Lords Sitting of 18 July 1983

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.
Several Lords—Took the Oath or Affirmed.

Shorthold Tenancies in London
Baroness Gardner of Parkes: My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take action to bring the regulations for shorthold tenancies in the London Area into line with those for shorthold tenancies outside London.
Lord Skelmersdale: My Lords, for shorthold tenancies in Greater London a fair rent must be registered by the rent officer within 28 days of the tenancy being granted. For shortholds outside Greater London which began after 1st December, 1981, this initial registration of a fair rent is not compulsory. Instead, the rent may be freely agreed between landlord and tenant, although either party may apply at any time to the rent officer for a fair rent to be fixed. We have no plans at present to change these arrangements.
Baroness Gardner of Parkes: My Lords, I should like to thank the Minister for his Answer. Would he inform me whether he is aware of the disastrous effect that this so-called registration of rent is having within the London area, in that it is keeping many properties vacant which would otherwise be available to needy tenants?
Lord Skelmersdale: My Lords, I agree that this subject is part of a whole range of opportunities which were freed by the Housing Act 1980, and indeed it has made a good start with some 5,000 registrations that we know about, but I feel that, with a little bit of political uncertainty since 1980 and the Labour Party's pledge to repeal this activity, it could hardly have been expected up to now to have had a mammoth impact on the private rented sector.
Baroness Gardner of Parkes: My Lords, would the Minister confirm that the Rent Act 1974 was the cause of a great many people—British people in particular—being unable to obtain accommodation in London today? If, as I believe, the noble Lord will confirm this, would he tell us whether there is any likelihood of some action being taken to change the situation whereby those few in tenancies have secure rights but any other young British person requiring a tenancy has no hope of getting one, and all the accommodation on offer today is on offer to foreigners?
Lord Skelmersdale: My Lords, I would agree with my noble friend that the Rent Acts generally from 1965 onwards have contributed to the structured decline of the private rented sector. But I do not think that that is the only reason for the decline, because, as we know, there is a confessed wish of a majority of people to live not in rented accommodation at all but in owner occupation.
Baroness Faithfull: My Lords, may I ask my noble friend the Minister whether he would agree that, despite what he has just said, an enormous number of young people are unable to find rented accommodation? In the meantime, what would he suggest that they do?
Lord Skelmersdale: My Lords, there are various sorts of tenancies available in what I might loosely describe—but not, I hasten to say, in any legal way—as controlled tenancies. There is also of course the open-ended private rented sector both in London and outside in the provinces.
I regret that I did not answer the second part of the second supplementary of my noble friend Lady Gardner of Parkes in which she asked about the possibility of a review. No such review is contemplated, but of course, as is normal when a new Minister takes over a portfolio, he is having wide thoughts and wide-ranging consultations as to what action he might pursue in the future.
Lord Cledwyn of Penrhos: My Lords, will the noble Lord deal with the question that his noble friend asked him—namely, that there are a large number of houses available for letting in London which are not let at the moment? This is the question to which the noble Lord has not addressed himself. He can disregard manifestos and policies in the past and deal with the facts as they now are, and the needs of young people in the London area. Will he be good enough to tell us what is the policy of Her Majesty's Government now in regard to that position?
Lord Skelmersdale: My Lords, I have recently been down to the docklands where the policy of Her Majesty's Government is being carried through to the letter. There, buildings are available to let at reasonable rents, and low cost home ownership schemes are being pursued with the utmost vigour. In other parts of London, properties would be rented, first, if landlords were assured that they would get fairness and, secondly, if prospective tenants could afford to pay the rent.
Lord Tordoff: My Lords, will the Minister assure us that in these wide-ranging thoughts that his right honourable colleague is having they do not include the possibility of reintroducing to the Housing Bill when it comes through the parliamentary process again any thoughts on the sale of charitable housing association dwellings?
Lord Skelmersdale: My Lords, that is a totally different question, but I make the general point that thoughts are thoughts and I should not like to put any limit on them.
Baroness Gardner of Parkes: My Lords, may I ask the Minister to take back to the department the suggestion that action be taken under the Housing Act 1980, Section 52 (4)? Is the Minister aware that that section was the section implemented to remove the control on shorthold tenancies as a requirement of the rent officer?
It says,
"The Secretary of State may by order direct that subsection (1) (b)above shall have effect, either generally or in relation to any registration area specified in the order, as if paragraph (c) were omitted".
Paragraph (c)deals with the necessity to agree a rent with a rent officer prior to offering a shorthold tenancy. Will the Minister take that back to the department to look at that again to see whether such a direction could be made for London?
Lord Skelmersdale: My Lords, this has never been implemented, but I shall certainly take up my noble friend's suggestion with my honourable friend the Minister for Housing and Construction.
Lord Wells-Pestell: My Lords, having regard to the need for housing that people can buy in the dockland area, may I ask whether the Minister considers it right and proper that properties being built there should be for sale at £160,000? Some special properties are for sale at over half a million pounds.
Lord Skelmersdale: My Lords, the need for housing, as in anything else, is for a mix both socially and businesswise and indeed in any other way. I think it is right and proper that both ends of the price spectrum should be present in a particular area of the country.
Lord Davies of Leek: My Lords, will the noble Lord say what limits there are on a person keeping a house empty without letting it? Is there a period of time in which he must pay rent or rates on an empty house?
Lord Skelmersdale: My Lords, if a person owned a house, rent would not come into it. I believe that after a certain period it is possible to receive rate relief on an empty property; but I shall have to write to the noble Lord with the details.

Leisure Centres: Efficient Use Of Facilities
2.45 p.m.
Lord Auckland: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what plans they have in mind, in conjunction with local authorities and private consortia, to advise and, where necessary, assist leisure centres to ensure their most efficient use in sporting, recreational and artistic activities.
Lord Skelmersdale: My Lords, the Government are anxious to ensure that all leisure centres are managed in the most efficient way, including the use of private sector expertise where appropriate. The Sports
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Council is always willing to help and advise local authorities and private consortia on the best ways of achieving this aim, and is also able to give grants to help operators improve their facilities.
Lord Auckland: My Lords, I thank my noble friend the Minister for that helpful Answer. Is he aware—I am sure he is—of the continuing problems of leisure these days, and thus the need for properly managed leisure centres to encourage sport, the arts and everything else thus connected? Can we be assured that this is not a kind of "Yes, Minister" plea for large public funds? Will he elaborate a little on the amount of contact between the Sports Council and these leisure centres, bearing in mind the large grants which private funds are making into leisure centres sports and the arts generally? Finally, has he any news of the EEC Development Fund in this respect?
Lord Skelmersdale: My Lords, as far as the third part of my noble friend's supplementary question is concerned. I have no information on the EEC grant, but I shall write to him. I should like to make the general point that sport is important to the whole community and local authorities must continue to play a major part in the provision of local leisure facilities. However, having said that, I hope that all local authorities will look at their facilities carefully and will always ensure that they are managed efficiently. This may mean opening such centres for rather longer hours than they would normally wish to do; it may mean attracting grants for refurbishment, for example, from the Sports Council; or it may mean doing the same thing with a mix of private enterprise and other parts of the public sector—for example, longer use of sports facilities in schools.
Lord Sandford: My Lords, I wonder whether I may ask my noble friend two questions. First, does he agree that when the district audit has completed the study that it is doing in this general field of the provision and management of leisure centres we shall be in a better position to assess these matters? Secondly, would he provide us with a fairly comprehensive Written Answer to a Question, if I were to ask one after the Recess, on progress (which I believe to be all too slow) in the dual use of educational buildings for leisure and recreation?
Lord Skelmersdale: My Lords, I cannot comment on the district auditor's report—a document which is still not completed, let alone published. On my noble friend's second point, yes, certainly, if he would like to put down a Question for Written Answer I should be delighted to answer it as fully as possible.
Lord Taylor of Gryfe: My Lords, will the noble Lord give an assurance that in the disposal of Forestry Commission land with a substantial recreational facility, these will be preserved in the plans for disposal?
Lord Skelmersdale: My Lords, with respect, that is rather a different question because leisure centres entail buildings.

Wheel Clamps: Experimental Use
2.50 p.m.
Baroness Gardner of Parkes: My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will comment on the effectiveness, to date, of the experimental use of wheel clamps in central London.
Lord Lucas of Chilworth: My Lords, the experimental use of wheel clamps began on 16th May. It is too early to make a reliable assessment of the effects on illegal parking and the flow of traffic. That assessment is the responsibility of the Transport and Road Research Laboratory, and will depend mainly on comparisons between "before" surveys in the autumn of last year and "after" surveys at a similar time, September or October, of this year.
Baroness Gardner of Parkes: My Lords, I thank the noble Lord for his reply. May I ask him whether he saw the article in the Daily Telegraph dated 14th July headed, "Protests as police end clamping of diplomats' cars"? Did he read in the report that in the first eight weeks of the experiment 4,358 vehicles were clamped in the Kensington, Chelsea and Westminster area, and of those, 101 vehicles belonged to diplomatic missions, and in particular the French Embassy had 11 vehicles affected, seven in one day? In view of those figures, will he consider the Written Reply given by my noble friend Lord Elton to my noble friend Lord Balfour of Inchrye, in which Lord Elton said that under diplomatic relations they could not clamp recognisable diplomatic vehicles? Will he also give thought under those circumstances to limiting the number of recognisable diplomatic vehicles, as has been done in other countries? For example, in Australia, you cannot have an unlimited number of diplomatic vehicles. It seems that seven vehicles clamped in one day is rather a lot. Will the Minister comment?
Lord Lucas of Chilworth: My Lords, my noble friend has asked a number of questions. She asked whether I had seen the article in the Daily Telegraph.Yes, I have seen it. Regarding the figures that she mentioned in relation to the response given to a Written Question by my noble friend Lord Elton to the noble Lord, Lord Balfour of Inchrye, my noble friend explained that the Commissioner of the Metropolitan Police has obtained legal advice which suggests that wheel clamping contravenes the provisions of the Geneva Convention on diplomatic relations. Wheel clamping of identifiable diplomatic vehicles has accordingly been discontinued. In response to my noble friend's rather more specific supplementary question on what are we going to do about it, I think that it will be more helpful to your Lordships if I say—and it is not very much to tell your Lordships —that that situation is being further examined and we are awaiting the results of that examination. As to what happens in Australia, the Australians have some odd customs which do not always accord with our sense of fair play.
Lord Underhill: My Lords, the noble Lord has said that the wheel clamping of diplomatic cars has been suspended. Does this mean also that it is not within the province of the Metropolitan Police to remove a diplomatic car when it is impeding the flow of traffic and is in a dangerous position? If so, I think that most people will regard that as being something that should be looked into very seriously. As one of those of us who supported the experimental period for wheel clamps, may I ask whether the noble Lord is satisfied that sufficient publicity is being continually given to the experiment in order that the experiment should act as a deterrent? Some of us regard the experiment as one which would be successful on the deterrent principle rather than in just getting convictions.
There is also a report that the cars of visitors to this country have also been the subject of wheel clamps. If that is so, is there anything that can be done to avoid that possibility? Will the Minister tell us whether or not there have been cases of persons deliberately removing the wheel clamps? If so, is he satisfied that the penalty of £200 is sufficient for that?
Lord Lucas of Chilworth: My Lords, in so far as the responsibility of the police is concerned. I am sure that your Lordships will accept that I am not able to answer for matters which fall, quite properly, within the purview of the Home Office. I notice that the noble Lord, Lord Underhill. has a Question relating to this matter on the Order Paper for 26th July. I think that if he likes to pursue that line of questioning on the 26th he may get a rather more satisfactory reply from that department.
To turn to publicity, there has not been a further round of material issued by the department, although I would have thought that both press and radio through most channels have given a considerable amount of publicity to this matter. In regard to visitors, it is largely up to a visitor to satisfy himself as to the rules and regulations of the country he is visiting. Most of our visitors to other countries will go to one of the motoring organisations and ask what kind of emergency equipment is required. I would expect, frankly, that the overseas organisation would give the advice. If my noble friend Lady Gardner is to believe this, there is no doubt that visitors who have embassies in London would find advice readily forthcoming from that.
In reply to the supplementary question, on the removal of clamps, there are four instances where clamps have been removed. It would be quite wrong for me to make any comment with regard to the penalty which the Act provides as a maximum—that of £200—since none of these cases has yet been brought to court. I am sure your Lordships accept that it would be wrong for me to comment on these four matters before they get to court.
Lord Mottistone: My Lords, will my noble friend give consideration to the matter of policemen standing in Park Lane with wheel clamps very ostentatiously displayed at midday on every day, particularly when Parliament is sitting, to discourage people from parking?
Lord Lucas of Chilworth: My Lords, I note what my noble friend had to say.
Lord Tordoff: My Lords, will the noble Lord agree that perhaps we should put our own house in order first? Will he contemplate an experiment of using wheel clamps in the Lords' car park outside Nos. 6 and 7 Old Palace Yard in order that those people who park in an unauthorised manner there, blocking parking bays for the staff, should be discouraged from so doing? Will he agree that it is not only difficult for the staff but it may pose a threat to the security of your Lordships' House?
Lord Lucas of Chilworth: My Lords, the experiment is in an attempt to ease the problem of a third of a million illegal parking offences in London each day, with the consequent hindrance of the public and free flow of traffic. I hardly think that the introduction of clamps to your Lordships' car park would aid either of those objectives.
Lord Boyd-Carpenter: My Lords, if the object of the exercise (as my noble friend has just said) is to prevent the obstruction of traffic by badly or illegally parked cars, will my noble friend explain why it is thought that this objective would be helped by making those cars immovable?
Lord Lucas of Chilworth: My Lords, your Lordships' House, as my noble friend Lord Boyd-Carpenter will recall, debated this matter at great length and felt that it would provide something of a deterrent in certain areas. There is not here a question that, in general terms, a clamp would be applied where a motor vehicle is parked dangerously when the other alternative provision of taking away the car could equally apply.
Lord Denham: My Lords, we have spent 22 minutes on three Questions. I wonder whether your Lordships might feel that we should go on to the next business.

Tobermory Pier: Isle of Mull
3 p.m.
Viscount Massereene and Ferrard: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take steps to ensure that Tobermory Pier, Isle of Mull, is not permanently closed.
Lord Lyell: My Lords, Tobermory Pier remains available for use by smaller craft, including fishing boats. My right honourable friend the Secretary of State for Scotland has met a local delegation to discuss the future of the pier. It is owned by Caledonian MacBrayne and it is for them to make proposals. However, my right honourable friend has indicated that he is prepared to consider financial assistance towards the cost of reasonable works. It should therefore be possible at least to put the pier into a satisfactory condition commensurate with the use at present made of it.
Viscount Massereene and Ferrard: My Lords, while thanking my noble friend very much for that reply, may I also declare an interest? Is my noble friend aware that the Isle of Mull is twice the size of the Isle of Wight and has a tourist trade of very nearly a quarter of a million, together with tens and tens of thousands of livestock? Is he further aware that without Tobermory Pier, if it were not to be repaired, the Isle would only have one pier, which is exposed to the northerly gales, so that sometimes the mail boat cannot call? I should like to thank my noble friend again for his reply. Is he aware that I was going to go on for a long time but I will not do so because of my noble friend's heartwarming reply?
Lord Lyell: My Lords, I am grateful, as I am sure all your Lordships will be, to my noble friend for his support of the Isle of Mull. I personally have to declare a non-interest because I have not been there, but I am sure we are all fascinated to learn that the Isle can, among other things, boast of the presence of a noble Viscount: my noble friend. I would stress to him and to your Lordships that the vast bulk of goods, vehicles and passengers reach Mull by the modern roll-on, roll-off ferry which goes to Craignure. This is entirely unaffected by any recent development at Tobermory as regards the pier.

Foster Children (Scotland) Bill [H.L.]
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to foster children as they have effect in Scotland. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Mackay of Clashfern.)
On Question, Bill read a first time, and to be printed.

Finance Bill
Brought from the Commons endorsed with the certificate of the Speaker that the Bill is a Money Bill; read a first time, and to be printed.

Business: Standing Order 43
Lord Denham: My Lords, on behalf of my noble friend the Lord President of the Council, I beg to move the Motion standing in his name on the Order Paper.
Moved, That Standing Order 43 (No two stages of a Bill to be taken on one day) be dispensed with for the purpose of taking the Companies (Beneficial Interests) Bill through its remaining stages this day.—(Lord Denham.)
On Question, Motion agreed to.

Companies (Beneficial Interests) Bill
3.4 p.m.
Lord Mackay of Clashfern: My Lords, I beg to move that this Bill be now read a second time. This Bill has

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been brought forward to deal with an acute legal difficulty that has come to light in the application of company law to certain shares held on trust. The problem is this: Section 27 of the 1948 Companies Act introduced the rule—an important company law rule—that a subsidiary may not be a member of its holding company. Allotments or transfers of shares in breach of the rule are void, a very severe penalty. The section already provides an exception to the general rule where shares are held by a subsidiary as trustee—provided that neither the company nor any subsidiary is beneficially interested under the trust.
Turning to practice, it is well known that in many groups a subsidiary acts as trustee of the group pension scheme. It is also very common for such schemes to hold at least some shares in the parent company. Whatever the wider arguments about so-called self-investment, with which this Bill is not concerned, it has clearly never been thought that there was any possibility that an acquisition of the parent company's shares by a subsidiary trustee in these circumstances might be void. No trustee of a pension scheme would risk that outcome, yet that is indeed the position without this Bill, given that the parent company or any other subsidiary has the interests or rights, which it typically will have, described in Clauses 2 to 4. The most typical of these is the right to receive any balance of the trust property when liabilities under the scheme have been satisfied or provided for. A similar problem arises under Section 37 of the 1980 Act and under the other provisions listed in Clause 1 of the Bill.
A failure to legislate would, now that this problem has come to light, cause severe and widespread practical and legal problems which it has never been the intention of the existing legislation to create. We are not talking here of unsuccessful attempts to avoid company law but we are dealing with the unsuspected application of company law in a practical situation which has existed for a considerable time without, so far as we know, any detriment to anybody.
The interests and rights to be disregarded, as described in Clauses 2 to 4, are either remote or minor, and most of them depend on the occurrence of events which will rarely occur. It is perhaps significant that, although for the most part they derive from standand terms of trusts and schemes, they have not previously been recognised as creating a beneficial interest in the trust assets. None of them can be considered to provide a company with the means to control itself through the acquisition of its shares by a subsidiary or some other person on its behalf, and that is essentially what the company law provisions seek to prevent. The Bill does, however, make appropriate provisions in Clause 2, together with the Schedule, for the situation where one of the interests to be disregarded—the residual interest—vests in possession and accordingly ceases to be remote.
To sum up, the Bill is very technical, but the difficulty which it seeks to resolve is very real and practical. Without this legislation, the title to very many shares held in trust now or in the past, particularly by pension and employees' share schemes, would be in doubt. Very many schemes, trustees and shareholders would be put in an extremely difficult situation. Once this situation is advertised by publica-
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tion of a Bill, as it now has been, it cannot be allowed to remain unremedied for long. It also seems right in these exceptional circumstances that the difficulties should be removed retrospectively. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read a second time.—(Lord Mackay of Clashfern.)
3.8 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House would support the general purport of this Bill, which has been adequately explained by the noble and learned Lord. This House, in common with another place, rather frowns upon retrospective legislation, and very rightly so; but in the circumstances described by the noble and learned Lord it is quite proper that this House should give a Second Reading to this Bill and, indeed, should expedite its progress to the statute book.
There are a number of questions arising. One can quite understand, following the passing of the 1948 Act, that a particular clause of the 1948 Act, now interpreted, probably escaped notice for some time, because the development of these particular types of trusts proceeded only very slowly during those years but has accelerated more in recent years. Now there are a very large number indeed of trusts that are affected by the provisions of this Bill.
I should like to know, and I am sure the House would similarly like to know, just how this discovery took place. After all, the 1980 Act had a fairly detailed examination in this House, and we on this side then complained that the Government seemed most reluctant to accept any amendments to that Bill. Indeed, they wanted to rush it through. I should like to know why it was that the particular sections of the 1980 Act, which were subjected to very thorough examination by parliamentary counsel, to whom the noble and learned Lord has very often referred, escaped their attention then. That is the second point that I want to make.
Thirdly, does this Bill mean that the process of consolidation of the Companies Acts, the necessity for which has been repeatedly referred to on all sides of the House, is indefinitely postponed, or does it mean that counsel, having got to Clause 34, will presently arrive at Part V of the Act, Sections 68 and 69, which are notoriously ambiguous, and will then bring forward another Bill in connection with the interpretation of those sections, which attracted very considerable comment in this House, as the noble Lord knows? Are we to have a piecemeal development? Are we to have a whole series of little Bills as the provisions of the 1980 Act are subjected to the same critical examination? We should like to be reassured on this, because it is in the interests of industry and commerce generally, as well as of the professions, that consolidation takes place with the minimum of delay.
Finally, although I am quite sure that the noble and learned Lord will be able to give me an answer in the affirmative, is he quite sure that there are no taxation implications in any part of the Bill? The Inland Revenue have a tendency to examine these matters in very great detail, and I hope that the noble and learned Lord is able to give us a reassurance on that matter. Those are the only questions that I have to ask, and I

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reiterate that we on this side of the House should like to ensure the speediest possible passage of the Bill on to the statute book.
3.13 p.m.
Lord Lloyd of Kilgerran: My Lords, I must first apologise to the House because my name does not appear on the list of speakers, which is entirely my fault due to a hitch in the usual channels. Nevertheless, I shall be very brief. I also welcome this Bill, and I should like to congratulate the Government on bringing it forward so quickly, having discovered the lacuna that exists dating right back to the Companies Act 1948. The noble and learned Lord the Lord Advocate has explained the necessity for this Bill. As the noble Lord, Lord Bruce of Donington, said, if a Bill with retrospective provisions were brought to this House we—certainly we on these Benches—would oppose it strongly. Nevertheless, as this is such an exceptional case I feel sure that the passage of this Bill will not he taken as a precedent for introducing Bills with retrospective effect.
As I said, this lacuna has existed since the Companies Act 1948, and since then we have had at least four or five Companies Acts. Even in the discussions in your Lordships' House on Sections 36 and 37 of the Companies Act 1980 this lacuna was not discovered. It means that this new Bill is adding another burden, particularly to small companies and small trust funds, as well as to certain firms that have introduced schemes for partnership and shareholding for their employees. I should like to have from the noble and learned Lord an assurance that the promises already made for the consolidation of company law in this country will be brought forward with greater urgency now that this Bill is to be added to the list of Companies Acts.
3.15 p.m.
Lord Mackay of Clashfern: My Lords, I am grateful for the general thrust of the remarks of both the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Lloyd of Kilgerran. May I say that I am also grateful to the noble Lord, Lord Lloyd, for intimating to me that he intended to speak, notwithstanding that his name was not on the list. Of course, I welcomed the knowledge that he was going to speak, knowing that he would add to the distinction of this very short debate.
As regards the questions put by the noble Lord, Lord Bruce, I think the answer to the first one will do a good deal to dispose of some of the later ones. I think the situation was that somebody looking at a pension scheme questioned whether it was in accordance with the provisions of the Act of 1948, and, as is usual in these matters when a difficult question arises, it ultimately landed up with learned counsel. Then, learned counsel, having compared the proposed scheme with the Act of 1948, concluded that the scheme fell foul of the provisions of the 1948 Act to which I have referred. Of course, those familiar with these matters then realised that this was not an isolated example but was, in fact, a very general situation, and, accordingly, that it was one which should be remedied.
That shows that the problem was highlighted by the discovery of the application of a long-established provision to trust deeds, which have also been in existence for some time—though, as the noble Lord,
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Lord Bruce, has said, the number of these has increased quite considerably and properly in recent years. So it is not so much a defect in the legislation as that in applying the legislation to practical matters those with experience did not think that they fell foul of the legislation but on very close examination, and on a narrow reading of the legislation, it appeared that they did. Accordingly, it is right that what was the understood and perceived practice should now be made the effect of the legislation.
That also answers the question of the noble Lord, Lord Lloyd of Kilgerran, about an additional burden for small companies. On the contrary, this difficulty in their trust schemes having been discovered, there would have been a tremendous burden on them unless the legislature had stepped in to prevent that burden arising, and that is precisely what we seek to do now. So, again, I suggest that the fact that the 1980 Act or the 1981 Act did not specially provide for this problem arose from the fact that those dealing with these matters in practice did not see that the 1948 Act held this problem for them. Now that that has been appreciated, legislation immediately appears to be called for; and I think I have also answered the point that it is a fairly general problem that has arisen.
So far as consolidation is concerned, we are determined to press on with that as rapidly as possible. This Bill will not in any sense impede that process, which is very well advanced. I am hopeful that in the course of the present Session some, at least, of the results of these labours on consolidation will become apparent and will give your Lordships satisfaction.
So far as taxation is concerned, the situation is that this Bill, if enacted, will bring the position in law to what it has been understood to be in practice for some time. Therefore, there are no tax implications in the sense of changing what has hitherto been understood to be the tax position.
On Question, Bill read a second time: Committee negatived.
Then, Standing Order No. 43 having been dispensed with (pursuant to Resolution), Bill read a third time, and passed.

International Monetary Arrangements Bill
3.20 p.m.
The Minister of State, Privy Council Office, and Minister for the Arts (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. The Bill, together with the International Monetary Fund (Increases in Subscription) Order, implements the United Kingdom's share of international decisions to increase the resources available to the International Monetary Fund by the end of 1983. The United Kingdom subscription to the IMF was increased by order last week under the International Monetary Fund Act 1979. And Clause 1 of the Bill now amends Section 2 of that Act so that the limit of approximately £350 million on the power of the Treasury to lend to the IMF under the general arrangements to borrow is replaced by a limit of 1.7 billion special drawing rights—in money terms, approximately £1.2 billion.
The second clause of the Bill provides statutory authority for the Treasury to indemnify the Bank of

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England in respect of its participation, together with other central banks or the Bank for International Settlements, in operations to provide bridging finance for countries. Such bridging finance can provide a breathing space for countries faced with a sudden deterioration in their external finances and allow time for an International Monetary Fund adjustment programme to be negotiated and implemented.
Before these international decisions to which I referred were taken, this House had an opportunity last December to discuss international deficit finance. It was a most stimulating and educational debate provoked by the noble Lord, Lord Lever of Manchester, with many notable contributions. The origins of the present difficulties were well covered and well understood in that debate. Throughout the 1970s and particularly following the fundamental shift in the world economy after the 1973 oil crisis, the newly industrialising countries financed development by borrowing. Increasingly, borrowing was from the private sector and from commercial banks in particular.
It is worth emphasising that the main borrowers were all economies with very considerable underlying strengths and development potential. That this borrowing came to be characterised as "the debt problem" reflected the interaction of broadly three factors. The first was a reduction in the level of global economic activity and the consequent fall in commodity prices, combined with a period of high interest rates which were the inevitable counterpart of high inflation, and the policies required to reduce it. The second factor was the extent of the borrowing by some developing countries that had to be serviced, as they sought to delay the inevitable adjustment of their own economies to new and changed international conditions. The third factor was a growing concern of commercial banks about the creditworthiness of these countries.
The noble Lord, Lord Benson, pointed out during the course of that notable debate last December:
"…when all is said and done there remains the burning question: should lending continue to those foreign borrowers whose credit is now in question? I believe that it is inevitable that it must, and that it should be aided by an enlarged IMF. There are, too, cases where it would be appropriate for the central banks and the commercial banks also to lend to sovereign borrowers in this state,"—[Official Report,15/12/82; cols. 686–7.]
Replying to that debate, at col. 705 my noble friend Lord Cockfield stressed:
"the need to fortify and improve the existing mechanisms… the central banks, commercial banks and their supervisors and, in particular, the IMF, which has a key role to play now, as it has had in the past".
Within two months, finance ministers and central bank governors agreed to increase the total amount of commitments under the IMF's general arrangements to borrow, broadly known as GAB, from SDR6.4 billion to SDR 17 billion—that is to say, approximately 18,000 million dollars, or £12,000 million. This was the first substantial increase in general arrangements to borrow since the year 1962, which helps to put it in some perspective. The IMF Interim Committee, meeting under the chairmanship of my right honourable friend the present Foreign Secretary, agreed that IMF quotas should be increased by 47.5
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per cent. from around SDR 61 to SDR 90 billion, equivalent to 95 billion dollars. It was decided to implement these decisions by the end of 1983, a considerable acceleration of the previously envisaged timetable.
Since then events have moved on, but the analysis remains the same. The Treasury and Civil Service Select Committee endorsed these agreements and supported, in their words,
"the speedy passage of the legislation laid before Parliament to give effect to these agreements".
The committee's report rightly stressed that three elements are necessary in dealing with debtor countries. I refer to paragraph 4.10 of their report. The first element is that commercial banks agree to reschedule their outstanding debt and to make a modest contribution of net new lending. The second is that their lending is supplemented by a loan from the IMF. The third is that the IMF's contribution is conditional on the borrower undertaking an adjustment programme.
The role of the private banks is of course vital. As my honourable friend the Economic Secretary said when introducing this Bill in another place:
"there is … nothing unusual in banks seeing corporate customers through temporary patches of difficulty, so long as they are taking steps to put their business in order. In the same way it is quite natural for commercial lenders to be prepared to continue to lend money to their major country customers—provided that they have the assurance that the borrower concerned is taking action, agreed with the IMF, to put its economy in better order".—[Official Report, Commons;11/7/83; cols. 612–3.]
Of course the IMF and the world's central banks, operating through the Bank for International Settlements, have a key function to perform. The central banks and the BIS have acted quickly to provide bridging finance in cases where there was a general threat to banking confidence, until longer term adjustments can be agreed with the IMF. Dr. Leutwiler, the president of the board of directors of the Bank for International Settlements, has expressed his hope that there will be no further need for emergency credits of this kind, while recognising that the possibility cannot be ruled out. Nevertheless, the Government feel it right, as a matter of propriety, to seek specific authority to cover any future indemnities because of the contingent risk to public expenditure. That is the purpose of Clause 2 of the Bill.
But the central international financial institution is the IMF. The adjustment programmes agreed between borrowers and the IMF are absolutely central to the process now in train—the basis for setting the borrowers' economies in order and giving commercial banks the confidence to agree to reschedule existing loans and advance additional funds. There is widespread agreement that the fund's resources need to be increased.
I believe that the measures before the House today strengthen the practical role that this country can play in co-operative international operations to deal with the current debt problems. In debate after debate on general economic affairs in your Lordships' House it has been put to me that this form of international co-operation is desirable and essential. I believe it is right for us to support the existing international financial institutions and to join other nations in

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helping responsible countries facing severe difficulties. I beg to move.
Moved, That the Bill be now read a second time.—(The Earl of Gowrie.)
3.29 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House have little dispute with the Government about the broad thrust of the Bill. As the noble Earl said in the course of his opening remarks, it was quite proper for IMF funds to be made available, within the constraints placed upon the debtor countries by the IMF, provided that the debtor countries put their economies in order. Within that broad general context, many of us feel that the policies of the IMF are to some extent over-influenced by the present Government, and indeed by the Government of the United States, insisting on the more rigorous applications of monetary policy which are applicable in some cases.
Nobody would dispute that the lender has the right, if he is to make large sums available to people already in debt, to require that they should take some steps to remove the causes of the imbalances within their economy. Nevertheless, the noble Earl rather skated over (although I am not suggesting he did so in any way deliberately) some of the matters that were raised in the debate in your Lordships' House on 15th December, which pointed to the unwisdom of many banking institutions throughout the world in making loans to countries at high rates of interest without any kind of prudent regard as to their ability to repay, even in times of normal trading circumstances.
I believe that most of the noble Lords who were present during that debate came to the conclusion—and some articulated it from all sides of the House—that the banking institutions themselves were very largely to blame; that there had been a tendency, particularly in the countries of South America, to spend rather large sums on armaments, and following close upon the heels of those salesmen came the representatives of the banks, assuring them that credits could be made available to them for this purpose.
I repeat that so far as the general thrust of this Bill is concerned we are in support of it. I myself had rather hoped that my noble friend Lord Lever would participate in today's debate, to give us the very constructive ideas appearing on pages 18 and 20 of The Economist for 5th July about the formation of a centralised export credit agency. I will not touch upon that today, in the hope that other noble Lords may do so.
A point upon which I do wish to touch, and into which I shall go in some detail, is the position of ourselves and the Argentine. It is well known that the Argentine is still in a state of hostility at the present time so far as we are concerned. It is known today that the Argentine is still obtaining supplies of armaments from various countries in the world. The terms on which she is getting those armaments and the means she is using, or will ultimately use, to pay for them are unknown; but it is a fact that the Argentine is still continuing to re-arm.
This raises a question of considerable principle: the question as to whether it is proper, in these circum-
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stances, for Britain and British banks to participate in a facility, some £100 million of which will be directed at the relief of Argentina's liquidity position. This is a straight question of principle. I do not propose to deal with this question in emotional terms, which would perhaps be inappropriate in your Lordships' House, but it is a matter to which we ought to direct attention since the people of our country generally are quite mystified as to how it is that this situation exists in respect of a country with which we are still technically in a state of hostility, with the Argentine representing, presumably, an ever-present threat against which we have to safeguard ourselves at considerable cost to the country and (if I may mention a term which I would mention with more emphasis were the noble Lord, Lord Cockfield, present this afternoon) to the taxpayer.
The Government themselves have been very uneasy about this from the commencement. Your Lordships will recall that on 14th February last this matter was raised by my noble friend Lord Molloy, who sought some assurances in the matter. The noble Lord, Lord Trefgarne, who was replying at the time, said this:
"The purpose of these facilities is to enable Argentina to meet her debts as they fall due, and the IMF support programme, of course, has a number of conditions atached to it. As the noble Lord will recall, it is not customary to reveal the details of those conditions. I can say, however, that the conditions are pretty stringent". [Official Report,14/2/1983; col. 2.]
The noble Lord added, in the course of his reply to a further supplementary question put by the noble Earl, Lord Lauderdale:
"Those restrictions are quite severe and will no doubt at least curtail Argentinian ambitions, if they have any".
This point was further reinforced the next day. The noble Lord, Lord Belstead, in reply to other questions on this matter and in referring to remarks made by his noble friend Lord Trefgarne in reply to questions, said:
"My noble friend said that he very much doubted whether the Argentinians will have much in the way of spare cash for the sort of military adventures which we may fear". [Official Report,15/2/1983; col. 99.]
The view which the Government were putting forward at that time, and which this House quite clearly understood, was: first, that the Argentinians had little spare cash of their own, anyway, to devote to armaments; secondly, that in so far as the loans made to them by the IMF were concerned, the restrictions imposed by the IMF were quite severe. But that broke, because it was found out that the IMF had imposed no such restrictions at all affecting Argentina's right, if they so wished, to use their financial resources in order to buy armaments.
The next argument that was put forward was put forward also by the noble Lord, Lord Trefgarne, on the 14th February, as follows:
"I might add that if support had not been provided for Argentinian debt repayment purposes in these circumstances, presumably they would have defaulted on their obligations—not only on their obligations to us but on their wider obligations to the world banking community in general; and that would have released substantially more funds for the purposes which the noble Lord and I both deplore".—[Official Report,14/2/1983; col. 3.]
In other words, if we did not, through the IMF, lend the Argentinians the money, then somehow that would make it easier for them to acquire armaments. The delicate reasoning that lay behind that argument

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was never fully explained, but I have no doubt that the noble Earl, Lord Gowrie, when he replies, will probably elaborate on that point a little. But the converse of it would appear to be this: that the more money that is loaned to the Argentine the less money there will be to buy arms.
This really is a question of principle. We went to the rescue of the Falklands on a question of principle. Many of our men died for that principle and hundreds were wounded in the course of upholding that principle. Why should the practice, which I would have thought would be universally accepted, that you do not give financial aid to a person or to a country that is still in a self-avowed state of hostilities to this country, be exempt from the principle?
The Government themselves in another place expressed some distaste about this. The Economic Secretary to the Treasury, speaking in another place on 11th July, at col. 616, said:
"I cannot hide from the House my distaste, and the distaste of my right hon. and hon. Friends, that this should be necessary".
Then he pointed out that we, the United Kingdom, through the IMF and through the United Kingdom banking sector, are involved in the international effort to facilitate the resolution of Argentine's debt problem.
I invite the noble Earl, who I am quite sure is very sensitive concerning matters of this kind, to address himself to this problem: is it to be the case that the loyalty of the ordinary man and woman is to be to his or her country, but that the bankers' loyalty is to be to the international banking system? This question has to be asked, and I am hopeful that the noble Earl will be able to say that in all circumstances the loyalties of British banks should be to the British people, who very largely sustain them, and to their own nation, and that this should take precedence over any wider and very clubbable loyalty to the international banking community with whom they are in daily contact.
I say, I trust without any degree of wishing to give offence, that bankers, particularly international bankers, live rather different lives from ordinary mortals. I make no particular complaint about that. They meet on these numerous occasions, they are in continuous touch on a daily basis by telephone and telex. There is an international camaraderie, which I take it is quite proper, among them. Quite clearly, therefore, they together have a desire that the international banking system, from which they profit considerably, should be preserved intact with the least possible ripples of trouble. This is something, I think, which ought to be challenged; this is something which we ought to think a little more deeply about.
It is said, of course, that if these facilities were not granted the international banking system might be imperilled. It was referred to in the course of the debate last week in the other place—the so-called domino effect: if there were a default by any particular nation, or perhaps a group of nations, particularly again in South America, the whole system would be in peril. I do not know whether the noble Earl, Lord Gowrie, has had the opportunity to consult his noble friend Lord Cockfield on the subject, because Lord Cockfield referred to this aspect of the matter in the
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debate on 15th December. Some fears were raised from all sides of the House that the whole workings of the banking system, largely due to the follies of the bankers themselves, were in some danger.
The noble Lord, Lord Cockfield, was most reassuring. He said on 15th December, in col. 701:
"Let us start by looking as calmly as we can at the actual facts. The total external debt of the third world countries now just exceeds 500 billion dollars. In real terms, that is somewhat less than 2½ times what it was 10 years ago. In relation to GNP, the growth is relatively modest but individual countries, particuarly in Latin America, have very heavy debts—Mexico, Brazil and the Argentine are prime examples. These are all countries with great economic potential. The problems arise not so much from the magnitude of the debts, as from the impact of the recession, which has stunted growth everywhere, and sometimes from economic mismanagement as well. But, having regard to the potential of these countries, and the improvements in management that are feasible, given proper control over the economy, it is quite wrong to suggest—as has been suggested by several noble Lords this evening—that this is massive bank lending which sooner or later will have to be written off".
Those were very reassuring words from the noble Lord, Lord Cockfield. True enough, he made those remarks on 15th December, but the noble Lord, Lord Cockfield, who likes to update his remarks from time to time, stated again that that was his view as recently as 21st March. The noble Lord then said, at col. 1146:
"As I said in December—and I adhere to this view—the present situation is a cause for concern but not for alarm. This is the difference. Steps were necessary: it was essential to take them. Those steps have been taken. The funds available to the IMF have been substantially increased—an increase of 47½ per cent. is a very large one indeed. The funds of the World Bank have been replenished".
So the argument that if we do not take this action, that if we in the United Kingdom suddenly decide to veto—which of course we are quite entitled to do—the lending of £100 million of our money to the Argentine, an international banking collapse would follow, is quite clearly wrong.
Therefore, the idea which was put forward in another place in the course of the debate last week, that somehow any hesitation in making funds available to the Argentine would lead to unemployment, is a lot of monstrous nonsense; it would do nothing of the kind.
Moreover, it has been suggested that if such a step were taken it would provoke some trade retaliation. The Argentine is in no position to retaliate trade-wise against the United Kingdom. The noble Lord will see from the records for 1981 and 1982 that our imports from the Argentine were £136·9 million and £58·7 million respectively, while our exports were much lower, at £161·2 million and £37·3 million respectively. So the Argentine would be in no position to embark on a trade war of that kind. Therefore, the excuses will not work.
I must go into this in very great detail, I am sorry to say, because I want an effective and informed answer to a question which the House is entitled to ask. The existing criteria have been laid down by the IMF and given by the Economic Secretary to the Treasury as follows. The countries concerned must take certain action in regard to,
"balance of payment deficits, public sector domestic and external borrowing, domestic credit expansion, the elimination of external arrears and the removal of exchange restrictions." [Official Report,Commons, 11/7/83; col. 616.]
Is there any reason why those cannot be extended by the IMF in approved cases? Is it entirely out of the

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question that the British representatives on the IMF should insist upon an additional criterion—that the funds cannot be used for the purchase of armaments for possible use against the countries that are advancing the money? Is that an unreasonable proposal to put forward? I should not have thought that it was an unreasonable criterion.
As I have said before, bankers are very friendly and clubbable people, internationally, one with the other. It might be argued that for the United Kingdom to make such an argument would disturb the broad and general harmony within which international banking takes place. It cannot be forgotten, and I trust the noble Lord and the Government will not forget either, that one of the difficulties may well be that the individual bankers who take part in the consortium also have board representation on most of the world's leading armament companies. Therefore, there may not be the same incentive to restrict the sale of arms.
I have tried to put these arguments as temperately as I am able, even though it gives me and many of my noble friends, and, indeed, noble Lords in other parts of the House, some cause for considerable indignation. If no action of this kind can be taken and if no pressure can be exercised to this end, what does it really prove? It will prove something that we have long suspected—that the Prime Minister, the Chancellor of the Exchequer and the Foreign Secretary are lap dogs when it comes to the City of London and financial interests.
The Earl of Gowrie: My Lords—
Lord Bruce of Donington: My Lords, the noble Earl will have an opportunity to reply. It must be said that the Prime Minister herself has a very limited knowledge of these matters. The House will recall that when she was answering a question—
The Earl of Gowrie: My Lords, I must ask the noble Lord to give way. He has been astonishingly irrelevant and astonishingly offensive. There is every opportunity, as I shall shortly seek to show, to influence the way that the IMF programmes are budgeted.
Lord Bruce of Donington: My Lords, the noble Lord must not be so impatient. The function of the loyal Opposition in this House—
The Earl of Gowrie: For 36 minutes, my Lords?
Lord Bruce of Donington: Yes, my Lords, because it is a very important subject. The function of this House and of the Opposition is to oppose and to bring forward exactly these considerations. That is why I point out in illustration of my last remark that, when the Prime Minister was answering a question on 6th March 1980 in another place, she said that,
"the tendency is for bank profits to be high when times are bad for others and a good deal lower when times are good for others." [Official Report,Commons, 6/3/80; col. 656.]
She said that as though she were mystified by this phenomenon. The noble Earl may fulminate as much as he likes upon this, but he will have to satisfy himself in his own mind that he is correct, as distinct from
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quite properly supporting his Government. I say on behalf of the Opposition, as I have a right to say and will go on saying, that the present Government have neither the intellect nor the will to stand up to the banking community. For that they should be indicted, and we on this side of the House have not the slightest hesitation in indicting them on those lines.
3.58 p.m.
Lord Taylor of Gryfe: My Lords, this debate has gone on rather longer than expected, but in view of the fact that when this matter was discussed in the other place there was very sharp criticism of the SDP-Liberal Alliance for failing to make its position clear, and because this is a very important subject, I propose to say a few words this afternoon. We on these Benches are agreed on the need to support the international financial institutions in maintaining stability in the international financial system. Questions which we may ask are: Is it enough? Is it in time? The possibility of collapse of the international financial system is something that I do not look forward to and would not like to encourage.
The Minister has rightly identified the main causes of the present crisis: the oil price increase, the world economic depression with the consequent collapse in the prices for primary products, and the continuing high interest rates. The Bill we are discussing will make a contribution towards relieving the situation, but until the world economic depression takes a positive turn for the better the crisis will continue. I can well understand the chairmen of the central banks making reassuring statements from time to time because they must maintain confidence in the system, but in the light of the facts of the moment I doubt if that reassurance is justified.
It is easy to criticise the international bankers. That is always an emotive thing to do. It is easy, in retrospect, to criticise indiscriminate lending. But your Lordships will recall that when the lending was taking place two facts existed. The first was the need to recycle petro-dollars, and the international banking system was hailed because it had these large deposits of petro-dollars which were on-lent for further development. They were being on-lent for countries, many of which had double-digit growth rates. To that extent it looked a reasonable possibility that these monies would be repaid. Today, because of the factors which I have mentioned, the situation has changed. The world banking system has taken some steps to tighten its controls and its monitoring of that lending. The exchange of information now at Washington (the Ditchley 2 organisation) will help in a sensible exchange of information on countries which are large borrowers.
But more important, and relative to this debate, is the positive role of the IMF in the rescheduling of debts. The IMF has not simply lent additional monies to make the system reasonably stable; it has also encouraged the clearing and central banks to lend as a condition of further IMF lending. As a further condition, it has insisted on the rescheduling of existing debts, thereby avoiding the crisis which we all fear. To that extent we support fully what the IMF is doing in this positive way. But do not let us

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overestimate the size of the IMF contribution, nor our size in relation to the total IMF resources.
Lord Molloy: My Lords, I am following the noble Lord's extraordinarily interesting argument, but would he tell the House who forms the IMP? Who are the individuals who sit there and have this massive control? Who appoints them, and who checks on them?
Lord Taylor of Gryfe: My Lords, the British Government, like those of other countries, have representatives on the IMF. Once the 47 per cent. increase is carried through, the total British contribution to the IMF quotas will be only 7 per cent. I think the total at the moment is 10 per cent. So do not let us overestimate our power and influence to make the IMF decide in favour of our political prejudices or particular wishes.
The nature of the crisis is such that only last week Brazil was within 24 hours of defaulting on the short-term borrowing (the bridging finance) she had secured from the Bank for International Settlements. The chairman of the Bank for International Settlements, Dr. Leutwiler, said that there would be no further credits for Brazil from the BIS; and within 24 hours of the closure date agreement was reached between the IMF and Brazil. The Brazilian situation is that they owe $94 billion, of which $11·5 billion is to British banks. But to give your Lordships some idea of the nature of the crisis, the total export earnings of Brazil this year will be $22 million. In order to service her debt and repayment requirement, $17 million of that $22 million will be taken up. Even with the assistance which has been given, and the rescheduling of the debts, there is still a critical situation so far as Brazil is concerned. The league table is: Brazil, $94 billion; Mexico, $91 billion; the Argentine, $41 billion; and the third world total debt, around $600 billion. The crisis has not disappeared.
So far as the third world debt is concerned, primary products fell in price last year by 14 per cent., and between 1977 and last year debt servicing of the third world countries went up from 15 per cent. to 30 per cent. The third world countries are caught in this awful squeeze of debts increasing, because debt is related to the London inter-bank rate, and at the same time commodity prices are collapsing.
I want to say a word or two about conditionality—about the questions raised by the noble Lord, Lord Bruce of Donington, who speaks from the Labour Front Bench. This is a very difficult matter, and it arises repeatedly in United Nations deliberations. The test which the IMF places on borrowers is their ability to repay. The regime which they set for the countries to make reasonable repayment is to ensure that their economies can carry the debt that they are now incurring. Once you introduced into that system some preference for a particular political regime, it would make the IMF's general activities extremely difficult.
I can recall that at the end of the war, when I was engaged in the reconstruction of Europe as an official of the United Nations, we sometimes had to make decisions to assist countries with whom we had been at war. I remember that in all our discussions in the United Nations the Russians used to take exception to this. They used to say that assistance and aid should be
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given only to countries which they described as countries that had resisted the Fascist hordes. We had, however, to get the European system working again. That required giving credits, support and aid to countries with whom we had recently been at war. There is something of a parallel in all this. We took the criterion of need, and not of our particular political affiliations. To some extent the test must be applied to the Argentine. Does its increased armament commitment affect its ability to service its debt? If it does, the IMF is entitled to take a very strict line, as it would with any other country. In many countries it has cut back public sector expenditure because it believed it was excessive. By the same token, the IMF is right in insisting on rigid financial discipline. and must take into account the fact that the Argentine is spending large sums on armaments.
Similarly, with apartheid. I noticed that in the discussion in the other place the view was expressed from the Labour Benches that we should not lend to South Africa because we disagree with apartheid. In so far as apartheid restricts a country's economic growth, stability and ability to repay a debt, apartheid should be condemned by the IMF in those terms. But if you are running the IMF you cannot do so on the basis of particular political prejudices or on the inevitable emotional feelings one way or the other. Therefore I suggest that our representatives of the IMF should critically examine the large expenditure on armaments in the case of the Argentine, and should also critically examine whether the policies of apartheid restrict or undermine the ability of South Africa to meet its credit commitments.
I want to say a few words in relation to the interesting idea put forward by the noble Lord, Lord Lever of Manchester, in which he suggested (and this would be undiscriminating, I suspect, if I may say so to the noble Lord, Lord Bruce of Donington) that there should be a general extension of the Export Credit Guarantee Department arrangements which presently finance sales to foreign countries, and that this should also include an export credit guarantee arrangement on capital which we might lend on to other countries. This is worth looking at. It is an idea that was aired during our previous discussions in December and last March.
In the Brandt 2 Report, Common Crisis,there is very good comment in relation to IMF policies. I commend the Government to take note of these three points. The first point is:
"That countries be encouraged by the enlarged availability of low-conditionality credits to come to the IMF at an early stage of anticipated difficulties".
Too many of them come at the last stage, the IMF gets a bad name because it has to impose rigid disciplines on these countries, and it then becomes classified as an agent of imperialism.
Secondly, the Brandt Report states:
"That the IMF use its expanded resources to give countries support for expansionary adjustment wherever possible".
In the application of IMF policies there has been a tendency to be totally contracting and restrictive. The report goes on to state:
"That greater attention be paid to supply relative to demand conditions, so that payments deficits are corrected by an appropriate mix of policies with less exclusive concentration on demand

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constraints, devaluation and credit ceilings as the main instruments of adjustment".
I suggest that we should take a positive role in IMF discussions, and perhaps pay some heed to the proposals contained in the Brandt 2 Report, Common Crisis.
4.11 p.m.
Lord Beswick: My Lords, I find it quite astonishing that the Government Ministers complain that some of us should want time to discuss the issues involved in this Bill. The noble Earl referred to what he rightly called a notable debate at the end of last year, in which the dangers inherent in modern moneylending were discussed. But I think he will agree that that can scarcely be considered the end of the matter. The basic problems remain. We are as far away as ever from a genuine solution to the difficulties that we talked about in the debate last December. I would have hoped that we could have had a full day's debate on some of these matters, and I hope that after the Summer Recess we shall get such a debate; I might even help fulfil that possibility by myself putting down a Motion.
It is not that the Bill now before us is itself of such profound importance, though I must say that the potential liabilities opened up by Clause 2 cannot be considered as unimportant. However, against the background of the problem, the Bill really is a pitiful piece of legislation. Some may say that it is an ambulance measure, a first-aid operation. But when I learned something of first-aid I was told that when there was loss of blood, the immediate action must be to stop that loss. This Bill does not stop the flow; it is designed to provide more blood, so that the flow can continue—to the continued profit of the donor, and the weakening of the patient.
Much has been said about the large sums that have been borrowed, but it is possible to say that it is not so much the actual volume of lending and borrowing that has bedevilled our economic systems, but rather the quite stupid rates of interest that have prevailed. I do not believe that we have even begun to understand the distortion to our economic and social systems brought about by this debauch of moneylending. Of course, we can see what could happen if there were a default by a major borrower. Of course some banks could seriously burn their fingers and areas of trading could be brought completely to a halt. But the point that I want to make is that we need also to understand the deep-seated threat to modern societies if there is no default, but the devices in this Bill make it possible for moneylending to continue at anything like the current rate of interest.
In my submission there is a flaw, a design fault, in the world banking system, and this Bill simply props up the system. Much greater effort should be directed at identifying the fundamental design fault and appropriate modifications made. There are others far more learned about banking than I who can give solutions; but in my unlearned way I should like to point to some of the evidence that persuades me that there is this design fault.
I have no doubt that in this House there will be quite a number of us who hold Government stock yielding 15 per cent. interest. That 15 per cent. did not reflect
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a prosperous economy in 1979 or 1980 with business and profits booming and growth at an all-time high. Precisely the opposite was the case—it was because business was so bad that the rewards went up. This morning I read in an American newspaper that in the United States between August and December 1980 prime interest rates rocketed from 11·12 per cent. to 20·35 per cent. Again this did not reflect real economic growth of that order. It was simply a panic reaction to signs of trouble.
If I may for a moment be allowed to look back I would say that many years ago I helped to start a little airline. I recall that it did quite well and one year my dear friend the chairman said proudly that he was going to propose a 10 per cent. dividend. He was rightly proud because everyone had worked hard, they had earned success and everyone was going to share in the rewards. But in the case of that 15 per cent. Treasury stock there had been no success. There was no question of that yield coming from economic growth. It seems to me basically wrong that there should be increased rewards as the result of failure. I shall not pursue that line of argument any further this afternoon but I would call attention to another piece of evidence in the case against moneylending as now practised.
Some of my friends in the other place, and the noble Lord, Lord Bruce, powerfully this afternoon, have emphasised the point that the effect of this Bill will make it possible for the Argentine to continue to borrow money—some of it our money—to enable it conceivably to buy weapons; and equally conceivably some of which weapons might be used against us. The Government agree that this is a bad thing. The noble Lord, Lord Taylor of Gryfe, said that it was a bad thing. But we are told that the institution itself is unable to stop it. The noble Lord, Lord Taylor of Gryfe, spelled out the difficulties confronting the IMF if it tried to impose conditions relating to military preparations.
But the extraordinary thing is that though its powers of persuasion or compulsion cannot cover military expenditure, the IMF powers can cover social and industrial expenditure. It can require austerity from everyone in a particular country. Now I am certainly not myself going to argue that in certain cases a bank manager should not say to his customer that he cannot borrow more money unless his personal extravagances are cut. But what the international bank manager is saying is that whoever may go without, whatever may have been the cause of the difficulty, the moneylender must be certain of his extravagant return. It was Mr. Henry Kissinger who described the position as clearly as anyone. He put it this way:
"As a condition for its assistance the IMF invariably insists on measures that have the effect of contracting the economy, increasing unemployment and reducing consumption".
Moreover, as I have tried to indicate on previous occasions, we have to bear in mind that those conditions are enforced because of many problems that have arisen, directly in part and indirectly in large part, by the high rate of interest charged on earlier loans. The lending of money can be a valuable part of our economy if it leads to increased production of real wealth and out of which interest and dividends can properly be paid. But surely there is something

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basically wrong that rates are higher when growth is lower. If there is no growth, then, to maintain rewards to the moneylender, some innocent people invariably have to suffer in the way that Mr. Kissinger spelt out.
No doubt I can be reminded of the elementary principle that risk-taking in banking should be rewarded. But this Bill is designed to take out such risk as there was in lending to sovereign borrowers. The Bill will of course go through; but I repeat my hope that, in the near future, we shall have the opportunity of discussing the real issues involved. As certainly as anything is certain in this world, the problems involved behind this Bill will not go away as a result of simply finding some more money.
4.21 p.m.
Lord Molloy: My Lords, I apologise for not having my name down to participate in this short debate. However, there has been reference to me. I was responsible in the very heat of the Falklands crisis for submitting to your Lordships the idea that the day would come when we have to sit down, negotiate and start trading again with the Argentine Government, and that perhaps by that time there would be a sane and sensible Argentine Government. It would be a difficult situation in which we were faced with taking action in the hope that this would lead ultimately towards achieving that democratic Government. Equally, I was somewhat shattered when the IMF made its decision to lend money to the Argentine Government, not on the grounds that people were going to be killed, that they were going to be bombed or that any Welsh Guards would suffer terrible things, but that the international financial scene would otherwise be placed in difficulty. The dollar, the pound, the franc and the mark were all put well ahead of any soldier, sailor, airman or anyone else. I found this particularly repugnant.
I have to be honest in saying that I cannot go all the way with my noble friend Lord Beswick on the fundamental objectives of the Bill. Like my noble friend Lord Bruce of Donington I find that the measure can and will make a contribution. I agree with the remarks of the noble Earl, Lord Gowrie, in the early part of his speech, that it can help a great deal. I believe, however, that there must be great control. It is no use we in this Chamber getting up and saying, "The IMF do this" or "The IMF do that" because ordinary people are beginning to ask what the IMF is I have heard the IMF in this Chamber confused with the General Agreement on Tariffs and Trade, with which it has no connection. It is known that as a result of the Bretton Woods conference there was supposed to be strict control. I do not expect that many of us would be able to identify the representatives of the British people saying at the IMF how much we should contribute and where the money should go. Despite what I consider a dastardly act, I support immediate talks with Argentina once it has removed its hostility to my country. That has not happened.
I object strongly when this Government—supported, I am surprised to say, by some parties on this side of the House—are prepared to take the risk and to inform the Argentine Government that we are willing to contribute through the IMF so that they can
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have a few more millions but asking them only to use it for economic purposes and not to harm British subjects. Is it not possible that the Government could go further and argue that they have such confidence in the Argentine Government never acting again to harm the Falkland Islands that they wish to encourage more British families to go to the Falklands to develop farms and to make the land more productive?
That is the Government's stand, is it not? It cannot be anything else. I find it wounding that we should behave in this way, especially as one of those who says that the time has to come when we must trade with Argentina. I can imagine the justifiable anger that would have been displayed by the noble Earl, Lord Gowrie, if during his period as Minister with responsibility for Northern Ireland there had been some contribution to American financiers from the IMF to make sure that the IRA had better arms and more guns with which to attack the British Army. Would there have been the same cool attitude that has been seen this afternoon along the lines of, "It's too bad chaps, but that's the way it goes"? Anyone taking that view has no right to sit on any Front Bench. However, that is what would have happened.
There would have been total condemnation in this House in which I would have joined if financiers operating public money had said, "We are very sorry about the rough things we have said about the Soviet Union invading Afghanistan and if a few more billions are needed to maintain your arms there you shall have them." That is what is being said in other countries. It is what ordinary people are saying. It is wrong for us to believe that folk outside do not understand these things. They do understand. I support the noble Earl, Lord Gowrie, 100 per cent. in what he says about showing a co-operative attitude in international affairs. As the noble Earl rightly says one important step is through endeavours created under the Bretton Woods agreement; and, indeed, the International Monetary Fund.
There comes a time however when we have to say that although we are prepared to be co-operative, to be helpful and to start trading again, we will only start trade when those who have slaughtered our men and some women in a recent war say that they are no longer hostile to us. If they want to make an agreement with us to trade, we can say that we are prepared to trade. Until that is forthcoming, I am not prepared to listen to all the pleadings that have been made. I was disappointed to hear the contribution of the noble Lord, Lord Taylor of Gryfe. I do not want anyone to say that I am becoming emotional because a few hundred British soldiers, sailors and airmen gave their lives. I do not want anyone to say that I should forget that. I have no intention of forgetting it. I do not know what we can do.
I listened carefully to the speech of the noble Earl, Lord Gowrie, and his submission that under the Bill we are trying to be more generous and give more aid and help and increase international co-operation. I support that aim 100 per cent. But my shoulder is right behind my noble friend Lord Bruce of Donington. Like my noble friend, I feel that we should have been stronger. It is not enough to stand still for two minutes and give 21-gun salutes to the Welsh Guards, the Scots infantrymen and the men of the RAF. We do not

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dismiss them in 12 months simply because there is a new International Monetary Fund that has to be co-operated with. We have to take the same attitude that would have been adopted if the money had gone to the IRA or the Soviet Union to mount an invasion of some other country. That would be rightly condemned. These are the issues that we must consider seriously. By doing so, when we ultimately want international co-operation we shall achieve it on the most honourable basis that the human mind can devise. In that way, everyone will gain without bitterness or sadness. There will be a genuine feeling that we are moving along a saner and better road towards international behaviour in the dark, miserable and dangerous world in which we live.
When we can achieve a situation where, for example, there is an increase in the IMF funds to attack poverty, ignorance and disease, it will be a wonderful thing. Indeed, that is the part of the Bill with which I agree. However, I feel very strongly indeed that we move too hastily and too far as regards a people who felt a form of violence and hatred for us and who are still not prepared to say, "Very well, it was a black, dark, period of our relationship; it is now all over, let us try to give some sunshine and light to a new situation". We are prepared to say that, but they are not, and until they do so we ought to stand firm and have nothing to do with any organisation that is prepared to lend money to a régime which is only about 200 miles from the Falkland Islands.
Indeed, are we not now sending people from our land to try to develop the Falkland Islands? Can we do that with the absolute surety that the hostility still being professed by the Argentine Government is not much to worry about, so much so that we are prepared to go out on a limb and lend them money in the safe assurance that they are not going to attack the people who are, perhaps, not yet in the Falkland Islands? It is that aspect that the Government ought to take on board and consider very seriously indeed.
4.31 p.m.
The Earl of Gowrie: My Lords, I certainly agree with the noble Lord, Lord Beswick, that this is a subject of immense importance, so much so that only a few days ago, when wearing my hat as Minister for the Arts, I rather surprised an arts journalist by saying that some of the things one could or could not achieve in the world of the financing of artistic activities might be contingent on events in Latin America or central Europe in terms of international financial stability. Therefore, I certainly yield to nobody in thinking this subject important. I do not think that there is any single issue except perhaps the issue of world peace which is more important today than continuing international financial stability and the sort of terms for international stability with which this Bill seeks to deal.
The response to the Bill in your Lordships' House has fallen very squarely into two parts. There are those like the noble Lord, Lord Taylor of Gryfe, and the noble Lord, Lord Beswick, who are concerned with the economic consequences and the economic thinking behind these measures. There are those like the noble Lord, Lord Bruce of Donington, and the noble Lord,
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Lord Molloy, who express themselves in broad agreement with the economic purposes but have expressed, very trenchantly, anxieties about a system which might be lending money to a country still formally engaged in hostilities with us—a country which might use such money to proceed against us or to damage our interests.
Of course I agree with the motivation for such anxiety, but I think that the criticism misses a key point: that this issue of "conditionality"—and the noble Lord, Lord Taylor, gave us an admirable account of the problem of conditionality—can be imposed in ways other than those suggested by the noble Lord, Lord Bruce of Donington, or the noble Lord, Lord Molloy. If I am not misinterpreting them, they want loans to such countries as Argentina to be contingent upon a political response—in this case as regards foreign affairs—by that nation.
The noble Lord, Lord Taylor, showed us very clearly how very difficult it is for an international economic body like the IMF, as against the chancelleries of the soverign countries around the world that belong to the IMF, to engage itself in direct conditionality and to say, "We want you chaps to have this, that or the other political objectives or this, that or the other political system". But that is not to say that the IMF cannot be enormously influential on the ways in which people respond politically to the needs and demands of their creditors and of the rest of us—
Lord Paget of Northampton: My Lords, would the noble Earl—
The Earl of Gowrie: My Lords, let me just finish the point. Were the Argentines to divert money to buy more arms, or indeed anything else, the IMF programme being negotiated with the Argentines could be severely jeopardised. Let me just say to noble Lords before I give way that the IMF programme and any bank lendings contingent upon it do not give Argentina any surplus funds to spend on arms. Indeed, the programme puts very tight control on Argentina's finances, and, if the Argentines were to divert money to buy more arms, this could jeopardise the programme and Argentina's ability to negotiate further funding. Indeed, I can tell the House that the international commercial banks have not yet signed the 1·5 billion dollar loan which has been under negotiation for several months. In earlier reports, the 11th of this month was quoted as a possible signature date. My present advice is that this has slipped and the loan is unlikely to be signed just yet. It is, therefore, unlikely that any such loan would be effective unless and until Argentina has satisfied the performance criteria of the fund programme. So the funds the Argentines receive will be contingent upon how they behave.
Lord Paget of Northampton: My Lords, I am most grateful to the noble Earl for giving way. Why is it very complicated for the IMF, as a matter of policy, to say that they only accept clients who are at peace with their fellow members of the United Nations, that they will not lend money or recommend the lending of money to nations that are at war and that they must wait until they make peace?
The Earl of Gowrie: My Lords, if there were circumstances of global conflict, that would be a great deal easier. But there are, of course, conditions of partial war and peace, or of good relations or bad relations, that exist between member countries. If noble Lords look at the membership of the IMF, they will find that this suggestion really would be a little unrealistic. The membership of the IMF includes 146 countries. Six countries—the United States, the United Kingdom, France, Germany, Japan and Saudi Arabia—all of which are profoundly unlikely under any rational scenario to be in any state of formal hostilities with each other, appoint directors to the executive board. The remaining countries are grouped into 16 constituencies and they elect 16 executive directors to the board. The point I am trying to make is that the IMF is a particular type of body, and, as a financial body, it is highly influential and can influence its creditors in ways which are thoroughly conducive to peace. But, if it took the frontal approach suggested by the noble Lord and others, it would immensely diminish its chances of being able to influence countries in their pocket books—which is where, in fact, they are probably most easily and sensibly influenced for good.
I can assure the House that the 1.5 billion dollar commercial bank loan currently being negotiated with the Argentine is very closely linked to the IMF programme, and that drawings will only become available while the IMF conditions are being satisfactorily met. If I showed a little impatience during the perhaps rather contentious remarks—where personalities were concerned—of the noble Lord, Lord Bruce of Donington, it was not because I do not recognise this genuine anxiety about lending money to people who may be, or indeed are, engaged in hostile diplomatic relations with one; it is simply that I have often debated economic affairs with the noble Lord, Lord Bruce, over the last five years and have always been accused of turning my back on Lord Keynes. It seemed to me that the noble Lord was turning his back on what could he called the economic consequences of the peace. I should have thought that it was a principle dear to Keynesians and to neo-Keynesians, or even to modified Keynesians, that countries with which one can have interruptions of good relations, or poor relations, should not suffer economically for a reason which can only strengthen those elements which are seeking to promote violence or disorderly policies within the countries in question.
I also have to say that I am always rather impatient when I here the old socialist argument about the bankers' ramp as if the IMF were, so to speak, gnomes. That is not what the IMF are. The way they conduct their affairs is not simply designed to provide commercial profitability, and we value their work highly. Of course membership of the IMF board enables us to take part in periodic reviews of the IMF's progress and to ensure that the appropriate conditionalities are met. I think what I have said about the Argentine shows that we take that seriously.
Coming to the remarks made by the noble Lord, Lord Taylor of Gryfe, I can only really commend them to the House as an admirable tutorial on the situation we have got ourselves into in the international world. I do not think it is fruitful to apportion blame, and I do not think it is particularly fruitful to criticise commer-
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cial banks for lending to countries which enjoyed high and indeed enviable rates of growth until growth was pulled up by the international energy crisis, and perhaps even more by the international liquidity crisis, if I may put it that way, which followed 1973 and which has cast such a blight over all our lives since.
The task of the 1980s is now to get more stable growth. It is therefore essential—and perhaps I may say this to the noble Lord, Lord Beswick—that all countries engage in these rather grim and gloomy policies (admittedly jeopardising growth in the short term) which enable us to get to non-inflationary and sustainable growth in the longer term, admittedly at perhaps a lower level than we enjoyed in that astonishing post-war flowering.
The measures in the Bill before the House strengthen rather than weaken the role that this country can play in needed international efforts to deal with international difficulties, and they strengthen the existing international financial institutions in carrying out their vital role of promoting and facilitating adjustment. I hope I have dealt with the central fear expressed in relation to the Argentine. Otherwise I very much welcome the wide support that the measures have commanded throughout this House and another place, and I commend the Bill to your Lordships.
On Question, Bill read a second time; Committee negatived.

Local Authorities (Expenditure Powers) Bill
4.44 p.m.
The Minister of State, Department of the Environment (Lord Bellwin): My Lords. I beg to move that this Bill be now read a second time. It has a single objective even if the legal niceties involved are inevitably a little more complex. I will endeavour to explain that aim, and how the Bill seeks to achieve it. This Bill was first introduced into another place in the previous Parliament; but because of the early dissolution, it failed to complete all its stages there. It has now been reintroduced, and comes before this House largely unchanged.
The purpose of the Bill is to remove a doubt which local authorities have brought to our attention about their ability to make grants towards certain urban development projects. This doubt has come to light in the particular context of the Government's Urban Development Grant initiative. It applies more generally, however, to a potentially wider range of projects involving either the acquisition of land or any building works on land which local authorities may wish to grant-aid, using Section 137 of the Local Government Act 1972. I am sure that the House is by now fully acquainted with the Urban Development Grant Scheme. The essential characteristic is that by using relatively small amounts of public resources —local authority contributions, backed by a 75 per cent. Government grant—considerably greater sums are levered from the private sector in support of projects aimed at the regeneration of our inner cities.
When the Bill was read a second time in another place on 7th July, my honourable friend the Under-Secretary of State for the Environment was able to

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announce a further batch of 21 UDG projects, making 93 approvals in all to date. These projects represent a total investment of £216 million, of which £173 million comes from the private sector. It is because we wish to avoid any unnecessary delay to these schemes that the legal doubt about the authorities' own powers to assist in this way should be speedily resolved.
Let me now seek to explain the nature of that doubt and how it has arisen. Local authorities have long had powers to make loans for the acquisition of land, and the carrying out of works on land, including the erection of buildings. In England these powers are embodied in Section 3 of the Local Authorities (Land) Act 1963, and there is an equivalent Scottish provision. These powers are extensively used by local authorities in, for example, assisting local firms to provide themselves with new premises. Local authorities also have a much more general power to incur expenditure for the benefit or improvement of their area. This power is subject to an annual expenditure ceiling equal to the product of a 2p rate and is hence often referred to as the twopenny rate provision. It is contained in Section 137 of the Local Government Act 1972; and, again, there is an equivalent Scottish provision.
Last year, after a great deal of discussion, into which I need not go now, Parliament did two things in the Local Government (Miscellaneous Provisions) Act. First, it confirmed that Section 137 could be used inter alia to make grants for local industry and commerce. Secondly, it widened the scope of the 1963 Act so that local authorities could make loans not just in respect of land that they owned or had sold, but in respect of any land. I hasten to reassure your Lordships, that both these changes were made with the full support of the local authorities themselves, and indeed at their request.
But they have had an unfortunate if unintended result. The general power in Section 137—the twopenny rate provision—is however only available where there is no other specific power, whether or not subject to conditions or limitations, which authorises them to incur expenditure for the same purpose. As noble Lords will realise, it is not an easy matter to say what is or is not the same purpose. But one or two local authorities represented to us that if they had power under the 1963 Act to make loans, say, for the erection of buildings, they could not use Section 137 to make grants for the same purpose, which is exactly what they want to do in many UDG schemes. The Government's own legal advice agreed with this interpretation, which is why the Government decided to introduce this measure, as a matter of urgency, to make sure that they could use Section 137 to make such grants.
Let me now explain how the Bill achieves this purpose. It does so by providing that certain powers shall not be regarded as restricting—in the way I have described—the power in Section 137. The powers concerned are Section 3 of the Local Authorities (Land) Act 1963 for the reasons that I have already given, and also any enactment in a local Act for which the Bill provides powers for the Secretary of State to designate in an order.
Your Lordships may wonder why it is necessary to refer to local enactments in such general terms, or to
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have a designation procedure. The answer is straightforward: we simply do not know at this stage what provisions in the many local Acts which exist may inhibit the use of Section 137 to further urban redevelopment projects. We must rely on the local authorities themselves to tell us when they find an example, so that my right honourable friend can make an order to remove the inhibitory effect. But we have provided safeguards to ensure that the order-making power is exercised only when, and to the extent, it is needed. So that if, for example, one local authority to whom the local Act applied wanted the order but another did not, then the order could be made only to apply to the former. Similarly, the Bill provides that the local authorities concerned must be consulted beforehand. My honourable friend has already given an additional assurance, in another place, that the department will also keep the local authority associations in touch with any points of principle which arise in the use of this order-making provision.
The only other provision to which I need draw attention in introducing this Bill is the brief reference in it to retrospection. This provides that in relation to Section 3 of the Land Act the Bill will have effect as from 1st April of this year, and that any order designating a local Act may similarly have effect from 1st April of the year in which it is made. This provision was incorporated into the Bill when it was reintroduced into this Parliament to meet some concern which has been expressed about the position of local authorities which had made payments, under UDG schemes in particular, in this financial year—and hence after the Bill was first introduced—but before it could receive Royal Assent. I am sure your Lordships will regard this limited degree of retrospection as both practical and reasonable.
I have endeavoured to explain as clearly as I can the very simple purpose of this Bill. There is however one last point that I should perhaps make for the sake of completeness. This is to remind your Lordships of the undertaking that my honourable friend gave on 7th July in another place to look at how best extra publicity for Section 137 could be brought about. This was in response to concern over the way in which some local authorities may be misusing their discretionary power conferred by the section. He said,
"we had it in mind to include details of Section 137 expenditure in the summary of accounts that we propose local authorities should prepare in future. We shall be consulting the local authority associations shortly about our detailed proposals so that we can implement the change at the earliest possible moment".—[Official Report, Commons, 7/7/83; col. 436.]
My concern this evening is to commend this Bill to your Lordships as essentially a technical measure to fill an unintended but important gap in local government's armoury to tackle the regeneration of our inner areas. It is in that spirit that I commend this Bill to your Lordships.
Moved, That the Bill be now read a second time—(Lord Bellwin.)
4.54 p.m.
Baroness Birk: My Lords, on this occasion the Opposition are able to welcome the Bill put forward by

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the Minister and we are doing nothing to impede its progress. We are also pleased to see that the Bill has taken note of what was argued in Committee in another place on the first Bill, before the election, so that it makes it retrospective to 1st April 1983. This is essential and I am pleased to see it incorporated in the Bill.
The Bill, as the Minister so clearly explained, is attempting to clarify the law relating to Section 137 of the Local Government Act 1972. I think, but it is probably better if there were no doubt—there is a school of thought that there was no existing doubt—that this was clear and it could have gone ahead with, if necessary, the courts having to sort it out if anybody objected. On the other hand, I can see that it caused a certain amount of anxiety among many local authorities. Therefore, while one does not want to add to legislation, even in the smallest form as this is, it is still better that it should be completely clear.
However, there are several points relating to the use of Section 137 in the fields of industrial and economic development to which the Minister has not addressed himself. First, there is the general unsuitability felt by many individuals, local authorities and some of the local authority associations, certainly the AMA, of having to rely on Section 137 to legalise the valuable work undertaken by local authorities to rejuvenate and energise their local economies. It is a provision normally associated with providing bus shelters or projects of a much smaller kind.
During proceedings on the Local Government (Miscellaneous Provisions) Act 1982, I remember arguing to give local authorities far greater financial flexibility and higher spending on economic development in their areas. That is essential to revitalise the inner city areas. Although some progress was made in that Act, as the Minister pointed out, it did not go as far as many of us had wanted, as far as the product of a higher rate. When one is dealing with industrial and commercial measures and trying to improve them and put them into an area to improve both the quality of life and the employment situation in an area, that is different from some of the other more cosmetic although equally important but smaller services that we are discussing. There are already problems with the 2p limit itself. The limit is not on the rate that a local authority can levy, but on the expenditure it may incur. That means that the Government's urban development grants count against the limit.
In bringing forward this legislation. the Minister is attempting to help the urban development grants scheme which the Bill does, but he could help more by using the powers available under Section 44 of the Local Government (Miscellaneous Provisions) Act 1982 to exempt urban development grants from the calculation. The Minister could then tell local government that what counts against the limit is not the gross expenditure before deduction of the grants, but expenditure net of the grants. With the UDGs available at 75 per cent. the use of this power could make an enormous difference to the amount of economic development work a local authority could undertake. It would enable it to stretch its economic
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and industrial limbs in a way which it cannot when it is inhibited by the Section 137 provisions.
This is an example of the Government seeking discretionary powers from Parliament and then not using them. Clause 1(3) will give the Government more discretion, this time to discriminate between local Acts and local authorities using general Acts. Can the Minister tell me at this stage whether the Government will use this discretion? They have not so far used the discretion they have under Section 44. If they do not use it it will mean that many local authorities are at a disadvantage because they are unable to implement some of the local Acts.
Finally the Bill has to be seen in the context of the Government's overall policy towards local government. Today we are discussing the powers of local government to spend within the product of a 2p rate: a fairly small sum, we agree; but, even so, the Government have given the impression of trying to be helpful about this. How does this helpfulness square with what the Government are planning to impose on local authorities after the summer?
Since the Bill first appeared we have seen the Tory manifesto and the Queen's Speech, in both of which a Bill has been promised which is not concerned just with the marginal problems of the 2p rate but with the Government's plans to legislate to take away the local authority's freedom to levy any rate it chooses. I am sure the Minister will say that those powers are aimed at only a few overspending authorities, but many of those alleged overspenders—this is on the Government's own criteria and includes Conservative as well as Labour authorities—are authorities many of whom are doing most for industrial development in their areas and who stand to benefit most from this Bill.
Finally, the Bill clarifies the legal hurdles which always lay hidden in most legislation and, therefore, as I have said, we will give it an easy and speedy passage. It should take any doubts out of urban development and facilitate the excellent work that many local authorities are endeavouring to carry out in this area; but, without sufficient financial means and vigorous local government, these efforts may be legally blessed but in practice could be nugatory.
5 p.m.
Lord Beaumont of Whitley: My Lords, I should like to thank the noble Lord who introduced this Bill for his explanation of it. It is a Bill which I think will get widespread support in this House and certainly from these Benches—not that we think that necessarily it has been produced in the most satisfactory way or that we are entirely happy about everything in it. But basically it is a Bill to give more power to local authorities to do work which is necessary to be done. This is fairly unusual for this Government and we are delighted that they are taking these steps. The objective is admirable: the improvement of the inner city and the use of our resources in order to make that improvement. Unfortunately, in order to do it apparently we have to produce some slightly convoluted legislation dealing with where it is a matter of debate as to what controls need to be imposed on the local authorities in their use of the monies which they can raise.

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It is the philosophy of the party which I represent and that of our noble allies on the Back-Benches that we would like to see as much power as possible given to local authorities and that one way of enabling this to be done is to produce a better and more democratic way of electing the authorities so that the kind of extremist use of funds which has been referred to, and which is the target of some of the measures which have to be introduced, is no longer possible. I have already written to the Minister on this matter regarding an interchange that we had the other day. I do not know whether he intends to say something about it today, but I very much look forward to that. But, given that we are where we are and that we start with this unsatisfactory system, the Bill obviously needs support.
I think that one or two very minor points should be taken up. I understand that my noble ally, the noble Lord, Lord Kilmarnock, is intending to take up the point which Mr. Cunningham proposed in the other place when this Bill came up before the election, a point which had to do with how one controlled the use of monies which could be used under this Bill if there were extremist authorities which wished to use them in ways which obviously would not be fitting and, in particular, if they wanted to use them in an extreme political way. I hope that the noble Lord, Lord Kilmarnock, will not only deploy arguments about this but will actually manage to get from the Government some commitment about the same matter. That I think is the main point.
Another point is the retrospection which the noble Lord, Lord Bellwin, mentioned. In this particular case, I think it is a very mild retrospection although we on these Benches usually pride ourselves that this is something which we do not let pass easily. But it would be picking at nits to make objections on this particular matter. I congratulate the Government on their desire to see that local authorities can go ahead with the kind of work for which this Bill clears the way. I only regret that there is not a sounder basis of local government finance and local government elections on which we can build something much more radical and which would give much more power to local authorities.
I have little doubt that what is needed so much in so much of our politics is more and more decentralisation. The more that Government look at things and set up vast authorities and bodies to administer from the centre, the more we get lost in a maze of bureaucracy; whereas if you go down to the grass roots and allow the people there to see what needs to be done and to see the resources that they already have—and in these cases the resources so often are the resources of manpower, which in these days, unfortunately, are only too obviously idle and available—the more we are able to devolve that kind of power and the better I believe it will be for the welfare not only of the local authorities but of the country as a whole. I am quite certain that we should be moving in that direction. This, I suppose, is a tiny step in that direction and therefore deserves our support.
5.6 p.m.
Baroness Gardner of Parkes: My Lords, I have put down my name to speak on this topic simply because of the commencing phrase of the Title, which reads:
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"An Act to remove certain restrictions on the powers of local authorities under Section 137 of the Local Government Act";
and because I am aware from previous debates in this House of the great discrepancy in the amount of money which is represented by a 2p rate. We have had debates and comments at earlier stages in this House and I have listened with great interest to those from areas outside London who have said (as the noble Baroness, Lady Birk, has said) that to them a 2p rate was barely enough. Sums quoted were perhaps £20,000 or £30,000. I have every sympathy with those authorities. I think that they have every intention of spending the money raised by their 2p rate well and wisely and in doing a lot of local good.
However, I think that I must again draw attention to the very different situation which exists in London. A 2p rate in the Greater London area, raises £38·8 million. That is a subject of quite a different size from that which we would be considering in other areas. For that reason, I would ask the Minister to ensure that, particularly in terms of a vast expenditure like that which at the moment is so uncontrolled in its use, this should never be increased beyond the 2p. If there is ever an increase for some areas then, it should be done in such a way that a ceiling or a capping should exist upon this expenditure, because it really is not in the interests of the ratepayer to have sum as large as £38·8 million unwisely spent.
In the city of Westminster, a 2p rate for two of the major oil companies' offices represents £21,000 or £26,000. To the large store in Oxford Street, a 2p rate represents £22,000. That is as much as the whole of some authorities raise with their 2p rate under this section. The head office of a large chain store group which has a rateable value of £2 million finds that to them a 2p rate represents £47,000. Two of the largest hotels would have to find an extra £9,000 or an extra £11,000. The Westminster Chamber of Commerce have worked out that, for every business space occupied in London, roughly £1,000-worth of rates are payable for every staff member. Therefore every extra 2p, every extra £1,000 on your rates is putting more jobs at risk.
There are also unseen and perhaps unconsidered rates which have to be met by ratepayers in London. When you realise that the London Electricity Board pays a rate bill of £26.5 million a year, that is £17 for each domestic ratepayer in London, and more for each commercial ratepayer. People who pay their electricity bills and find those costs high do not realise that they are actually paying more because they are also paying for the rates that are paid by the London Electricity Board. Ninety per cent. of all the rates paid in Westminster are paid by the business community; and so, the Minister having mentioned that extra publicity was to be given concerning Section 137 expenditure, I should appreciate some comments on whether he meant that this was to be publicised as a good thing or a bad thing. I should like to know more about that because it is important for the ratepayers, who do not have the choice of refusing to pay their rates; that is a statutory obligation and it has to be met. I should also like to be assured that more ratepayers will not be forced out of London in 1984.
The Minister mentioned that this Bill would remove doubts and I think that it is very timely and necessary.

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As I see it, it is intended to regularise a situation that already exists, and, in that sense, the retrospection is no problem at all. But, referring to some of the points which were made by the noble Baroness, Lady Birk, such as variation and how local authorities felt inhibited by Section 137—sadly, some local authorities do not feel so inhibited. Even last week the Minister answered a Question and said that he relied on authorities which were to be abolished to act in a reasonable way between now and then. Only a day later 1,055 new staff were taken on. Who could say that was reasonable? I just feel that I should like to place these matters on record and to ask the Minister for an assurance that these points will not be overlooked—that is, the point of the vast difference between authorities and the difference in the amount of money that is produced by a 2p rate.
Baroness Birk: My Lords, before the noble Baroness sits down, since she commented on some of the points I made, I am sure she would agree that even the authorities who are getting in, as she quite rightly said, a much larger amount of rates have tremendous demands made on them, with larger populations. Their geographical position and also their needs for expansion and the possibilities for industrial and commercial expansion are very important, not only locally but nationally as well. I think the noble Baroness knows too much about it all to stand on what sounded at times rather like generalisations. I hope she did not mean to generalise about the whole of London or the whole of these big cities.
Baroness Gardner of Parkes: My Lords, I thank the noble Baroness for her intervention. Last time, when I gave chapter and verse and named the companies concerned, there was an objection from that side of the House that this should not be done; but I will of course be happy to supply chapter and verse on the facts that I have given—
Baroness Birk: My Lords, that is not the point I was making.
Baroness Gardner of Parkes: My Lords, on the point the noble Baroness was making, for example, about Greater London spending its money well—I presume that is the point she was making—perhaps I may tell the noble Baroness that the Greater London Enterprise Board has created only 44 jobs at a cost of £476,000. That I do not consider an economical use of London's money; nor do I consider a grant to the Black Lesbian Society as being a good use of Section 137 money. I could go through 50 similar grants for your Lordships. I believe that the ratepayers of London are not satisfied that their money is being wisely spent, and that is why there is a demand for the Government to take what I think is, unfortunately, a most necessary action to control the rate expenditure in London.
5.15 p.m.
Lord Kilmarnock: My Lords, this is a sensible Bill for sensible councils: the objective is admirable, as my noble friend and ally, Lord Beaumont of Whitley, has
1012
already said. We understand perfectly well that it is directed mainly at urban development grants. We know that local authority associations want it, although the metropolitan authorities appear to have some reservations, and we understand why, in that the urban development grants element of the total expenditure is met 75 per cent. by central Government and 25 per cent. by local government grant, but that advances made by a local authority under Section 137 of the Local Government Act 1972 for this purpose may, strictly speaking, be illegal. Local authorities are anxious to cover themselves against this, though I also understand that some expenditures have already been undertaken under this heading with the simple safeguard of a district auditor's certificate. The Bill would remove any impediment under this heading, but the trouble is that it opens a hole which a coach and horses could be driven through.
Some noble Lords will no doubt be familiar already with the case of the Islington Borough Council, which was advised that the passage of this Bill would enable it to produce a politically-motivated local newspaper that the law does not permit to be produced at present, and that this could be distributed free at ratepayers' expense. Of course we would not object in the least to other Section 137 expenditure under the general heading of employment and industry—I know, for example, of some very worthy schemes undertaken on the other side of the river in Dartford and Greenwich—but we do very strongly object to the type of misuse or abuse of public funds contemplated in Islington. It may be said that this is merely one maverick council and that is not sufficient grounds for subjecting all councils to some additional form of control. It may also be advanced—and indeed it was advanced in Standing Committee C in another place before the Bill fell at the Dissolution of the last Parliament—that the proper remedy for abuses lies in the hands of the electorate. That was a point made by the Association of Metropolitan Authorities. They said that, if the truth of the matter is that local authorities are abusing their freedom to spend up to the product of a 2p rate, it is up to the local electorate to decide what are and are not abuses.
We would accept both points if local authorities were truly representative of their electorates; that is to say, after the introduction of proportional representation for local elections in this country along the lines recently proposed in your Lordships' House by my noble friend Lord Harris of Greenwich and referred to by the noble Lord, Lord Beaumont of Whitley. Pending this, we feel that some safeguard must be written into the present Bill. The noble Lord, Lord Bellwin, said that there was one, but it did not appear to us to be adequate, or the right one. An attempt was made in Standing Committee C to introduce into the Bill an amendment making it unlawful for Section 137 expenditure to be made to any body,
"whose composition is restricted by constitution or by practice to representatives of one or more political parties, nor to assist organisations or activities calculated to promote a political cause".
This fell owing to the difficulty of defining political purposes. A further suggestion was made that the limitation contained in Section 137 should be lifted, but only in relation to development expenditure where both central Government and the local authority are

1013
involved. An attempt to give body to this idea was made in a further series of amendments and, at col. 110 of Hansard on 26th April, Sir George Young, speaking for the Government, said this:
"Against the background of that concern, I am prepared to take away and consider an amendment on the lines of Amendment No. 10.
That amendment read as follows:
"That the power conferred on a local authority by this section shall not apply to expenditure unless that expenditure has been approved by the local authority and by the Secretary of State."
Sir George went on to say this:
"we shall have to consider drafting carefully because we shall want to consult the local authority associations".
But what happened. my Lords? As I say, that was on 26th April. The general election followed shortly after, and almost immediately upon the resumption of the legislative process we have the same Bill as before, rushed through the House of Commons in one day, while in this House we are being asked to take it on a telescoped timetable.
The amendment moved in the Standing Committee, which the honourable gentleman appeared to favour, may not be the right one; it may give excessive power to the Secretary of State. But the point I want to make this afternoon is that this House would not be taking its duties seriously as a revising Chamber if it did not devote some considerable attention to a very important and potentially dangerous lacuna in the Bill. Civil servants may regard the Bill as a mere technicality, and the noble Lord, Lord Bellwin, used the same phrase. Ministers may have been misled by their civil servants. I put it as charitably as that. However that may be, I want to ask the noble Lord whether the Government, in consultation with other interested parties, are prepared to bring forward their own amendment along the lines which appeared to be conceded by Sir George Young before the general election. If not, I must tell the noble Lord that we on this Bench shall not be happy to let the Bill through as it stands "on the nod", and shall seek to improve it at the Committee stage.
5.20 p.m.
Lord Bellwin: My Lords, I am very grateful to the noble Baronesses and noble Lords who have spoken on the Bill. Indeed, I am gratified—not an experience that I always have—to have noted the generally satisfactory reception which this Bill seems to have received. I am certainly grateful for that. If your Lordships will bear with me, I should like to deal with the points slightly back to front. They will flow well enough if I respond, first, to the observations made by the noble Lord, Lord Kilmarnock, because his was the only note of major dissension as to any aspect of the Bill. Also, I think it is quite proper that I should comment upon the point that my honourable friend made in another place.
May I say at once that I am well aware of the great concern that many feel, both in your Lordships' House and elsewhere, not about Section 137 but about the misuse of it. I find it sad, as I find many things sad, because I see it as yet another example of how the flouting of generally accepted conventions by individual authorities leads to a call for action which affects
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all local authorities. Indeed, many of the problems facing local government today, not least its relationship with central Government, rest clearly and heavily on the backs of those relatively few authorities.
I shall not go into the history, as I should like to do, of the original 3d.—the provision which was added to the statute book in 1963. But it is fair to say that the wider power of Section 137, which we are now talking about, has in recent years worked very well. Hitherto, it did not attract anything like the criticisms that have been made of it comparatively recently, and it is what can only be described as the wilful abuses of discretion which have led us to the unhappy feeling that so many have about it today. But having said that, consideration of what I am entitled to call a largely technical Bill does not, in my view, represent the time or the place for action to be taken.
I say again—and I shall come in a minute to the precise observations of my honourable friend in another place—that it is proper to say that the Government are watching these provocative developments very closely. We are already taking steps to require authorities to include in their accounts details of the expenditure being made under Section 137, so that ratepayers can see and have highlighted the matters on which their money is being spent. This will be a useful step. But I say again that I am conscious of the anxieties which this situation is bringing about. When the previous Bill was being considered in another place, the then—
Baroness Birk: My Lords, has the Minister finished on that point?
Lord Bellwin: Almost, my Lords. I just want to respond specifically to the point about my noble friend. When the Bill was being considered in another place, the then honourable Member for Islington, South, put forward a proposal which would require ministerial approval to expenditure authorised by the Bill, in order to try to prevent the possible abuse of Section 137 by some councils, which I say again gave rise to so much justifiable concern. My honourable friend undertook to consider whether it would be possible to introduce such a requirement into this Bill. We considered this carefully as one possible way of dealing with the problem but we did not feel able to incorporate the change into the Bill now before your Lordships.
The question was discussed very thoroughly with the local authority associations. They had serious objections to it on the grounds that, first, it represented a new control over and a serious diminution of local authority discretionary powers. Secondly, they felt that it was not justified by—as they saw it—the relatively limited evidence of abuse which had been brought forward. Thirdly, it would not in fact preclude the vast majority of questionable payments which had been drawn to our attention. Again, I shall not go into further detail as to why we felt that the weight of the argument lay with them; at least so far as this Bill was concerned. All I can do to try to assuage the concerns of the noble Lord, Lord Kilmarnock, is to repeat again that we are not lightly turning away from this and trying to pretend that what is happening is not really

1015
happening. If I tried to do that, my noble friend Lady Gardner would certainly make sure that I did not get away with it—not that I want to. Did the noble Baroness want to intervene?
Baroness Birk: Yes, my Lords. The Minister has in his last remark covered the points that I wanted to draw to his attention: that there has been consultation with the local authority associations and that this will continue. But is he aware that we on these Benches will certainly be very unhappy to see this Bill, which is a small Bill for a particular purpose to legalise something about which there was some doubt, used as a vehicle to do something for which it was not meant to be used at all?
Also, would he agree that, while there are some local authorities which are spending money on certain things with which many of us would fundamentally disagree, they are a minority? It seems to us wrong to generalise and bring into unsuitable legislation something that should not be in this Bill, and on this occasion the Minister has the support of these Benches. I am so sorry to have taken up time, but I thought that I should state that view as this subject arose after I spoke.
Lord Bellwin: My Lords, I thank the noble Baroness for that. She gathers from what I have already said that it is not our intention to introduce anything of the kind into this Bill. But I hope that she agrees with me, and indeed with the other concern expressed. There is a problem here and we cannot turn our backs on it and pretend that it does not exist simply because it applies to a relatively small number of people. I am glad that it is only a small number but there is some evidence that it applies to a growing number of people. Perhaps we may leave it at that for today; but I am sure that none of us is turning our back on that aspect.
I should now like to come to the other side of the coin, which is the suggestion by the noble Baroness, Lady Birk, that we should extend the use of Section 137. As she said, there are people who feel that this should be done, and I have no doubt that there are people who would use it very well. My noble friend Lady Gardner illustrated in the sheer numbers that she mentioned why some authorities could make very good use of an extension. But I thought that her statistics were very relevant. When you talk of any authority which has available this 2p power, that is almost £40 million in a year—I admit that that is the largest—and that puts the whole thing into context. I found that interesting.
I assure her that the concerns which she has are the ones that we also have in mind. If there were to be any further increase in the headroom which is currently generally available to local authorities to use Section 137 to take account of urban programme expenditure, it could only be additional to the netting-off arrangements which were introduced in the Local Government (Miscellaneous Provisions) Act last year, which in themselves gave some extra flexibility. I should just assure the noble Baroness that Section 137 already permits local authorities to net-off the grant that they receive from the department. Section 137(4)(b) lists
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various disregards; that is, items that do not count against the 2p limit. These include payments corresponding to payments made by the department under the Local Government Grants (Social Need) Act 1969. That is the Act under which we pay urban development and urban programme grants. Only the authorities' 25 per cent. share of grant-aided expenditure in fact scores. If the noble Baroness would like to pursue this further with me, I should be very glad to expand on it in correspondence with her.
My only other comment relates to the point raised by the noble Lord, Lord Beaumont of Whitley, about proportional representation. The noble Lord sees it as a possible solution to the abuse issue. I listened carefully to what the noble Lord said but I am not convinced. I have had the experience of serving in local government in control, in opposition, in majority control and in minority opposition: the whole gamut. I do not believe that there are any other permutations. My experience was that it was not the best form of local government.
I understand the appeal of proportional representation, especially to those who feel that they will never be in a position of control: their only hope is to hold the balance of power. When they hold the balance of power they feel that they may exert some kind of control. I understand and respect that point of view. I know how frustrating it must be to feel that one will never be in control. One leading local government colleague who now sits in another place said that he would never have had the chance to take the chair. As I say, I understand how frustrating that must be, especially to a good local government man. I hope that he will now be a good national government man.
Proportional representation does not, I feel, lead to better government. I accept that on occasion it may mitigate extremism, but so far as my experience goes it is not conducive to getting things done. I could expand on this, because it is a very interesting, almost academic point which is fascinating in itself. Perhaps however your Lordships will not ask me to deal further with it today, though I shall gladly discuss it personally with the noble Lord, Lord Beaumont of Whitley, if he so wishes. I thank noble Lords for their reception of the Bill. I hope it will have a speedy passage through your Lordships' House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Army, Air Force and Naval Discipline Acts (Continuation) Order 1983
5.32 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, I beg to move that the draft Army, Air Force and Naval Discipline Acts (Continuation) Order 1983, laid before the House on 29th June, be approved.
As your Lordships will be aware, a new Armed Forces Act is passed every five years when the opportunity is taken for the provisions and procedures of the service disciplinary system to be reviewed in depth and updated as necessary. In the intervening years the annual renewal of the service discipline Acts is by means of continuation order such as the one for

1017
which I now seek your Lordships' approval. The last quinquennial Armed Forces Act was passed in 1981.
Your Lordships had the opportunity in the course of the debate on the Address to consider the broader issues of foreign and defence policy and, with your Lordships' permission, I will therefore confine myself now to matters related to personnel and discipline within the armed forces. But I will of course endeavour to answer any questions which may arise in the debate.
During its period of office the Government have demonstrated a tangible commitment, not only to the need for effective defence and the provision of resources to achieve it, but also to the well-being of the armed forces themselves. For example. in 1979 the Government made a firm commitment to restore the pay of servicemen to the levels of their civilian counterparts and to maintain it thereafter at these levels. Your Lordships will be aware that we have recently accepted the latest recommendations of the armed forces pay review body.
Of course, proper levels of pay, though essential, are not by themselves enough. The Government are also examining improvements to conditions of service which will reinforce their pay policy. Of particular importance is the accommodation of servicemen, and in this field the Government are continuing their efforts to improve the standard of accommodation. I myself was privileged to visit Lowestoft last Tuesday for the naming ceremony of the third accommodation barge which will provide greatly improved accommodation for over 800 servicemen in the Falklands.
A positive stance of this sort has rewards in the form of high morale, motivation and levels of expertise, all of which were amply demonstrated last year in the South Atlantic. The confidence of the forces in the Government and their policy is also shown in figures for recruitment and retention. Although established strengths have declined slightly since 1981, the total strength of the armed forces, at 320,600, is still higher than the figure for 1979. This, together with the improved retention rate, means that the general level of skill and experience in the forces is high while the demand for basic training is reduced. The total trained strength in the armed forces is some 14,000 above the 1979 figure.
Lord MayhewMy Lords, before leaving that particular point, could the noble Lord tell us what impact the Falklands operation has had on recruitment?
Lord Trefgarne: My Lords, if the noble Lord would allow me to finish my opening remarks, I shall most certainly be willing to deal with that point when I close the debate.
I have already referred in passing to the magnificent achievements of the armed forces in the South Atlantic. The dedication and courage which was shown during that campaign is typical of the performance and conduct of the services wherever they may be serving around the world. The reputation they enjoy for professionalism is due in no small measure to the framework of the service discipline acts within which they operate. It was George Washington who said:
"Discipline is the soul of an army. It makes small numbers formidable. procures success to the weak and esteem to all".
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Advances in technology and the sophistication of weapon systems may have changed the tactics and conduct of battle, but there remains the essential need for a well-trained and disciplined force. The men and women of the Army, Navy and Air Force are just such a force and we can take pride in them. I beg to move.
Moved, That the draft order laid before the House on 29th June be approved—(Lord Trefgarne.)
Lord Bishopston: My Lords, I feel sure that the House will welcome the order which has been introduced by the Minister. I should like to underline the remarks he made about the personnel of our armed forces. I had the benefit of going to the Falklands only a few months ago and was very impressed by the calibre of the task force, particularly since they had to travel 8,000 miles before they reached their destination and faced the major challenge of the Falklands campaign. From the technical point of view we were all impressed by the strategy and by the weaponry and high technology with which our armed forces are equipped. As both I and, I am sure, other noble Lords have mentioned previously, the men and women who serve in the armed forces are our greatest asset so far as our future defence is concerned. Therefore, I fully support the Minister's comments. It is most important to keep morale at a very high level.
As the Minister said, the order which he has laid before the House tonight is based on the Armed Forces Act 1981. This continued and amended the Army Act 1955, the Air Force Act 1955 and the Naval Discipline Act 1957. This is an annual order which prolongs the powers authorised by the measure. As the Act with which we are concerned was amended as recently as during the 1981–82 Session, one assumes, probably rightly, that the measure is up-to-date for the current situation.
However, we are faced with changing circumstances, especially so far as discipline is concerned. It would be helpful to the House if the Minister could go into a little more detail about the consideration which is being given to aspects of discipline. It would also be helpful if the Minister could say whether he is completely satisfied that the powers contained in the 1981 Act, even though they been so recently reviewed, are still relevant to the changing situations which face Her Majesty's armed forces, especially with regard trends relating to discipline, behaviour and so forth.
I will not detain the House longer on this particular measure because I anticipate that after the Recess, but not before, we shall be debating the White Paper on defence and that will give the House a better opportunity to deal at greater depth with some of the matters which might otherwise have been questioned under this particular measure.
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his reception to this order, and perhaps I might seek to reply to the point made by the noble Lord, Lord Mayhew, when he intervened during my opening remarks. There has been no discernible longterm effect on recruiting from the Falklands conflict. There was some immediate, short-term effect I understand—but nothing having any long-term implications.

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On the point made by the noble Lord, Lord Bishopston, one of the matters to which I attended when I first arrived at my present department was to inquire about the level of discipline because I, like everyone else, had read a number of reports about service problems. But I am convinced that the general level of discipline in our armed forces is as good as it ever was and no worse than in the rest of the community. Incidents caused by servicemen do tend to hit the headlines rather more than they do when caused by civilians, for reasons I am not immediately clear about. In general, we have no cause for worry about the general level of discipline and behaviour among our armed servicemen.
As was said by the noble Lord, Lord Bishopston, we are anticipating a debate on defence matters generally in the autumn. I, too, will contain my wider observations until that occasion. I beg to move.
On Question, Motion agreed to.

International Jute Organisation (Immunities and Privileges) Order 1983
5.42 p.m.
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 29th June be approved.
The noble Lord said: My Lords, the international Agreement on Jute and Jute Products, a copy of which was laid before the House on 22nd March 1983, was opened for signature on 3rd January this year. It was signed on behalf of the United Kingdom on 6th June. The main element in the agreement is the establishment of an International Jute Organisation. The purpose of the draft order before your Lordships is to accord the organisation legal personality. Once this is done, we can proceed to early ratification of the agreement.
The organisation will propose, approve and seek finance for projects in the fields of research and development, cost reduction, market promotion, competitiveness (particularly in relation to synthetic products) and, above all, dissemination of information. The agreement does not provide for market stabilisation measures, although it does envisage that further consideration may be given to the possibility of stabilisation of prices and supplies.
The headquarters of the organisation is situated in Dhaka in Bangladesh. The Government of Bangladesh will conclude a headquarters agreement with the organisation to accord it such privileges and immunities as will be considered necessary for the organisation's efficient funding in Bangladesh. However, we must meet our obligations under the jute agreement by according the organisation legal personality. This means that the organisation will be able, where necessary, to conclude contracts, buy and sell property and to institute and defend legal proceedings in those states. The order does no more than that. It grants no privileges and no immunities to the organisation. I very much hope that your Lordships will approve this draft order, thereby signifying your
1020
recognition of the important work to be performed by the International Jute Organisation. I beg to move.
Moved, That the draft order laid before the House on 29th June be approved.—(Lord Lyell.)
Lord Ponsonby of Shulbrede: My Lords, may I thank the noble Lord, Lord Lyell, for explaining the purpose of this particular order. It is an order of concern to the United Kingdom, as the main trading centre for jute. I wonder whether the noble Lord can tell your Lordships what benefits to the United Kingdom will flow from the establishment of this organisation. Perhaps he can also tell your Lordships how many people in this country will benefit from the immunities and privileges conferred by this order. Your Lordships will recall that earlier today, when we were discussing quite another matter during Questions, considerable concern was expressed by a number of your Lordships from different parts of the House about the extension of immunities and privileges to various persons of one sort of another.
Finally, can the noble Lord tell your Lordships what effect, if any, the establishment of this organisation will have on our own Exchequer?
Lord Lyell: My Lords, I am grateful to the noble Lord for his reception of my moving of this order. The noble Lord asked three specific questions. If I may take the two easier questions first—his second and third questions—the noble Lord asked how many persons would benefit from the immunities and privileges conferred by this order. I am sad to have to tell the noble Lord that this order confers no immunity or privilege upon any person. If the noble Lord's interest was excited by the various references, I am sorry to have to disappoint him. I am also able to tell the noble Lord—although possibly this might be of greater interest to him—that the effect of this order on the Exchequer will be absolutely nil; it will have no effect at all on the Exchequer.
As to the benefits of this order to the United Kingdom, I am pleased to be able to tell the noble Lord that United Kingdom merchants and manufacturers concerned with the jute industry have welcomed this agreement. Indeed, your Lordships will be interested to know that although the jute industry is only a very small industry now, the spinning of raw jute and the manufacturing of jute goods in the United Kingdom is carried out almost exclusively in the Tayside region—that is, my own home area. Above all, Dundee used to be the centre for jute. It still is a very important industry there, and the surrounding county of Angus, which is now the region of Tayside, is still very much concerned with the jute industry.
It is a slightly personal good wish when I say that I am very happy to assure the noble Lord, Lord Ponsonby of Shulbrede, and other noble Lords that the agreement to which we are giving legal personality in this country by means of this order has been very much welcomed by the jute industry. I hope that will prove to your Lordships that there are benefits to the order now before us. With that short explanation, I beg to move.
On Question, Motion agreed to.

Weights and Measures Act 1963 (Wine and Grape Must) Order 1983
5.49 p.m.
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 28th April be approved.
The noble Lord said: My Lords, I beg to move the draft order standing in my name on the Order Paper, and I should like to speak at the same time to the Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983. If any of your Lordships wish to discuss these orders separately, of course I would accede to any noble Lord, but if I see no sign of disagreement I shall speak to them together.
These two orders do have one thing in common. They are both concerned with the trade in wine, a subject which I know to my cost from answering questions here about a year ago is very dear to the hearts of many of your Lordships. The growth in sales of wine over the past decade has been matched by a growing number of complaints about sales of table wine by the glass and the inability of consumers to know how much wine they are getting for the price they pay.
Your Lordships may recall that questions have been asked in this House from time to time, and usually these have been led by my noble friend Lord Chelwood, about proposals for introducing a voluntary code of practice to standardise the quantities in which wine is sold by the glass and whether this would be supported by prominent display—for example on a price list, a wine list or menu—of both the quantity offered and the price.
I am happy to report that plans for introducing such a code are now well advanced. The order to amend Schedule 3 to the Weights and Measures Act 1963 is designed to make it possible for the licensed trade to follow the voluntary code of practice. This has been prepared by a working group of the trade which has been chaired by the Brewers' Society, and it includes also organisations representing licensed victuallers, hoteliers, restaurateurs and caterers. This group first met in January 1983. All of this group quickly agreed that if they were to recommend to their members rationalisation of quantities of wine sold by the glass rather more flexibility than is currently provided by the law required. Schedule 3 to the 1963 Act does, among other things, specify those capacities measures which may only be used by traders in measuring out alcoholic drinks and other what we call non-prepacked liquid products.
The present list in the Act includes those imperial measures in which certain draught spirits, beer and cider may only be sold, as well as 4, 5 and 6 fluid ounces which could, if the trade so wished, be used for measured glasses of draught wine. The trade however have become accustomed to buying wine in metric quantities since bottles were first required to carry a quantity marking in the United Kingdom under EEC requirements in 1978. Many of their members are likely to want to standardise their sales of wine by the glass by using the same system of measurement; but they felt that the existing legal measures of 100 ml, 200 ml and 250 ml were either too small or too large for general use. I must say that the surprise that I see
1022
on the faces of noble Lords opposite is shared by me; when I ask for a glass I am very happy to receive any measure.
I am sure that your Lordships will agree that there are already too many legal options available in Schedule 3. It was this factor that attracted the only reservation entered by consumer interests in the course of the statutory consultations undertaken by the department preceding publication of the draft order. The initial proposal was to add just two sizes, 125 ml and 150 ml, to the list of legal capacity measures. The trade promptly responded to consumer reservations by recommending in their voluntary code that where retailers choose to dispense wine by the glass in more than one quantity they should restrict themselves to two sizes, drawn either from the metric or from the imperial range, and that there should be a gap of not less than 50 ml between sizes drawn from the metric range or not less than two fluid ounces in the case of the imperial range.
My honourable friend the former Minister for Consumer Affairs in the previous Administration wisely in my view, and I am sure in that of many of your Lordships, agreed to a further request from the trade working group to add a third size of 175 ml. I am afraid that I am not able to demonstrate to your Lordships the capacity of the glasses; I do not know whether it is in order to bring in the various liquids and consume them in your Lordships' House; but I am afraid I am not able to display the glasses of these particular sizes to your Lordships. The addition of the third size of 175 ml means that a retailer who exceptionally wished to offer two sizes could use both 125 ml—this already has strong support in the trade—and 175 ml, and at the same time he would observe the 50 ml obligatory gap.
The purpose of this particular order is to facilitate the adoption of the trade's voluntary scheme for table wine which is sold by the glass. Your Lordships may feel that such a code does not go far enough in that it does not include sparkling and fortified wines. I stress that this is a voluntary scheme and it reflects the very considerable increase in the consumption of table wine. There is no reason why any trader who wishes to do so should not adopt the same principles for other intoxicating liquors; the only constraint on him is that he must choose measures from the list in Schedule 3 to the Act, including of course the three new measures. The additional sizes are to be limited to sales of intoxicating liquor; there has been no pressure for their use in other circumstances. This restriction will avoid the need for local authorities to purchase separate standard measures in the three new sizes for other uses.
The order will not make it obligatory for the trade to sell wine by the glass by quantity or in a specified quantity. There is however wide support for the voluntary code of practice, and the Government hope that increasingly both members of the trade organisations which produced the code and other wine retailers will abide by its terms. It is the Government's firm belief that this voluntary approach could succeed in putting some much needed order into this trade where previous attempts to find a legislative solution have failed.
Discussions on technical regulations that will be needed to provide for the lining, testing and stamping

1023
of wine glasses to be used as legal capacity measures and to amend the intoxicating liquor measuring instruments regulations are already in hand. I hope that these will come into operation before 1st December 1983, which is the operative date for the draft order. It was originally thought that the operative date could have been brought forward to 1st November this year; that was the date which was given in the Department's Explanatory Memorandum. But on reflection this was considered to be unduly optimistic. I believe your Lordships will share my hope that lined glasses or suitable measuring instruments will become available in sufficient quantities to allow the trade to bring their voluntary code into operation early next year.
If I may turn briefly to the draft Wine and Grape Must Order, this is necessary to meet our obligations to the European Community to specify the quantities in which both what are termed "still" table wines and grape must must only be prepacked. The provisions of the order will take effect progressively between 1st January 1984 and 1st January 1989. The obligation derives from Directive 79/1005/EEC which was considered in draft—I spell it d-r-a-f-t—by the House of Commons Select Committee on European Legislation on 11th January 1978. Wine bottlers in the United Kingdom accept the need for standardisation of bottle sizes, and this order does have the support of both trade and consumer interests. In response to representations from trade organisations that special arrangements should be made for vintage and other wines, your Lordships will note that the order will continue to allow wines already bottled in other sizes before 1st January 1984 which have been laid down or are still in the distribution chain to be sold.
Finally I am sure that your Lordships will wish to know that both of these orders were considered by the Joint Committee on Statutory Instruments but the Committee did not draw the special attention of your Lordships' House to either order. My Lords, with that I beg to move the first order standing in my name.
Moved, That the draft order laid before the House on 28th April be approved.—(Lord Lyell.)
6 P.m.
Lord Ponsonby of Shulbrede: My Lords, may I again thank the noble Lord, Lord Lyell, for a very full explanation of a complicated and potentially confusing matter. It is a matter which is of great concern to the consumer, and I fear that the confusion is likely to continue for a considerable period of time. It seems to me that the consumer can either enter an imperial measure wine bar or a metric measure wine bar. Therefore, he will be faced with four different amounts which he might receive in his glass of wine.
Can the noble Lord say how long it is proposed that imperial measurements and metric measurements shall continue to coexist side-by-side? At the same time, can the noble Lord tell your Lordships whether there is any intention on behalf of the Government to apply the requirements for metric measurements to the service and sale of beer and milk or whether these will continue to be sold in imperial sizes?
1024
I was also surprised that these particular orders and regulations are not to apply to sparkling or fortified wine. This means—and perhaps the noble Lord will confirm this—that for the purchase of sherry or vermouth in a wine bar or in a pub there are no requirements laid down for the actual measures in which these should be served. This is slightly odd, in a sense, when the measures are to apply to the sale of grape must which, I understand. is hardly ever sold across the counter in the United Kingdom. Perhaps the noble Lord can say why the application of the order is restricted in this way.
I understand that brim-measure glasses are not allowed when wine is served. In view of this can the noble Lord say whether the Government have any intention of phasing out brim-measure glasses for the service of beer? These points need clarification on the coming into force of these orders. In other respects we welcome these two orders.
Lord Mayhew: My Lords, I come rather fresh to this subject although I have from time to time drunk wine by the glass. I listened very carefully to the introductory speech of the noble Lord and came to the conclusion that there is not much here to cheer or safeguard the simple consumer of wine. First of all, there is no obligation whatever, as far as I can see, on any seller of wine to use a standard glass at all. It is precisely those sellers of wine against whom complaints have been made in the past who will continue to sell short measures despite anything that the Government are doing, with the added advantage to themselves that the Government will be giving a false sense of security to customers with all this rigmarole which we have just heard about. Listening to the noble Lord, anyone might think that the consumer was being safeguarded, but there is nothing in what the noble Lord said which safeguards the consumer against the dishonest retailer. His words will, as I say, merely give a false sense of reassurance.
Let us suppose the customer was not reassured and that he was alert, he must still find his way between the imperial measure and the metric measure, between the 125 ml glass and the 195 ml glass.
Noble Lords: 175 ml.
Lord Mayhew: We are already confused in this House, my Lords. Even noble Lords do not know the difference between 175 and 195 ml glasses. Again, listening very carefully to the noble Lord, another thing which struck me was that the group to which he referred—the trade—and the Minister had taken their decision about metric plus imperial measures after, and not before, the consumer interests had been consulted. I should like reassurance on this point. The consumer interest to which he referred and which was consulted has approved the final complicated conclusion which was put forward by the interested group. I have no doubt that the Government have the best of intentions, but I cannot say that anything in the noble Lord's speech convinced me that much is to be done for the consumer by this order.
6.8 p.m.
Lord Lye11: My Lords, I am very grateful for the interest shown by the noble Lord, Lord Ponsonby of Shulbrede, and particularly grateful for the close attention paid by the noble Lord, Lord Mayhew, to my remarks, which were complicated. I did not ask the indulgence of your Lordships to make them any easier. Indeed, your Lordships will be aware that consumer legislation, particularly in this area, which is so dear to our hearts as well as to other vital organs of the bodies of your Lordships, is complicated.
I shall first attempt to deal with the questions put by the noble Lord, Lord Ponsonby of Shulbrede. He, and I am sure, your Lordships, will be happy to learn that any set of measures, whether imperial or metric, which are to be used by sellers of open wine in glasses will, of course, be advertised so that the consumer or the customer who wishes to drink wine will know what he is getting and will be able to draw a comparison to know whether or not he is receiving fair value. Clearly, if the consumer feels that the seller of the wine is overcharging in any way, the consumer can take his custom elsewhere.
The noble Lord, Lord Ponsonby of Shulbrede, asked about imperial sizes and metric sizes and, above all, whether any imperial sizes would be prohibited. Certainly there is no intention of imperial sizes being prohibited. Indeed, there are adequate imperial sizes in Schedule 3 to the Weights and Measures Act.
Among other things, the noble Lord also asked about grape must. I am no expert in chemistry or on the precise moment of time when grape juice ferments, but I understand that grape must—the substance set out in the order—is grape juice before fermentation is complete. So far as I am aware, grape must is not bottled in the United Kingdom. Indeed, the noble Lord may care to look at page 3 of the grape must order. The noble Lord mentioned vermouth. In (d) he will find the reference to:
"British wine (e.g. fruit or tonic wines)".
Certainly the noble Lord and I have discussed the merits of ginger wine, elderberry wine, sloe wine and other extremely intoxicating brews not covered by the order before us this evening. I am able to tell the noble Lord with the full authority of the department that grape must is grape juice before fermentation is complete.
The noble Lord also asked about brim measures. We understand that it is not customary to serve wine in glasses filled to the brim for reasons which I am sure would be evident to the noble Lords, Lord Ponsonby of Shulbrede and Lord Mayhew, and indeed to all your Lordships. Very few serving people have steady hands to fill glasses absolutely to the brim without spilling any. I am not aware of whether this problem is prevalent in your Lordships' House. Certainly we tend to be satisfied with the measure of any glass of wine sold in your Lordships' House, as well as with the quality. The Government are aware that some people, and particularly enforcement bodies, are concerned about the allegations of other short measures in glasses, for instance, of beer. All the available evidence has recently been reviewed, and we have concluded that an overwhelming case for action at the present
1026
time has not necessarily been made out, but we shall keep the matter under review.
The noble Lord asked why the code did not cover sherry or vermouth. I understand that the reason is a question of demand. The main demand for action in the sale of intoxicating liquors by the glass has been on table wine, where, as I pointed out to your Lordships, sales have increased considerably since we joined the EEC. There are various small sizes in the list of legal capacity measures which are eminently suitable for sherry, vermouth and other similar liquors. Your Lordships will find that the capacities come right down through the range of 50 ml and a number of small imperial measures. I think it comes right down to 1 ml or one-sixth of a gill. One-fifth of a gill is placed up in various establishments in Scotland. They point out proudly that they are selling one-fifth of a gill, and even our side of the Border they are happy to do that. I hope that I have covered most of the points raised by the noble Lord, Lord Ponsonby of Shulbrede.
I commend the noble Lord, Lord Mayhew, on his diligence. I am grateful to him for the close attention he paid to my remarks. I assure him that no false security is granted by the order. I stressed that it will, we hope, aid the voluntary code of practice which has been agreed by this joint working group. I am able to assure the noble Lord, as I hope I was able to assure the noble Lord. Lord Ponsonby of Shulbrede, that consumers of wine by the glass will find the measures which are sold in a particular establishment advertised. If a consumer wishes to adhere to an imperial or to a metric measure, he will be able to find out exactly what value he is getting, just as I, and, I am sure, the noble Lord, when we do our shopping are able to find the value we are getting. I have to do some nimble mental arithmetic to discover whether I should put one jar of coffee back on the shelf and take another because it is better value. I am sure that the noble Lord is able to do that before he takes his first, or perhaps subsequent, glass of wine in whichever establishment he would patronise.
The noble Lord may have heard about various measures of wine. He raised the point of 125 ml or 195 ml and expressed confusion as to which size was which. After we sit down, it need not take long for me to show the noble Lord the difference in capacity—what constitutes 70 ml. I believe that the customers will know this and that the trade would be happy to know it.
The major point put to me by the noble Lord, Lord Mayhew, was that the Government had taken action on these particular measures by which wine is sold by the glass. He wondered whether we had consulted adequately. I hope that we have, but I stress that pressure was coming to the Department of Trade from various consumer interests. My noble friend Lord Chelwood asked me several questions starting in July last year, and the questioning process has gone on. My noble friend Lord Cockfield answered a number of Questions in written form later on in the year.
I hope that the noble Lords, Lord Mayhew and Lord Ponsonby of Shulbrede, and indeed all your Lordships, will agree that this is a valuable first step to regulating sizes of glasses of wine. Above all, we hope that the orders will assist the voluntary code of practice and will enable the consumer to know how much wine

1027
he or she is receiving and whether he or she is receiving good value. I stress, before we take this too seriously, that there is a valuable saying that the noble and learned Lord who normally sits upon the Woolsack has given me cause to think of many times: de minimis non curat lex, the law does not perennially concern itself with trifles. I believe this is a relatively important matter. I hope that it will aid the voluntary code. With that, I commend the first order which stands in my name on the Order Paper.
On Question, Motion agreed to.

Weights and Measures Act 1963 (Amendment of Schedule 3) Order 1983
Lord Lyell Lord Lyell rose to move, That the draft order laid before the House on 28th April be approved.
The noble Lord said: My Lords, I spoke to this order at length. I beg to move.
Moved, That the draft order laid before the House on 28th April be approved.—(Lord Lyell.)
On Question, Motion agreed to.

Dock Labour Legislation
6.17 p.m.
Viscount St. Davids Viscount St. Davids rose to ask Her Majesty's Government what action they intend to take in view of the present effects of the Dock Labour Acts, whether they are contemplating legislation, and, if so, what would be its nature.
The noble Viscount said: My Lords, I rise to ask the Question I have on the Order Paper. When a Goverment promote an Act of Parliament they usually expect it to do good, and they are very generally right. They are also usually pretty sure that it will do some harm. It is quite difficult to produce an Act of Parliament that produces no harm whatever, but the harm is usually expected to be comparatively unimportant. The Dock Labour Acts are very much in this category. They produced a great deal of good when they started, as most Acts do. They went through a long period of stability when they continued to do good, but, I am afraid, this is not a very stable world. Things have a habit of changing. What hit the Dock Labour Acts was containerisation. When container traffic came in, and later on the Ro-ro ship (on which container-carrying lorries rolled on board on one side of the sea and rolled off on the other), very many fewer dockers were needed, and the Dock Labour Acts started to go wrong.
The Acts then went through the process, which again is very common with Acts of Parliament, that the good that they did gradually decreased, while the damage that they did increased; there would come a point logically where they were doing more harm than good and when they should be repealed. But this very seldom seems to happen. Acts of Parliament, once they are on the statute book, seem to be allowed to stay there while they sink into ever greater disfavour, largely, no doubt, through political indolence or mere lack of parliamentary time. They end up in a state where they actually start harming the very people they were originally meant to help.
The Dock Labour Acts performed a very valuable purpose at the beginning. Dock labourers were very badly paid, and work was sporadic. It was difficult to get a decent living by it, and as a result, the dock labourers were not available at all times to load and unload ships. Very often, ships had to wait before they could be loaded or unloaded. The whole system was very unsatisfactory. So these Acts were produced. They laid down a number of our major ports to which they were to refer. They stated that all the dock labourers in those ports were to be listed. They stated that dock labour could be done only by these listed labourers. They laid down that the labourers were to be continuously employed by certain listed port employers, or indeed by the port authorities themselves. They laid down a levy which was to pay for all this. Dock labour boards were to be appointed to say what dock labour was, and finally a National Dock Labour Board was to be appointed to keep control of the whole system.
So far, so good. As I say, it was the coming of the Ro-ro ship and the complete change in the handling of cargo which put an end to this. Dock labourers had less work to do, their numbers started to diminish. As their numbers diminished, this highly complicated and expensive system became more and more of a burden, and the cost of registered dock labour went up just at the time when the cost of dock labour in the non-scheduled ports went down.
The difference has now reached a point which can be put quite simply. In 1950 there were 4,500 dockers in the Port of London alone. There are now fewer than 500 there, and the number is still dropping. The cost of registered dock labour as against unregistered dock labour in the non-scheduled ports is now as 7 to 3; in other words, it costs more than twice as much to give the work to a registered dock labourer. This system cannot possibly go on. No system could survive a difference like that.
The dock labourers tried two ways out. One was to go on strike, which predictably did not help; the other was to create a positively Byzantine set of restrictions in an effort to keep as much work as possible listed as dock labour and therefore keep it to themselves. The result, again predictably, was to send the registered ports further and further down the drain.
What is to be done about it? One thing that can always be done, of course, is nothing. If you leave a problem for long enough, quite often it will go away. But in this case one thing is quite certain: if you leave the problem much longer, all the dockers will go away. The problem will solve itself in that fashion, but of course at the cost of killing off all our major historic ports. That, I am sure your Lordships will agree, is quite unacceptable.
There are those who would like to see all the Dock Labour Acts simply torn up. But we cannot just do that. There are still dock labourers and they have rights; and there are a number of other complications, though I shall not put them all to your Lordships at this late hour. But one just cannot do that, certainly not in a hurry.
What is really needed is a detailed study to be undertaken with some urgency, but making sure that it is thorough, taking a little time over it, though not

1029
too much because the damage is going on, and, finally, putting something on the statute book to sort out this matter. But it is complicated, very complicated indeed. I have just sat through seven days of a dock labour arbitration tribunal, in which an unfortunate small firm of inland shipowners tried to get permission to take cargo in and out of the Port of London—which, I believe, is one of the things that the Government would like to see happen. I may be considered biased in this, and so I shall tell your Lordships of just two remarks made by members of the tribunal, who might be assumed to be both intelligent and neutral observers. The chairman of the tribunal said that he was amazed that there was any traffic at all, in or out of the Port of London. Another member of the tribunal—
Lord Skelmersdale: My Lords, if I may interrupt the noble Viscount for a moment, I would point out that I think he is in danger of breaching the sub judice rule; at least that is what I am currently advised.
Viscount St. Davids: My Lords, I am not quoting exactly. I am being very careful not to quote exactly; besides which, the case is at an end. I have been very careful about that in my timing in putting down the Question. Another member of the tribunal said that it was quite clear why the Rhine was busy and the Port of London was dying. That is the position we are in. Something must be done. It should not be done in too much of a hurry, but the work needed to do it should be done very thoroughly, and done now.
6.28 p.m.
Lord McCarthy: My Lords, I should like to begin my speech by agreeing with a very large part of what the noble Viscount has said—I do not agree with it entirely, but I agree with a very large part of it—and by thanking him for raising the issue this evening in this House, because it gives us an opportunity to do two things. It gives us an opportunity, first, to discuss the real, pressing problem of what the noble Viscount says, quite rightly, is a vital British industry, and, secondly, to raise a number of general issues about how that industry has come to its present stage. It is an industry which, I suppose, has undergone one of the most consistent, systematic, sets of investigations, inquiries, and various forms of Government intervention, based on inquiry, investigation, and, in the end legislation, of almost any industry in this country. Yet it comes to be in its present state, and maybe we could learn a few lessons from that situation.
With regard to the noble Viscount's remarks about the present position of the industry, I think that I agree with almost everything that he said. All I should want to add is that, as he would admit, the position has not given any degree of security to the dockers themselves. There is still great uncertainty about the scope for dock work within the Dock Work Regulation Act. So far as one can tell from the figures in the latest report available of the National Dock Labour Board, which, I am afraid, is for 1981—there is not yet a 1982 report—the rate of decline of registered dockers is about 20 per cent. a year. If the situation went on like that, then, as the noble Viscount suggested, they would
1030
be all gone by about 1987. Even though there is a decline in the total number registered of something like 20 per cent. a year, there is a further surplus to requirements of those left of something like 18 per cent. a year. Yet there is a rate of voluntary severance from the industry, if the present situation resembles that described in the annual report of the National Dock Labour Board in 1981, of something like 5,000 dockers a year. So the situation is extremely uncertain.
The first question that I should like to put to the noble Lord who replies for the Government is whether the Government and the National Dock Labour Board have any idea when the figures are going to change direction. If the rate of decline continues at 20 per cent. a year, all existing dockers will be gone by 1987. Oh the other hand, the industry stated in the National Dock Labour Board report in 1981 that it thought that the figure would flatten out at something like 14,000 dockers. It should be down to that about now or possibly next year. Do the Government or the National Dock Labour Board, which is presumably in contact with the Government, still subscribe to the view that this progressive decline will somehow end and flatten out at something like 10,000 or 14,000 dockers? If that is the case, the situation may be containable. If it is not and if the figures have had to be revised, I hope that the Government will say so. It is then that some of the more apocalyptic suggestions put forward by the noble Viscount come into operation.
We have to ask ourselves, as did the noble Viscount: what is the solution to all this? He considered a number of alternatives. One that he did not consider—I am prepared to say myself that I do not think it is a solution at this moment and I do not think that he would disagree—is an extension of the areas of the Dock Work Regulation Act. Your Lordships will no doubt remember that when this Act was introduced by the previous Government in 1976, it was originally proposed to put a corridor around the existing ports, indeed around the British Isles, that was to be five miles wide. All classified dockwork within that five-mile radius was to be the province of workers registered under the new dock labour scheme. In this House, in the latter stages of the Bill, I think, the Bill was amended so that the corridor was reduced to half a mile. It was defined in such a way that the corridor did not run all the way round the United Kingdom but only half a mile out from National Dock Labour Board ports. It would be easy to suggest, as some people may do, that the solution would be to return to the original objectives of the 1976 Act. I do not believe that this is possible. It is worth while quickly saying why it is not possible. The noble Viscount suggested, I think, in his speech why it is not possible. I agree with him.
It is not possible because the 1976 Act misconceived the central problem. Those responsible for the 1976 Act thought, as there were grounds for thinking at the time, that the problem arose out of the dispersal of dockwork away from the traditional areas of dockwork and the giving of dockwork to workers who were not registered dockers. Therefore, if you could extend the area of registered dockwork and define registered dockwork in a sufficiently wide way, you could solve the employment and job security problems of the registered docker, and you could create within

1031
the area of the National Dock Labour Board a viable labour force that could become a permanent, efficient and mobile labour force. That turned out to be an erroneous diagnosis of the problem.
The basic problem was not the diffusion of dock work, although it took place. The basic problem was the disappearance of dock work. There are relatively few full-time dockers outside the area of the National Dock Labour Board. There are probably more full-time dockers still within the province of the National Dock Labour Board than outside its province because containerisation. roll-on roll-off, and all kinds of other technological innovation within the industry have almost destroyed the old kind of dockwork. No form of legal regulation to extend geographical boundaries can deal with that problem.
I do not think that there is any solution by extending the areas of the National Dock Labour Board Scheme. Nor do I think, as the noble Viscount said, that there is any solution in abolishing all these Acts. I am, however, bound to say that in some ways—I do not wish to be partisan—one might have expected the present Government to take this way out through the Tebbitisation of the National Dock Labour Board or what I would call Book One of Adam Smith, the removal of all forms of legal regulation and all protection for registered dock workers, freeing the labour market for dock workers in the same way as the Government want to free the labour market in the area of wages councils, the area covered by fair wages regulations, and so on.
I come now to my second question. For all the reasons put so well by the noble Viscount, this would be a disastrous policy. Not only would it destroy the central dock areas which are still crucial to this country. It would produce again what we have not seen for a good number of years—something which, on the whole, the National Dock Labour Board Scheme has saved us from. We would once again see mass industrial action in the area of Britain's docks. This, for all kinds of reasons, would be a disastrous way forward. I would like the Government to say so. I should like the Government to say tonight that, whatever solutions they may have in mind for the area of the National Dock Labour Board, they do not envisage the total and complete Tebbitisation of legal regulation of registered dock workers and the total abolition of all forms of legal regulation.
I come to the third proposal that has been suggested by the noble Viscount; that is, another inquiry. I am bound to say that I approach this with great reluctance. We talked earlier today about brim measures. The dock industry is brimful of such measures. It has had 19 investigations since 1920. It is arguable that all of them have got the problem wrong. What they have done really is to design a policy to deal with the existing problem, not appreciating that a new problem had taken its place. For example, the Devlin Report which was excellent on the issue of decasualisation failed completely to take into account the effect of containerisation.
The ACAS report and the reports before the introduction of the 1976 Act failed completely to understand how the problem was not one of diffusion
1032
but one of job loss. It is therefore with great reluctance that I come to the idea of yet another inquiry. I come to it simply because I cannot think of an immediate alternative to yet another inquiry. I am always prepared to take back that proposal if the Government can come up tonight and say what is their alternative. In the light of that, I should like to indicate two areas that any future inquiry might like to look into—.
Baroness Seear: My Lords, is the noble Lord really saying that when he cannot think of a solution to a problem he will suggest an inquiry? I find that absolutely terrifying. I have great confidence in the noble Lord. There must be a large number of matters on which he cannot think of a solution. Are we to have an inquiry into all of them?
Lord McCarthy: My Lords, they have to be sufficiently important. The noble Baroness and myself sat, I think, upon an inquiry when we did not know of a solution before we began the inquiry; by the time we produced the report we had found a solution. We can use inquiries if we have the right people to find solutions to problems. It is possibly, with great reluctance, the only way in which we can proceed. I should, however, like to indicate the two areas I have in mind.
Surely the first point is that everything depends—and I come back to the first question which I asked the Government—on whether we can really believe that there is a figure at which demand for labour in the registered ports will flatten out. If that figure is, for example, 10,000 or 8,000, the problem is manageable. The problem then become a once-for-all injection of public funds to enable the dockers in excess of that number to accept voluntary severance. We know that money—indeed, very considerable sums—has been spent in the past by the Ministry of Transport, but the greater part of the voluntary severance which goes on in the docks at present is paid for by a levy on employers. It is the cost of that levy which keeps up the cost of labour more than any other single factor in the registered ports. Therefore, my first point is that if the inquiry or the Government could arrive at some reasonable figure at which the demand for labour in the registered ports would flatten out for the next five years or so then, given the age profile—because 70 per cent. of dockers are over 40 and 35 per cent. are over 50—a once-for-all injection of funds should stabilise the industry.
My second point—and it is a much more general point—is as follows. Surely this is part of an overall problem. The areas of the most substantial old ports are in fact either the areas of high unemployment or the areas of urban deprivation. If we are to find a system of voluntary severence for the majority of existing registered dockers, what are we to give these people to do? What are we to employ these people on? Is it not time for the Government yet again to look at their complete refusal to believe that redundancy and efficiency—important as they are in manufacturing industry and in our old industries, such as the docks—must go hand in hand with planned, specific job creation?
6.42 p.m.
Viscount Long: My Lords, I am most grateful to the noble Viscount, Lord St. Davids, for introducing this debate and for letting your Lordships and the Government know of his feelings about what should be done in the future regarding the dockland labour forces and the labour Acts which come into this debate. What I have detected from the speeches of both the noble Viscount, Lord St. Davids, and the noble Lord, Lord McCarthy, has very little to do with improving the situation as it stands at present. In my view, both noble Lords have been boxing round the question because at present it is so sensitive and complicated. Therefore, I point out to the noble Viscount that he might find me indifferent on some of the facts that he wants; but I will try to help both him and the noble Lord, Lord McCarthy, as regards the future. The noble Lord, Lord McCarthy, also referred to the different Acts, commissions, and so on, defending the labour force.
The Acts to which the Question refers are the Dock Workers (Regulation of Employment) Act 1946 and the Dock Work Regulation Act 1976. I apologise to your Lordships, but I feel that I must give some background details of what those Acts are about. Regulation of dock work has a long history in the United Kingdom. The first serious effort to regulate numbers of dockers was made in Liverpool in 1912. A principal feature of the scheme, which was on a voluntary basis, was the registration of workers to identify those entitled to seek work within the port. The registration system was extended during the 1914–18 war when joint committees were set up in the larger ports to advise Government on release of men for the forces and subsequently to limit the numbers of demobilised men seeking casual work. The Shaw Inquiry in 1919 regarded registration as "the beginning of a remedy" for conditions then prevailing in the industry. Nevertheless, progress towards establishing effective schemes between the wars was very patchy.
The second world war brought about a transformation, making comprehensive provision for schemes and real moves towards decasualisation. In 1940 the first statutory schemes were introduced under an order requiring compulsory registration. In 1941 decasualisation schemes were extended to all major ports, providing the basis for a guaranteed weekly wage and imposing specific obligations on dockers.
The Dock Workers (Regulation of Employment) Act 1946 enabled schemes to be made:
"for ensuring greater regularity of employment for dock workers and for securing that an adequate number of dock workers is available for the efficient performance of their work".
In other words, the purpose was to ensure that there was an identified pool of experienced workers available to meet daily fluctuating demands for the loading and unloading of ships. Registers were established of dock workers who alone could be employed on dock work by registered employers in designated ports, the definition of dock work generally being that set out in war-time regulations, and the administration of the statutory scheme being in the hands of the National Dock Labour Board composed of equal numbers of employers and workers' representatives.
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Until the mid-1960s most registered dockers were casual workers often allocated only on a daily basis to employers. In 1965 an inquiry under Lord Devlin saw this casual system of employment as the source of what is called "dissension and inefficiency" in the industry. It concluded that industrial relations, working practices and modernisation in the docks would improve if all registered dockworkers were offered employment on a permanent basis and the number of registered employers was greatly reduced. The 1967 scheme, which is still current, reflected this report. The scheme was primarily directed at reducing the extent of casual employment by ensuring that the great majority of registered dock workers were employed under contract with a registered employer. I think that the noble Viscount, Lord St. Davids, mentioned that in his speech.
In the early days of the scheme a number of developments gathered pace which have radically affected the industry. There is the spread of containers and "ro-ro" traffic—which is the new roll-on roll-off container shipping which was again mentioned by the noble Viscount, Lord St. Davids—and the shifting pattern of trade towards south-east ports. The noble Viscount mentioned that there was a great change in the industry and that probably everyone had been caught out by the speed at which technology had taken over the docks—that is, the latest crane equipment, and so on. These developments reduced the number of dockers needed in all ports, but particularly on the west coast, and have given rise to disputes over the definition of dock work. The key issues in the early 1970s were: first, what should be done about the registered dockers for whom no permanent employer could be found and who were therefore on the Dock Labour Board's Temporarily Unattached Register; and, secondly, who should pack and unpack containers—the stuffing and stripping issue?
It was these two issues which gave rise to the 1972 national dock strike with the unions determined not to accept any threat of compulsory redundancy or return to the casual systems of employment. That strike was ended following the report of a committee jointly chaired by Mr. Jack Jones and my noble friend Lord Aldington. That report recommended, and the parties accepted, that except for disciplinary matters the Temporarily Unattached Register should be eliminated, and those on it at the time should be allocated to employers pending acceptance of voluntary severance by them or by other dockers whose place they could then take. This agreement was reaffirmed by the employers under the threat of another national strike in 1980.
That is not to say that it has barred all adjustment to change. In fact, voluntary severance arrangements in the industry have secured, without serious industrial action since 1972, a reduction in the registered dock labour force from 43,000 before the 1972 dispute to less than 14,000 now. My Lords, the noble Lord, Lord McCarthy, asked me the latest figure. I can only say that that is the latest figure. I had 15,000 down in my brief but a few moments ago I was able to ascertain that it is now just about 14,000.
Lord McCarthy: My Lords, I thank the Minister for that reply. I also asked him—and I hope he will tell me—about the figure of 14,000, which is the figure that the Dock Labour Board said originally was the figure below which it would not need to lose any more labour. Is that still the position?
Viscount Long: My Lords, no one can foretell the optimum level, but informed opinion in the industry suggests that we are approaching an equilibrium on the subject. I have no crystal ball to give your Lordships the definite answer to it, but that is as near as I can get.
The other and related issues which caused difficulties in the early 1970s were the definition of dock work and particularly the stuffing and stripping of containers, and the growth of ports such as Felixstowe and Dover which handled an insignificant amount of non-rail traffic when the original 1946 Act was passed, and are therefore excluded from the scheme. The Dock Work Regulation Act of 1976 aimed at taking arguments about definitions out of the area of industrial dispute and the legalistic framework of industrial tribunals applying outdated definitions by making the NDLB responsible for recommending to the Secretary of State what should be dock work. The Act provided for the scheme to be extended to "definable dock areas" within half a mile of any harbour or "harbour land" (a term with somewhat imprecise geographical limits). These provisions cannot, however, be implemented until Parliament has approved a draft new scheme, which it refused to do in 1978.
The noble Viscount, Lord St. Davids, made particular reference—or I believe he started to—to the case of Mr. Murrells. Mr. Murrells and others are engaged on trading with self-propelled barges on the River Thames out of wharves which are outside the confines of the Dock Labour Scheme. I am afraid that the matter is the subject of a case before an industrial tribunal, whose hearings I believe ended only at the end of last week. The tribunal has not yet determined the issue, and it would be quite wrong for me to comment on the substance of the case. All I would say to the noble Viscount at this stage is that this is not a case of bullying by the bureaucracy of the National Dock Labour Board, but of two parties, the board and the employers, using the machinery provided by statute to resolve an issue between them. Therefore, my Lords, it is a matter of some regret that the issue remains unresolved a year after it was first put to the tribunal.
A number of criticisms of the Dock Labour Scheme have been made, and in conclusion I will say that the Government accept that there are aspects of the manpower regime in the docks that are difficult to justify in modern circumstances. Many of the underlying problems reflected and underpinned by industrial agreements are not within the Government's power to solve. All of them will take time to solve, and to attempt to bulldoze through changes would not necessarily serve the best interests of port employers or port users. The Government have no plans to legislate at this moment. It is primarily for the
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industry itself, not the Government, to work towards solutions to the underlying problems and to chart the way forward.
House adjourned at five minutes before seven o'clock.