Lords Sitting of 26 July 1977

Preamble
The House met at half past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of London):
The LORD CHANCELLOR On the Woolsack.

LORD CHITNIS
Pratap Chidamber Chitnis, Esquire, having been created Baron Chitnis, of Ryedale in the County of North Yorkshire, for life—Was, in his robes, introduced between the Lord Campbell of Eskan and the Baroness Serota.

WELDING KITS: OTECTIVE GOGGLES
2.40 p.m.
Lord CROOK: 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 whether, following the issue of the Protection of Eyes Regulations 1974—requiring the provision of protective filters, which conform to the British Standard, to those engaged on jobs involving welding—the time has now arrived for action to secure that the goggles provided with "do-it-yourself" welding kits, freely sold and advertised, offer similar protection to persons inside the home.
Lord ORAM: My Lords, it is understood that the filters in many of the face shields supplied with welding kits for non-industrial use comply with the relevant British Standard. A recommendation is, however, to be sent to suppliers of "do-it-yourself" welding kits asking them to comply with this Standard if they do not already do so.
Lord CROOK: My Lords, while thanking my noble friend for that reply, which so far as it goes is very satisfactory, may I ask why it is impossible for suppliers to be told, instead of being merely requested?
Lord ORAM: My Lords, it is possible that they be told, but I think that voluntary compliance should be our first objective. If voluntary compliance with the British Standard is not obtained, there are relevant powers under the Consumer Protection Act 1961, and we would consider taking action under those powers.
Lord CROOK: My Lords, I thank my noble friend.

TDI RESEARCH: PROTECTIVE MEASURES
2.42 p.m.
Lord CROOK: 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 what action is being taken following the report of Brompton Hospital Research that the present safety limit as to TDI (toluene di-isocyanate) provides no protection to susceptible persons.
Lord WALLACE of COSLANY: My Lords, I understand from the chairman of the Health and Safety Commission that, while the current safety limit provides an effective safeguard for the health of nearly all workers, it has always been the practice of the Health and Safety Executive to advice that those persons who are susceptible to TDI by reason of a predisposition to chest ailments and allergies should avoid exposure to this substance by not working with it. When workers become "sensitised" to TDI and subsequently respond adversely to small amounts, then the normal control standards do not provide protection and the only practicable solution is for them to cease working with TDI.
Lord CROOK: My Lords, may I thank the noble Lord for that Answer and say how much many of us appreciate the way in which the Executive have gone ahead with their job? We hope that the suggestions that have been made to firms will be taken up.

NUCLEAR TEST BAN TREATY: GENEVA TALKS
2.44 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 progress has been made at the Geneva conference of delegations from the United States of America, the Soviet Union and the United Kingdom on proposals to ban nuclear tests.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, consultations between representatives of the United Kingdom, United States and Soviet Union on the negotiation of a comprehensive test ban treaty began in Geneva on 13th July. These tripartite discussions have got off to a serious and useful start and are still continuing. We expect a pause shortly in which each delegation will report to its own Government, and we can then take stock of progress made.
Lord BROCKWAY: My Lords, I thank the Minister and welcome the progress which has been made. But may I ask him this: In these discussions, has the Soviet Union made any concessions about on-site inspection of nuclear tests? Secondly, has there been consideration of the fact that France and China, which are developing nuclear weapons, are not participating in these discussions?
Lord GORONWY-ROBERTS: My Lords, despite improvements in detecting and identifying seismic events, complex problems still need to be solved: that is part of the purpose of the negotiations. We are ready to discuss all possibilities, including the suggestion of the Soviet Union at the last United Nations General Assembly that a compromise basis for some degree of on-site inspection might be possible in this context. As to the possible participation of the two other nuclear weapon States, France and China, it is clearly a matter for the Governments of those countries. I have no doubt that they will assess the nature and timing of their own participation in this important exercise.
Lord BROCKWAY: My Lords, is it not desirable in these circumstances that there should be a wider world conference for disarmament, which would bring in all the nations to make their contributions?
Lord GORONWY-ROBERTS: My Lords, as a first stage, the three countries principally concerned—the United Kingdom, the United States and the Soviet Union—are properly applying themselves to the technical and other aspects of the difficult but urgent problem of a comprehensive test ban. If agreement is reached, no doubt the appropriate world forum for further discussion and means of implementation will be considered. As my noble friend knows, the United Nations will, during its next session, hold a special session on disarmament as a whole.
Lord CHALFONT: My Lords, may I ask the Minister whether Her Majesty's Government have any new information as to the level on the Richter scale of underground seismic events at which it can now be decided quite beyond doubt whether an event is a nuclear explosion or an earthquake? Is that level now sufficiently low for Her Majesty's Government to adopt the view that on-site inspection is no longer necessary?
Lord GORONY-ROBERTS: No, my Lords, I do not think that we have got that far, but progress has undoubtedly been made in the sense that my noble friend has suggested. There is still a line beyond which verification, which is essential to the practical success of any disarmament negotiation and proposal, cannot be fully guaranteed. As I have said on behalf of Her Majesty's Government—and indeed my noble friend has also said this more than once when speaking on disarmament from this Box—it is essential that verification, leading to a sense of security, be achieved as a basis for real disarmament in this, as in other, fields.

INDIA: INDUSTRIAL WORKERS' WAGES
2.48 p.m.
Lord BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the massive aid given by this country to India, they will state what investigations have been made into wage levels of industrial workers there, on the lines of the investigations made into wage levels in the Republic of South Africa; and when the results of such investigations will be published.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, Her Majesty's Government are not aware that any such investigations have been made.
Lord BARNBY: My Lords, arising out of that reply, may I ask the noble Baroness two questions: First, is it correctly understood that the Government have initiated, with the Board of Trade and the Confederation of British Industry, a further burst of activity on inquiries into wage levels in South Africa arising from the internal structure of the Republic? Secondly, does not the caste system in India indicate discrimination, and would it not be right to say that, in many cases, the wage levels for non-whites in India differ as much from the minimum living standard as is the case in the Republic of South Africa? May I ask what is being done about it?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I am not aware of any burst of new activity on the part of the Board of Trade in the direction which the noble Lord indicates. As to the wage levels of industrial workers in India, as the noble Lord will know, India is one of the poorest countries in the world and, because of that, naturally the levels of wages all over the country reflect the fact that it is poor and cannot afford to pay wages on the same level as South Africa, which happens to be a very well-off country. Nevertheless, the workers in India operate under free conditions and they are able to join trade unions, and, moreover, free trade unions.
Lord BARNBY: My Lords, surely India was a much more wealthy country than South Africa 250 years ago.
Baroness GAITSKELL: My Lords, is it true that we give massive aid to India,
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a country where there is an extremely high population and a great deal of poverty? Do we give massive aid?
Baroness LLEWELYN-DAVIES of HASTOE: No, my Lords. India is in receipt of rather less aid than many countries which are richer, and what we give is, I think, amply justified. Noble Lords will be very glad to know that our latest grant will result in something like £150 million to £170 million of British goods and services.
Lord HARMAR-NICHOLLS: My Lords, in the absence of an investigation, and taking into account what the noble Baroness has said about the relative wealth of the two countries, has she a schedule of the level of wages in the two countries and, if she has, can she give it to the House?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I have no schedule of the wages in India because, as I explained, no investigations have taken place. There was, as the noble Lord will remember, a report by the Industry Sub-Committee of the House of Commons in 1973 into the conditions and pay of people working in British firms or their subsidiaries in South Africa, and I have that report here, if the noble Lord would like to have it.
Lord BROCKWAY: My Lords, is it not the case that the Indian Government have outlawed discrimination by the caste system? Also, can the noble Baroness tell us whether India has accepted the working conditions laid down by the International Labour Office?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, to the best of my knowledge the latter part of that question is true, and so of course is the former part.
Lord MACKIE of BENSHIE: My Lords, would it not be right to say that in this case two blacks do not make a white?

DEVOLUTION
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of

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the House, at a convenient moment after 3.30 p.m., my noble and learned friend the Lord Chancellor will repeat a Statement on devolution.

BRITISH RAILWAYS BILL
Read 3a, and passed, and returned to the Commons with the Amendments.

EUROPEAN COMMUNITIES COMMITTEE
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved on behalf of the Committee of Selection, That the Lord Walston be added to the Select Committee on the European Communities in place of the Baroness Phillips.—(Lord Aberdare.)
On Question, Motion agreed to.

MINISTERIAL AND OTHER SALARIES ORDER 1977
The LORD PRIVY SEAL (Lord Peart): My Lords, I beg to move that this House approves the draft of the Ministerial and Other Salaries Order 1977. The draft order now before the House is designed to increase the pay of all Ministers and office holders in this House by the amounts allowed under the current round of the pay policy. The order, which is made under the Ministerial and Other Salaries Act 1975, increases the salaries of Ministers and office holders by £208 a year, or by 5 per cent. where this is less. These increases will, however, be paid only to Ministers and office holders who are Members of this House. Ministers and office holders in the other place will not be paid the increases provided for by this order, as their Parliamentary pay is being increased by £208. My Lords, I beg to move.
Moved, That the draft Ministerial and other Salaries Order 1977, laid before the House on 29th June, be approved.—(Lord Pearl.)
On Question, Motion agreed to.

ADMINISTRATION OF JUSTICE BILL [H.L.]
2.54 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg, to move that the Commons Amendments be now considered.
Moved, That the Commons Amendments be now considered.—(The Lord Chancellor.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
[References are to Bill (131) as first printed for the Commons]

COMMONS AMENDMENT
1 Clause 8, page 4, line 9, at end insert—
"(1A) The Oaths Act 1961 shall extend to Northern Ireland."
The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 1. This Amendmet extends the Oaths Act 1961 to Northern Ireland. It is desirable in principle and will, in addition, be useful in facilitating a consolidating Statute on the subject of oaths which will extend throughout the United Kingdom.
The present position is that the Oaths Act 1888 extends to the whole of the United Kingdom, but the Oaths Act 1961 (which applied the provisions of the Oaths Act 1888 as to affirmation to cases where it is not reasonably practicable to administer the oath to a person in the manner appropriate to his religious belief) does not apply to Northern Ireland. I am assured that there is no deep reason for this, arising from any difference of policy between Northern Ireland and the rest of the United Kingdom on this matter, but simply that it was contemplated in 1961 that similar provisions would be introduced by the Stormont Parliament. This has not been done and the position in Northern Ireland is out of line with that elsewhere. The Secretary of State for Northern Ireland has agreed that this would be a convenient opportunity to remedy that defect and it will, as I have said, facilitate the consolidation of these Statutes on a United Kingdom basis. My Lords. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment. —(The Lord Chancellor.)
Viscount COLVILLE of CULROSS: My Lords, I welcome this Amendment, and I think that if he were in his place the noble Lord, Lord Hale, would have done so, too, because I believe it was he who drew attention to the difficulty in the case of certain Chinese witnesses, when we were earlier discussing this Bill. We shall now be able to deal with Chinese witnesses in Northern Ireland as well.
On Question, Motion agreed to.

COMMONS AMENDMENT
2 Clause 18, page 11, line 29, leave out "£30" and insert "£10".
The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 2. This reduces the figure in paragraph (a) of Clause 18 from £30 to £10, but otherwise leaves the paragraph as drawn. Your Lordships will remember that we considered this both in Committee and on Report. I then explained that, in maintaining a register of county court judgment debts of £10 and upwards, the Government were providing a much greater service to the commercial community than had ever been contemplated in the past, and I suggested that it would be reasonable, in the interests of saving public service manpower, to make at any rate a modest increase in the figure of £10. But in deference to the views expressed in Committee, I moved an Amendment reducing my proposed new figure of £50 to £30, and the noble Viscount, Lord Colville of Culross, described that as a gift horse which he did not propose to look in the mouth, although he expressed the hope that the door was still open to further discussion. The metaphors became a little complicated, but the meaning remained clear. The matter was further discussed in the other place and, in the light of that further discussion, the Government came to the view that the whole matter admitted of further consideration in the light of the arguments put forward for retaining the status quo, and the effect of the Amendment is to achieve just that.
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However, I should make it clear that the Government have not totally changed their mind on this issue, and I still venture to doubt whether it is a proper use of manpower to register these very small judgment debts. But I think that the right thing to do is to review the matter again, and under the terms of the clause I shall retain the power to increase the figure by Statutory Instrument, if at some future date it seems expedient to so do. However, I repeat the assurances given in another place that I would not do this without further consultation, and any order that was made would be subject to Parliamentary control under the Negative Resolution procedure. For these reasons, I advise and invite the House to accept the Commons Amendment on this point. I beg to move.
Moved, that this House doth agree with the Commons in the said Amendment. —(The Lord Chancellor.)
Viscount COLVILLE of CULROSS: My Lords, I am sorry that I appear so greatly to have mixed my metaphors. I did not appreciate that it was all in the same sentence as the noble and learned Lord has attributed to me. This Amendment represents the solution that I would have wished: indeed, at one stage I suggested something very similar. It keeps the situation as it is for the moment but, as the noble and learned Lord has said, it gives him the opportunity quite flexibly to take into account what the people who use the register of county court judgments have to say. If the noble and learned Lord—or, indeed, his successor—comes to the conclusion later on that there is room for change without doing any harm, it will be a perfectly simple matter to carry out that change; there will be no further need to come with substantive legislation to this House. Therefore I very much welcome the Amendment, and I am glad that the further discussions in another place have led to this change.
On Question, Motion agreed to.

COMMONS AMENDMENT
3 After Clause 23, insert the following new clause:
Rectification oldie register
".In section 82(3) of the Land Registration Act 1925—

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(a) after the word "interest", there shall be inserted the words "or an order of the court";

(b) the following paragraph shall be substituted for paragraph (a)—

"(a) unless the proprietor has caused or substantially contributed to the error or omission by fraud or lack of proper care; or"; and

(c) paragraph (b) shall cease to have effect."

3.1 p.m.
The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 3. The Amendment inserts a new clause, "Rectification of the register", after Clause 23. It is important that the entry of a person on the Land Register as the registered proprietor of a piece of land should, so far as possible, be conclusive as to his title. Nevertheless, it would be too rigid a rule to provide that the register was wholly incapable of amendment if an error or omission subsequently came to light. Such a rule was adopted in the earliest days of land registration, but it soon had to be abandoned. It has been accepted for many years now that rectification of the Land Register should be possible in certain circumstances to correct errors or omissions. The relevant provisions are contained in Section 82 of the Land Registration Act 1925 which sets out the grounds on which rectification may be ordered.
The power of the registrar or the court to order rectification is, however, limited where the registered proprietor is in possession of the land, since it is an accepted principle that the proprietor in possession should not be dispossessed unless there is good reason to do so. Section 82(3) of the Land Registration Act 1925 deals with the position of the proprietor in possession, but it has become clear from decisions of the courts that the subsection does not give the proprietor in possession the full benefit of the presumption against rectification which the Act was clearly intended to provide. This has been pointed out by learned commentators as a serious defect in Section 82, and the Law Commission put forward some provisional proposals for remedying the defect in a 1972 working paper.
The Law Commission's proposals were, in brief, that rectification should not be
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ordered against the proprietor in possession unless either he was in some way to blame for the error or omission in question, or for some other reason—on a kind of balance of hardship test—the justice of the case required it. I am assured by the Law Commission that these proposals received widespread approval in consultation and will be confirmed when they submit their final report. The Law Commission have also confirmed that this is a self-contained point which can be implemented in advance of their comprehensive report on improvements to the land registration system. Accordingly, this would appear to be a useful amendment to the Land Registration Act which will be of practical benefit in the working of the system. My Lords, I beg to move.
Moved, that this House doth agree with the Commons in the said Amendment. —(The Lord Chancellor.)
Viscount COLVILLE of CULROSS: My Lords, I welcome also the insertion of this new clause, the only one, I believe, which has been put into the Bill in another place. This is not a subject upon which have an enormous amount of experience. I am, however, aware that there have been some very complicated sets of facts which the courts have had to pronounce on in the last decade regarding the subject of rectification of errors, and it has evidently emerged that there is something wrong with the way in which the original Act was drafted. I am sure that the noble and learned Lord is right to take this opportunity to correct the balance of the way in which the courts are allowed to proceed and to insert it in the Bill at the earliest opportunity. Therefore, I am very happy indeed to see this Amendment.
The LORD CHANCELLOR: My Lords, I am most grateful to the noble Viscount for his assistance on this matter—as, indeed, on the other provisions of this useful Bill.
On Question, Motion agreed to.

COMMONS AMENDMENTS
4 Clause 24, page 15, leave out lines 33 and 34
5 Clause 25, page 16, line 14, leave out from "charge" to end of line 16 and insert—

"(a) it shall take effect only in equity, and

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(b) it shall be capable of being overriden as a minor interest unless it is protected as provided by subsection (3) below."

6 Clause 27, page 17, line 34, leave out from "provisions" to end of line 38.
7 Clause 31, page 19, line 22, leave out from beginning to "(25)" in line 23 and insert "sections (Rectification of the register) to",
8 Page 20, line 1, leave out "24 to" and insert "sections (Rectification of the register) to",
9 Page 20, line 21, leave out "those enactments extend" and insert "that enactment extends".
The LORD CHANCELLOR The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 4 to 9 inclusive.
Viscount COLVILLE of CULROSS: Hear, Hear!
The LORD CHANCELLOR: These Amendments can conveniently be taken together since they are all drafting matters, as the noble Viscount by his approval has indicated, and do not affect the substance of the relevant provisions in the Bill, with the possible exception of Amendment No. 6 which deletes paragraph (b) from the new subsection (3A) which is to be inserted in the Administration of Estates Act 1925. The House will remember that Clause 27(3) of the Bill gives the Lord Chancellor power by order to vary the formula for capitalising the value of the life interest of the surviving spouse on intestacy. The present formula, based on the value of consols, has become inappropriate in current conditions.
The purpose of the Amendment is to remove the retrospective element in the transitional provisions of the clause as it was originally drafted. Those provisions were drawn in terms wide enough to enable the order to re-open past cases, and it was put to me by the Law Reform Committee of the Bar Council that this was undesirable. I agree with that view and Amendment No. 6 rectifies the matter. My Lords, 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.

COMMONS AMENDMENT
10 Schedule 2, page 23, line 37, leave out from beginning to end of line 6, on page 24, and insert—
"4. In section 17 of the Costs in Criminal Cases Act 1973 (power to make regulations about costs):—

(a) in paragraph (a) of subsection (1) for the words "and the conditions under which such costs may be allowed" there shall be substituted the words", circumstances in which and conditions under which such costs may be allowed and expenses which may be included in such costs"; and

(b)the following subsection shall be inserted after that subsection:—

"(1A) Regulations under this section may provide that rates or scales of allowances payable out of central funds under this Act shall be determined by the Secretary of State with the consent of the Minister for the Civil Service."."
The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 10. This is a drafting Amendment to paragraph 4 of Schedule 10, following a point first raised in the House by the noble Viscount, Lord Colville of Culross. Unless anybody wishes me to do so, I do not think that I need to pursue the matter. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Lord Chancellor.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
11 Schedule 5, page 35, line 3, at end insert—

"6 & 7 Vict. c. 85.

Evidence Act 1843.

In section 1, the words "in those cases wherein affirmation is by law receivable"."

12 Schedule 5, page 35, line 5, at end insert—

34 & 35 Vict. c. 83.

Parliamentary Witnesses Oaths Act 1871.

In section 1, the words from "Where" to form" and the words "or affirmation"."

13 Schedule 5, page 35, line 12, column 3, at end insert—

"and in the definition of the expression "swear" the words "in the like case"."

14 Schedule 5, page 35, line 26, at end insert—

"1954 c. 33 (N.I.).

Interpretation Act (Northern Ireland) 1854.

In section 26(2) in the definition of "oath" the words "as respects persons for the time being allowed by law to affirm or declare instead of swearing" and in the definition of "swear" the words "in the like case"."

15 Schedule 5, page 35, line 42, column 3 at end insert and section 2(2)."
16 Page 38, line 3, at end insert—

"15 & 16 Geo. 5. c. 21.

Land Registration Act 1925.

Section 82(3)(b)"

The LORD CHANCELLOR: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 11 to 16. These Amendments add some consequential repeals to Schedule 5. Amendments Nos. 11 to 14 are further consequentials on the Amendment to the Oaths Act 1888 by Clause 8. Amendment No. 15 is consequential on the extension of the Oaths Act 1961 to Northern Ireland, and Amendment No. 16 is consequential on the new clause about the rectification of the Land Register. 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.

WATER CHARGES EQUALISATION BILL
3.10 p.m.
Lord STRABOLGI: My Lords, on behalf of my noble friend Lady Birk I beg to move that the Commons Reason and the Commons Amendments be now considered.
Moved, That the Commons Reason and the Commons Amendments be now considered.—(Lord Strabolgi.)
On Question, Motion agreed to.
Lord SANDFORD: My Lords, may I suggest that in considering them we take Nos. 2 to 4 in one block and Nos. 5 to
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8 in another block; and I do not think there is very much to be said on either block.
Lord STRABOLGI: My Lords, I am grateful to the noble Lord.

COMMONS REASON FOR DISAGREEING TO CERTAIN OF THE LORDS AMENDMENTS AND COMMONS AMENDMENTS TO ONE OTHER OF THE LORDS AMENDMENTS
[References are to Bill (109) as first printed for the Lords: the Commons Reason and Amendments are printed in italics]

LORDS AMENDMENT
Page 1, line 14, leave out subsection (2) and insert—
"(2) Subject to subsection (5A) below, in relation to each statutory water undertaker by which, in the year ending 31st March 1976, a supply of water was provided on an unmeasured basis, the Secretary of State shall determine for the purposes of this Act the amount which appears to him to represent the value at that date of that part of the undertaker's assets which was then referable to the supply of water on an unmeasured basis.
(2A) In this section the "qualifying asset value" of a statutory water undertaker for any accounting period means the amount determined under subsection (2) above in relation to the undertaker, less such amount as appears to the Secretary of State to be appropriate in respect of depreciation for any previous accounting period or periods beginning on or after 1st April 1976.
(2B) Subject to subsection (2C) below, any reference in this Act to the relevant financing costs of a statutory water undertaker for any year is a reference to an amount which is determined by reference to the qualifying asset value of the undertaker for the corresponding accounting period and consists of the aggregate of—

(a) such percentage (in this subsection referred to as "the qualifying percentage") of the interest payable by the undertaker in the corresponding accounting period as appears to the Secretary of State to be referable to indebtedness incurred with respect to assets whose value is reflected in the qualifying asset value for that period, and

(b) so much of the provision for depreciation made by the undertaker in the corresponding accounting period as appears to the Secretary of State to be referable to any such assets, and

(c) in the case of a statutory water company, the qualifying percentage of the franked payments, within the meaning of Part V of the Finance Act 1972, made by the company in the

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corresponding accounting period, multiplied by the appropriate factor.

In this subsection the "appropriate factor" means the proportion which the average bill for general rates and water services in respect of premises to which a supply of water is provided by the undertaker on an unmeasured basis bears to the average bill for general rates and water services to such premises throughout England and Wales.
(2C) The amount ascertained under subsection (2B) above shall be reduced by any relief received in the corresponding accounting period through the rate support grant by premises to which a supply of water is provided by the undertaker on an unmeasured basis to the extent that such grant takes account of water supply charges.
(2D) For the purposes of this Act, in relation to the year 1978 or any subsequent year the corresponding accounting period of a statutory water undertaker is the accounting period of the undertaker which is co-terminous with or begins in that year."
The Commons agreed to this Amendment and proposed the following Amendments thereto:—
2 Page 1, line 14, Line 14, leave out "Subject to subsection (2C) below"
3 Page 1, line 14, Leave out lines 35 to 41.
4 Page 1, line 14, Leave out lines 42 to 47.
Lord STRABOLGI: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 2, 3 and 4 to the Lords Amendment No. 1.
Moved, That this House doth agree with the Commons in their Amendments Nos. 2 to 4 en bloc to the Lords Amendment No. 1. —(Lord Strabolgi.)
Lord SANDFORD: My Lords, although there is not much to say I should like to say just a little. If the noble Baroness, Lady Birk, were here I would say rather more, but as she is not and it is near the end of term, I will not. It would be useful if the noble Lord, Lord Strabolgi, could let us know what are the reasons. It is rather unusual, except in respect of privilege Amendments, to give no reason at all for disagreeing to a Lords Amendment. All I should like to say is that from this side of the House we welcome very much the Government's decision to embrace the water companies into the water industry. Although they are still sticking to what we consider to be their mistaken view that the water companies are an anomaly and it is wrong in principle to have them there, they have been embraced into the industry, and for that we are grateful.
Lord STRABOLGI: My Lords, I am grateful to the noble Lord for what he has said. I will convey his remarks to my noble friend and I am sure she will communicate with him as soon as possible.
On Question, Motion agreed to.

LORDS AMENDMENTS
5 Page 2, line 34, at end insert—
"(5B) In the first financial year in respect of which an order is made under subsection (1) above, the amount of the levy calculated under subsection (4) above shall be reduced by two-thirds and in the second financial year in respect of which such an order is made the said levy shall be reduced by one-third."
6 Page 3, line 1, after "to" insert "subsection (3A) of this section and"
7 Page 3, line 16, at end insert—
"(3A) In the first financial year in respect of which an order is made under section 1(1) above, the amount of the payment calculated under subsection (2) of this section shall be reduced by two-thirds and in the second financial year in respect of which such an order is made the payment shall be reduced by one-third."
The Commons disagreed to the above Amendments for the following Reason:
8 Because they might affect the levy and application of water charges, and the Commons do not offer any further Reason trusting that this Reason may be deemed sufficient.
Lord STRABOLGI: My Lords, I beg to move that this House doth not insist on their Amendments Nos. 5, 6 and 7 to which the Commons have disagreed for the Reason numbered 8.
Moved, That this House doth not insist on the said Amendments to which the Commons have disagreed.—(Lord Strabolgi.)
Lord SANDFORD: My Lords, once again I am sorry that the Commons have disagreed with our Amendments, but these are privilege Amendments and I think there is nothing more to be said.
On Question, Motion agreed to.

COMMODITY PRICES: SELECT COMMITTEE REPORT
3.13 p.m.
Lord ROBERTHALL Lord ROBERTHALL rose to call attention to the Report of the Select Committee on Commodity Prices (HL

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165); and to move for Papers. The noble Lord said: My Lords, I beg to call attention to the Report of the Select Committee on Commodity Prices, of which I was chairman, and to move for Papers. We have a rather longer list of speakers than I expected. Some of them are members of the Committee, and no doubt they will deal with problems that I omit, and no fewer than three of them are noble Lords who assisted the Committee by submitting papers and appearing before it.
In a report of this kind, it is customary to acknowledge the help received from all the people who were good enough to submit papers and to come to give evidence. Although it is customary, I do not think that we should treat it as a perfunctory matter. It is a tribute to the respect in which your Lordships' House is still held that so many busy and important people are willing to take so much trouble to prepare memoranda and to come to talk to us. If your Lordships have looked at the acknowledgments you will have noticed that we refer particularly to Mr. Grondona, who, as some of your Lordships know, has been a leading advocate of commodity stabilisation for a great many years and can be regarded as one of the founding fathers of this subject. Although we did not recommend the actual acceptance of his proposals there is no doubt that they have the substance of the matter in them.
In connection with the acknowledgments and also on behalf of the Committee, I wish to pay a tribute to the staff of your Lordships' House, particularly to our secretary, Mr. Carstairs, for his unflagging zeal and service to the Committee. As an ex-civil servant he knew his way completely round Whitehall and was able to get us answers to our queries in no time at all. But, as your Lordships will know, all committees are deeply indebted to the whole supporting staff. I myself am constantly surprised, especially at the skill with which the shorthand writers and the printers manage to make good sense of what is sometimes inaudible and sometimes unintelligible to other people.
The problem with which the report deals is that of fluctuations in commodity prices. As I suppose all of us—or our
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wives—will know very well because of the last year's experience with tea, coffee and cocoa, these prices can rise in a quite extraordinary way, and the same is true in the other direction: they can also go down. These fluctuations cause a good deal of difficulty to all connected with the production and use of these commodities. For a long time, it has been urged that commodity prices should be made more stable, but not much progress has been made. That is the subject of the report. It has been in your Lordships' hands for some time and I hope that I may deal rather briefly with it.
The first thing to be said about it is that, at the present time, the problem falls into two divisions, or can be considered from two points of view. One is the general problem as it has been considered for 30 years or more. A great deal has been said about it, a great many experiments have been made. Her Majesty's Government have had a fairly settled policy on this since the end of the war. It is well grounded and indeed at the beginning I thought that perhaps it was somewhat doubtful whether we ought to have a committee to go over ground that a great deal was known about and on which it was not likely that anything very new could be said.
But the second strand in the report is the current situation and the relation between commodity policy and the demand by developing countries for a new world order. About the time that this demand from developing countries for a new world order was getting up steam in a UN forum, the then Prime Minister, now Sir Harold Wilson, made a speech at Kingston, Jamaica to the Commonwealth Prime Ministers in which he called for a new initiative in this field. Since then, the whole subject of commodity policy has become a burning issue and has been widely discussed in international circles. But the main forum of discussion has been UNCTAS (the United Nations Conference on Trade and Development), where a proposal was put forward some two years ago for what has been called the integrated programme for commodities. That programme included a proposal for a Common Fund which was to be used mainly for enlarging and financing a number of international commodity agreements in this field.
International commodity agreements are the generally accepted method of trying to attack this problem of price stabilisation. As I said, this whole question of the Common Fund has been hotly debated, both in UNCTAD and in a number of other international organisations; it gave rise to sharp differences of opinion between the great majority of countries, mostly the developing countries, on the one hand, and a small number of developed countries, of which the United Kingdom was one, on the other hand.
The Committee formed the opinion that there was some inconsistency between the attitude taken by the United Kingdom and the call of the Prime Minister, which was still supported by Her Majesty's Government, for a new initiative; the Committee was certainly left in no doubt that the developing countries thought there was considerable inconsistency. The Committee, therefore, proposed to recommend a change in the attitude of the Government. But just as we were finalising our report the Government—I will not quite say shot our fox, but withdrew their animal and entered a new one, as we thought, which was much more acceptable to the Committee. In the end we practically endorsed the Government, both on the long-term programme and on this current and very burning issue. I shall very much look forward to the account of the present position which I hope the noble Lord, Lord Oram, is going to give us.
The background to these two aspects of the report is given in the first two chapters, the first giving the United Kingdom position at the time that we met, and the second the political background to the UNCTAD proposals. The greater part of the rest of the report is concerned with the more general question. We deal with the political issue as appropriate, and the last chapter gives our conclusions and recommendations, which are then summarised. I hope the Summary of Conclusions will be found useful by those who have not time for the full document. All this is in the first volume, and the written and oral evidence is in the second and third.
In the third chapter we examine the extent to which commodity prices have actually fluctuated and the reasons for this. I think that before the war one of
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the main reasons for fluctuations was what used to be called the trade cycle or the business cycle, the fluctuations between booms and slumps, which made a very big change in the demand of the main consuming countries for the main commodities, especially raw materials. This had a very disturbing effect indeed, particularly on the less developed countries which produced these commodities. But it also had a backward action, so to speak, on the advanced countries, because many of their customers in the countries producing primary commodities had their incomes reduced practically to nothing, so that the trade of the manufacturing countries suffered a great deal.
This was one of the reasons which stimulated many people, including Mr. Grondona and Lord Keynes, to come forward with proposals for commodity price stabilisation. But, partly as a result of Lord Keynes' work in other fields, the trade cycle has been much less in evidence in the post-war period until quite recently. That, I think, is one reason why there was not a great deal of interest in this subject of commodity price stabilisation. But there was a general boom between 1973 and 1975, and that was followed, as your Lordships know, by a recession from which the world is emerging very slowly. It is not surprising, therefore, that there have been more violent commodity price fluctuations since then, and a restoration of interest.
On the whole, however, the Committee considered that the cause of fluctuations now lies more on the supply side than on the demand side. Most of the commodities that are covered by this field are either those where producers cannot switch very easily to producing something else, or those produced over quite a long period. There is interference with supply in one form or another, there is too much or too little, and compared with manufactured goods and with services, the tap cannot be turned off at all easily. Owing to the characteristic of demand, that gives the big price fluctuations. In manufactured goods it is, within limits, much easier to change production: you go on short time or produce unemployment if the price is tending to go down, and you can work full time and expand if there is a good demand.
In the next chapter we examine the effects of fluctuating prices. Our conclusion

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is that these are damaging to the processors, the manufacturers, and the consumers, because of the big changes that they experience, but there is no doubt that the principal damage, that which is most felt, is that to countries which have to specialise in producing one or two of these commodities. Price fluctuations present them with extremely serious problems. They find it very hard to adjust themselves to a sudden increase in their incomes, and very hard to adjust back when that situation is over, and even more hard to adjust to a big fall in prices. Fortunately, the number of countries seriously affected in this way is not very large. Zambia is perhaps the most obvious at the moment; it is almost entirely dependent on copper and the price of copper is very low; the economy is suffering very seriously indeed.
In the next chapter we deal with the problem of long-term supplies. I hope that the noble Lord, Lord Lee of Newton, will refer to that, as he kept us mindful of it. It is relevant of course, to the future price. We examined this and came to the conclusion that there is a serious future problem, particularly for minerals and metals; the most promising sources of new supply are in countries which are exposed to political instability, where there is the fear, and sometimes the reality, of unilateral revision of contracts. We think it would be a great pity if the old partnership broke down between countries such as Britain (a leading one), which provide finance and know-how for mining development, and the countries which possess the resources. I think that arrangements should be made for a type of international guarantee of contracts of this kind on the lines suggested by Dr. Kissinger when he was American Secretary of State.
We then come to the analysis of the problem and the remedies which have been suggested. The remedies were sometimes put forward by individuals and sometimes by Governments. Moreover, a number of experiments have been carried out by the producers and consumers of the commodities. The solution for durable commodities—commodities that can be stored—is an obvious one. We are all familiar with this solution as regards annual crops where one does not throw the whole crop on to the market
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at harvest time: it is held off and fed out again in the course of the year and thus the prices remain fairly stable. However, the solution is not as easy as that for most primary commodities, partly because of the longer production period required for many of them; partly because it is more difficult to make arrangements on a world-wide scale; and partly because it is extremely difficult when production takes some time and is subject to all sorts of interruptions, to predict the size of the problem with which one must deal. There are considerable technical difficulties as well as some political difficulties in dealing with the situation in this way.
However, the solution generally favoured and the one recommended by the Committee is to have international commodity agreements which represent both consuming and producing countries and for them to establish what are called, in this context, "buffer stocks"; that is, stocks which are purchased by the organisation when the price is low because there is an excess of supply, and then fed back again when the price shows a tendency to rise because there is a shortage. In the opinion of almost everyone who has studied the subject, those are undoubtedly the lines upon which to proceed.
The question is often asked, why is it not done? It has been done as regards a number of commodities of which the best known is tin, which has had a buffer stock for a long time. There have been and there still are commodity agreements covering cocoa and coffee, and wheat and sugar have also been subject to such agreements. However, none of these agreements has been very successful, partly because of the difficulty which affects all international agreements—namely, that it is extremely hard to get companies to agree on anything because they all see their interests in different ways. In the view of the Committee, such buffer stock schemes as have been tried, have been tried on much too small a scale. They have not been given a chance to show what they could do because of the inadequate amounts involved. That leads to the view that if new buffer stocks are formed, or if the existing ones can be overhauled, they should be handled on a much bigger scale and have more money, because that would provide more time to find out what was going on and

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to make better decisions about the price, which has also been a problem in the past.
The Committee then looked at a number of questions which have arisen in the area of commodity agreements. It has sometimes been urged by producing countries or feared by consuming countries that agreements of this sort wilt be used to put the price up, as was done by OPEC with oil. We feel that it would be much more difficult to make effective arrangements of this kind if there were international commodity agreements in which both the producers and the consumers had a voice and, in any case, we believe that the special conditions which enabled OPEC to function are not likely to apply to other commodities. Therefore, we do not take that threat very seriously.
It has also been suggested that the world should support agreements of this kind because that would be one way of giving aid to developing countries which are often the producers of these commodities. That is a very simplistic view. These commodities are produced by developed countries as well as by developing countries. If one takes the whole spectrum of developing countries, one will find that more of them are consumers of these commodities than are producers. Therefore, it is extremely doubtful whether it would be in the interests of the developing countries as a whole to use these methods as a form of aid and, if they did, the advantages would fall very unevenly between rich and poor countries and between consuming and producing countries.
An extremely vexed question in the international discussions has been the demand by the developing countries which produce these commodities for the prices to be indexed. We are much more familiar with that than we used to be. I suppose that we all know what indexation means and we would all like it to be applied to our own particular situation. However, the idea of a general indexing of these prices presents great difficulties. It seemed to us that this was not something of which to be afraid. When setting their prices, they would have to take into account the general movement of prices, but it would be almost impossible for all prices to be indexed in the same way.
The penultimate chapter of the report goes into the question of commodity markets. This is of considerable interest to Britain because London is one of the great international commodity markets. We were led to consider this matter because developing countries often think that these markets keep the price down against them. On the other hand, many people think that the commodity markets are great areas for speculation and a cause of the fluctuations. We took a great deal of evidence on this matter and considered it very carefully. On the whole, we came to the conclusion that, far from being dangerous, these commodity markets perform a necessary and useful function and help to stabilise prices, although there is some danger that they may assist speculation. That matter is being looked at.
Next, we come to the recommendations. As I have said on the general side, Britain has been a leader in this area, and has for a long time been urging the setting-up of international commodity agreements and the use of buffer stocks, as well as that both consumers and producers should be represented. On the whole, this has been a non-contentious issue in politics and we therefore approve the policy as it has been pursued. We make some recommendations which stem largely from the difficulties of operating these agreements—difficulties such as the lack of information and, especially, the inadequate size of the buffer stocks.
Finally, I turn to the second strand—namely, the pressure for a Common Fund. As I have already indicated, the British Government were regarded by many countries, including many Commonwealth countries, as very negative in their attitude towards this fund. It was felt that this was the only project which had been put forward since Mr. Wilson called for a new initiative. The Committee therefore examined the reasons given for the United Kingdom's fears. It did not feel that they were very convincing reasons.
As I have also said, there have been a number of international discussions in the EEC, the OECD and other areas where developed countries have been trying to form a common front on this matter. As a result of the last meeting of an UNCTAD negotiating committee in Paris, a paper

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was presented on behalf of those countries. That paper seemed to us to go about as far in this direction as we should like.
That sums up my introduction to the debate. All our inquiries have led us to think that it is quite difficult to get commodity agreements going and that it is fairly difficult to run them when they do exist. Just as it would be a mistake for the developing countries to think that a Common Fund will put an end to all their troubles, so it would be a mistake for those who attach importance to price stabilisation to think that we are likely to make rapid progress in this area. But the Common Fund calls for a very large amount of capital and, so far as we can tell, for a sensible attitude to these agreements. Therefore, we believe that those who are concerned about the problem should welcome UNCTAD's initiative for a Common Fund. My Lords, I beg to move for Papers.
3.43 p.m.
Lord CARR of HADLEY: My Lords, I am sure that all your Lordships would wish me to thank the noble Lord, Lord Roberthall, and his Committee for the great work that they have done. It has been a great volume of work when we realise the lengthy period during which the Committee have been carrying out their inquiries. And when we read not only their substantial report, which I have managed to do, but observe the two further volumes of evidence and memoranda, which I confess—probably like most of your Lordships—I have seen more from the outside than from the inside, it has clearly been a very arduous job, but a very important one. As an ex-Member of another place for some considerable time, I believe that that illustrates the sort of job which this House does extremely well and which another place scarcely manages to deal with at all. Therefore, I am sure that we should all like to thank and congratulate the noble Lord and his colleagues who have conducted this inquiry and produced this report.
I had a little sympathy with the noble Lord when he spoke about the Government coming along and shooting their fox. I had such an experience myself when, a good many years ago now, I
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was chairman of one of the sub-committees of the old Estimates Committee. On the whole, we regarded the action as a compliment rather than as anything else, because we very much doubted whether they would have shot the fox if they had not feared that, if they did not do so, the Committee were about to. Therefore, I do not think that the noble Lord and his Committee should feel in any way discouraged, because in fact they were responsible for the death of the fox even though the Government got out the gun.
I am sure that the whole House would also wish to thank the noble Lord for his extremely lucid summary of the Committee's report. He has taken us through a model Second Reading speech, explaining it in an exemplary manner. I am left with the difficult task of trying to give the Opposition's views on the recommendations and conclusions advanced by the Committee.
It is undoubtedly a very important subject. It is important to us and to other consumer countries that we should have an adequate and regular supply of these commodities and, as consumers, as cheap a supply as possible. It is also obviously an important subject to those less developed countries which are largely or significantly dependent on the production of various of these primary commodities. It is important not only for those economic reasons but for deeper reasons, for it is a subject which is extremely important in the conduct of international relations in many areas. As we have noticed recently, scarcely any international conference can take place, whether it be under the European umbrella, under the United Nations umbrella or under the Commonwealth umbrella, where this subject does not loom as one of the important items on the agenda. So it is a very important subject indeed.
Therefore I ask myself: On what principles should we base our approach to it? Here I suppose, inevitably we display our natural economic and political instincts and beliefs. In this, and in other matters, we have really to choose between the engine of market forces or the engine of State direction, control and finance for the economic driving force. I am sure it is no surprise to noble Lords to know that I have always preferred the engine of market forces, believing that to be the more effective. Indeed, I am

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in little doubt that if one is looking solely for long-term economic benefit—how one maximises economic benefit in the longterm—then market forces are quite clearly the best way of achieving that end.
But, of course, even in economic terms one cannot always afford to take the long-term view. Sometimes the long-term working out of economic forces produces short-term economic difficulties, which it is difficult at least, and sometimes even impossible, to live with. Moreover, human affairs are about more than economics. So while believing in the value of market forces as the best way of maximising economic benefit in the long-run, I have also believed, as we do on this side of the House, that it is right and necessary for Government to intervene in the free play of market forces on grounds of public policy for social and political objectives. Of course, when I use the word "political", I use it in its fullest and widest meaning and not in any partisan sense.
But we should not intervene more than we have to, because we should always realise that when we intervene we shall in the long-run probably pay an economic penalty for that intervention, although it may be a price worth paying. Taking this balanced view, I have no difficulty in declaring that in principle I am in favour of seeking to achieve more stability than we have had in the past in commodity prices. I welcome the Committee's conclusion that there would be widespread advantages in more stable commodity prices and that we and other countries should support action to achieve that greater stability.
I also welcome and agree with the Committee's conclusion that British interests and those of primary producing countries are to a considerable extent complementary. Of course, they can be in conflict if we take the shortest-term view about getting the cheapest price at a particular moment. Of course they can be in conflict if the producing countries take an opposite view and want to seek to maximise the price to an undue degree at any given moment. But if both sides are reasonable, then I believe that Britain's interests and those of the primary producing countries are, as the Committee say, or certainly could, and should to a considerable extent, be complementary,
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and I imagine that that also applies for other consuming countries as well.
Britain has a particular need greater than most other industrial countries for sure access to supplies of raw materials for industry and of food products, and a sure supply at the most competitive prices. We have this particular need for the obvious reason that, on the whole, we are more dependent on imports than are most other major industrial countries. Therefore, our need for competitive prices has no doubt been the main reason why British Governments of all political colours have tended, having perhaps said encouraging things at international conferences, to be hard bargainers when it comes to turning those intentions into practice. We should be rather cautious before we ask our Governments, of whatever Party, not to be fairly hardheaded in looking at British interests in these matters.
What we are coming to realise more than we used to—at least I hope and think we are—is that stability of price is in itself an economic advantage, and not just a social and political advantage to the producing countries. For most of my own industrial life the principal raw material with which I had to deal was aluminium. I always felt how lucky I was that it was aluminium and not copper. I had no doubt that manufacturers and fabricators in aluminium had, on the whole, a long-term advantage over fabricators in copper, simply because of the greater stability of aluminium prices compared with copper.
When I say "advantage", I am not just looking at short-term commercial advantage; I am looking too at the greater certainty with which one could plan ahead one's investment and marketing programmes when one was dealing in a raw material price movements of which were much more stable than those of some competing commodities. I believe therefore that there is an economic advantage in stability itself, and that we are not lacking in hard-headedness if we are prepared to pay a certain price for stability. But of course, one cannot pay any price for stability. As the Committee say, and I agree with them, the basic problem is to assess the benefits to be gained against the costs and difficulties involved.

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In these difficult matters there are no absolute yardsticks by which one can measure the benefits on the one hand and the costs on the other. So one is thrown back, as so often in the most important matters which one has to decide, on using one's best judgment, and not by getting out some nice measuring instrument and recording a figure on the scale which gives an answer one way or the other. Taking that judgment, I can only express my opinion that I believe that our Committee give us good guidance. I very much hope that the Government will express that view too, and will be prepared to accept it.
Holding the view that I do about market forces playing as much a part as possible, I welcome what the Committee have to say about doing all we can to help those market forces to work as smoothly and efficiently as possible. Here I am sure that the emphasis that the Committee put on the need for the best possible information is of key importance. It is also of importance when one comes to consider commodity agreements, but it is of key importance in getting market forces to work as smoothly as possible. I have never understood why some, but of course by no means all, of the most ardent supporters of market forces seem to be deeply suspicious about the collecting of information. I agree that one has to go down into the market place, but one is inclined to make a better decision in the market place, and to judge better one's long-term interest and not merely today's interest if one is better supplied with information.
Of course one has to look at and take with a pinch of salt the information one gets. We are sophisticated enough in these things nowadays to know that the most expert attempts at crystal gazing are, in the end, no more than that. Sometimes in the past we have made the mistake of thinking that they have some greater validity. But the more study and the more information arising from real study that can be provided, I am sure the better we shall find the market forces will themselves work.
I also welcome what the Committee have to say about our British commodity markets. I am glad that they come down in favour of the view that, on the whole, there
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can be little doubt that these commodity markets have served, and do serve, to have a stabilising rather than a destabilising influence. At the same time I think they are right to point out that this, although generally true, is not always true, and that inflation in particular has brought some new factors to bear; notably, that it has brought into these commodity markets people who have not normally been there before and are looking to the use of them more to hedge against inflation and for other purposes of that kind, than because they are experienced dealers in and users of the commodities concerned.
If that is the case, as I think it is, then I also agree with the Committee that the commodity markets ought to look very carefully at their practices; not just be content to say that these particular practices have been all right in the past, but to recognise that circumstances have changed and that therefore they may have to change some of their practices to guard against some of the new dangers that have arisen. I very much hope that our commodity markets will pay serious attention to the suggestions which the committee have made, bearing in mind their overall verdict that these markets play a helpful role not only in forwarding our commercial advantage in any short-run consideration but as a stabilising rather than as a destabilising effect. I also agree with the Committee in saying that although we should do all we can to make the market work efficiently and smoothly, more is needed. Hence there is a need, if we can get them, for a number of international commodity agreements.
May I just run down with approval some of the major points which they made, I think learning and helping us to learn from the unfortunate experience of commodity agreements in the past. It is no good burking the fact that the past experience has been unfortunate, and on the whole very unsuccessful. And am I right in recalling from this report that only the Tin Agreement has survived? Others have either never been set up, or when set up have collapsed for one reason or another, quite quickly.
It seems to me that really there are six conditions for success which the Committee lay down, which at least strike me as being vital conditions. First,

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the need for fuller information than we have had in the past, which is something I have already referred to. Secondly, I believe that it is absolutely certain that if we are going to have an agreement based on buffer stocks, then the buffer stocks need to be considerably larger in relation to the consumption and production of the particular commodity than has been the case in the past. Frankly, if one cannot raise the finance for considerably larger buffer stocks, then one may not only be wasting one's time, one may even be doing more harm than good by going in for further agreements. I agree with them that it is important to have production and/or export quota in reserve, but underlining very much "in reserve"; it is the buffer stocks concept which is the important one and the production and export quota should be a means in reserve.
I think, too, that they are right in saying that in future it is essential that consumers and producers should be equally represented on the council of management, or whatever one should call it, of a commodity agreement and that—and this may not be popular with us or with any other consumer country, but I think it is right—consumers as well as producers should contribute to the cost of these commodity agreements.
Probably, next to the size of the buffer stocks, the most important matter, and clearly one of the most difficult, is the nature of the target price which the commodity agreement settles. Here we have a great problem because the consumer naturally wants the lowest possible target price while the producer wants to press for the highest possible target price, sometimes without paying sufficient regard to the danger that if producers set the target price too high they are merely inviting new producers to come into the market from other countries and of course also inviting intensification of research on substitutes which may in the long run do great damage to the commodities the supplies of which they are trying to further.
As the Committee rightly make clear, it is essential that the target price set must be based on, and move in time and in line with, the pattern of supply and demand set by market forces and that unless one tries, difficult though it is, to
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have a target price which is based essentially on the long-term trend determined by market forces, it is most unlikely that one will get a commodity agreement which has any staying power, any real life in it, for more than a very short time. Thus, I believe that, in saying to us that we should seek a number of commodity agreements and that we should be guided by what seem to me to be the most important points which I have picked out from the report, the Committee is indeed giving the Government good advice.
We come now to the difficult matter of the Common Fund, and here we have to face a political and a financial and economic problem. Whether or not with logic, it is undoubtedly true that the Third World has raised the Common Fund to a political touchstone of good faith on the part of the richer countries, and any attempt to dodge that issue would be almost sure to lead to failure to make progress. Although with some considerable doubts, I am inclined to believe that, on the whole, we and the other more developed countries should grant the concept of a Common Fund, although I do not think we could grant it quite in the form in which it is put forward by UNCTAD. I believe we should grant it because it could lead to saving in financial cost. If one believes, for example, that it is unlikely that all commodities will peak at the same time, will all fall into the trough at the same time, then I think a Common Fund could make the financing problems of a number of commodity agreements somewhat easier and more economical. So I think a properly run Common Fund can lead to economy of financial resources and is therefore supportable on that basis.
However, there is a big proviso which the Committee properly bring out; that is, that the Common Fund would be a disaster unless a proper and high degree of autonomy was left to each individual commodity agreement. I am sure they are right in saying that while, on the whole, the difficulties of getting some general automatic adjustments, such as those recommended by the noble Lord, Lord Kaldor, or Mr. Grondona, are very attractive, the more one looks at them the less practicable they seem to be, and one must go on a commodity-by-commodity basis. If that is so, it is extremely important that the Common Fund should

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not destroy the vital autonomy of each individual commodity agreement and the decisions of its management.
Then one has to say about commodity agreements that, of course, as the Committee point out and as is obvious, they are not suitable for all the products and not even for all the 10 core products mentioned and defined by UNCTAD; one obvious reason being that it is not much good talking about buffer stocks of commodities one cannot store for very long. But there are other reasons which the Committee go into.
The Committee have made a very sound case in principle, which I hope the Government will support, for an approach on the lines it suggests. But they also point out—and we should be foolish to ignore that part of it——the great practical difficulties. We have seen the practical difficulties from past experience and, even if we learn from experience, as the Committee's report helps us to do, great difficulties still remain. We must get agreement not only between producers and consumers, as parties having a tendency to conflicting interests, but, even more difficult, we must get agreement among the different producers and different consumers. Strangely enough, that often seems more difficult than getting agreement between producers as a class and consumers as a class. Then there is the difficulty in fixing the right target price, an absolutely vital matter, of which I have spoken, and one which will always be a great difficulty.
There is the problem of course of how one finances all this, particularly at a time when not only Britain but almost every country believes its public spending is already too high, so that if one goes in for more public spending in one area one is faced with the awkwardness of having to find some reduction in another area. This is something which it is always easy to say but very difficult to do, at least when one finds oneself sitting round a Cabinet table; noble Lords of whatever Party who have been in that position will know how difficult it is.
Despite the difficulties, I hope noble Lords will urge the Government to make a favourable response to the conclusions and recommendations in our Committee's report, because it would be in our national interest to do so. Of course, we recognise
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that the solution must be an international one; we recognise that Britain's weight either of wealth or influence in these matters round the international table is nothing like as great as it used to be. But we still have influence and I urge the Government to see that that influence is used in almost every respect in the sense recommended by our Committee.

DEVOLUTION
4.8 p.m.
The LORD CHANCELLOR: My Lords, the Statement on Devolution made in another place by my right honourable friend the Lord President was as follows:
"With permission, Mr. Speaker, I wish to make a Statement on devolution.
"In the light of the debates in the House and other representations, the Government have decided that new proposals should be brought forward for devolution. I wish to inform the House of the main changes we now propose.
"The Government will introduce two Bills next Session to provide, respectively, for devolution to Scotland and to Wales. The Government have always been fully and equally committed to the achievement of devolution for both countries and we will present the two Bills to the House on that understanding and on the same basis. We believe that the House would welcome the separate consideration of what are dissimilar proposals.
"For any question relating to the interpretation or application of the devolution Statutes, we will now propose that the Judicial Committee of the Privy Council should be the final court of reference, as well as undertaking the pre-Assent scrutiny of Scottish Assembly Bills. The Judicial Committee will thereby finally be the sole court determining questions on vires.
"We believe that it is possible to dispense with certain of the detailed controls on the actions of the devolved Administrations to provide more clear-cut arrangements. We will propose that the Government's general reserve powers should be available only in cases where a matter is prejudiced

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for which there is no devolved responsibility. The powers will remain as an essential safeguard to protect matters which are not be to devolved, for example defence, trade, the economy and industrial relations.
"We will omit the proposed statutory powers to limit rents and prescribe model rent and rebate schemes. We will no longer provide for the Secretary of State's consent being necessary for changes in the pay and pensions of Scottish teachers, and for the pensions arrangements of a number of public bodies in both Scotland and Wales.
"As for the Assemblies themselves, we have concluded that they should be left much freer to arrange and to conduct their business, and we will accordingly omit a number of the provisions in Part II of the Scotland and Wales Bill. On reconsideration, we believe that members of the Scottish Executive should have the title of Secretary, and the head of the Executive the title of First Secretary. We will also propose a power of premature dissolution for the Scottish Assembly, dependent on a vote of at least two-thirds of its members. We no longer propose the creation of Assembly Commissioners for the investigation of complaints against the new Administrations and their officials, and will propose that the Scottish Assembly should be able to legislate on this matter.
"We will also propose the reservation of responsibility for the pay and pensions of teachers, and of health service employees in Wales.
"Given the expressed concerns about the structure of local government in Wales, we will propose that the Welsh Assembly should have a statutory duty to review the structure of local government.
"The Government are continuing to develop these and other proposals for inclusion in new legislation for introduction next Session. The House will, of course, wish to consider them fully when they are expressed in legislative form and can provide the basis for debate. We have already made clear that in any future debate on proportional representation for the devolved Assemblies there will be a free vote on this side of the House.
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"In our review we have paid particular attention to the arrangements for financing the devolved services. A White Paper is being published this afternoon setting out our conclusions and the background to them. It sets out measures which we have in mind to improve the working of the block fund arrangements. First, we shall propose to the devolved Administrations the possibility of setting up an independent advisory board, with the task of improving the information base for financial discussions. Secondly, we shall propose a new approach for settling levels of devolved expenditure. The new system would relate the total of devolved expenditure to comparable expenditure elsewhere in the country, and would establish a percentage formula which would be maintained for a number of years, as an alternative to negotiations every year with the devolved Administrations. The Government will wish to take account of the views of the devolved Administrations on the acceptability and operation of this formula-based system.
"The House will wish to know that we have not identified any satisfactory form of independent revenue raising power for the devolved Administrations. But if the new Administrations wish to put forward proposals for a tax power to supplement the block fund within the conditions set out in the White Paper, and the Administrations were prepared to meet the costs, the Government will consider such proposals sympathetically.
"Additionally, on the establishment of the new Administrations, it is the Government's intention to seek their agreement to the establishment of Joint Councils for Scotland and for Wales, on which representatives of the Government and the new Administrations could consult as necessary on matters of common concern. These would provide a valuable means of ensuring continuing co-operation and consultation.
"In relation to England, consultations are continuing on the basis of our consultative document Devolution: The English Dimension, which the Government published at the end of last year.
"The Government believe that the changes now proposed will result in

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simpler and more clear-cut arrangements for devolution, and firmly secure the interests of the people of the United Kingdom as a whole".
My Lords, that concludes the Statement.
4.16 p.m.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I am sure that the House will be grateful to the noble and learned Lord, and I should like to express my own gratitude to him for having deferred the repetition of the Statement until the Judicial Committee upstairs was able to conclude its business at four o'clock. He will also understand that I have probably had less time to consider some of the Statement's details than I otherwise would have had. I am also grateful to my noble friends for allowing a person like myself, with a certain number of personal bees floating about in his bonnet, to reply from the Opposition Front Bench, which perhaps I ought not to do.
I do not want to start a debate about devolution in the middle of this afternoon's Business, and the content of the Statement is sufficiently important to make me cautious about what I say in reply to the noble and learned Lord. I think we have been into this point before, but I should, nevertheless, like to express a regret that the Government persist ultimately in treating this as an ordinary programmed Bill, to be processed through the ordinary Government machine. It has always been my view, and it is, I think, the view of the Party to which I belong, that a widespread consultation with various political organisations, including the Opposition Parties, should be the basis for any important constitutional proposals of this kind. The proposal for consultation which we were given was limited to the parameters of the existing legislation and that, for reasons which we explained publicly, was not good enough for us.
Perhaps I have missed it, but I do not see any reference to referenda in the Statement as delivered by the noble and learned Lord. Do the Government's promises on referenda still stand, or have they been silently withdrawn? Are the people of Wales and the people of Scotland, when the proposals have been passed—
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if they ever are—to be consulted before they become effective?
I regard the reference to the Judicial Committee of the Privy Council as a retrograde step. The reason is that the Government have now gone back to the proposal that the Privy Council should decide in advance as to the vires of particular proposals in front of the legislative Assemblies. To my mind no court of law, however wise and judicious and judicial, can possibly tell in advance about vires, and to submit the question of vires to the Judicial Committee of the Privy Council in advance, as the sole court of jurisdiction is, in effect, to deprive the subject who may be adversely affected by legislative proposals of the right to protest to the courts ex post facto. I regard this a highly retrograde step, and I express my disagreement with it.
I do not think it would be right for me to comment in detail on many of the remarks that the noble and learned Lord has made. My own information about opinion in Wales (as to which the noble and learned Lord is naturally very much better informed than I am, mine depending really on hearsay) is that any form of Welsh Assembly is so far not attractive to Welsh opinion as a whole, and this reinforces what I had to say about the necessity for referenda. My first reaction—although I do not wish to take it further than that—to the financial proposals is that they will not satisfy Scottish Nationalist opinion at all, and they may not satisfy any Welsh Nationalist opinion there may be. My view is that, sooner or later, if you are going in for some kind of devolution, which in the end means coming to terms with some form of federation, you have to give either precepting powers or tax-raising powers to the devolved Assemblies. This is not said as a member of the Conservative Party: it is said in good faith as a student of the subject. I have kept it as short as possible, and I hope I have kept it as restrained as possible. Having said that, I have said what I have to say.
4.22 p.m.
Lord MACKIE of BENSHIE: My Lords, in following the noble and learned Lord I should like to thank the Lord Chancellor for repeating this Statement, and I should like to give it a fairly

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enthusiastic welcome. I think it is a great advance on the previous Bill, and the Government are to be congratulated, in my view, on having taken a considerable step forward and on having consulted very much more widely than before. Perhaps I may comment on one or two points, going through the Statement.
I think that two Bills are very necessary and very much more sensible, but I should like to ask in what order the Government propose to take them as they go through the House, and how they propose to do it. Unlike the noble and learned Lord, Lord Hailsham, and of course with a great deal less knowledge, if I may say so, I rather like the idea of the Judicial Committee. My understanding is that it could operate both before and after—that it could both study the effects of the proposed Bill and comment on it, and act as a forum for the citizen after the Bill is passed. Certainly it is a great deal better than the proposals contained in the previous Bill, where the Secretary of State was given the powers of a Governor-General, rather. Indeed, I thought this paragraph, dealing with the Government's general reserve powers, rather significant. I was very glad to see that there had been this restriction, and, along with the proposal with regard to the Judicial Committee, I think this will be a great improvement, and certainly very much more acceptable to the people of Scotland.
I am delighted about the apparently small matter of the names of the Ministers in Scotland. I do not see why we could not have followed Northern Ireland's example, and simply called the chief man the Prime Minister, but "First Secretary" and "Secretary" are very much better than "Chief Executive", in which I thought the Government were small-minded. I am always glad to see such improvements in the Government—due, no doubt, to the influence of excellent people. Going on from that, and dealing, again, with Wales (although, obviously, I am not as well qualified to speak for Wales), I think it is cognisant of the situation to impose a statutory duty on the Assembly to review local government. I trust that in Scotland the Assembly themselves will do that.
The agreement on proportional representation is very important indeed, as
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we have a free vote, and I have no doubt that noble Lords on this side of the House will be delighted to support the proposals for a free vote upon proportional representation. On the levels of devolved expenditure, I think that the formula is a great advance. I personally have looked for long at the question of taxation—and it is a very difficult one. When you look at the behaviour of Eire in the days pre-Common Market, there is no question but that a closely involved economy has to look at the major partner, which is of course England, with 50 million people, and it makes the question of varying expenditure extremely difficult. But at least with a formula over four years, the Assembly in Scotland will not be constantly supervised over every single detail by a long-nosed Treasury which hates parting with any power whatsoever; and I think that this is a very reasonable compromise. I would not comment on the English dimension, but I think it is very important that the Government study the necessity for the satisfying of aspirations of regions of England, as well as of Wales and of Scotland.
Lastly, I should like to ask the Government why they do not mention agriculture and industry, because I assume that this means that we are left with the situation in the White Paper, where agriculture and industry really come under the Secretary of State and guidelines are laid down by the United Kingdom Government for the conduct of the Scottish Development Association and for the Highland Development Board. It appears to me that this is entirely wrong, in that when you look at the Government of Northern Ireland and at the good things about them, there is no question but that the development of industry and the conduct of agriculture were extraordinarily well done by that Government. I should like to add the question which has already been asked by the noble and learned Lord about referenda after the Bill has been produced.
4.28 p.m.
The LORD CHANCELLOR: My Lords, I fully appreciate from what both noble Lords have said that this is not an occasion for a detailed interposition of this matter in a major way in the course of the existing debate. There will of course be ample opportunities for debate

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when the proposals in the Statement are particularised in legislative form, which sometimes achieves a considerable difference; and the Bills will be published in due course. The intention is that both Bills shall receive a First Reading at the same time, and then we will proceed from there to give effect by legislation to the proposals to which I have referred today. There has been widespread consultation and consideration of the matters which emerged in the discussion of the Bill in another place, and the new proposals which are made reflect reconsideration of what was previously proposed and the outcome of discussions with various people.
On the specific matters which were raised, first by the noble and learned Lord, Lord Hailsham, it is indeed proposed to persist in the intention to hold referendums after Royal Assent. We attach very great importance to this. I notice that the noble and learned Lord jibs at "referendums". I was a little hesitant about it myself, but apparently that has now become a term of art in this context, and classicists like the noble and learned Lord will have to live with it. We have given consideration of course to ascertaining the wishes of the Scots and Welsh people in a referendum before devolution legislation is enacted, but we have come to the conclusion that to do so would pose very serious practical difficulties. They would require initial separate legislation, and that could delay the devolution settlement. But, more importantly, they would be very imprecise affairs, because voters would be asked to approve or reject a scheme which had not been considered by Parliament and which might indeed be substantially modified by Parliament after the referendums had been held.
Therefore, we certainly intend to hold referendums before the Act comes into effect, and we attach great importance to ensuring that, before any proposals are implemented, they have the support of the majority of Scots and Welsh people. The new Bills will contain the necessary provisions for holding referendums. I shall not venture to forecast what the outcome of the referendum will be in Wales. As Mark Twain said, "Prophecies are always dangerous—especially about future events". I am certainly not going to embark on that prophecy
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at this moment in time. We shall wait and see.
In regard to the review of vires by the Judicial Committee of the Privy Council, I myself believe that this is a valuable provision. As the noble Lord, Lord Mackie, has said, there was a great deal of criticism earlier of the executive power, the sort of dictatorial power given to the Secretary of State himself to intervene while a measure was going through the Scottish Assembly and asserting purely executive control in that way. I think that there is a great deal to be said for this judicial review before and after legislation emanating from the Assembly is finalised. I note with satisfaction the approval that has been given by the noble Lord, Lord Mackie, to the changed attitude towards override, and that he approves of the titles of the Members of the proposed Executives.
On the question of the tax-raising powers, I do not think I can add to what was said in the Statement. As the Statement indicated, a White Paper on the financing of the devolved services will be published this afternoon. It contains a very detailed and, I hope your Lordships may think a reasonably objective analysis of possible forms of independent revenue-raising powers for the devolved Administration, but the conclusion the Government have reached is that it has not been possible to identify any satisfactory form of independent revenue-raising powers. As the Statement went on to say, if the new Administrations wish to put forward proposals for a tax power to supplement the block fund within the conditions set out in the White Paper and the Administrations were prepared to meet the costs, the Government will consider such proposals sympathetically. As to the English dimension, consultations arising from the White Paper on that are continuing and it will be returned to when those consultations have been completed.
With regard to agriculture, the Statement does not in terms make any reference to agriculture. We have already included among the powers to be devolved those aspects of agriculture which can be dealt with separately in Scotland. Decisions on matters like agricultural support are of great economic importance and we think must be taken at the British, and indeed international, level. British

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farmers operate in a single market and that market would be distorted, it is thought, if the farmers were not supported on a consistent national basis. I apologise for the length of time I have taken in answering noble Lords, but I am grateful for the way in which they have responded.
4.34 p.m.
Lord MAELOR: My Lords, as a Welshman—and a Welshman who has never spoken an English word with his noble and learned friend the Lord Chancellor—may I say that this Statement will be welcomed in Wales. I want to correct an impression given by the noble and learned Lord, Lord Hailsham, when he said that he understood that the majority of the people in Wales are against devolution. What has happened is this. They have expressed themselves by a majority against the idea propounded by the Welsh Nationalist Party which advocates separation, complete independence. Otherwise, the people of Wales are in favour of devolution and are looking forward to it. This Statement, as I have said, will be greatly welcomed there.
Lord TAYLOR of GRYFE: My Lords, I wonder whether I might ask two questions. It is rather difficult to grasp all the points in a lengthy Statement of this kind. The first was referred to by the noble Lord, Lord Mackie. It was the specific reference to the responsibilities of the Welsh Assembly in reviewing the structure of local government. Am I to take it that it will be within the powers of the new Scottish Assembly similarly to review the structure of local government, which is a matter of great national concern? Secondly, among the subjects not to be devolved were included finance, trade, economy and industrial relations. Since a good deal of the economic and trade policy in Scotland is at present already devolved to the Secretary of State for Scotland and was not so long ago removed from the DTI, am I to assume that there is no change in the status of trade and economy as a matter of concern being subject to the review of the proposed Assembly?
The LORD CHANCELLOR: My Lords, in reply to my noble friend Lord Taylor, I think that the latter part of his statement is accurate. On the question
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of the review of local government, there has been a great deal of pressure in Wales to review the framework of local government in Wales. For that reason, that has been expressly referred to in the Statement as something which the Assembly should give its mind to. There is nothing directly comparable in the Statement in regard to Scotland. It may be that there is less pressure there than in Wales. I know not. That is how the matter stands.
Lord STRATHCLYDE: My Lords, as one who had served for longer than any other Member of this House as a Scottish Minister, would your Lordships allow me to speak for two minutes, and no more? I thank the noble and learned Lord for having informed us of Her Majesty's Government's intentions. May I say that I listened to the Statement with very great regret. It is raising a subject which would die in the ordinary course of events. It is a subject which has divided and is dividing my country—and when I say "my country" I mean Scotland—and is not one that is bringing it together. It is also going to threaten the great benefits that Scotland has received by being joined to England. During the period when I was a Scottish Minister I think that I received more deputations than any other Scottish Minister before me, for reasons I do not need to explain, but I have never had any great wish for the setting up of such a thing as a Scottish Assembly. The feeling of the people, as I gather, is that we have far too many legislative bodies at the moment. We want less Government control and more to be allowed to get on with our own affairs in our own way. I am terribly sorry that the Government have thought it wise to raise this matter again. I do not think that it is going to help Scotland or England or the people of both countries one little bit, but rather that it will divide them further than they have ever been divided since the union of the two Parliaments.
The LORD CHANCELLOR: My Lords, I appreciate that that is a point of view which many people hold with sincerity and seriousness, but I myself am quite satisfied that the majority of people take a different view and that it is time to devolve a greater responsibility for their own affairs, those affairs directly affecting them, to the people of Scotland

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and Wales. No doubt we shall return to this broad question in the fullness of time.
May I add a further observation to my noble friend Lord Taylor? The structure of local government in Scotland is already a devolved matter in the Bill. That will continue. That is why there was no specific reference to it in the Statement of my right honourable friend in another place.
The Earl of SELKIRK: My Lords, may I ask the noble Lord whether he can confirm three points: first, that the First Secretary will be appointed at the behest of the Secretary of State; secondly, that law and order will not be a devolved subject; and, thirdly, that the reduction of taxation will also not be a devolved subject?
The LORD CHANCELLOR: My Lords, I am sorry; I missed the first point put by the noble Earl.
The Earl of SELKIRK: My Lords, it was whether the First Secretary would be appointed at the behest of the Secretary of State?
The LORD CHANCELLOR: My Lords, I should be very surprised if that was provided for. I think that would be a decision for the Assembly itself to make. I do not know whether he will be the First Secretary. Certainly, it is not contemplated that he should be nominated by the Secretary of State for Scotland. On law and order, very large questions are raised as to the extent of devolution, broadly speaking, and I would expect that to remain as the domain of the Secretary of State for Scotland. There will be no power proposed to reduce income tax. If the Assembly brings forward a suitable proposal, all that may arise is a limited power on their part, provided they are prepared to pay the administrative costs of doing so, to raise revenue by some subordinate method.

COMMODITY PRICES: SELECT COMMITTEE REPORT
4.42 p.m.
Debate resumed.
Viscount SIMON: My Lords, if we may now return to the question of com-
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modities, I had the great privilege of being a member of the Select Committee whose report is being brought to your Lordships' attention today by my noble friend, if I may so call him on this occasion, Lord Roberthall. I should like to begin by paying a tribute to the noble Lord as our chairman. He guided the Committee with unsurpassable skill through a maze of evidence, and eventually led us to what your Lordships will recognise as a sound and coherent series of conclusions and recommendations. Not only the House, but certainly the members of the Committee, are deeply indebted to him.
At first glance, the terms of reference of this Committee suggested that what we were being asked to engage in was a study in applied economics—a field which I personally feel completely inequipped to explore. But as soon as we started to look at the problem, inevitably we were brought face to face with the political and, indeed, human implications of the subject. The speech of the former Prime Minister to the Commonwealth Heads of Government in Kingston was, as has already been said, a basic document for our studies; and during all the long time that we were sitting events outside, such as the preparations for the Nairobi Conference, the Nairobi Conference itself and the North-South dialogue in Paris, were reminding us constantly and forcefully of the aspirations of the less developed nations, searching for what is called "a new economic order"—I do not much like the expression, and I shall come back to it in a moment—which would give to their people a better chance of achieving a permanent advance in their deplorably low standards of living.
I say that I do not like the expression "a new economic order" because it seems to me one of those vague expressions which can mean anything or nothing: very suitable for a Party political manifesto, but not the basis of any serious discussion. Moreover, in so far as it might form a basis, it suggests a revolutionary approach to change rather than an evolutionary approach. It seems to me that if the conditions of the world's trade have been proving unsatisfactory for the less developed countries—and I believe they have—it is far better to tackle a particular place where the shoe pinches and try to rectify that, rather than to

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start on a grandiose "new economic order".
The resolution of the UNCTAD Conference in Nairobi, which adopted what is known as "the integrated programme for commodities", expressed in general terms the objectives of the less developed world. Those objectives are set out in the report, and your Lordships will find them referred to in paragraph 2.5. This shows that stabilisation of prices is only a small part of a very much wider programme. Indeed, by itself, price stability might do more good to the industrial nations, as consumers of raw materials, than to those poorer nations who produce and sell them. That, I think, echoes a point which was made by the noble Lord, Lord Carr of Hadley.
The value of stability to manufacturers in the price of their raw materials is very great. Listening to the evidence that was presented to us, I myself became convinced that the stabilisation of export earnings, whether through the Stabex scheme, through compensation arrangements sponsored by the International Monetary Fund or by any other means that might be conceived, are of much greater value to the less developed countries than the stabilisation of prices. Indeed, if I may put an obvious example to your Lordships, if there is a country which depends almost entirely on a single commodity and it faces in one year a crop failure, that country needs urgently the increase in price which market forces will bring about because of the shortage of supplies, and if by any means the price was stabilised they might well face a disaster. Of course, this does not mean that attempts to stabilise prices to a limited extent through international commodity agreements are of no value. The Committee recommend this, and I warmly agree with them in that. We are very glad that the British Government have, through the ages, supported this idea and have shown signs of continuing to do so.
The resolution of the UNCTAD Conference to which I have already referred in fact refers to avoiding excessive fluctuations in prices, and it seems likely that international commodity agreements would offer the best chance of doing that although, as has been mentioned already, past history suggests that success is by
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no means certain. What is clear is that, to achieve any success at all, these agreements must involve consumers as well as producers. They must be efficiently run, be insulated from political pressures and supported by adequate finance—which means in fact a great deal more than has been committed to such schemes in the past. There are, of course, other desiderata: the noble Lord, Lord Carr of Hadley, mentioned three more, and others are referred to in the report.
That brings me to say a word about the Common Fund. We on these Benches are pleased that the Government are now supporting the idea of this Common Fund It may be that their attitude at Nairobi was misinterpreted, but at the time it certainly looked like pouring cold water on a proposal that did not merit being rejected out of hand. However, now that Britain is ranged with the other industrial countries behind the concept, it is enormously important that no serious misunderstandings should be allowed to develop between the industrial countries and the less developed countries, but it seems to me that there is a risk of this.
We, with our colleagues in what is called Group B, are still talking of a Common Fund to facilitate the financing of buffer stocks and so encourage the setting up of international commodity agreements. But the Group of 77, on the other hand, see the Common Fund as—and I quote here from the paper which they submitted to the last conference:
"the main instrument for attaining the objectives of the integrated programme for commodities".
That, as I have already said, goes much wider and includes many objectives besides the international commodity agreements.
I am not arguing that financial support on an international basis, where this is needed for these other objectives, should be withheld. I certainly hope that so far as it is able to do so Britain will contribute generously to a fund to help the attainment of these other objectives. But I feel very strongly that it would be wrong, and could be disastrous, if the same fund was used to support the financing of buffer stocks and projects included in these other objectives. Your Lordships will not want me to go through all the other objectives, but they include such things as diversifying production in developing countries, expanding the pro-

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cessing of primary products and even improving marketing, distribution and transport systems. These are objectives which can well cost an enormous amount of money.
I feel that if they are dealt with out of the Common Fund, apart from the fact that the Common Fund would have to be very much larger, there is a real risk that it will not be successfully administered because here are two quite separate problems. In supporting the financing of buffer stocks, the Common Fund, as we see it, must be operated in a way that is based on economic considerations, entirely free from political pressures, acting as the market requires it to do in order to modify price increases or decreases caused by changes in supply and demand. The other objectives need political decisions of a very difficult kind on the priorities between one project and another, and it seems to me that for that purpose they need different types of administration and control.
May I try to clarify this thought with an imaginary example? Let us suppose that there is a boom and prices of commodities are high. In that situation, the buffer stocks are being sold, money is coming back into the commodity agreements and presumably, in so far as it has been lent by the Common Fund, is being repaid to the Common Fund. So at that stage the Common Fund is full of money, and there will be immense political pressure to spend that money on objects which may be very desirable in themselves. But if that political pressure succeeds, the result will be that when the trade cycle goes round and the prices fall, and it is then necessary for the commodity agreements to go into the market and buy stocks in order to protect falling prices, there may be no money in the kitty.
So, although I do not want to suggest for a moment to the representatives of the developing countries that we are trying to hold back, they might themselves appreciate that, if they want to get the full ambit of the integrated programme, they should have two separate funds. I hope the various richer countries would be able to contribute to them, but the funds should not be united together in a Common Fund dealing both with the stocking of commodities and with these other objectives
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in the integrated policy. There is a great deal more that one might say, but there are many names on the list of speakers so I should just like to leave that thought with both your Lordships and the Government.
4.55 p.m.
Lord DAVIES of LEEK: My Lords, it is indeed a great privilege to take part in this very important discussion on commodity prices. Far from being crystal gazers, we were blessed with people who have expertise in all kinds of departments. We were blessed with people who, in many cases, had spent 30 years or more in public life or in activities on the metal exchanges, on the commodity markets or in banking. Whatever attitude one might take to the report, there is no doubt, as The Times said, that the efforts were painstaking. I must say that some of the slick comments I have seen in some sections of the Press indicated to me right away that the persons who wrote the articles had hardly turned over six pages of the document before going into areas of comment which were unjustified. The articles indicated, before a couple of paragraphs were read, that people had not taken the trouble to study this great and difficult problem. Like the noble Viscount, Lord Simon, I have been so soaked in the subject that I could go on for a long time, but I shall try to discipline myself because there are other speakers who have important aspects of the problem to discuss.
But before I go into my short dissertation, I should like to add to the comments in the introduction. Without naming a lot of names, I should like to express my gratitude to our noble chairman, who conducted our discussions with care knowledge and understanding, and, if I may use the term, to the civil servant, Mr. Carstairs, who looked after us and saw that our documents arrived on time, and that most of us had an opportunity of doing our homework before we started interviewing witnesses or began making comments in private in the Committee.
The difficulty about this fascinating subject is: what does one pick out of the report that is worth while? Some of the things that shake me were evident when I was looking at today's USA World Report on the Third World, which is in the Salisbury

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Room for anybody to read. I shall not go into the documentation of the billions of dollars that have been poured into the underprivileged areas over the period between the end of World War II and the present moment. Nevertheless, this month's Crown Agents Quarterley Review, in a sparkling but probably controversial article, headed "Is the Golden Era of Growth Over?", adds:
"It is now increasingly accepted that the world economy has entered a new phase of economic development markedly different from that of 25 years or so ago following World War II, and referred to then nostalgically as ' a golden era '. There are a number of significant features distinguishing the position of the world at present from those of the 'fifties and 'sixties. They include a more moderate rate of growth, a relatively high rate of inflation, a relatively high level of unemployment, fluctuating rates of exchange and a fundamentally different pattern of world payments."
I shall not read any more, because it is not music to the ears of any political Party which thinks that, in its manifesto, it has the open sesame to the Brave New World. The reality is that we are going to face a world with less growth, because relatively more capital investment is needed to get the same unit of output as we had 25 years ago.
I will try to make that point clear; it is illustrated in a number of articles. Underprivileged man in the Third World is now demanding higher standards of living. He sees films and watches television, and he is demanding a higher price for his commodities. He spends some of that higher price upon a better suit, better sheets, a better home. In other words, he is raising his standard of living. Outside China, which follows its own economic programme, he regards this as the only way to try to catch up with his luckier brethren in the advanced parts of the world.
Despite cheap remarks, I was forced to the conclusion that the standards of self-discipline in the commodity markets are high—the Committee have reported that fact—and that the stick rather than the carrot is the growing supervision of the Bank of England. There are, of course, mavericks in every walk of life, but we have seen nothing miraculous to put in their place. Indeed, in a world where the gods seem to have forsaken mankind and where men no longer believe in myths, miracles no longer happen.
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Manifestos which speak of economic and political miracles are often consigned to the waste paper basket after an Election.
We say in the introduction to our report that the instability of commodity prices—that is, of foodstuffs and raw materials—has long attracted attention since our heyday as a world imperialist Power. Many experiments took place in the aftermath of the Second World War, and we mention them on pages lxii and lxiii of our report. We mention the Lomé conference in Togo when the Common Market reached an agreement with about 46 different countries. Previous speakers have already pointed to the partial success of the Tin Agreement. There have been various meetings of the United Nations Conference on Trade and Development. For guiding principles, we have looked at the proposals which have just been spoken about regarding buffer stocks. Many of these ideas were incorporated as far back as 1948 in the Havana Charter. I remember that as far back as 1948 the noble Lord, Lord Boothby, was one of the protagonists of a very similar system to that of building up buffer stocks.
In paragraph 1.10 on page xii of the report the Committee said that it is very difficult to organise comprehensive stabilisation schemes. Paragraph 1.11 says that there are two main reasons for this. The first is the
"political difficulty of reaching agreement among producers, let alone among producers and consumers together, because each country sees its own interest differently. As the number of interested countries grows, so too does this difficulty".
The second main reason given in paragraph 1.12 is that
"British power to influence events in this field is limited, and has changed in nature. The United Kingdom is only a minor producer of a small number of raw materials".
Further down the paragraph the Committee said:
"Its economic position apart, Britain no longer carries its former weight as chief spokesman of the Commonwealth".
When I hear rhetorical arpeggios building up regarding what we should do next, I believe that we should remember that in the Commonwealth we are just one among equals, rather than the leader. In the matter of world trade, we say that,
"Britain no longer has the same independent voice that it enjoyed before joining the Common

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Market. Policy about farm output, and agricultural imports, for example, must now be EEC policy".
Therefore, before we begin to consider the vital areas of our economy we must remember that no longer are they completely under the control of any Government, whether Labour, Conservative or Liberal. We had to bear these realities in mind in coming to our conclusions in this report.
The view is that Her Majesty's Government, having looked at the mechanisms for stabilising commodity prices, are treading well trodden ground and no radically new strategy on price adjustment mechanisms is likely to emerge. I believe that a tribute should be paid to Mr. L. C. Grondona, who for 50 years or more has been a pioneer. I will quote to the House from a pamphlet which he wrote many years ago, because what he said is still true today. This was that, whatever discoveries we make,
"our whole economic edifice rests upon the enterprise of primary producers in several fields, and so long as prices of basic commodities fluctuate widely, as they have done in the past, the entire industrial and commercial superstructure rests upon shifting sands".
With a few qualifications I believe that to be axiomatic, and we should look at our problems in that light.
We have seen all the way through the political difficulty of reaching agreement. The Kingston speech which Sir Harold Wilson made showed that he recognised the need for policies in the fields of mining, plantations and investment. Whether or not we are a great Power, I still say—and the Committee came to this conclusion—that the know-how and expertise of the London markets, both the Metal Exchange and the commodity markets, are second to none. That is why I understand that, independently of the British Government, London has been chosen as the headquarters for the international commodity agreements. I receive regularly the weekly reports on the International Agreement on Tin, and the reports of the International Wheat Council and the International Sugar Organisation. Therefore, despite my rather lugubrious remarks at the beginning of my speech, there is no doubt that, because of our heritage of business know-how, London still has the opportunity to explore new areas for the first
916
time and to take the lead in trying to find an answer to the problem of stabilisation of commodity prices.
Every noble Lord knows that the oil crisis sharpened the attention of the technological world regarding both soft and hard raw materials. We have mentioned this in our report. In 1973 when the Organisation of Petroleum Exporting Countries began to jack up the price of oil, the producers of other commodities, spurred on by the example of the oil tycoons, wanted to do the same. As Time magazine pointed out in 1975, spurred on by shortages and rampant speculation at the time in the commodity markets, the prices for staples like copper, rubber, cocoa, coffee and cotton rose, and in some cases doubled or trebled by the middle of 1974. But, after the oil crisis pushed the West into a recession, commodity prices tumbled and in some cases one-third of what had been paid at the peak was now paid for them. The price upswing aggravated world inflation in industrial countries and when the downswing of prices came shock waves of discontent went through the non-industrialised world. This was the Third World, which depended heavily on commodity production income. Hence the pressure there for the same kind of cartels that the oil people use.
Chapter 1 of the report of the Committee comments on the Korean War of 1950–1952 on that boom and the yearning then for price stability in the United States of America. But Kissinger, speaking then, said
"We are prepared to discuss new arrangements in individual commodities on a case by case basis as circumstances warrant".
This opened the door a little for the exploration of stabilisation deals and the USA, which did not belong to the tin agreement—29 nations did—then suggested that some new arrangements should be encouraged for other commodities. So, as I said earlier, we had the Lomé Convention.
The noble Lord, Lord Roberthall, spoke about indexation and the Committee. It was the Shah of Iran and many Third World leaders who, in 1975, asked for the indexation of raw material prices and for them to be linked to inflation in the West. The Americans did not favour this idea at the time and now our Government are

917
not too keen on it. We ourselves made a comment in passing, and, if your Lordships will look at paragraph 8.28 you will see that we said:
"note also that as a result of the high standing of these markets, both for their expertise and their reliability, they make a substantial contribution to our invisible earnings, estimated in a recent Bank of England Review to be of the order of f200 million a year".
There is a warning there. Before we start the rapid dismantling of the system of commodity business and systems of dealing on the markets that we have in London at the present moment, let us remember that, if this is done in the transition period, we could lose hundreds of millions of pounds of invisible earnings. Too often, this country forgets that the invisible earnings made by our international expertise contribute towards helping our economy to remain as strong as it is.
Finally, I am old enough to remember the World Economic Conference of 1933. I can remember the ecstasy with which I gave lectures on what would be the results of that World Economic Conference and how we cheered and felt that the world was changing, but the sad reality of it all was that neither the World Economic Conference nor the then Kellogg Pact to outlaw war nor the then League of Nations established the kind of paradise that we hoped would come out of man's machinations and man's efforts to frustrate those who were guilty.
In our report, all of us really believe in trying to do something but we also recognise the reality and the hard work that will be needed to get the stabilisation of commodity prices for which we are asking. Before sitting down, I should like to examine where banking comes in on this. One of the threads that is difficult for us to follow is the question of the debts of the Third World. The oil exporting countries aside, nearly all the Third World countries have grave payment difficulties. No matter how big the loans made to them are, they do not earn enough to meet the current imports of necessities, or to meet their obligations on the nearly 180 billion dollar debt that they already have.
The International Monetary Fund gave a warning last month, and it was this: in the study of world credit markets released at the beginning of June, the IMF noted that the volume of international
918
lending had increased by 40 per cent. last year. It is worried about the structure of the balance sheets of the American Banks. It is not risky because of corruption. What is worrying the IMF is that, traditionally, banks spread risks, having a large number of depositors and borrowers; now, because of the pressure of the under-privileged nations, banks recycle large deposits from a small number of States, mainly the oil States. These they then recycle into loans to a limited number of under-privileged foreign borrowers. This is risky lending, but highly profitable. According to the IMF, the international earnings of 13 of the largest American banks increased 36 per cent. between 1970 and 1975. At an annual rate of 36 per cent., that amounted to half their total earnings.
America is the biggest exporter of capital; the Soviet Union has become a large borrower. While America is the biggest lender, the Soviet Union owes to the rest of the world somewhere in the neighbourhood of £930 million for the first quarter of 1977. That could be dangerous. So I would say, as the United Nations said some three years ago, that all the talk about a new economic order means new rules for international trade and new rules for economic commodities. All that is mooted at conference after conference. We had the job of looking at these matters, and we found that, rather than rushing into trying to give this House some kind of formula which has a touch of magic about it, looking at the hard work and know-how that we have developed over the years it is better to send the ship steady as she goes rather than trying to go full steam ahead into a sea which is as yet uncharted in the world of commodities.
5.19 p.m.
Lord KISSIN: My Lords, in the first place I want to thank the noble Lord the chairman of the Committee, for allowing me to sit in on some of the Committee meetings, because as a producer, a consumer and a distributor I have a personal interest and therefore the proceedings of the Committee have been rather fascinating to me. A large section of the Press has greeted the Report of the Select Committee on Commodity Prices with the headline "A pat on the back for the commodity markets" or "Mild

919
and cautious" and some other remarks. But the subject explored by the Committee is not a subject which lends itself to headlines. It is a subject that is politically complex in our society and deserves constant research and thinking. I think it was for that reason that the then Prime Minister, Harold Wilson, made this subject the key speech at the Kingston Conference.
The Committee has taken an enormous amount of trouble and has produced a great deal of evidence and one of the most comprehensive surveys on the issues of commodity price structure and commodity markets. It has exploded the popular myth that has been created about the operations of the commodity markets, and it has rightly pointed out the numerous dangers that exist in believing that it is easy to stablise prices by promoting joint operations between producers and consumers, and that such joint operations can be achieved without complicated mechanism to the benefit of all concerned.
I want to praise the Committee for not allowing itself to be misled by these popular preconceptions. I consider it unfair to criticise the report for not coming up with a quick and easy solution for price stabilisation. After all the Committee cannot be expected to give a complete reply on such a wide-ranging subject as stabilisation of commodity prices, with which it concerned itself. How can the Committee be expected to come up with instantaneous solutions to problems that have confounded politicians and economists for years and years? All the Committee can be expected to do is to assemble evidence as to the causes of fluctuations of commodity prices and offer its views on the various schemes that exist to improve the stability of these prices.
The fact that commodity prices have shown themselves to be a lot more unstable than prices of other goods and services has been a subject of major concern to Governments all over the world. A sharp rise in commodity prices fuels inflation in industrialised countries, while a sharp fall in prices can severely reduce the incomes of producers in developing countries. The Committee has analysed extensively the operations of three elements which are said to
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influence the stability of commodity prices. It has investigated the operation of the commodity markets, it has analysed the role of speculators, and it has given extensive consideration to potential agreements between producers and consumers in regard to buffer stocks and in regard to other measures for price stabilisation.
The report has rightly accepted the fact that basically price fluctuations are not the result of any peculiarity in the markets themselves, but rather a reflection of the supply and demand conditions. These are different from those which prevail in the market for manufactured goods. It is clear that shifts in demand, but more usually actual and expected changes in availability of the commodity on the world market, will have a disproportionate effect on the market price. Traditionally the markets have reacted to these changes in demand and supply, and have set a realistic price at which the producer can find an instant buyer and the consumer an instant seller for today, for tomorrow, or for a year ahead. By harmonising prices in this way the free market provides an essential, and I believe an efficient, service to both consumer and producers alike. Schemes which are introduced in order to stabilise fixed prices affect the efficiency of the market. In the long run it must be obvious that sudden shifts in supply and demand cannot be controlled by agreement unless agreed prices are kept in line with market conditions. If not, any scheme aimed at stabilisation is likely to break down.
We have heard in our lifetime endless reproaches from producers and consumers that market speculation is responsible for sharp fluctuations in commodity prices, but, my Lords, the term "speculation" is very wide. If we define the speculator as someone who takes a vew of the future, then in this sense he is no different from the producer, trader or consumer, who uses the futures or terminal markets to hedge or to protect himself against uncertainty. This form of so-called "trade speculation" must be substantial, but why should it have an unsettling effect on the markets? The Committee rightly points out that "outside" speculation may accentuate price movements in certain circumstances, but there is no evidence to suggest that it

921
is by itself a dangerous factor to the stability of the markets.
One has to realise that if the markets are to function effectively they must provide a broad and active trading medium which can be utilised by the trade at all times. The report confirms the view that the speculator plays a role in helping to create a volume necessary for an active market through his willingness to accept risk. In my view—and this is a widely shared view—the producer and consumer alone cannot provide sufficient volume for a viable market. Accepting the fact that speculation makes a positive contribution to the operation, the report rightly draws attention to the need for safeguards against excessive outside speculation. I support the Committee's view that there is a definite need for all markets to adopt some sort of clearing house or financial control system similar to the one that operates today in the market for soft commodities such as coffee, sugar and cocoa.
The Committee refers to the London Metal Exchange. While I am aware that supervision of the commodity markets by the Bank of England exists, I am not convinced that there is not a need for the adoption of stronger financial measures for other markets. I know that the London Metal Exchange has given considerable thought recently to a method of monitoring schemes which will limit certain firms' exposures to the Ring, and thus eliminate the possibility of a domino effect. I, for one, believe that the view expressed in the report demands more efficient measures, because there is undoubtedly a danger of financial collapse on this particular market when companies hold enormous numbers of contracts. The sums controlled are enormous, and, as the Committee says, most principals who use the London Metal Exchange are sizeable firms, but some may not be so strong and the dangers are greater than is generally appreciated. In my view, the argument put forward to the Committee, that a clearing house would be unworkable because of the high cost involved in expensive metals, is, surely, no longer quite as valid as it was when it was put forward, particularly since the gap between soft commodities and the metal prices has narrowed quite significantly.
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I think the London Metal Exchange should study the implied criticism of the report and give further thought to some sort of financial control or clearing house system, because the measures that they are proposing to take, in my view, provide for insufficient financial controls and in that sense are half measures. The task of every terminal or commodity market is to safeguard financial security of that market, because a failure in any one of our markets would undermine the credibility of all our markets. The market system today brings to London, as has been said, £200 million in direct earnings, but how much does it bring in in ancillary earnings through insurance, shipping and banking?
I should like to refer to the twin problem of price stabilisation and income stabilisation. In my opinion, it has in the past proved impossible to devise a scheme which reconciles totally the interests of the producer and of the consumer. Obviously consumer countries will always press for lower prices, and one must bear in mind that their concern about prices often stems from their inability to control exchange rates and prices rather than from any peculiarities in the markets themselves. On the other side of the coin, the Governments of the producer countries, which are largely developing countries, will always have a natural bias towards higher prices, and one must remember that the vulnerability of developing countries to fluctuations in commodity prices varies a great deal from country to country.
Given these constraints, the report rightly implies that it is an impossible task to try to stabilise with one single scheme the whole of the world commodity markets. It appears to me totally convincing that the Committee's view to tackle the problem of stabilisation by dealing with individual commodities on a product by product approach is the only method which has a reasonable chance of success. There are supply agreements which work, but they are based on the fact that there is a limited number of sellers and consumers, and as they are limited they are more likely to be forced to adhere to the agreement. However, even these agreements are not always shockproof and they have the tendency to break down. When prices fall on the market sellers tend to break rank and sell their own product as quickly

923
as they can. When prices rise the reverse takes place. We have seen many cases when neither party can be relied upon to fulfil its commitments.
When major producers try to go it alone there are ways in which they can raise and hold prices. Following the apparant success of OPEC there have been many recent calls for concerted action among commodity producers. However, I am convinced that the majority of these agreements tend to collapse when prices fall and the inevitable scramble begins to sell one's product. Admittedly, OPEC itself has certainly improved the producers' position to a degree which is not shared by other commodity producers, but there are some very obvious reasons for that.
OPEC commands a virtual monopoly over low-cost oil. It has little to fear from the competition in substitutes. However, even OPEC is not as effective as one might assume, because some of OPEC's major suppliers have, as we now see, no need for immediate revenue, but OPEC also includes other substantial suppliers who totally rely on immediate revenue. The unity of interest between these differing economic and political entities has produced major conflicts inside OPEC because the cost of cutting production and sales has different effects in different producer countries.
The Committee has given extensive consideration to the possibility of international commodity agreements run jointly by producers and consumers. Using export quotas or buffer stock methods which are intended to stabilise prices may come closest to satisfying the needs of both consumer or producer. These schemes are obviously only feasible for a limited number of commodities, and even then there are inherent dangers in these schemes. There is the problem of deciding the price range. Buffer stocks would have to be large enough to give a reasonable expectation that agreed ceiling prices can be defended.
However, there is the danger that if stock piles are too large they may result in prices being held down for a period long enough to cause hardship to producing countries and also to stifle the development which is necessary to ensure future supplies. The Committee rightly points out that
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such a scheme is likely to break down if the agreed parameters of prices fail to reflect changes in market conditions. Producers will tend to maintain price levels which are fixed at a point above the equilibrium level in a way that could lead to an enormous build-up of stocks. The consumer would then be in the very unenviable position of having to pay, through taxation, to help finance the carrying of such large stocks as well as having to pay a high price for the commodity. This state of affairs exists currently in the EEC where consumers are financing inefficient farm production while at the same time they are forced to pay high food prices.
It appears fairly obvious that buffer stocks are only practical in commodities when the volume of trade is small and the market is relatively restricted. When the volume is large, the cost of carrying enormous quantities of stocks must exceed the benefits that accrue from the attempt at price stabilisation. America, which advocated the buffer stocks recently in Nairobi, has just proposed the postponement of the implementation of its own proposals for sugar and grains.
One naturally sympathises with those developing countries whose economic development is dependent on the export of one or two basic commodities. I feel that intervening in the commodity market is, on the whole, not the best way of channelling international aid. A more useful approach to the problems facing such producers could be found if the IMF or UNCTAD were to give increasing financial encouragement to developing countries to set up their own income stabilisation scheme, similar to those that operate in advanced primary exporting countries as, for instance, New Zealand. This approach could more easily take into account the varying needs of producing countries. A further advantage would be that it would not interfere with the efficiency of the market mechant ism. The final and direct advantage would be that it would give developing countries direct incentives to improve the efficiency of their own production and to link, wherever possible, the support with the diversification of their production programme.
We are all aware of the endless attempts that have been made at involving Governments, producers and other agencies in

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bringing into effect controls over commodities and commodity prices. Although trading units increase in size and Governments try to trade with Governments—a process which has not always been very successful—the international commodity markets have proved their validity in remaining the best medium for free trade. By recognising that fact, the report has put the right emphasis on the various problems that surround the complicated stabilisation problems. It has paid the attention to the commodity markets that they deserve, but at the same time it has laid down the requirements under which it considers that the markets must operate. Those responsible for the markets should take good note of these requirements and satisfy themselves that their regulations are fulfilling the needs which a sound mechanism requires. The report lays emphasis on the fact that, given the right volume, the existence of independent markets remains essential to all parties concerned with trade in commodities. It draws attention to the need to encourage the participation of so-called speculators, and recommends that methods should be taken to control their participation.
The report rejects the notion that market speculation is primarily responsible for instability of prices. However, it also rejects the notion that by agreements between producers and consumers, the problem of stabilisation can be solved in one clean sweep. It expresses its doubts as to the usefulness of buffer stocks as an overall solution and explains the difficulties which must be solved in order to make them constructively effective for certain commodities. My Lords, the report has given an ample survey of all the existing problems and provokes ideas for thought. I should hate to think that this report, so methodically prepared and designed, will disappear on the shelves of our libraries. I genuinely hope that it will generate further thinking and more positive action by the various institutions and agencies concerned with the problems, towards the solution of those problems which, in the view of the Committee, are not beyond our capabilities to solve.
5.38 p.m.
Lord WALSTON: My Lords, I share the high opinion expressed by the noble
926
Lord, Lord Kissin, and the noble Lord, Lord Carr of Hadley, concerning this report. It is a most valuable document prepared in a most lucid manner and making this extremely complex subject intelligible even to a layman such as myself. I am most grateful especially to its chairman and also to its members for the work that they have put into its preparation. When I think about commodity problems and discuss them with other people I notice that often people are trying to reach very different objectives. I have a variety of objectives and I think that it is valuable to mention them at the outset in an attempt to clarify one's aims and to see how close one can get to achieving them.
Clearly, one of the objectives of stability in commodity markets is to ensure continuity of supply at stable prices for the consumers which are, by and large, developed countries, manufacturing countries, consuming countries and specifically ourselves. That is of enormous importance to us. Secondly, it is also important to us and to the developed world as a whole that the developing world should have some assurance of a certain level of income—especially, if possible, an income above that which they have at present—which, purely from a point of view of self-interest, will provide a larger market for our products and those of other manufacturing countries, thereby giving us greater profits here and greater potential for employment. That is a second objective which can be obtained by improving the present situation in the commodity markets.
Thirdly, there is the purely political objective of increasing the political stability of the Third World, thereby ensuring that it does not fall prey to the blandishments of our enemies and alien ideologies, because undoubtedly the more unstable it is and the greater poverty that exists there, the easier it is for them to turn away from us and either militarily or economically deflect from us those commodities which they produce and on which we depend. Fourthly—and to the mind of many of us this is far and away the most important—there is the purely moral aspect of doing what we can within the realms of political possibility to diminish the ever-growing gap between the rich countries and the poor countries. In that context I am very glad to see that

927
the report points out that a rise in commodity prices has, in fact, a very small effect indeed upon inflation in this country and that we should not be deterred purely on those grounds from advocating both stability and to some extent an increase in commodity prices.
If they have not already seen it, it is worth drawing the attention of noble Lords to a small item published in The Times today where a report is mentioned which states that the United Kingdom consumer today consumes 30 to 40 times the total resources that are consumed by the inhabitants of some of the poorer developing countries. That is simply an indication of this ever-widening gap.
With his customary honesty and frankness, the noble Lord, Lord Carr of Hadley told us just where he stood with regard to prices and of his belief in the market mechanism as being the correct criterion—the best and most effective way of determining prices. However, he went on to say that he agreed that, in certain cases, there was a need to modify the effect of the market mechanism. I shall be equally frank and say that I am in fundamental opposition to the noble Lord. I do not believe that in these days the market mechanism is the best or the most efficient method of determining prices, because I think it is inefficient economically. I believe that it leads to a misuse of resources; it leads to a squandering of resources. The free play of the markets has led to over-fishing in our oceans. It has led to the dust bowls in the United States and to the destruction of coffee and grain in the 1930s. It has also led to an undue reliance on oil, to too small investment in research into other sources of fuel and into other technical methods of extracting fuel from the earth. We are suffering from that now because we have relied unduly on the market mechanism.
I believe—and this is most important—that the market mechanism is essentially unjust because it means that prices are determined, not on cost of production or on needs, but purely on the bargaining strength of the two parties to a deal; that is, the producer and the consumer. If the producer happens to be in a strong position, he can demand his price; if the consumer
928
happens to be in a strong position, he can do the same.
We saw what happened in the last century in the matter of bargaining over wages, when the employer was in a strong position and the worker was in a weak one; we saw the grinding poverty and exploitation that resulted from that. We are seeing it in a somewhat different form today when the unions are in a strong position. Even though the industrialist may not be in a weak position, the consumer is in a weak position. Therefore, we have injustices and inequities there. We see it on a world scale in the growing disparity in wealth between the rich nations and the poor ones, because the rich nations are in a stronger position and the poor nations are in a weaker one. Therefore, the gap grows ever wider. For those reasons I believe that the market mechanism is essentially an inefficient and unjust mechanism.
Having said that, I am not perhaps quite so far from the view of the noble Lord, Lord Carr of Hadley, as I would appear to be from what I have said. I do not believe that prices can be established by a few gentlemen—even ones as eminent as the noble Lord, Lord Kaldor—sitting in their ivory towers and deciding what the price should be. Some attention must be paid to the market needs and to the likely over-production or under-production.
Therefore, in a realistic way in our attempts to bring stability to the commodity market we must aim at a system whereby long-term economic trends—that is, supply and demand—are taken into account but where producers and consumers alike are cushioned against the violent short-term fluctuations. Here I think that the noble Lord, Lord Carr of Hadley, and I are getting close to common ground. But as the years go by I believe that our differences will appear far more marked. However, at present we both agree that that is what should be done.
As this very valuable report points out, various methods have been tried with varying degrees of success (unfortunately, most of them with very little success) and various other methods have been suggested. To my mind the most effective methods are as follows: first, and where possible, long-term contracts between consumer and producer; secondly, buffer

929
stocks of one form or another; and, thirdly, possibly running in conjunction with that, a system borrowed from the Community—namely, the Stabex scheme—whereby the overall earnings of a developing country have some guarantee against violent fluctuations themselves. In many cases I believe that something can be worked out for the different commodities along these lines.
However, on buffer stocks, which have many attractions, I would make two points which are absolutely essential. First, we—and by "we" I mean the developed and consuming nations—must not give an open-ended commitment. The noble Lord, Lord Kissin, referred in passing, to the Common Agricultural Policy. We learn from that of the appalling distortions and economic non-senses which can arise when producers, whether they be producers of agricultural products, metals or any other prime commodity, are given an open-ended guarantee. Then, of course, production is encouraged to an undue extent and unmanageable surpluses arise. Therefore, if there are to be such things as buffer stocks there must be a system whereby the liability to purchase is limited in some way or another either to quantity or to price.
The second point which to my mind is also of great importance is that there must be for the alterations in price for the buffer stocks—both the selling and the buying—some automatic system of decision-making on the lines suggested either by the noble Lord, Lord Kaldor, or Mr. Grondona. Mr. Grondona has been referred to frequently and I should like to say in public that I have had for many years, and still have, the greatest admiration, for both his ideas and his devotion to this complex subject.
If we are to have buffer stocks, the decisions about when to buy and sell cannot be left to a group or a management committee, however skilled and able. They certainly cannot be left to periodic haggling between the governments of the poor and the rich countries, the producers and the consumers, and thereby inevitably agreed or disagreed to as a result of political haggling and various pressures which have nothing to do with the facts of life. There must be some automatic adjustment in prices so that,
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if stocks rise above a certain level, the price will automatically fall by a given percentage, and vice versa.
I do not think that it would be right at this stage to continue any further with this absolutely fascinating subject, or to attempt to go in any more detail into the various methods which could be adopted, most of which have been very ably described in this report. All I would do in conclusion is to urge upon Her Majesty's Government to do more than take note of this report. They should do more than say that this is valuable and interesting; they should actually and within a short period of time produce concrete proposals based on the facts which are given in this report and based on the avowed intention of bringing stability into the commodity markets for reasons of social justice, economic advance and political stability.
5.53 p.m.
Viscount AMORY: My Lords, as it proceeded with its work, your Committee realised that it was exploring a well-trodden field. The documentation is enormous. As the noble Viscount, Lord Simon, said, our investigations carried us into realms of commerce, economics, politics, ethics and ideology. Nevertheless, I hope that the House will conclude that the report we are debating is a thorough, conscientious and fair examination of the sector covered by our terms of reference, and that the number and variety of witnesses we heard or read is impressive.
Throughout, we had to keep reminding ourselves that our terms of reference were narrow and specific, being related only to the problems of instability of prices. There were therefore many subjects and many sectors of the field which were of great importance but which were outside the scope of our studies; namely, aid to the poorer countries; instability of export earnings; the need for economic development and diversification, and national and international currency problems.
It became clear that questions of aid must be considered separately from schemes of stabilisation which are aimed simply at stability of prices. On our particular subject of instability of prices, I confess that, as we got deeper into our examinations, I became as a member of the Com-

931
mittee, more and more impressed with the complexities of the problems. Every commodity calls for individual treatment. Each has quite different price trends. Most, if not all, are subject to unpredictable hazards and influences. Some are storable, some are not. Some commodities are produced partly by relatively poor developing countries and partly by highly developed ones. I was surprised to find how few were produced exclusively by the really poor countries, though where-ever a particular commodity was, it was clearly of dominating importance to the economy of that country.
It became obvious that international commodity agreements—ICAs as they are called—by themselves are not likely to be a panacea for all commodity troubles. Equally, the Committee felt sure that, in spite of the not very successful results to date, ICAs have a potentially valuable part to play in suitable cases, and that renewed efforts should, therefore, be made by producers and consumers jointly to work out schemes to which both should contribute. Each individual scheme should be as autonomous as possible, though Governments should give such schemes positive encouragement.
Buffer stocks, if storable and large enough, as Pharaoh found, are, within limits, a sensible way to even out problems of supply and demand. From experience to date, floor prices are easier to secure than ceiling prices are to maintain. Price changes are healthy and essential if supply and demand are to be equated. But, when once stability has been properly defined in terms of price movements, then excess instability is seen as a positive evil. The historical evidence is interesting, but, except for two short periods, commodity prices have not been so unstable since the war as they were between the wars. I think that the noble Lord. Lord Roberthall, pointed that out.
The Committee was extremely sorry that it had to conclude that Mr. Grondona's ingenious, comprehensive and imaginative scheme for buffer stocks on a national basis would be impracticable in current circumstances. But the "passive" —automatic—characteristic of his scheme of buffer stock management is an attractive feature of his proposals, as I think the noble Lord, Lord Walston, indicated.
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The Committee was impressed by the evidence given by witnesses of the gravity with which political risks are regarded by investors, particularly in the case of commodities like metals which involve a long time-scale. Where there is a risk of the rules being changed unilaterally and unpredictably, long-term investment will be frustrated. The Committee was interested in the possible idea of an International Resources Bank, as suggested by Dr. Kissinger, with its operations governmentally supported or underwritten. It felt that such a bank would be a tremendous help in ensuring stable treatment by the benefiting countries. Some method of protecting investment from the vagaries of changing political attitudes would be very valuable indeed.
We concluded that any general scheme of indexation with the aim of stabilising the prices of primary products in real terms would be too difficult in practice. The noble Lord, Lord Roberthall, mentioned that. It was interesting that a committee of experts set up by the Secretary-General of UNCTAD to examine indexation did not find it possible to present an agreed report. The diagram on terms of trade on page 66 is revealing as indicating that the worsening of terms of trade against the producers of primary products is at any rate rather less than is sometimes believed.
In Chapter VIII the report pays tribute to the commodity markets—several noble Lords have referred to this—in particular in the final paragraph of that chapter. The evidence of the professional skills with which they are managed and of the useful services they provide is very impressive indeed—and the noble Lord, Lord Davies of Leek, referred to this. The report in the same paragraph rightly mentions the valuable contribution, of no less than £200 million, which these markets make to the invisible earnings of the United Kingdom. Lord Davies regarded that with "ecstasy", and in my view it is well-founded ecstasy.
We found difficult the question whether speculation helps or hinders the stability of prices. It seems that some speculation may in fact be beneficial, and often is, but that an excess of uninformed speculation may be harmful. We were glad to hear that the Bank of England keeps in very close touch with these matters. I

933
might say in passing that I have a good deal more respect for the market system than has the noble Lord, Lord Walston, but perhaps that is not surprising as we gaze at each other from opposite sides of your Lordships' House. However, I agree that it can work too harshly and that, when it does, it calls for wholehearted efforts to mitigate its harsh effects.
I know that every member of the Committee will wish to express gratitude to our chairman. His expertise as a distinguished economist and the consideration he has given to these problems over many years made him an invaluable guide to the Committee. How fortunate we were, too, in our specialist adviser and in those excellent officials of your Lordships' House whose professional services were, needless to say, of the highest quality.
I have already apologised to Lord Roberthall for my inability to remain till the end of the debate because of another firm commitment of which he knows. I believe the Select Committee has been able to produce a report which will be widely recognised in many countries as helpful and impartial in its conclusions. The study of the problems of price instability, which was the subject entrusted to it in its terms of reference, is difficult and complicated. When I read the note at the bottom of page 20 I felt proud to have been a member of a committee capable of such erudition.
6.3 p.m.
Lord SEEBOHM: My Lords, at this stage of the debate most of the points I wished to make have already been made and I find myself agreeing almost entirely with everything noble Lords have said, with the exception of the noble Lord, Lord Walston, who said a few things with which I disagreed profoundly. There are only two points I wish to stress and therefore I will not delay the House for long.
Let me say at the outset that this is not a purely economic question. It concerns the whole relationship between North and South, between the rich and poor, and it is a highly emotional matter. The unfulfilled hopes that were raised at Kingston in 1975 and the somewhat deafening silence between UNCTAD IV in 1976 and March of this year could be the forerunner of a real breakdown in confidence
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between nations and have very serious political consequences unless something is done. I therefore welcome the Committee's report, which seems to be a very comprehensive and well-balanced study, and I add my congratulations to those expressed by other noble Lords.
As I said, there are two points I wish to stress. First, I strongly recommend the setting up of a Common Fund and it seems that Her Majesty's Government's thinking on this has moved a long way since Nairobi. I strongly agree with what the noble Lord, Lord Carr of Hadley, said about this matter, particularly the point he made about economy from having a common fund and, as the noble Viscount, Lord Simon, said, this is a very important factor and could in fact reduce the cost of setting up commodity agreements by a very large sum. I also believe that the loans, or whatever they will be called, should be interest-free because if a commodity is keen and is run well it buys at the bottom and sells at the top and should make money, so money could be returned partly from profits and partly from selling when the price is high.
I believe that the principle of international commodity agreements is right, but nevertheless I do not believe that all the inherent difficulties of reaching agreements between producer and consumer will easily be overcome and that disappointingly few will be established in the foreseeable future. I also agree about the importance that the noble Lord, Lord Roberthall, mentioned of getting good information. This is a vital matter in stabilisation, but unfortunately there is another element we must consider—one might refer to them as acts of God—in that nobody can foresee a frost such as happened in Brazil a year ago, or two droughts running which completely destroyed the groundnut farming industry of Northern Nigeria.
That brings me to my second major point, which has been raised by several noble Lords, and is the result of rather changing my opinion since I gave oral evidence to the Select Committee. I have attended two international conferences since then and this subject of commodity agreements was discussed at some length at both of them. It was felt at them that the need for developing countries was

935
best described as the stabilisation of foreign exchange earnings. While international commodity agreements were part of this, something else was necessary in both the short and long term. Commodity agreements, in my view, are likely to be more beneficial to the individual farmer or producer than to the country itself. It was pointed out that the rise in the price of coffee into the stratosphere did no good whatever to Brazil, which did not have one bean to sell. It was further pointed out that some countries with several commodities—for example Malaysia with cocoa, rubber and tin, and Nigeria with much the same and now of course with fossil oil—could face the collapse of one commodity with equanimity provided the others were firm.
It is this problem of stabilising total foreign exchange earnings that is the core of the matter and this, if it is to be faced at all, involves extending the use of the existing compensation fund under the aegis of the IMF. Under this scheme developing countries should establish a reference figure of earnings with the IMF and should be offered interest-free loans in years when those earnings fall below such reference figure, to be repaid when earnings recover. Hopefully, this would be a revolving fund, but no doubt there would be defaulters from time to time and that would have to be accepted. Once a loan had been taken, I would expect the IMF to exert some kind of discipline to see that imports were also regulated in a responsible manner.
During the 20 years I have spent operating in the developing countries I have seen some almost brought to their knees by importing goods of little or no social or economic necessity. A system of income stabilisation of this kind could allow the developing countries to make financial and economic plans that had at least some relation to reality and could be of far more use than some of the aid that has been available in the past. It would also get away from the atmosphere of patronage and charity which can be so resented by the recipient.
I must refer to the opportunity of forming a world commodities centre in London. In the report the Select Committee was kind enough to refer to my oral evidence on the subject, but felt
936
it would have little, if any, effect on commodity stabilisation and therefore made no recommendation. In my view, that is only partially correct. A sub-committee of the Parliamentary Group on World Government has made a detailed study of the matter, and we believe that if all the dozen or so international commodity associations and study groups were concentrated in London in a purpose-built centre with adequate facilities for conferences and offices, matters could move much faster and there would be an international forum of a continuous and continuing kind on a great number of subjects which could be of enormous value to the developing countries and to the United Kingdom.
I think that the noble Lord, Lord Davies of Leek, was anxious that there should be some start, some initiative, by the United Kingdom in this matter, and this seems to me something that we might well start. Those who are already here—there are about five or six of them now—bring to this country a large part of those foreign exchange earnings of £200 million, as has already been mentioned, and was described in the Bank of England's Ouarterly Bulletin in March. If all were here, this figure could be doubled or trebled when a few more Community agreements become operative. While the cost of building such a centre from scratch might be in the order of £10 million, it would bring in rents which would certainly offset a considerable part of the cost, and it would show the developing countries, and in particular those in the Commonwealth, that what we said at Kingston and Nairobi was not meaningless. I doubt very much whether the actual cost would be non-economic, even from the start taking into account the foreign exchange earnings. Let me end by saying again how excellent I find the report, and how much I hope it will lead to action.
6.11 p.m.
Lord KALDOR: My Lords, I should like to add my congratulations to the many others extended to the noble Lord, Lord Roberthall, and his colleagues for having produced such a scholarly report in so short a time, after taking such extensive evidence that was most valuable. I myself had the privilege of attending

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some of the meetings when evidence was taken, and I learnt a considerable amount from them about the way in which people who operate commodity markets, or are interested in commodities, look at the matter. Except on one major point, which I shall consider in detail, there is little in the report with which one could positively disagree. At the same time, I cannot help echoing the sentiment expressed just now by my noble friend Lord Walston that the report missed an important opportunity. It conveys the general impression that little can be done by way of a major or comprehensive reform, since each commodity has peculiar features of its own, and it is best to avoid the use of general remedies which are based on broad distinctions, because every broad distinction has an exception. One can find an exception to almost any proposition made in the field of economics or in the social sciences.
One is left with the impression that in the Committee's view the problem of the stability of commodity prices is not as important as it is often thought to be and that in so far as it is an important problem one should not expect that anything much can be done about it, although there is obviously scope for improvement in various ways and in specific cases. One of the Committee's more remarkable conclusions is that,
"commodity markets do not in themselves represent an inherent destabilising influence on commodity prices."
The obvious question this invites is, "As compared to what?"
Clearly, the prices of all commodities which are dealt with in commodity markets are very much more unstable than prices of all commodities which are not dealt with in commodity markets, and where production and consumption are kept in balance in some other manner; for example, motor cars, refrigerators, men's shirts, and millions of other items that I could quote. The efficiency of the market mechanism, in keeping a balance between supply and demand or production and consumption, has a clear measure. It is to be measured by the amount of price variation that is required in order to bring about any given adjustment in the underlying conditions either on the side of demand or of supply.
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Judged by that test, commodity markets represent a remarkably inefficient instrument for the fulfilling of the function of keeping production and consumption in balance, since even small changes in underlying conditions are capable of causing large variations in prices, and all variations in prices contain an unnecessary fortuitous destabilising element; namely, they redistribute income in a haphazard way between the different parties. They make some people poorer and other people richer, as a by-product of adjusting supply and demand, which is not an inherent or necessary part of the situation. It is a cost that we have to pay in order to use the price mechanism as an adjuster.
In my view, the committee failed to grasp the important implications for the world economy of the very existence of basic differences in the production and marketing of primary commodities on the one hand, and of manufactured goods on the other hand. The Committee failed to appreciate that industrial countries can prosper only if they are assured of adequate supplies of food, fuel and raw materials, which are their essential input. Finally, the Committee failed to appreciate that most of the troubles in the last century and a half, which resulted in world-wide economic crises—whether these crises were combined with a major inflation, as now, or a major deflation, as after 1929—could be shown to have had their origin in the failure of the adjustment mechanism which keeps the growth of supply in primary commodities in due relation to the growth of requirements, as determined by the growth of world industrial production. World industrial production cannot grow faster than the expansion of the food and raw material base permits.
In particular, the Committee failed to appreciate the importance of the fact that both sharply rising and sharply falling commodity prices can be the cause of a recession and mass unemployment in the industrial countries, and can also be a major cause of inflation. Indeed, the Committee dismisses this latter view in one brief sentence, by saying:
"Fluctuation in commodity import prices, apart from oil, seem a minor element in the rich nations' inflation problem."
The Committee then quotes the example of Germany, which is much dependent on imported food and materials, but where there is very little inflation. I consider

939
this example a particularly inept one, since Germany opted out of world inflation only by repeatedly appreciating her currency, thereby aggravating the inflationary problem of other less fortunately or, financially, less strongly placed countries.
However, the Committee's view in these matters is certainly not the generally accepted view of economists, or even of the major Governments of the Western World. Thus, President Carter in presenting his anti-inflationary programme on 15th April this year, made prominent reference to the potential role of international commodity agreements in contributing to the battle against inflation in the United States. He said:
"When prices of raw materials and food fluctuate upward, the effects tend to spread throughout the economy, raising prices and wages generally … Reducing fluctuations in commodity prices therefore helps to reduce inflation … My Administration will enter into negotiations for international agreements for grain and sugar to reduce fluctuations in prices. We will also consider with an open mind other commodity agreements that concentrate on moderating price fluctuations."
Subsequent to this statement, this theme was enlarged by the testimony to a committee of the United States Congress by Mr. Fred Bergsten, who is a United States Treasury Assistant Secretary for International Affairs. I should like, with your Lordships' permission, to quote at some length from Mr. Bergsten's statement, because it puts the very point which your Lordships' Committee failed to appreciate in a far better way than I could in my own words. Mr. Bergsten said:
"Sharp fluctuations in the prices of primary commodities, both agricultural products and industrial raw materials, have been an important factor in triggering and sustaining inflation. Inflation, in turn, has triggered increased unemployment. There are two reasons why commodity price instability has added significantly to these problems.
"First, excessive rises in commodity prices, even when they are temporary, induce economy-wide price increases beyond the direct impact of the commodity prices themselves. This is because producers of manufactured goods and food processors often justify additional increases in their prices on the basis of cost increases stemming from rising prices for their raw materials. However, these increases are not likely to be withdrawn when raw material prices subsequently recede. The effect is a ratcheting up of the general consumer price index, which in turn provides justification for higher wage increases. As inflation
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spreads, for this as well as other reasons, inflationary expectations then generate additional demand for business inventories and create fears of impending shortages, provoking protective purchases and forcing raw material prices up even further in a spiral which, as we saw particularly in 1973–1974, can be devastating.
"Second, excessive price declines for commodities can also, paradoxically, fuel inflation. When such declines are precipitate and extended in time, they can deter investment in new productive capacity at both the primary and processing stages. Supply may then become inadequate to meet the normal growth of demand in future years, pushing prices up at that time."
Mr. Bergsten then comes out strongly in favour of buffer stocks as the only satisfactory method that would meet the needs of the importing countries, or the consuming countries, for greater price stability, and also stimulate investment and thus adequate future supplies by assuring a remunerative price to producers; and which, in contrast to other methods, such as quotas and production controls, would allow price to perform its function of allocating resources to the most efficient producers. He concluded his statement by saying that the present US Administration believe that international commodity agreements are important from the point of view of moderating inflation in the United States.
This is far ahead of any official statement made on behalf of Her Majesty's Government in this field. On this matter, the thinking of the Americans is much ahead of ours; and, as the Committee shows in its chapter called "Policy of HMG", while the British Government put forward far-reaching proposals for the creation of international buffer stocks immediately after the last war—largely, I believe, under the personal influence of Lord Keynes, who was then in the Treasury—they have been dragging their feet on this matter ever since. Apart from the rather vague initiative taken by the previous Prime Minister in Kingston in May 1975, which was not really followed up, the attitude of Her Majesty's Government in the view of your Lordships' Committee was
"too negative in general and open to question in several particulars."
They were opposed to the creation of a Common Fund, which the new United States Government supports; and your Lordships' Committee
"consider it unfortunate that the UK has until very recently given the impression of so cold a welcome."

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The Committee note that this attitude has changed now as a result of recent meetings in Geneva and in Nairobi, and our Government are no longer opposed to the establishment of a Common Fund.
In my view, however, both the Government and your Lordships' Committee considered the problem much too narrowly; merely as a method of helping the producing countries, and not one which is of major importance to the consuming countries. At least, in reading various official statements made I looked in vain for the aspect of helping consuming countries, like Britain, and other industrial countries, as distinct from primary producing countries. The Committee themselves took the general line that
"although some reserve of capacity is desirable … there is a general presumption against keeping any substantial part of resources idle for any length of time".
I wonder whether they would also think that the international Gold Standard of the 19th century and the early part of this century was a wasteful system because it tied up so much valuable gold as a monetary reserve. In my view, if the world succeeded in creating an international monetary medium which is directly convertible into major commodities and the value of which is therefore perforce and necessarily stable in terms of basic commodities, this would confer an inestimable boon on the world economy, both in terms of monetary stability and in terms of enhanced economic growth, in relation to which the cost incurred in holding larger stocks of basic commodities, and the wealth which is tied up in that form, would appear insignificant. However, the Committee regarded such far-reaching proposals as:
"outside the purview of the Committee".
Yet there is need for a committee, my Lords, whether it is set up by the Government or the Parliament of this or some other country, or whether it is set up by a number of Governments through an international body, which would examine in depth the problem of world inflation as it now presents itself, after any formal link between money and gold has been abandoned and when monetary stability is the privilege of only one or two countries in the world, such as Switzerland and Germany, who are able to offset constantly
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rising world prices by raising the exchange value of their currencies in relation to other industrial countries. In other words, these countries manage to opt out of world inflation but only (I have not the time to develop this theme) at the cost of aggravating inflation in the rest of the world.
In the matter of inflation we are living from hand to mouth, trying to cope from month to month and from year to year by means of one temporary expedient after another. There is no world authority regulating the supply of money, and, personally, I am extremely dubious whether inflation in the world could be banished by some simple means such as the establishment of a global, yearly money-supply target for mankind. Indeed, I am dubious whether inflation can be got rid of simply by regulating the amount of financial claims which the public holds against certain privileged financial institutions—the so-called clearing banks in this country—to the exclusion of other financial insitutions, which is the label attaching to that mysterious and amorphous substance which it is now fashionable to call "the money supply".
6.30 p.m.
Lord THOMAS: My Lords, may I be allowed to confess that one of the main reasons why I put my name on the list of speakers was to make sure that I had on record my opinion of what an invigorating, inspiring experience it is to be on one of these Parliamentary Select Committees. I have spent most of my years—too many of them—with my nose too close to the grindstone of industry and, like many uninitiated businessmen, I thought that Parliamentary Committees were held at stratospheric levels in a thin partisan atmosphere. Experience shows that that is not so. We were steered and encouraged by an obviously hard-driving, fully experienced chairman. We were served by a secretariat that had a keenness of purpose, honed to a sharp cutting edge, that put our workings in orderly fashion. The very businesslike way in which the Committee which produced this report was run was most inspiring. The cross-fertilisation between the Members of the Committee and the witnesses was most interesting and encouraging.

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The time and effort spent on this report and the debate this afternoon will benefit worldwide. I do not propose to go into the detail or to give my own views. They are, I hope, in the report itself. All I know is that it is pro bono publico and the fact that it is already beginning to have influence is shown by a paper I received from the Federation of Commodity Associations who say that since they gave evidence before the Committee, the Bank of England and the London Metal Market have already put into action certain practices which are recommended in the report. They have put forward a scheme for monitoring and computing figures which will have the effect of producing quicker and more comprehensive information. I hope, as the noble Lord, Lord Carr, has said, that the Government will take very careful note of this report and that they will get some action going as a result of it.
6.32 p.m.
Lord HALE: My Lords, I am happy to associate myself with many of the things that have been said and, in particular, with the words of the noble Lord, Lord Carr, who said that this is something that your Lordships' House can do extremely well using its wealth of expertise. I consider it almost an impertinence on my part to intervene among so many experts; but I feel that, on the whole, individual opinion may be heard. It was about three years ago when I requested the assistance of the research department of the House of Commons who gave it in such measure that I had a mass of documents setting out the details of the time. It is interesting to recall, in the light of some of the remarks made, that there is not much that I disagree with at all. I do not think there is anything I positively disagree with, but in parenthesis I can say that I realise it is part of the Socialist myth to say that an enormous amount of gambling goes on in the price of commodities and it is part of the Conservative myth that nothing of this kind really happens. While much has been missed out on this subject in the report, their finding is that, in general, long-term buying by persons who have some interest is more of a stabilising factor and the danger comes from short-term buying for
944
bigger profits which takes place more rarely and in times of expansion.
Three years ago, the problem was grain prices; that little fish had left the shores of Peru and that that, mysteriously, had put up enormously the price of the soya bean in America; and that cattle feed was expensive. Four slightly sinister-looking commercial magnates had arrived from Moscow and, by a simultaneous operation, had purchased practically all the wheat that America had left from a very successful year's crop. But the organisation did not go quite so well on shipping. The headlines were about approaching famine, about the world being confronted with this disaster and that disaster. There were admirable articles with sensational headlines, and the problem of prices was one of considerable magnitude.
I read those headlines with pleasure and I propose to devote myself for a minute or two to what has happened in the last two days—the two days since this report was published. I am sorry to say, pessimistically, that while I am not criticising the admirable work of this Committee—and it would be a gross impertinence to do so; for it has been admirably done and presented, and I think it is a work of reference that will be consulted in the future—I feel that the prospects of its recommended solution, with which I agree, being put into effective action within any reasonable time is a little remote.
I rely solely upon The Times for my information. At this moment in another place they are involved in a painful discussion on the after-effects of cases of corruption with which Members are said to have had connection. I do not comment on that. Corruption has always been with us. It is a matter that has had its spot in the history of commodity prices. I think it was Rudyard Kipling who said:
"Who shall say that the secret hid
Under Cheops' pyramid
Was that the contractor did
Cheops out of several millions;
Or that Joseph's sudden rise
To Comptroller of supplies
Was a fraud of monstrous size
Upon King Pharoah's swart civilians?"
The subject of commodity prices, historically speaking over the years, is one of infinite romance; and this report contains many paragraphs of very great

945
interest: the burgeoning of the cocoa tree and its three- and six-year period in addition to its four and eight, if I remember. The noble Lord, Lord Thomas, who spoke just now, made another stimulating suggestion that buffer stocks of subterranean metals, elements, were buffer stocks while they were under the ground. And they should be able to be called upon urgently for increased development at short notice to deal with an emergency; that could be done much more cheaply than by endeavouring to superimpose superstructures of metals above the ground.
The report deals at length with the subject of coffee. What has happened since? What has happened to coffee is that the price which soared rapidly to about £4,000 a ton has now sunk with equal rapidity to a forward price of about £1,750 per ton—an enormous variation, largely based on the fact that Brazil is an immense producer and on the statement that Brazil had suffered terrible frosts which destroyed the crops and provided one of those unforeseen or, if not wholly unexpected, at least impossible-to-avoid emergencies which can have catastrophic effects.
On the other hand, it was stated in the news last night that a number of exporting firms in Berlin are facing insolvency because they were buying forward on a fallen market, and it has been alleged—though not too specifically—that there is some evidence that the degree of frost involved was grossly exaggerated. Certainly I read that trees had been destroyed all over the place. That does not quite conform with the fact that it is reported they are anticipating a very good coffee crop this year. Perhaps it might bear some investigation.
In the same way, one great expert apart from Miss Ady—she was a great expert and was followed by another great expert who spent his life dealing with, cocoa and here I disagree with the noble Lord, Lord Roberthall—concluded the evidence by saying that he could tell us some more very interesting stories about cocoa, and the noble Lord, Lord Roberthall, thought the moment had come when the Committee should not be occupied with interesting observations but must get its nose to the grindstone of pure and undiluted fact. I regret the loss
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of that information, but some of it is to be found in a book published under the pseudonym of Adam Smith, which we are told conceals the name of a well-known and rather jolly character in his writing, who told us the story of a Swiss bank.
It is a very odd Swiss bank because it is mostly American; it was sited in Basle, which is not the best place to operate in Swiss financial circles. It was full of brilliant young men with ideas, and the writer acquired shares in it and followed its career for a time, by which time it has been taken over by a Californian bank—a bank of great magnitude with immense assets—which was lucky for the Swiss bank and unlucky for the Californian one, because something was then disclosed about one of the directors of the Swiss bank, known for its struct rectitude and its habit of secrecy, which undoubtedly assists gentlemen, who are not always observing the laws, to conceal their funds. If I may interrupt myself, I think I have said before that it was Voltaire who said:
"If you see a Swiss banker jumping through a plate-glass window, jump after him immediately without hesitation; there is at least 10 per cent. in it".
It was found that one of their enterprising directors had signed contracts to buy half the cocoa supply of the world. If I remember correctly, it finished with a trial of the principal accused in absentia; and Private Eye, who can see fairly clearly in a fog just like Sherlock Holmes could, have recorded that they detected him as an economic adviser on television the other night. These things do happen. Let us say that the reputation of the City of London is very high, but we have to face these things.
What are the other problems? The report deals with tin. I said on a previous occasion that I once owned a tin mine which I had to buy for £1,000. It was operating with profit until the price of tin dropped to £30 per ton. I have long since parted with it at the price I paid for it, and I know nothing about its present condition. But, in the course of the evidence before the Committee, it was said that the primary producers, where they could do an OPEC, would do an OPEC if we did not watch it. Primary producers will say: "This is our price for tin: you can take it or leave it." That is exactly what is reported in The Times this morning

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as being the present intention of Bolivia, the second largest producer of tin in the world. These are quite serious matters and they all make a little more difficult the concentration on their hopes of a scheme which, as I see it, could be done only through UNCTAD and on which UNCTAD has done a great deal of research. The Times also reported yesterday that UNCTAD has again adjourned until the spring the consideration of the fund for financing variations in the price of commodities.
I have mentioned coffee and tin, and I would, with the utmost delicacy, mention something which is sub judice—or morally sub judice anyway—on which I do not propose to make any comment, because the case will go to the Lords. We have a contest going on over an international cartel in the battle between an American company and Rio Tinto Zinc. It is a cartel in uranium, which is not classified among the normal commodities; but uranium is a raw material—not only metaphorically but literally—with a very dangerous potential. There was the fact of the cartel and the fact that a ship sailed loaded with uranium from Zaire a few years ago, landed in Holland, changed its name, its register and its flag, and went out to sea, got loaded up with uranium at sea and voyaged along the Mediterranean where it finally arrived somewhere near Israel. The Israelis say they never noticed it, and so far as they know nothing like that has ever arrived there and no other destination was an alternative.
The question of the observance of international obligations is today a very grave matter indeed. I see that some of my intimate friends and colleagues in another place are talking about producing a paper—which I have not yet read, so I shall not comment on it—suggesting that we break all our obligations to our Common Market partners at will. I think that our Common Market partners have put up with an awful deal from us. If we break, or attempt to break, or attempt to obstruct the working of a solemn obligation reinforced by a plebiscite and reinforced by long decisions in both Houses, who is going to trust Britain's word again? Who is going to trust anybody's word again? What is the use
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of entering into the kind of obligation which Helsinki represents? As was explained to me by my mentor, Dick Stokes, an international commercial treaty is an obligation which is observed by both parties, so long as it is to their mutual interest, or to their separate interest, and no more.
Those are some of the things that are worrying me, and I apologise for taking a longer time on them than some much more distinguished speakers. I should like to thank the noble Lord, Lord Carr, for the privilege of having heard his speech and, as I am not so quick on the uptake as I once thought I was, I shall study the report of it and read it with the rest of the debate.
Unfortunately, I have been distracted by a silly paragraph in the Daily Telegraph, which I ought to have had more sense than to take the slightest note of. But my attention was attracted to it, and I am supposed to have said something at a small party yesterday at which I was present, and at which a young man who said he was from the Daily Telegraph exchanged some words with me. He asked my name, he asked what I did and he asked whether I knew Lord Brockway, and I answered him in monosyllables. I did not say what was attributed to me. I hope it may have emanated from some mistake. I am quite incapable of saying that, and a lot of people know it. I thought that I would not be such a fool as to trouble your Lordships with such an allegation but, at my age, it has worried me. This is the kind of small, annoying suggestion to which I have never been exposed before.
The last time I spoke to the Daily Telegraph was when that great doyen of reporters, Harry Boyne, later Sir Harry Boyne, invited me to have lunch with him in the Press Gallery. When he was knighted I asked him to come and visit me here. I am sorry that he has not done so up till now, and I hope that he very soon will. I do not wish the young man any harm at all, because he seemed to be a very nice man, and I shall leave it there. I am grateful for your Lordships' patience, and I apologise for having taken a little longer than I anticipated, which was due to a slight inability to concentrate. I congratulate all who have worked on this

949
report, for producing a very fine report indeed.
6.53 p.m.
Lord ENERGLYN: My Lords, there would have been a very serious gap in the deliberations of your Lordships' House if the noble Lord, Lord Roberthall, had not brought this amazing—nay, I would say fabulous—report before us today. In saying that, I earnestly hope that the report and its evidence will not suffer the same fate as its counterpart suffered in the United States in the 'fifties. I refer, of course, to the report popularly known as the Paley Report. If the Americans had heeded the conclusions of the Paley Commission, who knows?—world economics might not have been in its present state of confusion. Therefore, it is to the hidden messages embodied in this remarkable report that I should like to draw your Lordships' attention.
The Paley Commission produced a monumental survey of the resources of the world under the prophetic title "Resources for Freedom". In presenting the report to the Speaker of the House of Representatives on 1st July 1952, President Truman expressed the
"hope that this report and the actions which may be taken as a result of it will contribute significantly to the improvement of this Nation's material position and to the strengthening of the free world's economic security, both of which are the continuing objectives of United States policy".
This declaration was important as we students of the subject well know. But it revealed how aware President Truman was of the perilous state into which America could be plunged, unless there was some orderly approach to the problem of the world's material resources. It is perhaps quite a good thing for Britain that America forgot its Paley Report, because I see that this omission could work to our advantage.
The Commission made the following suggestion, upon which the economic strength of America could be founded:
"The industrial nations of Western Europe and Japan, on the one hand, have strong industrial capacity and labor skills but severe resource limitations. They can prosper in the future only on the basis of heavy imports. At the other extreme are numerous nations of South America, Africa, South Asia, and the Middle East, whose average living standards are low but who possess rich and relatively undeveloped natural resources often in excess of their prospective needs".
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It went on:
"In between these two groups are such nations as the United States, Canada, Australia and New Zealand whose resources are relatively strong, whose industry is advanced and whose living standards are high. These three groups of nations could co-operate economically over the next 25 years to the tremendous advantage of each".
It did not come about. If this geo-economic bloc had been achieved, Britain would have been forced to enter the EEC, and would have had no option but to do so. Its failure to materialise was equalled by Britain's failure to understand the profound nature of this American concept, this bloc. If we had been mindful of the material and ethical resources of Australia, Canada, New Zealand and—I even go so far as to say—South Africa, we should not now be making the admission in paragraph 1.12 of this report referred to by the noble Lord, Lord Davies of Leek. As he pointed out, given the chance to operate with our expertise we could, as entrepreneurial mineralogists, once again be supreme in the world of the mineral markets. Forget not, my Lords, that when we had an Empire we governed over 30 per cent. of the known mineral resources of this world. We never had to bend once to ask for any commodity from anyone; it was there for the asking. Therefore, I read certain messages into this report which makes constant reference to stockpiling.
Certain noble Lords have referred to stockpiles as buffer stocks. Should stockpiles be created to buffer fluctuating prices, or should they be created for stragetic purposes? The world in which we now live completely outmodes, in my opinion, the use of the terms "buffer stocks" and "strategic resources". We are now concerned about the possession and the acquisition of key materials, because without them the industries concerned will be brought to a halt. Therefore, we must look at our position in relation to the EEC.
Britain appears to me to be in a far less vulnerable position than any other country in the Community. We are the only part of the Community that has an unfulfilled mineral potential. If I may digress for a moment, it is an undeniable fact of history, is it not, that war is the easiest of human enterprises? Ironically, war eradicates temporarily the wide

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spectrum of economic problems. Emotional wars are relatively unimportant, but premeditated war demands long-term planning and the development of stockpiles. It would be too sinister, therefore, to attach undue importance to the development of the buffer stocks we are speaking about if they are intended for premeditated war, but perhaps it is not too unrealistic to consider that possibility. Therefore we should look at Britain's resources.
There has been a surge of mineral exploration in Scotland and a number of very important deposits have been discovered. None of these deposits is, however, worth the paper upon which it is written because its development will be denied by one planning authority or another. If we wished, we could develop small mines in this country which would provide long continued, healthy and highly expert occupations for miners. This in itself would be worth while. For too long these deposits have been considered to be small and not commercially viable because they have had to compete in world markets. However, when one speaks about commodities that are in a strategic position, price is not the primary factor; it is the ability to possess them which matters.
One could think, as a cachet, of the romantic possibility of developing the goldfield of Sutherland. In 1868 there was a gold rush into Kildonan. It was reported that 400 freelance prospectors extracted in two years £12,000 worth of alluvial gold panned from the streams. This goldfield exists but it has never been accurately located. Nevertheless, a goldfield is waiting for us there. There is also the gold of Wales, but one could not touch it without meeting opposition from the planners. Perhaps, though, gold is not so important.
The noble Lord, Lord Davies of Leek, pointed out that one can enter fields where one may do more harm than good. In this context, may I remind noble Lords of diamonds. America, realising its dependence upon very restricted parts of the world for industrial diamonds, has developed synthetic diamonds on a massive scale. In 1964 its output of synthetic diamonds was 4 million carats; in 1968, it had risen to 11 million carats. This represents about 50 per cent. of the
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diamond requirements of America. Without these industrial diamonds, American industry could not proceed. What about Britain? Should we go in for the production of synthetic diamonds? The technique is known and there is no limitation upon the supply of carbon. After all, the diamond is only crystalline carbon. However, as the noble Lord, Lord Davies of Leek, has pointed out, it would not be to our advantage, with the Diamond Corporation located in this country, to go in for the production of synthetic diamonds.
Let me take another good case. So far as the present situation regarding cobalt is concerned, we are one of the biggest consumers of cobalt in Europe. The total world output of cobalt is about 24,000 tons, 14,000 of which come from Zaire while about 4,000 tons come from across the border in Uganda. Therefore, 18,000 tons of cobalt come from that very critical area of Central Africa, and whoever annexes the output of cobalt from those two countries has the world demand for cobalt at his mercy.
I could go on at great length in this way. If only we could curb the unbridled powers of planning authorities, who stifle at birth the discovery of minerals in this country! With great and absolute confidence I should like to declare that within five years I could find work for at least 10,000 miners whose turnover, in terms of saving imports, would be of the order of about £100 million. Therefore I look upon this fabulous report, upon which again I congratulate the Committee, as containing the kind of evidence which we, who are unashamedly entrepreneur mineralogists, can use to persuade Governments to develop their resources intelligently, without spoiling the scenery and for the benefit of mankind.
7.9 p.m.
Lord LEE of NEWTON: My Lords, may I join with other members of the Committee in paying a very sincere tribute to our chairman, Lord Roberthall, for the enormous skill—indeed, patience at times—with which he guided us through our long deliberations. Perhaps the best compliment we can pay to him is that on the one occasion that he could not attend a meeting we decided not to hold it rather than put anybody else in the chair. One

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cannot pay anybody a much higher compliment than that. Also we had the great advantage of the services of Professor MacBean, who acted as our adviser. He has long experience and knowledge of this subject and he was invaluable—as was our very able Clerk, Mr. Carstairs, who went to enormous pains to keep us informed of every development in commodity prices as it took place. One cannot thank him too much for the work he did on our behalf.
Your Lordships may well consider that members of a Committee which used about 630 pages to produce a report, have said quite enough without them now wanting to take part in a debate of this type. I am sorry the noble Lord, Lord Carr of Hadley, has not yet got round to reading Volumes II and III; I assure him that they are splendid reading. Now that we have three months' recess, he could, with great advantage, peruse—in the small hours of the morning if necessary—the words of wisdom which we offer to the world in Volumes II and III.
It has been said that the "heavy" Press, as I believe they like to call themselves, have not greeted this Report with the minute, detailed examination that it deserves. Indeed, I thought that the report in the Guardian was rather silly. As I think my noble friend Lord Roberthall reminded us, the Guardian said that we were opposed to the creation of a Common Fund. How anybody who has read Paragraph 9 and the conclusion to Paragraph 31 could come to a view of that sort I just do not understand. I was extremely pleased when my noble friend Lord Roberthall corrected the Guardian in a letter which was most apposite and appropriate to what they had said.
I do not want to rehearse all the things which other noble Lords have said during this debate, but I should like to say with hindsight that perhaps we should have stressed more than we have, either in the report or in the conclusions, a reference to the retained value of some exports from the developing countries. Had we been able to obtain more evidence from representatives of the LDCs which export considerable portions of their raw materials it would probably have helped in this respect but, despite our efforts to get more people of that type to give I evidence we just did not manage it.
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We had the advantage of having Sir Guy Sauzier from Mauritius, a country about 90 per cent. of whose exports consist of sugar alone. One can well imagine their problems, but we did not receive that kind of reaction to the advances we made to some of the LDCs for people to come along and give evidence to us.
In Appendix V of Volume III, at Page 615, we have the submission from the Institute of Development Studies, and I attached particular importance to their submission. The submission itself shows that, in some cases, the retained value of exports of some of the LDCs is as small as 10 or 11 per cent., yet, where they make efforts to add value by indulging in processing operations, the obstacles in the form of tariffs rise speedily with the degree of processing, and, as tariffs are expressed as a percentage of total value, they represent a much higher discriminatory tax on added value due to processing, than the nominal tariff rates would suggest.
This is a deleterious approach by the consuming countries. I believe that, if we are to see the countries of the developing world get more and more advantage from their own assets, we must not only welcome but also assist them in doing far more processing work on their products, instead of raising the tariff walls against them as would appear to be the case. I submit to noble Lords that, if they care to examine the submission I have mentioned, they will see that, whereas we all want to see a bringing together of the producing countries and the consuming countries, while discrimination of this type exists we cannot very well expect that the late developing countries will be very happy about their relationship with us.
I should like now to turn to matters which are discussed in Chapter 5 of Volume I, namely of our future supplies of minerals, metals, et cetera. One has no need to have been associated with the Colonial Office, as I was, to know that a new dispensation now obtains. A great many of the developing countries are now independent. They have their own governments. I am pleased that they have decided to take over ownership and control of their raw materials. I believe this was an absolutely essential step, but in Paragraph 5.9 of Chapter V we refer to the changes which have now come about. We point out that, whereas a few years

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ago the great companies in the developed world invested their capital in searching for metals and then in sinking capital in the mines and so on, they are now holding back and they are doing so because there is a feeling of uncertainty. Apparently, in some instances, Governments in the developing world have changed the terms under which that capital was sunk and there is now apprehension because of the political uncertainties created by changes in the terms under which it was agreed that such capital should be sunk. As we know that the manufacturing world is looking to its own expansion—in other words the ability to gobble up more and more raw materials—if there is to be a hiatus in our supply position from many of these developing countries, an extremely serious position could emerge.
Perhaps I may mention copper. We had evidence from a number of sources—among which I remember Sir Mark Turner—that, although copper is now in surplus, it will be in very short supply indeed by the 1980s. One questioned a whole range of witnesses as to whether there was any machinery by which the problem which has now arisen could be circumvented, and, frankly, there is no such machinery in existence. Therefore, the Committee took the view, as those of your Lordships who have read Chapter V will know, that the time had arrived when we should try to involve Governments in making arrangements in order that the developing countries shall get the best out of the exploitation of their own indigenous raw materials and the consuming world he assured of a continuous supply. As somebody said, there is mutuality in this, but, we must get some arrangement at Government level which can guarantee that contracts will not be violated and that capital can be sunk. When we talk about metals and minerals, we are talking of a very long time lag indeed before there can be any recoupment from the investment of capital. A matter of years is involved and I believe that this is a most vital consideration and one that the consuming world will neglect at its peril.
At UNCTAD IV in Nairobi Dr. Kissinger made a very interesting suggestion. He suggested that there should be an international resources bank set up
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in order to guarantee finances for this kind of development. I do not think it was taken as seriously as it ought to have been at that stage. We inquired as to whether there was any possibility of the idea being resurrected, but our inquiries were rather negative. I do hope that when UNCTAD again look at this problem they will either look at the suggestion which Dr. Kissinger made, or will look at the way we have tried to phrase our recommendation on this subject, because, as I repeat, there is here a mutual advantage to both supplying countries and those who are consuming.
The question of indexation, and so on has been raised. I do not think that it would work. On the other hand, we have to look at the problems which the present period has thrown up. If we take Zambia, 90 per cent. of their export is, of course, copper. While Kenneth Kaunda has seen the price of copper go almost through the floor, there have been huge increases in the prices of his imports. When you have a developing country, far from being affluent, which is faced with a problem of that type, how can it possibly find capital to invest in more copper mines, anyway? Therefore, we really must attempt to get an answer to what I hope all noble Lords will agree is a very vital issue indeed.
The report itself has received a very generous and very constructive reaction in your Lordships' House. I think the major criticism has been by my noble friends Lord Walston and Lord Kaldor on the question of our reaction to the commodity markets. I see their point, but those of us who are not as enamoured as others of the market mechanism were satisfied that, if we were to get the opportunity of speedy action on what we were suggesting, our best approach at that time was to mention the weaknesses we found in the market mechanism—and indeed we mentioned those in some detail—rather than to embark upon a venture, which most certainly would have meant that the Committee would sit for the next five years, of hoping to convince other members of that Committee that the best approach was to abolish the commodity markets. Indeed, when my noble friend Lord Kaldor refers to what Mr. Carter and others have said in the States, I do not think even my noble friend would say

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that the commodity markets of the United States are in the slightest danger of being abolished by Mr. Carter.
Lord KALDOR: My Lords, with my noble friend's permission, I said that President Carter believes that stabilising commodity prices by means of buffer stocks is very much in the interests of the United States as a consuming country, in order to ensure supplies and to moderate inflation. But to introduce buffer stocks as any kind of price stabilisation device is not the same thing as abolishing the commodity markets.
Lord LEE of NEWTON: My Lords, I am making the point that in our interpretation of our terms of reference we did not believe that the problems of world inflation figured among them. We were more parochial perhaps in our approach to our terms of reference on that. We did, as my noble friend knows, level some criticism particularly at the London Metal Market. I do not want to repeat what my noble friend Lord Roberthall said, but I thought our criticism was pointed, and during the course of this debate knowledgeable people have said that this is essential if we are not to see an increase of the use of the commodity markets as a hedge against inflation.
My Lords, I do not wish to go any further. It was a great experience to be able to analyse the problems which this subject brings on a world scale. People have said that they hope our Government will take notice of our report. Quite frankly, I hope so, too. But I hope that a large number of Governments throughout the world who are equally nonplussed as to how to get stability into commodity prices will take note, too. I believe that, unless UNCTAD itself can get far more specific, instead of merely believing that all you have to do is mouth something about a common fund without analysing precisely what you mean, we are not going to make rapid progress. Therefore, I believe that our report will stand up to investigation on a world scale. I hope that, if others will emulate that which I have asked the noble Lord, Lord Carr, to do and read Volumes II and III as well as Volume I, it will have a very advantageous effect indeed.
7.27 p.m.
Lord ORAM: My Lords, during the course of this excellent debate there have been a great number of very well deserved tributes paid to the noble Lord, Lord Roberthall, and his colleagues for the very great work and the excellence of the work they have done in producing this report. As the noble Lord, Lord Carr of Hadley, invited me to do, on behalf of the Government I very warmly join him in saying that this report is a thorough, balanced and very helpful contribution to the debate on this vastly important subject. Indeed, taken as a whole, I believe that it provides one of the best and most comprehensive introductions now available to current problems of commodity trade and of commodity prices stability. I wonder if I can say it perhaps in more personal terms, in that over the last 20 years or so I have, in a very amateurish way, tried to dabble in this subject, and I have found it, as the noble Viscount, Lord Simon, said, a maze. Often I have wondered where to begin. If I were beginning now I would know. I would begin with Lord Roberthall's report, and no one could do better.
My noble friend Lord Lee referred to Volumes II and III, and I also should like to do so. It is not just the analysis and the recommendations which are contained in Volume I which are so valuable. I think the other two volumes and the bringing together, as the Committee did, of that remarkable list of experts from various fields connected with this overall problem is really a remarkable piece of work. I recognised in the list of witnesses a considerable number who over the years, have in one capacity or another sought to guide my own halting steps through this maze, not least the witness to whom the Committee and a number of speakers in today's debate have made special acknowlegement: I refer to Mr. St. Clare Grondona, whose work in this field has, of course, been outstanding. Without wishing in any way to pronounce from this Box on his scheme, I believe that he will welcome the fact that my noble friend Lord Walston and the noble Viscount, Lord Amory, pointed to the significance of the passive, automatic character of his proposals in relation to long-term trends. I believe that as regards the Grondona proposals that is an important aspect to bear in mind.

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I now turn to the general nature of the problem. I think that I cannot do better than to summarise what I see as the Committee's own broad conclusion, with which I hope all noble Lords can agree. The market prices of commodities perform a necessary function in the world economy, but excessive price fluctuations are damaging both to producers and to consumers. So importing countries like Britain have a common interest with exporting countries in securing greater price stability. That, I suggest, was the Government's central theme in the commodity initiative which we took two years ago at the Commonwealth Heads of Government meeting at Kingston, and it remains the foundation of our whole approach.
How should the problem be tackled? I share the Committee's view that, because the circumstances of individual products vary so widely,
"only the commodity-by-commodity approach stands any chance of success".
It follows that schemes to stabilise prices, where action is practicable and economic, must be based on individual commodity agreements negotiated between the main producers and consumers concerned. At Kingston we sought to give a fresh impetus to international work on precisely those lines. The Committee express concern that some of the impetus may subsequently have been lost. If I may, I should like to resist that suggestion. Indeed, on the contrary; our proposals were substantially carried over into the position adopted by the developed countries collectively at the fourth UNCTAD Conference in May last year; and have, we believe, been given practical effect in the programme of work on 18 commodities which that conference set in hand.
It is too early to say what kind of international action may prove appropriate for those 18 products. Commodity agreements already exist for tin, cocoa and coffee. Of the other products, it is clear that not all are likely to be suitable candidates for price stabilisation schemes. In some cases such schemes may not be feasible for technical reasons; in others they may not be relevant to the real problems of the commodities concerned. There is no universal solution and it would be unwise to place too much emphasis on any one technique.
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Because direct action on prices is not always possible, action to stabilise the export earnings of developing countries is an essential element in our approach. I noticed that the noble Viscount, Lord Simon, put emphasis on the distinction between the stabilisation of earnings as against the stabilisation of prices, and the Committee also emphasised this distinction. In this connection, we should all recall that the European Community broke new ground in this area with the Stabex scheme, to which my noble friend Lord Davies of Leek and my noble friend Lord Walston referred. The Stabex scheme was introduced under the Lome Convention in 1975. Then in 1976 substantial improvements were made in the International Monetary Fund compensatory finance facility, which is specifically designed to deal with earnings instability on a worldwide basis. The IMF scheme is now, we believe, an effective international response to that problem. Following the increase due this year in IMF quotas, up to 5·6 billion dollars will be available under the scheme to non-oil developing countries and a further increase in quotas is currently under consideration.
I now turn to the specific recommendations which the Select Committee has made. Clearly, I cannot discuss all of them today in much detail but there are one or two upon which I should like to comment. One was spoken about by the noble Lord, Lord Carr of Hadley. He referred to the importance of information about the behaviour of commodity prices. I entirely agree with the noble Lord, and of course with the Committee, that full and up-to-date information on trends in the production and consumption of commodities is clearly essential. We agree with the Committee on the importance of the present international efforts in this connection, and we are alert for ways in which they might usefully be extended, with particular reference to information on long-term trends of supply and demand, to which the Committee drew particular attention.
Secondly, I should like to comment on the point raised by my noble friend Lord Lee of Newton who referred to the Nairobi Conference and the proposal which Dr. Kissinger introduced there. I understand that the new United States Administration has indicated that it does not

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intend to pursue Dr. Kissinger's specific proposal for the creation of an international resources bank, but it does believe—and Her Majesty's Government agree in this respect—that further international work is needed on the investment problem to which Dr. Kissinger drew attention. I have no doubt that the two Governments will seek to examine that area of problems to which my noble friend referred.
Next, I should like to refer to the size and financing of commodity buffer stocks. Where buffer stocking is feasible and economic—and, as the Committee point out, it is not appropriate in many cases—I agree that the aim should be to prevent excessive reliance on export or production controls. But the actual size of the stock in any particular case will depend on a variety of factors, including the price stabilisation objectives of the commodity agreement concerned. There is no general rule to determine the right size or to tell us exactly where to strike a balance between buffer stocking and other stabilisation techniques.
The Committee urge the Government to press for equal contributions from consuming and producing countries to the financing of commodity stabilisation schemes. Noble Lords will recall that the noble Lord, Lord Carr of Hadley, made reference to that matter. Once the decision to create a new buffer stock has been taken, producers and consumers of the product concerned have to choose between alternative methods of financing, on the merits of the case—and there are a number of possibilities including the use of levies. For that reason, we believe that it would not make sense to proclaim in advance a general commitment to any particular approach. But our starting point—like that of all the main consuming countries—is that, where producers and consumers have agreed on measures to stabilise the price of a commodity, lack of finance must not prevent an international agreement from being concluded, and the parties to the negotiation should discuss ways of ensuring that.
The noble Lord, Lord Roberthall, made a brief reference to the proposals of his Committee relating to price indexation. I agree with him that commodity price indexation—that is, attempts to link commodity prices to movements in the prices of manufactured goods—would
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be impracticable and inevitable and, more generally, that price enhancement is not a rational means of transferring resources—in other words, of giving aid—to developing countries. Quite apart from the huge practical objections, the distribution of benefits and of costs would be arbitrary and indefensible.
There have naturally been several references to the Common Fund and I welcome the Committee's endorsement of the approach which we adopted, though I gather from what the noble Lord, Lord Roberthall, said, that it was a near thing and that we only just escaped censure. But it is a good thing that, under the various influences in the debate within the Committee and elsewhere, misunderstandings which at one time existed have to some extent been cleared away.
Lord LEE of NEWTON: My Lords, can my noble friend give me an assurance that what we were going to say on this subject was not leaked, as a result of which the Government immediately jumped into line?
Lord ORAM: My Lords, it certainly did not reach this part of the Government. I have paid tribute to the influence of the Committee, but I do not want my noble friend to over-emphasise that.
As I have said, I welcome the Committee's endorsement of the approach which we, with the other main developed countries, adopted at the United Nations conference on the Common Fund in March this year. I think that we can fairly claim to have made a major contribution to this collective position. Since March, there has been a further important development. At the recent Conference on International Economic Co-operation, all the main industrialised countries joined the European Community in agreeing that a Common Fund should be established. Its specific objectives and purposes remain to be worked out in resumed negotiations in UNCTAD in the autumn.
I believe that, in the eyes of many countries, the original proposals for a six billion dollar Common Fund, which were put forward by the UNCTAD Secretariat, have now been largely overtaken. These proposals present real difficulties and the priority task now is to work out the elements of an alternative

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approach based on individual commodity agreements. Useful economies should be possible if the financial resources of the agreements can be brought together. I believe that that point was emphasised by the noble Lord, Lord Seebohm. The essential role of the Fund, as we see it, should be to take advantage of those economies.
However, a great deal of work remains to be done before a practicable scheme can be devised. We welcome the decision of the Commonwealth Heads of Government at their recent meeting in London to set up a group of technical experts from Commonwealth countries to examine all the issues. I am sure that noble Lords will join me in congratulating my noble friend Lord Campbell of Eskan, who will chair the group, which held its first meeting in London at the end of last week.
In addition to that kind of work we are playing an active part in work which has started among the developed countries to prepare for the resumed negotiations on the Fund in November. We look forward to those negotiations. I hope that the participants in that conference will get down to the positive task of designing a Common Fund which will be both viable and effective.
As I have said, the report is an extremely valuable one, but I should like to endorse the remark made by the noble Lord, Lord Seebohm, that it should be our hope that these three volumes will not simply find an honoured place on library shelves. I am sure that they will, rightly, have an honoured place on library shelves; they will be an enormously valuable source of material to students. But we should seek to ensure that they are put to practical use. I have already indicated the Government's attitude to a number of the recommendations which your Lordships' Committee brought forward. Further than that, I can assure noble Lords that, in working out the approach to the forthcoming negotiations to which I have referred, the work of the Committee and its report will be a most practical aid to the Government in the formulation of their policies.
7.46 p.m.
Lord ROBERTHALL: My Lords, we have had a very good debate. It has been
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wide-ranging and much of what has been said has been relevant to our discussions. In fact, it has been a better debate than some from that point of view. At this late hour it would be out of place for me to attempt to discuss individual speeches. However, I should like to mention two. First, I refer to the welcoming speech made by the noble Lord, Lord Carr of Hadley, who, at least from my point of view, gave the debate a good wind. Secondly, I refer to the speech of the noble Lord, Lord Oram, who made very generous references to the general scope of the report. I expected him to be even more cautious than he was in his dealing with the recommendations that we made. For what was a relief, if perhaps rather a small one, I thank him.
I should also like to thank the House for giving me the opportunity of being Chairman of the Committee, which I found extremely interesting and enjoyed very much. May I now beg the leave of the House to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

GREATER LONDON COUNCIL (MONEY) BILL
7.48 p.m.
Lord CARR of HADLEY: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Carr of Hadley.)
Earl CATHCART: My Lords, I had the honour to be the Chairman of the Select Committee to which your Lordships referred this year's Greater London Council (Money) Bill for the purpose of hearing the three Petitions against it. I should like to make some brief remarks about GLC Money Bills in general. I hope your Lordships will agree with the unanimous opinion of the Select Committee that these Petitions should not be allowed because the purpose and effect of this Money Bill are too remote from the alleged injury to the Petitioners' interests to justify these Petitioners. Consequently, they fail to establish a locus standi.
Before 1976 the GLC annual Money Bill had never been petitioned against, but in that year there were five Petitions

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which were disallowed. However, representatives of those Petitioners were subsequently allowed to give evidence before the Select Committee appointed at that time. This year there were three Petitioners, all of whom had petitioned on similar grounds as in 1976, but they again failed to establish locus standi.
I hope your Lordships' House will accept the opinion in this Select Committee's report that an annual Money Bill authorising capital expenditure under general headings is not a proper occasion to challenge planning authority which has been previously obtained to carry out a specific development—in this case the erection of college buildings on St. Paul's playing fields, for which the Greater London Council already had powers gained independently from this Bill. Incidentally, this development was not mentioned in the Bill we are discussing tonight. I believe that if similar Petitions continue in future years against this Bill, and the Promoters were to apply for expenses, future Select Committees of your Lordships' House would be fully justified in recommending that expenses be allowed for the Promoters under the Parliamentary Costs Act 1865 on the grounds of vexatious petitioning.
I have one other point I wish to make. The annual GLC Money Bills can be traced back to 1875 when London had by far the biggest population and expenditure of any city in the country. This statutory obligation to promote annual Money Bills was again re-enacted in the London County Council Act 1963. The situation today is that London is the only local authority which is required to do so. In evidence before our Select Committee learned counsel for the Promoters of this 13i11 gave us five reasons why the GLC should continue with this unique obligation.
First, he told us the sums are very large indeed, and secondly, because of this, it is right for Parliament to review them annually. Thirdly, an annual Money Bill enables individual Members of both Houses to challenge on Second Reading specific aspects of financial proposals. Fourthly, it enables Parliament to discuss London needs on a broad basis. I must agree that London is still the largest of our great conurbations. The GLC has a population of 7¼ million against West
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Midlands, including Birmingham, of 2·8 million, and Greater Manchester with 2·7 million. If you were to judge it on rateable value, London has £1·9 million rateable value, whereas Greater Manchester has £390,000. Of course, correspondingly its expenditure is infinitely greater than that of the other two conurbations.
Nevertheless, I question whether Parliament is justified in giving specific treatment to London simply on account of its size, and especially bearing in mind that these days, in relation to other parts of the country, it is not as outstanding in size, as it was in 1875. The fifth reason which learned counsel gave us was that, because the GLC has an annual Money Act in which all capital finance is approved by Parliament, it is assisted in floating stock or bond issues by carrying weight with banks, finance houses, and overseas investors. That may well be so, and it may be the best reason for Greater London having this privilege; but if the authority of Parliament grants financial advantages to London, should not we accord the same privileges to the other large metropolitan authorities?
I believe that we should now rationalise this state of affairs by either obliging all metropolitan authorities to promote annual Money Bills or, in my opinion better still, by promoting a short amending Bill to amend the Act and thus release the GLC from this obligation and bring it into line with other local authorities. I believe that this is in fact the logical step. I believe it is more in keeping with our modern skills at financial control which occur right the way down the chain. Of course it would have the other advantage that it would release the GLC from the danger of being petitioned against.
On Question, Bill read 3a, and passed.

INSURANCE BROKERS (REGISTRATION) BILL
Returned from the Commons with the Amendments agreed to.
NORTH WEST WATER AUTHORITY BILL [H.L.]
Returned from the Commons agreed to with Amendments; the said Amendments considered and agreed to.
HOUSE OF LORDS OFFICES
Fourth report from the Select Committee made and to be printed.