Lords Sitting of 19 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.

LORD CARVER
Field Marshal Sir Richard Michael Power Carver, GCB, CBE, DSO, MC, having been created Baron Carver, of Shackleford in the County of Surrey, for life—was, in his robes, introduced between the Lord Harding of Petherton and the Lord Elworthy.

PICKETING LAW
2.46 p.m.
Lord ORR-EWING: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what lessons they have learned and what they plan as a result of the picketing of Grunwick.
Lord WALLACE of COSLANY: My Lords, as my right honourable friend the Secretary of State for Employment stated in another place on 12th July, he intends to consult the parties principally concerned to see whether improvements to the law on picketing can be proposed.
Lord ORR-EWING: My Lords, does it not bring the law into some disrepute when 18,000 miners try peacefully to persuade 260 workers in a single firm? Does it make sense to have to divert 4,000 policemen from other vital duties in order to keep some measure of order? Will the Government consider most seriously and urgently whether the law on peaceful persuasion can be clarified and peaceful persuasion made peaceful, so that employers, employees, local residents, local firms and, above all, the police are not exploited by a vicious minority dedicated to creating strife and violence?
Lord WALLACE of COSLANY: My Lords, may I first state to the House that there has been no trouble since 11th July. Picketing has been peaceful. There have been no arrests. The noble Lord referred to a large number of miners. Certainly it is a tradition among trade unionists, when there is a difficult issue in which their comrades in another union are involved, if necessary to rally and support their comrades in arms. The trouble has arisen from outside elements—of Right and Left, may I state—who have provoked trouble and brought the police, whose conduct throughout has been magnificent, into a difficult situation.
Lord MURRAY of GRAVESEND: My Lords, when the Government are looking at the position of picketing, will they also look at the organisations, such as the misnamed National Association for Freedom, which have apparently also come in from outside to stir up trouble?
Lord WALLACE of COSLANY: My Lords, when I talked about the extremes of Right and Left, that was one of the organisations I had in mind. I am not going to classify them as of Right or Left. It is a matter for noble Lords to do so.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, the question of picketing and the law relating to it obviously requires a debate at some stage and I do not want to enter into the wider issues, but there are two questions that I should like to ask the noble Lord. Is it not the case that, so far from needing clarifying, the law of picketing needs to be observed and kept since the main lines of it are perfectly plain? Does not the noble Lord think that perhaps the phrase "comrades in arms", which he used, is unfortunate? Should they not be peaceful companions supporting a peaceful cause?
Lord WALLACE of COSLANY: My Lords, perhaps my reference to "comrades in arms" had the military connotation which the noble and learned Lord assumed; but that phrase is also used generally in the context of people helping one another, and it was in that context that I used it. Certainly I, and I know the whole House, would not condone any attempt at violent persuasion in any shape or form; it is not the tradition of this country, anyway.

175
There is a certain amount of difficulty in sorting this problem out. The law remains, it is true; the Conservative Party when in office introduced legislation in this connection, as did a previous Labour Government. My right honourable friend wants to have very prolonged and detailed consultations with all sorts of bodies; the TUC, CBI, the organisation concerned, ACAS, and above all the police representative bodies, of which there are not just one but several. He wants to consult with the Police Federation, the Chief Constables Association and many other organisations and their relevant equivalents in Scotland. There therefore arises from this situation some need for consultation. In due course the House must be advised, and in due course this Chamber will have to debate the conclusions of those discussions.
Lord WIGODER: My Lords, may I ask the Minister to agree that the principal lesson to be learned is that, where there is an exceptional dispute which has arisen as the result of exceptional provocation on both sides, it would be quite wrong to rush into an amendment of the law without very cool and careful consideration?
Lord WALLACE of COSLANY: I entirely agree, my Lords. And, of course, it is true that certain proceedings are taking place at the moment and the decisions reached may have some very important bearing on various discussions that are to take place. I entirely agree that we should not rush this and make some sort of sensational gesture. We have had enough sensational gestures. We want to see orderly and peaceful picketing and proper, normal industrial relations.
Lord PAGET of NORTHAMPTON: My Lords, would the Minister agree that picketing in its origin was an aspect of freedom giving the weak the right to be heard in face of the strong, but when the situation becomes reversed then picketing, as in this instance, can become an instrument of terror and, as such, raises the grave anxieties we have heard expressed?
Lord WALLACE of COSLANY: My Lords, in reply to my noble friend, I
176
would not be so sure that originally the case was of the weak against the strong. Later on, possibly, strength grew on one side rather against the other. We must await the decisions of the two courts that are sitting.
Lord INGLEWOOD: My Lords, when the noble Lord spoke of comrades in arms, did he include the Socialist Workers' Party, who claim to have played a very prominent role during this strike latterly, planned what they call a "week of action", and are believed to be ready to start again in the middle of next month?
Lord WALLACE of COSLANY: My Lords, I condemned extremists on both sides. When I referred to comrades in arms I was referring to genuine trade unionists, men of great repute and integrity, and a movement to which I am proud to belong.
Lord CLIFFORD of CHUDLEIGH: My Lords, may I ask the noble Lord to explain—perhaps his noble friend might also do so—what was the insinuation that the National Association for Freedom was supposed to have done wrong? So far as one can see, all it was doing was helping to deliver the mail to Grunwick—
Noble Lords: Really!
Lord CLIFFORD of CHUDLEIGH: — which, under the Post Office Act, was illegally being withheld.
Lord WALLACE of COSLANY: That is a matter of opinion, my Lords. Many of us have the opinion that it might have been provocative action but, as I say, it is a matter of opinion. What we are concerned with here is that, in a dispute of this kind, it should be trade unionists working legitimately for their rights, and any interference from outside bodies for political or other reasons should be banned and not allowed to provoke further trouble.
The Earl of LAUDERDALE: My Lords, is the Minister saying that citizens of this country are not allowed to support an industrialist who is being harassed?
Lord WALLACE of COSLANY: My Lords, I think that industrialists as well as workers have their trade unions.
Lord CARR of HADLEY: My Lords, may I ask the noble Lord two questions, one specific and one general? Specifically, would the Government seriously consider approaching the TUC to see whether it is possible to develop a code of practice about picketing? I am sure my noble and learned friend Lord Hailsham of Saint Marylebone is right when he says that the law here is quite clear, but that it is clarity about how it should be practised and observed which is lacking. Will the noble Lord bear in mind the good effect of what was an informal code of practice in the miners' strike of 1973–74? There was an informal code of practice which had very beneficial results. My general question is to ask the Government whether they will consider on this and all occasions giving a strong public lead, not underestimating the moral authority which Ministers have, in making clear to everybody concerned the difference between picketing and demonstrations? In this country both are legitimate activities, but there is a difference between them and it ought to be made clear.
Lord WALLACE of COSLANY: My Lords, I certainly accept the noble Lord's last suggestion and I assure him that it will be passed on to my right honourable friend, who is as anxious about this matter as we all are. Regarding a code of practice, I certainly agree that orderly procedures voluntarily adopted by those involved in disputes could do much to help ensure that picketing is peaceful. The idea of a code of practice on the subject will of course be one of the possibilities that will be considered, and I thank the noble Lord for his remarks.
The LORD PRIVY SEAL (Lord Peart): I suggest that we have had a very fair discussion on this Question, my Lords. Perhaps we might move on to the next Question.

LAW OF THE SEA CONFERENCE
2.57 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what conclusions were reached at the Law of the Sea Conference.
Lord PEART: My Lords, during this session, which concluded on 15th July, detailed informal discussions were held on the main subjects on which agreement was still outstanding. On the issue of the régime for the exploitation of the deep seabed, there was little sign of a narrowing of the gulf between the developing countries and the industrialised countries.
It had been hoped that in the course of the session, the president of the conference would issue a new informal composite negotiating text. This text would be intended to replace the present negotiating text as the basis for negotiation at the next session. Unfortunately, it could not be got ready before the end of the session and is now expected towards the end of this week. I shall arrange for copies to be placed in the Library when it becomes available.
Lord BROCKWAY: My Lords, I thank my noble friend the Leader of the House for that Answer. Is it not the case that the text which is to be prepared is not a text of agreement but a text classifying disagreements about which compromises may be reached? Is this not a very disappointing result of a conference which has gone on for nearly four years and which still indicates that the nations are competing against each other to control the minerals under the sea?
Lord PEART: My Lords, I hope my noble friend will wait until he has seen what is in the Library. I understand his comments. This is of course a very difficult matter and many problems exist here which involve not only fisheries and mineral development; but I hope that out of it will come something which will be creative in the best sense, and will be helpful.
Lord BROCKWAY: My Lords, does not the crucial question concern who is to exploit the millions of minerals which are in the rocks under the oceans and—as last weekend's conference of the Society of Chemical Industries showed—even present in seawaters? Who is to have these? Should these not be for the benefit of all the nations of the world rather than for the one nation which exploits them?
Lord PEART: My Lords, that is precisely the purpose of the conference. I am not in any way responsible for the delay here. The conference has adjourned, and it will meet again in Geneva in March next year. The British Government should not be blamed. All I am saying is that this is the way that we should try to get a good régime, and I hope we shall.
Baroness GAITSKELL: My Lords, does the noble Lord the Leader of the House agree, first, that in considering the delay here we must take into account the fact that a complex and difficult problem is involved, and, secondly, that we would fool ourselves if we were to think that this is a problem which we can solve quickly? It may take years to solve. If we minimise the problem, we should simply be on the wrong track.
Lord PEART: My Lords, I agree with my noble friend.
Lord CAMPBELL of CROY: My Lords, bearing in mind that the first three weeks of this session was by agreement devoted entirely to the question of an international authority for deep-sea mining of minerals well beyond the shores of the countries concerned, and that the noble Lord has said that no progress has been made on that, and since all the other matters on which there is some progress and agreement, such as navigation and control of pollution, depend upon a settlement of this question, will the Government now consult urgently the United States and other Governments? Will they see whether a way can be found of going ahead with the other subjects of the conference, while at the same time not holding up the mining of these minerals, which will never be available for anyone if the present delay continues?
Lord PEART: My Lords, I do not dissent from that, but I hope that noble Lords will wait to see what the document says when they have an opportunity to read it.
Lord KENNET: My Lords, will my noble friend, as co-ordinator of maritime policy in the British Government, consider visiting the conference next time it meets?
Lord PEART: Yes, my Lords, if I am asked; I do not dislike Geneva.
Lord RITCHIE-CALDER: My Lords, although we realise that this is a very complex subject, does my noble friend agree that time is not on our side, and from now on Governments will be taking the kind of unilateral action which we have seen in the case of the 200-mile limit, and which would apply equally to the minerals under the sea?
Lord PEART: My Lords, I accept the warnings of my noble friend, but I would ask noble Lords to look at the text of the document in the Library.

BRITISH SHIPBUILDING: VESTED FIRMS
3.2 p.m.
Lord ORR-EWING: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when the first payments will be made to the subsidiary firms vested in British Shipbuilding on 1st July 1977.
Lord WINTERBOTTOM: My Lords, compensation was paid in full on 1st July 1977 in respect of all the shares in Robb Caledon Shipbuilders Limited, and of the preference shares of John G. Kincaid Limited. The first payments in respect of the other companies are expected to be payments on account. The timing, and the size, of these payments will depend on the progress of negotiations in respect of each company. The Government hope that some will be made before the end of this year.
Lord ORR-EWING: My Lords, does the Minister recognise that only one company was wholly-owned, and that therefore the settlement affected only one company? The great majority were subsidiaries of bigger groups, and it is those firms which badly need some payment in order to restructure themselves so that they can invest in new machinery for the future and thus help to create new jobs. Have the Government, therefore, a sense of urgency in proceeding with this settlement, so that some payment on account can be made at an early date?
Lord WINTERBOTTOM: Yes, my Lords; the point made by the noble Lord is quite correct. Obviously, these companies want compensation as soon as possible. I seem to remember that during the debates both here and in another place the phrase "early and substantial" was used in relation to payments on account. We are entering a period of negotiation. Both the Government and the stockholders are being represented by expert advisers and, at the end of the day, arbitration may settle conflict between the two negotiating parties. In view of the fact that these are commercial negotiations, matters can, unfortunately, be delayed, but it is the hope of the Government that an early and substantial payment on account will be made.

PARLIAMENTARY QUESTIONS: MINISTERIAL RESPONSIBILITY
3.4 p.m.
Lord KENNET: 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 the Leader of the House which Minister should reply to Questions in this House on the machinery of Government; and whether it was in order for a Written Answer to such a Question to be made on 27th June (col. 995) by a departmental spokesman.
Lord PEART: My Lords, most Questions on the Order Paper are addressed to Her Majesty's Government, and the Minister replying does so on behalf of the Government. The Written Answer on 27th June was not in any way out of order.
Lord KENNET: My Lords, while accepting of course that the Written Answer was not out of order, if my noble friend the Leader of the House says so, is the situation, in his opinion, fully satisfactory when the following Question is addressed to the Government:
"Since the Department of Energy has recently yielded control over nuclear pollution to the Department of the Environment, is there not now a case that it should likewise yield control over marine pollution to the Department of the Environment?"
that the Answer to that Question should come from the Department of Energy—
182
that is, the Department whose functions were called in question by the Question for Written Answer—and not from, for instance, the Leader of the House as the Minister for the Civil Service?
Lord PEART: One can argue about this, my Lords, but this is the rule, and I think it is a good rule.

EMPLOYMENT PROTECTION BILL [H.L.]
3.6 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): 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.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clauses 1 to 159 agreed to.
Clause 160 [Citation, commencement and extent]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 1:
Page 127, line 38, before ("Act") insert ("(Consolidation)").
The noble and learned Lord said: With the leave of the Committee, I will speak at the same time to this Amendment and to Amendments Nos. 2 to 48. They are all drafting Amendment; relating to the Title of the Bill. The first Amendment changes the Title of the Bill from Employment Protection Bill to Employment Protection (Consolidation) Bill, and the remaining Amendments make the consequential changes in Schedule 16. I beg to move.
Lord TREFGARNE: It falls to me, it seems, to ask the noble and learned Lord whether it is in order for Amendments to be taken on this scale in what is, in fact, a consolidation Bill. Of course we are aware that consolidation Bills are not normally amended at all, but today we find that a large number of Amendments are to be moved on behalf of the Government. Can the noble and learned Lord

183
explain why this should be, and whether it is a departure from the usual procedure?
The LORD CHANCELLOR: I do not think that it is a departure for mere drafting Amendments to be moved to consolidation Bills. There was only one change involved here; namely, the change in the Title from Employment Protection Bill to Employment Protection (Consolidation) Bill, and an illusion of magnitude has been added to that simple change by the multiplicity of occasions on which reference is made to the Bill in the Schedule. I hope that the Committee will not be unduly shocked by this state of affairs.
On Question, Amendment agreed to.
Clause 160, as amended, agreed to.
Schedules 1 to 15 agreed to.
Schedule 16 [Consequential amendments]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendments Nos. 2 to 48 en bloc:
Page 174, line 37, after ("Protection") insert ("(Consolidation)")
Page 174, line 41, after ("Protection") insert ("(Consolidation)")
Page 175, line 20, after ("Protection") insert ("(Consolidation)")
Page 175, line 34, after ("Protection") insert ("(Consolidation)")
Page 175, line 40, after ("Protection") insert ("(Consolidation)")
Page 176, line 16, after ("Protection") insert ("(Consolidation)")
Page 176, line 22, after ("Protection") insert ("(Consolidation)")
Page 176, line 26, after ("Protection") insert ("(Consolidation)")
Page 176, line 29, after ("Protection") insert ("(Consolidation)")
Page 176, line 32, after ("Protection") insert ("(Consolidation)")
Page 176, line 35, after ("Protection") insert ("(Consolidation)")
Page 176, line 40, after ("Protection") insert ("(Consolidation)")
Page 176, line 44, after ("Protection") insert ("(Consolidation)")
Page 177, line 6, after ("Protection") insert ("(Consolidation)")
Page 177, line 22, after ("Protection") insert ("(Consolidation)")
Page 177, line 29, after ("Protection") insert ("(Consolidation)")
Page 178, line 3, after ("Protection") insert ("(Consolidation)")
Page 178, line 10, after ("Protection") insert ("(Consolidation)")
Page 178, line 28, after ("Protection") insert ("(Consolidation)")
Page 178, line 32, after ("Protection") insert ("(Consolidation)")
Page 178, line 41, after ("Protection") insert ("(Consolidation)")
Page 179, line 5, after ("Protection") insert ("(Consolidation)")
Page 179, line 14, after ("Protection") insert ("(Consolidation)")
Page 179, line 22, after ("Protection") insert ("(Consolidation)")
Page 179, line 30, after ("Protection") insert ("(Consolidation)")
Page 179, line 34, after ("Protection") insert ("(Consolidation)")
Page 179, line 38, after ("Protection") insert ("(Consolidation)")
Page 179, line 46, after ("Protection") insert ("(Consolidation)")
Page 180, line 13, before ("Act") insert ("(Consolidation)")
Page 180, line 16, after ("Protection") insert ("Consolidation)")
Page 180, line 21, after ("Protection") insert ("(Consolidation)")
Page 180, line 24, after ("Protection") insert ("(Consolidation)")
Page 180, line 34, after ("Protection") insert ("(Consolidation)")
Page 180, line 38, after ("Protection") insert ("(Consolidation)")
Page 180, line 49, after ("Protection") insert ("(Consolidation)")
Page 181, line 3, after ("Protection") insert ("(Consolidation)")
Page 181, line 10, after ("Protection") insert ("(Consolidation)")
Page 181, line 15, after ("Protection") insert ("(Consolidation)")
Page 181, line 18, after ("Protection") insert ("(Consolidation)")
Page 181, line 24, after ("Protection") insert ("(Consolidation)")
Page 181, line 29, after ("Protection") insert ("(Consolidation)")
Page 181, line 33, after ("Protection") insert ("(Consolidation)")
Page 181, line 36, after ("Protection") insert ("(Consolidation)")
Page 181, line 41, after ("Protection") insert ("(Consolidation)")
Page 182, line 4, after ("Protection") insert ("(Consolidation)")
Page 182, line 8, leave out from ("for") to end of line 9 and insert (""Act 1975" there shall be substituted (""(Consolidation) Act 1977"")
Page 182, line 12, after ("Protection") insert ("(Consolidation)").
On Question, Amendments agreed to.
Schedule 16, as amended, agreed to.
Schedule 17 [Repeals]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 49:
Page 185, line 34, column 3, leave out ("27(10)").
The noble and learned Lord said: This, again, is a drafting Amendment. I beg to move.
On Question, Amendment agreed to.
Schedule 17, as amended, agreed to.
The LORD CHAIRMAN of COMMITTEES (Lord Aberdare): The Question is, That this be the Title of the Bill?
Lord LEATHERLAND: Should we not insert the word "Consolidation" in the Title, inasmuch as we have had 40 or 50 Amendments inserting it in other parts of the Bill?
The LORD CHANCELLOR: I think that is accomplished by the first Amendment that I moved. Perhaps I moved it at excessive speed.
Title, as amended, agreed to.
House resumed: Bill reported with the Amendments.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 13th July), Report received, Bill read 3a, and passed, and sent to the Commons.

TORTS (INTERFERENCE WITH GOODS) BILL [H.L.]
3.13 p.m.
The LORD CHANCELLOR: My Lords, I beg to move that the Commons Amendments be now considered.
Moved accordingly, and, on Question, Motion agreed to.

COMMONS AMENDMENTS
[References are to Bill [77] as first printed for the Commons]
1 Clause 3, page 2, line 35, at end insert—
'(6A) Where under subsection (1) or subsection (2) of section 6 an allowance is to be made in respect of an improvement of the goods, and an order is made under subsection (2)(a) or (b), the court may assess the allowance to be made in respect of the improvement, and by the order require, as a condition for delivery of the goods, that allowance to be made by the claimant.'
2 Clause 8, page 5, leave out line 39 and insert 'all or any part of the interest claimed by the plaintiff, or in right of which he sues'
3 Clause 9, page 6, line 22, at end insert—
'(1A) Where goods are the subject of two or more claims under section 6 this section shall apply as if any claim under section 6(3) were a claim for wrongful interference.'
4 Clause 12, page 7, line 42, at end insert—
'(3A) Where subsection (3) applies but the bailor did not in fact own the goods, a sale under this section, or under section 13
186
shall not give a good title as against the owner, or as against a person claiming under the owner.'
5 Page 10, line 14, leave out 'state' and insert—

'(a) specify the name and address of the bailee, and give sufficient particulars of the goods and the address or place where they are held, and

(b) state'

6 Page 10, line 19, at beginning insert 'specify'
7 Page 10, line 34, leave out 'when' and insert 'at any time after'
8 Page 11, line 19, leave out 'specify' and insert—
'(a) specify the name and address of the bailee, and give sufficient particulars of the goods and the address or place where they are held, and'
9 Page 11, line 20, at beginning insert 'specify'
10 Page 11, line 22, at beginning insert 'specify'.
The LORD CHANCELLOR: My Lords, with the leave of the House, I beg to move that this House doth agree with the Commons in their Amendments Nos. 1 to 10 en bloc. These are all minor Government drafting Amendments which clarify the Bill and make no substantive changes in it. Most of them have been suggested by the Finance Houses Association, and I am most grateful to them for their help. I think it would be for the convenience of the House, if the House agrees, for the Amendments to be moved en bloc, but if an explanation is sought about any one of them, or indeed each of them, I shall be happy to endeavour to give the appropriate explanation. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Lord Chancellor.)
On Question, Motion agreed to.

CONTROL OF OFFICE DEVELOPMENT BILL
3.15 p.m.
Report received.
Clause 1 [Continuance in force of provisions relating to control of office development]:
Baroness YOUNG Baroness YOUNG moved Amendment No. 1:

187
Page 1, line 12, leave out ("seventeen") and insert ("fifteen").
The noble Baroness said: My Lords, I must apologise to the House for returning to this very narrow point on a relatively narrow Bill. We had considerable discussion on this at Committee stage, but, having had a chance to read the Committee proceedings, I did not feel very happy about the arguments which were put up then, and I felt it only right that we should return with a slightly differently drafted Amendment on Report. The difference between our Amendment on this occasion and that on Committee is that this time we are suggesting that the office development permit system should last for another three years only, instead of, as we originally proposed, two years, as compared with the proposal of the Government that it should be kept for another five years, with presumably the alternative then of renewing yet again.
On this point, the reason that the noble Baroness, Lady Birk, gave for not accepting our original Amendment was that there was a very great need for office development in assisted areas, which are defined as either being areas that are known as special development areas or development areas, or intermediate areas, in each case where unemployment is high. However, when we looked at the figures it was perfectly clear that no office development had taken place in any of these areas up to 1972, and the reason why office developments had taken place since then was that the Department of Trade and Industry had in fact given grants to firms wishing to develop offices in those particular areas, and the effect of the grants, coupled with the work of the Location of Offices Bureau, had meant that firms had moved out.
The noble Baroness was not able to produce any evidence at all that the whole negative control of office development permits had helped, and it is because we have not had any evidence that it seemed to myself and my noble friends on this side of the House that it was not good enough to continue this piece of bureaucracy, which really was not doing any good at all, when it was not necessary. The real control on office development rests with the local planning authorities, which can decide whether or not they
188
wish the development at all. They have very powerful planning laws at their disposal, and they can therefore determine whether or not an office shall go in any particular place; and it would certainly answer the problem that there could well be too many offices in London.
This, again, was one of the arguments put up, and I noticed, on reading the Official Report of our proceedings on the 12th July, at column 860, that the noble Baroness said:
"… the unemployment percentage for the whole of the GLC area is 4 per cent., in the special development areas it is 10·1 per cent., in the development areas 8·9 per cent., and in the intermediate areas 5·9 per cent.";
and she used her argument to show that unemployment was nothing like as high in the Greater London area as it is in others. I thought at the time that this could possibly be thought to be somewhat misleading, because Greater London includes central and inner London as well as outer London, where, of course, the position is quite different.
I have now had the opportunity to check the unemployment figures for central and inner London, the two areas that were referred to by her noble friend Lady Stedman, when we were talking about the order for the Location of Offices Bureau, as being two areas in which the Government wished to encourage office development. The Greater London Council has not based its unemployment rates precisely upon the Department of Employment formula for calculating unemployment, which expresses the registered unemployed as a percentage of those working in each area. The GLC has taken a residence basis for each area. On this basis, inner and central London have very high unemployment rates, indeed. Looking at places like Canning Town, with 9·7, East Ham, with 5·1 Hackney, with 7·4, Holloway, with 10·2, Poplar, with 14·1 and Stepney, with 12·7, it is easy to see that unemployment in central and inner London is just as high as in the development areas. Therefore, it is not necessarily to the advantage of the unemployed that offices should be moved away from central London. I believe that the argument on unemployment is not one that can be substantiated and I think that we should look at this again.
I then asked the noble Baroness, Lady Birk, to tell me the circumstances in which she felt that the office development permit system could be dropped. She said at the beginning of her remarks in col. 859 that the office development permit system should be maintained if the economy picked up and that, as it was expected to pick up within the next two years, the system should be maintained in order that there should not be too many offices in Greater London or elsewhere. Later in her remarks, having been asked when she thought there would be a relaxation in the office development permit set-up she said:
"I should say that this would be when we get an upturn in the economy …"—[Official Report, 12/7/77; col. 868.]
It is difficult for those of us who are trying to consider the length of time that the office development permit procedures should hold to be told that they should be maintained if the economy picks up, because it will be a good thing to have them, and at the same time to be told, that they should be relaxed if the economy picks up because it will not be necessary to have them.
One cannot argue both ways in one speech. For that reason, I have put down my Amendment. I think that the House is entitled to know what the Government believe about this matter and whether they are hanging on to quite unnecessary controls that are not wanted by local government, will not assist the unemployed and certainly will not help the very serious situation existing in inner London. I beg to move.
The Earl of KINNOULL: My Lords, I rise to support my noble friend in her usual persuasive speech. I find myself more and more passionate about this small Bill as each stage goes by. I am passionate because, on each successive occasion, the Government case seems to become weaker and more threadbare, and the need for the continuation of office development permits appears more unproven. I think that it was on the last occasion that the noble Baroness's case became so threadbare and the paucity of her argument such that she was reduced to claiming that the Opposition were simply using dogma as a reason for their objection.
190
That is uncharacteristic of the noble Baroness who always delights us with her presentation, her preparation and her wit. I myself suspect that her advisers had unguardedly said that this was a small Bill which would go through the House of Lords "on the nod" and that they would not bore her with hard facts or figures, for that would only widen the argument. How far have they misjudged the vigilance of my noble friends Lady Young and Lord Sandys in scrutinising the stream of indifferent Bills which have come before this House during the present Session!
In 1972, Parliament approved the continuation for another five years of office development permits. It was then, I think, satisfactorily proved that there was a real need for this system. Today, we look again to see whether another five years should be granted. I am sure that the noble Baroness would agree that we are entitled to ask the question: "Why another five years?"—and to be convinced by the answer. What is the real evidence? Are the office development permits really proving a positive achievement in the general strategy of the Government? The noble Baroness' reply so far is that office development permits are a vital component in her three-pronged strategy to help assisted areas.
My Lords, that is all very well except that the noble Baroness produces no evidence to show why it is so vital. Why, for instance—and this is a point which always occurs to me—cannot the planners look after the planning? Why should the Government come in with office development permits in relation to which there is no right of appeal and no time sanction by which the permits must be granted?
I feel passionately that the office development permits introduced in 1965 are now a worn-out, negative and irrelevant part of our planning procedures. Conditions today no longer demand office development permits; the assisted areas could be assisted with far greater effect by other positive means and, indeed, the three-pronged strategy has now only two prongs left.
My noble friend's Amendment is a very reasonable Amendment. It seeks to allow Parliament a further three rather than five years to consider office development permits. The last time this was discussed,

191
the noble Baroness assured the House that, of course, it might well be that the life of the office development permit would be ended will before five years. I do not know whether that was the undertaking; but we should have a great deal more confidence if we felt that the Government had another five years' life. I hope that my noble friend will stand firm on this Amendment. I think that it is a reasonable Amendment and that it would be of great benefit to planning as a whole.
3.28 p.m.
The PARLIAMENTARY UNDERSECRETARY OF STATE for the ENVIRONMENT (Baroness Birk): My Lords, may I first thank the noble Earl, Lord Kinnoull, for his very kind remarks? I find it difficult to be witty about this Bill. Somehow, it does not lend itself to wit. As the noble Baroness, Lady Young, has said, we have been over this ground before. I would not say that the arguments were threadbare; it is that the ground has become bare from so many years of treading over it in our discussions as to whether controls should or should not remain.
I think that we must be quite frank about this. There is a complete divergence of opinion over this whole subject. The Opposition would much prefer not to have any controls at all. At the Committee stage, the noble Baroness moved an Amendment to cut down the period from five years to two years; that Amendment was not pressed. Now, as she has said, she has looked again at the matter and has come back with a period or three years. It seems to me that whether you say three years or two years does not make much difference. She and her supporters make no secret of the fact that they dislike the system and they use every argument against it.
We believe that it is a necessary part of the strategy. On the argument on which the noble Baroness based most of her case for a three-year period, if we get an upturn in the economy in the next year or two, it will be or vital importance that office accommodation and building should be steered—and this would mean commerce and work and employment—to the assisted areas during and after that time. You do not, at the beginning of an
192
upsurge, suddenly stop your controls which are beginning to work and say: "We will not do anything about this", and have a free-for-all.
Regarding unemployment, I am sorry that the noble Baroness thought that she was being misled. I do not think that she was misled at all. What I had said was that the unemployment percentage for the whole of the GLC is 4 per cent. I had also said that it is true that in some areas of London unemployment is extremely high. I also explained, in a different part of the Committee stage, that parts of the inner areas of London were treated as assisted areas, whereas what we were talking about were the attractive places where people want to build office blocks, which is in Central London and the City.
I said that in the special development areas the unemployment figures are 10.1 per cent.; in the development areas, 8.9 per cent.: and in the intermediate areas, 5·9 per cent. I am not undermining the argument that in some areas of London unemployment is extremely high, but if you take the area represented for so many years by my noble friend the Leader of the House, Workington, the unemployment figure is 14 per cent. The noble Baroness, Lady Ward of North Tyneside, will support what is happening in the North-East and over the rest of the country. This is not an argument for saying that it is better to be unemployed in London than to be unemployed in Newcastle or Workington. Nevertheless, it is a fact that it is easier to find office jobs in London than it is outside London.
Therefore I am afraid that the argument against three years is, so far as I am concerned, exactly the same as the argument against two years. As you know, in recent months the Government have been looking closely at the office employment location policy. It is perfectly true that the grants made by the Department of Industry—which have now been increased—are a great incentive for industry to locate itself in the assisted areas. Nevertheless, we believe that the three things together, the Location of Offices Bureau Advisory Service—which has been praised all round the House—the industrial grants, and the ODPs must work together.
What we do not know, and it is impossible to find out but it has very great

193
importance, is how far the existence of ODP control acts, if you like, as a deterrent to attempt to build offices in the Central London area and the South-East. Take the case of somebody who wants to build an office block. He may decide that he is not even going to apply for an ODP because he knows exactly what the form is and that it is very unlikely that he will get one. It is not possible for that to be shown up in statistics. Nevertheless, it is something which the Government consider extremely relevant, and that is one of the reasons why we are anxious to keep these controls for another five years.
This does not mean that it is mandatory for the controls to exist for five years, because at any time by order the control can cease. The noble Baroness said this was a narrow point in a narrow Bill. We are now at the stage, with her increase from two years to three years, of asking: "What is all the fuss about? Why not then settle for five years, which is the Government's view and is in the Bill? "If at any time during that five years it is possible to lift the controls—and there is no point in having controls if you have a surging economy, and are trying to build up employment, industry and commerce everywhere—the Government will bring the controls to an end. For these reasons, I ask the House to resist the Amendment and leave the Bill as it is.
3.35 p.m.
Baroness YOUNG: My Lords, with the leave of the House, I should like to thank the noble Baroness, Lady Birk, for the trouble that she has taken over her reply. She began by saying that she felt there was a divergence of opinion between us on this matter; yet she knows as well as I do that this particular Amendment has all-Party support from the Great London Council. It is not one which has divided the Parties in local government, although it may in national Government.
Baroness BIRK: My Lords, just to get this clear, I was referring to the political philosophy behind the divergence so far as national Government are concerned. In order not to take up more time, I did not go over what we discussed about the GLC. It would be extraordinary if the GLC, representing London, did not take this view.
Baroness YOUNG: My Lords, I am not sure that I would think that was very extraordinary. In my experience of local government, it is not always unanimous in its views on these matters. However, that is a fact on this case and we do not need to debate this. It is something which has the support of all Parties on the GLC. The argument on this Amendment is an attempt to find a compromise out of the two views that have been expressed. I and my colleagues believe that this is an unnecessary system of control which has outlived its usefulness.
The noble Baroness has not produced any facts to support her case that office development has taken place in the assisted areas because of the ODP system. She said that it was not possible to show this in statistics, but the Government thought that it was important. As my honourable friend Mr. Rossi said in another place, not one office of 10,000 square feet or more, for which an ODP had been refused, had ever found its way out of the South-East. He said that the way to get these developments in the assisted areas—and it is a point I support and should like to see implemented—is by giving Government grants and by the work of the Location of Offices Bureau. He said that we should not forget London because, terrible as unemployment is in the North-East—and we have all this as a background to our minds—it also rises to over 14 per cent. in parts of London. He also said that unemployment, wherever it is, is a terrible thing so we want to do all we can to help developments wherever they may help to end unemployment, which at the end of the day will only be helped if more jobs are created.
I was concerned because the noble Baroness repeated yet again the contention that, if there was an upturn in the economy, the ODP system would be necessary and, if there was an upturn in the economy, it could be relaxed. She used one argument at the beginning of her speech and one at the end. I have the feeling that it is not the Government's intention to relax this system.
Baroness BIRK: My Lords, I am sorry to interrupt the noble Baroness again. What I said was that if there was an upsurge in the economy, it would be wrong to relax the ODP controls immediately. I said that there had to be an opportunity

195
for the boom to continue. I said specifically that to stop it immediately could have counter-productive effects.
Baroness YOUNG: My Lords, we are agreed on this point, and that is why we put in the three-year principle for the ODP system to be introduced. We have considered this matter carefully. It is something about which our colleagues in local

CONTENTS

Ailsa, M.

Garner, L.

Nunburnholme, L.

Alexander of Tunis, E.

Glenkinglas, L.

O'Hagan, L.

Allerton, L.

Greenway, L.

Reigate, L.

Alport, L.

Gridley, L.

Robbins, L.

Atholl, D.

Grimston of Westbury, L.

Rochdale, V.

Avon, E.

Hailsham of Saint Marylebone, L.

Sackville, L.

Barnby, L.

St. Aldwyn, E.

Belstead, L.

Hampden, V.

St. Davids, V.

Berkeley, B.

Harding of Petherton, L.

St. Helens, L.

Blake, L.

Home of the Hirsel, L.

Sandys, L.

Broadbridge, L.

Inglewood, L.

Selkirk, E.

Caccia, L.

Ironside, L.

Sharples, B.

Campbell of Croy, L.

Killearn, L.

Skelmersdale, L.

Carr of Hadley, L.

Kimberley, E.

Spens, L.

Carrington, L.

Kinnaird, L.

Stamp, L.

Clifford of Chudleigh, L.

Kinnoull, E.

Strathclyde, L.

Clwyd, L.

Lauderdale, E.

Strathcona and Mount Royal, L.

Cork and Orrery, E.

Long, V.

Strathspey, L.

Cranbrook, E.

Lucas of Chilworth, L.

Sudeley, L.

Cullen of Ashbourne, L.

Lyell, L.

Trefgarne, L. [Teller.]

Daventry, V.

Mancroft, L.

Vernon, L.

Deramore, L.

Merrivale, L.

Vickers, B.

Derwent, L.

Montgomery of Alamein, V.

Vivian, L.

Ebbisham, L.

Mottistone, L.

Wakefield of Kendal, L.

Eccles, V.

Mountgarret, V.

Ward of North Tyneside, B.

Effingham, E.

Mowbrav and Stourton, L. [Teller.]

Ward of Witley, V.

Elliot of Harwood, B.

Westbury, L.

Elton, L.

Moyne, L.

Willoughby de Broke, L.

Emmet of Amberley, B.

Newall, L.

Young, B.

Exeter, M.

Noel-Buxton, L.

NOT-CONTENTS

Aberdeen and Temair, M.

Energlyn, L.

Ritchie-Calder, L.

Amherst, E.

Fisher of Camden, L.

Roberthall, L.

Amulree, L.

Gaitskell, B.

Rusholme, L.

Avebury, L.

Gordon-Walker, L.

Sainsbury, L.

Aylestone, L.

Grey, E.

Samuel, V.

Banks, L.

Hampton, L.

Segal, L.

Beaumont of Whitley, L.

Henderson, L.

Shepherd, L.

Birk, B.

Henley, L.

Shinwell, L.

Brockway, L.

Hughes, L.

Sligo, M.

Buckinghamshire, E.

Hunt, L.

Snow, L.

Burntwood, L.

Janner, L.

Soper, L.

Castle, L.

Kirkhill, L.

Stone, L.

Champion, L.

Leatherland, L.

Stow Hill, L.

Chorley, L.

Listowel, E.

Taylor of Mansfield, L.

Collison, L.

Llewelvn-Davies of Hastoe, B.

Thurso, V.

Cooper of Stockton Heath, L.

McCluskey, L.

Wade, L.

Crook, L.

Maybray-King, L.

Wells-Pestell, L. [Teller.]

Cudlipp, L.

Morris of Grasmere, L.

Wigoder, L.

Darling of Hillsborough, L.

Oram, L. [Teller.]

Williamson, L.

Delacourt-Smith of Alteryn, B.

Paget of Northampton, L.

Wilson of High Wray, L.

Donaldson of Kingsbridge, L.

Pannell, L.

Wise, L.

Douglas of Barloch, L.

Parry, L.

Wootton of Abinger, B.

Douglass of Cleveland, L.

Peart, L. (L. Privy Seal.)

Wynne-Jones, L.

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

Raglan, L.

government feel strongly. We believe it is a negative control which has outlived its usefulness and on this Amendment we should like to test the feeling of the House.
3.39 p.m.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: Contents, 87; Not-Contents, 71.
Resolved in the affirmative, and Amendment agreed to accordingly.
3.47 p.m.
Baroness LIEWELYN-DAVIES of HASTOE: My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales that they, having been informed of the purport of the Control of Office Development Bill, have consented to place their prerogative and interests, so far as they are concerned on behalf of the Crown, of the Duchy of Lancaster and the Duchy of Cornwall, at the disposal of Parliament for the purposes of the Bill.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution), Bill read 3a with the Amendment, and passed and returned to the Commons.

LOCAL AUTHORITIES (RESTORATION OF WORKS POWERS) BILL
3.49 p.m.
Baroness BIRK: 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.—(Baroness Birk.)
On Question, Motion agreed to.
House in Committee accordingly.
[The BARONESS WOOTTON OF ABINGER in the Chair.]
Clause 1 [Restoration of powers conferred by certain orders]:
Lord SANDYS Lord SANDYS moved Amendment No. 1:
Page 1, line 5, leave out Clause 1 and insert following new clause:
Restoration of Powers
.—(1) Any authority named in Column (1) of the following table may enter into agreements with any local authority for the construction of buildings or works wholly or substantially in the area of the former borough specified in respect of such authority in column (2) which will engage the services of the officers of the first mentioned authority.
(2) In this section "officers", in relation to any authority, includes the holders of any offices or employments under that authority.

TABLE

(1)

(2)

The Borough Council of Barrow-in-Furness

Barrow-in-Furness

The Borough Council of Blackburn

Blackburn

The Borough Council of Bolton

Bolton

The City Council of Bristol …

Bristol

The Borough Council of Burnley

Burnley

The City Council of Cardiff …

Cardiff

The Borough Council of Derby

Derby

The Borough Council of Gateshead

Gateshead

The Borough Council of Grimsby

Grimsby

The City Council of Kingston upon Hull

Kingston upon Hull

The City Council of Lincoln

Lincoln

The City Council of Liverpool

Liverpool

The City Council of Manchester

Manchester

The City Council of Newcastle upon Tyne

Newcastle upon Tyne

The Borough Council of North Tyneside

Tynemouth

The City Council of Plymouth

Plymouth

The Borough Council of Rotherham

Rotherham

The Borough Council of Scunthorpe

Scunthorpe

The City Council of Sheffield

Sheffield

The Borough Council of South Tyneside

South Shields

The City Council of Stoke-on-Trent

Stoke-on-Trent

The Borough Council of Stockport

Stockport

The Borough Council of Sunderland

Sunderland

The City Council of Swansea

Swansea

The Borough Council of Wigan

Wigan

The noble Lord said: I beg to move this Amendment standing in my name and in the names of my noble friends. My noble friend Lady Young made it quite clear in her closing remarks on Second Reading that we regard this Bill as completely unnecessary. However, we are making a genuine attempt in this Amendment, and indeed in those following it, to improve the Bill. That is what we seek to do by this series of Amendments. The Bill, as drafted, may be short as it consists of only two clauses, but in our submission it is confusingly so because it follows a pattern of drafting which was much criticised by the Renton Committee on the preparation of legislation. If I may trespass on your Lordships' time—
Baroness BIRK: May I interrupt the noble Lord? I think it was agreed that

199
we should speak to Amendments Nos. 1 and 6.
Lord SANDYS: I beg your Lordships' pardon: I should say that I beg to move Amendment No. 1 and I should like to speak to Amendment No. 6 at the same time. These two Amendments are linked, and I return to the fact that the Renton Committee on the preparation of legislation made a very special point in Recommendation No. 39 on page 152 of the report, which read as follows:
"The needs of the eventual user of Statutes must be given priority over those of the legislator when proposals for amending existing legislation are being framed".
That was paragraph 13.17. Then, in Recommendation No. 41, the Renton Committee further added:
"The present practice of amending legislation textually, wherever convenience permits, should be applied as generously as possible".
Unfortunately, the Government have set aside the very wise words of the Renton Committee, because there is no doubt whatever that they have presented your Lordships and another place with a Bill in totally different terms. We believe that the manner in which the Government have presented this Bill, that is to say with a recitation of references to orders which have now lapsed, does not make for clarity for the users of legislation.
I believe that it will assist noble Lords who may not have had the opportunity to follow the proceedings of the Bill through Standing Committee in another place if I explain the list of 25 authorities which is set out in our Amendment. These authorities are now district councils which no longer have responsibility for the functions that their predecessors, the old county boroughs, had at the time of the passing of the Local Government Act 1972 relating to the control of direct labour departments. The list is a little difficult to understand. The Government have created the problem, which perhaps my noble friend Lady Young put most succinctly at Second Reading when she said:
"The Bill puts in statutory form the former orders allowing 25 district councils to carry out works for their county councils and neighbouring district councils in specified areas".
The problem arises because only 12 of the named authorities have made use of their
200
powers, while no fewer than 13 have made no use of them. May I give some examples. Stockport is not anxious to be included in the list. Grimsby, which I regret to say is incorrectly spelt in column 2 of the Amendment, has not used its powers. At a council meeting in May of this year Grimsby passed a resolution, which was forwarded to the Secretary of State, requesting that it should be permitted to relinquish the said powers.
At this point I should draw your Lordships' attention to Amendment No. 6 which sets out in simple form the manner of relinquishment of powers. This Amendment will be no surprise to many noble Lords who followed the course of the Bill through another place, for they will recognise the terms of the Amendment moved there. The fact that Derby is referred to in this list a as borough council may cause some surprise. It was a matter of warm congratulations that Derby should have City status conferred upon it at the time of the Silver Jubilee. Derby is not anxious to use the powers which are to be conferred by the Bill.
What, therefore, are we left with? We are left with a group of authorities which are anxious to use their powers, and prominent among those authorities which have specifically asked for powers are Rotherham and Sheffield. Sheffield has a problem with regard to highway construction where a quite substantial works contract amounting to over £1 million was concerned. Furthermore, Stoke-on-Trent, the very largest user of these powers in terms of finance and whose works in the past year were valued at £1.2 million, is particularly anxious to pursue their use. At this point, however, I must refer to the fact, to which I have no doubt my noble friends will also refer, that there were no fewer than 13 unfavourable district auditors' reports on direct labour organisations which are now functioning. I will not refer at this stage to specific cases, because I know that they will come into later arguments.
It is not my task to make a Second Reading speech; my purpose is to explain the two Amendments. Because of the manner in which the Amendments are set out I believe that they follow the very apt suggestions of the Renton Committee regarding making it clear what the legislation is about. I am quite

201
certain that to any user of the legislation who was presented with the Bill it would not be apparent which authorities are involved. Now we have a complete table and a means by which those authorities that are not anxious to use the powers conferred by the Bill are able to relinquish them.
So far as the very important matter of boundaries is concerned, I believe that special powers already exist. In Section 254, which is to be found in Part XII of the 1972 Act, there is a quite specific instruction for the Secretary of State's guidance, should be wish to identify a local authority to which any particular functions are to be transferred. Furthermore, by Section 67 of the 1972 Act the Secretary of State was given additional powers. At this stage I do not believe that it is necessary to explain in greater detail the functions of those sections, although I should be happy to try to do so, if necessary. I beg to move.
3.58 p.m.
Baroness BIRK: I cannot see any merit in changing the Bill in the way proposed by this Amendment. Indeed, it could result in a considerable disadvantage, for to name each of the 25 authorities could make the Bill hybrid. The merit of the present drafting is that it indicates clearly the reason why the Bill is necessary. The Amendment, together with the proposed change of title, suggests that new powers are to be given to 25 authorities, whereas all that is proposed is the restoration of powers which these authorities had up to 31st March 1977. This is made absolutely clear by the form in which the Bill is drafted. The fact that the Bill does not indicate which are the 25 authorities is no reason for approving this Amendment, which goes much further than that. The names of the 25 authorities can easily be established by reference to the Statutory Instrument.
So far as relinquishment is concerned, the powers conferred by the Bill are permissive, not mandatory. I know that the noble Lord, Lord Sandys, dwelled upon the point, which also came up at Second Reading, that certain authorities had not used the powers, but it is for each of the 25 authorities to decide whether it wishes to seek to use the powers. No
202
duty is placed on them to do so and, indeed, whether the powers are used depends upon whether another authority awards work to the DLO, because that is what we are talking about under this Bill.
I do not think it would be right to enable a particular authority by resolution to relinquish the powers conferred on it by the Bill because the policies of local authorities change over the years, particularly where there are changes in political control. To enable an authority of a particular persuasion at any given time to relinquish powers which the authority might wish to use in the future would not be acceptable, and, as I think we are all aware, there are numerous permissive powers held by local authorities which they may choose not to exercise. We are not aware of any precedent enabling an individual authority to abdicate the powers given to it.
When the noble Lord, Lord Sandys comes to the point about the DLOs and how some authorities have not exercised them correctly, that is possibly true on occasion, in the same way as it is true that certain private contractors do not always behave as they should. Indeed, many DLOs have been used when a private contractor has gone bankrupt, so this is six of one and half a dozen of the other.
The Bill is drafted in this form because the powers with which it deals were conferred on the authorities by orders under the Local Government Act 1972 for a fixed period only. Therefore, the purpose of the Bill is to do away with the terminal date, to make the powers permanent, and for that reason it is drafted in terms of an Amendment to the orders and not in terms of new powers. Except for changing the Bill and turning it inside out, with which the Amendments to which we shall be coming are concerned, it seems to me that there is no reason for this Amendment.
There is only one further point I wish to make. If the real purpose of it is that the noble Lord and his colleagues feel that the actual authorities should themselves be spelled out, I have some sympathy with not having to turn from one Act of Parliament or one Statutory Instrument to another in order to seek information. I believe the more easily

203
one can make information available, the better, and I should be prepared to consider whether we could list the 25 authorities in the Schedule to the Bill for information purposes only, provided this would not raise questions of hybridity. If that is the main purpose of the Amendment I can certainly give that undertaking.
Lord SANDYS: The noble Baroness has agreed one simple point in connection with the drafting. We believe that legislation by reference to Statutory Instruments should be avoided. As in this particular case no fewer than three Statutory Instruments are concerned and have to be consulted if one is to achieve the full list of 25, it seems to be very satisfactory if the Government agree that a Schedule to the Bill should be attached and we would warmly welcome that suggestion. Bearing that in mind, and further reserving our position upon the situation as it now stands, so that we may return to this issue at the Report stage, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
4.4 p.m.
Baroness YOUNG Baroness YOUNG moved Amendment No. 2:
After Clause 1, insert the following new Clause:
Provisions concerning exercise of powers
.The parties to an agreement or intended agreement whereby any building or work (in this Act called a "relevant work") is to be constructed by a district council (in this Act called a "contracting council") under an agreement made by virtue of section 1 above shall comply with sections (Obligation to put work out to tender) (Form of Contract) and (Separate accounting)) of this Act.
The noble Baroness said: In moving this Amendment I wish to speak at the same time to Amendments Nos. 3, 5, 8 and 9. This is a series of linked Amendments and they are based on the recommendations which are known as the CIPFA recommendations—which stands for those made by the Chartered Institute of Public Finance and Accountancy. This series of Amendments would have the effect of making the authorities which would have these powers present their accounts in the form recommended by CIPFA. I do not think it is necessary for me to explain in detail how these accounts will work, so
204
far as I understand it, the Government themselves have accepted the principle of the CIPFA accounting. They believe it to be the right way of presenting accounts and what they are concerned about is the time when they should be brought in.
I believe also that the principle of the CIPFA accounting has the support of the Liberal Party. May I quote what the honourable Member, Mr. Stephen Ross, said in another place on 17th May:
"I support the Conservative Opposition in their request to the Minister that the CIPFA basis of accounting should be written into the Bill."—[Official Report, Commons, 17/5/77; col. 269.]
This matter was debated in Committee in another place and there was a tied vote. Therefore, I believe the principle of this matter has the support of all Parties, and the reason why I believe it has support is that it has been produced by accountants for local authorities and the fact is that direct labour departments more than any other departments in a local authority are themselves in direct competition with private builders. So it is necessary that comparisons of costs should be fairly made. The only way these comparisons can be made is if a similar system of accounting is used for direct labour departments as would be used by private building firms. This is not only in the interests of other private building firms who are in competition with the direct labour departments; it is of course very much in the interests of ratepayers that they should be able to understand the accounts and it is therefore very much in the interests of local authorities as a whole.
One has only to look and see the latest difficulties that a direct labour department has got itself into. I refer to those figures that have been produced since June of this year from the Wakefield Council, whose leader I believe is Councillor Smart, who recently wrote of the advantages of direct labour departments in the magazine Municipal Review. The figures show that on 22 building works the deficit is now £1,082,551. At a time when local government is going through a great financial crisis it seems to me quite wrong that it should be incurring this kind of deficit, and I cannot believe that it is in the interests of local government or of the building industry that this should be so.
Furthermore, the CIPFA recommendations have already been included in two local Acts; namely, the Tyne and Wear Act and the South Glamorgan County Council Act, and the Committee will recall that those two Private Bills were subject to very full debate in your Lordships' House. This said, it is necessary to try to understand the reasons why the Government have been unwilling to accept these accounting proposals. The first reason that has been given is that the 25 authorities listed, who would be the only ones to whom this would by Statute apply, would then have two different accounting systems. Where the direct labour department was doing work for the district authority itself it would use one accounting system; where the district council was doing work for the county council or a neighbouring district authority it would have to use the CIPFA recommendations, and it was thought that this would be too complicated for it to apply. In my view, this argument simply does not stand up when one considers the Tyne and Wear Act and the South Glamorgan County Council Act where in fact the CIPFA recommendations apply.
Furthermore, as to the argument used by the noble Baroness, Lady Birk, which was that if a county council was going to accept a tender from a direct works department of a district council it would want to ensure that it was getting value for money, it could not tell if it was getting value for money unless that authority had the same kind of accounting procedures as were being used by a private builder who submitted a tender. So the fact is that the county council could not know what it was going to get. This point was very well made when a similar Bill which would have applied to Scotland was going through another place, when the honourable Member Mr. Ewing made it quite clear that it could well be that a county council was going into a completely open-ended commitment if there was not a proper statement of accounts showing the proper costing of the direct works department.
Such accounting would, therefore, be helpful to the other authorities that were contemplating using this direct labour; and at the end of the day, although, as the noble Baroness said on the preceding Amendment, there may well be
206
inefficient private builders, if private builders are inefficient sooner or later they go bankrupt, and they therefore suffer for their inefficiency. If a direct works department is inefficient, the ratepayers can simply subsidise it for years to come without anybody realising what has happened. As my noble friend Lord Sandys indicated, it is a terrible indictment that 13 authorities—it is true that none of them is on this list—have been up-braided by a district audit because of the inefficiency of their direct works departments.
We believe this is an important Amend ment. We are not asking for anything which has not got agreement in principle between all the parties. The question we need to ask the Government is what they are waiting for, and why will they not include these proposals in this Bill? The CIPFA recommendations were published in June 1975. The noble Baroness said that there was a Departmental Working Party reporting on the proceedings for accounting for construction work and that it was expected to report later this summer. She then said that the problems of accounting for maintenance work would be undertaken. I do not know how long it is expected that all this will last, but it does not look to me as if there could possibly be anything in the Queen's Speech in November which would bring in these procedures for direct labour organisations, and presumably if there is no indication at the beginning of the new Parliamentary Session we could wait at least one more year, if not longer, for these procedures to be brought in.
I should have thought, on the contrary, that there was every argument for bringing them in now. The 25 authorities could be used as a pilot scheme to see how they worked and to see whether any further refinements were needed, because it seems to me that once the principle is agreed it is only right that it should be carried out in practice. This is particularly important at a time when we need to encourage efficiency in local government. It in no way prevents a local authority, if it so wishes, from having its direct labour department; but it does make sure, from the point of view of the customer and the ratepayer, that the true accounts are shown up, so that everybody

207
knows whether or not they are getting value for money. I beg to move.
Baroness BIRK: May I ask the noble Baroness whether I am right in thinking that she included Amendment No. 5 in the group she was speaking to?
Baroness YOUNG: Yes, I did.
4.14 p.m.
Baroness BIRK: It is understandable, and I share noble Lords' concern, that there should be a proper financial framework for the operation of direct labour organisations. I do not think there is any argument between us on that. I also appreciate that since similar Amendments were tabled in another place some effort has been made to remove certain weaknesses to which attention was then drawn. In particular, in the new clause, Clause 3, a limit has been included below which competitive tendering is not required. Some provision has also been included to deal with negotiated contracts. But none of the new clauses, however, adequately covers the provisions which would be needed to give DLO authorities power to charge on the basis of a quoted price. Without such a power the use of standard contract forms providing for contract price would be largely inappropriate.
It is not really clear what is meant by the reference to "proper charge" in the new Clause 9. A clear indication would need to be given of the way in which proper charges were to be assessed. Also on Clause 9, which would require a DLO authority to ensure that in respect of such projects income is sufficient to defray expenditure, private contractors do not necessarily operate in that way in respect of each contract, and in fairness DLO authorities really should not be expected to do so either. So a financial objective should operate in relation to a DLO's activities over a period. This, I accept, is really just picking on points on the various clauses. My basic exception to them all is that, although I accept that the general intent behind these clauses certainly accords broadly with the Government's view on the way in which the accounting system should develop, the weaknesses in the drafting demonstrate the need for the provisions to be properly worked out.
208
The most important point of all, as I previously explained on Second Reading, is that the place for introducing a new financial system is comprehensive legislation dealing with DLO activities generally. I explained this on Second Reading but I am afraid I shall have to go over the argument again. It would be completely inappropriate to have these provisions in the Bill, because they would apply to only that part of the DLO activities of the 25 authorities which is undertaken by virtue of this Bill. The provisions would not affect the other DLO activities of the 25 authorities which represent by far the greater proportion of their DLO work; that is, the work they do for themselves. Nor would they affect the DLO activities of all other local authorities.
It would seem to me, and I hope to the Committee, that it would be quite anomalous to have special accounting provisions simply for 25 authorities, whose powers were merely being restored as a result of the reorganisation of the 1972 Local Government Act. It would also be confusing to have different systems operating within a single authority, which would be the case for the 25 authorities. If this were inserted in this Bill they would have to operate two different accounting systems, which I do not think can make for great efficiency. It would also be wrong to provide a new financial system to bring DLOs into line with private contractors without giving DLOs an ability, like private contractors, to seek work on a wider basis. What we need to do is to provide a proper framework covering not only the financial arrangements but also the scope of DLO activities.
We accept that until there is comprehensive legislation there should be a continuing dialogue. In our Consultation Documents last year we set out the main principles we proposed to embody in the comprehensive legislation. We expect to receive in the summer a report from the Departmental Working Party on the detailed arrangements in relation to new construction work. A further CIPFA report is expected before long in relation to maintenance work, and I hope the Working Party will be able to advise on the detailed arrangements on that aspect early next year. When we have a report from the Working Party we will consult those concerned on these issues, and this will enable the discussions to be continued.

209
Regarding this Bill, however, it would not be right, for these reasons, to accept these new clauses. I think I should say a word on the new Clause 5, which is included in the group, which deals with the suspension of powers. Before one can contemplate suspending a local authority's powers under general Statute one must have established clear-cut criteria to enable a sound and fair judgment to be made of the need for such action. Until there are satisfactory accounting and charging arrangements this cannot be done. There must be a proper basis for considering the form of the sanction in the case of a DLO which does not operate effectively.
Under the comprehensive legislation that the Government had hoped to introduce, a DLO authority would have been under a duty to avoid making a loss (having been given power to charge on the basis of a firm price); the Secretary of State would have had power to direct that all or part of a DLO's activities should cease if a DLO failed to meet the financial duty in three consecutive years; and, in deciding whether to exercise the power, the Secretary of State would have had regard to whether the DLO authority was likely to meet the financial objective within a reasonable period. In all these instances the client authority would take into account the fact that it would have to pay the actuals costs of the DLO authority in deciding whether it was economic to award work to a DLO. Therefore, in that way its financial responsibilities are the same as regards whether it awards the work to a DLO or to a private contractor. A client authority usually puts its work out to tender and it is in its interest to choose the most economic course.
The noble Baroness, Lady Young, quoted the examples of Tyne and Weir and Glamorganshire. It is perfectly true that when the Bills were drafted it was pointed out that there were financial problems. However, the Promoters at the time decided to go ahead as this whole question was then being raised and discussions were taking place. However, it is certainly extremely improbable and unlikely that this would happen in any further private Bills.
Lord O'HAGAN: It is always interesting to listen to the noble Baroness,
210
Lady Birk, and she adopts a patient and motherly tone as if she were a world weary elder relative dealing with difficult and irresponsible children raising awkward questions. The noble Baroness has put up a barrage of technical points about the drafting of some of the Amendments moved by my noble friend Lady Young, and has also attempted to drown us with a whole series of points which claim to show that it would be impossible to introduce a proper system of accounting for direct labour organisations.
I should like to ask the noble Baroness, Lady Birk, the question that I asked on Second Reading, because she has not yet answered it. It is a question that I think your Lordships need to hear again and we should like to hear the noble Baroness' answer, if she has one. We understand that when the Government had a plan for a much more comprehensive Bill, they were to introduce a system of thorough, overall control over direct labour organisations. If that system is ready now why can it not be used as a pilot experiment in the Bill now before the House? The noble Baroness, Lady Birk, made great play with the drafting defects, as she explained them, of the Amendments before the House. I always take it as a compliment if the Civil Service pick holes in the drafting, because they must think that there is something in the Amendment that is worth pointing out as a drafting defect.
The noble Baroness then explained in great detail why it would be so difficult to introduce proper accounting methods. Yet, at the same time, she continues to proclaim the Government's intention and desire to bring those proper accounting methods into practice. We need to know why this Bill, the Government's own Bill, cannot be used as the trial run for these accounting methods. They have been worked out by the CIPFA Working Group since 1975. The Government support the recommendations. I do not know whether the Liberals in this House support the recommendations, but the Liberals in the other place support them. Why did not the Government take this opportunity to put them into effect? It is not a technical or an ideological matter; it is concerned with large sums of money.
I shall not repeat some of the horror stories that are known to your Lordships

211
about things that have gone on in direct labour organisations in Glasgow, Wandsworth or other places. However, I should like, briefly, to give your Lordships an idea of the comparable return for the money between building operations carried out by private operatives and direct labour. The figures are taken from the statistics that the Department of the Environment publishes. The figures that I have for last year show that the output per man as regards direct labour was 1,084 and the private figure was 2,861. We must get some common sense into the accounting of direct labour organisations. If they fail, or if they are inefficient, it is not the Government who pay: in the end it is us. This is an opportunity for the Government to show their good intentions and to put tough accounting procedures into the Bill, because we still have not had a good explanation as to why they will not do so.
Baroness BIRK: I think that the noble Lord, Lord O'Hagan, was so busy working out his phraseology to describe how I was replying to the Amendments that he omitted to listen. I explained the position exactly and not in technical language. Incidentally, the Bill is very technical and I felt that it would be for the convenience of the Committee to get all the technical matters off in one go without having to go backwards and forwards. I shall repeat what I have said and I should be extremely grateful if the noble Lord, Lord O'Hagan, would, in his boyish way, listen to what I am saying. I accept that the general intent behind the clauses accords broadly with the Government's view of the way in which the accounting system should develop, but I said that it would be completely inappropriate to have these provisions in the Bill because they would apply to only that part of the DLO activities of the 25 authorities which was undertaken by virtue of the Bill.
The provisions would not affect the other DLO activities of the 25 authorities—that is to say, where they do work for themselves and not for other client authorities; I shall make sure that the noble Lord, Lord O'Hagan takes these points in, so he must be patient—which represent by far the greater proportion of their DLO work. Nor would they
212
affect—and this is extremely important—the DLO activities of all the other local authorities. Therefore, it would be quite anomalous to have special accounting provisions simply for 25 authorities whose powers were being restored. In addition, it would be confusing to have different systems operating within a single authority which would, in fact, be the case for the 25 authorities.
As we intend to introduce a Bill which deals with a much more comprehensive approach to DLO activities generally, that would be the time to bring in all the provisions that we have been discussing. There is no difference between us as regards the need for these new accounting and charging provisions. After all, we set up the Working Party and we have accepted its report. However, this Bill is not the instrument to do it. All the argument in the world will not change what is, frankly, an obvious fact.
Baroness YOUNG: Would the noble Baroness, Lady Birk, care to answer the point made by my noble friend Lord O'Hagan, as to whether or not the original Bill that was drawn up and dropped included these recommendations? If it did include them, will she tell us whether the Government have clauses in draft which could go into a Bill at any time?
Baroness BIRK: The general recommendations on the wider issues had been worked out and were being worked out. They would have to be scrutinised again but they could probably go into a Bill. However, it would be a quite different Bill because it would be dealing with DLO activities of all local authorities and not just these 25—it was only because the order finished on 31st March 1977 and it was just to bring them into line. Noble Lords opposite are trying to build an edifice on something which is just a small rearrangement, a correction, in order to bring the activities of the 25 authorities within the new boundaries which have now encompassed them since the Act of 1972. If the Opposition come forward and say, "Yes we would love to have this Bill which has not yet been put before us" we would respond very gladly and bring it forward, no doubt, for the next Queen's Speech.
Baroness YOUNG: We have listened with very great care to what the noble

213
Baroness, Lady Birk, has said about this series of Amendments. I fully appreciate the objectives of the Bill and what it seeks to do, but I cannot accept that it is so difficult for these 25 authorities to have these accounting procedures on the occasions when they will be doing work for a county council or a neighbouring district council. There is nothing whatever to prevent them bringing the accounting procedures for their direct labour departments that are working for themselves into line with the CIPFA recommendations. Then, of course, they would not have the two procedures together. That is an argument that does not stand up to the test when one considers what the reality of the situation in a local authority would be.
I quite recognise that many of these Amendments may be incorrectly drafted. Anyone who has ever attempted to amend a Bill knows perfectly well that no Amendment is ever correctly drafted. I should be quite prepared to withdraw the Amendments if the Government would come back and draft them correctly. However, that was not what the noble Baroness promised. She has agreed with us that in principle they are right and that they ought to apply in local authorities.

CONTENTS

Ailsa, M.

De Freyne, L.

Mackie of Benshie, L.

Airedale, L.

Denham, L. [Teller.]

Macleod of Borve, B.

Alexander of Tunis, E.

Deramore, L.

Mancroft, L.

Allerton, L.

Derwent, L.

Mansfield, E.

Alport, L.

Eccles, V.

Merrivale, L.

Amory, V.

Effingham, E.

Montagu of Beaulieu, L.

Ampthill, L.

Elliot of Harwood, B.

Montgomery of Alamein, V.

Amulree, L.

Elton, L.

Mottistone, L.

Arran, E.

Emmet of Amberley, B.

Mowbray and Stourton, L. [Teller.]

Atholl, D.

Falkland, V.

Avon, E.

George-Brown, L.

Moyne, L.

Banks, L.

Gisborough, L.

Newall, L.

Barnby, L.

Gladwyn, L.

Noel-Buxton, L.

Beaumont of Whitley, L.

Glasgow, E.

Nunburnholme, L.

Belstead, L.

Glenkinglas, L.

O'Hagan, L.

Berkeley, B.

Greenway, L.

Onslow, E.

Blake, L.

Grey, E.

Rankeillour, L.

Broadbridge, L.

Gridley, L.

Reigate, L.

Brock, L.

Hailsham of Saint Marylebone, L.

Rochdale, V.

Brougham and Vaux, L.

Hampton, L.

Sackville, L.

Caccia, L.

Hanworth, V.

St. Davids, V.

Campbell of Croy, L.

Henley, L.

St. Helens, L.

Carrington, L.

Home of the Hirsel, L.

Sandford, L.

Cathcart, E.

Inglewood, L.

Sandys, L.

Clancarty, E.

Kinloss, Ly.

Selsdon, L.

Clwyd, L.

Kinnaird, L.

Sharples, B.

Cork and Orrery, E.

Loudoun, C.

Skelmersdale, L.

Cranbrook, E.

Lucas of Chilworth, L.

Spens, L.

Cullen of Ashbourne, L.

Luke, L.

Stamp, L.

Daventry, V.

Lyell, L.

Strathclyde, L.

This Bill, which we do not believe to have been necessary but which nevertheless is before the Committee, provides an opportunity to have these accounting procedures in 25 authorities on certain occasions. It seems to us on this side of the House to be something that would be well worth trying out as a pilot scheme. If they are based on the CIPFA recommendations, we shall welcome the Government's proposals when they come forward. However, as I understand the timetable, the report will not be complete until next summer, and it will be at least 18 months before anything could happen. We have an opportunity in this Amendment to do something immediately which we believe to be in the best interests of the building industry, the ratepayers of authorities and, above all, local government itself, because it will be seen to be fair and right. For that reason I cannot withdraw the Amendment.
4.32 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 104; Not-Contents, 57.

Strathcona and Mount Royal, L.

Trefgarne, L.

Ward of North Tyneside, B.

Strathspey, L.

Vernon, L.

Ward of Witley, V.

Sudeley, L.

Vickers, B.

Westbury, L.

Terrington, L.

Vivian, L.

Wigoder, L.

Thurlow, L.

Wakefield of Kendal, L.

Young, B.

NOT-CONTENTS

Balogh, L.

Gaitskell, B.

Phillips, B.

Birk, B.

Greenwood of Rossendale, L.

Raglan, L.

Blyton, L.

Gregson, L.

Rhodes, L.

Boothby, L.

Hale, L.

Ritchie-Calder, L.

Brockway, L.

Halsbury, E.

Roberthall, L.

Buckinghamshire, E.

Henderson, L.

Rusholme, L.

Burntwood, L.

Houghton of Sowerby, L.

Sainsbury, L.

Castle, L.

Hughes, L.

Shepherd, L.

Champion, L.

Janner, L.

Shinwell, L.

Chorley, L.

Kirkhill, L.

Snow, L.

Collison, L.

Leatherland, L.

Stone, L.

Cooper of Stockton Heath, L.

Llewelyn-Davies of Hastoe, B.

Stow Hill, L.

Crook, L.

Longford, E.

Taylor of Gryfe, L.

Darling of Hillsborough, L.

McCluskey, L.

Taylor of Mansfield, L.

Davies of Leek, L.

Maelor, L.

Wells-Pestell, L. [Teller.]

Delacourt-Smith of Alteryn, B.

Milford, L.

Williamson, L.

Donaldson of Kingsbridge, L.

Oram, L. [Teller.]

Wilson of High Wray, L.

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

Pannell, L.

Wootton of Abinger, B.

Fisher of Camden, L.

Parry, L.

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
4.42 p.m.
Baroness YOUNG Baroness YOUNG moved Amendment No. 3:
After Clause 1, insert the following new clause:
Obligation to put work out to tender
.—(1) A local authority which desires a contracting council to carry nut a relevant work shall either—

(a) put the relevant work out for competitive tender and in respect thereof comply with the provisions of the Code of Procedure for Selective Tendering (1972 Edition) published by the National Joint Consultative Committee of Architects, Quantity Surveyors and Builders or such other code of procedure as shall from time to time be published by that committee in collaboration with the Secretary of State; or, if the Secretary of State so directs, shall comply with such other code as may be prescribed or approved by him for the purposes of this section; or

(b) negotiate a price which shall not exceed the limit specified in subsection (2) below.

(2) The limit specified for the purposes of subsection (1) above shall be £50,000 or a higher sum being the same proportion to the said sum of £50,000 as shall be borne by any increase in the Index of Retail Prices to the figure shown therein for the month of July 1977.
(3) The Index of Retail Prices means the Index of Retail Prices published by H.M. Stationery Office or any official publication substituted therefor.
The noble Baroness said: I have spoken to this Amendment. I beg to move.
On Question, Amendment agreed to.
[Amendment No. 4 not moved.]
Baroness YOUNG Baroness YOUNG moved Amendment No. 5:
After Clause 1, insert the following new clause:
Suspension of powers
.The Secretary of State shall have power by written notice to suspend for such period or periods as he thinks fit the operation by a district council therein named of the powers conferred by section 1 above if after consideration of the specified accounts prepared by that Council in accordance with section (Separate accounting) of this Act or the reports of the District Auditor on the new building and construction works carried out by that council on its own behalf he is of the opinion that there is an unreasonable risk that the exercise of those powers will result in loss to the council.
The noble Baroness said: Again, I have spoken to this. I beg to move.
On Question, Amendment agreed to.
[Amendment No. 6 not moved.]
4.44 p.m.
Lord O'HAGAN Lord O'HAGAN moved Amendment No. 7:
After Clause 1, insert the following new clause:
Duration of Act
.—(1) This Act shall continue in force for the period of year beginning with the date of the passing of this Act and shall then expire unless it is continued in force in accordance with subsection (2) below.
(2) The Secretary of State may by order made by statutory instrument provide that this

217
Act shall continue in force for a period of one year beyond the date on which it would otherwise expire.
(3) An order shall not be made under subsection (2) above unless a draft of the order has been laid before Parliament and approved by a resolution of each House of Parliament.
The noble Lord said: I rise to move Amendment No. 7, which stands on the Marshalled List in the names of my noble friends and myself. There has been some misunderstanding about the origins of this Bill. In the Local Government Act 1972, certain transitional provisions were made for the consequences of the alteration of local authority boundaries. One of those provisions was to enable the direct labour organisations to continue working and so make for an easy transition to the new system of local government when fully implemented.
What the Government have chosen to do is to attempt to perpetuate those transitional provisions and to fossilize and make them permanent, and so to prove the truth of an old French proverb which I shall quote only in English "There is nothing that lasts except the provisional". This is not a good way to make laws nor is it a good way to enable local government to carry out its proper functions.
There is another reason that led me to think about the way the Bill is phrased. It is this: as we can see from the words of the Bill itself, it seeks to establish on the Statute Book, permanently and for ever, direct labour organisations working to, and within, boundaries that are now wholly out of date. We may well find in years to come that there are difficulties because there will be no other piece of legislation in relation to which it is relevant, and continues to be relevant, to take into account the location of the boundaries of the old boroughs before the local government reorganisation.
I am not resting my case on the fact that local authorities may not know where the boundaries were some while ago. Nevertheless, with a constantly evolving landscape and townscape, it is difficult to keep track of boundaries that have nothing but historical interest except in this one particular instance. Therefore, because the Government are choosing to attempt to perpetuate something that was meant to be merely temporary in a permanent Statute, I want both Houses
218
of Parliament to be given a chance to keep an eye on it and see how things are developing.
If ever there was a case for a Bill being referred to one of the new Standing Committees proposed by your Lordships' Practice and Procedure Committee, in which evidence could be taken from Departments and outside organisations as to the desirability and workability of the Bill, it is this one. I have in my hands newspaper articles, one of them headed:
"More facts needed before role of direct labour departments expanded".
Another one concludes:
"Direct labour is as good as the men who manage it. Before the Government legislates to extend the system it must pause for a moment from the politics and look to its managers".
That has not been done. That full survey has not been carried out.
Because this Bill is giving permanence to something that was not designed to be permanent, I feel that Parliament needs to keep an eye on how the situation develops, and at the same time Parliament needs to be able to take stock of how direct labour organisations are working. They are controversial, they are costly, and often they are disastrously inefficient. I am attempting in this Amendment to provide that this Act shall not continue in force without an Instrument being passed through both Houses of Parliament annually. That would give both Houses a chance to examine how things were developing and whether the Bill was working as intended. It would give both Houses a chance to see how direct labour was facing up to the new challenges. It would give both Houses a chance to examine whether difficulties had arisen because of the out-of-date nature of the boundaries on which this Bill is based. It is a piece of common sense to make sure that this Bill works. If the Government intend to have this Bill, surely they want it to work. In the interests of greater Parliamentary scrutiny of this legislation—post-legislative scrutiny, if you like—I beg to move this Amendment.
Lord SANDYS: I should like to support this Amendment, so cogently moved by my noble friend Lord O'Hagan. In parenthesis, I should like to say that the Government should take note of the ingenious way in which it is drafted, for it could have been the sort of Amendment

219
which the Government might have had in mind for the Control of Office Development Bill to which we have so recently given our attention.
To turn to the Local Government Act 1972, I believe that, when that Act was before Parliament, great consideration was given to the consequential and transitional arrangements. The section with which we are concerned, Section 254, laid particular stress on the problems of the boundaries of local authorities. There is a subsection there, subsection (4), which I shall not quote in detail but which I have had before me and which permits the Secretary of State to give a specific direction on this matter. Further, the Secretary of State can call upon additional powers under Section 67, which deals with a much wider range of transitional and consequential provisions. The Amendment is entirely in keeping with both those sections of the 1972 Act and would give Parliament the opportunity to examine this matter in a year's time.
Baroness BIRK: I agree it is an ingenious Amendment, but ingenuity is not the only criterion for accepting Amendments, and while I give credit for its ingenuity I am afraid I must urge the Committee to resist it. What the noble Lord, Lord O'Hagan, would be doing would be restoring the powers for only one year with provision for one extension for one year by order of the Secretary of State. There is no sufficient reason for limiting the operation of such powers in time. This arose only because the measure introduced by the last Conservative Government on local government reorganisation failed to deal with the position of direct labour organisations. The 1972 Act should have made permanent arrangements regarding the scope of their activities, and the only reason why the orders were time limited originally was that it was not possible under Section 254 of the 1972 Act—this was a consequential and supplementary provision under which the orders were made—to provide the powers on a permanent basis because the Local Government Act powers were not wide enough to enable the orders to do that.
This Bill will be supplanted at a later date by comprehensive legislation on local authority direct labour organisations—we discussed this on earlier Amendments—
220
and this will provide a uniform basis for the operation of DLOs throughout the country and in the context of the present local government boundaries. Unfortunately it is not possible at this stage to say when that comprehensive legislation will be introduced, but it would be a nonsense and an unnecessary waste of time and effort to have to legislate again simply to enable the 25 local authorities to continue to have these powers. I cannot see the sense of trying to run a DLO on a yearly expectation of life because that must make forward planning impossible.
Lord O'HAGAN: I hesitate to interrupt, but I think I heard the noble Baroness say that she could not see how it could be a good idea to legislate again. Surely she understands that the Amendment would mean that this legislation would become annually renewable.
Baroness BIRK: My Lords, if the comprehensive legislation comes forward, we shall have to be legislating on that and there does not seem to be any reason in the meantime to look at this every year and to try to run it on a yearly expectation of life; perhaps I used the word "legislate" when I did not mean to do so.
This arose out of an anomaly and the anomaly, when it was discovered, was corrected temporarily by the transitional orders. It was a stop-gap measure and it was hoped that before the temporary orders expired we should have introduced the comprehensive Bill, but unfortunately that was not to be, and while we still intend, as I have said in discussing the Amendments today, to bring forward such a measure, it is necessary now to take action to continue the effect of the transitional orders. There seems no reason considering the history of this whole episode arising out of the 1972 Act, to depart from rectifying it for the time being, until new legislation comes in, and to make this rather extraordinary exception of having it on a yearly basis. I do not think that would make sense one way or the other.
Baroness YOUNG: The noble Baroness said she did not feel it made sense, yet she herself has argued consistently throughout our debates on the Bill that it does no more than continue what is the present practice. We have

221
argued quite the contrary, that the Bill is putting in statutory form orders which have been renewable, and therefore there is a difference. This Amendment—and I congratulate my noble friend Lord O'Hagan because it is ingenious—says what the Government are saying and what they are intending to do. I should have thought therefore that it was worth accepting.
Baroness BIRK: I cannot see any point in accepting the Amendment unless the noble Baroness feels, returning to the point of the other substantive Amendments, that she would like to go over to the new system of financing just for 25 authorities under which each would have to be operating by two different sets of accounting. In addition to that, there would be uncertainty as to what would happen at the end of each year. I should have thought that with her Party's view on public expenditure—she is always keen, and rightly so, to ensure that expenditure and personnel are not wasted—she would have realised that the effect of all that has been said throughout the discussion on the Amendments to the Bill would result in greater expenditure and more manpower being used in what would be a rather ineffectual and inefficient way for 25 authorities and only for a small part of their work. This is an extension of the argument we have had previously.
Lord O'HAGAN: I am disappointed by that answer because my Amendment would not take away from the Government their objective in putting forward this Bill. My Amendment would, while safeguarding the Bill itself, give Parliament an annual opportunity to see how things are progressing. We have heard on all sides that the DLOs are in need of examination, particularly on the accounting side—that is something on which there is almost unanimous agreement in the Committee—and I am sad that this constructive Amendment has not met with a better reception. I will reflect on what the noble Baroness has said and, in the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Baroness YOUNG Baroness YOUNG moved Amendment No. 8:
222
After Clause 1, insert the following new clause:
Form of contract
. Any agreement for the carrying out of a relevant work shall incorporate the appropriate standard form of building contract for the time being published by the Joint Contracts Tribunal (commonly called the RIBA Standard Form of Contract) or that published by the Association of Consulting Engineers, the Institution of Civil Engineers and the Federation of Civil Engineering Contractors (commonly called the ICE Standard Form of Contract) or such other standard form as shall be in common use.
On Question, Amendment agreed to.
Baroness YOUNG Baroness YOUNG moved Amendment No. 9:
After Clause 1, insert the following new clause:
Separate accounting
.—(1) The accounts of the contracting council shall include a separate account (hereinafter called "the specified account") in respect of each relevant work carried out by that council under an agreement made by virtue of section 1 of this Act and which shall be included in the accounts next following the expiry of nine months after the issue of the final certificate for that work; and subsection (1) of section 159 of the Local Government Act 1972 (which relates to the inspection and taking of copies of accounts) shall have effect as if the reference to the accounts to be audited included a reference to the specified account.
(2) The contracting council shall bring into the specified account all costs, liabilities, charges and expenses including financing costs attributable to the relevant work to which the account relates and shall in particular without prejudice to the generality of the foregoing ensure that the specified account shall—

(a) include a proper charge in respect of—

(i) labour and labour overheads;

(ii) the use of premises in connection with the carrying out of the relevant work,

(iii) building and works department administrative and supervisory expenses;

(iv) central administrative expenses;

(v) capital, operating, maintenance and finance costs for all plant equipment, vehicles and workshops, and used in carrying out the relevant work;

(vi) any supplies taken from stock for the purpose of carrying out the relevant work; and

(vii) in relation to goods manufactured by the contracting council and used in the carrying out of the relevant work, labour materials and all other relevant expenses; and

(b) where an item is attributable partly to the relevant work and partly to other work or to two or more relevant works show a fair apportionment having regard to the respective values of the works in question.

(3) After audit the specified account shall be available to the public for examination.
(4) The contracting council shall use their best endeavours to secure that (having due regard to the provisions of subsection (2)

223
above) the income derived from the carrying out of each relevant work is sufficient to defray their expenditure in respect of that work.
The noble Baroness said: I spoke to this Amendment earlier. I beg to move.
On Question, Amendment agreed to.
Clause 2 [Short title and extent]:
4.58 p.m.
Lord O'HAGAN Lord O'HAGAN moved Amendment No. 10:
Page 1, line 22, leave out ("Local Authorities (Restoration of Works") and insert ("Direct Labour (Extension of").
The noble Lord said: In moving this Amendment, I seek to tell your Lordships and members of the public, and those who are concerned to examine the Bill, what the Bill actually is, and I think that is a good Parliamentary principle. Governments—this is no doubt a criticism which could be applied to all Governments—tend to want to find the most flattering or else the most obscurantist Titles for their Bills; they either wish to make them sound better then they are and gild them, or they wish to be what I believe is called obfuscatory and make it wholly unclear what the Bill is for. My noble friend Lord Sandys told me that when he first looked at the Bill and saw the Title, Local Authorities (Restoration of Works Powers) Bill, he thought it was a conservation measure. The Title as it stands gives very little indication of what the Bill is really intending to do.
To give Bills Titles which indicate what they really are should not be considered simply a joke. It is necessary to make the objects of our legislation clear both to the average citizen trying to find an Act relevant to his particular anxiety and to the practitioners of the law. The words Local Authorities (Restoration of Works Powers) Bill give no clear idea of what the Bill does. The Bill extends the powers of direct labour, and my Amendment seeks to make this clear. This is a simple, small Amendment designed in Parliamentary terms to comply with the principles of the Trade Descriptions Act. It seeks to describe the Bill as what it really is, and to remove the cloak of the rather long and complicated Title which at present obscures the true nature and purpose of the Bill. I beg to move.
Lord SANDYS: I should like to support the Amendment because I believe it to be important, and my noble friend has referred to a difficulty which I had in placing the Bill in its correct pigeon-hole. I again referred to the report of the Renton Committee on the Preparation of Legislation, which I mentioned earlier, to see what it had had to say about the arrangements for Short Titles. It is interesting to note that the Statute Law Society had an important suggestion to make. It contended that Titles should not be chosen
"…at random, inconsistently, or unsystematically, but should be selected by a designated person or body charged with this task and according to prescribed rules ".
That is the view of the Statute Law Society on the matter. The Society goes on at greater length to enlarge upon its argument, but I believe that the case is very largely self-explanatory from what has been written into the Amendment and from the argument presented by my noble friend Lord O'Hagan.
Baroness BIRK: In a period of inflation the noble Lord, Lord O'Hagan, is certainly inflating this Bill because he is trying to make it much wider. I do not think that he is entirely clear as to what the Bill is about. All the Bill is concerned to do is to restore the powers of 25 authorities. I agree that there are occasions when the Titles of Bills are not quite so comprehensible as they might be, but this is the Local Authorities (Restoration of Works) Powers Bill, and anybody who has sat through the Second Reading and Committee stage ought to be quite clear that what we are doing in the Bill is to restore powers to 25 authorities which lost them because of a change of boundaries due to the 1972 Local Government Act. The phrase "Restoration of Works Powers" is absolutely correct nomenclature. To use the Title "Direct Labour (Extension of)" would, in my view, be quite wrong and inaccurate. For this reason, the Amendment is unacceptable. It does not convey with accuracy the meaning of the Bill, nor what the Bill is about. It would be grossly misleading to suggest that the measure is concerned with the general extension of the power of direct labour organisations, which is what the noble Lord's Amendment would suggest, and even if he did not see it that way, that is

225
how it would normally be read. Therefore, I hope that the Committee will resist the Amendment.
Lord O'HAGAN: I thank the noble Baroness for her stout defence of the Parliamentary draftsmen and her departmental advisers. This Bill does indeed extend direct labour, and extends it into infinity. The object is to make it go on without stopping. We shall not continue the argument; we shall return to it another day. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
On Question, That this be the Title of the Bill?
Baroness YOUNG: Before we pass this point, I should like to say that I am conscious that, now that the Committee has accepted the series of Amendments on the proposals on accounting, I believe that there needs to be an Amendment to the Long Title of the Bill, and that I wish to consider this at the next stage.
Title agreed to.
House resumed: Bill reported with the Amendments.

EEC COMMON COMMERCIAL POLICY: 40th REPORT OF THE ECC
5.7 p.m.
Lord TREVELYAN Lord TREVELYAN rose to move, That this House takes note of the Fortieth Report (HL 226) of the European Communities Committee on the EEC Common Commercial Policy. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. It is, as I understand it, the policy of the Select Committee both to comment on specific proposals made in the Community which affect British interests, and to examine in general major aspects of Community policy. Today the Select Committee, with notable assistance from the Department of Trade and the noble Lord, Lord Reay, the rapporteur for the Loma Convention in the European Parliament, submits to your Lordships a review of the Community's Common Commercial
226
Policy; that is, the commercial policy of the Community towards the world outside the Community. We hope, thus, to draw the attention of the House to a matter, the importance and scope of which we believe are not generally understood. The Committee has also been greatly helped by the visit of its Sub-Committee to Brussels, and the advice which the subcommittee received there.
We consider that this is one of the Community's successes, largely due to the efforts of Sir Christopher Soames and his able team of officials. It was adumbrated in a period of European prosperity. It would probably not have developed in precisely the same way if the severe recession could have been more clearly foreseen, but, by and large, I do not think that it would have come out much differently.
Let me first single out three aspects of the policy. First, the Community forms the largest trading bloc in the world. To belong to this bloc must surely be of continuing advantage to the interests of this country. Secondly, the Community has achieved a high degree of integration of its Members in its commercial relations with non-Member countries. Thirdly, it is a generous outward-looking policy, and has little of the narrow, inward-looking quality which, in the early days of the Community's existence, we had feared it would have. In this respect, the policy suits the interests of this country which thrives on an expanding basis of international trade, and accords with our recognition of the importance of the advancement of the developing world. It is a policy with which we should be well satisfied. The main basis for the commercial policy is the Common External Tariff, which is now lower than the average level of duties imposed by the other great trading blocs—a tariff to which this country now fully adheres during this year, at the close of the temporary transitional period applying to it.
As will be seen from the report, the picture is by no means simple. This is largely due to the need for flexibility in dealing with the many different trading situations. An over-rigid framework would not have met the needs of the Community or its trading partners, which are numerous and diverse, for many countries

227
have eagerly sought trade agreements with the Community. The Member States may continue existing bilateral agreements when they are due to expire, but only after consultation with the Commission, which must check that such agreements do not run counter to Community policy, but any agreement made by the Community with a non-Member State overrides existing bilateral agreements. New agreements are negotiated only by the Community, and the major trade agreements to which the United Kingdom is a party are now Community agreements.
I do not want to weary your Lordships with a repetition of the details of the various types of agreement which we have set out in the report, but I should like to comment on four types of agreement: those with the EFTA countries, those with the countries of the Mediterranean littoral, those with the State trading countries and those with the members of the Lomé Convention. The free trade agreements with the EFTA countries followed the enlargement of the Community in 1973, and reflect both the comparable degree of economic development in the Community and the EFTA countries and the long-standing geographical and economic ties existing between them. Secondly, the agreements with the Mediterranean countries also reflect geographical and long-standing historical ties. They comprise three types: preferential agreements with Greece and Turkey which contemplate their possible adhesion to the Community and, in that event, would ease their way to membership; agreements with Spain, Israel, Malta and Cyprus, which contemplate ultimate free trade with the Community; and agreements with other countries of the Southern and Eastern shores of the Mediterranean, which are conceived more in terms of aid than of free trade.
The Community is now engaged in bringing balance and cohesion to its Mediterranean policy. There is urgent need of a coherent policy for this area in the agricultural sector. The Government stress the view that the current problems of the Community's Mediterranean producers arise from structural causes, and not from the agreements with non-Member countries. The Committee accept this view, but point out that the probable accession to membership
228
in the next five to ten years of some Mediterranean countries would make it essential to relate the concessions in agricultural products granted to non-Member Mediterranean States to the output of the Mediterranean Member States in the same products. It is an example of the need to co-ordinate the Community's internal and external policies. This touches the difficult problems of the enlargement of the Community, requiring a separate report which the Committee hope to submit to your Lordships later this year.
The present report explains the Community's machinery for dealing with the Arab boycott. We note that this machinery has not yet been invoked, and doubt whether it will provide a more practical approach to this difficult question than the present policy of the Government. The Committee believe that the Community's policy for dealing with the State trading countries is sound. COMECON's aim appears to be to negotiate with the Community on behalf of all its members, which show no eagerness to support this procedure. The Community has agreed to have formal links with COMECON in the field of information, but has every intention of negotiating trade agreements separately with the individual countries involved. Agreement has already been reached on the conditions for the import of Romanian textiles.
The Lomé Convention, debated in your Lordships' House in November 1976, remains the cornerstone of the Community's relationship with the developing countries, and requires the further discussion of it in the report. We have heard it said that the Convention is based on four principles: that there is a need to link trade promotion with the grant of trading facilities; that, unlike the generalised system of preferences, which is unilateral, the Convention is an international treaty which cannot be varied unilaterally by the Community; that the Convention has established the need to combine trade concessions with co-operation in development which will improve the capacity of the beneficiary to exploit the concessions; and that the Convention's importance lies in the fact that the Community is a group of countries addressing another group of countries.
This is what one might call the ideological basis of the Convention. As I understand it (though my acquaintance with it is only recent), it originated in the concept of establishing a new relationship with the old colonial countries—a relationship which would have a political and psychological, as well as a commercial, aspect. This idea was, I understand, of French inspiration in the Yaoundé Convention, but it has been developed with the accession principally of the former British colonies in East Africa. There is much sense in this line of thought, but the concept of exclusive development of the Community's relations with a section of the developing world carries with it some inherent difficulties. The members expect to have a privileged position, but continually find that their preferences are being eroded by the Community's subsequent policy, either through the general scheme of preferences or through new bilateral agreements. There is a clear division of principle between those who think it would be wrong to treat the Lomé countries as an exclusive club, particularly as some of the poorest developing countries are not members, and those who hold that the privileged position of the Lomé countries should as far as possible be maintained.
An important feature of the Convention which is being developed is the scheme for the stabilisation of export earnings, known as Stabex. The Governments of the Lomé countries may apply for financial assistance if a country's export earnings from certain primary products fall by prescribed percentages. This scheme is now operating successfully, and has in a number of cases made a significant contribution to earnings, though the funds available for transfers under the scheme are as yet very limited. The institutions of the Convention give the impression of being rather top-heavy. There is a Council of Ministers, a Committee of Ambassadors and a Consultative Assembly. The practical working of the Convention can best be managed through the smaller working body; that is, the Joint Committee of the Lomé members and the Council of Ministers.
One important question will be what position in the Community's commercial structure should be given to the South Asian States which are not members of the Convention. Their membership
230
would swamp the Convention. However, these are the most populous and poorest countries. The Community already has trade and co-operation agreements with India, Pakistan and Sri Lanka, and India benefits from the Community's food aid scheme and the generalised preferences. It seems inevitable that these countries should be treated as a separate category outside the Convention.
One weak point in the Community's arrangements is Japan. Negotiations have not got very far. It is the opinion of the Committee that renewed attempts to reach agreement should be made very soon, and the Committee hope that the British Government will pursue this further. On New Zealand and Australia, the Government consider that they can do most for these countries' interests by negotiations within the Community on matters such as the reform of the Common Agricultural Policy, rather than by pressing for Community agreements with these countries. Canada has an agreement with the Community for mutual encouragement of trade and industry which it seems to regard as important, and, I think, is not pressing for anything else.
There are some general points which require comment. The Commission speaks for its members in GATT, and the Nine Members seek to co-ordinate their position in the negotiations in UNCTAD. The Community has supported a positive and practical approach to the negotiations for the establishment of a common fund to stabilise commodity prices. It has generally found that it is unrealistic to ask for trade concessions from developing countries comparable to those granted by the Community, but it has emphasised that opportunities to provide security for investments and raw material supplies and for reducing non-tariff barriers should not be overlooked. It hopes to make available reinsurance to complement national schemes of investment insurance.
A serious hindrance to orderly negotiation with the developing countries lies in the proliferation of assemblies devoted to the expression of the needs of the developing world both inside and outside the United Nations and the Community. It is beyond the competence of the Community to rationalise the system as a whole, but there appears to be room for

231
rationalising the Community's own agencies in this field and care is always necessary to prevent the establishment of special administrative bodies for tasks which should be performed by the Commission's own staff. Finally, there is the attempt to harmonise export credits in co-operation with non-Member States in OECD. Some progress has been made in establishing guidelines but total harmonisation will take time, particularly while rates of inflation vary so widely among the Member States.
An important negotiation now in progress relates to the multi-fibre agreement. This is a matter that I should judge would have been dealt with on a different basis if the recession and its effect on employment in the European textile industry could have been foreseen. The European Council of Ministers have agreed a mandate for this negotiation which has to be translated into binding international agreements. It is essential for British and other European industry that the Community stands firm on its mandate. Here, in particular, there must be co-ordination of the Community's internal and external policies.
In general, it is noteworthy that the Community has tried to use its power in such a way as to increase the level of mutually beneficial trade with the developing countries. Considerable progress has been made in working out the policy of this great trading bloc. It is one of the areas in which the Community has recorded significant success. The importance of the Common Commercial Policy is often overlooked by the media because it is difficult to find the way in this complicated field. It should be marked, especially by those who are only concerned to emphasise the Community's failures and to prevent this country from making a positive contribution to a great and imaginative idea, the development of which will surely benefit our country. I beg to move.
Moved, That this House takes note of the Fortieth Report (HL 226) of the European Communities Committee on the EEC Common Commercial Policy.—(Lord Trevelyan.)
5.22 p.m.
Lord BANKS: My Lords, as a Member of the Sub-Committee which drew up the report on the EEC Common Commercial
232
Policy I am particularly grateful to the noble Lord, Lord Trevelyan—grateful to him not only for the very thorough and comprehensive way in which he has presented this report to your Lordships this afternoon, but also for the efficient and expeditious manner in which he conducted all our meetings. I am quite sure that all the other Members of the Sub-Committee would agree with me on that.
I believe it to be a very important report. As the noble Lord, Lord Trevelyan, has pointed out, it emphasises the scope and significance of the Common Commercial Policy and it describes it in some detail. I think that the report is right to say that this scope and this significance are not always fully appreciated. The EEC has 74 trade and co-operation agreements with 92 countries. There is the establishment of free trade with the EFTA countries; the arrangements with Greece and Turkey and all the countries round the Mediterranean; there is the Lomé Convention to which the noble Lord referred, linking 52 countries to the Community including 22 former Commonwealth countries; there are the arrangements with Asian countries; there is the generalised scheme of preferences and there are the negotiations under GATT. In all these, the nine nations of the Community, as the noble Lord has said, the largest trading entity in the world, are acting as one.
Not all the agreements involve preferential access to the EEC markets but most do so, and the Common Commercial Policy as a whole is a great exercise in the liberalisation of trade. The average level of EEC Customs duties—and the noble Lord referred to this—is only about 6 per cent. compared with 7.1 per cent. for the USA and 9.7 per cent. for Japan. The success of the Common Commercial Policy is an achievement which justifies those who have all along rejected the notion that the EEC must inevitably be a selfish, inward-looking institution. By acting as a unit, the Community exercises great influence in the world, as the report makes clear, and I hope that this will encourage the Governments of the Nine to move towards acting as a unit in other spheres in addition to trade.
Nobody would claim that the relationship between the EEC and the developing world is yet established on anything like

233
a final or satisfactory basis. Far from it, alas! But the Lomé Convention, covering 52 developing countries, is nevertheless a remarkable development. The access which it gives to EEC markets is not made reciprocal. Then there are the provisions for aid, for industrial co-operation and for the operation of the Stabex system. The great attraction of the Stabex system is that it supplements earnings without keeping up prices. In that respect, it has something in common with the deficiency payments system of agricultural support. The funds allocated to Stabex are small; but it has, as the report points out, made a very large contribution to the earnings from certain products of some of the ACP (African, Caribbean and Pacific) countries. I very much hope that the Stabex principle can be used on a wider scale to deal with some commodities on a world basis. In this way, operating beyond the limits of the Lomé Convention for certain commodities, the Stabex principle would be used in the operation of the proposed Common Fund.
That thought leads me to express the further hope that in the field covered by UNCTAD (the United Nations Conference on Trade and Development) the EEC will be able from now on to act as a unit in the same way as the nine countries act as a unit under the Common Commercial Policy. The report rather glosses over, perhaps, the disarray in the ranks of the EEC at Nairobi earlier this year and, in particular the hesitancies of West Germany and Britain over the acceptance of the principle of a Common Fund. Much ill will was created which united action could now do much to disperse.
The generalised scheme of preferences which extends preferential tariff terms to a whole range of developing countries must inevitably, as the report points out, erode the Lomé concessions; and the noble Lord, Lord Trevelyan, referred to this. The aim must always be, however, to move towards the widest possible degree of freedom of trade, but Lomé and the GSP are there to see that, on the way, the developing countries suffer least from tariff barriers, and of course Lomé brings in the other important advantages to which I have already referred.
Some members of the Sub-Committee, as the noble Lord indicated, had the opportunity to enter into discussions
234
with officials in Brussels about the Common Commercial Policy and I was particularly interested in the discussions on the GATT negotiations. We so often hear of the internal divisions within the Nine, yet here was an example of the Nine acting together and negotiating with other large blocs in the world, such as the USA, for example. The US tariffs, it was pointed out to us, consist of peaks and troughs, some very high and some comparatively low, while the EEC tariffs are fairly level. The USA wanted a percentage reduction in tariffs while the EEC wanted to eliminate some of the US peaks. It reminded me of the negotiations for mutual force reductions in Central Europe where the Russians want a percentage reduction but the West say, "No, we must get down to a given figure" because they claim to be outnumbered by the Russians at the present time. The strategy seems to be rather similar in this negotiation within GATT between the EEC and the United States. But the important aspect was that here was the negotiation being carried out by the Commission on behalf of the nine nations, the EEC acting as a unit.
I have spoken of the Common Commercial Policy as a great exercise in the liberalisation of trade. But if I left it there, it would not be giving a complete picture. The noble Lord, Lord Trevelyan, did not leave it there, either. The world recession, and the unemployment which it has brought, have to some extent revived protectionist attitudes in the world and these are to be found in the EEC as elsewhere.
For some time of course the textile industry has presented particular difficulties, and the GATT multi-fibre agreement was designed to deal with this situation. It is now being renegotiated to make it stricter; but, in the meantime, until the renegotiation is complete, the EEC Commission has further limited the imports of textiles and thus forestalled perhaps even more severe unilateral import restrictions by some individual EEC Members. This action drew United States protests; but more worrying than the need for these particular measures has been the emphasis of the EEC Heads of Government at the recent Summit Meeting in London on the danger which unemployment posed to their commitment to free trade.

235
The Prime Minister has recently stated that special measures may be necessary in steel and electronics as well as textiles to minimise the potentially dangerous increase in unemployment. We know of course that EEC trade relations with Japan are crucial in this respect, and I am glad that negotiations—or talks at any rate—have been resumed this week between the EEC and Japan. The French Prime Minister has spoken of the need to make the EEC as protected and self-sufficient a trading unit as possible. There is said to be French pressure to cancel the present round of GATT talks rather than to allow them to drift into failure.
However, Mr. Strauss, President Carter's special trade representative, was full of optimism last week after seven hours' discussion with the Commission. He said:
"We view the problems of the international economies as a reason not for slowing progress on the GATT talks but for pressing ahead faster."
I hope that optimism is justified. I trust that the EEC will not abandon its general commitment to free trade. I hope that the leaders of all the developed countries will be able to agree on an expansionist policy. I am sure that a relapse into protection would lead the whole of the world into a downward spiral of standards. Expansionist policies on a world scale, coupled with the maximum possible freedom of trade, must be the aim. The Common Commercial Policy of the EEC must continue its very considerable contribution to the achievement of that aim.
5.34 p.m.
Lord LYELL: My Lords, the whole House will once again be indebted to the noble Lord, Lord Trevelyan, for giving us the opportunity to discuss the report of his Committee. I will be brief because there is a long list of speakers. Certainly, from past experience of debates of this nature, I know there are a number of specialist speakers here who have a great deal of knowledge in some of the fields that are covered by various aspects of the report.
I believe that all of us are now aware of the size and power of the EEC as a major world trading organisation. The report points out—and we have had it spelt out already by the noble Lords, Lord Trevelyan, and Lord Banks—that
236
the Community has more effect on world trade than either the United States or Japan. What is very gratifying to us, both in this House and the Community, is to find that the Common Commercial Policy of the Community has been such a great success, especially in relation to its external aspects and links with the Third World. The report went out of its way to spell out all the aspects of the Lomé Convention and some of the disadvantages of that Convention: how it was unwieldy, and how some of the poorer nations in the Third World were not covered by all the rules and agreements which were drawn up.
The report brings out the importance of the links of the Community with GATT and UNCTAD. It is a tribute to the success of this policy that the Community does not clash greatly with the bilateral relations between Member States and other countries. This proves beyond any doubt that the Community will not be an inward-looking organisation, either with other nations in Europe, former members of EFTA or the Mediterranean littoral who may wish to seek associated, limited or full membership of the Community, or other nations of the Third World or North America.
I believe, also, that the Community takes its responsibilities to the Third World seriously and of course especially to the signatories of the Lomé Convention. The noble Lord, Lord Trevelyan, stressed the point both in his report and in his speech today of the Convention not including the poorest nations which possibly deserve the most help. He mentioned Sri Lanka, but of course we have to consider India, Pakistan and Bangladesh. He mentioned that the various preferences which these countries may enjoy, either bilaterally or as part of a larger agreement with the Community, are gradually being whittled away. This is something which I believe the Community is looking at and it will continue to place great importance on this.
We were happy to find in the report the different types of Community policy. I take special notice of the arrangements under the GATT multi-fibre agreement. The noble Lord, Lord Rhodes, and the noble Baroness, Lady Hornsby-Smith, have spoken many times on textiles, and I am sure that this aspect will be of great

237
interest to them. The noble Lord, Lord Trevelyan, has mentioned this agreement and I support his desire that the Community should stand firm on its mandate and should go as far as it can to support intra-Community trade in this sector.
Also in the report particular attention has been drawn, among other things, to what I call the Mediterranean agricultural policy. This combines two major perils—if I may call them that—of agriculture and the CAP, particularly as it affects Italy and the South of France for some of their agricultural produce. The second peril is preferences and access to the Community of agricultural or horticultural produce, from the nations in the Mediterranean littoral. The report seeks our support in the Community's efforts to co-ordinate this trade, and I believe that we should urge the Community to do all that is possible in this particular region.
Trade is always a matter that can cause disputes between nations and, I believe, round the world. I believe that there is much greater risk of this when bilateral relations are in danger of duplication by any supranational organisation and, in particular, the Common Commercial Policy. We had major examples of this danger yesterday when we were discussing the EEC Budget and how necessary it was to see that nations' Budgets were not duplicated in any major respect—were not paralleled—by the EEC Budget. Yet I believe the report spells out how successful has been the common policy, taken over the wide spectrum which is covered—I believe there are five or six more items involved that I feel I ought to cover. I was interested to see that the Committee believe that an agreement should be reached with Japan. The noble Lord, Lord Banks, drew attention to that aspect and we are glad to know that negotiations with Japan are continuing. That is one aspect where the Common Commercial Policy of the Community can help us.
I think the report has shown us how very successful this common policy has been. The noble Lord, Lord Banks, stressed the multi-fibre agreement. Certainly in my home region in Eastern Scotland I know the anxieties which are still present in relation to that agreement, especially with the risk of the continued world and European recession, together
238
with the consequential low level of employment in this particular industry. My Lords, I think we are all optimistic that the Community can continue to play a major role in world trade and the report has shown that the Community is taking its responsibilities very seriously indeed, both on a bilateral scale and in connection with Third World countries. Above all, it is showing a sense of responsibility as one of the very largest trading organisations in the world. I think that is one point which should be stressed today. I should like to conclude by thanking the noble Lord, Lord Trevelyan, for giving us the opportunity of discussing this matter today, and I look forward to hearing the rest of the debate.
5.42 p.m.
Lord SHERFIELD: My Lords, this report on the Common Commercial Policy of the EEC is a meaty one and, on the whole, it speaks for itself. But as a member of the Committee, I am very glad to be able to make a few general comments on it, though they will not diverge very far from those already made by the two other members of the Committee who have spoken.
My first point—and the noble Lord, Lord Trevelyan, stressed it at the outset of his speech—is that the report tells what on the whole has been a success story. The starting point is, of course, the Common Customs Tariff, which lies at the heart of the European Community and is at the basis of the Common Market. Round this has grown up the Common Commercial Policy which, in turn, branches out widely into the fields of aid, development and commodity policy. The report shows how the Community has built up the largest percentage of world trade and has become the most powerful trading bloc in the world, with a formidable negotiating "clout" and a powerful attractive force, so that countries from all over the world are more or less driven to enter into negotiation with it. Moreover, the Community has learned to speak with one voice and to control bilateralism on the part of its members.
So far, the Community has used its economic power with restraint and with a good understanding of the needs of less industrialised and less developed countries.

239
The Commission have been resourceful in devising forms of association with non-member countries, and particularly with ex-Colonial countries, in the shape of the Lomé Convention. They have developed the Stabex scheme for stabilising the export earnings of the Member States who are members of the Convention, and that has recently been strengthened and extended. Incidentally, in the course of our work, some of us had the opportunity to visit Brussels to discuss trade policy, among other matters, with the Commission. We were, I think, all very much impressed by the high quality and ability of the officials who are dealing with these subjects.
I have referred to the outward-looking nature of the Common Commercial Policy, on which the Committee has commented with approval. The question is whether that attitude will be maintained. As the noble Lord, Lord Banks, said, there are some rather ominous signs that protectionism, under various forms and under various other names, may be creeping into Community policy. The negotiations on the important question of non-tariff barriers to trade are making slow progress—although not, as our report concludes, as a result of any lack of will on the Commission's part. The pressures on Governments, in a time of very slow economic growth, to abandon free trade principles are great, but so far the line has been fairly well held through agreements for voluntary restraint and by more structured and elaborate arrangements in particular fields, such as the multi-fibre agreement, which is now up for renewal, and to which other speakers have referred. These have proved acceptable so far, but demands for further measures of trade restriction under the euphemistic name of "organised free trade" are building up, particularly, it seems, in France, and motions with protectionist flavours are appearing in the European Assembly.
I think it would be helpful if the noble Lord who is to reply for the Government could give the House some reassurance that it is their policy to resist these pressures in the further negotiations in GATT and elsewhere later this year. It is, I am sure, an illusion to suppose that a return to protectionism and re-
240
strictive trade practices would in the long run be of any benefit to the Community itself or to its trading partners and associates.
In the development of the Common Commercial Policy the members of the Community have worked together closely and well. They have established common negotiating positions; they have bulit up a network of agreements for free trade and aid. Of course, there is a long way to go, but so far it is a success story and that is no doubt why so little is heard about it. The advantages of belonging to such a powerful economic trading bloc are obvious. The disadvantages, had the United Kingdon remained outside, seem equally obvious. Our membership of the Common Market is under renewed attack and yet the Government seem to do very little to defend and uphold it. Cannot the Government, or at least those members of it who are not trying to revive the controversies settled by the referendum, take more vigorous steps to publicise the successes of the Community, possibly even by making some use of the conclusions of this report and of others which the Select Committee on secondary legislation produces from time to time?
5.48 p.m.
Lord CHELWOOD: My Lords, I should like to apologise at the outset for not being in my place when this debate started and to apologise also for any discourtesy of which I may have been guilty. I understand that the debate started rather earlier than was expected and my plane was an hour late; so I apologise. My Lords, I hope that the Select Committee's report on the Common Commercial Policy of the Community will be widely read. Certainly, I think it deserves to be. When I was a Member of the European Parliament and Deputy Leader to Sir Peter Kirk, I was a member of the Committee which studied these matters and, in spite of having some knowledge of them, I learned a great deal from the investigations made by Sub-Committee B under the quite outstandingly good chairmanship of the noble Lord. Lord Trevelyan.
I am sure it is true that the Common Commercial Policy is a success story but, in addition, it is something unique in history. I do not think that is an exaggeration because, for example, who would

241
really have thought in 1945 that, after so many bitter and bloody confrontations, two countries—France and Germany, not to mention any others—with totally different brands of narrow chauvinism, were shortly to co-operate for their mutual commercial benefit and, incidentally, for the commercial benefit of many of their trade rivals too? So I feel that we can safely say that the Community has set a very good example through its Common Commercial Policy, although I recognise that it has only made a start. What a pity that we did not join as early as we could have done. The blame for that certainly rests on both of the major Parties, although we can say that we have made a real contribution in this field by using our considerable influence and experience to excellent purpose.
The report shows very clearly that the Community has been less protective and more liberal generally in its trading policies than any other trading bloc or country. I have two related criticisms which can fairly be made, and I shall put them in the form of questions. First, has the Community been firm enough in seeking reciprocity, to which we refer in paragraph 51, in their agreements with non-Member countries? I am not thinking of the developing countries where to a large extent reciprocity is impossible, although not in certain ways. I am suggesting that the Community should be more firm and should say to the developed countries with which it enters into commercial agreements, "If you will, I will".
Secondly, when a country is faced with the kind of recession which we and some of our partners in the Community have faced during the last few years, with unemployment unacceptably high and rising prices that hurt the lower paid and the needy, liberal policies come under severe strain. Obviously it requires courage for Governments to take full account of the hurt which may be done to an exporting country. Also, it requires statesmanship to weigh this factor against the problems and pressures which Governments face at home. Therefore my second question is this: is there a risk at the moment of backsliding from the liberal attitudes which the Community has so rightly adopted and which are so rightly praised in the Select Committee's report?
242
During the last three days I have noticed headlines in The Times and the Financial Times which I should like to quote:
"India angry over EEC quotas;
EEC plans duty on Japanese bearings;
EEC draws up plans to curb imports of cheap textile products;
EEC may erect new trade barriers, warns Barre; Australia complains of EEC steel barriers".
As I have said, these headlines have appeared during the last three or four days, so quite clearly there is something in the wind. Where there is a clear-cut case that a country is exporting something below the domestic price, which is the correct definition of dumping—one might go even further and say where there is a clear-cut case that a country is exporting something below the cost of production—or a clear-cut case that imports from them are genuinely likely to disrupt the domestic market, there is probably justification for some protection through quotas or tariffs. I believe that it was the noble Lord, Lord Brimelow, who I do not see here today, who was reported in the Press as saying that quotas and protective tariffs should not be hung up on Christmas trees; one should be very careful what one hangs on such trees. Therefore it is very much to be hoped that the Community will do everything that it possibly can to stick to its liberal policies and to continue to set a good example in this respect.
Next I should like to say a word about Parliamentary procedure. I have found the question of the Ponsonby procedure and the related question of Community trade agreements, which are the subject of Orders in Council, very confusing. As noble Lords know, these orders are subject to the Affirmative Resolution procedure. It is very strange indeed that the British Parliament—I am speaking of both Houses—which has not used the Ponsonby procedure for more than 50 years should, none the less, be expected to debate and endorse treaties made by the Community with the full approval of Her Majesty's Government: treaties which, because of some legal quirk, are not defined as Community treaties, although they are precisely that. I do not understand this, and I believe that this point must be looked at very carefully indeed.
I noticed—we quote this in the report—that in their Fifteenth Report the Joint

243
Committee on Statutory Instruments expressed dissatisfaction with designation orders, although I believe that their main concern was about the form which these orders take. When, therefore, he makes his contribution to our debate from the Government Front Bench it would be encouraging if the noble Lord could say a word about whether the Government are satisfied with this procedure which seems to me to be very strange. Perhaps I may put it more simply and say that it does not seem to me to make sense—when we have never insisted on our undoubted right to debate trade agreements made by Her Majesty's Government in this century—that when the agreements are made by the Community, with the full approval of Her Majesty's Government, there has to be an Order in Council which is subject to the Affirmative Resolution procedure. I hope that I have explained that clearly; I am so confused about it myself that I may even be confusing noble Lords.
I do not believe that the report makes any mention of New Zealand. It is, of course, quite true that there is no actual Treaty with New Zealand. However, I am very concerned—and I believe that noble Lords will share my concern—about the present position regarding New Zealand dairy exports. I was not very impressed by the so-called renegotiation which was undertaken by a Labour Government. I thought that it was an unnecessary exercise which achieved very little indeed, although when the referendum come to be held the outcome was highly satisfactory. However, what appears to have been achieved by the renegotiation is a much clearer understanding of what New Zealand may expect after 1980 so far as their dairy exports to the United Kingdom are concerned.
I do not believe that it was made absolutely clear—it may have been clear in spirit but it was not clear in the letter—in, I believe, Protocol 18 of the Accession Agreement what preference would be given to New Zealand dairy exports after 1980. It was left to the good will of our Community partners. In Dublin, however, in 1975 the European Council took the view that the Accession Agreement should remain the basis for continuing imports of New Zealand butter after 1980. It was the Leader of the House in another place, who was then the Minister of Agriculture,
244
who described the endorsement of the agreement in Luxembourg in June 1976 as full and satisfactory. Now, however, we understand from the Press, and I believe this to be probably correct, that a legal ruling could upset this agreement upon what seem to me, as a non-legal person, to be quite spurious grounds. We all know that this could result in quite a grim situation for New Zealand whose economy, despite the most strenuous efforts at diversification, still rests very heavily indeed on dairy exports and on sheep meat. Therefore it would be comforting to have some reassurance that things are not quite so bad as they have been painted in the last few weeks and days.
At the same time, I have also read the suggestion that New Zealand should get a price rise of only some 10 per cent. for their butter and cheese exports to the United Kingdom when the price is renegotiated in the near future. I understand that this is considerably less than half the increase in the cost of production. This seems to me to be unfair and inconsistent with the spirit and letter of the promises made by the Community at the time that we acceded.
For the French Farm Minister to comment, as I understand he did, that he was "fed up" with the problems of non-European Community countries is surely just adding insult to injury and I feel that there is an obligation on Her Majesty's Government—and I think that your Lordships will endorse this—to ensure that New Zealand is fairly treated in this very important respect.
Next, I wish to say a quick word about the Euro-Arab dialogue. One thing which does not come out in our report, which deals fairly fully with this question in Paragraphs 24 and 25, is the importance of the Community trade with the Arab countries. I was given some figures last week which emphasised the importance of that trade. The Arab countries' exports to the Community account for more than half their total exports, I was surprised to learn, while their imports from the Community amount to only just less than half their total imports. That emphasises the great importance of the Euro-Arab dialogue, which is largely concerned with commercial matters, though those cannot of

245
course be separated from political questions.
As to the boycott referred to in Paragraphs 22 and 23, while the Commission quite rightly officially deplores discrimination, as do Her Majesty's Government, it is sensibly left—I think sensibly, anyhow—to the individual companies to decide how they should respond to any pressures brought to bear on them to observe the boycott. I feel that some account must be taken of the fact in this context that large parts of Arab territories, particularly large parts of Egypt and Jordan and a smaller, though important, part of Syria continue to be occupied in total defiance of Security Council resolutions. Therefore it is not difficult to sympathise with the Arab point of view even though some of us may not fully agree with it.
Paragraph 26 refers to COMECON and I simply want to say here that I feel that the Community attitude is a correct and proper one, bearing in mind that, apart from the period from 1965 to 1975, when trade between the formerly independent countries of Eastern and Central Europe with the Soviet Union was on a fairly normal basis, the Soviet Union has used COMECON as a means to exploit the satellite countries by selling their raw materials at very high prices and requiring barter arrangements with them, which means that the countries of Eastern and Central Europe have, in exchange, to sell back finished and semi-finished goods at very low prices. Therefore, I feel it absolutely right that the Community should insist that it should enter into bilateral agreements with the COMECON countries and not deal with COMECON itself, which, in any case, refuses to recognise the Community.
The Select Committee's report says nothing directly about the Common Commercial Policy from the British point of view and I think it not a bad idea to ask how we fared and, in particular, to consider whether some of the grave economic problems which we face at the moment—for instance, the weakness of the pound, our balance of trade problems, very high inflation, low productivity, heavy unemployment, high taxation—would be noticeably better had we not joined or were we to pull out.
I myself cannot see that this would be the case. I have made a careful study
246
of the matter and followed all the correspondence in The Times and I think some of these problems might be considerably worse. Who, for instance, supposes that the massive support for the pound that was so readily forthcoming from our Community partners would have been so easily obtained had we turned our backs on Europe So I feel that the suggestion from some people that we should now pull out is sheer folly.
I come to my conclusion and I apologise for speaking for a quarter of an hour. In my view, it is time that the Community, with its immense economic strength, should flex its political muscles a little more and become a world Power in the very best sense of the word. I think it has failed in this. The basis for achieving this is to have a strong and successful commercial policy and strong economies. So in this field there has been disappointingly little progress. Perhaps there are understandable reasons for this. I think that probably there are. They include the effort needed to build war-shattered economies; the caution with which former enemies and rivals moved towards any form of political unity; inevitable fears, mistrust and national jealousies. All are quite understandable, but I think that this country could and should give a better lead than it has so far. I think that we could perhaps take better advantage of our belated entry, bringing a degree of objectivity to these questions that is rather lacking at the present moment. That certainly is the role that our partners in the Community hoped that we would fulfil when we joined in 1973 and when we received such a warm welcome, reflecting the confidence that they had in us. If we were to betray that confidence we should indeed be a nation in decline. My Lords, I am sure that we are not.
6.6 p.m.
Lord RHODES: My Lords, we are indebted to the noble Lord, Lord Trevelyan, on two counts: first, for having introduced this subject this afternoon and, secondly, for having chaired so well the Sub-Committee which has produced this report. It is a good report; it highlights successes in the EEC and also some of its shortcomings. The successes are the external relations and the shortcomings are its internal and industrial policy. This is historical. It was easier to whip up

247
enthusiasm for external measures which benefited everybody in the Community than it was for internal Community policies which had to do with the national interest of its members, resulting in trivial arguments like, "How much do we pay and how much are we going to get?".
So success attended the external policies, which in consequence got the lion's share of EEC resources and manpower. That was all right so long as times were good; we can all be generous when times are good. Full employment and reasonable growth give everybody a sense of encouragement to go on. But since 1974 there has had to be a re-think. Massive unemployment and little or no growth have caught the EEC without the necessary strength in its industrial departments to cope with the job. The problem is that nearly three-quarters of the EEC Budget is devoted to agriculture alone and that is why the industrial sectors of the EEC will face a good deal of difficulty in the years ahead.
Nothing illustrates this dichotomy of interests better than what is happening about the multi-fibre agreement. When it was signed in 1974, there was full employment and growth; there was general optimism about an orderly liberalisation in world trade in textiles. Since then, we have had OPEC and a downturn in world trade, together with massive imports from old and new sources and these have resulted in a catastrophic decline in the clothing and textile trade in Europe.
At long last everybody concerned is seized with the necessity for action to be taken. We claim the Community to be a big industrial and commercial entity. It is showing some of its muscle now, and the textile trade of this country can thank its lucky stars that we joined the EEC when we did, because in the years that have followed 1973, being members of the EEC has put a restraint on the internecine competition which would have taken place, without any question whatever, if we had not been in it. If GATT had been the only resource we had we would have had far more closures and for more unemployment. Our thanks are due in very large measure to our Ministers in this Government and to their officials, and also to the EEC officials and Ministers now renegotiating the multifibre agreement in Geneva. May I say
248
that, by and large, the EEC Ministers have accepted the British line.
A year ago I made a speech here on this matter. I will quote from it because it is still topical, and I should like some of these points to be highlighted so that they can be dealt with to the benefit of the textile trade in Europe:
"We want it—
this multi-fibre agreemen—
to be renewed, but it must be improved to meet up-to-date requirements, and we want it for a minimum of six years. As it now stands, a bilateral agreement for more than 12 months carries with it a growth rate of 6 per cent. per annum. Think of that on an exponential basis. A 6 per cent. growth rate bears heavily on countries like ours with high import penetration—in some cases up to 60 per cent. This is insufferable because in 10 years the amount allowed is doubled. It certainly cannot be tolerated in a recession, particularly in those areas of the trade which have suffered the most distortion. So the safeguard clauses in the multi-fibre agreement must be strengthened at once and their application speeded up".—[Official Report, 30/11/76; cols. 211–12.]
In that same speech last year I made criticisms of the EEC officials for having dragged their feet. I withdraw that criticism, on this count, that they are undermanned. I find on visiting Brussels that there are only half a dozen really first-class men engaged on the industrial side of the negotiations. They are all on agriculture. So I withdraw some of the strictures that I made in that speech last year. These six men have had to negotiate during the last few months 13 bilateral agreements on increase in the volume of imports. It took a long time. It is all right quoting America as being very speedy in their decisions, but they are an entity; they can bring something in overnight. We have to think in terms of nine members, and with a staff of only six. I would ask the Minister to press that the negotiating team be enlarged to cope with the many and complicated agreements which will have to be completed by the end of this year. I would ask him, too, if he has considered recruiting people from industry to help. I have in mind people like Mr. David Price, who was a tower of strength to the wool trade before he retired last year. Such men are available, and they could be of tremendous help to the negotiators in Brussels and Geneva.
Our negotiating team has a mandate. It has been said from all parts of the House

249
this afternoon that the negotiating team must stand firm, and so it must. The whole of the textile trade of Europe has had a really serious setback during these last three years. It may be that the multifibre agreement itself might have to be not only renewed but amended. This is mid-July and in terms of complicated agreements there is little time between now and the time when the multi-fibre agreement lapses.
I should like to ask the Minister another question. What happens at the end of the year if there are still outstanding negotiations to be completed? Are we to understand that the existing import levels will be frozen until those outstanding negotiations are completed? In concluding this part of my remarks—and I will not keep the House long on my other point—I would say that it is in the interests of the developing world, and the EEC as a whole, to get these negotiations completed before the end of the year.
I want to mention only one more topic, and that is on paragraph 45 of this report. It is the matter of Japan. Just as the EEC is now a powerful entity and can speak on behalf of its members in the courts of the world, so the EEC—mark my words!—within the next year or two will have to speak up for the nations of the Free World in terms of growth rates throughout the world. Paragraph 45 mentions Japan. It has been mentioned that a small delegation is in Tokyo at this moment. I do not think they are getting on very fast. On the question of growth rate, I make the plea that in the next round of negotiations this should be brought to the fore. Japan cannot exist without a growth rate of 9 per cent. On that sort of basis she is going to take most of the surplus trade throughout the world. It is to the EEC and its power, its closer-knit policies as enumerated in this Common Commercial Policy which we have been discussing this afternoon, that we can look for help.
6.19 p.m.
Lord BARNBY: My Lords, the noble Lord, Lord Trevelyan, to whom we are all indebted for having introduced this Motion, naturally covered a wide range of possible points in connection with trading within the EEC, and, of course, the
250
words of the Motion made possible the covering of a wide field. I shall address myself in the main to the wool textile industry, the textile industry to which the noble Lord, Lord Trevelyan, referred, and the multi-fibre agreement to which Lord Rhodes referred, which is an important consideration in these discussions. The House must forgive me if I am to some extent repetitive, but I think these points are important.
The noble Lord, Lord Rhodes, has been closely associated with the wool textile industry and speaks with great authority. Moreover, he had experience in commercial matters when he was a Minister. I have been associated with the wool textile industry all my life and since my retirement, because of my association with the industry, I have managed to keep in close touch with it.
The industry has been in great distress during recent years largely because of imports from Asiatic and other countries which pay lower wages than those paid in this country. For several years the industry has feared that in high places in Government there has been the belief that the textile industries are expendable, that we should sink our long-established employment relations with a great number of other countries throughout the world in favour of the less developed countries and that we should forego our established position in their favour. That feeling which has caused so much anxiety in the industry for so long has now changed, and the attitude of Government Departments has also changed a good deal.
I should like to say a little about imports. I have referred to low wages which have been an important factor as regards the distressing import levels. Moreover, the State trading countries sell at prices which are decided quite irrespective of the cost of the article. In other words, the technical term "State trading" really means "political prices". I remind your Lordships that the dangerous attitude, to which I have referred as having existed with regard to the textile industry, has now become less prominent. However, I must at the risk of repeating what the noble Lord, Lord Rhodes, has said, emphasise various points about the wool textile industry. I said that I would speak to the wool textile industry, although my comments apply largely

251
to the cotton textile industry. As regards the cotton textile industry, in the first decade of this century you could go from Bradford to Liverpool and see mills springing up like mushrooms. We held the world. We traded everywhere, but what is the picture today? A great many of those mills have passed out of existence as textile mills.
As regards the wool textile industry, its overseas selling capacity has been equalled by no other industry. When I was President of the Confederation of British Industry I often said: "You talk about exports—go to the wool textile industry! You will find that there is not a market in the world that is not penetrated by a salesman for someone in the wool textile industry". Schools for teaching export salesmen and so on were negligible. People could learn from the wool textile industry.
I have been in the industry all my life and have seen what it was in the past. I have recently been supplied with tragic figures which show that in the past 10 years the firms have decreased from 222 to 117. Many firms have gone out of existence. Employment has decreased from 242,000 to 117,000. It is a tragic story. The people in the wool textile industry believe in their efficiency. They have good employer organisations. No industry has had better relations with the working sector of the community than the wool textile industry. I think that there has been only one strike in 50 years. The worker representatives in the wool textile industry have been of a calibre much better than in a good many other industries.
I return to the question of exports. To have efficient exports there must be a strong home market. The home market has been penetrated by imports and I think that the figures show that imports have increased from £400 million to £1,600 million. Those imports have caused great distress and have been most unfortunate. As the noble Lord, Lord Rhodes, has said, the present situation is governed by the multi-fibre agreement which was arranged four years ago and which terminates at the end of this December. The time is short to start a renewal. The agreement depended on a 6 per cent. increase and was negotiated at a time when trade was good and those in the
252
industry felt that they could absorb imports on that scale. In the event we have had a world depression. I do not know to what extent the present Government are the cause of it, but they are certainly not likely on their present financial policies to improve the trading situation very much; but we may hear more encouragement from the noble Lord, Lord Oram, than recent events have indicated. The EEC as a whole accepted these imports which affected their industries on a scale which was harmful to them as well. They were rather costive in taking action to resist this and correct it.
Turning to the employer organisations, one can take pride in the degree to which all these international employer organisations are said by the leading officers from this country to have contributed so much. As I have said, the important multi-fibre agreement must be revised. Imports have come from a variety of Eastern countries—from not only Hong Kong, Singapore, South Korea and Taiwan but also there has been a vast amount of imports from politically priced countries. The leaders in developing countries will be required to make some sacrifices in the general adjustments, because they must see that there are some less fortunate and less developed people in the developing country league who must have a better bite at the cake.
If negotiations fail we must know what fallback the Government have. Perhaps when the noble Lord, Lord Oram, replies, he can give us some idea where the negotiations stand at present. Certainly, we hope that he will have absorbed the degree to which the textile industry has been the victim of what may be called unfair competition.
The EEC has the lowest tariffs of any major trading country. The textile industry in this country employs 800,000 people. How is it that the shipbuilding industry has received major infusions of Government money but that the Government have been so niggardly in the amounts they have advanced to the wool textile industry? Is it not just as important to have the bodies employed in the wool textile industry? Is there a political reason for the shipbuilding industry receiving more help than the textile industry in order to avoid unemployment? I have already emphasised

253
the way in which the textile industry is efficient in its operation and in its exports. It is for that reason that the Government must forthwith give their greatest help to the EEC negotiations on the multi-fibre arrangement and recognise that the past neglect must be corrected. There is not much time until the end of the year so the greatest emphasis must be placed on the matter. The textile industry as a whole and the wool textile industry in particular merit the strongest possible Government support.
6.32 p.m.
Baroness HORNSBY-SMITH: My Lords, I also must apologise for my late arrival, for, although we are usually accustomed to precise analyses of how long Members will speak and although our Whips Office informs us when a certain debate will come on, for once the estimate went awry. I was assured that this debate would not start until 6.15 p.m. and I apologise to noble Lords, especially to the noble Lord, Lord Trevelyan, for not being present at the beginning of the debate.
I congratulate the noble Lord, Lord Trevelyan, on bringing this very informative report before the House, and not least on the valuable analysis that it has given us of the many and very complicated commercial activities of the Community. I particularly welcome the evidence of the growth in EEC trade and the extensive Community agreements with countries outside the EEC. This gives the lie to those earlier critics who were sure that the Community would be inward looking and rigid when, in fact, it has by a combination of aid and trade, extended and speeded up support for the less industrialised and newly emerging nations.
If I confine my speech to two points of criticism of policy—not of the report—rather than speaking about the very substantial part of the report with which I am wholly in accord, it is solely in the interests of time. First, I should like to say a few words about paragraph 22, which deals with the Arab boycott of Israel. Here I found myself—perhaps for the first time—in disagreement with my old friend and colleague in both Houses, Lord Chelwood. The Arabs who refuse to trade with Israel can be
254
recognised as using this method as an instrument of economic warfare between nations still seeking a peaceful settlement of their conflict. But that the Arabs should tell other nations whom they are to trade with if they want to keep their Arab business is sheer discriminatory blackmail.
The Committee's report confirms that the Community has taken a stand against such commercial discrimination and provides a forum to investigate such complaints. Our Government accept, and are therefore committed to, this policy. But it really is not good enough to place all the responsibility on the Commission and leave it to individual firms to make representations if the Government can, in complete conformity with the EEC, formally add some muscle to their oft-expressed regret. They could do this not merely for individual firms but, with the weighty evidence that they obviously have in the Departments' for a host of firms whose desperately-needed export trade is being so adversely affected by this wholly unethical discrimination.
When shipbuilding firms are deterred from tendering for a £3½million order for tugboats and when construction firms are frightened to tender for the Haifa port; when both the shipbuilding and construction industries are suffering from heavy unemployment and are listed, with textiles, as the three industries most affected by the current unemployment, it really is time for the Government not merely to bark but to add some bite to their activities in support of the many vital exporting companies in this country which are being deterred from exporting freely wherever they wish.
My Lords, we have passed massive legislation to prevent discrimination against the individual. We protect him from unfair dismissal, and if he is made redundant. we make the employer pay considerable compensation and redundancy money. But, if the Arabs discriminate and that massive discrimination is the reason for lost exports and reduced production leading to redundancies, the Government seem to sit back and say, "Let industry fight its own battles". That is not only discrimination against some high-sounding industrial name on a letter heading; it is discrimination against the British workforce. As such,

255
the Government should fight it as strenuously as they would fight the sacking of an individual from a firm at home.
I now turn to the issue raised by the noble Lord, Lord Rhodes and my noble friend Lord Barnby; that is, the question of textiles. I very much agreed with the noble Lord, Lord Rhodes, when he raised the matter of the limited number of people who are, in fact, detailed to deal with the commercial side of the problems of the Community. To the vast number in agriculture I would add the vast numbers in all the social welfare departments of the EEC, and all those concerned with harmonising the professions, including lawyers and academics galore. Although I have great respect for the many brilliant minds, there are far too few practical industrially-trained people who, in the end, have to furnish the prosperity—the national products—from which we can fulfil the tasks we hope to achieve in social and other fields.
It is, perhaps, unfortunate that this debate precedes by a few days the wealth of factual evidence collated in a report by the British Textile Confederation, representing both employers and employees. I believe that the report will be presented to the public this week. Certainly it will be to Members of Parliament. Over 12 years and in three divided doses, I have earned my living in the textile trade. Therefore, noble Lords will not be surprised that I should like to support all that has been said so far in the debate about the crucial importance of amendments to the multi-fibre arrangement.
First, I should like to say a few words about the proposed agreement with Romania on textiles, mainly in garments. If COMECON achieves its aim to have the right to negotiate on behalf of all its members, then an agreement on behalf of one nation, such as that currently being negotiated with Romania which may have a limited impact on Community trade, could—and I believe would—be used as a thin end of the wedge to make an agreement a pro, forma for the same concessions (the same terms) to be granted to other Eastern European countries such as Poland, Russia and Czechoslovakia which have a much larger and wider textile trade. This could, amalgamated under
256
COMECON, have serious results indeed on the textile industry in this country.
In a previous debate I dealt with cheap suits—having attended two joint meetings of Members of the other House with employers and employees from the industry, I make no excuse for dealing with them again—which every expert in the trade knows well are being exported from Eastern Europe and imported into this country at a totally uneconomic cost. A European analysis of the man-hours worked to earn sufficient money to purchase the various needs of life has time and again established that in the Eastern territories it takes four to six weeks' work to equate to the price of a suit, and if you want a good one it is two months.
The anti-dumping regulations appear only to be invoked against free enterprise countries, and time and again in answer to Questions in this House and in another place the Government fall back on the excuse that the Governments of the Eastern bloc, controlling all the means of supply and demand, refuse the evidence on which a case could be brought. If I and thousands like me have seen with our own eyes such suits selling for the equivalent of £60 or £80 in Eastern European stores while those same suits have been landed here at £8, then in any practical understanding of the word that is "dumping". It requires neither a statesman-politician nor a mathematical genius to recognise how it is achieved. If you make 10,000 dozen garments and you sell them to your own countrymen at a mark-up of 200 per cent, or 300 per cent. you can dump 2,000 dozen on the foreign market below cost, and overall you could still make a better profit than any British manufacturer would be allowed to do under the present restrictions. In the process the countries exporting are able to undermine the bête noire of all Communist countries, private enterprise, by putting firms out of business and employees out of work.
I turn now to the negotiations on the multi-fibre agreement. The impact of the far too generous initial quotas, while most adversely affecting the British textile trade, has also had an adverse impact on France, Germany and Italy. It was understandable that in their post-war boom, and when we were not involved in the negotiations as a member of the Community, they were generous and

257
anxious to help to their utmost capacity when they had high employment themselves and a booming market. However, it is one thing gradually and rationally to help the underdeveloped countries, but if you do it with too great a speed and in times of recession and slit the throat of your own industries and produce mounting unemployment, you are destroying the gross national product through which, in the end, the great industrial countries can import or even grant aid.
In the last three years EEC textile imports have increased by 80 per cent. in tonnage and reached the huge total of 9·3 billion dollars. During that four year period the EEC has moved from a surplus on textile trade of 956 million dollars to a deficit on textile trade of almost 1·3 billion dollars. To shrug off this merely under the cover of aid to the Third World is lunatic to our own people and our own industry. When these agreements were entered into there was little unemployment in the Six, and undoubtedly their generosity and genuine desire to help the Third World outstripped their forecasts of their own future trade and level of employment. Have not we had forecasts over the last four years that have gone awry?—and one must be understanding of the fact that so too can the Community make mistakes, but we must also see that they are rectified.
At a time of massive unemployment it is asking too much that we should be importing two-thirds of the textile demand in this country. Little though your Lordships enjoy figures I hope you will suffer a few to illustrate the quite dramatic change of scene in three short years. Seven out of 10 shirts sold in this country today are imported; seven out of 10 pairs of jeans; five out of 10 blouses; four out of 10 costumes; six out of 10 men's jackets. As a result of these three years, at least 100,000 jobs have been lost to British textile workers. In 10 years, when we have been struggling for economic survival, we have allowed textile imports to rise by 600 per cent. as the noble Lord, Lord Barnby, said, to the terrific figure of £1,659 million.
In the debate which took place in the other place on the 21st February, the Under-Secretary of Trade, Mr. Michael Meacher, gave the strongest and most welcome undertakings we have so far had from any member of the Government,
258
and he confirmed the disastrous effects on the current application of the MF agreement on the British textile industry, and indeed the European textile industry. He showed his awareness that the MFA does not provide adequate protection for our domestic industry during a recession. I hope that, with the unanimous backing of both sides of the industry and the very important document about to be produced, and the backing of this very important report, where this problem is most fairly laid out and underlined, our negotiators in the MFA will fight long and hard for the essential amendments on the basis of the hard and true facts which the Minister enunciated, and so provide a fair deal for this vital and highly efficient British industry.
6.47 p.m.
Lord ORAM: My Lords, I am very glad to join in the tributes which have come from all sides of your Lordships' House to the noble Lord, Lord Trevelyan, and his Committee for having produced this report. The report itself, as many have said, is an extremely valuable one. I hope that the members of the Committee who have spoken will take satisfaction out of the excellence of the debate to which their report has led. I say these things, if I may, not just on behalf of the Government but personally in that over the years in various unofficial capacities I have tried to wrestle with a number of the problems that are dealt with so ably in this report. One thinks of EFTA; the Lomé Convention; UNCTAD conferences.
As I say, having taken those subjects very much to heart in various capacities I can say that this report we are dealing with is, in my view, the only, certainly the best neat bringing together of all the issues involved, and we must be extremely grateful to the Committee for the excellence of their work. Indeed, if I may take up a point that the noble Lord, Lord Sherfield, made in this connection when he was urging that the successes of the Community should be advertised, I entirely share his view on that matter. I am sure that he will agree that this report can be one of the means of achieving that end. I have in mind particularly the Lomé Convention, which I regard as a real breakthrough in terms of relationships between the developed world and the developing world, and which is one of the

259
great achievements, as I see it, of the enlarged Community.
It will not be possible for me to respond to all the points that have been made in the debate. Indeed, I shall be able to manage only a few because as I have listened to the debate, points have been coming thick and fast. However, before dealing with some of them it may be helpful if I commented in more general terms on the nature of the Common Commercial Policy.
The Community is founded on the idea of a Customs union between its Member States, with complete free circulation of goods across the national boundaries and a common tariff on imports from non-Member countries. So any changes which any Member State wishes to make to its trading arrangements generally are bound to have a direct effect on the rest of the Community. For this reason alone the Community clearly had to have a coordinated commercial policy from the start. But there is another reason as well. The Member States of the Community are small to medium sized Powers in world economic terms and, acting separately, they cannot seriously hope to have a decisive influence internationally. The CCP is a means of co-ordinating and reconciling national views into a single authoritative European voice in international trading matters. As a united whole, the Community is the largest single trading bloc in the world, and its influence is correspondingly great. This can be seen in the Community's role in both multilateral trade negotiations and in its bilateral dealings with specific countries. The CCP is, I suggest, very much a case of the whole being greater than the sum of its parts.
As the report reminds us, the basis of the CCP is enshrined in the Treaty of Rome itself. It sets out in general terms those areas of policy which fall within the CCP. It also defines the balance of powers and responsibilities of the Commission and the Member States. The Treaty sees the Commission as the main initiator of policies and as the Community's sole negotiator with other countries on trade matters. But although the Commission can initiate, it cannot act until it has the approval of the Council of Ministers. This means that each Member State, including the United Kingdom, can
260
ensure that its own vital national interests are safeguarded by amending or vetoing Commission proposals. In practice, the Commission will normally try to put forward proposals that command support from the Member States and the Commission often discusses particular problems with the Member States to ensure that its proposals will satisfy their concerns.
I have said a little about the reasons for having a Common Commercial Policy, and the way it works institutionally. I now turn to some of the more important aspects of the policies the Community actually pursues within this framework. The cornerstone of Community commercial policy is the GATT—the General Agreement on Tariffs and Trade. The GATT is essentially a set of rules governing the conduct of international trade. These rules are designed to foster a general expansion of world trade on a multilateral and mutually beneficial basis. All the major trading nations of the world, including all the Member States of the EEC, are signatories. The Commission now speaks for the Community in GATT matters, subject to Directives from the Council of Ministers.
Perhaps in this context I might take up a point raised by several noble Lords about the danger, as they see it, of protectionism creeping into the world scene. I would remind noble Lords of the Declaration of the Summit Conference in May of this year, a Declaration which had the full support of Her Majesty's Government. That Declaration stated that the multilateral trade negotiations must now be pursued vigorously, partly in order to contain the forces of protectionism. Thus, the points which noble Lords have raised today have indeed been very much in the mind of Her Majesty's Government in taking part in that Summit meeting.
Reverting to GATT, the importance of the GATT lies not only in the series of rights and obligations it sets up. It also provides the background against which trading problems can be examined internationally. For example, the Commission has regular high level consultations with the Community's major trading partners, such as the United States and Japan. On these occasions, current problems are discussed and solutions sought which are compatible with the

261
GATT ground rules. The GATT also lays down the conditions in which antidumping duties may be imposed or protective measures, such as import quotas, may be applied. Actions of this type lie within the scope of the CCP, though it is an area where the Commission must necessarily work in particularly close contact with Member States and, on occasion, with the industries concerned.
Another important aspect of the GATT is that it provides a convenient multilateral negotiating forum. The current round of multilateral trade negotiations are the latest of several rounds of trade negotiations aimed at lowering world-wide tariff levels and other barriers to trade. A second major GATT negotiation currently in progress is the renegotiation of the multi-fibre arrangement—a matter referred to by a number of your Lordships—which regulates the international trade in textiles and clothing.
It was my noble friend Lord Rhodes, the noble Lord, Lord Barnby, and the noble Baroness, Lady Hornsby-Smith, who particularly had the importance of these negotiations in mind. I was asked about the situation at the end of 1977 and it was pointed out that the matter was urgent because of the need for a new arrangement at the end of this year. The points that have been made are fully in the minds of the Government negotiators, but it is too early to give a firm answer as to how we see the situation at the end of the year because, as noble Lords will appreciate, serious negotiations on a new multi-fibre arrangement started only this month in Geneva, so it is a little early to be categorical. But we certainly see a revised MFA, along the lines proposed by the Community, as the best way forward. In consultation with our EEC partners, we are certainly preparing to meet any contingency that arises from those negotiations.
I have referred to the two sets of negotiations under the aegis of GATT. Both these complex sets of negotiations illustrate the Common Commercial Policy in action. Before the Community can participate properly in the negotiations, it has first to agree on common positions internally. Achieving unanimity can be a lengthy and time-consuming process, particularly if the Member States hold differing and strongly-held views. Major
262
national interests must be safeguarded and reconciled. A case in point is the fierce debate which has occurred within the Community over the negotiating position to be adopted regarding the multi-fibre arrangement, to which I have just referred. But once the Community has agreed its position—as is now the case over the MFA—then its views can have a decisive influence over the outcome. In the multilateral trade negotiations, the Community, the United States of America, and Japan are probably the three determining voices. In the multi-fibre arrangement the Community's importance matches its position as the largest single importer of textiles from the developing countries. This is the reason why the Community believes that the difficult task of co-ordinating the Community behind a single voice, speaking a single view, is, in the end, worth while.
I have dwelt at some length on the GATT framework within which the Community's policy operates. I have done so partly because it is easy to forget the all-pervasive, yet half-invisible influence it has had, to so beneficial an effect, in the last 30 years. I have done so also because the series of bilateral links the Community has forged in recent years must be viewed against the GATT background, and perhaps I may say a few words about the bilateral links. The network of bilateral links that the Community has made with other countries in recent years is probably the most distinctive and tangible feature of the Common Commercial Policy. It is, therefore, natural and entirely appropriate that the Committee chaired by the noble Lord, Lord Trevelyan, should have devoted a large part of its report to it. Its report gives a detailed and lucid account of all the various types of agreement that the Community has negotiated, and the wide geographical spread that has been covered. The noble Lord, Lord Trevelyan, in introducing the debate this evening, summarised the four categories of agreements that the Common Commercial Policy has covered.
The Community today is by far the dominant economic influence in Western Europe. It is, therefore, hardly surprising that the other non-Communist countries of western Europe, and around the Mediterranean, have sought close ties

263
with the Community. These take two forms. As a consequence of our accession to the Community in 1973, free trade agreements were negotiated with the remaining EFTA countries so that tariffs would not have to be re-establish between them and the United Kingdom. Following a four-and-a-half year transitional period, there is now effectively a 16 nation EEC/EFTA free trade area.
The second group of agreements comprise those with the Mediterranean countries. These are more disparate in form, reflecting the varying stages of development of the 13 countries concerned, from Tunisia and Turkey, to Israel and Spain. These agreements also arise in large measure from geographical proximity, or long-standing historical ties. They have been extensively revised and extended in scope in recent years in an attempt to bring coherence and some degree of consistency to their provisions. The only major exception is Spain, where the Community hopes to negotiate a revised agreement later this year.
The future development of these agreements is very much bound up with the question of enlargement of the Community to incorporate Greece, Portugal, and possibly Spain. As the report rightly points out, a major issue arising in this connection is the problem of Mediterranean agriculture. No one would dispute that there are serious problems in the Mediterranean areas of the existing Community, as well as in the three potential new Member States. We believe these problems to be essentially of a structural nature, for which suitable and cost-effective solutions must be sought, and this was, I believe, the view of the Committee. What would be wrong would be to attempt to solve structural problems by unduly rigid internal, or external, market mechanisms. These could be damaging both to Community consumers and to trade with countries outside the Community, without making any real impact on the underlying problems.
Looking further afield, the report devotes a good deal of space to the Lomé Convention, to which I have already referred. I think it is now well recognised that this agreement with 52 African, Caribbean and Pacific countries, is something of a landmark in relations
264
between the industralised countries and the developing world. As well as granting duty and quota free entry into the Community for almost all products, it includes a major element of aid and technical assistance. It also includes a major innovation in the form of the Stabex scheme for stabilising the export earnings of the producers of certain primary products. It is too early to give a considered view on the effectiveness of these arrangements, but all the signs so far are that they have had a significant and beneficial effect.
My Lords, in the course of my general remarks I have, I think, taken up a number of the specific points made by various noble Lords who have participated in the debate, but if your Lordships will bear with me, there are one or two other points that I should like to make. One or two noble Lords referred to the importance in the world of trade with, or the trade of, Japan; in this connection I would say that progress towards a formal trade agreement with Japan in the future will depend on what progress is made in the multilateral trade negotiations towards a mutually satisfactory safeguard clause. In the meantime, we should not lose sight of the useful steps being taken by the Commission to establish closer and more regular discussions of trade problems with the Japanese.
The six-monthly high-level consultations are developing as a valuable forum for the discussion of trade matters between the Commission and Japan, and, as the report of the Sub-Committee notes, have made some progress towards removing obstacles to Community exports and towards restraining Japanese exports of steel to the Community. It is to be hoped that these consultations will be continued on a regular basis at a high level, and that both sides will continue to use them as an instrument to help resolve the outstanding problems in Community-Japanese trade.
One other subject that was common to two or three of the speeches to which we have listened was the situation in respect of New Zealand. On this subject, the noble Lord, Lord Chelwood, in particular, made this point. Despite recent changes in our trading patterns, Australia and New Zealand remain very important to us, and I agree with the noble Lord on that.

265
We shall certainly do all we can to maintain and strengthen the trading partnership within the framework of our membership of the Community; and this, of course, includes seeking satisfactory arrangements on access for New Zealand dairy products.
Lord CHELWOOD: After 1980, my Lords?
Lord ORAM: I am establishing a general principle that that should be our objective, yes. I think I have already dealt with the multi-fibre arrangement, which was raised so forcefully by the noble Lord, Lord Barnby, and the noble Baroness, Lady Hornsby-Smith, but in this connection I shall certainly take note of what my noble friend Lord Rhodes said about the undermanning of the team in Brussels which deals with this. I think he made a most important point in this connection, and I shall certainly pass on what he has said in that regard.
If I may now conclude—and I apologise for having taken so long, but it is a complex subject and an important report—I should like now, very briefly, to look ahead to the future of the Common Commercial Policy. I am sure that the Community will wish it to retain its basically open and outward-looking character, and this is certainly the Government's view. We see the present round of GATT multilateral trade negotiations as helping towards this objective. There is the possibility of establishing more satisfactory relations between the Community and the East European countries. This process has already begun with the exchanges of letters between the Community and COMECON, and with the negotiations with some of these countries on textiles and on fisheries matters. We hope that this will lead on to the establishment of formal relations. Then there is the question of the enlargement of the Community, where I look forward to the further report which the noble Lord, Lord Trevelyan, referred to as being forthcoming later in the year. Then, by 1980 we shall have to have renegotiated the Lomé Convention. This, in turn, leads on to the wider issues of how to regulate the Community's trade with the developing countries of the Third World; and this, I am sure, will prove to be one of the dominant political and economic issues of the 1980s.
266
In conclusion, I should like again to say how much I appreciate the work of the Select Committee and the opportunity it has given us for today's debate. The subject, as has been recognised by all who have spoken, is one of great importance to this country, and, as the Committee remind us, one which is given insufficient attention in the media and elsewhere. I hope that this debate will have done at least something to remedy that situation.
Lord CHELWOOD: My Lords, before the noble Lord sits down, I know that noble Lords more than understand that it is not possible in a debate like this to answer off-the-cuff all the questions which are put to a Minister, but would the Minister be good enough to write to those noble Lords who have raised questions with him which he has not been able to answer?
Lord ORAM: My Lords, that is a tall order, because there were masses of points raised, but perhaps the noble Lord, Lord Chelwood, would accept my undertaking to look at the main ones. I hope I have answered quite a number, but I shall certainly look at the main ones, though I should not like to give an undertaking that I will write to every noble Lord on every point.
7.15 p.m.
Lord TREVELYAN: My Lords, I think we must all be grateful to the noble Lord, Lord Oram, for his wide survey of Government thinking, which has been of great interest. I am very glad that our report has stimulated a debate of real substance, which I have found very interesting throughout I must also thank noble Lords who have shown their appreciation of our report. Every now and again of course, when we produce these reports, we wonder whether we are doing any good. I think a debate like this gives us a lot of encouragement.
It seems to me that there are really four ways in which these reports can do some practical good. First, they create a dialogue between your Lordships and the Departments of Government, and that improves the decision-making process. Secondly, our reports can be useful as a background and a brief for Members of the European Parliament. Thirdly,

267
they can be of use to members of the Commission and of the United Kingdom delegation in Brussels, as giving an outside view of the Community. Lastly, there is, I think, some danger that the Community's business should be regarded in this country as something alien to us, instead of something of which we are an integral part and something, therefore, about which we should know a lot. I very much hope that our labours will be of practical use if only as a reference book to an important part of Community policy.
On Question, Motion agreed to.

ETHYL ALCOHOL: 37TH REPORT OF THE ECC
7.18 p.m.
Lord RAGLAN Lord RAGLAN rose to move, That this House takes note of the Thirty-seventh Report (HL 191) of the European Communities Committee on Ethyl Alcohol (R/2959/76). The noble Lord said: My Lords, your Lordships have been having a most interesting discussion on the broad principles or bare bones of the Common Commercial Policy. In the CAP, we have a policy which is fully operational although it is limping, rather, under the weight of the green money system; and your Lordships' committee, Sub-Committee D, is continually employed in scrutinising a steady flow of proposals of a technical kind which, as my noble friend Lord Peart knows very well, are the flesh and blood of a working policy.
This proposed Directive is one of these. I am very pleased to see so many members of the Sub-Committee present, and I should like to take this opportunity to thank them publicly for the contribution they have made towards producing this report. I am glad that several of them (more than are on the list of speakers) are going to speak this evening to the report; it greatly helps me to have them here to support me.
I am not going to go through the report, but rather I will take what I think are the essential elements of this draft Directive and try to set them in a wider policy context than it is strictly possible to do within the formal confines of one of our reports. It is a very complicated
268
Directive, and your committee had quite a puzzling time unravelling it—and it is unfortunate that we do not altogether like what we found. Your Lordships will know that ethyl alcohol is the principal active ingredient of many drinks, but the Directive does not refer to wine, beer, cider or other such drinks which acquire their alcoholic strength by the normal, natural process of fermentation. It embraces only alcohol of the kind which is obtained by putting similar ferments to these, including, incidentally, potato mash, through a process of distillation to make either spirit drinks or alcohol spirits for industrial use. It also embraces synthetic alcohol which is obtained from petroleum. It is not the ordinary vinous or "beery" drinks which it refers to, but the distilled spirit obtained from these types of ferment. Ethyl alcohol is a very important industrial raw material which is used in large quantities for many things; for example, it is used as a solvent base for perfumes and inks and as a liquid vehicle for aerosol sprays of many kinds. When it is used for this purpose, it evaporates quickly and harmlessly in a short time.
I shall try to explain as briefly as possible the need for this Directive. As your Lordships will know, more wine and other fermentable produce is being produced in certain areas of the Community than can be sold in the normal way as drinks. This is not a new problem. The way in which the countries concerned have traditionally dealt with their surpluses is by distilling the produce to make industrial alcohol. In Holland, grapes are not grown and potatoes are used in the same way as surplus wine is used in France and Italy. In France, Germany, Italy and Holland, this distillation is carried out under the auspices of a State alcohol monopoly. This governs all output, whether of agricultural or of synthetic origin. However, synthetic alcohol is very much cheaper than the cheapest agricultural alcohol except the alcohol which is derived from molasses—and your Lordships will see a table of comparative costs on page 15 of the report.
In order to make the production of agricultural alcohol viable, certain industries in these countries are required to buy it. This specific industrial use is

269
known as a reserve sector and having a reserve sector is considered to be justified in the interests of relieving these countries of an otherwise embarrassing surplus of wine, potatoes or molasses which is made from sugar beet. Since the famous Charmasson judgment, these State alcohol monopolies have been declared illegal obstacles to intra-Community trade as they interfere with imports from other Member States. Now the Commission is having to try to get agreement on a compromise régime and, not unnaturally, it has come up with a hotchpotch of existing practices in the Nine, including the provision of reserve sectors and the proposal to tax spirit drinks in order to subsidise the production of this costly agricultural alcohol and make it more nearly competitive with synthetic alcohol.
This tax is euphemistically known as an equalisation charge. Our gin industry reckons that it would work out at about 10p a bottle while the Ministry of Agriculture thinks that it would be more like 3p. Whatever the charge, or the sectors that it is proposed to reserve—principally the pharmaceutical industry, which, your Lordships will be interested to know, uses 600,000 hectolitres of this stuff each year—the whole idea comes as strange and wonderful to this country. This is because we make only enough alcohol from agricultural produce to satisfy our own spirit drinkers and to support a valuable export trade in spirits which will be quite hard hit by the proposals in this Directive. Our industrial alcohol is almost all found from petroleum. There are no reserve sectors, no governing régime and the imagining of an alcohol surplus I think stretches only so far as a vision of wilder scenes of "Whisky Galore".
In certain areas of the Community however, the livelihood of many people—and they are poor people, many of them—depends on the production of grapes and, sometimes beet, which nobody wants. The advent of this Directive must prompt the question whether it is right that they should continue to be subsidised in their uneconomic employment by a requirement for certain industries to take their expensive alcohol through what amounts to a tax on spirits.
Your Committee did not think this right. As I mentioned earlier, this alcohol surplus has been a problem for a long time,
270
particularly in France, and because of tradition, political difficulties and lack of means to find alternative employment in the areas concerned, it has not been tackled. Now it is the Community's problem; but the Commission is not trying to solve it in the spirit of free trade which inspired the Charmasson judgment. It is trying to use the same kind of controls which the State monopolies have been using.
I do not think that we in this country are in a position to criticise State monopolies. We have them in the shape of our Milk Marketing Board, which we are fighting strongly to retain, because we think that producers and consumers alike would suffer if it went and if there were a free-for-all. Furthermore, our marketing boards keep in business producers who would go to the wall if there was free competition: the economy of whole regions—those furthest from the centres of consumption—would suffer badly. If the régimes of the alcohol monopolies were suddenly abolished without special remedies being sought and applied, the economies of whole regions would suffer likewise. Whereas, if our boards were abolished, consumers would find themselves paying more for less, it is fully recognised that, in this case, consumers are already paying more than they need, and it is proposed to deal with what is essentially a structural surplus without taking steps to tackle the causes of that surplus.
Again, we have no reason to be particularly proud in this country of our record in regard to structural surpluses. Our industries are rife with them and we have been battling with the problem for years, propping up traditionally uneconomic industries to save jobs because we recognise that the economy of whole cities and whole areas depends on retaining these jobs. We know, too, that upsetting a traditional way of life is a painful business; but, in our case, we have at least insisted that the Government, as representatives of the general taxpayer, should take some general responsibility in helping to put structural surpluses to rights.
What this proposed régime would do is to put responsibility for the cost of the surplus onto the consumers of alcohol alone. It would do this indiscriminately, whether they were bibulous or industrial

271
users and without setting aside provision to reduce the surplus. The surplus is not being recognised for what it is—a socioeconomic matter of great seriousness affecting a very wide area and something which should, I believe, be made the responsibility of a Community regional policy.
If the Government accept the Commission's proposal, they will be accepting the principle of a tax only on the consumers of certain products to pay for the scheme; they would be accepting that the Common Agricultural Policy can dictate the source from which certain industries get their raw materials. They will also be endorsing the institutionalisation of a perpetual surplus of agricultural alcohol. For those reasons which underline the views which we give in paragraph 35 of our report, your Committee advise the Government not to agree to these proposals in their present form.
I should like to end with a personal view which I am sure will fall on receptive ears in the person of my noble friend Lord Peart. In trying to deal with this surplus of alcohol we should be understanding of the real difficulties which some of our partners are in. If we do not show them sympathy, we cannot expect sympathy from them when we have problems. We must be prepared to yield occasionally and not stand up rigidly for everything we want. That is in the nature of a partnership. But we should make it clear that these proposals will not help or solve anything in the long run. It will be far better if the Commission take them back again and get it right next time. I beg to move.
Moved, That this House takes note of the Thirty-seventh Report (HL 191) of the European Communities Committe on Ethyl Alcohol (R/2959/76).—(Lord Raglan.)
7.32 p.m.
Lord SAINSBURY: My Lords, I want to make the briefest of interventions this evening merely to reinforce what my noble friend Lord Raglan has already said about this proposal. In my opinion, this Directive is just another example, as paragraph 20 of our report makes clear, of what is now the Community's standard reaction to the development of any product that threatens the market for a
272
CAP product: in other words, an attempt to restrict the marketing of a rival product. That is what has happened here with agriculture and synthetic alcohol.
The proposal as it stands at present will lead to control over both the types and prices of alcohol used in industry. I can find no justification whatsoever for this substantial infringement on the right of manufacturers to choose those raw materials which are best suited to their businesses at the most advantageous prices available. I endorse the Committee's view that there should be no constraint on how manufacturers run their businesses in an endeavour to mop up unwanted surpluses. I hope that my noble friend the Leader of the House, who is to reply to the debate, may be able to shed some light on how the Community justifies its interference in the industrial process.
To make things worse, the actual system of control proposed is bureaucratic in the extreme. As the report points out, it will hardly work satisfactorily since it calls on national civil servants to display commercial and industrial expertise which their training has not given them. I hope Brussels will take note of this report, and that it will be one more nail in the coffin, not of the Market itself, of which I remain a strong supporter, but of the excessively interventionist and bureaucratic measures which are being put forward.
7.35 p.m.
Lord ELTON: My Lords, I must apologise for not having my name on the list of speakers but it was not until after it was printed that it was clear that I was going to be able to be here to intervene in this debate. But I think it is a subject of sufficient importance to justify such an intervention. I should like at the outset also to congratulate the Committee on their lucid explanation of a subject of great complexity. That complexity deserves an adverse comment from this House. If I may quote paragraph 23 of the Report:
"A further feature of the proposal to which the Committee wish to draw attention is the bureaucratic and highly complex nature of the actual system of control proposed. An official of the Ministry of Agriculture in oral evidence said that the Ministry itself had had difficulty in understanding the proposals because of their complexity and ambiguity. It is not surprising therefore that trade bodies in giving evidence

273
should speak of their difficulty in making sure they had correctly understood the proposals, especially as, apart from their complexity, many of the Articles as drafted are still ambiguous and imprecise in their meaning".
This is the second shot at the document we are looking at: it is not the first draft. Any document which can be commented on in those terms by three separate groups of intelligent human beings is very severely wanting. We are accustomed already in this House to doing battle on behalf of lucidity and conciseness with Parliamentary draftsmen in this country. One is somewhat daunted with the prospect of another phalanx ranged behind them of draftsmen in Europe, and I think we ought to make our views known at an early stage.
The background to this document is more simple than its contents. If I may give a not altogether simplistic interpretation: as I see it, large sectors of the European Community are dependent on producing stable products, and prominent among these are sugar beet, grapes and grain. These communities within the Community are economically dependent on selling them at a good price. Their Governments have paid such attention to the good price that they have produced a surplus of them, and this is the policy pursued by the Community.
The fate of agricultural surpluses, if left unattended, is naturally to go rotten; in other words, to ferment. Happily, this process produces fermentation which results in alcohol. This alcohol can be distilled to a purity rendering it useful for a number of purposes. But, unhappily, alcohol produced by this means from grape and grain works out at from two to five times as expensive as alcohol produced synthetically from petroleum, as listed in Table III to which the noble Lord, Lord Raglan, has referred. The substances produced resemble one another closely, and no one in his senses will pay, for instance, £1,230—the top price shown in Table HI—for a metric tonne for ethyl alcohol produced from the wine lake, when he can have an equal quantity from, as it were, North Sea oil at £270.
Thus though you have reduced the wine lake by distillation, you have in no way made it more saleable. Meanwhile, the grapes inexorably ripen on the vine. You have therefore to intervene in the market
274
to make it operate to the benefit of the producer. This is something that the draftsmen of this document propose to do by reserving certain substances in which it shall be illegal within the Community to incorporate synthetic alcohol. These substances are specifically those for oral consumption, vinegar and pharmaceuticals. There is a semantic oddity which distinguishes vinegar and medicines from things which are intended for oral consumption, but I will pass over that because I am sure your Lordships understand the intention.
These substances provide the producers of surplus grain and grapes with three convenient groups of captive consumers who must be supplied with expensive alcohol of agricultural origin. I find this phrase very difficult: "Alcohol of agricultural origin". I should prefer to call it "agrihol" and have done with it. Incidentally, what better harvest-home could you have than an "agriholiday" when all this is safely gathered in?
However, the intention is that this expensive "agrihol" should be substituted for the less expensive and equally acceptable "industrihol", if that is the word. In any case, even these provisions should not suffice to maintain the price of "agrihol" at a sufficient level and intervention agencies would be required to purchase an agreed but substantial quantity of it at an agreed and equally substantial price. That is reducing the supply, increasing the demand, and keeping up the price. That is the scheme in outline—and a pretty unacceptable one it is.
We have to recognise the necessity for a Common Agricultural Policy and we have to recognise the wisdom of budgeting for occasional small surpluses in individual commodities, in order that in bad seasons there shall not be dramatic shortfalls and unacceptable price increases such as we have seen recently with potatoes. What is not necessary and, in my view, not acceptable, is to budget and plan for permanent, recurring and cumulative surpluses and then to start to invent means of getting them taken out of stock at artificial prices by consumers, unwillingly and—but for the vigilance of Parliament and, in particular, of your Lordships' Committee, who are to be congratulated—unwittingly created. That is not merely unfair to the consumer

275
but it distorts trade by a completely unwarranted intervention. How would it be, by analogy, if there were to be a regulation that all cans for vegetables, baked beans and so on, were in future to be lined not with tin but with silver? The economic implications would be in some ways approximate to those we are examining now.
Furthermore, these are means of restricting innovations. If you insist on depending on old processes, although new ones are more efficient, you are in fact reducing the efficiency of the Community as a whole. For at least as long as we cannot import food at competitive prices on the world market, persistent surplus on the grand scale has no more place in our agricultural policy than persistent deficit on the grand scale ought to have in our economic plans. Glut and slump are the twin enemies of sensible planning.
Having looked at the outline, let me briefly turn to the niceties. Who is to pay for this? Presumably the purchaser of the medicine, the vinegar and the wine. The volume of alcohol qualifying under this heading in the pharmaceutical industry is probably small: I do not know how small. I rather hope that the noble Lord, or those who stand ready to advise him, may be able to have this information by the time we come to the end of the debate; it is not vital but it is interesting. By far the greatest purchaser, in any case, will be the State, in the form of the National Health Service, and I hope that Her Majesty's Government have calculated the additional cost to the Exchequer of that item. It may or may not be formidable, but I see no reference to it in the document. I am not an expert on vinegar and in fact many would claim that I am not an expert on alcohol either. I think that alcohol used in spirituous liquor needs to be of agricultural origin, and I think there have been scandals both in Italy and Germany which suggest it is not popular or advisable commercially to use chemically-originated alcohol—"industrihol "—in drinks of this sort, which are intended to reflect the season in which they are made.
Before I go too deeply into this subject, I should like to reflect on the purpose this debate is supposed to fulfil. As I under
276
stand it, our only purpose, apart from increasing our own information on a quite important subject, is to have some influence on events in Europe, which we can only achieve by any influence we exert upon the Minister who will place the views of the British people before the Community. The material that has been made available to the Committee is available to the Minister. The conclusions which this has enabled the Committee to arrive at are available to the Minister, and so indeed, without any great effort on his part, will be any representations made to your Lordships other than through the Committee. So what we really have to do is merely to place our emphasis on this available material and not to recapitulate it to the great tedium of many of your Lordships here present.
I would say, then, that this House endorses the strictures which the Committee has seen fit to draw against this draft document and its conclusions. I should like to take the opportunity to say that, in my view, it is not the business of the Community to legislate for permanent grand-scale surplus. The report tells us that there are 5 million hectolitres of "agrihol" already available. For those of your Lordships who, like myself, have not gone metric with any facility, I am told that represents 109,990,000 gallons—a figure to make the mind boggle.
It is not the business of the Community to instruct industries on the raw materials they may use. The noble Lord, Lord Sainsbury, has said that very powerfully, and I might add that that appears to be clean contrary to the intentions of the Treaty of Rome, in the name of which this policy is instituted. I think it is the business of the Community to protect the interests of its industry as well as its agriculture, and I believe the Minister ought therefore to pay careful attention, for instance, to the representations made by that most important exporting industry, the Scotch whisky industry. Your Lord-shops will be apprised of the fact that anything which can be made to look like a subsidy received by the distillers of whisky will be seized on, for instance by the Americans as an excuse for slapping on a compensatory import tax at the other end of the Atlantic voyage. Therefore, the intention and the drafting of the document must be clear and there must be

277
guarantees in it to define whisky and the payments that are made. Your Lordships will be aware—if it is not entirely germane to this debate, I think it is not irrelevant—of the heavy discrimination under which whisky labours in the European Market against, for instance, cognac and rum. We are supposed to be a unified Common Market. It is rather distressing when one finds there is so much antagonism actually introduced by legislation into the Common Market.
In the report there is also an argument, to which the noble Lord, Lord Raglan, referred, about the cost to gin and, of course, to the gin drinker, the consumer, who is on the end of this legislation. I would hope that the Minister will take on board that this is not a matter of Party rancour. On either side of the Floor we are saying things which sound remarkably alike, and the same is true of the other place. We wish to see fair play, and we do not think that is something which will arise from the adoption of this document as it now stands, unless it is very radically altered.
7.49 p.m.
Lord COLLISON: My Lords, when I looked at the list of speakers this afternoon I was quite surprised and a little worried because there were so few. For that reason I decided to say a word or two this evening. If anything, it is out of respect and appreciation for the work done by our chairman, the noble Lord, Lord Raglan, who introduced the report and went very thoroughly into the technical details. Other people have mentioned those and so I need not repeat them. The strictures levelled at the report have been quite devastating: that is clear from what one has heard, and in one sense I join in them.
I think the attitude of the Committee is summed up in paragraph 20 of the report, which says:
"In the opinion of the Committee, this proposal for an ethyl alcohol régime is another example of dealing with Common Agricultural Policy surpluses through a policy of taxing consumers. It is also a further example of what appears to be the Community's standard reaction to the development of alternatives which threaten the market for a CAP product".
Because of my background, obviously I shall be the last person in the world, in principle, to criticise support for the agricultural industry. I believe that the
278
industry is entitled to that support in order to enable farmers and workpeople to enjoy a standard of living and other standards which are consistent with this day and age.
May I make my position quite clear. Agriculture has been allowed to suffer for too long at the hands of developed industry, and in those places where developed industry has been able to exercise tremendous influence I believe agricultural support to be right. The question is how that support is to be given. One understands, of course, that our European colleagues have the problem of surplus production with which to deal. In this case it is wine, but the production of wine presents no problem to this country. Indeed, it is because we do not have a surplus of wine that the production of synthetic alcohol as an alternative to agricultural alcohol has developed, and the industry is growing. In our case, therefore, this proposal offers no advantage to agriculture. There may be an advantage to the producers of ethyl alcohol if they are guaranteed easy access to the Continent. On the Continent, however, very little ethyl acohol is used. Consequently, there are no advantages so far as agriculture is concerned and, as has already been made clear, there are also disadvantages in the case of other industries.
As has been said, the proposals represent a substantial constraint upon the freedom of manufacturers to buy the raw materials which are best suited to their businesses at the most advantageous prices that are available. Indeed, it is suggested in our report that this policy conflicts with the principles of the Treaty of Rome. It is interesting to note that when they had considered the proposal the Committee on Budgets of the European Parliament reported that they were struck by the fact that what is envisaged in the balancing arrangement appears to be the placing of a burden on an efficient industry which produces potable spirits to subsidise the inefficient production of alcohol obtained by distilling other agricultural products. They add that a proposal of this nature is difficult to justify. To be quite fair, we should report, too, that on balance the Agricultural Committee of the European Parliament favoured the proposal.

279
When noble Lords debated yesterday the report of Select Committe A they will have noticed that in paragraph 39 the Committee said that they considered that a general review of the Common Agricultural Policy was desirable, paying particular regard to the comments made in the earlier paragraphs of the report. I agree with this point of view. In my time I have tried to serve the community in a number of ways, but my first loyalty and love is for agriculture. Also I have a loyalty towards and a firm belief in the principles of the Common Market. Right from the beginning I was in favour of our membership for wide, not only agricultural, reasons, although I believe that in the long run the Common Market will prove to be beneficial to those who are engaged in agriculture. One has only to think of the importance of this powerful economic trading bloc.
This was emphasised in the previous debate. Indeed, if one looks at what happened in Europe in the past and the constant conflict, a Common Market which brings countries together must be an advantage and must be supported. Therefore, I want to make it quite clear that if I appear to criticise certain aspects of the Common Agricultural Policy my criticism must not be taken as a dislike of, or opposition to, the Community itself. As I have said before, certainly I do not oppose a proper support system for the agricultural industry.
I have two worries—I know that t am widening the debate but I believe it to be quite proper that I should—about what is happening. My love for agriculture causes me to feel concern about the reputation of agriculture as a result of the policy of the Common Market to give support by way of intervention, since this encourages producers to produce more than can be consumed. It is an open-ended and quite costly policy. I believe that people who do not understand what it is all about view agriculture in a bad light because of this policy—I think, quite unfairly. Also they imagine, and sometimes say quite bluntly, that it is because of this policy that food is so costly. Manifestly this is not true, and we all know that it is not true. The difficulty is that people see that the result of an intervention policy is the creation of enormous surpluses—a beef mountain,
280
a wine mountain in this case, and a butter mountain—and they believe that this is absurd. I have said this before in our Chamber and I say it again. Therefore I am in total agreement that the Common Agricultural Policy needs to be revised, if only to safegurad the reputation and good name of agriculture itself.
My second worry stems from my regard for the Common Market. In a sense we are new boys. It could be thought by our colleagues abroad that we do nothing but criticise, condemn and (I hope noble Lords will forgive the word) bellyache about their policies in regard to the Common Agricultural Policy. I do not wish it to be like that. I should hate to feel that we are regarded as carping critics. On the contrary, I want our contribution to the whole of the Common Market system, including the agricultural part of it, to be seen as sympathetic, understanding, positive and creative. We are an old country, in the sense that our agricultural industry is the most developed agricultural industry in the world. Those of us who are engaged in the industry are proud to say that we have the most efficient agricultural industry in the world. We have a sophisticated system. Our marketing system, for which we are fighting now, is sophisticated and we do have something to offer.
May I therefore say to noble Lords that I have these two worries. Fully supporting the Common Market as I do, believing that the Common Agricultural Policy will eventually be an advantage to the agricultural producer and to the other members of the Community, but believing also that the Common Agricultural Policy needs revision, I put in a plea that we should be seen to be friends. In this case, for example, my right honourable friend John Silkin has put up a firm defence of our system. We have no problem over wine, although we do have a problem over the large-scale production of synthetic alcohol. When my right honourable friend has to put up a firm defence, he is not seen by anybody to be merely destructive.
I am grateful to noble Lords for listening to me for 10 minutes. I believed this to be an opportunity to deal with the wider issues of my concern regarding the image of agriculture and my concern for my friends in the Common Market. I

281
finish as I began by thanking the noble Lord, Lord Raglan, and his Committee for producing what I feel to be an excellent report, towards the end of which certain suggestions have been made. I shall not run through them, although I hope that the Government will bear them in mind when they consider the report. It was not possible to come to really firm decisions about this because there is so much vagueness left in the situation and the explanations are not good enough. There are certain things which we ought to be trying to achieve by ourselves and our friends elsewhere, and I hope the Government will take account of these comments in the report.
8 p.m.
Lord RITCHIE-CALDER: My Lords, I did not put my name down because I had not intended to speak but I noticed a deplorable absence of Scottish—or "Scotch" men—in this debate and it seemed to me that this involved us, as Scots, very profoundly indeed. I can understand that many noble Lords did not recognise in the term "ethyl alcohol" a sort of femme fatale threat to Scotch whisky. If it had been Poosie Nancy we might have understood it. Implicit in this whole discussion—and I want to say to the speakers who have preceded me that I endorse what they have said—I take as some reinforcement the general opposition to this approach by the Commission and I want to say that we realise just what is involved here. I follow my noble friend Lord Collison in his views about the wonderful and justifiable claims of British agriculture and I should like to say that in agriculture in Scotland there has been produced a by-product which has been historically longer lived—and will be longer lived—than North Sea oil; that is, Uisge Beatha.
What we are looking at is something that is, if I may say so, vulgarising the whole of our attitude to Scotch whisky, which some of us think is in fact bottled poetry and history. I do not think my Band of Hope friends would agree with me, but I am sure that others do. In this somewhat sterile and depressing discussion, we are dragging in things like synthetic alcohol made from oil, and the dreadful prospect of Scotch whisky being treated as a surplus. It never is surplus. We never can get
282
enough of it. Here, we have a situation which I think my noble friend on the Front Bench will recognise as important. It is the fact that, in this type of discussion, we are being dragged into the kind of almost unrealistic discussion of how one treats the manifest facts of the Scotch whisky industry, with its enormous exports. We are treating it as though it was something that we could dispose of in what one might think was a lac d'alcohol, or whatever one likes to call it.
In Scotland, we do not look at it that way and we never will. We put a lot of peat and a lot of inspiration and a lot of time into it and also age is the big contribution that we make. I have no brief from the whisky people beyond what I myself feel: I am certainly declaring an interest which is a natural interest in the end product and not in the method of production. Therefore, I want to say that those who are representing us in this discussion should recognise that ultimately, we have our peculiar rights, just as the other producers in Europe have. One of our important, historical products is in fact Scotch whisky and we have to protect it by any means we can. We must not allow the degradation of something which we respect into something which is called "agricultural alcohol".
8.5 p.m.
Lord PEART: My Lords, first, I should like to thank my noble friend Lord Raglan for initiating this debate and for his work as chairman of the European Communities Committee, which has produced what I think is an extremely erudite report. Indeed, I think that this House can take credit for the fact that its documents are, I believe, appreciated far more than noble Lords give credit for: they have now reached such a high standard that there is recognition in another place of the good work that the Committees in the Lords have done. I think that should be put on the record and I am grateful for the opportunity afforded to me by this debate to explain the Government's view of the EEC draft proposal for an alcohol regulation.
The Community is still at an early stage of the discussion of the draft proposal. Indeed, it has not yet been before the Council. It is in a Council working group but it must go to Ministers

283
for the first time by the end of 1977. So all is not lost, and I say that to the supporters of the report and to those who have participated in the debate this evening. So the Community is still at an early stage in discussion of the draft proposal and our view of it will need to be defined further as discussion progresses.
No doubt, our negotiators will be helped by the report which is before us. Noble Lords will understand why—as is customary—I cannot be entirely explicit about the negotiating line we shall take on certain issues. It would be very wrong for me, a former Minister of Agriculture who used to negotiate, to try to spell out our negotiating position to the House this evening. To do that could be prejudicial to the United Kingdom interest.
The questions raised by noble Lords have demonstrated the complexities of the issues involved, and I am grateful to all those who have contributed to this debate. The Government will certainly give careful consideration to all that has been said. I should like to say to the noble Lord, Lord Elton, in regard to the financial implications for the United Kingdom that I have checked a little and obviously, with no production of alcohol from materials more expensive than cereals and nearly all our production going into drinks, the United Kingdom would be unlikely to receive any compensation. The costs to the United Kingdom would derive from our usage of molasses, the amounts being dependent upon the quantities used and the price levels and from our intervention contribution. Again, how much? The figures used are notional and the mechanisms are not yet clarified. Therefore, any estimate would be very much a guess and it would be wrong of me to make a guess at this stage, but I will look into the matter more carefully and will write to the noble Lord.
Lord ELTON: My Lords, the noble Lord is most kind, and when he comes to read Hansard he will see that what I was specifically asking about was the increased charge to the National Health Service. I recognise that it is a recondite question, but I hope when he writes to me he will answer that question.
Lord PEART: My Lords, I cannot say. It would be absurd for me to attempt to because I would be speculating. All I can say is that we are concerned about its impact on the industries involved and the effects, direct and indirect, which the draft Regulation could have on the United Kingdom industries. Here I endorse very much what my noble friend Lord Raglan said, in explaining his proposals and also what the noble Lord, Lord Sainsbury, has said about the impact on the industry and also the bureaucratic nature of the proposal. I must emphasise that we have been in very close touch with these industries since the proposal emerged and they have put their views very fully to us.
We share their concern about many aspects of the proposal. The proposal is a revision of a draft originally tabled by the Commission in 1972. The earlier proposal was shelved in 1973 after lengthy discussion in the Council, and has only recently re-emerged in its considerably revised form. In a nutshell the problem is one of over-production within the Community of agricultural alcohol. On many occasions I remember hearing the arguments affecting particularly the wine producing countries and how they must reduce their wine lake through distillation, which is mentioned in detail in the report and has been described by my noble friend Lord Raglan and others.
It is directly attributable to overproduction of certain agricultural raw materials for which distillation is a convenient outlet. This may not be a United Kingdom problem since we have no surpluses in this sector. But it is one which we cannot ignore, for it will not go away until some forceful and positive steps are taken to resolve it at Community level. Questions raised by certain noble Lords illustrate the need for clarification of some detailed points of the Commission's proposal. The basic problem, as noble Lords recognise, is that for certain agricultural products, upon which certain Community farmers depend, there are no viable outlets except by way of distillation into alcohol. In addition, virtually any agricultural product can be fermented and distilled, so that surpluses (in particular of fruit and wine) are made into alcohol instead of being thrown away. Unless there is rationalisation

285
of agricultural production it is clear that the alcohol market must be very unstable.
The national protectionist monopolies set up by several Member States in order to regulate the market in alcohol have been declared illegal by the European Court of Justice. There is, therefore, a two level structural problem—one problem at the raw material stage and another at the distilling stage. The draft regulation aims to solve these problems by protecting producers of high-priced agricultural alcohol—both the growers of the raw material and the distillers—from competition by lower-priced alcohol. This latter uses a cheaper raw material, or is more efficiently produced, or both.
Under the Commission's proposal, certain market sectors—drinks, vinegar and pharmaceuticals—would be reserved for agricultural alcohol; distillers would be allocated annual production quotas; and the sale of these quotas into the reserved sectors would be supported by subsidy. Sales into intervention would be possible for any alcohol under quota which could not otherwise be disposed of. Alcohol in excess of the quotas would receive no support, and molasses alcohol (the lowest priced agricultural alcohol) would also be without protection, since the Commission maintains that it is price-competitive with synthetic alcohol.
The scheme would be financed by a flat-rate consumption tax on all agricultural alcohol and spirit drinks used in the European Community. Thus, although spirit drinks (with a few exceptions irrelevant to the United Kingdom industry) are excluded from the market regulation as such, they are expected to help to pay for it. If the United Kingdom sees difficulty in accepting some aspects of the proposal, I think it is fair to put on record that most other Member States also have considerable reservations about it. We, therefore, expect that there will be some lapse of time and a fair amount of modification to the proposal before an acceptable text emerges. We shall certainly be pressing for changes, and we shall ensure that there is adequate time for consultation with our industries as the negotiations proceed.
As I hope I have already made clear, the Commission's proposal is in many
286
respects objectionable to us. For example, we question whether it is proper, both in the terms of the Treaty of Rome and in terms of commercial practice, to reserve certain market sectors for goods of a particular type. I think this was the main point made by my noble friend Lord Sainsbury.
This implies restricting manufacturer and consumer choice, encouraging price increases, and represents interference by an agricultural regulation in the affairs of non-agricultural industry. And again, subsidised sales into the free sector mean that our considerable synthetic alcohol industry would be subjected to a squeeze by agricultural alcohol, without the means of defending itself. I can assure noble Lords that we have already voiced strong objections to these points in Brussels and will continue to do so.
We have also been questioning why our spirit drinks, which are not part of the alcohol problem, should be expected to help pay for it. Another pertinent question, in the interest of both producer and consumer, is why our gin and vodka industry should be deprived of its traditional supplies of raw materials, or forced to pay increased prices because of levies on molasses alcohol.
We would wish the regulation to contain clear provisions for restructuring the industry, that is, for discouraging the uneconomic production of alcohol, so that we do not have to go on indefinitely supporting unnecessary or inefficient production. In negotiations in Brussels, which are at present still on an official level, we shall aim for remedies to the ills I have listed.
Before concluding, I should like to emphasise that the proposed alcohol régime already includes some features which are not entirely bad for us. The dismantling of protective régimes in other EEC Member States could lead to the opening up of new markets for synthetic alcohol, and could give increased opportunities for exports of spirit drinks. The undoubted quality and prestige of our spirit drinks would be recognised and would be protected under the new régime. And we would be entitled to an export restitution or production refund on our very substantial exports of Scotch whisky made from Community cereals.

287
It is clear from the draft proposal that the Commission have tried to meet the points made by the United Kingdom during discussions of the previous draft—although they have succeeded only to a partial extent. Discussion in the EEC Council will give us the chance to examine both the extent of the changes made so far and the possibility of obtaining others. I should like to emphasise to the House our firm intention of working for such further improvements—particularly with a view to minimising adverse financial effects for the consumer and to maximising opportunities for future restructuring of uneconomic production.
My noble friend Lord Collison spoke feelingly about the role of agriculture in the Community and the importance of the Common Agricultural Policy. I was glad to welcome his constructive approach to this, as a distinguished former leader of the agricultural industry. I always detect too much carping criticism of the Community by many people, I am sorry to say on my own side, and indeed on the other side as well. I am never worried too much about surpluses to that extent. I am more worried if we have an agricultural system which produces scarcity, and that has happened in the world. Let us not denigrate the system which is emerging. I know there are problems. I got rid of intervention as the sole means of support for the beef industry. Noble Lords will remember that I brought in a premium system, which has not been destroyed by the Community, and which gives our farm producers considerable security, rather similar to our old deficiency payments system, although even that system did not always work. No system is perfect.
Naturally, I do not want to see surpluses destroyed, or some products put into intervention; when that intervention period is carried on for a long time the quality of food put into intervention deteriorates. We all know that. Eventually the CAP will play a positive role, I hope, in world agricultural matters. After all, if the United States of America can dispose of its surpluses of cereals by valuable export markets, there is no reason why we in the Community or we in Britain should not export many of our valuable products—after we have satisfied the needs of domestic consumers—to the markets of
288
the world. Therefore, on this issue, believe that the criticisms that noble Lords have made in their report are correct and justifiable. They will help our team in Brussels. At the end of the day, I hope that we shall finally come out with something which will be sensible and to the benefit of our economy.
Lord VERNON: My Lords, before the noble Lord, Lord Peart, sits down, being a member of the Sub-Committee, I should like to refer to a misapprehension which has arisen in the debate. The draft report from Brussels is injurious to the Scotch whisky trade. The evidence given by the Scotch Whisky Association—I am sure that the noble Lord, Lord Raglan, will put me right if I am wrong about this—was that it welcomed the Directive which would help to sell its product in Europe. I felt that that should be put on record.
Lord RAGLAN: My Lords, I do not think that I can answer the point raised by the noble Lord, Lord Vernon, without notice because I am a little confused with this Directive and the Excise Directive which the Committee was examining at the same time. I am not sure whether the evidence from the Scotch Whisky Association was in favour of the Excise Directive rather than this Directive. I must check, but I do not have time to do so at present.
Lord ELTON: My Lords, although I am not a member of the Committee, perhaps I may presume to come to the aid of the House. It is my distinct impression from all the material that I have seen that the Distillers' Association has shown considerable alarm about what might be the results of this Directive if it were enacted as it now stands. There is no proposal to introduce industrial alcohol into whisky as the noble Lord, Lord Ritchie-Calder, tried to terrorise us into fearing. The Association is very apprehensive about the document as it now stands.
Lord RAGLAN: My Lords, I think that that point was borne out by what the noble Lord, Lord Ritchie-Calder, said, but I should like to see it in writing. We referred to the matter on page 12 of our report at paragraph (c).
Lord VERNON: My Lords, if I was wrong about this matter, I apologise to the House.
Lord RAGLAN: My Lords, the noble Lord, Lord Elton, questioned the usefulness of this procedure whereby we produce a report and then have a debate on the matter and repeat ourselves. I would point out that in the Select Committee we discuss whether a report should be debated. The decision to debate a matter is nearly always taken if it is judged to be a controversial matter upon which noble Lords who are not members of the Sub-Committee which examines the problem, might like to express an opinion, as has happened today. It also gives one an opportunity to philosophise about a proposal, as I have attempted to do this afternoon, and to examine it from more angles than is possible within the strict confines of a report. Moreover, one has the opportunity formally to voice one's concern about certain matters and thus get details of them into the Parliamentary record. That is, as the noble Lord, Lord Peart, has just remarked, very helpful to the Government, when they are negotiating in Brussels and wish to be reinforced in their attitude from behind. We have other means of calling Ministers' attention to matters, and I should not like the noble Lord, Lord Elton, to think that all we do is produce reports for debate.
I was most grateful to my noble friend Lord Peart for, as always his summing up was so authoritative. He is well practised in the mysteries of the CAP. I know that this is a very slow-moving Directive. It has been going for five years and it may be a long time before it comes to fruition. I am pleased that he has noted our reservations and I am glad to have his assurances. Finally, it is because the carrying liquid is alcohol that the nice smelling squirt from the aerosol that is directed into the armpit feels so cold. Unlike the case of drink, the origin of that alcohol is really irrelevant to the user. It is not right that drinkers of spirits who are taxed for other reasons in other ways should pay to make the alcohol in the aerosol cheaper, but not so cheap as it could be if it came from elsewhere. That is a distillation of our main criticism of the proposal.
Lord ELTON: My Lords, I apologise for rising again, but I should like to put the record straight. I attempted to congratulate the Committee on having carried out an extremely useful function. I said that our function was not to repeat it but to endorse it, which is very different from what the noble Lord was attributing to me. I hope that he will accept my congratulations as chairman of the Committee.
Lord RAGLAN: My Lords, I thank the noble Lord, Lord Elton, for his nice remarks and I am sorry that I misunderstood him.
On Question, Motion agreed to.

BRITISH RAILWAYS BILL
Reported with Amendments.
GREATER LONDON COUNCIL (MONEY) BILL
Report from the Select Committee that the locus standi of the Petitioners against the Bill is disallowed; a Special Report made and to be printed; Bill recommitted to an Unopposed Bill Committee.
CITY OF LONDON (VARIOUS POWERS) BILL [H.L.]
Returned from the Commons agreed to with Amendments; the said Amendments considered and agreed to.
LONDON HYDRAULIC: POWER BILL
Returned from the Commons with the Amendments agreed to.