Sitting of 4 August 1965

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

EXPERIMENTS ON LIVING ANIMALS
Address for Return,
"of Experiments performed under the Act 39 and 40 Vict. c. 77, during 1964."—[Mr. George Thomas.]

ORAL ANSWERS TO QUESTIONS
  MINISTRY OF AVIATION

    Sub-orbital Airliner
    Mr. Derek Pageasked the Minister of Aviation whether he will initiate feasibility studies regarding a sub-orbital airliner.
    The Minister of Aviation (Mr. Roy Jenkins): In the present state of our knowledge it would be premature to embark on feasibility studies of a sub-orbital airliner but limited research into the problems of hypersonic flight is proceeding.
    Mr. Page: Will my right hon. Friend bear in mind that this is the ultimate airliner in any further projects following on the Concord, and does not he agree that it is as well to bear in mind the implications regarding the aerospace launcher along the lines suggested by the British Interplanetary Society?
    Mr. Jenkins: I shall bear this implication in mind, but I want to make progress, as I hope we shall, with the Concord before we devote too many energies to looking too far ahead.

    Emigrants (Reduced Fares)
    Mr. Kenneth Lewisasked the Minister of Aviation what has been the cost to the national airlines over the past year of reduced fares for emigrants.
    The Parliamentary Secretary to the Ministry of Aviation (Mr. John Stonehouse): I do not agree that emigrant fares involve a cost to British Overseas Airways Corporation. But for these reduced fares the bulk of these emigrants would not have gone by air. British Overseas Airways Corporation consider this traffic constitutes a worthwhile source of additional revenue.
    Mr. Lewis: Can the hon. Gentleman say why this has been stopped from the end of July? Are the Government worried that there might be such a rush to get out of the country owing to the present Administration that they have clamped down on this scheme?
    Mr. Stonehouse: No. This is simply a question for B.O.A.C. which considers that it is useful to provide the lower priced tickets for seats that would not be used by those paying full fare. There is no loss involved to B.O.A.C. in continuing this practice.

    Aircraft Technicians (Employment Overseas)
    Mr. Onslowasked the Minister of Aviation how many technicians formerly employed in the British aircraft industry are known to have accepted employment overseas in the past nine months.
    Mr. Roy Jenkins: Those taking up employment abroad are not required to provide information about their prospective work to a Government Department. I am not therefore able to provide firm figures, but the indications are that the number is small.
    Mr. Onslow: Is the right hon. Gentleman aware that the research conducted by the Royal Aeronautical Society suggests that about 30 per cent. of the most highly qualified persons who leave the aviation industry do so in order to emigrate? Would not the right hon. Gentleman accept that this is a matter of public importance and concern, and that a real effort should be made, either on his part or on the part of his colleague the Minister of Labour, to establish what effect cuts in the aircraft industry have had in accelerating the brain drain?
    Mr. Jenkins: I agree that it is a matter of importance, but it is of equal importance not to see this issue out of perspective, as there has been some tendency to

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    do. Our information is that the recent cuts may have led to five technicians emigrating from Preston, eight from Weybridge, and four from the Hawker Siddeley Group.

    Stansted Airport (Aircraft Noise)
    Mr. Newensasked the Minister of Aviation if he will make a statement on the extent to which Harlow will be affected by aircraft noise if the proposals to build a third London airport at Stansted are proceeded with.
    Mr. Stonehouse: My Department has undertaken to give the local authorities concerned—well in advance of the public inquiry—the best available information about the likely noise caused by Stansted in the event of its development as the third London Airport. As this information is still being prepared I am not yet able to say to what extent Harlow will be affected.
    Mr. Newens: Is my hon. Friend aware that a large and increasing population, particularly if Harlow Town is expanded, will be subjected to the effects of aircraft noise if the proposal to create London's third airport is proceeded with at Stansted? Will he see that this factor is given ail due weight, along with other factors, in determining the location of this third airport, because a large number of local people think that it is very poor planning to create a problem which has given rise to so much trouble elsewhere?
    Mr. Stonehouse: It is too soon to say exactly how this will affect Harlow, but we are extremely well aware of the points which have been raised, and during the inquiry these will certainly be borne in mind.
    Mr. Lagden: Is the Minister having consultations with his right hon. Friend the Minister of Transport with regard to the possible traffic bottleneck that may arise in east and central London should Stansted Airport grow to the extent that we all hope it may?
    Mr. Stonehouse: Yes, we are in touch with the Ministry of Transport on the question of the co-ordination of transport between the main airports, and certainly if Stansted is developed this will be very much in our minds.
    Mr. A. Royle: Can the Minister give an assurance that he will press ahead as quickly as possible in the establishment of Stansted Airport, in order that the pressure of aircraft noise does not all rest on my constituency of Richmond, but is shared by some of the people living elsewhere?
    Mr. Stonehouse: We are anxious to develop the third airport—when it is required—in the best place, but I certainly do not wish to anticipate the results of the inquiry which will be held at the end of this year.
    Mr. Marten: I was about to ask when the inquiry was to be held.
    Mr. Stonehouse: It will be held at the end of this year.

    Air Corporations (Computers)
    Mr. Eldon Griffithsasked the Minister of Aviation what types of computer are in use by the nationalised airlines.
    Mr. Stonehouse: I refer the hon. Gentleman to the written reply of my right hon. Friend the Minister of Technology to the hon. Member for Devizes (Mr. Charles Morrison) on 7th July which gave details of the computers owned by the Air Corporations and the purposes for which they are used.
    Mr. Griffiths: Is the Minister aware that the computer at present employed by B.E.A. is an excellent machine, which is doing valuable service and is capable of great development, but that it now appears that B.O.A.C. is planning to install—at a cost of about £6 million—a computer which, although it may serve the particular functions of B.O.A.C. quite well, is incompatible with that now in existence at B.E.A.? Is not it lamentable for the future of British aviation as a whole that these two nationalised airlines should have computers which will not be able to co-ordinate one with the other?
    Mr. Stonehouse: On the first point, I quite agree. B.E.A. has made a very good buy in obtaining a computer which meets its particular needs, but these needs do not necessarily correspond with those of B.O.A.C., and I understand—having gone into this matter with somecare—that the Airimp system of the I.A.T.A. will provide full compatibility between the computers of B.E.A. and

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    those acquired, or to be acquired by B.O.A.C.
    Sir Knox Cunningham: Are these British computers?
    Mr. Stonehouse: B.E.A. has bought computers built here, but B.O.A.C. is proposing to buy American computers.

    Space Programme
    Mr. Martenasked the Minister of Aviation whether he is satisfied with the progress of Britain's space programme; and if he will make a statement.
    Mr. Roy Jenkins: As I informed the hon. Member on 23rd June, a review of United Kingdom interests in space is being undertaken. I hope that this will enable us, by the autumn, to take a more comprehensive view of objectives and possibilities than has hitherto been the case.
    Mr. Marten: Does not the Minister agree that by this delay we, as a country, are slipping behind our rivals in this highly technological sphere? Could he give an interim decision as to whether Black Arrow will be fired off? Secondly, when will he get the Bondi Report?
    Mr. Jenkins: The Bondi Report will go to my right hon. Friend the Secretary of State for Defence, and not to me. Without notice, I could not say when it is expected. In the meantime, we are proceeding with the preliminary work on the small satellite launcher based on Black Knight—sometimes known as Black Arrow. I do not think that this review is holding up proceedings. We are still participating to the full in E.L.D.O., but it is important in this difficult and challenging field to know exactly where we are going, what we can afford to do, and how we can best hope to get value for money.
    Mr. Maude: Is the right hon. Gentleman aware that although everybody would agree that it is of the utmost importance to be quite sure what are the right lines of approach, there is a certain amount of apprehension that, as a country, we are slipping behind, even in comparison with France, at present? Will he give the House an assurance that he will try to expedite the fruitful exploration of this field as quickly as possible?
    Mr. Jenkins: Certainly I can give that assurance. I am trying to expedite
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    it, and I hope that as soon as we come back I shall be able to make a more positive statement to the House.
    Mr. Orme: Can my right hon. Friend say what expense is incurred, both preliminary at the moment and proposed in the future, and can he also say what value there is in competing with the United States of America and the Soviet Union in this space race? Have not he and the Government considered trying to get some unified attempt, and thus cut down the wasteful expenditure of all Governments? Surely we have enough problems on earth to solve at the moment without trying to spend money in outer space.
    Mr. Jenkins: There is another Question about the expense involved, which I will answer later in precise terms. As for competition with the United States and the Soviet Union, it is our view that we cannot afford to compete on the scale on which they are operating. What we have to decide—and this is the reason why I am considering a review of the position—is what we can do which will keep us in this important technological field and bring some worthwhile economic results without an expenditure disproportionate to our national capacity.
    Mr. Hogg: Can the Minister give us any news of the present state of the E.S.R.O. programme, which has a distinct bearing on what has been asked?
    Mr. Jenkins: The present state of the E.S.R.O. programme, as the right hon. and learned Gentleman must know, is a matter for my right hon. Friend the Secretary of State for Education and Science.

    Manned Space Flight
    Mr. Eldon Griffithsasked the Minister of Aviation what steps he is taking to keep informed of United States and Soviet developments in manned space flight.
    Mr. Roy Jenkins: Manned space flight is not a present aim of this country or of any of the international organisations of which we are members, but my Department has access to the published literature emanating from the U.S.A. and U.S.S.R., and frequent reports are provided by our technical missions in the U.S.A.
    Mr. Griffiths: Is the Minister aware that there is a large body of technological fall-out from this manned space programme which is benefiting American industry? It has benefited not only industry but medicine, micro-miniaturisation, and many other things. Is he confident that the published material that he says he is getting is made available to scientists in this country and to industries which can benefit from it? Can he further say whether or not he is being apprised by the United States of possible advances being made which are not published but which are equally important?
    Mr. Jenkins: I think that we are getting as much information as we could reasonable expect in this field. We cannot hope to have all the advantages without participation, but the cost of participation would be equivalent to the total cost of our defence budget—a point made earlier by my hon. Friend. But we have a good deal of information, and we are doing the best we can to disseminate it to industry.

    F111 Aircraft (Avionics System)
    Mr. Martenasked the Minister of Aviation if he will make a statement about the avionics systems to be used in the F111 for the Royal Air Force.
    Mr. Roy Jenkins: I have nothing to add to what my right hon. Friend the Secretary of State for Defence told the House on 13th April, 1965.
    Mr. Marten: Will the Minister do his utmost, if and when the time comes to buy the F111, to see that the British avionics industry is given the earliest possible notice of what is required of it, so that it can get its bids in at the earliest moment?
    Mr. Jenkins: Certainly if this eventuality should arise we will endeavour to see that no lack of prior warning and prior information will in any way tell against the British avionics industry.
    Mr. Soames: Will the right hon. Gentleman assure the House that in the Press conference which I understand his right hon. Friend the Minister of Defence is now giving on the defence review in the Ministry of Agriculture—or, rather, the Ministry of Defence—he will not be imparting any information to the Press
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    on the subject of the F111 which he has not already given to this House?
    Mr. Jenkins: I do not think that wherever my right hon. Friend is holding this Press conference there is any danger of his doing that.
    Mr. A. Royle: Can the Minister say when we are getting the F111 and also whether the Secretary of State for Defence intends to come here at 3.30 to make a statement to the House on the information that he is now giving to the Press in the conference at the Ministry of Defence?
    Mr. Jenkins: As the hon. Member knows, I cannot give the House any decision upon the F111. The decision will depend upon the defence review and, as has always been made clear, it will be taken in the autumn. There is no need for a decision before the autumn. One advantage of this is that we have some months in which to review it without incurring any additional costs.
    Mr. Maude: Is the right hon. Gentleman aware that the real difficulty as we see it is that his right hon. Friend the Secretary of State for Defence said that he thought it possible, if not likely, that many of the avionic devices in the TSR2 could be incorporated in the F111? Is it a fact that research in and development of these avionic devices has stopped with the cancellation of the TSR2 and that progress towards providing British avionics for the F111 has therefore ceased?
    Mr. Jenkins: No, Sir. There is a possibility of incorporating avionics which were associated with the TSR2 not merely in the F111, if a decision were taken to purchase that plane, but also in the Buccaneer Two-Star, if a decision were taken to go ahead with that plane, and also in the Phantom, where these have more general applications worthy of consideration.

    Super-super VC10 Aircraft
    Mr. Liptonasked the Minister of Aviation what approval he has given for orders to be placed with the British Aircraft Corporation for the Super-super VC10 jet airliner.
    Mr. Roy Jenkins: I have not so far been asked to approve such orders.
    Mr. Lipton: In the light of our balance of payments and the future of British civil aviation, would my right hon. Friend agree that it would be stone crazy to buy Boeings for dollars instead of going all out to get a Super-super VC10 jet off the ground? Time is running out with every month.
    Mr. Jenkins: Yes, Sir. This is an important decision for the British aircraft industry and, as my hon. Friend says, for the balance of payments. What we have to consider and what I am trying to consider is whether there is likely to be a substantial market for a stretched VC10. The development costs, both for the airframe and the engine for such a plane, would be very heavy and they would have to be borne to a very large extent by Her Majesty's Government.
    In these circumstances, the difficulty is not B.O.A.C.—we all want to see B.O.A.C. equipped with these planes and so, I hope, does B.O.A.C.—but the fact that it clearly does not make sense to incur these very heavy development costs to sell a very limited number of planes to B.O.A.C. My endeavour is to discover what is the best prospective market. If it is good, we shall consider going ahead.
    Mr. David Price: Can the right hon. Gentleman assist us by giving us some indication of the total size of the order below which it would be uneconomic to go ahead, on the Minister's argument, with the stretched VC10? Secondly, would he assure us that he is looking at the total cost benefit either way over the whole economy, and not simply limited to the economics of B.O.A.C.?
    Mr. Jenkins: Yes, I am. It is a great mistake to regard this issue as turning primarily upon B.O.A.C. It turns primarily upon whether it is a worthwhile investment for Her Majesty's Government of public money. I should not like to say exactly what size of order would be the minimum, but, as the costs of the development of the airframe amount, as I have said before, to several tens of millions of £s—to which has to be added a not very dissimilar sum for the development of the engine if the larger plane is to have adequate range—clearly a reasonable size of market is required to make it an economic proposition.
    Mr. Raphael Tuck: Has my right hon. Friend any faith in Sir Giles Guthrie's recent rather half-hearted statement of intention to buy Super-super VC10s? Is he aware of Motion No. 311, standing in my name and the names of about 49 other hon. Members, calling on Her Majesty's Government to support the British Aircraft Corporation to get the Super-super version of the VC10 flying?
    Mr. Jenkins: I am aware of that Motion, which I have studied with interest, and I have had conversations with my hon. Friend, but the issue remains not primarily one of B.O.A.C. but one of judgment, as to whether this is a proper investment of public funds.
    Mr. Tuck: Sir Giles Guthrie?
    Mr. Onslow: The House will be encouraged by what the Minister has said, but could he assure us still further? Could he give us an assurance that he will consider this project on its merits, and that, if it is a question of substantial Government financial backing being necessary, he will not shrink from using his influence to secure that, in spite of the current financial stringencies?
    Mr. Jenkins: I will not shrink from using my influence, such as it may be, provided that I am convinced that it is a reasonable proposition.
    Mr. Kershaw: Is the Minister aware that I am discouraged by what he said, because he seems to imply that, unless we get fairly substantial export orders for the VC10, there is no hope of going on with it? Is it not, for political reasons, unlikely that we shall have very large export orders for the VC10? Is it not tantamout to saying that he thinks that it will not work and will not be ordered?
    Mr. Jenkins: No, Sir. I did not say that I took the view that firm orders would have to be placed. The view which I took, and which I am sure the hon. Member would take if he had responsibility for these matters, is that there should be a reasonable prospect of securing such orders.

    Flying Techniques (Films)
    Mr. Derek Pageasked the Minister of Aviation whether, in view of the need to promote air safety, he will provide

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    suitable films on flying techniques for use by private flying clubs.
    Mr. Stonehouse: I am assisting the General Aviation Safety Committee to obtain films and other material for use by flying clubs in the interests of promoting air safety.
    Mr. Page: I am grateful for that reply. Will my hon. Friend do all in his power to make films more widely available and, in particular, available to the Parliamentary Flying Club?
    Mr. Stonehouse: Yes, I will be pleased to arrange for that to be done.

    European Launcher Development Organisation
    Mr. Wainwrightasked the Minister of Aviation if he will make a statement on the progress that has been made up to date by the European Launcher Development Organisation.
    Mr. Roy Jenkins: I would refer my hon. Friend to the Answer I gave on 21st July last to the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd).
    Mr. Wainwright: Would my hon. Friend always take into account the fact that this country is apt to get behind in this kind of launcher development? Would he ensure that money is spent to make certain that this country, along with other countries, makes good progress?
    Mr. Jenkins: Yes, and I think that, in evaluating what we can do in this respect, it is important to bear in mind that more is likely to be done on a collaborative than on an individual basis, but that does not affect the fact that we still need value for money.
    Mr. Eldon Griffiths: Would not the Minister agree that it is of vital importance that the E.L.D.O. organisation should succeed, because unless we are able to provide some form of international launcher device, which will get European satellites into orbit, we shall have to accept—perhaps for all time—that the United States and the Soviet Union will have a monopoly in world telecommunications? It is, therefore, of great importance to the industry and the balance of payments of this country that we should, in some way, create a launching vehicle
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    which will enable us to have satellite communications.
    Mr. Jenkins: I accept a large part of what the hon. Member said. It is not the case that, since this Government came into office, we have been unco-operative in E.L.D.O.
    Mr. Wainwrightasked the Minister of Aviation if he will give the total cost, up to the latest available date, of the United Kingdom's contribution to the European Launcher Development Organisation project.
    Mr. Roy Jenkins: For the period to 31st December, 1964, our liability for contributions was £15.15 million, of which £13.02 millions were actually paid.
    Mr. Wainwright: Is my right hon. Friend quite satisfied that we are spending sufficient money to make rapid progress? Would he confirm that we do not want to pay a very high rental to other countries for telecommunications when we can obtain satellite communications of our own, in conjunction with our European friends?
    Mr. Jenkins: In this review, which is proceeding extremely actively at present, I will bear in mind what my hon. Friend has said. I am grateful to him for his expression of opinion.
    Mr. David Price: Would the right hon. Gentleman assist the House, when he makes his review, by also giving the House a considerably more detailed written statement—possibly in the form of a blue book or a White Paper—than he could ever give in a statement? He will appreciate that a number of hon. Members on both sides of the House, who are extremely interested in E.L.D.O.—he will always have our support—want to know more details of what is going on.
    Mr. Jenkins: I will bear in mind how I can best communicate to the House—which I want to do very fully—the results of this review.
    Mr. Mawby: Will the right hon. Gentleman bear in mind, with regard to telecommunications, that we have a stake in a world system and that there is no need to go forward on this purely for telecommunications reasons, as some hon. Gentlemen have suggested?
    Mr. Jenkins: I do not think that there is a need purely for telecommunications reasons, although this is one factor to be taken into account, with others.

    London Airport Area (Aircraft Height Checks)
    Sir H. Lucas-Toothasked the Minister of Aviation what height checks on aircraft approaching London Airport have been carried out by or under the instructions of his Department; whether such checks have extended to areas such as Hendon; and whether he will make a statement.
    Mr. Roy Jenkins: Aircraft on the last seven miles of their approach to Heathrow are subjected to random checks by precision approach radar. During the last three months less than 0·4 per cent. of the aircraft checked came below the 3 degree glide path.
    When more than seven miles from Heathrow pilots are instructed to maintain a height of not less than 2,000 ft. The checks mentioned do not extend as far as Hendon but I am considering instituting wider checks in the near future.
    Sir H. Lucas-Tooth: Will the Minister bear in mind that low-flying aircraft cause an intolerable nuisance in areas such as Hendon? Will he pursue his efforts in this direction with the utmost determination?
    Mr. Jenkins: Yes, indeed. I will bear this point in mind. I have instituted special discussions during the summer for I, and I think many other Members, have been worried about the degree of noise over central London, and I hope to make sure that the regulations are observed.
    Mr. Maxwell-Hyslop: How many aircraft is 0·4 per cent.? The Minister told us that the figure was 0·4 per cent. without telling us the value of 100 per cent. Unless we are told the value of 100 per cent., his information is meaningless.
    Mr. Jenkins: I do not think that without notice I could give the total number of movements into London Airport over the period, but 0·4 per cent. is clearly one in 200 of the very substantial number of aircraft approaching London Airport.
    Sir Rolf Dudley Williams: Will the Minister look into this matter? For
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    instance, will he look into the fact that two aeroplanes were flying over Westminster this morning at considerably less than 2,000 ft.? I think that this is becoming quite intolerable.
    Mr. Jenkins: I am giving very close attention to this matter. With the expertise of a layman, I have occasionally thought that planes were flying lower than they should have been at the entrance to the glide path. I have had this checked It occurs occasionally but only very infrequently.

    B.E.A. and B.O.A.C. (Receipts)
    Mr. Shepherdasked the Minister of Aviation what percentage of the receipts of British European Airways and British Overseas Airways Corporation, respectively, arising from scheduled international passenger services are derived from flights covered by pooling arrangements which virtually eliminate competition.
    Mr. Roy Jenkins: In the financial year 1964 to 1965 77 per cent. of the revenue of B.E.A. and 61 per cent. of B.O.A.C. came from routes covered by pooling arrangements. I cannot accept the implication in the Question that such pooling eliminates competition.
    Mr. Shepherd: Is not the Minister aware that these figures, together with the fare rigging of I.A.T.A. and the bilateral arrangements, mean that effective competition in air travel has virtually ceased to exist? Does he not realise that until this is broken there is little or no hope of people flying at lower fares?
    Mr. Jenkins: No. I do not agree that all competition is reduced. Indeed, within the B.E.A.—Air France pool on the London-Paris route there have been considerable variations in the past few years in the percentage of traffic carried by each carrier. At the same time, I have previously informed the House, and I do so again, that I have some concern about the level of certain rates on high-density European routes, and I hope that we might begin to make progress in a lower direction.

    Airline Pilots (Flying Hours)
    Mr. Shepherdasked the Minister of Aviation what were the average actual

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    flying hours per week for the last available year flown by British airline pilots on scheduled flights.
    Mr. Stonehouse: My Department does not have information on the average flying hours a week for British scheduled services, but a sample from the larger airlines suggests that the answer is between 10 and 14 hours.
    Mr. Shepherd: Is the Minister aware that the American average—and America has a better safety record than we have—is about 50 per cent. more per week? Is he satisfied that the trade union element among British pilots is not so strong that in fact we are working our pilots fewer hours than we ought to fly them?
    Mr. Stonehouse: I do not think that it is fair to make that sort of comparison.
    Hon. Members: Why not?

    London Airport (Aircraft Movements)
    Mr. Kirkasked the Minister of Aviation what is the maximum number of aircraft movements an hour possible at London Airport under present circumstances; and what are the results of comparisons he has made with other airports of similar size.
    Mr. Roy Jenkins: The present capacity of Heathrow airport is a sustained rate of 48 movements per hour. By 1967 we hope to have increased this to 64. Heathrow handles many more aircraft than any other airport in Europe; more are handled at several United States airports, but the conditions at these airports are, for many reasons, not comparable.
    Mr. Kirk: Can the Minister say why conditions at United States airports are not comparable? Is he aware that certain experts say that at Kennedy Airport and O'Hare Airport, Chicago, three times as many aircraft movements can be handled as at London Airport?
    Mr. Jenkins: There are a number of reasons why conditions are not wholly comparable. One is the weather. Another is the very much higher percentage of the traffic of London Airport than at United States airports, particularly O'Hare, which is international traffic, which leads to certain language difficulties with air traffic communications. At O'Hare only 2 per cent. of the traffic is international.
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    It is also true that at O'Hare several more parallel runways are in use.
    Mr. A. Royle: Will the Minister give the House an assurance that he has no intention of increasing the night movements into London Airport?
    Mr. Jenkins: I have no intention of acting in a way which ignores the interests of those who are disturbed by noise around London Airport., about which I am very concerned and about which we have done something practical already.
    Mr. Royle: In other words, no.
    Mr. Lipton: Is the Minister aware that many people regard London Airport as one of the car parking airports? Is it correct that we are making more money out of the car-park charges than we are out of the aircraft themselves?
    Mr. Speaker: Order. I do not think that that arises on this Question.
    Mr. Maude: Can the Minister say whether the planned increase from 48 movements an hour to 64 will do more than keep pace with the estimated increase in traffic requirements? Will there, in fact, be an increase which will have any effect on the need or otherwise for a third London airport?
    Mr. Jenkins: I fear that this increase will have no such effect. The need for a third London airport remains equally urgent.

    Air Traffic Control (Automation)
    Mr. Kirkasked the Minister of Aviation what studies his Department has made on automating air traffic control in the London area.
    Mr. Roy Jenkins: The Royal Radar Establishment and the Civil Aviation Operational Research Branch have for some time been studying the application of automation to air traffic control problems including those of the London area. Computers to process flight plans will, from next year, be progressively introduced at the Southern Air Traffic Control Centre and equipment, already in production, for the processing of radar data, will be in use by 1970.
    Mr. Kirk: Is the Minister aware that it is good news that at last something is being done about automating London Airport? How fast can he press ahead with

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    this? Will he say whether the whole of this field will come within the terms of reference of the inquiry which he is proposing to set up into the third London airport?
    Mr. Jenkins: I will press ahead as fast as I can. There is another Question down about the hon. Member's second supplementary Question. The inquiry will consider whether Stansted is the right site. It will be able to consider whether an alternative site would be a better site. It will not be able to consider whether there is a need for a third London airport. I hold the view of the previous Administration that this must be a matter for Government decision.

    London (Third Airport)
    Mr. Bostonasked the Minister of Aviation if he will make a statement about the site for the proposed third airport for London.
    Mr. Roy Jenkins: In its Report published in March, 1964, the Interdepartmental Committee on the Third London Airport concluded that Stansted would be the best site. As already announced a public inquiry into the proposal is to be held towards the end of this year.
    Mr. Boston: Can the Minister say anything about the report that the Isle of Sheppey has been under consideration as a possible alternative? Will he confirm that in any negotiations the Island Development Committee and other local bodies concerned will be brought in?
    Mr. Jenkins: The Island of Sheppey was considered by the Ministry of Aviation, when it conducted its survey into the matter, as a possible alternative site. It has some disadvantages. It conflicts with the Shoeburyness Range, it conflicts with the continued existence of Southend as an airport and it is not a very easy area for access by public transport from London. But it will be quite competent for the inquiry to consider this and other possible alternative sites if they are advocated by people appearing before it.
    Mr. Kenneth Lewis: In the meantime can the Minister tell us what steps he proposes to take to try to see that greater use is made of Gatwick, which is inadequately used?
    Mr. Jenkins: I am determined in the period between now and the development of the third London airport, whether it is at Stansted or elsewhere, to get a better spread of traffic between Heathrow and Gatwick. I am anxious to do that as far as possible by voluntary means, and the national interest here and the interest of those living around different airports are involved to such an extent that I hope that voluntary means will succeed, but I would not rule out having to take firmer measures.

    B.E.A. (Supply of Sweets)
    Mr. Raphael Tuckasked the Minister of Aviation whether he is aware that a number of passengers who formerly used British European Airways have now transferred to other lines because British European Airways no longer supplies sweets on take-off and landing; and if he will issue a general direction in the public interest to British European Airways to resume the supply of these sweets to its passengers.
    Mr. Stonehouse: No, Sir. I think that this is a matter which could reasonably be left to the collective judgment of the board of British European Airways.
    Mr. Tuck: Is the Minister aware that the sucking of this barley sugar affects the ear health, if one may so call it, of passengers on take-off and landing? Does he think that this penny-pinching is worth the resultant loss of passenger traffic?
    Mr. Stonehouse: I do not agree that B.E.A. has lost traffic as a result of this. In fact, it has increased in the last eight years by 121 per cent. B.E.A. feels that with the modern aircraft which it uses nowadays there is not so much need for the customers to suck sweets. I feel that my hon. Friend has not scored a bull's eye on this point.
    Mr. Shinwell: Is the Minister aware that we are quite willing to forgo the sweets if we can only get a seat when we want one? It appears now that one finds it difficult to get a seat unless one gives notice a long time in advance, and occasionally that makes it awkward.
    Mr. Stonehouse: I will certainly bring that to the attention of B.E.A. and I hope that the Corporation will be able

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    to meet the requirements which are made upon it during this year.
    Mr. Boston: Does not the Minister think that as a result of this decision all the suckers are on the other air lines?

    Trident II E Aircraft
    Lord Balnielasked the Minister of Aviation what are the reasons for the delay in the order by British European Airways for the Trident II E; and whether he will make a statement.
    Mr. Roy Jenkins: The Government have approved a decision by B.E.A. to order 15 more Trident aircraft, bringing its total order for these aircraft up to 39. The further aircraft are to be Trident II Es and are for delivery from 1968 onwards. They will have somewhat greater capacity and range than B.E.A.'s existing Tridents and are particularly suitable for B.E.A.'s longer routes.
    Lord Balniel: Is the Minister aware that this will he welcome news indeed to the 6,000 people in Hatfield who work at the Hawker Siddeley works and who are supremely confident that this aircraft will prove as successful as its predecessor? Would the right hon. Gentleman answer two questions? First, is he aware that because of the delay which has taken place so far there is going to be a gap in the production lines between the ending of production of the Trident I and the commencement of production of the Trident II E? Will he accelerate the signing of the contract and so keep this gap as small as possible? Secondly, to what extent are the Government backing this deal financially?
    Mr. Jenkins: I am grateful to the noble Lord for his first remarks. I agree that this aircraft has very good export prospects indeed. No undue delay has occurred in proving this aircraft, in view of the importance of the order, and I will endeavour to minimise any gap which may exist to the greatest possible extent, whether by expediting the placing of the full contract or by other measures which it might be possible to take. To answer the noble Lord's question about financial backing, the aircraft will secure from the Government launching aid along the pattern which has become normal in the last
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    couple of years, but I would rather not go into greater detail on this matter now.
    Mr. Maxwell-Hyslop: Is this not about the same configuration of aircraft as the one which de Havilland originally wanted to produce and which B.E.A. originally specified? Is it not the case that Lord Douglas, the Chairman, changed his mind so that the aircraft was produced in a smaller form with no export potential and the whole programme has been delayed? Is it not a fact that now, at long last, we may eventually get the aeroplane which should have been produced and which would have sold abroad had Lord Douglas not sabotaged the whole thing by changing his mind?
    Mr. Jenkins: This all goes back a good deal into history, for which I was not responsible. I think that the hon. Gentleman's strictures about Lord Douglas, who ran B.E.A. with signal success for a long period, are uncalled for and unjustified. There are certain important difficulties, but I believe that this aircraft will have a very good future.

    London—Rio de Janeiro (Traffic Rights)
    Mr. Maxwell-Hyslopasked the Minister of Aviation why the Brazilian airline VARIG has been granted unrestricted traffic rights into London from Rio de Janeiro, when British United Airways is restricted to one flight per week through Rio de Janeiro.
    Mr. Roy Jenkins: I have granted a permit in accordance with the Brazilian rights under the bilateral Air Services Agreement in the expectation that the Brazilian authorities will respond in the same spirit. The British airline on the route, with which I have been in full consultation throughout, agrees with my action. If our expectations of reciprocity are disappointed, I will reconsider the position.
    Mr. A. Royle: Is the Minister 100 per cent. satisfied as to the safety record of this airline and would he look at the matter again before British subjects are encouraged to travel from London Airport by this airline?
    Mr. Jenkins: I do not think that there is anything which would make it right for me to refuse reciprocal traffic rights

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    on safety grounds. However, in view of what the hon. Gentleman has said, I will look into the matter again; but I should not like it to be thought that what he said carries the endorsement of the Ministry of Aviation.

    Warsaw Convention (Hague Protocol)
    Mr. Maxwell-Hyslopasked the Minister of Aviation what progress is being made in ratifying the Hague Protocol to the Warsaw Convention; what is delaying British accession to the Protocol; and when the new limits of liability of air carriers towards passengers will come into effect.
    Mr. Stonehouse: The Hague Protocol is in force between 43 countries. The United Kingdom is not among them because up to now it has been considered that we should denounce the unamended Warsaw Convention before agreeing the Protocol. To do this would have deprived us of the benefits both of the Convention and of the Protocol in our relations with a number of important countries, including the United States of America who, like ourselves, are parties to the Convention but not yet to the Protocol. The position is being re-examined and I hope that, in consequence, it may prove possible for us to endorse this fairly soon. The Protocol and the new limits of liability for which it provides will come into force 90 days following agreement.
    Mr. Maxwell-Hyslop: Will the hon. Gentleman please press on with this vigorously? Is he aware that when I tabled an Amendment about this when the Measure was going through—an Amendment designed to increase the limits of liability—it received enthusiastic support from hon. Members on both sides of the House? Is he aware that the present position is quite intolerable, because at the moment the dependants of anybody who is killed in an aeroplane will not get more than £5 14s. a week on the basis of £3,000 compensation? Would the hon. Gentleman please get on with this matter as quickly as possible, because the present position is grossly unjust to the dependants of people who are killed in accidents?
    Mr. Stonehouse: We are indeed aware of the importance of this matter. The
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    Hague Protocol increases the liability from £3,000 to £6,000 and we have endorsed that increase. However, the problem here is that the United States has not yet agreed to this Amendment and we must try to get that country's agreement in view of the importance of our North Atlantic routes and of securing the advantages of the Warsaw Convention, with which at the moment the United States agrees.
    Mr. Maxwell: What objection does the United States Administration see to signing this Protocol? Would my hon. Friend say whether we need necessarily wait upon the pleasure of the United States in this matter?
    Mr. Stonehouse: I do not want to go into the details concerning the United States objections, but it is a fact that if we go ahead—as we may have to do if the United States continue not to co-operate in this respect—we may lose some of the advantages which we now have in regard to our relations with the United States under the Warsaw Convention.
    Mr. Marten: Is the Parliamentary Secretary aware that the reply which he gave to my hon. Friend was precisely the reply which I gave a year ago when I was standing at the Government Dispatch Box? Is he able to say what steps have been taken in the last 12 months to try to persuade the Americans?
    Mr. Stonehouse: We are examining the position and hope to make more progress than was made by the last Administration. As the hon. Gentleman will know—indeed, he is well versed on this question—it is extremely important that in signing the Hague Protocol we do not lose the benefits which we have under the Warsaw Convention in respect of our relations with the United States. We want to get the United States with us in this matter and that is why we are against undue haste.

    Aircraft Noise
    Mr. A. E. Hunterasked the Minister of Aviation what additional measures he is proposing to take regarding the limits imposed on aircraft noise, particularly near London, Heathrow, Airport.
    Mr. Roy Jenkins: In addition to the measures already in force I am considering, with the airlines, the possibility of reducing the permitted day levels of aircraft noise at Heathrow, at the first main built-up area under the take-off path, to 106 PNdb for all jet aircraft except those loaded to an all-up weight of more than 260,000 lb. These latter aircraft will be required, as at present, to conform with the limit of 110 PNdb, and to operate as quietly as is practicable.
    I am also proposing to examine, in consultation with operators and manufacturers, whether and, if so, when it might be practicable to apply this day limit of 106 PNdb to all new aircraft coming into service, irrespective of weight. This, of course, raises international implications and with this in mind I am considering inviting interested Governments to a conference in London at which airport authorities, airline operators, manufacturers and scientists could be represented to discuss all aspects of noise in the vicinity of airports.
    Mr. Hunter: I thank my right hon. Friend for his efforts and endeavours to assist people living near London Airport. Will he issue a report of the outcome of the international conference which he is arranging with other Governments? Is he aware that many hon. Members on both sides of the House have urged international consultations on the question of aircraft noise and that if he is able to issue a report on this conference it would be of great assistance to all concerned? Might I take this opportunity to wish the conference every success?
    Mr. Jenkins: Yes, Sir. The first thing is to get the conference going, and I am hopeful that it will be possible to get it started in the not too distant future, perhaps next spring. It will be a conference not only of Governments but, as I have indicated, aircraft authorities, operators, scientists and manufacturers will be represented. In these circumstances, there would be no question of holding a secret or confidential conference. Its results will, therefore, be made public and I will also consider reporting, to the House after the conference has been concluded.
    Mr. Maude: Would the right hon. Gentleman say roughly how his proposed
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    new limit of 106 compares with the practice in other countries with major airports? Is it to be lower than the generality, or about the average?
    Mr. Jenkins: I would not like to give a firm pronouncement on that without notice. It is certainly lower than that in application at many major airports, but one of the problems which we must face in this matter is that London Airport, from the point of view of noise nuisance to citizens, is one of the worst sited major airports in the world.
    Mr. Molley: Would my right hon. Friend consider acquainting those local authorities affected with any proposals or propositions he may make ápropos this issue?
    Mr. Jenkins: Yes, Sir. We keep in constant touch with the local authorities concerned, through the Consultative Committee, and my hon. Friend the Parliamentary Secretary is in particularly close touch with them.
    Sir B. Craddock: Will the Minister say what progress has been made in research into the muffler and such devices to try to cut down noise as well as other nuisances?
    Mr. Jenkins: This is precisely one of the questions that we want to discuss at the conference. We are in the position at present in which one can keep the noise down to, I would not say a totally tolerable level, but not a completely intolerable level with regard to lighter aircraft, but for the heavier aircraft we have to continue to run at 110 PNdb. What I am looking for is the possibility that as a result of discussion and forward planning we might be able to reduce that level for all aircraft in the future.
    Mr. Dudley Smith: Will the right hon. Gentleman accept that there has been a welcome decrease in aircraft noise over the last two of three years, for which the previous Government and this Government have been responsible, and that we are grateful for it? As there are now suggestions that London Airport is to be increased substantially in size, will he give an undertaking that night flights will not necessarily be increased as well?
    Mr. Jenkins: I am aware of the discomfort caused by night flights, and this

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    is something that we have very closely in mind. It is not so much a question of greatly increasing the size of the airport as of using much more intensively the facilities that are at present broadly available.

    Satellite Launchers (Rocket Engines)
    Mr. David Priceasked the Minister of Aviation what support his Department is giving to the further development of rocket engines for satellite launchers.
    Mr. Roy Jenkins: The United Kingdom, through contracts placed by my Department, is developing engines for the first stage of the E.L.D.O. launcher and is participating in studies for further E.L.D.O. programmes involving the development of more powerful engines using advanced propulsion techniques. We have also placed contracts on national account for preliminary work on engines suitable for a small satellite launcher. All of this is supported as necessary by work in our research establishments.
    Mr. Price: I am grateful to the Minister for that reply. Do I take him to mean that most of the work is going on on the successor marks to the Gamma 304 engine? As to the second part of his reply, do I take it that work is taking place on high energy fuels producing better results than the traditional HTP that has been used in the Gamma engine?
    Mr. Jenkins: I think that the answer to both of the hon. Gentleman's supplementary questions is "Yes", but as I move, as he will be aware, with a certain caution in these highly technical fields, perhaps I might write to him to confirm that.

    B.O.A.C. (Catering and Hotel Enterprises)
    Mr. Hefferasked the Minister of Aviation, in view of the need to develop and expand existing nationalised industries, if he will give a general direction to the British Overseas Airways Corporation, in the public interest, not to enter into arrangements with private catering firms for the creation of joint catering and hotel enterprises.
    Mr. Roy Jenkins: I see no need to object in principle to co-operative arrangements between the nationalised Air Corporations and private catering
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    firms, but I think that all concerned will need to consider such proposals carefully on their individual merits.
    Mr. Heffer: Is my right hon. Friend aware that the joint shop stewards committee—[HON. MEMBERS: "Oh."]——of B.O.A.C., which has made representations to a number of people on this issue, is deeply concerned, and takes the view that as this is likely to be a profitable business it could well be conducted by the nationalised industry itself?
    Mr. Jenkins: I will, of course, take account of what my hon. Friend says on this matter—[HON. MEMBERS: "Oh."] Certainly, I will, and I am grateful to my hon. Friend for raising the point, which is an important one. If what was involved here were a new proposal equivalent to that of setting up B.O.A.C.-Cunard, I would be most opposed to doing so, but I do not think that one wants to rule out an extension of the business of the airline Corporations into certain catering fields, where the combination of the expertise of a Corporation and of a catering firm might lead to a useful development in that respect.
    Mr. Patrick Jenkin: Would not the Minister agree that the time, effort and skill of B.O.A.C. would be much better devoted to running the business of an airline and not to getting involved in other people's business?
    Mr. Jenkins: I do not understand whether the hon. Member objects to the proposal or not.
    Mr. Maude: Will the right hon. Gentleman assure the House that in his view the consideration here is that the travelling public using the airport should get a proper catering service?
    Mr. Jenkins: I am greatly concerned, in all these matters, in looking after the interests of the travelling public as well as with the legitimate interests of the Corporations, in which a great deal of taxpayers' money is invested.
    Mr. Tilney: Will the Minister bear in mind that private enterprise risks its own money and usually makes a profit, whereas, so often, public enterprise loses the taxpayers' money?
    Mr. Jenkins: Public enterprise sometimes appears to lose taxpayers' money

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    because of the restrictive conditions under which it was forced to operate by the party opposite.
    Mr. Emrys Hughes: Is my right hon. Friend aware that there is a growing feeling among members of the travelling public at Prestwick Airport, and other sections of the public, that they are being exploited by the high charges of the caterers?

  WIRELESS AND TELEVISION

    Fourth Television Channel
    Mr. Dudley Smithasked the Postmaster-General when he will announce the Government's proposals for the allocation of the fourth television channel.
    The Postmaster-General (Mr. Anthony Wedgwood Benn): I would refer the hon. Member to the reply I gave to his Question of 15th June.
    Mr. Dudley Smith: Would not the Postmaster-General agree that it would provide a welcome stimulus to the B.B.C. and also add competition to commercial television if this channel were handed over to the Independent Television Authority?
    Mr. Benn: I am aware of the very great interest there is in the future of this channel but, because of the technical, financial, educational and political considerations, I do not propose to be rushed into a decision on how it should be allocated.
    Mr. Frank Allaun: Is it not true that there is remarkably little demand for a fourth channel; and that the public would greatly prefer a real choice of programme on I.T.V. and B.B.C.1, instead of the deliberate coincidence of programmes we get at present?
    Mr. Benn: That is a subject on which I think my hon. Friend has a Question later in the Order Paper.
    Mr. Gibson-Watt: Will the Postmaster-General give an assurance to the House that if he is to make a statement on the fourth channel, he will make it to the House, and not during the Summer Recess?
    Mr. Benn: Yes, Sir. I think that it is clear from what we said earlier that when
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    the review of broadcasting policy is completed a statement will be made to the House.

  LEGISLATION
  Sir H. Lucas-Toothasked the Lord President of the Council what further legislation Her Majesty's Government propose should be completed during the current Session.
  The Lord President of the Council (Mr. Herbert Bowden): Her Majesty's Government intend to complete all the legislation they introduced this Session.
  Sir H. Lucas-Tooth: Will the Lord President give an undertaking that no new Bills will be introduced before another Queen's Speech?
  Mr. Bowden: I cannot give the firm undertaking, but that is probably the position.
  Lord Balniel: As we now know that the minimum guaranteed income scheme is not to be introduced this Session, or next Session, or in this Parliament, is it proposed to introduce subsidiary legislation, for instance, to provide the help for non-contributory elderly persons which has been postponed on the promise that a guaranteed income scheme would be introduced?
  Mr. Bowden: I am sure that the noble Lord would not expect me to anticipate the next Queen's Speech, or the one after that.

  AIRCRAFT AND HOVERCRAFT (IN REM JURISDICTION)
  Sir Knox Cunninghamasked the Attorney-General whether he has studied the evidence sent to him by the hon. Member for Antrim, South, showing the existence of a demand for jurisdiction in rem to cover aircraft and hovercraft in this country; if he will approach the Belgian Government with a view to the calling of a conference of those nations which took part in the International Conference on Maritime Law held in Brussels in 1952 to discuss international agreement for in rem jurisdiction and the arrest of aircraft and hovercraft; and if he will make a statement.
  The Solicitor-General (Sir Dingle Foot): I have studied the letter which the hon. and learned Member sent to my right hon. and learned Friend, but I do not consider that it discloses any substantial demand for a change in the law which would expose airlines to unforeseeable arrests—possibly even for quite small claims. Modern international air traffic observes tight schedules and their disruption would cause great inconvenience in the public. In any event I do not think that the International Conference on Maritime Law would be the appropriate body to consider this question.
  Sir Knox Cunningham: Is the hon. and learned Gentleman not aware of the increasing number of small private aircraft which fly to and from the United Kingdom? Should they not also be treated as ships and liable to arrest until bail has been put up to meet a claim? Would not this help in the birth of dynamic legal reform, conceived by the Labour Government nine months ago, whose arrival we all so eagerly await?
  The Solicitor-General: I do not think it would be possible to distinguish for this purpose between one class of aircraft or another. As regards dynamic legal reform, that of course is primarily the business of the Law Commission which this Government have brought into existence.

DEFENCE REVIEW
Mr. Soames: On a point of order, Mr. Speaker. In view of the fact that I understand the Secretary of State for Defence is holding a Press conference at this moment to impart to the Press a progress report on the Defence Review, may I ask you whether there has been any request by the Secretary of State to make a statement to the House?
Mr. Speaker: I have received no such request.
Mr. Soames: Further to that point of order. May I seek your guidance? It seems to us a grave discourtesy to the House inasmuch as presumably the right hon. Gentleman has not summoned a Press conference without wishing to impart some information to the Press. We know that he has not imparted it to this House. I wonder whether, therefore, you
1696
could make a request to him to come to the House to impart the information to the House?
Mr. Speaker: That does not give rise to a point of order.
Mr. A. Royle: On a point of order. Is it not a contempt of this House for the Secretary of State for Defence to give a private Press conference in the Ministry of Defence this afternoon and to refuse to let the House know his ideas on the reorganisation of defence?
Mr. Speaker: The point is this. The word "contempt" has a magic and technical meaning. Should the hon. Member wish to make a complaint of breach of privilege, it should be done at another time and I would then consider it on its merits.
Mr. Sydney Silverman: On the presumed point of order which has been raised, is it not a presumed contempt of the House to use alleged points of order to give vent to an obvious political grievance? Is not that a contempt?
Mr. Speaker: I do not think it is a contempt in any sense. I have repeatedly pointed out that it is a form of cheating which is to be deprecated.
Mr. Kershaw: Further to that point of order—
Mr. Speaker: We must have a point of order if there is one, but I do not think there has been one up to now.
Mr. Kershaw: In that case, I shall err no more than anyone else, Mr. Speaker. In view of the business tomorrow, for which debates on the Adjournment have been fixed, would it be in order for the Secretary of State to make a statement on the Adjournment? I understand that those debates are by informal agreement and that he could ask for them to be set aside in order to give what information he has to the House.
Mr. Speaker: The position is that if the Minister asked leave to make a statement he would get it, because I have no power to refuse it. There is nothing else I can do about it.
I give no encouragement about tomorrow, but I take the opportunity of saying that after having worked out a provisional timetable with the greatest

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possible care I find that thereafter there will be a Royal Commission containing over 70 Bills and one Church of England Measure imposed upon it.

AGRICULTURE (WHITE PAPERS)
The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): With your permission, Mr. Speaker, and that of the House, I would like to make a statement about two White Papers the Government have today presented to the House, copies of which are now available in the Vote Office.
The first marks an important step forward in our plans for the development of agriculture over the longer term. It contains our proposals for improving the size, lay-out and equipment of farms, for developing the rural economy in the hills and uplands, and for encouraging co-operation among farmers.
The problem of the small farm has never been comprehensively tackled in this country before, although much has been done abroad. We have far too many farmers trying to win a reasonable living from insufficient land. Many of them cannot hope to earn for themselves and their families an income in keeping with modern standards if they are dependent solely on farming. We want to help these men. It would be neither in their own long-term interests, nor could the nation afford it, if we were merely to try to boost their incomes artificially by higher subsidies. We want to attack at its roots this problem of too little land providing too small a business, giving too poor an income.
We are going to tackle this problem in various ways. First, we shall help the man who can get more land to develop his farm to a satisfactory size and equip it properly. We shall give generous grants for the necessary remodelling works and other costs, and we are exploring ways of helping over credit for land purchase.
Secondly, we shall give financial help to the man who wants to give up an un-commercial holding by selling it either privately or to the State for approved amalgamation. This help will take the form of grants to aid resettlement, or annuities to aid retirement. I should
1698
stress that we aim to let the farmer who retires in this way stay on in his own farmhouse if he so wishes.
Thirdly, we shall give help through a series of grants to those who wish to co-operate together to get some of the advantages of a bigger size business. We are for the first time providing grants to stimulate co-operation in production, for example, of a uniform product to be sold on contract. We propose to set up a Central Council to administer these grants for farming and horticultural co-operation and to provide the necessary purposeful drive.
The small farm presents a particularly acute problem in the hills and uplands where there is also a need to plan the integrated development of agriculture and forestry together with related uses such as recreation and tourism. All past reports on this problem have stressed the need for a body which can promote and co-ordinate such rural development.
We propose to do this by setting up Rural Development Boards, to start with in a few selected areas. The boards, which will include people with local knowledge, will have a variety of powers to help them carry out their programme of rural development. They will work with, and through, the people and the authorities already in the area, including the Regional Economic Planning Councils and boards.
In addition, we propose to reaffirm our belief in the vital agricultural rôle of the hills and uplands as a reservoir for breeding stock by re-enacting the hill cow and hill sheep subsidies on a long-term basis. We also intend to introduce a new scheme of capital grants for land improvements of a kind particularly important in hill and upland farming.
Finally, the Farm Improvement Scheme which has done so much for the modernisation of our farms, particularly by helping the industry to save labour, will be extended on lines similar to the present.
The second White Paper deals with the Meat and Livestock Commission. There is a vital need to improve the marketing arrangements for agricultural produce in this country. One of the most important products, to both the housewife and the farmer, is meat. The White Paper sets out our conclusions,

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after discussions with the main organisations concerned, on how the marketing of meat and livestock should be improved.
The improvements required touch all sectors of the industry, and are interrelated. We have concluded that a single body of independent persons, a Meat and Livestock Commission, should be set up to bring them about. Its responsibilities would extend over Great Britain, and the funds for its work would come mainly from levies on animals slaughtered for meat. It would be assisted by a number of advisory committees which would be representative of consumers, producers and the trade.
The functions of the Commission will extend all the way from the farm to the retail shop. On the farm the Commission will be closely concerned with livestock improvement. It will also help the farmer to improve his marketing of fatstock in various ways such as assisting the placing of contracts, and collecting and disseminating market intelligence. The Commission will act for the Government in certifying fatstock for the guarantee, although the Government will remain responsible for its level and the conditions of eligibility.
Next, the Commission will aim to improve slaughtering and wholesale distribution, notably through the introduction of a carcase classification scheme and by giving expert advice to the industry on the efficient construction of slaughterhouses and improved techniques of slaughtering. It will work towards improved presentation in the retail shop and could help to promote the sale of home produced meat. It will also promote and co-ordinate research. Lastly, the Government would look to the Commission for advice on the level of current and prospective supplies at home and abroad.
The Commission may in future find that a further step by way of regulation, reorganisation, or development is needed to serve the interests of the industry and the nation. We therefore propose that it should be empowered, after consulting the interests concerned, to promote schemes for this purpose. Any such scheme would be subject to approval by Parliament.
The need for such a Commission is urgent. We therefore intend that it should
1700
be established as soon as possible and expect it to bring benefit through its work to consumers, producers and the trade alike.
Mr. J. E. B. Hill: On a point of order. I think that I heard the Minister say that the two White Papers were now available in the Vote Office. I have just been to the Vote Office. The White Papers are not now available there. They will not be available until 3.45. Would it not make for the convenience of the House, when a very important statement is being made, for the Press summary to be made available to Members at the same time as it is made available to the Press, namely, at 3.30, which I think I saw happening up in the Press Gallery? It would be a great convenience if we could have it at 3.30.
Mr. Peart: I have carried out the normal practice as I understand it. I am in no way being discourteous. I am anxious that we should have full questions and answers on this Statement.
Several Hon. Members rose—
Mr. Speaker: I cannot deal with the matter of general practice now. It would merely hold up the House. Also, I should like to refresh my memory about the difficulties of this. I had to look at it once in the last Parliament.
Sir M. Redmayne: In any case, is it not treating the House with scant courtesy—[HON. MEMBERS: "No."] Yes—to produce this complicated statement, supporting two White Papers, which we cannot have seen, on the next to the last day before the House rises for the Summer Recess? I presume that there must be legislation arising from these White Papers. Does the Minister really propose to draft that legislation without consulting the House at all in these matters?
I shall deal with one or two points only, because I know that my hon. Friends will have very many questions to ask, Mr. Speaker. I hope that by your good grace, Sir, they will have the opportunity to ask them. I want to ask specially what is meant by that part of the statement which says that a man who wants to give up his holding can sell it to the State? What is the State to do with the land? For how long will it hold it? Will it then resell it for amalgamation, and, if so, at what

1701
price? Is not this, in fact, the creeping nationalisation of land? The Minister will have great difficulty in explaining how it is not.
Next, the Minister was even more vague about the rural development boards. He simply said that they
"will have a variety of powers".
What is meant by "a variety of powers"? Does this include the acquisition of land and possibly by some more stringent means than those which are referred to specifically in the statement?
What is meant by the statement that the functions of the Meat and Livestock Commission
"will extend all the way from the farm to the retail shop"?
Are we to assume that trading plays no part in that at any stage?
Lastly, on this matter, although I must admit that I should like to ask many questions, what is meant by the statement that the Commission will be charged with giving
"advice on the level of current and prospective supplies at home and abroad"?
How does this relate to the Prime Minister's recent statement that what is required for agriculture is a vigorous import substitution policy? Is there any relation between the two? What are we to read into this phrase in the statement?
Mr. Peart: May I, first, reply to the allegation of discourtesy. I have produced these White Papers. Of course, there will be legislation. Before that legislation is introduced, there will be ample time for hon. Members to examine my proposals, I hope constructively and objectively. After all, there will be several months. Apart from that, all through our discussions on policy and in the preparation of the White Papers we have consulted all the interests concerned. I am anxious to do something. I should have thought that this would have the approval of hon. Members opposite, who did nothing.
The right hon. Gentleman asked me whether the scheme under which a man can give up his holding to the State was not, in fact, creeping nationalisation. This is voluntary. The State will hold the land. Then it will be resold to an individual farmer so there can be larger units. If the right hon. Gentleman thinks
1702
that this is creeping nationalisation, I can only assume that he is living in a world of fancy.
The rural development boards will have powers of pre-emption. We think that this is right and proper. It is not unusual. Many other countries in Western Europe have this. If we are to have a co-ordinated plan for development in certain selected areas, which will affect hill land and upland, I think that this will be the right approach.
The Meat and Livestock Commission will not be a trading authority. It will be there to stimulate production. I have listed its functions in the appropriate White Paper. I hope that hon. Members will read them. The stimulation of contracts, to give only one example, will be of great benefit to producers.
The right hon. Gentleman asked me about the Commission's functions in relation to the giving of advice on imports. Import policy will be the responsibility of the Government. It must be. Any question of the rôle of agriculture in the national plan, its contribution to our own growth and to the saving of the import bill, will be the responsibility of the Government, not of the Commission.
Lady Megan Lloyd George: Is the Minister satisfied that the proposed Meat and Livestock Commission will have the necessary powers to safeguard producers and consumers against exploitation by middle men? What will be the total additional value of the benefits accruing to farmers under the proposals he has announced to the House?
Finally, what special consideration has he given to the problems and needs of Wales?
Mr. Peart: I believe that the Commission will seek to improve marketing. This is its purpose. By doing that, in the end the nation and the consumer will benefit. I hope that when the schemes to improve farm structure get into full operation by 1970 they will be running at approximately £15 million to £17 million, which is a considerable sum of money. For development in the hill and upland areas the peak figure will be in the region of £2 million by 1970. The Farm Improvement Scheme will be running at £12 million a year, which will be at the present rate.

1703
There is also a new advance in co-operation. I am seeking co-operation on the farm itself in the sphere of production. There will be an increase in support, and I estimate that the approximate figure—these figures must be approximate—will be nearly £1½ million by 1970. I repeat that this is an advance. Altogether, the Government will inject considerable sums of money into parts of our agriculture which need it.
I must not forget Wales. Wales has considerable hill and upland and, therefore, the broad approach to the improvement of our hill and upland areas will help Wales considerably. I shall certainly consider the need for a development board in Wales. In the White Paper I have said that if we are to have a board for Wales there will be only one board which can do its work in one area, and then if the development work in that area is completed and we have to move on to another area, the same organisation could do the job.
Mr. Stodart: When the right hon. Gentleman refers to the rural development boards having powers of pre-emption, does this mean that a seller might not then be able to take the highest price from a private bidder because the development board might have the right to take it at a lower price? Is that the object?
May I now ask two questions about Scotland. How many of the rural development boards are intended for Scotland, and will the board that is envisaged for the Highland area co-operate closely with the Highland Development Board?
As to the Meat Commission, will not a Great Britain body be a considerably top-heavy affair? As Scotland is an exporter of quality meat, should there not be a separate commission for Scotland?
Mr. Peart: I think that proliferation would be disadvantageous. I think that a commission covering England, Wales and Scotland is the right approach and that two commissions would be wrong. That is the decision that I have come to and I think that it is the right one.
The question of rural development boards in Scotland is something which we shall have to consider. I have not
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made any final decision about this. Obviously, my right hon. Friend the the Secretary of State for Scotland would consult all the interests concerned, including the Highland authority, and consider where we should make a start, but we have nothing specific for Scotland at this stage.
The selling of land will be at the market price.
Sir G. de Frietas: Can my right hon. Friend say how far his proposals for co-operation flow from the Knapp Report, and how far and in what way his proposals affect the position of the Agricultural Central Co-operative Association?
Mr. Peart: My hon. Friend will remember that the Knapp Report was produced by an independent body. Obviously, its findings were carefully considered, but it in no way binds any Minister to make any particular decision. I propose to set up a special council, which will have drive, and we shall still use existing organisations. [Laughter.] I do not know why the hon. Member for Cornwall, North (Mr. Scott-Hopkins) always laughs at references to new proposals.
I should have thought that the stimulation of producer co-operation by the creation of a new council, with new grants and new aids, would be welcomed by the industry. I am certain that bodies like the A.C.C.A. and its Welsh and Scottish equivalents will act as agents for this new body.
Mr. George Y. Mackie: Is the right hon. Gentleman aware that most of the proposals are contained in the Farmer and Stock-breeder of 27th July, which is of considerable help? There are one or two questions that I should like to ask. Is the Minister aware that the industry would welcome a valid scheme to help reconstruction but that it will depend upon the scale? Can he also say where the money will come from for this scheme? I think that he mentioned a sum of £17 million. Will it come out of the general guarantees for farming or is this something on top of it?
Is the right hon. Gentleman aware that the Meat Commission scheme appears to me to be an emasculated Verdon Smith Report without the essential support buying? Without support buying,

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the industry is just as apt to get slumps in a period of long-term shortage as it is in a period of short-term shortage. May I ask why this factor has been omitted and what the right hon. Gentleman proposes to do about it?
Mr. Peart: I welcome what has been said by the hon. Member, speaking, I assume, for the Liberal Party. It conflicts with the rather vulgar and naïve statement just made by the Chairman of the Liberal Party Agricultural Committee. I am glad the hon. Gentleman's approach is different.
Of course, valid schemes will have to be examined, but the money which I mentioned will not be included in the guarantees, only co-operation.
On the question of the Meat Commission, I would only say that this commission has certain similarities to and certain differences from that which was proposed by Verdon Smith. I considered the Verdon Smith Report very carefully, but we have, in addition, this very important major reserve power, and I should have thought that this approach would have been welcomed by the hon. Member.
I carefully looked at the whole question of support buying, but this would probably have been too costly. After all, where it has been introduced in other countries—France is an example—farmers have not got the support system that we have in this country. In other words, we have a deficiency payment system. Therefore, expenditure of money on support buying in this country and the building up of stores, etc., would have been extremely costly and would not have been practicable.
Mr. Derek Page: Does my right hon. Friend realise that the proposals that he has announced today are no substitute for an adequate level of support for farm incomes?
Mr. Peart: I accept that. Here we are not dealing with a price review. I am seeking to make the industry much more efficient and viable. I am seeking to improve the position of thousands of small farmers, and to stimulate better meat marketing. The Government have never suggested that these proposals, which are designed particularly to help
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many small men struggling to earn a decent living on insufficient land, are a substitute. We are giving the fully commercial farmer an opportunity to earn a proper level of remuneration in accordance with our Agriculture Acts. I never said that the proposals were a substitute, and I reaffirm the fact.
Mr. Kitson: Is the right hon. Gentleman aware that we on this side of the House are appalled at the timing of this statement? Would he state on what criteria these grants and resettlements are to be based? Would he give an assurance that they are not to be based on an acreage payment, because there is a very considerable difference in the price of land in various areas? Will the right hon. Gentleman also tell us what this will cost the Exchequer?
Mr. Peart: I have given an estimated cost. As to the hon. Member's criticism of the timing of the scheme, I think that this is the right way. I only wish the hon. Member had criticised his own Government for failing to introduce something like this.
Mr. Hazell: Is my right hon. Friend aware that his statement will undoubtedly be welcomed by many farmers, since it is clearly the intention and desire of the Government to maintain prosperity in agriculture? Will my right hon. Friend assure the House that in the preparation of the White Papers he consulted the National Farmers' Union, the National Union of Agricultural Workers, and other interested organisations?
Mr. Peart: I have said in the White Papers that all interests were consulted. In the working out of legislation all important organisations involved will be consulted. I have followed this practice, which I believe to be right.
Mr. Kimball: Is the right hon. Gentleman aware that he is unlikely to increase the rate of retirement from farms very much, but that as from today he will have to use the taxpayers' money to pay every small farmer who is thinking of retiring? In the present economic circumstances, is this a very wise scheme? Is the right hon. Gentleman not aware that under the Conservative Government, when there was confidence in the industry and a wholesome market for land, the amalgamation of farms was going

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ahead at a far greater rate than most people appreciate?
Mr. Peart: I cannot accept that. It is true that under the Conservative Administration many small farmers went out, but that was a willy-nilly process, often with great hardship, but I am offering incentives. Whether the farmer accepts this is a quite voluntary matter. We think that this is the proper approach.
Mr. Walter Harrison: While thanking my right hon. Friend for that statement and paying him due credit as a Minister of Agriculture, Fisheries and Food, may I ask him directly what benefit the housewife will receive from these proposals?
Mr. Peart: There is the improvement of meat marketing and production and also for the first time in a statutory authority there is a special consumer committee which I am proposing. In the end this will be of great benefit, I believe, to the nation and the housewife.
Mr. Jopling: Will the right hon. Gentleman say in which areas the rural development boards will operate? Will he also estimate how much land they will pre-empt in the future, in what manner they will acquire it and whether it will be done by compulsory purchase? Once they have acquired the land will they let it, sell it or is it intended that they should keep it for all time?
Mr. Peart: I have not made a final decision about the areas. Obviously, we must have careful consultations about this, but I am sure that there are certain areas which are ripe for this sort of development. To give an example of the type of area, without committing myself to my Welsh hon. Friends, there is Mid-Wales. It may be that the rural development board will be the right approach for that area. If I decide that, there will be local consultation and the right of people to make objections to the area being scheduled as a rural development area.
Mr. Harold Walker: Will the responsibilities of the Meat and Livestock Commission extend to the regulation of exports of beef and beef cattle? If not, why not?
Mr. Peart: I know that my hon. Friend is quite rightly concerned about exports.
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This matter, however, must be my responsibility, acting for the Government, and I would give the same reply about imports. These must be a Government responsibility and not the responsibility of the statutory Commission.
Mr. Noble: Will the Minister please answer the points put by my hon. Friend the Member for Richmond, Yorks (Mr. Kitson) which he said that he had answered but which I and I do not think anybody else heard? The question was whether the amount to be paid as annuities to farmers is to be on an acreage system. I heard nothing about that in the statement. Another question was about what the amount would be, and I did not hear anything about that in the statement either.
Could the right hon. Gentleman also add two other answers? He talked about an income in keeping with modern standards. This is important, but the figures which I have heard quoted up-to-date cannot be in keening with modern standards. The right hon. Gentleman also said that he made the decision not to have a commission for Scotland. I hope that he meant that he and the Secretary of State for Scotland together made that decision. I regret that decision myself.
Mr. Peart: If there is a decision about Scotland my right hon. Friend the Secretary of State for Scotland will take the initiative and I shall be associated with him, but we have not yet made up our minds, as I have said, whether we shall start a Commission in Scotland.
As for income, I should have thought that the new grants and extensions would have met the right hon. Gentleman's point. I did not intend to mislead the hon. Member for Richmond, Yorks (Mr. Kitson) or the House. The details of the process of amalgamation are on page 4 of the White Paper. I know that hon. Members have not read it yet, but payment will be related to acreage. Up to the age of 55 there will be a grant of £500 plus £15 per acre—[Interruption.] I was asked to give a reply and I am being courteous. Perhaps the right hon. Gentleman will read the White Paper later.
Mr. David Griffiths: We on this side of the House congratulate my right hon. Friend most heartily on a most revolutionary act on behalf of agriculture. Hon.

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Members opposite laugh and scorn, but they are only laughing and scorning as far as big farmers and business are concerned. They are not worrying about the small farmer.
Hon. Members: Speech.
Mr. Speaker: Order. Hon. Members cannot make speeches about this matter. There is very great pressure on the time of the House.
Mr. Griffiths: Is it envisaged that my right hon. Friend will give more financial aid to the hill farmers?
Mr. Peart: Yes, Sir. An improved farm structure will benefit considerably many farms in the hill areas. By 1970 aid will have reached £17 million and for specific development of hill and upland areas, I gave a figure of £2 million. The Farm Improvement Scheme will also benefit those areas and we must not forget what I said about producer co-operation.
Sir M. Redmayne: This is a most unsatisfactory situation. The House has many more questions to put to the Minister than you could possibly allow us to ask him, Mr. Speaker. May I have an assurance from the right hon. Gentleman that he will not draft legislation before he has had an opportunity to consult the House?
Mr. Peart: I believe that hon. Members, after they have read carefully the details in the White Paper, will have an ample opportunity to consult those interests who are effected. I will carry out the consultation from the Government's point of view. There will inevitably be arguments and, quite rightly, controversy in the rural community and in all our farming and technical journals. This is a good thing. I hope that hon.
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Members will appreciate that before the Bill is presented there will be ample time for discussion and consultation. I am responsible for bringing in the Bill and I shall do it.
Mr. Urwin: Will my right hon. Friend accept a further assurance from me that we warmly applaud the initiative which he has displayed in this matter and that we also welcome the very new ideas enunciated in his statement? May I ask what will be the amount of grant towards amalgamation costs and what exactly it will cover?
Mr. Peart: I gave a global figure which, I said, would reach £17 million by 1970. I intend to bring in a whole series of grants. For example, for farm remodelling the rate of grant will be about 50 per cent. The grants for structural changes and improvements will be 50 per cent.—for demolition 50 per cent.—and for other incidental expenses in amalgamation there will be another grant of 50 per cent. Then I mentioned also the outgoing payments. Here is a series of grants specifically given and I hope that the House will welcome them.
Several Hon. Members rose—
Mr. Speaker: Order. We must go on.
Mr. Maxwell-Hyslop: On a point of order. As two White Papers have been introduced by the Minister, could not we have more time to put questions to him before we pass on to the next business?
Mr. Speaker: I am sorry. I have to decide these things, which is an extremely difficult task to discharge. We have spent more than 20 minutes on questions on this subject and it would not be fair to the rest of the House and its business to go on in that way.

ELECTRICITY
4.8 p.m.
The Minister of Power (Mr. Frederick Lee): I beg to move,
That this House takes note of the Report and Accounts of the Electricity Council for 1963–64 (H.C. No. 331) and of the Central Electricity Generating Board for 1963–64 (H.C. No. 332).
This is the first major debate that we have been able to have on the electricity supply industry during the course of this Parliament. While, formally, the debate is about the Reports for the year ended 31st March, 1964, which were published nearly a year ago, the Reports for 1964–65 should be available early in October, but at this stage we cannot anticipate their contents. But I hope that, as is customary in debates of this kind, Mr. Speaker, you will allow some latitude both to me and to other hon. Members who will seek to catch your eye so that we may deal with some more recent developments than it was possible for the Reports to cover.
I hope that the terms of the Motion are not controversial, although controversy will probably not be altogether absent from our discussion today. The fact that we are devoting a whole day to the debate shows we are agreed on both sides as to the vital importance of the electricity supply industry to the nation as a whole. It may be a truism to say that electricity is now essential to almost every aspect of modern life, and not only essential in the life of Britain today. All the developments we see for the future depend on the electricity which drives our machines, operates our computers and helps to provide the multitude of complex services upon which an industrial nation like ours relies so heavily.
For much of the time we take electricity for granted. It is something which, we feel, is always there and we rely on it completely. But we should remember that there are vast numbers of men and women working in this great industry, controlling the machines and maintaining all the complex plant which brings the supply to us, and the power which will always be there as demand increases will be provided because of the men who are making and erecting the new plant and planning the development of our complex supply system.
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The Reports themselves are about the work of these men and women, about 200,000, who work in the electricity supply industry itself and the others in fuel and the provision of plant and services. The Reports are a record of what these people have achieved, and I draw the attention of the House to some of the facts set out. They are a record of achievement of which the industry can be proud.
Towards the end of the Electricity Council's Report, Appendix VI gives in summary form the results of the industry since 1954–55. Over those nine years, the number of consumers served in England and Wales has risen by nearly 3 million, or by 22 per cent. In the same period, total sales of electricity have risen from less than 58,000 million units to 121,000 million units, in other words, more than double. In Appendix VIII, there is a table showing that the total output capacity of the power stations has risen from 17,000 MW to 33,000 MW, in other words, nearly double again. Appendix X shows that the total number of workers in the industry was 210,000 on 31st March, 1964. The figure nine years earlier is not given in the Report but it was 179,000. Thus, the amount of plant has nearly doubled, the output of electricity has more than doubled, but the number of workers has risen by only 17 per cent. In terms of units sold, this represents an increase in productivity of nearly 7 per cent. per year.
While these great advances were going on, the industry was successfully holding, its prices at a remarkably stable level. As Appendix VI shows, over the nine years the average price of a unit of electricity went up from 1·37d. to 1·62d., in other words, by 18 per cent. In the same period, retail prices generally rose by 30 per cent. I know that there have recently been further increases in electricity prices, about which I shall say something a little later, but for the moment I am dealing with the period covered by the Reports, and over that period, I submit, the industry's record is extremely good.
Mr. John Peyton: I realise that we are debating rather ancient Reports and that the Minister will necessarily be dealing with some of the details in them, but I hope, Mr. Speaker, that, with your permission, he will not feel

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inhibited about raising the veil on what has happened since.
Mr. Lee: That is fair enough. In what I said a little earlier I tried to make sure that the hon. Gentleman would have the right to do that. I shall myself hope to say something, but I think it necessary, as we are debating these Reports, at least to mention them in passing.
I was giving a summary of what I felt was a fair appraisal of the accomplishments of the industry, suggesting that it was a summary of work well done and something upon which we could congratulate the whole industry. I think that this success is due to advances in labour productivity, improvements in thermal efficiency and, to a great extent, technical advances and economies of scale which have led to a steep reduction in the cost of new plant.
It is a striking fact that the average cost of new conventional power stations has fallen from about £60 per kW in 1955 to about £40 today. Our integrated supply system enables us to take advantage of the economies that can be obtained from large generating sets and from concentration on a relatively few designs. But it is also a great credit to the plant manufacturing industry that such a reduction should have been achieved.
There is no doubt that the story of the industry is one of great success, but, of course, within it there are problems and difficulties. First, the continual growth of electricity demand calls for and will continue to call for very heavy investment. The net assets employed in the industry now stand at about £3,000 million, and new capital investment is needed at a rate now in the neighbourhood of £600 million a year.
Nearly half is provided from the industry's own resources, mainly from depreciation funds and from the balance of revenue which is left after meeting outgoings and paying interest on borrowings. The remainder has to come from borrowings from the Exchequer, and, in times of economic strain such as we are now enduring, it is a very heavy commitment.
At present, capital investment is running at a high rate because the growth of load was underestimated during the late 1950s and the programmes for new
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generating plant had to be sharply increased a few years later. Moreover, the cold weather in the winter of 1962–63 showed the need for greater margins of security in both generation and distribution.
The new capacity is being provided, but the effect is that the industry has to bear a heavy burden of expenditure on new plant which has not yet begun to yield a return. During the past two years, the growth of sales has flattened out a little so that revenues have been less buoyant and there have, during this period, been sharp increases in costs, in wages and that kind of thing. I am not sure that we have yet got the answer to why this has occurred, that is, why demand should have flattened, but it certainly has and it will be interesting to see whether it becomes the pattern in future years. Because of these things, price increases have recently been necessary.
Hon. Members who follow me in the debate may wish to refer to this aspect of our work. The need for price stability is very much in the mind of everyone, certainly in this Chamber, and I need hardly say that I regret that electricity prices had to go up. I am sure, however, that they had to. I satisfied myself that there was no possible alternative.
The industry must either earn the money which it needs for capital investment or it must borrow it, and the policy that we are following in this matter is consistent with that pursued by the last Government. Nationalised industries have financial and economic obligations to the nation and an industry which employs such enormous capital assets as the electricity industry does must earn a reasonable rate of return on them.
To emphasise a point in that connection, in the past two years we have had one round of price increases, in which each of the area boards has raised its prices, the last being the London Board on 1st July this year. Because, however, there are 12 area boards and some were able to postpone their tariff increases longer than others, one sometimes gets the impression that prices are going up more frequently than is the case. There has been only one round of price increases.
As I said earlier, over a long period the price of electricity has risen much less than retail prices in general. Even over

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the two-year period ending 31st March, 1965, during which time there were these price rises, about which there have been complaints, the average price of electricity went up by 5½ per cent. and the general level of retail prices rose by almost exactly the same figure. I have already mentioned that in years gone by the increases in price were far and away less than the rise in the retail index itself. Even during the recent two-year period when there has been a rather higher rate of increase for electricity, it is still no higher than the advance in the retail index.
In speaking of prices, I should like to mention that the position of some consumers has been substantially improved as a result of our action. I refer to the unfortunate tenants who bought electricity, not direct from the boards, but from those landlords who exploited the opportunity to resell electricity, sometimes at a fairly enormous profit. I do not say that there were a great number of these people, but their number was growing and we felt that this practice had to be dealt with. Certainly, there were many tenants who were being exploited in this way and they could do nothing about it.
The Electricity Act, 1957, enabled the area boards to fix maximum prices for the resale of electricity. When I took office, seven years later, no maximum prices had been fixed. I do not deny that there were many difficulties, but I would have thought that they should have been overcome much earlier. I discussed the matter with the Electricity Council and was able to announce in the House on 22nd March that the area boards had agreed to fix maximum prices. This has been done with effect from 1st July. These maximum prices allow a fair margin for the landlord, certainly enough to cover all reasonable costs, and any tenant who is charged more than the maximum price now has a remedy open to him.
Another problem which has been with us for a long time and which it would be appropriate to mention is that of connection charges for new housing estates. This question arises in the House from time to time. Indeed, it was debated on the Motion for the Adjournment on 8th July. As my hon. Friend the Parliamentary Secretary explained, I am trying
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to bring the gas and electricity industries together in an agreement which, I hope, will be acceptable to both of them and will ensure that consumers are free to make their own choice of fuel as far as is economically practicable. I hope that it will not be too long before such an agreement is worked out.
So far, I have spoken of the past and the present and I hope that what I have said will reinforce the impression that the annual Reports give an impression of an industry which is continually advancing in scale and efficiency. But what of the future? In this respect, one thing which is certain is that the industry will continue to be among the leaders of technical progress. It leads the world in the application of nuclear power. We in this country already have by far the biggest output from commercial nuclear power stations of any country in the world. We produce more nuclear power than the whole of the rest of the Western world, including America.
Last week, the Generating Board published details of another British investment that will help to maintain our lead. That is the A.G.R., which I announced in the House some time ago. One of these reactors is to be built at Dungeness and it will make nuclear power fully competitive with our best coal-fired stations.
As I have already informed the House, the Government are reviewing the size of the second nuclear power programme. In April, 1964, it was decided that a programme of 5,000 MW should be adopted for planning purposes for the years 1970 to 1975. This, however, was to be subject to review in the light of the information obtained from the Dungeness tenders. There will be a further statement when the review is completed and I hope to be able to make it before the end of the year.
Whatever the outcome of the review, the industry will continue to need coal for many years to come.
Mr. Eric Lubbock: May I interrupt the Minister? Does this mean that the programme for A.G.R. stations might now exceed 5,000 MV? Is this figure the minimum?
Mr. Lee: I should not have thought that there was the slightest danger of

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its being reduced. With the success of the A.G.R., the hon. Member's assumption is certainly right.
No matter how the change-over comes, for many years ahead there will not only be a need for great quantities of coal, but the need will be for increasing quantities of coal. In 1963–64, the Generating Board used 61 million tons of coal and in 1964–65 it used 64 million tons. Fifteen new coal-fired stations are now under construction, partly to replace the older stations which are closing down. When these new stations are completed, the Generating Board will have a large proportion of its capacity in the form of new coal-fired stations with a working life of 25 years or more. These stations will burn coal with a high efficiency in the 500-MW sets which the Generating Board has adopted as standard for the next few years. Forty-seven of these sets are now on order. They will be able to produce substantially more power than the entire capacity of the industry 10 years ago.
Standardisation of size will yield economies in construction. I emphasise that it is standardisation that we are referring to here, and not stagnation. Prototype sets of 660 MW to operate at supercritical steam pressures of 3,500 lb. per sq. in. are now planned for the very early 1970s.
I turn to the transmission side. Here the industry is introducing transmission at 400 kV. Here again, I should like to say a few words on the subject, in which the House takes a very great interest, and I am glad it does, because it is enormously important. Very high pylons are necessary for transmission at this voltage and they cause some amenity problems, but we must not forget that without this move to a higher voltage the amenity problems involved in long distance transmission would indeed have become even more serious. One 400 kV line will carry as much power as three existing 275 kV supergrid lines or 18 of the standard 132 kV grid-lines.
Nevertheless, very great efforts are being made at considerable cost to reduce the impact of these new lines on the countryside. For example, in North Wales the Board proposed to place 2¼ miles of 400 kV line underground
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at the crossing of the Glaslyn Estuary. Following a public inquiry, my predecessor decided that the length of undergrounding ought to be extended by another 1½ miles. The cost of the Board's placing the whole section underground will be about £4 million. Another section of 400 kV lines is being placed underground in the Peak District National Park following a public inquiry, and here the cost will be £3½ million.
I give these instances to show the type of cost entailed in undergrounding. At the same time, the industry is vigourously pursuing every line of research which holds out promise of reducing the enormous cost of placing such lines underground. Indeed, I was discussing the problem with the Council and the Generating Board only the other day and they were telling me about the work which was going forward.
It would be quite wrong and pointless to say there is any easy solution to this very difficult problem. There is, of course, a fundamental difficulty, because an underground line must be both insulated and kept cool along its whole length, and the two requirements are contradictory: insulation tends to keep the heat in. The most we can hope for in the foreseeable future, therefore, is some reduction in the enormous disparity which exists at present between the £50,000 a mile of 400 kV overhead lines and the £1 million a mile, the cost of the equivalent underground cable, but what can be done, I can assure the House, is being done.
I have seen some of the work being done at Leatherhead and other places and I can assure the House that neither the Board nor any of the employees are allowing anything to stand in their way in breaking through in this very important field. Indeed, research on this problem has top priority and every idea which promises to become a step forward is being actively followed up.
Sir Richard Nugent: Will the Minister, while on this point of transmission, tell the House what the prospect is of reducing the amenity problem by the use of D.C. transmission instead of A.C.?
Mr. Lee: There are researches going on. I know that it is going ahead in some

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other countries. It is a point I am extremely interested in. I am not able at this point to say that there is a decision, but a lot of hard work is being done on it.
Mr. Arthur Palmer: Will my right hon. Friend not agree that the industry will get a 12 per cent. to 12½ per cent. return for the increased cost of undergrounding?
Mr. Lee: Yes, that is why we have to look at the costing factor of undergrounding as against a huge overall programme. I will say a word or two more while on the question of costing, because, of course, it is a very great problem at a time when all of us, I think, would like to feel that the huge amounts of capital expenditure which are necessary ought to be looked at very closely.
I hope it is clear to the House from what I have been saying that the Generating Board is not simply waiting for research to produce cost reductions. Even at present day costs they are laying a very considerable proportion of their new transmission lines underground instead of building them overhead in order to preserve amenities in the way we want it to do.
If I could give the House some figures on this perhaps it would answer the point which my hon. Friend the Member for Bristol, Central (Mr. Palmer) has in mind. The Board gave me some figures of the amount of money which it spends on underground cables and I give them to hon. Members because they are not generaly known and they may surprise hon. Members. About one-third of the total expenditure by the Generating Board on transmission lines in 1964–65 was spent on underground cables and by 1970 this is expected to rise to over two-thirds. During the three years starting in 1968 the Board expects to spend £39 million on 1,350 miles of overhead lines and £107 million on 500 route miles of underground cable.
These are astounding figures. I do not want to prevent undergrounding, but we must face what it means.
Mr. John H. Osborn: Would the right hon. Gentleman explain? I presume you are referring to low voltage transmission—
Mr. Deputy-Speaker (Dr. Horace King): I am not referring to anything.
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The hon. Member must put his question to the Minister through the Chair.
Mr. Osborn: I beg your pardon, Mr. Deputy-Speaker. Could the Minister explain this figure in so far as it concerns low voltage transmission? How much of total expenditure is on low voltage as against high voltage underground transmission?
Mr. Lee: What I am trying to show is that the problem of amenity is being met to a very large degree. I do not differentiate between 400 kV. and 132 kV. The cost was astronomical. If we are to insist on more and more under-grounding, then we have to face the hugely increased percentage of cost in that operation. This puts into perspective the problem that we have to face.
Dr. Jeremy Bray: Would my right hon. Friend not agree that it is necessary to get into the public mind the size of the savings achieved by using 400 kV. distribution? It is no use simply quoting enormously expensive distribution costs unless they are related to the saving in generating costs and in energy lost in the distribution process. It is rather browbeating the public if one does not set against the cost of underground distribution the comparable savings of very high voltage distribution.
Mr. Lee: I am not disputing what my hon. Friend says. I think that the House will know we are very much concerned with amenity. I am not trying to subdivide the issue and discuss what is good and what is not. I wanted to show hon. Members what the Board is doing on undergrounding, because it, too, is very keen about the amenity side. That being so, I wanted to show the House the enormous costs which this is bound to entail.
I have spoken a lot about generation and transmission which are the responsibility of the Generating Board. The work which the area boards are doing is no less important, and if I say less about that it is certainly not because it is more difficult to single out particular developments to mention in the field of distribution.
However, the House may like to know that rural electrification is now approaching completion. Of the 280,000 farms in England and Wales, 94 per cent. have an electricity supply, compared with 32

1721
per cent. on vesting day. Of the 1,800,000 "other rural premises", 97 per cent. have a supply, compared with 55 per cent. on vesting day. I am sure that the House will agree that again is a huge programme, upon which we can compliment the industry. I suppose that it means that it has enabled agriculture to become possibly the most highly mechanised agricultural industry in the world. We pay those in the electricity industry our compliments on the great work theat they have done in that respect.
About 16,000 farms are still without an electricity supply. Last year, rather more than 4,000 new connections were made, and the boards plan to continue for another two years connecting farms at the rate of about 4,000 a year. Thereafter, the rate will slow down considerably, and by 1970 there is expected to be a residue of about 7,000 farms without a supply. Half of those are farms that do not require a supply, which may mean that the farmer is unwilling to pay the connection charges demanded by the board. The other half can be given supply only at an excessively high cost, £1,000 to £1,500. Faced with costs of that order, we need to pause before advocating that the industry should seek to connect 100 per cent. of the farms.
Electricity boards are already incurring a loss of about £5 million a year on rural supplies, which has to be borne by the general body of consumers. At the same time, other uneconomic supplies are given to rural areas by the gas industry, and that is a problem that we are trying to look at now. There may well be room for closer co-ordination between the two industries and some give and take in areas where neither can hope to break even and where the presence of one merely increases the losses incurred by the other. In other words, there are areas in which both gas and electricity seem to be competing for the honour of supplying the greatest amount of subsidy to those concerned, and it may not be a bad idea to question whether the journey is really necessary in the case of one or the other. That is a problem that I am looking at closely.
In distribution, as in generation and transmission, the industry is pressing ahead with its research work. New equipment is being developed and improved working methods introduced to increase
1722
the efficiency and security of electricity supplies. Within the last few days, the industry has announced the setting up of a new laboratory at Capenhurst which will concentrate on research into distribution and on appliances and methods of using electricity. The work done in that laboratory will form part of a research programme covering generation, transmission and distribution on which the industry is planning now to spend £10 million in the current year.
The very fact that research is being undertaken on such a scale is one of the best assurances that we could have of its determination to maintain the rapid pace of development which it has achieved so far. I believe that we can say with confidence that the industry has served the country well in the past. All that I have learned about it since I became Minister of Power last October has strengthened my conviction that it will serve the country just as well in the future.
Mr. Peyton: I did not want to interrupt the right hon. Gentleman, but we are very concerned to know about what appears to be a most important point; that is, the effect on the future investment of the industry of the announcement made by his right hon. Friend the Chancellor. It was a very vague hotch-potch of stuff which was put before the House the other day, and this is the opportunity to find out what is its specific effect on and application to this highly important industry.
Mr. Lee: I see the hon. Gentleman's point, but these are early days. As a matter of fact, there is no specific effect to which I can refer at the moment. I am having discussions with each of the industries concerned about short-term measures that they can take in the light of the Chancellor's statement. But at present I am not in a position to give any detailed statement of its effects.
If I may put it the other way round, suppose that the Chancellor had first of all gone into detail about each of the industries in an effort, shall we say, to cut them back, and had announced it afterwards. Then there would have been cause for apprehension and disquiet. I think that we did it the right way round. The Chancellor made his statement, and each of the Ministers who have responsibilities for nationalised industries will

1723
now be discussing with the industries concerned how we can put into effect the general principles about which my right hon. Friend was speaking.
Mr. Peyton: Does the Minister mean that he anticipates a significant cut-back in investment on the part of the electricity industry? This is a very important and crucial point, and I must press the Minister on it.
Mr. Lee: If the hon. Gentleman will look again at what my right hon. Friend said, he was not talking about cutting back, but postponing and lengthening out the period. I have said today that I am quite certain that the figures necessary for capital development which the Board requires must go ahead, otherwise there will be a hold-up through the lack of capital and inability to meet loads, and so on. Within all that, there may well be areas in which we can defer certain capital developments, but there is no intention of deferring anything of an essential nature which might in any way imperil the development programme of the industry.
I was saying that I am quite sure that we all congratulate those who lead the industry and those who work in it on the very remarkable achievement that they have to their credit. It is a great pleasure for me to be able to work with them. In the future the industry will be one of the highly technical industries upon which we can rely with the very greatest confidence. We are all now dedicated to the idea that the national product must increase. It will mean greater demands on energy than the country has needed in the past. The achievements that the industry has to its credit give us the greatest confidence that, no matter what the demand may be on this very fine industry, such is its competence that it will certainly be able to meet it.
4.49 p.m.
Mr. Nicholas Ridley: The Minister has given us a very thorough survey, for which we are grateful, of the problems of the electricity industry. Some months ago, the Minister was described in The Times as "one of the three weak Freds". It would be only fair to congratulate him on having got through this rather traumatic summer without undue damage. He looks very well and very fit, despite the late sitting
1724
that we have just had, when, no doubt, he was here until 11.30 this morning.
The right hon. Gentleman has avoided falling into any of the pitfalls of the 200 million tons of coal that have been dug for him. He has avoided all the iron and steel traps which have been set for him. He has avoided setting light to any explosive mixtures of gas during this first Session of Parliament as Minister of Power.
I think that the right hon. Gentleman has even been able to pour a little oil on the troubled waters of his own party. But the moment of truth will come next Session, when he has to face many of the serious problems confronting the fuel industries, and he will have trouble from his own supporters if he pursues the sensible policy which in many respects he has so far pursued. If I might misquote "Gray's Elergy", next Session "the lowing herd will wind slowly o'er the Lee."
Many questions remain unanswered. In previous debates many questions have been asked about the fuel industries, and I am sorry that some of the major issues were not dealt with by the right hon. Gentleman today. My right hon. and hon. Friends have pointed out the enormous amount of capital that we require for the fuel industries. Between 1965 and 1970, £3,500 million have to be found for this industry, and if one adds to that the amount that it is to find from its own resources, there is a total of between £7,000 million and £8,000 million worth of investment which it will require in the next five years.
During the debate on the Gas (Borrowing Powers) Bill my hon. Friend the Member for Yeovil (Mr. Peyton), my right hon. Friend the Member for Guildford (Sir R. Nugent), and many others, asked where this money was coming from. It is no good going on producing borrowing powers Bills and Orders when the Government, clearly, have not the slightest idea of how they are to raise these enormous sums of money; and I am not talking only about these two industries. There is also the public sector, private industry, and other vast fields where capital will be needed. So I must ask the Government where this money is to come from. We have had no answer to this question when we have asked it in previous debates.

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By means of the Budget the Government have attacked the gilt-edged market. They have devalued their own credit in the market, and, as my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), who I am delighted to see here, pointed out in a recent article in the Director, the Government's credit is not only nil; it is minus. Between 1958 and 1963 the net borrowing which the Government—and this was a Tory Government—were able to achieve was £3 million. Last year the figure slipped to minus £467 million. Not only have the Government got no credit; they are a distinct liability on the market, and they are unable to raise one penny of this sum.
We have to realise that this money will come from overseas drawings, from overseas borrowings, and from the Government's printing presses. There is no other source from which this large investment capital can be found. I know that these are not questions for the Parliamentary Secretary to answer, but they are questions for the Government to answer, and the hon. Gentleman is responsible for assuring us that every penny of electricity investment is vital and cannot be done without. We cannot go on investing money without having absolute certainty that this investment will yield a proper return, is right in its priorities, and is essential to the future of the nation.
It is not only a question whether the investment is correctly made within the electricity industry, but also whether it is properly made vis-à-vis other industries. One fundamental reason why the Government are right to adhere to the target set for the nationalised industries is that it gives some sort of guarantee that at least the investment is being asked to earn a proper return.
The whole of the electricity industry's investment depends on its forecast of demand for the future. We have, first, the capacity forecast which is based on an exponential curve of past experience and about which a lot is said in the Select Committee's Report. It is based on a 4 per cent. per annum growth rate, or a 25 per cent. increase in growth between 1964 and 1970. Secondly, the Electricity Council has decided to increase what is called the planning margin from 14 per cent. over normal capacity to 17 per cent. This is to allow for exceptionally severe
1726
weather conditions, plant breakdowns, and other mishaps.
I should like to consider for a moment whether those two assumptions are valid. We must ask ourselves these questions in the present conditions of scarcity of capital. First, do the Government really think that we are going to achieve a 4 per cent. growth rate? We have been achieving a 2 per cent., or 2½ per cent. growth rate, and I have no doubt at all that since the party opposite took over our affairs the rate has been very much less than 2½ per cent. The First Secretary of State has done all that he possibly can to reduce the rate of growth, and this does not augur well for achieving the 25 per cent. growth which we are expecting over the next six years.
Within this, will the demand for electricity grow as fast over the next five years as it has grown in the past? The Minister said that it had flattened out, and that the demand curve was not going up. It is based on the 7·8 per cent. increase per annum over the last 10 years, which we will not perhaps achieve; so I think that there are serious grounds for doubting whether the Government will, in fact, have such a large commitment as the electricity industry is expecting.
I propose now to deal with the 14 per cent. to 17 per cent. increase in the margin. During the bad winter of 1962–63, which was the worst for 100 years, the kind that might occur only once, twice, or perhaps three times in 100 years, we had a 7 per cent. margin, and we also had a work-to-rule among electricity employees. Even so, we got through. We had cuts in voltage. We had disconnections, and we had some inconvenience and even some hardship, but the hardship suffered during that winter has to be set against the enormous demands on capital, and the difficulties which the Government will have in finding the money, before we can decide what we should do.
In its evidence to the Select Committee the Central Electricity Generating Board said that it would have been all right during that winter if it had had a 14 per cent. margin, and no work-to-rule. If it would have been all right in that winter with 14 per cent. and no work-to-rule, it is arguable whether it is right to bump up the margin to 17 per cent. by 1970, which it is going to do. According to the figures

1727
given by Sir Ronald Edwards, by 1970 the industry will have a capacity of 66,000 mW and a demand of 54,000 mW. If my arithmetic is not incorrect that is an 18 per cent. margin.
What all this adds up to is that the margin will increase from 7 per cent. in the bad winter of 1962–63, to 18 per cent. in 1970, and this large increase in the margin has to be justified by the Government. I am not saying that it is wrong, but, in view of the scarcity of capital, we want to hear the justification for these very large increases in capacity which could be a mis-investment of our money.
A few minutes ago my hon. Friend the Member for Yeovil pressed the Minister to tell us what the Chancellor meant in his statement last Tuesday, when he said:
"The nationalised industries will be called on to follow a similar course of action."
The course of action was not clear and the only bit that can possibly apply is the statement that the Government intend to
"slow down the rate of expenditure on capital projects."—[OFFICIAL REPORT, 27th July, 1965; Vol. 717, c. 228–9.]
What does this mean? Does it mean that the C.E.G.B. will be asked to stop or to postpone projects? What is the extent of the cut-back, and what will be the effect on the margin, and on capacity in the future? It is no good using words and phrases like that unless the Minister tells us exactly what he means. If he gives us the full details of what is implied, we can assess its effect.
It may be that there is some scope for reduction. The difficulty lies in the fact that the next five years are the years when we shall be short of capacity, whereas by 1970–75 we may be making the mistake of over-providing. I very strongly endorse my hon. Friend's question. We expect to have a clear statement from the Parliamentary Secretary as to what he has in mind—what the extent of the cut back will be, and what effect it will have on electricity supply.
The figures for raw materials of the industry show that the consumption of oil, in terms of coal equivalent, will increase, by 1970, from 9 million tons to 12 million tons, that the consumption of coal will increase from 70 million tons to 78 million tons, and nuclear power
1728
from 1·3 million tons to 12 million tons, provided that all the factors which the electricity industry takes into account remain equal.
Indeed, Mr. Brown, the Chairman of the Generating Board, said that he would be surprised if the take of coal ever exceeded 80 million tons. We would like to know the Government's idea of that. The final point that emerges from a consideration of the raw materials of the industry is that the economics have to be decided now as to what power stations will be built—nuclear coal-fired or oil-fired—for the period five, six, or seven years ahead. If the Government are to change the rules between now and then it will upset the economic calculations which the industry has made.
In a previous debate on the Gas (Borrowing Powers) Bill my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster), my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), my hon Friend the Member for Yeovil and many others, repeatedly asked the Minister whether he would alter the financial target for the gas industry. We asked whether he would do this, or place an oil tax on the gas industry, or reduce the oil tax on the electricity industry, or do something about imported coal and the prohibition thereof. He would then falsify all the economic facts upon which the Electricity Council has been basing its forecasts for the future. So it is of vital importance to have a statement about this. If we are to invest between £7,000 million and £8,000 million in the next five years we want to be certain that we are investing on an absolutely accurate assessment of the costs of competing fuels in the future.
The Minister has chosen to do this by means of his celebrated Energy Advisory Committee. He keeps calling for an integrated fuel policy. The Labour Party's election manifesto talked about having a co-ordinated policy for the major fuel industries. But, whatever he does, it is something of much greater importance than debating the matter across this Table; it is a question of not wasting precious British capital in the future. That is why my hon. Friends have been pressing the Minister. We want to know what the policy will be. We do not believe in an integrated fuel policy, with everything parcelled out and worked out

1729
for years ahead, but we want to know the worst, and what will come from the Government on this subject.
For one who feels as strongly as I do about this matter it is disappointing to learn that the Energy Advisory Committee has met three times during the nine months that the Government have been in office—once for one-and-a-quarter hours, once for three-quarters of an hour, and on the third occasion for an unspecified number of minutes. Perhaps we may be told how long the third meeting lasted. This is not producing the answers. We do not mind how the Minister arrives at them, but we want to know what he intends to do to protect fuel generally.
My hon. Friend the Member for Yeovil referred to the Committee as a useful talking shop, but said that the results would be anything but unanimous. We have some doubts whether this is the right way to arrive at a fuel policy, but that is not so much our business. What is our business is to be told the Government's intentions, and we look forward very much to being told this.
I want to say a few words about the new tender for Dungeness B. There is great interest in this new nuclear power station, and it is quite right to congratulate both the Atomic Energy Authority and the Nuclear Power Group on having produced a design which has been proved cheaper than any other design available in the world. This is a great tribute to British technology, and at a time when we have had some reverses in technological development it is right to pay tribute where it is due.
This represents a breakthrough, and it is reflected in the C.E.G.B.'s forecast that nuclear power which now provides 1 million tons of coal equivalent, will rise to 12 million tons in 1970. A twelve-fold increase clearly indicates that this is something that works, something which is winning and which will gain in importance. There has been some speculation why the American boiling water reactor tender was so high. It is better to face this point, and not to brush it off.
That is why we are extremely glad that the Central Electricity Generating Board has published a booklet explaining in fairly technical but very clear and concise terms the factors upon which it
1730
arrived at its decision. Having read it with great care and interest, I find it a most impressive and convincing document, and one which has done great service to British industry.
To my mind three points emerge. First, the conditions of tender were identical for all tenderers. No advantage or disadvantage was given to any one or the other, with the single exception of the duty upon imported materials and machinery which might have been bought from America. The total cost of the duty, included in the American tenders, was £800,000, which is negligible in a sum of over £100 million, and nobody could claim that the element of duty on imports would in any way have changed the result.
The second point is that the United States' tender was prepared with full freedom to decide where to buy its materials and plant, whether to import or to manufacture in this country, without any duress being put upon it to conform to conditions which did not suit its system. It had a free run.
The third point is that the criteria—the bases upon which the tender is assessed—are stiffer here than in America. The productivity of labour is probably lower in this country, which increases the cost, and the fuel costs may be higher here. The real defect of the American reactor is that its lack of availability has increased its cost to the C.E.G.B.
To anybody who doubts that this has been an honest and a fair process, I would say, why do not the Americans call for a tender for the A.G.R. on the Oyster Creek site in America? If anyone has any doubt—if anybody believes that there has not been fair play—let him call for a tender for a British A.G.R. on the Oyster Creek site. He would come to the conclusion that it would be cheaper than anything which might be tendered for by the Americans, and it would put finally to rest the doubts raised on this question.
There is one other question, which has wider implications. Should not we have a foot in the boiling water reactor camp? Are we right to put all our eggs in the A.G.R. basket? I believe that these are not the same type of reactors. The point is that the A.G.R. is a reactor with

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a larger power output than the boiling water reactor. It is suitable for advanced industrial countries, where there is dense population and heavy use of electricity. As such it has potentialities in the advanced countries. The boiling water reactor is suitable for sparsely populated countries where the use of electricity is lower. We cannot confuse the two.
If we were now to try to get on to the boiling water reactor bandwagon, we should be five years too late. We should be pouring our precious resources into something which the Americans have already developed and we should be trying to ride both horses at once. I believe that we have backed a winner in the A.G.R. I congratulate those concerned and I hope that the Government will now turn their attention towards increasing the exports of this product and making sure that we can get a return from our very large investment in it.
The Minister talked at some length about the prices structure of the electricity industry. Clearly, the financial target, the economic obligation, has tended to raise the price of electricity. Sir Ronald Edwards said at the power conference at Brighton that, in the last 10 years, the price of electricity had gone up by approximately 21 per cent. If it had not been for the financial target, it would have gone up by only 18 per cent. So, hitherto, the effect of the financial target has been to replace an increase of 18 per cent. with one of 21 per cent.
This is a small price to pay for the immense improvement and the immense advantages of the targets which I discussed earlier. My hon. and right hon. Friends laid down those targets when they were in Government and we on this side believe that they are vital. We congratulate the Government on sticking to them: we realise that it has been a somewhat embarrassing and difficult decision for them to take. We welcome their conversion. My hon. Friend the Member for Yeovil paid great tribute to the Minister for this. We hope that this can cease to be a matter of dissension and that the targets can now be accepted as an essential discipline for the nationalised industries throughout our economy.
Mr. Lubbock: In spite of the fact that the present Ministry has persevered in the policy of the financial targets, would
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the hon. Member not think that there should be a uniform policy for reference of price increases by individual electricity boards to the National Board for Prices and Incomes? Is it not anomalous that one case of an increase should be referred to the Board and yet another, which relates to a larger increase, is not referred?
Mr. Ridley: I have noticed the hon. Gentleman's Question on this subject and the Answer which he received. I intended to refer in passing to this. There is little point in referring a price increase of this sort to the National Board for Prices and Incomes, when 80 per cent. of the costs of the area boards are represented by the bulk supply tariff which the Generating Board places upon them.
The Generating Board appears to be in a position of immunity from the hon. Member for Orpington (Mr. Lubbock), who cannot ask Questions about it, from the National Board for Prices and Incomes and from the consumers themselves. So this problem is slightly more complicated than he suggests. It is, obviously, anomalous to refer one increase to the Board and not another. But it would be wrong to try to look at this problem as a small one. We may have struck here an administrative weakness which should be considered seriously.
The London Electricity Consultative Council has made a request, as a result of this point, to have a seat on the Electricity Council. What does the Minister think about this? Is this an idea which he will take up? I should like to hear his views. It does not seem a very impressive idea to us, but he may accept it. We on this side of the House feel that the Central Electricity Generating Board managers in the country should have representation on the area boards, so that they can be in closer touch with the protests of consumers and the commercial considerations which are in the minds of the area boards.
Clearly, the C.E.G.B. should be brought into closer contact with public opinion. That is one of the structural problems to which some of my hon. Friends may wish to refer and on which I should like the hon. Gentleman to comment.
Mr. Palmer: I hope that the hon. Gentleman is not unaware that this present structure of the electricity industry is the revised structure of the Act of 1957, which his party brought in and which, in many details, was criticised from this side of the House at the time.
Mr. Ridley: I would never be dogmatic and assert that any organisation was always right. I can think of sweeping changes which I would make on the benches opposite. Although it is only eight months since they were appointed, I think that the whole organisation should be turned upside down and bundled out through that door.
This would not prevent me from admitting that, every few years, in organisations like the nationalised industries, which are a new experiment in this country—we have had them for only 15 years, which is, in my opinion, too long —any experiment which we can do to improve on them is welcome. The hon. Gentleman and I sit on the Select Committee on the Nationalised Industries and we think about how these things should be better organised. I am making a suggestion which I hope that he will consider favourably.
It would be wrong of me to follow the Minister at any length into the subject of amenity. I should like to sly a few words about it, but I think he gave us such a comprehensive and interesting survey of the difficulties of undergrounding lines, the costs thereof and the increasing share of the distribution capital which will be used for undergrounding lines rather than for overhead transmission.
Some progress could be made with undergrounding the smaller lines, the distribution lines. Nobody believes that the 400 megavolt lines can be undergrounded in any significant numbers, but the forest of smaller wires which festoon our countryside are the ugliest. These are what people are beginning to mind more than the rather magnificent striding pylons which can look very fine over open, hilly country and which can be made a success. In any case, I do not believe that it is practical to put these underground. Much more thought is needed on this subject.
1734
The success of the A.G.R. may enable nuclear power stations now to be put inland. This will mean that they can be put nearer to the load and this, in turn, could reduce the length of transmission line which is necessary. A new approach may be necessary. It may be necessary for the C.E.G.B. to plan its stations, its lines and its loads so better to avoid the areas of outstanding natural beauty.
The new techniques of D.C. transmission—super-conductivity, fuel cells and all the great promise which research and science offer to the electricity industry—may obviate the need for these massive strings of pylons. We urge the Government to proceed with research into this subject. We welcome the Report of the Electricity Council, we congratulate the leaders of the industry and we hope that, in the year to come, it will continue to make the good progress which we on this side of the House recognise.
5.19 p.m.
Mr. Arthur F. Palmer: I listened with great care to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who opened for the Opposition, but I thought that there was a contradiction between his fears that there might be a reduction in the capital allocation to the electricity supply industry in future and his doubts whether the money could be found. I agree with him that all investment in electricity supply must be justified on its merits and properly related to the other fuel and power industries, but I have great difficulty in understanding the argument that the capital cannot be obtained. After all, it is a public utility industry with little financial risk.
It is obtaining 50 per cent. of its new capital from its own resources, and its history shows that it has always expanded in good times and in had. I should have thought that, provided that we maintain full employment and reasonable national productivity, there should be no great problem in devoting a sufficient proportion of the national resources in terms of material and manpower to the continued expansion of the electricity supply industry. Unless it is based on doubtful and academic financial assumptions, I feel that the hon. Member's fear is a little far fetched as an exercise in logic.

1735
I want generally to make a point which I made, as did other hon. Members on both sides of the House, when we recently discussed the affairs of the gas industry, I think for the third time during this Session: the problems of electricity supply, as those of gas, are problems of fuel and power generally. That to me means an expression of fuel and power policy, which is to see electricity, gas, oil, coal, water power and nuclear fission in a consistent and national relationship with each other even if the balance of that relationship changes from time to time. I think that it is fortunate—it was not always the case—that this point of view is beginning to gain supporters within the fuel and power industries themselves.
Thanks to the helpfulness of my Whips and the co-operation of one or two hon. Members opposite, I had the opportunity recently of attending the British Electrical Power Convention at Brighton. I attended some of its sessions; and I serve on the council of that body. It will be remembered that the theme of this interesting conference was "Electricity in the Fuel and Power Future". Leaders of the coal industry, the gas industry and the oil industry attended the convention, and read papers in spite of the fact that the convention is primarily an electrical convention and was organised by the electrical industry.
It is unnecessary to say that there were differences of emphasis and points of view between the leaders of the industries who spoke at the convention, but what was outstanding to me, as one with some experience of the power supply industry and the outlook of its rivals, was that there was a very high degree of unity and agreement between the participants at least on the essentials, and the fact that these fuel industries are growing more naturally together in understanding is a great step forward.
There was agreement, for instance on the proposition that for a long time ahead electricity is married principally to the coal industry, but, if I may put it this way, in a kind of polygamous relationship which does not bar secondary alliances with both nuclear fission and the oil industry. On the other hand, gas is disentangling itself from a long-established marriage with the coal industry
1736
and, for better or worse, is now morally married to a new found partner, oil. If one may put it this way, it seems that the gas industry is fast heading towards monogamy. I have never been able to make out whether polygamy or monogamy are desirable or undesirable states in themselves. It is largely a question of variety against concentration. But I do not think that anyone would disagree that polygamy is always a more complicated relationship, and so it is proving for the electricity supply industry.
In fact, the point which I want to make today—and I hope that my hon. Friend will deal with it in his reply—is that the electricity supply industry is being very much penalised in relation to the gas industry—and this makes it difficult for the country to obtain a national fuel and power policy—because of its broadmindedness. It is asked to sustain the coal industry, which it is glad to do on a fair basis, not simply for the good of the coal industry, although that is desirable in itself, but because, since the two industries are very much joined together, the prosperity of the coal industry in the future is of real and material interest to the electricity supply industry.
The coal-fired power station is cheap in the matter of capital cost, and provided that the right part of the country is selected, usually near a coalfield, it is often cheap in running costs. But since the finances of the Central Electricity Generating Board are all in one, it is only right that the C.E.G.B. should have the opportunity to use oil where oil happens to be cheaper—and that largely depends, as I say, on the siting of the power station. This is not to the detriment of the coal industry, because if the Central Electricity Generating Board is free to use oil when it pays it to use oil, then it is made very much easier for the industry to use coal where the coal cost is marginal in other places, and in that sense I have never been able to see that there is any great contradiction between the continuing use of coal by the electricity supply industry and the ancillary use of oil, or, for that matter, the ancillary use of nuclear fission. In considering the electricity industry in relation to the gas industry, there is the unfortunate fact that the electricity industry has to pay tax on all the oil which it uses whereas the gas

1737
industry is let off scot free. I believe that there is a rather abstract technical processing justification for it, but in fact the distinction is obviously wrong. I hope that my right hon. Friend will pay urgent attention to this, which I think is an anomaly which the electricity supply industry has a right to bring to the notice of the House. It has a right to ask that some relief be granted, especially if it is right to protect the coal industry during a period of redeployment—and I think that it is right to do that. It need not necessarily be permanently protected all the time, but certainly until the coal industry is finally rationalised, and the protective taxation should be applied fairly. Handicapping should be fairly done, if we are to obtain a realistic fuel and power policy with competition between the various parts.
I should have thought that one possible way forward would be not simply to raise the level of taxation on oil for the gas industry to the full extent which is applied on electricity but rather to devise a special public utility oil fuel tax which could be imposed at some moderate level, equally and fairly to both gas and electricity.
Another basic fuel and power proposition which I should like briefly to mention is in relation to this new-found energy source, nuclear fission. When one talks rather loosely about nuclear power one often overlooks the fact that, from the public supply of energy point of view, it can be utilised only through the medium of electricity. This is the other secondary, ancillary, polygamous alliance of electricity which is inescapable.
For this reason, I have always felt that it was wrong that the electricity supply industry was forced into adopting nuclear power as an energy source without it stating that the time had not been reached when it was a sound commercial proposition. Since the development of nuclear power depends very much on electricity power, it is only right that the electricity supply industry should have been able itself to make the decision as to how much nuclear power it should use.
One of my complaints about the former Administration was that in the middle 'fifties they unguardedly and, I believe, wastefully rushed the electricity supply industry into an over-large nuclear power programme. While we all welcome this
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form of energy as a new scientific development, until recently nuclear power has tended to make the supply of electricity more expensive than it would otherwise have been, even without it.
I appreciate that, looking ahead, expenditure of this kind is justified. Nevertheless, when it comes to deciding the future size of a nuclear power programme I would rather trust the judgment of the C.E.G.B. than all the pressures which come from outside, including the Atomic Energy Authority. I say that because the C.E.G.B. must necessarily temper its enthusiasm for technical and scientific progress with a degree of commercial caution. Whatever might be said about Government policy, new or old, the C.E.G.B. obviously pays more attention to commercial questions than the Atomic Energy Authority is obliged to do as a non-trading concern.
Mr. Lubbock: Would the hon. Gentleman not agree that in the light of the report which we now have on the A.G.R. station, the logical thing would be for the C.E.G.B. not to order any more coal-fired stations but to go in for a complete nuclear power programme from now on? How could we have developed the A.G.R. technique had we not had a nuclear power programme for electricity supply from which to accumulate experience which, in turn, enabled us to make further progress?
Mr. Palmer: I am not denying that, and I have not been arguing against the development or use of nuclear energy. I have merely been saying that the size of the nuclear power programme should be largely a matter for the judgment of the C.E.G.B. I am certainly not against nuclear power, but I should have thought that it would be generally acknowledged that there was undue haste at one stage, as was proved by the fact that the industry was obliged to cut back. For this reason the matter should have been left to the judgment of the electricity supply industry itself in the first place. We should have had a more rational nuclear power programme than the one which was forced too fast.
To obtain maximum efficiency from nuclear power plants—and while I am concentrating in this part of my speech on nuclear power, these remarks apply to modern coal and oil fired plants, too

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—they must be big and concentrated. At present Government policy is to site nuclear power stations a long way from the centres of population. This means the industry being faced with extra problems, the main one being the transmission of the energy away from the station to the ultimate consumer.
Indeed the transmission of power from one part of the country to another is becoming one of the major problems of the industry. Of the many developments in the electricity supply industry initiated during the relatively short period of office of Lord Hinton, one of the most important has been the understanding of this question of transmission as not just a technical problem. To appreciate what is truly involved in this small, concentrated island, we must see it as a social problem as well.
I do not intend to discuss at length the interesting and technical issue of under-grounding compared with the more conventional overhead method of conveying electricity in large quantities from one part of the country to another. This is a difficult technical matter where the laws of nature are biased against the engineer.
Nevertheless reference was made to the use of direct current. I think there has been some neglect in research into the use of d.c. A good deal of work on the transmission of d.c. has been done overseas, particularly in Sweden, Russia and the United States. A considerable amount is known about it in those countries, but the industry in Britain has become a little too conservative minded, in the technical sense, on this issue. We were one of the first countries to develop the universal a.c. system, and it seems that having been done that we have not considered the new advantages of transmitting by d.c. in a modern setting. Without going into all the technical aspects involved, d.c. may be more easily undergrounded and that it is more flexible from the transmission point of view in some other ways than a.c.
The C.E.G.B. would do well also to remember that the huge central power station may not always be the only way of producing electricity. Growing transmission difficulties may in the end force a return to simpler local methods. I realise that these are fanciful words at the moment, but we must consider this development and, in this connection, I
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understand that work is already being done on fuel cells for domestic and factory use. In the end these may be nuclear powered.
While we welcome the exciting developments which are taking place in the nuclear power programme—the new Dungeness B station and so on—I suggest that the industry should not put all its technical methods and resources in one package whatever the label. The case for having diversity technical approach is always strong, because technological changes are taking place the whole time.
I will now deal with a matter which is of considerable financial and organisational interest. Since the war three major Acts of Parliament have affected the industry. There was the Electricity Act, 1947, which was the fundamental nationalisation Measure, followed by the Electricity Reorganisation (Scotland) Act, 1954, a Conservative Measure which broke away the Scottish electricity supply industry from the industry in the rest of the Kingdom—which I have always felt was a mistake—and then there was the Electricity Act, 1957, another Conservative creation.
I played, if I may say so modestly, some active part in the 1957 discussions both on the Floor of the House and in Standing Committee. The Labour Party did not oppose that 1957 Measure in principle, because we accepted that some degree of decentralisation had been proved necessary by experience. My own view is that, provided a Conservative Party accepts the principle of public ownership, I am in favour of its playing a proper part in ideas for the natural evolution of the industry, in bringing about improvements, although I hope that, mercifully, it will not be in a political position to make many changes from these benches. It is the proper rôle of a Conservative Party to accept public ownership after it has lost the battle over its introduction and then to join in the improvements of the way in which it works out in practice.
It was a little in that understanding spirit that some of us were prepared on this side to accept the 1957 legislation as bringing about a necessary measure of reorganisation based on the Report of the Herbert Committee, but that did not mean that all the features of that legislation were accepted by us in detail—
Mr. Peyton: That has been the attitude of successive Conservative Governments over a period of years. What we have been waiting for in vain has been some reciprocity of that attitude by the party opposite towards private industry.
Mr. Palmer: I would probably not be in order if I went into the interesting question of my party's attitude to private enterprise, but I do believe that in a Socialist economy a Conservative Party has quite a useful and constructive rôle to play, although I prefer that it should do so in Opposition.
In my view, there were faults in the 1957 Measure, and I was therefore delighted to hear the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) suggest that the Central Electricity Generating Board was too far away from the consumers. It was precisely that point that some of us on the Opposition side made in Standing Committee about the new 1957 structure. One of the outstanding weaknesses of the industry today is not decentralisation, in the technical sense, of the area boards, or decentralisation, in the technical sense, of the Generating Board. That was sound, and it was one of the major recommendations of the Herbert Committee.
What is very wrong with the industry—and I make the same point about the gas industry—is that at the head we have this rather vague Electricity Council, this confederal body; that we have not, as the Herbert Committee recommended, a strong central executive to make the decisions that must be made somewhere in an industry of this size on a national basis. Mind you, considering the difficulties it has to face, because of its very nature, I do not think that the Electricity Council does a bad job, and it is very much assisted by the persevering personality and knowledge of its present Chairman, Professor Sir Ronald Edwards, who brings great powers of logic and judgment to bear on the various problems. But, all the time, in order to get a national policy, he has to work very hard. There is a very great tendency on the part of the area boards to look to the Electricity Council as their defender, and they can always join together in the Council to form a majority against the Generating Board. That kind of clash is aggravated by the fact that the area boards are distributors,
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while the Generating Board is their sole monopoly supplier.
The trouble shows itself in many ways, but particularly in pricing policies. Not only is the Generating Board the sole wholesaler, but it also fixes the prices. I have never heard of such an extraordinary arrangement, whereby a monopoly wholesaler is able to fix a price to a tied customer. I know that it is supposed to be done in consultation with the Electricity Council, but, in the long run, the monopoly wholesaler has the final word. It is interesting to remember that this was something against which we on this side argued very strongly in 1957. We said that it was wrong that the Generating Board should fix the bulk supply tariff; and that the proper body to make the arrangements was the Electricity Council in consultation with the Minister, but that was not done.
The most outstanding example of this rift in price policy is in the industrial price policy. It is accepted on all sides of the House that our greatest national need is to improve industrial productivity, and there is a very close and well-known relationship between improvement of industrial productivity and the installation of abundant supplies of electricity. Our British use of electricity, measured either in terms of kilowatts installed per worker or kilowatt hours used per worker is very much lower than in comparative industrial countries. That has been the case for a very long time. It would not be too bad if our relative position was improving but, judging from the recent figures, our relative position is worsening.
One of the most disappointing features of the 1964 Report of the Electricity Council, which is supposed to tell us all about everything in the industry, is that it does not devote very much space at all to the question of improved and increased industrial electrification. I know that the reasons for the low present use of electricity per worker in British industry are complicated, and are not all the concern or responsibility of the supply industry. But I believe that the electricity supply industry could do infinitely better than it is doing in the matter of rapid industrial electrification by improved sales and promotional policies, and by closer co-operation with other industries, both nationally-owned and privately-owned.

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I should like to see a combined operation undertaken by the electricity boards, British Railways and the electrical manufacturers to make home railway electrification much more attractive than it is. It is nothing short of a national scandal that we should have this direct use of oil on a railway system in a country that is still packed underground with coal and teeming with power stations. We bring in oil for direct use on the railways, and this is having a most serious effect on our export trade in electric traction vehicles. Foreign buyers say that there is not very much practical experience for them to go by in this country if they are to buy goods from British electrical manufacturers.
I am also all for close co-operation between the Central Electricity Generating Board and all large private manufacturers and users of power in order to get industrial electricity prices reduced as far as possible, but the stumbling-block is the general internal tariff structure in the supply industry, which is much too rigid for quotation purposes. In the annual report there is at least news of progress being made, in that the Electricity Council has appointed a working party consisting of members of the Council, the Generating Board and the area boards to look at the basic tariff structure of the industry. The terms of reference include the words:
"… so that commercial policies can be formulated with long-term trends in mind."
This emphasises the point I made earlier about the organisation of the industry. If the Electricity Council was able to work together properly there would be no need for it to appoint a special working party to resolve the differences which obviously exist. It gives emphasis to the the point that what is required in this industry is much more single-mindedness at the top.
I was delighted to hear the remarks of my right hon. Friend the Minister that no capital cuts were contemplated in relation to electricity supply. I hope that this is a firm assurance, because it would be a tremendous error if we cut back on the rising electrification of our country.
Capital is essential but this industry is run and inspired by human beings. The success of the industry—it has had many real success—is largely due to the efforts, the knowledge and skill of the employees
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of all grades. It should never be overlooked that the employees have to give a 24-hour service. They are on the job day and night, whether in the centre of a great city or far away in a remote rural hamlet, and they often have to do it under very adverse working conditions of weather a point which is often overlooked by the consuming public.
This House owes it to the employees of the industry to congratulate them upon a very successful year's work. Anything I have said a little critical about the policies of the industry concerning mainly top direction is put forward, I hope, in a most constructive way. That is my intention, because I am anxious to assist the continued success of a publicly-owned industry which I firmly believe is a great instrument for human progress.
5.52 p.m.
Sir Richard Nugent: I am glad to follow the hon. Member for Bristol, Central (Mr. Palmer). The House always enjoys hearing his speeches about the electricity industry. We respect his very expert knowledge on this subject. I agreed with the greater part of what he said.
I am a little doubtful about his view that the Council should fix a general tariff instead of the Generating Board fixing it. The Council has ways of making its views effective and the fixing of the tariff was done in an objective way. Certainly it was a way which the Select Committee had no reason to criticise at all. On the hon. Members comments about my party putting the 1957 Act on the Statute Book and the part which he said the Conservative Party should play in reference to the nationalised industries I noted that he said he preferred to see us do so in opposition. I hope that he is making the most of it now because he is not likely to see it for very long. In the rest of his speech, I think he interested the House and made a most valuable contribution to the debate.
The Report we have before us has the defect of being so very much out of date. It is the 1963–64 Report. I had hoped that the Minister would tell us a little more about what would be in the 1964–65 Report, which I imagine will be published in the next month or two. It is difficult for the House to debate the affairs of this great and important industry when our information is so very

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much out of date. I join with my hon. Friend the Member for Yeovil (Mr. Peyton) in his criticism of the Minister's statement about the effect of the Chancellor's cuts on this industry. I ended in not knowing what the Minister meant, whether he meant that the capital programme was to stand unaffected or that there was to be some postponement of some of the major items of capital expenditure. I do not know, and I am sure the House does not know either.
I ask the Parliamentary Secretary, when he winds up the debate, to clarify this, because it is of immense importance. Let us be quite plain about it. If it is necessary to postpone some of these major items for six months or more, the effect will be exactly the same as cuts. Past experience has taught us that this is the most unwise kind of cut to make because it throws out of gear a vast programme which has repercussions from which it takes several years to recover. I would sooner see other solutions to the capital problems in which the Government are involved.
In commenting about this industry I feel what I felt when I was Chairman of the Select Committee on the Nationalised Industries and was reporting on it. The vastness of the industry gives me a sense of real humility in making any critical comment on the leaders of the industry who have such huge responsibilities. I say immediately my word of praise for their handling of the gigantic job they have in hand now, not only for running this huge industry, but of contriving to double its capacity in the current seven years up to 1970. The estimate in the Report of a capital expenditure for 1964–65 was £587 million, which is a gigantic sum to spend in new capital. The stresses and strains which must be involved at every level in this huge industry in doubling itself in seven years must be gigantic. I take my hat off to the leaders and all in the industry for their successful undertaking of this task.
I very much welcome the Minister's acknowledgement of the good record of the past 10 years. We occasionally hear from hon. Members opposite something about the last 13 years having been wasted, but the speech of the Minister was on a much better note and a more realistic one. This is one aspect of our
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national life where very great progress has been made to the benefit of everyone during the period of our Government. I was delighted to hear the Minister paying tribute to it.
There are four points which the Select Committee commented on in its Report which I wish to comment upon. One is nuclear generation. As the hon. Member for Bristol, Central rightly said, the record on nuclear generation in the 'fifties on the whole caused more anxiety than satisfaction. The Magnox was a wonderful piece of engineering development, but its costs were by no means comparable with coal generation and the prospect was none too good. There had to be a cut back, and we all know the history. The success of the A.G.R. generator to be built at Dungeness is a tremendous venture and a magnificent achievement by all concerned. I am happy to add my congratulations to those which have been offered from all parts of the House. The actual costs of generation there, we are told, will be better than 10 per cent. cheaper than the cheapest coal generation. It is a very big advance indeed. It may well turn out in practice to be better.
I remember that at the time when we were reviewing the industry a couple of years ago when we completed our Report the issue was still very much in the balance with the Generating Board considering whether it would prefer to use the advanced gas-cooled reactor or a boiling-water reactor from America or Canada. It is of great satisfaction to know that the British invention has succeeded and will make such a valuable contribution for us. Any right hon. or hon. Member who has had the interest of inspecting one of these new nuclear generating stations will be lost in admiration at the ingenuity and the skill with which man has contrived to design and build these remarkable generating plants. It really is a great British achievement.
Turning to research, I was glad to hear from the Minister that expenditure on research has now gone up to £10 million per annum. This was a direction in which the Select Committee was somewhat critical, not of the Generating Board, whose research was good and appeared to be comprehensive, but particularly of the area boards, which seemed to have paid insufficient attention

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to research in transmission and especially in distribution. Evidently, this is now going ahead fast, and I am sure that it will yield valuable results for the benefit of the whole community. Many tens of millions of pounds a year are being spent on distribution by the area boards, and it is clear that a great deal of research would be valuable.
I was pleased also to see the good progress which has been made in consumer research. The Select Committee was critical of the lack of market research in the consumer sector in the 1950s when the big expansion of space heating was going forward. This undoubtedly contributed substantially to the under-capacity of the industry which came to light in the cold winters of 1962 and 1963. Because the information was incomplete, because consumer trends were unknown, the forecasting apparatus, elaborate though it was, was improperly informed, and, therefore, the programme was insufficient to meet the growing demand. It is good news that this has now been overcome, that consumer research is going ahead on a comprehensive scale and that the Council and boards are now being kept fully informed of how consumption is going and what the likely developments will be.
I was glad to see that the tariff structure is again under review. I am sure that this is essential. We found that the tariff structure of the area boards was woefully old-fashioned when we made our review. They were still proceeding on the basis of the old-fashioned promotional tariff which worsened the peak rather than helped to even it out. This is a direction in which research pays valuable rewards in getting the best possible distribution of consumption over the 24 hours.
My third point concerns the financial target, which is still 12·4 per cent. The financial target laid down in 1961 by the Conservative Government in Command 1337 yielded no less than £70 million of what is called the balance towards the capital expenditure of the industry during 1963–64. This means that to that extent the taxpayer has to pay a lesser sum in finding the necessary below-the-line capital for the financing of the further expansion of the industry. In the year
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under review—1963–64—it works out that the Treasury has to find £240 million and that the industry, from its depreciation and from its surplus, has to find £222 million, or nearly 50 per cent. What has been achieved—we see it coming out quite clearly—is what I regard as better balance in the huge capital expenditure for this industry between, on the one hand, the taxpayer who provides money through the Treasury and, on the other hand, the consumer who uses the electricity.
The fourth point to which I should like briefly to refer is one which worried the Select Committee very much concerning the relationship between the Generating Board and the manufacturers. Our worry was that the Generating Board was virtually the monopoly buyer for most of the big electricity generating equipment. There are only a handful of contractors who are still in the field supplying this very heavy gear. As the contracts are so big nowadays, ranging from anything from £5 million to £10 million or even £20 million, clearly, if any of the contractors, so to speak, misses his turn in getting a contract, he may well be in danger of being put out of business.
We were concerned that the relationships between the Generating Board and the contractors was not working too happily at that time. We recommended that an individual arbitrator should be appointed by the Government and should hold a fair balance between the two. The Generating Board insisted that competitive tendering was still the best method, and so it is in principle. When, however, the contracts are so enormous and when failure to get a fair share of the contracts can be calamitous for a firm, this was something in which it seemed to us that independent influence was needed.
I am glad to hear from unofficial sources, and this is confirmed, I think, by a comment in the Report, that the relationship has much improved in the last year or two since we made our comment. I hope that the Parliamentary Secretary will confirm this. It would be the best solution of all that there should be just a little more give and take between the Generating Board and the contractors, so that between them they could contrive to get a relationship in which there was

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confidence on both sides, that the contractors were giving good value to the Generating Board and that the Generating Board was giving the contractors a fair crack of the whip.
Mr. Walter Harrison: If it was wrong for the contracting departments or the Generating Board to have the advantage in the first instance, surely it is equally wrong for the contractors to have an advantage as against the boards and the Generating Board. This is a position which applies at the present time.
Sir R. Nugent: I do not think that it does. This is a matter of balance between the two. It certainly is the duty of the Generating Board to see that it gets good value in the tenders which it receives and in the contracts which it makes for the equipment it buys.
On the other hand, it is for the Generating Board to see that these people can live. There are all too few of them now. We do not want them all to go out of business. Some of them at times, especially during the nuclear programme in the 1950s, bore heavy losses. My impression is that this situation has happily cleared and this is the best situation of all between good sense and good spirit on both sides. I hope that this will continue.
There are two further points on which I should like to comment and which go rather beyond the industry itself. One is the personnel and conditions of employment and the other is amenity, on which there has already been comment. The Report tells us of the negotiations that were opened by the Council of Europe to upgrade the manual workers to the status of salaried staff. There are some 130,000 manual workers in this industry and the Council set out in 1963 and 1964 to strike a bargain with the manual workers to bring them up to the basis of salaried staff. They made this upgrading subject to the acceptance by the unions of more efficient methods and patterns of working. Those negotiations broke down in March last year and a work-to-rule and an overtime ban were brought in. Most fortunately, it lasted for only a week.
The Minister of Labour came in quickly and set up a tribunal of inquiry, and in the event not too much damage
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was suffered. But I should make the point in passing that no less than one-third of all generating capacity in the country was closed down as a result of this working to rule. Had it continued for more than a week, or had the climatic temperature gone lower at that time, the country would have been in very serious trouble indeed. In the event, the tribunal made a helpful report, negotiations were resumed and, as far as I know, successfully concluded. I should like the Parliamentary Secretary to say a word about this.
Mr. Palmer: Would the hon. Gentleman not agree that this is really the central argument for giving the manual workers staff conditions? This will give them a greater stake in the electricity supply industry and in its continuing prosperity and should reduce the possibility of friction.
Sir R. Nugent: Yes, indeed. This is a point which we on the Select Committee made in our Report, that these men carry such a heavy and vital responsibility to the whole community that they should be put on to a basis of payment and conditions of employment commensurate with the very heavy responsibility that they carry. I was personally much in favour of the Electricity Council's initiative, especially that of Sir Ronald Edwards himself, in doing this. I understand that the first stage of this new scheme of salary status was introduced in July of last year, and the second stage was introduced in February of this year. I hope the Parliamentary Secretary will be able to tell us how it is now progressing. Is all going well? Are the manual workers who are now on a salaried status responding and co-operating? I am glad to see that the Minister is now present.
The point is that this is a matter which goes beyond the industrial field where we can say to the industry "You get on with it and make the best deal that you can". This is something where the Government are bound to take an interest, whether it is the present Government or whether at some future time it is a Government from my party. The electricity supply is really the life blood of the country, not only in the home but in industry, transport, shops and offices. It is the supply of power on which we all depend. No Government can afford

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to stand by and watch this supply imperilled. We have learned in the last two or three years how grave the situation can be. Because of that, I feel that right hon. and hon. Members opposite must have a direct interest in seeing these negotiations successfully concluded and a new basis established.
We really need a new form of relationship between this vast army of men and their employers, all of whom are working for the life of this country. I accept the point made by the hon. Member for Bristol, Central that this is a 24 hour service and that that it is not easy to arrange. I have already said that the first responsibility is, as always, with the management from the top to the bottom. There must be a form of management which will induce a sense of leadership and team spirit amongst these men throughout the industry. This is not so easy when we are dealing with about 130,000 people. But at the end of the day we must aim at a form of relationship under which these men who enter the service will make a contractual agreement whereby, in return for good pay, conditions and pensions, they will not withdraw their labour in any circumstances, that they will use the arbitration machinery which is set up to ensure that they will get fair treatment in the light of any claims which they may make at any time.
It really is intolerable today for the workers in this industry in the course of wage negotiations to be in the position to twist the arm of the public even to the extent of endangering life, quite apart from industry, in order to improve their bargaining position. These methods are barbarous and out of date, and I am sure that the vast majority of men and women who work in the industry do not like this. Therefore, it must be the concern of government, and especially of the present Government in view of the particularly favourable position of right hon. and hon. Members opposite in their special relationship with the trade unions, to make a real step forward which will be immensely for the benefit of the whole country. I would not say that any other country has arrangements which are much better than ours, but this is a relationship which must be worked out.
I am sure the people of this country will expect the Government to take a
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lead in this matter. I ask the right hon. Gentleman to exert his utmost influence, which I know is considerable, with his right hon. Friends to see that this new salaried status is worked out on a contractual basis between employee and employer in this nationalised industry in order to give security of supply that everybody wants.
Now I come to the question of amenity. I accept the right hon. Gentleman's major point that the cost of under-grounding is prohibitive except in very special cases. I say straightaway that the Select Committee was impressed by the Generating Board's approach, and particularly Lord Hinton's approach in person. I am sure they were doing all they possibly could. The difficulty is that we all want further extensions of electricity supply and the only way to do this at present is by means of these vast overhead lines. The prospect that lies ahead by 1970 of a grid approximately 30 miles square consisting of these 400 kV transmission lines covering the whole area, on pylons 150 ft. to 200 ft. high is really alarming. When the country realises that this is what we have in store for them, they will rise up and look to the Government of the day, and to the Government of tomorrow as well, and say, "We really cannot take this". It will mean that wherever one stands in England's green and pleasant land we shall see these pylons galloping across the countryside. I do not entirely disagree with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that they are fun—
Mr. Lubbock: So long as they are in somebody else's constituency.
Sir R. Nugent: Yes, and so long as we do not see too many of them. But they really do become intolerable. I press the point that transmission by direct current has a contribution to make. I was glad to hear confirmation of this fact from the expert mind of the hon. Member for Bristol, Central. This system is much more developed in other countries. It reduces problems of transmission and it would considerably reduce interference with amenity. It makes undergrounding less expensive. This is a method which we should push ahead fast.
The other point I wish to make is that which I made when I was perhaps slightly

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out of order on the Gas (Borrowing Powers) Bill, that in working out a national fuel policy the Minister could make a contribution here if he would consider an acceleration of the gas expansion programme so that, as soon as it is practicable, gas carries a greater share of the heating load. Gas is extremely good for heating. It is competitive. It is sometimes cheaper and it has the enormous advantage that it can be put underground simply. There are none of these terrible problems of insulation. As the Minister knows, one 36-inch high pressure gas pipe put underground will carry the entire gas supply of the country.
Therefore, in terms of amenity, gas is surely the answer as far as we can introduce it to carry the heating load. I ask the right hon. Gentleman to give this very serious thought. Obviously it is not a development which can be carried out overnight but, looking ahead, if we can get the gas industry to carry a greater part of the heating load it would relieve the country to that extent of this very difficult problem of amenity which lies ahead. With these comments I should like to pay my respects to the electricity industry and to express my best wishes for its future.
6.21 p.m.
Mr. Walter Harrison: I do not intend to mince many words over the issues to which I should like to draw the attention of the House because I feel that my hon. Friend the Member for Bristol, Central (Mr. Palmer) and the right hon. Member for Guildford (Sir R. Nugent) have adequately covered in their eloquent speeches many of the matters which I had in mind.
I congratulate my right hon. Friend on an excellent Report although, as has been stated already, it is rather late. The Report is a credit to the success of a nationalised industry.
Mr. John H. Osborn rose—
Mr. Harrison: No, I shall not give way. It is some time since I have addressed the House. I pay due respect to the House and I hope that hon. Members will not interrupt. The issues which I shall mention may be controversial and if it is intended to contest
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each single one of them I shall be up and down like a jack-in-the-box.
It is my intention to bring before hon. Members two controversial issues. The success of this nationalised industry is the result of the success of the Labour Government in 1947 in nationalising it and it has been successful despite the fiscal policies of the previous Administration—and this, I imagine, would have been the subject of the intervention if I had given way a few moments ago. What has been achieved in this industry can also be achieved in another industry, which we intend to nationalise—steel. The attacks on this industry, directed at it in the early stages of nationalisation, are now being directed at the intention to nationalise steel, but in the next few years we shall have the same success in that industry.
We can be assured that with the nationalisation of our basic industries we shall have more than a 4 per cent. growth—a more progressive norm. The supply industry fits in with the economic structure of the nation. It is one of the key factors in our economy. It has a first-class relationship with the coalmining industry and I hope that that relationship will be maintained, despite the utterances of many hon. Members opposite who would throw the coal industry overboard overnight if that suited their vested interests. The electricity industry takes community considerations into account and I sincerely hope that the coal mining industry which has supported the nation for such a long time will be given proper recognition and for many years to come will play a useful part in solving the country's fuel and power problems.
The electricity industry is closely involved with other developing industries. It bears an important relationship to commerce, to civil engineering, to the consumer, to technical education and to the training of personnel. As I have said previously, this is the industry which has progress in its profile, but I now want to deal with the sour aspects concerning nationalisation. I feel that I should try to draw the attention of the House to one or two of the little subtleties which are creeping into the industry and which one could term as counterattacks on very progressive nationalised bodies.

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I ask hon. Members to consider who meets the cost of training management in private enterprise. I put ten Written Questions to the Minister last Friday and the reply was that a terrific amount of money is allocated to the training of management in private enterprise by the Minister of Education and Science. I can go along with that, but at the same time I bear in mind the question of who bears the cost of training management and personnel within the supply industry. [Interruption.] Does the hon. Member for Sheffield, Hallam (Mr. John H. Osborn) wish to intervene? The nationalised industry bears the cost and these facts need careful consideration.
Mr. John H. Osborn rose—
Mr. Harrison: The hon. Member has missed the boat.
If private enterprise can have the training of its personnel subsidised in this way then equally there should be the same possibilities for the training of management and personnel within the nationalised industries. There is a serious point here which I want to cultivate in answer to the right hon. Member for Guildford. I interjected during the course of his speech, but he did not answer me satisfactorily. I would point out to the right hon. Gentleman that the sinusoidal curve has undergone a complete change. At one time there was room for contracting within the industry, but the curve has now turned subtly in the opposite direction.
I have mentioned creeping nationalisation, but here we have creeping denationalisation, because private enterprise is gradually taking over the functions of the Central Electricity Generating Board and the area boards. I refer specifically to the contracting departments which the right hon. Member for Guildford mentioned. Work is being taken from these departments of the area boards and I would refer especially to the contracting departments of the London Electricity Board. It is generally acknowledged, as has been stated, that over the past five years there has been a terrific amount of capital development, with new generating plants and an enormous amount of new distribution. In 1964, a sum of £135 million was spent on new conventional power stations and
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£88 million on nuclear power stations, making a total investment on new generating capacity of £223 million.
As the Report states, there was a marked acceleration in capital expenditure to reinforce and extend the main transmission systems to the tune of £76 million spent on new work alone. Yet, in spite of this, and contrary to what the right hon. Member for Guildford has said, the tendency of the contracting departments of the boards has been to do less and less a percentage of this type of work. It has been the deliberate objective of various boards to permit this work to go out to private contractors. The policy has been to sub-contract not only their own work, but to farm out contract work which they themselves have obtained within their contracting departments. In fact, it is now running at an average of over £100,000 a year.
Earlier this year, in reply to a Question to the Minister, I received the following Answer:
"I am informed by the Central Electricity Generating Board that the value of contracts placed with private electrical contractors and with area electricity boards in these three years, for work on power stations under construction, was as follows"—[OFFICIAL REPORT, 19th March, 1965; Vol. 708, c. 339.]
and then come these figures. In 1962, for private contractors £1,100,000; for the boards £133,000. In 1963, for private contractors £764,900; for the boards, £71,000. In 1964, for private contractors £1,346,500; for the boards, £186,500. These figures prove that the cycle has gone right round. It is a sure indication of where the lion's share of contracting work is going, and, incidentally, this is only on power stations, not on other capital works.
On one of the £65 million power stations at present under construction, the local area board did not receive a pennyworth of work in the entire contract, but men from the local contracting department of the electricity board were being recruited and regularly employed by the private contractors working on the site, although the actual work should have been the electricity board contracting department's work.
Sir R. Nugent: May I interject? The contractors I was talking about were the contractors who do the capital works principally for the Generating Board.

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Inevitably, they are private enterprise. The Board does not do it itself. The contractors the hon. Gentleman is talking about are the contractors who do private work. Sometimes area boards do some of this contracting themselves, and some of it is done by private contractors. It is a completely different field, and I was making no comment about that whatever.
Mr. Harrison: The right hon. Gentleman spoke of contractors. I have given the figures which prove the point. I accept from the right hon. Gentleman that, when he spoke of contractors, he meant building contractors. My point regarding electrical contracting must be accepted. I take it that right hon. and hon. Members opposite accept that my figures are correct regarding the swing-over on electrical contracts. It is proved, and the present policy is turning out to be a very bad one. What should be the electricity boards' work and the Central Electricity Generating Board's work is gradually and subtly taken over by private contractors.
I refer specificially to the contracting section of the London Electricity Board. Here, the facts are devastating. For many years, there was a special department which dealt with power station construction. In 1948, after vesting date, a summary of principles governing the conduct of electrical contracting and retailing was agreed and accepted by all area boards and by the electrical contractors' association, and the Authority's opinion on that occasion was that there should be no restrictions on the contracting activities of the electricity boards as it believed that this principle would be beneficial both to the boards and to the contractors.
As I said earlier, I have accepted this principle all along. The Herbert Committee was set up—there has been reference to this today—and it recommended as highly desirable that the customer should be able to turn to alternative sources of tender if he thought that either the board or the private contractor was charging excessive prices or offering inadequate service, and this was especially so if the customer happened to be the electricity board itself.
To cut a long story short, the London special contracting department was
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organised on those lines. Over the years, it worked on about 40 different power stations and, into the bargain, achieved a direct net profit of over £500,000. In 1962, it was working on 14 power stations and had about eight other major contracts in hand. Then came the change in policy. Power station contracts are now left to private contractors. In the London contracting department alone there was a decrease in manpower—the figures have been given by the Minister in answer to my questions—of 555 men from 1962 to 1964. The majority of them are now working for private contractors doing what should be the board's own work. Their training was undertaken and paid for by the Authority. The value of contracting work in progress by that particular department has decreased from £927,000 to £384,000 in the same period. In this respect "contraction" is the appropriate word.
This policy is detrimental to the public interest, and I hope that, in the development of fuel and power policy, the Minister will introduce more competitive public enterprise so that this progressive industry may be made all the more successful.
6.36 p.m.
Mr. John H. Osborn: I add my tribute to the work done by the electricity boards and the Electricity Council, and I congratulate them on the success they have achieved. I say this as a Conservative, in spite of the remarks of the hon. Member for Wakefield (Mr. Walter Harrison). As a Conservative Member of Parliament, I was in the United States of America, just before publication of these Reports, outlining the virtues of nationalised electricity and pointing out some of the advantages as well as the disadvantages. When I spoke to an American audience, I tried to be objective.
My first point, appropriately, perhaps, a political one coming from a Conservative Member of Parliament, is that, if I, as a Conservative, appear not oppose nationalisation in the context of this debate only, it must not be thought that I support any extension of it. I say this because our debate today is the focal point or the fulcrum of democratic control of one of the biggest monopolies in the country. Admittedly, it is a State monopoly, but it

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is a monopoly subject to control by Parliament under the original Act and the subsequent amending Acts. If I understand the Minister aright, the industry has capital assets to the value of over £3,000 million and we are talking in terms of capital assets of £7,000 million in the next ten years.
We are debating the Reports and Accounts for the year ended 31st March, 1964, and the intervention I sought to make in the speech of the hon. Member for Wakefield was to inquire which Minister he was congratulating. The Reports were published when a Conservative Minister of Power was in office, so I add my congratulations to him, too.
Mr. Walter Harrison rose—
Mr. Osborn: The hon. Gentleman was very reluctant to let me interrupt him, but we on this side will welcome interventions.
Mr. Harrison: Was it a Labour or Conservative Minister of Fuel and Power who instituted the nationalised industry in 1947?
Mr. Osborn: I have given way, and the result is to bring political controversy into a debate which I had hoped would have little such controversy.
We have as supporting information the Report of the Select Committee dated 28th May, 1963, and the Observations on it dated 21st January, 1964. The country should know that the information made available to Members of Parliament particularly as a result of the work of the Select Committee covers three volumes and runs into thousands of pages. That is the reading matter which we as Members of Parliament have to digest. The board of any company would find so much reading matter too extensive to form the basis of a clear judgment.
Mr. Walter Harrison rose—
Mr. Osborn: The hon. Gentleman must allow me to continue. I welcome the opportunity provided by a debate such as this for a Minister to give us a review of, in this case, the electricity industry.
I will continue with a personal observation. I have tried to assess by what authority I can intervene in this debate. I have bought electricity for industrial
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purposes. I have set up a factory, and this has required close collaboration with the local electricity boards. I have been on various committees of industrialists who have been very much concerned with the difficulties of supply and adaptation of their equipment to electricity. However, I do not as yet claim to be an expert on the industry. We all have interests of various types, including constituency interests. One of the difficulties facing us in Parliament now is probably the lack of the expertise necessary to interpret this information.
There are many ways by which outsiders can influence an industry. The private sector has been spoken of. The private sector can be influenced by shareholders. It might be said that there is 3 per cent. electricity stock. What influence can the holders of that stock have on the conduct of an electricity board? I repeat what I said in the debate on the gas industry. Members of Parliament are trustees for the taxpayer, but we have only a limited chance of challenging the Executive, whether it be the Minister or the bodies which have been built up under him, and whether the Minister be a Conservative, or whether, as in this case, he be a Socialist. One of the difficulties we have in Parliament is to find the equipment and the information with which to challenge the Executive on occasions such as this, and challenge it constructively and not necessarily destructively.
What could have gone wrong in this case? It could be my own fault, but it was not until the business of the House was announced last Thursday that I knew that we would definitely have a debate on electricity supply before the House went into recess. This is part of the parliamentary system. I see the Minister nodding. It would appear that he was in the same position as I was.
Mr. Frederick Lee: The hon. Gentleman is right in saying that I was in the same position. Today we debate one of the nationalised industries. It was for the Opposition to take the initiative in determining which industry we should debate. Very properly, they chose electricity.
Mr. Osborn: I thank the right hon. Gentleman. I was not saying that critically.

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Many organisations outside the House, particularly trade associations and perhaps some chambers of commerce and industrial associations, have very strong interests in electricity supply and have made private approaches to the Ministry. They had no definite knowledge that there would be a debate today. Many of those who over the last few months, have expressed views to me as a Member of Parliament representing a Sheffield constituency would have liked me to deploy a much more forceful case, but they have to have time in which to collect the information. I am not criticising the Minister; I hope that he understands that.
Many people who have very strong views would wish to make them privately to the Minister, or, if not directly to him, to his civil servants, rather than ask a Member of Parliament to do this. This is a feature of the new political-industrial organisation which is very relevant in the case of the nationalised industries. Many trade associations and individual companies take this view, probably rightly so0—I am certain that if I wanted to deal with many of these issues I would not necessarily want to have them debated in Parliament. Industrialists and others with problems go, quite rightly, direct to the chairmen of area boards and to the other two chairmen, Sir Ronald Edwards and Mr. F. H. S. Brown.
I am aware of those problems. It is of interest that I have been specifically asked not to raise them in the House of Commons at present. This is because of a fear on the part of those outside that the normal negotiations would be prejudiced rather than helped by the fact of my raising the issues. I mention this only because it is a feature of the new relationship between industry, the boards which have been established and Parliament.
I must explain this a little further. The Central Electricity Generating Board is both a customer of and a supplier to large sections of industry. My right hon. Friend the Member for Guildford (Sir R. Nugent) pointed out that the purchasing power of a nationalised monopoly commands a great deal of respect. This is a feature of nationalisation which could have undesirable aspects. I do not say that the power is being abused in this case, but the person who has to supply dare not endanger his chance of gaining further
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orders by raising matters in a public forum such as this. It can be said that area boards have developed their own relationship both as suppliers and as customers with British industry.
The exponents of nationalisation are also exponents of the virtues of parliamentary control. Do they consider that the present system of Parliamentary control is adequate? Are they satisfied that Parliament has enough influence on the Executive? I should have been happier if, prior to this debate, the Select Committee could have given us a more up-to-date Report than that which we now have. I raise this point because there are hon. Members opposite and, I stress, on this side, too, who have been talking about the reform of Parliament. This is an aspect of Parliamentary activity which should be considered.
My first principal point is the relationship between the industrial user, the domestic user and the electricity industry. I shall not pass comment on the extent to which the costs of production are too high and that there have been recent increases in tariffs. Does a nationalised industry of this size make the best use of its manpower, in spite of the increase in productivity to which the Minister has referred? Paragraph 175 of the Report of the Electricity Council shows that the managerial increment has increased by 3·4 per cent., the technical engineering increment by 7·1 per cent., and total manpower by 2·2 per cent. What yardsticks are there by which we can ensure that we are getting the increase in productivity which we should be getting? What can we in the House do to question this?
I want now to make points concerning South Yorkshire and the Yorkshire Electricity Board. The board points out in its Report that in the last year costs have risen from 1·034d. per unit sold to 1·072d. and that the cost including distribution has risen from 1·412d. per unit sold to 1·445d. The table shows that of the approximately 356 million units sold 94 million were for domestic consumers. The rest went to farms, commercial users and others.
As the hon. Members for Leeds, North-West (Sir D. Kaberry) and for Sheffield, Brightside (Mr. Winterbottom) in debates in the House, have pointed out, there is concern in industrial areas such as Sheffield and South Yorkshire. There has

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been an increase in tariff in Yorkshire. Industry there is of the view that it has had to bear more severe rises than has industry in other areas.
Increased electricity charges mean increased costs of production in our factories, and I have been very interested in the discussion we have had on transmission and transmission economy. I think that the greatest economy we could have would be less transmission and more generation near to the site at which the electricity is to be used. But what evidence have we—I notice that there is a £5 million subsidy for rural distribution—that industry is not paying for these extra transmission costs—costs which it ought not to be paying, and, for that matter, what evidence have we that industry in the North and in the Midlands near the coalfields is not paying for transmission costs elsewhere?
I have had the word "postalisation" used to me—that is, averaging, similar to a flat letter rate. In other words, is there a policy of averaging between the Generating Board and the area boards which means that industries near the coalfields are paying heavier charges than they should? If this is so it can distort costs. Under Section 14 of the 1957 Act which relates to Section 37 of the principal Act there comes the whole question of tariffs and the special agreements. In Sheffield the predominant industry is steel. Naturally, electric furnaces are used extensively. One essential for predicting costs of production is stable electricity prices, and the recent increases in Yorkshire, and elsewhere for that matter, have faced the steel industry with immense burdens.
The problem many companies have to face is that under the new special agreement there is both a firm load and a disposable load. The disposable load, I gather, under certain agreements can be charged at as low as half price, but if any of these tariffs and the length of time power can be switched off are being revised it means that long-term estimates of costs can be false. This is but one more instance of a burden which private industry has to bear because of the powers which reside in an authority such as the Council and Board. This point of view has been put to me on various occasions. It has been raised with consultative councils and I would
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like this matter to be looked at again by the Select Committee and others. It could well be that industrial representation on the area boards does not carry sufficient weight. Is the Select Committee satisfied that industry—a vital user—has sufficient representation locally and nationally?
The second point I want to make has already been touched on, and that is atomic power for electricity generation. We welcome the fact that atomic energy is now the cheapest source of generating electricity at present. Within the last few months we have had definite confirmation of this break-through. What does interest me, particularly as Members of the House have had a chance of visiting the French project at Rance, is that the costs of electricity generated from nuclear energy can be compared to the best hydro-electric and tidal generating stations. These are international comparisons, but I understand from our French hosts that they believe that hydro-electric generation, particularly in their own project, would still be competitive with the best thermal and nuclear stations.
I welcome the announcement the Minister has made that the 5,000 megawatt programme, referred to in the recent White Paper of last year is liable to be increased. I welcome the two publications we have had from the Generating Board about the costs of nuclear electricity generation, and I also welcome the fact that these costs of generation are 25 per cent. lower than the costs of the Magnox type and 10 per cent. lower than the conventional type power station. Table II, on page 15 of the Report, shows that, dependent on the load factor, the costs of electricity generated by the advanced gas-cooled reactor power station are between 0·457d. and 0·577d. per kWh.
I have had drawn to my attention an article in the Daily Telegraph by Mr. Martin Burn, who quotes figures for the boiling water reactor at Oyster Creek of 0·31d. and possibly as low as 0·29d. per kWh. It is suggested that whereas we have a capital cost of £92 per kW at present, current American atomic power capital costs are as low as £63 and at Oyster Creek as low as £30 per kW. We have the Generating Board's evidence, which I welcome, of course, and I think it is right, even if the benefit

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is marginal, that as we have British "know-how" and technique, that in this instance it should be used in the form of the A.G.R. atomic power station.
Mr. Lubbock: As to the £92 per kW the hon. Member is quoting, is not that the cost of the Wylfa Station? Because A.G.R. is much lower in cost.
Mr. Osborn: No. Martin Burn quotes these figures of capital cost per kW in America. The Dungeness nuclear station, according to the C.E.G.B. appraisal, is quoted at £92. This is the figure I have used in this argument.
I would say that there is a very good case for asking the Minister, the C.E.G.B. and the Atomic Energy Authority to carry out a survey and research on variety of B.W. and P.W. reactors, and I hope he will approach the Minister of Technology about this. What study are we giving to the virtues of a boiling water and similar types of reactor for smaller power stations, bearing in mind that one of the big issues we have been discussing today is the cost of transmission? If by putting in boiling water or similar type power station reactor nearer to the site of usage we could cut some of our other costs this would be an advantage. If there is not a cost advantage, there could be an amenity advantage.
We in this House have not sufficient information to decide the advantages and disadvantages of each type of reactor, but I hope that when the Minister looks into this further he will consult the Generating Board and the Minister of Technology so that we can have a survey of the merits of the other type of reactors. But I welcome the fact that at the present time a decision has been reached. I do not wish to dispute that decision. The next immediate progress forward will be on ground which is firm, and I would not wish to go back on it.
It had been my intention to make but a few observations. I welcome the information the Minister has given us, and the chance not only of contributing towards the debate, but of learning from others what is going on in this complex but exciting field.
6.59 p.m.
Mr. Richard Wood: My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) has just been very modest about his so-called lack of
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expertise, but drawing freely on his business experience, and on his own researches, and evident very hard work, he has made a speech which we have all listened to, I think, with great interest and, I hope, profit.
I should like to follow him in one comment he made about the timing of this debate. It seems to me that the Government, with their unerring sense of occasion, have fixed this debate on the electricity supply industry, whose products and fortunes, after all, affect almost every single person in the land, on a day when, perhaps understandably, a good many hon. Members seem to have decided to desert this place for more congenial surroundings. The Government following the example of other Governments—in my view, the bad example of other Governments—continue what seems to be the general practice, that we discuss electricity in the high summer rather than in the possibly more suitable chill of December or January.
On this occasion, moreover, as has been pointed out several times, we are, formally at least, debating a Report, a little absurdly in this case, which discusses the industry's operations not under this Government but under the previous Government. But at least that fact may have the effect of producing a rather more cheerful debate than the debates which the Government have had to face during the last eight days. At any rate, 4th August is the anniversary of our going into the First World War. It seems very peaceful today, and I dare say it will remain so. I doubt whether I shall disturb the peace very much. But I would like to make a few remarks, and perhaps one or two of them will be a little more controversial than is my usual style.
At the beginning of the last Parliament, when I first became closely associated with the nationalised fuel and power industries, it seemed very evident that of all the nationalised industries, not only the fuel and power industries, electricity appeared to be very much the favourite son. But its natural advantages of cleanliness, easy availability and its monopoly in certain fields of use have thrown into relief the very real problems that face the industry today and are likely to face it increasingly in the future. These natural advantages that I have mentioned—and there are many others—have created not only an

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immense demand, as we all realise, but a demand which has been increasing at an accelerating rate.
In 1959, the demand for electricity in Great Britain, I was reliably informed in that year, was thought likely to double within the following decade. But today, only six years later, the demand is likely to double long before 1975, and it is for me at least a very imposing thought that all the generating stations, great and small, which were built before the end of 1963 represent less than half the total capacity that is planned to be available in five years time.
I remember a year or two ago paying a visit to the B station at Ferrybridge and looking out of the window there at the C station, which was then merely ground with bulldozers and earth-moving equipment on it. At that time, the B station had only just been completed, but I was told that the C station was going to be seven times the capacity of the B station. At High Marnham, near Newark, there is a fine monster of the early 1960s which will be completely dwarfed in terms of capacity by the growing stations on the Trent and in the south of my own county of Yorkshire.
This vast total capacity is necessary for that fateful hour, sometimes in December and sometimes in January, of peak annual demand. A few years ago, the public made perfectly clear its wish to be reasonably insured that, during periods of super-peak demand such as we had in that very cold winter a year or two ago, electricity supplies would not fail. In reply, I made it equally clear that the expense of such insurance was certain to be massive, and so it has proved. An investment which is running at the rate, next year, of £650 million to provide a generating capacity in 1970 of 66,000 megawatts is the cost of the premium which must be found in one way or another by the nation if it is going to obtain a reasonable cover against an interruption of supply.
I come now to a point which was rightly raised by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). The size of the capacity to be provided must depend largely on the estimates that the Government have made of the economy's future growth. As my hon. Friend pointed out, the Electricity
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Council is already providing for a margin of something like 18 per cent. If growth under the present Government becomes stagnation—I believe that was the favourite word of the right hon. and hon. Gentlemen opposite a few months ago—and the margin of capacity over demand consequently swells considerably, as it would, over the comfortable margin of 18 per cent., surely the people of this country will rightly complain that the Government have done nothing else than extract from them an extortionate premium on a fraudulent prospectus.
I am bound to admit that I feel very uneasy. My uneasiness is partly relieved by the knowledge, which a good many of us share, that the industry is in the hands of men for whom I myself have not only great admiration and great respect but also great affection. I speak of Sir Ronald Edwards, Mr. Stanley Brown and others, and in this context I would not like to forget the name of Lord Hinton, with whom I worked very closely and who has recently retired from the industry. I have no doubts about their capacity and ability but it is obviously essential that they work closely with the forecasts and expectations of Her Majesty's advisers pro tem. I believe that the full phrase is pro tempore. I hope that it is pro breve tempore. If the estimates of these advisers turn out to be wholly false, then the full blame will rest on the Government and not on the leaders of the industry.
It was a common jibe of the Socialists when my party was in office that we could not make a success of the nationalised industries because we were ideologically opposed to nationalisation. That illustrated the narrow, doctrinaire approach which, I am sorry to say, the present Government have continued to follow during the last miserable 10 months. A large section of the party opposite continues to put its party doctrines far higher that the needs of the nation. I never cease to be thankful that it was the Conservative Party which first set precise standards of performance for the nationalised industries, and I believe that the White Paper of 1962 was the most important single step forward in the relationship between those industries and the public.
I would like to give the Government the credit for supporting now the White Paper

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policy, whatever some of its wilder adherents may have said when the White Paper was first produced. But I do not believe that the present Government would ever have produced such a White Paper. If the White Paper had not been produced and the nationalised industries had not got their obligations set under it, the burden on the taxpayer caused by the present massive investment would now have reached astronomical proportions. Obviously one thing that the White Paper made necessary was for the electricity industry and the other nationalised industries to find a greater proportion of the money that they needed for their future development out of their own revenue. That in itself provided an incentive, which I am certain the industry warmly welcomes, to force down both the cost of capital development and the cost of producing electricity.
Over the years, the industry has been remarkably successful in reducing its costs, as the right hon. Gentleman the Minister pointed out earlier this afternoon. I am glad to say that that incentive still exists, but again I am beset by doubts as to the policies that the Government may possibly press upon the industry, which may make it impossible for the industry to go on forcing down its costs of production in the way that its leaders would like.
The search throughout the last decade for competitive nuclear energy has obviously played an important part in that cost reduction. Over a number of years it had an astonishing effect on the costs of conventional generation, and with the advanced gas-cooled reactor, as my hon. Friend the Member for Sheffield, Hallam pointed out, it seems to me that a breakthrough of the competitive ability of nuclear power is likely to be achieved. Important though this is—and I think that perhaps a number of people attach too great an importance to it—it is wholly wrong to exaggerate the effects and the immediate consequences of this breakthrough because it is clear—and the right hon. Gentleman made this point this afternoon—that electricity generation will continue to be overwhelmingly conventional and predominantly coal-fired for a good many years to come.
In my opinion the developments which may change the whole face of electricity supply throughout the world are still in
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their infancy. The hon. Gentleman is much more technically qualified than I am to describe them, but looking at all that has happened during the first 65 years of this century, including perhaps even the "13 wasted years" since 1951, it would be a bold man who would predict that in the year 2000 we would still be thinking in conventional, or even in nuclear, terms. These, however, are the terms in which we must think for the immediate future, and some of the problems which they pose are formidable. The number, size and siting of power stations and the provision of adequate transmission alone will give the present Minister of Power and his successors quite enough to go on with.
The other night the Secretary of State for Education and Science used some brave words about the despoliation of the countryside. That was when he was doing his best to spin out the debate until Big Ben mercifully struck.
Mr. Eric Lubbock: He spoke of the coastline.
Mr. Wood: The right hon. Gentleman was no doubt drawing our attention to the whole question of the despoliation of the countryside, and when I was Minister it was frequently represented to me that the pylons were not an addition to the beauties of the countryside but, as my right hon. Friend the Member for Guildford (Sir R. Nugent) said, the Minister of Power and the electricity industry will find it physically more and more difficult to maintain necessary supplies in the face of the opposition with which most of us here have a good deal of sympathy unless they are rescued by technical developments both in the siting of power stations and in the means of moving electricity from the point of production to the consumer.
Nuclear developments, dry cooling towers and new methods of transmission, including cheaper underground transmission, might—and it is a big might—all come to our aid, but the difficulties, which are only too obvious, underline the essential need for research to continue. We have been told that this is a modernising Government. After the last 10 months some of us have our doubts, but we have been reassured by the right hon. Gentleman that this research is going to continue, and that

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he fully recognises the importance of it. I hope that the right hon. Gentleman and his Parliamentary Secretary will not be content with mere words but will continue to give real encouragement to this industry to press on with research because without technological advances in this field their task and that of their successors and of the industry will become well nigh impossible.
The right hon. Gentleman can confidently count on our support for this industry which, I am convinced, as I think he is, is well led by men who are aware of its problems and who are determined to overcome them. I believe that the right hon. Gentleman shares these views, and he can, therefore, also count on our help in the relationship that exists between the Government and the industry. The Minister knows that this relationship is a peculiar one and can be delicate, occasionally perhaps difficult, but I can assure him that we shall continue to give him all our support as long as he continues to be guided only by the national interest in all his dealings with this great industry.
7.15 p.m.
Mr. Michael Alison: I rise to speak as one who has the prospect of having within his constituency three large coal-fired power stations. One of them is in operation, one is building, and the third is definitely projected. The first is at Ferrybridge, the one that is building is at Eggborough, and the one that is in prospect is at Drax. The last-named will be the largest power station in Western Europe, capable of producing 3,000 MW.
I therefore have a definite constituency interest, and it is perhaps right to begin by adding my praise to the electricity industry and to the C.E.G.B. for what they have achieved. They have made really solid progress in terms of the economic efficiency of the industry, particularly in relation to labour productivity, of which Sir Ronald Edwards made considerable play in his presidential address. What strikes me particularly is the 19 per cent. increase in thermal efficiency which has been achieved during the last decade. In a country which has pioneered the art of boiling water efficiently, this is quite dramatic.
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There is a lot on which we can congratulate the Board and the Council, and we in this part of Yorkshire are proud of the fact that these sites have been chosen for these really stupendous power stations. It reflects credit on the buoyancy of Yorkshire industry, and also on the efficiency and profitability of the South Yorkshire Coalfields.
Mr. John Harvey: Does not my hon. Friend regard it as remarkable that while we on this side of the House are saying these deservedly nice things about this efficient industry, this exhausted Government cannot rally one back-bencher on their side to participate in the debate?
Mr. Alison: It certainly is shameful, and I am particularly depressed that so few Yorkshire Members are present. After those few introductory words of congratulation, I should now like to give the House a worm's eye view of the impact of the operations of the Board rather than the bird's eye view we have had this afternoon. I wish to draw attention to the economic difficulties which arise locally—and to some extent nationally—from the scale and method of developing these big new power stations.
I propose to start at the local level because it is relatively easy to pinpoint the impact on a town of the construction of these power stations. Near Selby, and within sight of the centre of the town, we have the cooling towers of the power station at Eggborough, and before long we expect to be able to see the cooling towers at Drax. The basic problem locally is the obvious one of the shortage of labour. Unemployment in my constituency is running at about 0·7 per cent., which is half the national average. This means that the labour situation, already tight, has to digest the impact of the sudden arrival of these colossal power station projects, involving during the constructional period the employment of huge labour forces which fade away when the operation stage is reached.
In the case of Eggbrough we face a demand for about 2,500 constructional workers at the peak, and in Drax a demand for about 5,000 workers. This is sufficient in theory to absorb the total working population of the whole of Selby, taking every man out of his present commercial or industrial activity. The real

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rub is that the earning opportunities provided by the construction of these power stations are already proving sufficient to have the effect of drawing off large parts of the working population of the town. In much the same way as the children followed the Pied Piper workers leave to work on these huge projects some miles away. Of course we all know that the actual situation is not quite as stark as I have painted it, because construction is phased and it does not all happen at once. Furthermore, the contractors usually carry round some of their own men, who move from one power station construction site to another, and in that respect there is not so great a great drain on the local labour force.
But the position is still a very severe one locally, and I hope the Minister will consider the way in which it affects some local firms. One long-established chemical firm in Selby, which is extremely efficient and is seeking to expand, has found that one in eight of its labour force has left in the last few months to work either at Ferrybridge or at Eggbrough. Further, a small shipbuilding firm with a large export order business working on the Yorkshire Ouse has had its labour force of about 300 men reduced to 250 in twelve months, entirely by removals to power station sites. If this were to go on indefinitely that firm would hardly be able to carry on.
All this arises from the special power of these huge C.E.G.B. constructional contracts to attract labour by reason of their earning opportunities. The point is not that the power station contractors pay higher hourly rates, because those rates, by national agreement, are precisely the same as those paid by local firms. The attraction is the almost unlimited overtime facilities. Apparently men will almost kill themselves to carry away overtime earnings rising sometimes to £50 a week. Less satisfactory, because there is no commensurate increase in production, are the hidden bonuses given by contractors to persuade men to come and to stay. Lodging allowances are paid to local people who do not need them. Free tickets are given to workers so that they can see their great aunts in Windermere, and that sort of thing.
These perks create what we know as a wage drift, which is really an increase in wage rates unaccompanied by any
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increase in production. This, writ large, is the disease which affects two-thirds of the country. That is what goes on locally. Wage earners are drawn away by the auction procedure. The C.E.G.B. is in a very strong position, because of the scale of its contracts, to make bids favourable to itself. Of course the argument can be put forward that this is a beneficial process, that, because it is an economically important project, a power station should have the rights to divert factors of production to what might be considered more productive employment.
Yet I cannot believe that the local power station projects that we have in this part of the West Riding have established so overwhelming an economic priority that they justify the complete dislocation of the current activities of local firms. The problem is aggravated by the fact that the men who go to these power station projects work an extraordinary amount of overtime, which in itself cannot be a good thing for the whole tone of employment in the locality. The snag is that this employment comes to an end in anything from three to five years. The men are than thrown back on the heap. By that time they have lost their original jobs; indeed, the firms that employed them may have been forced out of business.
In this sort of situation I hope that the Minister will consider taking action. I suggest that he should undertake to give directions, as he has power to do, to the C.E.G.B. to ensure that it gives much greater thought to the impact of its operations upon local economies. In this connection I want to make two specific suggestions. First, I suggest that contractors for the C.E.G.B. should be required to recruit a certain percentage of their labour force from outside the locality of their immediate operations. This is quite a reasonable request, because there are certain parts of the country where unemployment is high and where people are looking for work. Under the Ministry of Labour resettlement transfer scheme financial and other incentives for recruiting labour from outside the immediate area of operations are provided.
My second suggestion is that C.E.G.B. contractors should be forced to notify their vacancies to the local labour

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exchange; indeed, if possible local labour exchange representatives should have sites representatives so that they can ensure that recruitment is not done "on the nod" by the foreman—because this is where the process of poaching really gets under way. There should not only be recruitment from outside the locality but a definite application to the local labour exchange for labour, with a labour exchange representative on site, if possible.
The Minister should also seriously consider consulting his right hon. Friends the Minister of Housing and Local Government and the Minister of Labour about the impact on housing amenities in this area, where we shall have a large influx of labour. At the peak, we shall have 5,000 workers on site at Drax, which is about half the present population of Selby. Selby is fortunate in one respect but unfortunate in another, in that most of its women go out to work and there is no question of finding casual lodgings in the town. If 5,000 men are going to live on site they will have to find somewhere to live.
I should like to know what thought has been given to this question in respect of one of the projects which I have mentioned. I hope that the Minister will consider the necessity for a rational preparation of the ground for the launching of these huge unprecedented power station constructional projects like that at Drax. I make these local points because they are specific examples of the numerous ways in which the country's overall economic difficulties spring from a series of little local situations where pressures on the supply of labour are very severe. They produce a bidding up of wages without any commensurate increase in production. This is at the root of our inflationary difficulties, and it does damage to our exports into the bargain, because of the dislocation it brings to other, smaller firms.
I want to say a word about the overall operations of the C.E.G.B., especially in relation to capital expenditure. The Minister was very impressive when he referred to the heavy burden that the C.E.G.B. has to bear in respect of capital investment, and the reason why it has to bear it. Many hon. Members have referred to what Sir Ronald Edwards said
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in his presidential address at Brighton. He said quite plainly that the Electricity Council would have to borrow £400 million this year alone in England and Wales, quite apart from what it raises internally—about which the Minister has already spoken.
This is a staggering sum to borrow. Not only that; it is a staggering increase compared with its net borrowing from the Exchequer last year. Last year it borrowed £317 million from the Exchequer, so the £400 million for this year represents almost a 33 per cent increase. It is worth reminding the House that the Chancellor quite plainly stated the other day:
"The Government has decided that the growth of public expenditure between 1964–65 and 1969–70 wil be related to the prospective increase in national production. In the Government's present judgment this means limiting the overall increase in public sector expenditure excluding the investment of the nationalised industries, and taking one year with another, to 4¼ per cent. a year at constant prices."—[OFFICAL. REPORT, 6th April, 1965; Vol. 710, c. 279]
In view of a 33 per cent. increase in the borrowing of the C.E.G.B. this year it is quite reasonable to ask where the Board will borrow the money from. Where will they get this extra £400 million? If one looks at this year's Budget Financial Statement, one discovers the sad and sorry but true fact that Government financial credit has gone. Indeed it is not just Labour Government credit: it is, alas, the previous Government's credit as well. In recent years, the Exchequer has had to pay back to the public more than it has been able to borrow from them.
If one looks at the Exchequer borrowing for 1964–65, it is striking that they had to pay back twice as much on repaving outstanding loans as they were able to borrow afresh from the public. They made up the total by a form of raising funds which was either "once-and-for-all" or was directly inflationary. In 1964–65, they managed to get by with their borrowing either by drawing on the I.M.F. interest-free notes or by dipping into the Exchequer equalisation grant, for which there was a good deal of sterling, resulting from the disposal of foreign currency—that is the once-and-for-all method—or they did it by increasing the floating debt by issuing Treasury Bills,

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that is, by creating credit, which is directly inflationary.
What will they do this year, with this huge C.E.G.B. borrowing requirement? Unless some very hard thinking is done by the Minister and his colleagues, we shall continue financing C.E.G.B. operations and other capital projects by the old process of depreciating the currency, creating credit and raising prices. How will the Chancellor's measures bite, on the Minister's Department or on the economy at large? And can the Minister give some specific answers to the local questions which I have raised?
7.31 p.m.
Mr. R. W. Brown: I rise in answer to the challenge of hon. Gentlemen opposite. I am sorry that the hon. Member for Waltham-stow, East (Mr. John Harvey) has chosen to leave the Chamber after he made a silly and childish remark, when he might have heard the rest of the debate. I have sat through the debate and listened to hon. Gentlemen opposite with some interest. It was not very long ago that they were denigrating nationalised industries. We saw posters saying, "No more nationalisation"—
Mr. Patrick Jenkin: Hear, hear.
Mr. Brown: The hon. Member says, "Hear, hear". He will learn that this sort of thing is what it is all about. I was delighted to hear hon. Gentlemen opposite got arguing the case against the nationalised industries, but squeezing out for it every possible piece of praise and plaudit which they could. I should have preferred to listen to this rather than contribute to the debate.
We have before us today a first-class report of an industry which has shown itself dynamic. It has shown that it is seized of the importance of providing the best possible service to the people at the best possible price it can. This has not always been the attitude of hon. Gentlemen opposite, during the past year. Prices of electricity have had to go up to keep in step with rising prices. One of the things which I liked about the Report, and which brought home to me some memories, was the reference on page 39 to the thermal efficiency of generation in the conventional steam station. It was,
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at one time, my job to look after the thermal efficiency and to see that we got it as high as we could. I know the problems especially that of overloading. I read paragraph 97 with some quizzical thinking, in the sense that it says that the increase in average thermal efficiency was not as high in 1963–64 as they would have liked, because of the problems of the machinery, which had been overloaded the previous year.
I hope that hon. Members will understand that this is a serious point. It affects the efficiency of the stations considerably. When I was responsible for efficiency in the stations, it went up eventually to 19·5. When I looked at this figure of 26·7, I was reminded that my station was only a booster station, that is, that we had to bank down after the peak period and we came into peak working in the peak periods, from 7.30 to 9.30 a.m. and from 4.30 to 6 p.m.
The need for research co-ordination in the industry is brought out very clearly, as is the fact that this is an industry which was faced with changing stresses. It had to look to the future and the problems of what rôle atomic energy would play. I recall being at an institution meeting where we had a graph drawn forecasting where atomic energy would play its rôle in 1972 and it was a larger part of the cake than has actually happened. One hon. Member opposite referred to the building costs and the problems of building these stations. I have always felt that one of the reasons why the atomic energy stations have cost so much is because of these outside factors, which are not necessarily the developing costs of the installation itself.
I was pleased to see the five factors which the industry had been looking after in order to try to improve their transmission, generation, and distribution techniques. It seems to me that the Report has highlighted the most important factors. As one reads on, one sees the tremendous attempt they are making to grapple with the problem and face the future, when atomic energy will undoubtedly become an important part of the electricity industry. This brings us much greater problems than just the development of the reactor. It has an effect on the whole station itself, even down to the safety measures, which will vary considerably from the safety

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measures which have to be observed in the traditional steam stations.
They indicate that they are on top of the job and are seeing that, by the 1970s, they will be in the front rank of providing us with a service of electricity in accordance with the desire of the nation, when, by that time, we hope we shall have an industry which can be geared up and making the maximum utilisation of electricity. One of the problems is that of peak loading. I was most impressed with the attempt which has been made by the electricity boards to encourage consumers to take their electricity on the new storage heater basis—to get it at a cheaper rate. This is important, if only we could get the people to understand the advantages which are there for them if they do this, and the help they could give to the station.
One hon. Member opposite referred to this very point. It is worth noting that they have to estimate the total capacity per installation and that they have very hazardous means of determining what their demand will be. This means that they err on the side of caution, and it costs that much more on each occasion that the peak demand is required.
I was interested to see that not only has the electricity industry been interested in its own research, in the sense of their technical research, but they are now showing a very real concern for the consumers and their needs. It has been argued from time to time that these monolithic bodies are out of touch with people and never really understand what the consumer wants.
On page 50 we can see the attempt of the industry to understand the needs of its consumers. The industry is using modern management aids to provide the best possible statistics on which to work. We see that the industry has geared itself up in this way, not always with the support of everyone in the country. It has forged ahead and is beginning to make the impact for which many of us hoped who had faith in the industry in the early days. I was delighted to see the results of some of this research into consumer needs and to see that it is showing advantages and being reflected in the work of the industry.
It is also remarkable that the industry should play an important part in international
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activities—in the development of Europe and the industrial problems of the electricity industry throughout the world. I was employed in a private part of the industry and was not concerned with the Board, and I therefore need not declare an interest. But we have always believed that the industry could play an important rôle in international affairs, and I was pleased to read of the interest which is being taken in this respect.
The industry has also taken a noteworthy interest in education and training. For many years I have been involved in teaching engineering, and I have always complained that, generally, industry is not aware of the training facilities which are available in this country. In this report the electricity industry indicates that not only is it making full use of the services which are available but it is prepared to go into the training business itself to ensure that it gets staff of the calibre it needs. I did not understand one comment by an hon. Member opposite about an increase of 7·1 per cent. in the technical engineering grade. Was he complaining about that? The more one develops these techniques, the more one needs technical people to deal with them. I was pleased to see the wide range of courses which are being run.
Mr. Palmer: My hon. Friend makes a useful point. Perhaps he will also agree that there has been a corresponding fall, both absolutely as well as relatively, in the number of manual workers employed.
Mr. Brown: I thank my hon. Friend for that comment. It is a point which I was trying to make—that the industry has made itself efficient and is using these technical aids.
I was seized of the importance of the reference in paragraph 208 to careers development. This is a point which industry does not always understand. Industry complains that it cannot get executives and that it has no top men coming along, no captains of industry. It does not seem to understand that it is its responsibility to select its staff and to plan a career for executives so that people may see a future in the industry and may see themselves moving to jobs which are well within their capacity. Then we find happy employees working to their maximum efficiency. The return to industry clearly is very great. I am

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very pleased that the electricity industry has introduced this system of careers development. In 10 years' time the reward for doing this will show clearly in the status of executives and top executives in the industry.
I do not want to detain the House too long, because there is not much that I can add to this outstanding Report. I am proud that the industry has been able to submit such a report. A headmaster would have written, "Well done".
Mr. Patrick Jenkin: Surely the hon. Member recognises that the whole of the period covered by the Report which he is praising so lavishly was under the auspices of a Conservative Minister.
Mr. Brown: What the hon. Member believes he said, I do not know. What we are talking about is the people in industry—the electricians, the technologists and the scientists. We are not talking about hon. Members opposite. They spent their time fighting the Finance Bill on the Corporation Tax and Capital Gains Tax. I am talking about those who dedicated themselves to an industry to give a supply to the country in the most efficient way and at the most efficient price. This has nothing to do with politics. Many of us on these benches have spent years trying to explain to hon. Members opposite that industry is industry and politics is politics. Time and again we have to ask them not to bedevil industry with silly political comments. The silly comment which the hon. Member made epitomised that very thing.
I hope that, having read the Report, we can say to the hon. Member that if he wants a little extra tutorial we will give him the help he needs to understand the Report. If we are to ask industry to gear itself up for the future of the country, we must ensure that industrialists, workers and management know that they will be allowed to get on with the job without being bedevilled by people who are guilty of political sniping and carping. When they have done a good job, let us have the courage to tell them so. Let us tell them, "Well done. We hope for more improvements, but we are thankful for what we have received. We look forward to an ever improving industry in the future."
7.47 p.m.
Mr. Eric Lubbock: The hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) must learn that because hon. Members on these benches—I am not entitled to speak for the Conservative Members present, although I think I may do so on this occasion—praise the electricity industry, they are not necessarily advocating further nationalisation. That would be a complete non sequitur and a confusion of thinking which he ought to adjust. I agree that we should avoid bringing politics into discussions of the nationalised industries, but that was very much what he was doing in his speech, although he blamed Conservative Members for it.
He says that this is a very fine report. I think that it probably was a year ago. Will the Minister tell us why it has not been possible to produce the up-to-date report before we rise for the Summer Recess? This question applies not only to the Central Electricity Generating Board because it happens in other nationalised industries, too, and it is very inconvenient. The year end for most of these industries is 31st March but they seem not to manage to produce their annual reports in the four months before we rise for the Summer Recess.
There may be some vital point in one of these reports of which none of us is aware. If we were aware of it there might be some Parliamentary action which we desired to take. I urge the Minister to see whether there is anything he can do to speed up the preparation of the annual reports of the nationalised industries for which he is responsible. Let him do a bit of modernising. Let him see whether he can cut down the period between the year end for the nationalised industries and the production of their annual reports.
Mr. Frederick Lee: The hon. Member will agree that this is not the fault of the industries. This report has been available for 10 months. They may well turn to us and say, "We get our report out but if you do not debate it you must not blame us."
Mr. Lubbock: I am talking about the report for the year ending 31st March, 1965. Although it is too late this time, I hope that the Minister will see whether these reports can be produced in the four months before we rise for the Recess.

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Most large companies manage to work within this sort of time scale. I see no reason why the C.E.G.B. should not manage it. I hope that the Minister will discuss this matter with the C.E.G.B. and the Electricity Council to see if means can be found to speed up the provision of these annual reports.
Mr. Palmer: I have considerable sympathy with the hon. Gentleman's point and, as one who reads these reports in considerable detail, I assure him that the facts and details which the industry includes in its reports represent the sort of information which would not be found in the average company report.
Mr. Lubbock: The hon. Gentleman knows a great deal about management and will be aware that frequently it pays to produce information quickly, so that it may be acted upon, rather than produce it in minute detail but too late for action to be taken. I would be prepared to see a limited reduction in the amount of detail presented if we could get the information more promptly.
Many questions have been asked about the industry's capital expenditure programme and whether the Chancellor's recent announcement will mean any scaling down of the C.E.G.B.'s investment programme. I do not see how such a scaling down could take place. Indeed, it would be unthinkable for it to happen and I hope that the Minister will make a less equivocal statement at the end of the debate than he made at the beginning. To relieve the anxiety which exists, I hope that the right hon. Gentleman will assure the House that there is no question of any scaling down taking place in the capital expenditure programme of the industry which might affect the amount of electrkity generated in future years. I hope that he will also assure us that whatever studies may be going on in the industry they are being confined to items of capital expenditure which bear no relationship to the capacity of the industry.
It may be practicable to do something about office blocks and ancillary expenditure which will not affect the total output of the industry. I have no objection to that sort of thing happening as part of the Chancellor's measures. Nevertheless, we should be given a categorical assurance
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that no restrictions will be placed on the investment programme of the industry which will affect its output in future years.
What a magnificent achievement for Britain the A.G.R. station is. The documents which we have been sent by the C.E.G.B. prove that we are in advance of the world in this new development. I disagree with the remarks of the right hon. Member for Bridlington (Mr. Wood) on this subject. I regret that the right hon. Gentleman is not in his place because I would like to have addressed my remarks to his face. We in this country tend to play down our achievements far too often. I was particularly disappointed, therefore, to hear the right hon. Gentleman say that a number of people had attached too great an importance to this new development and that it would be wholly wrong for us to exaggerate its future potential. He went on to say that we will be depending on dominantly coal-fired stations for a long time to come.
If one considers the time-scale of capital expenditure in electricity generation I suppose that the right hon. Member for Bridlington is partially right because the Minister said earlier that there were 15 coal-fired power stations under construction Naturally those will go ahead. Nevertheless, the implications of this new development for the future type of station which we will have in the C.E.G.B. are, I should have thought, very much more important than the right hon. Member for Bridlington seemed to think.
I heartily congratulate Atomic Power Constructions Ltd. on winning the recent tender and the Atomic Energy Authority for the pioneering work it has done in this sphere, work which has enabled us to lead the world. The hon. Member for Bristol, Central (Mr. Palmer) suggested that perhaps we had had too large an atomic energy programme, but I assure him that without the foundation of the magnox stations we would never have been able to develop the A.G.R. system. The Magnox programme was of an absolute minimum size to keep the three consortia in business. At one time it looked as though one of them would have to fold up. A dangerous situation occurred a few years ago because of the contraction in the nuclear power programme.

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Initially we had five consortia. Two of them went out of business and we were left with three. There was only just enough work in the Magnox programme to keep those three in business pending the arrival of the A.G.R. programme. Therefore, although economically one may criticise the Magnox programme—or, from the point of view of the profit and loss account, of the C.E.G.B., too—it is now beginning to pay off and we have an industry which cannot only produce A.G.R. stations for the electricity industry of this country but will, I hope, be able to export these stations to all parts of the world.
I am an optimist about this, particularly when I look at the conservative assumptions which have been made in the document which has been presented to us by the C.E.G.B. I note that the comparison of costs between the A.G.R. and other types of stations the C.E.G.B. assumes a 20-year amortisation life and a 75 per cent. load factor. That compares with the design of the components used in the station of 30 years and 85 per cent.
Mr. Patrick Jenkin: Technically speaking, to have a 30-year life and a constant 85 per cent. load factor is theoretically possible but practically almost impossible. Would the hon. Gentleman, therefore, not agree that the figure of the potential cost of electricity based on both those assumptions cumulatively is wholly unreal?
Mr. Lubbock: With respect, I do not think that the hon. Gentleman is right. Conventional stations depreciate over 30 years. I hope that he will go with me that far. It is equally true that the prototype A.G.R. station at Windscale has been operating at a load factor of over 85 per cent. and, for that reason, I suggest that the estimates of performance are quite conservative.
Mr. Ridley: Is it not also true that the Oyster Creek criterion is an 88 per cent. load factor and a 25-year amortisation, which is one reason why the cost is so much higher here than in America?
Mr. Lubbock: I wondered earlier why the Oyster Creek figures were mentioned because they seem rather meaningless unless one knows all the assumptions which have been made in arriving at those costings.
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Even if there is a difference of opinion between the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and me as to the pessimistic or optimistic nature of these assumptions, I refer him to the part of the C.E.G.B. document which deals with the development potential of the A.G.R. We are told that the first A.G.R. will have a coolant gas pressure of 450 lbs. p.s.i. and that there is every hope of raising that pressure to 600 lbs. p.s.i. at future stations. It is pointed out that great benefit will also be derived from increases in reactor sizes. The C.E.G.B. suggests that this will mean a reduction of as much as 10 per cent. in the cost of generating electricity if the later reactors in the A.G.R. programme are double the size of the ones being provided at Dungeness B.
This raises an important point, for the Minister said in response to an intervention which I made when he was speaking that he thought that 5,000 megawatts, which was the minimum scale thought to be desirable by the Atomic Energy Authority in its Annual Report last year, was the minimum and that we were going to think in terms of a programme with a substantially larger figure than that. I hope we can be given more information about that, because the whole of the 5,000 megawatts envisaged by the Atomic Energy Authority would be taken up by four stations of the size of Dungeness B, and we are already talking of a station twice as big as that. It therefore seems that we shall have to think of an A.G.R. programme considerably larger than the 5,000 megawatts mentioned.
What does the Minister think about this? How long will it be before we get a fast breeder reactor in production operation? Do we still stick to the time scale we had in mind a few years ago, when it was said that by 1975 the fast breeder reactor would be fully tested, that the prototype would have been in operation for a sufficient number of years to bring the station into a nuclear power programme, and that it would probably be the only type of station we would order from then onwards, because if the Atomic Energy Authority's hopes were realised it would be considerably cheaper ultimately even than the A.G.R.?
Will the Minister tell us his thoughts, in the light of these costings, about the

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relative position of nuclear and conventional means of generation for the future power programme? It would be quite impossible so to adjust the programme as to change the 15 coal-fired stations that have been ordered, but what about the future orders that will be placed by the C.E.G.B.? If these figures are absolutely reliable, as I am sure that they are, should we,, not be ordering any more new conventional stations at all, and should not future stations be entirely nuclear? That is the logic of the figures in the Report—
Mr. Palmer: The hon. Gentleman is overlooking something that should never be overlooked in relation to a large electrical transmission system. Everything depends on the siting and costing of the station, which means that it may be economical to use a nuclear power station on one side and equally economical to use a coal-fired power station somewhere else.
Mr. Lubbock: There may be more geographical limitations on the siting of a nuclear power station than on the siting of a coal-fired station. We have not yet got to the stage where nuclear power stations can be placed inland, but the time may well come when there is no real difference in the criteria to be applied in siting an atomic reactor and any other kind of power station. The problem of cooling water also applies to conventional stations, which is why so many have been placed along the Trent for example. I think that this difference in cost is so striking that there would have to be very strong reasons for placing further orders for conventional stations, and this should be one of the basic parameters of the Minister's fuel policy which he hopes to develop, I think, between now and the autumn.
Let the Minister tell us how many tons of coal will be consumed by the Central Electricity Generating Board. The Minister should add on to the 65 million tons he mentioned the consumption of the 15 coal-fired stations under construction, and then tell the Coal Board that that will be the total amount required by the C.E.G.B. in the early 'seventies. It is important that the Minister should come clean on this, and at least give the National Coal Board some idea of what
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is expected of it. It is much worse for the Board to have no target whatever than to have a target that is less than it might hope to get.
Another aspect is the sales potential of the A.G.R. abroad. What are the Government doing to promote the sales of A.G.R. stations? I take it that the C.E.G.B. is doing something there, because of the following sentence in the technical and economic appraisal:
"It is hoped that the results presented will be of value to electricity supply undertakings throughout the world."
I take that to mean that the C.E.G.B. is meeting its responsibility for distributing information to people in other countries who may wish to place an order for an A.G.R. station. This is so important that the Minister himself should be taking an active part in seeing that these facts and figures are put before every electricity undertaking in the world, and that there is a hard selling campaign of the A.G.R. in all countries where there is a possibility of its being ordered.
It was, I think, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) who said that the area boards could not be blamed too much for the vast increases they imposed, because 80 per cent. of their costs were determined for them by the C.E.G.B. Whether or not that is true, it appears to me that the machinery for the representation of consumer views is totally inadequate. I have complained of one matter before, and I will complain of it again to the Minister now, because I do not think that he has heard of it. The London Electricity Board increased its charges by between 9 per cent. and 10 per cent., and his right hon. Friend the First Secretary referred that increase to Mr. Aubrey Jones. The South-Eastern Electricity Board increased its charges by 13·3 per cent., and when I asked the First Secretary why that increase, too, had not been referred to the National Board for Prices and Incomes, he replied that the consumers' representatives had not asked for it to be referred.
That indicates that the consumers' representatives are not doing their job. I am upset about it, and my constituents are upset about it, and I can tell the Minister that I have had a good many letters about these increases. We have here a very anomalous position when this Board that has been set up to protect

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the public against unreasonable price increases looks at things in such a very arbitrary way, and it is a matter of luck whether the supposed representatives of the consumers are doing their job properly. The Minister should try to persuade his right hon. Friend to reconsider what he said to me on this subject, and refer the matter to the National Board for Prices and Incomes.
If we are to have a policy for prices and incomes we must realise that people will demand wage and salary increases if they find that their own living costs are going up. I do not mind if the First Secretary thinks that people are prepared to stand increases of 13 per cent. in electricity charges without asking their employers for a rise. I only say that he is wrong and that this happens, or that people instruct their representatives to try to negotiate a rise on their behalf.
I very much agree with those hon. Members opposite who have said that a pricing policy must come before an incomes policy, that until we have managed to control prices we shall never get people to moderate their demands for wage and salary increases. Here is a glaring case where the Minister should intervene.
A final point concerns the regulation which came into effect on 1st July preventing landlords from charging over a fixed maximum amount for the resale of electricity. The Minister said in his opening speech that the area boards had no power to enforce this and that it was necessary for the individual consumer to look after his own interests—by which he meant that the consumer has to take the landlord to court and can then recover the excess amount from him. How many cases have come before the courts since 1st July? If the Minister cannot give that figure, can he tell me how many actions are pending? It would be interesting to know whether consumers are using their new rights and whether sufficient publicity has been given to the machinery available to them to do so.
If the Minister finds that there are very few cases, it indicates that consumers are not aware of their new rights, not that exploitation and over-charging is not taking place. I am aware of several cases of people still charging over the fixed amount and appearing to get away with
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it. Unfortunately, in all these cases the person who is overcharging is the operator of a caravan site. There is very little one can do in these cases because, if any person brought an action and recovered the excess, the operator would retaliate by increasing the charge he makes for the plot.
One case which I have drawn to the attention of the Minister of Housing and Local Government is of a site operator who immediately on 1st July raised the charges for the plot so as not only to recover the amount he was overcharging for electricity and was no longer entitled to but actually to make an increased profit. He sees this as an opportunity to fleece people on the site. I say with great regret to the Minister that, welcome as this move was for people living in rented accommodation, it will have no effect at all on people who live in caravans.
I have said some fairly harsh things about the slowness of the C.E.G.B. and the Electricity Council in introducing their reports, but I conclude my speech by echoing the best wishes which other hon. Members have offered to them for the coming year.
8.14 p.m.
Mr. Patrick McNair-Wilson: I wish to correct the hon. Member for Orpington (Mr. Lubbock) by saying that the price increase announced by the L.E.B. in June was 11 per cent. not 9 per cent. to 10 per cent. as he suggested. This underlines the fact that this debate, while not affecting my constituents from the point of view of power stations, directly affects them from the point of view of cost of electricity as consumers. Therefore I welcome the opportunity of discussing the industry.
It is rather sad to reflect that by the time we come back after the Recess we shall have had a Labour Government for rather more than a year. The promises made about a co-ordinated fuel policy will still be unfulfilled. When we remember the fighting words in the Labour Party's election manifesto:
"We will have a co-ordinated policy for the major fuel industries"
and similar noises which have been made subsequently, we have also to remember that a year will have passed in which nothing has happened.
Mr. Frederick Lee indicated dissent.
Mr. McNair-Wilson: The Minister disagrees, but the fact is that the Fuel Advisory Council has met only three times and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) stated the number of minutes spent in meetings of that body.
Mr. Lee: The hon. Member should not judge of the quality of my meetings by the lack of quality of his own.
Mr. McNair-Wilson: That is good fighting stuff, I let it go to return to the Minister's other comments. As yet we have no co-ordinated fuel policy, and I do not see one coming. We remember the famous, almost infamous, words:
"Labour is ready poised to swing its plans into instant operation,"
We see that they were not true.
We have had a number of debates in the last few weeks, on the fuel industries, notably the gas industry. It is useful now to be looking at another of the great industries which competes so acutely with the gas industry. The electricity industry is unusual in some respects in that it is essentially a capital-intensive industry. I was interested to note when reading yesterday's Evening Standard an article headed: "Look, No Hands". It told about a guide showing a party of visitors round the Rugeley Power Station in Staffordshire who was stumped by one question: "Please", said a small boy, "may we see some men working?" To keep this capital investment at a level at which the industry can take advantage of all the technological advances made is an enormous task. The Minister has told us that the industry will have to borrow about £400 million in the next year. I do not want to go over the ground traversed by my hon. Friends, but I must ask the Minister to make sure that whoever winds up this debate shall give a definitive answer about where the money is to come from.
We have had three Budgets this year from the Labour Government and each has been tougher than its predecessor. We see a cutting down of public expenditure at various levels. It is not enough for the Minister in his opening remarks to make bland comments to the effect that he did not think there was any need to suppose there would be any
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cutting back in the electricity industry. He managed to satisfy the hon. Member for Bristol, Central (Mr. Palmer), but he certainly did not satisfy me, and I do not think he satisfied any of my hon. Friends. We shall look forward to a definitive statement later.
This debate is taking place against a background of uncertainty. That was a point made by my hon. Friends in the debate on the gas industry. All the fuel industries are undergoing very considerable change. Great and welcome advances are being made, and I wish to be associated with everything that has been said in congratulating the electricity industry on its advance, but while those changes continue and there is this uncertainty the need for some clear lines of approach from the Government are made the more necessary. One of the greatest questions which have to be faced by all the fuel industries, and notably the gas and electricity industries, is the use of the primary fuel in future.
The electricity industry is at the moment almost entirely coal-based. If we take the figures given by Sir Ronald Edwards at Brighton in June, we see that in 1963–64 the 1 million ton coal equivalent for those years in the electricity industry accounted for 61 million tons, which is 86 per cent. and in 1970–71 it will still be high at 78 million tons, although falling in this case to 76 per cent. The oil industry's contribution to the manufacture of electricity remains fairly static, from the 1963–64 figure somewhere around 7·8 million tons and, therefore, about 11 per cent., to a 1970–71 figure of about 12 million tons, or 12 per cent. The nuclear energy aspect shows a startling steep increase, but coal is still the basic primary fuel.
I shall refer to the comparative competitive position of nuclear energy. I hope that the Minister, realising that coal is still the primary fuel, will give consideration to seeing that it is used as cheaply and as efficiently as possible. I suggest, for instance, representing a London constituency, that large bulk loads of coal should be brought into the Port of London in large ships—say, of 22,000 tons—and then taken by barge up to Battersea or Fulham to ensure that we get the freight side of this primary product carried out as cheaply as possible. Much could be done to help

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to make the industry more economical by improving the transport arrangements.
Something has been done about big power stations. Of course these are more economical, but it is always difficult to equate the big station which is economical to the power station located at the load, because the two are in a sense contradictory. If it is desired to have power stations with the shortest possible transmission lines—that is, as near to the load as possible—the stations will be scattered. Those, too, as near as they can be matched, will be the keys to economy.
My hon. Friend the Member for Cirencester and Tewkesbury spoke of his artistic appreciation of transmission lines and pylons. I do not share that view. I know that my hon. Friend is an artist and therefore entitled to his view. I hate the steel cobweb which is going up all over the country, this pylonitis from which we are suffering. I was delighted to hear that the research figure has risen from nearly £6 million to £10 million this yea I hope that research will be carried out into the most effective ways of burying cables. The direct current has advantages, because the current tends to travel in the centre of the cable rather than on the periphery, as is the case with alternating current, and direct current helps to avoid short circuiting.
I was delighted to read these words in paragraph 264 of the Report, admittedly a year old:
"The use of high-voltage direct current transmission, as in the Cross-Channel link, has many advantages, including reduced cable costs and short-circuit levels … research is therefore being undertaken to develop better and more economic methods."
It is extremely costly. At a minimum, to bury a 400 kilovolt cable will cost about £1 million a mile. According to the Report, we shall need about a single track of the M.1 to cope with the cable weight. While recognising the needs of industry, I want to see Britain preserved as much as possible. I am not one of those who are prepared to sacrifice everything without trying to see what can be done to preserve Britain.
I turn to the nuclear programme. Every hon. Member who has spoken has praised the nine Magnox reactors and their performance. They have been a great success. They are enormously expensive to
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build, but comparatively cheap to run. For the very reason that they are so expensive to build, they have never been fully economic and able to compete with the best of coal-fired stations.
A totally new situation has arisen with the arrival of the advance gas-cooled reactor. I will quote the figures supplied in these excellent booklets which have been sent to hon. Members. The electricity so generated is 25 per cent. less expensive than that from the most powerful new Magnox reactor and 10 per cent. cheaper than that from the most up-to-date coal-fired station, that at Cottam. We are now in a totally new situation where electricity can be made more cheaply, more efficiently and more cleanly by this new process.
It raises for the Minister a new question mark. After all, in the second nuclear programme—that is, the programme for 1970–75—the Minister has accepted the 500 megawatt output at a cost of about £400 million. This was before A.G.R. If A.G.R. is so much cheaper and more effective, I should like to know what the Government's plans are. In view of this new cheapness, will they increase the figure of 500 megawatts and build it up to get more from the same £400 million? Will they cut their coat to the £400 million and leave it there? If they are to increase their programme beyond the original figure, a completely new situation will be created for the coal industry. With this new cheap power at the Minister's command, will he institute a totally new programme of nuclear power stations, perhaps almost totally at the expense of the coal industry?
We recognise the problems involved in constructing a co-ordinated fuel policy. It is made even more difficult by the fact that these technological changes are taking place. However, this does not alter the fact that the Government made some pretty sweeping promises. Indeed, the Minister in his election address in 1964 made the sweeping statement that Labour would attack persistent rises in prices. As I said at the beginning of my remarks, we in London are not so happy about rising prices in the electricity industry. In the last ten months Labour's pledges have been very largely discounted. However, I still hope that we can see the policies. The policy for fuel is as important today

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as it was when the promises were made. I hope that when we return after the Recess we shall be able to see the beginnings of a co-ordinated policy which will give a fair place to the electricity industry and the gas industry and take into consideration all the new fuels which are at our command.
8.27 p.m.
Mr. Merlyn Rees: The hon. Member for Lewisham, West (Mr. McNair-Wilson) will forgive me if I do not take all the points he raised. I shall comment later on his remarks about amenities.
A short while ago an hon. Member asked whether the fact that the nationalised electricity industry had been a success shows that there was some particular virtue in nationalisation justifying its spread to other industries. I well recall two of the arguments which were advanced many years ago in all the discussions which took place on public ownership of the Morrisonian type, with boards and so on. The first argument was that this type of organisation would encourage technical advance and that there were particular advantages therefore in industries such as gas and electricity being taken over. The second argument was that the vast sums of capital involved could not be raised through the normal channels of joint stock companies. I only say this because it is my strong view that the success of public ownership in this field does not mean that public ownership of this type is applicable in other forms of industry. There may be other forms of public ownership which it would not be in order for me to develop tonight.
All I argue is that in this form of industry public ownership of this type has proved its worth; and, in spite of all the badinage of politics, it took a good many years for all the plans which were set on foot in 1947 and 1948 to come to fruition. When it comes to elections and when the former Leader of the Opposition uses folish words about public ownership, it does nothing but denigrate the country. Both public and private enterprise have a part to play in this country. The Report which we are considering shows the great success of the electricity industry in general, and proves that when it was
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decided to take this industry into public ownership it was the right thing to do.
This does not mean that there are not many questions that have to be answered by Ministers in the years to come. This is a time when new fuels are appearing on the market. I was looking the other day, in another connection, at all the estimates that were made on fuel needs in the 1950s, and most of them have been wrong. With due deference to any statisticians, it is likely that the most that the Minister and the various boards can do is to make as intelligent a guess as possible. But whatever is done in this respect, it must be a flexible policy because constantly new factors have to be taken into account.
In this respect—and I am sure that everybody present is interested in this question of fuel policy—I would commend the brief pamphlet recently produced by P.E.P. called "Questions of Fuel Policy". Some very interesting points were raised which are the direct concern of the electricity industry. The question of amenity is raised in this way. The pamphlet asks:
"Is the balance between amenity and efficiency rightly struck at present in the lengthy procedure of licensing, public inquiry and the like that required …?"
Is not this a great weight on the back of the electricity industry? I would be the last person to want to ruin the countryside, but the electricity supply industry has this great burden on it at the moment.
Another question is raised, which brings in the other fuel industries:
"Is the consumer adequately informed of the price trends in the various fuels?"
Many people are now moving over to central heating. This is a relatively new development in this country compared with the United States and Canada. When I talk to people about this, the most preposterous figures are put forward in favour of gas or electricity. People say they have looked at Which? and that they have written to various consumers' organisations. Bearing in mind that the figures will not be proved accurate over the years, it would help very much if more accurate figures, given the weaknesses involved in them, could be provided.
The other question that was asked in the pamphlet was:
"Are research and development adequate and properly organised in these industries;

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in electricity, in particular, is the balance of activity between the Central Electricity Generating Board and the Atomic Energy Authority the right one?"
I am not suggesting that these questions are capable of immediate answer, but, to come back to my original point, I think public ownership is the right sort of organisation for this industry to solve these questions. But, having said that, the problems are there, and they are very great problems with which my right hon. Friend has to deal.
I intervened shortly in this debate to raise two questions. The second one is of a constituency nature; at least, it affects an area near to my constituency. The first one is of a more general nature. Nobody looking at the nationalised industries—and this is equally true of some of the bigger private firms, the oil companies and so on—could do anything but praise the training schemes that they provide. They are excellent. They lead the way. What sort of training is provided in the electricity industry at management level? Looking through the Report, I see that at Buxton there are facilities for this. However, I am particularly concerned with one aspect.
What training is provided for shop stewards and people of that kind? Many private industries provide excellent schemes of training, not within the firm—this is the point I wish to emphasise but outside the firm, provided by the local colleges of technology and in some cases by extra-mural departments in universities. The extra-mural department of the University of Leeds provides such schemes. I know of schemes in other parts of the country and they are growing, but I find that when I visit some colleges of technology and ask whether the nationalised industries participate in this the answer is, "No". This is a mistake. The answer when I check it is that the nationalised industries provide training themselves. I ask, first of all, whether they provide training for shop stewards. It would be advantageous sometimes for people in the nationalised sector to mix with people from other parts of industry, and particularly with shop stewards from other industries. I know how valuable this can be in the mingling and mixing of ideas.
In the Yorkshire and Humber area from the regional planning point of view,
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there is a close connection between electricity supply and the coal industry. All the power stations mentioned by the hon. Member for Barkston Ash (Mr. Alison) are coal-fired and are in a very successful area of the N.C.B., an area which can look forward for many years to come to full working. There are not the same problems were as there are in other parts of the country. There are shortages of labour, but for reasons other than those which apply elsewhere. Further, given the vast extension by the electricity industry, it is nevertheless poaching, if that is the right word, electricians from the coal industry.
The question is which comes first? The coal must be provided to fire the stations, yet despite all the money spent by the N.C.B. it finds itself short of electricians. Is it not possible for some sort of co-ordination in that area? There will be a close connection between the two for many years. I made some inquiries here and the plain answer which I had was "No". I wonder whether this could be looked at again. I grant that the electricians must be under the full control of the N.C.B. and the pit managers for safety reasons, but, nevertheless, I am sure that something could be done.
I come back to the general point. It has been a great pleasure to look through the reports. The electricity industry last year and this year provided, and for many years to come will provide, a large bulk of power in this country whether coal-tired or atomic energy-fired. We should all be proud of this and we should "take a self-denying ordinance" at the next General Election and realise that if we denigrate any part of industry for political purposes we do great harm to the country. I despair sometimes at the way in which people are prepared to run our country down. We lead the way in so many fields—in the coal industry and in the electricity industry. The least we can do, wherever we are, is to praise the electricity industry which is a credit to us all.
8.38 p.m.
Mr. Patrick Jenkin: The hon. Member for Leeds, South (Mr. Merlyn Rees), in his concluding remarks, said something with which I am sure all of us can agree. We have taken part in a number of debates

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on the nationalised industries in this Session. So far, we have had several on the gas industry and now we are having one on the electricity industry.
I think that it has been common ground between both sides of the House that the performance of these industries has been of a very high order and that no one has wanted to make any political points on whether or not they were nationalised. The trouble has always come when we on this side of the House have offered praise to the nationalised industries on the progress which they are making and the way in which they are grappling with serious problems and we are immediately taunted by hon. Members opposite who say, "You are in favour of nationalisation if you are honest with yourselves." This does not follow at all, as the hon. Member for Orpington (Mr. Lubbock) made clear.
The only other point I take up following the speech of the hon. Member for Leeds, South is his reference to the amenity problem and the prospect which my hon. Friend the Member for Lewisham, West (Mr. McNair-Wilson) graphically described as a vast steel cobweb enmeshing the country. Taking up a constituency point for a moment, I express my thanks to the Generating Board for having agreed to bury two miles of the Brimsdown-Barking transmission line which is to replace the existing one which runs partly through my constituency and partly through that of my hon. Friend the Member for Waltham-stow. East (Mr. John Harvey).
When the proposal for an overhead line was first mooted, it caused grave concern locally because people would have had these enormous pylons actually stuck in their back gardens, with the foot of the pylon just a few feet from their back windows. One can imagine the despondency with which such a prospect was viewed. I am happy to say that the Generating Board saw the point very quickly and agreed to bury that part of the cable.
This debate comes at a significant point in the history of the electricity industry because of the announcement and figures recently published with regard to the advanced gas-cooled reactor proposal for the Dungeness B power station. I shall return to some of the
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details of that in a moment. I agree with those who have said that, however much one may question some of the assumptions made and the figures published in this connection, it nevertheless represents a factor of considerable consequence. The picture of forward demand for coal, for instance, must have changed as a result of this event.
The increased demand for capital which a nuclear generating programme will undoubtedly bring will be of the utmost importance because nuclear stations, capital-wise, are very much more expensive than coal-fired or oil-fired stations. I reiterate the question, and I hope that the Parliamentary Secretary will deal with it rather more adequately than did his right hon. Friend: where is all the money to come from? Hundreds of millions of pounds will have to be raised over the next few years, and it is very difficult to see how the money will be found.
There is also the problem which a nuclear programme brings of dealing with peak load demand. A nuclear station is essentially a base load generator, and, if an increasing proportion of total generating capacity is to be in the form of nuclear stations, there will be the growing problem of dealing with peak load demand. We have the gas turbines now increasingly being installed as a relatively inexpensive means of meeting peak demand, and it may be that this method will have to be considerably extended as the old coal-fired base load plants go out of commission.
This raises the question of the fuel duty. There has been a considerable argument about whether the gas turbines used to meet peak load demand should have to bear fuel duty on the feedstock. It would be even more remarkable if, in these circumstances, our electricity industry had to pay it whereas the gas industry was exempt.
I disagree with the suggestion of the hon. Member for Bristol, Central (Mr. Palmer) that there should be some sort of public utility tax applied to both these industries. In my view, there is no justification at all for a tax on fuel in this connection except in the shortest possible term to ease the transition problems of the Coal Board in the resettlement of miners displaced by technological advance. This must be in the shortest

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possible term, and I hope that it can be shorter than the five years mentioned in some quarters.
Turning to the specific problems raised by the choice of the advanced gas-cooled reactor for Dungeness B, may I say, first, a few words about the background and how we find ourselves where we are. The Atomic Energy Authority developed the Magnox gas-cooled reactor, and nine stations have been built broadly adopting the same technology, though, of course, with many improvements and developments, from the Berkeley Power Station on the Severn Estuary in 1962 to the latest in course of construction at Wylfa, in Anglesey, due to come on steam in 1968. Berkeley had only a 275 MW designed output. Wylfa has a designed output of 1,180 MW, which gives an indication of the development in the size of reactors which has taken place. Similarly, the cost has come down substantially. Berkeley cost about £180 per kW of installed capacity whereas Wylfa is about £100 per kW of capacity.
While these developments have been going on in this country, the Americans have also been advancing but on a much broader front. They have been developing different sorts of reactors, not only the Magnox gas-cooled, but the boiling water reactor. Work has been done on the pressurised water reactor and in Canada on the P.W.R., also.
Early last year, President Johnson announced that the American nuclear industry had established what he called an economic breakthrough. He was referring to the tender which had been accepted for the construction by the General Electric Co. of America of a power station at Oyster Creek, south of New York for the Jersey Electric Company. It was due for completion in 1967.
The breakthrough took the form of what one can only describe as an astonishingly low capital cost for the plant. Compared with our own latest plant at Wylfa of £100 per kW of capacity, Oyster Creek, which has a designed output of about 515 MW had a turnkey contract price in the tender which was accepted of £48 per kW installed. The anticipated output of the plant—again, to use the technical term—when the output is stretched will be 640 MW instead of being 515 MW and the cost will be down to £38·5 per kW.
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These figures include the interest on the capital during construction. They include the land and the training of operatives, but not the initial fuel charge, which is a substantial extra amount. The significance of these very low capital cost figures is that electricity can then be produced at a much lower cost than anything which had hitherto appeared possible from nuclear stations.
The production cost for Oyster Creek in English equivalent is 0·34d. per unit. At stretched capacity it will come down to 0·31d. per unit, falling, perhaps, over the years to 0·29d. per unit. That is why President Johnson hailed it as so remarkable a breakthrough since it would mean that electric power could be available anywhere in the United States at the same cost as, or even lower than the cost of, power from a coal-based power station situated right on top of a coalfield. When one bears in mind the vastly cheaper American price of 20s. to 28s. a ton compared with the comparable price here of about 60s. per ton, one begins to realise the extent and significance of this breakthrough in America.
It is against that background that we come to the tender which was sought by the Central Electricity Generating Board for Dungeness B. The Atomic Energy Authority has been doing work for many years on the A.G.R. and has for about two years been operating a pilot plant with a 30 mW plant at Windscale. Originally, I understand that the intention was that the tender should be only for A.G.R., but, in view of the published facts about Oyster Creek, inevitably it was necessary to widen the scope a little and the C.E.G.B. undertook to consider tenders for a boiling water reactor, because that is the nature of the reactor at Oyster Creek, provided that it satisfied all the conditions required for a reactor operating in this country.
Tenders were received in February this year. They were examined exhaustively. One cannot but be impressed by the quality of the assessment that has been done on all the tenders that came in this highly complicated matter to make sure—and I have been much impressed by this—that the ultimate figure could be really compared like for like so that the best possible choice could be made. It turned out that there were two principal coil-tenders, Atomic Power Construction, for the advanced gas-cooled reactor, and the

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Nuclear Power Group, which tendered for the boiling water reactor designed by the American company. In the upshot it turned out that the capital outlay for the A.G.R. was £78·4 per kW installed capacity and for the boiling water reactor £70·9 per kW.
So it immediately appears that these figures are substantially higher than the American price, which was about, as I say, £48, or, alternatively, £38. Production costs of the boiling water reactor and the A.G.R. are significantly different. A.G.R. uses a less enriched fuel and, therefore, has a lower operating cost, and has higher availability than the particular one because of the new engineering advances which have been made in design and the lower labour cost and the result of taking both capital cost and the operating cost and putting them on the same basis and comparing them was that A.G.R. came out marginally higher.
Some rather extravagant language has been used about the A.G.R., not, I think, wholly justified when one bears in mind that the ultimate advantage which A.G.R. had over B.W.R. was about three-hundredths of 1d. per unit. If we have a power station producing about 1,200 MW, three-hundredths of a 1d. per unit represents, over several years a considerable sum of money, but that is, in fact, the margin one is talking about, and I am not at all sure that it qualifies—
The Parliamentary Secretary to the Ministry of Power (Mr. John Morris): Will the hon. Gentleman accept it from me that the margin is a difference of 10 per cent. on generating cost?
Mr. Jenkin: As I understand the matter, 10 per cent. is the figure for the comparison with coal-fired stations. I am following the figures in Table I in the Appraisal Paper immediately above the double underlining. Whereas with the A.G.R. it is 0·457d. per unit with the B.W.R. it is 0·489d. a unit and, taken to two decimal points, that is three-hundredths of 1d. That is the difference between the competing tenders.
The Minister, in his announcement on 25th May, described it as the greatest breakthrough of all time and said that we had hit the jackpot. But, quite apart from the narrowness of the margin, what has puzzled all commentators is why the tender in this country for the boiling
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water reactor designed by General Electric, the same people who built Oyster Creek, and who, since then, have tendered for boiling water plants at comparable prices, should be so wildly higher, for a plant in this country, than it was for a plant in the United States. This is a question which, I think, does require an answer, and, of course, there is no answer in this assessment at all.
Oyster Creek, as I said, even at design capacity was at £48 per kW and Dungeness B was £71 per kW capacity and that represents an increase of 66 per cent. I appreciate that there may well be parameters and assessments of length of life and perhaps of some of the safety requirements and some of the civil engineering problems which could account for part of this discrepancy, but the discrepancy is of such a fantastic size that it really does begin to raise major doubts. One begins to wonder whether the Nuclear Power Group really wanted the contract.
Was it really trying? Are we sure that its tender is the lowest possible one that could be submitted for a boiling water reactor in conditions in this country? It is the discrepancy between the figure at Oyster Creek and subsequently at Dresden II—which is an American power station where the bid is slightly higher than at Oyster Creek, but which is in the same range—and the figure put in by the Nuclear Power Group for a boiling water reactor designed by American General Electric which makes one ask these rather searching questions.
It has been suggested by some people that General Electric, in America, is losing money and will not be able to make it pay and that all it is doing is bringing up the figure in this country to what would be necessary to make it pay. But, look at Dresden II power station. The design capacity is 755 MW at £42·5 per kW. If it is stretched to 820 MW, the price per kW becomes £39.
Oyster Creek was not a once-for-all project. It was a perfectly realistic price, and it can be compared with figures in Germany, where total inclusive prices in tenders for a 600 MW power station look like coming out at between £50 and £54 per kW, compared with the figure here of £70.
One is forced to conclude, if one of the reasons that I have suggested is not the

1805
right explanation, that here is one more example where we find that costs of construction in this country are markedly higher than those in the United States or in the countries of our neighbouring European competitors. One hears of one of the major components for the boiling water reactor which was to be made in this country to exactly the same design as had been put in in America, and the cost was to be two and a half times as much. That is perhaps the real explanation of why the boiling water reactor is so much more expensive in this country than in America.
One is led to ask: why have we got ourselves into this position? We were undoubtedly leading technologically some years ago, but now we find that the Americans, once again, have caught up and are now able to build an economic power station substantially cheaper than we can here to the same design, and at almost exactly the same price as that of one of our own design. We must not sit back and congratulate ourselves on this technical advance, striking though it has been. I do not wish to denigrate the work that has been done, because it has been of a very high order. But we must recognise that there is still a long way to go. The problem of trying to design and build nuclear power stations cannot be worked out in a country as small as our own in competition with a continent the size of America.
The hon. Member for Bristol, Central (Mr. Palmer) put his finger on one problem when he said that with the Central Electricity Generating Board we have only one major purchaser, whereas in America there are several major electricity suppliers who can bid and who are the customers. It gives an opportunity for competition, not only in the construction of power stations, but in the design and development of whole reactor systems. That is something that we have not got in this country. The Atomic Energy Authority is the only body which designs reactor systems, and, naturally, to conserve its resources, it is never able to advance except on a very narrow front. It has confined itself to gas-cooled reactors.
That is one more example where it will be important for us to join up with Europe and become part of the European market on a continental scale. We could
1806
get very much closer to Euratom. Good work is being done on the Dragon project, at Winfrith Heath, and at C.E.R.N., in Geneva, but much more needs to be done in Europe as a single market for atomic reactors and generating equipment, so that we can have here the same conditions as those which have allowed the Americans to make their very striking advance over the last few years.
The necessity for doing this has been underlined by the "three Budgets" announced by the Chancellor, because we are still struggling to pay our way. We are still having to go on griping about the economic performance of this country and the stability of the £. That is why it is essential to get this sort of sub-structure to our industry right. If we get our energy costs right, the chances are that we will get the rest of industry right.
9.0 p.m.
Mr. John Peyton: It seems rather sad that we should be debating electricity at this time of the year, towards the end of what seems an almost interminable succession of Parliamentary activities, at a time when electricity is not in the forefront of people's minds, and that we should be doing so on the basis of reports which are very old history indeed.
I was disappointed that the Minister appeared in the House today much more in the rôle of an historian than that of a prophet, because, despite the indulgence of the Chair, and the rest of it, there was very little attempt on his part to raise even the slightest corner of the veil so that we could have a look at future prospects.
I am sure the hon. Gentleman will not think that I am being unduly partisan if I say that I am very disappointed that the back benches of a party which is wedded to the creed of public ownership and nationalisation have shown so little interest in the progress of this immensely important publicly-owned industry.
The Minister referred to the increases in productivity which had taken place, particularly during the year under review, and he indicated that we were to have an increase of productivity of 7 per cent. per annum. What he did not say was what we have paid for this, and before we congratulate ourselves on increases in

1807
productivity I think we should be quite clear about the amount of investment that we have had to find to achieve that result.
The Minister told us that the capital cost per kilowatt had fallen during recent years from £60 to £40. Does the hon. Gentleman expect that trend to continue? The Minister was referring to the capital cost per kilowatt for conventional stations, and I should like to know whether the hon. Gentleman expects that downward trend to continue for conventional stations, and if so, on what grounds, because I believe that it is likely to be reversed.
As the Minister told us, it is clear that the increase in demand has begun to flatten out. He was disarmingly frank when he said that he had no idea of the reasons for that, and I do not think that I would be able to explain it either. What it is important to know is whether there is a likelihood of that flattening out tendency to continue, because it is going to govern the whole investment policy of this industry and, of course, of the Government.
One of the things that I find it very difficult to accept is the way in which in this House, with microscopic attendances, we pay such scant attention to the huge sums of money that are drawn from our overstrained resources. The assumption is that our rôle is that of a lender or provider, which is always a comfortable one, free of any embarrassments.
It is very important for the Government to make it clear that they will watch the position carefully, and not to say, in that time-honoured phrase, beloved of all Government Departments, that the matter "will be borne in mind". These trends will have to be watched very carefully because of the importance of this investment and its effect upon our scarce resources.
I repeat what some of my hon. Friends have said. I congratulate the Minister once again on having had the courage to adopt as his own the policy which we created when in office—the policy of recognition of the financial obligations of the nationalised industries. I do not believe that the Government would have created this policy themselves, but they have adopted it, which took some courage on their part in view of what some of their colleagues had been saying.
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The Minister was a little vague in some of the things that he said. He told us that there might be an agreement on the question of connection charges, and he suggested that freedom of choice for the customer was a desirable thing as far as it was economically practicable. I hate the idea of Ministers interfering unduly with the natural processes of competition between these industries, not because the industries are infallible but because this interruption by Ministers is only likely to make matters a good deal worse.
I want to deal with the question of our position in nuclear power. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) has just produced a learned and expert argument on the respective merits of the two competitors—the boiling water reactor and the advanced gas-cooled reactor. I am sure that all hon. Members will unite in expressing warm congratulations at the fact that the A.G.R. was successful. This is a great boost for British technology, and we should take every opportunity to proclaim it rather than to throw doubt upon it.
What we must do is to tell the Government that things cannot go on very much longer before we have a full debate, with the full facts deployed, and when we can be given some idea of what are the Government's intentions. The intentions of the previous Administration in this matter were based upon a situation which has now been replaced by a quite different one. Therefore, if the Government are still in power in the autumn, we expect them to tell us clearly what their ideas are and to give the House a full opportunity to debate the question of the next step in nuclear power.
I want to deal for a moment with the question of coal consumption by the electricity industry. The Minister said—in one of those soothing speeches which, one feels, are carefully tailored to meet the needs of some of his hon. Friends who were not, on this occasion, sitting behind him—that there would be a need for increasing quantities of coal forever and forever.
I doubt this. The Government would do very well to read most carefully and then read again the remarks made by the Chairman of the Central Electricity Generating Board in Brighton, about

1809
where the limit stops, that the maximum coal consumption of the Generating Board is likely to be nearer 80 million tons than 100 million tons. If the Parliamentary Secretary cannot give us a clear answer—we understand that he cannot expect to be completely right—he may be able to give us a reasonably well-informed guess about what is likely to be the top limit of coal consumption by the electricity industry in the future.
I was very disappointed that we did not hear more from the Minister about large sets and their work and what is the latest view of the industry and the Government on this question. The Minister said that there is a very real prospect of considerable working economies. We must hope that these are realised. Nevertheless, I am sure that the Parliamentary Secretary will not challenge me if I say that we are taking a certain amount of risk in that large sets involve placing quantities of bigger eggs in fewer baskets. I hope that the hon. Gentleman will be able to give us a little information on that subject.
I was astonished that any Minister of the Crown could come down to the House of Commons for a debate on a nationalised industry—following as shortly as this one does upon the statement, which was apparently of great importance, by the Chancellor of the Exchequer—without any details at all, without the slightest indication in his own mind as to what would be the effect of those proposals upon this industry. When I heard these proposals from his right hon. Friend the Chancellor of the Exchequer, my reaction was to think that this was a rather crude hotchpotch put together by a lot of incompetent cooks. I do not want to be misunderstood so I will explain that that word is spelt without the R: C-O-O-K-S.
We have these proposals and today the Minister spoke on behalf of a nationalised industry apparently without the slightest clue of what the effect might he. When I asked him what the effect of these proposals might be on the industry, he said that it would not involve cutting, though it might involve some postponement. But these are largely similar things in practice. He then said that there was no intention to defer anything of an essential nature.
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We must hope for something very much better than this, because this shows an utter lack of grip and comprehension. My right hon. Friend the Leader of the Opposition charged the Government in the censure debate on Monday—an absolutely justified charge—with producing policies and then proceeding to deny their validity. This is what they have done. They have made it clear again. I hope that the Minister will be able at least to indicate the kind of lines on which he will proceed in his approaches to the electricity supply industry.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), in his interesting and effective speech, asked once again where the money is to come from—a question which we have asked repeatedly and to which we have had no satisfactory answer. Most of us recall having heard time and again jibes that the Tories never talk about anything but money. Now we very much hope to hear from the Government, embarrassed as they are, how they intend to finance these industries and deal with all the other claims upon our limited resources. My hon. Friend reasonably remarked—and I hope that the Parliamentary Secretary will bear this in mind—that it is not only a question of justifying his expenses within the context of the industry itself but also a question of justification within the context of the economy as a whole.
My hon. Friend raised, and I want to deal with it for a moment, the question of the relationship between the growth rate and the investment plans. To what extent are the Government committed to a 4 per cent. or 3·8 per cent. growth rate? What is the effect likely to be on their investment plans if we fail to achieve that growth rate or anything like it? Clearly it would be a great waste of our resources to embark on a programme which assumed a 4 per cent. growth rate and had as its aim an 18 per cent. margin for the electricity supply industry. I hope that the Parliamentary Secretary will enlighten us on this point.
Some of my hon. Friends mentioned the Energy Advisory Council. I say frankly to the Minister that it is very sensible that Ministers should avail themselves of all the expert advice possible, but it is crazy to expect advice with any kind of unanimity to come from a body of this kind which, as I have said

1811
before, is composed entirely of people who are bound both by duty and by interest to differ from one another. We all look forward with interest to hearing what kind of policy comes out of these deliberations. We have been told often enough that if the Labour Party were returned to power—and that horrifying event has happened—we could expect co-ordinated policies for fuel and for transport. So far we have heard not a squeak of them. It is more with relief than with disappointment that I say that. Still, we shall await what comes out of this machine with a great deal of interest and apprehension.
The hon. Member for Bristol, Central (Mr. Palmer) was good enough to say in a rather condescending way that he thought the Conservative Party had a useful and constructive rôle to play in the affairs of the nationalised industries. In fact, we have taken a much more constructive view of the need and the rôle of the nationalised industries than has the Labour Party, but we should be very glad to welcome any evidence of its awareness of the needs of this industry, and, if it is able to play a constructive rôle in its turn, I shall be well prepared to pay a far more generous tribute to it than we received from the hon. Member for Bristol, Central. I do not understand what he meant by his remarks about more single-mindedness at the top. This industry is fortunate that it has a great single-mindedness at the top. At this stage perhaps I should echo what was said, particularly by my hon. Friends, in tributes to some very remarkable men who bear the responsibilities of this immense industry.
My right hon. Friend the Member for Bridlington (Mr. Wood), with his long experience at the Ministry of Power, paid an eloquent tribute to Sir Ronald Edwards and successive chairmen of the C.E.G.B. I echo every word he said. The industry is fortunate indeed to have the services of such people and I look for rather more willingness on the part of the Government not to take the credit themselves but to let these people have it.
My right hon. Friend the Member for Guildford (Sir R. Nugent) asked for clarification of some remarks of the Minister. I hope that that will be forthcoming. In an imaginative and intelligent
1812
speech my right hon. Friend showed himself well aware of the stresses and strains involved in the expansion of such an immense industry as this. I will remind the Government of some of the questions he asked. What progress is being made on the status proposals? It is clear that the working out of these proposals—the merits of which I in no way challenge—has cost a good deal of money. Has the progress made been worth while? I hope that the Parliamentary Secretary will deal with the point made by my right hon. Friend, when he said that the industry is the life-blood of the community and that the point at which we should aim, from whichever side we look at the matter, is the establishment of a contractual relationship, the breaking of which by strike is impossible, and that the supplies of this vital industry are safeguarded at all costs.
A part of the debate was, naturally, devoted to Yorkshire. I have already referred to the speech of my right hon. Friend the Member for Bridlington, in which he made some important comments to which I will refer. He posed a question which we do not put to the public often enough. It is easy to ask, "Do you, in all circumstances, wish your supplies to be quite safe in the most exceptional winter?" To that question people will reply, "Yes", but they must then be faced with the cost of making that supply secure against any possible eventuality. One of the most important questions to face is the cost of sustaining supplies at time of exceptional peak demand.
I agree with everything my right hon. Friend the Member for Bridlington said about the need for research and the necessity to consider developments which will solve our problems—and that goes for developments which may today be in their infancy. I hope that the Government will do all they can to urge the industry along the road of research and so to deal with some of the problems which otherwise will, in the light of today's technology, be wholly insuperable.
My hon. Friend the Member for Barkston Ash (Mr. Alison) was perfectly right to bring to the attention of the Government and the industry the effect of leviathan power stations going into thinly populated rural areas. The distortion of the local economy by such an event is

1813
considerable. It should be considered by the Government and it is something which must be handled with great care by the C.E.G.B.
Reference has already been made to the anticipations we all feel about the arrival of the Minister's co-ordinated fuel policy. I agree that we now find ourselves facing a totally new fuel situation with the evolution of the advanced gas-cooled reactor, and I hope that in the autumn we shall hear from the Government what their reactions to that situation are.
I fully and warmly agree with the hon. Member for Leeds, South (Mr. Merlyn Rees)—who is, unfortunately, not in the Chamber at the moment—when he says that most estimates on these matters are bound to be wrong. He expressed the need, as he saw it, for a flexible policy. These things are in themselves sufficient for us to accord the hon. Gentleman a very warm welcome, should he ever wish to come to these benches, and if that attitude of mind has spread to hon. Members opposite we shall be very pleased, indeed.
I should like to mention one or two points that are part of the harvest coming from the British Electrical Power Convention at Brighton. We congratulate Sir Ronald Edwards on that gathering, and on taking charge. I would particularly draw the attention of the Government to the caution with which Sir Ronald himself approaches the question of future demand. In page 5 of his Presidential Address, he says:
"We are, however, acutely conscious of the fallibility of estimates."
We would be quite wrong, if our estimating goes awry, to put great blame on the industry—these are the chances we all have to take—but what would be wholly wrong would be to doubly insure by increasing our investment beyond what is reasonable or right in this industry in order to produce an immense margin.
I should also like to draw attention to what Lord Hinton said in page 31 of the paper he read at Brighton, in which he nailed the thing down in a very important way. He said:
"The electricity industry will win only if it keeps capital and operating costs down; scientific and technological developments are
1814
worth while if they help to do this but anything else that helps is equally worth while even if it is less scientifically exciting."
There is a very real temptation in a technological, modern, go-ahead industry like this to chase attractive will o' the wisps at great expense. I hope that the temptation will be resisted; that heed will be taken of Lord Hinton's counsel and that other and duller means of saving money will not be despised. Lord Hinton also said:
"And there are less exciting ways of reducing costs. The Central Electricity Generating Board have about £750 million locked up in capital work in progress and a return of 12 per cent. must be earned on this money, though the works on which it has been spent are earning no revenue. If construction periods were shortened to what is known to be achieved in some other countries and if commissioning could be done on the programmed date, the Board would save about £15 million a year. If the availability of new plant in the early years after commissioning could be increased by ten points per cent. above its present figure, the Board would save about £5 million a year."
They are all good, ordinary commonplace ways of saving money even in an immense industry like this, but they are appropriate. I hope the Government will lose no opportunity of urging on this industry the importance of seeing that the huge investment we are making fructifies to the maximum.
I say frankly and with dismay that I feel the present Administration's approach to the handling of our resources is irresponsible and ill-informed, but, in common with everyone who has spoken in this debate, I say that the progress of this great industry over the years is something which far too many people take entirely for granted. It is a remarkable phenomenon and one for which those responsible deserve the highest praise.
9.30 p.m.
The Parliamentary Secretary to the Ministry of Power (Mr. John Morris): We have heard the hon. Member for Yeovil (Mr. Peyton) criticising "the irresponsibility of the Government" so many times that we begin to wonder what is the main qualification for occupancy of the Front Bench opposite. Hon. Members opposite have chosen as their leader an expert on the organ; perhaps the hon. Member is a barrel organ player, as he has repeated this charge on so many occasions.

1815
Although all of us are looking forward immensely to the Recess, I am sure that we have felt this debate has been very well worth while. We have been dealing with a vital industry which, as the right hon. Member for Guildford (Sir R. Nugent) said, is the lifeblood of the country. I immediately, on behalf of my right hon. Friend and the Government, pay very warm tribute to the leaders of this great industry. The country is very fortunate in having such outstanding public servants in the persons of Sir Ronald Edwards, Lord Hinton and now Mr. Stanley Brown to shoulder what the House undoubtedly appreciates are fantastic burdens. They operate on an immense scale.
It is a privilege to be able to pay this small tribute to them and, indeed, to all the workers in the industry, operating, as my hon. Friend the Member for Bristol, Central (Mr. Palmer) said, on a 24-hour basis. Without them we know not what would happen. They are seldom paid any tribute for the hundred and one occasions when everything goes right, but on the rare occasion, perhaps one time in a million, when something goes wrong, the industry is criticised. The industry is the keystone to our industrial progress today.
It is a necessity to every form of life in the country in whatever type of activity we are engaged upon. Whether one is a domestic consumer, a commercial undertaking, or in any kind of industrial undertaking, it is essential that electricity should be available as easily and cheaply as possible.
Electricity has to be fitted into the pattern of all the other fuel industries. My right hon. Friend has ultimate responsibility for all the fuel industries. He not only has to look at this industry, but at all the other fuel industries together, to take decisions concerning them all having regard to the short-term and the long-term needs. At the end of the day, because of the wisdom of the founding fathers in 1947 and 1948, it is the nation as a whole which comprises the shareholders in the coal, electricity and gas industries.
I have very great pride in the achievements of this great publicly-owned integrated electricity industry. I cannot imagine what would be the state of our
1816
economy today had not that vital decision been taken in the days of the 1945–50 Government to bring the industry into public ownership. Because of the scale on which it operates it has been able to take decisions in the national interest and not in the interests of the few.
During the last few years sales have more than doubled and capacity has nearly doubled. At the present rate we envisage a further doubling of capacity in an even shorter period. This is a great industry. It has an impressive record of expansion. It has a highly commendable record of productivity. All this is the direct result of integrating the whole of our electricity industry under one system, with responsibility in the Minister of Power of the day.
Having regard to the immense demands of industry today, great capital sums are involved. The net assets in the electricity industry stand at £3,000 million already and capital is now needed at the rate of £600 million a year. I listened very attentively to the remarks of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). Unless I misheard him, he referred to a new capital need over the next five years of between £7,000 and £8,000 million. The hon. Gentleman will correct me if I have misstated him. I am sure that, on reflection, the hon. Gentleman will find that that figure is much too high. As my right hon. Friend the Minister said, capital investment is running at the rate of £600 million a year. The figure over the next five years wil be about £3,000 million, if it continues at this rate. We cannot be more precise than that, because, as hon. Members know, capital investment programmes are subject to annual review, and a review is now in progress. At the end of the day the figure of £3,000 million or so may be about the right figure.
Of this about half will, under present policies, come from the industry's own resources. The remainder will be borrowed from the Exchequer under the Electricity and Gas Act 1963 which was passed by hon. Members opposite when they were in power. I imagine that what the hon. Gentleman has done is to take the figure of £3,000 million and doubled it, because of the other statement that the industry is finding half of the investment from its own resources. The mistake that the hon. Gentleman has made—

1817
it is a mistake which many of us have made in the past—is to confuse borrowing with investment. The hon. Gentleman has arrived at a figure double the amount envisaged for the investment in this industry over the next five years. In other words, the amount to be found from borrowings will be about £300 million a year.
The hon. Member for Yeovil asked me very specific questions about the statement of my right hon. Friend the Chancellor of the Exchequer.
Mr. Ridley: I apologise for perhaps getting the figures wrong. Can the Parliamentary Secretry attempt to answer the question as to where even the £300 million is to come from? We have had no answer to that point.
Mr. Morris: The hon. Gentleman will pardon me, because he exonerated me in his remarks, which I am sure he will read carefully. He said that these were general questions for the Government to answer and not for the Parliamentary Secretary to answer. He said that my job was to ensure that I gave an assurance to the House that every penny needed by the industry would be properly spent.
I have outlined to the hon. Gentleman, first, the amounts involved, and, secondly, the machinery under which the money will be lent to the industry, under the Act passed by the former Administration. As regards the wider question of the financing of publicly owned or any other form of activity which receives its money directly or indirectly from the Government, having regard to his original remarks the hon. Gentleman will not expect me to transgress on the Chancellor's own ground.
The hon. Member for Yeovil was asking what is meant by the postponement of projects in accordance with the statement of the Chancellor of the Exchequer. All I would say on that question is that consultations and discussions are taking place between my right hon. Friend the Minister and the industries about the short-term measures they can take in the light of the Chancellor's statement. I am not in a position to make a detailed statement at this stage. The short answer, which I am sure the hon. Gentleman will be glad to
1818
hear, is that the measures will not affect the electricity industry's plans for power station construction, transmission and distribution.
The impact on the industry's non-industrial capital projects—for example, showrooms and the like—is being discussed with the industry and it is not yet possible to give an estimate of how much this will amount to. Perhaps that answers the questions which were asked by the hon. Gentleman. I cannot at this stage give him any further details.
Mr. Peyton: What the hon. Gentleman is really saying—I take it that he is making this statement after some consultation—is that the effect of these proposals, whatever it may be in other spheres, will be very marginal indeed on the electricity supply industry. They will have no serious effect at all?
Mr. Morris: I am sure that the hon. Gentleman, having spoken from the Dispatch Box on this side of the House, would not expect me to make a statement without adequate consultation. I am sure that he will accept from me that I have taken advice before uttering my words. Surely that cannot be in dispute.
On the second point, I cannot give any firm estimate, but I agree with the hon. Gentleman that so far as the whole of the capital needs of the industry are concerned no great sum seems to be involved. However, these matters are being discussed with the industry and these are the types of projects under discussion.
Mr. Patrick Jenkin rose—
Mr. Morris: I am sorry, but I cannot give way again now.
The hon. Member for Yeovil asked about the capital costs of conventional stations and asked what would be the likely forecast of costs in the future. I am advised that the trend of capital costs per kW will probably not continue downwards in future at anything like the same rate as in the past. The two reasons for this are, first, that further economies resulting from the size of generating sets will in future be realised more slowly and, secondly, that it may be harder to find suitable sites for generating stations. I cannot give any better estimate and I cannot turn myself into a better prophet than that.

1819
Questions were asked by the hon. Member for Cirencester and Tewkesbury about the safety margin and the raising of that margin from 14 per cent. to 17 per cent. I am not sure whether the hon. Member was criticising the margin and saying that it was excessive. Perhaps all he wanted was an explanation, and I am sure that I can give him that. The original margin which the industry had was criticised by the Select Committee, and perhaps I may read briefly the final comment of the Select Committee. It appears on page 42 of the Report, and is as follows:
"After the overhaul of forecasting methods and the reconsideration of margins of capacity, Your Committee consider that the industry should aim to achieve a security of supply at least equal to that enjoyed in other advanced countries."
That is the aim of the present exercise, to increase the margin and to bring it up to 17 per cent. Of course, that figure of 17 per cent. is set five years in advance, and it not only has to take into account the need to have an adequate margin but it has to take into account also the risk, that has been faced, of underestimating the load at that time, five years ahead.
I would say to the House that this margin is needed. It is in accord with the spirit of the recommendations of the Select Committee and it is reasonable having regard to the margins in other countries. I am sure that at the end of the day, in the light of these considerations, it will be worth while.
Other questions were asked by a number of hon. Members, including, in particular, the hon. Member for Cirencester and Tewkesbury, on whether the generating capacity will be needed. The present forecast of the industry is based on the Government's own view of the growth of the economy and their assessment of the needs of a detailed part of it. If there is this growth, which I hope will be achieved, all this capacity will certainly be needed.
My right hon. Friend dealt in some detail with the issue of amenities and their preservation, about which a number of questions were asked. He gave a number of details of the very large amount involved in the undergrounding of cables. All the points which have been made in the debate on this subject will be borne in mind. There will always
1820
be an attempt to ensure the preservation of amenities as far as possible, having regard to the vast sum of money involved.
My hon. Friend the Member for Bristol, Central raised a number of points First, he raised the question of fuel duties and of gas being let off scot-free, in his own words, I am sure that my hon. Friend will not expect a reply from me tonight in that this is a fiscal matter where there obviously would have to be consultations between my right hon. Friend and the Chancellor of the Exchequer, and my hon. Friend's questions might be more appropriately addressed to the Chancellor.
Mr. Palmer: I take for granted that my hon. Friend's Department is making strong representations to the Chancellor of the Exchequer on this point.
Mr. Morris: My hon. Friend will not expect me to tell him what are the kinds of representations which are being made from time to time between one Minister and another.
Mr. Ridley: Why not?
Mr. Morris: I am sure that if the hon. Member for Cirencester and Tewkesbury had held office, as has his hon. Friend the Member for Yeovil he would accept that as being a correct indication of what happens.
Mr. Peyton indicated dissent.
Mr. Morris: My hon. Friend the Member for Bristol, Central said that the expansion of nuclear capacity should be a matter largely for the commercial judgment of the Central Electricity Generating Board and not a matter for the Atomic Energy Authority. I appreciate why my hon. Friend makes this remark, but perhaps, on reflection, he will consider that it is not a matter for the C.E.G.B. or the A.E.A. It is a matter for my right hon. Friend in that, at the end of the day, it is he who has to approve the capital investment of the industry, and it is not solely even his responsibility. It is also a matter for the Chanceller of the Exchequer, the Minister of Technology and, it may well be, other Ministers whom I cannot remember offhand. It is certainly not a matter only for the C.E.G.B. or the A.E.A.
My hon. Friend also asked a number of questions about the structure of the

1821
industry—the area boards, the Electricity Council, and the C.E.G.B. All I would say is that this system seems to be working adequately at the moment, but no system can be perfect and I would be interested in any representations which my hon. Friend might make from time to time.
I have dealt with some of the points raised by the right hon. Member for Guildford. Like several hon. Members, he paid a great tribute to the British nuclear energy industry. It is a matter of great pride to us all that the tender for the Dungeness B station has been successfully arranged. The right hon. Gentleman told the House of his pride when he visited British nuclear power stations. I hope to visit one myself next Monday at Trawsfynydd, in the Principality. It is a matter of great pride to the whole House that, as a country, we are playing such an important rôle in these matters.
The right hon. Member for Guildford, as did his hon. Friend the Member for Yeovil, referred to the Status Scheme for manual workers. It will be recalled that the Pearson Report commended such a scheme. All I can say at the moment is that we are in the early days of the Scheme, and I am advised that it is progressing reasonably well. I cannot add anything further at this stage.
My hon. Friend the Member for Wakefield (Mr. Walter Harrison) asked several questions about contracting. Contracting has never wholly been done by the boards, and contracting in general, looking at all the boards, has not been reduced. If my hon. Friend has any points to make on this aspect of the industry's activities, I shall be delighted if he will call to see me to speak further on these matters.
Several points were raised about the price tariff of the industry, whether the views of the customer were adequately made known, and what the rôle played by the Generating Board was. The 12 customers, through the chairmen of the Area Electricity Boards, are represented on the Electricity Council, along with the independent members. The 12 chairmen are the most interested parties of all, and the Generating Board comes to the Electricity Council to justify itself. All the consumers' consultative councils are able
1822
to make representations to the Electricity Council—one has done so recently—and ultimately they have the procedure of appeal to the Minister.
Various observations were made on the subject of research. All hon. Members are agreed on the importance of research and the adequate spending of money in the industry for this purpose. My right hon. Friend is satisfied with the programmes to date, and he watches this matter very closely. Recently, greater co-operation and co-ordination between the gas, electricity and coal industries has been instituted. All three have joined together to co-operate further, and this is an innovation which has been started by my right hon. Friend.
In addition to some points about research, which I have already covered, the hon. Member for Sheffield, Hallam (Mr. John H. Osborn) made a comment about the short notice of this debate. All I can say is that the debate was arranged in the normal way through the usual channels. If any trade associations have not been able to make their representations in time, there is the usual machinery of the consultative councils open to them, and my right hon. Friend or one of his officials is always at the disposal of trade associations if anyone is minded to make representations.
I was not present when the hon. Member for Barkston Ash (Mr. Alison) spoke, but I understand that he made a number of references to the use of labour by private contractors of the Central Electricity Generating Board, advocating—I may have the wrong impression here, as I was not present—what appeared to be the revolutionary doctrine that there should be ministerial intervention as regards the kind of labour employed by private contractors vis-à-vis the C.E.G.B. I will read carefully the hon. Member's remarks in the morning. If that was what he was advocating, it has wide implications and I was surprised to hear his remarks. I had a Question some weeks ago from the hon. Member and I tried to reply fairly fully to him. If anything further has been dealt with which is outside the Question that was asked, I will write to him in due course.
A number of questions were asked by the hon. Member for Orpington (Mr. Lubbock). He asked what would be the

1823
effect of recent developments on the second nuclear power programme. The answer is that the Government undertook that after the Dungeness tenders had been examined, they would put in hand a reappraisal of the nuclear power programme. This they are doing and we will let the House know the outcome as soon as possible. The review will cover the size, cost and composition of the programme.
Among his other questions, the hon. Member asked how things were going since maximum prices for the resale of electricity were fixed, whether any cases had been taken to court and whether my right hon. Friend was satisfied that consumers knew adequately about the arrangements. As the hon. Member knows, maximum prices have been in force only since 1st July and it is much too early to pronounce upon progress. I have asked the chairmen of the consultative councils to let me know how the new arrangements are going. We shall certainly be prepared to look into abuses and to reconsider the question if it is shown that there is genuine need for strengthening the means of enforcement.
A number of other questions remain to be dealt with, but there is not the time for me to do them justice. I listened intently to the remarks of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) when he compared the tenders which had been submitted for the Dungeness B station with some American tenders. I, too, read the series of articles in the Daily Telegraph by Mr. Duncan Burn. All I would say is that the Dungeness B tenders were competitive under British conditions. When Mr. Burn compares
1824
the price of the British tenders with what is done or may be done in America, he is not really comparing like with like. There may well be quite extraneous matters, which have little to do with the nuclear field alone, in the tenders that were put in for the British installation.
Mr. Patrick Jenkin rose—
Mr. Morris: I am sorry that there is not time to give way.
I have looked carefully into the matter because I had forewarning that the hon. Member would raise it during the debate. All I would say is that we are comparing like with like. These contracts for Dungeness were put out to competitive tender. I am sure that there is no hon. Member opposite who would not strive to maintain that kind of system.
We are dealing with a great industry which has done great service to the country. We are dependent upon it day and night for the continuance of our economy. I pay tribute once more to the enormous amount of work that has been done over the years by the servants of this industry. I commend the Report to the House.
Question put and agreed to.
Resolved,
That this House takes note of the Report and Accounts of the Electricity Council for 1963–64 (H.C. No. 331) and of the Central Electricity Generating Board for 1963–64 (H.C. No. 332).

BUSINESS OF THE HOUSE
Ordered,
That the Proceedings on Government Bills may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. W. Howie]

ORDERS OF THE DAY

  HIRE-PURCHASE BILL [Lords]
  Considered in Committee.
  [Sir SAMUEL STOREY in the Chair]
  Clauses 1 to 58 ordered to stand part of the Bill.

  HIRE-PURCHASE BILL [Lords]

    Clause 59.—(TRANSITIONAL PROVISIONS, CONSEQUENTIAL AMENDMENTS AND REPEALS.)
    Question proposed, That the Clause stand part of the Bill.
    10.0 p.m.
    Mr. Graham Page: This Clause is a blot on this Consolidation Bill, and I think it is a blot on the precedents for consolidation Measures. As the Long Title includes the words
    "with corrections and improvements made under the Consolidation of Enactments (Procedure) Act 1949"
    I think that under the rules of order I am precluded from moving any Amendment even as to the date of commencement of the Bill, and therefore the only form of attack I can make on this thoroughly objectionable part of the Bill is to oppose this Clause, and I do so. I think the Government have been thoroughly lax and lazy in putting it into the Bill.
    Subsection (4) amends a number of statutes which are set out in Schedule 5, and the first nine of those statutes are general statutes in which hire-purchase agreements happen to be mentioned and the relevant Sections have been amended so as to bring them into line with this Bill, but the tenth statute in the Schedule of Enactments Amended is the Hire-Purchase Act, 1964, the very Act which one might assume was the main subject of this consolidation. In fact it is being amended and not repealed and only part of it is being consolidated in this Measure.
    Clause 59, and in particular subsection (5), repeals the statutes specified in Schedule 6, and in Schedule 6 we see that the Hire-Purchase Act, 1938, is wholly repealed, the Hire-Purchase Act, 1954 is wholly repealed, but the Hire-Purchase Act, 1964, is only partly repealed, and in that partial repeal there
    1826
    appears a reference to the Advertisements (Hire-Purchase) Act, 1957. That Act does not appear itself either in the Schedule of Enactments Amended or in the Schedule of Enactments Repealed so it will remain in force after this so-called consolidation Bill becomes operative.
    What emerges from this is that Clause 59 ensures that this consolidation Measure leaves untouched two important branches of hire purchase law. The first is the law relating to the unauthorised disposal of motor vehicles by hirers under hire purchase agreements, that Clause contained in Part III of the Hire-Purchase Act, 1964.
    Clause 59 will, I submit, cause the utmost inconvenience by, as it were, leaving a part of the law which is being consolidated and a part of the statute which is being consolidated out on a limb, out in the cold, a sort of Cinderella of consolidation. I know that Part III of the 1964 Act, which deals with the disposal of hire-purchase motor vehicles, is concerned with the rights of third parties and not parties to a hire-purchase agreement. But that does not take it out of hire-purchase law. Would not anyone, whether he is a layman or a lawyer, expect to find that subject in this consolidation Act?
    The second point which emerges from the Schedules and subsections (4) and (5) of Clause 59 is that Clause 59 ensures that the Advertisements (Hire-Purchase) Act of 1957 remains untouched. Again, anyone, either a layman or a lawyer, would expect to find that branch of hire-purchase law within this consolidating Measure. I know that it does not directly affect the civil rights as between the parties to a hire-purchase agreement; it creates certain offences. But, none the less, it is an integral part of the hire-purchase law, and one cannot help suspecting that there has been undue haste to get the Measure on to the Statute Book in order, perhaps, to boost the Government's much publicised legislative score of so many statutes per so many dynamic days. To drag in consolidation Bills in that is unfair to members of the public which have to look at the Bills and try to understand the law from them.
    Clause 59 is even more suspect in that respect, when one turns to subsection (1). It says:
    "This Act (including the repeals effected by this section) shall not have effect in relation

    1827
    to any hire-purchase agreement, credit-sale agreement or conditional sale agreement made before 1st January, 1965."
    Not only is the independent existence of two important branches of hire-purchase law preserved by Clause 59, but the whole of the existing statutes relating to hire-purchase law is preserved in respect of agreements which were made before 1st January, 1965.
    Would one suspect from the long title of the Bill that that part of the law was being excluded from the Bill? It is
    "An Act to consolidate certain enactments"
    and not the law relating to certain agreements. I must say that Clause 59, subsection (1) seems to me to leave consolidation in chaos and confusion.
    In any ordinary statute dealing with the form and validity of contracts, it is normal to say that the reforms made will apply only to contracts after the date when the Bill comes into operation and will not apply retrospectively to contracts made prior to the Act. That is what was done in the Hire-Purchase Acts of 1938, 1954, 1964. As a result, there are now three codes of hire-purchase law. First, there is the law as it was contained in the Hire-Purchase Acts of 1938 and 1954 applicable to hire-purchase agreements made before 1st January, 1965, being of a kind unaffected by the Hire-Purchase Act, 1964.
    Then there is the second code of hire-purchase law which again is contained in the 1930 Act and the 1954 Act and again is applicable to pre-1965 hire-purchase agreements, to those agreements which are of a kind which are affected by certain provisions of the Hire-Purchase Act, 1964. Finally, there is the third code of hire-purchase law as contained in the 1938 and 1954 Acts, as amended by the 1964 Act, as applied to hire-purchase agreements made on or after 1st January, 1965.
    It is only the third of those three codes which is consolidated in the Bill, and anyone who has a pre-1965 hire-purchase contract and who wants to know the law relating to it will have to refer to repealed Acts which, for all I know, may be out of print very soon. They are certainly repealed by the Schedules to the Bill so far as future contracts are concerned, and Clause 59, by keeping the other codes alive in other
    1828
    statutes, destroys the proper working of consolidation. Of course those codes must be kept alive. We cannot, in a Consolidation Bill, after the law relating to contracts already made. The hire-purchase agreements may last for four, five, six, or even more years, and the pre-1965 code will be needed for at least that length of time.
    The proper consolidation device for doing this is to set out in a Schedule to the Consolidation Bill the law as it applies to the different kinds of contract. In the present case two Schedules would have sufficed, containing the first two codes that I mentioned. The Schedules would merely say that for such and such a contract Clauses so and so of this consolidation Bill apply, but the following are substituted for the remaining Clauses of the Bill.
    But Clause 59 discards that device. No one can rely on this Consolidation Bill as containing the law relating to all hire-purchase agreements. Let us suppose that one is dealing with a contract made last year. One will still have to collect together the law relating to that contract, which will be in the 1938, 1954, 1957 and 1964 Acts. If no consolidation had taken place, that would be so, and one could not complain, but the whole point of consolidation is to get the law together into one instrument, and the existence of a Consolidation Bill such as the one before the Committee is misleading, because one looks at the Schedule and sees the enactments repealed, the 1936 Act gone, the 1954 Act gone, the 1964 Act nearly gone, and then there is the trap. There is Clause 59 which keeps the old law in existence in respect of contracts made prior to 1st January, 1965.
    What is going to happen about two or three years hence? Will Her Majesty's Stationery Office still print these repealed Acts which will still apply to pre-1965 contracts? I am sure that the device of Schedules for obsolescent laws should have been adopted in this case. I do not think that such schedules would have been either long or complex in this case, but even if they were, that is not a reason why they should be omitted. In fact it is probably a reason why they should be included, because if they tend to be long and complex, surely it is an admission that the law which is left unconsolidated by the Bill is itself long and

    1829
    complex, which is a very good reason for consolidating it and bringing it into the Bill? I want to quote two sentences from the OFFICIAL REPORT. The first, on 28th July, reads:
    "It is far better, not only for the legal profession but also for the general public, to be able to find the whole law on a subject in one instrument, preferably in one statute."—[OFFICIAL REPORT, 28th July, 1965; Vol. 717, c. 635.]
    On 2nd August there was this passage:
    "It is for the convenience of the public and those members of the public who are particularly affected, so that if they want to find the law they can find it in a single Instrument."—[OFFICIAL REPORT, 2nd August, 1965; Vol. 717, c. 1222.]
    Both those gems of wisdom fell from the lips of the hon. and learned Solicitor-General within the last week. Yet he asks the Committee to accept Clause 59, which wholly fails to achieve that object; in fact, it does just the opposite. If the draftsman had been given more time I am sure that he would have adopted the normal course and produced a proper consolidation Measure.
    The passion of this Government for trying to advertise its dynamism by chalking up a large score of statutes going through the House has led to a rush over this Consolidation Bill, and has meant that the draftsman has failed to consolidate the law properly. He has left out of the Bill a vital part which any member of the public having to deal with this subject would expect to find in it.
    The Solicitor-General (Sir Dingle Foot): No one will accuse the hon. Member for Crosby (Mr. Graham Page) of a lack of diligence. We are indebted to him, because he has brought to our attention, night after night, features of various consolidation Measures. His first complaint was that this matter had been rushed—that we had not taken sufficient time. Why is it that we bring forward this Consolidation Bill at this time? It is to meet an undertaking which was given in the former Parliament by the right hon. Member for Bexley (Mr. Heath). In this respect the hon. Member's quarrel is not with us; it is with his own Leader.
    I remind the House what was said by the right hon. Gentleman on 18th February, 1964, dealing with the question of hire purchase. He said:
    1830
    "We have tried to hold a balance between the interests of purchasers, on the one hand, and traders, on the other. I hope the House will agree that at this stage the Bill gets the balance right. It is obvious from what the hon. Member for Kilmarnock (Mr. Ross) has said that when the Bill becomes law it will be appropriate to consider the consolidation of legislation dealing with hire purchase, and I hope that this can be done."—[OFFICIAL REPORT, 18th February, 1964; Vol. 689, c. 1048.]
    This is precisely what has been done.
    The hon. Member made various criticisms of the Bill, which were really directed at the Consolidation Committee. Neither the hon. Member nor I were members of that Committee, but various colleagues of the hon. Member, including the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), were. The hon. Member is saying that the Committee has not adequately done its work, and I feel that I must come to the defence of that Committee.
    The hon. Member for Crosby has failed to observe what the Bill is about. He has complained that we have not included in it all the provisions in the Hire-Purchase Act, 1964, and in the Act of 1957. But certain parts of the 1964 Act deal with matters with which we are not here concerned. Part III of that Act deals with motor vehicles on hire purchase. The law, which is set out in Part III of that Act, does not in any way affect the rights as between the hirer, the owner and other parties to a hire purchase agreement. That is what we are concerned with in this Measure.
    We are concerned simply with the contractual relations between the hirers and the purchasers and the other parties to the contract. That is what this consolidation Bill is about. Similarly, the Act of 1957 deals with advertising, which, again, is something which is not done in this Measure. Under the 1964 Act, Part 3 is concerned with the sale of goods. It provides the exceptions to what lawyers know as the nemo dat rules and the objective of that Part 3 is to regulate the legal position as between the owner under a hire-purchase agreement and the person who has acquired the motor car, or whatever it may be, in good faith. That is to say, we are assimilating that branch of the law to the law relating to market overt. Part 4 of the 1964 Act improves the Act of 1957 in relation to advertising.

    1831
    These are entirely different provisions, which are in no way covered by the Bill. We are dealing with a particular aspect of hire purchase, that is, the contractual rights between the parties to hire-purchase contracts. That is the only respect in which the law is consolidated.
    The other matter which the hon. Member raised was Clause 59. He criticised the Clause—as he did on Second Reading—in particular, because it refers to the date, 1st January, 1965. After all, the task of a Consolidation Bill is to consolidate the law and, in this case, it is simply consolidating the law as it was passed by Parliament under the last Government in 1964. The 1964 Act made certain considerable changes in the law regarding hire purchase and, of course, there had to be a date when those changes came into operation.
    The date which is set out in the 1964 Statute is 1st January, 1965. There is nothing novel about this. For contracts before 1965, the law is the law as it then existed. After 1st January, 1965, the law governing hire purchase is the law as it is set out in the Act of 1964 and as it is consolidated in this Act. That is a perfectly natural and logical distinction. Therefore, I respectfully suggest that there is no substance whatever in the hon. Gentleman's criticisms.
    Mr. Graham Page: The Solicitor-General has referred to an undertaking given by the then Government on the passing of the 1964 Act. I am sure that, had those who gave the undertaking—particularly the right hon. Gentleman who gave the undertaking—had the conduct of the Consolidation Bill he would have seen that it really did consolidate the law relating to hire-purchase agreements, and not only part of the law. He would have provided for a proper consolidation Bill. The hon. and learned Gentleman said that I was complaining of an offence by the Joint Committee. Not at all. The Joint Committee is not charged with reporting to the House what is not being consolidated. It is for this Committee of the House to consider that. This Committee is entitled to consider the subjects which are being consolidated and which ought to be consolidated under the long title of the Bill.
    The hon. and learned Gentleman explained that the consolidation is intended
    1832
    to be only one relating to the contractual rights between the parties, but anyone reading the Long Title and the Short Title of the Bill might assume—I think, correctly—that it deals with hire purchase law as a whole, that it consolidates hire-purchase law. This is why I say that the Bill is misleading in calling itself a Consolidation Bill and not consolidating the whole of the law.
    As the Solicitor-General said, the task of a consolidation committee is to consolidate the law, but what it has done in this case is to consolidate only that law relating to agreements entered into on or after the 1st January, 1965. That is my complaint about it. It only consolidates the law relating to certain agreements, and it is thereby misleading to the public in that it does not by means of Schedules, which are common in Consolidation Bills, deal with the obsolescent law relating to previous agreements. I still think that the Clause is a blot on a Consolidation Bill.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.
    Clauses 60 to 62 ordered to stand part of the Bill.
    Schedules agreed to.
    Bill reported, without Amendment; read the Third time and passed, without Amendment.

  HIRE-PURCHASE (SCOTLAND) BILL [Lords]
  Considered in Committee.
  [Sir SAMUEL STOREY in the Chair]
  Clauses 1 to 56 agreed to.

  HIRE-PURCHASE (SCOTLAND) BILL [Lords]

    Clause 57.—(COMMENCEMENT.)
    Question proposed, That the Clause stand part of the Bill.
    10.29 p.m.
    Mr. Graham Page: I have the same objection to this Clause as to Clause 59 in the previous Bill, namely, that it excludes from consolidation the law relating to pre-1965 agreements. As the Long Title does not include the magic words about corrections and improvements, I believe that I could have devised an Amendment which would have

    1833
    been in order in this case, but it would be a grave English constituency Member who endeavoured to amend a Scottish Bill, and it would also have involved me not only in amending the Clause, but in drawing the Schedules of obsolescent law myself, and I am afraid that I shied from that.
    I will content myself with referring the Committee to my previous criticism of this kind of Clause and with the comment that I think the inclusion of it in a consolidation Bill is unfair to those who are involved in hire-purchase transactions.
    10.30 p.m.
    The Secretary of State for Scotland (Mr. William Ross): The hon. Member for Crosby (Mr. Graham Page) will appreciate from the speech of my hon. and learned Friend the Solicitor-General that it was to me that the former President of the Board of Trade gave a pledge that there would be consolidation. If the hon. Gentleman had any knowledge of what the law of Scotland was like in regard to hire purchase, he would appreciate why not one Scottish Tory is here to support him in his protests on this matter. The law is now pellucid com-pared
    1834
    with what it was and I am sure that anyone who is interested in hire purchase matters will welcome the Clause. The Title does not refer to "all enactments" but "certain enactments".
    Mr. Graham Page: I thank the right hon. Gentleman for his remarks. I did refer to the phrase "certain enactments" in connection with the Title of the previous Measure. I think that it should have contained the other phrase to make the matter clear to the public. I will merely quote some words used by the Solicitor-General in the House the other night, when he said:
    "Oliver Cromwell once described the laws of England as 'a tortuous and ungodly jumble'."—[OFFICIAL REPORT. 2nd August, 1965; Vol. 717, c. 1221.]
    I suggest that the law of Scotland could be similarly described.
    Clause ordered to stand part of the Bill.
    Clause 58 ordered to stand part of the Bill.
    Schedules agreed to.
    Bill reported, without Amendment; read the Third time and passed, without Amendment.

  SALMON AND FRESHWATER FISHERIES BILL [Lords]
  Order read for resuming adjourned debate on Question [2nd July]. That the Bill be now read the Third time.
  Question again proposed.
  10.33 p.m.
  Colonel Sir Tufton Beamish: I am glad to have this opportunity to make a few remarks about the Bill. I would, at the outset, like to say how greatly I appreciate the assistance I have had from the Government during the passage of the Measure. I am glad to see the Joint Parliamentary Secretary in his place and I hope that he will comment on the Measure before we give it its Third Reading, as I am sure we will.
  The Bill started life as a Private Member's Measure in this House. I drew a low place in the Ballot and the Bill ran into some minor difficulties. As a result, it was transferred to another place, where it was skilfully handled by the noble Lord, Lord Egremont, helped on by the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food in another place. It was owing to a misunderstanding that the Bill did not get its Third Reading in this House. Now that the difficulty has been cleared away, we are having what I think will be a short Third Reading debate.
  I will briefly describe what the Bill sets out to achieve. It is an all-party Measure and has had the support of the three parties in the House throughout its journey. It has also had the backing of the River Authorities' Association and widespread backing in the country. There has been no opposition at all and, as I have indicated, it has throughout had the blessing of the Government, for which I am grateful.
  The Bill is based on Chapter 14 of the Bledisloe Committee's Report, in which the Committee recommended very strongly indeed that the penalties for persons killing fish by illegal methods—by which I mean the use of explosives, electrical devices or poisons—should be substantially increased. There is a common factor in these three methods; their indiscriminate character. There is nothing selective about killing fish by any of
  1836
  these methods. Those who have indulged in these indiscriminate methods have had rich hauls and have made fat profits, and have caused very severe damage to many rivers in England and Wales, as they had previously in Scotland. If these methods were to be allowed to continue with impunity for two or three years more, some of the finest salmon and trout rivers in England and Wales could be destroyed for a long time to come.
  The most serious method used by these poachers is the use of poisons, particularly a poison called Cymag—well known to many right hon. and hon. Members as one which is legally and properly used for the destruction of pests, particularly rabbits and rats. There is clear evidence that, in one night, gangs of poachers using this poison can make as much as £300, £400 or £500. I have amassed evidence from Cumberland, Westmorland, Lancashire, the West Country and Wales, but these methods could be used anywhere that the poachers chose.
  The main object of the Bill is to make the punishment fit the crime, and it is my hope and expectation that if and when it becomes law it will nearly eliminate the scientific gang poaching that has been going on for a number of years in England and Wales. The Bill is modelled on the Scottish Act of 1951, which was wisely passed by a Labour Government and has been very effective in Scotland.
  The Bill would become operative within three months of its enactment. It repeals and re-enacts with amendments Section 9 of the Salmon and Freshwater Fisheries Act, 1923—which, after all, is now more than 40 years old. At the same time, it somewhat widens the scope of that Section in order to improve the chances of conviction. It also sets out to strengthen the enforcement powers held by river authorities.
  Penalties are the nub of the Measure. The penalties in Section 9 of the 1923 Act are today derisory—so much so that they have ceased to deter at all. Very few prosecutions are now brought under the Section, and a great deal of poaching has been able to continue with impunity. The Bill's object is to provide penalties that will ensure that there is a real deterrent.

  1837
  Under the 1923 Act, the maximum fine for poaching of this scientific and rather wicked character is £50, which I believe is the maximum fine one can incur for unintentionally parking one's car without sidelights. The Bill provides a penalty on summary conviction of imprisonment of up to three months or a fine of up to £50; or, on a second offence, for a fine of up to £100, or, in either case, both imprisonment and fine. It provides, on indictment, for imprisonment for up to two years or for a fine for which no maximum is laid down, or for both. In its penalties on summary conviction and on indictment the Bill follows lines similar to those already incorporated in the Scottish Act of 1951.
  The Measure also provides, as I think is important, for certain forfeitures. On summary conviction, it provides for the forfeiture of fish and instruments, and on indictment it provides also for forfeiture of vessels and vehicles. Here, again, the Bill follows broadly the valuable precedent set in the Scottish Acts, which have been thoroughly effective.
  These are the objects and effects of the Bill, which naturally, includes consequential amendments to other Acts. It is not just a rich man's salmon fishing charter. It may come as a surprise to some people to know that last year river boards issued more than 50,000 licences for salmon and trout fishing. It may come as even more of a surprise that in England and Wales last year more than 400,000 licences were issued for people who wished to fish for non-migratory fish, which include trout. Salmon and trout fishing is enjoyed by a very large number of people of all sections who get an enormous pleasure from it, and it also provides a great tourist attraction. England and Wales are justly famous for some of the best salmon and trout fishing in the world. It is a national asset to us.
  I repeat my thanks to the Government for facilitating the Bill to its Third Reading and I hope that it will be really effective in ending the wicked and selfish behaviour of a very small number of people who, if that behaviour went unchecked, would destroy this national asset.
  10.42 p.m.
  The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): As the hon.
  1838
  and gallant Member for Lewes (Sir T. Beamish) said, this is a Private Member's Bill which he introduced in this House. I am sorry that it was blocked here, but I am glad that in another place we were able to see it go through without opposition. It is an all-party Bill which is backed by the river authorities.
  I thank the hon. and gallant Member for his kind remarks about the Government giving assistance to and supporting the Bill. The Bill extends the provisions of the Salmon and Freshwater Fisheries Act 1923, against the more obnoxious forms of fishing by means of explosives, poisons and electric shock. The hon. and gallant Member did not mention paragraph (c) of Section 9 of that Act, which makes liable any person who
  "unlawfully or maliciously cuts through, breaks down or otherwise destroys any dam, floodgate or sluice with intent thereby to take or destroy fish."
  Little did I think in my youth that I would stand at this Box to help through Parliament a Bill dealing with actions in which I took part. I did not do it for huge profits but for the pot, when I shut a dam or put down a sluice. I welcome the Bill and hope that it will get its Third Reading.
  Question put and agreed to.
  Bill accordingly read the Third time and passed without Amendment.

  CRIMINAL PROCEDURE (ATTENDANCE OF WITNESSES) BILL
  Lords Amendments considered.
  CRIMINAL PROCEDURE (ATTENDANCE OF WITNESSES) BILL

    Clause 2.—(SUMMONS TO WITNESS TO ATTEND COURT OF ASSIZE OR QUARTER SESSIONS.)
    Lords Amendment No. 3: In page 2, line 28, leave out subsection (4).
    10.43 p.m.
    Mr. Martin McLaren: I beg to move, That this House doth agree with the Lords in the said Amendment.
    This is a paving Amendment leading to Lords Amendment No. 4. I suggest, Mr. Deputy-Speaker, that it might be convenient to consider it with Lords Amendment No. 4.
    Mr. Deputy-Speaker (Dr. Horace King): Yes, if the House wishes.
    Mr. McLaren: When the Session began I never thought that I should be responsible for an Order of the Day starred on the Order Paper as a Government Order of the Day, or that the Government would suspend the rule at ten o'clock partly for my benefit. I am very much obliged to the Government for their kindness in finding time for these Lords Amendments to be considered.
    The new Clause repeats Clause 2 (4) which is to be deleted and puts an end to the issue of subpoenas in a further case, namely, where a witness summons can be issued to compel the attendance of a witness at a magistrates' court under Section 77 of the Magistrates' Courts Act, 1952. The material words of that Section are:
    "Where a justice of the peace … is satisfied that any person … is likely to be able to give material evidence, or produce any document or thing likely to be material evidence, at an inquiry into an indictable offence by a magistrates' court … or at the summary trial of an information or hearing of a complaint by such a court … the justice shall issue a summons … requiring"
    the attendance of the witness.
    That is the ordinary procedure, but there is reason to think that the Crown Office subpoena has been used as an alternative procedure in cases where the party issuing the subpoena knows that he would fail to satisfy the magistrates that the witness could give any material evidence, because the Crown Office subpoena can be obtained without him having to show that. It is true that the witness may then issue a summons. He can apply to the High Court to set the subpoena aside on the ground that he would be unable to give any material evidence.
    In practice, some difficulty arises in cases where the party delays serving his subpoena until it is too late for the witness to make the necessary application to the Divisional Court. It seems right that the parties should have to use the procedure under the Section of the Magistrates' Court Act, as a person ought not to be exposed to the trouble of attending a court to give evidence, unless it can be shown that he can give some material evidence.
    The Amendment was suggested by the Lord Chief Justice, who, in Committee in another place, spoke in its support. It may be a comfort to Ministers to think
    1840
    that they may be the main beneficiaries of this provision, because it has been known for subpoenas to be served on Ministers on inadequate grounds.
    The Minister of State, Home Office (Miss Alice Bacon): I think that this is the last piece of legislation which will be put before the House before the Summer Recess. It is rather remarkable, after all the months we have had of long sittings, of all-night sittings and controversy, that this should be a Bill introduced by an Opposition Whip and given Government time after ten o'clock at night.
    The Bill is based on the Sixth Report from the Criminal Law Revision Committee. The proposal in the new Clause was not among the recommendations of that Committee. As it relates to proceedings at magistrates' courts, it was not within their terms of reference which related only to attendance at courts of assize or quarter sessions. But this Amendment was suggested in another place by the Lord Chief Justice who supported it in Committee, and I agree with the hon. Gentleman and accept the Amendment.
    Question put and agreed to.
    Subsequent Lords Amendment agreed to.

    New Clause B.—(POWERS OF PARLIAMENT OF NORTHERN IRELAND.)
    Lords Amendment No. 5: In page 5, line 31, after Amendment last inserted, insert new Clause B:
    "B. Notwithstanding anything in the Government of Ireland Act 1920 the Parliament of Northern Ireland shall have power to make laws for purposes similar to the purposes of this Act."
    Mr. McLaren: I beg to move, That this House doth agree with the Lords in the said Amendment.
    This proposed Clause enables the Parliament of Northern Ireland to pass laws for purposes similar to any of the purposes of this Bill. It is necessary to have a provision on these lines as any matter relating to the Supreme Court of Northern Ireland is a reserve matter on which the Parliament of Northern Ireland, in the absence of further statutory provision, is unable to legislate owing to the provisions of the Government of Ireland Act, 1920.
    Question put and agreed to.

    Clause 8.—(SHORT TITLE, CONSEQUENTIAL AMENDMENTS AND REPEALS, COMMENCEMENT AND EXTENT.)
    Lords Amendment No. 6: In page 6, line 6, leave out from beginning to "does" in line 7 and insert:
    "(5) Any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, and as including a reference thereto as extended or applied, by any other enactment.
    (6) Section (Powers of Parliament of Northern Ireland) extends to Northern Ireland and so much of this section and Schedule 2 to this Act as relates to the Writ of Subpoena Act 1805 extends to Scotland and Northern Ireland, but, save as aforesaid, this Act"
    Mr. McLaren: I beg to move, That this House doth agree with the Lords in the said Amendment.
    The new subsection (5) in this Amendment is consequential on Amendment No. 4, to which we have already agreed. Provisions in this form are the favourites of parliamentary draftsmen. The procedure under Section 77 of the Magistrates' Courts Act has been extended to the issue of witness summonses in proceedings in magistrates' courts under other Acts, and this subsection brings within the scope of the Bill all such other proceedings.
    The new subsection (6) is consequential on Amendment No. 5, to which we have already agreed.
    Question put and agreed to.
    Remaining Lords Amendments agreed to.

  TAXICABS (SIX-MILE LIMIT)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
  10.54 p.m.
  Mr. Dudley Smith: It seems amazing that the six-mile taximeter limit, which was introduced in the last century with the express intention of stopping cab horses from exploitation, is still in existence, particularly as cab horses now seem to have departed from the scene.
  I am sure that the Joint Under-Secretary of State for the Home Department, who, very kindly, is to answer the debate, will agree that this limit is now very much out of date. Indeed, since the introduction
  1842
  of the internal combustion engine and the expansion of mechanised transport, London has grown considerably in size, and its communications are vital. A six-mile limit in the Metropolis now, particularly with the suburbs as they have developed, is totally inadequate.
  All of us have occasion from time to time to use London taxis, and, on the whole, it can be fairly said that the service is a reliable one with very high standards. The hon. Gentleman's Department has gone to great trouble to maintain this high standard, as have the Metropolitan Police. The safety and quality of the cabs and the training of drivers are vital factors, as are maintenance and the general standards observed.
  I have found that most drivers are reliable and friendly, and my comments tonight are not meant as a criticism of the trade as a whole. I am thinking, rather, of the small proportion of drivers who get it a bad name by trying to exploit the six-mile limit and—I must add this in fairness—of the snail-like pace of the hon. Gentleman's Department in tackling what is known to be a matter of some controversy, taking the whole of this Parliamentary year so far to arrive at a conclusion.
  I exonerate the hon. Gentleman himself from any criticism in this matter, because I know that he is personally very keen to solve it. I only wish that his right hon. and learned Friend the Home Secretary had pressed on with it more strongly some months ago. I say much the same about the representatives of the cab drivers and owners who have been to the Home Office on several occasions and tried to reach agreement on the sort of change which is needed. I hope that, perhaps, as a result of this Adjournment debate, they may soon bring their deliberations to a conclusion.
  During the course of this parliamentary year, I have asked a series of Questions on the matter, and each time I have received what is known in ministerial jargon as a holding reply. The last one—the hon. Gentleman must be sick of having these Questions tabled to him—came on Thursday, 9th July, when, in a Written Answer, the hon. Gentleman said:
  "Discussions are continuing with the cab trade on a suitable fares structure, but I cannot say when it will be possible for legislation to be introduced."

  1843
  In a further Answer to my hon. Friend the Member for Bournemouth, West (Sir J. Eden) on the same day, he said:
  "The object … is to arrive at a suitable basis for the statutory control of fares for all journeys within the Metropolitan Police District."—[OFFICIAL REPORT, 8th July, 1965; Vol. 716, c. 284.]
  Perhaps I ought to declare a minor interest in this matter. I have a small financial connection with a company which is indirectly concerned with the taxicab trade; but this matter is a long way removed from that, and my interest stems from entirely different motives. I have raised this question in the past and, no doubt, I shall have to raise it again because, like all members of the public, I use taxicabs from time to time, and many of my constituents are seriously affected by the problem.
  From the inquiries I have made, I have formed the opinion that there is a general desire on the part of the public for the limit to be extended, and I am sure that many cab owners and drivers take the same view. I have made a point of conducting my own public opinion poll among all taxi drivers I have encountered, and, so far, I have found a distinct majority in favour of change, albeit that they cannot entirely agree on what they want.
  The most significant aspect of the necessary change would affect conditions at London Airport. It would stop the squalid exploitation which goes on of a number of passengers arriving at the airport, particularly foreigners coming here for the first time. A small number of unscrupulous drivers get this country a bad name by haggling with strangers—sometimes people who can barely speak English—when they arrive. To use a colloquialism, they really "take them for a ride". I have heard of very unpleasant scenes when drivers arriving with their passengers in the centre of London have demanded £5 or even as much as £10 and have got it because people pay up to save embarrassment.
  I conducted an experiment today. I chartered a taxi outside the Palace of Westminster, and I was told by the driver that he wanted £2 10s. to take me to London Airport. I thought that this was rather steep, and asked if he could reduce it. He said that he could not because
  1844
  he would have to make the return journey back from London Airport without a fare, although I reminded him that, once he came within the six-mile limit, round about Hammersmith, he would have a very good opportunity of picking up another fare. However, we agreed, and I went out to London Airport.
  I met a number of taxi drivers there who were lining up waiting for passengers. I think that one or two of them were a little hostile when they recognised me and realised what I was about, but, on the whole, a large number did agree with me that there was a problem which needed to be settled. I was appalled to find that there were large numbers of pirate taxi drivers, not drivers licensed by the hon. Gentleman's Department or by the Metropolitan Police, but those who clearly take their cars there and tout around for custom in the exit halls. I am told that there are as many as 100 incidents a day of people who are being taken away, I should have thought illegally, and charged the earth for their journey. I blame the airport authorities for this; it could have been stamped out.
  My hon. Friend the Member for Cardiff, North (Mr. Box), a neighbour of the Joint Under-Secretary, told me only this evening of a woman friend of his family who arrived at London Airport only three weeks ago, got into a taxi with her luggage and was told by the driver that the cost would be £3 10s. When she said that she thought that it was extortionate, she was told by the driver that she could take it or leave it. She thereupon took out her cases and carried them over to the airport bus, to the jeers of some of the assembled taxi drivers. Again, this is an extraordinary business and is something which should be stopped. I believe that my hon. Friend wrote to the Minister of Aviation about this incident.
  I know that the Joint Under-Secretary is not responsible for what goes on at London Airport, but I urge him to have consultations with his right hon. and learned Friend the Home Secretary to see whether a new system could be devised. Many of these cabs which ply for hire at London Airport are licensed by the Metropolitan Police. I have also had complaints, not merely concerning London Airport, but from constituents of mine in Chiswick who, for some reason

  1845
  or other, have had to take a taxi from one of the London termini to Chiswick, which is not all that far, and have faced bills of between 30s. and £2 as a result.
  My solution to the problem—I realise that it may not be acceptable to the Home Office—is that the meter limit should be extended to 12 miles and that anything after that distance should be charged at double fare. I know that London Airport is more than 12 miles from the centre of London, but this is a special case and there could be an agreed tariff which could be prominently displayed at the airport and which could be the subject of airport police enforcement. Perhaps even a special licence to ply for hire at the airport could be introduced, the licence coming from the hon. Gentleman's Department.
  It has been suggested in some quarters that under new regulations which might be introduced double fare might be charged after six miles. At least, this would be an improvement on the present situation, but I still consider that a limit of six miles is unrealistic in this day and age. Drivers to whom I have spoken about this tell me that they should not be under any obligation to undertake fares over six miles. They may well have a good case on this, particularly sometimes when they are on return journeys going home.
  I should have thought that, once the regulations are changed—and I hope very much that in due course they will be—action could be taken against any man who refused a fare and was then caught trying to extract money from any person, saying, "I cannot do it for the set rate. If you pay me a little extra, I might be able to think about it", so that these people would be severely penalised.
  From studying the facts, I am left with the view that the Home Office really must act quickly, because this matter has dragged on for a long time. It is in the public interest that the meter limit should be changed. It is in the genuine interest of the owners and the drivers of cabs. It is certainly time that this un-savoury Eastern market-type trading which goes on at London Airport and other public places was ended once and for all.
  I am told by my hon. Friends who have done a lot of travelling on the Continent
  1846
  of Europe that this practice certainly does not happen at continental airports. It certainly should not happen here. I hope that the Joint Under-Secretary will quickly take action.
  11.3 p.m.
  The Joint Under-Secretary of State for the Home Department (Mr. George Thomas): I congratulate the hon. Member for Brentford and Chiswick (Mr. Dudley Smith) on the pertinacity that he has shown concerning this question. He has been a campaigner ever since I have held this office, and I know that he was before. He is, of course, quite right to remind us that the question of the taxicab service in the great metropolitan city in which we find ourselves is a matter of public concern.
  Before dealing with the points that the hon. Member has raised, I hope that he will not mind if I reject his charge that we have moved at a snail-like pace. This problem did not begin in October last. It was part of the legacy which we inherited on taking office and about which we have talked so much during recent days. That is the lighter side, but it is a problem. Until last autumn, it was an intractable problem. It was quite impossible to get the trade, which is an involved one with drivers, journeymen-drivers and owners all having their separate interests, together to discuss the problems which worry us all.
  I want to say at once that I share the indignation of the hon. Gentleman at that minority of taxicab drivers who hold the public to ransom whenever it gets the chance. I was horrified at the story which the hon. Gentleman told us had been recounted to him by my own Member of Parliament, the hon. Member for Cardiff, North (Mr. Box), of the lady who was jeered at by other taxi drivers when she went to the bus. Making people feel small if they do not agree to pay the extortionate charges which some taxi drivers demand is something that the rest of the trade, as the hon. Gentleman rightly said, finds reprehensible. The majority of drivers know that it is damaging to them.
  The law at present is that a taxi driver must accept a hiring for any journey within the Metropolitan Police District and the City of London of up to six miles or one hour in duration. That obligation applies whether the driver is standing or

  1847
  plying for hire. The High Court ruled in 1947 that a fare scale prescribed by the Secretary of State by Statutory Instrument applied only to journeys of up to six miles, so that, under the present law, a taxi driver is entirely within his rights to demand what he likes for any journey over six miles, if he undertakes to do it.
  The driver can refuse to go beyond the six miles, but if he agrees to do it; it is a matter for what is euphemistically called an arrangement between the passenger and the taxi driver. A notice to that effect is displayed in the passenger compartment of all our taxis. It is fair to say that there has been growing public opinion against the six-mile limit, which is now regarded as thoroughly unsatisfactory. It is true, also, that it dates back to the days of the horse-drawn cab.
  Instances have been given to us tonight by the hon. Gentleman of fares of up to £10 being asked for journeys to or from London Airport. I want to link myself with the criticisms which the hon. Gentleman has made about those abuses. The tourist industry and the airways companies have been urging a change in the law in order that the position should be rectified. The recent strike at B.E.A. which paralysed normal forms of transport presented an opportunity for exploitation when a monopoly position was created. It is intolerable that the British public and foreigners visiting our country should be held to ransom. It is a disgraceful situation which makes a speedy solution urgently necessary.
  We have not been dragging our feet. Since last year confidential discussions have been entered into with the trade. As they are confidential I know that the House would not expect me to reveal in detail the views of the several constituent parts of the taxicab trade, but I can tell the House that we have now reached the stage where all sides of the trade recognise that the six-mile limit of controlled fares is unsatisfactory in modern conditions, and are anxious that the good name of the trade should not continue to suffer through practices indulged in by a minority.
  The Home Office believes that it is desirable to introduce control over the fares for all journeys of whatever length within the Metropolitan Police District, and I believe that I am right in saying
  1848
  that the trade now also accepts this in principle. But it is one thing to accept it in principle. It is another thing to get agreement on details.
  I mentioned that there are a number of organisations within the trade, each with its own legitimate interests, and we believe that it would not be fair to the trade to regulate the fares for journeys of any length within the Metropolitan Police District on the basis of the present tariff which applies only for the shorter journeys, namely, those of up to six miles, or one hour in duration.
  We have to remember that the further from the centre of London the taxi driver goes, the less likely he is—as the hon. Gentleman's taxi driver told him today—of getting a return fare back into the area where most of the demand for taxis exists. To enable the trade to provide a service for the longer distance hiring without financial loss or resultant impairment of the standard of service, as a first step we must devise a suitable fare structure under which a somewhat higher tariff would apply for the longer journeys.
  Mr. Dudley Smith: Will that mean a slightly higher tariff within the present six-mile limit?
  Mr. Thomas: No. It would be for the longer journeys. I do not know what amendments will need to be made to the tariff which exists for the six-miles, but it is not part of the case for dealing with the problem of the longer journeys.
  I am pleased to tell the House that we believe that a solution is not far off. I feel, in particular, that the drivers' representatives realise that a solution could only encourage public confidence in the trade; a confidence which, in its turn, would have a beneficial effect on their business, but one of our major difficulties is that all London cabs are required to be fitted with taximeters so constructed as to be capable of recording the prescribed fare for journeys up to six miles, and, clearly, it is desirable that any revised tariff that may be authorised in the future for longer journeys should also automatically be recorded on the meter.
  It is important for the relationship between the passenger and the driver that they should both have recorded for them what the charge should be, but the meters available at present are capable of recording reliably only two tariffs, the basic

  1849
  one, and another exactly double the first, and this higher tariff would come into operation at a pre-determined point, calculated by time and distance combined for any journey.
  It is not possible to record a more sophisticated graduated tariff, rising in stages throughout the journey. This could be achieved only by a completely new meter whose development would take a good deal of time, be costly, and perhaps quite uneconomical. I am sure that the hon. Gentleman and the House will recognise at once the implications of this for the preparation of a new scheme of taxi fares. We have to decide on a tariff which is fair both to the public and to the trade. It must also be capable of being accurately and automatically recorded on the taximeter; but, in so doing, our choice is virtually limited to the point of distance at which to introduce a tariff double the basic one.
  The hon. Gentleman suggests 12 miles instead of six, but that is not a suggestion we can readily accept; and I will try to explain why. It would result in a considerable reduction in drivers' incomes. The journey to London Airport would then be well below the recommended rates which, I think, are £2 10s. or £2 15s. and it would be very hard to justify such a drastic step. These factors are not easy to reconcile, but we believe that it can be done, and done in the reasonably near future—that is, in a matter of months.
  If fares for all journeys were prescribed by law at a level which would enable the driver to have a fair return, it might be unnecessary to vary the present compulsory distances. An extension to 16 miles, which, I understand, is the distance between Central London and London
  1850
  Airport, could be justified only if the most exceptional circumstances were present, but I hope—although I can put it no higher—that a suitable scheme can be devised in the next few months. It will not be for lack of effort on our part if it is not. Present arrangements are under an Act of Parliament, and fresh legislation would be needed to alter them, and the trade is in no doubt about our determination to bring to an end the present system whereby people, and particularly strangers, are being put in an embarrassing position and often exploited by overcharging.
  The hon. Gentleman referred to certain practices at London Airport which, I am pleased to say, come under the jurisdiction of my right hon. Friend the Minister of Aviation rather than that of the Home Office. I know that my right hon. Friend the Minister is concerned about the question of the pirate taxicabs, which are a matter for him. I can go no further at present than to say that he is tackling this problem. This is not merely a question of regulations. It is a matter which would have to result in legislation, but I assure the hon. Gentleman that his determination to see a change in the present taxicab rules in London is shared by the Government. We must, however, reach this change by agreement or, at least, we hope to reach it by agreement.
  It certainly looks now as if we shall soon be in a position in which the drivers, the journeyman drivers, the owners and the Government are all agreed on steps which will remove what is an unpleasant blot upon a public service, which, as the hon. Gentleman says, has served our people so well.
  Question put and agreed to.
  Adjourned accordingly at twenty minutes past Eleven o'clock.

MINISTRY OF AVIATION
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TECHNOLOGY
  Economics and Statistics Division (Staff)
  Economics and Statistics Division (Staff)
  Computers
  Computers
  Hovercraft (Cross-Channel Services)
  Hovercraft (Cross-Channel Services)
BOARD OF TRADE
  Control of Office Development Order (Birmingham Conurbation)
  Control of Office Development Order (Birmingham Conurbation)
  Companies Act (Section 195)
  Companies Act (Section 195)
  Machines (Import Duty Relief)
  Machines (Import Duty Relief)
  Development Districts (Government Policies)
  Development Districts (Government Policies)
WALES
  Old Colliery Sites, Abertillery (Clearance)
  Old Colliery Sites, Abertillery (Clearance)
  Council for Wales and Monmouthshire (Report)
  Council for Wales and Monmouthshire (Report)
  Population
  Population

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bristol
The Lord Vernon—Took the Oath.

COMPULSORY PURCHASE OF LAND
2.36 p.m.
LORD INGLEWOOD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will advise local authorities acquiring by compulsory purchase order land claimed to be needed urgently for housing not to delay the service of notice to treat, in cases where the owners concerned are anxious to complete the sale.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON): My Lords, Her Majesty's Government have no reason to think that this is a widespread problem, but if the noble Lord has any particular case in mind and will let me have the details, I will have inquiries made.
LORD INGLEWOOD: My Lords, I thank the noble Lord. It may well not be widespread, I agree, but on the other hand the rare cases where it arises can cause very great hardship, as he will appreciate. Would the noble Lord look into the circumstances of the County Borough of Sunderland's recent compulsory purchase orders, when he might see that some hardship is being caused?
LORD MITCHISON: I shall be glad to look into it.

PROPOSED POSTAGE STAMP DESIGNS
2.48 p.m.
LORD BR AYE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the widespread public dissatisfaction, they would order the Swastika and German Cross beside the head of Her Majesty the Queen to be removed from the fourpenny stamps which it is intended to issue in September next to commemorate the Battle of Britain, and replace these Nazi emblems by a more suitable design.]
LORD HOBSON: My Lords, the stamps referred to are two of a block of six designs depicting different aspects of the Battle of Britain. On one, the broken Swastika, half covered by the sea, is shown on the shattered tail fin of a Luftwaffe bomber that has been shot down and is sinking into the English Channel. Above, four R.A.F. fighters ride triumphant. The other shows a German Cross on the wing-tips of a Messerschmitt 109E overlapped by the wing tip of a Spitfire. Since this is what the Battle of Britain was all about, my right honourable friend does not propose to withdraw the stamps.
LORD BRAYE: My Lords, as a supplementary question, may I ask the noble Lord whether, in view of the considerable number of complaints that have been received about these designs, and the Questions which are down in another place to-day, Her Majesty's Government will reconsider their decision?
LORD HOBSON: My Lords, I appreciate, as I am sure Her Majesty's Government do, the quite considerable amount of disquiet that has been expressed about the publication of stamps of these designs. But I would point out to the noble Lord, and to the public in general, that they are under no obligation to purchase these stamps. First, the ordinary 4d. stamps will be on sale and, secondly, there will be a number of other stamps commemorating the Battle of Britain of the same money value as are those to which some people have taken offence.
LORD BLYTON: My Lords, is my noble friend aware that I can understand the sensitivity of people regarding the Swastika cross being on the stamp? But why have there not been any Questions to the Government on the Swastika cross in the picture in St. Stephen's Hall

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which shows King Alfred the Great defending the shores of Britain at Swanage Bay?
LORD HOBSON: My Lords, I thank the noble Lord for drawing my attention to the matter which he has raised.
LORD BRECON: My Lords, will the noble Lord not agree that people are not bound to buy these stamps, but they are bound to receive them?
LORD HOBSON: That may be so, my Lords.

RESTRICTION ON UNIVERSITY BUILDING PROGRAMME
2.41 p.m.
LORD WYNNE-JONES: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what effect the recent statement of the Chancellor, of the Exchequer will have on the approved programme of university building and therefore on the attainment of the accepted time-table of university expansion.]
THE MINISTER OF STATE FOR EDUCATION AND SCIENCE (LORD BOWDEN): My Lords, university building projects for which contracts have not yet been signed will be postponed for six months, except in development districts and areas of high unemployment. My right honourable friend the Secretary of State for Education and Science, in consultation with the University Grants Committee, will consider urgently how best to reduce to a minimum the effects of this decision on the growth in student numbers.
LORD WYNNE-JONES: My Lords, I thank my noble friend for his Answer. But may I ask him whether he is aware that the growth of the population which is likely to come to universities has, according to the estimates of the Department of Education and Science, increased so much beyond the original Robbins estimates that by the year 1970 the numbers possibly coming to universities will be roughly the same as the Robbins estimate for the year 1975; and that therefore, if the building programme is delayed
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it will be impossible for the universities to meet the challenge which has been put forward?
LORD BOWDEN: My Lords, the question of student population and the potential growth of the universities is very much in the minds of the Department, and is constantly being studied. We are, of course, only too well aware of the fact that there will be congestion in the universities; and that is why we deplore the need for these cuts in the building programme, which may be as serious in their effect on universities as were the cuts which were imposed in 1962. I was myself a member of a university at that time and I well remember how important they were. I can assure the noble Lord that we shall do everything we can to mitigate the troubles otherwise inevitably to be expected.
LORD LEATHERLAND: My Lords, perhaps I should declare an interest, as I am the Treasurer of the University of Essex, which of course is a completely unpaid post. I wonder whether my noble friend will undertake to see that a very special case is put up for the new universities. Is he aware that they are already finding it difficult to put up quickly the bread-and-butter buildings, which are already possessed by the older universities? Does he realise that, if contracts are cancelled now, these new universities, which are already grappling with a difficult task, will probably find themselves without the vitally essential buildings needed for their various departments?
LORD BOWDEN: My Lords, all these matters, and many others—since, in my experience, all universities are uniquely unfortunate—are being actively considered by the Department in an attempt to see what we can do to help. There are other cases where I have discovered that large and expensive buildings may have to stand empty unless certain additional small contracts are placed, and this situation we are investigating.
THE EARL, OF DUNDEE: My Lords, can the noble Lord assure us that the Government have not abandoned the ultimate purpose of providing a university education to every applicant who wishes to have one and who can qualify by passing the necessary examination?
LORD BOWDEN: My Lords, this will remain our ambition. What we cannot necessarily define is the date by which we can accomplish it.
LORD SHERFIELD: My Lords, has the noble Lord's attention been drawn to the report of the Estimates Committee in another place in which they state that. if the Robbins target is to be achieved without prejudice to accepted standards of university education, a further large increase in the capital grant of the Vote they were investigating (before the latest measures) would appear inevitable? Is this not a disquieting situation and does the noble Lord think it right that the new measures should bite on capital grants for universities but not, apparently, on grants for other educational building?
LORD BOWDEN: My Lords, I understand only too well the implications of what the noble Lord has said. The question as to whether the cuts should fall on schools or universities is an extraordinarily embarrassing choice and I think that, on balance, in the light of the information we have, the Government have made the right decision. The schools have had a raw deal for some time, and furthermore the important point which we always have to make is that new schools are required where new housing estates are being developed. For this reason the schools have had to have a greater priority than the universities.
LORD BYERS: My Lords, is the Minister aware that this is really a shortsighted decision? Is he not aware that, if we are to get greater efficiency in industry, we must have more highly educated people as soon as possible? I think the priorities have gone wrong.
VISCOUNT ECCLES: My Lords, does the cut fall on technical colleges?
LORD BOWDEN: My Lords, yes indeed in some measure, and this is a matter which is now being investigated. I cannot say how much we all deplore the necessity for these cuts, which will in fact be cruel in their impact on universities and which may indeed damage our long-term prospects. However one point in mitigation is that the cut is only for six months. Furthermore, in some cases—with regard to technical colleges in particular—so far as I can make out the cuts will be more apparent than real, inas
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much as the building programmes are already behind schedule.
LORD BRECON: My Lords, the noble Lord said that there would be no delay in projects in development districts. Does this mean there will be no delay in any project for the University of Wales? Has he consulted his right honourable friend the Secretary of State for Wales, and, if so, what agreement did he come to?
LORD BOWDEN: My Lords, the definition of a "development area" does not by any means include the whole of Wales. But I think that two university colleges in particular will almost certainly escape without any cut at all. This matter is still being considered, and I cannot make any further comment upon it at the moment.
LORD CARRINGTON: My Lords, if the cuts are to be more apparent than real, why do the Government go out of their way to take credit for the cuts?
LORD BOWDEN: I did not say that: I said that some of the cuts for technical colleges were more apparent than real.
LORD CHORLEY: My Lords, do the cuts apply to the teacher-training college programme as well?
LORD BOWDEN: My Lords, the answer is yes, but only to a very small extent.
LORD CONESFORD: My Lords, is this an example of "Stop" or "Go"?

AID TO KENYA
2.48 p.m.
LORD BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what is the total commitment, since independence, for advances and subventions to Kenya; also, what are the terms for the latest subvention just announced.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON): My Lords, the total commitment since independence, in cash and kind, and

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including cancelled loans, is about £62 million. Of this, about £53 million was included in a programme of assistance to Kenya which has come to be known as the "Independence Settlement", and was agreed on June 3, 1964. The balance of assistance is about £9 million. Of this, £365,000, which represents the latest subvention, will be mainly by means of a 30-year loan with a waiver of interest for the first five years and a five-year grace period on capital repayments.
LORD BARNBY: My Lords, I thank the noble Lord for his reply. Does it not seem that the present state of our finances is not such as to justify long-term loans free of interest? Secondly, with regard to the total sums, which seem quite large in relation to Kenya's population, would it be possible to publish some information which would indicate what these total grants amount to per capita, and what is the estimated national income per capita of Kenya. May I also explain to the noble Lord that my Question was put down prior to the publication of this document, which only appeared to-day? From the two relevant schedules it seems that the figure is £24 million in the present financial year; and I seem to recollect that two years ago there was a report of the figure being £57 million. Perhaps the noble Lord could tie them up.
LORD WALSTON: My Lords, I think any noble Lord or other person who is sufficiently interested in this question can acquaint himself with the total population of Kenya—I am afraid I am ignorant as to the accurate figure—and one could then work out the aid per capita that is being given and has been given in the past.
With regard to the way in which this aid has been made up, as the noble Lord will realise from my original Answer, a great part of this £53 million was part of the original Independence Settlement, and the full details of that were given by the Secretary of State for Commonwealth Relations in another place on June 3, 1964. If he would like to look that up in the relevant records he will find exactly how that figure was made up.
LORD OAKSHOTT: My Lords, may I ask the noble Lord two quick ques
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tions? First of all, in regard to this White Paper and the interesting figures of loans and grants to Kenya, shown on page 58. Is it possible to break down these figures? For example, are the purchase and resettlement schemes for the "mixed" farmers included; and, if so, how much were they? Secondly, a general point: ought we not, in a time of financial stringency like this, however much we desire to help all the underdeveloped countries of the world, to give priority to countries in the Commonwealth?
LORD WALSTON: My Lords, I assume, from the last point of the noble Lord, that he is in favour of our giving priority to Kenya, as a member of the Commonwealth, and therefore supports substantial help to Kenya. The breakdown of this assistance, I can say offhand, is very largely for various forms of land settlement: the last amount of £365,000 is purely for the compassionate cases, amounting at the moment to 28, and the previous amounts, other than the orginal £53 million, were entirely for one form of land settlement or another. With regard to the details of the £53 million, while I could give them to the noble Lord, I would suggest that, as it is a complicated matter, he should look up the actual Hansard reference of June 3 of last year, in which he will see that a large part of it is undertaken for some form of land settlement; some of it is by way of cancelled debts and some of it by way of assistance to British personnel and pension schemes, some of it a notional figure for military equipment and buildings left behind. It is a complicated question better read than talked about.
LORD OAKSHOTT: My Lords, I am very much obliged to the noble Lord. He will realise that the last column on page 58 is the estimate for 1964–65. I am wondering whether these schemes will be included in that estimated figure and how much they will be. I am quite prepared to look up the figures that have been given.

BUSINESS OF THE HOUSE
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 p.m. my noble friend Lord Champion will be making a Statement on the Meat and Livestock Commission.

COVENT GARDEN MARKET BILL
2.52 p.m.
Order of the Day read for the consideration of the Commons Message of yesterday; namely,
"That the Promoters of the Covent Garden Market Bill shall have leave to suspend Proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further Proceedings and that all fees due on the Bill up to that date be paid.
"That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House.
"That there shall be deposited with the Bill a Declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill presented to this House in the present Session.
"That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read), and shall be committed to the Chairman of Ways and Means, who shall make only such Amendments thereto as have been made by the Committee in the present Session, and shall report the Bill, as amended, to the House, forthwith, and the Bill, so amended, shall be ordered to lie upon the Table.
"That no further Fees shall be charged in respect of any Proceedings on the Bill in respect of which Fees have already been incurred during the present Session.
"That these Orders be Standing Orders of the House."
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, I think your Lordships will expect me to say a few words to explain this Message from the Commons. The House of Commons agreed yesterday to a Motion that Standing Orders should be suspended in the case of the Covent Garden Market Bill, and this House has been asked to concur. The effect of this will be that proceedings on the Bill are suspended, and at the beginning of the next Session it will pass formally through all stages in the House of Commons through which it has already passed during this Session. It will then come up to this House for First Reading and consideration in the usual way. I beg to move that this House do concur with the Commons in their Message of yesterday.
Moved, That this House do concur with the Commons in their Message of yesterday.—(The Earl of Listowel.)
On Question, Motion agreed to: Ordered that a Message be sent to the Commons to acquaint them therewith.

PRIVATE BILL STANDING ORDERS
2.53 p.m.
THE EARL OF LISTOWEL: My Lords, I beg to move the Motion standing in my name on the Order Paper. I should like to say just a few words of explanation about the Amendments I am proposing to Private Bill Standing Orders this afternoon. I think your Lordships will expect a short explanation of these Amendments and justification of them. Amendment No. 1 removes the last reference to the London County Council, consequent upon the passing of the London Government Act 1963, as a result of which it is replaced by the Greater London Council. Amendments Nos. 2, 3, 4 and 5 amend those Standing Orders which deal with deposit of Bills and relevant documents at various Government Departments. They provide for the deposit of those documents at the Ministry of Land and Natural Resources, and Welsh Bills at the Welsh Office.
Amendments Nos. 6 and 7 deal with the Standing Orders which regulate procedure in respect of Orders made under the Statutory Orders (Special Procedure) Act, 1945. These are the most important of the Amendments, and I will explain them as accurately as I can. Your Lordships may remember that during Committee stage of the Statutory Orders (Special Procedure) Bill on June 22 an Amendment was made to leave out subsection (4) of Clause 1 on the ground that its provisions could be better given effect to by means of Amendments to Standing Orders. The Amendment I am now moving is designed for this purpose. It provides that if the Chairmen of Ways and Means and myself feel, on consideration of a Petition for Amendment of a provision of a Special Procedure Order, that it will alter the scope of the Order, or affect the interests of other parties, we may warn the Joint Committee to which the Order is referred. The Amendment, however, specifically provides that the Chairmen's warning does not bind the Committee.

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Lastly, Amendment No. 8 provides for an increase in the fees charged by the Official Shorthand Writer for attendance at proceedings on Private Bills and for the provision of transcriptions. These fees were last revised in 1960. The increases have been agreed to by the Treasury. To save the time of the House, I should like to take these Amendments en bloc. With your Lordships' permission, I will move that the Amendments set out in the Marshalled List be agreed to.
Moved, That the following Amendments to the Standing Orders relative to Private Bills, etc., effecting the Deposit of Bills and regulating procedure in respect of Orders made under the Statutory Orders (Special Procedure) Act 1945, be approved:
1 Standing Order 4A, line 38, leave out "the London County Council".
2 Standing Order 27, line 62, at end insert "and at the Ministry of Land and Natural Resources".
3 Standing Order 37, line 14, at end insert "and at the Ministry of Land and Natural Resources".
4 Standing Order 39, line 10, after "Insurance" insert "the Ministry of Land and Natural Resources".
4 Standing Order 39, line 64, at end insert:—
" (11) of every bill extending to Wales, at the Welsh Office, Parliament Street".
5 Standing Order 46, line 5, after "Government" insert "or Ministry of Land and Natural Resources".
6 After Standing Order 207 insert the following new Standing Order:
Special report by Chairmen
"207A—(1) Where the Chairmen certify that a Special Procedure Petition is proper to be received as a Petition for amendment but are of opinion that any amendment asked for would, if made, alter the scope of the Special Procedure Order or affect the interests of persons other than the Petitioner, they may make a special report to that effect.
(2) A special report made under this Order shall be laid before both Houses and shall stand referred to the Joint Committee on the Petition.
(3) A special report made under this Order may, without binding the Joint Committee, express the Chairmen's opinion on the extent to which effect should be given to any amendment to which the report refers and the steps that should be taken to bring that amendment to the notice of persons likely to be affected thereby."
7 Standing Order 208, leave out paragraph (2) and substitute the following new paragraph:
"(2)—If no such Memorial is deposited, but the Chairmen

(a) are not satisfied that a Special Procedure Petition should be certified as proper to be received, or, if it is presented as a Petition for amendment, are not satisfied that it is such a Petition; or

(b) are of opinion that a Special Procedure Petition contains matters on which they should make a special report under Standing Order 207A,

the Chairman shall give notice in the Office of the Clerk of the Parliaments of the time and place at which the Chairmen will further consider the Petition."
8 Table of Fees, page 99, line 34, leave out "5–13–6" and insert "6–10–6";
Table of Fees, page 99, line 35, leave out "6–14–6" and insert "7–14–6";
Table of Fees, page 99, line 37, leave out "1–9" and insert "2–3";
Table of Fees, page 99, line 38, leave out "2–9" and insert "3–2".—(The Earl of ListoweL)
On Question, Motion agreed to.

HOUSE OF LORDS OFFICES
Order of the Day read for the consideration of the Fourth Report from the Select Committee.
The Committee's Report was as follows:
1.—PALACE OF WESTMINSTER CONTROL AND CUSTODY
The Committee received an interim Report from the Administration Committee.
2.—THE ROLL OF HONOUR
The Committee considered and agreed to a request from the Victoria and Albert Museum for the loan of the Roll of Honour for an exhibition of calligraphy to be held in the month of November.
3.—PARLIAMENT OFFICE
The Clerk of the Parliaments informed the Committee of a new arrangement in regard to the Clerkship of the Journals.
The Committee authorised the payment of a special responsibility allowance to Mr. J. C. Sainty, Senior Clerk, on his appointment as Clerk of the Journals.
4.—HANSARD REPORTING STAFF
The Committee sanctioned the application to temporary Reporters of the revised attendance fee as set out in the Appendix to Establishments Circular No. 12/65 with effect from 1st November, 1964.
5.—OFFICIAL SHORTHAND WRITER
The Committee approved an increase in the scale of fees and the annual retaining fee for

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the Official Shorthand Writer, as agreed with the House of Commons and the Treasury, with effect from 1st November, 1964.
6.—REVISED SCALES OF PAY
The Committee sanctioned the application of the following Establishments Circulars:—

(a) E.C. 13/65 Pay of the Higher Civil Service,

(b) E.C. 14/65 Revision of pay scales between the Principal's maximum and the Assistant Secretary's minimum,

(c) E.C. 20/65 Revision of allowances,

(d) E.C. 21/65 Typing grades and proficiency allowances,

(e) E.C. 22/65 and 26/65 Conditioned hours,

(f) E.C. 25/65 Retrospection of overtime etc. following pay increases,

to analogous grades of the staff of the House of Lords.
7.—MEAL ALLOWANCE
The Committee approved an increase in the rate of meal allowance payable to certain officials working late in the evening after a normal day's duty.
8.—DEPARTMENT OF THE LORD GREAT CHAMBERLAIN
The Committee authorised the employment of an additional temporary assistant for two to three weeks during the Summer Recess this year.
9.—RETIREMENT
The Committee sanctioned the payment of a pension and an additional allowance under the Superannuation Acts to Mr. B. C. Arrow-smith, Custodian, who retired on 7th June, 1965.
THE EARL OF LISTOWEL: My Lords, beg to move that this Report be now considered.
Moved, That the Report be now considered.—(The Earl of Listowel.)
On Question, Motion agreed to.
THE EARL OF LISTOWEL: My Lords, I beg to move that this Report be agreed to.
Moved, That the Report be agreed to.—(The Earl of Listowel.)
On Question, Motion agreed to.

JUDGES' REMUNERATION BILL
House in Committee (according to Order).
House resumed: Bill reported without amendment: Report received.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.

FINANCE (No. 2) BILL
3.0 p.m.
Order of the Day for the Second Reading read.
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, in moving the Second Reading of this Bill, I imagine that your Lordships will not wish me to dwell at great length on the details of the two major new taxes for which the Bill provides. These have been exhaustively discussed—both in another place and in the Press—in the last three or four months and are now thoroughly familiar to us all. Nevertheless, it may be helpful if I briefly remind the House of the reasons which have led Her Majesty's Government to propose the introduction of these two new taxes and of some significant respects in which the Government's original proposals have ben modified as a result of earlier discussion.
I begin with the capital gains tax. There are, I think, few people who would dispute the statement by my right honourable friend the Chancellor of the Exchequer that the failure of our tax system to tax capital gains has hitherto been regarded as a major omission. It can hardly be denied that capital gains confer on their recipient much the same kind of benefit as income—which may well be earned with great effort. Yet in the past income, including earnings, has been fully taxed, while capital gains have gone scot-free. In itself that has been widely regarded as inequitable; and, as a practical matter it has been one of the barriers to the progress of an effective incomes policy. In addition, the absence of a capital gains tax has facilitated certain avoidance devices, which consist in essence of turning taxable income into tax-free capital gains, and has thus weakened the existing system of direct taxation. The proposals in the Bill will remedy these defects.
I have already referred to the modifications which the Government have made, for both taxes, to the proposals originally published. These modifications are, I suggest, evidence of the Government's flexibility and willingness to deal with constructive criticisms on their merits. I need mention only three of the amendments made to the provisions of the

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capital gains tax. First, the rate of tax on capital gains received by people with small or moderate incomes has been reduced. The Government's original proposal was that if it was to the benefit of an individual taxpayer, two-thirds of his gains would be taxed as the top slice of his income, the remaining third being exempt, instead of all the gains being taxed at the flat rate of 30 per cent. This fraction of two-thirds has now been reduced to one-half on gains up to a maximum of £5,000 a year. As a result, the individual whose maximum rate of income tax is 8s. 3d.—the standard rate—will pay tax on his gains at just over 20 per cent., instead of 27½ per cent.
Second, in the case of past issues, made at a price below par, of British Government or Government guaranteed dated stocks, any gain arising from price movements between the price of issue and the redemption price will be exempt from capital gains tax. This concession meets the representations made to my right honourable friend that in issuing these stocks at a discount the Government had given an implicit pledge that the capital appreciation to redemption would be tax-free. Third, the Bill now recognises the special position of the small businessman who has built up a business during his working life and needs to sell it, in order to provide for his retirement. If an individual who is 65 years of age or more sells a business which he has owned for the ten preceding years, he will be exempt from tax on the first £10,000 of gains which he then realises. An individual who sells between the age of 60 and 65 will get a proportionate part of this exemption. Moreover, particularly to meet the special position of small farmers, the same exemption will be available if the business is given—for example, to a son—on the retirement of the owner. With these and other modifications I believe that the capital gains tax will be generally welcomed. Indeed I notice that The Economist for July 24 referred to it as "a long overdue reform" and as essentially sound and well conceived. It went on to say that
"the conception and enactment of such wide sweeping changes is a fundamental innovation in British economic and fiscal legislation: and is tangible proof of a refreshing willingness to stake large amounts of political capital on ideas."
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I now turn to the corporation tax. The Government's reasons for reforming the system of taxing corporate profits are as follows. First, the reform is an essential piece of modernisation. A corporation tax, separate from the general income tax on personal incomes, makes the country's tax system at once more comprehensible and more responsive to present-day needs for fiscal adjustments designed to influence economic conditions. Secondly, the old system was by no means free from anomalies which lent themselves to exploitation by companies astute enough to take advantage of any loopholes. Your Lordships will not wish me to enlarge upon this in detail, but my right honourable friend the Chancellor of the Exchequer has no doubt that the reforms incorporated in this Bill will bring in their train the not inconsiderable gain of ending a state of affairs which stood in urgent need of a remedy.
Thirdly, the new scheme will enable the tax system to exercise an influence, in a manner of which it has not hitherto been capable, upon the distribution policy of companies. I think we all accept that one of the needs of the day is that companies should increasingly plough hack their profits for the expansion of production, rather than distribute them as dividends. The existing tax system does not sufficiently encourage this. But the new tax structure will make a given sum of net profits worth more if retained for expansion than if dissipated in dividend payments. In this way my right honourable friend hopes to provide an incentive to dynamic companies to develop at a rapid pace through the use of ploughed-back profits. Lastly—and this is the subject which occupied your Lordships' House in the useful debate initiated nearly three months ago by the noble Lord, Lord Aldington—there is the question of overseas investment. My right honourable friend attaches a good deal of importance to the features of the corporation tax scheme from which a tendency should arise to moderate the rate of overseas investment.
My Lords, taking them together, these are cogent reasons: and it is not surprising that my right honourable friend felt obliged to resist any Amendments suggested in another place which would have involved a derogation from the

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principles of the intended reform. Nevertheless, he was sympathetic to legitimate criticism; perhaps I may be permitted to mention briefly some instances in which the Bill was amended to bring some easement to the taxpayer. When the Bill was published there was some apprehension that its provisions would bear harshly on what it terms "close companies"—that is, broadly speaking, companies which are under the control of a small number of persons. By various Amendments my right honourable friend has done much to allay this apprehension, while at the same time keeping his original objectives in view. Close companies will not be permitted to serve as vehicles for the unjustified accumulation of idle funds, but if they are developing and building up a trading venture full account will be taken of their needs to plough back profits for development.
This is one example of an easement of the corporation tax provisions for some of the companies affected. To illustrate the process further I should particularly like to say a word or two about the overseas aspect of the new taxation system. This was the subject of many representations and much considered discussion. I have already mentioned the debate in your Lordships' House on May 6, and of course my right honourable friend carefully considered that debate. During the passage of the Bill he decided to extend considerably the scope of the transitional relief for companies trading overseas. Not only was the period of the relief extended from five to seven years, but also the amount of the annual relief was substantially increased. I do not wish to be tied to exact figures, because this is a particularly difficult field in which to make precise estimates; but the extension in the scope of the relief introduced by the Chancellor may well cost something of the order of £35 million for the first year alone. On any view this is a substantial additional relief for these companies which should ease the adjustment to the new tax system.
Perhaps I should at this point remind the House of what the O.E.C.D. Survey said about our balance-of-payments crisis. In the paragraph headed: "Origins of the Crisis" it says:
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"Underlying the two most recent periods of acute payments difficulties (1960–61 and 1964) has been a rather consistent general weakness of the external balance. Over the seven-year period from 1958 to 1964 the cumulative current account was just in balance; that is, the current account made no contribution to the financing of long-term capital exports which averaged £175 million a year during the same period."
I would add, in this connection, that the Government are not against overseas investment as such, which must and will continue, but in our balance-of-payments difficulties it is vital that we do not attempt to do more than we can afford. It is to the balance-of-payments problem that I now turn.
When we came into office last October we inherited a formidable task in regard to our external balance of payments. The previous Administration had allowed an intolerable deficit to develop over and above the long-term weakness of the external balance, and we are living with the consequences. The strategy, I need hardly remind your Lordships, is to achieve a state of balance on our external accounts in the course of 1966. This year's deficit is likely to be well below half last year's figure of £745 million, and the further measures announced last week are designed to ensure that we reach our aim of eliminating the deficit during next year and of maintaining the strength of sterling
It is clear that the balance-of-payments situation has improved a good deal this year, compared with 1964. In the first half of the year the deficit on visible trade totalled £159 million, little more than half the rate on average last year. If we look behind the month-to-month variations in the figures, due to special factors, imports seem to have been coming in at a fairly constant rate, about 1 per cent. below last year. Exports have been averaging about 4 per cent. more than in 1964, but in recent months they have not maintained the strong rise evident when we last discussed the Economic Situation. Turning to the long-term capital account, in the first quarter the net outflow remained high, at £90 million, or much the same as on average during 1964. The figure was to some extent affected by a marked reduction, probably largely temporary in character, in overseas direct investment in the United Kingdom. There are, understand, signs of an improvement in

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the second quarter, with an easing of the temporary factors, and, in addition, gains from the exchange control measures taken in April to draw additional receipts into the reserves. But progress, particularly on exports, has not been good enough, and though the trade deficit has been reduced, what has been lacking is progressive improvement in recent months. We need to get the improvement on the move again.
My Lords, perhaps I should say a few words at this point about the figures announced yesterday of gold and convertible currency reserves. The third quarter is seasonally the least favourable period, and some further call on the reserves could be expected in July. Sterling came under renewed pressure in the latter part of the month and this contributed to the loss of reserves. As a consequence of the Statement by the Chancellor of the Exchequer on July 27, the pressure on the exchange markets was relieved, and the spot rate for sterling hardened to 2·79¼ dollars, the best level for over a month.
In accordance with the Protocol of July 20 to the Offset Agreement, during the month the Federal Republic of Germany made an advance payment, equivalent to £41 million, to a special account with the Bank of England to meet payments due by March 31, 1966, under contracts already placed or foreseen. This is, of course, only one of a large number of transactions, both outgoings and receipts, affecting the reserves in the month. The calls on the reserves fluctuate widely—for example, United Kingdom payments on Invisibles Account are thought to be usually very heavy in July—so that it could well be misleading to highlight, for example, the loss of reserves together with the receipt from Germany as a measure of the trend. I am sure your Lordships were glad to see on the tape this morning that the pound was standing higher in the foreign exchange markets today without further support from the Bank of England.
The measures announced last week, notably the further changes in exchange control and those affecting payment for imports will provide a valuable further gain to the reserves immediately. Exporters have had by now a massive series of improvements in export credit
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arrangements and other facilities in addition of course to the export rebate. Finally, the measures to restrain the growth of public expenditure and the more stringent terms for hire purchase borrowing will, by easing pressures on the domestic economy, further ease the external trade deficit.
Your Lordships will be aware that we have been tackling the balance-of-payments difficulties against the background of an extremely heavily loaded domestic economy. By the beginning of this year, demand and output had been growing fast for some two years, and pressure on resources had risen to a high level. The new O.E.C.D. Survey has some pertinent remarks on this pressure on resources. The Survey states that:
"The present phase of expansion, like the previous one, was largely induced by policy measures. From the reduction of the Bank rate in March 1962 to the Budget in April 1963, a series of reflationary measures were taken, directed at stimulating both consumption and investment demand."
It concludes on this aspect with these words:
"In retrospect then, the expansionary policy measures taken at the beginning of the expansionary phase must clearly be judged to have been excessive."
Whatever the cause, the fact is that early this year unemployment was very low. At the same time, it was evident that we were coming under increasing cost pressure.
Expansion continued fairly rapidly in the first quarter. The new national income figures, published last week, show that output in the first quarter of this year was about 1 per cent. higher than in the fourth quarter of last year and 4 per cent. higher than it was a year earlier. When we last discussed the economic situation, in May, it was pointed out by my noble Leader that the purpose of the immediate revenue measures in the April Budget had to be seen in the context of the need to restrain the growth of consumption in the interests of the balance of payments, which of course includes the need to get a more competitive cost structure.
The latest indicators show that the rising pressure has been contained, and that the Budget has begun to take effect. If we discount the seasonal element in the change, unemployment has stopped falling and indeed appears to have risen

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fractionally. Retail sales in volume terms, discounting the rise in prices, fell back in April and May and there are indications that this continued in June. There was also some check to housing starts in the second quarter which slowed down the growth of the number under construction and will help to ease the overload on the building industry. But, in absolute terms, the economy remains extremely tightly stretched. Businessmen are complaining of delivery delays and difficulties in getting supplies of components. The unemployment rate underlying the seasonal demand for labour is about 1½ per cent., distinctly below the long-term average, and there are acute shortages of, for example, skilled engineering workers in the Midlands and South-East where a good deal of export industry is concentrated. Cost and price trends remain too strongly upward. Given the urgent need for improvement in the balance of payments, we decided we must act to speed up the release of resources and ease pressures. That was, of course, the purpose of the measures announced by the Chancellor of the Exchequer on July 27. To some extent these were short-term measures. In the medium and long term, somehow we have to cure the deep-seated, underlying weakness of our balance-of-payments position, and this means securing an improvement in our exports performance.
The difficulty which we have experienced in trying to improve our exports performance underlines the need to make our costs and prices more competitive. Since taking office, the Government have concentrated on the development of a policy for productivity, prices and incomes as an essential long-term measure for strengthening the economy and improving our competitiveness and export performance. The vital significance of this policy is emphasised in the Economic Survey to which I have previously referred. That Survey points out—and I quote:
"The prices and incomes policy is of the highest importance; success in this field would make a major contribution to achieving sustainable growth for the medium term."
However, the Survey goes on to say that the aims of the prices and incomes policy are unlikely to be achieved unless the economy is run with a lower pressure of demand to that prevailing recently.
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As I have mentioned, the Government have taken measures to restrain the pressure of demand and to meet the immediate difficulties with which the economy is faced. It is now all the more essential to ensure that we do not forfeit our chances of making progress in the medium-term and of securing a faster rate of growth of output and exports, through inflationary rises in prices, costs and money incomes. There is no doubt that prices and money incomes have been rising much too rapidly in recent months for the health and strength of the economy. Part of the increase in prices is of course directly due to Government measures to reduce the pressure of demand. For example, these accounted for 1·4 points of the 2 points rise in the Retail Price Index in April this year. But prices have also continued to increase because the rise in money incomes (wages, salaries and profits) has exceeded the rise in productivity by a substantial margin.
I do not wish to suggest that the policy for productivity, prices and incomes, foreshadowed in the Joint Statement of Intent and set out in the two subsequent White Papers, is ineffective. It is only three months since the main principles set out in these documents were endorsed by an overwhelming majority of trade unions affiliated to the Trades Union Congress. It would be quite wrong to attempt to judge, on the experience of only three months, the success of a policy designed not as a short-term expedient but to bring a lasting solution to a continuing economic problem. This is something which requires changes in our traditional habits and attitudes which simply cannot be achieved overnight. Moreover, there were a number of obstacles to making the new policy immediately effective—the high pressure of demand and acute shortage of labour, the current move towards a 40-hour week which has put heavy pressure on costs, and the forward commitments of various kinds on wages and salaries which had already been entered into. This is something which we recently discussed at some length on the Motion of the noble Lord, Lord Thomson of Fleet. To quote again from the O.E.C.D. Survey:
"The attempt to influence prices and incomes should not be adjudged a failure on the basis of short-term trends. Success can only be expected to come gradually."

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As the Prime Minister pointed out in his speech on Monday last,
"the most successful machinery for an incomes policy in the world, that in Sweden, took 20 years to evolve".
My Lords, somehow we simply must achieve our productivity, prices and incomes policy in much less time than that, or our balance-of-payments problem will overwhelm us. I am not pessimistic about all this, for we have, despite the difficulties, made a very great deal of progress. In addition to the previously announced policy on productivity, prices and incomes, we are hoping to have our National Plan for technological progress and faster economic growth ready for publication in the autumn. This we confidently expect will enable the nation to break the vicious circle of inflationary expansion being followed by a balance-of-payments crisis. My Lords, the task ahead constitutes a challenge to the British people, and I am confident that, given the co-operation, the understanding and the support of all sections of our community, this nation of ours will successfully meet that challenge. I beg to move.
Moved, That the Bill be now read ª.—(Lord Champion.)
3.30 p.m.
LORD CARRINGTON: My Lords, as the noble Lord, Lord Champion, has said, though we are debating the Finance Bill it is customary at this time of year to use the occasion for a general debate on economic affairs. The noble Lord has spoken with his usual care and courtesy, and I know the House is grateful. I think we shall all agree with a great deal of what he said, and he has certainly been fairly uncontroversial. It is possible that I may be rather less so.
There can be no doubt—indeed, I do not think that any member of the Government has sought to deny it, and certainly the noble Lord, Lord Champion, has not—that we are facing a serious economic situation. Though it is true that our balance-of-payments difficulties may be eased this year, there is still a very heavy deficit and one which cannot give much cause for satisfaction when we face the knowledge that, over the next few years, we have to pay back very large sums of borrowed money. The news which we have read in the news
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papers this morning is, to say the least of it, disturbing, and it may be—I do not know, but it may be—that the calculations of the Chancellor of the Exchequer are on the optimistic side. I shall have more to say of this later. But, before I go any further, I think I ought to dispose of the Finance Bill.
In the context of our financial situation, it seems to me utterly irrelevant. Its two main provisions, corporation tax and capital gains tax, will do nothing to help us in our present condition; and, until the Opposition in the Commons forced the Government to accept Amendments, the Bill was not only irrelevant but was, in some respects, downright harmful. I have already spoken in this House of its effects on companies trading overseas. The Government have accepted some Amendments which will delay the incidence of that extra taxation—but it is only delay, and we must hope, for the sake of our investments abroad, that wiser counsels will in the end prevail, or, even better, that we shall get a new Government before any damage is done, at any rate in this field. As for the capital gains tax, whatever the arguments for or against it, the way things are going at the present time there are not going to be many capital gains about. I must say that I think it is a great pity that so much energy and so much time should have to be devoted by the Civil Service, by Parliament, by lawyers and accountants and all the rest of it, to a Bill so little pertinent to the needs of this country.
The state of our economy is not a matter for Party dispute, because all of us wish to see it strong and there is no advantage for any Party in the catastrophe which will result if we do not put our house in order. Our standard of living, which has increased so greatly in the last fourteen years, will decline; we shall be unable to fulfil our obligations and commitments overseas; and we shall cease to have any influence in world affairs—for, as everyone said in the Foreign Affairs debate last week, influence in foreign affairs depends upon the strength of the economy at home. None of these things can be contemplated with anything other than dismay by any member of any Party. Yet, my Lords, it is the Government and noble Lords sitting on the Bench opposite who have been in control of our economy for the

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last nine months, and it is right and proper that we should examine what they have done critically, but at the same time constructively, in the hope that we may he able to pinpoint where things have gone wrong and perhaps persuade them to do a little better in the future.
I do not think that even the Government's most starry-eyed supporter would claim that their economic policy has been an unqualified success. It seems to me that the problem falls into two distinct parts, though in the final analysis they are both part of the overall problem: first, the strength of the pound and the factors which have caused it to weaken over the past months; and, secondly, the balance-of-payments deficit and the trade gap. Let me make it clear from the outset that nothing that I shall say is intended to undermine confidence in the pound. We are all agreed as to the importance of that. But the unpalatable truth about the pound is that lack of confidence coincided with the arrival of the Party opposite into office.
I do not suggest that noble Lords opposite are any less anxious than any of us on this side to see the pound maintain its strength—of course they are not. Nevertheless, there was a loss of confidence; and for two reasons, I think. First, because when, in October, the Government assumed office, they made an enormous amount of Party capital out of the trade deficit which they claimed to have discovered on their arrival in Whitehall—and I hope that noble Lords opposite have read what Mr. Maudling said in another place on this subject. It really will not do any longer to maintain the line that this was concealed by the Conservative Government, or that all the trouble stems from this. Nothing was concealed and nothing was withheld; and nobody suggested that there was not a problem to face. But the Government made so much of it, not only at home hut also, as I understand it, abroad, at the EFTA Conference which was held just after the Government took office, that for the first time they began to frighten those in other countries who had their money over here; and their subsequent actions did nothing to give confidence to those investors.
I do not know whether any of your Lordships have read an article in the Financial Times to-day by Nigel Lawson. I must say I think it is very funny,
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although perhaps noble Lords opposite may not think it quite so funny. It is a "spoof" of a speech which the Prime Minister may make when next he talks on the wireless, and an extract from it illustrates exactly what I mean when I say that the investors abroad had no confidence when the Government took office. In this "spoof" the Prime Minister is made to say:
"You know, when the country elected a Labour Government last October, we decided—and I must say this, quite honestly, we decided unanimously—to do the difficult things first. Things that needed guts, tough things—incredibly tough sometimes—like raising pensions and abolishing prescription charges. But we did them, regardless of electoral popularity".
My Lords, the blunt fact is that nothing that the Government have done since then, and until the severe measures announced last week—
LORD LEATHERLAND: My Lords, would the noble Lord tell us whether this is still the "spoof" speech or whether he has resumed his own oration?
LORD CARRINGTON: The blunt fact is that nothing that the Government have done since then, and until the severe measures announced last week—and I shall come to them in a moment—has reassured those in Europe and elsewhere who do business with, and invest in, this country that the Government are capable of restoring the British economy. In my view, this is a great pity, because, as I said earlier on, I am quite certain that the Government have done and are doing their level best to bring back that confidence.
The second difficulty—and this was brought out very forcibly in a leading article in the Financial Times yesterday and, indeed, by Mr. Heath in another place on Monday—is that the Government have never acknowledged their own policies and told the country exactly what and how much they are willing to sacrifice in the defence of sterling. In the words of the article in the Financial Times:
"Ever since last October Ministers have been saying one thing and doing another. In the first week after the Election they did everything possible to draw attention to the size of the deficit while assuring the country that drastic measures would not be required. And then, when they were forced into the deflationary policies which they had formed, they refused to admit what they had done and continued to talk about expansion ".

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The Government really must face up to the fact that people overseas are perfectly capable of reading the speeches of Ministers, and do read them; and people abroad have drawn conclusions from those speeches which have contributed to the weakening of sterling, in spite of the measures taken by the Government for exactly the opposite purpose. Ministers must now stop pretending, in speeches in the country, that everything is all right and that the Socialist millennium is just round the corner. If we are to get out of our troubles, there can be no doubt that some of the measures which the Government have taken, or perhaps all of them, must become effective; and, if they are going to become effective, they are going to hurt somebody. It is one of the unfortunate failures of the medical profession that medicines are never agreeable to take, but if you want to be cured you have got to take them. So it is with our economic affairs: if we want to get better we must take our medicine.
I very much hope that the measures the Government took last week will be successful in restoring confidence in the pound. I think it is too early yet to say whether they have or whether they have not, but I want to ask the noble Earl a question. It is this: if the measures of last week are not adequate, will the Government be prepared to take further action, and take it quickly?—because slowness and indecision have been the Government's greatest faults.
The key matter in our economic situation is this confidence in the pound; and I am sure that the Government mean to take steps to regain that confidence abroad. If they find they cannot do it, that their image is already so tarnished and their competence to deal with the situation is already so much in doubt, then they must go before it is too late. I am certain of one thing: if to-morrow there was a Conservative Government you would find the situation transformed and confidence would once more begin to flow back into the pound and into the future of this country—
SEVERAL NOBLE LORDS: Hear, hear!
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, has the noble Lord finished?
LORD CARRINGTON: For the moment, yes.
THE EARL OF LONGFORD: My Lords, would the noble Lord feel able to disclose the hitherto well-concealed secret of what the Conservatives would do which is different from what we are doing?
LORD CARRINGTON: The noble Earl is really a compulsive interrupter. At the slightest breath of criticism of the Government it is as if an enormous spring had shot the noble Earl forward to the Dispatch Box, inquiring and inquisitive. Of course, I am coming to all that. I am sorry, but I have more of my speech to make. If the noble Earl will be patient he will, I hope, be rewarded by listening patiently and calmly to what I have to say.
The second problem, which is interrelated, is that of our balance of payments. I remember talking to a very eminent man in the City not so very long ago about this problem. He said that the whole thing could be solved in a flash were we not spending £2,000 million a year on Defence. That may be perfectly true. It would be equally true to say that the problem would be solved in a flash if we were not spending hundreds of millions of pounds a year on a great many other necessary and desirable things. But I hope that the temptation to abandon our commitments overseas and to reduce Defence services to a level which we on this side of the House might find absolutely unacceptable will continue to be resisted by the Government. I think I can give them credit—and I hope I am right—for being generally anxious to maintain our obligations overseas. But there is very heavy pressure from the Left Wing of their Party—the 75 signatures in Tribune and now, I understand, an acceptance by the Parliamentary Labour Party of the need for an immediate arms cut, though that may be just papering over the cracks. But this is not the way of a great nation. Abdication of our responsibilities is not, in the end, a solution which honourable people can accept.
In any event, the problem, in my view, is rather more complicated than that. Almost ever since I can remember there have been at intervals—and not very long intervals at that—economic crises, and all of them have been due to

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our precarious trade position. There have been glaring headlines in the newspapers, solemn discussions on radio and television, stern speeches of warning from Ministers, of whichever Party were in office, and others on what must be done to put the matter right, and, in the end, for one reason or another, we have got through—sometimes because the Government took the right steps at the right time; sometimes, perhaps, because prices moved in our favour, sometimes, perhaps, because we were just plain lucky. There may have been temporary increases in taxation, temporary cuts in Government spending, but generally speaking, nobody has been greatly inconvenienced, although, naturally, I except from this the 1931 crisis.
I believe it is true that the average man and woman in this country does not really believe in any of it any longer. They have heard it all so often before. All the phrases are familiar, including, with respect, some of the phrases that the noble Lord, Lord Champion, used this afternoon: "greater productivity", "the importance of exports", and so on. All the remedies seem familiar; everyone is firmly convinced that it will he all right in the end, that something will happen. Somehow, some way or other, the trade figures—if anybody really believes in them—will take a turn for the better. Anyway, it is not much concern of theirs this is a matter for the Government, for they—it is always "they"—are in charge of the situation. I am afraid that a lot of people have become rather cynical about politicians of all Parties and the exhortations made by politicians for harder work and more exports. It has always been all right before. Why should it be any different this time? So they say, "Why not let the politicians go on with their talking while we get on with our affairs?"
I am not at all sure that it is in fact going to be all right this time, unless we do something about it. No one can be much heartened by the present export figures for this year; nor, indeed, can anybody be greatly relieved by the downturn in imports according to the figures so far published. There does not seem to be any widespread realisation as to what these figures mean or the consequences for us if there is not a radical improvement in them. For never let us
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forget that we are in debt to the tune of billions of dollars to the International Monetary Fund. Successive Governments have failed to bring these economic truths home to the man in the street. Certainly the back-to-Dunkirk spirit of the Prime Minister's first few speeches struck in most of us a thoroughly jarring note. We have seen little in the last months of the promises of the new and modern Britain which, if I may say so, fell so glibly from the tongues of noble Lords opposite during and before the Election campaign. Somehow or other, the Government have got to bring home these facts. I do not believe it is possible to do it by exhortation. I hope that we shall hear later this afternoon from the noble Earl the Leader of the House what the Government propose to do.
There was very little that was constructive in the Prime Minister's performance on Monday night in another place, but there is one thing about which I want to ask the noble Earl the Leader of the House. In column 1192 of the Hansard of the other place, the Prime Minister, in talking about incomes and prices, said:
"If the voluntary system fails, we might have to provide for statutory reference of every claim for increased incomes above the norm to go to an expanded and strengthened Prices and Incomes Board, just as in the absence of voluntary agreement we might have to require a compulsory early warning system for reference to the Board of proposed price increases in cases which seem to require justification."—[OFFICIAL REPORT, Commons, Vol. 717 (No. 166), August 2, 1965.]
May I ask the noble Earl these questions? What will be the criteria of failure of the voluntary incomes and prices policy? How long will the Government leave it before they take action, and by what degree will incomes have to go up before they take that action? Finally, what does the Prime Minister mean when he says he is going to provide for
"statutory reference of every claim for increased incomes above the norm"
to go to this Board? I should have thought that was a very difficult thing. I should be grateful to the noble Earl if he were to explain later in the debate some of these rather difficult things.
We were told at the time of the Election, and for months before, that many new ideas were to be brought into the management of our economy. Britain was to be modernised; there was to be no

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"Stop—Go". Your Lordships will remember the sneering references made to my right honourable friends Mr. Maudling and Mr. Selwyn Lloyd. The Conservative Government were pilloried for having brought about a materialistic society. The Labour Party was to alter all this—though how was never specified and has not been specified to this day. What are the proposals of noble Lords opposite? So far, in spite of the jeers, we have had nothing but "Stop" with occasional spurts of unexplained and uncontrolled acceleration, and the attempts of the Chancellor and the Prime Minister to pretend that the lastest measures announced last week are not "Stop" would be hilariously funny were they not rather pathetic.
We in the Conservative Party believe that there must be a new approach to this problem, the sort of approach outlined by Mr. Heath in his speech on Monday, an aspect certainly obscured by what I thought were the trivialities of so much of the comment on that debate. He made these three points. I make no apology for repeating them here in this House, for they are the kernel of the more detailed policies which we in the Conservative Party shall unfold in the next few months. First, he said that the taxation system must be adapted to the encouragement of people to better themselves, to get on in the world and to produce more. We on this side of the House believe that incentive should be rewarded: that somebody who is working hard, and using his brains, skill and inventiveness for himself and the good of the country, should be rewarded and not penalised. We do not believe in an egalitarian society.
Secondly, he said that we must re-create a competitive economy and that in doing this we shall have to tackle restrictive practices in labour and industry. Your Lordships will remember that it was Mr. Heath who led the attack on restrictive practices in retailing. We just cannot afford any more the obstacles to productivity which these restrictive practices put in front of us. There is not one Member of your Lordships' House who could not get up and, with no more than a moment's thought, give more than one example in his own personal knowledge of a restrictive practice. There are
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a great many ordinary men and women in this country who are thoroughly ashamed of many of these practices and would willingly see them disappear. This can be done, we believe, without bringing in hardship for anybody involved.
My right honourable friend went on to talk about the reform of company law and the terms of wage settlements which deal with productivity. As he said, this is an outline, but we, as Conservatives, believe that we can put the economy right by greater competitiveness, by the encouragement of incentives and by the abolition of restrictive trade practices. There is nothing wrong with our economy that good leadership and sound policies cannot put right.
LORD ARCHIBALD: My Lords, before the noble Lord sits down, may I ask him a question? He has made the point that in last September and October there was no concealment of the trade gap. In a technical sense, and from the fact that official statistics were being produced, he may be right; but would not he agree that under-playing, under-emphasising, the importance of the deficit and all its consequences is at least a first cousin to denial of its importance?
LORD CARRINGTON: No, my Lords, I would not agree with that. Mr. Maudling, when he was Chancellor of the Exchequer, frequently, in public speeches, made it plain that we were facing difficulties. As a matter of fact, I thought that someone would say that, and so I took the trouble to get a quotation. On September 26, 1964, Mr. Maudling said:
"It is true we are facing difficulties and no one has attempted to disguise this, but one thing is crystal clear. The greater our difficulties the more disastrous Mr. Wilson's policies would be for the country."

AGRICULTURAL DEVELOPMENT: THE MEAT AND LIVESTOCK COMMISSION
3.53 p.m.
LORD CHAMPION: My Lords, I am sorry to inflict myself on the House again so soon, but I have to make a Statement similar to that which my right honourable friend the Minister of Agriculture, Fisheries and Food is making in another place about two White Papers which the Government have presented to the House and copies of which are now available in the Printed Paper Office.

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If I may, I will use my right honourable friend's own words:
"The first White Paper marks an important step forward in our plans for the development of agriculture over the longer term. It contains our proposals for improving the size, lay-out and equipment of farms, for developing the rural economy in the hills and uplands, and for encouraging cooperation among farmers.
"The problem of the small farm has never been comprehensively tackled in this country before, although much has been done abroad. We have far too many farmers trying to win a reasonable living from insufficient land. Many of them cannot hope to earn for themselves and their families an income in keeping with modern standards if they are dependent solely on farming. We want to help these men. It would be neither in their own long-term interests, nor could the nation afford it, if we were merely to try and boost their incomes artificially by higher subsidies. We want to attack at its roots this problem of too little land providing too small a business, giving too poor an income.
"We are going to tackle this problem in various ways. First, we shall help the man who can get more land to develop his farm to a satisfactory size and equip it properly. We shall give generous grants for the necessary remodelling works and other costs, and we are exploring ways of helping over credit for land purchase.
"Second, we shall give financial help to the man who wants to give up an uncommercial holding by selling it either privately or to the State for approved amalgamation. This help will take the form of grants to aid resettlement, or annuities to aid retirement. I should stress that we aim to let the fanner who retires in this way stay on in his own farmhouse if he so wishes.
"Third, we shall give help through a series of grants to those who wish to co-operate together to get some of the advantages of a bigger-size business. We are for the first time providing grants to stimulate cooperation in production, for example of a uniform product to be sold on contract. We propose to set up a
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Central Council to administer these grants for farming and horticultural co-operation and to provide the necessary purposeful drive.
"The small farm presents a particularly acute problem in the hills and uplands where there is also a need to plan the integrated development of agriculture and forestry together with related uses such as recreation and tourism. All past reports on this problem have stressed the need for a body which can promote and co-ordinate such rural development. We propose to do this by setting up Rural Developments Boards, to start with in a few selected areas. The Boards, which will include people with local knowledge, will have a variety of powers to help them carry out their programme of rural development. They will work with, and through, the people and the authorities already in the area, including the Regional Economic Planning Councils and Boards. In addition, we propose to reaffirm our belief in the vital agricultural rôle of the hills and uplands as a reservoir for breeding stock by re-enacting the hill cow and hill sheep subsidies on a long-term basis. We also intend to introduce a new scheme of capital grants for land improvements of a kind particularly important in hill and upland farming.
"Finally, the Farm Improvement Scheme which has done so much for the modernisation of our farms, particularly by helping the industry to save labour, will be extended on lines similar to the present.
"The second White Paper deals with the Meat and Livestock Commission. There is a vital need to improve the marketing arrangements for agricultural produce in this country. One of the most important products, to both the housewife and the farmer, is meat. The White Paper sets out our conclusions, after discussions with the main organisations concerned, on how the marketing of meat and livestock should be improved.
"The improvements required touch all sectors of the industry, and are interrelated. We have concluded that a

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single body of independent persons, a Meat and Livestock Commission, should be set up to bring them about. Its responsibilities would extend over Great Britain, and the funds for its work would come mainly from levies on animals slaughtered for meat. It would be assisted by a number of advisory committees which would be representative of consumers, producers and the trade.
"The functions of the Commission will extend all the way from the farm to the retail shop. On the farm the Commission will be closely concerned with livestock improvement. It will also help the farmer to improve his marketing of fatstock in various ways such as assisting the placing of contracts, and collecting the disseminating market intelligence. The Commission will act for the Government in certifying fatstock for the guarantee, although the Government will remain responsible for its level and the conditions of eligibility. Next, the Commission will aim to improve slaughtering and wholesale distribution, notably through the introduction of a carcase classification scheme and by giving expert advice to the industry on the efficient construction of slaughterhouses and improved techniques of slaughtering. It will work towards improved presentation in the retail shop and could help to promote the sale of home produced meat. It will also promote and co-ordinate research. Lastly, the Government would look to the Commission for advice on the level of current and prospective supplies at home and abroad.
"The Commission may in future find that some further step by way of regulation, reorganisation or development is needed to serve the interests of the industry and the nation. We therefore propose that it should be empowered, after consulting the interests concerned, to promote schemes for this purpose. Any such scheme would be subject to approval by Parliament.
"The need for such a Commission is urgent. We therefore intend that it should he established as soon as possible and expect it to bring benefit through its work to consumers, producers, and the trade alike."
4.0 p.m.
EARL FERRERS: My Lords, your Lordships will be grateful to the noble Lord, Lord Champion, for repeating this Statement, which is an extremely important one. At the outset, I would congratulate Her Majesty's Government on being prepared to continue the Farm Improvement Scheme grants, which I think have done almost more than anything else to modernise agriculture. But, having said that, I must address a word of protest to the noble Lord that his Government should produce two White Papers of such importance to agriculture twenty-four hours before the House rises for the Recess, which gives no time at all for consideration or political expression.
A whole fund of questions jumps to one's mind, which I will try to prune out as best I can. But I am bound to ask the noble Lord one or two questions on so important a Statement. He has said, for the first time, that the Government are virtually going to offer small farmers some form of assistance—a golden pitchfork—to encourage them to get out of their farms. I would ask the noble Lord: what are the sizes and the extent of the grants and annuities to which he refers? If a farmer is to give up his farm by encouragement, how much is he going to he paid for it? What are the limits of eligibility? Is it going to be by the acreage of a farm or by the amount of man-days that a farm uses? And having got rid of his farm to the State, if he wishes to do it that way as opposed to disposing of it to a private individual, who is going to run the farm? I understand that the State will keep the farm for a period, but until it is relet, who runs it? And is it going to be relet or resold? Is the State going to hold on to this land until it is let, or for good?
As to the second White Paper, the Meat and Livestock Commission seem to be given fairly extensive powers. I assume that they are going to be more than advisory powers, as the noble Lord said that they would reach from the farm right down to the retail shop. Can the noble Lord say whether trading is going to be a function of the Commission? Are they going to buy and sell meat? Can he also explain what is the further step which may require to be taken by the Commission—does this refer to reserve

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buying powers for the Commission to buy meat when the prices temporarily drop? I should be grateful if the noble Lord could give an answer to at least some of these questions, because I feel that they are of great importance.
LORD REA: My Lords, before the noble Lord replies, may I just say from these Benches that we thank the noble Lord for his Statement but that we are not grateful to him. For my part, I think it is far too long, one of the longest we have ever had in this House, and it seems unnecessary, because there are two White Papers already in the Printed Paper Office which we can read for ourselves. I doubt whether any noble Lord can possibly have taken in what has been said in such a way that he can make an intelligent assessment of it. I beg the Government, please, not to interpose an agricultural debate into an afternoon when another subject is on the Order Paper.
LORD BRECON: My Lords, in trying to understand some of the things the noble Lord has said in his Statement, am I to gather that the policy of the Government now is to get rid of small farms as such and, certainly in the Principality of Wales, to see them disappear altogether?
LORD ROYLE: My Lords, before my noble friend replies, may I ask, on the second Statement, whether the Commission will have power with regard to the co-ordination of overseas supplies and holding supplies? It does not seem to me to be clear in the Statement whether that comes within the scope of the Commission. May I further ask whether the Commission will now have power in their hands to establish factory abattoirs?
LORD INGLEWOOD: My Lords, may I ask whether all this long catalogue of powers which the noble Lord read out requires legislation and, if not, which of them can begin without legislation? Do the Government intend to draft this legislation before either House of Parliament has had a chance of debating the White Papers? Because if so, it seems a quite intolerable step. With regard to the Boards, under which Department are they to operate—under the Ministry of Agriculture or under the Ministry of Land and Natural Resources, which may seem more appropriate? The Minister of Agriculture in another place referred to the
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pre-emption of land. This is something very serious, and I hope that the noble Lord can tell us a little more about it. This word "pre-emption" can mean anything or nothing.
THE EARL OF DUNDEE: My Lords, can the noble Lord make clear whether this applies to Scotland?
LORD BALERNO: My Lords, may I ask the noble Lord whether he is aware that there is considerable apprehension amoung the members of the staff of the Pig Industry Development Authority about the continuation of their employment? Could he give an assurance that the employment of the staff of the Authority will be continued under the Meat Commission, under terms no less generous than those they have at the present time? I welcome the Minister's reference in the Statement to the fact that the Meat Commission will continue to be an agent for research. May I remind him that while purely scientific research is best done by bodies such as the Agricultural Research Council, applied and technical research can be more immediately and more efficiently done by a body such as the Commission?
LORD CHAMPION: My Lords, I have had a number of questions and I will try to keep my answers as brief as possible. I must admit that I have some sympathy with the noble Lord, Lord Rea, about the length of this Statement. Of course, this is already decided and I am merely repeating a Statement prepared for another place. The noble Earl, Lord Ferrers, complained of its being presented so late. I can only say that the noble Earl will have the whole of the Recess to read the White Papers and master their details, and, if he wishes, I am fairly sure that we shall be able to have an opportunity to debate these Papers after the Recess. The noble Earl asked what were the grants that were going to be made and said: "Are they going to be sufficient to provide a golden pitchfork?" We do not regard them as a golden pitchfork, which would be an implement for prodding people out, but rather as golden roller skates, for helping them out. The noble Lord will find the amounts in the White Paper, and I do not think your Lordships will expect me to read them out now, particularly in the middle of this debate. This also

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applies to the limits of eligibility, which the noble Lord will find set out in full in the White Paper.
The noble Earl also asked me how much of this land will be taken over by the State. I would say that very little or none will be taken over by the State, excepting some little bit that may be taken over by the Boards that are to be set up. But certainly it is not the Government's intention to take over and hold land permanently. What we shall do as soon as possible, if we cannot amalgamate it with another farm straight away, is to let it until such time as we can amalgamate it.
The noble Lord also asked, on the Meat Marketing Commission, whether trading is to be a function of the Meat and Livestock Commission. No, my Lords: trading is not going to be a function of the Commission. This applies, to some extent, to the question asked by my noble friend Lord Royle. The Commission will be advisory; they will be helpful, and they will conduct research in some of the fields already covered by P.I.D.A., the body mentioned by the noble Lord, Lord Balerno. And in answer to Lord Balerno's question, I must say that the intention is to integrate this body; and I am sure the Commission will be happy to have the experience which resides in the body of people who have up to now served P.I.D.A. so well.
The noble Lord asked me what further steps might be taken by the Meat and Livestock Commission. It is for the Commission themselves to decide, first of all, whether they think some further powers are necessary, or some further suggestions should be made. If they consider that this would be advisable, they then must prepare a scheme, discuss it and present it to the Minister; and the Minister can secure the scheme finally only by the consent of both Houses of Parliament.
The noble Lord, Lord Brecon, asked me a question which clearly comes up in the mind of everybody who knows small farms, farmers and so on. No; it is not our intention to pitchfork out of business a small farmer who does not want to go. What we are trying to do is to ensure that the farmers shall agree to remain, and that they shall have a reasonable livelihood based upon a farm that will support them. That is really what we are doing
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here. We are certainly not going to take compulsory powers to push any farmer out of business who is content with a comparatively small income and the way of life that he has chosen.
So far as the question of my noble friend Lord Royle is concerned, it will not be for this Commission to co-ordinate overseas and home buying. Final decisions as to imports, and so on, must be taken by the Government, and not by an independent body such as this is going to be. The noble Lord, Lord Inglewood, asked me whether legislation would be drafted before consultation. These are proposals in this White Paper. They have been informally discussed with the bodies concerned. Now there will be formal consultation—
LORD INGLEWOOD: My Lords, I do not want to interrupt the noble Lord unnecessarily, but I am afraid he has misunderstood me. Clearly there should be consultation with the interests involved, but it was a debate in Parliament about which I was asking.
LORD CHAMPION: That is a matter for the House to decide, and, as I indicated to the noble Earl, Lord Ferrers, it will be, to some extent, for the Opposition to decide whether we debate these White Papers. I believe they are of sufficient importance to justify a debate in this House before legislation is finally agreed.
The noble Earl, Lord Dundee, asked me about Scotland, and certainly these proposals cover Scotland equally with the rest of the United Kingdom. I think I have answered all the questions, and I am sorry to have detained your Lordships for so long. I hope that we may now revert to the financial discussion.
LORD BLYTON: My Lords, could my noble friend say what further financial aid will accrue to the small farmers? Could he say what consultations the Minister has had on these proposals with the National Farmers' Union and other interests concerned? Is the financial aid not good redundancy payments, if there is a merger of small farms?
LORD CHAMPION: I am afraid I did not get the last point put by my noble friend. There have, of course, been consultations at every stage of the preparation of these White Papers and the presentation of this Statement to-day. But

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they have been, as I said just now, on an informal basis. After these White Papers have been laid, the consultations will then proceed on a formal basis on all the aspects, including the financial assistance to small farmers.
LORD BLYTON: My Lords, as my noble friend—
SEVERAL NOBLE LORDS: Order, order. Byers, Byers.
THE EARL OF LONGFORD: My Lords, I hesitate to-day to interrupt anybody at all, in view of what was said earlier about my compulsive interruption, but I wonder whether my noble friend would not feel that this discussion has gone far enough for the moment.
LORD BLYTON: My Lords, it was only the fact that my noble friend said that he did not hear the last part of my question that caused me to rise. What I said was: is the financial aid not good redundancy payment for redundant farmers to make bigger units?
LORD CHAMPION: The intention is that it will help farmers who are not really able to get a decent living on the small farms.

FINANCE (No. 2) BILL
4.16 p.m.
Debate on Second Reading resumed.
LORD BYERS: My Lords, I think my first duty should be to thank the noble Lord, Lord Champion, for the comprehensive way in which he wound up the agricultural debate that we have just had; but I take it that we have now concluded that, and are once more dealing with the Finance Bill and the economic situation.
If I may say so, the noble Lord, Lord Carrington, has a very engaging sense of humour, and I think we all enjoyed his little joke: that if a Conservative Government were returned to-day, confidence in the pound would be immediately restored. I am afraid that the balance-of payments crisis is a great deal more difficult than one which could be solved by the return of a Conservative Government. But I do not think that the Conservatives were guilty of concealing the situation as it existed during the Election. I remember well, at a very early part of October, calling upon the Conservative Government to take some
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action, despite the fact that there was an Election, if the balance-of-payments situation was as bad as Mr. Maudling had then forecast. So I feel that to say they concealed the situation is not a fair charge.
What I find so depressing about our present economic situation is that "we have been here before", and it does not look as if the present Administration have any new or better ideas for dealing with these recurring crises than those whom they succeeded. I would say that if we are to have a managed economy, then it must be managed well; and I believe that we have to get the priorities right, and stick to them. I feel that we have all been guilty in some way in contributing to the situation as it exists at the moment. In my view, the first thing to do is to agree on the overall objectives, and this must surely be to increase the national wealth to a steady optimum rate, by improving efficiency, and at the same time, as the Government have made clear, to export the amount of the national wealth that is required to restore the balance of payments. Until we get to that position, we cannot, I think, afford the improved social benefits that so many of us want to see. I think the Government must make this clear. I dislike this situation intensely. It is not the sort of thing which radical reformers like to have to admit. But the fact is that if the crisis is as critical as we believe, then we must forgo the social benefits which we have advocated. I believe that this is, unfortunately, even more the case when we are in a debtor position, because our foreign creditors measure our determination to put matters right—or the lack of it—by the social benefits that we are prepared to expand or to forgo.
Having said that, however, I must add that I do not follow the noble Lord, Lord Carrington, the whole way. I think that we should make one thing absolutely clear to foreigners in general, and that is that we are not prepared to regard the old-age pension as a donation which can be increased only in times of prosperity. People in retirement have a right to a decent pension which is not constantly eroded by inflation; and it is for this reason that for some years now (I think we first put it forward in the 1945–1950 Parliament) my Party, the Liberal Party, have advocated tying the pension to the

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cost of living, so that there is an automatic adjustment at quarterly intervals, instead of having these dramatic increases suddenly produced. For the effect on the unsophisticated foreigner is to make him think that we are handing out money that does not belong to us. I believe that the Government would be wise to get a different attitude on this whole question of pensions. Ideally, pensions should be tied to the national wage, but I believe that the first stage is to get some relation to the cost of living, so that when something is handed out it does not appear profligate to people who do not understand our welfare system. I have said that about pensions, because I believe that if we are to get through this crisis we need to get many things into perspective.
There seems to be fairly general agreement in the debate so far as to what our problem is, but I find no general measure of agreement on how the problem should be tackled. There are two interrelated problems: first of all, the short-term crisis, which seems to recur with ever-depressing regularity; and, secondly, as the noble Lord, Lord Champion, said, there is the long-term weakness in the whole economy. Those two things are separate, yet they are interrelated. The short-term weakness arises from the excessive demand in the economy, which has been exacerbated by heavy public expenditure, and the long-term weakness arises from the fact that, broadly speaking, we are far less efficient and far less competitive than many other industrial nations. I believe that it is in their effectiveness in dealing with these two problems, the short-term and the long-term, that the Government's performance will be judged. I am not interested in who was to blame in the past. All I am interested in is whether the Government measures, and the Finance Bill, are likely to prove effective, both in the short run and in the long run.
One danger is that some of the short-term measures proposed by the Government may well impede the solution of the long-term problem. This seems to me a real danger and one that has been inherent in many of the past crises. For instance, a major factor in getting improved efficiency in industry will be in going ahead with the trunk road motorway system. It is highly depressing to see
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that we are going to save something like £25 million on those roads. We know that American firms now, when calculating their costs of transport in Europe and in Britain, add on more for British road conditions because of the congestion. This is going to have a bad effect, in the long run, and therefore the Government ought to look at that problem again. I was glad to see that priority is to be given to the roads giving access to the ports. But it may well be that money spent on the docks, at the expense of something like housing—in which we all believe—may give us a much better long-term answer economically, and enable us to have many more houses, schools and hospitals once we have solved this particular economic problem. I think there will have to be a cut in housing and hospitals, and in services which we should not like to see cut. But I would say this to the Government: can we not try to organise some sort of building programme which can produce the hospitals, schools and houses that we need, with far more efficiency and far less effort, and yet perhaps achieve the same total without putting an excessive strain on the industry itself?
I am particularly worried about the indication that we had to-day that university building is to be cut. I hope that this does not mean—although I think it does—that there will not be as many places in the future as we had originally anticipated, because it seems to me, as I tried to indicate at Question Time, that the wrong criteria are being used. The Government gaily come and say, "We are very sorry, but the universities have to suffer with the rest." Then we are told that it will not affect areas where there is high unemployment; nor will it affect development areas. That has nothing to do with it. The test is, are we going to have the places we need to get the trained people into our industrial, academic and professional system? It has nothing to do with unemployment, and nothing to do with development areas. This is where I think there has not been sufficient new thinking in this field. I hope that this aspect will be looked at again. The suggestion that technical colleges may be cut seems to me to be ludicrous, wherever they are, because it is the lack of technology which is one of the root causes of our present inefficiency.

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The Government have now been in power for over nine months, but I have seen no real effort to expose trade union practices and restrictive practices which are holding back developments which we, as a nation, could well achieve. I do not think it is sufficient to condemn these practices. The unions must be shown that increases in real wages can only come out of productivity. That should be accepted as the starting point in wage negotiations: how to get the productivity, and how to share it. This seems to me to be the new attitude which ought to be developed by the Government, who are so closely associated with the trade union movement. Then we have George Brown, who appreciates the vital importance of productivity, and who is making a tremendous effort to get the incomes and prices policy going. I think he should be supported to the full. But the policy itself is condemned, by implication, by Mr. Cousins, who hops off to his trade union, the Transport and General Workers' Union, and, by implication, supports them in their opposition to this policy. This cannot be right, and this is what I mean by getting things in perspective.
I know the Prime Minister's difficulties. I should not like to have his job of loosening one of the nuts—or should I call it one of the bolts?—in this carefully clamped together Cabinet—because one never knows what is going to happen there. There must be a declaration by the Government that these practices are wrong, and that we are going to have an incomes policy and a price and productivity policy. We can see the lack of success in this field when we look at some of the resolutions which have been put on the agenda for the Trades Union Congress in a month's time.
So far as the management side is concerned, I would suggest to the Government that a great deal more could be done to encourage managements to improve their practices. The good managements —and, thank goodness! there are plenty of them—are always looking for ways to improve their practices; but there are many who never even think of it. I went last week to what is called a presentation put on by the British Institute of Management, in which a firm with a particular success
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record, including the export field, demonstrated with full figures exactly what had happened to it over a period of fifteen years. They discussed quite frankly the sort of problems they had come up against, and the way they had to solve them. This sort of thing should be going on all over the country, if necessary with Government's support, because I am quite sure that this free exchange of views is something which must lead to the higher degree of efficiency that we need.
I come back to my main concern, which is two-fold: first, that in dealing with the short-term crisis we may continue to neglect basic long-term weaknesses in the economy; and, secondly, that the short-term measures will be so non-selective that they will positively postpone the long-term recovery. I regard it as absolutely vital that productive investment is not cut back too heavily; that the restraints are selective. We should not be afraid of creating a higher level of unemployment; but once that has been done, it is no use just having the unemployment—we need to re-train it quickly, to provide proper redundancy payments, and to regard it not as unemployment but as mobility of labour.
This is the sort of way in which we can get out of the trough we are in to-day. We should try to reduce imports—and I know how difficult this is—by methods which do not give added protection to lazy managements. This is one of the curses of the import surcharge. This is a dilemma, but it seems to me that it might be worth looking at the Italian system, where they insist that the importer puts down a deposit with the bank some days, months, or weeks ahead of his receiving the goods. This acts as a brake on the import without necessarily adding to the cost. I hope that we shall not prevent the entry of imports needed for a quick turn on re-export business. And here, selectivity is very important. I believe that the proper solution is not to be concerned so much with cutting imports as with making our exports far more competitive. In Germany, imports went up by 22 per cent. in the first six months of this year, but they kept their prices stable, because of this competition of the imports that were coming in, and at the same time they revitalised their export business. I think one can get too transfixed with the

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idea of cutting imports. It may well be that it is that breath of competition and fresh air that we need at the moment. However, I am quite sure the Government are fully aware of this.
There is only one more point that I should like to make, and it is this. One of the reasons for these recurring short-term crises could be a lack of up-to-date, reliable information on which to base decisions. I do not know whether the Government are satisfied about the reliability of the information which they get. For instance, are we considering using, or do we use, techniques which, including computers and simulated programmes, are able to indicate what is likely to be the effect of different actions open to the Government at any particular time? In dealing with a crisis like this, one could be seriously misled by having figures which were six months out of date or which were not accurate to within 2 or 3 per cent. I believe there is a serious danger that for these and other reasons the Chancellor's measures may take longer to be effective than he is banking on at the moment, in which case things will get worse.
There is a school of thought developing in industry to the effect that expansion plans must be pushed through now, because if we wait until 1967 it will be more expensive. If these plans could be postponed without affecting the economy they should be so postponed, and the Government should watch this, because there is the temptation to say, "If we wait until 1967 we shall have to pay another 20 per cent."
Therefore all I want to say on the Finance Bill in relation to the economic situation is this. I think the fact that the Government introduced a Finance Bill of 270 pages, weighing I believe a pound and a half, must have shown that they had not appreciated how serious was the economic situation in the country. Had they done so they would not have produced a Bill which was so far-reaching, which contained two major reforms at the same time, and which required so much amendment at its various stages. In my view, businesses ought to be concentrating now on improving their efficiency and not learning new rules. I think we could have taken the capital gains tax
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this year and the corporation gains tax could have been left until next year. The mere fact that we got this Bill gave people the impression that the financial situation was not really too bad, otherwise the Government would not have brought in a measure of this sort.
In past debates I have made clear my position in regard to companies with overseas interests, and, as the House knows, I have my own interest to declare, which I did in the last debate. As the noble Lord, Lord Carrington, said, there has been no fundamental change so far in the attitude of the Government to the problem of the overseas company as it is at present organised, and it means that in 1967 an efficient company trying to produce raw materials for this country will be suffering a tax rate of 70 per cent. which is a penalty not suffered by the American and other companies with whom we have to compete in exploiting enterprises like mines overseas. I am not going to rub this in. I think the Government will be forced in the long run—and I hope in the short run—to look at the whole question again. All I want to emphasise is that the Finance Bill will be over and we ought to be fully concerned now with getting this pitiful situation to rights.
I hope in dealing with the short-term crisis the Government's measures will be unpopular. If they are not unpopular I do not think they will work. I hope the Government will not be frightened of this temporary unpopularity. It sounds a paradox, but if they really are unpopular they will get support; they may become popular by being unpopular. But I hope that in dealing with the short-term measures they will be really selective. If they do that, then, as a nation, we shall begin to see the daylight at the end of the tunnel, and I hope we shall not have crisis recurring after crisis.
4.38 p.m.
BARONESS PLUMMER: My Lords, since my Introduction on June 2 I have attended this House diligently, hoping to absorb the atmosphere and to adapt myself to its unique procedures. I have been riveted with interest and, I must admit, fascinated. The more I listened, the more reluctant I felt to rush in with my maiden speech. For, my Lords, although it is known that your Lordships' response to

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maiden speeches is generous, good-natured and benign, I am slightly bewildered as to how to render my own. This is because I particularly remember the one day on which there were two maiden speeches by my noble friends. One of them, who seemed to me to be leaning over backwards to be non-controversial, was in fact accused of "not speaking to the Bill", whereas the other was accused of being controversial. I suppose there can be many interpretations of what is a controversial speech. Indeed, having seen and heard your Lordships in this House, and having noted the calibre of the speeches, especially those of the noble and learned Lords, I think that a debate on the interpretation of a controversial speech would be highly diverting.
This brings me to my own maiden speech, and I apologise to the noble Lord, Lord Rea, and the noble Lord, Lord Byers, that it is about agriculture. I submit that this is relevant to the Finance Bill for, after all, it relates to the question of the balance of payments. In passing, I will refer to the extent to which the increase in agricultural products since the war has saved us a vast amount which would otherwise have had to be paid for imported foodstuffs. I am a farmer, and have been for many years—but I shall not be very much longer if the present weather continues. I am also a member of the N.F.U., and have been for many years. In my view agriculture—our largest industry—has not been nearly enough exploited, so far as exports are concerned.
I should like to begin with just one small section of the industry as an example—livestock for breeding exports. Three years ago I was an exporter of breeding pigs and attended most of the Eastern European agricultural shows, including that at Moscow. Incidentally, I also had the great pleasure of winning the championship with one of my breeding pigs at the Markleeberg show. Alas! since my husband's death over two years ago I have reorganised my farming operations and no longer have livestock on the farm. I do not intend to have any in the future, for personal and practical reasons. However, I have been able to see the vast potentialities in this section of the industry. For example, last year £1,143,132 worth of cattle livestock was exported for breeding purposes. This figure represents a 50 per cent. increase
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on the previous year's figure, which was £858,211. In April and May of this year alone, the figure stands at £446,382, which progress, if continued through to the end of the year, will show a highly satisfactory increase on last year.
One of the reasons for these encouraging figures is that about three years ago a number of enthusiastic individual exporters decided on a special export drive to promote sales. They chose Eastern Europe for this drive, because in the past no special efforts had been made in that area, and because it was an obviously immediate market, not only for livestock but for machinery and all the ancillary products. In June of last year, the first British agricultural exhibition was held in Moscow. This resulted in sales worth £750,000 in Russia alone; and as a result of contacts made there and in the other Eastern European exhibitions the trade figure of £5 million to £6 million was achieved, with prospects of a very much larger figure.
One of the most encouraging aspects of that show was that there were many small exhibitors showing for the first time outside England. With proper encouragement and promotion this type of small exhibitor could be increased by hundreds. Together with the larger firms, they could make a very important contribution to the national effort. To give another example, there is a small firm in Devon which, not having previously exported at all, sold £75,000 worth of equipment to Eastern Germany as a result of last year's Markleeberg's Exhibition. They have also had further inquiries for another £200,000 of equipment and prospects of great interest shown by Czechoslovakia. This is just one small firm which, as I said, could be repeated by hundreds.
It is interesting to note that the machinery export figures for Eastern Europe alone were £855,650 in 1963 and £1,230,470 in 1964. The total figure for the whole of the industry is £200 million. If the same efforts that were made in the Eastern European markets could be extended to the so far untouched countries like Africa, South America and the Far East, there are no limits to what extent we could increase our exports. Given the right encouragement, which I see the Government are already initiating, there are many ways of going straight ahead. For instance, supplies needed by many of these countries include package deals,

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such as herbicide and pesticide plants, complete feed mills, plants for packaging cheese, butter, and margarine, egg grading and sorting equipment, poultry cages, milking parlours, and so on, for we do possess the highly specialised know-how in these products.
Of course, the right sort of credit terms are essential, and here again I see from various articles in the Press that the Department of Economic Affairs plan to help speed the flow of exports. We are well aware of the formidable array of countries like Canada, France, Western Germany and Italy as our competitors in this field, and they seem to have a different system of credit aid from ours. But I am convinced that we could compete successfully if only our exporters had the desire and will to do so, for it is a well-known fact that our techniques of mechanisation are recognised as being of the highest standard, as is shown by the following figures. One British farm worker is capable of feeding 27 people, as compared to the figure of 13 to 16 people in America, Canada, France, Western Germany and Italy—again our competitors. I believe that the 1947 Act revolutionised the agriculture industry, when Tom Williams was Minister of Agriculture. We have the good fortune of having Mr. Fred Peart as our present Minister, a worthy successor to the noble Lord, Lord Williams of Barnburgh, and he too saw the importance of agricultural exports when at this year's Royal Show he said that
"it displayed an emphasis on exports of quality products to all parts of the world."
In fact, when he said this, matters had gone even further.
When I was preparing my speech I made a note that I should plead for some sort of board or council to co-ordinate and encourage exports of agricultural products. I find I have been overtaken by events. In fact, I see again from the Press that only last Thursday the Ministry of Agriculture and the Board of Trade met representatives from all parts of the agricultural industry and agreed the introduction of just such a board as I would otherwise have been advocating to-day. I note that the constitution of representation of this board is still to be worked out, and it is my fond hope that the agricultural worker might feature in this as well as the producer organisations. I
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have put my point of view, but whatever the outcome I am delighted to know that at last we shall have formal machinery for encouraging and stimulating our agricultural export programme.
However, at the risk of boring your Lordships, I should like to repeat that this will be no good without two other vital factors, the drive and enthusiasm of individual groups—the people who will do the exporting—and the expansion of our markets for agricultural products overseas. I have pinpointed the existing situation in Eastern European markets alone so far as exports of livestock and machinery are concerned. I have done this to illustrate that if the same sort of push and drive were made in other parts of the world the results could compare very favourably with those of other industries. Farming productivity is increasing at a rate of 5 to 6 per cent. a year, a figure almost double that of British industry. So far, and indeed for the past twenty years, other industries have not been able to close the gap of the balance of payments with sufficient speed. Of course there have been increases, but only marginal ones. We need fast and efficient increases, and there are signs in the agricultural industry that an increase of £250 to £300 million is not an impossibility given the right encouragement. These figures would go a long way towards closing the gap of the balance of payments. There are few other industries with such enormous potentialities.
I have tried to stress the importance of agriculture to this country and to the rest of the world. We have only to look at the recent reports of Common Market discussions, which seem temporarily to have broken down owing to disagreement on this vital question of agriculture.
4.47 p.m.
LORD ROBBINS: My Lords, it is always a privilege to follow a maiden speech, and I am sure that on this occasion your Lordships would wish me to congratulate the noble Baroness on her lively and distinctive contribution. In addressing myself to the subject matter of this debate, I confess that I have never felt more grateful for the asylum presented by the Cross Benches. We are confronted with a crisis in our affairs which is more menacing than any since the war, and as I myself conceive the

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issues it is difficult to adopt an attitude agreeable in all respects to either side of the House. The situation is indeed grim, grimmer, I think, than has appeared from any of the speeches made this afternoon so far.
Internally we are confronted with brisk inflation. Despite Mr. Brown's devoted efforts, the incomes policy is not working. Prices, as measured by the Cost of Living Index, have been rising at a rate of more than 6½ per cent. per annum, which means that all those who live on fixed incomes are likely to be that degree worse off. And if one takes account of the shrinkage in the real value of their holdings, those who hold Government stock yielding 6½ per cent.—an almost unprecedented rate in our financial history—will be lending at a zero rate of interest, and those who do not get 6½ per cent. will be lending at negative rates.
Externally the position is still worse. Our first line cash reserves have shrunk to a sum which would hardly purchase a week's imports. If we were not propped up by loans from abroad, the present parity of the pound would have disintegrated long ago. And although with the support we are receiving and the extraordinary reserves which we can muster we have managed to survive thus far, the future is very uncertain. The fundamental malaise of our balance of payments persists. It is true that the deficit is substantially smaller than it was a year ago, but it is still running at an alarmingly high rate and there are no prospects of a very rapid improvement.
Why has this happened? I think we get our perspective all wrong in this connection if we try to put the blame on deficiencies of productivity. I do not wish to deny the importance of such deficiencies. No one who has had the misfortune to have to use either London Airport or British Railways could be blind to shortcomings in that respect; and it would not be difficult to find a similar state of affairs in parts of the private sector. Nor should I wish to deny that, if productivity had increased faster and incomes had not increased, the situation would be substantially better. But these are long run considerations, highly important as regards our eventual rate of growth, but largely beside the point in relation to present difficulties. You do not get such sudden increases in aggregate production. That is why mere
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exhortations to produce more, to the neglect of other essential measures, are so pathetically irrelevant. You do not get a sudden emergence of difficulties in the balance of payments because growth is not as rapid as it might be.
But such a change, such a rapid emergence of difficulties, is the essence of the situation with which we are confronted. Three years ago we were not doing badly. Our exports were reasonably competitive, our imports not excessive. The figures for 1962 showed a surplus. Then last year we were out of balance to the tune of some £750 million; and even now, after all that has been done, that formidable deficit has been reduced by only half, if that. Is it really plausible to assume that such spectacular variations are the reflection of changes in productivity? I doubt it.
But if we reject explanation in terms of productivity, where are we to look? The obvious answer, I suggest, is in terms of expenditure. If aggregate expenditure grows faster than production, then the inevitable consequences are rising prices, lengthening delivery dates, increasing imports and increasing obstacles to a commensurate increase in exports. Surely this is what has happened. I should not wish to deny the influence of other adverse factors. But if we try to get things in broad proportion, I see no escape from the conclusion that the main cause of our present difficulties has been excessive aggregate expenditure. Given the fundamental disposition to save and spend, and the probable rate of increase in production, our fiscal and monetary arrangements have been such as to produce a situation in which domestic inflation and external disequilibrium were more or less inevitable. After all, this is not the first time that this sort of thing has happened. This is where we came in before.
In such circumstances, I must say that I see little point in much of the current recrimination about responsibility. I do not see how members of the late Government can repudiate some blame for failure to prevent the emergence of excess expenditure. They were in control, and they did not apply the measures of restraint that were necessary. But whatever they have done since coming into office—I shall be speaking of that later—I do not think that members of

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the present Government have much justification for reproaching their predecessors. I do not remember much talk on their part in the past of the necessity for going slow and curbing the rate of expansion. Indeed, I think the former Chancellor would be entitled to say to his critics, "True, I made a mistake. I underestimated the expansive forces. But if I had taken the advice I was given I should have underestimated them even more."
The fact is, surely, that public opinion has been in something of a muddle on this subject. We are all still suffering from the traumatic effect of the Great Depression of the 'thirties—the waste of manpower, the loss of production; and, regardless of the fact that the conspicuous phenomenon of the last quarter of a century has been inflation rather than deflation, we tend to exaggerate the danger of the latter and ignore the danger of the former. We are so afraid of running the economic machine at under-capacity that we are always tending to run it beyond its capacity to work without rising prices and difficulties in the balance of payments. We are so barren of invention that we seem to think that the only cure for some long lasting unemployment in the North East and parts of Scotland is to blow up the rest of the system until developing industries elsewhere find it almost impossible to recruit labour. And then, when repeated difficulties of this kind make it impossible altogether to ignore the dangers, we tend to deceive ourselves with the belief that if only the employers and the trade unions would be reasonable, all would be well.
I am not one of those who oppose an incomes policy. I am quite sure that in an economy such as ours something of the sort is desirable, if only to regularise matters in the public sector. But I am sure that all experience shows that employers and trade unionists alike would have to be recruited from some other planet before, in the face of pressures of the kind to which they have been exposed since the war, they abstained from attempting to raise wages and prices. I admire greatly the spirit which underlies Mr. George Brown's endeavours; but I am sure he will not succeed unless the pressure of demand is abated. And I
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would say, as regards public opinion, that the most urgent need is the realisation that, as has been recently argued by the O.E.C.D. Report, to which allusion has already been made, it is "Go-Stop", rather than "Stop-Go", policies which underlie most of our recurring difficulties.
In such circumstances, I find it wrong to withhold tribute to members of the Government for the broad conceptions with which they are tackling our present difficulties. I say "broad conceptions", for I can think of points which are not mere details on which I have many doubts and reservations. I regret the timing of the deflationary measures. A stiffer dose last Autumn might have avoided the necessity for still stiffer doses now. I wonder whether what has yet been done is sufficient to prevent grave continuing difficulties. And I regret very much indeed that so much of the pressure is put on the investment rather than the consumption end: that it bears on provision for the future—roads, public utilities, universities—rather than on enjoyment in the present. In my judgment, a stronger dose of the regulator at an early stage would have been preferable to much that has been done recently to discourage new construction. But, when all that has been said, I think we should admire the empiricism with which the Government has tackled the difficulties, putting the strength of the economy before adherence to inappropriate dogma and ideology. And I should regard with considerable distaste any attempt on the part of opposing Parties to make capital out of the ardours and endurances which such a policy may entail. I wish I could give similar praise to some of the more permanent measures embodied in the Bill which is the pretext for to-day's discussion. But, where these are concerned, I find myself in sharp opposition, both as regards substance and as regards the mode of their introduction.
I suppose few of us would object to the principle of a capital gains tax, although there are practical reasons why I personally have never felt very enthusiastic about proposals to introduce it. But in order that the principle may be acceptable, it is surely essential that it is only capital gains and not capital holdings as such which are singled out for

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taxation. And that is precisely what the present tax completely fails to do. There is no clause in the Bill which distinguishes the nominal increase in capital values which is, or should be, the normal accompaniment of a fall in the value of money, from real increases which may take place when the changes in the value of money have been eliminated.
This is no fine-spun academic point: it has the most important practical significance. It means that in a period of rising prices a man who has put his savings into equities to escape the inevitable depression of gilt-edged securities is taxed on realisation, even though all that has happened is that the value of his holdings has just kept pace with the decline in the purchasing power of money. That is to say, he is subject to a capital levy even though the real value of his capital has remained constant. I must say that I think this is flagrantly unjust. I also think that, in a period when one of the main desiderata is an increase in savings, it is inexpedient. The secular inflation has already undermined confidence in Government securities, and the capital gains tax is a disincentive to investment in general. I suppose it will be said that you cannot expect any Government to legislate on the assumption of its own bad faith and incompetence as regards the value of money. I can only say that I should have much more confidence in any Government which provided safeguards against just this danger.
As regards the corporation profits tax, my objections go even deeper. I object to the fundamental principles involved. I was taught by my very dear friend and splendid teacher, the late Lord Dalton, that taxes on profits as such, as distinct from taxes on the individuals who receive them, were unfair and regressive. And I object fundamentally to the principle that the joint stock company as such is an entity which should be treated differently from the individuals who own it. I am not suggesting that shareholders can run a company. Nor do I believe that management should always pay out to shareholders all profits as they arise: the distribution of earnings involves considerations of long-term as well as of short-term interests of shareholders. But I believe that it will be a bad thing for this country if ever it comes to be assumed that the
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payment of dividends is simply a ritual to keep the stock markets sweet, and that, if shareholders ask for less retentions, management should be deterred by the tax structure from complying with such demands. That is the precise intention of this tax—in so far as its intentions are discernible.
Objections of this sort, both in regard to the capital gains tax and in regard to the corporation profits tax, have perhaps little direct relevance to the present difficulties of the economy. But there is much relevance in the manner of their introduction. I am clear that this has a substantial responsibility for the general falling away of confidence, which is one of the main difficulties in the position of sterling at present. The introduction, at short notice, of changes affecting seriously the position of so many individuals and companies, the ham draftsmanship involving such a host of Amendments, the appalling complexity and obscurity of the Bill, even in its amended state, has created among those affected an impression of an underlying hostility to what goes on in the private sector which it will be very difficult, I am sorry to say, to remove.
I do not myself believe that this is true of Ministers, or indeed of their permanent advisers. But the impression is there. The change in the attitude of the leaders of industry and finance is one of the most conspicuous features of the psychological history of the last few months. And it tends to communicate itself in wider and wider circles. It is no use saying that all this is discounted abroad by the foreign creditor who is used to taxes of this sort. He may be used to this kind of tax, but he is not used to this mode of imposition; and, however wrongly, he has new fears for the future of capital holdings in this country. It will take much to live this down.
May I revert to more immediate problems? It is one of the drawbacks of the particular measures which have been adopted that they must take some time to show their effects. At present, despite all that has been done to deflate the economy, we are still in a state of high boom. So far, the curbs on investment are operating only in the planning back-rooms and in forward contracts. That is one reason why I should so much have preferred the use of the regulator, which

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can be relied on to operate strongly within a short period. But it is difficult to believe that they will not eventually produce some effect. I personally should be surprised if there is not some braking visible by mid-winter.
The momentous question remains, how much? Will the measures which have been adopted so far be sufficient to check the inflation and restore health to the external balance? Remember always as regards this latter, that we have not only to wipe out the present deficit, but also to repay what we have borrowed and to create sufficient surplus to play a suitable part in the development and pacification of the world as a whole. To the question, "Are the measures sufficient?", I find it difficult to give a definite answer, for there are so many unknowns involved. I would only say that if the Government—who should have better information than the rest of us—have any reason to doubt the effectiveness of what has been done up to date, they should not hesitate to act further. And they should not be deterred by the fear of depression later on. I find it difficult to believe that the present degree of deflation, or even some intensification thereof, is likely to cause severe depression.
After all, we are still operating at a capacity of 98·8 per cent. as measured by the employment percentage. Contraction to the figure which, in the past, has meant something like equilibrium could not by the wildest use of language be called a disaster. And if by any chance it seemed that the mark was being overshot there are plenty of means available to reverse the process. Too often, since the war, the adoption of policies to curb undue expansion has been delayed on the pretext that depression was just round the corner—as if you should delay operating the fire hose for fear of rainy weather the next winter. Our business is to solve the problem which now confronts us, not to shirk it because other problems may arise later on.
Amid all these uncertainties it is natural that there should be prevalent in many quarters queries concerning the future rate of exchange; and although, doubtless, there are considerations of prudence which should guide what one says in this connection, I do not think that it should not be mentioned in this House. When
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every economist and every businessman with foreign connections is discussing this question, it does not seem very grown up to proceed as if it did not exist. Let me say at once that I approve of the decision which the Government took last year to maintain the rate of exchange. In my judgment, it would have been an ignominious thing to have resorted to devaluation without making any effort to see whether the situation could be cured without it. It would also have been a dishonourable thing with so much foreign money here, which had been so placed in the belief that the rate would be maintained, would not be abandoned without a struggle.
However, I should also like to say that I am not one of those who would be opposed to devaluation in any circumstances. As the only surviving U.K. economist delegate to the Bretton Woods conference, I still believe firmly that, if an economy finds itself in what the statutes of the International Monetary Fund describe as a "fundamental disequilibrium", then, rather than inflict on itself catastrophic deflation in order to maintain existing rates, it is better for it to cut its losses and, with due consultation with other centres, adjust to a new parity. But, my Lords, the governing word is "fundamental". The men who drafted that statute, I can assure your Lordships, had in mind the disequilibria of the inter-war period, the great depression, when severe contractions and mass unemployment were insufficient to restore the position of countries such as Great Britain and the gold bloc. They were not thinking of the disequilibria of economies running at 98·8 per cent. of capacity. They were not creating an instrument providing for changes of parity on each and every occasion when spending gets out of line with domestic production and the international conditions of supply and demand. And when I think of the perilous dislocations in the world at large that would inevitably be caused by the devaluation of sterling at this juncture, I cannot but applaud the decision of Her Majesty's Government to try to fight it out the hard way.
But supposing that, as time goes on, all reasonable measures fail to work. Supposing that the withdrawal of capital becomes insupportable, or that it becomes clear that the external balance will not be restored at the existing sterling rate,

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save by measures which would recreate the unemployment conditions of the interwar era, then I have little doubt that we should choose the alternative of devaluation—or rather, as I should prefer, letting the rate float until the time had come when we could see what permanent rate was appropriate.
Then, supposing that day should come—I profoundly hope it will not—let no one think that that solution would be an easy way out of our troubles. Let no one think that just letting the sterling rate go would mean an end to the need for restraint and circumspection; and that, if the pound were devalued, we could just heave a sigh of relief and begin the next spending spree. We have seen that sort of thing elsewhere; and both theory and experience combine to teach us that if, in the event of devaluation, a strong curb is not still kept on aggregate expenditure, the whole process begins again—indeed, the depreciation of the rate of exchange itself becomes a factor in a further inflationary process. I hope and pray that we shall not have to contemplate this danger. But if we do, then it is quite fundamental that we should see to it that the adjustment of the rate of exchange is an adjustment to an internally stable position.
Our position is indeed very serious. There is no easy way out of these difficulties. But that is not to say that the difficulties are insurmountable, that there is no way by which we can emerge from this crisis. I think that, whatever happens, we are going to have a tough journey. But I am fully convinced that, with clear heads and strong nerves, we can come through. The important thing is to get our ideas straight, and to face the situation without illusion and without prejudice.
5.15 p.m.
VISCOUNT ECCLES: My Lords, I should like to add my congratulations to those expressed by Lord Robbins to the noble Baroness, Lady Plummer. I was so glad that she chose to speak on agriculture, and as a beef producer myself I hope that she will often intervene in our debates and give our industry, which can do so much more, the support that it needs.
The noble Lord, Lord Robbins, has made a most impressiv speech. I think we are extremely fortunate to have a
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Cross-Bench in your Lordships' House from which speeches of that calibre and weight can be delivered, and I would not disagree with anything the noble Lord has said about the seriousness of our position. But I should like to be "odd man out" this afternoon and talk about the Finance Bill itself; and, in particular, to pursue some of the reflections upon the corporation tax which the noble Lord. Lord Robbins, put before us in such a very thought-provoking way.
It must be clear that the two most important sections of this Bill are the capital gains tax and the corporation tax, and in another place Treasury Ministers said firmly that we must consider these two taxes together. Mr. Diamond said that no man in his senses could contemplate the introduction of one without the other. What, then, is the single premeditated aim of these fiscal twins? As your Lordships know, the ate at which a new tax is first levied is usually modest, the intention being to increase the rate in future years and gradually to reveal the full purpose of the tax. So in considering the social and political effects of the Finance Bill, we should not assume that a rate of 30 per cent. for the capital gains tax, or of 35 to 40 per cent. for the corporation tax is intended to be the maximum rate for all time.
Be that as it may, in my submission, even if these two starting rates are never increased, the taxes are bound to have a very significant effect upon our society; upon the relations between one set of people and another. For myself, I would welcome some social changes at this time. Indeed, some very big changes are required, if only because the old constraints of poverty and unemployment, and also, over a certain sector of our economy, the constraint of competition, have been largely removed. Managers and work-people have acquired a new freedom of action but, as the noble Lord, Lord Thomson of Fleet, said in an important speech in this House a week or two ago, we are not adjusting ourselves responsibly to this freedom which has been brought by affluence. We are lacking something very important; something to put in the place of these old constraints. One thinks of a better understanding of the general good, and a willingness to accept voluntarily discipline which we accepted before because we had to. Mr. George Brown is calling in vain for such a sense of

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common purpose; but, of course, he cannot make himself heard. His voice is drowned by the Prime Minister's sarcasms, and by all the inconsistent actions and statements of other Ministers; not to mention the thousand Amendments that had to be put down, and debated, to this Bill.
So the question I want to ask is whether these two new taxes, so important in their principles, are well-chosen instruments for promoting the responsible and vigorous society that we all wish to see. The common object of these taxes—the pair of scissors of which each is one blade—is the intention to reduce the private ownership of wealth, and especially to reduce the value and influence of the ordinary shareholders upon British business. This is what makes this Finance Bill so interesting. It is the first taste of a new kind of Socialism. No one objects now to using the taxes to reduce gross inequalities of wealth. In the field of incomes, surtax and full employment have gone a very long way in levelling down and levelling up. A bricklayer to-day has more to spend than his parish priest, and a motor car and a holiday abroad are within the reach of millions. Now that, under Conservative Governments, there has been such a levelling up in incomes throughout the country, it is hardly surprising that a Socialist Administration should turn a green eye upon the private ownership of capital.
In my view, capital is not a sacred cow which no Chancellor should milk: but, my Lords, justice is one thing and jealousy is another. The capital gains tax, as the noble Lord, Lord Robbins, pointed out, is introduced with no provision against deterioration in the value of money, and is to start at a rate and in a manner that could easily become merely vindictive and do irreparable damage to the flow of private savings. I fear, too, that the provisions dealing with short-term capital gains will make the capital market much less flexible for all kinds of transactions, and certainly much less attractive to international business. I never thought that we should see a Chancellor of the Exchequer, with the cheerfulness of a man who does not know what he is doing, strangling his own child—the market in gilt-edged securities. From
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now onwards the prices of all Government stocks will be arrived at on a mass of different considerations, all of them wholly unrelated to economic logic.
Then, the attempt to value works of art as though they had been sold on April 5 last will lead to a great many injustices. Anyone who has anything to do with the market in works of art knows that this is a ridiculous proposal; and I hope that next April, a Conservative Government, while keeping a permanent capital gains tax, will get rid of the short-term provisions, will take gilt-edged securities right out of the tax, and will exempt works of art acquired before April 5, 1965.
Now I want to return to the corporation tax. The Government say that one reason why they had to have the capital gains tax was because the corporation tax is designed to persuade companies to retain profits and not to distribute them. They say that retained profits might compensate the shareholder for a lower dividend by adding to the value of his shares; and, therefore, like all good Socialists, they are determined to see that the shareholder does not get an untaxed profit on his investment. The drift of this argument can, I think, be better appreciated if I look for a moment at the underlying purpose of the corporation tax. Why did the Government introduce it in this form? They could have done everything they wanted to do by way of penalising distributed profits without all this upheaval in company accounting. They went for the kind of tax we have before us because, as a matter of political principle, they wished to separate the interests of the managers from the interests of the shareholders. In another place, Treasury Ministers made no bones about this. They said that it was their desire to diminish the value of ordinary shares and to diminish the influence of the shareholders on the conduct of a business. We have to ask ourselves whether or not this is a wise policy. Will the attack upon the ordinary shareholder, which can be pressed right home as the rate of corporation tax is increased, help us to solve the long-term economic problems which are so familiar to us?
Here my Lords I think there are two relevant, major problems. First, we have the growth of very large companies. Some

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300 companies now undertake two-thirds of all the new investment in privately owned industry. This development brings with it the need to find ways of making the comparatively few people who control these great aggregates of power susceptible to social and political pressures. Therefore the responsibility of management is the first problem; and the second is the old division between capital and labour. We are taking much too long to overcome these out-dated attitudes to what should be a combined effort to produce more, and produce more efficiently. No changes in society are more urgent than those which would follow from the discovery of new ways to knit together the interests of capital, management and labour, and the interests of all three with the national good.
I am going to suggest to your Lordships that the corporation tax will fail to make a contribution to either of these problems—and, indeed, must make both of them considerably worse. Take, first, some of the pressures to which managers should be susceptible. They ought all the time to be pushed to reduce the unit costs of their output. But in conditions of creeping inflation and full employment the pressure is not there: all too easily the increased costs are passed on to the consumer. Again, management should feel the pressure to earn the highest possible return on the assets under their control. If they are not capable of doing this, someone more efficient should take over those assets and use them fully. How can pressures of this sort, in the conditions in which we are living to-day, be brought upon managers and be understood by all those who work in the business? We do not want to go back to the stick of poverty and mass unemployment—although, when I heard the noble Lord, Lord Robbins, I wondered whether he was not right in saying that there is nothing we can do except deflate really hard.
But, my Lords, the serious feature of the corporation tax is that it embodies the doctrine that the shareholder is not a fit person to assist in putting such pressures upon managers. If he is not, then comes the sinister question: who is? I know that Labour Party economists argue that ordinary shareholders in our big companies have had a negligible influence upon the managers of these businesses. In their view, if the shareholders
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do put on any pressure it is pressure for dividends higher than is good for the long-term health of the company. This contention, like so much else that the Labour Party are saying, is quite out of date. To-day, 25 per cent. of all the ordinary shares in British business, some £6,500 million worth, and over 50 per cent. of all the fixed interest securities in British business, are owned by insurance companies, by investment or unit trusts or by pension funds. These funds are expertly managed. Thanks to the new profession of investment analysts, we are seeing the development of very well informed views on the relative success of capital employed in one business as compared with another. The modern industrial manager, as I know very well, has to base his decisions about the employment of new capital on the standards demanded by these expert investors. This is very good for British business, but—and here is my point—this is a discipline which the corporation tax is expressly designed to weaken.
I should like to examine a little further this kind of discipline, because the new and salutary pressure which is being exercised by the representatives of the ordinary shareholders is only part of a social change that is growing very fast. Already, millions of families in this country have a stake in the equity of British business through their insurance policies, in their holdings in unit trusts and, above all, in their pension funds. But direct investors also, and particularly women, are becoming each year better informed about the affairs of the companies in which they are shareholders. My noble friend Lord Ritchie of Dundee, when he was Chairman of the Stock Exchange, did very fine work in this field and I should like to add my congratulations to him on his Privy Counsellorship. This dissemination of financial information is a very healthy process, because we shall never have enough capital to do all that we want to do; and the better informed are people who have new capital to dispose of, the better for the economy as a whole.
If we look only a few years ahead we see the opportunity for every man and woman to become an owner of property; that is, a capitalist. I know, of course, that the Party opposite were brought up to believe that such a development would

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be deplorable. We on these Benches have always held that the principle of "every man a capitalist" was a good thing; first, for social reasons, because a man without capital has only a limited freedom; he may find himself at the mercy of his employer or overwhelmed by some accident of fortune; and, second, because this can lead to very important results in labour relations; which is the problem that I raised a moment ago. How are we to knit together the interests of managers, wage-earners and the public at large? The Socialist answer, exemplified in this tax, is that when greedy shareholders no longer put on pressure for higher dividends, these managers and their employees will work with greater harmony and greater efficiency; further, they will take into their calculations the public interest, in place of the interests of the irresponsible owners of the business. But all the evidence we have shows that this will not happen. The nationalised industries have proved what does occur when managers do not have to think about their shareholders.
Why is nationalisation so unpopular to-day? It is precisely because the Socialist dream—that once the State owns the capital, managers and men will work harmoniously and efficiently together for the common good—has not come true. The public have seen through this delusion; the man in the street feels that his ownership of the assets does him, as an individual, no good at all. He has to buy what he is offered at prices that he really cannot compare with anything similar. And what does he get in return? Labour relations are not noticeably better in the nationalised industries; in many cases the service is noticeably worse (as one can see from the columns of The Times this morning), and the public receive not a penny of dividend for all their immense investment; indeed, there are huge losses to be written off. If the total elimination of the private shareholder has had disappointing results in the nationalised industries, why should we expect any better from the gradual elimination contemplated under the corporation tax?
There is an old-fashioned fallacy behind this tax. It is that those who work in industry, whether paid a salary
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or a wage, are one set of worthy people, whereas those who own the equity of the business are another, and unworthy, set of people. That conception of the two sets has never been entirely true; and every day now it is becoming less true. The overlap between these two sets of people is already very large. Directly or indirectly, we are all shareholders now, and the community of interests is growing between a man at work and a man who is saving. Here is one of those social changes which, if properly understood and encouraged, should be of immense value in going beyond the old divisions between capital and labour.
I agree with the noble Lord, Lord Robbins, when he said that men cannot be exhorted suddenly, and at one jump, in peace time, to put their own particular interests away and to think first of the common good. It is much wiser to be patient and to proceed from one stage to the next; to build up a network of less ambitious loyalties—loyalties to the place where we live and work, loyalties to the industry or profession to which we belong, loyalties to our club or to our hobby which occupies our time in our leisure hours. Where such limited loyalties do not exist, few men do their best; and, as the noble Lord, Lord Thomson of Fleet, reminded us, many men do not even pretend to work hard. We can see this happening all around us to-day.
As I said earlier, the public do not feel that they own the nationalised industries and, therefore, in these industries there is something seriously lacking without which the common loyalties between employees and owners cannot grow and are not growing. But in the private sector a much better chance presents itself for establishing a common interest between the workers and the owners, especially now that so many employees are becoming owners, in one way or another. This is a truly beneficial development, but it is a development which the corporation tax deliberately stops. The tax brings pressure on managers to pursue policies with less and less regard for the shareholders. The authors of this measure, because they are Socialists, set their faces against encouraging a community interest between capital and labour, the kind of dynamic community that could lead to a

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discipline that both would understand and accept.
In the form in which this tax is introduced, it is a bad tax. In combination with the capital gains tax it will damage savings, and it will increase, rather than curb, the irresponsibility of managers and men. I regret this very much, because in the difficult and depressed conditions into which we are going, and for which the Government have to bear so much responsibility, there can be nothing more important than to find new ways of knitting together the interests of capital and labour. I can only hope that before too long Mr. Edward Heath and his right honourable friends will have the power to amend this bad Bill.
5.39 p.m.
LORD WINTERBOTTOM: My Lords, my first speech in your Lordships' House naturally awakens some diffidence in me. My apprehension is increased by the fact that I am about to indulge in an essay in the "dismal science"; and, what is worse, I am doing it so shortly after the magnificent speech of the noble Lord, Lord Robbins; but I will endeavour to be brief. My noble friend Lord Champion, when opening this debate, drew our attention to the analysis by O.E.C.D. of the fundamental problem facing the country, namely, the problem that we are constantly facing with our balance of payments. I am hoping to make some contribution towards the solution of this problem in my speech to-day.
I believe that we have to create adequate exporting incentives as an essential part of our concerted attack on our general balance-of-payments problem. But may I say, in passing, how I deprecate the note of panic which can be heard on the subject in many places? Without shedding any of our international responsibilities, which would, of course, be a short cut, and a bad one, to a solution, we could, by exporting, say, a further 2 per cent. of our gross national product, bring our accounts fully into balance today. To ask our nation to send a further 2 units out of 100 abroad is not, I believe, to ask the impossible.
Any Government dealing with this problem has to mount a three-pronged attack on it. The first prong is the provision of Government services, information and so on, and the provision of adequate credit facilities. I think it true
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to say that information facilities nowadays are excellent and the credit facilities available as good as those available in any other nation. The second prong of the attack is the negative one of reducing imports by such steps as the import surcharge, and the restriction of home demand to free industrial capacity for export manufacture. Everyone agrees that the second course is restrictive and defensive, is a hindrance to a national growth policy, and does not necessarily win friends abroad.
It is the third line of attack that I wish to discuss to-day, and that is a policy of going over to the offensive and of increasing our exports by the provision of adequate export incentives. By "incentives" I do not mean exhortation; of that we have had more than sufficient. I think it true to say that an aggressive policy will not be possible until the basic facts are grasped. The first is that profit margins on goods sold in export markets must, almost by definition, be lower than if the same goods were sold at home. The second is that the responsibility of directors of companies is to their owners, the shareholders, not to the State or anyone else. Their job is to maximise the return on the capital entrusted to them, and they will tend, therefore, to sell their goods in the market where they can earn the greatest return.
Your Lordships will notice that I said "tend", because in fact a responsible board will take the national and other interests into some account. Mr. Harold Wincott, in a recent article in the Financial Times, wrote:
"Although it is clear that when the chips arc down it is the shareholders who take the decisions which really matter about the future of a company, I have the best reasons for knowing that the successful company is the company which gives equal weight to the interests of those who own it, those who work for it, those who buy its products, and, if you like, the interests of the community at large. Indeed, I don't believe any company can succeed if it doesn't give equal weight to all those interests."
I would agree with Mr. Wincott's sentiments but not his weighting. The first responsibility of boards is to their owners, and all the rest is enlightened self-interest; and enlightened self-interest, I think your Lordships will agree, is about as common a virtue as common sense.
I hope your Lordships will excuse me if I illustrate this point from a company

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about whose work I know something. The company is relatively small and efficient and operates outside the trade association of an industry dominated by two giants. The quality of its products is high and its prices below those of its rivals. It can, therefore, sell all its output in the home market, or indeed in the export market. It cannot quickly increase production because it works 24 hours per day in a continuous cycle of 24 weeks. It takes care to grow only as fast as its rivals, so as to ensure that the wrath of Gog and Magog is not awakened. The profit margin on home sales is about 10 per cent. and that on export sales about 6 per cent.
A complete switch from the home market to exports would mean a drop in the trading profit of 40 per cent., which would be unacceptable to its owners and, for many reasons, bad for the people who work in it. The compromise, born of enlightened self-interest, which has been worked out by the firm, is that exports are limited to about 12 per cent. of its total sales, which enables the firm to make some contribution towards the cost of its imported raw materials and to keep in touch with developments overseas. If an export incentive of 4 per cent. were given, it would be as profitable to sell abroad as at home, and it would become possible and acceptable for this firm to send a far larger proportion of its output overseas. But, let us face it, until the return on export sales can be brought nearer, by fixed fiscal action, to that on home sales, it will be no good telling directors to rise to their feet and get cracking on exports.
If the problem is to be solved, our fiscal system must be adapted to make it more beneficial to owners to export than to sell at home. My right honourable friend, the Chancellor of the Exchequer, in November last year, I think it was, took the decisive first step with his export rebates scheme. This is excellent in principle and I believe a very important breakthrough in our approach to this problem; but, because of the basic differences between the British and the Continental systems of taxation, this type of export rebate can be only limited in its extent. It is not yet large enough to equate the profitability of selling abroad with that of
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selling at home and it cannot become large enough until the spread of indirect taxation on which the Chancellor can draw for this purpose is far wider than at present.
I think it should also be brought to your Lordships' attention that this rebate is far smaller than the equivalent rebates offered, for instance, to our German competitors. Again I hope that the House will forgive me if I give an example from my own experience. A product, if made in this country, is granted an export rebate of 1½ per cent. If the identical product is made in Germany, a total rebate of 7 per cent. is granted, made up of 3 per cent. refund of turnover tax and 4 per cent. export rebate. My German friends inform me that it is believed that a similar French product would be granted an overall rebate of 20 per cent., although that sounds unbelievably high.
I believe that we must continue to reform our fiscal system in order to take these facts into account, and that as we reform it we must work towards a system closer to that existing in Europe. I believe it for two reasons. The first is because I am sure that we must throw in our lot with the Europe which one day must evolve from the discussions which are taking place there at the moment. To prepare for this day we must cease to be peculiar people and try to do the routine things in the Continental fashion. Secondly, I believe that only by adopting the added-value tax in one of its forms can we, while honouring our international agreements, give our exporters the incentives that they must have to make it possible for them, while carrying out their duties to their owners, to send their goods abroad rather than sell them at home.
I make this suggestion knowing what a burden on the Treasury it would be—and I should think that the Treasury has carried quite a burden in past years. I also know that such a change of taxation must cause a significant shift in the price structure of this country. Yet, my Lords, I believe that in the long run this is the direction in which we must go, because it is the direction in which members of the Common Market are going. The change must, of course, take time. The year 1969 is the European deadline for a common added-value tax, and so perhaps an alternative interim measure might

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merit consideration. France and Germany both have payroll taxes which can be, and are, treated as indirect taxes by international convention, and hence can be used to finance export rebates. A tax of this kind would be simple to operate, it would not affect the balance of our price structure to the same extent as would an added-value tax, and it could be used—I think this is important—to prevent the wasteful usage of labour which is one of the shortcomings of our economy.
I hope that my noble friends who are in a position to influence the fiscal policy of this country will consider this suggestion. I hope that they will not be over-influenced by the Richardson Report, which I believe to be a thoroughly negative document. And I hope that they will recognise that it is not always idleness or vice which inhibits many firms from sending a larger proportion of their products abroad, but simply that it is sometimes unprofitable to do so and that their board's responsibility to their shareholders therefore makes it impossible. Perhaps at this moment it may be worth while to pay tribute to those firms who have done so much in the field of exports, in spite of the more realistic fiscal policies of their competitors' Governments.
5.51 p.m.
LORD GRANTCHESTER: My Lords, my first duty and pleasure is to congratulate the noble Lord, Lord Winterbottom, on his maiden speech, even if some of us may have reservations on some of his arguments. On the point that we should move nearer to the fiscal policies adopted by the countries of the European community, I would agree with him. The noble Lord is no political novice, nor is he without experience in industry, as we have observed from his remarks. In addressing your Lordships he has drawn upon a past in which he has already distinguished himself. I am sure that I may say on behalf of all that we shall listen to what he has to say on future occasions with pleasure and with benefit to our understanding of current problems.
As I have already explained to the noble Earl the Leader of the House, I have a month old engagement for this evening which I cannot miss. I have apologised to the noble Earl and I wish
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to apologise to other noble Lords who might have thought me discourteous in leaving before the end of this important debate.
After the speeches of the noble Lord, Lord Robbins, and the noble Viscount, Lord Eccles, I should not wish to detract in any way from what they have said. Rather do I hope in more homely and general terms to continue along similar lines. There is no longer an opportunity of influencing any changes in the Bill before the House, so I do not propose to prolong the arguments about the many details which make it, in my view, a damaging blow at recovery and a barrier to the restoration of confidence. There is no need for me to repeat the arguments of the noble Lord, Lord Robbins, who has put them much better than I could, but I believe I am in agreement with him in coming to this conclusion. It is a national disaster when confidence at home is undermined; it is an international disaster as well as a national disaster when confidence abroad in this country and its good sense is undermined.
Perhaps I may say a few simple words in support of another point made by the noble Lord, Lord Robbins. I myself meet quite a number of those who are occupied in business and industry and the ancillary services. They are full of uncertainty about the meaning and implications of this Bill. They have spent a lot of valuable time which could have been better employed in discussions with lawyers, accountants and actuaries. The lawyers, even those who specialise in this field, say that it is likely to be some three years or more before the implications of this Bill can be fully judged.
Uncertainty in the effects of legislation is always bad. At a time like the present, deliberately to create uncertainty is unforgivable. To put it in plain language, this Bill has made many businessmen feel that their work has been made a pest rather than a pleasure, and that they are being harried by petty persecution, whatever Ministers may say about their intentions.
To what have Government descended when a report by the City Editor of a widely read evening paper last night can contain a sentence like this:
"The Bank of England and Treasury are free to 'cook the books' and have been doing so for some months."

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This, at a time when there is a widespread feeling abroad that the Government have shown an unusual disregard of the rules of good housekeeping which the world believed had become an integral part of the British character. This was the shock which first shattered confidence.
The present Government are not committed to joining the European Economic Community. They are committed, however, to following the same pattern of administrative development, a point made by the noble Lord, Lord Winterbottom. During our recent economics debate I asked for a comparison of the burden laid upon a British citizen compared with the burden upon his German competitor. I got no reply. The answer is that the scales are weighted heavily against the British citizen. There are some special reasons for this, and recently I addressed a question to the Council of Ministers of Western European Union to look at these reasons and express an opinion on them. My question to the Council of Ministers was by-passed and, so far as I know, the British representative on that Council has tabled no memorandum on this question which might help the serious consideration of our world-wide obligations in a European setting. In my view, this problem is not being tackled in a sensible way.
Coming hard upon actions which I believe have irretrievably damaged confidence in the present Government at home and abroad, about which we spoke yesterday, we have now the spectacle of the reversal, or retraction, even if called temporary, of so many of the policies and professed beliefs of the Government Party paraded before the electorate during 1964. I apologise to Members of the Government for saying this, as I have received, personally, from them the utmost courtesy. For their views on some matters I have the greatest respect, but, with proper deference to the humility which we must try to show on all occasions, I cannot conceal my opinion—and it would not be right for me to do so—on matters which are overridingly vital to the recovery of this country.
Although in my youth I was taught that it is the business of an Opposition to oppose and not to propose measures,
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I will say that, in my view, the present difficulties require a further tightening up of the quantity of money in circulation (which I think was the effect of one of the points made by the noble Lord, Lord Robbins) together with, at the same time, a substantial cut in existing protective tariffs. This is the only way we can ensure a competitive spirit in British industry. When the new franc was introduced and the reform of the currency undertaken by M. Rueff this was the action taken. By acting as it has done, in taking a new attitude on major aspects of foreign policy—for, my Lords, either the Government Party was right in 1964 and is wrong now, or if it is right now it was wrong in 1964—it is not only on foreign policy that it has retracted. In handling the incomes policy it started off by setting the worst of examples. In its contradictory acts affecting the welfare services, mortgages, efficiency, the cost of living and inflation, I think it has really made itself ridiculous. I notice that the Daily Telegraph this morning calls part of the policy "ludicrous".
Ministers have appealed to those who do not agree with them to help the country's recovery by patriotic effort. Well and good. But, with the greatest respect, I would say to Ministers that, if they find it impossible, as I fear they may, quickly to regain the confidence they have so disturbed abroad and in large measure at home, and if they find it impossible, as I fear they may, quickly to live down the sense of having become ridiculous by the wide variety and contradictions of their thoughts and actions, the only patriotic course that I believe they can adopt will be to invite the electorate to pass the task of governing to a new Government. I know that this would bring bitter disappointment to Ministers and entail personal sacrifice, but I am sure they would face up to such a decision rather than allow disaster to overtake this country. I am distressed that Parliament should be sent away at such a moment. In my opinion it should be recalled to review the position within a matter of, say, four to six weeks.
6.5 p.m.
LORD CITRINE: My Lords, I should like to join with the noble Lord, Lord Grantchester, in offering my congratulations to the noble Baroness, Lady Plummer, and the noble Lord, Lord

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Winterbottom, on their most effective maiden speeches. Like the noble Lord, I am sure that we all look forward to hearing from both of them on many future occasions, because they will be an asset to our deliberations.
I should like, in passing, to make reference to the speech of the noble Lord, Lord Carrington, the Leader of the Opposition. The noble Lord is a man whose objectivity of mind I have long admired, and he has impressed me with his sense of fairness. Therefore I was sorry to find this afternoon that, to some extent, he departed from this. Whether or not he was prompted by the example of his strong-armed colleagues in the other place, he did bang the Party political drum, although perhaps not quite so strongly or loudly as they did. I hope that on the next occasion when we have the pleasure of listening to him the noble Lord will resume his normal, fair-minded, objective approach to the subjects that come before us.
I am not going to argue the general case in regard to the economic position of this country. They have been doing that in the other place day and night, with the assistance of those invalids who could be brought in on stretchers to give them added strength in their deliberations. It seems to me that we are getting to the state of attrition in this country, when most of our wise legislation will be done in the early hours of the morning by men who are physically exhausted. I need not traverse some of the critical arguments which have been raised in the debate to-day. I am content to rely, in this respect, upon the considered opinion of the Organisation for Economic Cooperation and Development. They say, on page 27 of their Report:
"The Government's goal of reaching overall balance of payments equilibrium by the end of 1966 is not an easy one."
Then, in the same paragraph they wind up by saying:
"Its achievement will depend upon a readiness to persevere with existing policies and to reinforce them if need be shown."
If English means anything, "to persevere with existing policies" can mean only that they approve of the policies now being followed by Her Majesty's Government. It is commonly recognised that the policies which have been recently
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enunciated are bound to prove unpopular; and if they have to be reinforced by traversing along broadly similar roads, they will become more unpopular. I hope that noble Lords opposite, and their colleagues in the other place, will at least have the conception of responsibility not to exploit that situation for Party political objectives. We are in too serious a position as a country for that. I thought that the speech of the noble Lord, Lord Byers, in most respects, was admirable. He carefully avoided any measure of recrimination about what he thought were mistakes, and he put, in my opinion, a most reasoned case.
I want to confine myself entirely to one aspect of policy, but it is one which I feel is fundamental to this question of recovery. I refer, of course, to the prices and incomes policy. All agree, I should say, with the exception of a solitary ex-Cabinet Minister, who so far as I know is not likely to enter this House, that it is a desirable objective. It is something which we should all like to see. It is a policy that was enunciated for the first time in this House, so far as my recollection goes, by the noble Viscount, Lord Amory, after his period as Chancellor of the Exchequer and Governor of Canada. That policy was in part, at least, attempted by the late Conservative Government, and while I have said in this House that I think some of the methods used to try to implement that policy were wrong in timing, and perhaps in character, I have never denounced such a policy except in some of the minor aspects.
The present Government have made it quite clear that they intend to succeed in the implementation of this policy. What I am rather amazed at is the attempt to criticise and castigate the Government because they have not implemented their policy in the nine months in which they have been in office. I know, from having been in charge of a large industrial State undertaking, how long it takes to evolve policy, and how long to establish the machinery to carry out that policy. Yet the Government are being upbraided because their policy has not matured over the nine months they have been in office. No such mistake is made in the Report to which I have already referred, that of the Organisation

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for Economic Co-operation and Development. They say on page 26:
"The new Prices and Incomes Policy needs to be aimed not only at moderating the rise in cost and prices but in creating a situation in which they rise markedly less rapidly than in the other main manufacturing countries. For this to be achieved and to have results on the trend of exports and imports, many years of continued efforts may be needed."
They do not say "months", they say "years"; and I hope that some notice will be taken of those words.
Some of us, from the beginning of this policy, expressed doubts as to the practicability of its implementation. In this House I confessed myself unable to understand the remedies which could be effective, either in the sphere so glibly referred to from time to time, of the elimination of restrictive practices by workers, or as the means of controlling prices. We have yet to sec whether that can be effective. We all hope that it will be, but the difficulties in the way arc enormous. So, while hoping for the best, I am prepared to recognise that, no matter how well-intentioned the policy may be, it may be impracticable to carry out the Government's full intent. The Prime Minister has several times announced that if voluntary methods fail, recourse will have to be had to some measure of compulsion. I should be very sorry indeed to find that situation developing. I do not like to contemplate it, because my imagination carries me into all sorts of internecine struggles, whether it is with labour, workers in the workshops, with employers, or whoever it may be, which must, if they eventuate, deflect the country from its major objectives.
But the Government may have no alternative. They may find that voluntary methods fail. Broadly, this problem is to keep incomes and prices—incomes in particular—in step with increases in production. I should have thought that that was sheer common sense, as any other course must essentially mean inflation. But the curious factor is this: Although this policy of getting incomes and production in step is one which most people would accept, they never apply it to themselves. They always think in some vague way that it is to be applied to the economy as an economy, but not to themselves—not to their own trade union; not to their own group of manufactures; not even to the judges. Farmers, doctors,
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dentists, teachers and a host of others, who cannot be described as militant trade unionists, are pressing the Government, and have been pressing them for a long time past, with demands for improvements in their salaries which are very far out of line with the policy we have been discussing. In justice to the judges, it must be said that their increase has been long overdue. I understand that the last increase they had was in 1954, so I suppose that the present increase works out at an average of about 2 per cent. per annum, which is rather below the norm that the Government are asking trade unions and others generally to observe.
But I cannot escape the conclusion that this example, in regard to the judges, and to other sections of the community, who are not trade unionists, in the sense that we understand it, will be quoted very widely among workers and must create a prejudice that will militate against acceptance of the policy. I do not believe that many people have a glimmer of an understanding of the problem we are having to face. I have quoted on other occasions, though not in this House, the Report of the Trades Union Congress for as far back as 1956, in which they used these words:
"One lesson which every working class family has learned over the last fifteen years is that increases in wages have largely been cancelled out by increases in prices. This process will continue unless rises in incomes are kept broadly in line with increases in output—or until it is terminated by unemployment."
A little later they go on:
"The rest of the world does not owe British workpeople a living, and competition for overseas markets is becoming more intense."
I regard that as a very courageous statement. But what actually followed? Have the unions observed these principles? I have already said that scarcely any other section of the community has even bothered about it. It looks very much like a scramble in which" the Devil takes the hindmost".
Recently there was a conference of the Executives of trade unions called by the Trades Union Congress. With some dissentients—some of them very powerful dissentients—they supported the policy which the General Council had accepted in the Declaration of Intent, and the other documents on the policy of incomes and prices. Next month the T.U.C. is to meet, and on its agenda—as has already

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been mentioned in this debate—there is an open challenge to that policy. A number of resolutions are down on the agenda, some of which reject the policy as a policy. Others qualify it, but in all of them one can sense a resistance to the policy. I am not now able to enter, perhaps, so closely into the mind of the T.U.C. as I did in former days, but personally I believe that the policy will be upheld. What does that mean? It does not advance us very much, except in a purely moral sense. The Trades Union Congress has no powers over its unions, any more than the Federation of British Industries or the British Employers' Confederation have over their members. It cannot require them to conform to policy; it must trust to their sense of decency and readiness to accept majority decisions.
For years the trade union movement has demanded a planned economy. Surely it is implicit in a planned economy that wages cannot be left out of that planning. Wages still remain in some industries a major item in the cost of production. In mining it used to represent about two-thirds of the cost, but I imagine that mechanisation has now reduced that proportion considerably. Therefore it seems to me completely inconsistent for the unions (I am now referring to individual unions, of course, and not to the Trades Union Congress) to resist any kind of attempt to approach a planned policy in respect of wages.
This system of annual applications for increases in wages will destroy our economy. In my days as a trade union official, it was the custom to make agreements for from three to five years, and during that period the rough was taken with the smooth; and it was reasonable that that should be so. How in the wide world can any exporter, or indeed anyone else in business, put in firm prices when they do not know what their labour costs will be? That seems to me to be so plain that I cannot understand there being any challenge to it. We certainly cannot expect stability or effective competition in the export markets while that system remains. I believe that it is detrimental to the interests of the individual trade unionist who may feel that he is getting some temporary advantage, but soon finds it stolen away from him by increases in prices. Of course there is the exceptional case, where there are sub
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stantial increases in the cost of living; but even there some qualification is needed, and some measure of increase cannot escape being expected.
I want to say, as strongly as I can, to those trade unionists who in former days had some respect for me, that inflation is destroying the value of money. That is what is happening, however imperceptible—except, of course when the wife goes along to the shops—it may be. There are many causes for it. There is no single cause, but it cannot be contended that this matter of wages is not a major cause. As has been said earlier in the debate, I think by the noble Lord, Lord Carrington, the workers do not feel any sense of crisis whatever. They are perfectly equable about the whole thing. Remember what was said by the T.U.C., and how long ago it is. They wound up by saying:
"For the last ten years we have had the novel experience of full employment in peace time."
It was novel, my Lords: we never had it before.
"The problems we have been meeting are of a new kind—they are problems of full employment, of economic expansion. They are not insoluble, but they will not be solved by trusting to luck, or by the Government or anyone else relying on outworn economic and industrial policies. Nor can the trade union movement tolerate irresponsible or selfish action, whether from other sections of the community or from within its own ranks, which would erode the foundations of full employment."
I hope that my friends in the trade union movement, when they read these words, will not be irritated by what I am saying. I am trying to say in this House what I would have said from the platform of the Trades Union Congress had I remained Secretary.
I think it is far too important to mince words in a situation like this. But in the mind of the average worker—what then? What has happened in these nine years? There has been no large-scale unemployment; earnings have increased, and at one time we had a political slogan, extensively advertised: "You've never had it so good". And this despite the fact that the country has been getting deeper and deeper into the morass. Some feel that it is a temporary phenomenon, but enough has been said to-day to dispose of that idea. It is basic in our economy. But can you wonder that the

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workers remain unconvinced? All responsible people who are at all well informed know the dangers that lie in front of us. I say, persuasively if I can, but emphatically, and not with any intention to preach or lecture, that the time has come for trade union leaders to make a stand against pressure from their own members; and I would apply that doctrine also to other sections of the community. It is not something which applies alone to trade unions.
This is a test of leadership. Leadership does not consist in doing what the crowd wants you to do on every occasion; it consists in trying to guide the crowd, in trying to show them that the policy you are expounding is a just and proper one, and one which will, in the long run, benefit them. It requires moral courage to do this, and many trade union officers are in a precarious position when it comes to the exercise of moral courage. As a result of the system of election, their livelihood depends almost entirely upon the mood of the members to whom they are addressing their advice. It is difficult for them—and let us all recognise this—but I would say to them and to those delegates, and those steadfast trade unionists who will attend the Trades Union Congress at Brighton in early September: "This is a Government largely of your own creation. Your sustained advocacy, your efforts and your money have gone to its establishment. I feel confident you will avoid any action which might frustrate its endeavours to deal effectively with the most serious economic problem which has confronted our country for many years".
6.28 p.m.
LORD SHERFIELD: My Lords, first I should like to add my congratulations to the noble Baroness, Lady Plummer, and to the noble Lord, Lord Winter-bottom, for their interesting and distinguished maiden speeches.
I intervene briefly to deal with two points which have not, I think, been substantially covered in this debate. In deciding to introduce, at a time of acute economic and financial difficulty, a major reform of the tax structure, the Government have placed a heavy burden on many sections of the community, but on none can the burden have been heavier than on their own servants, and I am
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thinking particularly of the officials of the Treasury and the Inland Revenue Departments. They have had to adjust themselves to a new Government, to a considerable reorganisation of the Administration, and they were dealing with a critical economic position.
As one who has had some experience of the pressures on officials, both in normal and in abnormal times—though recently the times seem to have been rather consistently abnormal—I can well imagine the conditions under which these officials and draftsmen, both Departmental and Parliamentary, have been operating. With the officials working against time and against the inevitably shifting background of inter-ministerial discussion which I can well imagine, it is not surprising that a considerable number of Amendments had to be put forward in another place. I should like to express some recognition here for the anonymous band who have carried this burden for many months.
My second point is of a different kind. Recently the sector of industry with which I have been most concerned has been that of the smaller industrial company. I suppose that over 90 per cent. of the companies and businesses which have recently come within my purview are, by definition under the Finance Bill, close companies. The importance of the medium and small business in our industrial structure can be roughly measured by the fact that about one-third of those employed in industry are working in companies with less than 500 employees, or, on another yardstick, that unquoted and private companies account for some two-fifths of the employment in manufacturing industry and some 30 per cent. of its output. There is, of course, a trend—on the whole, a desirable trend—through merger or expansion to rather larger units, many of which are, or become, public companies; and I would not venture to give figures as to the percentage of the companies in this broad sector which are in fact close companies, but it is certainly large.
The publication of the close companies provisions of this Bill upset this sector of industry. Those who were about to complete arrangements for investment leading to expansion or greater efficiency hesitated to do so. Those whose plans were less mature held them up. There was a general slowing down of desirable

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activity. As the noble Lord, Lord Champion, said in his opening speech this afternoon, the original close companies provisions of this Bill have been extensively amended in another place. And though I would not say that the revised sections are entirely satisfactory, the worst features have been removed, and this section of the Bill has certainly been much improved. I think the important thing now is to restore confidence and this will depend very much on the way in which the provisions of this Bill—and I am referring to the close company provisions—are applied in practice; that is to say, whether they are sympathetically administered and, above all, whether cases are dealt with quickly and, in particular, whether prior clearance can be obtained.
I am sure this is possible but it depends on two things. It depends, first of all, on the general guidance given by the Government to their servants, and, secondly, on the ability of the officials concerned, mainly the officials of the Treasury and Inland Revenue Departments, to deal quickly and sympathetically with the affairs of the companies concerned. I have no doubt that the latter will do their very best within their staffing position and the time available, but much more depends on their directives.
I must confess—and I am speaking entirely for myself—that I have been somewhat puzzled by the attitude of the Government towards the private sector of industry and business, particularly towards the group of smaller companies and industries to which I have referred. I am not clear whether the Government are trying to encourage them to be more efficient or prosperous, or to knock them. Perhaps the policy is intended to be one of stick and carrot. If so, I suggest that the amount of carrot so far dangled is scarcely enough to entice even the most co-operative donkey.
It is, of course, a general feature of the way we conduct our affairs that in the field of legislation and administration it is held to be better that 999 good citizens should have their lives made a burden to them in order to prevent one person exploiting, abusing or getting away with something. There are some examples of this in the present Bill—entertainment expenses for example,
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which are not, I think, abused by most people, and where in case of abuse the Inland Revenue has the necessary powers. I thought far too much prejudice emerged from the way in which the Government approached this question. The noble Viscount, Lord Eccles, indeed extended that thought to the major provisions of the Bill, but I am talking only about close companies, and in their case I think there was something of the same kind in the original draft.
No doubt there are, or were, close companies which were designed to act as, I think the expression is, "money boxes" for the benefit of a few individuals; but those are exceptions, and if the Government are to recover the confidence which has been shaken, I hope that they will make it clear that they are the exceptions. I hope they will make it clear that they intend to promote and encourage the efficiency and prosperity of the smaller firms, and so enable the provisions of this Bill to be applied in an atmosphere of confidence on the part of that particular section of industry and business. If the Government could bring themselves to give some assurance in this respect, I think it would be both salutary and helpful.
6.36 p.m.
LORD SAINSBURY: My Lords, as an old friend and neighbour of the noble Baroness Lady Plummer and her late husband, Sir Leslie Plummer, I should like to add my congratulations to the many she has already received on her expert and constructive maiden speech.
It is our custom when discussing the Finance Bill in this House to range far and wide on matters that concern the national economy. We should all, irrespective of Party, be able to agree on certain basic aims of economic policy, such as the stability of the pound, the long-term balancing of our external payments and a sustained rate of economic growth. Let us face it, my Lords: we have never since the war achieved those three aims at the same time. The sickness of the British economy is of long duration and did not start on that day in October last when there was a change in Her Majesty's Government. For example, the United Kingdom's official gold and foreign currency reserves in mid-1964 were actually lower than seven years earlier, and seven years ago they

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were totally inadequate. Last year's deficit, of course, swallowed almost the whole of them. As the Observer put it last Sunday:
"The cash in the till only balances the money we owe to our creditors.''
Similarly between 1958 and 1964 our share in world trade fell by 4 per cent. from 17·7 to 13·7.
Last week's O.E.C.D. Economic Survey of the United Kingdom, which has been referred to many times during the debate, refers to the persistent deep-seated weaknesses in the economy which have grown up over a number of years. It further goes on to say in another paragraph that this persistence of an unsatisfactory underlying balance-of-payments position in good years and bad points to fundamental factors.
Over the years we have followed a policy of deflation and reflation, and the great difficulties here are the right timing and the degree of both measures. Hitherto, we have succeeded in restoring the balance of payments only at the cost of arresting the growth of production. The aim of the present Government is to lessen domestic overstrain and not to cut future demand so that it brings increases in production to a halt and reduces capital investment indiscriminately. In my view, that was what happened in 1961. We must never lose sight of the obvious relationship of capital investment to imports. The "little Neddy" for the chemical industry has investigated the import of chemicals which, between 1962 and 1964, rose, by no less than 46 per cent., to £252 million. The Committee suggested that if more plant capacity had been in existence in this country there would not have been such a rapid rise in imports. Another example of the need for import substitution is in the machine-tool industry. Here again, the "little Neddy" for this industry agreed that production capacity needed to be substantially increased.
The next point that I should like to raise is the question of business confidence, which is so important if we are to sustain the right level of capital investment in a mixed economy of both public and private enterprise. During the war it was an offence, and rightly so, to spread alarm and despondency. To-day, faced as we are with great
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economic difficulties, it is still, in my view, an offence, though only a moral one. People who should know better talk of a pending crisis in the inevitability of devaluation. It is such talk that can help to bring about the particular events we all hope to avoid.
This talk that causes alarm and despondency is not confined to this country. Recently the Chairman of the Federal Reserve Board of the United States, Mr. William Martin, said that he found disquieting similarities in the United States between the present prosperity and that of the fabulous 'twenties which led to the 1929 crash. I do not believe that these parallels between the present time and the situation in 1929 and the early '30s are in any way justified. History rarely repeats itself exactly, and, whatever our shortcomings and failures, world statesmen have learned something in the intervening 35 years. The great Lord Keynes did not live entirely in vain. Today, there are both international organisations and international co-operation on currency and financial matters which did not exist in those earlier years.
But this is not to say that the situation of this country is not serious and has not been serious for a long time. At the moment it is not helped by the general deterioration in the world trading climate. However unpleasant it is, let us face it, in recent years we have not fully earned our rising standard of living; and for this both sides of industry, and the community as a whole, cannot escape responsibility. Restrictive practices, lack of the competitive spirit, overmanning and the refusal of many to accept the challenge of change have added to our difficulties. We have failed to make up our mind to give priority to investment rather than to consumption. We have invested less proportionately than, for example, West Germany, one of our major industrial competitors. We have invested too much abroad and too little at home. Another unpalatable truth is that if you borrow large sums of money from other countries you must have regard to the effect of your actions on the opinions of those countries' Governments.
In this serious situation, scoring Party points, indulging in carping criticism, is of little constructive value. In my opinion, the only way to achieve a strong pound in the long term and to assure

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our future prosperity, is by better and more discriminate use of all our resources. This is the task to which we, as a nation, should address ourselves.
6.47 p.m.
LORD BARNBY: My Lords, I find myself fortunate in, for the first time, following the noble Lord who has just sat down. I have the opportunity of emphasising with what pleasure I listened to the reasoning which he gave. I, like others, have been able to enjoy several speeches that he has made since joining your Lordships' House. They have always been couched in humane and liberal principles. But I have always found myself in difficulty in understanding how he manages to combine what is required for his brilliant success as head of a vast organisation with being able to sit on that side of the House.
It was not my intention to presume to address myself at all to the underlying principles of taxation in this Bill. It is a long Bill of 270 pages. It has been gone through thoroughly. I think there have been 250 Government Amendments. And at this stage of a debate there is need for compassion on subsequent speakers and on the House in general, so I shall certainly try to follow the recommendation so eloquently made to us recently by my noble friend Lord Egremont, that speeches in this House should be shorter.
I was motivated to intervene because I wanted to bring up three small points which have been causing concern to industry. The first has already been dealt with most adequately by Lord Sherfield. I was delighted to find him defending the close companies' case. His long and brilliant record in the Civil and Diplomatic Services gives power to his plea. The close company is referred to in Part II of the Bill, at page 205. The point I want to reinforce is that, after taxation and possible direction, it seems that the capital formation can often be inadequate to assure the successful development of an efficient firm. In the event of capital not being adequately generated, nor being obtainable from any other direction, it might be loaned by the "participators" as a private loan to the firm. But if that were done the interest for their loans would not be a charge to trade. That seems a very unfair provision in the Bill.
The next point I would make is with regard to the repatriation of funds. The
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desirability of this has been repeatedly emphasised. It is difficult to understand the reasonings of this. Many small rivulets make a large stream. Over a long life I have had experience of this sort of thing in business. When capital was abroad there were considerations as to whether the return upon it would be greater abroad than it would be in this country. On the remittance of the funds so received, if advantage is taken of the security premium, some 25 per cent. has to be surrendered to the Exchange Control at the official rate. This does not seem logical or encouraging to repatriation.
I come now to the third point which is causing great concern in the small companies in industry. While we are in sympathy with the suppression of the absurd past abuses in expenses, smaller companies are compelled to incur expenses to develop their businesses and to get foreign customers. Therefore, it seems harsh that the manner in which the principles of the Bill will perhaps be enforced might hamper them greatly.
The provisions in regard to corporation tax make it difficult to recapture the initial and investment allowances and, indeed, tax loss carry-forwards. There was encouragement, very properly, in legislation introduced by the previous Government, which would also no doubt have the sympathy of the present Government, that where large investments have been made there should be a considerable part recaptured against tax. Those recoveries have been made more difficult by corporation tax. Productivity has certainly been ridden hard in this debate, but no one is going to quarrel with the idea that we want higher productivity. We are all seeking to find out how that can be achieved. I cannot help quoting from my experience, as a good part of my industrial life has been spent in North America. There was always there a pool of under-employed labour to draw upon, and of course there is high productivity and high efficiency. For this country, I will merely quote from the Financial Times leader this morning:
"There seems little prospect of moderating the rise in wages until Mr. Callaghan's deflationary measures begin to have their effect on the unemployment rate."
I want to refer to overseas investments, which have received rather rough handling in the decisions of the Government.

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The noble Lord, Lord Aldington, in a debate in your Lordships' House some weeks ago, laid such emphasis on the fact that generous overseas investment is the surest way to increase exports. Naturally, all of us in our particular spheres of activity feel preferences in priorities. There has been much reference in speeches today about them. I want to suggest that if we want to make an impression that we are economising so that this can be actively brought home to foreign countries, we should drastically curtail loans or subventions to emerging countries and in other overseas directions; in this I would include contributions to the United Nations.
It would be unfortunate if there were restriction of expenditure on all roads. This matter was referred to by the noble Lord, Lord Byers. I know that the emphasis has been put on main trunk roads, but local authorities were also urged to spend less. Those of us who come back from foreign travel and come along the Cromwell Road up to the Terminal and cross Warwick Road must think what a bad impression it must make on the hundreds of thousands of overseas visitors to our islands when they often have to wait in a long queue just because we have not provided a fly-over or underpass.
Lastly, I would make a reference to telephones. I have spent a good deal of my time, as I have said, in North America. I have made criticisms in this House of the poor telephone system for about thirty years. I have been told in the past that it is unpatriotic to criticise when people are doing their best to serve the country; that it is a bad example to hold this matter up as one of inefficiency. The telephone service in this country is grossly ineffective compared with the service in Canada and the United States. There is room for great improvement here. We are just not getting the service we need to deal efficiently with a proper export trade. I support the Bill.
6.57 p.m.
LORD FRANCIS-WILLIAMS: My Lords, like other noble Lords, I begin by congratulating the noble Baroness, Lady Plummer, and Lord Winterbottom on their maiden speeches, both of which
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appeared to me to be excellent. Perhaps because I know the noble Lady best, I particularly enjoyed the speech of Lady Plummer, who hit on the secret of addressing your Lordships' House by talking knowledgeably about something which she knew well—in her case, agriculture.
I must at once confess to your Lordships that I spent the early part of the debate in what might perhaps properly be described as a "tizzy" of excitement, because, following the interruption by my noble friend Lord Longford (an interruption which I thought was carried out with his usual courtesy and desire for information which so distinguishes him, but which seemed to annoy the noble Lord, Lord Carrington) we were promised by Lord Carrington that he would, in due course, reveal to us what a Conservative Government would do in this situation, in the unlikely and lamentable event of their being called upon to do so. Since I have read all the speeches in another place without, I must say, getting much light thrown upon the matter, I waited in great expectation until the moment of revelation should come. Then at last, my Lords, the wraps were taken off, and the noble Lord, Lord Carrington, told all.
And what did we get? We got three resounding platitudes. I do not think "resounding" is the right word: they did not resound, they draped. We were told that taxation would be adapted to the desire of people to better themselves. There is a great original thought for you. I should have thought that most Chancellors had been trying for a considerable time, in view of the necessity of raising money to cover the national requirements, to find ways of taxing which would enable people to better themselves. This has been one of the great social purposes of the whole of this century.
Then we were told that the Conservatives would recreate a competitive economy. One wonders what they were doing during the whole of the thirteen years when they were in office. Were they destroying the competitive economy then, so that they could subsequently recreate it, or what? Finally, there was to be a reform of company law and methods of wage settlements—both admirable purposes, but not, I think, to be described by

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anybody, however benevolent towards Conservatism, as earth-shaking, major departures in political philosophy. Really, my Lords, if this is the new "wind on the Heath, brothers," one can only say that it neither nips nor invigorates. However, there is still the noble Lord, Lord Erroll of Hale, to come along. I suggest to him that he could gain—I will not say immortality, but, at any rate, a down column headline in The Times, if he would tell us what these platitudes really mean.
To help him, I will put some specific questions. If it means anything at all to say that taxes are to be adapted to help those who are trying to better themselves, which is an excellent principle in itself, does Conservative thinking on this involve reducing taxation at higher income levels and putting more on the less well-off in the form of more indirect taxation? Do they see those who are seeking to better themselves being helped at the expense of others in the community, who may for one reason or another not be in a position to better themselves in quite the same way, or have the Conservatives discovered some new source of national income undiscovered by the rest of us, which they intend to call upon for this purpose?
When the noble Lord, Lord Carrington, says that they are going to recreate a competitive economy, what exactly is meant by that? What is this act of recreation that is going to take place, and will it include—as probably any sound competitive economy in these days ought to include—a certain amount of competition between publicly-owned and privately-owned enterprises? Does it mean that, in the recreating of this competitive economy, the Conservatives are going to do a good deal more than they did in their past thirteen years to break up monopolies and, perhaps, trade associations, and so on? What do they mean? I am sure we shall all hang on the words of the noble Lord, Lord Erroll of Hale, to find out.
I do not want to go too much back into the past but this idea that keeps popping up with a sort of glassy-eyed desperation on the Benches opposite, that despite an £800 million deficit there would not have been any crisis if the Labour Government had not mentioned it, is really too much. It is like saying,
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"Of course it's all right for the next-door neighbour to know that little Johnny has chickenpox; but don't tell the doctor. It might frighten him." The gentlemen in Zurich and Amsterdam and Paris and New York—the doctors of the financial world—are experts. They can count the spots. They can tell what is wrong, without having to be told so.
This reminds me of an occasion at the beginning of the war, when I was editor of a daily newspaper. One night all my papers, and all the papers published by every other newspaper office, were seized on the newspaper trains by the police and taken away into custody. In addition, cars leaving London were stopped and the papers that people had bought in the streets were taken from them. After urgent telephoning, we found that this was because all the papers were publishing the news that British troops had arrived in France, which had been broadcast on the French radio. Next morning we had a rather excitable meeting with the War Office. I said to the General who was acting as the spokesman, "But look. Obviously, if this had been broadcast in this way on a foreign radio, the Germans knew all about it"; to which he replied, "But nobody believes foreigners." It may be that the Conservative Party thinks that nobody believes foreigners, and that if the Labour Government had not pointed out the extent of the deficit which they had to face nobody would have believed it, not even the foreigners themselves. I find it very difficult to agree with that; because, indeed, it was a very bitter inheritance which was to have, and has gone on having, continuous effects—one not only of a deficit, but of a degree of overspending which was carried on with an irresponsibility which, I think, is very remarkable indeed.
I think it is well summarised in a comment on the O.E.C.D. Survey of the British economy, which has been mentioned several times this afternoon—a comment made by the economic editor of the Spectator. That is a paper of which, as your Lordships will know, Mr. Iain Macleod is the editor, although I sometimes doubt whether he reads everything that goes in it, or at any rate understands it. The economic editor of that paper said that, on the basis of the comments

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in the O.E.C.D. Survey, it is clear that—and I quote—
"… this is a caustic indictment of Mr. Reginald Maudling's much-praised reflation policy, and it gives Mr. Harold Wilson the opportunity to tell the public that not only did his Government inherit the worst balance of payments crisis in history, but the most reckless programme of public spending ever planned."
That, my Lords, as I say, is a quotation from the Spectator, edited—nominally, at any rate—by Mr. Iain Macleod; and it seems to me a fair summary of the problems.
Although he had much criticism to make, I was particularly glad to hear the noble Lord, Lord Robbins, congratulate the Labour Government on the courageous empiricism of its policy. Indeed, when one considers the number of unpopular decisions that this Government have been prepared to take on a majority of three and compares it with the constant burking of responsibility of a Conservative Government with a majority of 100, then I think it must be regarded as one of the most notable acts of political courage in our Parliamentary history. Those who complain, as they frequently do, that this Government have failed to fulfil their promises because a programme promised for a full Parliament has not all been carried out in nine months, seem to me about as sensible as somebody demanding to pull the communication cord in the Flying Scotsman when they are an hour out of London because they are not yet in Edinburgh. My Lords, have no doubt; we shall get there. We shall get there because we have the great advantage of having a Government who are prepared to face up to these problems, who are refusing to allow themselves to be governed by dogma, but are prepared to look at the problems afresh in the light of the necessities of the time; and who do not shirk unpopularity but put the national interest first.
7.15 p.m.
LORD HAIRE OF WHITEABBEY: My Lords, I must say that I find it very pleasing to be batting alongside my noble friend Lord Francis-Williams. I think it will be readily agreed by all of us that he has swiped the bowling so far to right and left, and he has left very
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little else for us to do except hold up our own ends.
Before I go on to my own speech, I, too, should like to refer, as he did, to the two maiden speeches we have had in to-day's debate. Perhaps, as I echo his words, I may say that, because I know him best, I should like to refer first to the speech of my noble friend Lord Winterbottom, who was a contemporary of mine in another place, and I heartily congratulate him on a most considered, most carefully thought-out contribution to one of the problems of our economic times. May I also say to the noble Baroness, Lady Plummer, that I greatly enjoyed her charming speech, which I felt was a most useful contribution?
My Lords, this debate started off with a discussion of the Finance Bill, but like the events of the past few weeks, the Finance Bill is already heavily overshadowed; it has become the headlines of yesterday. The corporation tax and the capital gains tax are, in my view, now almost historic, and we are faced with a spotlight which is now trained on the cuts announced last week and the reduction of the gold and dollar reserves which were announced yesterday. It is not just in the film industry that the word "cut" is part of the jargon: it seems it is an essential part of the jargon of politics and economics.
My whole life seems to have been be-devilled by cuts. Before I was ten, my father had lost his job because there was a cut in Government contracts in the textile industry, in which he was employed, and he was out of work for eight years. When I was twenty and in my first job as a schoolmaster, teachers' salaries were cut in the national emergency of that year. When I was 30, the war had just started, and everything was cut. When I was 40, I was in Parliament, and, because of the national emergency at that time, I found myself voting for cuts. To-day we have another period of restriction. So all my life—the life, in fact, of every man or woman under 50 in this country—has been seared with cuts.
Whichever the Government during these years, there were the ups and downs of the trade cycles, now called the imbalance of our trade and the gap in our balance of payments. This has menaced

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all our lives. Yet 99·9 per cent. of our people go on "living it up", oblivious of the fact that the nation's wellbeing is at stake. It is so easy to blame our present Labour Government; it is so easy to blame the previous Tory Government; it is so easy for an Opposition in Parliament, whether in this House or in another place, to provoke, as we have seen done in the past week, a national inquisition into "Whodunnit?" The plain fact is that it is the nation which has done it. We do not work hard enough; we do not make enough; we do not export enough; we do not care enough. I could not say it in more basic English. It is to-day the basic truth in our English way of life.
For fifty years, as the noble Lord, Lord Robbins, has told us this afternoon, this malady has been creeping on us; and now we are at fever pitch again. Once again the Government of the day are expected to pull the chestnuts out of the fire. It is the duty of every one of us to stand by and to assist those who are in leadership at this dreadful time. Even this hard-working Government, even the Prime Minister, with all his experience, are not going to find it easy in the face of the debt of £800 million that we inherited and about which we have heard so much. Nor would a Tory Government, if the luck of the ballot boxes had gone the other way, have found it easy. No one can say that this Government are not setting an example of hard work. This is the most hard-working Cabinet of the century. It is, indeed, a Ministry of all the talents, if I can throw that across to noble Lords opposite. I venture to suggest that the average working day of a Cabinet Minister in the present Government is something like fourteen hours and that of the Prime Minister, is frequently eighteen hours. Would that every manager and every trade unionist in the country could boast of half as much!
One thing is certain. This Government will not countenance a Micawber-type economy, waiting for something to turn up: they will be much too busy removing the stigma of debt from the national accounts. We must be able to pay for what we buy; we must be able to pay our way in the world; we must export or perish. I must say that I get very tired at times of exhorting others to export more; but, at least, mine is one
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of those 300 firms which together account for more than 50 per cent. of our total national exports. If 300 firms can carry half the load that must mean that a very large number of firms in our country are not pulling their weight.
The O.E.C.D. Survey has been referred to many times to-day; but, till now, the paragraph I am about to read has not been quoted. No wonder this Survey, which is an independent Survey, has this to say about our export performance:
"During 1958/64 export performance has been rather consistently unsatisfactory although world demand conditions have been generally buoyant. Exports of manufactured goods, which make up the bulk of United Kingdom exports, have risen less fast than those of the other major industrial countries taken as a whole, so the United Kingdom's share of such trade has declined steadily."
It is not so many years ago, when the first Labour Government were in power, that 25 per cent. of the world's trade was undertaken by this country. At that time our share of world trade was 25 per cent. To-day, as my noble friend Lord Sainsbury has said, it is down to 13·7 per cent. Since 1958, when it was 17·7, it has declined to 13·7.
At this late hour I have no desire to detain your Lordships; but I should like to ask a few questions of my noble friend the Leader of the House, and perhaps make a few suggestions about exports. I wonder whether any progress has been made by the Working Party set up to investigate collective selling organisations. This was referred to in the debate in your Lordships' House on February 11 last, on exports. I should like to know when that Working Party is going to report, because this happens to be a subject in which I am very much interested. In that debate, it was announced that a publicity campaign for exports was to be launched. I have not seen very much of a publicity campaign. Perhaps there has been one and I have missed it; but I should like to know from my noble friend whether one has taken place.
On the question of exports, I have to make what I hope will be a few constructive suggestions. Could we not encourage our exporters to do much more advertising abroad; and could we not introduce a scheme of shared advertising? For instance, in my own organisation we arrange that our agents who do foreign advertising share the cost with us, pound

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for pound, up to a given limit. Could the Government not, in fact, have some such scheme to encourage further exporting? Yesterday we had the long-awaited news of the Queen's Award to Industry. I welcome the suggestion that we should have this beautiful award handed to those who have made a great success in exporting. I think it will certainly introduce a competitive spirit; it should bring new exporters, and it may increase our total volume of exports.
Some of us on this side of the House have been giving consideration, unofficially, to ways and means of encouraging exporting. We had worked out (perhaps, as yet, not fully) a graded scheme for exporters. Roughly, the suggestion was that our exporters should be graded into a one-star, two-star and up to five-star classification; that is, those who had achieved a certain specified target figure would be so classified. This will be quite a simple scheme to operate. The classification could appear on the firm's notepaper; the firm could be so registered in Government Departments, and so on. And when the classified firm applied, for example, to a labour exchange for scarce labour, it would be given priority. When the firm applied to suppliers for scarce materials, these suppliers could be encouraged to give priority; and, indeed, when the firm applied to the bank for scarce credit, perhaps the bank could be encouraged to give, say, a five-star firm more priority than a one-star firm. I feel that in such a way the "no-star" firm would soon find it to its benefit to become an exporter and would try to achieve the qualifying target figure.
My last suggestion which is perhaps the easiest to apply is this. Why do we not encourage more incoming tourists into this country? Why do we not encourage tourists, who bring with them foreign currency, to come to this country in many more thousands than they do at the present time? We hear at this time of our own holiday-makers who are going abroad and taking currency with them. I am aware, of course, that the Government support the British Travel Association and make a handsome contribution to them for publicity and promotion. But every country in Europe supports its tourist industry in a much more emphatic and positive way than we do. For
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example, these countries subsidise the building of new hotels; I cannot see why we should not do the same.
Nor can I see why we should not encourage hoteliers to reduce their rates for overseas visitors. I suggest that we could subsidise motor inns on holiday routes; we could subsidise the construction of more holidaycamps, morecamping sites, and so on; and developers might be given tax and rate rebates for a period, as is done even in little Northern Ireland, a part of the United Kingdom, and in the Republic of Ireland, where tourism is greatly encouraged. Like all the European countries we should try to make our tourist industry grow into a leading industry so that it will bring much valuable foreign currency to us. Our tourist publicity is at present based on the image of a Beefeater and a Guards Drum-Major. London is made a magnet, and is already overcrowded. The tourists, however, want to move around. Let us try to help them. The tourist industry can make an enormous untapped contribution to our export drive.
But if we are going to do this, we must get going. Time is not on our side, at least for 1966; for by the time we are back in this House in October the tourist agents will be busily promoting the next season. Our municipalities could investigate and report now on these proposals; if they did, we might still be in time for 1966. This is the kind of drive that we have to make if we are to win through in our national economic crisis. How much more worthwhile is it than wasting our hard-earned foreign currency on such useless foreign imports as "one-armed bandits" and pornographic literature, which I believe is costing us something like £20 million a year.
My Lords, my final word is to the noble Lords on the Benches opposite. If two out of the three days which were recently spent in another place on their Censure Motions had been spent discussing such vital subjects as exports, the nation might realise that we mean business.
7.30 p.m.
LORD COHEN OF BRIGHTON: My Lords, as one of the last speakers this evening, may I first congratulate the noble Lord, Lord Winterbottom, and the noble Baroness, Lady Plummer, on their

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speeches? I know the noble Lady was very nervous, but I do not think she needed to be. I am sure that after her experience to-day she will be encouraged and will not shake at all when she makes another speech.
It has been a long debate and I am glad that towards the end of it we were able to hear a lively speech from my noble friend Lord Francis-Williams. It really woke up things, I think, and I am waiting to hear the reply which I am sure that his caustic comments deserve; one that will support the point of view expressed from the Benches opposite earlier in the debate.
I propose to take a different line from that taken by speakers so far. As I see it, our problem is a twofold one: we have a problem to deal with immediately, but there is also a long-term problem. Many of the comments made during this debate have referred only to the long-term problem. It is no use saying what we are going to do in two, three or four years' time, and thinking it provides an answer to our immediate problem, which is to deal with the overheating of the economy. I believe that the reduction of £200 million in public spending achieved by the Chancellor, or which will result from his proposals made this week, may provide us with the breathing space which is so necessary. I will give my reason for saying that. On this side of the House we are very proud of the fact that the Chancellor has reduced our national deficit by 50 per cent. during the short period in which the Labour Government have been in office. The remainder of the deficit will eventually be eliminated, so we may face the future knowing that although we shall have a very long haul before us, the deficit has been completely wiped out.
For the first time in many months the economic indicators are all pointing the same way and indicating that the boom is over. The reduction of expenditure by £200 million resulting from the Chancellor's proposals mean that the boom is over; and when the latest cuts are added to that £200 million and there is the further tightening of hire-purchase restrictions they will provide a further indication. Incidentally, I wish that the cuts had been a little more drastic. A period of six months' reduction in the hire-purchase period, in my opinion, is
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not enough. Complaints of insufficient capacity to meet demand are likely to diminish sharply over the next two months. The amount of work in hand in both the private and public sectors is well above the 1961 levels and the phasing out of the deflationary measures has probably been better for industry than a massive once-for-all package—although, of course, it has not helped sterling.
I believe the squeeze will have an increasing impact on imports, and I wish to deal with this matter fully, because it is not only a question of exports; it is a matter of imports as well. While it would be too pessimistic to write off any question of a rise in exports over the next few months, the deterioration in world economic conditions certainly means that Britain cannot look to an increase in exports to cure her trade gap. I am, of course, talking of the short term. We cannot do that for the moment because there is an economic depression in the world. We cannot hope for a rebate or for any major increase in our exports. More unused capacity at home may free resources for exports, but it does not secure export orders if most other countries are also tightening their belts.
Over the short-term, therefore, the import side of the trade equation is the most important. I make that point because I do not think that it has been sufficiently emphasised so far. In the short-term it is imports that matter, because it will be very difficult to build up exports in the current world economic position, and a fall of some 5 per cent would eliminate the gap. Indeed, a 5 per cent. fall seems well within reach by the end of the year, with a continued import surcharge, stricter control over import finance, the levelling out of home demand—because we have taken some of the heat out of the economy—and the ending of the stockpiling cycle all working in that direction.
Despite the continued lack of confidence in sterling, once the balance-of-trade deficit is eliminated and the deflationary measures really start to work on the economy, from the short-term point of view I do not think—with the exception of the problem created by the state of our gold reserves—that it will be as difficult as some people are suggesting to face the sombre picture which has been

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painted. We may get out of our difficulty by imposing a reduction in the money available in the community and by manufacturing in this country—this is important—many of the things which we are at present importing. We are importing far too many goods which we should be manufacturing. That is one of the things we must remember.
There is another point with which I wish to deal because it has not yet been touched on, and it relates to something with which I am particularly familiar. One of the reasons for the difficulty which occurred last year was the withdrawal of foreign balances which had been loaned short-term to a very large number of local authorities. Those balances have been more or less restored, but local authorities are borrowing, and have borrowed, the astronomical sum of £2,224 million a year. I consider that at the present time local authorities have far too much short-term money. It is true that the amount of money which the local authorities can obtain short-term is controlled, but there is a very big loophole which Members of your Lordships' House may perceive if they read the Financial Times. I say this because it is my duty to invest many millions of pounds each year in connection with the organisation with which I am associated, to get the highest rate of interest for my members, and also to have liquidity.
There is a very simple way to do this. Noble Lords may have noticed that local authority loans in this country are available for five years at 6⅞ per cent. or 7 per cent. and, at the option of the lenders, it is possible to withdraw after eleven months on giving fourteen days' notice. That has been going on for a long time and the local authorities have been building up loans over two, three or five years. If at any time there were a run on the local authorities—it would of course be met by the Treasury and there is no question of anybody losing money—it might create problems of the kind we faced last year. I say to the Government that they ought to take steps to prevent, not just this leak in the restrictions, but generally the borrowing by local authorities of what is really "hot" money.
In the organisation of which I am a member, which controls with other organisations £5,000 million worth of assets,
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we have a great deal of money coming in. A lot of this money is not put in the Stock Exchange and a great flow of fresh money is coming in to local authorities. When the Stock Exchange recovers—I will not say, when a Tory Government comes in—that money will go out and the local authorities will find themselves in difficulty. It is important that we should deal with this problem, and I hope that the Government will think over this suggestion.
I am now going to say something which I know will not be popular, certainly not on the other side of the House. It is proposed to cut £100 million to £150 million from our Defence expenditure next year. I was delighted to read in the paper that at a meeting of my political Party on Monday it was agreed that there should be further cuts in Defence expenditure. At a time of great financial strain, the estimated running costs of the overseas British Forces in 1964 was no less than £320 million. When we have commitments to others, we have to be careful about withdrawing our existing Defence arrangements if it is going to make a great difference, but, at the same time, I believe that some of this could be saved. We are spending £105 million in Germany, £8 million on NATO, Europe, £75 million in the Mediterranean and the Near East, £86 million in the Far East—and also the lives of our men there—£27 million in Asia and the Persian Gulf, and so on. I would suggest that, so long as we are not upsetting our relations with our allies, this is a matter into which the Government should look seriously.
In your Lordships' House the other day we heard an excellent speech by the noble Lord, Lord Thomson of Fleet, who rightly said that there was a great deal to do to reinvigorate our economy. He criticised workers for restrictive practices. But I do not think that he really dealt with the whole problem. In my view, there are some of our manufacturers and businessmen who have not moved with the times. They are not up to date and they are not meeting foreign competition. A short time ago, I was in America investigating certain industries there and I went to White Plains, just outside New York, to visit the headquarters of General Foods, one of the world's largest firms in the food

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industry. They showed me their charts and organisation surveys, and to my surprise I found that they owned a number of food firms in this country which I had always thought of as British; I will not mention the names. They showed me the figures before they acquired these firms and the figures afterwards, and I could see the difference that American enthusiasm had made to these businesses. I do not agree that everything American is good, but I do say that we have to get far more enthusiasm into the development of business and into the modernisation of plant and equipment.
Incidentally, I completely disagree with the criticism of the corporation tax, because obviously if you do not dispose of all your profit in dividend, you have an opportunity of bringing in some of that new plant and equipment which is so necessary to many of our manufacturers—although I know it makes a clash between duty to shareholders and that to the community. It is so easy to sell in England and so difficult to sell abroad. We have just heard it said that sometimes it does not pay to sell abroad, because probably one may make a smaller profit. I am a European. I believe that we have to go into Europe. Unless we can stand competition abroad, we cannot stand competition at home. We have to see to it that our manufacturers are re-equipped, have enthusiasm and drive, so that we can reinstate ourselves, not as the greatest manufacturing country in the world, but as one that can stand on its own and face the world without any deficit. I believe that that is the answer to our problems.
I do not believe that the situation is as serious as it is painted by the Press and the Party opposite and sometimes by our own people on this side. We are pulling round and when we are out of debt next year we shall have the opportunity of going ahead. I agree with my noble friends on this side who have said that the Labour Party in power is going to carry out its promises during its period of office. It is not going to he displaced by those who, after a few months, say that we have failed to do the things which we were elected to do. In doing these things, I believe that we shall give a new inspiration to British industry to go ahead, to face the com
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petition from the rest of the world and achieve the success which I am sure we can achieve if we all put our hearts into it.
7.48 p.m.
LORD ERROLL OF HALE: My Lords, I am sure that your Lordships will agree that we have had a most interesting debate this afternoon, comprising a satisfactory blend of political wisdom and a certain amount of repartee, with which I hope to deal in the course of my remarks. May I add my congratulations to the two maiden speakers, particularly to the noble Baroness, Lady Plummer, not only on her excellent maiden speech but also on her considerable success in a specialised part of the export field. I am glad to see a former colleague from another place, the noble Lord, Lord Winterbottom, speaking here in the same characteristic and open way as he did in another place.
Perhaps I may deal with one point made by the noble Lords, Lord Francis-Williams and Lord Cohen of Brighton, who tried to defend the present Government by saying that it was not possible to do everything in the first nine months. In that case, why did they repeatedly say during the Election that the Labour Party was poised for instant action? Now, as the days go past, I know that supporters of the Labour Party are glad to try to forget those "100 days of dynamic action."
While it is inevitable that recriminations will be made for some time to come about the position in October, 1964, the public is becoming increasingly tired of the recriminations of the two principal political Parties about what was or was not the situation at the time and about who was to blame and who was not to blame. But there was one new factor, introduced by the Prime Minister in the course of the debate on Monday evening, which has not been answered and which I think should be answered clearly and decisively now, because I had a good deal to do with the matter myself. At the end of the debate in another place, the Prime Minister accused the former Conservative Government of having had ready a complete plan for import controls which was handed to the Labour Government by officials, all ready for putting into operation.

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There is no need to have any secrets about import controls and import surcharges, which were also the subject of criticism earlier in the year. There is quite a long history attached to these and other possible measures. As one of the Cabinet Ministers concerned, I should like to explain the facts, so that we need not return to this subject either here or in another place. During the Summer of 1962, I suggested to one or two of my colleagues that we should look at measures introduced by Mr. Selwyn Lloyd in the summer of 1961, in order to see what effects they had had, and so that, if need be, we should be better prepared in the future. It was also suggested that we should look at any other weapons which might be used on a future occasion, and study these, as well as those already tried, in order to assess their practicability in an orderly fashion, and not in the urgency of a crisis atmosphere. Accordingly, as President of the Board of Trade, I had studies put in hand of hire-purchase controls, the use of the regulator, particularly as regards its effect on industry, the possible use of a system of quantitative import controls, and the institution of an import surcharge. During the winter of 1962–63 a great deal of work was done on all these subjects, and particularly on import controls and the import surcharge.
The advantages of import controls were that they could bite decisively and quickly, the precise imports to be imported could be specified and the amounts to be admitted laid down. It would be possible to ensure a definite monetary reduction in imports, and the system could be varied piecemeal, in the light of experience. Import controls had the further important advantage that they would be in conformity with GATT and other trade agreements. The administrative problems were also thoroughly gone into at the time, including such questions as staffing, administration, accommodation and anticipatory buying. A similar evaluation of the surcharge was also made. Its advantages and disadvantages, particularly the breaking of so many of our international trading agreements, were fully gone into. In doing all this, we were taking right and prudent steps to guard against a possible contingency in the future. So, far from criticising us for this preparatory work, the Govern
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ment to-day ought to be congratulating us and thanking us for having behaved in a responsible way.
Perhaps I may give an illustration from another aspect of our national life. The Government have inherited our plans for Civil Defence and, indeed, for Defence generally. I hope that the Government are keeping those plans up to date in the light of experience.
LORD SHEPHERD: My Lords, may I ask the noble Lord one question? I take it from the criticisms he made earlier in the Session, that he and his colleagues were against surcharges; that they would have thought it right, and certainly more legal internationally, if we had gone for quantity controls. The noble Lord says that this matter was examined. Can he say how his Government, had it been necessary to bring in controls, would have brought them in without taking legislative action?
LORD EROLL OF HALE: My Lords, what I was trying to explain was that in 1962–63 the Government had prepared alternative plans, so that they would be ready, should the need arise; and had the need arisen, clearly the Conservative Government would have looked at both plans and decided, in the light of the circumstances of the time, which was the better one to adopt.
LORD SHEPHERD: But what action would they have taken?
LORD ERROLL OF HALE: No action was necessary, and no action would have been necessary.
As I was saying, in regard to another aspect of our national life, namely, Defence, we left behind us plans which I hope are being kept up to date in the light of experience. Naturally, we all hope that they will never be required, but it would be a foolish Government which did not make plans for difficult situations appertaining to the defence of the country and the defence of the pound. I hope, therefore, that we shall hear no more of the ridiculous charges which have been made by members of the Government, and by the Prime Minister, in particular, on the score of import surcharges and import controls.
I intend to move on from October. 1964, to a few weeks later, because this is a matter for which the Government, in my

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belief, are entirely responsible—namely, their failure to maintain world confidence in sterling. The noble Earl who is to reply was, I think, Chairman of a well-known bank. I am sure he would be the first to agree with me that if one of the directors of his bank had gone around the City saying that his bank was bankrupt it would have had a serious effect on the fortunes of his bank.
THE EARL OF LONGFORD: My Lords, I hope that I may be allowed to interrupt the noble Lord, though I know that the Leader of the Opposition is not keen on it. The point is that when I came into the bank it was flourishing, and it was flourishing still more when I left. I did not inherit a most abominable mess. That is the great difference.
LORD ERROLL OF HALE: The noble Earl will surely appreciate that if one of his directors had gone around saying that his bank was bankrupt this would have had an adverse effect. This is exactly what the then Foreign Minister did in Geneva, when he went to the meeting of Ministers in EFTA. He said:
"Gentlemen, Britain is bankrupt."
He said that in Geneva, which is only a one-franc telephone call from Zurich, and the news got there very quickly. Of course the situation was a difficult one (I hope the noble Earl will allow me to finish my sentence), but at a time like that it was essential not to exaggerate the difficulties, and certainly essential not to exaggerate them in public and in front of those very people whose confidence was most urgently required. I will gladly give way if the noble Earl wishes—I see that he does not. So this was entirely the responsibility of the Government, and this is one of the reasons why we are in such difficulties to-day: because the Government initially lost the confidence of the world in the pound, and subsequent actions have not so far been sufficient to restore that confidence.
One of the growing practices, not only of the Government but, I regret to say, of many noble Lords opposite during the debate to-day, has been to make general strictures on British industry. I feel that this can do this country very little good. The Prime Minister himself, of course, is an expert at slamming sluggish directors and bad managers; and, interestingly enough, he now castigates
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even the general body of workpeople—I think at the Durham Miners' Gala—about their restrictive practices and the like. Maybe there are some sluggish directors, bad managers and restrictive practices among workpeople; but I do not think it does much good to make broad sweeping generalisations of this kind. The noble Lord, Lord Byers, in an interesting and customarily forthright speech, said: "We are far less competitive and efficient than a number of other nations." Personally, I do not believe it. I think we are holding our own pretty well.
LORD BYERS: My Lords, may I ask the noble Lord whether this is really the new policy of the Conservative Party, to shut their eyes to what is actually happening? If we are not going to recognise this sort of thing, how are we going to put it right?
LORD ERROLL OF HALE: Of course, there is always room for improvement. But a nation that can export something like £3,500 million worth of goods to all the markets of the world in a single year cannot be all that inefficient, although I am the first to realise that there is room for improvement. What damages this country are these sweeping generalisations with little supporting evidence.
LORD HAWKE: My Lords, before my noble friend leaves that point, would he care to make some comment on the campaign of denigration of the British aircraft industry which appears to have been carried on by that well-read paper, the Economist?
LORD ERROLL OF HALE: I sometimes wonder on whose side the Economist is. I agree that what they say does not do anything to help; nor does the cancellation of British aircraft do anything to help the British aircraft industry.
What happens as a result of these sweeping generalisations is that foreign confidence in British industry is undermined; and furthermore, it makes the task of our exporters all that much more difficult. If directors are to be made more efficient, if restrictive practices by workers are to be removed, let us go about it quietly, without undue publicity. The "blowing off" about it (if I may so put it colloquially to noble Lords opposite and to the noble Lord, Lord Byers)

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does not put it right. What does put it right is to seek out the places where action is required, and to get it done quietly and efficiently.
The Government are very fond of committees and councils, and have set up a great number since they came into office. It would be one of my strictures on the Government that when faced with a problem they set up a committee, or when faced with a difficult situation they set up a regional council, an economic council or a planning council. Obviously, in a complicated country such as ours there must be a number of committees and there must be proper interchange of views and the cross-fertilisation of ideas. But from the long list in Hansard which was given in answer to a Question of mine in April of this year, it is apparent that the Government have gone mad on committees. While, as I say, committees are required, I think the time has come to reverse this process, because we believe that fundamental change and economic improvement come through the will and effort of the individual. While committees may do valuable work in coordination and ensuring uniformity of action over a broad field, what will really make this country go ahead more is to give more opportunity for the individual to exercise his will and to make his effort. That is to be my text when making some observations about the Finance Bill.
I was particularly interested in the speech of my noble friend Lord Eccles, who dealt almost entirely with the Finance Bill. I should like to say that I always enjoyed working for him in the Board of Trade when I was his Parliamentary Secretary, and therefore I was particularly fascinated in listening to the way he philosophised so ingeniously and cleverly on the future problems of Britain. Needless to say, I was extremely interested in the speech of the noble Lord, Lord Robbins, who said that he found the Finance Bill one of unparalleled difficulty and complexity. Perhaps I could point out to him that it is considerably easier to understand in the original Hungarian text.
LORD SHEPHERD: Let us have a new one, for a change!
LORD ERROLL OF HALE: Not everybody has heard that one. I tried
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it out this afternoon on two of my noble friends, and as they had not heard it I thought it was worth the risk.
The basic trouble with the Finance Bill is that it does not provide any help or assistance to individual or collective effort. The noble Lord, Lord Francis-Williams, asked me if I would suggest what the Conservatives would do—was there any source of untapped wealth? I would say that there are considerable sources of untapped energy at all levels of our society, because the present level of taxation discourages a man from giving that extra bit of effort which makes all the difference. This applies not only to the relatively well-to-do executive, who likes to have a day off, or does not go for the higher job; it applies also to the work-people who are not prepared to do overtime or to work on a Sunday to secure the completion of an urgent export order, because the additional earnings would attract a higher rate of income tax. The first thing this Finance Bill does is to raise the standard rate of income tax, and to provide a very real deterrent to increased personal effort at all levels.
LORD FRANCIS-WILLIAMS: My Lords, I do not want to interrupt the noble Lord, but I am very puzzled. If they now recognise this source of untapped energy—and I agree it does exist in this country—why did they not do anything about tapping it properly during the last thirteen years?
LORD ERROLL OF HALE: We reduced income tax on several occasions during our thirteen years; and we were also able to reduce indirect taxation. I feel that, if there has to be a choice, I should prefer myself to see a reduction of direct taxation taking priority over a reduction of indirect taxation.
LORD FRANCIS-WILLIAMS: Would the noble Lord—
LORD ERROLL OF HALE: I said priorities, and if the noble Lord will forgive me, I have been on my feet for eighteen minutes and I should like to keep my speech down to a reasonable length.
As regards the corporation tax, which was so brilliantly dealt with by my noble friend Lord Eccles, I am sure the mistake here was to bring it in so quickly. A further year spent in studying its effects would have ensured a much smoother

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introduction of this tax. As it is, it has caused a great diversion of effort on the part of men engaged in business, because they had to work out the new arrangements which will apply. It has also, through its over-hasty introduction, seriously affected our overseas investment, as illustrated by some remarks made by the noble Lord, Lord Byers. Indeed, I know of at least one case where a senior executive of a very large company had to cancel his export sales tour because the complexities of this new tax and its effect on his business were such that he had to remain in England to sort them out.
There is also an important disadvantage of the new corporation tax, which I should like to couple with a point raised by the noble Lord, Lord Winterbottorm, in his maiden speech, when he referred to bringing the United Kingdom tax system into line with the systems of the countries comprising the E.E.C. In fact the way in which this Bill will alter our company tax system is exactly the reverse way to the direction in which the countries of the E.E.C. are moving. In my view, this is one of the most regrettable aspects of the corporation tax in the long run, for if we later wish to enter the E.E.C. we shall need to turn our whole system back to the present balance.
Finally, in my remarks on the Finance Bill, I come to the capital gains tax, which seems irrelevant at the present time, since most people who are fortunate enough to possess capital are accumulating losses to set off against possible gains in the future. I have always felt that a capital gains tax was an experiment worth trying if thereby one could win over the acceptance of the unions to the Labour Government's Prices and Incomes policy. If we could have real price stability, then taxation of small but genuine capital gains would be a price well worth paying, and there would be none of the deterioration in the value of money to which the noble Lord, Lord Robbins, referred so eloquently in his speech.
Of course, what happened is more or less what we might expect. We have the capital gains tax, but no response from the unions at all. Indeed, the record is a pretty sorry one. In the 42 major settlements this year, only one is below
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the norm of 3½ per cent. set by the First Secretary in his policy. Needless to say, the one which is below is an award to hospital workers of only 2½ per cent. So much for Labour's Election promise to ensure that the lower paid workers and public employees would not be exploited. All the major awards are above the norm set, and therefore prices are bound to continue to rise and we shall all be the sufferers.
I should have liked to refer, in the context of the Finance Bill, to the question of close companies, because here again close companies are those owned by individuals, in the main very often built up by the founders. The proposals for close companies were particularly savage in their attacks on the enterprise of individuals. I was not able to be present to listen to his speech, but I know that the noble Lord, Lord Sherfield, referred to that matter extensively and with expert knowledge.
The noble Lord, Lord Cohen of Brighton, said very frankly that the boom is over. I was interested to hear what he had to say, because the Chancellor of the Exchequer, both last November and early this year, had been putting on the brakes more speedily, but it seemed as though the brakes were not having any effect. Those of us who were connected with the Treasury and Government Departments in the last Administration know that it takes time for the brakes to have any effect. Personally, I thought in June and July that there were signs of the brakes beginning to take effect: National Savings were down; used car prices were down 10 per cent; unemployment was marginally up against the traditional seasonal trend, and there were a number of similar factors. I think probably the Chancellor of the Exchequer thought the same, because in winding up on the Third Reading of the Finance Bill, on July 15, he said:
"There is a temptation to assume … that we should rush into further measures which would have the effect of restraining the economy even more. This would be an unfortunate thing to do and I am resisting the temptation to do it."—[OFFICIAL REPORT, Commons, Vol. 716 (No. 665), col. 911, July 15. 1965]
Twelve days later came the announcement of further savage cuts, undoubtedly brought about by his growing realisation that his Government had still failed to win over foreign confidence and that these

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further measures were needed, not to keep the economy on an even keel but in order to satisfy the foreigners who still doubt the ability of the Government to pull the country through.
As a result of this further severe and savage application of the brake, I think we must expect to see a considerable degree of recession during the winter. It will not necessarily lead to unemployment because, of course, the first step is to abandon overtime earnings, and then there comes a period on short-time earnings. But the result is smaller take-home pay packets, and there will be considerable discomfort and inconvenience, because all this will come at the very time when higher prices caused by the recent wage awards will be working through to the shops and to their customers. So I venture to say to noble Lords that we on this side of the House do not like the situation at all. We are filled with foreboding. We hope that the noble Earl, when he comes to wind up the debate, will be able to reassure us, but I hope that, in speaking frankly, as we on this side of the House have done, our motives will not be misunderstood.
I am sorry to have to say that I detect a growing tendency on the part of the Government to call in question the patriotism of Members of the Opposition in another place and in this Chamber. One example was when the noble Lord, Lord Rhodes, was winding up a debate on June 2. Referring to my criticisms of the Government's prices and incomes policy, he said:
'We must remember Nurse Cavell's words 'Patriotism is not enough'; and in my view an attack on this policy by the Opposition is unpatriotic."—[OFFICIAL REPORT, Vol. 266 (No. 84), col. 1168.]
Then we had the Chancellor of the Exchequer saying, on August 3, in reply to a supplementary question by an Opposition Member:
"I am bound to say that the level of patriotism among honourable Members opposite gets lower and lower as the Session wears On. …—[OFFICIAL REPORT, Commons, Vol. 717 (No. 167), col. 1255.]
A NOBLE LORD: Read the question! What was the question?
LORD ERROLL OF HALE: The question was by Captain Elliot, the honourable Member for Carshalton, and was as follows:
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"When the Socialists locusts have eaten these reserves, which reserves have they earmarked to eat next?"
As they have already liquefied part of the American investments held by the Government, preparatory (as the Chancellor of the Exchequer had admitted) to bringing them into the first-line reserves, I think it was perfectly reasonable for Captain Elliot to ask what the next line of reserves to be so liquefied would be.
I want to say to your Lordships that we on this side of your Lordships' House yield to no one in our sense of patriotism, and we strongly resent the criticisms which are creeping in on the question of patriotism at the present time. We believe it to be our patriotic duty to show up the faults of the Government, to try to persuade them to mend their ways in the short time left to them before a shocked electorate throws them out.
8.15 p.m.
THE EARL OF LONGFORD: My Lords, I came down to the House to-day well aware that this was the last major debate of a very happy year and intending to make a speech which would be as nearly statesmanlike as lies within my compass. The House will be relieved to hear that I am not going to stick to that purpose too closely, in view of some of the comments which have fallen from the noble Lord, Lord Erroll of Hale, and one or two other things which have been said at different times.
The noble Lord, Lord Erroll of Hale, has, if I may say so, certainly become a most acceptable Member of this House, in the short time he has been with us, and again, unless I much mistake it, he is a man sweet-natured and sensitive; therefore I hope I shall not cause him undue distress if I say just one or two things fairly clearly about the speech which he has just delivered. In twenty years I have listened to a great many complacent speeches from both sides of this House, and I may even have made a few myself, but never have I heard a speech so full of complacency, as the noble Lord, Lord Byers, a dispassionate umpire, so to speak, can no doubt testify.
We were told earlier on by the noble Lord, Lord Carrington, that the right honourable gentleman Mr. Heath has a new three-pronged policy, and the second aspect of that policy, as the noble Lord,

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Lord Francis-Williams, demonstrated in one of the most brilliant speeches for a long time—was vague enough, but this, at any rate, was intelligible. He said we must grapple—perhaps it has been put off for too long—with one of the essential problems of the British economy, namely restrictive labour practices; and he went on to set that out as one of the three main planks of the Conservative policy. How are you going to do all this good by stealth? Are you going to, sort of, creep up on a restrictive gentleman and stop his restrictiveness? Of course, it is so absurd that I think the noble Lord, on reflection, would want to correct Hansard, and I am quite ready for him to do it.
I will return for a moment or two to say one or two things about the noble Lord's speech. He asked me to say that he is patriotic. I am quite certain that the noble Lord is as patriotic as I am. I am half Irish, and whether that makes me a good English patriot the noble Lord himself must judge, but I am sure lie is as patriotic as I am. However the noble Lord, Lord Rhodes, was perfectly entitled to point out that some line he was taking was not calculated to help the country. If we cannot say that, I really do not know what we can say in political controversy. But I am a little surprised, because I was accused of being over-sensitive, along with a few other things, earlier on. I think noble Lords opposite are getting over-sensitive if they go ferreting round for statements we are supposed to have made about their patriotism. In particular the noble Lord has invented, as far as I can judge, what he calls "a series of sweeping denigrations of British industry by the Prime Minister". He does not quote these things. I would venture to say there has never been a Prime Minister who was personally so actively and intimately concerned with the welfare of British industry. It just happens to be the passion of his life, and everyone knows it, so all this talk of sweeping denigrations I am afraid is moonshine.
The noble Lord gave us an interesting piece of history of the origin of these plans for dealing with excess imports. I am not going to pursue that matter further, because everyone will want to look at what he said and see if it leads them in any way to alter their views about anything. But do not let me fail
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to remind the House of what the Prime Minister said in that debate. He said that the Leader of the Opposition—and I think he must have meant Mr. Heath—condemned the actions we took on taking office, but the right honourable Member for Barnet at that time said that this was his diagnosis and these were his remedies. I am only quoting what the Prime Minister said, so we do not need to pursue that matter further to-day.
I would express my admiration for those who, so to speak, fought their way clear of the Party atmosphere and delivered dispassionate speeches. We certainly heard one from the noble Lord, Lord Byers, and, if I may say so, from two of my colleagues, the noble Lord, Lord Sainsbury, and the noble Lord, Lord Citrine, who spoke very bravely. I am told that in the other place the Conservatives under their new Leader have organised what is called "group conversation" while the Leader of the Government is speaking. I hope we are not going to suffer that here. Already we have had a ban on interruptions imposed under the new leadership and all this talk about "roughing it up", and so on; but I think I would rather be stopped from interrupting when someone else is speaking than he stopped from speaking by a buzz of conversation when I am supposed to hold the Floor after about seven hours in the Chamber.
The noble Lord, Lord Robbins, made one of the most impressive speeches we have heard here for many years. I am going to say relatively little about it because I think everyone will wish to study it, but I would say that it ranks with that classic speech on his own Report which he delivered some years ago; and it was an occasion when the noble Viscount, Lord Eccles, also made one of the most influential speeches since the war.
The noble Lord, Lord Carrington, asked me one or two precise questions, which I will come to later on. I know he will take it in the best spirit, but he has developed a habit when asked about his Party's policy of referring us to statements made elsewhere. The other day we were referred to Sir Alec Douglas-Home's views on Europe on a particular occasion, only to find that he had not spoken of Europe. To-day we have been referred to a statement made by the

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Leader of the Opposition, and my noble friend Lord Francis-Williams has dealt with all that. There is one advantage about this tactic of referring to statements made elsewhere: it enables me to avoid replying at length to the arguments about corporation tax and capital gains tax. They have been deployed on both sides for weary months, and the House will forgive me for not making an elaborate defence of them to-day beyond what was said by my noble friend Lord Champion, who opened so well some hours ago.
As the noble Viscount, Lord Eccles, has courteously told me that he has to go in a few minutes, perhaps I could say one thing about the corporation and capital gains taxes before he leaves. One would think from what the noble Viscount said that these taxes were in some way inspired by malevolent Socialism amounting to Marxism. But in fact these taxes are used in America, and that is hardly a Socialist country, if I may say so to the noble Viscount, who cannot fail to be interesting, whatever line he takes. I thought all the tremendous argumentation about Socialist mentality behind the taxes was as remote from reality as some of the remarks I referred to earlier. I would remind him that the right honourable gentleman, Mr. Heath—to whom I wish all good fortune, in case I did not make that plain a moment or two ago—said, on Third Reading of the Finance Bill, on July 15:
"Moreover, we have not opposed the principle of the capital gains tax or the corporation tax at any stage in the debates on the Bill."
Then he went on to say, along with the noble Lord, Lord Robbins, and no doubt the noble Viscount, Lord Eccles, would agree, that he did not like the form or the timing. But, if I may say so, the whole philosophical argument against these taxes falls to the ground if we are to understand the Conservative Party did not object to them in principle.
The noble Lord, Lord Barnby, is with us, and perhaps he will forgive me if I do not answer all the points, some of which were intricate. Perhaps I may answer just one of them with regard to close companies, to which the noble Lord, Lord Sherfield, also referred. Here may I join, as we all do—I am sure the House is agreed—in paying tribute to the civil servants that Lord Sherfield men
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tioned earlier. The noble Lord, Lord Barnby, questioned the treatment of interest paid by the close company. Briefly, the position is that interest paid to a director or associate of a director is taxed in the same way as dividends. If the company goes to an outside source for its loan capital the interest would be allowed as a deduction in computing the profits. The Chancellor introduced an Amendment on this point during the passage of the Finance Bill. The rules are now the same, subject to technical qualifications, as for the existing profits tax, and there is no reason to suppose that they adversely affect the conduct of business. That answer will be in Hansard, and perhaps I can deal with the noble Lord's other points in correspondence.
LORD BARNBY: My Lords, I am obliged to the noble Earl. It still seems rather unclear.
THE EARL OF LONGFORD: It is a difficult subject and it may be that the noble Lord understands it better than I do, but may I write to him to give the full answer by correspondence? The noble Lord, Lord Erroll of Hale, criticised us for discouraging investment. I think that would be a fair summary of that part of his argument. I cannot pursue the theory of that now, except to point out that investment is still very high. There is no sign that it has been discouraged. I would submit to the noble Lord that if he is correct there is certainly no sign of this discouragement he has in mind.
May I congratulate the two maiden speakers—the noble Baroness, Lady Plummer, a real maiden in Parliamentary life, and the noble Lord, Lord Winterbottom, a hard-bitten warrior from the House of Commons? I think we all felt that they discovered what was necessary to make an attractive speech in this House, and both made speeches which gave the utmost pleasure. Many of us are thinking very much at this moment of Lady Plummer's husband, so dear to so many Parliamentarians.
I am sure the noble Viscount, Lord Eccles, and the noble Lord, Lord Erroll of Hale, who is tremendously interested in exports, and a very patriotic businessman, if I may use that phrase again, will be pleased that so many of our speakers have dedicated so much of their speeches to exports. Time was when

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it might have been thought by noble Lords opposite that the Labour Party were not interested in business or exports, and here we have a whole string of speeches about exports, which cannot be properly answered by me, least of all at this time. Perhaps I might give official answers at the moment, and the matters can be pursued with the speakers in question.
The Government are immensely interested in the question raised by the noble Baroness, Lady Plummer, about agricultural exports, and only last week the Minister of Agriculture, Fisheries and Food met representatives of some twenty agricultural organisations with an interest in exports to see what more might be done to ensure full use is made of these measures. I can assure the noble Baroness that this will be followed up. When all is said and done, agriculture's principal contribution to our balance of payments is as a saver of imports. That does not mean that a great deal more cannot be done.
The noble Lord, Lord Winterbottom, showed great practical knowledge of the export trade as did the noble Lord, Lord Haire of Whiteabbey, and they will forgive me if their speeches are dealt with by correspondence through the Ministries. They are both aware of the difficulties that arise through our international commitments, particularly in GATT, which forbid the use of subsidies to promote exports. The noble Lord, Lord Winterbottom, knows all about this. It is in our own interests as an exporting country to see that GATT is observed. That is rather an overriding point. But, nevertheless, I should like the noble Lord to feel that he has started a train of thought which I am sure will not finish here.
I would say the same in effect to the noble Lord, Lord Haire of Whiteabbey. I think I have time to deal with only one of his points. He referred to the collective selling organisations. I can tell him that the working party set up by the British National Export Council to inquire into the feasibility of establishing a new form of export sales corporation to mobilise the export potential of the medium-sized and smaller firms, has engaged consultants to make pilot surveys in Western Germany. Western U.S.A. and British Columbia, and the consultants will advise on the type of organisation which will help to meet them.
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I must not speak for too long, but I will try to put some of these matters in something of a perspective and end, I hope, on a note which is perhaps more or less agreed. Since 1963 (my mind goes back to that year partcularly; I do not know whether the noble Lord, Lord Robbins, regarded this as a favourable year) there has been a fairly general agreement among the leaders of the political Parties, and I would think among the majority of experts—I must not say ail the experts—that, with a reasonable degree of careful planning, it should be possible to increase the national income of the country by something like 4 per cent. a year. There was a widespread agreement about that. It was proclaimed by the late Chancellor of the Exchequer, and much applauded by all sides of this House.
But it was recognised then, and it has been recognised ever since, that even if this country were relatively self-contained, if there were no foreign balances and no awkward problems of this kind, this kind of policy, this systematic growth, would be defeated if money incomes increased much faster than production; that inflation could arise even in a closed society. I would disagree with any noble Lord who shows any sign of defeatism about the attempt to secure an incomes policy. I must not accuse the noble Lord opposite of despair, because that is the worst of all sins, but I would accuse him of pessimism about it. I would think that there are good prospects of this incomes policy succeeding, provided that the employers and the leaders of the trade unions persevere and proceed along the lines upon which they have started. I would think that success was extremely likely so long as we do not lose confidence. But, of course, if the noble Lord and his colleagues and those who represent something like half this country lose confidence in the success of the enterprise, the chances of success are greatly diminished.
We all remember that striking tribute paid by the noble Lord, Lord Thomson of Fleet, in a recent debate to Mr. George Brown and his labours. I should have thought that most noble Lords would echo that tribute. I do not think the noble Lord, Lord Erroll of Hale, dissented from the tribute. I think he thought that Mr. George Brown was extremely likely to fail. Trying to be realistic, what

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I should say is that, if he is given proper backing, he, and whoever happens to be doing the job at the time, will succeed; but he will not succeed immediately. It is going to take time. I recognise, if we are being realistic, that the grim situation described by the noble Lord, Lord Robbins, is with us now; so the fact that I think that this incomes policy will succeed a little further on is not an immediate answer to our problems. I recognise that.
The noble Lord the Leader of the Opposition asked me to interpret what he found to be a rather cryptic utterance of the Prime Minister about the steps that would need to be taken there if things went wrong. I am afraid that I am not at liberty to say what steps are in mind, and I do not honestly think that the noble Lord, who is a most experienced ex-Cabinet Minister, if he had steps in mind himself, would go any further than the Prime Minister has gone on that matter recently.
The noble Lord, Lord Robbins, devoted a large part of that weighty speech to a discussion of what might roughly be called the financial as opposed to the industrial problem. I would not offer a personal opinion which could be set against his, but I was most interested in the extreme emphasis that he laid on the financial aspect. I think that the Government and its advisers must make up their own minds when they study his speech as to how far they can go in accepting that particular analysis. It was certainly most impressive, and it was interesting that, coming at it from a different point of view, the noble Lord, Lord Cohen of Brighton, who spoke with splendid verve and sparkle, reached much the same conclusion from these Benches as the noble Lord, Lord Robbins, that these measures of restraint were highly necessary and perhaps overdue, and must be supported at all costs.
That was where the noble Lord, Lord Byers, was extremely helpful. He even urged us to become unpopular in order to become popular. I suppose that we must not even make the political calculation as to at what moment the Election would come, whether we were still unpopular or had become popular. I suppose we must not even think that one out. I do not think it is asking too much
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of a Government. I think we should not be masochistic. We have not got to seek popularity; I think we must be ready to face unpopularity. That is certainly the spirit of the present Government.
I must draw to a close. The Prime Minister said elsewhere—and I do not think he was differing from the noble Lord, Lord Robbins, except possibly in emphasis, and of course he had not heard the noble Lord's speech and the particular emphasis that he laid—that basically the trouble is industrial. Of course, there is a financial aspect to all this, and there is an industrial aspect, and the Prime Minister was calling attention to the fact that in the last year, for example, world manufactured exports went up 14 per cent. and ours went up only 4 per cent., and therefore we must redouble every effort to stimulate exports. There we can all agree. The noble Lord is as keen on stimulating exports as any of us. I would therefore express confidence myself that, as we look further on, we shall pull ourselves out of this particular difficulty; but I think it will be some time. I do not see any sort of easy escape from our difficulties. I think it would be a great mistake to make any assumption of that sort.
Before I utter my last words—which I will utter in a moment—may I say to the noble Lord, Lord Sherfield, what I should have said earlier, that of course the Government are deeply interested in the welfare of the small companies, and I am quite certain that they appreciate the great efforts he himself is making at the moment to help them.
My own last thought—and I will not take more than a moment—is this. I think our real trouble as a nation at the moment—I do not say it is getting worse, but it might be becoming more dangerous because our need is greater—is a kind of collective selfishness. I think many of us are ready to support a demand made on behalf of our group which we should never make on behalf of ourselves. The other day I was almost abused at a meeting by a most high-minded professional man, because I thought his particular group ought not to have more than a 13 per cent. increase. He would never have made that suggestion or taken up that attitude about his own personal fortune. I think that the problem before all of us is to make sure, in our membership of a group,

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whether it is a trade union, a professional body or any kind of business association, that we watch very carefully any assertion of group interests, because at the present time it is our group interests, if anything—our assertion of group interests regardless of the national income—which would destroy us if anything could.
I finish optimistically. I believe, in spite of the oppositional points made opposite, that we have reason to be grateful for the genuine, if critical, goodwill of noble Lords in all parts of the House. I take this opportunity of saying, particularly to the noble Lord, Lord Carrington, what an advantage I think it is in this House that there should be so much co-operation by people who recognise that, with all our faults, we are human.
LORD CARRINGTON: My Lords, the noble Earl is a most disarming Earl. But may I point out to him that he has not answered one of my questions? He explained to me, most courteously, why he was not going to answer the other one, but he has not even mentioned this one, of which I gave him notice. It is not a Party question. I think it is a question the answer to which would be considered helpful if he could give it. I asked him, if the measures of last week—that is, the financial measures that the Chancellor announced last week—are not adequate, will the Government be prepared to take further action, and take it quickly?
THE EARL OF LONGFORD: My Lords, the answer is that if these measures should not prove adequate, this Government, like the Government of noble Lords opposite, would take further measures and act quickly. But I do not want that to be the last word. I do not want to give the impression that at this moment we are considering other measures. We are confident that these measures will succeed.
On Question, Bill read 2ª: Committee negatived.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.

CONSOLIDATED FUND (APPROPRIATION) BILL
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read 1ª.
LONDON TRANSPORT BILL

  MANCHESTER CORPORATION BILL
  Returned from the Commons, with the Amendments agreed to.
  House adjourned at nineteen minutes before nine o'clock.