Lords Sitting of 8 February 1978

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

CROSS-CHANNEL ELECTRICITY CABLE
The Earl of LAUDERDALE: 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 how the United Kingdom share of the proposed 2,000 megawatt cross-channel electricity cable link is to be funded.
Lord STRABOLGI: My Lords, the capital cost of about £250 million will be shared equally between the Central Electricity Generating Board and Electricité de France. The financing of the CEGB's share would be for consideration in the light of the electricity supply industry's overall financial requirements during the construction period.
The Earl of LAUDERDALE: My Lords, I thank the noble Lord for that reply. Are we to take it that, quite possibly, the Government will find it worth while to give to the CEGB some kind of subsidy towards the British share? Can he also tell us whether there is any expectation of Community finance towards this, in that the Community's energy policy is bound to result from this very splendid and imaginative enterprise?
Lord STRABOLGI: My Lords, no such subsidy has been sought by the Generating Board from the Government, nor is this likely. There has been no formal indication as to whether the link would qualify for EEC finance. A decision to use any facility that became available would depend on several factors, including the availability and the cost of other forms of finance.
The Earl of LAUDERDALE: My Lords, may we take it from that that the Government will not miss the opportunity of getting something back from the Community for a very constructive contribution to its energy needs in this proposal?
Lord STRABOLGI: Yes, my Lords, certainly. But the finance is, of course, a different matter. The Government have, as yet, taken no firm decision on the link, but it was discussed during the French President's visit to London last December. My right honourable friend the Prime Minister told another place that he and the French President had noted that the generating authorities in our two countries are in negotiation towards an agreement, and expressed the Government's support for this.
Lord HANKEY: My Lords, while greatly welcoming this development, may I ask the noble Lord whether the cable will be well buried to protect it against trawling and anchors? Will some measure be taken to prevent it from affecting ships' compasses?
Lord STRABOLGI: Yes, my Lords. There is, of course, if I may remind the House, a cable at present. There is a 160 megawatt link which was constructed in 1961, but this has been found to be vulnerable to ships' anchors. It is intended that the 2,000 megawatt cable will be embedded to a depth of two metres throughout its length. Trials are taking place and these are not yet complete, but no insuperable obstacles are foreseen.
Lord PARGITER: My Lords, may I ask my noble friend whether or not this will affect the programme for power production in this country?
Lord STRABOLGI: Yes, my Lords; it should, of course, bring great benefit to both this country and France. Even the smaller cable which is there meant that during the severe winter of 1962–63 French electricity was able to help the United Kingdom's grid system, and in the long summer of 1976 we were able to reciprocate and export supplies to make up for loss of capacity in France's hydroelectric stations.
Lord HANKEY: My Lords, may I ask for an answer to my second question? Presumably, such a high-powered direct current cable will affect ships' compasses, and is this being guarded against?
Lord STRABOLGI: My Lords, I am afraid that I could not possibly answer that question. But I will go into it and let the noble Lord know.
Lord FERRIER: My Lords, will the noble Lord accept the congratulations of somebody on this side of the House, who is not ignorant of these matters, on the way in which he has handled these most fascinating questions?
2.40 p.m.
The Earl of LAUDERDALE: 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 on what principles they will judge whether the proposed cross-channel electricity cable is likely to be viable economically and when they expect construction to start.
Lord STRABOLGI: My Lords, the Government will consider the forecast costs in relation to the anticipated benefit from electricity trading between the Central Electricity Generating Board and Electricité de France, including prospects for the export of coal-generated electricity to France; and the contribution which the link would make towards meeting demand in this country. The CEGB expect that construction, which would be subject to Government investment approval, would not start before 1979.
The Earl of LAUDERDALE: My Lords, while thanking the noble Lord for that reply, may I ask him whether it seems likely that this link will make it certainly prudent, if not necessary, to have extra energy storage capacity on hand? Also, can he tell us whether the French will be entirely free to resell elsewhere in Europe the energy that they import from us?
Lord STRABOLGI: My Lords, I understand that there is no associated
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storage requirement. With regard to the French, negotiations are continuing between the French and British electricity boards. The link would, of course, have some effect on the opportunity for energy trading between France and neighbouring Continental countries.
The Earl of LAUDERDALE: My Lords, may we take it from that answer that the feasibility studies do not suggest that there might be a need for extra storage capacity, in order that the link can be put to the best possible use? Can the noble Lord also add to his reply to an earlier question about the depth at which the cable is to be buried? He said just now that it would be buried to a depth of two metres. Is he not aware that oil and gas pipelines buried to that depth in the North Sea have been subsequently exposed by the scouring action of water on the seabed?
Lord STRABOLGI: My Lords, with regard to the second question, I understand from the Central Electricity Generating Board that further embedding and disembedding trials in the Channel will be undertaken this summer, and I am sure that the point which the noble Earl has made will be borne in mind. The noble Lord asked me whether the link would affect the board's requirements for pumped storage stations. As I said before, I understand that there are no associated storage requirements.
Lord ELTON: My Lords, is the noble Lord aware that in Norway they are currently researching and about to produce a means of covering oil pipelines with an eight metre wide carpet of concrete which is said to be more proof against the scouring action and also cheaper than burying? Will the noble Lord's Department be in touch with them to consider this method?
Lord STRABOLGI: Yes, certainly, my Lords. We shall take note of what the noble Lord has said. There is a 130 kilometre long twin electric power cable under the Skagerrak between Norway and Denmark. There are other cables of this kind all over the world. There is one between the North and South Islands of New Zealand, and there are two connecting some of the Canadian islands with the mainland.
Lord BOWDEN: My Lords, may I ask my noble friend whether it has been decided who is to make the cable? Is the cable to be made in this country or elsewhere? Also, who is to make the terminal equipment which is so necessary?
Lord STRABOLGI: My Lords, it is a little premature to answer that question. First we have to decide whether or not to go ahead with the project.

INCOME TAX: HIGHER RATES
2.45 p.m.
Lord BOYD-CARPENTER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what, calculated to the most recent convenient date, would be the annual amount of revenue lost as the result of a provision that no part of an individual's earned income should be taxed at a rate exceeding 70 per cent.; and what proportion this figure would represent of the total yield of direct personal taxation.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, on the assumption that tax on investment income were to remain unchanged, the annual amount of revenue lost as a result of such a provision would be about £60 million, or approximately 0·3 per cent. of the estimated yield of income tax for the year 1977–78.
Lord BOYD-CARPENTER: My Lords, I thank the noble and learned Lord for those figures. Since the amount involved is well within the normal doubts involved in the calculation of revenue in any Budget, does it not follow from those figures that the reasons for imposing these confiscatory rates of tax on higher earnings are political and social rather than in order to raise revenue?
Lord McCLUSKEY: No, my Lords.
Lord HARMAR-NICHOLLS: My Lords, is the noble and learned Lord
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aware that, even if my noble friend's 70 per cent. figure were accepted, it would still leave us among the very highest taxed nations in the world, a fact which can only encourage the emigration of investment and personnel at a time when we want both of them in this country if we are to deal successfully with our production and unemployment problems?
Lord McCLUSKEY: My Lords, international comparisons have to be made with great care. Many other factors are involved—for example, local taxes, social benefits, various allowances and a great many complicated matters. For the noble Lord just to say that our tax rates are among the highest in the civilised world is to mislead us.
Lord BOYD-CARPENTER: My Lords, will the noble and learned Lord amplify his admirably terse reply to my supplementary question? If the reasons are not political and social, can he give any other reason for imposing taxation at this level for the sake of raising this derisory amount of revenue?
Lord McCLUSKEY: My Lords, we are accustomed to graduated taxes. Governments of all colours have introduced taxes of this kind. Let us turn to the future rather than rake through the embers of the past. In the course of the next few weeks my right honourable friend the Chancellor of the Exchequer hopes to look at the whole burden of taxation with a view to avoiding the kind of mischief which the noble Lord has in mind.

THE SVALBARD ARCHIPELAGO
2.47 p.m.
Lord KENNET: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the discussions being carried on between Norway, the relevant sovereign Power, and the Soviet Union, one of many Contracting Parties to the 1920 Treaty of Paris, on the subject of the Spitzbergen Archipelago; and whether they

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are satisfied that they in no way breach the principle of "absolute equality" established by that treaty, and that nothing is being done in or over the Islands or their adjacent waters by the Soviet Union, or any other State party to the treaty, in breach of Article IX thereof, which precludes the Islands from being "used for warlike purposes."
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, the only discussions between Norway and the USSR about Svalbard Archipelago of which the British Government are aware are the day-to-day contacts between the Norwegian Governor of Svalbard and the Soviet Consul on the island. Talks between the Fisheries Ministers of the two countries are due to take place soon over the administrative provisions of an extended fisheries protection zone established around Svalbard by the Norwegian Government in June 1977. The British Government are satisfied that the day-to-day contacts between the Norwegian Governor and the Soviet Consul are in no way in breach of the principle of "absolute equality" established by the 1920 Treaty of Paris. The applicability of the treaty to an extended fisheries zone around the archipelago is the subject of continuing discussions between Norway and a number of treaty signatories. The British Government are satisfied that nothing is being done by any signatory which breaches Article IX of the treaty.
Lord KENNET: My Lords, I thank my noble friend for his informative Answer. May I ask him whether this country is included in the conversations about the fisheries zone which are being held between Norway and the other signatories? May I also ask him whether our Government, who have equal rights in Spitzbergen with eight or nine other countries, including the Soviet Union, are accustomed to exercising those rights, particularly the right to land and to use the place for various purposes, and, if not, whether or not it would be good that from time to time we should do so?
Lord GORONWY-ROBERTS: My Lords, the answer to the first point
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which has been made by my noble friend is, yes. That is also the answer to the second point which he has made. May I refer my noble friend to the 1920 Treaty of Paris, a copy of which I have here—no doubt he has one but, if not, I will gladly lend him mine. He will find that the points he has raised in the second part of his supplementary question are fully provided for in the terms of that treaty.

SHIPBUILDING (REDUNDANCY PAYMENTS) BILL
Brought from the Commons; read 1a, and to be printed.

NORTH SEA RESOURCES AND THE ECONOMY
2.50 p.m.
Lord SELSDON Lord SELSDON rose to call attention to the opportunities now available for the rebuilding of the United Kingdom economy following the successful development of the oil and gas resources of the North Sea; and to move for Papers. The noble Lord said: My Lords, with a somewhat heavy heart, I rise to move the Motion standing in my name on the Order Paper. As I move from the hopefulness of youth to the cold reality of middle age, I ask myself daily whether those of my generation and the generation to come after me will have any hope at all of improving the standards and the way of their lives. I think it is a question that every family man asks himself regularly. I clutch at straws, and one straw I clutch at, as I believe many other people do today, is the North Sea. But knowing relatively little about the North Sea, other than from my time in the Navy, I view it with fear and suspicion; and my suspicion is directed more to what Government policy may be towards the North Sea and the fruits that it holds rather than to the technical, financial and other difficulties related to it.
I remind myself, and I would remind your Lordships, that we have been faced with successive Governments who have tried, often against overwhelming odds, to promise the British people rising living standards, while the cake has been getting smaller and smaller. At the same time,

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successive Governments have camouflaged, despite the trappings of the consumer society, the real decline that has taken place in worldwide economic influence, in domestic standards of living and other elements. Today I should like, in moving this Motion, briefly to remind your Lordships and myself of what the North Sea can offer, and to suggest ways in which these benefits could perhaps best be utilised.
On the second point, the utilisation of whatever benefits may come out of the North Sea, there will be considerable differences of opinion, and now is perhaps an appropriate time to debate these. But, on the first point, on what exactly the North Sea offers, there is also a considerable difference of opinion. Preparing for this debate, I sought the advice of people in the private sector, friends in the public sector, and others, to try to determine what was the value of this thing called the North Sea, and what would come out of it. The figures and information which I will now quote are not my own views but a distillation of the views of others.
We are faced on one side with the private sector trying to keep from Government profitable information, and, equally, Government trying to keep from the private sector what their intentions are. Above all, we must remember that the situation in the North Sea started relatively recently. I have put down my Motion in terms of gas and oil so that we should not forget that it was gas that started the whole thing off. Back in 1959 there was this discovery of the Slochteren field off Holland. That seems a long time ago, but it was not until 1965, just 12 years ago, that any real exploration got under way in the British sector, when BP found gas in the West Sole field. There were other finds off the Norwegian coast, and from the Dutch again.
Today we should remember that the whole of the British Gas Corporation network is now fed by the North Sea with supplies in excess of 3,600 million cubic feet a day. I cannot envisage 3,600 million feet of gas, but I can envisage its equivalent of about 130,000 tons of coal. New supplies from the Frigg and Brent fields will increase this to some 6,000 million cubic feet a day by the 1980s—that is,
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within two years—and we shall have sufficient natural gas to meet the estimated requirements of industry and the consumer; all this in a relatively short period of time.
Furthermore, there are other developments in the gas area which are not so much related to gas itself but to oil, where opportunities exist for utilising resources of natural gas which are related to oilfields. Unlike dry natural gas, this type contains substantial quantities of heavier petroleum gases, ethane and prothane, which have a value to the petrochemical industry. What I am trying to say is that it seems that by using the resources of gas we can be reasonably self-sufficient for a period of between 25 and 50 years; this is the gap involved. We are talking of 51 trillion cubic feet. That is the estimated reserves of natural gas in the North Sea, with possibly more to be obtained. If, as is suggested, there may be pipelines linking the oilfields for extracting natural gas, it being often uneconomic to have a single pipeline going to an oilfield, then this could even increase, and there are such proposals being made at the moment.
Half of our natural gas is in the North Sea and half in the Northern basin off Liverpool Bay. Exactly what would the position be if we had not had that natural gas? In theory, we have adequate reserves of coal and we could, in theory, have utilised that coal. But somehow the productivity of the coal industry has not been as great or as effective as that of the gas industry, and I will ask this question and try to answer it later. Despite the 1¾ billion tons of coal, the equivalent of gas in the North Sea, it is not gas that has captured the imaginatior, but oil. Although oil deposits were first found in the Norwegian and Danish sectors, it was not until 1969 that AMOCO found the Montrose field, and the BP Forties Field came a year later. The most significant finds took place only five years ago. We must remember that it is only in the last two years that oil has actually come ashore.
I think it is right to point out that, had this operation been under a single Government, of whichever Party, it could never have financed, nor would it have attempted to finance, the development that has taken

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place. In all, expenditure on North Sea development could be in excess of £15 billion, of which 7 per cent. would have come from Government, 40 per cent. from American and 40 per cent. from British corporations. When these companies first started their development oil prices were low. The risks were considerable. We were all suspicious and doubtful whether oil would come on stream on time. The Department of Energy were often fairly cynical about this. But, at the end of the day, people achieved what it was they had set out to achieve, despite considerable difficulties, despite danger and loss of life, despite the risks and political pressure involved, and as a result we are in a position where we could exploit in our own territory approximately 4 per cent. of the world's oil reserves.
It has only been recently that Government have taken a hand and become involved, and, in my view, quite rightly so. The way in which Government are involved, and continue to be involved, may be a matter for discussion, but it is fair to point out that, where Government have been overinvolved in these developments, things have not gone well, there have been problems and ultimately relatively little profit. It seems that any developments in the North Sea can be reasonably financed, that money is no longer a problem; and more than that, the mere existence of it, and the emotion going with it, has increased international confidence, strengthened sterling, and provides us with a chance to take certain economic steps which would have been denied to previous Governments because of constraints on the balance of payments et cetera. We are currently running at a production rate of 800,000 barrels a day, roughly 43 per cent. of the United Kingdom total requirements.
This will rise to some 1.4 million barrels a day during this year and some 2.2 million barrels a day by 1980, when it is estimated we shall be self-sufficient in oil. We should bear in mind, of course, that the quality of our oil is very high, and therefore we shall be exporting some and importing others of lower quality, so complete self-sufficiency in the true meaning of the word does not necessarily apply. What is the value of these reserves?— because cubic feet, tonnes and barrels do
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not mean much to me and, maybe, to many others. At current prices, roughly 14 dollars a barrel, we could assess that amount at £300 billion, roughly £20,000 for each household in the United Kingdom.
Coming back to a more practical point, what comes out of it in real terms, in monetary terms? We are faced with the knowledge that the development costs are so high—many times those of any other part of the world—that it often costs something like £5,000 per barrel a day; thus, it will take two years or so to recover the costs of producing one barrel. However, the revenue that is estimated to come out of it is best looked at in terms of what we believe would come to the Government rather than to the oil companies themselves.
I am advised that the current structure is such that in 1978 40 per cent. of the total revenue from oil and gas in the North Sea would accrue to the United Kingdom authorities, which would be of the order of some £600 million rising to £2·2 billion by 1980 when the Government will be taking 80 per cent. of the total revenue. There may be arguments between the developers and the Government as to exactly what is a fair cut of the cake, but I have reason to believe that although oil companies and others may complain bitterly, they are risk-takers and have taken the risks and would not feel too put out if that were the pattern that developed.
However, that £2·2 billion a year starting in 1980 is not new money, for we have already consumed and spent much of the resources of the North Sea. The Government may try to persuade us otherwise, because often that is a valuable course to take; but we should bear in mind that the public sector borrowing requirement is some £8 billion at present, perhaps falling to £6 billion this year. These deficits were obviously opposed by many people on all sides of the House, for perhaps in real terms we should have taken a dive in living standards and had very high unemployment, although for various reasons that did not come about.
Therefore, I raise the following question: If the oil is to come ashore—and I am assured that it is coming ashore on time, with remarkable efficiency and with good co-operation with the technical aspects of Government, the Department of Energy—

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what does it mean? Many of us would say that there should be direct cuts in taxation and that we should give the benefit back to the British people. There are considerable fears that the Government, for one reason or another, will squander and waste in consumption the benefits of the North Sea, that our reserves will run out by 1990 and that we shall be back in a stop-go cycle probably stopping long before then. We should bear in mind that that need not happen.
For the first time in economic history since the War, the Government need no longer be quite so concerned about the constraints of the balance of payments. It would be as well to point out that the impact of North Sea oil—the gas, of course, not being exported and with insufficient quantities to export—could have a positive contribution to the balance of payments of some £2·75 billion this year, rising to £5 billion in the 1980s. If we consider the "oil surplus", as it may be called, plus the invisible surplus which, although falling at present, as more people may go abroad as tourists and as the pound strengthens, could still remain constant at £1·5 billion, we are faced with one factor: the balance of payments account so far as visibles, and in particular manufactures, is concerned.
We have never really had a surplus on visible exports—I think only three in 50 years. We have ceased in real terms to be a major competitive manufacturing nation. We have, however, had a tremendous shift away from manufacturing. The question that I should like to ask is, whether we should continue to try to be a manufacturing nation, except perhaps in those specific areas where we have greatest competence and greatest competitive ability.
Many people have tried to point out to me when doing my research for this debate—sociologists in particular—that people always look at their own job and position in relation to their parents and their grandparents. They have reminded me that we started our industrialisation 40 years before many other countries, when it was hard and unpleasant, and the sons of those who worked in the mills wanted to improve their situation. Improvement was sought by their sons, and gradually people fought against the idea of repetitive work in manufacturing
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industry. Yet repetitive work is what provides the jobs.
We are advised that while the Bank of England estimates that there could be a £2·25 billion surplus on current account this year, it seems probable that this could be very much on the high side because we might estimate some form of reflation by the Government and with that a rather serious position on the visible balance of payments, as inevitably in these events manufactures are sucked in from abroad as consumer booms are created. Therefore while one says to the Government, "Perhaps you need not worry so much about balance of payments," that is only one aspect. The strength of sterling need not necessarily be related to balance of payments. At the moment it seems probable that we are almost back with a strong currency, for two reasons: the possible benefits of the North Sea and the constraints of policies which have been imposed by the IMF.
If a middle-of-the-road course is pursued and moderation is shown on consumption from the North Sea, it is probable that sterling could remain strong for a period. However, that does not solve the major problem which I think confronts this Government and any Government that succeeds it; namely, unemployment. Politically a high level of unemployment will always be unacceptable and is to be condemned. However, one of the biggest worries has been the shift in the balance of employment by different sectors. Over the five-year period between 1971 and 1976 employment in the private sector fell by 350,000 and employment in the non-productive public sector rose by 800,000. In the same period 800,000 people left manufacturing industry. They would not necessarily be the same people who moved over to Government employment, but that was the shift. But while that number of people left manufacturing industry, the service industries took on 1,200,000 more. The question I ask is whether perhaps greater emphasis should not be given to service industries if we are to be a manufacturing nation again.
Of the total workforce of some 25 million, approximately 30 per cent. are employed by the Government sector and 70 per cent. by the private sector. The CBI and others are urging reflation and reduced taxation, on the basis that such action will stimulate industry and could

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create employment. I think that that is true. However, a point to be borne in mind is that major capital investment in British industry at present would be more likely to create unemployment or increase unemployment than to create jobs. I would suggest, therefore, that we should concentrate from the grass roots upwards.
There are people who have pointed out that if, tomorrow, every small business took on one person there would be no unemployment. The small businesses advise that the Employment Protection Act is tantamount to banning increased employment. I have often looked at other companies around the world and marvelled at the way the British can work abroad; at their ingenuity; their ability to work long hours right through the night; and their ability to be creative and full of ingenuity when there is no plant and machinery available to make a spare, and I wonder why that does not happen back in the United Kingdom. I come back, I am afraid, to the simple question: Why should they? It is a question of incentive. The noble Lord, Lord Boyd-Carpenter, pointed out that it might be taxation. It is not necessarily taxation. It is more than that. There must be a reason.
We all hate shirkers. There have been examples of companies having started to work "flexi-hours" or people have used punch-cards. Surprisingly enough, the shirkers get caught out and everyone supports the idea. The British genuinely want to work, and the level of moonlighting is such that I am very much encouraged to believe that they do. There must be many noble Lords who have supported the aspect of moonlighting and have made cash payments to assist people to do jobs in their own time. However, it is taxation that needs a rethink and the Government will, I know, do that.
To me it seems odd, speaking as a Conservative too, that, of the total receipts from taxation by the Government, 50 per cent. come from income tax. Therefore, one asks the question: How much of that is company tax? What comes from profits? Under 8 per cent. comes from companies because of stock relief assistance and so on. If one asks every company: "Would you rather pay more tax to the Government and let your
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employees have a higher take-home pay?" they would all agree with the idea, because it is an argument they could not fault. The Government say historically: "We cannot alter a tax system". Experts point out that it is extremely difficult.
At the end of the day, the British only want to know that if they do work they may be rewarded. I remember that when I was a small boy my great-uncle Stafford Cripps, to whom I think the noble Lord, Lord Lee, was PPS, told me that if one worked hard at school and educated oneself one could get a good job, and that if one worked hard at one's job one could improve one's standard of living and save. I believe that that was Socialist philosophy. I do not believe that today the Conservative philosophy is any different, but I do not see any signs of it coming from the Benches opposite. My Lords, I beg to move for Papers.
3.10 p.m.
Lord SHEPHERD: My Lords, it is a customary courtesy of your Lordships' House to congratulate the mover of a Motion and I think that on this occasion we should offer our very sincere congratulations. The quality of the noble Lord's speech is something that we shall remember. It is not the first occasion on which the noble Lord has intervened and certainly we on this side of the House have listened and, to a large measure, agreed with him.
If I were to express two disagreements with the noble Lord's Motion, it would not be in a critical sense. First, this debate, which is broadly an economic debate drawing attention to the possible opportunities to be gained from North Sea oil and gas, is one that we should have held many weeks, if not months, ago, when what would have been said might perhaps have influenced the Government, because the Government are obviously giving great consideration to this matter. My understanding is that a White Paper or a Government Statement is shortly to be issued.
Therefore, my first question, which must be to my noble friend the Minister, is: When can we expect this Statement? I say to my noble friend that this is now a matter of great urgency. We have already wasted some of the opportunities. If we had not had the great need to exploit the North Sea in the way in which we have,

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incurring great expenditure overseas to the cost of our balance of payments, we should not have lost the opportunities of using our own industries for that particular development. Therefore, time is of the very essence in this matter.
My second criticism really arises from what the noble Lord, Lord Selsdon, said at the very beginning of his remarks about his and future generations, when he wondered whether there was hope for a higher and better standard of living. My criticism concerns the word "rebuilding" in relation to the British economy. From that remark, it sounds as though the British economy is flat on its face. I accept that it compares unfavourably with our major competitors, but, taking the world as a whole, we are still a strong economy and we have a strong manufacturing base. As I have said on many occasions from the Dispatch Box, many of our problems have arisen over very many years. We can always debate whether they stemmed from the beginning of this century or from the middle of the last century. However, our gradual decline has taken place over a long period.
Although North Sea oil and gas provide us with certain opportunities, they will not in any way rectify or change the decline of the last 50 or 100 years. They give us an opportunity, but, if we are to see the changes which the noble Lord himself wishes to see, it lies in Governments, industry, trade unions and everyone in the United Kingdom—and I shall return to that later—to make a fundamental change not only in our structures, but in our basic attitudes.
I believe that a change in attitude has already taken place. I believe that 1976 was a landmark: we looked down into the abyss of the possible collapse as a consequence of inflation of all that we in this country understood. We have made great changes. I think it was in October last year that we spoke in rather euphoric terms about a major change in our financial situation, saying that we had been able to move out of deficit on current account into a small surplus. I believe that the British people recognise the dangers and that many of the financial achievements have been due to the recognition and co-operation of the CBI, the TUC and the Government.
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Despite all the difficulties and pressures, I hope that the Government will maintain their stand in the fight against inflation, because, unless we deal with that over a period, whatever opportunities may arise or steps may be taken in other directions, there is little or no hope for this country. I believe that the mass of the people will stand with the Government and will stay within the guidelines. It is no credit to management or to those who negotiate with management who break the guidelines. I hope that this House, with its semi/non-political hat, will maintain its support of the Government in the fight against inflation.
Great changes have taken place in the financial field. I believe that we can also see some successes in the manufacturing and economic fields. In volume, our exports rose by some 8 per cent. during 1977—twice the rate of the increase in world trade. Let us give credit to our manufacturers and exporters for what they have done. I believe that North Sea oil and gas give us the opportunity to give help and assistance to those companies which have made a major contribution to the change during 1977. But I think that the Government need to walk with a degree of caution. There is a degree of uncertainty as to what contribution North Sea oil and gas make to the economy.
One figure given is that it represents some 3 per cent. of our gross national product. That figure of 3 per cent. is miniscule in relation to opportunity and growth. Taken as an average to the middle of the 1980s, I think it represents some 10 per cent. of our exports—that is, visibles and invisibles combined. One could say that those are significant figures, but they are not figures which can in any way allow us to relax. The noble Lord, Lord Selsdon, was right in saying that they give us time to adopt economic policies which can foster and develop, in particular, our manufacturing base. But, as the noble Lord said, if we do not seize these opportunities—whether they be available for five years or 30 years—this country's situation will indeed be dire. They give us time in which to change, develop and go for growth.
The noble Lord was quite right in saying that we can have a debate on how we can use those opportunities. Apart from the fight against inflation, the basic need is

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to deal with the unemployment situation. I do not believe—and I share the view of the Secretary of State for Employment—that we can look to the manufacturing industries for any significant employment prospects. I believe that we have to find that employment within the service sector or the public sector. Therefore, of the resources that become available from North Sea oil and gas, I hope that a part—not a large part, but a part—will be used with some discrimination within the public sector so as to have the greatest effect upon employment. Perhaps the construction industry is one that stands uppermost in most people's minds.
However, I suppose that one could put the opportunities into two categories. What does one do with the revenue? I have touched on this in one aspect of the public sector. I have no doubt at all that, if this country is to play its part and if it is to make inroads into its competitors' markets, it will have to be much more engineering-orientated. I believe that what we are doing in training and retraining in the field of engineering and production is pathetic in relation to the needs of this country. I have no doubt at all that, if we were to move to a 4 per cent. or 5 per cent. growth next year, we should have a great overheating in tile economy because of bottlenecks and shortages of skilled operatives.
With so many young men and women unemployed we have an opportunity now that we have some resources with which to play, and I hope that the Government will not only redouble their efforts in the field of retraining but will go out and see how they can improve and direct the whole general educational system towards young men and women going into the field of manufacture and production.
Retraining is essential, but I also think—and here I may be slightly provocative—that the Government ought to look seriously at the proposals for bringing about earlier retirement. I do not say compulsory early retirement, but they should provide companies with an opportunity to do it within their organisations. There are today so many young people on whom the future will depend, who cannot get into industry or commerce because there are men who are nearly at the end of their working career.
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I think that the nation would gain a great deal if their departure were expedited and we were to bring in some of the younger people who are looking for work.
There are many other ways in which we could spend the revenues. I think that this is something that we should debate on another occasion. I have read with care the CBI proposals as to what one should be able to do for the balance of payments. I am attracted to the CBI proposal that one should ease the restrictions on overseas investment. I believe that there is a good case to be made that exports follow investment, but I cannot help feeling that, in the present political climate, it would be unacceptable for the Government to do this at a time of such large unemployment and when there is a belief in the need to invest within our own industry. This was touched on by the noble Lord, Lord Selsdon.
There is a great deal of money lying around this country waiting for investment. Much of the problem is that the return appears to be inadequate. This touches on one factor to which I was going to refer earlier. While our trade may develop next year, it will only develop if we can increase our competitiveness, because the value of the pound sterling has undoubtedly moved against the exporters and therefore they can only recoup that situation by increasing their competitiveness.
May I come back to the balance of payments? The noble Lord's suggestion is worthy of consideration, but the timing is not right. During the course of 1978, I should like to see a considerable repayment of our overseas debts, particularly those of the nationalised industries and local authorities which were taken on at a time of relatively high interest rates. I would hesitate to recommend paying the IMF loan back because that is at a very favourable rate, but I would seek to repay those overseas debts on which there is a very high interest rate.
In conclusion—and it has been, I fear, rather a rambling speech—I come back to something I said at the end of last year in regard to investment. When one looks at the countries within the EEC and compares their improvements in productivity and world trade, one thing comes out clearly indeed. It is that what they have been able to achieve has been largely due

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to consistency of policy. They have known fairly well what the policy was likely to be for 3 years, 5 years, 10 years. All the political Parties assembled in your Lordships' Rouse have some responsibility in this matter. I well remember one of the first actions of the Conversative Party when it returned to power in 1970 was to sweep away the Industrial Re-organisation Corporation. On reflection they knew they were wrong.
I hope that the various agencies which we have set up will be allowed to continue, not necessarily because they are right or because they have all the resources available to them, but because they provide some means by which, particularly, the Scottish Development Agency and the Welsh Development Agency can deal with regional problems. I come back to the need for consistency. We have to create—and I believe that we are now in fact in the course of creating—far greater consultation and participation at factory level. I believe that there is now far greater agreement between workforces and management. There may be exceptions, but, by and large, I believe that this has taken place.
There is a greater understanding and spirit of co-operation between the little "Neddies" and the various bodies that have been set up by industry, Government and the trade unions—the 40 Industrial Groups, I think. I hope that that will be fostered. But I would hope that in the next 12 or 18 months there could be a greater identification of view between the two major political Parties in the field of the economic needs and economic demands and developments of this country. At least we could identify our intentions and the means of achieving them. I believe that that would be the greatest step forward, giving industry the confidence, first, to invest and, second, for the workforce to support its management.
3.30 p.m.
Viscount SIMON: My Lords, after two such speeches as we have just listened to I rise with great diffidence to address your Lordships. I should like to start by echoing what the noble Lord, Lord Shepherd, said about the extremely thoughtful and interesting speech with which the noble Lord, Lord Selsdon, opened our discussion. I do not think
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anybody could doubt that the discovery of oil and gas under the North Sea, and its successful but costly extraction, has brought considerable benefits to this country and will bring more for some years to come. For how many years is a matter upon which we cannot be certain, but most authorities seem to agree that it is of the order of 20 to 25 years. But even over this short period it would be a mistake to exaggerate the benefits.
I suggest it is worth remembering that, when our needs for oil are fully met from the North Sea—this point has perhaps already been made in a certain sense—we shall be spending, or shall have spent, in obtaining that oil, real resources far greater than the resources that we used to spend in manufacturing and exporting enough to buy oil at pre-1973 prices. In other words, as a result of the oil coming from our own North Sea we are not going to get it any cheaper: in fact, I think it has been suggested that it may well be more expensive in real terms than the oil we are buying now.
Of course we get the advantage in the balance of payments, and this is an important advantage which helps the Government and the country in what has been one of the constraints upon our working for many years. But we shall still have to adjust ourselves—both industry and the private consumer—to a high price for energy. We are not going to get it any cheaper. As I say, the balance of payments improvement may well ease the restraints which have been working on us, but in themselves they do not do anything to improve industrial performance. As the noble Lord, Lord Shepherd, put so clearly, that surely is our crying need at the present time.
To turn to the financial benefits to the Government—and I am here referring to oil—this is a different matter. What we want to discuss—and we believe the Government are going to produce a White Paper on this—is how we can best make use of the very substantial increase in Government revenue which will arise from oil during the next 20 years. I think the figures have already been given—at any rate, they are quite well known. In the simplest possible terms the increased revenue can be used either to increase expenditure or to reduce taxation—and I include in the increase of expenditure what the noble Lord, Lord Shepherd,

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said about repaying debts. Of course, this is a form of expenditure. My own feeling is that, subject to the overall requirement to contain inflation—and, as both noble Lords have said, it is perfectly clear that that must be our first requirement—the first claim upon the revenues should be to encourage in whatever way the Government can the modernisation and expansion of industry.
I was disappointed to hear the noble Lord, Lord Selsdon, saying he thought that as an industrial nation we were reaching the end of the road. Undoubtedly we have to redeploy resources out of some of the older established industries, which are fading, into new ones, but I agree with the noble Lord, Lord Shepherd, that we are still a major industrial country, and we can be a greater one still if we do the right things about it. Speaking from these Benches, I would hope that the development and expansion of industry would be mainly in the private sector, but even in the public sector there are industries which could be expanded and brought more up to date to help us in our industrial future.
How then from these revenues can the Government best encourage the modernisation and expansion of industry? May I, in parenthesis, add that I would include among industry, agriculture, because I believe there is much that could be done to develop our agriculture so that we become more and more self-sufficient in the production of what we need. The first thing that occurs to anyone is tax reduction. There is little doubt that this would improve the situation. What we have to get over is the feeling among industrialists that it is not worth investing further. Of course, there is a temporary position in which existing plant is under-utilised. I certainly hope that over the next few years that will not deter industrialists from going for expansion if they are given the right incentives. Apart from tax reduction it is very desirable that there should be some encouragement, through the tax system or otherwise, for small businesses. They can contribute an enormous amount to our economic prosperity. I think that in recent years they have been clobbered—that is certainly what they feel—and some encouragement to small industries would be of immense help.
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There is still the question of the industries that for historical reasons are in a permanent state of decline. The noble Lord, Lord Shepherd, touched upon that position. It seems to me that in the short term decisions may be forced upon any Government to give temporary help to what have been called "lame ducks", but I suggest that whatever is done should be accompanied by positive steps to prepare for the fundamental changes in the pattern of industry which we need. And I support most firmly what the noble Lord, Lord Shepherd, said about training. Nothing like enough has been done about retraining, and with revenue available for the purpose it seems to me that important improvements could be made. This change in the pattern of industry is unavoidable if we are to survive as an industrial nation, and in spite of what the noble Lord, Lord Selsdon, said, it is difficult to see how we can survive as anything else.
I mentioned before that, above all, we must keep inflation under control. This means that we should not encourage too rapid an expansion of industry. That in turn will mean that in the early years we shall have more funds available from oil revenue for other purposes. I suggest that there are two other purposes which we might consider. If we are to become self-sufficient in energy for 20 years, must we not prepare ourselves for something near self-sufficiency after 20 years? Last week we had a debate about alternative sources of energy, and it seems to me that some of these revenues could well be applied both to research into alternative sources of energy and to their development. Noble Lords who were here for that debate will remember that it was agreed that energy conservation is just as much an alternative source of energy as anything else. The Government have now put a certain amount of money at the disposal of local authorities and one wonders whether it will not be possible, with the oil revenues flowing in, to increase that in some way.
The other alternative use for these revenues I have touched on and it was mentioned by the noble Lord, Lord Shepherd; namely, some repayment of our debt, and I am sure he was right to say that we want to repay the high interest debts as early as we can. I do not know the details and perhaps the Minister,

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when she replies, will be able to say whether what Lord Shepherd suggested is practicable. In my experience, people who lend large sums of money at high rates of interest usually say they do not want it paid back before a certain length of time, I therefore do not know how far we could pre-empt the repayment of those loans.
There is one other possible claimant on these revenues to whom I must refer. The exaggerated publicity that has been given to oil and its benefits will make it difficult—dare I say, particularly in an Election year?—to resist public expectation of an age of boundless affluence. Yet to use this bonus—for that is what it is—to jack up indiscriminately the support which the community rightly gives to the disadvantaged could be both unwise and wrong. We can all think of anomalies in the social services which could be ironed out at relatively little cost, and if some money could be found to do that there would be a welcome in many quarters. But any general improvement of benefits must, I suggest, wait until the economy really gets going again, and then we shall soon find additional revenue coming in sufficient to provide, on a continuing basis, improved social services.
I come back to what I believe to be the first claim on the oil revenues, and that is the objective of the regeneration of industry. To this end, fiscal methods made possible by the oil revenues will help, but I agree with Lord Shepherd that much else is required, and that does not necessarily come from Government; it comes from employers, workers and the people. Unfortunately, people do not always react to a fiscal stimulus as economists think they will or as they think they ought to. I am sure our fundamental problem is the feeling of uncertainty among industrialists, and again I find myself saying almost exactly what Lord Shepherd said so much better than I could say it. One of the principal causes of a lack of confidence is the uncertainty which arises from our present political system or the manner in which it is worked. Every few years a General Election comes along and the unfortunate industrialist knows that the ground rules may be changed.
Your Lordships know that from these Benches we believe that electoral reform would help to damp down these violent
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oscillations, and I know there are noble Lords in all parts of the House who share that view. But even before we are able to get this very necessary reform—and surely we shall get it in time—cannot an effort be made to reach a consensus on these important decisions which will affect the life of the country for 20 or 30 years? Is not the essence of democracy the search for common ground rather than a pitched battle between conflicting views with one Party gaining a transient majority and enforcing its policy on the minority, or indeed in many cases what is not even a minority, of voters? I feel that action of this kind—searching for a common policy—would do far more to put confidence into industry than any adjustments that could be made in taxation.
3.46 p.m.
Lord BOYD-CARPENTER: My Lords, I agree very much with both the noble Lords who preceded me in saying that the House is greatly indebted to my noble friend Lord Selsdon both for introducing this debate—if he will allow me to say so, with admirable timing—and for the wholly admirable speech with which he introduced it. I cannot hope to match his obvious expertise in respect of the technicalities of the North Sea oil industry, but I did have a small opportunity to see something of it when I was chairman of the Civil Aviation Authority, since I was responsible for the airports which perform the important rôle of servicing the oil rigs, and I took the opportunity of going out to see some of them in operation. No doubt many noble Lords have had this experience, but to those who have not I must warn them that as you sit in the helicopter approaching the rig, the pad on which you are to land looks very small indeed while the North Sea looks very large, very cold and very green. That only strengthens one's admiration for those who, in the process of earning their daily bread, make these journeys with continued regularity and subject themselves to the most appalling climatic conditions existing in any oilfield in the world.
The situation in which we have to consider this matter is a curious and, perhaps for a Labour Government particularly, a paradoxical one. We have a financial recovery for which the Chancellor of the Exchequer is taking all the credit

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to which he is entitled, and perhaps even a soupcon more. On the whole, the financial recovery which we all welcome is, as we know, due above all the to fact that many eons ago Providence, foreseeing that in the late 1970s we should have a Labour Government in this country, provided oil in the North Sea by way of compensation. Add to that the salutary discipline of the International Monetary Fund.
We have a financial recovery which perhaps in some people's minds, or at any rate in their speeches, has blinded us to the very different picture of British industry, with no growth, lagging investment and a failure in productivity. I do not know whether other noble Lords were as shocked as I was by the figures embodied in Mr. Rees-Mogg's article in The Times on the 6th of this month in which he showed that, over the period 1974 to 1976, whereas the productivity per worker in all our rival countries had risen, in many cases by very substantial amounts, that in this country had actually marginally fallen. In a country which lives by industry, and which will have to live by industry when the North Sea oil has run dry, this is the crucial matter.
I agree very much with what the noble Lord, Lord Shepherd, said, as did my noble friend, that the bounty of Providence in the North Sea has given us and given the British Government an opportunity, almost certainly our last opportunity, to get things right. It has given a welcome easement to the balance of payments and thereby reduced very much the need for restriction to be imposed for balance-of-payments purposes and so on. It has provided substantial funds—and this House, like the other place, is not lacking in those who suggest agreeable ways of spending them—and it has also given us a pause and an opportunity to try to get right the industrial and commercial system by which we live, have lived and always will have to live.
I hope I shall not seem to be introducing a partisan note, or indeed to be offensive to noble Lords opposite, if I say that there is a fairly wide apprehension outside as to whether the present British Government really are going to seize this opportunity. If one reviews the history of Labour Governments in this country,
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one sees that they have a very creditable record indeed in social advance, for which they are fully entitled to take great credit. But the obverse of that has been, as a matter of history, that their record of financial and economic management has been bad, and they have had to face, or attempt to face, a series of crises which have turned up with a regularity and punctuality which, in these days, British Rail might well envy. I think there is a reason for this. Labour Governments, in their heart of hearts, have not much enthusiasm for the dynamic that makes what is still basically a free enterprise society "tick"—the pursuit of profit, the pursuit of individual earnings, the desire of the individual to provide well for his family and perhaps for his children.
There is a resistance to it; and the trouble, I think, is this. If one looks round the world, one sees that there are basically two methods by which a complex industrial and commercial society can be run. One is the carrot and the other is the stick. The Communist world uses the stick; and, to be fair, however brutal its methods may seem to those of us brought up in the liberal traditions of this country (and I would add, my Lords, "liberal" with a small "I", for the benefit of the noble Viscount), it uses it in such a way that it works. Indeed, we have seen in the Communist part of the world notable advances under that system which it would be foolish for those of us who disagree with it to deny.
The other method is the carrot, and the carrot is profit. The carrot that stimulates energy and gives the incentive to which the noble Viscount referred is the desire for profit; the reasonable and proper desire to earn and keep to oneself a reasonable proportion of one's earnings. I think the failure of Labour Governments—and, if one looks at it historically, every Labour Government except the first in fact ended in a financial crisis, and as the first lasted only 10 months it is perhaps unfair to blame them for failing to show the form of their successors—is due to the fact that they really are too liberal and generous to use the stick (at least, I thought so until last week, and I shall say a word about that in a moment) while not having the enthusiasm for incentive.
I want to say a word about those two things, and I hasten to assure my noble

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friend Lord Selsdon,in view of his reference to me, that the fact I am going to say a word or two about personal taxation does not mean that I am under the illusion that getting that right is a panacea for all our ills. Of course it is not. If I or any of us were to attempt to give our views on what needs to be done to restore the economy of this country, we would need to make a speech as long, as discursive and as inconclusive as is the normal Budget speech in another place. I am going to pick out only those two things, not because I think they are the only things but because, with respect, they are the two points which I should like to urge upon the House. The first is the incidence of a system of progressive personal taxation which successive Governments have failed to adopt and adapt to the development of inflation, with the result that very high rates of personal taxation are now being imposed, particularly on high earners.
I asked a Question for Written Answer of the noble Baroness on the 22nd November last as to what proportion of his income was kept by a married man with two children under 11, at various relatively high income levels in this country, and for comparisons with the same man in the countries of one or two of our Western European friends and in North Amreica. The noble Baroness, with her habitual courtesy, furnished this information and, out of the generosity of her heart, added another set of figures, which are most helpful and for which I thank her, showing what is left after, on top of taxation, social security contributions have also been deducted. I prefer, for my own purpose, the figures relating to taxation, for this reason. As one who was once Minister of Pensions and National Insurance, I still cherish the pathetic illusion, perhaps, that people feel they are getting something for their social security contribution, although I am sorry to say that the link of a contributory system and the strength which it gave to our social security in this country has been very much eroded in recent years, and I regret it. Still, people feel that they get something for it, as compared with the ordinary man's reaction to the demands of the Inland Revenue.
The figures which the noble Baroness gave me—and, if my eyesight is as good as it normally is, I think she has them there—
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are really startling. If you start at the level of £5,000 a year (which in these days includes a number of skilled industrial workers on overtime, et cetera), the man in this country on £5,000 a year retains, after taxation, only 78.4 per cent. of what he has earned. In all the other countries in the group they retain over 90 per cent. except in the case of Italy, where it happens, irritatingly, to be 88.7 per cent. before social security; and all except Germany and Italy retain that 90 per cent. after social security. At the other end of the scale which I put to the noble Baroness, the £25,000-a-year man, in this country he retains only 45.1 per cent., whereas among all the other countries the lowest figure of retention was 64 per cent.
So, despite the total figures for the burden of taxation which Ministers have used in this House and another place from time to time to suggest that, as a nation, we are not out of line in the burden of taxation that we bear as compared with our rivals, it is clear that in the higher brackets we are completely out of line. I can only make the comment that, whether or not there be a connection between them, it is perhaps significant that, while we are out of line completely in the way we penalise the higher earners, we are also, alas!, from the figures I have already quoted, out of line from the angle of productivity, growth, investment and all the rest of it. It may well be that there is a certain significance, and indeed a link, between those two sets of figures.
Indeed, the answers to both the Question I asked in this House today and that which I asked of the noble Baroness on 7th February indicate that the actual revenues obtained from these higher rates of taxation are negligible. Both the figure I asked for today, and was courteously given, and the figure in respect of investment income for which I asked on 7th February show that the yield at these higher levels of taxation is so small as to be within the margin of error which any Chancellor has to accept in drafting his Budget, anyhow. It is therefore clear—and this is the point I want to make to the House—as indeed I suggested at Question Time, that the purpose of these high rates of taxation cannot be the raising of revenue, because the revenue is derisory. It must therefore be something of a political or social nature; indeed, not

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perhaps without some connection with what have been so well described as the politics of envy.
Envy is the most corrosive factor in the world. It can ruin a family, it can ruin an individual, and perhaps it can ruin a nation. I would beg the Government—and I had a helpful Answer from the Minister on the Front Bench, perhaps the most helpful so far, at Question Time—not to persist in rates of taxation of this sort which may well have a quite disproportionately damaging effect on the whole enterprise of those who conduct the private sector, and indeed the public sector, enterprises of this country, for the sake of a revenue which cannot be a material factor and is therefore, perhaps, simply for the appeasement of those who envy the more successful and more active of their fellow countrymen. That was one point I wanted to make on taxation.
I want to follow it up with a reference to the matter of the guidelines which was just touched upon by the noble Lord, Lord Shepherd. I agree with the noble Lord that it is plainly in the national interest that we should all, to the greatest of our capacities, seek to abide by these guidelines. I remember arguing in another place when I was a Treasury Minister that high increases in wages produced inflation. This observation was greeted as apparently humorous by the noble Lords, then honourable friends who were present on the then Opposition Benches in the Commons. It is only in recent years that noble Lords opposite have accepted that there is a close connection between the two; and I welcome them as St. Paul was welcomed on another occasion after a conversion hardly more complete.
The Government risk losing that goodwill by the methods they are seeking to adopt to enforce it. I thought that The Times had it very well when it described it as lawless, secret and undefined. It was attempting to say that the Government view of what is the national interest is law. Charles I could not have put it more strongly. I sincerely hope that the noble Lord opposite will not suffer the fate of his very late and most sacred Majesty. But this was what our forbears fought against at the time of the Stuarts:
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the doctrine that the will of the ruler, the will of the Executive, is law. The guidelines are not law. They are the policy of the Government.
Does the House reflect on where this can lead? If a company is to be blacklisted, if a company is to be denied Government contracts because it does something which, though lawful, displeases the Government of the day, where is that going to end? It is possible to displease the Government of the day in many ways. It may well be that I am doing so at this moment. If the fact of the guidelines, which are not law, being departed from is a reason for abandoning all the normal rules about Government contracts, may not the handling by a company of its trade unions, or the politics of its chairman, equally be grounds for penalising a company, once this principle is accepted?
I beg the Government to get back to the position where either you must have—if you must have; and it is for them to judge—a compulsory wages policy backed by law and by the decision of Parliament, or you must really have a free and collective system. But to move secretly behind the backs of the companies, and sometimes without informing them, is an exercise in arbitrary power which is repulsive to the British people. And it is arbitrary power, one sees from the arbitrary way it is used. It is not used on everybody. It is used on small companies. What about Ford's who granted an increase, I think, of 13 per cent? And what about the agricultural industry which granted an increase which again appears to breach the guidelines? Not a squeak from the Government about that. But if it is a small company—Holliday Hall or somebody like that—then the full force of Government displeasure is displayed against them. It seems—and this is one of the aspects of arbitrary rule—that the Government are applying the principle that the noble Lord, Lord Thorneycroft, once quoted in the other place: And first of all we fall upon the weak, mainly because they do not squeak so loudly when they die. I hope that the Government will abandon this policy. The concept, as we were told in another place last night, of putting it into Government contracts but not leaving that term of the contract to be construed (as every

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other term of the contract must be) by the courts, but leaving it to be construed at the whim, unfettered and without appeal, of the Government, seems, even for so good a cause, to be quite intolerable.
May I say one thing more as one who was chairman of the Public Accounts Committee in the other place for six years. We did our best, and I think we succeeded, in securing that Government contracts were awarded, without arbitrariness, simply on the basis of the lowest tender of someone who could satisfactorily do the work. If you depart from that—and this was our experience on the Public Accounts Committee—you not only get inefficiency and waste, but you get, in due course, corruption. Therefore, I ask the Government, in the interests of goodwill in this situation, to drop this approach and rely on the powerful persuasive argument that they have. I do not underrate it. In their place I would seek to expound it. In all honesty, even in my place now, I support it wherever I can. But please do not tarnish the whole thing with procedure of this sort which must, taking up again what the noble Lord, Lord Shepherd, has said, divide us as a nation on one of the crucial issues for our economic recovery.
Lord SHEPHERD: My Lords, would the noble Lord not agree that there is a touch of fairness. There are very many companies, a vast number of companies, and trade unions, who have accepted the Government guidelines. There are others who seek to break it. There is, therefore, advantage to those who break it. Is it not right that the Government should find all ways open to them—and I agree it should not be done secretly; it should be done publicly—to say, as buyers: "We will not do business with you if you break these particular guidelines"?
Lord BOYD-CARPENTER: My Lords, it is just that argument which illustrates the danger of what is being done, because when liberty is attacked, when sound principles are broken, they are always, to begin with, broken in a good cause. I am sure that the noble Lord, with his peat experience, knows well that once you start tinkering with the way that Government contracts are allotted, and do not allot them because someone has done something, wholly lawful, which annoys or is contrary to the policy of the
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Government of the day, then you are opening the door to every sort of abuse. I say this to the noble Lord. If it is essential to bring these other companies into line—and it may be that it is—then it is up to the Government to come to Parliament and ask for powers. If it be essential for the Government to have these powers, no doubt Parliament will give them. But I beg the noble Lord from his own experience and the skill with which he managed this House—and many of us have grateful memories of his management—not to allow himself to be led into that most dangerous of all arguments which he put to me a moment ago: that because a thing is, on merits, virtuous, and because those who are against its being applied are less than virtuous, then the method does not matter, nor the legality.
I have only touched on these two matters. I know that there are many others which noble Lords will produce. I want, finally, to say that the North Sea has given us the sort of opportunity which comes to a nation only once, perhaps, in many centuries. It ranks perhaps with the storm of 1588 which routed the Armada or with the calm weather of June 1940 which saved the BEF. It is of that order of magnitude. I say with all humility to the Government that a Government which betrays that opportunity, for any reason whatever, whether it be envy, whether it be ill-will or whether it be incompetence, will never be forgiven by the British people.
4.10 p.m.
Lord GREGSON: My Lords, may I add my congratulations, first, to the noble Lord, Lord Selsdon, for the excellence of the Motion and the admirable way in which he proposed it, and, secondly, on the contributions which have been made by subsequent speakers, especially when they bear a relationship to the Motion. When I listened to the opening remarks of the noble Lord, Lord Selsdon, I nearly tore up my notes and crossed my name off the list of speakers because of the many points that he made. However, some of the points are worth restating. First, I should like to make a little further projection than the noble Lord, Lord Selsdon, did in saying what the figures might be by the middle of the 1980s when North Sea oil is in full production.

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We could be talking of a source of new revenue to the Government of about £3½ billion. At the same time, we have the economic effects, which could be giving us a benefit of around £7½ billion in relief on balance of payments arising partly because we do not have to buy oil from abroad, and partly because, within that figure, there is some percentage for export.
The revenue figure of £3½ billion must be considered in relation to the total Government expenditure. We must get it in perspective. In the recent White Paper, the figure projected for Government expenditure in 1978/1979 was £58.5 billion. The figure of £3½ billion I have just given is for the height of the North Sea advantage at present day worth, so we are not dealing with a very large figure. Nevetheless, there is a quantum of money arising from this operation. It has been questioned whether this relatively small amount should be considered at all for special treatment. On the other hand, it is identified in the public mind as arising from an identifiable separate source, and it could be useful and justified to treat it as an additional source of expenditure. This is, of course, only true if it is applied as an additional expenditure and not as a substitute for planned and required expenditure in the main bulk of Government spending.
Turning to the aspect of the economic effect, in many ways the effect of saving on the balance of payments will have more impact and, at the same time, will be loaded with much more danger. This is especially so if we take into account the problems that are facing the Dutch nation from its previous handling of the benefits of North Sea gas. Despite our membership of the Common Market, the United Kingdom is still an island community which does not have sufficient resources of either food or raw materials to support its population and which is therefore completely dependent on the value added by manufacturing to pay for the imports of food and raw materials required to maintain the population at even a minimum standard of living. I recognise that I have not taken into account the net credit of invisible earnings and spending, but whatever this net benefit may be in the future—and I add the comment that this is at the present time a falling figure—it is completely
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and utterly swamped by the value of United Kingdom North Sea gas at the present extraction rate. This has been completely absorbed into the economic structure of the country with hardly a sight to be seen of its benefits in terms of reference to our balance of payments. It is patently obvious that the United Kingdom manufacturing industry is failing or has failed in the task of providing this added value which is so essential to the economic well-being and standard of living of the population in this country.
In 1950, imports of manufactured goods were barely one quarter of our exports. This year—or, at the latest, next year—imports will equal exports. That decline is steady and is irrespective of Governments or political Parties in government. The noble Lord, Lord Boyd-Carpenter, quoted productivity figures from The Times from 1974 to near the present date. I suggest that he might look at the figures from 1970 to 1974. I think he would be surprised that the slope of the curve does not change.
Lord BOYD-CARPENTER: My Lords, will the noble Lord allow me to intervene? If he will look at the figures in that same article in The Times, he will see that Mr. Rees-Mogg also gave the figures for the preceding four years. They show a productivity figure which, though smaller than that of some of our rivals, represented an increase.
Lord GREGSON: My Lords, I thank the noble Lord for that correction. The figures relating the import/export performance for the years from 1950 to the present are taken over a period where we have comparatively reliable statistical data. There are people who claim that the decline in the United Kingdom's manufacturing industry, measured on a world trade basis, has been identifiable for at least 100 years. It is absolutely essential that, within this context of our view of the benefits of North Sea oil, we should note the living example across the Channel and should recognise the danger of not taking into account the effect British industry is having on our trade balances.
It would be regrettable if the effect of North Sea oil on the balance of payments were allowed to mask this critical underlying problem of the import/export balance of manufactured goods. I would

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make a plea to the Government that, in the future and relative to our trade statistics, the oil account should be treated as a separate figure so that the trend of performance of industry and the effects of import/export figures will be patently obvious. Only in that way do I believe that we can avoid falling into the easy trap that has affected the Dutch people in dealing with the advantages of North Sea gas. The direct effect of the economic well-being of the United Kingdom on the state of our manufacturing industry is serious enough. But, when the related effect on unemployment is taken into account, the social and economic result is clearly shown to be the critical problem of our time.
There is good reason to believe that the decline in manufacturing industry is accelerating, and changes in civilian employment quoted by the noble Lord, Lord Selsdon, give an indication of the rate at which people are leaving manufacturing industry and are being taken into employment elsewhere, or are appearing on the unemployment lists. If I might just take, I think from the same source, the complete figures for that period and add to them the loss of employment in the other wealth-producing areas, such as agriculture, mining, forestry and so on, in the same period we have actually lost over 1 million workpeople from wealth-producing activity into either service activity or on to the unemployment register.
To these changes in the employment pattern must be added, in addition to the trend of unemployment, a combination of the birth-bulge and the changing employment requirements of married women. The 1977 total for the labour force was projected as 26,053,000. That is expected to increase by 1981 to 26,734,000, and by 1986 to 27,781,000. That means that by the time North Sea oil is in full flow, and taking into account our totally unacceptable unemployment levels, about 2·5 million jobs have to be created. That does not take into account the replacement of existing jobs which will become obsolescent during that period. One has only to look further at the birthrate statistics to see that this continuing increase in the labour potential of the United Kingdom will go on at least to the year 1990. That, to me, is a very real and serious economic and social problem.
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While it is recognised that manufacturing industry cannot provide the employment levels that are necessary in the longer term, manufacturing industry must provide the wealth that supports acceptable unemployment levels. It is quite apparent that private industry and commerce have failed consistently over a long period of time to provide the base for United Kingdom economic well-being. You have to consider that in this wealth-creating area of activity the overwhelming percentage of the activity is in private hands. Recognising the failure of this situation, it is imperative that an extra injection of effort has to be put into manufacturing industry. It is also apparent that the present impetus has to be drastically increased and a considerably expanded programme of effort through public agencies, whether in being or to be created, is critical to improving the performance of private manufacturing industry.
Like another speaker in this debate, I think it would be catastrophic if, following peak-out and decline of North Sea oil, the United Kingdom were forced to purchase oil in the world market at the then ruling prices, considering that the sources by that time could well be the tar sands of the Athabasco or the Orinoco or the shale sands of the United States. I think that projections of the cost of that type of extraction have been widespread in the Press. And to think forward to the point where North Sea oil has peaked out and we are on the world market for oil in that sort of cost-atmosphere is an almost incredible task.
Since there is no way, in addition to reversing the trend, that manufacturing industry could support such a massive overseas financial drain, therefore in parallel to improving the performance of manufacturing industry, financial resources must be applied to both the conservation of energy and the replacement of fuel sources, particularly coal, as a portable fuel both liquid and gaseous, as a direct oil/natural gas replacement. For basic electrical power generation I cal see no alternative to a steady increase in investment in nuclear power. That, of course, assumes a continuing programme of replaceable energy resources.
We are already receiving the benefits of North Sea oil, and additional programmes relative to manufacturing industry and

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energy conservation and replacement will take some considerable time to build up to the levels required. In the meantime, North Sea oil revenue should be applied directly, in addition to existing schemes, to job creation, with emphasis in the manufacturing sector; but not exclusively, since there is no way that manufacturing industry could absorb the employment levels that are required to eradicate this social evil. Indirect job creation, in my opinion, by stimulating the economy, carries the very grave danger of having a negative effect by sucking in imports; and, when considering the present state of United Kingdom industry, I believe that danger is real. The increased value of the pound against other currencies also considerably increases the danger, since it reduces the export potential and makes import costs more attractive. Therefore, I believe that we have an opportunity, with the advent of North Sea oil, as no other nation in the Western world has, to tackle the problem which I believe to be endemic within Western countries at the present time; that is, the very grave social evil of our massive unemployment potential.
Viscount MASSEREENE and FERRARD: My Lords, before the noble Lord sits down, may I ask him this question: As he appeared to be disappointed that private enterprise had not been able to employ all the people in this country, does he therefore agree with the policy on which the Government have been embarking in taking money from private enterprise and from the wealth created by private industry and giving it to customers to buy our goods—for instance, in connection with the various shipbuilding orders that we have read about lately? Does he agree that that is the way to create wealth?
The PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF THE ENVIRONMENT (Baroness Birk): My Lords, I think the noble Viscount should confine his intervention to a short question, because that is usually the practice in these matters.
Lord GREGSON: My Lords, if I may be permitted, first I never said that manufacturing industry had failed to provide the employment: I said they had
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failed to provide the money to provide the employment. In any case, I think that the sheer economics, and the position of shipbuilding throughout the world—including the so-called "economic miracle" countries—is such that it would be completely wrong to sit back and watch our shipbuilding industry disintegrate before our eyes and to lose the skill and the employment of those people. I believe that, beyond the present state of world depression, there will be a requirement for their skills.
4.30 p.m.
Viscount TRENCHARD: My Lords, may I add my humble thanks and congratulations to my noble friend Lord Selsdon for providing this opportunity at this time. When I mulled the words of his Motion, I found myself wondering whether this great wealth that has come our way would help us to rebuild the economy, or might even be a slight deterrent to our doing so. The noble Lord, Lord Shepherd, mentioned the importance of attitude and I believe, from an industrial viewpoint, that in the last two to three years there has been a welcome return to an attitude of realism over a great part of British manufacturing industry. I believe that this has been largely due to the fact that, for the first time in the last two years, the real standard of living of this country has reduced, and this has reminded us all of the importance of first making the national cake before discussing its distribution.
While thinking along those lines, one thought of Germany, Japan and Holland and realised that more than one generation of the population of those countries still has it firmly in mind that they had totally to rebuild their economy, or their national cake, after the war—and how well they did it! One remembers that the population of the USA, with the dramatised enormous growth of that great country over a century, believes that the cake can always be made bigger. The tragedy, perhaps, in the British situation is that we have been relatively more static, and that people have come to regard the cake as being of fixed size. This thought, together with the fact that stronger sterling would make it harder for our manufacturing industries to increase their exports, as has been mentioned, led me to wonder whether the opportunities that we were seeing were

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like those of the man who saw a light at the end of the tunnel, until he realised that it was an engine coming the other way!
But, leaving flippancy on one side, clearly the enormous opportunity of this huge sum of money—yet, relatively, a small proportion of the GNP—cannot afford to be missed, and we have a duty to make sure that attitudes do not again become complacent. It provides us with a breathing space, as has been said. I believe that in that breathing space, if we are to rebuild the economy we really have to diagnose what has gone wrong with the economy, in what section, when and why. I shall not repeat the statistics of how badly we have done in productivity and in shares of world markets. They have led to the fact that whereas, at the end of the war, we had incomes and wages above all levels of the Nine in the EEC, there are now many countries with wages which are, in real terms, double ours. Although it is true that there are elements of decline in some areas of our manufacturing performance dating from the last century, we need to keep our minds on the period since the war and on the accelerating decline of recent years.
The first point of diagnosis that I should like to make is to consider those parts of the economy that have not declined—the City, agriculture and much of the distributive trades and service industries. All of these areas, so far as comparisons have been made, are at least as efficient and productive as their counterparts overseas. Without their successes, the general standard of living would be lower than it is now. It is a commercial policy, very often, that the reinforcement of success is easier than the turning round of failure. Therefore, I believe, first, that in a plan to rebuild we should give every incentive to the successful areas to continue to expand. I do not accept that service industries, which the noble Lord, Lord Gregson, mentioned, or the distributive industries do not make a real contribution to national productivity and to our standard of living.
Are we helping these successful areas at the present time? I doubt whether the City would say that our tax system, our exchange control and the fluctuations of our currency in the last decade have been helpful. I doubt whether our farmers
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would regard capital transfer tax—and we have larger and more efficient units than our competitors in Europe—the threat of wealth tax or a 25 per cent. subsidy to their competitors to ship temperate foods into this country through the green pound, as encouraging success. I hope that we can really reinforce success and give it some encouragement.
To return to diagnosis for a moment, not all of our manufacturing industry has had a poor record. A lot of our industry has records which are as good as those of our competitors in any of the more successful industrial countries. Of course, standards of performance and quality vary in all countries, always. But I feel that commentators have not looked closely enough at the areas within manufacturing industry where our competitivity and our productivity have declined. They tend, I believe, if one looks at various factors, to be the areas of large labour employment and labour-intensive industries.
Then, if we look for culprits so that we can make a plan to rebuild, I think that the groups of people who can affect the performance in this fairly selective, though very large, area of our economy are the Government, the shareholders and investors, management and, finally, labour. Government bashing is great fun. It goes on all over the world—industrialists love doing it—and it would be a bonus if our Government were blameless. But let me keep my remarks to only two aspects of the performance of our Governments in recent years which have had quite a major bearing on our performance and will certainly influence our recovery; that is, tax and price control.
Tax has been well mentioned by my noble friend Lord Boyd-Carpenter, and there is little need for me to go into it to any extent again. Some of your Lordships may have read the survey on the demoralisation of management, particularly senior management, which was entitled The Motivation of Management and was conducted by the ORC very recently. It validates all the points that my noble friend Lord Boyd-Carpenter has made and, while there is a lot of argument about how to interpret the various reports of the Donovan Commission and other comparisons about our

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tax level, there really is no doubt that 83 per cent., reached in exchange rate terms at not very high levels comparatively, is unequalled in the industrial world. It is also true that there is a severe disincentive right at the other end of the scale. Our standard rate starts at a relatively low level and, therefore, at skilled worker level, if one considers the other benefits of our social security system there is, in some cases, a disincentive to work.
As regards price control, I feel that a visitor—perhaps a judge from outer space—studying the figures of the fall of profitability in manufacturing industry, in inflation-proof terms—and they have been reviewed by the Bank of England, by Lloyds Bank and by many other reputable sources—showing a decline from a 15 per cent. or more return on capital before tax in the 'fifties to 2 or 3 per cent. in recent years, would ask, "Why do you control prices?" The truthful answer to that question would be, "Because we are trying to make an incomes policy stick and get the trade unions to accept it". However, the trade unions are among those who criticise industry for not investing. Two writers from the left of the political spectrum, which is often demanding stricter price controls, Sutcliffe & Glyn, say in their book British Capitalism, Workers and the Profit Squeeze.
Between 1964 and 1970 the share of profits was almost halved … The steady fall has become an avalanche".
Possible culprit No. 2 is the City and investors. There is no lack of funds. All of the up to date evidence has made this clear. Also, there is no lack of will by would-be investors to use those funds, provided that they can earn profit. There is one important problem area when one considers growth and the reduction of unemployment. It is clear that where private individuals have played a major part either through the banks or directly in investment in small businesses, the changes brought about by the egalitarian influence of our tax have left the small entrepreneur less well supported than he ought to be.
Before turning to management generally, may I point out that management recommend investment. One of the factors that they take into account in deciding
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whether to recommend new machinery and new methods in order that Britain may become competitive is their assessment of the share of any extra profit that will accrue to those who have paid for the investment rather than to those who will operate it. My experience, which covers a good many countries, is that this assessment is nearly always found to be more discouraging in Britain than it is in other countries.
The question one has to ask is whether our management in general is inferior to that found in other countries. First may I repeat the point that I have already made: That large areas of our economy are well run and successful. One must think also of the management of events like the Jubilee firework display! Could there be a better example of British management at its finest? There is nothing wrong with the British. My international experience has included the moving of British managers to many foreign countries and the moving of foreign managers to this country to do precisely the same jobs. No country has a monopoly of any one quality of management. I believe that it was the noble Lord, Lord Shepherd, who mentioned technology. I agree that our universities have not always encouraged our technical graduates to regard industry as providing a challenging and satisfying career. In any plan for rebuilding the economy a great deal of attention must be given to changing that attitude.
If I may make a final comment on the standard of management generally, in industry it is not fashionable to mention the Services. However, when the nation was at war I do not think that our overall leadership and management was inferior to that displayed by other countries. Of course we must do everything that we can to improve management standards, and we must start by improving the incentives.
May I now turn to labour and begin by saying that I believe that exactly the same things can be said about the average British employee in relation to employees in competitor countries as I have said about management. He is as calm, solid, reliable and reasonable as any foreign employee, and, in the case of some nationalities, more so. At times, members of any nationality can move into a mood of apathy or antipathy. I believe

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that the structure and atmosphere to be found within our larger factories is quite different from that which can be found in the factories of most of our competitor countries.
I believe that our collective bargaining systems and our trade union organisation are totally different, and here lies one of the biggest keys to the rebuilding of the economy. I hope that in the not too distant future the House will find the opportunity to allot a debate to this key area. If we were prepared not to copy but to parallel the kind of balanced bargaining positions in many other countries, I believe that we could double the real wages of the average employee in this country in little more than a decade. Because our wages are so low and because North Sea oil will be of such benefit, I feel that we could grow and reduce unemployment to a far greater degree than other speakers have thought possible. We might even be able to stop arguing about incomes and prices. We might also be able to relieve inflation, allow for flexibility and stop trying to judge exactly how much should be paid to individual employees in different firms.
We avoid this subject because we are a little frightened of it. It is a "hot" subject and we tend to tiptoe around it. The emotional struggles of our heartrending history live on. One has only to look at Northern Ireland. We had the Industrial Revolution first and we made the most mistakes. The systems, or perhaps the lack of systems, in the area of collective bargaining which have evolved since those days are unique in the world. We need to take a look at them and we should not be too proud to look at the systems evolved by other countries.
If is comforting for us to say that we need a good, modern manager and that then there will be no problem about raising productivity and moving forward the efficiency of our big industries. We say that we need a manager who not only knows his trade and does all the things that the old-fashioned manager did, but who is also the kind of man who is able to explain everything to everybody. I doubt whether the pressures today on factory managers in particular are widely enough understood. Even in past days it required a very good and well ordered manager to spare up to 15 per cent. of his
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time in order to change things and move them forward, as opposed to just keeping the ball on the island and attending to routine affairs.
We have added one thing and another to the requirements for this manager. We have used not only 15 per cent. of his time but far more, and when we use far more the show not only does not move forward but actually moves backwards. We start exchanging comments over the luncheon table about how incompetent the servicing of our motor-car, or any other personal experience of industry we have, has been, and we say how bad the management must be. But we have added duty after duty. They have to negotiate with everyone, with many levels of trade unionists in many unions, on every question. We have added the pressures of consumer lobbies and environmental lobbies, of price control and of legislation in a profusion which has never been seen before. I believe this should have high priority.
In summary, I should like to reinforce success, the successful areas, where we are seeing that the British can in fact still do it. I should like to remotivate and provide real incentives. I would like us to get together, forget the history of the Industrial Revolution, and put together a structure and an atmosphere surrounding collective bargaining and the trades unions which could transform the areas of large-scale employment, which are the areas which have let this country down.
4.52 p.m.
Lord LEE of NEWTON: My Lords, may I pay a very sincere tribute to the noble Lord, Lord Selsdon, for choosing such a vital subject as this and for the way in which he introduced it, and thank him for his kindly reference to my close association with my old very dear friend Sir Stafford Cripps. Those days were hard and difficult. He, I think, in the end sacrificed his life for the work which he held so dear. It is a strange thing that the noble Lord should have opened this debate today, because the general argument and discussion around what we do with the bonus of North Sea oil reminds me so deeply of the arguments which were deployed in Stafford Cripps's days when the Marshall Plan became operative.

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Stafford was utterly and completely determined to use it to build up the capital of this nation, while others called him "austerity Cripps" because he would not deploy it on consumer goods. Today we have practically the same kind of thing happening again. Read Mrs. Thatcher's speech to the overseas bankers yesterday—all based on reducing taxation, a thing we all want to do, giving the impression that if only we can achieve that kind of thing all will be well. As I was saying, it reminded me of those days when Stafford had to conduct a great battle—which, thank God, he won—to give the nation the opportunity of a new springboard following the losses of the war period.
The financial matters connected with North Sea oil are not, I think, as clear as they might be. Again, strangely enough, the noble Lord, Lord Selsdon, mentioned that North Sea gas came on stream in 1965. I happen to have been the Minister of Power at that time. He mentioned the BP strike of gas. I remember going out to the Sea Gem, which, unfortunately, afterwards foundered with grave loss of life. The noble Lord, Lord Boyd-Carpenter, was so right in telling us that when you go down in a helicopter the landing pad looks about two inches square. I kept my fingers crossed. Coming back I had a remarkable experience. The helicopter landed. I got out of my Mae West and earpads and so on; I was so relieved to do so that when I saw a number of journalists about I put up my thumb in exaltation, and BP shares went up half a crown in after-hours dealing. I have often wondered what would have happened if I had put my thumb down. There is a need for clarity on how we propose to deal with the structure of financial matters pertaining to the North Sea.
The way the discussion has gone, not only in this debate but in the Press and so on, it would seem that a number of people are advocating the setting up of a separate fund, to which, I suppose, net proceeds from the North Sea—once you have looked at the expense side—would go. In some magical way this great sum would then be allocated to various goodies and so on. Is that indeed the idea the Government have? It may well be that
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one could perhaps look more closely at the financial affairs of BNOC than the others. My noble friend Lord Balogh will be able to tell us something about that in a moment.
However, it seems to me that this idea of a specific fund composed of the finances from the operations of the North Sea would fly completely in the face of the Consolidation Act and all the things we have done for so long. Perhaps it would be a good thing if we could be informed as to whether the Government have as yet come to any determination on that kind of problem. I myself would have thought that, given the structure of our taxation system, it would be far better if the money simply went into the revenues, and then Government proposed ways of using it, and Parliament either assented or did not, rather than to have a specific fund in the way we are now hearing suggested.
It is agreed on all sides that this great boon cannot survive perhaps the next 30 or 40 years, and at that stage we shall not only have had to make up our minds on the kind of energy which is to replace North Sea oil and gas, but have had to do a simply mammoth investment job to ensure that whatever capital equipment we had decided upon is not only in contemplation but is in fact available to us at a given moment. I know that Plan for Coal for the end of the century speaks in terms of 170 million tons. Perhaps I could be excused for being something of a cynic. That was the figure I gave for 1970, if only people had not decimated the industry afterwards. To get the facility to produce the 170 million tons by the end of the century we really must have decided in what form we are going to use that coal; whether it would be gasification, experiments in oil or other ways, I do not know. I think that it will also be necessary to decide on the structure of many of the new housing estates which are being created without chimneys. Those are vital matters which we cannot possibly leave until the end of the period of availability of North Sea oil. If we do so, we shall have a hiatus which will be fatal to our aspirations.
There have been references to how we should look at the possibilities of developing our manufacturing industries. I thought that the noble Lord, Lord

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Selsdon, was a little too fatalistic in the way in which he looked at this problem. Of course it is the case that huge industries which were utterly labour-intensive years ago will never again be labour-intensive. Of course it is essential that we should apply the new technologies and the new products of the scientific revolution, but that will lessen the number of jobs available for that period.
On two or three occasions I have suggested to the Government that no one Government can face the problems of unemployment which the new dispensation has brought about. I believe that only by international agreements on lessening the working week, on perhaps reducing not only the hours of work but the age at which we retire, and on pension facilities, can the problem be solved. No one manufacturing nation dare face that problem alone. If it did so, it would give a huge edge to its competitors. However, as the problem is now common to all manufacturing nations, why cannot it be solved by them collectively? It could have been done, as I first suggested, through the International Labour Office, until the Americans did a silly thing and resigned from it. However, I hope that the Government will take the lead in bringing together all the great manufacturing nations to decide on the best course to take. We should say that we have all entered a period of "automation"—that is the word that was used—in which this is now the order of the day in methods of industrial production. We cannot do that and at the same time bring millions of women into industry and also preserve full employment. We cannot possibly do it, no matter how hard we try, unless we look at how we can reduce the number of hours worked and the retiring age.
I believe that we are now in a position where we should accept the four-day week. I should like to see three eight-hour shifts and the three-day weekend. In that way we would encourage employers to use capital investment because their new capital would be worked 24 hours a day. We would encourage employees by the fact that they would obtain the three-day weekend. It would cut out a great deal of the stupid and inefficient overtime which is now looked upon as a very ordinary concomitant of going to work.
Viscount TRENCHARD: My Lords, would the noble Lord, Lord Lee of Newton, not prefer a system whereby we tried to devise a plan which could double, as I said before, the manufacturing output of this country in little over a decade and solve the employment problem in that way?
Lord LEE of NEWTON: My Lords, it depends on whether we can find a market for that which we produce at the end of the day. There could be a very considerable argument as to whether the lack of capital development in our industries is causing more of our unemployment than the world slump which, of its very nature, negatives our chances of increasing our exports. Therefore, I would not demur from the suggestion of the noble Viscount, Lord Trenchard. When all is said and done, increasing wealth production is the answer to all our problems, especially with a Third World which is hungry for all these commodities if only it had the finance to buy them. However, while we are in the throes of a world slump it is difficult to decide which of these problems is causing us the greater concern.
First, I hope that the Government can tell us shortly how they propose that the finances of the North Sea shall be organised. I should also like to know about the great programmes for the vast increase in coal production, along with the very essential developments and decisions in atomic energy both of which will cost huge investment. When we get them going we shall hear the very necessary argument about how we cannot do much more because of the inflationary tendencies of these great programmes. These are enormous economic problems. I think that the Government have done a first-class job up till now in the way that they have handled this matter, but I suggest that we are now reaching a point where decisions of a very onerous and serious nature in this area must be taken.
I should like to make a reference to the remarks of the noble Lord, Lord Boyd-Carpenter. He and I have terrific agreement on Gibraltar, but in very little else. The noble Lord told us that Labour Governments have done a great job—he did not use the word "great"; I am using it—in the social field, but their economic policies have been pretty disastrous.

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I do not believe that there has ever been a Government more successful in economic policies than the Labour Government of 1945 to 1951. They took over an economy which was broken and which, in Churchill's words, was bankrupt. There was never a pocket of unemployment during that period. That Government brought this nation through the most dangerous economic crisis which we have ever known since the Industrial Revolution. I am proud that I happened to be a Member of that Parliament. The 1945 Parliament was the greatest in our history. I do not believe that it does any good for the noble Lord, Lord Boyd-Carpenter—I enjoy his humour and so on—to suggest that Labour Governments have had no success in the economic field, implying that any success that we have had has been with the Conservative Government.
The Governor of the Bank of England made a speech the other day saying that in 1973 we faced the danger of a complete collapse of our finances. I do not want to go into detail about the Barber boom. However, quite frankly, against that kind of background I believe that the present Government have done a first-class job of work and I do not think that we, on this side of the House, could stand for denigration of the kind we heard from the noble Lord, Lord Boyd-Carpenter.
Lord BOYD-CARPENTER: My Lords, as the noble Lord, Lord Lee of Newton, has quoted the 1945 Government of which he was an ornament, does he recall the following series of events? In 1947, the convertibility crisis and the enforced abandonment of our obligations on convertibility; in 1949, devaluation—the first for very many years; in 1951, a balance of payments crisis so bad that Lord Attlee went into an Election which he knew he must lose and wanted to lose.
Lord LEE of NEWTON: My Lords, Lord Attleee did not go into an Election in 1951 for that reason at all. The noble Lord, Lord Boyd-Carpenter, may have forgotten that three or four men died. We had a majority of four. The noble Lord was a Member of the "nights" who was never seen until 10 o'clock at night and who came to pray all night in order to keep the Government Members on the Front Bench. In any event, the fact is that
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we could bring Britain through to the days of devaluation—I know that the Tories thought that they could never devalue, but of course, we found out later that they had to devalue as well. I do not know whether this has a great deal to do with North sea oil or gas. However, the noble Lord and I have argued these matters for the last 32 years and I hope that we shall go on arguing them for the next 32 years.
5.9 p.m.
Lord BALOGH: My Lords, before launch myself into the debate, I must declare an interest. I was the Minister who piloted two Bills through this House which, as your Lordships know, were initiated on this side but which did not receive a very enthusiastic majority reception here. I subsequently became deputy chairman of the BNOC and I am now economic adviser, having retired for the fourth time. This debate and the debates on this topic which we have had in the past few weeks show that if there is one thing we can learn about history it is that we cannot learn from history.
First, we had "Selsdon Man "—Mr. Heath, mark I—before his conversion. Then we had the "Selsdon Woman" who wants to take us back to 1970, or perhaps even 1951. Then, lo and behold! here is the noble Lord, Lord Selsdon. However, having listened to his speech, I must call him "demi-Selsdon" only; he was not altogether "Selsdon In all and every situation the Conservative speeches really present a sort of horrid feeling of déjà vu or rather déjà entendu. They go back again and again to incentives, taxation and the terrible problem of the managers, who, after all, only have Rolls-Royces paid for by the firms—no incentives!
First, there seems to be a tendency to count our chickens before they are hatched. There was very great resistance to appreciating the magnitude of the North Sea gas and oil from 1965 onwards. Now there seems to be a sort of euphoria, which in my opinion is not totally justified. Secondly, we must use whatever we shall derive from the sea purposefully and discreetly, lest we should let slip from our feeble grasp this last possibility for industrial revival—the only lasting guarantee for the survival of a gentle and compassionate

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society which we find in this country.
When the present Government came to power, they were confronted with an all but impossible situation as regards the North Sea. The 1972 fourth round of licensing—and I must say this because it is forgotten nowadays—had given away two-thirds of the reserves to foreigners; so far as taxation was concerned, we had only corporation tax, which was nominally 50 per cent. but which also contained possibilities for tax avoidance on a huge scale. There was an accumulated tax credit of £2,500 million and that was accumulating at the rate of £450 million per annum even when the oil price was only about £10 a ton, and now it is about £60 a ton.
There was no control over the operations of firms. The noble Lord, Lord Drumalbyn and the noble Earl, Lord Limerick, with whom I had a great many fights, can testify to my efforts to call attention to these anomalies and secure estimates of costs, prices, investment and return. For four years the previous régime did nothing about that. Through the two Acts which we passed we remedied that weakness. Noble Lords opposite now have the nerve to complain that it is this Government which is holding back development. The colossal inflation of costs, far beyond the general increases in price levels, testifies to the shortage of resources. It is not the willingness that is lacking; it is the means that are lacking for a speed-up of production. When noble Lords opposite complain about the slowing down of development they show themselves to be totally ignorant of that fact.
Moreover, there has been no recession of development of the North Sea; it has stabilised at its maximum level. So long as we cannot produce experts, we shall be unable to speed-up further, even if that speed-up would be justified from a geological and saving point of view. We are working at the limits of capacity even though we have probably experienced the worst weather in Scotland for the last 30 years.
Profits and the tax-take are vital for the capacity to fulfill our general aims. Ninety per cent. of any increase in costs is borne by the Exchequer and thus diminishes our capacity to manoeuvre and speed-up progress in other directions.
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Thus the monitoring of costs and prices is needed and close and expert monitoring is not possible without actually being in the business. The Inland Revenue is in the tax business, not in the oil business. That was my conviction as a Minister and I have no doubt that that is why every single country except America has established a State-owned corporation. In America, they are now contemplating the possibility of such a corporation. Already, we hear reports from Norway complaining of tax avoidance, if not evasion. The same uncertainties apply to prices in this complicated market, where two giant oligopolies are facing each other and making pricing extremely volatile.
All that grumbling and the wild suggestions which emanate from Mr. King, the Opposition spokesman on energy in the other place, if taken seriously—which I hope will not be the case—are a grievous menace to our future prosperity. I discern here a somewhat desperate desire on the part of the Opposition to decry the Government's record, as the noble Lord, Lord Boyd-Carpenter, has done in every direction, however impossible. In view of the history of the handling of the gas and oil situation during the previous Government's Administration, I find this all but incredible. On the Opposition Benches we see the futile remnants of the Government of 1972 which gave away over two-thirds of our oil and gas wealth to foreigners, and which had not prepared new legislation either for control or for taxation purposes. Now they are going to reproach us for this.
What are they doing now? They are trying to ensure that our efforts to secure our rightful share of that wealth are frustrated. Even in recent debates, voices were heard advocating substantial concessions to the private oil sector. Fears were expressed lest the Government's strong-arm tactics should upset the companies and they might pull out, or at least postpone development. Of course, nothing of the sort has happened. All that talk is nonsense, and pernicious nonsense at that.
As any oil man would admit in private—but not in public—Britain is the most hospitable of all countries in the world for oil companies. It has one of the lowest, if not the lowest, tax-take and the most advantageous depreciation rules, and it

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does not interfere with domestic prices. What else do they want? Of course, the oilmen complain about our brutality. That is their duty as trustees of their shareholders. We must not take them too seriously; they will not go away. They are panting for more rounds; indeed, for a speed-up in licensing. These demands will have to be closely scrutinised from a national point of view, lest we produce at more than the optimum rate of exhaustion of those fields. The least contested conservation policy is through the limitation of licensing. It would be a tragedy if the deterioration either in the tax-take or in our current balance of payments should force us to an eventually detrimental speed-up in development.
Now, I turn to the problem of utilisation of the wealth. Before I do that, however, I should like to enlighten the noble Viscount, Lord Trenchard, that the British post-war increase in productivity was higher than the American. In fact the American was the lowest. Of course it was from a very high level, but we are talking about the speed-up.
Viscount TRENCHARD: My Lords, can the noble Lord tell me over what period he is quoting? I am aware that, in recent years, from the very high level that the Americans have achieved, their rate of increase has been no more than fractionally different from ours, but it is at a very much higher level. In mentioning the American economy, I mentioned the last 100 years.
Lord BALOGH: My Lords, in the last 100 years it is quite true. That, however, contains 50 years of total laisser faire in Britain; such laisser faire as has never been seen in the world before or after. Free trade; incentives galore. What happened? Our progress then was much less than it was after the war. That is one of the things which the noble Lord, Lord Boyd-Carpenter, ought to read up a little.
Lord BOYD-CARPENTER: My Lords, if the noble Lord is advising me to read up, would he, on his own part, read up Mr. Rees Mogg's figures on 6th February which he must have seen and which show that, over the period 1974–1976, United States productivity rose
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5·8 per cent. and United Kingdom productivity declined by 0·1 of 1 per cent. Does he dispute those figures?
Lord BALOGH: Yes, my Lords, they have. The explanation is that they are recovering from a depression. For one or two years you can always produce 5 per cent. increases, but not in the long run. Rees-Mogg never contemplated the long run at all.
Lord BOYD-CARPENTER: My Lords, does the noble Lord then dispute a similar table of figures for earlier years, when the United States figure was somewhat better than ours, though by a margin?
Lord BALOGH: My Lords, point 3 against 2·6. If you do not choose Friedmanite sort of periods.
Lord BOYD-CARPENTER: My Lords, if the noble Lord accepts those figures, does that not destroy the argument that he has just addressed to us?
Lord BALOGH: My Lords, it does not. If you choose the top of the nearest period and the lowest figure for the distant period, then, over a long period of time, you can get all sorts of interesting results. We could do it too. I am sure that Mr. Heath could very proudly announce that, in the Barber boom, the figure went up by 8 per cent. Much good that did to him. Figures must be carefully weighed.
Several noble Lords: Hear, hear.
Lord BALOGH: I agree. There are a number of ways in which the temporary relief which we are receiving, and shall receive, from oil and gas can be utilised. At this point, and in parenthesis, I must focus on the fact which the noble Lord, Lord Selsdon, also emphasised, and which was emphasised by other noble Lords, that we have spent the whole of the relief which we got from gas without changing anything at all in our industrial structure; without being more competitive, or anything at all. A portion of the oil has gone the same way. If you look at the non-oil balance of payments current account, you will see that part of the oil has already disappeared. If we go on in the way that I shall point out, we might lose the whole benefit.

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What the gas did was to enable us to import more and lose some of our share in the world's export market of manufactures. This must not happen with oil. The oil shot in our arm can be exhausted by allowing sterling to rise. Secondly, we could use it to accumulate reserves; thirdly, we could use it to repay debt, or, fourthly, we could use it to allow an increase in foreign investment, as was proposed by one noble Lord. Alternatively, we could cut taxation partly on individual incomes and partly on corporations. Fifthly we could restore the cuts made in Government expenditure, especially that on education and health, which contributes to our future competitiveness. Finally, but not at all least, we could ensure an increase in private investment by selective reorganisation and injection of capital into the private sector so that we should, within a measurable period, achieve a balance in our non-oil current account. To my mind, that is the most important point. Without it, I do not think we can go anywhere.
Noble Lords opposite, and, I am sorry to say, the Bank of England, wish to use the benefit for the first four of these possibilities. No one would rule out some relaxation in taxation after all the speechifyings which have been made about the relief which is to come, particularly if it were accompanied by such reforms, especially of the corporation tax, as would act as an impetus to spontaneous industrial restructuring rather than increased dividends. However, I must warn noble Lords and the Government that our present propensity to import is so high that any increase in national income, and more especially in disposable private income, would result in an increase of half as much in imports, thus violently limiting our freedom of action.
The Government at first resisted the revaluation of sterling and the relaxation of exchange controls. Then they gave in, at least partially, on both. The pound appreciated against the dollar and recently against the French franc by over 10 per cent. A combination of this appreciation with sizeable cuts of taxes on higher incomes and with the relaxation of exchange controls would, in my humble opinion, be pernicious. It would lead to a repetition of the Butler/Maudling/Barber affair. We shall exhaust our accrual of wealth in driblets.
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To allow the first appreciation was a most regrettable decision. It was explained by reference to the need to keep the increase in the money supply within the (totally artificial) limit fixed last year. This argument discloses a completely false basic economic philosophy. There is no strict connection between the increase in reserves and the so-called money supply and inflation. The influx could of course increase bank liquidity and thus menace the policy of the Government, but that contingency could have been dealt more easily by direct financial controls.
After the disasters of 1972/1973, there is surely no one in the Bank of England who would want to be bound by the delusions of "credit control through competition". In addition, or alternatively, the inflow could have been taxed, as in Switzerland, or sterilised, as in Germany. What actually was done was further to undermine our already ailing competitive position. A considerable relaxation of the exchange control on capital exports would be really the last blow for the budding hopes for our future. We are between the hammer of foreign competition and the anvil of our cost increases, especially because our capital equipment per head is totally insufficient.
It is shocking to see some Conservatives wishing to tear down the incomes policy which is the dam against inflation, and indeed the only effective dam. The behaviour of the Opposition and some trade unionists represents the most grievous possible menace to our being able to escape from this pernicious circle of having our booms ending prematurely in enforced cuts. We have already had news this morning that the market in gilt-edged securities is beginning to tighten up because they expect an increase in the rate of interest. An increase in the rate of interest in a period when we want to increase investment is all but suicidal. Moreover, there is a terrible problem. We have an idle capacity in equipment of at least 20 per cent., yet most of that idle capacity and much more of that in use is obsolescent. This is not mentioned by the CBI propaganda sheet, though they ought to know economic history does not know a case in which a country in the present situation

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of industrial inferiority of Britain has succeeded in escaping from it and regenerating its industry without first securing a protected home market. Such recovery as we made after the Great Depression, which was stronger and faster than that in any other country, was mainly due to tariffs and imperial preference.
I beg the Government not to close their mind against approaching the competent international fora to secure exemption from the restrictive integuments of certain of our international commitments. The post-war generation knew what they were talking about when they laid down rules for the protection of key industries in weak countries. They also provided for protection in general such as under the Bretton Woods scarce currency clause, which was unfortunately never implemented. It could deal as nothing else can with the cynical export of unemployment by Germany and Japan. This debate highlights the importance and the difficulties in the way of our industrial and general economic recovery from the secular sluggishness from which we are suffering and have been suffering for almost a century.
I think that the apology which had recently to be tendered by my right honourable friend to a foreign Government emphasises the correctness of the appreciation in the Berrill Report of the consequences of our economic weakness on our international influence. That report was almost unanimously rejected by your Lordships' House. I do not in any way blame my right honourable friend for what he has done. Palmerston could be Palmerstonian only because he had the strongest fleet and the strongest ecomonic, industrial and financial machine at his disposal. Had he suffered from our present circumstances, no doubt he would have been realistic enough to act precisely as my right honourable friend has done. Only let us not pretend that diplomacy is a substitute for strength nor indulge in dreams about the efficacy of measures which have time and again proved futile and forced reluctant Governments to retreat.
5.33 p.m.
The Earl of GOWRIE: My Lords, this is a very large room and it takes
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genius of a kind to raise the temperature in it. I congratulate the noble Lord. Lord Balogh, on what might, in the context of this debate, be called a formidable feat of energy conversion, because some moments ago we saw a little Parliamentary tennis of a kind which, in this churchlike atmosphere, we all too seldom enjoy. I certainly enjoyed it although I did not entirely follow it.
We expect the highest standards from my noble friend Lord Selsdon, and we get them. He has an admirable, and indeed enviable, gift of combining passion with clarity, and he brings experience of the real world to our sometimes rather theoretical councils. Unfortunately, he is an hereditary Peer and may not therefore get quite as wide a hearing as he deserves, but I certainly hope that another erstwhile hereditary Peer, also a man of ability, the present Secretary of State for Energy, will read that speech and attend to it. After all, in these days we are not supposed to hold a man's background against him. I hope the noble Baroness, whom we all know to be extremely persuasive, will see that the Secretary of State does in fact read it.
Except for getting the inflation rate much lower—and of course we have considerable disagreements about how this may be achieved—there is surely no more important national issue than this incredible stroke of good fortune, this perhaps last chance to arrest our long slide from being one of the healthiest industrial economies to one of the weakest. To make a brief debating point, I must contest what I understood to be the opinion of the noble Lord, Lord Balogh, that most successful economies are in some way uncompassionate or uncaring. Look at the present situation of chaos in the National Health Service as an incentive to improve our position now on compassionate as well as on economic grounds.
Mention of the noble Baroness brings me to something which I want to say before coming to the Motion directly, though the point is connected with the Motion. I want to say this very carefully because I do not want to cause her or anyone on the Government Front Bench personally the smallest particle of offence. We really must have a full economic Minister in this House. The economic Departments of State are the Treasury,

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the Department of Employment, the Department of Trade, the Department of Industry and the Department of Energy, not one Minister with executive duties and responsibilities, with the ear of the Secretary of State so to speak, from these commanding heights of a modern economy is represented here. Yet this House—reformed, unreformed or abolished—while it is here should perform its assigned constitutional task. It contains men and women with more varied and practical expertise in wealth creation as well as in economic theory than may be found in the House of Commons. No wonder a debate as important as this is relatively poorly attended and that the range of expert contribution, excellent so far as it has gone this afternoon, has proved relatively narrow. No wonder that the reporting of real issues consistently gives way to cynical accounts of day-to-day Party bickering in another place.
I do not wish to be misunderstood here and I repeat that it is no reflection on the noble Baroness—we know her to be an admirable Minister in the Department of the Environment and no doubt she would make an admirable Minister in one of the economic Ministries—but we need, and I think we deserve a full Minister from at least one of these Departments; I think it should be from two out of the four. My noble friend's Motion and the way he handled it proves as much, and so do the concerned contributions of the noble Lord, Lord Shepherd, and my noble friend Lord Boyd-Carpenter. When we on this side left Office the Secretary of State for Energy sat on these Benches and I look forward to it being not too long before he does so again.
Having got that off my chest, let me say that I think the moral of the debate is that North Sea oil is an opportunity and not a remedy, and I think my noble friend Lord Boyd-Carpenter used the word "opportunity". It cannot cure our economic difficulties but it provides a relatively short period of time—and I think my noble friend Lord Trenchard used the phrase "a breathing space"— in which we cannot claim that the fault is in our stars, but must ourselves buckle down and do something about the way we earn our living in the world. If I am correct in this interpretation of the debate—and I must say that I agree with it—it cannot be said too often that the oil
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is not a kind of celestial, or rather subterranean, football pool enabling us to spend huge sums of money—whether unwisely or wisely—whether on the much touted nostrum of industrial investment programmes, or on package tours or consumer goods. We cannot spend in the way of those small countries with colossal oil reserves such as exist among the Gulf States.
Put brutally, the effect of North Sea oil, always given the present world price of oil, is surely just to put our clock back to 1973, before the terms of trade in this area changed against us by as much as 20 per cent. I would be the first to argue that things were better in 1973 than they are now. At one level only I prefer Pugin's decoration in this House when viewed from that side rather than from this; it always seems to shine with a greater glow. But at a rather more profound level, there was then little more than one-third of present-day real unemployment. Even the most benighted Tory, however, would hardly argue that in 1973 we were living in Utopia. So we are hardly in Utopia now.
Some economists argue that we are worse off than we were, following the OPEC price rise and consequent development of North Sea oil, by about 1 per cent. of gross national product. My view is a little more optimistic than that, assuming—and we have no guarantees of the assumption—that international oil prices remain high. But optimists and pessimists agree that there is little fundamental change in the position of our economy; we are simply moving from problems associated with balance of payments deficits and cash shortages to those problems associated with relative surpluses and capital inflows. As a jazz fan, my favourite jazz singer said, "I been rich and I been poor and believe me rich is better". But we know, nevertheless, that there do exist problems of our relative and perhaps short-lived success. There is the inflation of money supply through capital inflows and there is the pound appreciating far beyond our battered industrial export sector's ability to cope. This is not perhaps quite Mr. Wynn Godley's nightmare, but it is nasty enough to jolt us out of any daydreams of riches.
The important message today, therefore, is that the problems of our real economy

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remain. It is to my mind incredible, and even rather disgraceful, that Mr. Roy Hattersley appears to think that inflation dipping under 10 per cent. should be the occasion for a kind of Parliamentary knees-up. The figure that surely counts is the figure that compares our inflation rate with that of our industrial competitors. We are still way above them. We are above the Dutch, with all their problems, as the noble Lord, Lord Gregson, mentioned; we are above the Swedes, the French, the United States and West Germany.

If we add to that imbalance the troubles of British Leyland and the tragi-farce of Swan Hunter, in which, as my noble friend Lord Massereene and Ferrard said in an intervention, we pay people to buy ships from us and offer to lend them money to run the ships and, having done all that, still cannot deliver the ships on time or even at all, we still find ourselves in a very poor state. I would say to the noble Viscount, Lord Simon, that I hope that any allocation of oil resources for industrial regeneration does not follow that disastrous pattern.
We are still living off the invisible sector, notably the City of London, and while I admire this sector—after all, I work in it—it surely cannot sustain what I think of as our industrial mezzo-giorno. I use the term because we are in almost the exact reverse position of Italy, where a relatively successful manufacturing sector tries to support a very large and very decrepit agricultural sector in the South. Our invisible sector cannot sustain the levels of employment that on all sides of politics we find politically and morally acceptable. Nor can the oil.
The only disagreement I have with my noble friend Lord Selsdon, if I understood him right, is that he thought we may in some way have to move away from thinking of ourselves as an industrial economy. We cannot afford to do that. I agree with my noble friend Lord Boyd-Carpenter that we are a country that lives by industry and will have to continue to live by it after the oil has gone.
It has been said in this debate and elsewhere that North Sea oil is not employment-generating. I do not wholly share that view. I am a "no-incomes policy, high wage man", rather, if I understood
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him aright, along the lines of my noble friend Lord Trenchard, and I should like to take up some of those points with him and some of the points raised by the noble Lord, Lord Balogh. However, that will have to wait for another debate, it not being directly connected with the oil. Nevertheless in the meantime, while I do not wish to make Party points, it would seem to me to be wrong not to stress general political differences of opinion and interpretation. I believe that the Government, most notably in the person of the Secretary of State for Energy, in the actions of Mr. Benn himself and the decisions that he and his Department have taken, are passing up really incredible opportunities for industrial regeneration, for the kind of spin-off from the oil which helps industrial regeneration and the employment it brings. I would say to the noble Lord, Lord Balogh, straight away, that the Government in which I was a Whip passed up such opportunities as well, but surely one of the points of a free Parliamentary system is that we should learn from each other's as well as from our own mistakes. But where employment is concerned let me cite an example. A Treasury economic progress report put out nearly two years ago, in July 1976—less than six months after the oil started flowing in any quantity—pointed out very fairly that the oil development programme had swollen the current account deficit in recent years, possibly by up to as much as £2,000 million. The report went on to say:
"The dominant item has been imports of goods and services connected with exploration and development—steel pipe, drilling rigs, hiring charges and so on. These imports cannot be directly identified from the trade statistics, but they are tentatively estimated to have amounted to between £¾ billion and £1 billion in 1975 alone"
My Lords, £1,000 million or, over two years, even £2,000 million worth of genuine old-fashioned pre-Keynesian demand is surely not negligible in employment terms. Can we really imagine the Japanese, had they discovered offshore oil in the early 'sixties or earlier, draining reserves by importing men and material to exploit it? They would have considered the chance to build a home-based oil exploitation industry, which later they could even use abroad—perhaps even in the North Sea to our own cost—virtually as important as having the use of the oil itself.

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Very well, that chance has been lost and maybe we are all at fault. But look at what is happening now. Look at the chances that are still being lost and will go on being lost.
What is Mr. Benn up to where the allocation of blocks for development are concerned? He has consistently preferred transatlantic to home-based companies and has consistently preferred to deal directly himself with their executives rather than use the City of London's desire to finance new British exploration and development. What on earth is Mr. Benn, of all people, doing waltzing hand in hand into the sunset, usually I think by private Lear jet, with such legendary socialist figures as Dr. Armand Hammer of Occidental Oil?
Lord BALOGH: My Lords, Dr. Hammer and Occidental Oil came into the picture in 1972, of course, so I think the noble Earl's reflections on the Secretary of State are both unjust and incorrect.
The Earl of GOWRIE: My Lords, I conceded that point earlier. The point I am not conceding, and which the noble Lord has not faced, is the fact that, every year, British applications for development blocks are made which Mr. Benn continues to hand over to Dr. Hammer and his colleagues. I am not saying that they are not worthy of them, but over the whole sector there surely is a considerable imbalance here.
Lord BALOGH: My Lords, I am terribly sorry, but that is just not correct. Much the greatest number of licences have been given to single, individual firms; for example, to BP, which, after all, is still a little British-owned. So far as the others are concerned they are given only to those who have proved themselves, and in this sector there is not very much large-scale industry which is totally British.
The Earl of GOWRIE: My Lords, the noble Lord, Lord Balogh, has not been listening, as I have, to the great chorus of disquiet on this. That is all I can say. To use my Japanese analogy once more, can one imagine the Japanese pulling in the "Seven Sisters" to develop oil off their shores? And they, the Japanese, with all their sophistication, have less
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sophisticated capital markets than exist right here, on our doorstep, in London.
Mr. Benn is an apostle of open government as well as of the need to encourage British technology. Yet he is worryingly uncommunicative about why particular blocks are allocated to particular companies. He has never, so far as I can ascertain, given a single explanation as to why an application from a native company has been turned down in favour of large American corporations.
Lord SHEPHERD: My Lords, would the noble Earl permit me to interrupt him? This is a very serious statement—I will not say, accusation—that he is making. I wonder whether the noble Earl, for the benefit of the House, would put down a Question as soon as possible to elucidate this type of information. I think it would be of great value to the House.
The Earl of GOWRIE: My Lords, am perfectly prepared to do so. What I am complaining about is that, as my noble friend Lord Selsdon said, there is no lack of capitalisation prospects within this country for year-on-year applications for development grants. Indeed, it would cause many on this side of the House great delight if Mr. Benn and the Government were to utilise, or were to suggest the utilisation of, union funds or pension funds in this respect. But, so far as I can ascertain—I shall be delighted to put down a Question, as I have done some research on this—nothing of this kind has been forthcoming.
Lord SHEPHERD: My Lords, I will not exactly say that the noble Earl has made accusations, but his words give me a twinge by suggesting that there is something sinister going on between Mr. Benn and American companies.
The Earl of GOWRIE: No—
Lord SHEPHERD: Perhaps the noble Earl will forgive me. All I would ask the noble Earl is whether, for the benefit of the House, and as soon as possible, he would put down a Question for oral Answer, very much on the lines on which he has been speaking, so that the appropriate Minister can make the proper reply.
The Earl of GOWRIE: My Lords, I go back to my earlier point: Would we have the appropriate Minister? But I shall do what I can.
My Lords, this brings me, briefly, to the role of the BNOC. It is, regrettably—but I think there can be no shirking this—in dispute between the two major political Parties. We on this side acknowledge the need for a regulatory body, but we are very uncomfortable at the ability of the referee himself, so to speak, in this all-important game, to take shots at the goal. I think we should need to be very powerfully persuaded, in office, that the BNOC, in its entrepreneurial role, was not actively preventing the native private sector from developing as it should in this region. I think that many people on all sides agree that the record of State entrepreneurism in this country is pretty bad, and, to us, there seems no clear case that the confusion between wealth-creation and the provision of services should continue indefinitely in this area. Whoever is in office, I think there is now something of a new consensus of opinion here.
Two final points. There is the issue of depletion, which I am a little surprised that more noble Lords did not raise. I understand that the Prime Minister is on record as saying that in his view—and I think he made it clear that it was a personal view rather than a Government view as such—it was the most important issue. I am, myself, something of a maverick on depletion. I would argue that if our economy is healthy, if we pay our way in the world, there is no reason why we should not be able to purchase energy, or, rather, a proportion of our energy needs—and remember, as noble Lords have said, we still have the coal and the miners—on world markets in the future, just as we have done in the past. Of course, we have a duty and an interest to help the world, and therefore ourselves, to develop alternative energy resources. That is important, but a subject perhaps for another debate.
Some commentators, notably and persuasively Mr. Samuel 13rittan, have argued that abolishing exchange controls and allowing us to plant the seeds of capital round the world now, as we have fruitfully done in the past, would not only help us ensure enough dividends to make future energy purchases possible, but would
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also ease the harm to exports and employment of the upward movement of the pound. I happen to share that view, but I would gratefully receive suggestions as to how it might be put across to our still rather xenophobic labour unions. I think the noble Lord, Lord Shepherd, shared that concern when he said that in his view exports follow investment, but he thought that it was not politically "on" at the present time.
Then there is the issue of foreign debt repayment, to which, again, the noble Lord, Lord Shepherd, referred. This seems to me to be not only morally and psychologically desirable but also practical, in that even where there are opportunities for the rolling over of debt repayment may be a saving in high rates of interest.
My Lords, this debate will not end this evening—and nor should it—but I hope that what will end is the feeling that somewhere over the rainbow there is a Government policy which can allocate North Sea oil resources in some special, magical way so that we can rebuild our economy on them alone. We can rebuild our economy, but only in the time-honoured ways: by working hard; by finding it worth while to work hard; and, as the noble Lord, Lord Lee of Newton, said, by producing goods and services which we can sell to others as well as to ourselves. There is no bonanza and no short-cut. What North Sea oil can do is to ease the national import bill in such a way as to allow Governments a chance to get off our backs, and to let us get on with it. What it can do is to provide some alternative revenue in real terms with which Governments may ease the tax burden on our individual selves and enterprises. If our situation is eased in these ways we shall, in my view, recover, with or without the oil. If not, not.
5.58 p.m.
Baroness BIRK: My Lords, perhaps I may first add my tribute to those already paid to the way in which the noble Lord, Lord Selsdon, opened this debate. It sounds rather as though he made another maiden speech from what we are all saying; but he opened this debate in such a moderate and thoughtful way that I must say I think he set the tone for something which, like the noble Earl

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opposite, I was expecting to be rather more abrasive. This lead was followed by my noble friend Lord Shepherd, who I think made an extremely constructive and statesmanlike speech. I think that those two speeches, followed by that of the noble Viscount, really set the temperature this afternoon.
I must say right away that I do not take the noble Earl's comments as being offensive in any way. I appreciate that he is trying to lighten my burden. But, as he is very well aware, the composition of the Front Bench does not rest with me. I would only say that there is one advantage: one of the hazards of being in Government is that you get not only very departmentalised but very compartmentalised. Having to work in this way certainly makes one not only know, but have to work hard in, the various policy areas right across Government. I take his point.
In this debate this afternoon, we have naturally had a number of suggestions for the use of our North Sea revenue and a number of fears expressed of what might or might not happen. We heard ideas from using the revenue mainly for cutting income tax to using it—although we have not heard this taken to extremes today—to increase public expenditure. The Government will shortly be publishing a White Paper. I am afraid that one of the other things which always seems to fall to me is that I seem to have to reply to a debate almost on the eve of a White Paper. Before anybody says anything about that, I agree we produce a lot of White Papers and Green Papers so that it is difficult to pick out a day when one of them is not soon coming up. In answer to my noble friend, Lord Shepherd, I hope and expect publication will be very soon indeed. I cannot anticipate the White Paper. But what I can say is how far we feel that North Sea oil will improve the chances for our economy, and the choices we must make, and get right, if we are not to burn up the oil without deriving a permanent benefit from it. The extent of our opportunities and the number of choices are both finite. This is appreciated all round. But the benefits of North Sea oil can be measured in three ways.
First, there will be a relatively small increase in our total national resources.
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This will be equivalent by 1985 to about 5 per cent. of our present national income To put this in perspective, the Government are hoping for a growth rate of at least 3½ per cent. over the next few years. So the extra resources flowing from the North Sea will be less than the increase in resources from two years' normal economic growth.
A noble Lord: We hope!
Baroness BIRK: My Lords, we have to live on hope as well as on bread. Secondly, there will be a sizeable increase in Government revenue; and it is largely due to my noble friend Lord Balogh that the present Government tightened up the corporation tax régime for North Sea oil companies and introduced the petroleum revenue tax. This has secured for the country the greater part of the North Sea revenues which would otherwise have gone to private companies—many of them multinational companies based abroad—and thus exactly the things that the noble Lords have been arguing for would have been made impossible by events for which they were responsible. Lastly, and probably most important, North Sea oil will be of substantial benefit to our balance of payments. It will give us the opportunity to expand the economy and create extra jobs at a faster rate than would otherwise be possible.
My Lords, I think that from this I can draw two broad conclusions. First, the national income and Government revenues coming directly from the North Sea, although large, will not be enough by themselves—as, I think, every speaker in this debate has pointed out—to allow a substantial increase in either private consumption or public expenditure. Our policy must be to ensure that all resources are used effectively to strengthen the economy. This means that we must contain inflation. North Sea oil, if used wisely, can give us a breathing space to achieve industrial renewal; for it is on this renewal that higher living standards ultimately depend.
Secondly, and this reinforces my first point, North Sea oil, as almost every noble Lord has said, is only a temporary windfall. On present forecasts North Sea output will be on the decline by 1990 and demand for oil and gas will have increased

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in the intervening years; so that we can expect to become net oil importers again in the 1990s. Real oil prices will be higher and oil supplies will be scarce: the world will seem a very cruel place if we have not used the North Sea fat years to become industrially competitive. To do this will mean sustained investment in industry. If we fritter away the North Sea resources on a consumption boom, as my noble friend pointed out we did with gas, we will find suddenly that the oil has gone and there is nothing to show for it.
Our experience with North Sea gas is a classic cautionary tale. Things would probably have been worse without the gas, but looking back over the last 10 years—and this is something I hope my noble friend will agree that we should learn from history—it is difficult to say that we have used our opportunities single-mindedly enough or well enough to strengthen the economy.
Before I discuss how the oil revenues might be used, I think I must refer briefly to a point raised by my noble friends Lord Gregson and Lord Lee of Newton that an oil fund should be set up in order to separate the accounting of North Sea oil. This is something that the Government are currently considering and on which they have not yet reached a final view. What has been said in this debate will be fed into the Government consideration.
How do the proposals that have been made today look? Some noble Lords have proposed—and it was interesting that they were very few—that the North Sea revenues should be devoted largely to reducing direct taxation. I believe frankly that this betrays a complete lack of understanding of what the North Sea oil debate should be about. The noble Lord, Lord Selsdon, set the pattern at the beginning when he rejected this. What we have to do is to agree a policy framework to guide our detailed decisions for the next 10 or 15 years but not to lay down a rigid formula for the use of the revenue and then forget about the real problems.
The noble Lord, Lord Boyd-Carpenter, has been showering me with difficult tax questions; I was quite sure that they were going to come out in the wash when I gave my careful answers. I say immediately that we accept that tax rates
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are too high at all levels of income and should be reduced. In particular, the Chancellor's long-term aim is to lift tax allowances well above the main social benefits and take people out of the "poverty trap". I do not think that it is any secret that he hopes to reduce the burden of income tax in the coming Budget. I should like to feel, that, since the most sensible on both sides of either House, now accept the concept and the being of a mixed economy, we could perhaps get away from these cries and counter-cries of "Envy!" I think we are in a more sophisticated era now. We have seen in this debate a very strong feeling, an undergrowth, of a wish to co-operate and make sure that by arguing on Party political grounds we do not throw out the oil baby with the bath water.
Lord BOYD-CARPENTER: My Lords the noble Baroness has referred to my, argument. I agree with her approach; but would she, herself, take account of the fact that if tax rates on higher earnings are maintained at these phenomenally high levels, with such a really derisory yield, then some explanation must be required? If the one that I have given is not accurate, it is up to the Government to provide another.
Baroness BIRK: My Lords, there he goes at it again! Here I am holding out an olive branch to him—and I could take up a lot of time to quote exactly the words of my right honourable friend the Chancellor of the Exchequer—and the noble Lord comes back to this again. One has got to get this very difficult balance right. He knows this well. In a society like ours, we have to balance the economic, social and financial factors. I cannot see that it would help anyone if one pursued policies which brought the economy almost to an end. The noble Lord's Party did that in 1974. That is the last word on that at the moment.
I would point out to the noble Lord something, which came to my mind while he was speaking from my days at the London School of Economics and from reading economic history at the time. I remember that one of the worst periods of British economic growth was between 1873 and 1910. With production stagnant and large emigration, due to tremendous unemployment here, there was no progressive

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taxation at all. Yet in relation to Germany, the United States and other countries, we performed much worse in the post World War II period than we did then. This is one thing across which one can keep on drawing these red herrings.
Of course tax reductions are valuable because they keep down the cost of living by increasing take-home pay without inflationary pay increases—there is nothing between us on that—because they strengthen incentives to work at all levels, and because they will provide the increased consumer demand which will be needed to expand the economy. But, above all, what we want is sustained growth and investment, not a short-lived consumer spree. Experience—and we all remember the "Barber boom"—shows that massive increases in demand tend to benefit our overseas competitors without leading to lasting increases in domestic investment. Imports come flooding in and the boom quickly breaks down because of balance of payments difficulties.
That is why we reject any rigid commitment to spend all our North Sea revenues on tax reductions—quite apart from the social and economic need to put aside some revenue for public expenditure. It is on where we put it, and how much, that there would be differences of opinion between us. What we have to do is to strike a balance between increased consumer demand and the investment needed to satisfy that demand, and a balance between tax reductions and extra public expenditure.
North Sea oil offers the possibility of a sustained growth and a more stable economic environment. More than anything else, stability—I think my noble friend Lord Shepherd used the word "consistency", but we are talking about the same thing—will help give industry the confidence to invest much more freely than in recent years. Confidence is essential. My noble friend was absolutely right when he pointed to the lack of confidence in industry due not only to changes between Governments but to changes of policy within the period of the same Government. It is this that we have to crack right across the board.
The Government will continue giving industry all the encouragement they sensibly can. As the noble Lord, Lord
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Selsdon, has made clear, development of the North Sea oilfields themselves shows that the money and effort can be found if the prospects are right. The Government will want to continue to encourage industry through general investment incentives, both at the national and regional level, and also through continued selective assistance to specific industries, which will include successful industries of the future—for example, the Government propose to allocate substantial funds to a growth sector: micro-electronics, and microprocessors. All will agree that one needs to put money into success to get future success as well as putting it into industries that are limping along.
My noble friend Lord Shepherd mentioned the great need for training and retraining and education in this field. I entirely agree with him. The Government have recently announced a further year of special training measures, are keeping up apprenticeship training, and also have recently announced a new "training for skills" programme due to start next autumn. The universities are now more orientated to industry, and there are now industrial scholarships. The noble Viscount, Lord Trenchard, is right, that the universities took quite a time to catch up with what was going on in society.
Government and industry need to understand each other's motivations as well as their mutual problems. Dialogue, unless it is based on deep understanding which leads to action, will be unproductive and sterile. Achieving this is what the industrial strategy is all about. The industrial strategy cannot deliver the goods unless the rate of inflation is brought down to the level of our industrial competitors. Progress in the past year or so has been enormously encouraging, and we are well on the way to single figure inflation. I thought it was, if not exactly mean, just a little teasing of the noble Lord, Lord Boyd-Carpenter, to rap my right honourable friend Roy Hattersley for showing pleasure last night in the fact that in about two weeks we will be down to single figure inflation.
Lord BOYD-CARPENTER: My Lords, it was not I that did so.
The Earl of GOWRIE: My Lords, I was the guilty party.
Baroness BIRK: My Lords, I beg the noble Lord's pardon, and perhaps the noble Earl, Lord Gowrie, will accept my observation as addressed to him. Of course it is not the end of the road that we want to reach, but at least let us be less grudging when we are making some progress down the right road.
Only today the National Union of Mineworkers have agreed to accept the principle of basic wage rises within the Government guidelines. I am sure we will see the reaction to that in the Stock Exchange and foreign exchange markets. These show all the time that the City supports the Government's policy, even if noble Lords opposite do not. Directly there is a whisper of a possible Election, what happens? Down go the values on the stock market and foreign exchange markets. The City may not always come out so overtly; but I have many friends in the City and I can assure your Lordships that they prefer the Government in power at the present time. All this slow progress could be frustrated if the general level of settlements breach the guidelines.
There has been a change in work patterns. This was referred to by the noble Lord, Lord Selsdon, and by my noble friends Lord Gregson and Lord Lee of Newton. It is true that in many ways we are moving in some respects towards service industries. Where this helps our invisible exports—as it does in the tremendous leaps and bounds of tourism—it helps our balance of payments and also gives employment. As pointed out by my noble friends Lord Shepherd and Lord Gregson, it is essential that we improve our manufacturing industry in order to provide the wealth on which we can build anything else.
The noble Lord, Lord Boyd-Carpenter—and on this I am sure I am right—was very passionate on the subject of the alleged blacklist. I do not wish to weary the House on something which is now a matter of record and has been gone over at great length in the other place. Our position is that we are absolutely free. It would be wrong if we did not use our discretion not to subsidise with public funds those companies which threaten to refuel inflation by excessive pay settlements. My noble friend Lord Shepherd was absolutely right when he said that. We are not saying: "This is illegal; you
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have to shut up shop". We are saying: "You cannot have the benefit of Government aid—whether it be by grants through the Industry Act, or whatever it is—if you are going to do that". The people who are prepared to deplore this action are exactly the people who make a terrible fuss if a group of workers want a wage increase. This is something in regard to which, if we are going to try and hold a strong line—and the Social Contract has worked fairly well and so has the counter-inflationary policy—then it has to work for both sides of industry. Most sensible, reasonable people think so.
My noble friend Lord Balogh has urged the Government not to close their mind against seeking more protection for our industries. I was not surprised that he said that because he has said it on many occasions. We have a strong interest, however, in the continuation of an open trading system. We export more manufactured goods than we import. The Government have made it clear that they will not stand by and watch otherwise viable industries damaged by unreasonable levels of imports. What I find worrying in the suggestions put forward by the noble Lord and other people is that a "tit for tat" arrangement could damage us enormously.
Most recently, the United Kingdom has achieved—through the EEC—a much improved Multi-Fibre Agreement which should greatly benefit our textile industry. The Government have also expressed their anxiety that countries like Japan and Germany should expand their economies as fast as possible and get their imports and exports into better balance. So it is a case not only of being aware of the problem but of trying to do something about it.
As well as assisting investment in private industry, the Government will continue to be a substantial investor in its own right. Through the nationalised industries, the NEB and the Development Agencies, industries in declining areas will be modernised and new job opportunities provided. The industrial infrastructure will be improved—that is, our transport system and the public utilities—but there is no question of public sector investment replacing investment in private industry. As I have already stressed, and must

1109
stress again, our aim is to mobilise all the country's resources right across our mixed economy.
My noble friend Lord Shepherd raised the very vexing question of the construction industry. It is certainly true that in recent years this industry has had a very tough time. This was largely due to the fall in private sector demand, and there have also been cuts in public sector demand; but these have to be seen in the context of the need to cut back public expenditure generally. The prospects for the industry, as I think we are all aware, are now better. Private sector demand has already begun to recover; and, as a result of all the construction measures announced during 1977 (which added an extra £800 million to expenditure in the period 1977–80), public expenditure on construction will now run at a steady £4½ billion a year up to 1982.
That is the whole lot, including inner city areas, home improvements, allocated departmental programmes, a larger share for housing and the allocation made last November for 1979/1980, which has still to be split between programmes. This does show that a tremendous boost has been put into construction, and the latest inquiry by the National Federation of Building Trades Employers, which was quoted in yesterday's Financial Times, confirms that they believe that recovery is on the way. If they feel that way, it will probably carry more weight with your Lordships than my saying it to you.
The Government want to do all they can to create greater stability in the industry, and I am confident that the industry will be able to respond to the demands which will be placed on it. But it must be ready to recognise and respond to changes in these demands, for, at the end of the day, we can only spend what we can afford. This applies to public expenditure generally—we do not want again a certain kind of "boom and crash" in the construction industry, with all the terrible unemployment that is involved.
Public investment will also he needed for energy—and my noble friend Lord Gregson pointed that out very succintly—— since the conventional energy sources will have to be greatly expanded as the existing North Sea fields run down if we are to secure an adequate supply. The new
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energy sources such as wind, solar and wave power, are currently at an early stage of development but we can expect an increasing commitment to bridge the "energy gap" left by North Sea oil when it runs out.
Conservation—on which historically we have a dreadfully slothful record—is essential. Measures taken over the last four years (and we started very late) have already saved us considerable amounts of energy and, as real energy prices increase, further conservation efforts will play an increasingly important part.
So far I have concentrated—and as quickly as I could—on the use of North Sea oil in strengthening the domestic economy, because this is the central issue which must determine our approach to any other issues which arise. The use of the North Sea benefits to finance issue. Some noble Lords on the Opposi-increased investment overseas is one such tion Benches have argued or implied that exchange controls can and should be abolished, now that North Sea oil has come to the rescue of the balance of payments. My noble friend Lord Balogh, on the other hand, has argued that the controls have already been relaxed too far. These two different views, which have been expressed in the other place and among experts outside, perhaps suggest that the Government's present policy is not too far off course as it seems to strike a balance between them.
The home economy could be held back if heavy outflows on investment account weaken our balance of payments so that the economy has to run at a lower level of demand than would otherwise be possible. Therefore, the Government will keep exchange control restrictions under continuing review: any relaxations will depend on the strength of our current account position at the time. We have already relaxed exchange controls a little, but it is right for the Government to be cautious about further relaxation. The turn-around in our current account position is a very new phenomenon and, therefore, more experience is needed before we can be confident enough to place further burdens on the balance of payments.
The repayment of overseas debt, which has been mentioned by several noble

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Lords, is of course, another claim on our balance of payments. There is a considerable hump in our payment obligations of about 20 billion dollars between 1979 and 1984—that is, while North Sea oil production is building up to its peak. The Government's policy is to spread this hump by early repayment and by new borrowing. The programme of early repayment has already begun: on 26th January, the Chancellor announced the repayment of 1 billion dollars due to the IMF, and the nationalised industries are also repaying about 750 million dollars of overseas loans early. I think that was something that the noble Viscount, Lord Simon, and my noble friend Lord Shepherd stressed.
Turning to the exchange rate, I recognise that my noble friend Lord Balogh, who is a most distinguished economist, has expressed very strong views about the exchange rate. He quite rightly and frankly points out his views are different from those of the Government. I do not think that now is the time for a long debate on exchange rate policy, so I will leave that as a disagreement between friends or something that we can perhaps discuss later à deux.
Everything I have mentioned is designed to create the right climate for the regeneration of British industry—but this is not an end in itself. The great hope of North Sea oil, is that, if properly employed, it will give everyone an increased standard of living. The working population will gain directly from economic expansion through higher real incomes and increased employment opportunities—and when I talk of "the working population" I am including management, which, as I am sure noble Lords will agree, also needs increased skills in many areas, in the same way as other workers. But there are other equally important groups in the community, to which my noble friends Lord Balogh and Lord Shepherd referred—the old, the sick, one-parent families and those living in a wretched environment. All those, and many other groups which are unfortunately too numerous to itemise at this moment, are also entitled to a fair share of the benefits—because that is what we mean when we talk of a compassionate society and our social obligations as well as our financial and
1112
economic obligations. They will only get this through greater public provision. In the farther future, I would say that there are cultural and artistic areas where, given the resources, it would be marvellous to increase public expenditure and public enjoyment.
The latest public expenditure White Paper shows a steady increase running at about 2 per cent. a year up to 1982. That is designed to be well within the growth of the economy as a whole over this period. I make no apologies for this, because the Government will continue to make sure that public expenditure grows no faster than the economy can afford. Again, it is a question of balance—North Sea resources are no excuse for prodigality and we cannot afford to expand public expenditure too much or too soon.
I would just say finally that the converse of exaggerated euphoria, which I join with everybody in denigrating, is not desperate despair. While I think we should show, as has been said by every speaker today, the need to take careful decisions, and the need for co-operation and for dialogue based on something firm, we have during 1977 seen a balance-of-payments surplus, inflation brought down, the general financial position strengthened, and we have also seen interest rates come down. So we have something to build on, together with the oil. Nevertheless, I come back to the fundamental issue which this debate has raised—the urgent importance of using North Sea oil opportunity to strenghten the economy. My noble friend Lord Shepherd felt that the White Paper should be issued as quickly as possible, and I agree with him. But, even without the White Paper, there is no time to be lost in trying to change attitudes, as we have heard from both sides of the House this afternoon. It will not be easy, but the opportunity is certainly there. If we fail to use it, our grandchildren will not forgive us, for we shall have failed them.
6.31 p.m.
Lord SELSDON: My Lords, I do not think that I am very good at summing-up noble Baronesses. I might be a little hesitant in what I try to say in these remaining few minutes. To me this has been a most interesting debate, remarkable in that it did not go in any way in the direction in which I intended it to go.

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The comments from Benches opposite were comments which I might well have made myself. Inevitably, we had the usual history lesson on the economic failures of previous British Governments, but I suppose that that is a fact of political life. As a hereditary Peer, something that I value above all is the privilege of being able to listen at first hand in your Lordships' House to people who have been through many things before. Equally, I always enjoy the extremely cultural and elegant way in which my noble friend Lord Gowrie manages to speak on a wide range of subjects, and to make some fairly perceptive points with remarkable charm, but with certain barbs beneath.
May I first thank all those who have spoken today for the kind remarks which they have made about my contribution, which, as I pointed out, was not really my own contribution but a distillation of the wide range of views and advice that I sought before this debate. It is a debate which should be widened and should continue, because there is no doubt, after listening to noble Lords today, that the many issues which have been raised cannot be quickly and easily solved. The noble Baroness pointed out that I did not emphasise or suggest a reduction in taxation. I think that that is what I intended to emphasise more than anything else, from both personal and other points of view—not perhaps a dramatic overall reduction in taxation, but a shift in the emphasis, because the emphasis has gone too far. I was encouraged to hear that the Government have stopped encroaching further in the mixed economy moves, perhaps because they have realised how easy it is to burn your fingers in areas of activity about which you know very little.
The prospects for this nation, despite the depressing way in which I sought to start, are quite remarkable. Those who do not understand the social and internal political problems must, if they are required to write, point out that, of all the nations in the free world, this is one that has a greater opportunity than it has had since the end of the last war, and probably since the start of the Industrial Revolution. The direction in which we go will inevitably have to be a new direction. Maybe it is best that we go by consensus, but I think that the greatest way is to say to the
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British "Look, you have now got a chance. It is up to you to do something about it, and we are going to create a climate in which this is possible". My Lords, I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

THE FIREMEN'S STRIKE: REVIEW
6.34 p.m.
Lord CLIFFORD of CHUDLEIGH Lord CLIFFORD of CHUDLEIGH rose to ask Her Majesty's Government what lessons they have learned from the firemen's strike. The noble Lord said: My Lords, in asking the Question which stands in my name on the Order Paper, I should first like to explain why it was put down. I was having a meeting with one or two Members of your Lordships' House just after we returned from the Recess, and the view was expressed that the Government would heave a sigh of relief, chuck the file into the corner and forget all about the strike. Therefore, I thought that it might be a good idea just to try to remind the House of some of the points that seem to have come out of the recent firemen's strike, and see what encouragement we can get from the Government about preventing such a dangerous situation from occurring again.
I begin by saying that I am one of those who think that, in the public service and especially where people's lives and property are at stake, the right to strike should perhaps be forgone, in return for some guarantee that the standard of living of those concerned will always be regulated so that their rate is a little above the normal, in order to make things worthwhile. Apart from that, going back to my days in the Territorial Army in the South-West, where half of our exercises were with the Civil Defence and where most Civil Defence exercises included a very large proportion of firemen, both regular and part-time volunteers, I was not at all surprised when I saw that the South-West area voted against going on strike. I was also not surprised that quite a few refused to strike; and that we had no trouble in the rural areas, where the volunteers went on as usual. And, of course, in our part of the world the Service mainly concerned was the Navy who themselves have plenty of experience in fire-fighting.
While speaking on that subject, the very first point that needs to be brought out is how much we in the country owe to the loyalty of the fire officers who did not strike, and I hope that the Government will make it clear to the country, and to the individuals concerned, how much we owe to them and how much we appreciate them. That brings me to a point which will, I am sure, arise again and again this evening. It must be seen that there is no "anti" feeling by the unions against those who carried on working, now that people have gone back to work. Another point in regard to firemen in my part of the world is that it has again and again been pointed out how important is the volunteer element in our national life.
An important lesson which should be learned is that there is now public awareness of the fire danger, which the Government very rightly stressed through the media at the outset. The Government should not now let everyone get back into the old laisser-faire way of carrying on, as they did before. I am sure that in the South-West they do not want to strike again, but, if the right to strike is not forgone, may I suggest to the Government that, in whatever arrangements are made for the future, there should be provision for a ballot before a strike takes place.
I feel that the Government must now work overtime in order to restore the morale that has been so damaged by the strike. In the last five years, there have been progressive disputes leading to the "emergency calls only" type of go-slow, or whatever one likes to call it, and these were building up towards the all-out strike that we have just had. If I may quote the words of a very senior fire officer who is a friend of mine, he said in referring to what happened,
"It is the worst example of creeping industrial disease causing loss of morale and discipline".
To my way of thinking, morale and discipline amount to the same thing. We must not allow this kind of thing to happen again, and I am hoping that the noble Lord who is to reply for the Government will give us some encouragement in regard to what they, together with the National Joint Council for local authorities' fire brigades, will do to see that this does not happen again.
Next I should like to deal with the intervention by Servicemen. The Services
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—overstrained by Ulster, Belize, Bermuda and now this, so much so that they cannot cope with our NATO commitments—did, as has been generally recognised, a very good job. They would do a very good job, of course. In my discussions with various Servicemen about their experiences, the first point that was made by them all was that the Fire Services in this country are grossly overmanned. For example, in London only 100 green goddesses coped with the same number of fires in an area that is normally covered by 600 modern appliances. In the Wood Green area of Glasgow, four green goddesses and one military fire station coped with an area covered by five normal fire stations, each of which had two or more modern appliances.
The next point that was made by every Serviceman who was engaged in firefighting related to pay. I am not saying that the firemen should not get any increase in pay. I opened the debate by pointing out my position so far as pay is concerned. However, I believe that it was wrong to expect Servicemen, on their pay, to do so much when their pay has to be compared with that of firemen even before the strike, quite apart from what has been awarded to them since.
We have all read in the Press about the pay of the private soldier. I will tell your Lordships about an officer friend of mine. Having been on leave for three days after returning from the worst part of Northern Ireland, he was called back for fire duty. He was on fire duty during the whole of the Christmas period. He told me that on Christmas Day the fire officer who was on duty at the same station received £100, including holiday pay, overtime and all the rest, whereas my friend got £12 a day as an army captain. One of my informants told me that in Glasgow the night rate is time plus one half and that when the night shift goes on duty, the men do a couple of hours' work at the most, cleaning up and training, and then go to bed, unless called out by a fire. However, there was no alteration in pay for the unfortunate Serviceman when he was on night duty.
It is this kind of thing which makes Servicemen say time and time again they are being used as slave labour. That is a lesson which I hope the Government will take to heart, and I hope they will correct

1117
the position fairly soon. In one part of the country they were complaining of petty nuisances—of sabotage, dustbin fires and so on—which did not make life any easier for them. At the Grosvenor Hotel fire, the striking firemen turned out to heckle the Servicemen who were trying to do their jobs.
I do not believe that the media were all that helpful. Noble Lords will probably remember the case of a disastrous fire at which a senior NCO broke down under the strain, having been asked about what had happened. The television chap then interviewed the striking firemen who said, "Of course, if we had done it, we should have saved those lives". However, the television people did not bother to ask them why they had not done it. This was all designed to put Servicemen in a bad light.
One interesting point is that a certain NCO had left the Services and joined the Fire Service. Then he found that he was so bored with not having enough to do that he rejoined the Services, was promoted and found himself back in the same area where he had been a fireman. His information was very revealing.
It is also a scandal that the Government would not allow the Servicemen to use modern equipment. I have spoken to several officers who said that they could have trained their men in a matter of three of four days at the most to operate these complicated modern machines, though they are complicated only when compared with green goddesses. My son-in-law, who is a submariner, tells me that all submariners are trained in the use of far more sophisticated breathing apparatus than firemen ever have to use.
I spoke to another officer at the military fire fighting headquarters in London and asked him what was the truth about the official signal from the Home Office to the military fire service that strikers—he could not remember where—had loosened the bolts on green goddesses. I should like to know whether what they all say is true; namely, that the firemen were paid bonuses for all of these hoax calls. I should also like to know whether it is true, as they said, that the firemen made arrangements for their wives or others to put through those hoax calls.
I feel that the Government must show that they stand by the officers in particular
1118
and by the others who did not strike. Before the strike ended, I know that some of my friends in the Services were told by the strikers that they were not going to go back unless those who did not strike got the sack. Noble Lords probably saw the leader in yesterday's Telegraph on that very subject. In the Press over the weekend there was a report of poison having been put into the coffee of one of the non-strikers.
I should like now to turn to another important lesson to be learned from the subversive elements that were evident not only in this strike but in others. I am sure that all noble Lords realise that the Trotskyist and Marxist groups carried in all their publications the headline: "Smash the Government and the 10 per cent.". The main operator is the Socialist Workers' Party, which used to be called the International Socialists, and its subsidiary, wholly controlled the rank and file movement. They produced the Daily Strike News for the rank and file firemen, and I am sure that the Government know how inflammatory were those organs. Strathclyde, Liverpool, South Yorkshire and parts of London were the areas which were most affected.
The Socialist Workers' Party—Yigal Gluckstein, Paul Foot and others—referred to the troops in all their issues as "scabs". Another group, the International Marxist Group—Tariq Ali and his boys—had a picture in the Socialist Challenge of the noble Lord's right honourable friend, and underneath the caption "Rees wanted for arson and murder". People like Jim Fitzpatrick, of the Fire Brigades Union, from Battersea, and Paul Macdonald from Strathclyde were both very prominent at the rank and file meeting on 26th November. We are used to "rentamobs" nowadays, demonstrations. We see pictures of the same ones at Grunwick and outside TUC headquarters, and, of course, at Bridlington where Terry Parry was knocked to the ground. I came across this little jingle about that in a fortnightly rag:
"They acted just like animals, cried Parry;
Come off it Terry, for a moment Terry.
Tell me what animals would yell and spit, and punch and kick,
Just for the hell of it.
The savagery that you're referring to
Is done by members of the human zoo."

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It is a matter of regret that this Government have not taken more action against these subversive groups, who, after all, only want to turn us into an East European State. They might have paid attention to my noble friend Lord Chalfont's debate on the subject a couple of years ago.
To my mind, the main lesson from a national point of view is that the Civil Defence organisation should never have been abolished. It was abolished by the present Prime Minister when he was Home Secretary. From that day they destroyed or got rid of some equipment. Other equipment they put into mothballs, like the green godesses. What has happened to the green godesses now? Have they gone back into mothballs? What is going to happen if and when you have another firemen's strike? Are you still going to depend on those vehicles? If you had not abolished the Civil Defence organisation, those vehicles would have been kept up to date, as would have been a sufficient number of the Auxiliary Fire Services, ready for any emergency. They abolished at the same time the Civil Defence Staff College. I happen to be a graduate of that. They have now turned it into a college for civil servants, a sure growth industry under the present Government.
In those days the Territorial Army was an integral part of Civil Defence. As I said earlier, half our exercises were with the Civil Defence organisation. They abolished that, and what happened?—I will give your Lordships one example. We had a territorial unit of sappers in the county I come from, and every year they built a Bailey bridge over the railway for the county show. That was abolished, and of course the Bailey bridge went elsewhere. When two years later floods destroyed the bridge on the main London to South-West road, the A.303, to get a Bailey bridge they had to send to the nearest regular depot, which was up in Essex. That is one example of how those Civil Defence operations have been ruined by the stupidity of abolishing Civil Defence. We saw in the Highland blizzard the other day one TAVR officer—that is all that is left of the truncated TA—prodding in the snow. If you had kept the TA and the Civil Defence organisation, half your troubles would have been over.
Perhaps some noble Lords can remember a debate we had in this House when the Government were abolishing Civil Defence. The Opposition was led by the noble Earl, Lord Jellicoe. I think the noble Viscount, Lord Long, made his maiden speech on that occasion. I know that my contribution on that occasion was duplicated by the head of the Civil Defence in the county and sent round to the Civil Defence workers to try to boost their morale. I make no comment on whether or not it did, but their morale was pretty low because they were abolished anyway.
If we had not done that, we would have had plenty of people trained to deal with radioactive sputniks if they landed in London or Birmingham instead of the Arctic wastes. But, No, everything of that kind is tied up. I think we ought to reintroduce that, or make some arrangements; otherwise we are going to be in a very poor state if any real calamity affects this country. After all, in Norway every male between the ages of 16 and 50 does something towards the defence or civil defence of his country. I do not see why we should not do at least as much as a small country like that. That is the biggest lesson that I hope the Government will learn, though I hope they will also learn some of the lessons from the actual mechanics of the strike and the way the Servicemen were treated during it.
6.57 p.m.
Viscount LONG: My Lords, first, I am sure all of your Lordships who are taking part in this debate would like to congratulate the noble Lord, Lord Clifford of Chudleigh, for raising it. Important as is it, there must be many lessons of our internal security that can and must come to light this evening. I should like to say to the Government, through the noble Lord, Lord Harris, that I hope this debate will have some "whys" and "know-hows" that will help the Home Office and the Government, and Governments in the future, when such emergencies arise. Never have any one of us, within your Lordships' House or among the public, had any reason to criticise the Fire Service. Their bravery is phenomenal. Their training and experience throughout has always been an inspiration to any of us who have ever experienced the horror of a fire.

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I think at this moment it is important to name the jobs that this man has to do. No longer is he just a fireman; he is a man of many trades in the world of rescue and safety. He is a man now having to live with the new chemicals which are coming on the market, which have to be learned about overnight, and are vicious and very dangerous. He has to do such jobs as rescuing cattle from rivers, dealing with very serious car or lorry crashes, with the latter sometimes involving dangerous chemicals. Today, he has to be a very experienced man. Equally, his equipment is sometimes only a few hours out of date because of the new chemicals and the gases that they release; even his oxygen apparatus may not be of help. Let us be quite clear in our minds that these are men who have to deal with serious problems that occur every day throughout this country.
My Lords, at this moment I should like to thank those experts outside the House who have been able to give me a new look into the fire brigade system as a whole and of their problems. I am most grateful to those who have contributed towards helping me this evening. We in this House, together with the public, have witnessed a very tragic moment, one of our senior public services coming out on strike, something that we never imagined would happen. I will speak for a moment, if I may, personally. I believe—and it may well be that many of your Lordships think the same—that as it was a question of money, or pay, the Government got their priorities wrong. It was when at the introduction of the pay freeze that all men who were earning wages had them frozen at whatever sum the Government wanted at that moment. However, the priority that I believe was wrong was that of comparing a fireman, a policeman, or a Serviceman with the industrial working man.
We are living in a very sophisticated society. That society demands to be protected by the police through law and order. It demands that Her Majesty's Armed Servicemen protect our shores—Northern Ireland is one such case. It demands of the Fire Service help, immediately, if any emergency should arise. I cannot for a moment understand how the advice was given to the Government—or the Government were weak enough at that moment to accept it—to cut across
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the whole spectrum of pay and people and allow the top priorities to be governed like the whole body of industry, especially as the Government demand of these services 100 per cent. at all times.
Therefore, when the wage freeze was brought into being it brought the important services into difficulties. We saw it happen in one case after the other. At present we are looking at the Army which, because of pay, is losing numbers so quickly. A few months or a year ago we looked at the police who were finding it difficult to recruit because of pay. We are looking at the young people who come into the Fire Service; they too now are suspicious that they will not get the money that others are getting. Therefore we are living in a society that must surely demand the best pay in order to protect itself at all times.
During the strike the firemen went through a traumatic experience quite unknown to the English race as a whole and quite unknown to themselves. They experienced bitterness, squabbles within the union and between friend against friend. We have witnessed all of that, and it was referred to by the noble Lord, Lord Clifford of Chudleigh. When firemen go out to an emergency they are all part of a team, whether it be three, four or six, each having to trust the other when faced with an ugly situation. They are the men we expect to rescue us. They are the men paid by the Government, through the local authorities, to protect society and to help it in one way or another.
Now we are looking at a situation that could well be as ugly as anything we have seen. They are the fringe benefits of a society which believes in destruction. There is wheeling and dealing into important protective parts of our society, breaking them up, breaking their morale and breaking their pride and their sense of duty. We have witnessed that situation for the first time. How horrifying it would be if it were to happen to more than one group of people. I am sure that all of us recognising the firemen's job, hope and pray in every way that the wounds and scars created by the strike will heal very quickly, so that man working with man within the Fire Service can again be friends, otherwise the one becomes a danger to all in his Service.

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I turn briefly to what the general emergency was about, how it was looked at and whether there are any lessons to be learned. The Fire Service, quite apart from a fire-fighting role, has in recent years tended naturally to assume the function of a general rescue and relief from distress unit, mainly arising from the general development of pressures in the form of heavy traffic, motorways, rapid means of transport by rail, sea and air, together with the change in style of buildings, such as the high-rise buildings or the high-rise flats, commercial premises, with the consequent problem of people being trapped in buildings, vehicles, lifts, et cetera. Probably 25 per cent. of the firemen's activities involve that type of work at the present day. On face value, it would appear that the provision of military assistance during the strike period covered reasonably adequately the responsibilities and activities of the Service.
However, when examined in depth, it is now becoming clear that the success of the fire and emergency cover arrangements during the strike were due primarily to two factors. I have named the first one: the tremendous response by local authorities, public bodies, industry and commerce, in providing at very heavy expense, extra fire patrols, inspection and security arrangements during the strike period, coupled with the exceptional zeal and service provided by the police force in arranging for instant response to every emergency call, including incidents other than fire, by either the local mobile police units or arrangements with private organisations.
The second point that I should like to make is that the military provision of heavy mobile fire fighting units, while being most desirable and necessary from the point of view of preventing complete conflagration and relieving public anxiety, proved non-effective in coping with larger fires, notwithstanding the availability, as advisers, of almost the normal complement of senior fire officers. Most of the major incidents in the London area in which a fire had any sort of hold ended in the buildings being destroyed by the time a call was received. On that aspect even the regular battalions of a fire brigade would probably have had to leave very heavy fires when they got out of control. I am not an expert fireman but I should
1124
think that they would have found the situation equally difficult.
There is one clear point that I should like to make. The first lesson to be learned from the strike is the value, from a pure fire-fighting and rescue point of view, of the professionalism of a regular fire brigade. Therefore, we have learned the lesson that we really cannot do without our regular services and, as I have already said, they must be paid properly.
The other point that I should like to raise is about communications. It was here that the dual arrangements between the police and the military, together with the joint use of communications, proved how necessary it is that the emergency services should develop communications on a joint basis, in the form of a land-line, radio and other sophisticated material in this field, so that, in times of national or even local emergency, there is compatibility. Without doubt, such an arrangement would lead to some sort of economy in the purchasing and development arrangements for the future.
That leads me to the future. It looks very much as though those great men in the Services who manned the green goddesses proved that they could do the job as economically as the regular Fire Service. Surely a lesson can be learnt from the use of the heavy, sophisticated and expensive equipment which is operated today. Can we not produce or design a smaller vehicle which would go out first? I understand that the arrangement is that two fire engines have to go out on every call. Therefore, could we not look at the possibility of developing a smaller vehicle such as the green goddess which could be sent out first? If the fire was bad, the crew could radio back to the fire station for heavy equipment? I believe that we should now be thinking of less expensive equipment to send out first. Of course, there is the matter of hoaxes. In those circumstances, two fire engines go out, arrive at the scene and find nothing happening.
I turn briefly to the standards of manning and fire cover. Using the experience of the combined police, military and local authority arrangements during the strike, it is possible to reconsider the arrangements for the manning and

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deployment of fire appliances in respect of all purposes in order to assess whether there is scope for altering the manpower requirement, and whether or not any part of the service provided by the Fire Service can be better dealt with by other arrangements.
I believe that it was the noble Lord, Lord Clifford of Chudleigh, who reminded me of my maiden speech. I would remind the noble Lord that I was not a member of the Civil Defence Corps; I was called in as a volunteer at that moment to make up the numbers. I well remember him saying that the Civil Defence Corps should come back into being. At this moment I am not sure whether that would be the right answer, or whether the Government are considering training members of Her Majesty's Armed Forces to deal with this in the future. In the firemen's strike the Servicemen were not trained; they came straight to the job without knowing how to fight fires.
At first sight, it appears that other arrangements are unlikely because of traffic conditions and the development of traffic-free precincts, together with large industrial, commercial and shopping complexes, which to a great degree inhibit access from a single point and tend to militate against reducing the number of appliances available for response to various areas and risks. It appears that, without very careful analysis of risk and of further developments and trends, it would be very unwise to make quick and possibly dangerous judgments regarding Fire Service cost-effectiveness purely on the basis of the peculiar circumstances of an all-round strike of the professional Fire Brigade.
I believe that we should proceed slowly from this debate and from what we have learned, rather than making up our minds quickly what to do for the future. This has been a useful debate. A catastrophe such as a strike always brings out the best in people: they start talking and getting interesting points together. I welcome the debate and hope that I have been able to contribute to it somewhat. This is a complicated and expensive matter, but the slower we go over it, the better the result is likely to be.
7.15 p.m.
Lord LEE of NEWTON: My Lords, the one matter upon which we shall all agree is that we cannot speak too highly of the manner in which the soldiers took over the onerous task which faced them. Looking at the situation again, one wonders how they would have fared had they not had the advice and assistance of the fire officers who worked with them.
One of the first lessons that we should learn from the firemen's strike is that we have now reached a position where those workers who have no real economic or industrial power and, indeed, no record of strike activity—including the fact that they do not even have a strike fund—are now prepared to attempt to emulate the activities of those who do possess such industrial power. Indeed, we have seen similar developments among very many of the professions and among people with very differing degrees of economic power.
Therefore, I think it is true to say that the public bodies, which, in the main, are the employers of such workpeople, are not attuned to the possibility that the negotiations in which they engage could well end in strike action. It is a completely new atmosphere for them. The sooner they learn that the days of a paternal approach to these matters are over and adapt themselves to the new conditions, the better. It may well be that we shall have to look closely at the efficiency of the very organisation which they have used for so many years for discussing wages, salaries and matters of that kind.
No matter how well-intentioned either side or both sides of a negotiation maybe, unless the machinery is right, the negotiation could very well stumble because of a deficiency there. For instance, at one period I thought that for people who quite obviously were used to industrial negotiating they had both reached a dead end, yet the strike went on week after week. There did not seem to be a part of the machinery—for example, compulsory arbitration—which could have brought out the point that they were at a dead end, that there does not seem to be any body or vehicle that can step in and assist in the matter. So there may well be a machinery problem in this kind of dispute.

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I believe it was the noble Viscount, Lord Long, who said that the Government should not have applied the criteria to this Service that they apply to industry. The noble Viscount suggested that the firemen should receive higher pay for their services. I do not believe that the firemen were in any way the victims of Government policy. We cannot very well differentiate when we impose a freeze or a norm; we cannot begin to differentiate other than on the time factor and on the norm that we impose. The fact which must be looked at squarely in the face is that all low paid workers—and the firemen are by no means at the bottom of the ladder—are the victims of a system of collective bargaining which relies utterly and entirely upon the amount of industrial muscle you possess. If you do not possess industrial muscle but try to pretend that you do, you are going to get hurt. Mr. Tom Jackson found that out two or three years ago.
It may well be that the Government must look again at their norm and the way they implement it. I found out in the days when I ran an incomes policy that, no matter what norm you state, the negotiators then say, "That is in the bag. We now start to negotiate over and above the norm". The only norm which is safe is a "nil" norm, if you use that kind of an incomes policy.
I hope that we can get to a more refined incomes policy from now on. I am one of the people who, for 30 years, have advocated incomes policies, and I do not intend to change now. There is a way in which we can begin to differentiate on a number of grounds. Instead of a flat increase of 10 per cent., which simply widens the gap between highly-paid workers and lower paid workers, we have to begin to introduce such ingredients as skill, danger, responsibility, dirt. To me these are essential ingredients in an incomes policy which is going to get rid of the injustices which a collective bargaining system have left behind it
When the noble Viscount, Lord Long, was speaking, I thought that he was going to suggest that there should be a time lag in which you could try to get rid of those injustices. I would agree about that kind of thing. If you judge merely by the stupid old business of how much industrial
1128
muscle you have got, you will never iron out the injustices which we all know obtain in certain types of employment. I would therefore suggest to the Government that, in looking at their Phase Four, they begin to try to apply that kind of refinement. I am afraid that, although I admire the firmness and the decision with which the Government have handled their incomes policy, including what they have done about contracts with firms, and so on, a lot of people are treating that as though it is something entirely new. Some of us who were in Parliaments long gone by, remember the fair wages clause which stipulated that employers must be paying a given trade union negotiated rate, otherwise they would not get a contract. What is the difference between that and what the Government are now doing?
If you are not really serious in wanting to eliminate the inflation—and if a number of people who are talking loudly on this are not serious then they are hypocrites—which has been a curse for so many years, then you make excuses as to why Governments should not do this, that or the other. I was appalled at what I read from the CBI. They say, on the one hand, "We thoroughly agree with the Government's 10 per cent., but if they try to implement it, my God! we will oppose them tooth and nail". Where, in Heaven's name, does one get with that kind of thing.
The noble Lord, Lord Clifford of Chudleigh, gave a few instances where firemen were sneering at soldiers about their work. I read some of that, but I also read of far more instances where the firemen's pickets left the picket line to go and assist the soldiers in putting fires out. He mentioned the activities of Trotskyites, and so on. I would ask him to consider that that was not peculiar to the firemen's strike. I know he wants to analyse the firemen's strike, and so do I. I want to find out what are the lessons. With great respect, I suggest to him that one should not confuse what was a specific issue which concerns us all with every single strike one can think of in the last three years. I care not whether it was the miners, or who it was; there have been professional demonstrators of every type trying to latch on to any particular strike.
I remember going to a meeting when the miners' problem was on. I was going

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to say a few words to them. While I was sitting waiting for my turn to talk, I listened to three or four young men sitting there. First of all, I thought that from their accents they did not sound like miners. I live among miners. I said to them, "Which pit do you come from"? They said, "Pit? We have never seen a pit in our lives, and we don't intend to". But they were the loudest at the meeting. This is not peculiar to the firemen. It is a canker which has grown into all our industrial disputes, and frankly I do not know how you handle it. But do not let us put that down as anything peculiar to the firemen's strike itself.
It was said that there are too many firemen. I do not pretend to be expert in that kind of thing, but I should have thought that whether or not there are too many firemen depends on whether or not there are too many fires. One cannot simply say that, given an average of whatever it is, three fires a night, all you need is 30 people, because averages have nasty habits of going haywire. If you have half-a-dozen fires where life is at stake and property may burn, you cannot have too many firemen. We must allow a substantially higher margin so that we can ensure that, if on a specific occasion there is a far greater than average number of fires, we can deal with the matter without, as it were, having to form a queue, and so on.
I shall not detain your Lordships any longer. I hope that it is recognised that Governments who are trying their hardest to eliminate a great curse, such as inflation, cannot perfect their policies in a short period of time. I think that the time is now ripe for the Government to go ahead in the way I have tried to suggest. But also, arising from this dispute, we must begin to look at whether in the areas of the professions, or industries which have no strike record, the machinery is sufficiently versed in the new atmosphere in which they have to work. I have a feeling that it is not. In heavy industry, from which I come, it took us many years to find out just which kind of negotiating machinery suited our purposes best. I hope that an effective and efficient incomes policy will minimise the number of strikes, but in the meantime we should look very closely at the efficiency of machinery which was produced at a
1130
time when strikes were the last thing to be contemplated.
7.29 p.m.
Lord GISBOROUGH: My Lords, I should like to start by thanking the noble Lord, Lord Clifford of Chudleigh, for getting this debate off the ground. I am sure that it will be most useful. Everybody has nothing but praise for the way the soldiers and the police collectively got together and ran the fire service during the strike. It was noticeable how quickly they learned the job, dealt with all the 999 calls and operated an extremely efficient service. I should also like to say that I have nothing but praise for the maintenance staff, presumably from the Home Office—I do not think they have yet been mentioned—who have been maintaining the green goddesses for the last 30 years. It was interesting that, had they been military vehicles, it would have been expected when they were taken out of their depots that, on average, out of every hundred that drove off, 10 would break down. In fact, only three broke down, which was an extremely good average. I hope this will be passed on to the maintenance staff. I should also like to add a word of praise to the designer of those green goddesses. They were designed 35 years ago and have been in mothballs ever since, and they are still not only efficient but highly efficient, and were found to be extremely good. There was very little criticism of them. The person who was able to design something which lasted efficiently for so long did a remarkably good job.
It has been mentioned that public reaction during the strike was good. There was a marked reduction in the number of calls; even hoax calls went down by about 30 per cent.—they constitute about 10 per cent. of the total of calls. Altogether, I think there were 25 per cent. to 50 per cent. less calls. In my part of the world, which is one of the highest fire risk areas in Europe, the green goddesses proved surprisingly adequate to deal with most of the fires. They were particularly adequate in view of the lower level of expertise of the soldiers; they were fairly easy to work and, when used in conjunction with the Royal Air Force fire tenders with their foam, it was possible for the Army and the Air Force to deal with all hazardous

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fires, even—which the RAF were able to do—life-saving in smoke filled premises. It was estimated that, by the end of the strike, the expertise gained by the Army had reached something like 75 per cent. of the level of expertise of regular firemen. The exception for the Army was the lack of skill in searching in smoke-filled areas. Of course this required training with apparatus which was not available to the Army, although the RAF were trained for this.
The main point I should like to make concerns the control rooms where the calls were logged and from which the engines were controlled. In one county the control room, which is normally manned in eight-hour shifts by 25 civilian firemen, was manned in eight-hour shifts by only nine police and soldiers. Even taking into account the fact that there were fewer calls, it was quite evident that nine men could run that control centre perfectly well—perhaps needing one or two more if the calls increased vastly. Certainly, 25 were not necessary, and one must ask why so many civilians are needed when the centres could be operated by fewer servicemen with less training. One cannot deny that the regular firemen have periods of great activity and often face considerable danger, and, when there are fires—I am thinking particularly of 1976, when there were so many dry weather fires, of which I had some experience—they work very long hours and have very little rest. As the noble Viscount, Lord Long, mentioned they also have to deal with different kinds of chemicals, with accidents and so on and nobody can pretend that they do not have hazardous work to do.
Those who have had the misfortune to need the firemen have never been other than full of praise for the efforts they have made. However, having said that, I believe it is true—one has heard this over and over again—that they have equally long periods of inactivity and boredom and it is claimed that very many regular firemen do day jobs because, if they are on night shift, they can usually reckon that they will be unlucky if they are called out. Maybe they do the day jobs because they need the extra pay, or perhaps because they estimate that they are going to be inactive overnight. Perhaps this is not true. It would be interesting to find out in order to put it into proportion.
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This leads one to wonder whether the Fire Service is not overmanned, and whether it could not be better and more economically manned with less regular firemen and more part-timers who would be able to come in at peak periods. In particular, it highlights the overmanning of the control rooms where soldiers proved that it was possible to manage with many fewer people. I hope that the Government will be able to look into these points and perhaps recommend to local authorities that reductions might be made in control rooms, and even in the Service itself, perhaps going into the question whether the numbers of regular firemen could be reduced and those of part-timers increased to cope with peak periods.
7.36 p.m.
Lord HOUGHTON of SOWERBY: My Lords, when I said that I should like to intervene briefly in this debate I had not realised that shortly my noble friend Lord McCarthy would be speaking to a broader reference on the fixing of public service pay. It is that theme which concerns me most. I suppose the main lesson to be learned from any strike is how to avoid another. One of the features of this strike which we must always bear in mind is that this was a soldier's battle, not a general's battle. This strike was the result of a revolt of the conference of the Fire Brigades Union against the moderate leadership, which they were not prepared to accept. That is an unusual situation. We usually attribute strikes to the manoeuvrings of power policies of leaders, of trade union bosses who call people out, who stop newspapers and so on, who say, "They shall not go back until we say". The authoritarian approach is often attributed to the system of government in trade unions; but here we had an example of the expression of the democratic will, and the fact that the strike was responded to as it was is an indication that it had the wholehearted support, at least to begin with, of those whom it concerned most.
I think the main lesson to be learned from the firemen's strike is that if Government intervention in the complex pattern of pay and conditions of employment is prolonged the political and economic consequences may become serious. This is especially so in the public services where

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the Government, quite naturally, resolved to set an inflexible example to all other employers. At one time, in the Civil Service at any rate, there was an attempt to break or curb the authority of Government, to decide in their own judgment what conditions of service should be imposed upon sections of their employees. That was why the Priestley Commission many years ago interposed into the whole system of fixing public service pay the principle of fair comparability, and the machinery for applying it, and of fair warning to the Government to observe the principles which they accepted, and not to interfere with the fair operation of the principle of fair comparability, even in conditions of economic difficulty.
That broke down under the stress of the battle against inflation. The principle of fair comparability, so long established, means that if adjustments are deferred, then the subsequent effort to catch up and make the necessary adjustments will be extremely tiresome; I have had experience of that. If it is left too long it is almost too frightening, economically and politically, to face the consequences of what has been done.
When I was chairman of the Teachers' Pay Review Committee I made one of the last awards in the catching up process in the public sector before curbs and restraints were accepted, if not imposed, on the whole level of remuneration. I shudder when I look back on that because that involved a 30 per cent. increase. Hundreds of millions of pounds were added to the educational budget of this country in one go, flowing probably and mainly from the miners' settlement earlier in the same year; I am talking about four years ago.
That rod is in pickle again in the public sector. The grievance grows stronger with the passage of time and then, when the doors are opened, as I said, there is this great difficulty in meeting the consequences of the prolonged deferment of adjustments. Tensions are mounting again. They came out in the case of the police and serious trouble there was narrowly averted. It was almost a miracle; I do not know how it happened, but it did. There is a committee looking at police pay at the present time. Hope has been deferred in the Police Service and the Government do not have to face the music just yet. But the band will play
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in due course, and I am afraid that that is a deferred situation.
It is not only a matter of being held back in relative terms. The curbs and restraints, the guiding lights, the guidelines and the plateaux—all the euphemisms for telling the troops that they cannot have the money—defer the reappraisal of the value of services rendered to the community in particular sectors of the public service. You cannot do anything for the police no matter how strong the case, because if you do it for the police you will have to do it for others. You cannot do anything for the firemen because if you do it for them the sluice gates will be opened and the flood will run right down the public sector. The result is that they are all huddled together with one firm Government hand on the lot. Something is bound to happen if that situation continues for too long.
This is a personal opinion, but I believe that the present pay policy is costing the country an enormous amount in economic lethargy and a dispirited workforce. Whether that cost is greater than the benefit in the battle against inflation I would not venture to say, because it is very difficult to strike that balance. Nevertheless, I remember—it is within the recollection of us all—that both political and trade union opinion united in declaring that high wages were not the cause of inflation. What has happened to that economic doctrine today? Probably they are a contributory factor, but who knows really and truly the full extent?
Lord LEE of NEWTON: My Lords, would my noble friend agree that they all looked into the abyss in 1974 and 1975 and changed their minds?
Lord HOUGHTON of SOWERBY: My noble friend and I have together been off beam more than once on this issue in another place, my Lords. One cannot be off beam in your Lordships' House because so many of us are off beam one way or another. I have made a serious point, and I conclude by saying this arising out of the firemen's strike and related to the position of the police and to the claims that are now gathering strength all over the public sector. The Civil Service unions are all putting their claims in now; they are, all of them, over the so-called guidelines. The teachers

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want to recover their lost ground. I view the developing situation with considerable apprehension.
I hope the Government will have the courage, as well as the wisdom, shortly to try to reassess the pay situation in Britain in relation to the general economic strategy. Have we got into a rut of conventional belief that pay must be held down as a vital factor in the battle against inflation, so vital indeed that all the consequences of depression have to be faced rather than allow greater flexibility? My noble friend Lord Lee of Newton referred to norms. It is said that nothing must exceed 10 per cent.; but everybody then says that 10 per cent. is the starting point. There are rows over what is claimed or granted over 10 per cent., and all efforts to stop the avoidance of the general principle are viewed with dismay and annoyance by the Government. You cannot even remunerate people for long and sustained overtime throughout a whole year, for example to deal with unprecedented tax changes in 1977; you cannot even reward people for the productivity you want out of them because it is alleged that to do so would infringe the guidelines. That is the sort of absurd situation we get into. I think that is enough as a curtain raiser to the speech I hope to make on a subsequent occasion.
7.49 p.m.
Lord SKELMERSDALE: My Lords, I hope the noble Lord, Lord Houghton of Sowerby, was not thinking of me when he used the phrase "off beam". I agree that in daring to offer a few thoughts on the subject of the firemen's strike I am talking on slightly different matters from those I normally address myself to in your Lordships' House, but sooner or later, after one has been in this august Chamber for some time, one must broaden one's field, so to speak, and I hope I shall be excused this opportunity of doing so.
Most, in fact all, of the general points I had intended to make tonight have already been made, as I suspected, but there are two particular points which I hope the noble Lord, Lord Harris of Greenwich, will take up, though I am convinced he will not be able to answer them tonight. Just about every noble
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Lord who has spoken so far has, quite rightly, praised the efficiency and the good will of all the troops who took part, at the Government's behest, in lieu of the firemen who were on strike. My first point is to question whether they were given all the aid which in fact they could have been given; whether they were given sufficient training, sufficient instruction, to carry out the jobs, which could perhaps have been done just that little bit better. In looking at the lessons of the strike, this is something which we should certainly consider.
The next point I should like to mention was raised almost weekly here while the House was sitting—that is, both before and after the Christmas Recess—and also by the noble Lord, Lord Clifford of Chudleigh, when he opened this debate this evening. I refer to the subject of issuing breathing equipment to servicemen and training them to use it—an old chestnut, your Lordships may say. The last occasion on which we discussed this matter was only a fortnight ago, on the 25th January, when my noble friend Lord Orr-Ewing asked a Starred Question. In answer to his supplementary, the noble Lord, Lord Winterbottom—and I am sorry he is not here this evening—said this in column 337 of the Official Report:
"…consultations did take place and the decision was that the timescale did not permit training in fire fighting apparatus for the ordinary soldier who was not already a specialist.".
My Lords, previous Questions on other days—as I have already said, there was a whole series of them—had already elicited the information that, while it took only a matter of hours to train a Serviceman to use the breathing apparatus, it took several weeks for the operators to have sufficient training not to run out of oxygen by, for example, breathing too fast in a smoke-filled atmosphere. That is fair enough. But the firemen's strike lasted for seven weeks, and might well have continued longer. My question to the noble Lord therefore is: At what stage were the consultations held? Also, what was the attitude at those consultations?—as the background against which they were held, if you like. Was it thought that the strike could not possibly go on any longer; or was it thought, perhaps, that if this unfortunate circumstance should occur and it should go on any longer, what could be done about it?

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No matter what causes a strike, I venture to suggest that the history of this particular one and of the miners' strike has shown that where a matter of principle is at stake that strike will be prolonged. Decisions have to be made immediately; and if there is even the faintest suggestion of a strike in the public sector, is this not the time when we should be thinking of how to deal with it should the occasion arise? In other words, could not the training have started before the firemen actually went on strike? After all, there is no great difficulty, I would think, as a military exercise, in filling a building with smoke with the use of smokebombs or whatever, and to have, as the object of that military exercise, not only the using of the breathing equipment but also, say, the firing of the smokebomb or whatever. This would have given the training which was quite obviously necessary.
My final theme is rather different. From time to time we debate the Post Office in this Chamber. It is not my object particularly to "knock" the Post Office this evening, but on the 4th December 1977 the Sunday Express had on its front page a couple of paragraphs stating that postmen were being paid up to double their normal overtime for firewatching out of their normal working hours. Perhaps the noble Lord has heard of this and can say whether in fact it is true. I am, in general, a very strong supporter of the Post Office, coping, as it always has to, with enormous problems of labour and capital requirements. But what were the postmen supposed to be doing? It was not anything, surely, that the firemen would have been doing had they been working normally and not on strike. In a very small way I am an employer of labour, and I would regard it, as I am sure would many other employers, as a normal part of one's working agreement that one keeps a general watch-out for the possibility of fires. Is this not also the case in the Post Office? What was so special about the circumstances at the time which made it necessary to spend all this extra money? Was it a new departure? Is it happening in other nationalised industries? What did the postmen hope to achieve? Most important of all, perhaps, is it still continuing? If so—this is a rather flippant point, but I hope it sums up the situation—is this sort of extra expenditure going to put a yet
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heavier burden on the rate for the postage stamp?
7.56 p.m.
Earl GREY: My Lords, I must apologise for not having put my name down earlier, but I was not sure that I should be able to attend this debate. Most strikes are regrettable, but the firemen's strike was more so because it affected our national safety. It resulted in the use of valuable members of our Armed Forces, who were taken from their vital rôle of protecting our country. At this point I should like to say how indebted we are to Her Majesty's Forces for the wonderful way in which they carried out their dangerous and hazardous duties. One can also remember when, some years ago, during the dustmen's strike in Glasgow, they were called upon, and by their actions prevented what might have been a serious outbreak of any one of a number of refuse-borne diseases. The problems the soldiers had to contend with in the recent strike were increased by the fact that the equipment used was inferior by present-day standards. The men were not as experienced in civilian firefighting as are the firemen. I think credit must also be given to the numerous fire officers who gave valuable advice and assistance, which was badly needed.
My Lords, many Questions were asked in this House about training the Army in the use of breathing and other appliances, and the answer given by the Government was that it takes six weeks' training. As has already been pointed out this evening, the strike lasted much longer than that. I should like to suggest to the Government that if a similar occasion arises again—and we all hope it does not—then a standby force, experienced and trained, is ready to step into the shoes of the firemen immediately, thereby minimising the loss of life and damage to buildings. In conclusion, I should like to say that it is extremely regrettable that there still remains a feeling of bitterness between the strikers and their officers. For the sake of the efficiency of the Fire Service, which up until now has been beyond reproach, one can only hope that this state of affairs does not continue.
7.58 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich):

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My Lords, I think all those who have participated in this debate, and indeed all those who have listened to it, would agree that it has been an interesting occasion. Not least, of course, we have had the benefit of some very interesting thoughts on incomes policy, and a developing incomes policy, from my noble friend Lord Houghton of Sowerby and my noble friend Lord Lee of Newton. My noble friend Lord Lee said during his speech that he has always been a firm supporter of incomes policy, and that is indeed true. He was a firm supporter of incomes policy when it sometimes was not a very fashionable thing to be, if I may say so. It required some fairly substantial political courage to take the line he did, and it is right to say that on an occasion such as this.
I always hesitate to cross swords with my noble friend Lord Houghton, all the more so on an occasion such as this, when he has indicated that this is something of an aperitif to a speech which he is going to deliver to us, no doubt within the next few weeks, in which he will develop his thoughts on incomes policy. I would say one thing to him and to one or two others who have spoken in this debate. My noble friend said that there was a danger of too much Government intervention in public sector pay settlements, and that there was a risk—a substantial one—involved. He said that there was a danger of creating a "dispirited workforce"—I think that was his phrase. He said that there were undoubtedly other compensating advantages. I would say to him—and he will hardly be surprised to hear it—that I do not myself believe that there is a real alternative to the policy which the Government are pursuing at the moment. I think there are undoubtedly risks involved. Certainly, anybody who has been involved, as I have been, in the police pay negotiations will be aware of the substantial problems which arise from standing firmly by one's position on a particular figure, as we did.
But I believe that there is overwhelming public support for the posture of the Government. I have absolutely no doubt about that—and that includes some of the members of the dispirited workforce; because the dispirited workforce are also consumers and their wives are also going to be affected by rising prices. The
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trouble in the past has been—and my I noble friend pointed this out in his speech—that it is very easy—only too easy—to find reasons why one particular group should get preferential treatment over the others and it is much more difficult to take a firm line consistently on all pay settlements in the way that the Government have taken it over the last few months.
I would say one thing before I turn to the subject of this debate. The noble Viscount, Lord Long, spoke, as always, agreeably and with moderation; but I fear that I detected—no doubt because he was speaking from the Bench opposite—some slight implication of criticism. No doubt I was wholly mistaken; but, just in case I was right in that assumption, I am quite sure that he would join with me in welcoming the statement made on 15th July, 1977, by Sir Geoffrey Howe, a gentleman with whom he no doubt has more than a nodding acquaintance, who asked:
Does the Chancellor understand that if he and his colleagues stick as firmly as he has said to their duty of exercising their authority and influence to secure pay settlements in the public sector, if they are in line with the target that the Chancellor has outlined, he will receive our full support?—[Official Report, Commons, col. 995; 15/7/77.]
I welcome that. It is always a delight to find some degree of bi-partisanship. Once or twice in recent weeks, I have had slight doubts as to whether the Opposition were wholly with us in dealing with the more sensitive pay negotiations. On one or two occasions, they appeared to be straying from the path of rectitude. Nevertheless, I welcome the fact that, apparently, there is such a high degree of agreement on this matter.
Viscount LONG: My Lords, I have a nodding agreement with the noble Lord over my right honourable friend; but I added that these were personal views and not from the Front Bench in the other place.
Lord HARRIS of GREENWICH: My Lords, I note that and I am sure that the noble Viscount—like a person speaking from this Bench—sometimes finds it difficult to separate personal views from those of Party. Nevertheless, as he spoke from that Bench, I did not think it inappropriate to draw his attention to

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what the Shadow Chancellor had said on this extremely important matter.
The noble Lord, Lord Clifford of Chudleigh, who opened this debate said that, with the return of the firemen to normal working, which took place on 16th January and which brought an end to the emergency fire situation, it was right to take stock of the situation. That is, generally, what we have done today. There are certainly a number of lessons to be learned from this. Obviously, the principal concern of my right honourable friend the Home Secretary and the fire authorities in the aftermath of the dispute has been to get the Fire Service back to normal working.
During the strike, some bitter things were said and done. That is true. But, against this background, I think it is reassuring that the return to work has gone as well as it has. As the House will know, Service assistance was withdrawn, from each brigade as quickly as possible—that is as soon as the firemen had reported back for duty and the regular fire appliances and equipment had been checked. Understandably, there have been some local difficulties. I would not seek to deny that. But, in general, these are being resolved.
I think that it would be right to begin my speech with an analysis of the situation which confronted us and then to deal with a number of points that have been raised in this debate. When, in November, it became clear to the Government that strike action would take place, we made a number of preparations to carry out our duty to do all we could to protect life and property in the situation which confronted the country. Plans were prepared by central Government and by the lire authorities and, in the event, these plans involved the activation of 1,060 green goddesses and the deployment of a total of some 20,000 Servicemen drawn from the Armed Services. In addition, 40 teams of trained firefighters equipped with breathing apparatus were also available. The police, in addition, played an important part, not least in verifying that, in fact, emergency calls were emergency calls. I know from a number of chief constables with whom I discussed this, that this was another burden on their already over-taxed resources. I think that it is only right on an occasion like
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this to pay tribute to the work which the police did so splendidly. So, too, I may say, did the fire officers, as the noble Lord who initiated the debate has said.
I take this opportunity to join with my noble friend, Lord Gisborough, in paying tribute to one group of people who have not really been recognised. They are the Home Office maintenance men who were responsible for keeping the green goddesses in such a state that they could be brought out at very short notice, and used in an operational situation. I am glad to confirm what he has said about them and I shall certainly make sure that what he has said is passed on to them.
The green goddesses were deployed in urban areas approximately on the basis of one for every two regular pumping appliances. In the main, the needs of rural areas were met by part-time firemen who played a crucial rôle during this dispute. In addition, guidance was issued through Government Departments and the fire authorities on the precautions to be taken in factories, schools, hospitals, old people's homes and so on, and advice was given to the public about precautions that they should take in the home through advertising campaigns in the Press and so on.
The response of all concerned was outstanding. I want to pay tribute to their dedication, determination and courage in a situation which imposed considerable demands on them all. For those members of the Armed Services engaged on emergency fire-fighting duties, this was a difficult and unfamiliar rôle; but they rightly earned the admiration and thanks of the entire country. During these difficult days for the fire-fighting force it became clear that the standards of serviceability of the green goddesses were much better than might have been expected. These appliances had proved their worth during the drought situation in the summer of 1976 and were to do so again during this dispute. These, and some other items of emergency fire equipment, will be retained.
During the nine weeks of the dispute, about 40,500 fires were reported. These gave rise to some 203 reported fatalities among members of the public and about 850 non-fatal casualties. From an analysis of data for previous years, the number

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of fires, fatalities and non-fatalities during the strike was about the same as might have been expected had the strike not taken place at all. The number of reported fatalities was, in fact, some 30 or so fewer than in the corresponding period in 1976–77. But, without far more detailed analysis than has yet been possible, the reduction, though gratifying, is small enough to have occurred by chance. It cannot, with certainty, be attributed to the additional publicity on precautionary measures or greater public vigilance during the strike, though I hope very much that these played a part.
As regards financial losses from fire, details are not collated by the Home Office or any other Government Department. The British Insurance Association publishes monthly estimates of direct fire losses. The figures published by the Association show that the estimated cost of fire damage in Great Britain in November was £42·7 million, and in December was £33·8 million. This compared with a monthly average for the whole year of £18·5 million and for 1976 of £19·3 million. Although the November and December losses were therefore undoubtedly and not of course unexpectedly, higher, the increases are impossible to quantify accurately because even in normal circumstances, fire losses vary unpredictably from month to month.
As I told the House in my Statement on 9th November, with the best that could be done by way of the emergency planning, the Government were under no illusion that the precautions which we took could match the fire cover provided by the regular fire service. I said this at the time in the knowledge of the sophisticated equipment which exists within the fire service to provide adequate fire cover throughout the country, the intensive training which firemen have to undergo in order to use the equipment safely, and the additional tasks, including fire precautions and other station duties, which are performed by firemen on a continuing basis.
Perhaps I may say a few words about breathing apparatus. As the noble Lord, Lord Skelmersdale, said, this has become something of an old chestnut, but old though it may be, I think it appropriate to deal with it—I hope finally. The
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matter has certainly been raised on a number of occasions. I remember exchanging words on this particular matter with the noble Lord, Lord Orr-Ewing—whom I am saddened to see is not with us—who rather mysteriously raised the question of the Suez Canal pilots in relation to this matter just before Christmas. It was raised also by the noble and learned Lord, Lord Hailsham of Saint Marylebone, and by question at that time by the noble Lord, Lord Clifford of Chudleigh; and, indeed, by him again tonight.
The unanimous—I repeat, unanimous—advice of the Fire Service was that this apparatus could not be used by troops. This was because it was not just a question of teaching a person how to wear a particular set of breathing apparatus. Obviously, that can be done. The real problem arose from the need to ensure the protection of the soldier concerned, bearing in mind the long, special training required in the Fire Service in firefighting techniques and safety procedures when using this equipment.
The advice that this equipment should not be distributed to the Armed Services was that of Her Majesty's Chief Inspector of the Fire Service. It was also a view which was endorsed by the National Association of Fire Officers when they met my right honourable friend the Prime Minister at the beginning of this dispute. This is a group of people to whom, quite rightly, the noble Lord, Lord Clifford of Chudleigh, paid particular tribute for their spectacular services during the dispute.
On the basis of advice of this kind, it seems to me, with great respect, to be a very extreme proposition indeed to suggest that one would push this advice on one side and ignore it. I do not think that would be right. What we did was to make a number of specialised Naval and Air Force units available who had experience in this particular area. They were added to the number of Servicemen who were available. It is important to deal with this question because understandably there has been public discussion of it. It is right that this matter should be disposed of once and for all.
Having dealt with this question of specialist equipment, it is all the more

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necessary to exercise caution in attempting to make comparisons between what happened before and during the strike in terms of the numbers of personnel and equipment used. Quite understandably, this question has been raised today and, indeed, by others outside this Chamber.
It must be remembered that the majority of regular fire officers were available to direct and assist the Servicemen during the strike. And that, in those parts of the country in which fire cover is provided by part-time retained firemen, some 70 per cent. of those part-time firemen continued to provide fire cover without any assistance whatever from the Armed Services. The police, as I have indicated, played an important role in assisting the Servicemen and dealing with many small fires themselves. Moreover, during the strike fire authorities did not have the resources of the brigades to carry out and enforce their fire prevention responsibilities under the Fire Precautions Act 1971 which is a very important part of the duties of the regular Fire Service. We had a debate on this issue only a few weeks ago.
Any attempt, therefore, to draw precise comparisons must be treated with some caution because the wide variety of factors involved require detailed and careful consideration. The Government intend to examine these closely and we will do this in the light of the fullest information we can obtain about what happened during the strike.
The noble Viscount, Lord Long, raised the question of existing standards of fire cover. These are based on the recommendations of a Joint Committee of the Central Fire Brigades Advisory Councils for England and Wales and for Scotland. Any proposal to change these standards would be a matter for my right honourable friends the Home Secretary and the Secretary of State for Scotland acting on the advice of the Advisory Councils.
These are matters which fire authorities themselves will want to consider. Indeed, they are likely to be raised during the forthcoming negotiations in the National Joint Council between the fire authorities and the Fire Service staff organisations about the reduction in the firemen's working week from 48 to 42 hours. This is an important step forward in improving
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the conditions of firemen and must be seen against the trend in industry generally. But the implications for the fire service will undoubtedly be considerable. Both sides of the NJC, having registered in principle as part of the settlement, agreement to introduce a 42 hour working week without loss of pay from November 1978, subject to satisfactory completion of negotiations, fully recognise the many problems associated with the introduction of that shorter working week.
The House will be aware that the fire service has been the subject of a number of inquiries, both of general and particular natures, over recent years. The most wide-ranging one was conducted by the Departmental Committee on the Fire Service under the chairmanship of Sir Ronald Holroyd. This Committee reported in 1970, and many of the aspects of the Fire Service which they looked into have been developed on the lines of the recommendations which they made. The work of that Committee had been preceded by the inquiry carried out in 1967 by the National Board for Prices and Incomes into the structure and levels of remuneration in the Fire Service. And it was followed by the Cunningham Inquiry which reported in 1971 on the work of the fire service and on an appropriate evaluation of that work. The Cunningham Inquiry made a number of specific recommendations about the pay of firemen, and these were implemented in the pay agreement of 1971.
The Cunningham Inquiry also recommended that a further evaluation of the work of the Fire Service should be carried out within two years. For a number of reasons, it was not possible for the NJC to make rapid progress on this matter. Last year, however, both sides of the NJC agreed on a job description of the fully-qualified fireman, which formed the basis of the work of the Inquiry which they subsequently set up under the chairmanship of my noble friend Lord McCarthy, to examine the firemen's job in relation to other occupations and their remuneration. My noble friend reported last September and recommended that against a broad benchmark of comparison with the generality of jobs in the community, discussions should continue in the NJC on the remuneration of the qualified fireman. The outcome of this has now borne fruit in the agreement for a new

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formula for fixing firemen's pay whereby the average earnings for firemen are to be equated with those of the upper quartile of adult male workers. This agreement is to be introduced in two approximately equal stages in November 1978 and November 1979.
I should like to say this in conclusion: the Home Departments conducted an Inquiry into the feasibility of a 40-hour week in the Fire Service which reported in September 1977. The Inquiry's conclusions have been remitted to the NJC and will be considered in the context of their negotiations on a reduction in the firemen's working week.
During recent years, as I have indicated, the Fire Service has been the subject of a substantial number of Inquiries. These have proved valuable in promoting the skills of the fireman and consequently the service which he gives to the community and in improving his pay and conditions. We should hesitate long before responding to suggestions that any further wide-ranging Inquiry should be imposed in the Fire Service at the present time. I sometimes think that we all have a habit of setting up rather too many Inquiries, which are in themselves a factor which, on occasions, can cause some disturbance and which can be extremely costly. What the Fire Service most needs at the moment is a period of stability during which fire authorities and members of their brigades can work together to restore the damage which has undoubtedly been done by the strike, and to build a better Service for the future.

REFUSE (DISPOSAL) BILL [H.L.]
Reported from the Joint Committee with Amendments, and recommitted to a Committee of the Whole House; Bill to be printed as amended.