.

Hanworth, V.

O'Hagan, L.

Berkeley, B.

Harmar-Nicholls, L.

Onslow, E.

Birdwood, L.

Hawke, L.

Orr-Ewing, L.

Blake, L.

Home of the Hirsel, L.

Rankeillour, L.

Camoys, L.

Hornsby-Smith, B.

Redesdale, L.

Campbell of Croy, L.

Hylton-Foster, B.

Reigate, L.

Carr of Hadley, L.

Ilchester, E.

Rochdale, V.

Carrington, L.

Killearn, L.

Romney, E.

Cathcart, E.

Kinnaird, L.

St. Aldwyn, E. [Teller]

Clitheroe, L.

Kinnoull, E.

Sandford, L.

Cobham, V.

Lauderdale, E.

Sandys, L.

Cornwallis, L.

Long, V.

Sharples, B.

Cullen of Ashbourne, L.

Loudoun, C.

Spens, L.

Daventry, V.

Lucas of Chilworth, L.

Strathclyde, L.

Davidson, V.

Lyell, L.

Strathspey, L.

de Clifford, L.

Macleod of Borve, B.

Teviot, L.

De La Warr, E.

Mancroft, L.

Thorneycroft, L.

Denham, L. [Teller]

Mansfield, E.

Trefgarne, L.

Derwent, L.

Margadale, L.

Trenchard, V.

Digby, L.

Marley, L.

Tweedsmuir, L.

Drumalbyn, L.

Massereene and Ferrard, V.

Vickers, B.

Ebbisham, L.

Merrivale, L.

Vivian, L.

Effingham, E.

Mersey, V.

Wakefield of Kendal, L.

Ellenborough, L.

Monck, V.

Ward of North Tyneside, B.

Elliot of Harwood, B.

Monk Bretton, L.

Westbury, L.

Exeter, M.

Morris, L.

Young, B.

NOT-CONTENTS

Airedale, L.

Gaitskell, B.

Ogmore, L.

Allen of Fallowfield, L.

Gardiner, L.

Oram, L.

Amherst, E.

Gladwyn, L.

Pannell, L.

Ardwick, L.

Gordon-Walker, L.

Pargiter, L.

Avebury, L.

Greene of Harrow Weald, L.

Parry, L.

Aylestone, L.

Greenwood of Rossendale, L.

Peart, L. (L. Privy Seal.)

Bacon, B.

Gregson, L.

Peddie, L.

Balogh, L.

Grey, E.

Pitt of Hampstead, L.

Banks, L.

Hale, L.

Platt, L.

Beaumont of Whitley, L.

Hamnett, L.

Rochester, L.

Beswick, L.

Hampton, L.

Rusholme, L.

Birk, B.

Harris of Greenwich, L.

Sainsbury, L.

Blyton, L.

Henderson, L.

Samuel, V.

Boston of Faversham, L.

Houghton of Sowerby, L.

Seear, B.

Brockway, L.

Hughes, L.

Shepherd, L.

Bruce of Donington, L.

Jacobson, L.

Shinwell, L.

Buckinghamshire, E.

Jacques, L.

Simon, V,

Burntwood, L.

Janner, L.

Snow, L.

Burton of Coventry, B.

Kaldor, L.

Stedman, B.

Byers, L.

Kennet, L.

Stewart of Alvechurch, B.

Campbell of Eskan, L.

Kirkhill, L.

Stone, L.

Caradon, L.

Leatherland, L.

Stow Hill, L.

Castle, L.

Lee of Newton, L.

Strabolgi, L.

Champion, L.

Listowel, E.

Swaythling, L.

Chorley, L.

Llewelyn-Davies L.

Taylor of Mansfield, L.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Thomson of Monifieth, L.

Cooper of Stockton Heath, L.

Lloyd of Kilgerran, L. [Teller]

Wade, L.

Crook, L.

Longford, E.

Wall, L.

Cudlipp, L.

McCarthy, L.

Wallace of Coslany, L.

Davies of Leek, L.

McCluskey, L.

Weidenfeld, L.

Delacourt-Smith of Alteryn, B.

Mackie of Benshie, L.

Wells-Pestell, L.

Diamond, L.

Mais, L.

Wigg, L.

Donaldson of Kingsbridge, L.

Maybray-King, L.

Wigoder, L.

Douglass of Cleveland, L.

Milner of Leeds, L.

Wilson of High Wray, L.

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

Morris of Kenwood, L.

Winterbottom, L. [Teller]

Fisher of Camden, L.

Murray of Gravesend, L.

Wootton of Abinger, B.

Foot, L.

Norwich, V.

Wynne-Jones, L.

On Question, Motion agreed to.

[Amendment No. 6 not moved.]
Clause 12 [Undertakings and orders in consequence of reports on examinations]:
5.53 p.m.
Lord REDESDALE Lord REDESDALE moved Amendment No. 7:
Page 17, leave out lines 33 to 36 and insert—
("( ) Such provisions as are authorised by the preceding provisions of subsection (4) shall not be included in such an order—

(a) in respect of goods which are exempted goods for the purpose of the Resale Prices Act 1964, and

(b) in respect of retail prices which are recommended by a manufacturer or supplier, the Secretary of State shall have the power to prohibit their use only where the recommended prices cannot be verified by the consumer, are not uniformly available to retailers, are not recommended by the manufacturers or suppliers, and are not fair and reasonable in relation to known and established retail margins.")

The noble Lord said: My Lords, this Amendment was moved in a different
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form in the previous stage of this Bill. I am unashamedly rehearsing this Amendment again, and perhaps I may use the words of the Chancellor of the Exchequer who recently said that his fox had been shot, but its tail had been stuck on in a different part of its anatomy. What I aim to do here is to resurrect my fox and, at least, change its scent, and I hope that, on this occasion and in its new guise, it will smell slightly more sweet to the noble Lord opposite.
I shall be as brief as I can. I do not wish to weary your Lordships by going through my involvement and interest in this Bill. I should just like to remind your Lordships yet again of the consequences of removing double pricing. It has been shown by a number of pieces of research that double pricing does not confuse the consumer and, in fact, is found to be a help. Furthermore, research done by the BMRB showed, on two shopping baskets of identical items, that those which had been double priced were 3·5 per cent. cheaper than those which had a single price. There is another aspect to this.

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Double pricing slows down price increases. I hope the Government realise that, if double pricing is abandoned, we shall have price increases, because one will not be able to sell goods so economically. We shall all be the losers. Furthermore, there is no question of protection for consumers.
I have tried to re-run and re-jig this Amendment, and I genuinely hope that it will be more acceptable to the noble Lord. I have done this by moving it on to the next clause, and I have also provided that the Price Commission can investigate whatsoever they want. All I am aiming to do is to limit the Secretary of State's powers on this one point. I have tried very hard to produce something which is acceptable, because I feel that it is in all our interests that we should retain double pricing. My Lords, I beg to move.
Lord ORAM: My Lords, as the noble Lord, Lord Redesdale, reminded your Lordships, we dealt with this point on a similar Amendment which he moved at the Committee stage. He and I were a little at cross-purposes, in that I suggested that his Amendment then compelled us to rely purely on a voluntary agreement and I could see that that worried him. I am glad that he seems to have reflected on what I said and has recast his Amendment, moving it to Clause 12, presumably with a view to avoiding the difficulty to which I pointed. There is now a great deal of common ground between us on this problem and, at the Committee stage, the noble Lord himself recognised that there are abuses in this area which require correction. On the other hand, the Government have made it clear that no across-the-board attack will be made on recommended resale prices, and that orders will be made only in cases of abuse and where the Price Commission have so recommended. So I think that our two positions are not very far apart, but I am afraid that they are sufficiently so for me not to be able to accept the Amendment. I should perhaps explain the reasons.
The Amendment would mean that any manufacturer or retailer affected by an order could challenge the order in the courts on any one of four grounds, which are spelled out in the Amendment. For example, it would usually be possible to argue that the recommended price could
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be verified by the consumer if he tried hard enough, for instance, by writing to the manufacturer. It would also be an extremely difficult task to impose on the courts a duty to decide whether a recommended price was fair and reasonable in relation to known and established retail margins. This is surely a task best left to the Price Commission in their reports, on which the Secretary of State should then be free to act by order subject to the normal Paliamentary control. I suggest that that is a more appropriate procedure than having recourse to the courts.
Another defect of the noble Lord's Amendment is the inclusion of the condition, on which the order-making power is dependent, that the recommended price shall not have been recommended by the manufacturers or suppliers. This would have the effect of preventing any order from being made, unless the retailer could be shown to have invented his own recommended price. Such a practice is already an offence under the Trade Descriptions Act, and the condition therefore means that the Bill would add nothing to existing legislation on recommended resale prices.
The reason for Clause 12(4) is that the abuse of recommended resale prices does not end with fictitious recommended prices. Above all, the Amendment requires the Secretary of State to satisfy himself—and, potentially, the courts—that all four conditions are met before he can make an order. If, therefore, an abuse arises because one, two or even three of the conditions are not met, it could not be corrected. It may not have been the noble Lord's intention that it should be all four, but my understanding is that this would be the effect of the Amendment as drafted.
I should like to suggest that the Amendment illustrates the difficulty of trying to impose detailed constraints on the powers of the Secretary of State in the main legislation. The Government believe that these constraints are unnecessary. Any sectors whose recommended prices are examined by the Price Commission under the new powers will have the opportunity to make their case the Commission, to study the Commission's published report—which must include the reasons for their recommendations—and make representations about it to the

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Secretary of State before he makes an order. They can also press for the order to be annulled by either House of Parliament. These, I suggest, are proper and effective safeguards which I believe in practice would meet the fears which the noble Lord has in mind. I accept a good deal of his case, but I do not accept that it is necessary to have the Amendment in order to meet it.
6.2 p.m.
Lord DRUMALBYN: My Lords, may I make two observations about this matter. First, I find difficulty in understanding how recommended prices can be brought into this clause. A price is a figure at which goods are offered for sale. A recommended price is not a figure at which goods are offered for sale. Inasmuch as this paragraph states that:
"…f any kind are or may be for sale",
it is very difficult to see what is meant by "may be". A curious use of the word "may" is to be found here. Anybody who compares his price with the price of another person is comparing it with the price at which that other person is selling; it is not the price at which he may be selling. If the word "may" is intended to mean "is permitted to be sold", that is not what a recommended price is about.
Unfortunately, I was out of the Chamber when my noble friend moved this Amendment at the Committee stage. When I read this provision I was puzzled by it. Then I noticed in the Explanatory Memorandum at a previous stage of the Bill that the phrase "recommendation of prices" was used as one of the purposes. I find considerable difficulty in understanding how this provision could be related to recommended prices. Secondly, since recommended prices are legally permitted by the Resale Prices Act, if it is intended to deal with recommended prices in this Bill surely we should ensure that they are proper recommended prices and we should not prohibit them altogether in any sphere.
I am not certain what the Government have in mind. The noble Lord said, rather darkly, that there were other abuses besides excessively high recommended prices, and I should like to know what they are. If a recommended price is too high, it means one of two things. Either
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it means that the manufacturer who recommends the price is allowing too high a margin on the price at which the goods would be sold on a normal mark-up basis in small shops—the result would be that there would be a very wide spread of prices where very large discounts could be obtained—or it means that the recommended price was always intended to be fictitious and bears no relation to prices. When I say "prices" I mean prices at which goods are offered for sale.
The way to deal with that matter would be to ensure that if one is to have recommended prices there should be proper indications of price. I believe that at an earlier stage my noble friend used the phrase "an anchor price". Perhaps "a bench-mark price" would be a better indication. There is no doubt that they are valuable guides even where the spread of prices is very considerable. In The Times of 9th July, I read a very interesting article which dealt with average discounts from recommended prices. They ranged very widely indeed—from 21 per cent. on carpets and 22 per cent. on consumer electronics to 1 per cent. on clothing and footwear. I wonder whether the noble Lord—certainly I shall give him permission to answer this point—could say why he thinks that it is necessary to deal with this matter only by prohibiting recommended prices either by a particular manufacturer or in certain areas—I do not know which he proposes—rather than by ensuring that any recommended price which is allowed by law is related to reality. Secondly, although it is very late in the day perhaps the noble Lord would give me an opinion, and the reason for his opinion, as to how and why this subsection deals with recommended prices, for I do not believe that it will be found to do so.
6.7 p.m.
Lord ORAM: My Lords, I am reluctant to ask for the leave of the House to answer these points, but I shall do my best. They are a little difficult to answer, Regarding the noble Lord's question about whether this power is appropriate, the answer is that if the noble Lord looks back to Clause 10, where the Secretary of State may direct the Commission to examine any question relating to prices or charges, he will find that the problem of recommended resale prices is one such area of inquiry that the Secretary of State might ask the

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Price Commission to examine. Indeed, the Price Commission have been examining such problems. If it is a legitimate problem for them to be asked to look at, they make recommendations, and then it is legitimate for an order to be made or an undertaking to be given. It is that which is provided for in Clause 12, and that is where the subsection appears. As I see it, it is in order to give the Secretary of State order-making powers in relation to a particular matter.
If the noble Lord reads through Clause 12(4)(b), I believe that he will find there a description of what are recommended resale prices. I see that the noble Lord does not find such a description. When I read through Clause 12 I found this to be so, and I believe he will find this to be so, too. Therefore the Amendment moved by the noble Lord, Lord Redesdale, was appropriately centred here. With regard to the other question, I am not sure that I have the answer off the cuff. Would the noble Lord mind repeating it?
Lord DRUMALBYN: My Lords, one question is whether it is actually provided for here and may I say that the words,
"such goods may be sold by retail at a price higher than the price at which the seller indicates he will or may sell them"
do not seem to be a justification because the recommended price is not a price at which goods may be sold? It is simply an indication of a price at which it would be reasonable to sell them. The other point I was asking about was the whole question of how this is dealt with—by prohibition. The noble Lord has mentioned the possible negotiation—if one may put it that way—and that may be the right answer. All I was saying was that I did not think prohibition was the right answer for something that can legitimately be done.
Lord ORAM: My Lords, I think it would depend upon the recommendation by the Price Commission after it had made the examination at the request of the Secretary of State. If it recommended that a certain practice in this field was wrong and should be prohibited, then the Secretary of State would take that recommendation into account in deciding whether to make an order.
I hope that I may have given the correct answers. If the noble Lord will
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look at what I have said, I shall certainly do so too and, if there is any difficulty, I am sure that we can resolve it by correspondence.
Lord REDESDALE: My Lords, I am grateful to my noble friend for so ably raising some points which I certainly had not got. One point which came out was that, in trying to re-jig my fox I might have overcooked it in its present amended form. Sadly, I really should have left it as it was before because I thought it was straightforward in trying to cover the three points and raise any abuses that might come up. Perhaps by trying too hard I have introduced elements which are wrong. I accept that point. However I do not accept that we have a satisfactory situation as it stands now.
I am grateful to the noble Lord for saying that we have a degree of common ground. At one point I was getting quite enthusiastic and I thought that we had even more common ground than we had, but I seemed to fall off the end of it! Sadly, it stems that the Government are not going to move on this point: I think that they are wrong and I should like to go on record as saying that they are wrong on this point and that it will increase prices. It is unfortunate. I can do no more now but beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.12 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 8:
After Clause 13, insert the following new clause:
Representations to the Secretary of State
. At all stages of the procedures described in sections 4, 5, 6, 10 and 11 of this Act, the relevant person may make representations to the Secretary of State regarding any matters thought by the relevant person to affect the initiation of or execution of any investigation or examination concerned.
The noble Lord said: This is a recasting of what was Amendment No. 17 at the Committee stage, when the noble Lord, Lord Wallace of Coslany, kindly said that he would look into the point and communicate with me, which he has done. Reading both his communication and the Official Report, it seemed to me that he was making two points: one was that

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Amendment No. 17 was on too narrow a basis and the other was that there was really no need for it because people always have a right to make representations to the Secretary of State, more or less at any time.
The problem is that within this Bill it is particularly important to draw to the attention of people who may be affected by it when it is particularly relevant for them to take advantage of their opportunity to make representations to the Secretary of State. I looked through the whole Bill and I find that in those clauses which might be said to be operative ones and which affect persons who will be involved in the various processes within the Bill—Clauses 7(3) and 12(1)—there is a specific invitation to the relevant person to make representations to the Secretary of State. In the what might be called the "executive clauses"—because the others tend to be informative rather than executive—which are the ones mentioned in my Amendment (to wit, Clauses 4, 5, 6, 10 and 11) there is no such guidance to the relevant person to take advantage of his right to make representations.
The other executive clause, if we may describe it as such because it is really more introductory of the safeguards—is Clause 9 where, in subsection (2), the Secretary of State is specifically invited to cause people to make representations to him. Therefore, it seems to me that, in this Bill where representations to the Secretary of State at certain points could be of great importance to companies, it is reasonable that they should have their arm jogged by a separate little clause in relation to those executive clauses for which this provision has not specifically been made.
I hope that this Amendment is sufficiently in accord with what the noble Lord, Lord Wallace of Coslany, was saying in Committee to be one which might commend itself to the Government so that the Government could improve their record by at last accepting an Amendment in good faith as being one which improves this Bill, in no way harms it, and is thoroughly to be desired. I beg to move.
Lord WALLACE of COSLANY: My Lords, I should very much like to be included in the noble Lord, Lord Mottistone's book of records but unfortunately
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one cannot quite do that. We have looked into the whole question and my reply is fairly lengthy but there are some important points, particularly towards the end of my remarks.
The Bill has been drafted to ensure that firms have the clear right to make representations to the Secretary of State at the most crucial point in an investigation and examination—that is, after a report has been delivered to the Secretary of State and before action is taken as a result. Indeed, we have carefully drafted the Bill to ensure that the order-making power cannot be used until firms have had a chance to make representations. The order-making power cannot be used for the first 14 days following receipt of a report on an investigation. It expires after 28 days. In the case of examinations, it cannot be used for 28 days following publication of a report; and it expires after three months.
At all other stages of investigations and examinations, firms are completely free to make representations to the Secretary of State. They do not need to be given any statutory right to this effect. The only point where they need such a right is when the order making power comes into play—and that is taken care of in the Bill. Nor does the Secretary of State need to have placed upon him a statutory duty to consider representations. Any representation would almost certainly relate to the criteria. Because the Secretary of State is bound by Clause 20 to have regard to the criteria when exercising his functions under the Bill, he is also bound to pay regard to representations which relate to the criteria. He would be failing in his duty to do otherwise.
We do not believe it necessary to provide for representations in the way proposed, since the point is met in practice. Moreover, I believe that the proposed Amendment could lead to unforeseen consequences. A requirement upon the Secretary of State to consider representations would not only mean that he had to consider the most fatuous representations; it could also lead to firms attempting to disrupt the system by bombarding the Secretary of State with representations—possibly at the last minute—which he would be forced to consider before exercising a particular function under the Bill. Furthermore, I believe that a

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statutory right to make representations to the Secretary of State during investigations and examinations will undermine the Commission's position. There is clearly a danger that firms will come to see the Secretary of State as the focal point of the investigatory system; with the Commission reduced to nothing more than a minor appendage to which firms pay little attention. I am quite happy that there are facilities for representations and they are provided for in the Bill. I hope that the noble Lord will accept the explanation, particularly the latter part of my remarks.
Lord MOTTISTONE: My Lords, I must start by apologising to your Lordships for not having said that I was, with your Lordships' leave, including Amendments Nos. 9 and 10 in my remarks. It is clear that the noble Lord, Lord Wallace, assumed that. The noble Lord said—and I take the earlier part of his remarks as a fair statement of fact—that people could in fact make representations at any time. But then in his closing remarks he said that if we made it statutory people would be inclined to take advantage of this and make fatuous complaints, and indeed perhaps deliberately try to upset the machinery of investigation in order to foil the whole purpose of the Bill, or words to that effect. I can see the point, but it seems a little at variance with the earlier statement, because if it is said—and when we read the Official Report we shall see that it is said quite clearly—that people can make representations at any time, there is nothing to stop them from making fatuous representations whether they are statutory or otherwise. I should have thought that there was not very much substance in whether or not they were statutory, if people are free to make representations at any time except when the actual terms of the machinery do not allow it. So that does not seem to be a very strong argument against my Amendment.
On the noble Lord's last point, I fully appreciate this; it does make sense. When the Bill comes into effect the Commission will be making various communications to the relevant persons under the terms of the Bill; they have to be notified when an investigation or examination is begun. May I leave with the Government the thought that there might
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be a standard covering letter for this which drew the attention of firms to their statutory and other rights and encouraged them to make representations to the Commission itself, or to the Secretary of State as the case may be. If this emanated from the Commission this could surely not be undermining the Commission's position, because they would be in the driving seat and giving this advice to firms. It seems to me that would be a reasonable way of meeting my point. I would not expect the noble Lord to say here and now whether he would agree, but perhaps he might bear that in mind for guidance to the Commission when it is carrying into execution the purposes of the Bill after it becomes an Act. With that, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 9 to 11 not moved.]
Then, Standing Orders No. 43 having been suspended (pursuant to Resolution):
Lord ORAM: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.— (Lord Oram.)
On Question, Bill read 3a, with the Amendment.
6.24 p.m.
Lord ORAM: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Oram.)
The Earl of MANSFIELD: My Lords, I had hoped that the noble Lord would say a few words on Third Reading, but he has chosen not to, and I shall, therefore, say them now. I do not think there is any question of order about this; it is merely a matter of convenience. I will not state at length, or really at all, the objections of noble Lords on these Benches to this Bill. We think it is a Bill which, as it has made its passage through the two Houses, has changed considerably so far as motivation is concerned. It started off as being, I will not say a panacea for inflation, but it was going to be a great help in the Government's attempt to contain inflation. The events of this afternoon, with the first Amendment

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which I moved and later withdrew, make it quite plain that in fact it is going to have little or no effect on inflation at all. We are told that in effect the only matter to which the Government are going to have regard, at least so far as this Bill is concerned, is what I might describe as the 12 months' rule; in other words, if a union is fortunate enough or strong enough to secure for its member a 60 per cent. increase in wages, that is something which so far as this Bill is concerned will play no part. On the other hand, if it seeks to have two bites of the cherry within 12 months, then the unfortunate firm which bows to such pressure will find that any resulting increase in prices which it wishes to make will be the subject of some kind of unwelcome investigation from the Price Commission.
This is really not the sum total of our objections to this Bill. What I tried to say on Second Reading was that we all concede that there are times when Governments have to intervene to some degree, as may be necessary, in private enterprise, or indeed in the public sector, in the interests of the consumer. That is something which should be done, as I suggest, in special areas, very specifically named areas, which should be set out with care and certainly not in a hotchpotch bureaucratic effort such as this Bill. What I think we have feared—and nothing that has been said during the progress of the Bill's passage through your Lordships' House has allayed these fears—is that this is really a collectivist, bureaucratic and indeed snooping attempt on the part of the Government to interfere particularly with private business in this country, in a way which I, for one, think will be seen to be increasingly unjustified in the future.
We have attempted to do two things. We have attempted to improve the Bill and to make provisions for fairness where we thought the Bill was deficient. As to the first, we have only been able to ask the Government in effect to think again in one Amendment, and it perhaps is the most important Amendment of the lot. It may well be that we were fortunate to impose it on the Government. What I would say—and I am looking at the noble Baroness, Lady Seear, when I say it—is this. Throughout the passage of this
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Bill in your Lordships' House it is right to say that neither the Liberals nor the Government have put down one Amendment; neither the Liberals nor the Government have seriously considered, in my opinion, any Amendment which has been put down by us. Is it the Liberal position, one asks, that they thought—and, for all I know, still continue to think—that this Bill is, and was, so perfect that it needed no Amendment in this revising Chamber at all; and a fortiori are she and her colleagues so satisfied that they think this is a Bill about which, in no way, shape or form, should the Government be asked to think again? That is the situation that we have reached in this House.
Do not let it be thought that I am complaining at the decisions to which the House has come, because I certainly am not. But it is something to which we shall all have to pay regard in the future: that our role as a revising Chamber, as a Chamber where reasoned Amendments are thought out and debated, is one which perhaps is not so safe for the future as some of us may have thought. My Lords, having made those remarks, may I thank the noble Lord, Lord Oram, and the noble Lord, Lord Wallace, for their unfailing courtesy in the way they have treated us. We hope that, when it receives the Royal Assent, this Bill will not do too much damage.
6.30 p.m.
Baroness SEEAR: My Lords, I know that there is a great deal more to discuss this evening and I do not intend to be drawn by the noble Earl, Lord Mansfield, into a long discussion as to what has been our policy as regards the Bill. However, I wish to make one or two comments. Unlike the noble Earl, we do not see the Bill as primarily an anti-inflation instrument. We see it as having some contribution to make in the area of inflation for reasons which I have given repeatedly during the debates which have taken place. First of all, through the 12 months' rule, it gives some measure of control over wage increases although it is very slight. I am astonished at the line which the noble Earl, Lord Mansfield, has taken over this matter. Was it really his wish that the Bill should include draconian measures against employers who gave way to wage increases in the general area, apart from the 12 months' rule? I had

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not understood that the Conservative Party had what would have amounted to a statutory incomes policy, but that is what the noble Earl this afternoon seemed to be asking for.
Another way in which the Bill can help with pay policy is the degree of assurance that it may give—I do not know how great that degree will be—to the rank and file trade unionists in this country who are still being asked to exercise restraint and on whose good sense the future of inflation really depends. They can believe that because of the Bill there is still some control over prices.
I ask the noble Earl, Lord Mansfield, to ask himself whether, if it had been possible for people who are against the whole of the Government's policy as regards attempting to control inflation, to go to the country and say: "Look, you are being asked to exercise restraint over pay and the Government have torn up all vestige of control over prices", this situation would not have been exploited to the full by the enemies of this country who do not wish to see inflation controlled? Surely this must be the case. It is for that reason, in the short term, that we have wanted to see the Bill go through.
The final reason is that we believe that the Bill is a first step towards an effective competition policy which we have needed for a long time. The noble Earl will know, because I have no doubt he read the proceedings in another place, that we have been instrumental in pushing the Government in the direction of saying that it is their intention that we should not continue with a Price Commission. We are the last to want to increase bureaucracy, but the Price Commission should be combined with an improved Monopolies and Mergers Commission. In this way we shall cut down bureaucracy. Indeed, as regards bureaucracy, the Bill which does not involve a code at the end of a year, is much less bureaucratic than the Act which it replaces with all the complexities and details of a code. Therefore, we say move on as fast as possible towards incorporating the Price Commission into the Monopolies Commission so that we can have an effective competition policy of the sort that other countries, more successful than ourselves, in the Free World developed many years before we shall.
Lord ORAM: My Lords, like the noble Baroness, Lady Seear, I do not propose to be drawn unduly by the concluding remarks of the noble Earl, Lord Mansfield, although I should like to take up one point that he made. He churned to have detected a change in the motivation concerning the Bill during the course of its passage through another place and ultimately here. I do not think that he is right in that view. From the outset it was made clear that the Bill had two purposes: the short-term purpose and the long-term. As regards the Amendments with which we have been dealing in this House, it is true that emphasis has been given by myself and others to the long-term purposes. I shall not weigh up the relative merits of the short term and the long term, but the introduction by the Bill of the investigatory powers and the replacement of the old system by this new system is a most important part of the new thinking and the new policy as regards this question.
In view of that, rather than accept what the noble Earl, Lord Mansfield, has said about the one Amendment that the Opposition carried, I would say that, because of the need for establishing the long-term purposes of the Bill, the Amendment which made the powers renewable year by year was probably the least desirable of the series of undesirable Amendments that we have been considering. I am very happy that as regards at least all the others the will of your Lordships' House has prevailed in a way in which we are not very often accustomed in this place.
My Lords, having made those remarks I should generally like to reciprocate the concluding sentence of the noble Earl, Lord Mansfield, and thank him and Lord Trefgarne, and I should also like to include Lord Mottistone, for the manner in which they have approached and dealt with the Bill, if not for the matters which they introduced into our discussions.
On Question, Bill passed, and returned to the Commons.

COAL INDUSTRY BILL
6.37 p.m.
Lord STRABOLGI: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Strabolgi.)
House in Committee accordingly.
[The LORD ALPORT in the Chair.]
Clauses 1 to 5 agreed to.
Clause 6 [Grants in connection with pit closures]:
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 1:
Page 4, line 23, after ("assist") insert ("in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity,").
The noble Lord said: The Amendment is directed to Clause 6(1). Your Lordships will note that in the margin to Clause 6 it is said that Clause 6 deals with:
"Grants in connection with pit closures".
Those are wide words because the grants which the National Coal Board is authorised to make are
"in connection with pit closures".
When one reads the terms of subsection (1) one sees that the grants which, in the opinion of the Secretary of State, should be made are further to assist
"re-deployment of the manpower resources of the Board and the elimination of uneconomic colliery capacity "—
whatever those words may mean. I understand what is meant by "redeployment of manpower resources of the Board", but as noble Lords who have been acquainted with the coal industry will know, it is very difficult to define what is meant by "uneconomic colliery capacity". Therefore, Amendment No. 1, which I have the honour to move, amends subsection (1) so as to include powers for grants to be made:
"in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity",
and then to continue with the words in the clause,
"in the re-deployment of the manpower resources of the Board and, the elimination of uneconomic colliery capacity".
In my view, the inclusion of a few words to indicate that the grants should be available to assist in the postponement of pit
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closures is in conformity with the words in the margin relating to the clause which state that the grants are in connection with pit closures.
As I said on Second Reading, the closure of pits is a very significant and emotive expression to someone like myself who from birth has been associated with Wales. Many of us from Wales take the view that many of the pits that have been closed because they are uneconomic should never have been closed at all. But in 1969 the Welsh Liberal Party produced an energy policy which said, "Postpone the closure of pits for 10 years and try to bring into the area coal-burning industries". That would therefore reduce the cost of transport of this rather poor coal from collieries of low economic colliery capacity and allow a phasing of those industries towards collieries which in those days were considered to be uneconomic.
I do not want to make any political point out of this, but, as noble Lords will know, many of these collieries were closed because at that time oil was very cheap and it was felt that a sacrifice should be made of the communities of the district by the closure of these pits. Therefore, I submit that it should be specifically stated in the Bill that grants are available to the Coal Board, with the approval of the Secretary of State, for postponing pit closures. I know, of course, that in many cases the National Coal Board and the Secretary of State for the time being have arranged for pit closures to be postponed. We have many examples of that. We have many examples of pits that have been said to be of uneconomic colliery capacity that should be closed and which, because of the representations that were made, were not closed and are now fully working.
Therefore, the object of my Amendment is merely to make it quite clear in the Bill that, subject to the approval of the Secretary of State, the Coal Board will have power to give a grant to enable the closure of pits of low economic colliery capacity to be postponed. Although we may have a postponement of the closure of pits, grants should be available to encourage industries of a coal-burning nature to come into the particular area, primarily in order to reduce the cost of transport of coal. As the Minister was

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good enough to point out in his reply to me on Second Reading, that has been done. The phasing of industry towards collieries of low economic capacity has been carried out in the past. I am simply suggesting that the practice of the past should be reflected in the words of the Bill.
With the leave of the Committee, I would ask the Committee to accept that the observations that I have made will relate to Amendments Nos. 2, 3, 4, 5, 21, 23, 24 and 25. However, in so far as those Amendments relate to different clauses I reserve the right to say a few words when those clauses are discussed. My basic theme is that there should be a reference in the Bill to the power of the Secretary of State to make grants to postpone pit closures and also to assist coal-burning industries to be brought into the areas where some geologists or experts in a back room have decided that the pits in those areas are of uneconomic colliery capacity.
It is very difficult to define what is meant by "uneconomic colliery capacity". In my view, and with my experience of what has happened in South Wales where communities have been destroyed by pit closures, it would be a social injustice not to include in the Bill some specific reference to the powers of the Coal Board and the Secretary of State to assist in this important social matter in relation to pit closures. I beg to move.
6.47 p.m.
Lord SHINWELL: I had expected the Committee to deal with this piece of legislation a little earlier and I apologise if I fail to remain throughout this stage of the Bill. I wholeheartedly support the proposition that has just been delivered by the noble Lord, Lord Lloyd of Kilgerran. I cannot understand why the specific language which he wishes to see incorporated in the Bill could not be accepted wholeheartedly by the Government without any objection.
The history of the coal industry is fascinating—there have been ups and downs, oscillations, fluctuations, frustrations, disappointments and sometimes, as now, exaggerated optimism of a fanciful character. I should like to illustrate the point which has just been made by the noble Lord and which I I
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support. I recall what happened when the noble Lord, Lord Robens, was Chairman of the National Coal Board. During that period, with no exaggeration we closed down about 200 pits, although I shall not attribute that entirely to the noble Lord, Lord Robens. In practically every instance we were advised that they were closed down for economic reasons. Those economic reasons have always appeared to be somewhat mystifying because they were not always clearly explained by the Chairman of the Coal Board, members of the Coal Board or even by the miners' leaders—and I say that advisedly because they were completely involved in the changes that occurred.
They all declared that it was impossible to proceed any further because the pits were no longer economic, by which I suppose they meant that they could not pay their way—they could not wash their faces. In point of fact, there was nothing in the nature of a discussion in depth—to use what is now a cliché—on the subject. We never discovered what was actually meant by the inability to undertake these operations in an economic fashion, unless it was to engage in the making of profit, which was not the intention of the legislation which I piloted through the House of Commons nearly 30 years ago. The intention was to create a viable industry.
It was never expected—and this point cannot be overlooked—by the Attlee Government which were responsible for the legislation, the members of the original Coal Board, their successors, or the miners' leaders in general, that the industry would become viable in the sense that every pit would be conducted in an economic fashion—that is to say, it would pay its way. To use an analogy, the mining industry is rather like a large store in the centre of London, not every counter of which pays. The ribbon counter may pay handsomely but the lingerie counter—and I mean lingerie in the general sense—may not pay at all. Nevertheless it is essential or customers cannot be attracted to the store. Why that cannot apply to the mining industry it is impossible for me to say.
I recall that many years ago, when as a junior Minister in the first Labour Government I was responsible for mines, we were confronted by what we regarded

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as a disastrous situation in the County of Lanark in Scotland. Practically all the pits there were regarded as uneconomic, the majority of them because they were flooded. It seemed impossible to dispose of the superfluous water in those pits and, as a result, many of them were closed down, until the Lanarkshire mining industry was regarded as reaching its demise. In fact some years later it was discovered that it was possible to reduce the flooding and some of the pits were restarted, and then became if not economic at any rate worth while operating, so providing employment for unemployed miners; and goodness knows! we had far too many unemployed miners in those days. We have nowadays far too many, if not unemployed miners, then those who could undertake work in the pits.
I suppose that from the standpoint of the National Coal Board—this applies to whichever board has been in operation since the legislation was first enacted—it was essential to provide a surplus; the pits were expected to pay their way, that if they could not provide a huge profit they should at any rate wash their faces. But that has never been the case. They have been provided with huge sums at the expense of the taxpayer, and much of it has been disposed of or set aside as of little consequence, to cover up the difficulties that have confronted the industry for many years.
The time has arrived when, in my judgment, no pit—I say "no pit" deliberately and advisedly—should be closed down on so-called economic grounds. If it is possible to produce coal at all from a pit it should be kept open; far better to keep the pits running, providing employment for miners. I appreciate that for geological reasons it may not be possible for certain pits to provide all the coal we would like, but there is no reason why men should not be employed in those pits rather than be on the dole or in receipt of social security. At least some coal would be produced.
I am open to correction, but I understand that the chairman of the NCB said recently that the target had not been achieved. Something should be said about this so-called target. I recall that in another place, when we had a discussion some years ago about the situation
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in the coal-mining industry, we set a target of 200 million tons. That was reduced to 180 million tons because, in the opinion of the experts, it would have been impossible to produce 200 million tons, and even if it were possible it would have been impossible to sell that quantity either at home or abroad. Later the figure was reduced to 140 million tons. When my noble friend Lord Lee of Newton was Minister of Fuel and Power he was confronted with the decision that the target should be reduced to 140 million tons, but that target was never achieved.
Wages have gone up, perhaps not as high as the miners would like but I do not want to enter into a discussion about wages; the miners, certainly the men working at the coal face, in my view deserve the highest possible wage that can be conceded. In spite of all the changes that have taken place, all the modern equipment that has been injected into the industry, all the money that has come from the pockets of the taxpayers and by way of the higher prices that people have had to pay for coal throughout the history of the nationalisation of this industry, the situation has been if not disastrous then precarious, and the target has never been reached. Indeed, only recently Dr. Ezra, the chairman of the NCB, declared that unless production was raised to at any rate the target level they would have to increase the price of coal again.
A great deal more could be said about it but I have merely outlined the matter to give perspective to my support for the Amendment. I hope the Minister will concede that we are simply asking that there should be specific language in this legislation, so that there shall be no doubt whatever, to the effect that before a pit is closed down on so-called economic grounds, provision shall be made, if at all possible, for financial aid to be given to enable it to continue in order to provide employment. Of course, if the geological situation becomes so precarious that it is not possible in the opinion of mining engineers to produce any coal at all, then that would be another matter; but so long as there is a possibility of producing coal, that pit should be kept open. This should apply particularly to those areas where coal-burning is done, where industries are available and need more coal.

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There must be sense in this request at this time, when there is so much talk about the need for more energy. We speak as if there were an energy crisis. Bearing that in mind, the language of the Bill should be specific and precise so that we may know exactly what to expect. If, after a thorough-going investigation, a pit must be closed down, that is another matter, but if there is any hope of getting coal at all in fairly liberal quantities, the pit should continue, and I urge the Minister to give this matter his fullest consideration.
Viscount LONG: We on these Benches support the noble Lord, Lord Lloyd of Kilgerran, in moving the Amendment and we appreciate greatly hearing the noble Lord, Lord Shinwell, who was Minister of Fuel and Power between 1945 and 1947, explaining his experiences of the coal industry. As Lord Lloyd said, we must in particular consider the small pits in. Wales, the hardest hit area, where communities have been built up, where the young people have grown up and trained in the vicinity of the small pits and have been hewing the coal. It would be a tragedy if, with unemployment as high as it is, the small pits were closed and there followed a redeployment of manpower which, in my view, would cost the NCB a great deal more than it would if that manpower were left where it is with new industry being brought into the area.
We are, of course, considering very small and isolated areas which, from the NCB's point of view, could probably be uneconomic. But, given the chance to go on hewing their coal, these miners could be an asset to their country again. That is why we support the Amendment, and we hope that the Minister will give consideration to it, because otherwise there could be great hardship for the small communities who for many years have lived and worked as miners. We support the Amendment on those grounds.
7 p.m.
Lord DAVIES of LEEK: I will be brief. Am I clear in understanding that the noble Lord, Lord Lloyd of Kilgerran, having made his preliminary speech on the need for the phasing of coal-burning industries that are adjacent to collieries of low economic capacity, is regarding that speech
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as covering Amendments Nos. 2, 3, 4 and 5, and the others? If that is so, he is saving the time of the Committee, and I will follow that example by making only a few brief remarks in support of the Amendment. According to Clause 6:
"The Secretary of State with the approval of the Treasury may",
—I emphasise that the word is "may"—
"out of money provided by Parliament, make to the Board such grants as in the opinion of the Secretary of State will further assist in the redeployment …".
The noble Lord, Lord Kilgerran, states in his Amendment after the word "assist":
"in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity …".
To my mind, that is absolutely necessary, not only in parts of North Wales, but in parts of North Staffordshire, especially in regard to the small pits.
When my noble friend Lord Shinwell was Minister, I had the honour to have been on the Committee which sat in the Moses Room. We took over the public ownership of the mines, and my noble friend ultimately had the onerous burden of bringing the pits under national ownership. At that time there were many small collieries which, in the gusto and enthusiasm of public ownership, were closed down. I believe that that was a great mistake, because when those pits were closed down colliers were moved to various parts of Britain—up to Fife, down to Kent. When they were moved houses were built for them near the pits. In my own old constituency hundreds of houses were built and Welsh, Scots, and North-East miners came there from so-called worked out or uneconomic pits. The cost of the building involved, the sewerage system, the local government machinery required to provide these amenities, are increasing the burden of expenditure on the National Coal Board.
I believe the Amendment is very important. I do not want to make a long speech because I think the situation is obvious, and I sincerely hope that the Government will be able to direct assistance into the areas, as suggested by the noble Lord, and as strongly argued by my noble friend Lord Shinwell. I am not in any mood this evening to be obstreperous or to go into the Lobbies, and I hope to

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hear a favourable reply from my noble friend on the Front Bench.
7.4 p.m.
Lord WYNNE-JONES: I hope that my noble friend will forgive me for intervening for a few moments. I am in general support of the Amendment, but I think that it is important to realise that the coal industry cannot possibly be lumbered with uneconomic pits. It would be a mistake to insist that pits were kept open, but I think that the point of the Amendment is not to insist that pits are kept open, but to make an attempt to find out how they may be used. If I understood the noble Lord, Lord Lloyd of Kilgerran, correctly on this matter, he was referring in particular to small local industries that could be linked with a pit.
When I first went to Newcastle I found, oddly enough, that there was just such an industry there. It is an industry involved in the manufacture of sanitary ware, sold under the trade name "Adamsez", the firm being the firm of Adams, which is an old firm. I got to know the man who was running it. He took me over the works, and he pointed out to me the interesting fact that when the firm started they had china clay right on their doorstep. They also had a pit actually in Newcastle, and when the coal industry was nationalised they were allowed to keep the pit, provided that they did not sell the coal but used it purely for working their own place. I believe that that was allowed in several places. They were able to run an extremely profitable concern because they were not trying to undertake the elaborate business of mining coal and distributing it around the country. They were simply mining the coal which was in their own backyard, as it were, and which was being brought in to fire their furnaces.
If that kind of thing can be done around the country, in such places as my noble friend Lord Davies of Leek has mentioned, in Staffordshire and South Wales, it could be quite a valuable way of keeping men in employment and keeping the coal going. It might be quite unprofitable to sell that coal on the open market, but it might still be profitable for firms to use it within their own works. I ask my noble friend the Minister to look at this matter and to say whether he thinks
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there is any chance of the Government giving any help, although I should be completely against the attempt to run uneconomic pits on the open market, because that would merely put an unnecessary burden on the coal industry.
7.7 p.m.
Lord STRABOLGI: We are all crateful to the noble Lord, Lord Lloyd of Kilgerran, for putting down the Amendment. He touched on this matter on Second Reading, and I gave a brief reply then, but I am glad that he has put it down again because it has given rise to an interesting debate with some notable speeches from my noble friends Lord Shinwell, Lord Davies of Leek, Lord Wynne-Jones and others, as well as an intervention from the Opposition Front Bench by the noble Viscount. I say at once to my noble friend Lord Davies of Leek that I shall try to give a helpful answer; and I hope that he will find it helpful. But there are one or two points which I must make on the Amendment. The first point is that the closure of collieries is no longer the serious and distressing problem that it was in the late 1960s, and the second is that generous financial inducements already exist to attract industry to areas where coal mining can be expected to decline.
As has been rightly said in the debate, the number of pit closures were very great in the late 1960s, but today the number is very much lower. For example, in 1967/68, 50 collieries closed, in 1973/74 only 18 closed, and in 1976/77 only four closed. As my noble friend Lord Wynne-Jones said, it is broadly true that the National Coal Board now close only those collieries which are exhausted which have become grossly uneconomic, or which have run into serious geological difficulties. That is an important point that has not so far been mentioned.
In my humble submission, in the long run it does the industry no good to keep grossly uneconomic pits alive by direct or indirect subsidies. In any case, there is now an elaborate procedure of consultation with the unions. This has to be followed in every case before a colliery is closed. I think it would be fair to say that this ensures that no pit is closed when there is any sort of case at all for keeping it open. Under this recognised procedure, the National Union of Mine-

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workers can have an inspection of the pit carried out by their own mining engineer, and can appeal, if they wish, to Board level in London.
However, if the pit has to close the Board take great pains to ensure that all the younger men are offered jobs at other pits. The older men, who may be made redundant, receive generous treatment under the Redundant Mineworkers' Payments Scheme. Most of the special development areas were established with the possible decline of the coal industry in mind. Most generous financial inducements already exist under the Industry Act 1972, passed by the Conservative Administration, to attract firms to these areas. Manufacturing industry is offered development grants of 22 per cent. on new buildings, plant and machinery, and loans or interest relief grants to help with the provision of working capital. In addition, there are removal grants of up to 80 per cent. of the cost of moving plant, machinery and stocks. In addition, further Government factories have been built in these areas and are available rent-free for five years to suitable firms. But, even so, there is a limit to the amount of mobile industry available, however generous the grants.
The problem of colliery closures is no longer a serious one, since the number of collieries which close in any one year is now comparatively few. However, coal mining, as I have said, is an extractive industry, and inevitably mines will get worked out or will run into serious difficulties and have to close. The areas in which this is likely to happen are well known, and generous financial inducements already exist under the Industry Act 1972 to persuade firms to move into those areas. In these circumstances, I hope your Lordships will agree that the spirit of the Amendment which the noble Lord, Lord Lloyd of Kilgerran, has put down is already operating, and that no further legislative provision is necessary.
Lord SANDFORD: Before the noble Lord, Lord Lloyd, decides what his reaction to that is going to be, I wonder whether the noble Lord, Lord Strabolgi, could help me. He says that there are powers under the Act which he quoted to persuade industry into special development areas, but can he assure the Committee that the powers under that Act are
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as specific as those cited by the noble Lord, Lord Kilgerran, in his Amendment? Surely there is no reference in that Act to inducements to coal-burning industries as such to come into special development areas; and although the noble Lord, Lord Strabolgi, says that there is some association between the areas we are talking about, where pit closures go on, and special development areas, that is coincidental; it is not precisely so, surely?
Lord STRABOLGI: No. Of course, industry cannot be directed to move, but under the Industry Act 1972, as I am sure the noble Lord, Lord Sandford, is well aware, since he was a member of the Administration which enacted it, considerable financial inducements already exist to attract industry into the assisted areas. Most of the special development areas were established to take account of the possibility of colliery closures; and, as I said, grants are paid. On the other hand, it is really not very much help in the long-term if you induce a coal-burning industry to move into an area where a colliery has to close for geological reasons and the industry then cannot get any coal. The other point, of course, is that, since coal is priced on the basis of the average cost of the coalfield from which it comes, its sale does not require any special assistance. The problem with an uneconomic pit is not using up the coal but dealing with the financial losses and then, of course, with the redundancies. There is plenty of coal.
Lord SANDFORD: I merely want to get the point clear that there is no special power under the Act which the noble Lord quoted to attract coal-burning industries as such into these areas. That is the point. There is not, is there?
Lord STRABOLGI: No.
7.14 p.m.
Lord LLOYD of KILGERRAN: I am very grateful to the noble Lord at least for accepting the spirit of my Amendment; and I was particularly interested to hear the notable speech of the noble Lord, Lord Shinwell. As I see that the noble Lord, Lord Lee, is in his place, may I say at once how, in the days when he was Minister, as an active member of the Welsh Liberal Party, strongly supported his view that there should be a production

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of the order of 170 to 180 million tons of coal in the United Kingdom over a period of, I think, five years. We in Wales were astonished that when Mr. Marsh took over the figure was reduced to something of the order of 135 million tons as the limit of productivity for the years after 1970.
I understand from the noble Lord, Lord Strabolgi, on behalf of the Government, that his reasons for not including the specific words which I have suggested should be put into this Bill in regard to giving grants to postpone pit closures, and also for phasing and encouraging industry into the area, were threefold. First of all, he said the problem of the closure of collieries is now not so serious as it was in the 1960s. There are far fewer pits, I suppose he means, and therefore not so many will be closed. I should have thought that, again, the tragedies of closing pits would still be as great in the areas where they decide to close them down as they were in South Wales in the 1960s.
Then he said that there are generous financial inducements already in existence, particularly under the Industry Act 1972, to encourage industries into particular areas. I should like to thank the noble Lord, Lord Sandford, and to support what he said in that respect. He extracted from the Minister the statement that there is no specific reference in the Industry Act to encourage coal-burning industries into an area where there is the suggestion or the possibility of pits being of low economic colliery capacity, and likely to be closed.
Then the noble Lord the Minister referred to the elaborate procedure (to use his words) which now exists, in conjunction with the National Union of Mineworkers, in order to postpone closures of pits and to consider what should be done with the manpower that might be released as a result. I find myself in a difficulty. I always feel that the kind of Amendment that I have put forward, suggesting that there should be specific references to what grants should be available for pit closures and for the phasing of industries into areas where the pits may be of low economic colliery capacity, should not be the subject of a confrontation on a Division basis.
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If I may say so with the greatest respect, the noble Lord, Lord Strabolgi, when he replied to the point that I raised on Second Reading, did not quite understand the point I was making particularly in relation to Schedule 2. He told me very firmly that Schedule 2 to this Bill re-enacted the terms of some previous Bills and dealt with all the matters arising when a pit closure had been decided upon. My Amendment is directed to the period before it is finally and irrevocably decided that a pit should be closed.
I hope that the Government will appreciate what noble Lords have said on this matter, and I hope that the noble Lord will reconsider the position. In the circumstances, in view of his somewhat sympathetic reply, I do not propose to press the Amendment at this stage, but I may raise the matter at a later stage.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 agreed to.
Clause 8 [Regional grants]:
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 2:
Page 6, line 28, at end insert ("including activities for the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity and generally for postponing pit closures.")
The noble Lord said: I beg to move Amendment No. 2. Clause 8 refers to regional grants. Subsection (1) of this clause is to give effect
"for the purpose of assisting or enabling the Board to pay due regard to the needs of the assisted areas when planning and carrying out colliery activities".
I hope that the Minister would agree that "colliery activities" would include in their scope those activities deciding to postpone the closure of collieries. If the Minister can assure me that "colliery activities" includes activities for postponement of closure of colliery activities, then I propose to withdraw this Amendment.
Lord STRABOLGI: I am happy to give the noble Lord that assurance.
Lord LLOYD of KILGERRAN: In those circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 and 4 not moved.]
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 5:
Page 7, line 10, leave out subsection (7).
The noble Lord said: I have some difficulty about subsection (7) of this clause. That subsection states:
"Section 9 of the Act of 1973 (grants by reference to contraction of the coal mining industry) shall cease to have effect".
I have looked at this clause in the Act of 1973 and I have had some difficulty in comprehending its scope. I should like to ask the Minister specifically why it is necessary to exclude the powers of Section 9 of the Act of 1973 which enables grants to be made by reference to the contraction of the coal mining industry. The words "contraction of the coal mining industry" appear to me to include pit closures or the elimination of pits of "uneconomic colliery capacity", to use the words of the Bill. I should like to ask, before deciding what action to take, why it is felt necessary to remove by this Bill Section 9 of the 1973 Act which specifically gives powers for grants by reference to the contraction of the coal mining industry.
Lord STRABOLGI: I am happy to give a short word of explanation. Subsection (7) states:
"Section 9 of the Act of 1973 … shall cease to have effect".
Section 9 of that Act is the section under which regional grants were payable between March 1973 and March 1976. It is now spent and may therefore be repealed—which will be under Part II of Schedule 5 to the Bill. It is very complicated with the various statutes involved, but I thought that it might be helpful if I were to throw some light on it.
Lord LLOYD of KILGERRAN: I am obliged to the noble Lord. As I understand it, the reason for eliminating Section 9 of the 1973 Act is that it is no longer considered by the Government necessary to have any clause in this Bill which will assist by way of grants in relation to the
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contraction of the coal mining industry after 1976 apart from the terms in the Bill in its present form. If my understanding of the Government's position is correct, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 [Activities relating to petroleum]:
7.25 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 6:
Page 7, line 14, after ("power") insert ("subject to the approval of the Secretary of State").
The noble Lord said: I beg to move the Amendment standing in the name of my noble friends and myself. Clause 9 moves us some way away from coal into the realms of the oil industry. There is no doubt that the National Coal Board have been engaged to some extent in oil activities, largely in concert with other groupings, subsidiary companies of theirs and others in the private sector. It is my understanding that such commercial arrangements are reasonably satisfactory. If, however, the noble Lord, Lord Strabolgi, can tell me that it is because of the unsatisfactory nature of these arrangements that the NCB now seek to enter the oil industry this may very well affect some of the things I have to say.
However, I do not believe that this is necessarily so. I believe that the National Coal Board have sought these powers and have been given them in the Bill in order that they can engage in what currently is a most attractive part of the energy business. Whatever anybody says, this clause gives absolute power to the National Coal Board to engage in non-coal activities. There are some qualifications, certainly; but in practice they are, I feel, quite meaningless. They are so loosely framed in the clause that it would be quite impossible to prove one way or another whether the Board were exceeding their powers or not. If the noble Lord opposite is going to say that the NCB have been engaged in these activities but there is some doubt under the 1946 Act as to how far they can go, that this regularises the position and removes the doubt, I would agree with him because it removes the doubt absolutely. It removes all the

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doubt; and off they can go into the oil and petro-chemical industry.
I ask why it is that the NCB want to go into it. Why, for example, do they need to go into that activity to gather experience in oil technology, oil refining and petro-chemical distribution? There is much expertise also in the State-owned sector of the oil industry through BNOC and there is a mass of expertise in the private sector. When we discussed BNOC, when we discussed the involvement of the State in oil activities in the Petroleum and Submarine Pipelines Act and the Energy Act, the BNOC were denied the complete and absolute freedom. Is it that the Government now see that such freedom can be given to a nationalised industry through the National Coal Board?
There is another factor. Is there today a good economic reason for the Board to engage in the making of petro-chemicals from coal? It could be argued one way or the other. If it were so, I suppose it is reasonable to say that the National Coal Board have the technology—certainly the technology in conversion is available. What is in some doubt is whether such conversions are, in current economic terms, worth while.
The total energy difficulties experienced in this country are easing with the provision of North Sea Oil; nevertheless, coal has re-emerged as an important energy source. I suggest that the NCB's prime target is in mining solid coal for solid coal uses. That we can come to using coal in liquified forms, we know; as to when that becomes an economic probablity, we do not know. It is at that time that the NCB might require these further powers.
Ever since that celebrated television programme on the oil industry was screened some years ago, that industry has had a most splendid attraction—almost a romance—for almost everybody. There is no doubt that the oil industry could be equally attractive to the NCB. In another place, and in your Lordships' House during Second Reading, the Ministers responsible have given certain assurances as to what the NCB intended to do. I am going to suggest that the NCB may have such intentions today, but tomorrow they could be different: a different Board
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chairman with a different kind of composition to the Board, may find that the success of his Board lies more in oil activities, and he might then proceed, using State money and State effort.
Once you start in the oil business as a sole entity, there is no going back. You have to go all the way along the line. It is extracted, refined, distributed and sold. There is no going back. As ICI found in 1969, when they were refining to provide petro-chemical feed stock for themselves, they ended up with a surplus of petrol. As will be recalled, that is practically the end product. How did they get rid of that end product? They opened their own petrol stations. They had 100 of them. Today they have 400. Indeed, they are now engaged in the purchase of refined petrol, its distribution and sale. There is no going back.
These are some of the powers we are going to give to the National Coal Board under Clause 9. I should like Clause 9 to be deleted. That is not practical politics nor a practical proposition. However, what is practical is that no nationalised industry should embark on virtually new fields without let or hindrance, without being accountable somewhere along the line. I suggest that accountability should be by the Secretary of State having to give approval. It has been said in another place that there are plenty of checks and counterbalances to see that the Board do not do this. That may well be so. If it is so, those checks and counterbalances are not inside Parliament. That is why I feel that it is necessary that should the Board engage in this, that or the other, the powers should be there with some minor qualification and Parliament must have some control as to where the Board go, what they do and how they do it.
The whole of the energy business, whether it is coal or oil, is far too important to be dealt with by different bodies who, for their own reasons, go different ways. There must be a pulling together regarding this energy source. The only way is through Parliament, and the only way that I can see is that the Board shall ask the approval of the Secretary of State. That is what Amendment No. 6 seeks to do. I hope that, without repeating what has been said in another place, I have given some of the reasons why I

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think that your Lordships should agree with us in this Amendment. I beg to move.
7.36 p.m.
Viscount LONG: I am most grateful to my noble friend for what he has said from his experience in the petroleum and motor industry. We assumed that we were starting with a Coal Bill and we are now, in no time at all, dealing with petroleum. It is dangerous that the Board, with no authority from anyone else, can go into the petroleum industry. Clause 9(3) says:
"The Board shall have power to do anything and to enter into any transaction (whether or not involving expenditure, borrowing or lending, or the acquisition of any property or rights) which in the opinion of the Board is calculated to facilitate the proper exercise of their powers under this section, or is incidental or conducive to the exercise of those powers".
During Second Reading, I said that this clause was too loosely worded and that the National Coal Board could do virtually what they wanted. It is obvious from the clause that they have the powers to do this. On page 4 of the Bill, Clause 5 (3) says:
"… but the Secretary of State may,…",
and further down, in Clause 6(1) it says:
"… the Secretary of State will further assist…".
Yet when it comes to the NCB wanting or having powers to go into the petroleum field, the Secretary of State's permission is not required. The Amendment quite rightly wants the Secretary of State to be informed.
The NCB is in need of £2,800 million. I understood that this Bill was for the pits, those that needed remodernising, refurbishing and so on. I am getting more suspicious and anxious that this money is to be diverted into other causes. I stand to be corrected, but I do not think it is right to allow the NCB authority or powers to go it alone into the petrol industry. Before we know where we are, we shall have petrol pumps manned by the unions which have unemployment in the mines, or petrol stations being taken over by the NCB, who do not have the necessary experience. This is extremely dangerous.
I am glad to see the way in which the Amendment is worded, to make sure that the Secretary of State is brought in,
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and to make sure that the NCB cannot, in a few years' time, walk into the petroleum business as such. I think that this Amendment should be looked at in that light.
7.40 p.m.
Lord LEE of NEWTON: I was very grateful to the noble Lord, Lord Lloyd; I came in just in time to hear him talking about my total in 1965 of 180 million tons of coal for 1970. In the event, that proved to be the right figure and the coal industry has been in trouble ever since. But in that White Paper, and indeed in the 1969 Act, which has been mentioned, I also wrote off £415 million of the Coal Board's capital debt, which was of great assistance to the Board. I also made arrangements for the National Coal Board to take shares in the North Sea and Irish Sea.
Noble Lords are getting very worried about the Coal Board going into the oil industry, but they are precisely eleven years too late. It has been in it all chat time. I read the other day that they sold a large number of shares to BNOC for a few hundred million pounds, and that goes to assist the public weal. I should not have thought that, on the whole, this was the kind of activity which was detrimental to the national interest. As a matter of fact, I recall that, when we made arrangements with certain American-owned firms which had practically a monopoly in the North Sea, we got very good terms for the Coal Board, because it did not put in any money until the presence of oil and gas was made clear. With all the problems of the oil industry and the fact that for every 10 holes you drill, on average, only one is a wet hole, I should not have thought that those were bad conditions for the British to enjoy.
I do not understand why the noble Lord, Lord Lucas, is so worried. In those days also, the Coal Board was the second biggest producer of bricks in Britain. It had a whole range of activities which were ancillary to its main objective. The noble Lord was telling us that ICI has gone into this business. Apparently, it has hundreds of petrol stations all over the country; and he applauds that. But a nationalised industry must not do anything of that kind. When an American oil company got a certain percentage of the British market, one of the things that we insisted upon was

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that it should build a refinery so that instead of having to pay for the crude, we got the by-products from the refinery. Indeed, one of the greatest miracles in the fuel industry came about when the gas industry, instead of carbonising coal, turned over to the by-products from the refineries which we had had installed. In that way, the gas industry expanded at the rate of 11 per cent. per annum instead of remaining an industry which was going out of existence.
Why are noble Lords afraid of this kind of thing? It beats me. The noble Lord mentioned ICI. I cannot think of any of the great industries in Britain which are now producing the identical products they were producing when they came into existence. If they had been, most of them would have gone out of existence. We owe their present existence in Britain to the fact that they were enterprising enough to change over to other things.
I go this far with the noble Lord: it would be wrong for an organisation like the National Coal Board to neglect its main reason for existence as a result of going into other things. None of us would want to encourage that kind of thing, especially if there were jolly good private firms doing well in the production of such commodities. I think that the noble Lord is barking up the wrong tree.
We are trying to get an energy industry composed of coal, gas, oil and nuclear power, and which is co-ordinated in the sense that we get the best and most economic products from each of them. I should have thought that that was a good thing from any point of view and, indeed, when Conservative Governments have been in power they have not tried to wreck that kind of development. I mentioned the 1965 White Paper which I had the honour to produce. It was the first White Paper which brought together all of the energy industries. We tried to make an estimate of what total product would be required in 1970—and, in the privacy of these four walls, I will tell the noble Lord that we got it right five years before it happened. So do not let us start imagining all kinds of things which are not going to happen. The Coal Board's main product will still be coal
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but in the course of getting that coal we shall see developments.
I have mentioned how the North Sea development came about and I am not ashamed of it at all. I take it that, when they are boring, they will come across various kinds of mineral and so on. Up to my day, there had never been an exhaustive survey in Britain of what we had under our soil. Mostly, we found other things when we were digging for coal. Despite the fact that the Coal Board has expended its capital on research into where coal lies and then goes into the very expensive job of sinking shafts, if it dares to come across a material other than coal, the noble Lord says that it must not touch it. Quite frankly, that is impossible in this day and age. My noble friend will probably say that the Coal Board is not looking at how it can expand into areas where private industry are doing well. They are not doing that at all; so let us please not try to restrict the Board when it is making a legitimate expansion into other parts of the energy programme.
Lord TAYLOR of MANSFIELD: I wonder whether we can just examine this clause for a moment or two. I think I heard the noble Lord, Lord Lucas, say that his chief preoccupation was not so much with the Amendment as with the fact that he would like to see Clause 9 disappear from the Bill altogether. Let us just look at it for a moment. It says this:
"The Board shall have power to carry on any activities consisting of—

(a) the acquisition and treatment of petroleum.

(b) the manufacture and sale of products of petroleum, or

(c) the treatment of products of petroleum for the purpose of rendering them saleable".

Why are those words put in? It also says that the Board will be able to occupy itself with those various activities if it appears to the Board,
"that those activities will or may ultimately provide an outlet for coal or products of coal, or may lead to the development of chemical processes or methods, or acquisition of commercial, industrial or technological experience or knowledge which may lead to new or improved uses of coal or products of coal".
I submit that those words in (a), (b) and (c) are there only to provide the Board with an opportunity for an outlet for the commodity which they produce. That is

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how I see it. I remember the Sankey Commission, and during all the years since then I have been very disappointed that not enough has been made out of what could be extracted from coal.
I hope that the Minister will not listen to the Amendment, at any rate with a view to accepting it. One of my disappointments has been that not sufficient use has been made of the potential that is in coal. In my humble submission, Clause 9 provides the National Coal Board with that opportunity. For that reason, I heartily, and without any reservation, support Clause 9.
Lord HUGHES: I should like to come in briefly on this Amendment, and it is rather surprising to myself to be entering into a debate on something in connection with the coal industry. I do so because it appears to me that as soon as we have a Bill dealing with a nationalised industry the Conservative Opposition always seem to look at it with, great suspicion, particularly if there is any suggestion that the industry may be embarking on a widening of its functions. I suggest that the noble Lord, Lord Lucas of Chilworth, and the noble Viscount, Lord Long, are completely wrong in their fears that this could enable the Coal Board to make a massive intervention in the oil industry. After all, they can do so on only a very limited basis, if they can do so without needing capital for the purpose. Since they need capital they must go to the Secretary of State, and Schedule I clearly lays down that he has to approve the borrowing of money either from other sources or from himself. So it is clear that Schedule 1 would enable any Secretary of State to prevent the Coal Board from embarking on any such enterprise, if he did not think they should do so. Any fears that the Coal Board could be opening up 400 petrol filling stations behind the back of the Secretary of State, are so fatuous as not to be worth contemplating for one moment.
Lord LEATHERLAND: I hesitate to intervene in this debate among experts. I do so only because nearly 13 years ago, when I first came to your Lordships' House, I raised the question of the production of oil from coal. It was explained to me on that occasion that, while research was proceeding, the expense of carrying out that conversion at that
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moment made it not a practical economic proposition. Nevertheless, we assume that research has continued, and that at some time the production of oil from coal may become a practical possibility. We know that considerable work has gone on with a kind of sister operation; that is, the underground gasification of coal. So I think we must look forward to the day when oil will be obtained from coal.
I want to make only one point, and that is the object of my having risen here tonight. It may be that, at some time in the future, this country will be faced with the threat of war, or with war itself; we hope not, but it may come. Where, then, are our oil resources? What will happen to the North Sea wells? Not one of them will be standing after 24 hours of war. What will happen to the tankers that are bringing oil from the Middle East? Not one of them will be on the surface of the waves after a week at war. If, therefore, we have beneath the soil of our own land the possibility of securing oil from our coal, then I think we should proceed—not on a huge scale at the moment, but certainly with active research and, perhaps, with some production in the obtaining of oil from coal.
If we were faced with a war, what weapons would we use? If we used planes, we would need oil. If we used ships, we would need oil. If we used tanks, we would need oil. But, as things stand at the moment, we would not be able to guarantee ourselves a single gallon of oil after a week of war. I have looked a long way ahead. I have perhaps been fanciful, but these things happen. None of us expected to have two wars in our lifetime, and yet we have had them. So I suggest that if we have the potential beneath our own soil, we should not waste it. We should be active, and see what use we can make of it.
7.55 p.m.
Lord SANDFORD: It looks as though I must spend a little time trying to persuade the Committee that we do not disagree with the noble Lord, Lord Leatherland, or the noble Lord, Lord Lee. We are not objecting to these powers being available to the National Coal Board. We agree that they should be, for the reasons which the noble Lords have been putting forward. I am afraid I must

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say that all the noble Lords who have spoken from the opposite side have been exaggerating the extent of what we are seeking to do. We are not objecting to these extensive powers being available to the National Coal Board, and noble Lords have only to look at the Amendment to see that that is so. We are not objecting to the National Coal Board using these powers and going into these fields, for the very good reasons which the noble Lord, Lord Leatherland, for instance, has just been putting before the Committee. All we are objecting to—and it is much more limited—is the National Coal Board having such wide powers, which they certainly need for all these reasons, and being able to exercise them, without the prior approval of the Secretary of State; and our Amendment is limited to that solely.
It is perfectly true, as the noble Lord, Lord Lee, said, that the National Coal Board started life by inheriting all kinds of activities, including brick-making. But they, very properly and sensibly, got rid of those and concentrated their attention on winning and getting the coal—more or less—because brick-making is a diversion and a distraction from their main purpose, which occupies the greater part of their talents, skills and manpower. But this is not to say that it may not now, as it has been in the past, be in the national interest, as well as in the National Coal Board's interest, for the National Coal Board to diversify again into various fields.
This is certainly the moment for them to be considering taking a stake in the petro-chemical industry. We are not objecting to that. We think that that is sensible. It is obviously sensible, in order to get the best possible use for the sake of the nation from this precious indigenous resource. We are not in disagreement on this point, whatever noble Lords might have expected. What my noble friend Lord Lucas is objecting to is the very limited point that they should be able to take a decision to use these very wide powers—and I think noble Lords will agree that they are wide, but we are not objecting to that—and to take a decision about the way in which they are to be used, solely on their own consideration.
Lord LEE of NEWTON: Will the noble Lord allow me to intervene? Does he realise that every year the capital programme of the National Coal Board has to be agreed with the Minister of Power? He has complete authority to refuse to agree to the expenditure of any amount of money for something with which he disagrees; in other words, he already has the power. They have to go to the Minister concerned to get the power to spend capital, and he can at any time refuse to give them that.
Lord SANDFORD: I entirely appreciate that. Nevertheless, this is a new feature in the Bill. Most Coal Industry Bills are just as the first Part of this one is—an extension of the Board's borrowing powers and the addition of one or two grants, which in this case amount to the fairly substantial sum of £325 million to £475 million, to do various things to a greater extent or additional to what they have been doing before. I agree there is that financial control. We are dealing here with something new and something wider, and we are agreeing, contrary to what noble Lords opposite might have expected, that this is a sensible and timely extension and diversification of the National Coal Board's powers.
Nevertheless, despite what the noble Lord, Lord Lee, said about financial control being there, we believe that in this case it would be more desirable for the National Coal Board, when they have initiated and worked out some scheme for the use of these powers, also to have to go, to the Secretary of State for approval of them before the Board pursue and implement them. It seems to us to be undesirable that these new and very extensive wide powers can be exercised without the approval of the Secretary of State, despite the financial control which he is able to exercise.
We believe that this Amendment is necessary because the petro-chemical sector is already covered by another nationalised body—the BNOC—and by several large private sector firms. This very limited Amendment is designed to avoid expensive duplication of effort in this sector by two nationalised industries and several large firms in the private sector. This is the only reason for the Amendment. In order to secure that objective it is well worth while having this minor Amendment. We

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are not in the least disagreeing with the existence of the powers, and we take entirely the point that this is a timely and good moment at which to introduce them.
Lord HUGHES: I wonder whether the noble Lord would be good enough to explain how he considers that the Coal Board can exercise these powers to use capital without the consent of the Secretary of State, and also how he envisages this being done on anything other than the most modest scale without the injection of capital by the Secretary of State. As my noble friend Lord Lee of Newton has just emphasised—and I thought that the noble Lord, Lord Sandford, accepted what he said—does not this mean that the Secretary of State's control is absolute?
Lord SANDFORD: I believe that the Secretary of State's control over borrowing and Parliamentary control of grants, both of which are provided for in the Bill, are appropriate. We have become used to the National Coal Board exercising their powers within the relatively circumscribed powers granted to them by the 1946 Act, as amended. Here we enter into an entirely new field, not one where the National Coal Board are opening up spheres of activity and aspects which they are pioneering. The Board are moving into areas which are already covered by another nationalised body and by the private sector. In those circumstances, we consider that it is necessary to have this sanction as well.
Lord HUGHES: It seems to me that in his reply the noble Lord has thrown away his entire case. He says that he accepts that the National Coal Board will be controlled financially in the field of coal in which they have been engaged ever since the Act was passed; yet the noble Lord envisages the possibility that the Board will have a blank cheque when it comes to this totally new field of activity. If financial control means anything, it must mean that control will be much stricter in the case of a new enterprise than in one which has been carried on for decades.
8.2 p.m.
Lord STRABOLGI: May I say a few words at this point. This very interesting debate has ranged far and wide over most of Clause 9. May I say at the outset that the powers which are being sought
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for the National Coal Board are rather more important and exciting than just running a few petrol filling stations, to which the noble Lord, Lord Lucas of Chilworth, seemed to think that they were consigned. We are in the second half of the 20th century and are moving towards the next century. We are on the eve of a very important technological age. I should like to spend just a few moments explaining to your Lordships how the Government view the relationship between coal and chemicals and to suggest that we raise our sights a little higher. I believe that the noble Lord, Lord Sandford, appreciates what we have in mind—and also my noble friend Lord Hughes, the noble Lord, Lord Lee of Newton, and my noble friend Lord Taylor of Mansfield.
Only 30 years ago, 75 per cent. of our production of organic chemicals was based upon coal and its by-products. Then came cheap oil and the rapid expansion of the petro-chemical industry, an industry which is very different in character from what it was even 30 years ago. We no longer have cheap oil, and it is certain that the next 30 years will see further changes in the petro-chemical industry as it adjusts to changes in the supply and price of its feedstocks, and continuing oil to coal price relativity favourable to coal will enable new opportunities for coal based chemicals to appear.
There is no sharp dividing line between chemicals made from coal or petroleum other than that of production cost. The purpose of Clause 9 of the Bill is to give the National Coal Board the chance to be ready to seize these opportunities as they arise, and not to move into fields, as I believe the noble Lord, Lord Sandford, implied, which have already been well covered by other industries, nationalised or otherwise. It is rather more exciting and imaginative than that. This nation is fortunate in its energy resources, but we know that our coal will long outlast our oil and natural gas. Therefore I submit that we owe it to ourselves, and to those who follow, to explore ways to extend the life of our reserves of oil and gas. We should be failing indeed if we neglected to set up the machinery by which a smooth transition can be made from one feedstock to another.
The Board believe that in the years to come there is an essential place for coal

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as an alternative to oil in certain refining processes and as a source for chemical feedstocks. They believe that in the United Kingdom at least the substitution of coal for oil in refineries will be a gradual development which might embrace a number of aspects—for example, the substitution of coal for oil for steam or power generation at refineries, the use of hydrogen from coal gasification to meet the demand for more hydrogen in refineries to produce lighter fractions; and there are many others. I understand that several oil companies are giving serious consideration to the future possibilities of using coal in oil refineries. In principle, the total projected United Kingdom demand would represent a significant fraction of the present total United Kingdom output of coal.
A partnership has now been formed between Coal Products and BSC Chemicals which will be the vehicle for future joint petro-chemical ventures which might also absorb activities with which the Board are already associated with BSC. Both BSC and the National Coal Board envisage co-operation between this joint partnership and oil and chemical companies in activities downstream of refining. The discussions they have already had with companies in the oil and chemical industries provide grounds for believing that co-operation will be forthcoming. Neither they nor their BSC partners are planning to set up in competition with the oil or chemical industries, nor to take over any small companies in this field. There are various others on the refining side. The National Coal Board have had talks with Conoco with whom they already have connections in the chemical field, although no firm arrangements have been entered into. I could go on for a very long time, but I do not wish to weary your Lordships. Nevertheless, this gives some indication of what the Government have in mind.
With regard to the rather narrow point which was raised very properly by the noble Lord, Lord Lucas of Chilworth, regarding petrol filling stations, at their request the Petroleum Industry Advisory Committee came to see officials of the Department subsequently. The chairman wrote to my honourable friend the Parliamentary Under-Secretary of
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State. The Petroleum Industry Advisory Committee asked for further clarification about the Board's policy and intent in the area of oil refining and wholesaling of petroleum fuels in view of its understanding that the National Coal Board was not seeking to enter conventional oil refining or such wholesaling. It is not quite clear where this understanding originated. In Committee my honourable friend said that the Board did not wish to enter the retail field, but he clearly indicated that products not needed for the Board's operations might be disposed of. I can only say that some of the products of refining would be used in operations which the National Coal Board and the BSC are planning. Others might be used in the National Coal Board's existing activities, or be sold to other people who would use them in their industrial operations; but any such sales by the National Coal Board of refined products would not be sales on the retail market and certainly the Board do not intend to go into the petrol filling station service industry.
If I may return to the Amendment, it would not extend Parliamentary control, as it does not make the Secretary of State's approval subject to Parliamentary endorsement. Under Section 7 of the Coal Industry Act 1971, the Secretary of State has power to direct the National Coal Board to discontinue or restrict any of their activities other than colliery activities. Also the Select Committee in another place on the nationalised industries will be able to review the whole range of the National Coal Board's activities.
With regard to finance the Government's agreement to the Board embarking on projects in the petro-chemical field is on the understanding that the Board's share of the necessary finance will be raised without recourse to public funds. Sources of funds will include borrowing raised on the market and profits from the activities of the existing Coal Products Limited and from the initial stages of the new operations themselves.
I am sorry to have spoken at some length but I wanted to explain the purpose of this clause to allay some of the fears of the petrol filling stations, and also to say that in my humble judgment and in the view of the Government the Amendment is not necessary.
8.11 p.m.
Lord LUCAS of CHILWORTH: I am most grateful to the noble Lord, Lord Strabolgi, for his explanations, which have left me somewhat unmoved. However, I should like to deal with one or two things raised by noble Lords. I want particularly to dispel the idea that we are primarily worried about a few petrol stations. We are arguing that the Coal Board can engage in those activities that stem from coal. There is no argument about that, and the noble Lord, Lord Lee of Newton, emphasised how they come about and how they got into the other business. What I have been saying is that this Clause gives an absolute power to engage in another end of the industry. The noble Lord, Lord Taylor of Mansfield, accused me of saying, "Let us get rid of the thing". I told your Lordships that I should have liked to see it out, but it was not a practical proposition; I felt we must look at these qualifications and so I tabled the Amendment.
I am staggered that the noble Lord, Lord Hughes, should say to my noble friend Lord Sandford that he had destroyed his own argument. I think the noble Lord, Lord Hughes, would probably agree that a nationalised industry is quite different from an industry in the private sector. There are no suspicions from Conservatives. There is a totally different viewpoint, which is not necessarily suspicion. Nationalised industries have no private shareholders; they are brought into existence by an Act of Parliament to do a specific job. I have been arguing that slid into a Coal Industry Bill is the ability to do another totally different and distinct job, and I want the Secretary of State to give approval for that long before the
finance comes along. Those are my replies to those who have argued against us.
The noble Lord, Lord Strabolgi, is quite right: we must be ready to seize any opportunity that is seizable by fair and proper means and under the control of Parliament. I am sufficiently sure that my arguments are, if I may put it this way, better than those which have been deployed against me, and I shall ask the Committee to prove whether I am wrong or whether the noble Lord opposite is wrong.
Lord HUGHES: Before the noble Lord concludes, does he imagine for one moment that any Minister would give approval to a project before he looked very thoroughly at the financial side and the amount of money which might be borrowed by the Board? If he thinks it works that way I can understand why he has put forward this Amendment, but as a former Minister I can assure him that it does not work that way.
Lord LUCAS of CHILWORTH: I do not want to delay the Committee by debating the functions. What I do know in hard commercial practical terms is that there come occasions when a project is embarked upon from which there is no retiring, and it might well be that a Minister could be put in a difficult position. Indeed, we have had almost that self-same position arising earlier this afternoon.
8.15 p.m.
On Question, Whether the said Amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 55; Not-Contents, 43.

CONTENTS

Amory, V.

Harvey of Tasburgh, L.

Reay, L.

Berkeley, B.

Hewlett, L.

Redesdale, L.

Brougham and Vaux, L.

Home of the Hirsel, L.

Rochdale, V.

Camoys, L.

Hornsby-Smith, B.

Romney, E.

Carrington, L.

Kinnoull, E.

St. Aldwyn, E.

Cathcart, E.

Long, V.

Sandford, L.

Cobham, V.

Lucas of Chilworth [Teller]

Sandys, L.

Craigmyle, L.

Lyell, L.

Sharples, B.

Denham, L.

Macleod of Borve, B.

Strathclyde, L.

Digby, L.

Mansfield, E.

Swinfen, L.

Effingham, E.

Monck, V.

Teviot, L.

Elliot of Harwood, B.

Monk Bretton, L.

Trefgarne, L.

Elton, L.

Montgomery of Alamein, V.

Vickers, B.

Emmet of Amberley, B.

Mottistone, L.

Vivian, L.

Exeter, M.

Mowbray and Stourton, L. [Teller]

Wakefield of Kendal, L.

Fraser of Kilmorack, L.

Ward of North Tyneside, B.

Gainford, L.

O'Hagan

Westbury, L.

Glenkinglas, L.

Onslow, E.

Young, B.

Harmar-Nicholls, L.

Rankeillour, L.

NOT-CONTENTS

Bacon, B.

Kaldor, L.

Paget of Northampton, L.

Blyton, L.

Kirkhill, L.

Parry, L.

Burton of Coventry, B.

Leatherland, L.

Peart, L. (L. Privy Seal.)

Champion, L.

Lee of Newton, L.

Rochester, L.

Collison, L.

Llewelyn-Davies, L.

Segal, L.

Delacourt-Smith of Alteryn, B.

Llewelyn-Davies of Hastoe, B.

Shepherd, L.

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

Lloyd of Kilgerran, L.

Stewart of Alvechurch, B.

Gladwyn, L.

McCarthy, L.

Stone, L.

Greenwood of Rossendale, L.

McCluskey, L.

Strabolgi, L.

Gregson, L.

Mackie of Benshie, L.

Taylor of Mansfield, L.

Grey, E.

Milner of Leeds, L.

Thomson of Monifieth, L.

Hale, L.

Morris of Kenwood, L.

Wallace of Coslany, L. [Teller]

Houghton of Sowerby, L.

Murray of Gravesend, L.

Wells-Pestell, L.

Hughes, L.

Oram, L. [Teller]

Wilson of High Wray, L.

Janner, L.

On Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
[Amendments Nos. 7 to 9 not moved.]
Clause 9, as amended, agreed to.
Clause 10 [Activities relating to minerals other than coal or petroleum]:
[Amendment No. 10 not moved.]
8.23 p.m.
Lord SANDFORD Lord SANDFORD moved Amendment No. 11:
Page 8, line 6, after ("power") insert ("after notice to, and consultation with, the relevant owners and lessees of any minerals other than coal or petroleum").
The noble Lord said: I should like to speak to Amendments Nos. 11 and 12 together. We are now in Clause 10, which deals with the Board's activities in the field of minerals, and these two Amendments are designed to ensure—or to obtain from the noble Lord an assurance to the same effect—that the National Coal Board, when it does, in the searching for, and the exploration, working and getting of coal, come across other minerals, it will not proceed in the exercise of these powers without first of all consulting others who already have an interest in the minerals in question, and who have rights in them. I think that the Committee will agree that it is only reasonable that this should be so, and I hope that the noble Lord will be able easily to give us the assurance that we are asking for.
Baroness HORNSBY-SMITH: I should like to support my noble friend Lord Sandford in these two Amendments, which very much go together. In a recent
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Community analysis of the most serious unemployment there three industries were listed—shipbuilding, textiles and the construction industry. Today it is the hard-hit construction industry and the companies which serve it with which I am concerned in relation to Clause 10 of this Bill.
Already the Coal Board can quarry alternative minerals that it may find in the course of its coal mining and other processes which may arise out of the coal mining that it has undertaken in those specific areas. This clause goes very wide. I know that the noble Lord will say that they may or may not use these powers, but we are putting these rights into a Statute—not necessarily for Sir Derek Ezra, but perhaps for two chairmen hence, with an entirely differently constituted Board. With this clause, we are giving them power to indulge in, for example, all manner of surface quarrying, whether it be sand, gravel, limestone, granite or Portland stone, all of which are at this moment of time quarried and produced by companies nearly all of which have very capital intensive operations.
For many years, in the early years of representing the Chislehurst Division in another place, I included in my territory the great cement works on the south side of the river at Swanscombe and at Stone. I visited them many times, and I know how tremendously capital intensive those operations were. So, too, are others of these industries which excavate from the surface of the soil rather than mining deeply. No-one suggests that they are not efficient, no-one suggests that they are flat out to capacity, because the road construction programme is half what it was in 1968, building construction, mainly due to the cutback on public works, is down 25 per cent. and cast concrete products are down

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by 16 per cent. Is this really the time to tell hard-hit, efficient industries which no-one can criticise for not fulfilling their task that, according to this clause, at any time and anywhere beyond the confines of where it is currently mining for coal, the Coal Board is to have power to enter those industries? There are many companies involved in this wide network of surface excavation. I believe that they would be failing in their duty if, for the protection of their own companies and highly skilled and specialised workers they did not, as they have done, protest at these very wide ranging powers which are being given to the Coal Board. However, if they seek these further powers, it must mean that they wish to expand into new territories not exclusively centred on coal mining and poach into the products from the soil now being worked by a multitude—a very wide collection and variety of skilled companies, each tied to their specialty. The implications are wider than at first sight the clause implies.
However, with the power conferred in the clause the coal industry could go into a dozen other building, construction and ancillary industries. The companies likely to be affected have trained their workers and put vast sums of money into efficient industries. I believe that at this time, when they are so hard hit and when no one has suggested that they have not the capacity and equipment to expand when the building trade looks up, these companies should be allowed to get on with their job, as the coal-mining industry has a monopoly in theirs.
In a speech introducing the Bill on 5th July the noble Lord, Lord Strabolgi, used an interesting phrase. He said:
"It"—
meaning the Bill—
"will establish a framework of grants to assist the industry"—
the coal industry—
"in case it should be blown off course."
I believe that the powers under Clause 10 will not just blow a wide range of well-equipped and highly efficient companies off course. It could open the hatches and scupper them.
Lord LLOYD of KILGERRAN: I shall be brief. My noble friends who sit on these Benches have always maintained that when nationalised industries wish to extend the scope of their activities, the
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proposals for extending their scope should be very carefully scrutinised, especially to ensure that such expansion of activities will not be to the detriment of local private enterprise. As I said on Second Reading, I share the anxiety of owners and lessees of minerals other than coal and petroleum, as regards the width of the sections of these clauses. Like the noble Lord, Lord Sandford, I shall be interested to hear what the Minister has to say and the assurances that he may be able to give.
Lord STRABOLGI: I am glad that the noble Lord, Lord Sandford, and the noble Viscount, Lord Long, have tabled these Amendments, because they give me the opportunity to clear up some points and give some clarification. These Amendments seem to be based on a misunderstanding of the nature of the power that would be accorded to the National Coal Board. I listened carefully to what the noble Baroness, Lady Hornsby-Smith, had to say.
The clause would not give the Board any power to override the rights of other parties or to ignore other relevant legislation. It would not give the Board any power of compulsory acquisition. The clause would simply establish that it was within the scope of the Board's powers as a statutory corporation, for the Board to work and get minerals other than coal and petroleum discovered in the manner defined in the clause and to carry on related activities as defined there.
There are, of course, other Amendments on this point but I should like to confine myself to the matters raised in these two particular Amendments. It has already been made clear during the proceedings on the Bill that in order to work and get minerals under the clause, the Board must obtain the necessary mineral rights. These can be obtained only by negotiation and agreement. Although it is a nationalised industry, the Board will thus be in no different position from any other person, private or public, who discovers the minerals and wishes to obtain the rights to work them. Therefore, I hope that I have made it clear that Clause 10 does not in any way affect the existing rights of mineral owners or lessees and that in the light of that explanation the noble Lord, Lord Sandford, will feel able to withdraw the Amendment.
Lord SANDFORD: I am grateful to the noble Lord, Lord Strabolgi, for his remarks. There are many other Amendments to this clause which we shall need to consider. Indeed, we shall probably need to consider them all together. Therefore, although I express my gratitude to the noble Lord, Lord Strabolgi, nevertheless I should like to reserve my position because we may need to return to the matter at the Report stage. However, so far as the noble Lord's reassurances on these two Amendments go I think that, on the whole, I am reasonably satisfied.
Amendment, by leave, withdrawn.
[Amendments Nos. 12 and 13 not moved.]
Viscount LONG Viscount LONG moved Amendment No. 14:
Page 8, line 17, at end insert—
("Provided that the power to work and get minerals under this subsection shall not be exercised by means of open-cast operations otherwise than in association with working and getting coal.")
The noble Viscount said: I shall be as brief as possible as regards this Amendment. With the permission of the Committee, it might be convenient for me to talk also to Amendment No. 15. We are now dealing with the more delicate and technical part of the Bill.
Lord STRABOLGI: I hesitate to interrupt the noble Viscount, Lord Long, but it might also be convenient to deal with Amendment No. 22, which could be described as a horse from the same stable. In that way we might save some time.
Viscount LONG: Yes, I agree—anything to help the passage of the Bill in Committee. We are now dealing with the more technical side of the industry. We are trying to acknowledge in the Amendment the fact that there are two sides to mining—mining through the deep shafts and tunnelling; and opencast mining. We immediately become concerned with the aggregates industry—sand, rock and gravel. We believe that by means of the Amendment we should safeguard the aggregates industry as a whole. The powers that have been given by the Bill to the National Coal Board give rise to anxiety in other industries, such as the aggregates industry, as regards the problem that the National Coal Board could interfere with the bulk minerals industry.
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The industry recognises that there may be a case for the National Coal Board to exploit rare and more valuable minerals accessible only by underground mining or where surface minerals are worked in conjunction with the winning of coal to create tipping, space or for some other good reasons. At present, from the way in which we are dealing with the Amendment, I can see no case for giving the Board power to exploit bulk surface minerals discovered simply when searching for coal and not associated with the winning of it. In other words, we are trying to protect the aggregates industry from the Coal Board which has more powers and which could move in more quickly and interfere with this type of mineral industry.
I was also interested to hear during Second Reading from the noble Lord, Lord Strabolgi, who I admire and thank for his help during this Committee stage and on Second Reading, that the Board has a great store of mining expertise directed, under the Coal Industry Nationalisation Act 1946, solely to the gaining of coal. The existence of this expertise in mining is a praiseworthy asset to this country. However, it is not the same as expertise in quarrying. I tried to separate that earlier when I moved the Amendment. The National Coal Board does not itself quarry and its opencast coal work is very interesting. Although some years ago I worked on moving equipment from the National Coal Board, I did not know that the quarrying is sub-contracted out. On the other hand, the bulk mineral industry does not sub-contract; it employs its own experts and knows exactly what they do as regards costing and so on.
The bulk industry carries on quarrying which in 1975 produced 216 million tonnes of sand, gravel and crushed rock. That industry is not in a very happy state. The building industry and the road construction industry are not working to full capacity. Therefore, it would be too easy for the National Coal Board to move in on those firms and disturb their work. We should like the Coal Board to deal entirely with its own tunnelling and to leave the pits and quarries to the aggregate industry. I shall be interested to hear other noble Lords explain their theories and arguments about this, but my view is that the National Coal Board would be well advised to

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leave the quarrying of aggregates to the industry. That has been the case for a number of years now. The National Coal Board and private enterprise have been working side by side, and so they should. They could carry on with their good work, the one helping the other. I believe that the National Coal Board should leave this side of the work to the industry. I beg to move.
8.42 p.m.
Lord STRABOLGI: This Amendment is the same as that put down at the Report stage in another place and withdrawn following a further reassurance given by my honourable friend the Parliamentary Under-Secretary of State for Energy. I hope that what I have to say will be taken as a strengthening of that assurance already given and that it will prevent the need for the Amendment to be pressed further.
Both the Government and the National Coal Board recognise that the aggregates industry is going through a difficult period due to the fall in demand, that the industry is currently working well below capacity and that forecasts of demand over the next few years do not suggest any rapid recovery. Neither the Government nor the Board have any wish to aggravate the industry's difficulties as a result of the powers that would be given to the Board under Clause 10 of the Bill. In assessing the likelihood of this it should be borne in mind that the clause confers on the Board no proprietary rights of any sort and does nothing to override the normal planning processes in the course of which the existence of spare capacity in the aggregates industry can be taken into account. Moreover, assurances have already been given that the Board has no present plans to expand its operations in the field of bulk mineral extraction; that it is extremely unlikely that the powers would be used to a significant extent in this field; and that if, during the five years from the passing of the Bill, the Board plans to use the powers in this clause to embark on a project for extraction of bulk minerals not in association with the working and getting of coal, it will notify the Sand and Gravel Association and the British Quarrying and Slag Federation so that there can be discussion of any points of concern to those Associations.
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The Committee can take it as implicit in this assurance that, while demand for aggregates remains below recent levels of production and well within the capacity of the industry, the Board will not use the powers under Clause 10 to any significant extent in working surface aggregate minerals otherwise than in association with the working and getting of coal. This does not rule out individual cases where it may be in the national interest or commercially attractive to engage in such projects. But, under the procedure for notification to the industry during the next five years, the Board will, before deciding whether to go ahead, take into account any representations that the industry may wish to make.
What I have just said is a considered statement made in the light of further discussion between the representatives of the bulk minerals industry, the National Coal Board and the Department of Energy. I submit that it is a serious attempt by the Board and the Government to allay the concern of the industry. I hope that that will give your Lordships the assurance asked for.
Lord LUCAS of CHILWORTH: Why is it that when an industry with substantial investment and substantial opportunities puts forward an objection and has meetings with the Departments concerned, it is always thought that assurances are to be considered satisfactory? I remember that assurances were given during the debate on the Energy Bill and yet as a result of pressure the Bill was changed. If the Government are so sincere in their assurances to the industry, why cannot they demonstrate that sincerity by actually writing the words into the Bill?
As the noble Lord said, they will not use these powers for bulk mineral extraction to any appreciable extent, although he said that there may be some individual cases which may be in the national interest or there may be a great commercial attraction. On the one hand, the Minister offers assurances to the industry and, on the other hand, he virtually takes them back by saying, "except for". Surely this Amendment puts beyond any measure of doubt the fears expressed by the bulk mineral industry. It has currently an over-investment, an over-capacity and an employment problem. By this clause we add some doubts as to which way the

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industry could go because someone else may step in at some time.
It is accepted that by virtue of its contracting out arrangements for opencast mining the National Coal Board has no expertise and so far has demonstrated no great wish to do it because its commercial arrangements with its sub-contractors have been quite satisfactory. In 1982 there will be an upturn; there could be huge demand for sand, gravel and aggregates. By then five years will have elapsed and the NCB could go in, buy its expertise from a then seriously injured industry and go ahead.
If we wish to leave a sense of confidence in Government and NCB intentions in that industry, surely the better thing to do is to write it into the Bill. Although the noble Lord and his colleagues, his honourable friends and his right honourable friends in another place, are giving these assurances with the best will in the world, in five years' time they may not. A better offer than a repetition of the assurance could be asked for.
8.50 p.m.
Lord SANDFORD: We are grateful to the noble Lord, Lord Strabolgi, for that reassurance, but I must tell him that whereas on reflection I might find quite a little on the assurances he gave me on Amendments Nos. 11 and 12 to be satisfactory. I doubt whether I shall be able to do so in respect of these. It was helpful of course to hear him confirm that there are no overriding mineral rights, that these will have to be obtained, that if they belong to somebody else there will be no overriding of planning powers—I certainly did not expect there would be—and that there are no present plans.
That is reassuring so far as it goes, and I recognise that what he said about the undertaking from the National Coal Board to notify the industry was helpful; but we must remember that this is an industry which supplies all the sinews of the housing and construction industry, nothing to do with mining at all. I do not need to repeat to Lord Strabolgi, who has been in your Lordships' House long enough to know as well as I do—
Lord STRABOLGI: And a bit longer, too!
Lord SANDFORD:—that nothing he said by way of reassurance will bind his successors and still less bind the Board. Parliament has given them these powers, framed as they are, and the Board will exercise them and be absolutely right to do so. I am afraid there is no question but that the noble Lord's reassurance will have to be increased, if not precisely in the terms of Amendment No. 14, then in something like those terms if we are to be satisfied at the next stage of the Bill. I doubt very much whether any further reflection on what Lord Strabolgi said will induce me to change my mind, so I am anxious to be quite emphatic about it, Nevertheless, I will consider what he has said lest peradventure I can read more into it than I can now, but I very much doubt it and I am reasonably certain that we shall have to return to this matter later.
However, what I should greatly prefer is for the noble Lord to take what I am saying seriously and endeavour to draft an Amendment of his own, something along the lines of Amendment No. 14, incorporating as much of what he has given by way of assurance as would be appropriate in the Statute. He will agree that not much of it is and, in so far as it is not in the Statute, we do not find it satisfactory. Nevertheless, at this stage I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 15, 16 and 18 not moved.]
On Question, Whether Clause 10 shall stand part of the Bill?
Lord STRABOLGI: Perhaps I should say a little more on clause stand part in view of what the noble Lord, Lord Sandford, said in withdrawing the last Amendment. The assurance we have given goes rather further than the fact that we shall notify the quarrying interests; not only are we going to notify them, we shall consult with them, and I think when Lord Sandford reads Hansard tomorrow he will see that that was the wording I used.
I should also like to say in general about this clause that the Government have never made out that the enactment of Clause 10 would result in a big expansion of the Coal Board's activities. Rather,

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they have explained that the exploitation of other minerals is likely to be on a small scale in comparison with the Board's main operations. But—I make this point in reply to the noble Lord, Lord Lucas of Chilworth—if we are legislating for an indefinite period ahead, as we are, then if the Board is to be given a new power to work other minerals it is much more sensible that it should be comprehensive rather than that certain minerals should be the subject of exception or qualification.
So far as aggregates are concerned, the Government and the Board are not saying that the Board will not utilise the power under Clause 10 to excavate such minerals. What they are saying is that the power is unlikely to be utilised to a significant extent in this connection, but that there may be cases where the Board will find a project a commercially attractive and useful, though marginal—I stress the word "marginal"—addition to the revenues of the coal industry. A power can be useful and desirable without having to be exercised on a large scale. I do not think I can go further than that.
Lord SANDFORD: I am grateful to the noble Lord, Lord Strabolgi, for trying to help the Committee, but I should have thought that the kind of explanations and limitations he is expressing to describe the intentions of his Department and the Coal Board would have been well expressed in the terms of my Amendment, which would have limited the workings of the Coal Board to those minor operations which arise from time to time in small degree in the course of its efforts to get and win coal by opencast operations. That is why we drafted the Amendment as we did. I hope therefore that the noble Lord will look carefully at that form of words to see whether it does not express properly the assurances which he is giving. We should be very much happier with them, and so would the industry, if they were in the Bill, and I hope it will be possible to do that because I doubt whether anything less than that will satisfy us.
Lord HUGHES: Having been for many years engaged in the building industry, I can understand the fears that have been expressed by noble Lords opposite on behalf of the aggregate industry. I am wondering whether both the Opposition and my noble friend in looking at this
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issue might expand the suggested Amendments a little further because, as they stand, they would prevent the Coal Board from doing this in any circumstances, even in the minor circumstances suggested by my noble friend.
I am therefore wondering whether Amendments Nos. 14 and 15 could be amplified in such a way that, subject to Parliamentary approval, if they wanted to apply them in certain circumstances that could be done. On the other hand, if the Amendments were accepted as drafted nothing could be done by the Coal Board unless another Bill was introduced, and we have enough legislation without providing for such a measure in the future. Orders under the Negative Resolution procedure, on the other hand, might make provision for something of the sort to be done to meet the legitimate fears of the industry and yet open the door for the minor circumstances that my noble friend contemplates. Perhaps the matter might be looked at in that way.
Lord SANDFORD: I am grateful to the noble Lord, Lord Hughes; I hardly expected support and encouragement from that quarter. I hope the noble Lord. Lord Strabolgi, will take the point which Lord Hughes made.
Lord STRABOLGI: I certainly take the point.
Clause 10 agreed to.
Clause 11 [Overseas activities]:
8.58 p.m.
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 19:
Page 9, line 7, at end insert—
(" (c) marketing or otherwise dealing with industrial property and know how,
(d) activities relating to the monitoring of imported coal from third countries to the countries of the European Economic Community and otherwise assisting in maintaining and improving coal production and stocking capacity of the European Economic Community.")
The noble Lord said: This Amendment is in two distinct parts and I will, with the permission of the Committee, speak at the same time to Amendment No. 20. These are directed to the scope of Clause 11 which gives power to the NCB to operate outside the territory of Great Britain.

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Naturally, one would expect to have in a clause of this type certain limitations on the power of the Board to indulge in activities outside Great Britain. Under subsection (5), these limitations do not apply to two kinds of activity; that is, selling or supplying for export and supplying imported goods in Great Britain. The purpose of my Amendment is to introduce a new paragraph (c) to enable the NCB to undertake the
"…marketing or otherwise dealing with industrial property and know how".
without having to go to the Secretary of State for leave to deal with that matter.
As we heard at Second Reading, as and is well-known in technological circles, the National Coal Board has a large amount of expertise, know-how, patent rights and, I believe, trade mark rights. These rights are extremely valuable, and it would be expected therefore that the National Coal Board should, in the public interest, exploit its know-how and its technological expertise abroad where-ever it can. Thus, it would seem quite unnecessary that the National Coal Board should have to have the leave of the Secretary of State in order to undertake activities of this kind in relation to know-how and industrial property matters.
The second part of my Amendment No. 19 is intended to introduce a new paragraph (d); having regard to the Directives that have recently been issued and that are being considered in the context of the European Economic Community. The EEC Commission has issued Directives in which it expresses anxiety about the state of the coal industry in Europe. The Directives have also said that pit closures would seriously damage the strategy of the Commission in dealing with energy for the next 10 years or so, and one of the matters with which the Commission is concerned is the import into the Community countries of cheap coal from third countries. Therefore, the second part of Amendment No. 19 is concerned with proposing that the National Coal Board, in the course of its international activities, will not find it necessary to consult the Secretary of State in
"activities relating to the monitoring of imported coal from third countries to the countries of the European Economic Community …".
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and that the National Coal Board should not have to get the approval of the Secretary of State in
"… assisting in maintaining and improving coal production and stocking capacity of the European Economic Community".
It is not necessary for me to deal at any length with both these points, as I understand from the conversations I have had that the Amendments might he sympathetically received by the Government.
Lord STRABOLGI: I am certainly sympathetic to the spirit of the Amendments, but I hope that I will be able to persuade the noble Lord and the Committee that they are not necessary. The noble Lord, Lord Lloyd of Kilgerran, has proposed the addition of the new paragraphs (c) and (d) in Clause 11(5), presumably so that the Board will have power to undertake the activities set out in the new paragraphs without requiring the authority of the Secretary of State, or of the Treasury, where capital investment is involved, as is set out in subsection (4).
Subsection (5) is, in effect, the continuation of an arrangement which has existed right from the Coal Industry Nationalisation Act of 1946, in that the National Coal Board has all along been permitted to export and import without needing any other specific authority. We think it right to continue this in the present Bill because the exporting and importing (where necessary) of coal has always been considered to be part of the normal essential work of the National Coal Board in running the coal industry in this country. The activities described in the new paragraphs are not essential to the Board's job of running the coal industry in this country. They are more analogous to the other type of overseas activity, and thus we think it right that they should require the authority of the Secretary of State.
In presenting Clause 11, it is not the Government's intention to reduce the Board's existing powers, and I understand that it will be the aim of my right honourable friend, as soon as the Bill is given the Royal Assent, to give the National Coal Board written permission to continue to engage in the types of activity for which it now has powers under the National Coal Board (Overseas Activities) Order

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1975. Article 2(c) of that Order already authorises—
"holding and dealing with patents and other rights in respect of inventions, and rights in respect of designs, trade mark and copyright in any country"
and Article 2(i) covers—
"providing technical advice and services in relation to mining activities outside Great Britain".
It will also be the aim to cover such new powers as it may be agreed the Board should exercise. To the extent that they may not be completely covered in the existing powers, and will therefore not be automatically, as it were, included in the new authority, I can give the noble Lord an assurance that the activities which he has set out in his Amendment will be most carefully considered for inclusion. Prima facie, they seem to me eminently suitable for that, but it is not for me to commit my right honourable friend at this stage. Nevertheless, with that assurance, I very much hope that the noble Lord will now see fit not to press his Amendment.
Lord LLOYD of KILGERRAN: I am very grateful to the noble Lord for the assurances he has given and, in the circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 20 not moved.]
Clause 11 agreed to.
Clauses 12 to 16 agreed to.
Schedules 1 to 5 agreed to.
[Amendments Nos. 21 to 25 not moved.]
House resumed: Bill reported with an Amendment.

EEC BUDGET: 43rd REPORT OF ECC
9.7 p.m.
Lord COBBOLD Lord COBBOLD rose to move, That this House takes note of the Forty-third Report (H.L. 234) of the European Communities Committee on the Preliminary draft EEC Budget for 1978 (R/1541/77).
The noble Lord said: My Lords, I rise at this rather late and, I fear, somewhat inconvenient hour to your Lordships to move the Motion standing in my name
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and to introduce the report of the European Communities Committee on the Prelininary draft EEC Budget for 1978. The report has mainly been the responsibility of Sub-Committee A, but it has been greatly assisted by representatives of the sub-committees dealing respectively with agricultural and energy matters. Your Committee is most grateful to witnesses from Her Majesty's Treasury and from the Ministry of Agriculture, Fisheries and Food, who provided figures and information at extremely short notice owing to the timetable; to Lord Bruce of Donington and Mr. Michael Shaw; and to Sir Donald MacDougall. It is particularly indebted to its specialist adviser, Mr. Denton, and its clerk, who have burnt large quantities of midnight oil; and to secretaries who have had to deal, again at short notice, with the product.
The need to produce the report so quickly before the Council meeting on July 20th, the day after tomorrow, has also, I fear, meant that your Lordships have had little time to look at it. I must also repeat one other point which was made clear in last year's debate. The EEC draft Budget is not exactly a Budget as we in this country understand the term. It is more akin to an estimate of the likely financial consequences of Commission proposals, the final decisions on which are mostly taken in the Council of Ministers. In its final form, therefore, the Budget may vary considerably from the draft now being considered.
Nevertheless, the draft Budget presents a general picture of Community developments, and this year, in particular, it raises a number of important policy and technical issues. These include new proposals for the Regional Fund, for the Social Fund and for industrial, energy and research projects. At the technical level, they include adoption of the new "own resources" method of EEC financing and the change to the new European unit of account.
My Lords, as the House will remember, the 1977 Budget went further ahead with the system of distinguishing between "payment appropriations", dealing with payments expected to be made during the year, and "commitment appropriations", leading to expenditure likely to be incurred mainly in later years—a great

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improvement on earlier practice. The figures which I shall mention, and which are the general basis used in the report, relate to "payment appropriations"; that is to say, to expenditure envisaged during the year 1978. The total draft Budget estimate amounts to 11,850,000 European units of account, equivalent, at the assumed exchange rate of £1 equals 1·5 EUAs, to £7,700 million. This is an increase over 1977 of some 23 per cent. in money terms or, allowing for an overall inflation rate of some 8 per cent., an increase in real terms of some 15 per cent. "Commitment appropriations" show increases of some 22 per cent. in money terms and some 14 per cent. in real terms. I must repeat that these figures are all subject to modification by Council decisions and by unforeseen developments, particularly in agricultural expenditure.
As in earlier years, my Lords, agricultural expenditure takes the lion's share of the budget. At just under 70 per cent. of the total, it shows a slight reduction on the 1977 proportion, but this may be increased by later decisions. The report before your Lordships discusses at some length the problems raised in the field of agricultural expenditure. In particular, it underlines the impossibility of any exact estimates, bearing in mind in particular the open-ended commitment on intervention and the many uncertainties of crop yeilds, weather conditions, world price movements, et cetera. Estimation is the more difficult since the Budget timetable has been revised to bring forward these estimates earlier in the year, but your Committee agree that, on balance, this earlier timetable is an improvement, since it gives more time for debate in the European and national Parliaments and for general public comment.
The report also stresses the great difficulties in the way of any really effective control of agricultural expenditure under the present system. It suggests that ways should be considered of imposing some quantitative controls, making reference to the United Kingdom experience in this field and to the arguments for increasing the "guidance" side of agricultural expenditure so long as it is designed to reduce the "guarantee" side. Your Committee strongly recommend that the financial consequences of agri-
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cultural policy decisions should be given much more consideration than they are under the present system, where agriculture interests appear to dominate discussion and decision. There is a great need to integrate agricultural policy more closely with general budgetry policy.
The control of agricultural expenditure is bound up with the green money system which involves a very heavy burden of monetary compensatory amounts—amounting to some 8 per cent. of the total Budget. This complicated and difficult subject was dealt with fully in the report on green money which was recently before your Lordships and debated in this House. As the House will remember, the main conclusions in that report were that the system has been introduced as a temporary measure to deal with minor exchange fluctuations; that the present wide margins between green rates and market rates could not be justified as a permanent arrangement; but that the speed and degree of return to normality must take account of various interests in Member countries.
My Lords, proposals are made in the Budget for additional expenditure in the Regional Fund, the Social Fund, and for certain industrial energy and research projects. Both the Regional Fund and energy problems have been the subject of recent reports and debates in this House and your Committee greatly welcome these initiatives. They are, however, bound to point out that unless room can be found for them in future years by reducing agricultural costs, they will add to Budget totals which, although marginal in comparison with the aggregate of Community national Budgets, are already on the increase.
My Lords, turning to the two major technical changes in this draft Budget, the report notes the move towards the "own-resources" system for contributions to the Community Budget, by way of VAT contributions rather than direct allocations from national Budgets. This change will become fully effective in 1980 after transitional periods in 1978 and 1979. The second technical change is the decision to adopt the so-called "basket of currencies" as the basis for the budgetary unit of account. This has already been in use for other purposes and is a welcome move towards greater realism since it

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reflects average ruling rates of exchange instead of historical and out-of-date relations between currencies.
My Lords, the report deals, in paragraphs 9 to 12, with the effect on the United Kingdom of the draft Budget proposals and the various technical changes. So far as can at present be estimated, the gross United Kingdom contribution in 1978 would amount to £1,292 million which, provided that the Commission's interpretation of transitional arrangements is accepted, would be reduced by a repayment of £200 million in 1979 to a gross contribution of £1,092 million. Set against this are the estimated receipts of £530 million, leaving an estimated net contribution of £562 million. Although the basis of calculations and the gross figures differ markedly from the White Paper estimates published in February 1977, the estimated net contribution is not far different.
These figures for receipts and net contributions take no account of indirect benefits from monetary compensatory amounts under the green money system. Since the change of method in 1976, there are only small direct United Kingdom receipts of MCAs; but United Kingdom consumers, and, therefore, the United Kingdom economy generally, benefit indirectly because lower prices are paid for agricultural imports from other Member countries which receive direct MCA subsidies. Thus the green rates which still differ widely from market rates, although adjusted to some extent in April 1977, may be expected to continue to provide very considerable indirect offsets against the United Kingdom net contribution; although any estimate of their value is extremely difficult.
My Lords, the House will be aware that the interpretation placed by the Commission on the transitional arrangements as they affect the United Kingdom is at the moment in dispute. Certain Member States have argued that, as a result of the move to European units of account, different arrangements should apply which would involve a considerably higher United Kingdom contribution in 1978. Your Lordships may have noticed recent articles in the Press pointing out that this dispute is only a part of a more general conflict of views which has come out in various recent negotiations. However that may
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be, your Committee fully support Her Majesty's Government in their insistence on the Commission's interpretation.
My Lords, I turn to two other important matters which figured largely in evidence to the Commission: the control of expenditure and the relations, as they affect the Budget, between Commission, Council and European Parliament.
In their reports on the 1976 and 1977 Budget, the Committee gave particular attention to deficiencies in control, both pre-Budget and ex-post facto. In the report on the 1977 Budget, the Committee concluded that, though there were some welcome improvements, there remained much to be done before control procedures could be regarded as satisfactory.
The most important development, and one to which we attached great importance last year, has been the establishment of the Audit Court. Ratification is now complete and it only remains for members and staff to be appointed. This should provide a really effective audit body, completely independent and operating on similar lines to the Comptroller and Auditor General in the United Kingdom. It is most desirable that the final stages should be completed quickly. We have also been informed that the Audit Court will work closely with the Budget Committee of the European Parliament, which will thus have facilities similar to those enjoyed by the Public Accounts Committee here. Your Committee regard this as a most encouraging development, though control procedures in the Commission, both on administration and on expenditure generally, still need attention, and the particular difficulties of controlling agricultural expenditure, to which I referred earlier, will persist. The Committee also remain concerned about the procedures and time available for the proper scrutiny of supplementary Budgets.
Another suggestion made in the Committee's last report was that a Financial Commissioner should be appointed without other responsibilities and in a position similar to that of a Treasury Minister or senior Treasury official. While this idea has not been followed in full, the Committee note with pleasure that the new Commissioner in charge of the Budget has no responsibilities for a major spending directorate—halfway on the road, so to speak.
The Committee have been greatly assisted by evidence from the noble Lord, Lord Bruce of Donington, who was Rapporteur of the 1977 Budget in the European Parliament Budget Committee and Mr. Shaw, from the other place, who is Rapporteur for 1978, both of whom have devoted their time and abilities to these problems. In addition to evidence on many of the points on which I have touched, they laid particular stress on the importance and difficulty of ensuring a clear line of procedure on budgetary matters between European Parliament, Council and Commission. It was pointed out to us that disputes about the relative powers were only resolved last year by a special ad hoc compromise which leaves the relative roles undefined.
The report sets out various areas in which the position is unclear, including the distinction between obligatory and non-obligatory expenditure, the consequential powers of the Parliament to make modifications or amendments, and the interpretation of these powers with respect to payment and commitment appropriations. It is clearly desirable that these matters should be clarified.
The Committee summarise their views by calling particular attention to the domination of the Budget by open-ended and inadequately controlled agricultural expenditure, to the consequent desirability of a review of the Common Agricultural Policy, and, if Community expenditure is to be usefully expanded in other fields, to the necessity of a thorough reappraisal of Budget priorities. My Lords, I beg to move.
Moved, That this House takes note of the Forty-third Report (H.L. 234) of the European Communities Committee on the Preliminary draft EEC Budget for 1978 (R/1541/77).—(Lord Cobbold.)
9.24 p.m.
Lord LYELL: My Lords, the whole House is fortunate at this late hour to have the opportunity of discussing the EEC Budget proposals, which is due entirely to the noble Lord, Lord Cobbold. We are grateful to him for giving us this opportunity. Also, we have distinguished Europeans on all sides of the House, not forgetting the noble Lord, Lord
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McCarthy, who did so much to put political ideas into my mind at Oxford some 17 years ago,
The figure and the size of the Budget are at once confusing and detailed. There seems to be confusion when we examine the figures for the measurement against gross national product of the Member States. The figure which is given in the admirable report of the Select Committee under the chairmanship of the noble Lord, Lord Cobbold, seems to be 0·62 per cent. of the gross national product, whereas Commissioner Tugendhat in his speech introducing the draft Budget in Luxembourg 10 days ago mentioned the figure as 0·69 per cent. I wonder whether the noble and learned Lord, Lord McCluskey, might be able to enlighten us, if only briefly at this hour, because I did a considerable amount of research with what I believe are called "the bibles" as the noble Lord, Lord Bruce, would concur. I did not manage to reconcile the figures, but no doubt the noble and learned Lord, Lord McCluskey, will be able to assist us.
In further examination of these figures, we can see that the draft Budget is to rise by approximately 23·6 per cent.; that is the figure given to us by the noble Lord, Lord Cobbold, in terms of payment appropriations, which are probably the fairest and most precise yardstick. Those will be of the order of £7·7 billion in 1978. Our purpose, my Lords, must be to ask: What is going to happen to that vast sum, and is it being spent as wisely as we would wish?
There can be no doubt at all that the Common Agricultural Policy looms over any discussions of this Budget like a brooding or restless giant. It is, of course, this aspect of the Budget which is the one to which the public at large will pay the greatest attention. The CAP and all the support payments are expected to cover 69 per cent. of the budgeted total, as we heard. It was noticeable in debates held throughout the Community that every speaker drew attention to the importance of the CAP as it affects the consumers and indeed the housewives—adding that the longer the defects of the Common Agricultural Policy are allowed to continue, the more will the Community find it difficult to obtain support for all the projects that everyone desires and is prepared to assist.

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This psychological mountain that glowers over any mention of Community finance, and especially the Budget, is all the more important to many of us in the House tonight in that crops and livestock cannot simply be turned on or off like automobile production. All of us who have any connection with the land want to see some sensible reforms and, indeed, possible and practical reforms, of the CAP. Such changes will require complementary action on the part of the Governments of Member States and, of course, the situation in our own agricultural industry, especially in the pigmeat sector, bears adequate testimony for the need for many kinds of reforms both in Member States and in the Community as a whole.
We cannot remain gloomy for long when we consider the enormous opportunities available to us and indeed to the Community, when we see the amount of time and effort which has been spent on the European Regional Development Fund and also on the Social Fund. To me and, I would hope, to the younger Members of the House and of the Community, the priority which has been laid on these two Funds by speaker after speaker in the European Parliament in Luxembourg will mean that the Community is going to be able to make at least some attempt to tackle the twin problems of unemployment—particularly among the young—and the problem areas in Europe. Both major obstacles concern me and most of my fellow countrymen in Scotland, but of course the whole of the United Kingdom is helped by the Social and Regional Funds.
Commissioner Tugendhat, in his speech to the European Parliament, made a plea for a measure of support for those Funds and it was very encouraging to find his insistence on the need to stop wasteful expenditure and duplication by the EEC of Member States' own budgets. The Commissioner also stressed the importance of ensuring that contributions from Member States to the EEC Budget should lead to just a reasonable and tolerable rise in public spending throughout the Community. Nothing is more encouraging to us than to see a major European figure take such a firm line in regard to the duplication of public expenditure.
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Another noteworthy aspect of the speeches in Luxembourg was the reference to energy saving and the necessity to search for new sources. I think that could be more important than either the European Regional Development Fund or even the Social Fund. Certainly it is more volatile, as we have learned during the last four years. The House this evening seems more than usually occupied with energy: we have dealt with the Coal Bill and, before that, the aptly named Drax "B" project. But when the Commissioner and most of the other speakers on the Budget were debating in Luxembourg 10 days ago they shared our concern with investment into alternative sources of energy, and here the relevance of the EEC Budget is all the greater. Noble Lords who have a greater opportunity to travel abroad than I have, will agree with me when I suggest that our friends overseas are normally happy with our economic performance, but they add the rider that self-sufficiency in energy will be a greater blessing than any other attribute. When the Commissioner gives such powerful support for this view, I think that the Budget will be seen in a new light by all of us.
It is relevant to mention the regional fund again, since this fund has the potential to turn the Community, and especially an independent EEC Budget, into something akin to the development agencies which have a direct and a local effect upon a factory, a plant, a community or a town far away from Brussels and from the so-called golden triangle of the EEC. Further emphasis on the regional Fund will remove many of the criticisms of the Common Agricultural Policy, and I hope and believe that this emphasis will be added to by other speakers tonight. I am sure that, for this purpose, we consider the noble Lord, Lord Thomson of Monifieth, to be with us at least in spirit, because it is he who did so much to help the regional policy when he was in Brussels.
These two aspects of the Budget are certainly relevant, not only as an indication that the Community seeks to break free of the Common Agricultural Policy's stranglehold on the Budget, but also as a measure of a change in direction by the Commission, ably assisted by the European Parliament. At last, it seems that the Budget will commit Community funds

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to specific areas, instead of merely preventing financial disaster to some area of agriculture. Many of us who are involved in agriculture—and, certainly, for this purpose I note the presence of my noble neighbour, if I may so call him, Lord Mackie of Benshie—consider that our own Government's follies are quite as spectacular as the wine lakes, the butter surpluses and the beef gluts that are so much part of the United Kingdom's folklore about Europe.
One other admirable feature of the debate on the Budget in Luxembourg was the institution of a new and strengthened Audit Court, of which we have heard a considerable amount from the noble Lord, Lord Cobbold. This certainly has an odd ring to some of your Lordships. I do not know whether the noble Lord, Lord Bruce, is used to it by now, but to me it is somewhat sinister. But never mind. I am sure that it will be effective. The appointment of full-time and independent auditors who have legal powers to carry out a thorough investigation into Member States' finances, with the possibility of checking on the day-to-day financial management of Community funds and Member States' funds, as they affect the Community, will mean that the Budget is subject to the same kind of detailed scrutiny as we are lucky to enjoy in the United Kingdom.
As we have heard from the noble Lord, Lord Cobbold, we are due to contribute a net figure of £562 million to the Community Budget in 1978, and I think it important that we should discuss the Budget this evening. New emphasis on regional and social policy, together with the references to searching for new forms of energy, are of immediate importance and relevance to each of us. Of course, the Common Agricultural Policy takes up a large amount of the Budget each year, and will continue to do so. But it is intended by the Commission to reduce the proportion which is going to the Common Agricultural Policy and other associated support payments. I do not believe that this will harm agriculture in the Community, but rather that 1978 will be the start of the pre-eminence of those funds which the Community wishes to use for more immediate and local purposes. I think that all of us here tonight must be very grateful for the valuable work done
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by the noble Lord, Lord Cobbold, and his Committee, and for the opportunity to have a debate on this important subject this evening.
9.34 p.m.
Lord BRUCE of DONINGTON: My Lords, I should like to offer my congratulations to the Select Committee, and to the noble Lord, Lord Cobbold, in particular, for the detailed work that they have done, under very difficult conditions, on the mass of documents that comprise the Budget of the Commission of the European Communities. When I tell the House that the Budget for 1977, when completed last year, occupied no fewer than 4,000 pages, complete with supporting documents, and that those which the noble Lord, Lord Cobbold, has examined so far run into several hundred, some idea of its magnitude can be appreciated. I was very grateful, too, for the remarks which fell from the lips of the noble Lord, Lord Lyell, who put his finger on the essence of the significance of this Budget so far as the United Kingdom Parliament is concerned.
After the very long and comprehensive introduction to the EEC Budget which the noble Lord, Lord Cobbold, gave to the House, it is quite unnecessary for me to elaborate further upon it. The outline of the Budget is in the Select Committee's Report for all those who are unfortunate enough to be absent from the debate tonight to be able to appreciate. Therefore I shall not expatiate upon it. I accept very largely, with one exception to which I shall return, the very fair summary which has been given by the noble Lord, Lord Cobbold.
The noble Lord, Lord Lyell, raised the question of the United Kingdom contribution which, of course, is the nub of the matter, for £562 million net is going from this country, in cash, in the year 1978. As the noble Lord, Lord Lyell, said, we have to make quite sure that this money is well spent. I could not agree with him more. Indeed, this should be the function not only of this House but of another place, which is also considering this vitally important matter at approximately the same time. Very severe restrictions have been placed upon expenditure in this country, as a result of which a number of vital projects have had to be cut. There have been cuts in capital expenditure and in the public sector borrowing requirement,

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albeit the Treasury made an error of an estimated £2,600 million. These are matters of some significance. We are building neither the hospitals nor the houses that we might otherwise be able to build, nor are we making that extensive investment in the public sector which many of us, regardless of Party, consider to be desirable. Therefore the amount of £562 million is by no means chicken feed and we have to ensure that it will be well spent.
When one considers this sum of £562 million, immediately one must exclude from consideration any benefits that are received by the United Kingdom from the Regional Fund, the Social Fund and the Agricultural Fund, because those benefits have already been deducted in arriving at the net figure. The noble Lord, Lord Cobbold—in due course I shall come to the noble Lord, Lord Gladwyn, who is already audible—seemed to infer that there should be offset against this sum of £562 million, which passes in cash across the exchanges, the benefit which we receive indirectly by reason of lower food prices. I want to deal with that point and at the same time to deal with the already audible Lord Gladwyn.
Quite simply, the position is that the Monetary Compensatory Amounts are paid out in cash mainly to the Federal Republic of Germany, They do not come into our pockets. It is quite true that, very largely, the Federal Republic of Germany are paid this sum in order that their prices to us for the food we require may be lower than they would otherwise be. However, what the noble Lord, Lord Gladwyn, when he comes to have his little say on the subject—which he has already given audible notice of—has forgotten and what I regret to say the Select Committee have not taken into account, is that the total net food imports of the United Kingdom in 1976 were £3,566 million. and our net deficit with the EEC was £1,500 million. That left £2,000 million of net imports from the rest of the world, and when we say that the price of food was held down by MCAs paid to Germany, we should also take into account that the world prices of food which are much lower (in practically all commodities save one) than those in the EEC, were brought upwards to the EEC level and the consumer suffered on that account. It is no good the noble Lord,
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Lord Gladwyn, shaking his head because these are the facts and I am sorry to have to instruct him on them.
Lord MACKIE of BENSHIE: My Lords, would the noble Lord like to say how much he thinks that world prices are held down by the total amount of food produced because of CAP in Europe, remembering that Europe, and particularly the United Kingdom, is the largest importer of food in the world?
Lord BRUCE of DONINGTON: My Lords, I would immediately agree with the noble Lord that it is not possible to quantify the benefit that undoubtedly accrues. It is not possible to say how much this lower price which we should otherwise pay is in fact costing us, but one thing is quite certain—and the most eminent economists are already agreed upon it: there is this countervailing influence which means that over a wide area and over at least £2,000 million net of food imports in this country we are paying more because of the existence of the Common Agricultural Policy.
Lord MACKIE of BENSHIE: No, my Lords.
Lord BRUCE of DONINGTON: My Lords, the noble Lord will have an opportunity to develop his own point in his own way, but when he reads the debate in the other place he will find that, in any event, if the MCAs were tampered with in that respect there would be an extra Community cost falling upon this country by reason of the extra surpluses which would then arise, would have to be stored, and would in fact deteriorate. So what has happened to the £562 million? What benefit do we get from the £562 million? I have not the slightest doubt that there are many benefits of an intangible nature, and sometimes practical nature, that the United Kingdom receives as a result of being in the European Economic Community.
There can be no doubt, for example, that the conclusion of trade agreements between the Community as a whole, acting with all the muscle that nine united Powers can do, is undoubtedly more advantageous to the Community and to the individual countries than would otherwise be the case if we were negotiating

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separately. I have not the slightest doubt that when it comes to dealing with the secondary boycott, which has already been tackled by the United States of America, it will be much easier for us in the Community to deal as one body rather than as individual States. But the question we have to ask is, what benefit do we get from the £562 million we are paying out, excluding those funds to which we have already referred and which are already taken into account?
The total Budget expenditures in 1978, leaving out the items which are already taken into account for benefit, amounts to £1,162 million. They comprise the cost of administration, the expenditure of the Community on industry and on energy, the expenditure on research and investment, the expenditure on European schools, food aid, aid to non-associated countries, co-operation with non-member States. There are some provisional appropriations to provide for contingencies and there is the cost of the institutions themselves, the Council, the Commission and the Court of Justice, which amount to about £130 million a year. So expenditure outside those funds, from which we derive great benefit and which are taken into account and produced in the nett figure, amounts in total in 1978 to £1,162 million, to which we are contributing £562 million, or 48.32 per cent.
Further, in the event of it eventually being decided that the Commission and the United Kingdom are wrong in their assessment of the effect of Article 131 of the Treaty, that amount will be increased by 200 million to 762 million. I invite those noble Lords who follow and interest themselves in budgetary affairs to contemplate what benefits they apprehend as justifying the expenditure of £562 million in 1978 at a time when there are capital expenditure cuts. It was not only I who asked the question; the noble Lord, Lord Lyell, also asked it. We have to be satisfied that we are getting good value. The question I have to ask the Government, and indeed, with respect, the noble Lords of the Opposition, is what benefit they think we are getting. It may well be that the explanation is that this is a good investment for the future. So be it. If this be so, let it be said. But let it not be said that there are countervailing
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benefits at this moment of time, because there are none. If proof is needed all noble Lords have to do is to read through the report itself.
The noble Lord opposite posed a query, which I shall presume to answer, in connection with the gross domestic product. The figure on page 27 of Volume 7 of the Commission's Report is in fact 0·77 of the gross domestic product. The figures of 0·62 and 0·69, come I think he will find, from varying estimates as to the annual yield required from the VAT own resources levy, which in a full year would require 0·62 on the Commission's current estimate. This was the explanation which was given to me, and which I can get again from the documents.
Considering the items in the Budget on which the noble Lord has touched, let us come to one first-class scandal—the expenditure by the Community of over 2,700 million European units of account on intervention in the milk sector. Of that, 500 million units of account, or £325 million, is wasted every year in deterioration of stocks, because the stocks of milk powder and milk products in the Community are over one million at the present time, and these products deteriorate. These are not my figures; these are figures of the Commission. £325 million is wasted every year in sheer deterioration of stocks. The storage of these mountains, the storage of both wine and indeed of skimmed milk powder amounts to some £297 million per annum. Indeed, as the Commission has said, we are no longer producing for use, under the CAP; we are producing for intervention. These are not my words; these are the words of the Commission.
I could go on to touch upon other items which are of equal importance. I will mention only, one which should be dear to noble Lords. If they go through the Budget, they will find under Article 227 of the Budget an expenditure of 5 million units of account by the Commission on propaganda for direct elections—some £3,250,000. I thought that the election was to be to the European Parliament, and that the individual Parties in the various countries would put forward their own ideas. Now we find the Commission sticking its nose in, because, of course, it knows perfectly well that one of the debates which will take place—not only

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in the United Kingdom but in every country in the Community—is about the effectiveness of the Community efforts so far and the steps that can be taken in redress.
Therefore, the Commission will put itself immediately on the side of those who want to retain the present system. It will use 5 million units of account on propaganda, on the assumption that the Council agrees, which it has not yet done, and on the assumption that the European Assembly will agree, which it has not yet done. It will enter directly into the political arena. That is something that I do not think it should do. I do not know what the noble Lord, Lord Lyell, thinks about this, or whether there has been any consultation within the Opposition about this, but it is certainly one of those things that Parliament should take a look at before it remotely dreams of giving approval to it.
The Community Budget is very small in total. The total expenditure of the Community is smaller than the annual budget of a medium-sized multinational company. It is, in fact, less than the corporate power in Europe spends upon its advertising propaganda in order to get consumers to buy its products. However, it is significant for us—as the noble Lord, Lord Lyell, said, £562 million of net significance to us. We should be ill-advised if we let the Budget go from this Chamber without raising a profound question mark as regards the worth of the £562 million.
Lord LYELL: My Lords, before the noble Lord, Lord Bruce of Donington, concludes his remarks, I should like to raise one matter with him. He has waxed very eloquently and strongly about what I referred to as "gluts". He said that the biggest scandal was the 2,700 million units of account on milk. Can he tell us what that is, not necessarily in figures but in terms of milk production and milk products from the EEC?
Lord BRUCE of DONINGTON: My Lords, I do not have the actual amounts in front of me. However, at page 46 of volume 7 of the Commission's Budget there is reference to the appropriation of 2,715·9 million units of account which, I have a note, amounts to about £1,850 million. I have a further note that the
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deterioration cost for the stock is £325 million and the storage cost of £216 million is included within that sum. I am sorry, but I do not have the quantities.
9.52 p.m.
Lord MACKIE of BENSHIE: My Lords, I have no doubt that the House will excuse me if I address myself to the report. I should like to say how disappointed I am to see such a small number of noble Lords in the House, albeit that they are of very distinguished character. However, it is symptomatic of the regard that politicians have for this very important matter—namely, the EEC Budget and its implications—that it comes on at this time of night.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I think that that is perhaps an unworthy reflection. We do everything we can to get debates on at the right time. I think that the noble Lord, Lord Mackie of Benshie, and the House, understand that this is the end of the Summer term when everything is coming to the boil. It is extremely difficult to get these debates at an easier time, but that does not imply any disrespect for or ignorance of the maximum attention that the House gives to this matter. I should prefer that the noble Lord would not say that politicians did not think that the matter was important.
Lord MACKIE of BENSHIE: My Lords, I should be loath to disagree with the noble and charming Lady but earlier in the Session important debates on the scrutiny of EEC legislation also took place very late at night and with very small audiences. I mean no disrespect to the usual channels that are always charming, right and proper, when I say that perhaps the House, as a whole, does not appreciate the importance of the scrutiny done by the Lords Committees, which is recognised by the Press. I think that when one has distinguished people like an ex-Governor of the Bank of England chairing Committees, more attention might be paid by the House—not by the usual channels—to the hard work which is done in those Committees.
I should particularly like to say that Sub-Committee A, which is so distinguished it is not true, dealing with money and subjects which simple peasants like

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myself do not understand, is a prototype of what a committee should be. However, because of the importance of agriculture in the Budget, it asked that Sub-Committee D sit in on many of its discussions. That sort of co-operation is much appreciated by, and enormously sensible on the part of, the Scrutiny Committees in this House.
My noble friend Lord Gladwyn will deal with general matters of the Budget, but as agriculture takes up 70 per cent. of the Budget I want to comment on the Common Agricultural Policy. I have been given an opportunity because of the intervention by the noble Lord, Lord Bruce of Donington, which was detailed and audible but in my view almost entirely wrong. I must say that the noble Lord has a facility for having a clearer view of the trees while totally missing the wood.
This valuable and excellent report at paragraph 39 says:
"The Committee consider that a general review of the common agricultural policy is desirable, paying particular regard to the comments made under the three preceding paragraphs ".
That is entirely true, but I should like to make one or two general remarks about the question of production of food in the world, in Britain and in particular in Europe. The noble Lord, Lord Bruce of Donington, may or may not know—I doubt whether he does—that every year there are a large number of extra people in the world. Those large numbers of extra people consume an additional 35 million tonnes of cereals each year. That is rather an important fact. As a result of one or two good harvests recently, we are now in a slightly improved position as regards world reserves, and prices have fallen slightly in comparison with prices in the EEC. However, we do not yet have anywhere near the total reserves held mainly by the United States in the 1960s.
We have 200 million extra tonnes projected only for the harvest this year, and that is nothing when there are an extra 35 million tonnes required each year. For a county like Great Britain, which imports nearly half its total food consumption, to ignore the contribution which the Common Agricultural Policy has made to total world food production
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is absolute nonsense. When we talk about the enormous wine lakes, beef and butter mountains and in particular the dried milk mountain, which is approaching a hill, we should have regard to what the Common Agricultural Policy has done to aid the world production of food and in keeping down the price of food in this country during the period of the 1974 shortage, together with the extra money which it may be said we would pay in the world market today.
The one thing that I have learned in many years in agriculture is that there is no industry where a 5 per cent. surplus or a 5 per cent. deficit can lead to such a rise and fall in price which can amount to 50 per cent. When it comes to looking at a settled policy for agriculture in Britain or in Europe, we should not ignore the fact that of course it costs money to have a surplus but that surplus is something which we need in order to keep the supply of food stable. I shall not dwell for too long on that, but it had to be said.
I wish to say only one thing in support of the report, but I should also like to correct a general view of agricultural policy in the CAP. A number of people think that because deficiency payments worked reasonably well in this country, the whole of Europe should adopt that system. It is true that deficiency payments worked reasonably well in this country, but at various times they cost sums of money to which people in Britain objected. For example, at the end of the war we were paying nearly £500 million in food subsidies; that was approximately four times the value now at end of war prices and it makes the £562 million about which the noble Lord, Lord Bruce of Donington, was so concerned about, look like absolute sweeties in terms of an assured food supply today.
We should not be too concerned with the actual system. In my view the system of intervention prices is much simpler, and many people agree with me. What is wrong really is what is highlighted in another paragraph of the report, where it is said that decisions on agricultural prices are not reached as the result of debate between the representatives of agricultural interests on the one hand and those identified with relevant, but nevertheless legitimate, interests on the other; they are reached by the Council of Agricultural

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Ministers who are fighting for a specific section of the Community, and that I think is entirely wrong.
It is a curious alliance that the two countries upholding the present system are the United Kingdom and Germany. Germany uphold it because it suits them, because they are rich, earn a great deal of money, are able happily to support their quite large agricultural sector—they have 1 million more people on the land than we have—and because they earn a great deal of money they are quite happy to support them with high prices. On the other hand, the United Kingdom, the other great supporter of the present system, cannot afford to have its consumers in general pay more, or pay even the proper price, for agricultural products, and that is why we support it.
What we really need in Europe and in the EEC is a realisation that one cannot go beyond the law of supply and demand. If we have too much milk powder we must pay less for milk powder; in my view it is as simple as that. When we in this country got into trouble with deficiency payments we produced a system of standard quantities; in other words, we did not have
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open-ended guarantees. That is what we need in the Community. It is what they attempted to introduce with the co-responsibility payments—call the system what one likes—which suggested that milk producers should pay back the cost of marketing.
When we come to look at the reorganisation of the CAP we should look much more at the way in which it is operated rather than imagining that deficiency payments, for example, could effect a magical reform. The intervention system is simpler, but what we need is to ally the intervention system with the law of supply and demand. If we did that, I think that farmers in the Community as a whole would accept it. What they want is stability of prices. They do lot really demand the sort of high prices that the German milk producer has today. In looking at this policy we should remember two things: first, that basically supply and demand must come into it and, secondly, that in a hungry world the United Kingdom and Europe need to import food, and that therefore the more they produce at home the more likely they are to import food at reasonable prices.
10.4 p.m.
Lord McCARTHY: My Lords, I have very little to say tonight. I am taking part in the debate largely because the noble Lord, Lord Cobbold, made me believe that there would be some difficulty in maintaining the debate, but there seems to be no difficulty whatever. Indeed, it seems to be a very lively and well-informed debate, and I am greatly aware of the fact that I have very little to contribute to it. But I should like to make one or two points. First, I felt that participating in the work of Sub-Committee A on this matter was rather like being an external examiner deciding the fate of a candidate whose thesis was referred back for the third time. I should say that my recollections in this respect have nothing whatever to do with my recollections of the noble Lord, Lord Lyell. I thought that he read an excellent essay this evening.
But, for me, it was a little like that because we felt that we had to say, particularly bearing in mind the last time that the candidate was before us, that there certainly was some improvement. There now appeared to be a special Commissioner responsible for finance, and that was an improvement. He was not entirely a financial Commissioner, but he did have a special responsibility for finance. There now was an Audit Court, which is what we asked the candidate to attend to last time, and he had done so, and that must be an improvement. There were certain improvements. But basically it seemed to me that the Committee was saying that there were the same old problems, which were mentioned in previous reports of the Sub-Committee, and there was a feeling that the candidate appeared to be incapable of doing better, or at least, if he were capable of doing better, it was not going to be in the foreseeable future.
The two areas where defects were most serious, as I think has emerged in the debate, were: first, the question of the balance of expenditure in the European Budget, the balance of the expenditure pattern in the Budget, the over-concentration on expenditure on agricultural support in the agricultural element in the European Budget; and, secondly, the lack of control of expenditures in the Budget as a whole and, in particular, the defective methods of control in the
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largest single element in the Budget—agricultural expenditure.
These were the areas which we felt contained the most important defects in the way in which the present Budget is calculated, estimated and run, and I believe that, if we are to have a debate about the European Budget, these matters are far more important than any other transitory or passing defect in the way in which the Budget is calculated, or the impact of the Budget upon the economy of the United Kingdom in any one particular year. I consider that these features are far more important than the question as to how far, or in what way, we can accommodate the new unit of account, the fact that the administrative costs of the Community appear to be increasing at a relatively rapid rate, and all kinds of relatively marginal issues which will, I believe, be found well recorded in the report of the Committee. I consider that these two matters to which I have referred are far more important, though there are other matters which we shall be evaluating in the Budget, and in the proceedings of the Commission in respect of the Budget, in the next few years.
It seemed to me that one had to think about, and listen to, people who came before the Committee in order to see whether any of them, or, indeed, any members of the Committee, had any really significant and practical proposals for dealing with these two major defects. There were those optimists who said that these two major defects would be solved in the fullness of time; in particular, that they would all be solved when we had an elected basis for the European Parliament. I believe that the more one looks into that, the less likely it appears to be. There is no particular reason why a change in the basis of selection for the European Parliament will change the essential features of the way in which the EEC Budget is calculated and carried into effect.
There were those who did not appear before the Committee, but who appeared outside the Committee, who argued that there is nothing to be done about these two features of the Budget because they are essentially a part of the way in which the Community is run and that they

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relate to the primacy of the CAP in the essential way of the Community's management. There were the pessimists who would say that nothing whatever could be done. There were those who came before the Committee and who seemed to be arguing at one stage that, if there was greater readiness on the part of those who got most out of what might be called the non-agricultural aspects of the Community's Budget—for example, the Regional and Social Funds; and they included in particular the United Kingdom—to urge that a greater part of their national expenditure on these areas should be funded through the EEC Budget, then, irrespective of anything which might happen to the agricultural elements in the EEC Budget, the mere encouragement of more national expenditure spent through those aspects of the Budget would produce a realignment.
I think, again, that the more one looked into these proposals in the course of the Committee, the less there appeared to be in them. Therefore I am afraid one must say that we came back in the end to what noble Lords may feel are a spatch-cock of relatively mild and superficial proposals: the continuous scrutiny of the Budget; the review of its procedures, and proposals for the review of the ways in which we finance the agricultural section of the Budget—nothing particularly radical and nothing particularly likely to have a short-term effect.
I believe the Committee were particularly influenced by a speech of Mr. Tugendhat on the 2nd May which we actually quote in our report. Referring to the policy decisions in the Budget, he said:
"…the manner in which the Member States have chosen to reconcile their differences is one which will grossly distend the European Budget, and will therefore impose a severe burden upon the European taxpayers…".
He went on to say:
"Decisions on agricultural prices are not reached as a result of a debate between the representatives of agricultural interests on the one hand and those identified with other relevant but different interests, including those of taxpayers and consumers, on the other. On the contrary, the debate takes place almost exclusively between Agricultural Ministers, who understandably conceive their primary responsibility to be to support their different national farming lobbies".
Fortunately, when I sought to cross-examine Mr. Tugendhat on the precise
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significance of that phrase, it was, as one would expect it to be, as vague and as imprecise as was necessary. Nevertheless, though vague and imprecise, along those lines, it seems to us, is the way forward, and it is in that respect that I should like to recommend our report to the House.
10.13 p.m.
Viscount AMORY: My Lords, my intervention will be very brief. As the noble Lord, Lord Cobbold, has said, the figures are highly complicated, and if I were to venture to put in my oar in an attempt, either to embellish the report itself or to embellish the extremely lucid exposition given by the noble Lord, Lord Cobbold, it is certain that I should succeed only in causing the utmost confusion in your Lordships' minds. I will therefore, if I may, make only three brief observations. The first one is to emphasise what the report says: that tie present degree of financial control is still clearly inadequate and unsatisfactory; and it is not certain that that would be automatically improved as the European Parliament increases its activities. However, it must be hoped that, in the light of experience, some means will be found to establish some stronger methods of financial control, so that the Budget really becomes a more effective policy document—and there is no real reason why that should not happen, I think, as more and more experience is obtained of this very difficult problem of budgeting. But it will need, I am sure, a continuing effort of willpower on the part of all concerned to see that things do move in that direction.
Secondly, I should like to express my opinion, which I think the report does, too, that the present degree of openendedness of the CAP is going to prove unmanageable, and something will have to be done about that sooner or later, either by developing some system of limiting quantities by standard quantities or maximum quantities, or perhaps in the way that the noble Lord, Lord Mackie of Benshie, suggested, by ensuring that the supports for your guaranteed prices do not get too much out of line with market considerations. But in some way or another that will have to be done. Also, I should have thought that, if the

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best value for money is going to be obtained, in some way the present authority of the Agriculture Ministers must be brought a little more in subjection either to the Council itself or to the Council of Finance Ministers.
I should like to say to the noble Lord, Lord Bruce of Donington, that, in one respect, I regard him as a public benefactor. My hearing is not as good as it was and I must say that his clarion calls come over to me loud and clear. For that I thank him. I am not going to attempt to follow him in his wide-ranging criticism of our membership of the EEC. He seemed to be instituting a debate on whether it is worth while our joining. Before I answer that, from my point of view, in one sentence, I do not quite accept all the arithmetical computations that he quoted. I think that the equations are in some cases more complicated than he implied. As regards the question of whether it is worth our being in the EEC, my answer, without any question, is that our membership is absolutely essential and that, as we are members, we must accept the obligations of membership using our influence, in as democratic a way as we can, to get those obligations changed if and when we consider them unfair.
The third thing that I want to say is this. The noble Lord, Lord Cobbold, paid what I thought was a very well deserved tribute to those who helped and serviced our Committee. I am sure that that is right. On behalf of the members of that Sub-Committee, I want to express our gratitude to our chairman, the noble Lord, Lord Cobbold, himself, for the leadership he gave us. He showed a very quick mastery of the technical and complicated questions with the skill that we should have expected from him with his own wide experience. He led us through mists, through bogs and past rocks with a sang froid and sureness of touch for which, I am sure, your Lordships will be as grateful to him as were the members of his Sub-Committee.
10.18 p.m.
Lord GLADWYN: My Lords, I shall not add much to this interesting debate.
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I have never been an expert on budgetary matters although, naturally, I followed them in a general way and I voted in the Parliament of Europe when they came up for discussion. I have also read the report of the Select Committee and, as usual, it seems to be an admirably judicious mixture of appreciation and criticism based, no doubt, on a mountain of evidence which, I believe, will shortly be made available to us—and no doubt we shall have our work cut out to read it when it is available. We are lucky to have among us noble Lords who have the time, the energy and the expertise to investigate the whole working of the European Economic Community and to make constructive suggestions on how it might be improved; for that is what they consistently do.
Before I say a few words on the general subject, I should like to say one word in relation to the speech of the noble Lord, Lord Bruce of Donington, every word of which I heard with the utmost clarity in spite of the fact that, like the noble Viscount, Lord Amory, I am slightly deaf. Indeed, I could not fail to apprehend what he meant. As I understand it, he held out as a great spectre the sum of £562 million which, the report says, is, in its opinion, our net contribution to the Budget in 1978. He said that £562 million was a dreadful sum for this unfortunate country to be saddled with; that it was beyond our means and facilities to pay. And the assumption I drew from that was that we should be better outside the Community rather than paying this portentous sum. That is more or less what he seemed to indicate.
Lord BRUCE of DONTNGTON: My Lords, will the noble Lord give way? The noble Lord is aware, of course, that I said nothing of the kind. The noble Lord will be perfectly well aware that I said it was a sum of some significance. Not at any point did I say or imply that we ought to withdraw from the Community.
Lord GLADWYN: All right; so much the better, my Lords. I am glad to hear that. The inference I drew was the wrong inference. But the noble Lord certainly laid emphasis on the fact that it was a

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very large sum, perhaps beyond our means. My reading of the report is not exactly that. What it says is:
"The estimate of receipts, however, leaves out of account the benefit derived by the UK from monetary compensatory amounts. Since the change in 1976 under which payment of MCAs is made to Member States exporting agricultural products, rather than to importers, there are only small direct UK receipts of MCAs, but the United Kingdom benefits indirectly in the form of lower prices for agricultural imports from other Member States than would have had to be paid in the absence of the MCA system. The green rates … may be expected to continue to give rise to substantial economic benefits to the UK consumer".
The noble Lord, Lord Bruce of Donington, seemingly disputes that.
I should like to ask the noble Lord, Lord Cobbold, whether he continues to agree with the report of his own Committee that nevertheless the benefits we receive from the green pound are likely to be very considerable, and whether he could quantify them in some respect. Whatever sum he thinks should be made available to us by the green rate is obviously to be deducted, if he is right in so thinking, from the £562 million. Moreover, I suppose we might be expected—as I think the noble Lord, Lord Bruce of Donington, admitted—to contribute a considerable sum to the general upkeep of the Community to which, as the noble Lord has also admitted, it is very much in our interest to belong. Having made that sum, it seems a less formidable proposition that we should subscribe £562 million in 1978 than would otherwise be the case.
I do not, however, want to dispute the technicalities of that with the noble Lord. I would only ask him to take into consideration the arguments put forward on the agricultural front by my noble friend Lord Mackie of Benshie. Does he not think that we would derive some benefit from the CAP, or does he think it is purely a liability? Perhaps he does. When the noble Lord, Lord Cobbold, sums up I should like him to give some consideration to these arguments.
Now, my Lords, the Committee rightly say that this Budget is not a Budget as we know it. But then the Council of Ministers is not a Government, the Commission is not a civil service, and the Parliament is not a Parliament. The
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whole thing is an experiment in international relationships which is being worked out largely pragmatically, as they say, from day to day, month to month and year to year. The only guiding principle behind it is the Preamble to the Treaty of Rome which, among other specific objectives, says that the signatory countries are:
"determined to lay the foundations for an ever-closer union among the peoples of Europe".
That is the main phrase in the Preamble of the Treaty which we signed and to which presumably we adhere.
The Treaty was hence simply a framework on which the signatory countries could build. The present structure—I have no hesitation in admitting—does not resemble what the founding fathers imagined it would be 20 years from the date of signature. There is no doubt about that. But when you come to think of it, my Lords, it is remarkable that in those 20 years we have achieved not only a customs union but also, however defective, a Common Agricultural Policy, a Common Commercial Policy, a machine, however rudimentary, for harmonising foreign policy, a Regional and a Social Fund of some significance—and it may be of increasing significance as the years go by—a totally new and successful method of assisting the development of non-industrialised countries, a court which works and a common annual expenditure of nearly £8,000 million. It is appalling to think that quite a large section of our people actually want to break all this up and to revert to the "beggar my neighbour" nationalistic tactics of the 1930s, which resulted in mass unemployment and ultimately in World War II. It does indeed sometimes look as if the gods are determined on our destruction and are therefore driving us mad.
The Select Committee very rightly draw attention to the ways in which future Budgets could be improved—and I am sure they will be. Already the influx of our compatriots into the European Parliament, including the noble Lord, Lord Bruce of Donington, during the last four years has resulted in great improvements, notably, as has already been said, in the constitution of they Audit Court and in the way in which the whole business is co-ordinated and subjected to healthy criticism.

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As the Committee also point out, one of the chief continuing defects of the present system is, so to speak, compartmentalism—that is to say, the practice whereby, for instance, the Agricultural Ministers (each with a powerful farming lobby behind him) arrive at their necessarily expensive compromises without much effort apparently being made to consider the problem from the wider point of view of the whole Community. If the Community is ever to function as some kind of entity—and that, after all, is what we are committed to in the Preamble to the Treaty which we signed—surely some consideration must be given to the formulation of general economic and financial policies?
It seems to me that it is precisely here that a directly elected Parliament will have a most valuable role to play. For, by the force of things and irrespective of their various political tendencies, they will be obliged to look at the problems before them, including the Budget, from a European and not from a purely national point of view. Moreover, unlike the Ministers, they will from the outset have to take their decisions by some form of majority vote. That is not something to be feared. The Parliament will have no great powers: we know that. Even over the Budget these powers will be strictly limited. But the mere fact that it will inevitably be expressing itself in terms of democratic common sense will give it great influence. I think, as the great Scottish poet, Dunbar, said many centuries ago:
"The truth shall you deliver: it is no dread".
So, unless our economic nationalists, and those who for various reasons want to return to the 'thirties, succeed in torpedoing direct elections—which, in the present gloomy mood of the nation, they may very well do—we can, I think, regard it as certain that, by the end of the elected Parliament's first term in 1983, most, if not all, of the Select Committee's proposals will have been met and we shall all be much happier and richer as a result. Let us hope, in any case, that in only about 18 months from now the British Members of the new Parliament will be taking some part in the work of our Select Committee and in the work of the Select Committee in another place, and that the whole Community will be
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entering into a new phase of constructive endeavour, an example to the world, worthy of our collective European political genius.
10.28 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, I should like to express our thanks for the work of the noble Lord, Lord Cobbold, and his Scrutiny Committee in examining the preliminary draft Budget so quickly; and, of course, especially to the noble Lord, Lord Cobbold, for drawing it to the attention of the House in a clear report and in his speech tonight. Indeed the report of the Committee is so comprehensive and lucid that it is quite unnecessary for me to try to engage in any exposition of the Budget. I can confine myself to a fairly brief statement of the Government's position on the issues which are raised. In particular, I do not propose to enter into the referendum argument which has suddenly sprung up and taken us all, including, I have no doubt, the participants themselves, by surprise.
It has been agreed that the experimental timetable adopted for the 1977 Budget, in part at the United Kingdom's request, should again be followed. That timetable has certain advantages and disadvantages, which are well known; but it is my impression that, on the whole, both the Committee and the House judge, as do the Government, that the advantages of having the timetable as it now is outweigh the disadvantages. Of course, tonight's debate, being held two days before the Budget Council meets, will enable me to draw to the Chief Secretary's attention the comments which have been made relating to the report itself.
I should like to look, as briefly as I can, at the several important developments which are heralded by the preliminary draft Budget. First, the Scrutiny Committee has rightly drawn attention to the possible and important effects of the introduction of the European unit of account on the application of Article 131 of the Treaty of Accession, and hence on the United Kingdom's contributions to the Budget in 1978 and 1979. Article 131 lays down a formula,

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as noble Lords will be aware, which is designed to limit the increase in the new Member States' percentage contributions to the Budget in the years between 1977 and 1980, when the full own resources arrangements apply to the United Kingdom and to the other new Member States.
It is the Commission's duty to carry out the necessary calculations, and the Commission's view, which Her Majesty's Government share, is that the purpose of Article 131 is to ensure a smooth progression in United Kingdom payments prior to payment on a full own resources basis, and that the smoothness of the progression has to be measured in national currency terms. But some Member States argue that Article 131 applies to the percentage contribution to the Budget in unit of account terms, and that the effects of any change in national currency terms are not relevant. This alternative approach, if it were adopted, could, according to the Commission's calculations, involve the United Kingdom in gross additional sterling payments of some £470 million over the two years 1978 and 1979. Such an approach is financially and politically unacceptable to the United Kingdom Government. We are in full agreement with the Scrutiny Committee's conclusion on this point, and I am happy to have in such strong terms the support that has been given to us tonight on this matter by the noble Lord, Lord Cobbold.
The United Kingdom Government have already made it clear, and repeat it, that they are not prepared to accept a solution which would so increase the United Kingdom's contribution and, in effect, overturn the transitional and safeguard arrangements which Article 131 is expressly designed to provide. A change in the unit of account would require an amendment of the Financial Regulation, which must be adopted unanimously. Without an amendment, there would be no legal basis for a Budget denominated in European units of account. Your Lordships will not expect me to speculate on the United Kingdom's approach or tactics at the Budget Council, but we certainly hope that a solution of this important issue—perhaps the most important issue arising out of the report itself—will be reached at that time.
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May I say a word about another important matter—the introduction of VAT own resources. It is envisaged that the system will be completed at the beginning of 1978 by the introduction of the Community rate of value added tax, subject to a I per cent. rate limit on a harmonised base in all Member States, to be paid directly into the Budget. As your Lordships will be aware—and we had a debate about this earlier in the year—agreement on the text and field of application of a harmonised VAT base for own resources, in the VAT Sixth Directive, was reached following the Fiscal Council on 22nd March. It has been cleared with the European Parliament, but the necessary implementing measures have still to be adopted. The Danish Government is maintaining a reserve on the Commission's proposal for implementing the Sixth Directive. The Belgians also have a reserve on a technical issue, concerning the burden on tradesmen imposed by the documentation which is needed to operate VAT own resources. We and many other Member States sympathise with the Belgian view, and with the modified system which they prefer, but the Commission have so far been unable to accept this and discussions are still continuing. So it is not yet certain that agreement will be reached in time for VAT own resources to be introduced from the beginning of 1978.
Mention was made by the noble Lord, Lord Cobbold, of the role of Parliament in the budgetary process. I agree with the Scrutiny Committee that clarification of the respective roles of the Council and the European Parliament in the Budget process is highly desirable, although it is not easy to achieve quickly. Important differences of view exist on the scope for commitments and payments and the application of the maximum rate.
I have to say a word about commitments and payments appropriations because this is an important matter. The Commission have proposed a further significant extension of the area of the Budget in which separate commitments and payments appropriations will be shown. Member States will have to consider at the Budget Council whether the extensions proposed by the Commission should be adopted. In general, the United Kingdom Government consider that the wider use of separate

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commitments and payments is useful, since it means that the Budget gives a clearer indication of likely expenditure in the year in question. However, we need to ensure that commitments appropriations do not build up into excessive expenditure when the time comes to make payment. So these differences between the Council and the European Parliament must be settled. I cannot say much more at this stage on that particular issue.
In relation to the maximum rate to which the report also draws attention, in drawing up the 1978 preliminary draft Budget the Commission have calculated the increase in non-obligatory expenditure relevant to the maximum rate by using the totals for commitments. This is in line with the Council's view, but the Assembly contends that the rate should be calculated by reference to payments. The significance of this question is that if the latter view were accepted, the Assembly could, by writing in large commitment appropriations, force the Council to accept large increases in the size of the Budget when the commitments are due for payment. Again this is a matter which is being considered, and it is not possible to anticipate the outcome of these considerations.
Let me turn from relatively technical matters to more general matters that arise from the report and which have been mentioned in the debate. First, in relation to the size of the Budget, I think it is important that the House should recall that the preliminary draft Budget is the work of the Commission, and the Commission include in the preliminary draft Budget all items for which, in their view, expenditure might be needed, including those for which no Council decision on policy exists. The Budget Council, on the other hand, usually takes the view that all items on which no Council agreement exists should be deleted unless agreement is likely in the near future, in which case Chapter 100 on provisional appropriations may be used. This tighter estimating approach implies supplementary Budgets later which have to go through the same procedures as the Budget itself. However, in the Government's view this is preferable to a Budget containing excess provision.
On the size of Budget, I ought to say that inevitably the final stages of the
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Budget as adopted will differ from the preliminary draft before us, but one cannot begin to guess by how much. The Commission's preliminary draft Budget total is 11,850 meuas, compared with the agreed Budget provision of 9,586 meuas for 1977. On the Commission's approach and on the hypothetical assumption that the preliminary draft Budget were not to be amended, the United Kingdom gross contribution would amount to some £1,290 million, or 16·6 per cent. of the Budget. But this is on the basis of full own resources payments which, for technical reasons, the Commission are asking that the three new Member States should pay in 1978, with a refund in the following year of the difference between these payments and the amounts due under Article 131. We estimate that the refund would be of the order of £200 million.
We do not favour the refund approach proposed by the Commission, and until the basis of our contribution to the 1978 Budget is settled we cannot with any precision estimate the size of our contribution. Of course, as has been said in the debate, to a considerable extent the United Kingdom contribution will be offset by receipts. But these, as again the debate tonight has made plain, are notoriously difficult to estimate, as the Scrutiny Committee recognises. If one had to make a guess at this stage I think it would be difficult to differ substantially from what the Committee said in its report in paragraph 12, on page 7.
On the basis of the figures I have just quoted the preliminary draft Budget is 23·6 per cent. up on last year. Of course, as I have said, the preliminary draft Budget figures tend to be larger than those eventually agreed. None the less, the increase is a large one and agriculture constitutes the largest absolute increase in the Budget, reflecting the impact of the price review in April. Large increases are also proposed for the Regional and Social Funds, for expenditure on industry to assist structural changes and on the development of energy independence. I shall have to say something—but I can keep it fairly brief—on the provision for agriculture.
Before saying that, I should like to say that our general approach—and I can

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summarise it very shortly—is in line with our approach to domestic expenditure. It will be to seek to restrain increases in expenditure so far as possible and to ensure that provision in the Budget represents a realistic assessment of the cost of carrying out agreed Community policies. Most other Member States face similar constraints and are likely to take a similar line. Along with the need for restraint we shall aim to ensure that when resources are allocated Budget priorities should reflect more general economic priorities, of the kind mentioned by the noble Lord, Lord Lyell. I need not perhaps go into those in any detail.
I can perhaps pass over the Regional Development Fund in one sentence, because we debated that matter in March and I do not feel that at this stage it can be carried any further forward. The report mentions the possibility of Community borrowing and again, with all respect, I cannot improve on what the report has said in paragraph 22, except to acid the piece of information that at the end of last month the European Council asked Finance Ministers to examine the borrowing proposals as soon as possible, and that will be done.
On the absolutely vital matter of agriculture: as has been said in this debate, agriculture accounts for about 70 per cent. of total expenditure proposed in the Preliminary Draft Budget and the Committee's report devotes a good deal of space to it. The reason for this preponderance of agricultural expenditure is well known, and indeed has been mentioned in the debate. It is, of course, that price support for agricultural commodities is the one area in which the EEC has taken over virtually all expenditure which would otherwise fall on national Governments. Whatever view one may take of the Common Agricultural Policy, it is certainly the case that the surpluses of milk products which are the major cause of the huge figure for agricultural expenditure cannot be the subject of admiration. The Government entirely accept that, whatever special reasons there may be for the big increase expected in 1978, the figure for agriculture is too large and should be reduced. Given that farm support prices and other elements of the CAP are fixed for a year at a time, it follows that the adoption of the Budget cannot really be an opportunity for a
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thorough review of the policy. This is principally a matter for the Agriculture Ministers of the Member States under the present system, particularly at their annual series of discussions in the spring to settle farm prices for the coming year.
Perhaps I should say just something about the recommendations in the Committee's report, some of which have been mentioned. One of the points that the Committee makes is that the institutional framework for agricultural policy decisions should be reformed to give proper weight to "non-agricultural interests". I hesitate to question this conclusion, especially since I see that the Budget Commissioner, Mr. Tugendhat, evidently takes the same view. The Government obviously agree that more weight should be given to the consequences for taxpayers and also for consumers when agricultural decisions are taken. But procedural changes may not in themselves be the answer. We have to face also the fact that to a large extent the other Member States may take a different view from ours of the respective claims of agriculture and the rest of the economy.
On the particular point of the open-ended commitment, the Committee rightly points out that, under the CAP as it stands at present, the financial commitment is open-ended and they recommend that it should be reformed by limiting the quantities of production to which the guarantees apply. Both the noble Viscount, Lord Amory, and the noble Lord, Lord Mackie of Benshie, have referred to that tonight. I can assure the House that the Government will give close attention to this recommendation. Perhaps I should mention that such a system does already apply to one commodity—namely, sugar—which nevertheless still constitutes a large and unpredictable charge on the Budget.
Without wishing to reject the idea of extending the system to other products, one important consideration should be mentioned. Quotas are fully effective only if they ultimately apply at the level of the individual farmer. They are complex and tend to fossilise production patterns in favour of the less efficient. They could therefore put United Kingdom farmers, who are regarded as among the most efficient in the Community, at a disadvantage. So, if the Community is

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to go down this road, it would have to find some way of overcoming that kind of problem.
Lord MACKIE of BENSHIE: My Lords, may I ask the noble and learned Lord whether he does not agree that standard quantities in relation to our own efficiency pattern system work quite well in this country?
Lord McCLUSKEY: My Lords, I have not suggested that they did not work. What I suggested was that, while they have advantages—and the fact that they work indicates that they have some advantages—they have a disadvantage in that they tend to protect the inefficient farmer, and in so far as we are more efficient we would tend to be disadvantaged.
Lord MACKIE of BENSHIE: My Lords, they do not apply to the individual farmer; they apply to the total amount produced.
Lord McCLUSKEY: Well, my Lords, at this late hour I do not propose to enter any further into that argument with the noble Lord.
I need not deal with the Committee's comments on MCA; they have not been gone into deeply in this debate. I should however, like to say to my noble friend Lord Bruce of Donington that I will not attempt to reply to the matters of underlying principle which he raised. I do not seek to underrate the value of discussing these matters, but in the context of this debate on this report, rather than on the policies which it seeks to provide for, I do not think the Government should elaborate a view. That can be done on a more suitable occasion when the issue is policy.
In conclusion, my Lords, I would thank the Scrutiny Committee for a thoughtful report, and thank noble Lords who have spoken for their contributions. I hope I have given, at not undue length, a sufficiently proper indication of the Government's attitude to the preliminary draft Budget, and to the Committee's report, to satisfy your Lordships. I am grateful to all who have taken part in this debate on a complex subject which has important implications for us all.
10.48 p.m.
Lord COBBOLD: My Lords, I will not detain your Lordships for many minutes. I should like to thank those who have spoken and made the debate very interesting. In particular, I would thank my colleagues on the Sub-Committee, Lord Amory and Lord McCarthy, for their interventions, and Lord Mackie, who was a sort of honorary member of the Committee. Lord Lyell made some very interesting and apposite observations. I will not enter the lists between the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Gladwyn. In reply to Lord Gladwyn, I would just say that I stand by what I said: that there should be a considerable offset from the MCA green rates arrangements against the net deficit. I know Lord Bruce and I have a little disagreement about that, and I am not going to risk quantifying those figures.
The noble and learned Lord, Lord McCluskey, kindly gave us some very interesting and helpful comments at the end. I would make one comment on one word he used, when he said that the "procedural" is not what is important. Of course, the Committee were not thinking at all in procedural terms about the Agricultural Council meeting; we were thinking in terms of the reality of integrating agricultural policy with budgetary policy. Finally, perhaps I might thank the noble Baroness, Lady Llewelyn-Davies, who represents the usual channels, for sitting through the debate. I hope that the noble Baroness has found it interesting. I assure her that, although we might have wished that the debate had been arranged at a more convenient moment, we fully appreciate the difficulties.

FARRIERS (REGISTRATION) (AMENDMENT) BILL [H.L.]
Returned from the Commons agreed to.
TOWN AND COUNTRY PLANNING (AMENDMENT) BILL
Returned from the Commons with the Amendments agreed to.