Sitting of 1 December 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  ROSS AND CROMARTY (STRATHCARRON— SOUTH STROME ROAD) ORDER CONFIRMATION BILL
  Read the Third time and passed.
ORAL ANSWERS TO QUESTIONS
  ECONOMIC AFFAIRS

    National Plan
    Sir C. Osborneasked the First Secretary of State and Secretary of State for Economic Affairs how many civil servants and businessmen were employed in producing the National Plan; since the National Plan was based on the assumption of 200,000 more jobs being available than men to fill them, and there are now over 500,000 unemployed, if he will give an assurance that future planning will take full account of the economic situation of the country, in order to avoid further waste of public money; and if he will make a statement.
    The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart): It is not practicable to give any estimate of the numbers concerned. The figure of 200,000 was an estimate of the manpower gap in 1970 resulting from the implementation of the Plan, not an assumption used in formulating it.
    Sir C. Osborne: Does the right hon. Gentleman agree that events have made a complete mockery of this Plan? Will he see that public money is not wasted in this way in future, please?
    Mr. Stewart: It is by no means the general view in industry that this is a
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    waste. It is not true, either, to say that events have made a mockery of it. In conditions of restored growth, we shall still have to face the problem of manpower shortage, to which the hon. Gentleman refers.
    Mr. Anderson: Does my right hon. Friend realise that many of us are sick and tired of the continued knocking at the Plan and at the concept of planning by hon. Members opposite? Will he ensure that as soon as practicable the Plan is revised?
    Mr. Stewart: I gave an answer to that question about three weeks ago. We are going on with that.
    Mr. Higginsasked the First Secretary of State and Secretary of State for Economic Affairs when he will provide input-output tables which show the relationship between the various industries covered by the National Plan and reconcile the figures given for each industry.
    Mr. M. Stewart: As the projections in the 1965 National Plan are no longer considered practicable for 1970, it has been decided not to publish the input/output tables based on them.
    Mr. Higgins: Would the right hon. Gentleman not agree that there is much to be learned from carrying out a post-mortem on the body of the National Plan? Since these tables were promised to the House almost a year ago by his predecessor, why are we not to know what the internal structure of the Plan, failure as it is, was?
    Mr. Stewart: One of the hon. Gentleman's hon. Friends at the beginning of Question Time was complaining about the amount of time spent by civil servants in preparing the Plan at all. It would not be sensible to proceed with this exercise. We are examining what is more to the point, the revision of the Plan.
    Mr. Longden: Is it true that the right hon. Gentleman's predecessor, now Foreign Secretary, when he wrote the Plan, was rather like Browning when he wrote his poem, in that only he and God knew what it meant and now only God knows?
    Mr. Stewart: It would be a foolish man who said that Browning's poems were useless.
    Mr. Ronald Bell: Does the First Secretary remember that his predecessor, speaking of the National Plan, said that the figures and the timescale would have to be rewritten but that the Plan would still be useful as a checklist? What does that mean?
    Mr. Stewart: It means that the Plan contains what is called a "checklist for action", that is, a list of items of policy with which it was particularly important to proceed. That part of the Plan is certainly of great and permanent value.

    Bathgate
    Mr. Dalyellasked the First Secretary of State and Secretary of State for Economic Affairs if, in view of the 9 per cent. unemployment rate in the area, he will visit Bathgate in the near future.
    Mr. M. Stewart: No, Sir; but I hope to visit Scotland in the new year.
    Mr. Dalyell: In view of the improved employment percentage, will my right hon. Friend agree that it is now up to individual firms to take advantage of the cash grant scheme and the off-the job adult retraining scheme announced yesterday by the Minister of Labour? Will the Government make sure that these good schemes are fully publicised, in the right quarters?
    Mr. Stewart: Yes, indeed.

    Reflation
    Mr. Buchanasked the First Secretary of State and Secretary of State for Economic Affairs whether he will now begin the process of planned reflation by means of Government investment at selected points of industry.
    Mr. M. Stewart: The timing of reflationary measures will depend on the improvement in our balance of payments. We have made clear on a number of occasions that they will be designed, like those already in being, to assist the movement of resources into exports and productive investment so that the basis of future growth is secure.
    Mr. Buchan: Looking at these unemployment figures, especially in regard to Scotland, does not my right hon. Friend agree that enough is enough and that the time has now come, while avoiding the
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    dangers of a consumer boom, to begin the process of selective reflation by Government investment and contracts, particularly in the machine tool industry and technological industry, in order that this process may begin?
    Mr. Stewart: I think that my hon. Friend will agree that, in this matter, we have to watch both the danger of letting deflation go too far and the importance of having regard to the balance of payments. As I have said, when we are able to take reflationary measures, we shall have in mind the considerations referred to by my hon. Friend.
    Mr. Higgins: In view of the Minister's original reply, can he say what percentage increase in exports he expects from Government investment? Is it not the case that, generally speaking. Government investment does not result in increased exports?
    Mr. Stewart: I do not accept the implications of the latter part of that supplementary question. As for the first part, the hon. Gentleman may like to put down a Question on the subject.
    Mr. Manuel: Does my right hon. Friend recognise that there is a great deal of concern about the present figure of unemployment in Scotland and that owing to the glowing report of the advance in our economy in Scotland over the past two years—now admitted by Scottish industrialists and businessmen generally—and recognising that it is a redevelopment area, is it not time that the screw was taken off in order to allow this area to make even greater progress than it is making now?
    Mr. Stewart: Although the growth of unemployment in Scotland has not been as fast as in the United Kingdom as a whole, it is true that this is a matter for concern. As my hon. Friend knows, a number of measures have been taken to give special advantage to Scotland and certain other areas.
    Mr. Edward M. Taylor: Does the Minister agree that there have not been any new measures recently? When he is considering reflation, will he do so on a regional basis and not as something to be considered in relation to the whole country?
    Mr. Stewart: That is certainly one matter which will be taken into consideration.

    Import Surcharge (Removal)
    Mr. Buchanasked the First Secretary of State and Secretary of State for Economic Affairs whether he will introduce legislation to ensure that the removal of the import surcharge will be accompanied by appropriate reductions in commodity prices.
    Mr. Patrick Wallasked the First Secretary of State and Secretary of State for Economic Affairs what new steps he is taking to see that the lifting of the import surcharge is passed on to the consumer in reduced prices.
    The Minister of State, Department of Economic Affairs (Mr. Austen Albu): As my hon. Friend the Parliamentary Under-Secretary explained in reply to the hon. Member for Lewisham, West (Mr. Dickens) on 20th October—[Vol. 734, c. 376.]—my right hon. Friend expects those concerned to recognise fully their responsibility for price reductions, bearing in mind that the removal of the surcharge should offer scope for them. My right hon. Friend does not consider that any further measures are called for.
    Mr. Buchan: Would my hon. Friend not agree, in the light of the fact that we have written into our White Papers the right of firms to raise prices when taxation is imposed, that we should also write in a duty to reduce prices when fiscal measures like those which are in force are removed? This is the point of the Question. Will he take such strict measures to see that prices come down?
    Mr. Albu: My hon. Friend is no doubt aware that the duty to reduce prices in suitable cases is included in the White Paper on Productivity, Prices and Incomes. We shall watch this situation closely.
    Mr. Wall: In view of the increase in prices imposed on the long-suffering consumer by the Selective Employment Tax, will the hon. Gentleman take steps to see that they comply with his request?
    Mr. Albu: We shall certainly do so. We shall be watching the situation and will make checks on cases where the surcharge could be assumed to have put an increase on prices in the past.
    Mr. Arthur Lewis: Will my hon. Friend get from the B.B.C. a tape recording of the speech of my right hon. Friend's predecessor when this was introduced, in which he said that his Department would take severe measures to see that these prices came down? What will those severe measures be?
    Mr. Albu: The situation is exactly what it was when my right hon. Friend, who is now Foreign Secretary, made that speech.
    Sir J. Langford-Holt: What does the hon. Member mean when he says that duties are included in the White Paper? What duties does the White Paper include?
    Mr. Albu: The criteria in the original White Paper imposed on firms the duty to reduce their prices where it was possible to do so; it also gave the Government power to refer those cases to the National Board for Prices and Incomes where necessary, and we shall do so.
    Mr. Hamlingasked the First Secretary of State and Secretary of State for Economic Affairs, whether he will undertake to report to the House within three months what price reductions are made by those manufacturers and merchants who raised the prices of their goods because of the import surcharge two years ago.
    Mr. Albu: We have no record of increases in prices by individual traders due to the surcharge, and we could not undertake to make the report requested without asking all traders to notify price reductions. My right hon. Friend does not regard this as practicable.
    Mr. Hamling: Does my right hon. Friend recall that when the import levy was imposed there was a deluge of questions from the opposite benches about increases in prices? Will he refer to all those and look at current reductions in all those prices which we have a right to expect?
    Mr. Albu: My hon. Friend may be interested to know that we made a study last year of the effect of the surcharge. In a very large number of cases—I think more than half—traders were absorbing the surcharge at that time. We shall certainly watch the situation now that the surcharge has been removed.
    Mr. Frederic Harris: In order to get this into perspective, does the hon. Gentleman agree that when the Chancellor announced the reduction in July last a large number of importers reduced their prices because they had to do so in order to sell goods in the intervening period up to November?
    Mr. Albu: In that case, they will be in the clear.
    Mr. Raphael Tuck: As my hon. Friend has already stated that it is the duty of manufacturers to reduce the prices of their manufactures when the import surcharge comes off, will he see that that duty is made mandatory by legislation?
    Mr. Albu: My right hon. Friend does not think that would be practical or possible.
    Sir S. McAdden: Did I understand the hon. Gentleman to say that he has no record of price increases which took place at that time? If he has no record, is this what is called "purposive planning"?
    Mr. Albu: I meant that we had no record of every single price increase which took place. The hon. Member knows that this would be impossible.

    Prices and Incomes
    Sir C. Osborneasked the First Secretary of State and Secretary of State for Economic Affairs what will be the difference between the present wages standstill and the period of severe restraint that will follow it; how many workers will be affected by it; and under what conditions it will be ended.
    Mr. M. Stewart: Command 3150 explains the difference: it is not possible to state the number of workers who will be affected by the revised criteria. Guidance for those negotiating settlements to take effect after 30th June, 1967, will be given after consultation with the Confederation of British Industry, the Trades Union Congress and other interested parties.
    Sir C. Osborne: Would the right hon. Gentleman give the House two clear promises? First, will he promise that the period of severe restraint will not be reimposed after next June? Second, will he promise that reflation will not bring inflation?
    Mr. Stewart: As I have said in answer to previous Questions, the Government's intent with regard to the timing and nature of reflationary measures is to see that they are not inflationary. As to movement of prices and incomes after 30th June, that is, of course, very closely bound up with the rate of growth which we can then obtain.
    Mr. Frederic Harrisasked the First Secretary of State and Secretary of State for Economic Affairs what policy the Government propose to pursue after the period of severe restraint.
    Mr. M. Stewart: The Government's aim is to pursue a policy for productivity, prices and incomes which will enable the nation to achieve the objectives set out in the Joint Statement of Intent of December 1964 and accepted by representatives of the Trades Union Congress and the employers' organisations.
    Mr. Harris: Does the right hon. Gentleman recognise that that does not give much of an answer? Is it not important that he and the rest of the Cabinet realise that employees particularly must know in some detail after the period of severe restraint what the Government's policy is to be if we are to get their co-operation to the degree the Government want?
    Mr. Stewart: I have set out on this and other occasions the main line and purpose of our policy. I agree that more detail needs to be worked out, but for that we shall want the consultation we shall have in the coming months.

    Economic Development Councils
    Mr. Stratton Millsasked the First Secretary of State and Secretary of State for Economic Affairs if he will make a statement on the future development of the little national economic development councils.
    Mr. M. Stewart: Within its terms of reference, each economic development committee determines its own future programme in the light of the special needs and problems of its industry: but I have recently drawn the attention of chairmen to the current need to give priority generally to questions having a direct impact on improving industrial efficiency and the balance of payments.
    Mr. Mills: Is the right hon. Gentleman aware of the growing frustration among many members of these Committees, the falling off in attendance and, in some cases, the resignations of important members? Would he consider redefining and clarifying the exact scope of the work of the Committees and possibly associating the Chancellor of the Exchequer, by membership, with the main "Neddy" bodies?
    Mr. Stewart: The hon. Member is wrong about this. Attendance continues to be extremely high on these bodies. The number of resignations has been very small. The general nature of the work which "Little Neddies" are intended to perform is well known. The application of that to the needs of each industry is a matter for each economic development committee to decide.

    Price Increases (Complaints)
    Mr. Stratton Millsasked the First Secretary of State and Secretary of State for Economic Affairs how many of the 6,000 complaints about price increases received by his Department were considered as justified; how many were not; and how many of those which did not seem justified were subsequently reduced following representations.
    Mr. M. Stewart: Over 1,000 complaints were outside the terms of the standstill. Of the remainder, nearly half are still being followed up. We believe that the number of increases already withdrawn, reduced or deferred following representations is greater than the 37 of which we have precise details.
    Mr. Mills: What exactly does that Answer mean? Is it not a continuation of the rather pathetic and useless gesture of the right hon. Gentleman in September? Can he not give rather more concrete details of the analysis of the reductions which he claims, rightly or wrongly, to have brought about?
    Mr. Stewart: First, the Answer meant what it said. As to detail, it answered the points mentioned in the Question. I do not agree that this was a useless exercise, nor did the public think so. I think that it contributed to the degree of stability of prices which we have achieved during this period.
    Mr. Bence: Can my right hon. Friend tell us whether there are among these 6,000 complaints any complaints about the fees which professional people are charging for services, like those of lawyers and estate agents? If he has, what action is he taking about these high fees?
    Mr. Stewart: I should like to answer the latter part of that question with notice, but the 6,000 complaints referred to in the Question cover nearly everything one could think of.
    Mr. Iain Macleod: If all the hullabaloo has boiled down to 37 cases for which the right hon. Gentleman is claiming effective action, would he be prepared to identify those 37 if I put down a Question?
    Mr. Stewart: I will consider that: the right hon. Gentleman might put it down and try.

    Economic Growth
    Mr. St. John-Stevasasked the First Secretary of State and Secretary of State for Economic Affairs what is his estimate of the growth of the British economy that is likely to take place in 1967.
    Mr. M. Stewart: It is not customary to publish precise official short term forecasts of this kind. However, I can say that it will be possible to permit only a modest rate of growth in 1967 until the balance of payments situation is corrected.
    Mr. St. John-Stevas: Is not that dismal reply tantamount to an admission of the total failure of the right hon. Gentleman's Department? How does he reconcile it with the pledge in his party's election manifesto to make economic growth their central aim?
    Mr. Stewart: I think that the hon. Gentleman knows very well that there is an inevitable connection between economic growth and the state of the balance of payments. It is the Government's intention to get the balance of payments right and to promote growth as soon as may be.
    Mr. Frank Allaun: At what point would the deflationary measures be halted? For instance, if unemployment reached 700,000, would we do it then?
    Mr. Stewart: One cannot answer this question in terms of picking particular factors like that. My hon. Friend will find that the Government are watching this situation and will time their measures correctly.

    Prices and Incomes Act (Schedule 2)
    Mr. Higginsasked the First Secretary of State and Secretary of State for Economic Affairs why Schedule 2 of the Prices and Incomes Bill was replaced by a quite different Schedule immediately after the Bill received the Royal Assent.
    Mr. Albu: Because the temporary standstill on prices and incomes made it necessary for the N.B.P.I. and the bodies listed in Schedule 3 of the Act to have regard to the criteria in Command Paper 3073.
    Mr. Higgins: Does the hon. Gentleman believe that it was a victory for the Opposition or a disaster for democracy that the measure which was defended on 10th August in this House was thrown into the wastepaper basket a few days later?
    Mr. Albu: Nothing of the sort. During the stages of the Bill my right hon. Friend and my hon. Friend the Under-Secretary of State made it perfectly clear that the criteria when the Bill came into operation would have to be adjusted to take account of the 20th July measures and the prices and wages standstill but that it was necessary to have the original Schedule in the permanent Bill.
    Mr. Iain Macleod: Is the hon. Gentleman aware that that does not answer the question of my hon. Friend? On 10th August, did the Under-Secretary know that this change was to be made the next day? If he did not, why not? And if he did, why did he not tell the House?
    Mr. Albu: The Under-Secretary in fact made it very clear in the debate on the Bill on 9th and 10th August that this was to take place. He made it very clear that the criteria in the Bill would have to be changed.

    East Anglia Planning Council
    Mr. Derek Pageasked the First Secretary of State and Secretary of State for Economic Affairs what surveys of
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    future population distribution and of likely industrial development have been completed by the Eastern Regional Economic Planning Council.
    Mr. Albu: The East Anglia Council plans to publish next year a report on its survey of population and employment in the region.
    Mr. Page: Would my hon. Friend explain how in the absence of the conclusions of these reports it is possible to place any reliance on recommendations by the council regarding railway closures? Will he have a word with the Minister of Transport?
    Mr. Albu: In the interim period, as my hon. Friend knows, regional councils are asked for their views on the effects of railway closures and they do the best they can to produce such information as they have.

    Department of Economic Affairs
    Mr. St. John-Stevasasked the First Secretary of State and Secretary of State for Economic Affairs whether he will take steps to improve the effectiveness and efficiency of his Department at the present time.
    Mr. M. Stewart: I am always striving to maintain the efficiency of my Department.
    Mr. St. John-Stevas: Since in the words of a distinguished former member of the Minister's Department the D.E.A. has been "defeated, demoralised and decapitated", has not the time come to wind up this expensive charade and merge it back into the Treasury, from which it should never have been separated?
    Mr. Stewart: No, Sir. I think it was an article in Crossbow—[HON. MEMBERS: "The Spectator."] Oh, but the Spectator article said that the prospects of the D.E.A. were now brighter than at any time since 1964.
    Mr. Shinwell: Could my right hon. Friend do something to improve the efficiency and effectiveness of the two opposite points of view of the Tory Opposition?
    Mr. M. Stewart: I am glad to say that that lies outside the field of my responsibility.

    Progress Report (Taxation Comparisons)
    Mr. Ridsdaleasked the First Secretary of State and Secretary of State for Economic Affairs why in the August publication of his Department's Progress Report he used 1964 taxation comparisons of other countries, when discussing the present taxation position.
    Mr. Albu: Because these were the latest figures for other countries available at that time.
    Mr. Ridsdale: Is that not misleading, considering that taxation rates in the last few years have gone up by £1,200 million? Will he consider publishing a report on comparative rates of taxation between the E.E.C. and E.F.T.A. countries?
    Mr. Albu: We shall certainly consider that when we have all the information available. The hon. Member might like to know that the present situation is that total taxation in the Netherlands, West Germany and France, on the basis of the latest, 1965, figures, is still substantially higher than in the United Kingdom.

    Industrial Production
    Mr. Ridsdaleasked the First Secretary of State and Secretary of State for Economic Affairs by how much industrial production has increased or decreased in the last six months; what he estimates the increase or decrease will be in the next six months; and what level he plans as a norm after the wage and price standstill is over.
    Mr. Wingfield Digbyasked the First Secretary of State and Secretary of State for Economic Affairs (1) to what main causes he attributes the drop in the index of industrial production for September; when there was last a drop of this magnitude; and whether he is satisfied that this trend is not continuing;
    (2) what action he is taking to counteract the drop in the output of manufacturing industries, especially engineering, recorded for September.
    Mr. J. H. Osbornasked the First Secretary of State and Secretary of State
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    for Economic Affairs what has been the Index of Industrial Production for each of the past three months; and how these figures compare with those for those for the same months last years ago.
    Mr. M. Stewart: With permission, I will circulate the detailed figures in the OFFICIAL REPORT. There was little change in the trend of industrial production in the first three quarters of this year. Output in the third quarter was 1 point higher than a year earlier and 4 points higher than in the third quarter of 1964.
    Month to month changes in the index are normally of little significance, but the fall in September may mark the beginning of a small downward adjustment due to the restrictions on consumer demand and credit imposed to correct the balance of payments. We do not believe that it will be continued for many months.
    How soon and how fast output will start rising again will depend on the rate of growth of exports and home sales in competition with imports. Credit is available for exporters and to facilitate productive investment, as was made clear by the Bank of England last month.
    In asking about the future level of the norm, I assume that the hon. Member for Harwich (Mr. Ridsdale) is referring to the incomes norm to be applied after June 1967. This is one of the matters about which, as stated in the recent White Paper, the Government will be consulting both sides of industry during the coming months.
    Mr. Ridsdale: Is not this all rather gloomy? Is it not apparent that over the next five years all we can expect is an annual productivity rate of about 2½ per cent.?
    Mr. Stewart: No one denies the seriousness of the present situation, but it would be quite wrong to make predictions of the kind the hon. Member has just made, and it would be unhelpful as well. There was a comparable fall in January, 1963. I do not think the hon. Member then made predictions of that kind.
    Mr. Lubbock: Has the Minister noticed the serious fall in production of houses in the figures announced? Could he consult with the Minister of Housing and Local Government to see that this sphere

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    is insulated from the Government's economic measures, as was previously promised by the Prime Minister?
    Mr. Stewart: That is a question for my right hon. Friend.
    Following are the figures:

    INDEX OF INDUSTRIAL PRODUCTION, SEASONALLY ADJUSTED

    (1958=100)

    1964

    1965

    1966*

    July

    128

    132

    134

    August

    129

    132

    135

    September

    129

    132

    131

    Average for third quarter

    129

    132

    133

    * Provisional

    Cornwall
    Mr. Pardoeasked the First Secretary of State and Secretary of State for Economic Affairs what advice he has received from the South West Regional Planning Council about unemployment in Cornwall.
    Mr. Albu: None, Sir, but the council is aware of the longer term employment problems of Cornwall, is watching the position closely and will comment in due course.
    Mr. Pardoe: Is the Minister's reply that he has had no response or advice from the planning council, an indication that he has as little confidence in the Bristol bureaucrats as we in Cornwall have? Will he continue to ensure that he gets no advice from this council, since it does not represent us in Cornwall and consists of the wrong men, chosen in the wrong way, making the wrong decisions in the wrong place about the wrong area?
    Mr. Albu: That may be a personal opinion of the hon. Member, but it shows that he does not understand the purpose of the planning council. It is not to look after the narrow constituency interests of the hon. Member, but to concern itself with the long-term economic planning of the whole region.
    Dr. Dunwoody: In view of the Minister of Labour's welcome announcement yesterday of the setting-up of four new training centres and the fact that the siting of one of them has not yet been decided, will my hon. Friend consult the regional planning council as to the advisability of siting the fourth centre in Cornwall?
    Mr. Albu: Yes, certainly.
    Mr. Bessell: Does the hon. Gentleman recall that the Economic Planning Council for the South-West has not yet submitted any report and the only recommendation it has made has been rejected by the Government? Will he therefore consider dismissing its present members?
    Mr. Albu: Certainly not. As I said, the hon. Member's hon. Friend does not understand the functions of this council. We are very satisfied with the work this council is doing.
    Mr. Geoffrey Wilson: Does the hon. Gentleman appreciate that the unemployment rate in Cornwall is the highest we have had since the war? Are four new training centres enough? Something much more vital should be done.
    Mr. Albu: Perhaps the hon. Gentleman will be glad to know that the rise in the unemployment rate in Cornwall compared with last year is less than one-quarter of the rise in the country as a whole.

    Motor Industry (Economic Development Council)
    Mr. Christopher Priceasked the First Secretary of State and Secretary of State for Economic Affairs when an economic development council for the motor manufacturing industry will be set up.
    Mr. Archerasked the First Secretary of State and Secretary of State for Economic Affairs whether he will institute discussions with a view to the setting up of a little economic development council for the motor industry.
    Mr. M. Stewart: Discussions are in progress about the establishment of an economic development committee for the motor manufacturing industry. As my right hon. Friend the Minister of Technology said in the House on 22nd November, the main issue is the establishment of a satisfactory working relationship between an economic development committee and the existing consultative machinery for the industry, that is to say, the National Advisory Council for the Motor Manufacturing Industry.
    Mr. Price: Is my right hon. Friend aware that in most people's eyes the

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    National Advisory Council has done very little good for this industry over the whole period of its existence since 1948? Can he tell us why the motor manufacturing employers are so reluctant to set up an economic development committee for their industry, because it is so vital for the industry's future?
    Mr. Stewart: Negotiations for setting up a committee are proceeding, and I trust that they will be successful. It must be accepted that the National Advisory Council has done valuable work, but there are certain subjects which would be better dealt with if an E.D.C. could be established.
    Mr. Archer: Does my right hon. Friend agree that in many sections of the motor industry managements have not been distinguished by their preparedness to consult with those whose livelihoods are most affected by their decisions? Would he agree, further, that any step which will impose upon them a sense of responsibility is to be welcomed?
    Mr. Stewart: Yes.
    Mr. Chapman: Does my right hon. Friend agree that, if it proves difficult to set up an E.D.C. for the whole industry, a number of the units in the industry are so big that we could quite well envisage separate small N.E.D.C.s for each one of them?
    Mr. Stewart: I do not think we need pursue that yet. I hope the discussions for the establishment of an E.D.C. will be successful.

    Tees-side
    Mr. Bob Brownasked the First Secretary of State and Secretary of State for Economic Affairs, in view of the report of the Northern Economic Planning Council, Challenge of the changing North, to what extent it is his policy that the northern region should absorb part of the growing national population; if he will establish Tees-side as a national growth area rather than a regional growth area; and if he will make a statement.
    Mr. Albu: We recognise Tees-side's great growth potential and the rapid strides it has been making, but we must consider its suitability for the longer-
    606
    term as part of the national review of these problems now in progress.
    Mr. Brown: Is it not high time that we got away from the two-nation concept? Surely my hon. Friend accepts that to do this we must not merely stop the drift from the North but reverse it.
    Mr. Albu: My hon. Friend must know that this has been the basis of the Government's policies since we came into office and we have made a great deal of progress towards it. I assure my hon. Friend that we shall not go back on this.

    Returns and Statistics (Clerical Work)
    Mr. Onslowasked the First Secretary of State and Secretary of State for Economic Affairs how many staff in the private sector of the economy he estimates are wholly or mainly employed with work which is directly connected with the compilation and rendering of official returns, statistics, and other forms, with the collection of taxes, and with other similar activities performed on behalf of the Government; and how many were so employed on 1st October, 1964.
    Mr. Albu: It would not be practicable to isolate these elements of cost or give any useful estimate of numbers.
    Mr. Onslow: Leaving aside the fact that that Answer reveals the same sort of complacency as has characterised all the Minister's responses this afternoon, does he not think that it would be valuable for the Government to know how many people the private sector has to employ unproductively on the Government's behalf?
    Mr. Albu: I do not know if the hon. Gentleman is suggesting that we should give up collecting this type of information. Most of the time we are being pressed by industry for more statistics to be made available faster to help it in its export drive.

    "Upswing"
    Sir W. Bromley-Davenportasked the First Secretary of State and Secretary of State for Economic Affairs what was the cost to date to public funds of the publication of the wall newspaper, "Upswing".
    Mr. Albu: £5,684 for the two issues already published.
    Sir W. Bromley-Davenport: Should not this wall newspaper be called "Upswing for Socialist Party Propaganda"? Is it not unethical to use public money for this purpose?
    Mr. Albu: I do not think that the hon. and gallant Gentleman would consider himself to be an expert in the arts of communication. Nevertheless, industry welcomes the attempt by Government to communicate to those who have to do a job in industry the problems which our country faces in the economic field.

    Regional Planning Boards
    Mr. Hector Hughesasked the First Secretary of State and Secretary of State for Economic Affairs what progress he has made in his plans relating to regional planning boards.
    Mr. M. Stewart: While I keep the operation of the boards under review, I have no present plans for altering their broad functions and organisation.
    Mr. Hughes: Will my right hon. Friend take steps to state the territorial and administrative limitations of the regional planning boards and the other features of the plans he has in mind?
    Mr. Stewart: I said that I have no present plans for altering broad functions and organisations.

  BOARD OF TRADE

    Motor Car Exports (Foreign Tariffs)
    Mr. Gurdenasked the President of the Board of Trade (1) whether he is aware that the retention of duties on motor vehicles and components by Portugal is not in accordance with the spirit of the Stockholm Convention; and whether he will make a renewed effort to have them removed, in view of the abolition of the import surcharge;
    (2) whether, in view of the abolition of the import surcharge, he will make renewed representation to the Swiss Government regarding the tariffs on private cars, and light commercial vehicles, which are retained as being revenue duties.
    Mr. Eyreasked the President of the Board of Trade whether, in view of the abolition of the import surcharge, he will press the Finnish Government to reduce customs duties on British cars in accordance with the F.I.N.E.F.T.A. Agreement.
    The President of the Board of Trade (Mr. Douglas Jay): We take every opportunity of pressing our view that the E.F.T.A. relationship should be reflected in the duties charged on motor vehicles.
    Mr. Gurden: I appreciate that the right hon. Gentleman takes some action in this regard. Does he point out that Britain is Portugal's best customer and that Portugal has retained two-thirds of its pre-E.F.T.A. duties on our motor cars and products?
    Mr. Jay: It would not be fair to Portugal to suggest that we get no preference under E.F.T.A. on motor cars. Nevertheless, I do not think that we are getting all the advantage we should, and I shall continue to press this on all the countries concerned.
    Mr. Eyre: Whilst appreciating the special difficulty of Finland due to Soviet trading pressure, is the President of the Board of Trade aware that the British motor manufacturers—[HON. MEMBERS: "Reading."]—are unfairly deprived of an advantage by the Government's harmful domestic economic measures? [HON. MEMBERS: "Reading."] Will he try to compensate for this harm by exerting himself abroad?
    Mr. Jay: It was a little difficult to hear the hon. Gentleman's question, but I am well aware of the position of Finland and I shall continue to press this point, as I did at the last E.F.T.A. meeting in Lisbon.
    Mr. Mapp: Will my right hon. Friend bear in mind and do what may be desirable in respect of the difficulties which another of our major industries—textiles—is experiencing in regard to trade with Portugal?
    Mr. Jay: Yes. That was the first subject on which I had conversations with the Trade Minister of Portugal in Lisbon.

    Hire Purchase
    Mr. J. H. Osbornasked the President of the Board of Trade what is the present outstanding hire-purchase debt; and what has been the value of hire-purchase sales in each of the last three months.
    Mr. Jay: Hire-purchase and other instalment credit debt due to finance houses and retailers (other than clothing and footwear shops and a few other kinds of business) was £1,307 million at the end of September, 1966. Instalment credit sales by retailers averaged £15 million, £13 million and £15 million weekly in July, August and September, respectively; new instalment credit extended by finance houses was £67 million, £37 million and £35 million in these calendar months.
    Mr. Osborn: Does not the President of the Board of Trade feel that this is a remarkable down-turn? What will he now do to stimulate retail sales by encouraging hire-purchase payments?
    Mr. Jay: The Government have made it perfectly clear throughout the last five months that, in our view, consumer spending last December was running at a too high level for the balance of payments to be brought into surplus. It was, therefore, intended that there should be some check of this kind.

    Hull
    Mr. James Johnsonasked the President of the Board of Trade if he is aware of the continuing unemployment in Hull, particularly for women; and whether he will seek power to pay a differential rate of investment allowance as recommended by the Yorkshire and Humberside Economic Planning Council.
    Mr. Jay: Recent figures of unemployment do not bear out my hon. Friend's contention that there is continuing unemployment in Hull, particularly for women. I am aware of the recommendation of the Yorkshire and Humberside Economic Planning Council, but I have no present intention of introducing any further regional differentiation into the investment grants system.
    Mr. Johnson: Is my right hon. Friend aware that a level over 2 per cent. unem-
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    Polyment has been a permanent feature for a long time on Humberside? Since he made such an encouraging speech when winding up the debate last night, will he not think again about this?
    Mr. Jay: I am glad to say that, according to my figures, my hon. Friend is rather exaggerating the level of unemployment on Humberside. Nevertheless, we shall watch it. It is possible to meet any problem by the use of industrial development certificates, quite apart from the grants.
    Mr. Kevin McNamara: Is my right hon. Friend aware that even when Hull Corporation has been prepared to make loans to industries in the area, the Public Works Loan Board has recommended that it should charge ¾ per cent. above that recommended as the legal rate? This will not encourage industry in the area but is more likely to encourage unemployment.
    Mr. Jay: That question should be addressed to my right hon. Friend the Minister of Housing and Local Government.

    South Africa (Exports)
    Mr. Wallasked the President of the Board of Trade what restrictions have been placed on British exports to South Africa.
    Mr. Jay: Only the embargo on the export of arms announced by the Prime Minister on 17th November, 1964.
    Mr. Wall: Will the right hon. Gentleman confirm that the embargo on arms does not include shells and ammunition or frigates built in this country, and will he explain why the Government are not supplying light ammunition to South African warships under the Simonstown Agreement?
    Mr. Jay: The definition of the embargo is laid down in the United Nations Resolution. If the hon. Gentleman wishes to know how it applies to certain detailed items, I shall be glad to try to give him an answer.
    Mr. Whitaker: Is it not decreasing our area of honourable manoeuvrability to continue Imperial preference to South Africa, which this party opposed when in opposition?
    Mr. Jay: My hon. Friend should remember that this is a two-way bargain in which we get preference from south Africa as well as giving it in return. This also must be borne in mind.
    Mr. McMaster: In view of the uncertainty facing the aircraft industry in Northern Ireland and particularly the rising and heavy unemployment there, will the right hon. Gentleman review his policy on the export of Seacat missiles, which cannot possibly be used against personnel in South Africa?
    Mr. Jay: We are bound, as other countries are, by the United Nations Resolution.

    Heathrow Airport
    Mr. Ryanasked the President of the Board of Trade what plans exist for the medium- and long-term development of Heathrow Airport; and if he will make a statement.
    The Minister of State, Board of Trade (Mr. Roy Mason): The development of Heathrow is now primarily a matter for the British Airports Authority. In addition to the proposed extension of No. 1 runway, about which the B.A.A. is consulting local authorities, other planned developments include the new cargo terminal and construction of a new passenger building.
    Mr. Ryan: I thank my hon. Friend for his Reply, but will he undertake to guarantee that local residents, particularly in Longford, will be consulted at each stage of the development of the No. 1 runway, which is now almost in their back gardens, on the reduction of their whole standard of living by aircraft noise?
    Mr. Mason: Yes, Sir; full consultation is now taking place.
    Mr. Kershaw: Will the Government not shut out of their mind the possibility of having a new airport down at the mouth of the Thames far enough away from London so that London does not suffer from the sort of noise which we now hear all the time?
    Mr. Mason: That is an entirely different question.

    Wines (Description)
    Mr. Edelmanasked the President of the Board of Trade what action he is taking to ensure that the labelled description of wines shipped from abroad and bottled in Great Britain corresponds with the actual nature and quality of such wines.
    Mr. Jay: I am always ready to inquire into alleged contraventions of the Merchandise Marks Act, 1887–53, which make it an offence to apply a false or misleading trade description to any goods, including wine, and, where appropriate, to take proceedings.
    Mr. Edelman: Is not my right hon. Friend aware of the widespread nature of this fraud? Will he make clear that regional labels on French wines should represent regions and should not be treated as generic titles? In the circumstances, will he introduce appropriate legislation in order to prevent these bogus descriptions, especially as there will be increasing purchases of these fraudulent wines as Christmas approaches?
    Mr. Jay: I have seen several statements on this subject. We are investigating the facts before deciding whether we can take any action.
    Mr. Arthur Lewisasked the President of the Board of Trade whether he is aware that wines labelled as French are being sold in this country when in fact the wine comes from Bulgaria, Hungary and the Union of Soviet Socialist Republics; and, as a means of saving hard currency, if he will take steps to see money spent on French wine by wine importers will only be allowed where it can be proved that the wine is French.
    Mr. Jay: The answer to the first part of the Question is "No, Sir". If my hon. Friend has any evidence to the contrary or evidence that import restrictions on wine are being evaded, I will, of course, see that it is investigated.
    Mr. Lewis: If my right hon. Friend has contact with the wine trade association, will he ask it for the information? Is it not true that bulk wine is being supplied to France from Iron Curtain countries, being bottled there and then being sold here at double the price we could get it for if we took it direct?
    Mr. Jay: I shall certainly consult the wine traders, but I am always glad to receive communications from my hon. Friend.

  CENTRAL SCOTLAND
  Mr. Dalyellasked the Prime Minister when he next intends to make an official visit to Central Scotland.
  The Prime Minister (Mr. Harold Wilson): I have no present plans for such a visit, Sir.
  Mr. Dalyell: Is my right hon. Friend aware that when he next comes to visit us many Scots in industry and the trade unions will be telling him that the biggest single boost the Government could give to confidence in the Scottish economy would be the announcement of a plan for containerisation in shipping, linked with modernised facilities serving Leith and Grangemouth?
  The Prime Minister: I know that there is very great interest in this. My hon. Friend will probably know that, when I met the Scottish T.U.C. the other day, we went very fully into this matter. Major developments for the ports are now in hand at Leith and Grangemouth, and the National Ports Council is considering the question of handling container traffic at Greenock. I am sure that this is a very helpful suggestion.
  Mr. Noble: Will the Prime Minister consider visiting not only Central Scotland but the rest of the country fairly soon? Does not he remember that, on his last visit in April, he promised high productivity, high wages and full employment, but since then the Scottish T.U.C., after its meeting with him, has reported considerable lack of enthusiasm as to the precision of the assurances he could give, and. on the other side—[HON. MEMBERS: "Too long."]—the C.B.I. for Scotland has reported the lowest trends of investment since 1959? Further——
  Mr. Speaker: Order. Supplementary questions must be reasonably brief.
  The Prime Minister: To take that as far as it went, the Scottish T.U.C. expressed its concern, as one might expect—a concern which is shared by all of us
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  in the House—and I think that its worst fear, which was expressed very strongly to me, was that we would get into the same situation in Scotland as we did under the previous Government. While the Scottish T.U.C. still has some anxieties on the point, I think that it has confidence in the way this is going to be handled.

  RHODESIA
  Mr. Winnickasked the Prime Minister what is the latest position with regard to Rhodesia; and whether he now intends to refer this matter to the United Nations.
  Mr. Kenneth Lewisasked the Prime Minister whether he will now propose to Mr. Smith of Rhodesia that they might both meet on neutral territory in order to seek a final solution to their differences.
  Mr. Hoosonasked the Prime Minister what proposals Her Majesty's Government are putting forward to the United Nations for setting up adequate international machinery for imposing mandatory international sanctions; and whether he will make a statement.
  The Prime Minister: With permission, I shall answer these Questions at the end of Question Time.

  WINTER EMERGENCY COMMITTEE
  Mr. Websterasked the Prime Minister if he proposes to continue the existence of the winter emergency committee for another year.
  The Prime Minister: I would refer the hon. Member to the Answers I gave to Questions by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), on 4th August and my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) on 3rd November.—[Vol. 733, c. 678: Vol. 735, c. 166.]
  Mr. Webster: Can the Prime Minister assure the House that there is an adequate stock of both fuel and plant, particularly in the light of the Minister of Power's statement, reported in the Daily Telegraph on Monday, that if we

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  have another hard winter we shall be in trouble?
  The Prime Minister: The position which has emerged from a close study of the prospects is that the margin of plant capacity in the principal industries concerned is greater now than it was last winter. No one can guarantee what the consequences would be if there were an unduly hard winter—this has always been the position for very many years—but the margin is greater, and it will increase in subsequent years. No committee, governmental or other, can in the short run provide an adequate margin of capacity. It is a four or five-year job, and the whole difficulty is due to miscalculation of requirements four or five years ago.

  PIT HEAPS
  Mr. William Hamiltonasked the Prime Minister if he will issue to all appropriate departments an instruction that the clearance of pit heaps and other industrial dereliction, especially in coal-mining areas, must be expedited.
  The Prime Minister: The available powers to deal with dereliction will be further strengthened by the passage of the Local Government and Local Government (Scotland) Bills which are now before Parliament. As to safety, my right hon. Friends are doing all they can to ensure that those responsible for waste tips examine them as soon as possible in order to detect, and guard against, any threat to public safety to which they may give rise.
  Mr. Hamilton: Does not my right hon. Friend agree that, even where no danger to life and limb exists, these tips and other derelictions are squalid and have been tolerated for far too long by industrial communities? Will he treat this as an emergency and get a crash programme going to get rid of these eyesores and help attract new industries to these areas?
  The Prime Minister: As my hon. Friend knows, under the Industrial Development Act, 1966, a capital grant is payable of 85 per cent, of the approved cost if the land in question is in a development area. I have not had time to study his words, but my right hon.
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  Friend the President of the Board of Trade made a statement last night on further help for the clearance of derelict land, including this kind of land.
  Mr. More: Will the Prime Minister cast a critical eye on recent Ministerial answers on the subject of inspection of these tips? Will he ensure, through the appropriate Ministries, first, that these inspections actually are made and with the necessary technical assistance; secondly, that in all cases of doubt the necessary remedial works are put in hand before disaster supervenes; and, thirdly, that, where large expenditure is involved, appropriate Ministries offer freely the grants which, under existing legislation, they are entitled to make to local authorities?
  The Prime Minister: Without going further than is justified by the facts in promising a critical eye, I can assure the hon. Gentleman that every step will be taken to see that there are inspections where safety is involved. With regard to the grants, I have nothing to add to what my right hon. Friend said last night about the situation in development areas.

  EUROPEAN ECONOMIC COMMUNITY
  Mr. David Howellasked the Prime Minister whether he will now specify the right conditions for negotiation between Great Britain and the European Economic Community; and what changes there have been in them since the last negotiations.
  The Prime Minister: I have nothing to add to my reply of 15th November to a Question by the hon. and gallant Member for Lewes (Sir T. Beamish), my statement and the replies to Questions which followed it on 10th November and to my speech in the debate on 17th November.—[Vol. 736, c. 220; Vol. 735, c. 1539; Vol. 736, c. 759.]
  Mr. Howell: Would not the right hon. Gentleman agree that, if we are to have a really informed public debate on this question, of the kind that I am sure he himself wants, it is necessary for the Government to make clear whether they still adhere to the five principles laid down by the Labour Party four years ago?
  The Prime Minister: I am anxious for a public debate and that it should be informed. But there is enough information—has been for some years—to provide fuel for such a debate. I am more concerned, however, with getting results than with getting a good debate. As I explained in the recent debate, for us to say in detail what our terms and conditions would be on particular questions would be harmful to the result which so many of us have in mind and would simply lead to pressure to go still further in the terms we would be prepared to agree to.
  Mr. Frederic Harrisasked the Prime Minister what plans he has for an early conference with the President of France on acceptable terms for Great Britain' entry into the Common Market.
  The Prime Minister: I have as yet nothing to add to my reply to a supplementary question on this point by the hon. and learned Member for Antrim, South (Sir Knox Cunningham) on Tuesday last.—[Vol. 737, c. 206.]
  Mr. Harris: It is regrettable that it always appears to be the President of France who is the stumbling block to our entering the Common Market. Would it not, therefore, be a good idea for the Prime Minister to seek an early meeting with the President in order to clear the air with him prior to seeking meetings with the leaders of other European countries?
  The Prime Minister: There will obviously be different views about the precise order in which the meetings should take place and I have nothing to add to the answer I gave. But we hope to have an early meeting with the President of France.
  Mr. Molloy: Will my right hon. Friend remember that, to many right hon. and hon. Members on both sides, the concept of linking with Europe goes much broader than joining the Common Market?
  The Prime Minister: That was said by right hon. and hon. Members on both sides in the recent debate and on many other occasions. I went so far as to say something about it in a speech outside this House last night.

  NATIONAL DISASTER FUND
  Mr. Arthur Davidsonasked the Prime Minister Whether he will take steps to establish a national disaster fund.
  The Prime Minister: No, Sir. I have nothing to add to the Answer given by my right hon. Friend the Chief Secretary of the Treasury on 18th November to a Question by my hon. Friend the Member for Hornchurch (Mr. Alan Lee Williams).—[Vol. 736, c. 207.]
  Mr. Davidson: As there has been considerable public disenchantment at the disputes which break out when it comes to administering funds raised for such charities, may I ask my right hon. Friend to take a fresh look at the law governing these questions?
  The Prime Minister: When my hon. Friend put down his Question I did think about this matter again, even after the statement made to the House by my right hon. Friend. There is very often disenchantment—one remembers it on earlier occasions than this year. But a national disaster fund would be very difficult to administer and, because it would not be related to a particular disaster which has made an impact on the public mind, one could not be sure that it would receive the contributions that would be necessary for handling some of the problems it should handle.
  Mr. Heath: I appreciate the disadvantages that the Prime Minister has, quite rightly, outlined, but will he consider seting up perhaps some form of co-ordinating committee, or expanding an existing organisation, with powers of co-ordination so that it could advise those running disaster funds on the administrative problems involved, such as the question of trust deeds and so on, and help with the disposal of funds?
  The Prime Minister: That is a very helpful suggestion and I should like to go into it further. Sometimes, of course, the problems have been solved by those with experience of these matters—the Lord Mayor of London, for example—taking over a fund. On this occasion, however, it was felt that the Mayor of Merthyr Tydvil should do it and, of course, when a disaster occurs where

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  there has not been one before, there are problems. I am much obliged to the right hon. Gentleman for his suggestion.

  ARGENTINE (BALANCE OF TRADE)
  Mr. Farrasked the Prime Minister, in view of the inadequacy of the existing machinery of co-ordination between the Secretary of State for Foreign Affairs, the President of the Board of Trade and the Minister of Agriculture, Fisheries and Food in relation to Great Britain's balance of trade with the Argentine, if he will take steps to secure its improvement.
  The Prime Minister: I do not accept the hon. Gentleman's premise but if he has any specific point to raise or suggestions to make I should be happy to consider it.
  Mr. Farr: Is the right hon. Gentleman aware that, in the last 10 years, our total net trade deficit with the Argentine has amounted to no less than £573 million? Bearing that staggering figure in mind, may I ask the right hon. Gentleman to consider launching a new initiative to replace Argentine imports with home-grown beef?
  The Prime Minister: The beef situation has been dealt with separately by my right hon. Friend the Minister of Agriculture at Question Time. The position is still that we shall go on needing all the beef that we can get, despite the recent and, as my right hon. Friend would feel, temporary weakness of the market. Only a few months ago, we were talking about having to stop shipments of meat from here to the Continent. In these circumstances, it would be foolish to impose long-term restrictions on imports from one country, since the situation could change rapidly.

  DEPARTMENT OF ECONOMIC AFFAIRS
  Mr. Bruce-Gardyneasked the Prime Minister if he will appoint an additional Minister to the Department of Economic Affairs, in order to assist in the co-ordination of planning in the United Kingdom.
  The Prime Minister: No, Sir.
  Mr. Bruce-Gardyne: While the National Plan for England and Wales has been buried by the Government, the Scottish Plan, an even more fanciful document supposedly based on the National Plan, is still hanging in limbo. Does not this suggest lack of co-ordination between the Scottish Office and the Department of Economic Affairs? If the Scottish Plan still has any meaning, cannot we have a chance to debate it?
  The Prime Minister: I do not accept the hon. Gentleman's comments either about burial or limbo. Right in the middle of a two-day debate on the matters, it would be wrong for me to try to enter into a debate with him at Question Time. He will have his chance later, as will my right hon. and hon. Friends. I do not agree with any of the premises in the hon. Gentleman's supplementary question.

  POLARIS SUBMARINES (INDIAN OCEAN)
  Mr. Rankinasked the Prime Minister if he will ensure that his offer of Polaris submarines for a joint Indian Ocean nuclear force does not interfere with his policy of non-proliferation; who are the prospective members of the force; and what contributions they have offered to the strength of the force.
  The Prime Minister: I have made no such offer. The rest of the Question does not, therefore, arise.
  Mr. Rankin: While I thank my right hon. Friend for that reply, may I ask whether he will assure us that no such force will be created and that no such offer will be made if the force is created?
  The Prime Minister: That is a hypothetical question but I can tell my hon. Friend that, throughout, our policy on the question of Polaris submarines or on nuclear questions generally is related in a high degree to the international need for a non-proliferation agreement. This is one of the main issues my right hon. Friend the Foreign Secretary had in mind on his recent visit to Moscow.
  Rear-Admiral Morgan Giles: Does not the Prime Minister realise that the ships needed for keeping the peace in the Indian Ocean are not submarines but aircraft carriers?
  The Prime Minister: I am aware of the hon. and gallant Gentleman's view to that effect, but he will recall that these arguments were fully debated in the two defence debates last spring and that, while his view was expressed with great vigour by him and others, it did not receive universal acceptance in the House.
  Mrs. Anne Kerr: Does not my right hon. Friend agree that the ships that are really required for keeping peace throughout Asia are probably grain-carrying ships rather than nuclear, Polaris or any other kind of military ships?
  The Prime Minister: I certainly agree about the importance of the grain-carrying ships and I think, when my hon. Friend has time to study these matters, that she will pay tribute to what Her Majesty's Government have done, with other friendly countries, in the tremendous aid we have given to India in her acute distress. But, while agreeing with my hon. Friend, I hope that, on her next visit to China, she will make that point in Peking.
  Mr. Lubbock: If there is no intention of having Polaris submarines in the Indian Ocean, will the Prime Minister say for what purpose islands have been acquired in that part of the world?
  The Prime Minister: It is not so much a question of the acquisition of islands and one does not necessarily need islands for nuclear submarines. However, in view of the hon. Gentleman's interest in islands, I refer him to the relevant paragraph—I think that it is paragraph 20, although I may be wrong; I could point it out to him if I had a copy here—of the Defence Review last year when we were talking about the urgent need not to keep so many troops in overseas bases, but to have the means of getting them there quickly, and we would not take them in Polaris submarines anyway.

RHODESIA
The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I would now like to answer Questions Nos. Q.2, Q.9 and Q.12.
As the House will already know, I shall be leaving this afternoon, together with my right hon. Friend the Common-
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Wealth Secretary and my right hon, and learned Friend the Attorney-General, for a meeting with the Governor of Rhodesia and Mr. Ian Smith.
The purpose of this meeting is to ascertain whether, within the programme of action to which the British Government are committed by the communiqué issued at the end of the recent meeting of Commonwealth Prime Ministers, a settlement of the Rhodesian problem can be reached on the basis of the principles to which successive British Governments have throughout adhered.
I must make it clear to the House that the fact that this meeting is taking place should not be allowed to disguise the fact that, despite the signs of movement we have had in the last week, there is still, so far as I can at this moment judge, a considerable gap to bridge.
The House will wish us to do everything in our power to get a settlement, and this we shall seek to do; but the House equally will insist, as the Government are insisting, that there can be no question of a settlement which does not honour the principles which all of us in this House stand by.
The House, I think, will further agree that a decision one way or the other cannot be delayed any longer. If no settlement on the terms which we are prepared to commend to this House is possible, then it is right that this fact should be known, and known quickly.
I shall, of course, make a full report to the House after our return.
Mr. Winnick: Is the Prime Minister aware that so many of us on this side of the House believe so strongly in the six principles that if any of those principles were to be abandoned many of us could not continue to support the Government on this issue? Would the Prime Minister agree that if we were to lose this battle with an illegal racialist régime, it would bring lasting shame and disgrace to all of us?
The Prime Minister: The hon. Member need have no anxiety. If there were any question of abandoning the six principles, which the House has endorsed, I could not support Her Majesty's Government, either.
Mr. Kenneth Lewis: Is the Prime Minister aware that I am glad, if a little surprised, by the straightforward, almost "Yes, Sir" Answer to my Question? Is he aware that he will get the full support of the House, at least of this side of the House, to secure an agreement, and that we wish him well and hope that he will come back with an agreement with Mr. Smith?
The Prime Minister: I thank the hon. Gentleman. In all the talks about talks our position has been that if a situation arose in which we could make progress at a direct meeting of this kind, we could have this meeting. I know that the House will hope that we can get a settlement which we can commend to the House. I believe that a great deal of the progress which has been made so far—and there is a long way to go yet—has been due to the patience shown by my right hon. Friend the Commonwealth Secretary, in what I believe to have been two historic visits, and by the line which he took, particularly last week. It has also been shown by the fact that everyone in Rhodesia, whatever some visitors from the House may have told the Rhodesians, understands the utter determination of Her Majesty's Government not to give way on any point which infringes the six principles.
Mr. Hooson: While we hope that the Prime Minister will be able to achieve an honourable settlement, and this, I feel, will largely depend on Mr. Smith, may ask the right hon. Gentleman whether he is satisfied that adequate international machinery exists for the implementation of mandatory sanctions? If not, what steps are Her Majesty's Government taking in that matter?
The Prime Minister: Yes, Sir. Of course, during and since the Commonwealth Prime Ministers' Conference, a great deal of attention and consultation has been given to this very question, and since that time these consultations have been going on. The fact of this meeting will not halt the action now being taken—the meeting of the Commonwealth Sanctions Committee on Monday—and other consultations. We hope that these sanctions will not be necessary if this meeting goes well, but I am perfectly certain that if we had not made it quite clear what the consequences would be
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of a refusal, or further delay, or procrastination, we would not have got to a point where I would feel justified in the meeting which will begin this evening.
Mr. Heath: Is the Prime Minister aware that the whole House will be glad that he is now going to meet Mr. Smith and that we greatly hope that it will be possible for the right hon. Gentleman to make an acceptable settlement with him? We would only like to assure the Prime Minister that he should take whatever time he feels to be necessary to achieve it.
The Prime Minister: I thank the right hon. Gentleman very much for what he has said and for the spirit in which he has said it.
Mr. Woodburn: We would all hope that Mr. Smith will bow to the will of the world in regard to what is right for the government of Rhodesia, but, if not, since this country has already imposed every economic sanction, and has practically ceased all trade with Rhodesia, would my right hon. Friend explain to the members of the United Nations that all we would be asking them to do is to carry out what we have already done?
The Prime Minister: Yes, Sir. My right hon. Friend is correct. Knowing Mr. Smith as well as I do, I am not sure that his motive in any settlement—and I do not say this in any sense which he would consider critical—is bowing to the will of the world. He will decide what he thinks is best for Rhodesia and I think that he will now see what is best for Rhodesia in these circumstances. We have to look at wider considerations.
But my right hon. Friend is right. In what is proposed, if we fail to get agreement there is no question of surrendering our present control of this problem, so far as it is in our control. We apply sanctions, but some other countries do not and some legally cannot unless the sanctions are mandatory.
Mr. Sandys: While joining in expressing satisfaction that the right hon. Gentleman, despite his rebuke to me last week, is now to try to negotiate a compromise settlement based on the realities of the situation, may I ask him whether, in view of his earlier statement that he would be

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prepared to meet Mr. Smith only if Mr. Smith had become the Head of a legal Rhodesian Government, that condition has now been fulfilled?
The Prime Minister: If the courteous reply which I gave to the right hon. Gentleman last week, and which he calls a rebuke, was, in fact, a rebuke, it was because I did not consider his interpretation of the realities of the situation to be the same as my interpretation of the realities of the situation. Nor have I considered his visit to Salisbury in any way helpful, unlike the visits of certain of his right hon. and hon. Friends, if I may say so, who have taken the national view when they have been there. While it is true that the right hon. Gentleman pressed on Mr. Smith the need for a settlement—I grant him that—the right hon. Gentleman has given some wrong impressions while he has been there.
The answer to his question is that the position is that I would not have contemplated the visit today unless I had enough reason to think that we were within hailing distance of a possible solution which would involve a return to constitutional rule. I do not say that we are there—there is a very big gap to bridge—but it may be possible that the condition to which the right hon. Gentleman has drawn attention may become enough of a reality in the near future to justify my visit after what I have said.
Mr. Grimond: Will the Prime Minister confirm that the reason why we have come within what he describes as "hailing distance" is simply and solely because of a shift on the part of Mr. Smith? Secondly, can he tell us whether it is true that he is going to meet Mr. Smith at sea and why, if it is possible to conduct negotiations at all, they cannot be conducted on land in the normal way?
The Prime Minister: I used the phrase "hailing distance", but I hope that this will not be misunderstood. On sea or on the land, I hope that we shall find it easier to talk to one another rather than by that particular means. When I used that phrase I did not mean that I thought that we had now reached a position where a settlement is likely. I think that it is possible, but there is a gap to bridge. I was answering in the context of the question put to me by the right hon.
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Gentleman the Member for Streatham (Mr. Sandys), about the possibility of a return to constitutional rule.
With regard to the question of who has moved, I do not think that it would be particularly helpful at this moment to go into the issues. The House will be given the full story. Last time we published all of the exchanges and the House will have the full story this time, when a White Paper is published, either as a result of the success—as I hope—or sadly, in other circumstances. The House can then judge. It is too early now.
Mr. Paget: Is my right hon. Friend aware that a great many people in this country, who have felt that we were on the slippery slope to war, not only with Rhodesia but, as the inevitable concomitant, with South Africa, are very grateful indeed to him for the action which he is taking?
The Prime Minister: I am grateful to my hon. and learned Friend for the last part of his question. It is a fact that my hon. and learned Friend has never understood, in the way that we do, some of the dangers, and certainly the great dangers that would have been involved if we had taken the advice of my hon. and learned Friend at various times in this unhappy history. My hon. and learned Friend, and some hon. Members and one or two right hon. Gentlemen opposite, must examine their own records in this matter to see whether they have not made it much harder to reach the situation which now exists, and have perhaps, delayed our getting there.
Mr. Shinwell: May I ask my right hon. Friend whether he can give a firm assurance that he will not allow any consideration or calculation of economic loss or gain to cause him to depart from the principles that he has laid down or from the Commonwealth Prime Ministers' communiqué?
The Prime Minister: I can certainly give that assurance to my right hon. Friend. I read some of the comments in certain papers this morning, suggesting that we have changed our attitude as a result of some calculations which I am supposed to have just seen—in the last 48 hours—about the possible effect of mandatory sanctions. This is totally untrue. It is a totally unworthy slur upon

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myself, and some of my hon. Friends who were named in these stories, to suggest that we would be likely, in any circumstances, to depart from the principles that we have laid down for the solution of this question.
The calculations on this issue have been made a very long time ago. We have not changed in our proposals for a settlement, nor shall we do so for any reasons of the kind mentioned by my right hon. Friend.
Mr. Biggs-Davison: In his efforts to solve this national British problem, will the Prime Minister keep in mind the very strong feeling that transcends parties in the country, and possibly to some extent in this House, that if a British Commonwealth community and a British problem were to be shuffled off on to the United Nations it would be considered a humiliating failure of statesmanship?
The Prime Minister: I explained that last week there may have been some misunderstanding about the phrase "shuffled off." The mandatory sanctions ensure that other countries are able to do what we have been doing, a very different thing from discharging ourselves of the responsibility, either for the jurisdiction over Rhodesia or for the solution of the problem. The hon. Gentleman, who knows a good deal about this, and who has been to Rhodesia a number of times, can make his own calculation about the kind of humiliation that we would have suffered if we had listened to him.
Dr. Gray: Does my right hon. Friend agree that in accordance with the six principles, advance to majority rule should have a termination point, and does he further agree that this period should be brief or at the maximum, 10 years?
The Prime Minister: We stand by the six principles. The salient parts of those have been laid down by our predecessors and we have stood by them. I do not think that it would be helpful at this stage to go into any more details as to the interpretation of them. If my hon. Friend will study the Blue Book that we issued last year, he will see how deeply we have gone into the kind of considerations that he has raised.
Mr. Selwyn Lloyd: Does the right hon. Gentleman agree that in view of the tre-
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mendous importance of ending this conflict upon proper terms—I repeat proper terms—a conflict which neither side will win—it would be much better that we just extend to him our good wishes and stop further questions?
The Prime Minister: I am most grateful to the right hon. and learned Gentleman.
Mr. Ashley: While many Members on this side of the House view the Prime Minister's efforts to solve this problem with sympathy and understanding, would my right hon. Friend recognise that in this case every possible difference between the letter and the spirit of the six principles is of profound importance, not only to this House but to the whole of Africa? Will he please bear this in mind?
The Prime Minister: My hon. Friend can be well assured from our record in this matter over two years, and indeed, from that of our predecessors, that we are well aware of those considerations.
Mr. Ian Lloyd Mr. Ian Lloyd rose——
Hon. Members: Oh.
Mr. Ian Lloyd: When, during his discussion with the Governor and the Prime Minister of Rhodesia, the questions of the extent or timing of universal suffrage arise, as they surely will, will the Prime Minister give close attention to the remarks of President Ayub Khan, of Pakistan, in his luncheon speech at the Mansion House last week, when he referred to the relevance of Western democratic principles to conditions in Pakistan, which are undoubtedly common to Pakistan and Rhodesia?
The Prime Minister: We shall bear in mind the views of the other Commonwealth Heads of Government. As the House will know, the plans that have been made in case there is no agreement here have been drawn up in complete agreement with the other Commonwealth Heads of Government.
Several Hon. Members Several Hon. Members rose——
Mr. Speaker: Order. I should have taken the hint earlier. Mr. Heath. Business Question.

BUSINESS OF THE HOUSE
Mr. Heath: May I ask the Leader of the House to state the business of the House for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Richard Crossman): Yes, Sir. The business for next week will be as follows:
MONDAY, 5TH DECEMBER—Further progress with the remaining stages of the London Government Bill until about 7 o'clock.
Thereafter, remaining stages of the Arbitration (International Investment Disputes) Bill [Lords], of the Education Bill and of the Tribunals and Inquiries Bill [Lords].
TUESDAY, 6TH DECEMBER—Debate on Foreign Affairs.
Remaining stages of the Bus Fuel Grants Bill.
WEDNESDAY, 7TH DECEMBER—Supply [6th allotted day]: Committee.
The debate on Foreign Affairs will be concluded.
Afterwards, any Amendments to the Local Government Bill, which may be received from another place.
THURSDAY, 8TH DECEMBER—Completion of the remaining stages of the London Government Bill.
Progress on the remaining stages of the Agriculture Bill.
FRIDAY, 9TH DECEMBER—Private Members' Motions.
MONDAY, 12TH DECEMBER—The proposed business will be: Second Reading of the Criminal Justice Bill.
Motion on the Police Pensions Regulations.
Mr. Heath: As the Leader of the House is aware, circumstances which we very much hope will be favourable, may require the subject of Rhodesia to be debated. If so, will the right hon. Gentleman be prepared to alter the business some time next week?
Is the right hon. Gentleman aware that the Criminal Justice Bill is a long and complicated Bill, in which many hon. Members have a great interest, and that is
630
one to which, I believe, the Government attach very great importance? Could the give consideration to having two days for the Second Reading of the Bill?
Mr. Crossman: On the first point, I agree with the right hon. Gentleman. We had better wait until Monday to see exactly when to have the Rhodesia debate. I would assume that it would not be wanted by the Opposition on the first day after the Prime Minister's announcement.
Mr. Heath Mr. Heath indicated assent.
Mr. Crossman: I assume that the Opposition would like some time.
Dealing with the Criminal Justice Bill we do not often have tremendously successful two-day debates on the Second Reading. I would have thought that it might be possible, if there was a demand for it, to have an extension of the time on Monday. But if the Opposition wanted to give a day, then we may consider it.
Mr. Alfred Morris: Can my right hon. Friend tell the House when we may expect the Housing Subsidies Bill?
Mr. Crossman: We expect it before Christmas.
Mr. Ridley: In view of the fact that this Session has another nine months to run, can the right hon. Gentleman say why it is necessary for Standing Committees considering Bills to sit two mornings, three afternoons and three nights a week at present?
Mr. Crossman: I appreciate the strain under which members of the Standing Committee on which the hon. Gentleman is serving are working. I gather that satisfactory progress is being made and that there is hope that things will be consummated in due course and at the proper time.
Sir H. Lucas-Tooth: When will the promised debate on procedure take place? Will it take place on specific proposals by the Government, and, if so, can they be put on the Order Paper in plenty of time so that they can be properly considered?
Mr. Crossman: The debate will take place on specific proposals. I give the assurance that they will be made known

631
in plenty of time, since they are liable to be complex.
Mr. Ford: May I direct my right hon. Friend's attention to Motion No. 277 standing on the Order Paper, in connection with the sound broadcasting of the proceedings of the House? Would he provide time for a debate, particularly since the conclusions of the Committee were based on incomplete technical information?
[That this House is of the opinion that provision should be made for its proceedings to be broadcast in toto via a sound-radio channel reserved for this purpose.]
Mr. Crossman: No, I cannot give any assurance about finding time, but I am prepared to consider possibilities about sound broadcasting as distinct from the decision on television and sound broadcasting together.
Mr. Godber: Can the right hon. Gentleman give an assurence on Thursday's business, when we are to start dealing with the remaining stages of the Agriculture Bill? He will be aware that this is a long and detailed Bill. Will we have adequate time on another day to carry on the discussion?
Mr. Crossman: I think that I can give that assurance.
Mr. Roebuck: Would my right hon. Friend consider finding time for a debate on Motion No. 271, standing in the names of the hon. Members for Harrow, West (Mr. John Page) and Harrow, Central (Mr. Grant)?
[That this House welcomes the independent mindedness of the busmen of the Harrow Weald London Transport Garage in passing a resolution that members of their branch of the Transport and General Workers Union shall be provided with the forms and facilities to contract out of the political levy and commends similar action by other trade unionists before 31st December to join the 1,556,000 of their colleagues who contracted out previously in the belief that the trade union movement would serve its members better by being independent of party politics.]
In considering the desirability of such a debate, would my right hon. Friend bear
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in mind that the men of the Harrow Weald bus garage, which is in my constituency, are being incited to contract out by a former Communist Party candidate and that this matter would make for a most interesting debate in view of the unholy alliance with hon. Members opposite, particularly since the Government are no longer tapping their telephones?
Mr. Crossman: The reasons why hon. Members desire this subject to he debated are many and subtle. I had not thought of the reason which my hon. Friend gave. I will certainly give it full consideration.
Mr. Lubbock: First, is the right hon. Gentleman aware that the devotion of two further half days to the London Government Bill—a Measure of limited scope which has already received more than adequate discussion—is a serious waste of Parliamentary time? Secondly, would he give an assurance that the White Paper on decimal currency will be debated this side of Christmas?
Mr. Crossman: I can give no such assurance on the second point. On the first point, tastes vary about the importance of Bills. I gather that there are right hon. and hon. Members who attach importance to the Bill and are determined that it should be debated at some considerable length.
Mr. Pavitt: Can my right hon. Friend say whether we shall have a debate on the Health Service before Christmas? Is he aware that we have had two very short debates on Prayers?
Mr. Crossman: I have not had that proposal made before. I will consider my hon. Friend's suggestion. But I can tell him that there is no prospect at all of a debate on the Health Service before Christmas.
Mr. Deedes: Reverting to the Criminal Justice Bill, will the right hon. Gentleman bear in mind that, while I accept his point about two-day debates on Bills, the Bill contains a number of widely different parts—it is about four Bills in one—and that this has some bearing on the value of a two-day debate?
Mr. Crossman: I will bear that in mind. I realise that it is a complex and very important Measure, on which we want full and adequate discussion. I was questioning the wisdom of allocating

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two full days to it. I am prepared to consider the possibility of extending the time on Monday if there is a demand for an extension from both sides of the House.
Mr. Victor Yates: Will my right hon. Friend bear in mind that there is a considerable number of hon. Members on this side of the House who will want to take part in the debate on the Criminal Justice Bill? After all, it is the biggest Bill of its kind since 1948. I think that one day is totally insufficient to discuss this Measure, and I hope that an arrangement will be made to enable hon. Members on this side as well as hon. Members opposite to take part in the debate.
Mr. Crossman: I think that I have made it clear that I am willing to consider opinion on both sides of the House. We will discuss the possibilities through the usual channels, but I would still prefer the alternative of extending the time on Monday rather than devoting two whole days to consideration of the Bill.
Mr. Berry: First, would the right hon. Gentleman appreciate, in connection with Monday's business, that there are hon. Members who consider that a Bill which takes away from London electors their democratic rights for a year deserves full consideration in the House? Secondly, would he allow time between now and Christmas for a debate on traffic in London, which, I think he will agree, is particularly relevant at this time of year?
Mr. Crossman: On the first part, I do not accept the imputations, but I recognise that there is strength of feeling on the London Government Bill. On the second part of the hon. Gentleman's question, I do not see any prospect of a debate being held before Christmas.
Mr. Selwyn Lloyd: With regard to the debate on procedure, which may easily cut across party lines—many Members are interested in it, and there are many reports to be considered—may I ask the right hon. Gentleman very respectfully whether he would, in consultation through the usual channels, give the longest possible notice of the day when that debate will take place and of the Motion to be debated?
Mr. Crossman: I am grateful to the right hon. and learned Gentleman. I share his view entirely. This will be an important debate. I give the assurance that we shall give plenty of time to get the Motion on the Order Paper. I will try to give the longest possible notice. We had intended to have that debate this week, but we have had special emergencies which postponed our intention, and which I regret as much as the right hon. and learned Gentleman.
Mr. Manuel: Is my right hon. Friend aware of the intense interest among wide sections of the population, among motoring organisations, and local authorities about what is contained in the White Paper on Transport? Would he consider allowing the House time to debate this very important White Paper?
Mr. Crossman: I cannot give an assurance that there will be a debate before Christmas. We can reconsider the matter after that.
Mr. St. John-Stevas: May I back up the plea for extra time to debate the Criminal Justice Bill, not only because of its complicated character, but because of the very grave constitutional changes which it proposes?
Mr. Crossman: I have taken note of the strength of feeling on both sides of the House. We must reflect on the best way to meet it.
Mrs. Anne Kerr: Has my right hon. Friend yet had time to see Motion No. 281 on the Order Paper?
[That this House calls for an immediate withdrawal of dangerous toys by wholesalers and retailers according to the standards laid down by the British Safety Council; and asks for legislation to ban the import, manufacture and export of such toys, also for legislation to ban the import, manufacture and export of war toys and of horror toys, such as doll guillotines and mini-Chambers of Horror, thereby not only increasing the physical safety of children, but also helping to improve the quality of their lives.]
Would my right hon. Friend find time between now and Christmas—in fact, as soon as possible—to permit the House to debate the very crucial question of dangerous toys, horror toys and war toys?
Mr. Crossman: I realise, especially at this time of year, that people are interested in this subject. I remind my hon. Friend that the Home Secretary already has power to deal with these toys. But certainly it is to be considered whether further powers are required.
Mr. Hogg: I am very sorry to press the Leader of the House further on the subject of the Criminal Justice Bill, but will he recognise that additional time late at night for discussing it would not satisfy a great number of Members on, I think, both sides of the House? It is not a question of wanting to divide on the Bill, or anything like that. It is a question of it being a very complex Bill on which there is a wide range of expert opinion in the House which would want to express itself on a number of quite diverse and separate topics.
May I press the right hon. Gentleman to revert to what I think would have been the universally accepted practice before the war, namely, that on a Bill of this stature we should have a two-day debate?
Mr. Crossman: I am willing to look at the precedents before the war, but I think that the right hon. and learned Gentleman would agree that after the war it would be a very unusual occurrence to have a two-day debate. The right hon. and learned Gentleman has not added to the views of Members on both sides of the House which I have promised to consider.
Mr. Hector Hughes: In view of the importance of the Criminal Justice Bill and the great number of hon. Members who want to speak on it, will my right hon. Friend consider having a timetable so that speeches will be short and effective and the Bill can be dealt with quickly?
Mr. Crossman: I might consider it, but it would not be for me to decide.
Mr. Mapp: Bearing in mind the amount of time generously given to such subjects as Scotland, Wales and, in the present case, London, does my right hon. Friend agree that discussion on the planning reports of the North, West Yorkshire and Humberside and the North-West might profitably be included in our time schedule of debates during the next two or three months?
Mr. Crossman: As a representative of the West Midlands, I agree that that is also an area which we might debate.
Mr. G. Campbell: Can the right hon. Gentleman say when the first rate support grants will come before the House, since the General Grant Orders which they replace were normally considered in December and the two new Local Government Bills have not completed their stages through Parliament?
Mr. Crossman: I am aware of the urgent need for the rate support debate. We usually have it in December. I gather that my right hon. Friend the Minister is still in negotiation with the local authorities. I hope to make a further statement on this subject next week.
Mr. Ronald Bell: If the debate on procedure is to take place on specific proposals put forward by the Government, will there be any opportunity for hon. Members to discuss other proposals which are not being espoused by the Government or the general considerations which are canvassed in the Report of the Committee?
Mr. Crossman: That is a very good suggestion, on which we ought to reflect, because I would like to have a wide-ranging debate dealing not only with the specific matters, but with the general question of Parliamentary reform. We will bear it in mind.
Mr. Crowder: I am sorry to raise again the question of the Criminal Justice Bill, but as this is such a highly complex matter, on which many hon. Members wish to speak, and as there will be no Division, I wonder whether the right hon. Gentleman could, perhaps, arrange the business in such a way that a two-day debate on this matter could be concluded on a Friday?
Mr. Crossman: That is a new point. I am certainly prepared to reflect on that suggestion, which had not occurred to me before.
Mr. Carlisle: While the Leader of the House is reflecting on this matter, as he has said he will, may I draw to his attention the fact that the Bill easily falls into two parts: criminal procedure, on the one side, and the treatment of

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offenders and prisoners, on the other? Will he look at the matter in this light and see whether he could not make a quite good two-day debate of it?
Mr. Crossman: Certainly, I will look at the question in all lights and from all points of view.
Mr. McMaster: In view of the situation facing the British shipping and shipbuilding industry, and the redundancies which have been announced and are likely to be announced, which will be particularly severe in areas of already high unemployment, will the Leader of the House consider setting aside an early day for a debate on this subject?
Mr. Crossman: No. I do not see any possibility of having such a debate before Christmas.
Several Hon. Members Several Hon. Members rose——
Mr. Speaker: Order. We must get on.

INVESTMENT GRANTS
The President of the Board of Trade (Mr. Douglas Jay): With permission, Mr. Speaker, I should like to make a statement about investment grants.
Since the National Productivity Conference in September the Government have been considering whether it is necessary to give some additional stimulus to industrial investment during the period immediately ahead. We have discussed this question with representatives of industry in the light of recent surveys of investment intentions, which suggested that there was likely to be a fall in private industrial investment next year.
We have now decided to effect a temporary increase in the rates of investment grant payable by the Board of Trade under Part I of the Industrial Development Act, 1966. The standard rate in respect of eligible capital expenditure incurred between 1st January, 1967, and 31st December, 1968, will be increased from 20 per cent. to 25 per cent. and the rate for development areas from 40 per cent. to 45 per cent.
These higher rates will apply to eligible plant and machinery used by manufacturing, extractive and construction industries; and also to mining works, scientific research equipment and certain
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computers. The rate for ships, hovercraft and most computers, which is at present 20 per cent. throughout the country, will be correspondingly increased to 25 per cent.
Under the Act, expenditure is regarded as having been incurred when the sums of which it consists became payable. This is explained in more detail in the booklet I have recently issued for industry. I should emphasise, however, that the mere placing of a contract within the two-year period will not in itself attract the higher rates of grant on expenditure under the contract. Such expenditure will qualify for the higher rate only in so far as it is incurred before the end of 1968.
There will be no change in the coverage or other features of the investment grants scheme. Claims made during 1967 in respect of expenditure incurred during 1966 will only qualify for the existing rates of grant of 20 per cent. or 40 per cent. The booklet on investment grants which I published earlier this week describes the details of the scheme and makes clear that the standard long-term rates will be 40 per cent. in the development areas and 20 per cent. in the rest of the country.
The necessary order under Section 7 of the Industrial Development Act will be brought before Parliament as soon as possible.
We also intend to speed up the payment of claims as soon as we have had sufficient experience next year to judge what is practicable.
My right hon. Friends the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland will be making corresponding arrangements for increased grants for agriculture and fishing vessels.
Mr. Barber: I would like to put three questions to the right hon. Gentleman.
First, bearing in mind that the Board of Trade's forecast for next year is that industrial investment will fall by 7 to 8 per cent., what is the revised figure as a result of these proposals?
Secondly, is the right hon. Gentleman aware that while we welcome a stimulus to industrial investment, there are very real dangers in panic measures to switch incentives on and off at very short intervals, which makes a mockery of industrial planning?

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Thirdly, is the right hon. Gentleman aware that, however welcome this announcement may be, the Government are only tinkering with the prevailing gloom and that the answer is to restore confidence to industry and to do so by pursuing policies which foster free enterprise?
Mr. Jay: As to an estimate of the effect of the change, the right hon. Gentleman must know that it cannot be put in statistical terms. We believe, however, that this will be a real stimulus. We want it to encourage immediate private industrial investment in the period immediately ahead. I am not sure whether the right hon. Gentleman meant to suggest that this is some sort of panic measure which should not be adopted now. If that is not what he meant, I do not quite know what he implied.
Mr. Barber: I welcome it.
Mr. Jay: I am glad to hear explicitly from the right hon. Gentleman that he welcomes it.
We have been urged by representatives of industry to take action of this kind at the present time.
The third point raised by the right hon. Gentleman could well be debated in the debate which is just about to be resumed.
Mr. Wyatt: Is my right hon. Friend aware that while the measure is good in itself, it has not been the fact that people do not get enough allowances or investment grant which is preventing them from putting in new machinery and equipment, but rather the fear that as long as the Government go on with the absurd credit squeeze they will not be able to make any profit out of their machinery and equipment? Does not my right hon. Friend realise that it is quite absurd that even if he were to give the stuff away people would not put it in if they could not make a profit out of it?
Mr. Jay: No sensible person would imagine that this is the only factor affecting industrial investment. If my hon. Friend thinks that it will have no effect whatever, he is taking an extreme view which is not shared by most representatives of industry.
Mr. Bessell: May I ask the President of the Board of Trade whether he is
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aware that my right hon. and hon. Friends welcome this announcement and that, however modest the increase may be, it will, nevertheless, be of great benefit to industry?
I should like to ask two specific questions. First, is the hight hon. Gentleman satisfied that the amount provided by the increase will replace the shortfall which is expected from private investment? Secondly, does the reference to mining include the cost of exploratory investigation as well as equipment for mining?
Mr. Jay: The answer to the hon. Gentleman's second question is that it includes in it exactly the detailed sense which was explained in the course of the debates on the Bill and as is also explained in the booklet which has been published this week. As to whether we consider that this proposal will be enough, we certainly believe that it will have a material effect on industrial investment if industry, as we hope, takes full advantage of it.
Mr. Sheldon: Is my right hon. Friend aware that the majority of Members of the House will certainly welcome the increase in investment grants, which has come at a particularly needful time? Will my right hon. Friend inform the House whether consideration has been given to the bringing forward of the payment of these investment grants in the light of the present economic situation, when so many of our progressive companies are finding themselves short of capital for these purposes?
Mr. Jay: There is a misconception here. Whether one proceeds by investment allowances or investment grants, the sums are made available to industry a considerable time after the plant is installed. The benefits of investment allowances are being afforded by the Exchequer this year and are accruing to industry this year. It is when they run out, in the middle of next year, that the grants will begin to be paid. As I said in my statement, we mean to pay them as soon as experience shows it to be practicable.
Mr. Dean: Is the right hon. Gentleman aware that there will be disappointment that his statement contains nothing about the proposed loan scheme for the hotel industry, in view of the difficulty

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that the industry is facing following the abolition of the investment allowances? Can he say when he proposes to make a statement on that scheme?
Mr. Jay: My statement did not include any reference to it because it is another subject. In any case, the scheme is going ahead, and there is no need to make a further statement about it.
Mr. Macdonald: In the discussions with industry, to which my right hon. Friend referred, was the view expressed that alterations and amendments to the rate of grant, however beneficial in themselves, can have a deleterious effect by creating uncertainty in the mind of industry? If that view was expressed, how much attention was paid to it?
Mr. Jay: These discussions were confidential, but I think that I can say that I do not recall that view being expressed. The action which we have taken is in line with the view of a considerable representative section of industrial opinion.
Mr. G. Campbell: Is the President of the Board of Trade aware that, because the increase is applied to certain investment in manufacturing, extractive and construction industries, it will not much help large areas of Scotland, where most of the employment is provided in other fields? A 45 per cent. grant is of no use to a firm which is not eligible for grant, but which has lost the investment allowances that it enjoyed previously.
Mr. Jay: The hon. Gentleman will notice that agriculture and fishing vessels are included, as well as the whole of manufacturing, extractive and construction industries. He would be doing an injustice to Scotland if he thought that those industries were not represented in that country.
Several Hon. Members Several Hon. Members rose——
Mr. Speaker: Order. I must protect the business of the House.

BUSINESS OF THE HOUSE (SUPPLY)
Ordered,
That this day Business other than the Business of Supply may be taken before Ten o'clock.—[Mr. Lawson.]

ORDERS OF THE DAY

  SUPPLY
  [5th ALLOTTED DAY] [2nd Series]
  Considered in Committee.
  [Sir ERIC FLETCHER in the Chair]
  Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. Lawson]—put and agreed to.
  Committee report Progress; to sit again Tomorrow.

  ECONOMIC AFFAIRS
  4.14 p.m.
  Mr. Speaker: Before I call the Motion on the Order Paper, may I announce that I have not selected the Amendment standing in the name of the hon. Member for Poplar (Mr. Mikardo) and other hon. Members.
  Mr. James Dickens: On a point of order, Mr. Speaker. May I ask, with great respect, whether you will reconsider your decision not to call the Amendment standing in the name of my hon. Friend the Member for Poplar (Mr. Mikardo), myself, and 44 other hon. Members on this side of the House? We feel that it puts forward an alternative point of view which will not be held officially by either of the two Front Benches this afternoon.
  Mr. Speaker: I am not prepared to reconsider my decision. When the Chair makes a decision on selection, it makes it after careful thought. I quite understand the point of view in the mind of the hon. Member for Lewisham, West (Mr. Dickens). He will observe in the debate that I have taken care, in selecting from both sides of the House, to give opportunities to hon. Members who take neither the Government's point of view nor the official Opposition point of view, but have their own.
  4.15 p.m.
  Mr. Edward Heath: I beg to move,
  That this House has no confidence in the economic policies of Her Majesty's Government.

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  I emphasise the words "no confidence" because they are not just Parliamentary, technical words. I believe that they represent the situation accurately. I move the Motion in the name of my right hon. and hon. Friends and myself, but there is no need for me to be partisan about it. What yesterday's debate showed clearly is that this point of view is represented on both sides of the House. There was not a friend to speak up on behalf of the Government yesterday from any of the benches. I have read a great deal of the debate and, with respect to the Chancellor, I heard a considerable amount of it as well.
  There are different reasons why Members have no confidence. Some want less control, some want more control, some want deflation to continue, and some want rapid reflation. Whatever the reasons, no one was prepared to speak up on behalf of the Government.
  However, everyone wants to know what the Government believe will happen. In that, I believe that we reflect the position in the country, which is undoubtedly worried about the immensely serious situation. Individuals are worried, particularly those who are unemployed and those who fear that unemployment will overtake them. No one, be he businessman or trade unionist, has any confidence in the Government, and I must say frankly that one finds very little more confidence abroad than there is at home.
  Let us, then, ask the Government what they believe will happen. So far, they have refused constantly to tell us, whether they be the Prime Minister, the President of the Board of Trade or, yesterday, the Minister of Labour. I hope that the Chancellor of the Exchequer at least will be prepared to give us his view of the future.
  It is very strange that, just over a year ago, the Government were prepared to tell us in detail what would happen every moment in the next five years. Now they are not even prepared to tell us what they think will happen in five months. I believe that the Government are giving us less factual information about the situation, or indications of how they see it developing, than any of their predecessors.
  That is not the way to restore the confidence of the business community or of
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  people abroad. It is not the way to get the best out of the British people. What the country expects from this debate, and what it has not had so far, is a full and frank description of the position from the Government and how they believe their policies will meet it. What the rest of the world is looking for and waiting for is this, and I believe that it is fundamental to the whole situation. What they want to see is that changes are being made in the structure of the economy which will produce permanent and longterm results.
  I am glad to see the Chancellor of the Exchequer nodding about that, because it means that we are in agreement about what is the key to the present situation. They want to see permanent results which will enable us to repay our debts when they are due, to meet the sterling area commitments, and to meet such other overseas commitments as the Government maintain. It is on the results of that that the future of sterling depends. As both sides of the House are agreed about the key to the whole of this, at least we have a criterion by which we can judge the Government's own policies.
  From the point of view of restoring confidence, or of showing that these permanent changes are taking place, the Government are their own worst enemies. They have far too great a legacy in all too short a time of wrong forecasts, of unfulfilled undertakings, of faulty psychology and of the failure of their policies for anyone at home or abroad to accept lightly what they say.
  The Government must recognise what a blow to confidence it was to find the complete reversal of every previous policy in their measures of 20th July. Whether one regarded their policies as right or wrong, the fact that a Government so recently returned at a General Election should completely and utterly change their policies at a moment's notice in the way that they did has undermined the confidence in any pronouncement which the Government may make, be it by the Prime Minister or the Chancellor.
  We had warned what would happen, but the Chancellor repeatedly derided our warnings and from the Prime Minister we heard those famous words, "I see no reason for an increase in unemployment this winter". They must be ringing rather hollowly in the ears of the

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  mounting unemployed. We were told that the National Plan would be carried through. When it came out I described it as "the biggest gimmick yet", and so it has turned out to be. The Government are still proclaiming this Plan and yet they are not prepared to give us a single figure on which they are basing their expenditure or their future policy; and they are not prepared even to carry out their own belief to produce another plan to take its place until the end of next year. How much store can be set by what they say?
  We cannot underestimate the blow to confidence of the reversal of these policies. The Government have done very little since to dispel the gloom. The Minister of Labour, who yesterday, came along in his charming, frank, and honest way, and appealed to all and sundry for suggestions and ideas on how to deal with the situation, has not done anything to restore confidence in himself or his colleagues. It is against this background that I want to take a cool, hard look at the present position, and I believe that it can best be done by examining the situation on the balance of payments.
  I want to put these figures to the Chancellor, and I hope that he will give us his comments about them. I apologise to the House for giving some statistics, but it is essential if we are to get to the heart of the problem. If we compare 1964 with the latest figures which we have for a full year, which is mid-1965 to mid-1966, we see that there was an improvement in the balance of payments of £463 million. This is a substantial sum. I shall not today go over the arguments which we have had in the past about the 1964 position, but that was an improvement in the balance of payments.
  But what happens when we get down to an analysis of the position? We find that about £390 million of that £463 million was due to temporary, short-term fortuitous circumstances. This is very important. The effect of a 3 per cent. improvement in the terms of trade accounts for £150 million. The effect of the limitations on exchange control accounts for another £100 million. The effect of the import surcharge, which was temporary, and which has now been removed, accounts for £100 million at least, and some would say £150 million.
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  The importance of the figures is that they show that any change in the balance of payments due to fundamental structural alterations is very small indeed. I would put it at a maximum of £70 million out of the improvement in the balance of payments, and if the import surcharge was more effective than the figure I have given it may be less.
  That surely points the key to the real problem with which the Chancellor is confronted, because the National Institute forecast, just before the last Budget said that the situation required an improvement due to basic structural alterations of £300 million a year in the balance of payments. This is what was required to meet the situation, and against it one has to offset the fact that over the latest period it is only a small proportion of that. This is really the problem with which the Chancellor has to deal.
  I agree with the President of the Board of Trade about the efforts of our manufacturers. I welcome what he has done to encourage them further. I pursued similar policies at the Board of Trade. The right hon. Gentleman has carried them further, and I agree with this, and welcome it, but it does not alter the fact that there is this basic problem of structural changes which are required in the economy to produce this scale of the balance of payments.
  Looking back, we can see quite clearly the real failure of the Government from 1964 to 1966. They failed to manage the level of demand in the economy at a level which was in line with what the balance of payments would stand. Of course, the balance of payments has to be taken into account with the degree of confidence in the Government, but their fundamental failure was to manage the level of demand.
  I suppose that the best interpretation is that they overestimated the effect of the direct measures which they were taking, and they underestimated the effect of the pressure of demand. We constantly pointed this out to them. We said that they were running an inflationary economy, and that the pressure of demand was too great. The worst interpretation is that they did it for electoral reasons, but, as I am today being non-partisan and non-controversial, I shall give them the benefit of the doubt

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  and say that this was a double failure of judgment.
  The crisis came when it was seen that, because of their policy, the balance of payments could not be met by the end of 1966, and they would not, therefore, be able, in 1967, in all probability, to have a surplus on the balance of payments which would enable them to repay the debt. It was recognised that the Government were not achieving their objectives, and as this was recognised in the second quarter of July, the crisis came.
  I believe that the vital point in this argument—and I emphasise it—is that there must be a much greater structural change in the economy, and that what has taken place so far is very small. We, and, therefore, the country, must not deceive ourselves that by good monthly figures here or there, or by the confidence of the Chancellor on television, or the President of the Board of Trade here last night, that the problem has been surmounted, or is being surmounted, because I do not believe that that is the case. Has the Chancellor any evidence about the situation which I have described? If he feels that he can contradict it, let him do so, but I do not believe that the figures are controvertible.
  The surcharge has been removed. What calculation has the Chancellor made about the impact of this on our balance of payments in the coming year? Has he made any calculation of the consequences of his action in the present deflationary situation? First, there is the question of the distortion as a result of imports being held back, and, secondly, there is the impact in the longer term of the removal of the surcharge.
  Can the Chancellor say what is happening to the proportion of imports to total home sales? Can he give us this as an indication of the way imports are likely to move to deal with the balance of payments and the likely movement of exports? Can he also say what is likely to happen to our share of world trade in world exports? Is the decline in any way being stopped or slowed down? This is the second vital equation in trying to foresee the future of the balance of payments.
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  It is on those fundamental points that we must judge the real trading position; and I emphasise again that it is essential to look at the long-term underlying trends if we are to have a satisfactory basis for policy.
  The results of the crisis, in the measures of 20th July, are well known. The Leader of the House, in one of his most carefully prepared statements, said the other day that it would be wrong to transform a carefully calculated cutback into an unplanned crisis of confidence. There was nothing carefully planned about that cutback. It was done at a few days' notice. It was done in panic, and in extreme measure.
  The House will probably say that the Government, in the position into which they had got themselves by their miscalculations, had no real alternative if they were to save the £. This was the consequence of their own mismanagement and misjudgment, but what happened was that this unwise deflationary action was added to what the Chancellor had planned, prepared, and carried through the House, the Selective Employment Tax. It is the consequence of the double dose of deflation with which the Government and the country now have to cope, and this is where we want further indications from the Government.
  The third thing which the Government did was to impose the freeze. I think that we ought at this stage to look rather carefully at the real purpose of the freeze. Was it deflationary? No, it was not. The freeze was equally on prices as well as on wages. It was not, therefore, a deflationary effect. Was it to enable those in industry to change their attitudes and provide a basis for longterm development of the policies that the Government were pursuing?
  It is difficult to believe this, because the Government, obviously, had no idea that they were going to pursue these policies at the freeze. They demonstrated that time and time again, and they still have no idea how they are to pursue them later. What they have done is to damage industrial relations and to make the prospects of voluntary co-operation in the sort of things that we want, such as productivity agreements, less favourable than they were; and the Government were so foolish as to stop productivity agreements during the freeze.

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  The real reason for the freeze was to appease foreign opinion, and this, too, is now absolutely clear. What was the reason for this? The Government, mistakenly, in my view, had placed such emphasis on the prices and incomes policy of the then First Secretary, as to make it appear to be the be-all and the end-all of their policy. The result was that when it disastrously failed, again as we pointed out during the election, the only way they could cope with the problem, to try to maintain confidence in them, was to impose the squeeze in order to appease foreign opinion. The Government's problem is now to unwind. At the end of the next six months they will, in fact, be facing disaster.
  In fairness to the Chancellor of the Exchequer, he always said that the freeze was not necessary. He said that the other measures which were being taken would achieve their end, and, at The Hague, said the freeze was, after all, a bonus. So one can say that he believed in the deflationary measures—a double dose—and that he has never really believed in all the pain and grief, the friction and irritation caused by the freeze. Perhaps the Chancellor might tell the House exactly how much he thinks the freeze has been worth in the balance of payments. The calculations which were published last Sunday indicate that the overall value of the complete freeze has been comparatively small.
  Let me turn now to the economic prospects at the moment, in order to come to the policy pursued by the Government. First, the problem of unemployment, which reached 541,000 last month. By purely seasonal increases, unemployment will reach just over 600,000 by February—that is, by purely seasonal increases. Since May unemployment has increased, allowing for the seasonal increase, by 20,000 a month, and this is very steep indeed. If, therefore, this progression continues, added to the seasonal unemployment, the figure may well be up to 650,000 by February. In fact, this is allowing that it will not go on at quite the same rate.
  The Prime Minister, usually when confronted with the steepness of the progression, says, "Of course, the figure is far less than November, 1962, or November, 1963". But that is not the right
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  point of comparison. The Prime Minister took his measures on 20th July this year and we are now in November. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) took his measures in July, 1961, and the right point of comparison is November, 1961. That is the point in the cycle, because it is five months after the measures were taken.
  But, of course, we cannot compare the same stage in the cycle a year ahead. If the Chancellor looks at the figures five months after my right hon. Friend took his action, what will he find? In July, 1961, the figure for unemployment was 258,000 and by November it was 387,000. The right hon. Gentleman took his measures in July this year when unemployment was 264,000, or 5,600 more. Now the figure is 541,000, which is an increase of 154,000 over the similar point of the cycle in 1961.
  There are two aspects which have to be considered. The first is that it is now becoming accepted that in the management of economic policy the rate of progression is of the greatest importance. One should then deal with this matter of reflation or deflation with as much gradualness as possible. That is the first thing.
  The second point is that, with this steepness of progression, what is to be the position a year ahead? The general view is that we shall not see the peak of the measures which have been taken until the winter of 1967–68. I do not believe, with great respect to the right hon. Gentleman, that anything which he has announced today really will affect that peak, when it comes, either its size or its position. That is the point which I put to him. He must take into account the very steep progression of unemployment which he has created by the double dose of deflation.
  It is also extremely interesting that when my right hon. and learned Friend took his measures in November five years ago, sterling stood at 2·81¼. Yesterday, five months after the right hon. Gentleman's measures, the £ stood at below 2·79—it was 2·7815/16. This is also an extremely interesting point about the efficacy of the right hon. Gentleman's measures and the problem with which he has to deal.
  Mr. R. B. Cant: Would the right hon. Gentleman agree that this weakness of sterling, according to the Financial Times, is a technical weakness due to the withdrawal of funds to Europe for window-dressing purposes?
  Mr. Heath: Exactly the same period of the year, so far as my right hon. and learned Friend was concerned. What is more, if the right hon. Gentleman looks back to 1961, he will find that there was an additional complication about the question of deflation and the lira at the same time. We can take those as being comparable situations.
  This is the prospect with which the Chancellor is faced. Unemployment was really caused to reduce imports, to reduce the bargaining power of the trade unions and to get redeployment. Here, the Government have really done very little to help. I should like to make my position clear on the question of unemployment. I have constantly said that we could not run this economy with any degree of efficiency, or without a severe risk of inflation, at the rate at which the right hon. Gentleman was running it last spring. I have said that quite clearly. I therefore believe that the unemployment figure would be higher than it was then if the economy were to be run with a reasonable regard to balance of payments. One should try to get a balance between those who are able to work, excluding the number mentioned by the Ministry of Labour yesterday, and those for whom jobs are available. The level at which one can run the economy depends to a very large extent on the obstacles to growth in the economy.
  I do not, therefore, accept that there is an automatic figure of unemployment at which we can run the economy. If one looks at each of the Western industrial organisations, they have a different figure which they reach without having inflation. The least perhaps is the Federal German Republic, and, in some ways, the American organisations, although their figures are not strictly comparable, tend to be higher.
  Surely the purpose of our efforts ought to be what the rest of the world wants, to make the structural changes which will remove the obstacles to growth and
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  allow us to run the economy with a decreasing number of unemployed. That is my own position on unemployment, and I want to make it quite clear.
  Let us look at the second indicator, that of production. Production is now back to what it was in December, 1964. There has been a severe drop. In my view, a further fall in production is likely. I think that we shall see this coming about. I think that we shall see an increase in unit costs, particularly in the motor industry. As we know, the motor industry is highly geared and its exports, particularly, can be affected by an increase in unit costs. I hope, therefore, that the Chancellor and the First Secretary will, particularly so far as the motor industry is concerned, watch the question of unit costs and export prices before anything else, because I do not believe that it is comparable with some of the other industries in this respect. Indeed, if it is necessary, I hope they will take action which will enable them to keep their costs down.
  I believe, too, that productivity has fallen. Has the Chancellor any indications that as a result of his policy productivity will rise? I have not seen any indications, and it is a serious matter if productivity is falling. My experience is that in areas and industries that are threatened with unemployment there is an undoubted slowing-down of effort and, as a result, productivity falls. Can the Chancellor of the Exchequer provide any answer to these problems? This is a judgment based on our own experience, and if he has anything to contradict it, let him say so. We ought to know.
  The next indicator is the decline in investment in the private sector. It will probably be 4 per cent. this year. The Board of Trade says 7 per cent. for next year, while the C.B.I. gives a figure as high as 20 per cent., or over. Whichever figure one takes—and I suspect that the figure of the Board of Trade looks very much on the best side—it is an alarming prospect. What are the reasons for this? It is essential that we should look at the fundamental reasons for the decline in investment.
  First, there is lack of liquidity, as was mentioned by an hon. Member earlier this afternoon following the statement made by the President of the Board of

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  Trade. The lack of liquidity is due to the credit squeeze—firms do not feel that they can get money for investment. But lack of liquidity is also due to the Selective Employment Tax. Some firms think that with repayment the lack of liquidity will be removed, but I do not believe so. Firms will have to recognise that they are constantly paying this money out, and, therefore, with the exception of those who get rebates, they will be using the money as a pool for payment of their Selective Employment Tax.
  But the rebate that some of them get is liable to taxation, so that the end amount for liquidity is comparatively small and unlikely to influence the situation. And any surplus liquidity they have, they want to keep in a situation in which they have no confidence. They want to prepare for anything worse that may come.
  I believe that the change from investment allowance to cash grant has also been detrimental to investment programmes. This is not a dogmatic view. The President of the Board of Trade has explained the delay in paying the grants. With investment allowances, firms knew through the Inland Revenue that they could get the allowance; it now depends on an administrative decision of the Board of Trade. When I heard the President of the Board of Trade last night expounding the virtues of having simultaneous delays instead of continuous delays—the right hon. Gentleman produced that flash of brilliance; I could not have produced anything like it—I asked myself: what will happen over the cash grants for investment? There will be similar simultaneous delays in granting the cash to industry, and this also militates against investment.
  There is also the cost of borrowing. The Chancellor of the Exchequer is in difficulty about doing anything there because of competition in other capital markets of the world. I do not think that he will be able greatly to help firms there. The right hon. Gentleman the President of the Board of Trade has made a statement of an increase of 5 per cent. over two years, but the machinery has to be installed, as I understand it, before the end of the two years. With a great deal of capital plant it is not possible to find the machinery, decide on it, order it, and get it installed in the time that the right hon. Gentleman has mentioned. It is quite
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  unrealistic. I do not believe that the 5 per cent., though welcome, will greatly help investment in plant and machinery.
  Another factor which is fundamental—
  Mr. Robert Sheldon: If increases in investment grants are of such little encouragement to industry why, in the United States, have investment incentives been withdrawn in order to discourage investment?
  Mr. Heath: That is one of the marginal factors. I do not say that this has no effect. I say that the 5 per cent. increase in the existing grant by the President of the Board of Trade is unlikely to have a very great effect, and the reasons for that are twofold: the first is liquidity, and the second is profitability. Firms today, with profits falling heavily, being squeezed, not only by the credit squeeze, but by the prices and incomes policy, do not see profitability being returned on their present investment and that makes them extremely wary about going for any future investment. These are fundamental facts.
  A further complication is the uncertainty in their minds about what the First Secretary will do with his prices and incomes policy in July. They therefore cannot make investment decisions because they cannot have any judgment of profitability. If the First Secretary intends to continue the same policy that he is now following, with the same consequences on returns, profits and dividends, they see no way ahead for further investment. These are the fundamental things that the Government have to face.
  Let us look at the problems of the Chancellor of the Exchequer in that context. He has to get a surplus of balance of payments to repay debt, and he will agree that the amount will be about £310 million by the autumn of next year. He cannot bank on an inflow of funds to London, because world liquidity will not permit any great flow of funds into London. I do not believe that he can adopt the suggestion made by some of his hon. Friends to confiscate our overseas investments. I understand that privately he has repudiated that idea, and I hope that this afternoon he will take the opportunity of publicly repudiating it.
  That suggestion could only be gravely damaging to our own national credit,

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  and rouse suspicions that if a Government were driven to such ends to maintain the national currency they would not hesitate to block balances here. This is something that no Government, even in war, have done, and I do not believe for a moment that the Chancellor of the Exchequer would tolerate it. I therefore hope that he will repudiate that suggestion contained in his hon. Friends' Amendment.
  The Chancellor of the Exchequer once said that if it were necessary to repay the debt from reserves he would do so, but I am sure that he cannot be very happy about that. It would not create confidence in sterling as a whole, though it may be that he still has Government holdings in the United States which he could move in.
  This situation means that, fundamentally, he must get the repayment of debt out of a surplus on balance of payments. and I believe the amount to be about £300 million or so next year and over £400 million between 1967 and 1970. This means a surplus from 1967 to 1970 of between £250 million and £300 million. With a slow rate of growth such as we have now—between 1 per cent. and 2 per cent.—there must be grave doubt whether he can achieve this.
  Public spending at 4¼ per cent., which the Prime Minister has reiterated is the Government's objective, is bound to take everything there is in that slow rate of growth, and, I think, more than there will be in it. That will mean no increase in consumer spending throughout the period, even though there might be slight increases in income. And it would mean, I think, that public spending would take from other resources. I have quoted those figures because I believe that they demonstrate the magnitude of the task that faces the Government, the Chancellor of the Exchequer, and the country during these next four years.
  My second conclusion is that the Government have so far shown no indication that they know how to deal with this situation. What is more, they have failed to explain the real situation fully and frankly to the country. We therefore cannot have confidence that their policies will be able to deal with the situation, or call forth that sort of
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  response from industry, trade unions and the public.
  The Chancellor of the Exchequer has put himself into a very real dilemma in the policies that he puts forward. A considerable number of his hon. Friends are proposing a completely controlled economy to deal with the situation. They would have import control, wage, price, and dividend control—and the rest of the controls that would undoubtedly have to flow from them. In fairness, I have to say that they are quite prepared to face all this. From their point of view, this is a perfectly arguable case. In fact, some of them would say that what they are arguing is real and true Socialism, and what they have always meant by Socialism. Now, some of them, like the hon. Member for Ebbw Vale (Mr. Michael Foot) are coming forward boldly and frankly with these proposals.
  I reject their proposals completely—and I hope that the Chancellor of the Exchequer will also reject them. They are, first, a complete infringement of liberty in a free society, and, secondly, even with that infringement they cannot succeed. They will not produce a sufficiently dynamic economy to meet the requirements of our people. I do not believe that they can succeed. It is all very well for them to wish to control everything and then reflate.
  As soon as the Chancellor reflates in those conditions pressures will seep through, as we saw them seeping through before, from 1945 to 1950. We have also seen them seeping through in the first 15 months of this Government, and they will do so again. Therefore, even if hon. Members opposite are prepared to accept the reduction of liberty involved the policy will not be successful.
  Let us look at the alternatives facing the Chancellor. If he tries to prevent the growth of unemployment, because of the pressure of his hon. Friends, but encourages consumer reflation, he will find himself in exactly the same position he was in last July, with a balance of payments problem probably even more acute than it was then. It means that the balance of payments has to govern the right hon. Gentleman's conduct. I hope that he agrees with that. It means slower growth until the Government are able to restore confidence at home and overseas by showing that they are

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  making the necessary fundamental changes in the economy.
  Confidence will depend on structural change, so let us consider that. Training for redeployment is one of the fundamental changes, as I have constantly said. I welcome what the Minister of Labour said yesterday on the subject, but the £2 million from the Government is minute compared to what has been spent by industry and the training boards.
  The Minister of Labour (Mr. R. J. Gunter)The Minister of Labour (Mr. R. J. Gunter) indicated assent.
  Mr. Heath: The Minister nods. It is only a small drop in the pool. Apparently the Chancellor agrees. He appears to be complacent and quite happy about the situation, but this contribution is on too small a scale, and too slow. Furthermore, it is limited to the unskilled and semi-skilled workers, although it is clear that more skilled men are urgently required. It is here that the problem needs tackling by the trade unions. We need to open up training rapidly for skilled men, and this needs to be accepted by the unions. Even with unemployment running at a high level and mounting rapidly, industry is short of skilled men. This situation must not be allowed to continue.
  I now turn to the public sector. Here, there is one very important fundamental structural change. The Chancellor and the Prime Minister have always argued that they want more men to allow for redeployment. There are two places in the public sector where manpower is obviously available—in the railways and in the coal mines—but these are the two places in respect of which the Government have not only refrained from taking action but—as far as the Minister of Transport is concerned—have slowed down action in this respect.
  I pay tribute to the National Coal Board and to Lord Robens for having made considerable changes in a most humane way, but much more has to be done, and with it must go Government policies to provide quickly the housing requirement for redistribution and redeployment. With the railways, it is not only a question of tackling the problem of liner trains; it is a question of rapidly making the railways more efficient and more economic in manpower than they are today.
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  Surely this is preferable, as a way of providing manpower for expanding industries which require it, than to go for acute deflation to provide it. The Government have refused to face one problem and they have created many other problems for themselves by doing it the other way.
  Mr. Michael Foot: Is the right hon. Gentleman saying that in his view the closure of pits should go ahead faster, despite the heavy unemployment in Wales?
  Mr. Heath: In my opinion, the closure of pits should move forward as fast as possible, and faster than it has been doing, provided that the Government make the necessary arrangements to enable the process to go on in the humane way that Lord Robens has already provided. [An HON. MEMBER: "And the unions."] I agree that the unions have also been concerned in this; it has been a joint effort between them. This is a place where manpower can be found, although we know that some pits are short of manpower. As a result of the squeeze, however, men are going out of manufacturing and exporting industries and back into coal mining, which is not an exporting industry. That is a by-product of the Government's policy.
  Mr. Archie Manuel: What about the railways?
  Mr. Heath: I cannot give way again. I have given way frequently, and I am trying to argue a fairly closely reasoned case.
  I now turn to another fundamental problem—the problem of regional policy.
  Mr. Manuel Mr. Manuel rose——
  Mr. Heath: The hon. Member knows that I always give way many times, and I have done so today. I cannot give way now.
  I turn to the question of regional policy. I agree with the President of the Board of Trade that the action being taken is undoubtedly having an effect in preventing the increase in unemployment proceeding as quickly as it has in the past. He cannot claim credit for this. The incentives and the factories were there, and industry piled in during the five years from 1959 to 1964. But we

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  can agree that this policy has had an impact.
  The figures relating to this aspect are completely unrealistic at the moment. We know that we cannot get expansion in growth regions during a time of contraction, such as at present. From the point of view of fundamental structural change a programme of growth points and growth zones, with the Government providing the infrastructure for industry, is the only satisfactory way of bringing about real change. Merely to go on spreading the jam thinly over all areas will not convince people that we are changing the basis of our industrial life.
  I should like to know what the Government calculations are about private and public investment. On Tuesday, the Minister said that the level of investment will not fall. There can be only one inference to be drawn from this there will be a great increase in public investment. Will the Minister confirm this? This is not what is required in present circumstances. What is required is an increase in private investment, because a great increase in public investment will put greater burdens on private industry and, therefore, on the taxpayers generally.
  Apparently we shall see the Government squeezing private industry more and more, taxing it more and more, spending more of the proceeds on public investment, and, finally, turning to the private sector and saying, "You will not be able to capitalise yourself. We must take a further interest in you." That is the logical conclusion, which the Leader of the House realises as well as the Member for Ebbw Vale, of the policies which the Government are now following in this time of contraction and squeeze.
  Will the Chancellor say what will happen about public expenditure? One of the largest increases in public expenditure—if not the largest—is in local government. We know about the great burst of exuberance when the Government came in. They freed the reins. Will that situation continue? We have only to look at the figures of local government expenditure to see how it has increased. Will the Government continue with this policy, or will they reduce local government expenditure?
  Mr. Ron Lewis: What about the Borough of Bexley.
  Mr. Heath: I know all about that. We do not get a new town hall, but others do.
  What the Government must do is to provide real incentives for private investment. The cause of the Government's dilemma is that they are trying to get results out of a private enterprise system in which they do not believe. It comes out time and again, for all the words of the Chancellor on television. It is quite clear that the Government are not taking action to encourage a fundamental private enterprise system. The present situation—with the burden of administration on firms and the degree of interference that is going on—is preventing firms from mustering their greatest efficiency. There is no doubt about this. The delay in making decisions, the intentions with which they are confronted, are damaging that very private enterprise which the Chancellor says he wants to encourage.
  The White Paper which we are discussing also in the debate is so vague as to be almost meaningless. It is probably the worst-drafted White Paper I have ever read during the 15 years that I have been in the House of Commons. It refers constantly to the "national interest", or to "social justice", both of which are completely undefined. It claims to set forward criteria by which people are to make their decisions. In fact, they are not criteria at all. They are just generalisations which cover administrative decisions by the Department or by Mr. Aubrey Jones and the Prices and Incomes Board.
  I have put it to the First Secretary that wages are in future to be governed, as a major element, by social justice. This will not give confidence to anybody abroad or anybody in this country who is trying to produce an efficient and effective economy. They will immediately see that economic decisions are always to be pushed on one side in favour of a vague criterion of social justice. Surely the House must agree that, if social problems have to be dealt with, they should be dealt with by social policy and not by interference in economic policy as such.

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  The First Secretary still has no idea of what will happen at the end of the six months' period, in July, 1967. The essence of the present situation is that firms must be shown that their present and future profitability will increase. I believe that this must be done by the Chancellor making changes in taxation. The right hon. Gentleman ought now to conclude that the Selective Employment Tax was a foolish adventure and has done far more harm than good. He must look at the taxation of corporate bodies, as well as that of investors and individuals. I notice that the Chancellor said on television that, of course, savings must have a good return. Yes, but not if people invest in a firm or in industry. Of course not—when measures are taken through Corporation Tax to ensure that they are damaged—[Interruption.] He is not leaving them enough to plough back to get the investment they want.
  The Chancellor must take action on individual taxation. Surely the increasing brain drain is evidence enough—even for this Government—that they must take action to prevent it by means of incentives to individuals. There is no point in mentioning here as good advice to the Government that they should abandon the nationalisation of steel, but I believe that they should look again at their policy of trying to take more and more holdings in private industry.
  The Government ought to look again at the question of agriculture. I know that this is fundamental, but we are looking at fundamental changes. I am astonished that, in the present situation, the Government are not prepared to go for an expansion in agriculture, are not prepared to change their present system so as to bring that about. It is just not happening. Indeed, the reverse is true. They have undermined the existing financial structure of agriculture. They have undermined its confidence. This will reflect itself in its production and, therefore, the amount of our imports bill. This is one of the fundamental changes which ought to be made to take much greater advantage of agriculture.
  I believe that a "mini-Neddy" is considering the right hon. Gentleman's relationship with industry over exports and imports. It could help us to the extent of £50 million or £100 million but,
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  as far as I know, no action has been taken yet as a result of its deliberations. There is no sense of urgency in the Government over dealing with a problem as formidable as that which I have described.
  I now come to the most fundamental structural change of all, for which opinion abroad, which, after all, is greatly concerned with sterling, is really watching. That is the question of trade union reform. This is where the Government refuse even to take a look. This is absolutely fundamental from the point of view of restrictive practices and the general attitude towards production. I know that the Government's view is that all this should be dealt with by human relationships. The Minister of Labour often says this. I do not believe this to be the case, and neither does the great part of the opinion in this country or overseas.
  The written evidence of the T.U.C. to the Royal Commission was immensely disappointing; its verbal evidence was even more disappointing. This problem must be tackled and the great weakness of the Government is that they refuse to tackle it until they get a Royal Commission Report years hence, by which time all too much damage will have been done.
  When the Chancellor or the First Secretary asks what is the alternative to the present proposals for the controlled economy, I say that the real alternative is a competitive, free-enterprise economy—with the encouragements which I have asked the Chancellor to give, but which, for reasons of social justice, he refuses to enter upon—and a reformed trade union law which re-creates a proper balance in the economy between management and manpower. This is fundamental.
  It must be done through a legislative framework. Only if it is done will trade unions and management be able to carry out all their functions in freedom, without upsetting the balance of the economy. Of course, this is no simple task. It is very difficult and complicated—the Minister of Labour knows that, as do I, from my time at the Ministry of Labou—but this is, above all, the fundamental structural change in the economy which must be made. I do not believe that the economy will flourish, nor do I believe that holders of sterling

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  abroad will have confidence in it, until it is done.
  I therefore say quite clearly to the Government that they will not deal with the problems which I have described on the scale on which they exist—the dilemmas with which the Chancellor is faced—until they tackle this in addition to the other structural reforms which I have mentioned. The Government must explain frankly to the country the scale of the problem and they must adopt policies which will enable them to deal with it. They must set out to restore the confidence which industry has lost and they must give free enterprise those incentives which will enable it to work. Otherwise, they will not get the results. They must do more to secure expansion of investment through confidence and they must make the structural changes which I have described.
  I notice that, in commenting on this debate, some have said that we have been greatly concerned with figures and statistics and organisation rather than with human beings. It is not true of this House that we are not concerned with human beings. We are, all the time. We know the consequences for individuals who have made their own plans and their own lives and who suddenly find them reversed through Government policy—whichever party may be the Government. We recognise that this causes grave hardships to individuals. It was always thought, perhaps, that the present Government understood this as well as anybody. I believe that we all understand it and want to bring it to an absolute minimum.
  There is no question about it—unless these measures are taken, the ultimate hardship will be very much greater for many more people. We feel for those who at the moment are suffering unemployment and who are afraid of it and for those who undoubtedly will suffer it in the coming months. We all recognise this. I have said that I accept unemployment due to change. I also say that I greatly regret unemployment which is due, I feel, to incompetence and mismanagement.
  Everyone in the House deplores the hardship, pain and grief which comes to people who are unemployed, but that
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  should make us all the more determined to take the sort of action which I have described. What appals me is that I see no sign of this being taken by the Government, which is why we can have no confidence in their policies.
  5.10 p.m.
  The Chancellor of the Exchequer (Mr. James Callaghan): We have had from the right hon. Gentleman the Leader of the Opposition a speech which varied between a genuine attempt to get at what he called the fundamental problems of the economy and his duty as Leader of the Opposition to construct a Motion of no confidence. I am bound to say that I thought the emphasis was more on the fundamental searching inquiries about the economy than on his concern to concentrate on his vote of no confidence.
  To that extent I found it more agreeable than I might otherwise have done but, although I do not want to encourage him in ill-doing, I must say to him that it was not quite the kind of speech we would normally expect from a raging, determined Opposition which wants to get at the Government because it has no confidence in the Government. However, I welcome the approach by the right hon. Gentleman and I shall attempt to respond to some extent in the spirit in which he spoke, although I have not forgotten that this is a Motion of no confidence and I shall have something to say about some of the attitudes of the Opposition.
  The right hon. Gentleman said that we need fundamental change and that we have had very little of it in the last two years. We might inquire why at the end of the term of office of right hon. Members opposite fundamental change was necessary. The right hon. Gentleman might pause and tell us sometime why the continuing adaptation of the British industrial system to the changing needs of the world was not made continuously throughout the whole period of office of the Conservative Government. We might ask him why it was not until 1964 that we had to make fundamental changes which, had they been made over the previous years, would not have been required to be made at that moment.
  If he says that little has been done in two years, what does he expect as a result of fundamental changes? How does he

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  expect fundamental changes to show their shape in a period of two years? While he was speaking I wrote down a list of the fundamental changes which are being and have been undertaken. I find that on none of them do we get much support from the Opposition. Indeed, every time we propose a fundamental change they scream and howl about it, and keep us up late at night. Of course they always insist that it is the wrong fundamental change. The only fundamental change they want is that we should declare war on the trade unions.
  That was the fundamental change to which the right hon. Gentleman committed himself this afternoon. I say straight away that if he wants to make fundamental changes about the status of men in relation to their employment—which he properly described as a complicated task—he had better try to secure the co-operation of those whom he proposes to change. I would not have brought this up but I am reminded of it by the fact that he has now plunged into a war against the unions. [HON. MEMBERS: "Not fair."] He told us that this is the only thing which people abroad are concerned about and that everything seemed to be judged by this and that what we had to do was to reform trade union law.
  I have not had a chance to check the date, but I believe that, in 1960 or 1961, when he was Minister of Labour, he was given an opportunity to set up a Royal Commission to inquire into the complicated structure of the trade unions and the relationship to the law of those engaged in industrial work in this country, but he refused to do it.
  Mr. Heath: I thought that we were having a serious debate, but if the right hon. Gentleman wants to adopt this attitude I should say that in 1959 three of my hon. Friends put a Motion on the Order Paper suggesting that a Royal Commission on the trade unions should be set up. None of my other hon. Friends signed it. I explained that we were trying to get the trade union leaders to reform the movement from within. They have failed to do so and therefore we have moved on to this suggestion.
  Mr. Callaghan: From 1959 when he failed to get the co-operation of the trade
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  unions, as he thought, he did nothing. When this Government came in they set about the task of reform of trade union law and set up the Royal Commission. I hope that no one will attack the bona fides or the authority of that Royal Commission which is engaged on the most delicate task of examining the constitutional and legal relationship of the trade unions with the law.
  It is right that we should allow the members of the Commission to get on with their work and to produce a Report. In the light of that Report we shall see whether we should make fundamental changes in a field of law for which many people have fought. Taff Vale is just outside my constituency. Its name is engraved on the minds of many people and it is written into the history of the Labour movement. Any attempt to change the law relating to the trade unions, to which I am not necessarily opposed, must be done with the full consent of those with whom they work. We must ensure that we shall get their co-operation or the attempt will fail.
  In the last resort the Government must act on this when we have the Report of the Royal Commission. It is not only the trade unions which are involved. What foreign opinion is looking to see is not whether we reform the law on trade unions, but whether we can deliver goods at competitive prices, on time, of the right quality, and when we promised to do so. We may organise our internal affairs how we like provided we do that. It would be wrong if we did not organise our internal affairs as we like. This is the basic problem. What the right hon. Gentleman should address himself to is not what foreign opinion thinks about this, but what changes he thinks ought to be made in these relationships which are necessary to achieve this end.
  I made a note of some of the fundamental changes which are now in train. There is the setting up of the Ministry of Technology which has a substantial effect on a number of industries. I illustrate this particularly by reference to the computer industry. It is not too much to say that the industry has been given a new injection of life as a result of the activities of the Ministry together with a considerable injection of public finance. That is one fundamental change.

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  Then there is the aircraft industry. At the moment discussions are going on, or are about to start, with the aircraft industry in order to achieve the fundamental change which is needed in that industry. It is generally recognised and accepted that it is unable to do this by an amalgamation merely between firms in the indutry. It perhaps needs some outside assistance, some outside force to bring them together. Here is a fundamental change which is now being tackled.
  The right hon. Gentleman himself paid tribute to the National Coal Board, and the way in which fundamental change is taking place there. He paid tribute to its humanity and the way in which the job is being done. We would be in a much better position to accelerate whatever rundown is needed in the coal industry if we had not had to start from scratch with a new programme of advance factories. My right hon. Friend has announced four separate programmes for new advance factories in those areas where the right hon. Gentleman demanded that we should make these fundamental changes. Then he has the impertinence to refer to the need for housing in those areas.
  Has he forgotten how hon. Members opposite allowed local authority house building to decline in those areas? Does he not recall that? Does he not remember and does he not know of the considerable injection of public investment being put now into the local authority programme, especially in those areas where coal mining is getting a special preference for housing? Either he has a short memory, or he thinks that we have. He should not put this sort of thing to us when we conside the changes we have had to make after the failure of hon. Members opposite to make them in their time. Take the development of the gas industry. Are not fundamental changes being made there?
  Look at the human side, the earnings-related benefit which my right hon. Friend introduced to make for more mobility. Why did the right hon. Gentleman not do that? He spoke of training and paid tribute to the fact that the number of Government training centres has increased. Indeed, it has. When his Government went out of office there were 13, but now there are 31 or 32 and there will be 39 next year. This has had a tremendous effect on the prospects for trained men.
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  The right hon. Gentleman should not pour scorn on what has been done in relation to training in industry because, in my view and the view of my colleagues, this can play a fundamental part and a bigger part than Government training centres can provide for training. [Interruption.] All right; he did not pour scorn on it. Let me try to put it in another way. When the right hon. Gentleman is putting this picture, he should accept and recognise that the Government training centres are only one small element in the total Government training programme. The other and much bigger element arises from the industrial training boards. This is where the big pivot for industrial training is today.
  Since the 1964 Act was passed, 17 boards have been set up. Consultations are proceeding about setting up another three. In addition, three more industries are now in touch with the Ministry of Labour to make some preliminary inquiries. Eventually, we expect that there will be about 30 of these training boards. The present 17 boards cover about 9 million workers.
  This is where the training will be done. Some of them are already operating, and they will be operating, on a very big scale. For instance, the Engineering Industry Training Board has a levy income of about £70 million a year. The Construction Industry Training Board has a levy income of about £6 million a year. They have been eligible for Government grants; public money has been made available to them during the first 12 months to help with their administrative costs. Government loans are being made available to these boards and will be made available to them for the acquisition of fixed assets and to provide working capital.
  This is where the training for skill, which is so vital for the structural change which the Leader of the Opposition calls for, will be done. We are making the fundamental changes that the Tories should have made, and all the time they are saying to us, "Why do you not make these changes?" and then objecting to them when we start on them. I do not think that the right hon. Gentleman begins to make out a case when he says that we are not making structural changes and that we have not produced the results yet.

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  Apart from that, the debate has been about three things: the level of employment and future prospects; the working of the prices and incomes policy, the position of development areas, and the extent to which they can be strengthened; and the general economic situation in the Government's plans for the future. My right hon. Friend the President of the Board of Trade dealt with the position of the development areas. I think that there was general acceptance in the House that the additional measures he is now proposing to take will have further effect on shielding these areas from the effects of existing economic policy. When my right hon. Friend the First Secretary winds up tonight, he proposes, in dealing with the general economic situation, to deal also with certain aspects of the prices and incomes policy.
  What I should like to do this afternoon is to discuss the overall economic prospects and policies and especially to examine the triple objective of growth, full employment, and a satisfactory balance of payments. In the Government's view, these three must run together. One of them alone cannot for ever be the pivot around which the other two revolve. All of them are essential.
  Looking back over the last four or five years, in 1963–64—I state this as a pure matter of history; I think that it will be accepted—all the accent was on growth, with a pretty total neglect of the effect on the balance of payments. That was the essential element which was chosen at the time. It resulted in a substantial degree of growth. It also resulted in a monumental deficit in the balance of payments. Clearly the Tory Party will acknowledge that it did not get those three things—growth, balance of payments and full employment—into balance.
  The year 1965 came along. The Labour Government attempted to get a better balance between growth and the balance of payments. It was clear that we could not run on as we had been doing, in view of the massive deficit. We were partly successful in getting a better balance. The deficit on payments—I will take up some of the right hon. Gentleman's figures later; perhaps he will forgive me for the moment—was reduced from about £760 million to £319 million.
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  In 1966 we hoped for, and I expected, a further considerable improvement. We thought that we were getting the balance right as between the three members of the Troika. That did not materialise. The first sign of this was the seamen's strike. There are other factors which are present in the minds of Members of the House. It was clear by the middle of the year that, having run a deficit for four successive years and as it seemed likely that there would be a further deficit in 1967, the Government would have to get the balance altered once again in order that the balance of payments itself should be first among the three essential elements. I repeat: I do not think that in a healthy society the balance of payments can for ever he the pivot around which everything else revolves. There is a need for full employment and for growth.
  Having made this for the time being our primary objective, what is the position? The right hon. Gentleman asked me to give an account fairly to the House. I would resist the implication that we are not giving facts to the House. I could give a great many illustrations of improvements in statistics, material and information made available to the House during the last two years. One of the interesting and valuable things has been the growing desire for more information about these matters. It is enabling us to have better-informed discussions of them. I, for my part, welcome it and I can assure the House that I will always give all the information I can.
  The right hon. Gentleman referred to the standing of sterling. It is not very helpful to compare 1961—even though it was the same month—with 1966. There have been very substantial developments in the European capital markets and in the flows of capital, especially in the development of the Euro-dollar market, since 1961, and I would not accept that this makes any comparison very valid.
  What cannot be denied, and what is a matter that everyone in the House will welcome, is that there has been a substantial improvement in the standing of sterling since the summer in the exchange markets. The reserves rose in September. They rose in October. There has been a further improvement in November. We

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  have begun to repay a short-term debt to the central banks. In addition, forward commitments of exchange equalisation account to the market have been sharply reduced.
  In short, what those figures and facts show is that confidence—this is the word; I come to the reality, as opposed to the intangible—has improved. There can be no doubt about this. Confidence in the capacity of Britain to pay her way has improved so markedly that in terms of sterling we have been able to reduce our liabilities very substantially.
  The evidence which I think helps the rest of the world to reach this conclusion is derived from the recent trade figures. One very good month does not make a summer, but it is an indication. As my right hon. Friend the President of the Board of Trade said yesterday, exports this year are up by 6 per cent. There was an all-time record in October. Imports have probably been depressed by the deferment of shipments in anticipation of the end of the temporary import surcharge.
  The right hon. Gentleman asked me whether some estimate had been made about this in considering the balance of payments situation next year. The answer is that it has. An attempt has been made to assess the movement in world trade—this is another question he asked me—in order to see what effect that would have. As the right hon. Gentleman knows, it is not usual to publish forecasts of figures, for the very good reason he gave—that the forecasts are always wrong. In trying to make the forecast, some account has been taken of both these elements.
  The present quarter should be a great deal better than earlier quarters in terms of balance of payments. But the improvements come too late, being only in the last quarter, to affect substantially the deficit for the year as a whole. I expect that it will be a considerable deficit, although it will, of course, be less than last year and very much less than in 1964. I have no reason to depart from the previous estimates I have given the House, that the overall balance of payments will move into surplus next year, with a healthy surplus over the year as a whole.
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  Our reserves do not move necessarily in line with the surplus or deficit of the balance of payments. As I said a moment ago, they are affected by movements of short-term capital, and these in their turn are influenced by relative interest rates in the main financial centres. The right hon. Gentleman was right when he said that our difficulties had been increased this year by rising interest rates elsewhere.
  No one can predict with confidence how world interest rates will move next year. All it is possible to say is that some slight easing has been perceptible recently, but, in my view and in the opinion of many I have talked to, this will not go very far until some other countries make fiscal policy do some of the work which is now being undertaken by monetary policy. When that happens world interest rates will get a downward push.
  As to the future of the balance of payments, the right hon. Gentleman spoke of the surplus which would be needed over the next few years. He is quite right. There will be need to repay the drawings made on the International Monetary Fund. In December 1967, it will be necessary to repay the first drawings made on the I.M.F. and on Switzerland. The figure will be—the right hon. Gentleman is right; this is one of the pieces of information I have given to the House—rather over £300 million, although that depends to some extent on drawings made in the meantime from the I.M.F. by other countries.
  By 1970, there will be the liability to repay a further £500 million. I agree with the right hon. Gentleman that that is a difficult task. In a newspaper article on the Common Market which he wrote recently, he said that the Common Market countries would not want to take on a country with a load of debt. I should have welcomed that sentiment more if he had thought about it in 1964. This is the way we have had to finance that deficit, and the largest part of the borrowing is made up by the need to finance that deficit with the borrowings which were then made. But the right hon. Gentleman is quite right, we must aim at a continuing surplus on The balance of payments, and this will make our task quite difficult over the next few years.

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  I turn now to the internal situation. The right hon. Gentleman said that the country wants to know what is going to happen in a serious situation. I welcome the opportunity which the debate gives of spelling out Government strategy for the next phase of the process of industrial redeployment and reconstruction. What changes are needed in the long-term structure of the economy? I have had a word to say about that already in taking up debating points at the beginning, and I shall come back to it later.
  As the House has recognised during this debate, we have moved into a position where there is spare capacity in both industry and in labour. This is more true, incidentally, of unskilled than of skilled labour. There are still many places where skilled labour is in demand, and this emphasises the need for the training to which the right hon. Gentleman referred and which we are getting on with.
  In response to what the right hon. Gentleman said, I wish to make clear that we do not aim at a large margin of unused capacity of labour. To do so would be both wasteful and inhuman. I noted what the right hon. Gentleman said about this himself, and I agree. I hope that in our propaganda in the country and on television we shall attain the same high standards in approaching this subject as we are doing in the House of Commons. Neither do we aim to return to a position where there is a constant collision between pressure on our resources and the capacity available to meet that pressure. It was that situation, the collision which we constantly had, which has been responsible, more responsible than anything else, I would say, for the continuing inflation. It erodes the value of wages. It erodes other incomes and the value of savings. It puts prices up.
  We have, therefore, reached the conclusion that it is necessary to maintain a situation in which there shall be some margin in order that we are not hitting the ceiling all the time. In the situation which we had, the seller could dictate to the buyer and he did. It has come as an awful shock to some people today to find that we are in a buyer's market. But it is a very useful situation to be in. It has
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  its benefits. It may be very unpleasant for those who believe in private enterprise; they have got to start competing, but I am all in favour of that. That is what private enterprise is there for. As I say, this situation has other benefits. It is at the moment bringing forward some very realistic cost estimates for construction work. There is a greater willingness to tender for work which people were not willing to do before. Firm completion dates are being offered. There is a speeding up in the supply of goods and services. These are real gains to efficiency. It is a very valuable and important result of ensuring that there is some margin.
  I wish to make clear, however, that during the present redeployment the margin of unused capacity may well grow larger than we need for permanent purposes, and the question, therefore, which the House and the country want answered is how we fill up that gap between the margin we want to keep and the much lower point that we might reach.
  I do not think that it is possible—I agree with the Leader of the Opposition—to state an exact margin of unused capacity of labour. In my view, this is to enthrone arithmetic where it does not belong. One needs constantly to watch the balance between growth, the balance of payments position and employment, trying—I agree—to make small changes to achieve the balance one wants. One of the difficulties of the last two years has been that we have had to make violent swings. We had the deficit of £750 million, and we had to try to haul back £450 million in a year, which we did. Now, this year, we are about stationary, and next year we shall swing over into a large surplus. But this is making changes which are far too big. I hold myself responsible in it, but I am saying that it is something from which we must get away. I agree that we want small movements. But please do not enthrone arithmetic where it has no place.
  How to fill the gap? First, we must start with exports. This is not a new thought. It just happens still to be true. The easing of home pressure has made for a keener search for export markets. Very considerable help has been given by the Government—by this Government, let me add—direct to exporters through the Export Credits Guarantee Department

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  Exporters are able to take advantage of the lull at home to meet foreign orders, and I am glad to be able to announce some further help in connection with the export rebate scheme, which, of course, depends on the level of indirect taxation.
  A great many exporters have paid tribute to the value of the export rebate scheme, and it is, indeed, worth quite a bit. In this current year, it will involve a rebate to exporters of about £94 million as compared with their fellows who are not exporting. That is a substantial sum of money even today.
  The Government have reviewed the rates of rebate to take account of the changes in the level of indirect taxation. My right hon. Friend the President of the Board of Trade proposes to lay a new Order for the approval of Parliament which will have the effect of increasing the rate of rebate for most of the exporting industries.
  On the basis of the 1965 level of exports—that is the only basis on which one can do it at the moment—the increased rebate will be worth an additional £5·6 million in a year to industry. This will help manufacturing firms to get costs down when they are going into these fiercely competitive overseas markets.
  For example, the rebate to the cotton and man-made fibre industry is now worth £1·7 million and will be increased by another £300,000. In iron and steel, the rebate is worth over £6 million and will be increased by another £600,000. The motor car and cycle industry gets a very substantial benefit from the rebate at the moment and the more it exports the more it will get. Its rebate is about £13 million a year which will be increased by getting on for £2 million. The rebate for aircraft is £2·4 million which will be increased by another £340,000. For radio and telecommunications, the rebate of £2·6 million will be increased by £416,000 while; for precision instruments and jewellery, where the present rebate is £2 million, the increase will be £364,000.
  In the case of a number of other industries, the rates will not be changed and for two industries there will be a small reduction in the amount because of the level of taxation. But, overall, the new levels will be a substantial advantage to
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  industry. It is tax that I am very glad to forgo because every penny paid out in rebates represents more exports. It is a rebate that industry I know has appreciated.
  Mr. J. Bruce-Gardyne: Can the right hon. Gentleman confirm that the rebates will not apply to exports to E.F.T.A.? Presumably he has also studied whether these new provisions are within the terms of G.A.T.T.
  Mr. Callaghan: These rebates do not apply to E.F.T.A. because E.F.T.A. countries will be tariff-free to each other as from 1st January next and therefore our exporters have every incentive to go to these countries. There is no barrier to get over. The subject has been examined from the point of view of G.A.T.T. and it is accepted that the remission of taxation in this way is within the terms of G.A.T.T.
  Sir Harmar Nicholls: This is a very valuable move in the terms I have been pushing for for many years. But it is only a way round G.A.T.T. Are discussions going on with the idea of being able to include such rebates in the Budget in the normal way?
  Mr. Callaghan: I cannot go as far as that at the moment. I acknowledge that the hon. Gentleman made a number of speeches when he was on this side of the House pressing his own Government for exactly this scheme. He is in the same old position. He asked his own side to do it—it is we who are doing it.
  There are good prospects that the level of world trade will remain high next year. I have been asked whether our share was declining. It has gone down pretty steadily. The estimate we have made for next year depends naturally and this is a forecast—on how well our exporters can do. But we are in a different position from the situation in 1961–62—and this is where the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) had bad luck, if you like. He tried to get an export-led boom going, if that is the right word, by lowering demand in this country. Alas, at that moment, or almost at the same time, the general level of world trade turned down. This is not likely to be the position at the moment.
  Mr. John M. Temple Mr. John M. Temple (City of Chester) rose——
  Mr. Callaghan: I have given way several times.
  When we were at the O.E.C.D. last week, I discussed this with my Ministerial colleagues and it was agreed among us that the growth prospects of the major industrial nations of the world look likely to be good even for the rest of the decade and I think that it is fair to say that, although the increase in world trade next year may not be quite as much as the increase was this year, there will be a substantial increase in the level of world trade and this would give our exporters the opportunity they are seeking.
  I therefore hope that we shall not find a decline in our share of the level of world trade, but that must depend on the degree to which we are successful. In relation to the primary producing countries, again demand may be better next year than this year. Their reserves have been rising for several years.
  Mr. Temple: Has the right hon. Gentleman seen the graph in The Times today by Unilever statisticians forecasting that trade will drop substantially in the next year?
  Mr. Callaghan: I have not had time to read The Times today. I was too busy preparing my speech. But I will certainly look at the graph. Unilever is entitled to its opinion but I hope that it is wrong. If it is right, it is going against the general expectation of those who look at these matters in the United States and certainly in the O.E.C.D. countries as a whole. I very much trust that it is wrong and I am sure that the hon. Gentleman wants to look on the bright side and not on the gloomy side.
  Sir Cyril Osborne: We want to look at the truth.
  Mr. Callaghan: There is no truth about this. It is a matter of forecasting. Overall, therefore, I expect to see a healthy rate of growth next year in world trade even though not quite as much as this year. Everyone recognises, and we constantly talk about, the supreme value of exports to our balance of payments. What is not so often acknowledged is that increases in exports—and I point this out to some of my hon. Friends who are pressing for a different type of reflation—have a strong reflationary effect at home. We get a double benefit in the
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  present situation—a help to the balance of payments and a reflationary effect at home. The Government therefore look first to exports, but not only to exports, to help fill up the gap of unused capacity. It would be most healthy if we could see demand grow at home because of increasing exports.
  Next, we look to productive investment by industry in new plant and machinery. The right hon. Gentleman said that this was forecast to fall next year and this, indeed, is what is expected. But it is vital to use the present lull in home demand for the improvement of industrial capacity and additions to it and I hope that we shall have his help and the help of everyone else in the House in trying to get this fact understood by industry in places where it is not so understood.
  Some people argue that modernisation of plant and machinery will create additional capacity at a time when there is some to spare. Precisely. That is the object of the exercise. It is what we need to do. We need to pave the way for renewed growth. Several times in the past we have tried to grow and have come up against the limitations of capacity, with consequential increases in imports and with exports suffering in the scramble for home markets. The more capacity we create now the sooner and the faster we shall be able to grow.
  It was for this reason that my right hon. Friend the President of the Board of Trade announced the bonus system today for firms during the next two years. As is well known, the permanent grants for new plant and machinery begin at 20 per cent. and are 40 per cent. in development areas. For the next two years, there will be a higher rate of grant of 25 per cent. overall with 45 per cent. in the development areas. These grants will apply to machinery and plant for manufacturing industry, construction, bridge-building, ship repairing, vehicles, plastics, petro-chemicals, spinning, weaving, computer plant used for scientific research, mining work—these are only some examples. Agriculture and fisheries will be covered by the special arrangements that my right hon. Friend the Minister of Agriculture will be discussing in due course.
  Perhaps I can give a simple example. The new temporary grant will give a

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  substantial bonus on a piece of machinery costing £10,000. The normal cash amount will be £2,000 but for the next two years that sum will be increased by £500. In the development areas during the next two years those who invest in new plant and machinery within the categories set out will be eligible, on a piece of machinery costing £10,000, to a direct grant of as much as £4,500. No one can claim that this will not encourage private manufacturers. Quite clearly it will.
  Of course, other things are important. They want to be able to see a market in which they are going to use their new capacity and to see a reasonable return on the capital employed. These things the Government have undertaken to ensure. [HON. MEMBERS: "Oh."] Even if the last point is in dispute, whether for party reasons or not, I do not know, what cannot be in dispute is that the real way for them to get a long-term market is to invest in plant and machinery now. Of that there can be no doubt. If they invest now, they will make possible the next round of expansion and also enable it to keep going once it has happened.
  Mr. Terence L. Higgins: Can the right hon. Gentleman confirm that the increase in grants which he has just suggested will increase the rate of return, which is the important factor in making an investment decision, on a product yielding 10 per cent. by only ½ per cent?
  Mr. Callaghan: I have looked at this on the discounted cash flow basis. I cannot quite recall the answer now, and I hope that the hon. Gentleman will excuse me, but, so far as I can, I think that it will make a difference of about £3 in £100. That is a substantial figure if I am right, but I would not want to be held to that. Will the hon. Member for Worthing (Mr. Higgins) take all that I have just said as cancelled? If he will put a Question to my right hon. Friend the President of the Board of Trade, he can then have an answer.
  The right hon. Gentleman referred to the disadvantage which private manufacturers have been under as a result of a shortage of capital available for investment. I think that he is right and that that has undoubtedly had an effect on
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  the setting back of some investment plans, but I do not go all the way with him when he says that repayments of the premiums which attach to the Selective Employment Tax will not have a substantial effect in overcoming that difficulty. I think that they will, and that is the generally held view. The period of extreme stringency is now coming to an end.
  Nor did I think that the right hon. Gentleman was right when he told the Scottish Young Conservatives that, because of the Bank of England, pressure is being put on manufacturing industry by the banks. That is not my experience. I have made many inquiries about this. I have had some complaints about it, but when I have looked into them I have usually found that it is because of the absence of credit worthiness on the part of the borrower rather than any other factor which has resulted in the bank denying credit to a manufacturer or exporter. The right hon. Gentleman will remember that manufacturing and exporting are right at the top of the list of priorities. If the right hon. Gentleman has examples, I will look into them, but I have not had any real complaints that a manufacturing industry which has genuine needs has been kept short of funds. I think that industry is going to be put into funds again.
  The right hon. Gentleman attacked public investment. He declared war on two things this afternoon and this was the second. It is much more important and significant than he gives credit for and it plays an invaluable rôle in the economy, despite the loud and bitter complaints of hon. Members opposite. I hope that one day I shall persuade them to see where logic and commonsense lie in this matter.
  I will give only one example. We all remember that last winter hundreds of firms in the Midlands and thousands of workers lost millions of pounds worth of production because the gas industry was not able to supply them with power. Why? Because there had been a failure to have sufficient investment in the gas industry at the right time.
  I know that hon. Members opposite are prejudiced against public investment, but they should not let prejudice go to extreme limits. This is the kind of public investment which is vitally necessary to the country. There are sound

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  economic reasons for making investment in these industries. Is the right hon. Gentleman going to tell me that the gas industry's investment of £15 million in the scheme for importing Algerian methane and distributing it was a bad investment?
  Mr. Heath: No.
  Mr. Callaghan: But that is the point. His argument is that public investment is bad.
  Mr. Heath: No.
  Mr. Callaghan: Yes, yes, yes. That is what he said this afternoon. He should go away and read his speech.
  Mr. Heath: The right hon. Gentleman need not work himself up like that. I have never attacked all public investment. Good heavens! The right hon. Gentleman should remember the amount of money which we put into the nationalised industries. What I said was that if there were a slow rate of growth but that at least 4¼ per cent. was taken out for public investment, that meant that someone else must be deprived of it. In other words, with a slow rate of growth it is a question of balance.
  Mr. Callaghan: I think that when the right hon. Gentleman reads his speech, he will find that he was making a much more general attack on public investment. I wrote this down before he made his speech, because this is the constant cry of hon. Members opposite. They are opposed to public investment and the right hon. Gentleman's comments this afternoon reinforced us in the view that they are always against public investment, although when their short sightedness and the folly of their approach is shown up, they start to crawl out of it.
  There have been a number of examples of valuable public investment, which increases public expenditure. For example, last year the Government took up their rights issue in British Petroleum. Good public investment, or bad public investment? Obviously good—obvious to everyone except, perhaps, the right hon. Member for Flint, West (Mr. Birch), who could not see anything good about anything we ever did. The road programme is increasing. Public Investment. Good or bad? Telecommunications in the Post Office; expenditure is increasing. Public
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  investment. Good or bad? Bad on the basis of the approach of hon. Members opposite [HON. MEMBERS: "No."] Oh, it is not bad. It is good, is it? Now we know. At long last! As my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) once said, there has been nothing like it since a Chinese general converted his troops with a hose pipe. They are all in favour of public investment now, every one of them, and they are ready to accept that it is a good thing for public investment to go ahead where it is justified, even if it means increases in expenditure.
  Several Hon. Members Several Hon. Members rose——
  Mr. Callaghan: Three hon. Members are now rising to their feet, but I am sure that each will have the opportunity to make a speech in due course. It is foolish to suggest that public investment is not a good thing when it clearly is in so many respects.
  I was asked whether the investment programmes were being cut. The answer is that their rates of growth are being pruned to their needs. For example, the amount in the electricity industry is being pruned back, because it is not expected that the needs will be as great as was originally planned; but compared with the amount spent in 1966–67, there will not be an actual reduction in public investment expenditure but an increase in 1967–68, but not as large as the increase originally planned.
  The combined effect, therefore, of higher public investment, which, we are all agreed, is necessary, and higher exports will generate renewed expansion at home and hence an increase of personal consumption at home. I expect that this will more than offset the fall in private manufacturing investment which has been forecast and which we hope to arrest as a result of the measures which my right hon. Friend announced today. If they rise, we shall see output rising again. In addition, there will be some stimulation due to the increase in wage rates shortly to take place during the period of severe restraint, and also because of stock building and because there will be some wearing off beginning in the new year of the effects of the present hire-purchase restrictions.
  All these factors added together show why in the Government's view it is wrong to have a general reflation at this

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  time. It may become appropriate from time to time to take deliberate and measured steps to encourage the expansion of consumer demand and to help industry to keep down unit costs—I accept what the right hon. Gentleman said about that—especially when those industries are in the export markets. The Government will continue to watch all the aspects of this situation very carefully, but will rely upon the planned reflation which we hope and expect to see, and which we have taken measures to ensure, in exports in productive investment, private manufacturing and in public investment.
  Another factor in this situation is the development areas, but I think that I should not spend time on that subject today in view of the substantial speech which my right hon. Friend made last night when he announced further measures.
  Mr. Stanley R. McMaster: Would the right hon. Gentleman care to say how far the investment grant scheme which he has mentioned will apply to the development area of Northern Ireland?
  Mr. Callaghan: The hon. Gentleman knows that the Northern Ireland Government have their own scheme in these matters and that it is a matter entirely for them.
  I was asked a question about public expenditure. It would be clear from what I have said that, apart from the expenditure in public investment, which is economically necessary, I do not look to public expenditure as a whole to fill up the margin of unused resources. I made clear that it is not right to restrain public expenditure, especially where it contributes to strengthening the economic basis.
  The Departments have been enjoined in preparing their estimates for this year, to scrutinise all items of expenditure carefully, and the pruning process is taking place. Likewise with local authorities. My right hon. Friend the Minister of Housing and Local Government has begun discussions with them and the same injunction will be placed upon them in relation to their services.
  The growth of public expenditure next year must be contained within what is
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  tolerable. I understand the natural curiosity and interest of hon. and right hon. Gentlemen opposite in what the level of public expenditure next year will be. I have been pressed to state, in November, what the figure is likely to be. The estimates are not yet ready; it is too early to say.
  We shall be looking at public expenditure in connection with the planning operation referred to by the first Secretary on 10th November. It is against this background that we shall be reviewing the 4¼ per cent. for public expenditure increase as a whole. The House will recall that this figure was an annual average for the whole period from 1964 to 1970. It was not tied to a single year. We do not expect to get 4¼ per cent. every year. Last year, for example, the increase, at constant prices, was only 1·8 per cent. Therefore, it would be wrong to expect that rigidity every year, irrespective of the measures we plan, that there is going to be a level of 4½per cent.
  I was asked about defence expenditure by some of my hon. Friends. Great pressure is being exerted by them on the Government and the Government are exerting great pressure to reduce overseas defence expenditure. I want to repeat that military strength has little value if it is achieved at the expense of economic health. Our aim is to ensure the right balance between defence responsibility and economic capacity. This is a continuing process and not a once-for-all process. Decisions that have been taken in the Defence Review will significantly reduce the cost of supporting troops overseas. They will cut back the budgetary expenditure foreseen by the Opposition by as much as 10 per cent. by 1969–70. The House knows that work is still going on to achieve the £100 million saving in overseas expenditure that was announced in July. It is our intention to continue to review defence expenditure as a whole in order to achieve a steady reduction in our world-wide burden.
  Mr. Stratton Mills: Is the right hon. Gentleman still confident that the £100 million reduction in overseas Government expenditure will definitely take place during the next financial year?
  Mr. Callaghan: That is an unnecessary interruption, because I was asked that question on Tuesday and the hon. Gentleman was here and heard the reply. I do not think that I should spend time on that now.
  I was also asked by some of my hon. Friends about the position of sterling. I emphasise again that our position as a reserve currency country brings both benefits and burdens. It would be nice to get rid of the burdens, especially if we could keep the benefits. But, on the whole, there is no rose without a thorn and that is true here. It would be wrong to encourage the thought that the international monetary system which has grown up over so many years can be changed overnight.
  It is a vast, complex and delicate mechanism and, badly or roughly handled or interfered with, it could plunge world trade into a deep depression. We have to watch some of the radical proposals, which it is easy to make from some of the editorial chairs, about the changes that can be so suddenly and drastically made. It is my view, and I approached this without any prejudice, that such changes cannot be easily made. It is equally wrong, however, to ignore the fact that the monetary system that we have is changing and modifying all of the time.
  We are doing everything that we can to press forward the process of change. Two examples come to my mind. There is the development of the techniques that have taken place during this year to enable the reserve currencies to play their part with less strain on the domestic economy. There is the development of international reserves. In my accidental capacity as chairman of the Group of Ten this year I have invited the deputies of the Group and the I.M.F. to come to London in February in order that we may pursue this project further. In the longer term I am hopeful of substantial changes, but I do not promise spectacular changes tomorrow.
  I return to where I started. The problem for this, as for any Government, is to combine a satisfactory balance of payments, with growth and full employment. I agree that future growth—this is part of the Government's policy, we do not have to learn it from anyone else—depends
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  upon the growth of productivity, upon stepping up investment, making full use of the latest technology and the more effective use of manpower.
  It is in some ways encouraging and in other ways a sobering thought that, whatever our immediate difficulties may be with the manpower situation, if we get this proper combination of these three elements, then in the long run we will have not a superfluity of manpower but a shortage of it. This implies a continuous process of redevelopment and retraining and that is why there must be mobility and that is why we have taken the measures that we have, with the practical steps in anticipation of this need. This also shows the need to improve the supply, or more particularly the quality, of management on which depends so much the efficiency of British industry.
  The Government's policy is based on the principle that we can harness full employment, growth and the balance of payments together. We believe, whatever may be said by hon. Gentlemen opposite, and whatever jibes and sneers may be uttered, that the National Plan is essential to this. The National Plan must play a central part if people are to have confidence in the future and if we are to achieve success.
  The First Secretary said that the present Plan is being revised. That does not mean that it is being abandoned. It is more necessary than ever that we should push ahead with the programme of action contained in the Plan, because success must be based upon getting a proper and satisfactory growth rate. I was glad to see that the National Economic Development Council, which is made up of industrialists, trade unionists and the Government recently strongly reaffirmed its belief in the continued value of this kind of planning.
  This is supposed to have been a Motion of censure, dealing with lack of confidence. I am bound to say that I much prefer the confidence of these industrialists and these trade unionists to the lack of confidence of the Opposition.
  6.8 p.m.
  Mr. Nigel Birch: The right hon. Gentleman had obviously prepared the polemnical parts of his speech before listening to the debate, because he did not hit the bull's eye once. He also pursued a technique which I have noticed

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  many Ministers opposite use when perfect harmony does not reign on their benches, of so overloading their speeches with detail that they become almost impossible to listen to.
  This was a long speech, ranging over very many subjects, but not really getting to grips with the real fundamentals of our position, as I shall endeavour to show. One thing which I thought was a little dangerous was the enthusiasm of the right hon. Gentleman for what he calls planned reflation. After enumerating all of these things, I found it difficult to see what was to happen to the balance of payments.
  In many ways this debate is rather a sad one, because most hon. Members, wherever they sit in the House, who follow our economic affairs, must feel that our country is trapped in a position from which it will not be easy to get out. The nature of the trap is that on 20th July the Government, out of necessity, were forced to pull out every stop that they had. The result was quite a fair amount of deflation, but contrary to what the Chancellor said, I do not believe that there has been any real international revival of confidence in the £. It certainly has not happened. That puts us in an awkward position.
  Why has not this revival of confidence come about as it has after earlier crises? The reason is the length of the crisis. The first run on sterling started more than two years ago, and it was 20 months before effective action was taken. During that time, inflation roared ahead, prices and costs rose, we lost our reserves and incurred enormous debts. Over this long period the nerves of even our most courageous friends became frayed. I think that their nerves are also frayed by a lack of direction in our economic policy which I believe, after listening to the Chancellor of the Exchequer today, is still lacking.
  I would say this of the Chancellor. I believe that if he had been allowed to run his Department as previous Chancellors were allowed to run theirs he would have had a much more cheerful story to tell. He would have acted more quickly. But first he had that public nuisance, the Department of Economic Affairs, thrust on him, and it still stinks
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  on his doorstep. He has also had to suffer from a Prime Minister who likes to be his own Chancellor of the Exchequer as well as his own Foreign Secretary and Secretary of State for Commonwealth Relations.
  The Prime Minister is becoming increasingly fond of nautical metaphors. We had another one today. I suppose that the sea water gets into the blood of these tough purposive Scilly Islanders. I have no objections to the right hon. Gentleman using these metaphors as long as they are good ones. He shows some familiarity with the technological jargon of the age of sail.
  There is, however, one metaphor which I do not think the Prime Minister can get away with. He said that he had been blown off course. "Blown" was perfectly all right; he is blown one way or another practically every day—look at Rhodesia. But the phrase "blown off course" conveys the idea that one was on a course and that one can navigate. I have no doubt that the Prime Minister can chatter very pleasantly about charts, astrolabes and chronometers, but he cannot navigate. That is the basis of our trouble.
  Before considering what will happen next, I should like to make two points on what I think will not happen. I do not think that some of the predictions about mass unemployment will be fulfilled. Here I agree with the Chancellor of the Exchequer. Unemployment may be bad, but I do not think that some of the exaggerated forecasts will turn out to be true.
  There is one thing which most people think will happen but which I do not think will happen. As a result of what has occurred in the past, the expectation of the public is that after a period of stop—and in this case, owing to the inflationary excesses, it will, perhaps, be a very long period of stop—we shall return to a period of fairly rapid economic expansion. In fact stop-go will recur, as it did in the golden years of Tory rule. [HON. MEMBERS: "Oh."] It worked very well. We have to have "stops" from time to time, and the Conservative Government always had good "go's."
  What I think will happen this time is that we shall have a prolonged grey period

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  when we shall lose not only our place in the world but the confidence of the world. I think that the Prime Minister really agrees with that. At the cost of agonising boredom, I listened to his speech at the Labour Party conference in Brighton. At least 15 times in that speech he said that we had got away from stop-go for good. He knew that we were in the middle of the biggest stop in history, and so did his audience. He knew that the audience knew, and the audience knew that he knew. What he really meant was that we had got away from the go; we are just having the stop. I do not think that there will be very desperate unemployment. Expansion will be long delayed and very slow. But, of course, it is difficult to plot the course of a ship which is drifting before the wind.
  I have only two points to make on what can be done to help. First, if we are to get the economy working efficiently we must not keep on changing the rules. This is what is happening the whole time. The National Plan was announced, but then, in a few months, it was dumped. Quite a few people believed that as a result of the National Plan something would happen. For those gullible creatures the Foreign Secretary's jape has been very expensive. Then the Government altered the rules by Corporation Tax, Capital Gains Tax, Selective Employment Tax and investment grants.
  The trouble about all these measures is that the people who are supposed to work them—the public first—do not understand them. What is even worse is that the officials who are supposed to work them do not understand them either. The amount of confusion, delay and waste of time as a result is frightful. We are all "had for a mug" occasionally, but the Chancellor of the Exchequer has been "had for a mug" four times running, and by the same man. It is quite something. I hope and pray that in the next Budget we shall not have another hideous abortion.
  My last point is on public expenditure. The Chancellor said a few words about trying to get control of public expenditure. I am convinced that this will be by far his greatest difficulty, and by far the greatest difficulty of all parties and hon. Members. Public expenditure
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  as a percentage of the gross national product has been rising steadily over the last few years. Now, as a result of the Plan, this rise will be faster still because the expenditure, as Ministers have said, is going on as planned but growth is either non-existent or negligible.
  There was a most illuminating pamphlet published the other day written by Professor Sir John Hicks called "After the Boom". He said that we think and talk too much about an incomes policy and not enough about expenditure. He analyses our economy and says that its health depends upon getting the right percentages in the three components of the gross domestic product—that is, consumption, public expenditure, both national and local, and investment. The Chancellor of the Exchequer indicated that he did not think that consumption would go down very much. It is extraordinarily difficult to depress consumption by fiscal means; it never comes off. We can take it that it is fairly fixed.
  The other two components are national and local government expenditure and investment. This comes back to the Chancellor of the Exchequer's point about investment. I am making the same point as my right hon. Friend the Leader of the Opposition. In exporting and import saving the private sector is by far the most important, because it is in the private sector that we find the industries which do the exporting and import saving. It is therefore immensely important that their share should be kept up. But it cannot be kept up if the share of the public sector increases. If the share of the public sector increases and investment increases and consumption stays the same, the only way in which the accounts can be balanced is by another balance of payments crisis which we cannot stand.
  The growth in public expenditure has been terrifying. Public expenditure on goods and services of central and local government on both current and capital account has increased 50 per cent. in the period 1960–65. National expenditure has gone up by only one-third, but local government expenditure has gone up by no less than two-thirds over that five-year period. I am not going into how it could be controlled. All I am saying is that we cannot possibly get our balance of payments right unless we get control

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  of Government expenditure. Without doing that, we will get straight back into the crisis again.
  It is a mathematical question. The laws of arithmetic are inexorable. The Chancellor said that we must not enthrone mathematics, but two and two have a nasty habit of making four. Even 1·5 and 2·5 add up to four. I am certain that unless the Chancellor can get his expenditure under control, we will be in permanent balance of payments difficulty.
  I have got to my peroration. My peroration on economics is always the same. I express the hope that the Government's measures will work, but I express the fear that they are not likely to work because the Government cannot navigate.
  6.22 p.m.
  Mr. Raphael Tuck: I was interested to note the sense of affront that seemed to strike the occupants of the Front Bench opposite when my right hon. Friend the Chancellor of the Exchequer accused them of opening a war on the trade unions. Unfortunately, we have memories and we know that the party opposite have promised that if they get back to power they will introduce legislation to reform the trade unions.
  We wonder what kind of reform it will be. My memory harks back to 1926, when the party opposite reformed the trade unions with the Trade Disputes Act. It was repressive and harsh reform in 1926. Some hon. Members will not be old enough to remember it, but I am, and we wonder whether this reform of the trade unions which the party opposite promise will not take that shape again.
  Despite all the carping criticisms by hon. Members opposite, the fact remains that if both sides of industry had honoured the pledges they made, if they had both kept to the declaration of intent which they signed in 1964, we would not be in the precarious position that we are in now. All honour to my right hon. Friend the Foreign Secretary, who at that time was First Secretary of State and Secretary of State for Economic Affairs, in getting the two sides round the table. They signed the declaration, but they did not keep to it.
  Many of our brethren kept to that declaration, but a small minority caused
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  the chaos in which we find ourselves at present. That small minority was keener on personal and sectional interests than the national interest. It was unpatriotic enough to be so. Wages and prices went up and we found ourselves in a spiral. I must stress that when the employers found, for example, that wages went up by 5 per cent., even though the wage bill accounted for only 40 per cent. of the total cost, instead of putting up the price by 40 per cent. of 5 per cent. they put it up by the whole 5 per cent. with no care for the consequences—the Devil take the hindmost! It did not matter to them. Private gain took precedence over public good.
  Prices went up, and we have made two innovations, with which I shall deal briefly. With one I am in complete agreement, but with the other I am in complete disagreement. The first thing that we have done is to bring in the Selective Employment Tax, which I might term the senseless employment tax. There is a movement afoot in this House and elsewhere to legalise abortion. I cannot for the life of me understand how we came to legalise this one. It was not even properly conceived. It is called selective. If there is one thing which it is not, it is not selective.
  If we want to redeploy labour and to take it from a service industry which is unproductive, like, for example, betting shops—although, I suppose, I should term that a disservice industry—if we want to take labour from an industry which is not productive, like betting shops, and move it to an industry which is productive, by all means let us tax the unproductive industry, and tax it almost out of existence. Let us lay a heavy tax on it, not simply the milk-andwater 12s. 6d. for women and 25s. for men. Let us do it properly and heavily, and one of two things will occur. Either we will get labour moved from unproductive industry and it will be available for productive industry, or the unproductive industry will be so profitable that it will continue and we will get a good amount of taxation out of it. But to lay a blanket tax on laundries and co-ops and small businesses is not selective and can only have the effect of a rise in prices.
  In connection with betting, I cannot understand why the Government have

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  not taken the bull by the horns. What are they afraid of? Why have they not taken over the control of casinos? There is a vast untapped amount of wealth to be had from casinos. Monaco is being run on them. In my view, there is no reason why the Government should not tap that source of wealth to the advantage of the community at large.
  As to the other measure which has been introduced—a prices and incomes policy—I agree with what my hon. Friend the Member for York (Mr. Alexander W. Lyon) said yesterday when he asked for a permanent compulsory incomes control. If we are to have planned growth—and we want planned growth—we must do one of two things. We can have it either voluntarily or compulsorily. It was tried voluntarily, but it has not worked voluntarily. The only other thing that we can do is scrap it and return to the free-for-all, but that is not our policy. We must therefore make it compulsory.
  In that connection, I would go further than my hon. Friend went yesterday. When he said "I would not say that it should apply only to wages", I would go the other way and say that it should apply to every form of prices and incomes, not only wages, but prices and dividends. It will be extremely difficult for the Government to try to persuade trade unions like, for example, the National Union of Railwaymen—the representative of which made a very patriotic, self-denying speech at the Labour Party conference when he said that if it was for the national good they were prepared to take a cut—to feel that they must take cuts when prices and dividends are allowed to go free and to soar.
  I know that there is provision in the Prices and Incomes Act about prices, but, on the admission of my right hon. Friend the Minister of Labour himself yesterday, wages have risen by ·1 per cent. and prices have risen by ·3 per cent. since the summer. Prices are going up more than wages. We are told that it is difficult to control prices and to tell people that they must not go above a certain price. If difficulty is to be the criterion or test as to whether we act, we might as well shut up shop.
  I urge the Government to keep a heavy hand on prices so that they do not go up. I urge them also, as I have tried
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  before, to include dividends as well in this control. If we are to have control, we must have it over the whole economy. About two weeks ago, in a Question to my right hon. Friend the First Secretary, I asked whether he would ensure that the increase in dividends which was not paid this year would not be stored away and then paid out next year when the freeze comes to an end.
  Mr. David Webster: Would it help the hon. Member's argument if he knew that dividends went down 13·7 per cent. in October and 1·1 per cent. last month?
  Mr. Tuck: I am grateful to the hon. Gentleman for giving me those figures. But dividends are not controlled. There has been a voluntary suspension of increases in most dividends, but there is no guarantee to us that, having been salted away, they will not be paid over next year when the freeze is over.
  In answer to my Question, my right hon. Friend the First Secretary said that if there were increases in productivity there could be increases in dividends. However, I am thinking of circumstances in which there is no increase in productivity but where an increase in prices results, and I urge the Government to bring in measures now so that dividends are controlled as well.
  Unless we can control the whole economy, it will be futile to start trying to control wages. A full control of the whole economy is the only way that we can be sure that the prices and incomes policy succeeds and that the economy is put into better shape in other words full control is vitally necessary to planned growth.
  6.30 p.m.
  Mr. Paul Dean: There is very little time left for back benchers to speak in this debate, so I hope that the hon. Member for Watford (Mr. Raphael Tuck) will forgive me if I do not follow his argument but, instead, go immediately to two specific points which I should like to make.
  The first one, which was referred to yesterday by my hon. Friend the Member for Finchley (Mrs. Thatcher), concerns the effect of the White Paper on severe restraint upon occupational pensions. From paragraph 42 of the White

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  Paper, it looks as if there is to be a virtual freeze on any increase in occupational pensions during the period of severe restraint. If that is a correct interpretation of the White Paper, it is most unfair on pensioners, and I believe that it is also unnecessary.
  Hon. Members may have seen the reaction to it by the Chairman of the National Association of Pension Funds, who wrote to the Daily Telegraph on 25th November, saying:
  "It is surely one of the most unfortunate features of the White Paper that pensioners of occupational schemes are to be affected by the period of severe restraint, as such pensioners have been the main victims of the inflationary era."
  That is a very mild comment to make on the White Paper when one remembers that the pension of a single person has already lost something like 6s. in purchasing power since the new rate was introduced in March 1965. That coming from a Government who are pledged to keep pensions and earnings in line is, to say the least, a very great contradiction.
  However, that is not the only reason. Another one is that some funds have already held up modest pension increases during the period of the freeze which they were able to give through their services. If they are now to hold them up again, many pensioners who would otherwise be able to have modest increases will suffer.
  A third point is that very often pensions are dependent upon earnings during the last few years of service. Inevitably, it means that people nearing retirement who are being affected by the incomes freeze will also be affected in the pensions which they get. Even if the Government decide to insist upon a freeze on pensions, how will it be carried out? It is said in the White Paper that some increases may be justifiable for pensioners getting the smallest pensions. Who is to decide who are the pensioners getting the smallest pensions? How will that be decided, and what will be the position of funds whose trustees are obliged, should there be a modest surplus, to distribute it amongst all pensioners and not try to differentiate between one group and another? I cannot believe that to give a pension fund the power to increase pensions will drive a coach and horses
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  through the severe restraint policy. I hope that the Government will think again about that section of the White Paper.
  The second main point which I intend to mention is the effect of the Government's policies over the whole economic held on the development areas and the less prosperous parts of the country. One of the features in speeches by Government spokesmen when the brakes were first clamped on and emphasised time and time again was that the development areas and the less prosperous parts of the country generally would be insulated against the more severe effects of the disinflationary policy. That is one of the things which were emphasised. It has not happened.
  If one looks at the West Country, where I come from, one finds that, far from being insulated against the worst effects, the opposite has happened. If one considers the combined effects of Government policy, one finds that the West Country is being hit harder than in almost any other period since the war.
  The unemployment figures speak for themselves. I know that they are worse in some parts of the country than they are in the West Country, but there is no doubt that the unemployment figures in the West Country for November show that we have 36,560 people unemployed, which is a percentage of 2·7. That is the highest November unemployment figure for the West Country in any November since the war. That in itself does not suggest that the original policies which the Government talk about are having the desired effect.
  It is not only that we have that level of unemployment. It is also that the desire to keep skilled people in the less prosperous parts of the country is working in the reverse direction. I give just one example of a metallurgist in the West Country who was made redundant because of the credit squeeze. He looked for another job in the same area and failed to find one. The result is that that man is now working in London. Here one sees regional policy working in reverse. If our regional policies are to be effective, we need to maintain the skilled manpower in areas of the country which do not share the national prosperity.
  The second aspect of this point is the effect of the Selective Employment Tax.

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  The hon. Member for Watford called it the "senseless employment tax", and I agree wholeheartedly with that phrase and that the tax is a thoroughly bad one from start to finish. However, if we are to have a tax of that kind, it should be used in a really selective way to ensure that those parts of the country where there is a predominance of service industries and which are, therefore, the hardest hit at the moment, have a lower rate.
  The tax could be used as a useful and very powerful factor in encouraging regional development; yet we find that it is bearing down harder on the West Country than on almost any other part of the country. In introducing a new tax, it is a strange sort of justice which operates it so that it bears down harder on those least able to withstand it.
  The figures are quite clear. I have obtained them from a series of Parliamentary Questions which I have put to Ministers, and I shall quote two of the results. The figure for Great Britain as a whole for the premium group is 38 per cent. In the West Country the figure is only 30 per cent. In the tax bearing group the figure for Great Britain as a whole is 35 per cent., whereas for the South-West it is 38 per cent. These figures show quite clearly the burden which this area—one of those least able to bear it—is having to bear under S.E.T.
  I sincerely hope that the Government have recognised the strong arguments which have been put forward from both sides of the House about the effect which this tax is having, and I hope that in the next Budget they will bring forward some substantial changes which will ensure that if this tax is to remain it will assist rather than discourage the development of the less prosperous parts of the country.
  It is no good the Government saying in one breath that they want to encourage regional development and to introduce measures to try to assist that if in the next breath they introduce measures which have precisely the opposite effect. We shall not feel that the Government mean business in trying to spread employment evenly over the country and in trying to assist the less prosperous parts of it, unless all their policies are geared
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  to this and they are all working towards this end.
  6.41 p.m.
  Mr. Archie Manuel: I hope that the hon. Member for Somerset, North (Mr. Dean) will forgive me if I do not follow him in all that he said. I shall, however, like him, to say something about regional problems and some aspects of regional decline, though in relation to Scotland.
  I want to deal straight away with some of the things said by the right hon. Gentleman the Leader of the Opposition. Possibly if he had given way to me I would not have had to say this now, but I cannot leave unchallenged the attack which he made on miners and railway men when he said that there was gross overstaffing in these two industries.
  Over the past ten years there has been a great depletion of British Railways' staff. Many of the very low paid workers have been moved, and there is no comparison between the number there now and ten years ago, and this has happened with very little outcry. There has been a far greater outcry from much higher paid men in the motor car industry. Whenever there is a shiver in this industry, which is far too big anyway, because of its mushroom growth, there is an outcry which would be much more realistic if it were to come from men earning low wages, such as were earned by many miners and railway men at the time when the Beeching policy was in full blast. I hope that the attacks made on the Minister of Transport will be repudiated as firmly as possible when my right hon. Friend replies to this debate.
  We all vividly recall the time when the right hon. Member for Bexley (Mr. Heath) was a major power in the Government. When he was President of the Board of Trade, it was difficult to wring an advance factory from him. Before he would allow one to be built, we had to guarantee a tenant for it, yet we have proved conclusively that if we take advance factories into certain areas they are occupied within a very short time. This has happened in my constituency.
  We also remember that when the right hon. Gentleman held a position of power in the Tory Party the unemployment figure in Scotland was 136,000. I am thinking

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  of 1961–62, when we had the highest-ever unemployment figure. I shall have something to say about the present unemployment figure. It is nowhere near that to that which I have just referred, but I am still not pleased with it.
  Mr. Iain Macleod Mr. Iain Macleod (Enfield, West) rose——
  Mr. Manuel: Unlike the Leader of the Opposition, I willing give way to the right hon. Gentleman, for whom I have a great deal of respect.
  Mr. Iain Macleod: Both the hon. Gentleman and I care a great deal about Scotland. He has compared the present situation there with the situation in 1962–63. He has given the peak figure of 78,000 in February, 1963. Should he not in fairness tell the House that that figure was swollen with 20,000 temporarily out of work, who disappeared from that figure in the next month?
  Mr. Manuel: I am willing to admit that, just as I am sure the right hon. Gentleman will admit that a great proportion of the present unemployment figure of 500,000, I think about 120,000, is made up of people who are temporarily stopped, and who will be re-employed within a short time.
  Last weekend the Leader of the Opposition was in Scotland. He was there for a few hours, parading about the place. He went to a football match in Edinburgh between two teams who are well known as virile opponents. I understand that they were united for the first time in the welcome which they gave the right hon. Gentleman when he arrived at the park. When the Leader of the Opposition speaks in Scotland, and tries to spread gloom and despondency, he cannot gather all the facts in the few hours while he is there meeting Tory leaders who, by their spleen and non-knowledge, cannot advance his case very far. I understand, however, that the right hon. Gentleman had a pleasant interlude. He kissed a girl from my constituency, and also crowned her the queen of the Young Conservatives.
  The right hon. Gentleman does himself and his party no good by making the kind of speech that he did in Scotland against the background of what is actually happening there, and I want to put on record
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  what the business community—the really knowledgeable people—is saying about Scotland's economic situation. "Scotland", the monthly review of Scottish business—and I take it that this being the official organ of the Scottish Council for Development and Industry the Tories read this valuable publication—said in its editorial in the December issue:
  "Looking back over the panorama of 1966 and forward to 1967, the Scottish Council can sum up its impressions in two words: confidence and clarity. Confidence springs first from the performance of Scottish industry. Established industry has continued to expand, new companies have continued to come in. Exports have risen—the recent survey made by the Council gives evidence that Scotland now leads the whole of Britain in export performance. Communications with other countries, vital to expansion, have improved—witness the successful new links to Holland and Germany introduced this year. Publicity has been given to Scottish events and developments by journals and broadcasting organisations on an entirely new scale. Scotland is—at long last—news in the right sense. Confidence springs also from the accumulating evidence of the strength of the Scottish economy."
  I do not think that there could be a higher tribute than that, no matter how much the hon. Member for Perth and East Perthshire (Mr. MacArthur) would like to puncture it, because these days he tries to create an air of growing gloom, despondency, and despair whenever he can. What is he going to do about this? He will need to look pleased about it even though he is not. Therefore, we have to regard this sort of evidence which we can produce as being very valuable.
  I could quote much more. In the November issue of the Midland Bank Review, right on the front page under the heading "Scotland takes the Strain", it says:
  "On balance over the last two years the Scottish economy has made good progress. Output and exports have risen faster than in the United Kingdom as a whole, and more new industries have been attracted to Scotland".
  That is very good. It is most heartening, and I am delighted about it.
  I want now to say something about the Prices and Incomes Act. Some very good friends of mine within the Labour Party and the House of Commons, whom I have known for a very long time, and I separate on this issue. I supported the prices and incomes policy of the Government. The necessity for Part IV of the Act did create a great deal of concern and sadness to Members on this

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  side of the House. I have a great reluctance to be associated with something that is not voluntary. The acceptance of this legislation at the Labour Party conference and at the Trade Union Congress, and the recognition of the need for it, revealed that the last thing that a great many of our people want is the discontinuance of a Labour Government or the weakening in any way of a Labour Government. I want the Government to continue. We have to face up to the realistic situation that all of us are agreed that we want a Labour Government to continue. Therefore, I reluctantly and sadly gave my support to the legislation. I hope we may find that at the end of the day it has been well worthwhile. At least, I sincerely hope so.
  I will now deal briefly with the six-months' period of severe restraint which we will soon be entering. If this is to be successful—and I hope my right hon. Friend on the Front Bench will recognise that some of us want it to succeed—my right hon. Friend should recognise that there will need to be strict control of prices. Spiralling prices will kill the Government's objective. The Government cannot, during the next six months, allow prices or rents to rise. This will be one of the most salient points in the success of the Government's policy over the next six months. We have to recognise that many local authorities are poised. They have listened to the Government and they have not increased their rents, but they are prepared to do so in January and February of next year. If that happens and we get the alarming increase in rents about which I have read, it will have a most damaging effect on the situation. The trade unions will be forced—and they will have my complete support—to go forward and wring what they can out of the employers if rent increases are imposed which will reduce the amount of food eaten in many homes and the kind of clothing worn by children in those homes.
  Prices and rent increases will need to be controlled. Certain increases will be discussed and allowed for productivity in certain sections of industry. It is also considered that increases will be allowed for lowest-paid workers.
  Regarding productivity, I am sure that the Minister of Labour recognises the
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  problem, because I have already put a Question to him on this matter. My hon. Friend should recognise that there are many thousands of workers in this country whose productivity cannot be measured. It is all very well to say that productivity can be measured in certain industries, but there are many workers—and I include railwaymen in this category—whose productivity cannot be measured. They provide a service day in and day out on a very low wage. For instance, we cannot measure the productivity of a signalman at work in his signal box, because he does not decide the number of trains that pass along the track. Also, a locomotive driver does not decide the number of carriages or wagons comprising his train, nor does he have any say about signals which are against him on a particular journey which delay his progress. All these things are out of his control. It has to be recognised that productivity cannot be measured in these grades of railways workers. Many workers in these grades are very low paid, and because their productivity cannot be measured I hope they will not be refused wage increases, because those increases are certainly their due.
  My final point concerns unemployment in the development areas. I have already described what is happening in Scotland. Although we are making economic progress, we now have 78,000 unemployed. The Scottish economy has made good progress. Output and exports have risen, as I said, faster than in the United Kingdom as a whole. Although this is very good, every Scottish Member on this side of the House will be concerned that there are 78,000 people unemployed. I hope my hon. Friend will convey to the Ministers responsible that it is our considered opinion that it is time the unemployment figure was reduced. The situation cannot continue, or the picture that I have given of the real recovery that is happening in Scotland will be damaged. It is time that the screw was being loosened a little and unemployment in Scotland steadily reduced. I hope my hon. Friend will convey to those in control of this situation that we have to ensure that Scotland's future, both financially and economically, will not be blurred because of further depopulation arising from the

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  present high unemployment figure. I hope that figure will be substantially reduced in a very short time.
  7.0 p.m.
  Sir Cyril Osborne: The Chancellor of the Exchequer has told us that our major problem is to produce exports at the right price, in adequate quantity, of the right quality and delivered on time. That is the kernel of the problem. He might have added that the exports must be sold at prices that produce profits. Exports sold at a loss harm the economy. He must also remember that those exports will have to be made by the private sector of industry and that he must regain that sector's confidence or he will not get his exports.
  The right hon. Gentleman chided my right hon. Friend the Leader of the Opposition for making a speech that was not a sufficiently vicious condemnation to justify a vote of no confidence. It is fair to say, however, that no hon. Member would have believed that eight months after the new Labour Government came to office flushed with victory, with a majority of 100, suffocated with economists—most of whom knew all the answers to all our problems—they could have reduced our national affairs to the present chaos. That is the greatest condemnation of the Government, plus the fact that one-third of hon. Members below the Gangway opposite would, but for the fact that it would destroy their own party, like to murder their Government themselves.
  Speaking as a business man who has these problems to solve, I must say that the Ministers give me the impression that they no longer control events and are bewildered and frightened by their problems. On the other hand, we do the nation a disservice if we exaggerate our difficulties. The country is not down and out, and it is not next to broke. Our economic problems are marginal and can be overcome.
  The Prime Minister said in New York last year that Britain had £11,000 million or 31 billion dollars of overseas investments. I should like to know, incidentally, whether those investments are still there. Those huge reserves were accumulated during the 13 so-called Tory
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  wasted years, and if we wanted to give the lie to that unworthy smear about wasted years those figures provide it. I hope that the Chancellor of the Exchequer will not give way to pressure from below the Gangway opposite by doing as the "rebel" Amendment demands, selling those investments in order to reflate consumer demand. That would be to eat next year's seed-corn today. He must resist that demand with all his might.
  If we have a hard winter that holds up the operations of the building industry, the present figure of half a million unemployed could easily be doubled by next spring. Our trade and industry position is far worse than is generally realised. Confidence in the future has been lost, orders are smaller, profit margins are much lower, overheads have increased, and the general outlook is not good.
  Hon. Members opposite who are as concerned as we are on this side about unemployment should remember that it is estimated that about 5 million jobs depend directly upon the exports which the Chancellor of the Exchequer says are vital, but that neither this Government nor any other British Government can compel foreigners to buy British. That means that no Government can guarantee those 5 million jobs. It follows, especially in a country which depends so much on exports in order to purchase food and raw materials, that no Government in a free society can guarantee full employment for everyone all the time, plus a high standard of living. That basic truth must be told to the people.
  It is often said that the way round our difficulties is to have regular investment in productive industry. That is true, but, as has been pointed out, if the amount of investment in private industry is reduced because of the amount going into the public sector, the economy can suffer severely. Over the last 20 years, about £8,400 million has been invested in the four major nationalised industries which, between them, have not paid one farthing out of profits in taxation to help maintain the Welfare State, so that the burden of the Welfare State falls disproportionately on the private sector.
  I should like at this stage to give one or two figures relating to the Welfare State.

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  The social services have become too great a burden for our present economy. The Beveredge Report estimated the cost in 1945 at £697 million, rising in the year 1965 to £858 million. The actual cost last year was £5,725 million, or 6½ times as much. We need a new investigation into all the social services.
  Expenditure on local and national government is higher than we can afford. Central Government expenditure in 1938 was £994 million; in 1946 it was £3,802 million; in 1955 it was £4,837 million, and last year it reached a figure of £9,345 million. In the last ten years it has more than doubled. Local government is proportionately worse. It cost £570 million in 1938; £712 million in 1946; £1,622 million in 1955, and last year it reached the staggering total of £3,989 million. These are the colossal burdens that productive industry has to carry—
  Mr. Frank Hooley: Would not the hon. Member agree that, with these colossal burdens, has gone a steadily rising increase in our total national wealth?
  Sir C. Osborne: Oh, no. We are in debt to the national bankers to a greater extent than ever before.
  The position is made worse by the fact that, since 1964, when hon. Members opposite took over, we have had 26,000 extra civil servants in Central Government and 159,000 extra local government officials. The burden which the Government are placing on industry is too great for it to carry. These expenses have to go on to our costs of production, and they make it more difficult for us to sell in international markets, as the Chancellor demands that we should do.
  Things are far grimmer than most people realise. I hope that the Minister will tell his right hon. Friend the Chancellor that industry wants to know what is going to happen after next July, when the period of restraint is over and the freeze is finished. What policy will the Government pursue? What plan have they got? We demand that there shall not be a reduction in our standard of living. We talk about the poverty of the lower-paid workers, but four-fifths of the human race live at less than one-fifth of the standard of living of the
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  lowest of our lower-paid workers. These people will demand more and more for their raw materials. The black, brown and yellow workers are saying, "Why cannot we have a fairer share of the good things of life?" This development will affect us much more seriously than now seems apparent.
  I want the Chancellor to tell our people the bitter side of the truth—not the gloomy side, but the bitter side. The people must face the facts. It is because the Government have failed to tell the people the facts, and have failed to tackle the problems before us that the Motion of Censure is justified, and I shall vote for it.
  7.12 p.m.
  Mr. James Dickens: This debate, following on that of yesterday, takes place against the background of momentous international events, and I want to begin by briefly relating the health of our economy at home to our international views. I make two brief comments upon the Government's attitude towards the future of Southern Rhodesia. First, I very much hope that my right hon. Friend the Prime Minister, in his negotiations with Mr. Smith, will remember that political principle must in every case take precedence over economic expediency, and, secondly, that whilst the effect of British economic sanctions against Rhodesia is a factor in our economic problems, and any intensification of these sanctions will be an additional factor in the months ahead, they must not be exaggerated. They are significant only when seen against the background of a "phoney" balance of payments crisis.
  We are debating economic affairs tonight in a year which has witnessed our ninth balance of payments crisis since 1947; this is our fourth attempt since 1955 to resolve the crisis by deflation. It did not work in 1955 under Mr. Butler—as he then was—and it did not work in 1957 under Peter Thorneycroft. It did not work in 1961 under the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). In each case we found ourselves at the end of the day worse off than any other advanced industrial country in terms of production, productivity, investment, exports and prices. When expansion was resumed we found ourselves comparatively weaker than before.

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  When shall we learn our lesson? We have tried the solution not once, not twice, but three times in recent years under the Administrations of right hon. and hon. Gentlemen opposite. I see no reason to believe that deflation under a Labour Government will produce a significantly different result.
  Hence the need to look for new solutions to our economic problems. These solutions are outlined in the Amendment which stands in the names of myself and 45 of my hon. Friends. It is a moderate, realistic and constructive alternative to the present course of policy which is being carried out by the Government. It might have been very much more radical. It might have contained demands for public ownership. I hope that in the lifetime of the present Parliament, with its majority of 94, the Government will be encouraged to take further steps along that line by fulfilling their election promise to take the water supply industry into public ownership.
  It is argued that our alternatives are not realistic; that they have no immediate bearing on the balance of payments crisis. Let us consider some of the 20th July measures and see how relevant they were to the immediate problem of meeting the requirements of our balance of payments situation.
  The restriction on office building, the further restriction on new private commercial developments, and the reduction of £150 million in public sector spending—these three things in themselves may have merits or demerits, but they have no immediate short-term effect on the balance of payments problem. The increased Surtax rates, while welcome to this side of the House, will not be payable before September, 1967.
  The Government's steps of 20th July last were, of course, a mixture of short-term and long-term measures. Was the advice given to the Government at that critical juncture sound advice which we can test against the experience of the recent past?
  My hon. Friend the Member for Stepney (Mr. Shore), who was formerly Parliamentary Private Secretary to my right hon. Friend the Prime Minister, was in no doubt about the quality of the
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  advice being served up to previous Governments and the present Government from certain circles. In his stimulating little book "Entitled to Know", he said:
  "The trouble is that, again and again, in the post-war period the wrong official advice has been supplied. … The advice tendered to successive Chancellors by the Treasury has been abysmally inept, as Britain's stop-go record so clearly illustrates. … A new Government, unhappily, doe not mean a new Civil Service elite. The counsellors of the past decade are, we can be sure, serving up much the same advice to the new Ministers."
  In view of the policy of the present Government, there can be no doubt that this analysis is accurate.
  Many of my hon. Friends are becoming increasingly critical of the advice being tendered to the Chancellor from high circles not only in the Civil Service, through the Treasury, but in the Bank of England. I go on record as saying that more and more of us demand that the Bank should be held more rigorously to the account of this House in its conduct, and especially in the public pronouncements of leading members of that institution. For we regard their advice to continue with a policy of deflation—a policy that has been carried out in the past and is being carried out now—as a stale, played-out remedy.
  I now want to examine some of the basic problems confronting our economy and to put forward solutions in a flexible, almost a pragmatic, way, as one might say. It is argued that this country has a serious balance of payments problem. But the balance of payments problem in 1965 on current deficit was £104 million, after the Government had spent over £500 million abroad, of which about £278 million was the result of Government overseas military spending. To that £104 million must be added £215 million, the balance of long-term capital outflow; containing gross outflow of private investment abroad—when 1965 was allegedly a crisis year—of £312 million.
  Against this background, two basic reasons for the balance of payments crisis become obvious. As Mr. Fred Catherwood, Director-General of the National Economic Development Council recently reminded us, one is the heavy expenditure on overseas defence and the outflow of capital. Another is the chronic inadequacy of the rates of new capital formation. For example, this

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  country between 1955 and 1964 invested 12·7 per cent. of the gross national product, excluding new dwellings, in new capital expenditure. Japan spends 21·5 per cent. of her gross national product, Germany 18·4 per cent., Italy 15·6 per cent. and Sweden 17·4 per cent. Thus, ours is one of the lowest figures of any advanced industrial country.
  It is riot just that we are spending, in the current financial year, almost £300 million in foreign exchange, maintaining overseas bases from Gibraltar to Hong Kong, which are far in excess of our resources, but rather that defence is a high and rising burden on the economy. This was made clear in chapter 19 of the National Plan which set out the impact of defence on industry:
  "… at home, the defence effort pre-empts a large part of the productive potential of some of the most important and technologically advanced industrial resources and is a large user of skilled and unskilled manpower."
  To be precise, the defence programme takes 7 per cent. of our national output at factor cost. It requires the services of 1¼ million men for manning and equipping. We spend as much on defence as we do on investment in industrial plant and machinery and more than we spend on durable consumer goods. Almost 40 per cent. of our total national research and development expenditure goes on defence, which also employs one in five of all our qualified scientists and technologists. Apart, therefore, from the burden on the foreign exchange, the weight of defence on industry is a major hindrance to economic growth.
  We spend 6·7 per cent. of our gross national product on defence. The Chancellor, in his disappointing and complacent speech this afternoon, seemed to regard the level contained in the Defence Review as reasonable. We regard this as highly unsatisfactory and want an early, and a real, significant reduction. The Common Market countries on average spend 4·7 per cent. of their cumulative gross national product on defence. This means that they, vis-à-vis this country, have a bonus each year of about £500 million to £600 million to spend on investment and the modernisation of industry. This obviously must be taken into account in discussing the balance of payments problem.
  I want the Armed Forces, by 1970, to number no more than 300,000 men. I
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  want us to have left Malaysia. Singapore, the Persian Gulf and Western Germany and to see our overseas commitments confined to modest garrisons in Hong Kong, Gibraltar and West Berlin. We on this side expect to see defence spending at not more than £1,750 million in 1970, at 1964 prices.
  The second aspect of the problem is the outflow of capital. This is, of course, a grave handicap to domestic economic growth. Just over £11,000 million worth of British overseas investments is often described by right hon. and hon. Gentlemen opposite as of a great benefit to this country. It is assuredly a benefit, but the National Plan puts the balance of benefit very well: it said that it yields for Great Britain a return which is on average
  "… considerably less, from the point of view of the national economy, than the return on home investments."
  Clearly, the seed corn does not rest abroad but here at home, and it is here that we have to build it up.
  Despite this view in the National Plan, between 1954 and 1964 this country invested £2,700 million abroad, notwithstanding the fact that during that decade we had to thrice deflate the economy to meet short-term balance of payments problems. In 1965, no significant improvement was made, because in that year—again allegedly a crisis year—we exported £312 million of scarce capital abroad. In the first six months of this year, the figures show only a fractional improvement, from £169 million to £167 million, over the first six months of 1965. Indeed, the figures for the second quarter of 1965, at £87 million, were some £18 million higher than the equivalent quarter of 1964. This must stop. These figures are appalling, and I hope that there will be a drastic reduction in the second half of 1966.
  The Amendment also proposes that we should liquidate a section of our overseas portfolio investment and has excited some interest. It was mentioned yesterday and today by right hon. and hon. Gentlemen opposite. Perhaps it is not too much to expect a Government statement on this point in the winding up speech tonight. Certainly, it is not enough to dismiss this notion as irresponsible. It has been advanced by Mr. Andrew Schonfield, a noted economist,

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  for the past eight years. It does not mean that we unload £11,000 million of British owned foreign securities tomorrow. We say that some of this portfolio section, totalling £3,600 million at the end of 1964 and which may be considerably higher now, could be sold and turned into foreign exchange.
  It is a modest suggestion. We put it to the House that we should start to repay our debts, which total £900 million—a quarter of this figure—from this source. The first payment of our debt is due this year and the remainder over the period to 1970. We say that it is infinitely preferable to realise a quarter of these immense assets which are rapidly appreciating than to indulge in the stale, played-out, moth-eaten policy of deflation at home.
  We say that we should decide to pay these debts by acquiring, at the going market price in sterling, some of these securities—I put the figure of £900 million—which our private citizens own abroad, and gradually and selectively we should sell them. This means that we take due regard of prevailing market conditions in the countries where they are held. The Government have shown how simple this can be, for they have recently sold off a few hundred million dollars' worth of American securities.
  It has been argued in the debate that this would be destroying a valuable foreign asset. Mr. Schonfield took this up in the Sunday Times on 18th September last when he said:
  "The reactions to this proposal are predictable—final confession of moral defeat, killing the goose that lays the golden eggs, eating the seed corn. Not a bit of it. The real seed corn is British investment in renovating the physical structure of our own country here at home. It is this which is now being thrown away to pay foreign debts."
  It is also worth making the point in passing that between 1962 and 1964 the capital value of these securities appreciated by £1,150 million or £250 million more than our total outstanding international debts. This suggestion should be seriously examined by the Government. I look forward to hearing a considered reply to it tonight. This is where we stand on this question.
  There are many other aspects of the present crisis which are dealt with in the Amendment. The First Secretary said
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  to me yesterday that I should pay attention to the fact that in this country the level of unearned income is a determining factor in the level of private investment. That may be true, but there is no necessary correlation between them. The House will remember that, between 1960 and 1964, the amount of money paid out in dividends rose by 60 per cent., which was far and away the highest level in any country of Western Europe and over three times the rate of increase in national productivity.
  Despite this, the rate of new net capital formation in this country over the same period was the lowest in Western Europe. There is certainly no necessary relationship between high dividends and high investment. Quite the opposite. Many of the dividends were going abroad during that period. The solution to this problem is to set up a National Investment Board with wide powers over investment in the private sector. This would mean taking supervisory powers over investment, particularly by insurance companies which, as Professor Richard Titmus reminded us, are acting in a socially irresponsible way. Unfortunately I have no time to develop that point in detail tonight.
  Among the other suggestions outlined in the Amendment is that we should review the rôle of sterling as an international reserve currency. We regard this as a played-out relic of British imperialism, a factor which has continued from the nineteenth century into the twentieth century. Its rôle is finished. I know that there are serious technical problems to be solved in arriving at a new international currency but we hope that the Government are taking every step to move towards transforming the International Monetary Fund into a new international central bank.
  We have suggested measures of income distribution which we hope will not be lost on the Chancellor. I leave the Chief Secretary to the Treasury with this point. A wealth tax, as he is well aware, is a commonplace in Western Europe. There is ample room for one in this country. The Economist in January estimated that 7 per cent. of all taxpayers in the country are responsible for 84 per cent. of the country's wealth and 88 per cent. of the taxpayers possessed slightly over £100 each on average. A wealth tax in Britain

  713
  of 1 per cent. on estates of £20,000 and above would bring into the Revenue a sum of £175 million. This would be a modest start. Denmark does this at 2½ per cent. at a much lower level, but we could improve on the 1 per cent. on estates of £20,000 and above in later years.
  The imperative need in the present situation is to end this policy of deflation with its high and rising level of unemployment. Not only is unemployment creating needless distress to thousands, but in the view of many of us it is shortsighted and most socially undesirable as a way of trying to resolve a problem which could be resolved by other methods. We want to see the Government ending the policy of deflation and embarking now, as a matter of urgency, on planned reflation of the economy.
  These measures, taken overall, constitute a constructive alternative to the Government's policy. Of course they assume a change of attitude within the Government. They assume that the Government will stop their present timidity in economic affairs and adopt a new, bold, and much more decisive attitude in the months ahead.
  7.36 p.m.
  Mr. Ian MacArthur: The House will have heard the hon. Member for Lewisham, West (Mr. Dickens) with interest, particularly as he speaks for such a large section of the party opposite, but his quarrel is with his own leaders. I hope he will forgive me if I do not follow him, in the belief that it might be improper for me to intervene in that quarrel.
  I want to move on, because time is pressing, to call attention to a large and, I think, significant anomaly which arises from the White Paper, Cmnd. 3150. This is the anomaly which was touched on by my hon. Friend the Member for Finchley (Mrs. Thatcher) last night. Some anomalies are unavoidable in this policy of restraint. That, I fear, we must accept. They are the consequences of the Government's incompetence and panic which have plunged our economy into the sorry state of today. Just as the Prime Minister's statement on 20th July was hurriedly put together, so at least some sections of this White Paper show all the signs of slipshod construction and
  714
  insufficient thought despite the unconscionable time which it took a-hatching.
  If some anomalies are unavoidable, others could and should have been avoided. One is the distinction drawn by the Government between salaries which have a built-in annual increment and salaries which have no contractual element of that kind. In many industries, particularly in the service sector, salary increases are related to experience, talent and performance. These increases, which are loosely described now as merit increases, are not to be allowed. By contrast, incremental increases are allowed, although they may relate to length of service and experience alone, without any relationship at all to talent or ability. No matter how small the contribution of the individual concerned, he will receive his increase, provided that he is able to hold on to his job. This, I suppose, indicates a sudden regard for the sanctity of contract which the Government until recently were so ready to ignore and erode in their economic policy.
  This conversion is welcome, but there is a strong case, and it is not only a case in equity, for considering the problems which will arise from this distinction. In a large section of industry there is a clear understanding that what amounts to an annual increment will be paid to, and can be expected by, people whose work and talent surpass the ordinary and who thus make a large and identifiable contribution to the efficiency of the business.
  I do not suggest for a moment that discretionary increases of this kind should be made this year as they would be made in a normal year. But I do suggest that the argument for allowing certain selective increases is strong and that the refusal to accept it will lead to possibly severe, and certainly to unsettling, consequences.
  The debate has already emphasised the falling investment in manufacturing industry. The Government hope that this trend will be reversed. We heard what the President of the Board of Trade said about this today. The matter was also referred to by the Chancellor of the Exchequer. In the service industries, and on the service side of manufacturing industry itself, there are very few tangible assets in terms of equipment. Their assets are people. Their critical new investment

  715
  is not in machines, but in men, and particularly in those who possess rare qualities of imagination, enterprise and outstanding ability. If they are not to be allowed to reward these people on a very selective basis, several consequences may, and I think will, follow, all of them undesirable.
  First, the very able young executive whose rare qualities are in demand will be tempted to look elsewhere for his employment, because the only real prospect he can have of an increased income is to move to the equivalent job elsewhere at a higher salary. Secondly, and worse, he may be tempted to seek the offer of other employment simply to give his present employer the opportunity of increasing his salary. In a circumstance of this kind, the Government have made it clear that the employer himself must decide the appropriate action. The appropriate action will surely be to pay the higher salary offered in order to retain the individual's services. These consequences, I believe, will have the effect of undermining the personal relations between employer and employee which are critically important in employment of this kind and, indeed, in any form of employment.
  The Government may say that the solution to this problem is to promote the individual and so make him eligible for extra rewards. But many industries are not hierarchical in their structure. They do not have the clearly defined ladder of promotion that exists, for example, in the Civil Service. Promotion for them is more often a progress forwards than a clearly defined advance up the rungs of a ladder. This question arises because of the Government's complete failure to understand how a large part of industry works, particularly in the service sector, and their refusal to recognise the damaging consequences of this policy.
  Next I ask the right hon. Gentleman to explain the qualified approval given in paragraph 27 of the White Paper to
  "increases … on grounds of contribution to productivity".
  Here again, the familiar phrase "the national interest" appears. Who is to be the arbiter? Who will decide which kind of work is in the national interest
  716
  and which kind of work is not in the national interest? I suspect that here again we see the strange distinction made by the Government between manufacturing and service industries, a distinction which is made by no other country in the free world.
  Hon. Members opposite often seem to think that it is noble to produce but somehow ignoble to sell the product. On occasion we have heard attempts to divide manufacturing industry into arbitrary groups—some desirable, some undesirable. I remember very well the Prime Minister, when he was in opposition, making some contemptuous remark about the manufacturers of striped toothpaste—an observation which seems more absurd today when we see the Prime Minister paying 7s. 6d. a week premium in respect of the man who puts in the stripe.
  I trust that within the context of paragraph 27 the phrase "the national interest" will include increased productivity in the service industries. It is probably more difficult in service industry than anywhere else to produce a yardstick indication, a yardstick measurement, of increased productivity. Increased productivity in the service industries makes a direct contribution to the greater efficiency of the nation and to the better standards of the people. Market research, marketing, advertising, product development, which together make a field in which I declare my interest, are among the services which are the essential and developing tools of manufacturing industry, and which ought not to be separated artificially from the process of manufacture. These very services are at the heart of the competitive spirit which the Chancellor of the Exchequer welcomed earlier today.
  One other point of interpretation which would be helpful. Paragraph 38 of the White Paper contains a reference to the need to notify increases proposed for 200 employees and more. I should be grateful if the right hon. Gentleman would indicate, because I understand this has caused some confusion, whether this paragraph refers to what I can describe as blanket awards covering 200 people or more in a single group, or whether it is intended also to cover individual awards which may differ between one person and another and which happen

  717
  to occur in the same concern. I have in mind a large concern employing many thousands of people. It may well find 200 employees for whom increases are justified within the terms of the White Paper. Is it necessary in that case for the firm to give notification?
  Earlier today the hon. Member for Central Ayrshire (Mr. Manuel) gave a robust defence of Government policy in Scotland. I turn to that matter for the last few minutes of my speech. I listened to the hon. Gentleman with some astonishment. I remember how much he used to mock at the "pipeline" when the Conservatives were in power. He mocked then, but now he rejoices in the jobs that have poured out of the end of that pipeline. I say that, because the march forward in the diversification and extent of Scottish industry over the last few years until this year is the direct result of the measures introduced during the Conservative period in office and continued by this Government until early this year.
  The hon. Gentleman rightly paid a tribute to the great record of Scottish industry. I join him in calling attention to that. We have broken many records. However, this Government have not helped. While the hon. Gentleman was speaking, I was thinking of some of the things which the Government have done in Scotland. I recalled how they scrapped the investment allowances, which has had such a serious effect on the service industries and on the tourist industry. I recalled how they scrapped free depreciation and the structure of the Local Employments Acts which provided £70 million by 1964 for developing industry in Scotland.
  I remember now how in place of this they have introduced a system of grants with a lower total value spread over a much larger total area. It would perhaps have completed the picture if the hon. Gentleman had referred to the unparalleled burden of taxation now carried by the people of Scotland, and in particular to the crowning folly of the Selective Employment Tax, which has had a most grievous effect on the Scottish economy. I can illustrate this by calling attention to the area of Scotland in which the tax has had the greatest effect, the Highland counties. Only 10 per cent. of those who work in the Highland counties
  718
  are in manufacturing industry. The cost of the Selective Employment Tax to this large area with a small population will be over £2 million in a full year.
  The Government take great credit for the aid put into Scotland through the Highlands and Islands Development Board. It is welcome aid. This year it will amount to £320,000. Thus, while the Secretary of State for Scotland pumps £320,000 into the Highlands, the Chancellor of the Exchequer siphons off eight times as much, over £2 million, by way of a tax which is completely inapplicable and irrelevant to the Highland economy.
  We called attention to all this in the very first days of this monstrous proposal. My right hon. Friend the Member for Argyll (Mr. Noble) and many of my hon. Friends tabled Amendment after Amendment calling the attention of the Government to the problem which the tax would create for the development of the Scottish economy. Soon afterwards, the Chancellor, in a letter to me and, I believe, in a letter to others of my hon. Friends, said that he was prepared to consider refining the tax later when he had had a chance to see how it operated.
  If he accepted that there was a possible case for refining the tax soon, why on earth did he not refine it at the beginning? Why wait until the harm has been done to change a tax which should never have been introduced? Why, with this thought in his mind, did not the right hon. Gentleman allow us to debate the Amendments? Why did he allow the Leader of the House to have a Guillotine on the very Bill on which, so we were assured, there would be adequate debate of all these matters? The Government's record in their administration of Parliamentary business and their conduct on the Selective Employment Tax, their excuses and vacillations, is monstrous and will not be forgotten in Scotland. That I can guarantee.
  Why will not the Government tell us what the tax will cost? I have calculated that the figure in the Highlands will be much nearer £3 million than £2 million. A sum of this order may sound little in relation to the total economy, but it is a very serious sum for the economy of the Highlands. How were the Government able to give the £2 million estimate originally? Why do they refuse to recalculate it now that the tax is being paid

  719
  and the repayment process is under way? If they continue in their constant refusal to answer Questions about it, they will be accused of concealing the figure because it is uncomfortably higher than their own first estimate.
  We have heard today about the disappointment of the development areas. In Scotland, we were promised shelter from the effect of the Government's economic measures. I am not impressed by the quality of the "shelter", a word dreamed up by the Prime Minister and endorsed by the President of the Board of Trade. The shelter is a sham.
  Public investment has been cut back by £3½ million, affecting the very services which are critical for the country's economic development. I was appalled to learn from an Answer given two days ago, to my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell)—the Government had not disclosed it before—that investment in the nationalised industries in Scotland is to be cut back by £6 million. What splendid shelter all this provides.
  Virtually all the other elements of the squeeze affect the Scottish economy just as much as anywhere else. In many ways they affect it more seriously, because the squeeze has a particular impact on certain costs which have an importance larger in Scotland than elsewhere. The latest increase in the fuel duty, for example, put up costs in Scotland by over £5½ million. The trend in private investment has turned abruptly for the worse, and the situation will deteriorate further over the next few months and beyond as employment prospects are depressed by the sharp fall in the forecast level of investment.
  I implore the Government to give more consideration to the rôle of agriculture in Scotland. Agriculture is critical to the economy of large areas of Scotland, and it is now in a state of depression and lost confidence. I ask the right hon. Gentleman to tell us that the Government realise that no real progress can be achieved in Scotland until the rôle of agriculture in the economy is recognised and positive steps are taken to promote expansion.
  Finally, I call attention to the impact of the squeeze on emigration. Average earnings in Scotland are about 6 per
  720
  cent. less than in the United Kingdom as a whole. This means that, in order to have the opportunity of a higher wage today, under the freeze, a man may well decide to move south where the level of unemployment is lower, where the chance of a job is better, and where the prospect of higher pay is certain. Here is another example of the Government saying one thing and doing another. They say that they will stem emigration, but they take action, not once but over and over again, which drives our young people away. Many more feet are joining the march south, and one consequence of the Government's careless regard for Scotland will be to swell this sad and growing drift.
  7.56 p.m.
  Mr. Robert Sheldon: The Chancellor referred today to his Budget statement and his calling for the triple objective of a strong £ a steadily growing industrial strength and full employment. In the measures of 20th July the impossibility of doing all three together was faced, and what was sacrificed to the impossibility of reconciling them was full employment. Unemployment is one of the solutions to a balance of payments difficulty, of course. But it is, largely, the solution which has been chosen, we must examine it, see why it is necessary and what it does.
  First, a high level of unemployment brings down the level of consumption. This is obvious. People consume less—as they consume less, they import less, and there is a direct import saving as a result of a high level of unemployment. The second consequence of a high level of unemployment is a general reduction of confidence. Today and yesterday, we heard a number of hon. Members calling for a growth in confidence. Clearly, this is precisely what one does not want. One wants this reduction in confidence so that people become a little apprehensive about the future, they consume less, they save a little more, and industry allows their stocks to run down so that imports are reduced.
  What is needed is an increase in long-term confidence, but this is a very difficult subject for discrimination, to make sure that one maintains long-term confidence while denying short-term confidence.

  721
  The third consequence of a high level of unemployment is to convince foreign bankers of our real intentions. These foreign bankers are not the crude deflationists of the 1930s. They have all read their Keynes. They know that the long-term needs of this country are a rise in productivity, a growth of exports, and so on. But they know about our difficulties and problems, and to them the fact that we are prepared to accept so unpalatable a measure of unemployment is one of the surest signs that the Government are determined to carry out their pledge and maintain the strong £ which is the guarantee they most want in leaving their money in this country.
  The fourth element of the result of unemployment is that pay increases are hard to obtain and so inflation is kept down. There again, imports are limited. These are the results and the actuality of what we get when we increase unemployment.
  What is claimed for it is rather more dubious. It is claimed, first, that there is a shake out, which means that overmanning is reduced. If this were true, a rise in unemployment would have little effect on production. But the production index seasonably adjusted fell from 135 to 131 at a time when unemployment rose. The percentage fall in production is greater than the percentage rise in unemployment. If it were true that only surplus labour was being dismissed then the production index might be expected to fall a certain amount due to certain dislocations but not by this amount.
  The second factor claimed as a result of unemployment is the redeployment into export industries. But if one examines the economic crisis of September, 1957, we see that, in the year following, exports did not rise. They fell. The year 1958, which was the year following the extreme economic crisis of 1957, was one of the few years since the war when exports actually fell. Much the same applied to the economic crisis of 1961. Our exports rose in the following year less than in the years before or after.
  So we do not see an increase in exports arising from an increase in unemployment. What we do see—and this is most relevant—is a considerable decline in the amount of imports. That
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  is the real result of a deflationary policy, and the reason is not hard to see.
  Exports are difficult to increase suddenly. Industry has no preferences. It does not deny certain markets to itself. It sells where it can. If it finds itself with surplus labour, it cannot simply allocate goods intended for the home market to the export markets. That is not how industry runs. It will sell in markets anywhere in the world and if one market closes it is not sure that another will open. It has to work hard for the markets it has and that will continue to be the case.
  Often the Government and all of us in this House are apt to blame exporters. During a visit to the United States this year I found that even an American Treasury official was saying that American exporters had gone soft. But we must not expect too much from exporters. The increase that has been taking place is commendable and there are other factors here with which I would like to deal.
  Before 20th July, when hopes were entertained for the prices and incomes policy at a time when, if successful, it would have had a massive effect on the economy, producing the triple crown required by the Chancellor—success in keeping the £strong, a high level of employment and growth—I was not so optimistic about the effect of the Act. I thought that, if we could get a reduction of 1 or 2 per cent. in the rate of inflation, this was as much as one could hope for. Together with other factors, this might have given growing control over the economy. My suspicion is that the results of the last few months have set back such an increase in the control over the economy for some time to come.
  The Chancellor of the Exchequer agreed that the prices and incomes policy was a bonus. We know that it is deflation that is mainly responsible for price stability, as goods are unsold and remain on the shelves. It is deflation that is mainly responsible for income stability as unemployment rises and people are unable to negotiate wage increases.
  But something can be obtained from the prices and incomes policy. We are fortunate if we can get 1 to 2 per cent. a year out of it. If it continued over three or four years, we could get a 3 to

  723
  5 per cent. advantage over our competitors. But this would mean retaining the policy for three years or so and such a period of stagnation is unacceptable to us. There is a danger of regarding the prices and incomes policy as the solution. It can help but only in a limited way.
  However, I am a long-term optimist. I believe that eventually our export difficulties will resolve themselves. I base this on two main reasons. The first is the decline in Commonwealth trade. From 1956 to 1964 our Commonwealth trade as a proportion of our total exports declined from 40 per cent. to 29 per cent. while our exports to Western Europe in particular, where the most competitive markets are to be found, increased from 28 to 38 per cent. So the exports lost to Commonwealth countries have largely been made up by exports to Western Europe.
  A decline in the cohesion of the Commonwealth has brought in its wake less trade which has not been due to a decline in total exports because we have been able to sell to these competitive countries of Western Europe. The decline in our Commonwealth trade means that we are now approaching the position where the curve should level out, with benefit to our economy.
  The second factor which gives rise to a more modest degree of optimism is the massive spending on defence. In the inter-war years, the cost of Government expenditure overseas in foreign exchange was on average under £3 million a year. It is now running at a rate net of £500 million. This massive increase is becoming more and more unacceptable. As this realisation takes effect—and I believe that it is working even in Government circles—I am sure that there will be a growing demand that this expenditure must be reduced.
  Up to 10th November, when it was announced that we were to make an approach to the Common Market, my solution, such as it was, would have been control of imports in one way or the other, followed by defence cuts, then by measures through technology and the I.R.C. and by success in the Kennedy Round, which are our long term hopes for exports. I would have proposed
  724
  control for perhaps two or three years, followed by the defence cuts. This would have given us an interval during which our long-term plans could come into effect.
  But the decision to go into Europe ruled out any chance of import quotas. The whole purpose of the Common Market is the reduction of quotas and tariffs and their imposition now is clearly impossible. I believe on the other hand that East of Suez defence expenditure can be cut even more than the Government are doing at present. Here again, the door is slightly ajar and we are just pushing it a little further open.
  Our problems are essentially short and medium term. When my right hon. Friend the Chancellor of the Exchequer mentioned again his triple objectives today, he did not put them in any form of priority. I myself have come to accept that full employment and growth have been sacrificed to the £. Therefore, we must not be surprised if this priority does not come up for re-examination.
  The great argument against devaluation in October, 1964, was that industry was near the limit of its capacity, which limited its possibility of expanding to produce the exports required. In order to provide the surplus capacity, a level of deflation and high unemployment would have been necessary in October, 1964, which at that time all of us regarded as totally unacceptable. But, as the Chancellor said this afternoon, now we have and shall be having this spare capacity, and if the orders were there, there would be no difficulty in fulfilling the amount of exports.
  As a matter of historical record, we know that, following the devaluation of September, 1949, exports from this country rose in 1950 by 21 per cent. and in 1951, as compared with 1949, by 47 per cent. There was a massive increase in exports, which was not surprising considering the large amount of offers which exporters make all over the world, a small proportion of which result in sales. The advantages of selling cheaply means a higher success rate from offers and the possibility of a massive expansion of exports.
  And so in 1950 we had an improvement in the balance of payments of £306 million and, leaving out the 1951

  725
  accounts, because of the incidence of Korea and the upset which that caused, the surplus of balance of payments on average through the years 1952, 1953 and 1954 was £150 million, which was largely the reason why the Tory Government were able to claim the success which they had. It was because of the devaluation by the Labour Government in 1949.
  This is not the only comparison which one can make. In France the devaluation in December, 1958, meant that in 1960 French exports went up by 21 per cent. over 1959 while in the five years from 1959 to 1964 French exports increased by 59 per cent. The present strength of the economy of a moderate sized country like France, which is able to embarrass a massive industrial and economic Power like the United States, is one indication of the value of that devaluation to the French economy. The Germans have had the benefit of an undervalued currency up to the last year or two, and the fact that their currency was under-valued enabled them to find markets all over the world.
  We know that at present all of this is an academic argument, but it is more likely to become relevant when we think about entering Europe. The economic purpose of entering Europe is to increase exports. Our exports are too low at present, perhaps too low by £300 million, but if we enter the European Economic Community, if we get the right terms, we shall see a massive rise of imports, and the Treasury and the Board of Trade have consistently underestimated the rise of imports. To offset that rise will need an increase in exports higher than we now consider necessary.
  It is no good relying on deflation until exports rise further, because if imports rise higher, we will need a measure of deflation even greater than we now have or are likely to have in the next few months. Any hope of controlling imports by import quotas or other means is a denial of the fundamental purpose of the European Economic Community. If we entered Europe with the wrong exchange rate, this would be gross economic mismanagement. We would then be unable to take advantage of going into Europe and with the further deflation necessary we would be the stagnant partner of the European Community.
  726
  The opportunity which we have of entering Europe gives us what is likely to be our only chance of the export-orientated boom which we need in order to stimulate our exporters to discover further markets and to start a boom in the only way in which a boom should come to this country—by means of our exports. These are the possibilities, and I hope that at some time in the future we will take them.
  8.15 p.m.
  Mr. David Webster: The hon. Member for Ashton-under-Lyne (Mr. Sheldon) has given us a very thoughtful and wide-ranging review of the economic situation as he sees it. Hon. Members of both sides of the House will, with him, acquit me if I do not comment on all his argument, because several hon. Members still wish to speak.
  He spoke with some anxiety about wage restraint and about a three-year period of restraint. I share that anxiety, because in Holland, where wage restraint has been practised for a longer period, the main export has become workers to other countries where they can get better rates of pay. That is one of the effects which we are already seeing in our economy with the freeze on incomes.
  I was glad that the hon. Gentleman stood up for exporters, because the exporters are often blamed for the situation in which they find themselves. One of the stupidest and craziest things about the 15 per cent., or, as it later became, the 10 per cent. surcharge, was that it stirred up resentment in our markets abroad and in addition made it 15 per cent. more profitable not to bother to export. Now that that surcharge has at last been removed, possibly without adequate precautions and without adequate foresight of what the consequences might be, let us hope that it will be thought much more profitable to attempt to export, as is so thoroughly necessary.
  The Prime Minister is the person who should be standing in the dock today. The Prime Minister is a constant inspiration to us all. The Prime Minister produces a gritty saying for each week for us to enjoy and with which we can refresh ourselves. We remember this week's saying, the gritty saying of the week—"Too many firms are squealing before they are hurt".
  The gritty saying just before the measures of 20th July was delivered

  727
  before a foreign Prime Minister, as usual at a dinner outside the House, when the Prime Minister said that he had no time for the dismal Jennies—and the Press was singled out for particular praise in this respect—who were running down the economy of this country. With that he swanned off to Moscow while the sterling balance streamed out of the ears of this country, and he came back and on the following Wednesday had to announce a series of panic measures so ill-digested and so ill-thought-out as to give to the Chancellor the bonus of an increasingly unnecessary amount of unemployment. Some unemployment there had to be. There was far too little slack in our economy at the time, but it is the careless and callous way in which it has been brought about which has caused distress to every hon. Member who has spoken on the subject.
  One of the things which we see from this vacuous White Paper is that there is no clear indication of what the Government propose to do when next July comes. The tragedy is that the breathing space which they have gained at the price of so much suffering is not to be used for the definite purposive policy which the Prime Minister is always talking about.
  There has been talk of changes in the investment grant and we have had some welcome news from the President of the Board of Trade today, but these things will only make it less of a loss for industrialists to operate. They will not make operations that much more profitable.
  One of the reasons why I am glad that Parliament is not being televised is that if foreign businessmen had been able to watch the hullabaloo by hon. Members opposite in the House yesterday against the notion of profits and against profitability in the capitalist system, they would take everything they possibly could out of the country's economy. Ministers are a little better informed. The Minister of Technology, for instance, has said that, after all, profits are not so evil, but that it depends on how they are distributed, and he did not see why profits should go to investors. The Chancellor is always shouting for more investment, pleading for more savings, and penalising the people who put up the money to make our industry go round.
  728
  The private investor is struck with every blow. When one thinks of the Prime Minister's gritty saying, about businessmen squealing before they have been hurt, and sees the trend of profits and dividends in the last few years which have dropped to minus 5 per cent. from 20 per cent. one sees an overall swing of 25 per cent., and it looks as if the businessmen have already been hurt. One sees, again, the horrifying spectacle, when the State-controlled countries are at last appreciating the benefit of private investment and of the profit motive, that we are moving away from this and going the other way. This is the danger.
  How are we to obtain investment from overseas if all the time we are penalising it? How are we to persuade overseas countries to assist us in shoring up our economy if they see the dangers which the Government's supporters are pressing all the time? We are told that the public sector will increase by 4¼ per cent. this year and that it might even go up to 6 per cent. in real terms. We will have to watch this. We are told that it will go up by more in the following year. There will be no scope for profits in that increasing sector of the economy. This means that there is no adequate criterion of efficiency in a growing sector of the industry. This is my great argument against public ownership. With the best will in the world there is no known criterion of efficiency with public control of Government spending Departments and with the increase in the nationalised industries.
  Mr. Hooley: Would not the hon. Gentleman agree that there are perfectly good scientific methods in the production of gas and electricity to enable one to judge how the system is being used?
  Mr. Webster: I will give the hon. Gentleman his point. The other day we were debating inland waterways and were told that the new Waterways Board had, with great care capitalised, amortised and worked out the need of profitability on the assets to be used. It can be done in certain sectors but if one takes the railways, the railway workshops, the mining industry and other vast sectors of our nationalised economy, there is no known criterion of efficiency. In addition, the nationalised industries are not able to export.

  729
  Even if there were an ability to export, as there is no adequate criterion of efficiency and competition. They would not be able to compete against overseas firms. This is one of the greatest dangers and the more that we swing to this type of economy, without an efficient and satisfactory yardstick, the more we run down the effective cost evaluation of our economy and its competitiveness. At the same time we see intimidation of businessmen by White Paper and by Government statement without any legislative backing. This is a dangerous thing which must be resisted. The C.B.I. has not resisted this sufficiently, but it is at last beginning to do so.
  It is time for businessmen and those who work for them and with them to resist this type of cajolery, because not only is it dangerous in itself, but it is being backed by a larger source of patronage than ever before. It has the increasing patronage of the increasing size of the Civil Service; it has the increasing patronage of the increasing size of the nationalised sector of our economy, with its growing buying departments. One has the feeling that with a Socialist Government, if an industrialist of prominence stood up and said "Up with this I will not put" there would be a suspicion, if he is supplying the nationalised industries, that he might well lose the contract upon which his firm depends.
  As the public sector grows faster this industrial and commercial judgment is withered away and this is a danger to the economy. We see another retrograde action envisaged. We are to have more people, with no experience of industry, dictating to industry what it is to do. We are to have morning sittings of this House so that Members cannot have contact with industry. The hon. Member for Louth (Sir C. Osborne) spoke about his first-hand business contacts. One will not be able to go out to get the reactions of business people to the consequences of our acts in this House. This is a disastrous thing because we must have this reaction from businessmen, coming back to this House so that we can contribute from first-hand experience.
  A number of other people, among them the hon. Member for Ashton-under-Lyne, who I regret to say has disappeared—no doubt to join the Common Market—spoke of this institution.
  730
  I had devoutly hoped that we should get into the Common Market on adequate terms. My fear is that, in his heart of hearts, the Prime Minister does not really believe in it. He likes a tight-knit little island. He wants a siege economy which he can control and if he goes into the Common Market, as his right hon. Friend the Minister of Transport has said, he will not be able to control the economy of the country. That is his anxiety and he does not really want to go any further than a smokescreen. I heard him speaking of the Treaty of Rome and his refusal to accept that Article 38 of the Treaty was signed and had been negotiated for years. He was saying that the agricultural aspect of this would have to be negotiated again. I cannot believe that he is willing to open this country's economy to the floodgates of competition and I cannot believe that, under him or this Government, the country's economy will be able to deal with that competition. It is for that reason that I lack any confidence at all in their handling of our economy.
  8.21 p.m.
  Mr. George Rogers: The House will be glad to know that I propose to keep my remarks very short, primarily because the Front Benches took a disproportionate amount of the time available. It is time that we stopped having eight Front Bench speeches in a two-day debate so that on the second day back benchers do not begin to speak until 6 p.m. When one considers that there are hundreds of us and only a handful on the Front Benches, one realises that the time allowed for them is disproportionate and that it is time that we did something about it.
  I sat here all day yesterdey and all day today, without proper food or comforts of any kind. When one gets to this stage, as we all know, one does not care whether one makes a speech or not, especially when all the best bits have been said by other hon. Members and when one has had to eliminate all the profound arguments which one had carefully prepared because they have already been used.
  One is left with a runt of a good speech which has become just a tattered relic of what might have been. It does not matter very much, because we all know that at

  731
  this hour our speeches are never reported and the only use that they are put to is in our local papers. I want to make a couple of remarks about the speeches from the Opposition Front Bench. My old Parliamentary colleague on the other side of the House, the hon. Gentleman the Member for Weston-super-Mare (Mr. Webster), is as ungrateful as the right hon. Gentleman the Member for Flint, West (Mr. Birch) to the nationalised industries. The right hon. Member for Flint, West, in attacking the investment of too much capital in the public industries, spoke of the superior importance of private enterprise because it was responsible for exports which have the final bearing on the financial and economic position of the country.
  However, what both Members forget is that private enterprise has the great advantage of a group of service industries owned by the State providing services at prices which are, in general, lower than any in Europe. The cheap gas, electricity and coal and other services provided by State-owned industries are profoundly important in the prices which private enterprise is able to quote when it tries to secure exports abroad. This is a fact which is too often forgotten by those who are prejudiced against public ownership.
  The hon. Member for Weston-super-Mare said that there was no measure of efficiency in the nationalised industries. I believe that our coal industry still provides the cheapest coal in Europe. We have no need to be ashamed of the example set to private enterprise by the work of our public undertakings. It is because they provide such a good service to private enterprise that capital investment is important in the public industries. If they are not kept up to date and adequate, then, as the Chancellor of the Exchequer said, they will not provide that service to private enterprise which alone enables that sector of our economy to function satisfactorily.
  Yesterday, the hon. Member for Worcester (Mr. Peter Walker) made a vigorous, partisan speech, unlike the speech today of the Leader of the Opposition, which I enjoyed much better. The hon. Gentleman gave us one of his usual lively, competent but very much to be
  732
  anticipated speeches in attacking the Government.
  One of the things which makes honest debate in the House difficult is the fact that each party, once it is in opposition, pretends that everything was perfect when it was in power and that everything is imperfect when the other party is in power. The trouble with industry and Parliament today is that the Tories only believe in one-party government, like the African leaders. They do not believe in democracy, because when democracy returns other than a Conservative Government they do not want to work with it. This applies to the Conservative Party and to businessmen throughout the country who are Tories. There is, therefore, to a large extent, a quite unnecessary loss of confidence among businessmen when the Labour Party comes to power because they are disgruntled at the fact that their party did not win the election.
  The hon. Member for Worcester said that production was rising fast two years ago when the Conservative Party left office. Does anyone here remember that production was rising fast when the Conservatives left office? The hon. Gentleman quoted the league tables to show our low position in productivity rates. It was precisely because productivity was so bad when the Tories were in power that the present Prime Minister was able to quote so effectively against them at the time. It does not help debate in the House to make statements of that sort which are so demonstrably false.
  The hon. Member for Worcester made one remarkable statement. I do not think that the House noticed it. It was very unusual, coming from a Conservative. He said, "Workers do not work harder when there is the fear of unemployment." Many of my friends in business have said to me recently and in past years that the workers need the big stick of unemployment to make them work. It is not as simple as that. If workers in offices or factories know that work is diminishing, it is true that they slow down in order to spread the work out and avoid the possibility of dismissal.
  There are not many of us in the House these days who know what pre-war unemployment was like. Some hon. Members have never known what it is to go

  733
  through a period of unemployment such as we had then. We know perfectly well that the threat of the big stick worked, because employers threatened many workers with the sack and told them, "There are hundreds of thousands waiting outside for your jobs." It was undoubtedly the cruellest of all disciplines. It works in many ways.
  We have all observed that recently there has been a diminution in unofficial strikes. The fact that the economic situation is worsening and the possibility of getting jobs is not so easy nowadays has, I think, had an influence on those irresponsible characters who have made the work of the Labour Government much more difficult since they came into power.
  There was an interesting article in The Times this morning by Sir Leon Bagrit about automation, a subject which has not been dealt with very much in the debate. He points out that we have as much knowledge of the techniques of automation as the Americans have, and that this is something which we should not forget. Although the National Research Development Corporation has done something to develop automation, the process is still far too slow. He points out that in a small market such as we cater for, automation provides an answer to the need for reducing costs.
  I think that one of the things on which the Government should concentrate is the development of rapid automation. In factories which I have visited recently, I have seen three examples where the whole processes could be automated without great expense and certainly with not much technical difficulty. A great deal of wage and labour costs—a difficult thing to say at the moment—could be eliminated by the process of automation.
  One of the sad things about the present situation is this. I have referred to the fact that many in this House have never known what it was to be unemployed. We had produced a generation which does not know unemployment. We were getting rid of the psychology of unemployment that held us back before the war and has held us back since the war. Unfortunately, however, the present unemployment is giving a rebirth to that fear. This will make it harder to get efficiency, which means the reduction of labour and the introduction of automation
  734
  in our plants, because through that old fear many workers will resist it.
  We seem a long way from the time when my right hon. Friend the Prime Minister a year or two ago talked about the day not being too far distant when it would be a privilege for us to work, when slave machines would do all the production for us. None the less, despite that, we can provide for people in different ways and we ought to proceed with automation to bring down our competitive costs as quickly as possible, not only for that purpose, but to increase our wealth to the extent we need.
  In the last few minutes of my speech, I want to deal with the psychological factors in this situation. This is something that receives very little attention. Almost our entire problem is one of psychology. It is the psychology of management and the psychology of the workers. It is the psychology that produces bad motor cars and shoddy workmanship. It is the psychology that makes inspectors necessary in our factories when, for example, the Volkswagen factory has no inspectors, yet with inspectors in our factories shoddy work is still being produced by our motor factories. One has only to talk to importers of our cars abroad and our own retailers, who constantly complain of the amount of work they have to do on the cars before they are saleable when they are delivered to them by the manufacturers.
  It is the psychology of the employer who will not work with his men. It is the psychology of the employer who has no initiative or leadership, or of the worker who prefers to be opposite his employer so that they are on two sides of the table rather than seated round the table. It is the psychology of the worker who is bloody-minded at a time when the nation knows that we need all his help, at a time when the Labour Government are in power, and he is the man who put them there; yet during the first eight months we were in office we had more strikes than in the preceding 12 months. That is the kind of problem to which we have to find a solution.
  I will give one example of a case concerning employers. A very important country in the world sent an agent here to look for a supplier of steel products. It was a very large order amounting, if

  735
  my memory serves me correctly, to 12,000 tons a month over four years. I had some connection with it in a rather loose way. The representative went to the steel firm and said, "What you sell seems to be all right, but it will be necessary for you to consult our technical expert. Unfortunately, he is in Geneva at the moment. Could you send someone over to see him to discuss the specifications?" The firm's export manager said, "Yes, certainly. I will go over to see him." However, next day, the chairman of the company turned up. He is a very powerful character. He was told about it and said, "No. You are not going to Geneva. If they want to buy British goods, they can come over here." The result was that the huge order for British steel products was lost, partly because of that attitude, though not entirely, because the credit facilities granted by us were not sufficient, in contrast with the facilities available from elsewhere, to tempt that country.
  My second example is a case concerning workers, and it is an interesting slant on the psychology. A short time ago, some friends of mine asked me to try and settle a labour dispute in one of their factories. It arose from the introduction of a bonus scheme. They had been paying the highest wages in their industry. As a result, they were losing orders to other firms which were paying lower wages. Being good people, they decided that they did not want to reduce the wages which they were paying. Instead, to get higher output, they brought into operation a carefully designed bonus scheme. No matter what they did, they could not get their men to work the scheme or even to give it a fair trial. I went along to their factory and, in the end, I said, "Now, come clean. What is this about?" One of the oldest men there said, "To tell you the truth, we would rather be given the sack so that we can draw redundancy pay and go to other jobs in the town." At that time, there were plenty of jobs, and it is a strange result of the temptation of large redundancy pay to men who have been in a firm for a good many years. It offers them a capital sum, and it means that, in periods of full employment, a man can find another job easily and put by a lump sum payment. The psychology of the
  736
  things that we do has a very important bearing on the attitude of workers today.
  I am greatly concerned about the failure to do anything to find a solution to what has been called the national malaise. I do not think that the Government have made their case clear to the workers, who do not understand what the Government are trying to do. Some of us think that we understand what it is. We understand that they are trying to change the whole psychology of the people by linking productivity with incomes. That is fairly simple. We understand that they are trying to stop illusory gains in wages to the workers and to replace them with substantial rises in real wages when the economy of the country has been reorganised. However, that is not understood in the factories and shops, where there is almost a hatred of some of the Labour leaders because of their wage freeze policy.
  It is clear that we are not getting it over to the people, and the Government ought to embark in several ways upon an attempt in more simple terms to explain their policy and how ultimately they believe it will benefit the people by giving them real increases in their standard of living.
  We all know how much the boredom of workers in their occupations affects productivity. I believe that all the factors of modern civilised life also have a bearing on this boredom of the worker and this lack of joy. The old pride of craftsmanship has gone. The flat dwelling and the city dwelling has something to do with it, and so has noise in factories. Where there is a noisy factory, the workers are more likely to be bloody-minded because of the nervous strain of constant noise. One sometimes finds that where the workers come to work by car and traffic is heavy, the nervous strain sometimes helps to cause trouble.
  I remember that at the Austin Motor factory just after the war, when I was a P.P.S. in the Ministry of Supply, a certain gentleman was chairman of the company. One of the managers said that he always gave 1,000 men notice on Monday morning because he came in with a weekend hangover, and took them back on Friday. He did this to get rid of his spleen. There is no doubt

  737
  that this works the other way as well. Sometimes when conditions get on workers' nerves, unofficial strikes result, and I think that the Government ought to go in for a serious study of the psychological factors. It has never been properly done, and I think that research into why it is that people are not enjoying life today would produce some interesting results, and might suggest the solution.
  I think that we need leadership on a much higher level than we have had. During the war it was relatively easy for Sir Winston Churchill to unite the nation because he was in a situation of high drama, the ultimate drama of life and death. Men and women felt drawn out of themselves into a great effort which had all the colour and drama of a great struggle. We cannot do that now.
  I had hoped that the Government would have a more idealistic attitude towards entry into Europe. This could have been a great adventure. It could have been something which roused our people, but it has been presented in the prosaic manner of the Economist. It is sometimes said that an economist is a man who fears the truth because he thinks that it blinds him to the facts. Certainly sometimes it is conversely true that he cannot see the trees for the wood, and sometimes I think that too many Members in the House today have facts but no vision.
  It was not Marxist facts which built up Socialism in this country. It was the men of vision, and the men who had passion who were prepared to put up with victimisation and persecution. They were the people who led the mass of our nation out of the degradation of capitalist wage slavery and brought them to where they are today, and this unification of men and women which Europe represents in the ultimate could be presented to our people as a great adventure. It is an act of faith. We do not want to go in without risk. The English people like risk. It has been presented in far too prosaic a manner, and the opportunity to change the psychology of our nation at this time has been lost.
  8.49 p.m.
  Mr. Stanley R. McMaster: I should like to use the remaining
  738
  minutes available for back benchers to discuss the effects of the Government's measures on my part of the country. Northern Ireland appears to have been almost completely forgotten by the Government. Before the election in March of this year, and indeed before the election in 1964, the Government were full of promises about what they would do for areas such as Northern Ireland, and other development areas in the United Kingdom.
  Northern Ireland is a marginal area. The result of the Labour Party's success in the last election has meant that a great depression has set in there. The effect of the deflationary policy, severe as it is with its freeze on wages, and more serious the squeeze on credit and the high interest rates, has been to cause a fall in confidence throughout the United Kingdom.
  This has brought a very sharp rise in unemployment in Northern Ireland. Unemployment has risen in the past month by 2,500—this in a small area with a small community. There have been protests throughout this debate about areas with an unemployment figure of 2 per cent. or 2½ per cent. I have seen unemployment in my area rise from 6½ per cent. to 7½ per cent. in one month. That is the average rate of unemployment for men and women. This means, in practice, that one man in ten faces this Christmas without work.
  The Government in Northern Ireland have been exerting themselves ever since the war to attract new industries to Northern Ireland. During the period of the Conservative Government they were extremely successful. Many firms were attracted to Northern Ireland, and they helped us to bring down our average rate of unemployment from 11 per cent, to 4 or 5 per cent. We were getting very near the national average, and we seemed at last to be seeing the light at the end of the tunnel; but the result of the Labour victory is that our major industries—industries such as farming, shipbuilding and linen—are all facing depression. Within the past week 500 men have been given notice by Harland and Wolff—500 men out of a work force of some 10,000; a work force which seven years ago was as high as 20,000 or 22,000.
  That is the kind of run-down in a vital industry which has occurred under

  739
  Labour's rule. Hon. Members opposite may smile at this. They may say "What is the importance of the shipbuilding industry?", but I would remind them that this is a maritime nation. Our shipyards are vital to our economy and our defence.
  What have the Government done? They set up the Geddes Committee. They urged it to report in great haste on the future of the shipbuilding industry. They gave high hopes to shipyard workers not only in Northern Ireland, but also on the Clyde, which I visited last week, on Tyneside, and in other parts of the United Kingdom. Immediately the Government received the Report, what action was taken to put it into effect? What action are the Government taking to bring our shipyards up to date, to help us to compete with highly modern and efficient countries such as Sweden, Germany, the Far East and Japan? Nothing at all.
  Sir Knox Cunningham: Would my hon. Friend draw the attention of the House to something which is very important, namely, the effect it is having on the farming community, and particularly on small farmers in Northern Ireland? The United Kingdom Government measures are having a disastrous effect on them.
  Mr. McMaster: I am grateful to my hon. and learned Friend who represents Antrim, South, a farming constituency. Although I speak with great feeling on behalf of my own constituency of Belfast, East, which is mainly an industrial constituency, I am well aware that the major industry of Northern Ireland is still farming, and I am very well aware of the worries of the farming community, the effect of the Selective Employment Tax, and the Government's announced plan of entry into the Common Market—a worry which is shared by all in this area of high unemployment. The Government have failed completely to fulfil their promises to our industries in Northern Ireland.
  The Prime Minister promised that the development areas would be sheltered from the effect of the squeeze; but what can be done to help the development areas when confidence generally is at such a low ebb? In Northern Ireland
  740
  the men who are made redundant on the farms by mechanisation, and those who are leaving the shipyards and the linen industry, will be dependant on our attracting new industries. But new industries are not coming to Northern Ireland. Why? Because of the lack of confidence throughout the United Kingdom as the result of the Government's squeeze.
  That is no way to make the economy of Britain efficient. It is no way to step up our exports. I suggest to the Treasury Bench that they reconsider their plans. What Britain needs today is much more incentives for her industries, not the heavy hand of Government control, and not the vast amount of public expenditure on such things as new town halls in Britain.
  The Government need to give the country the lead. They need to encourage industry and investment, ensure that industrialists have an expanding market and can set up factories in Northern Ireland where we have the available labour force. That would help our heavy redundancy, particularly in the shipyards and in the aircraft industry, which have fears for the future.
  That is the way to tackle the problem. It cannot be tackled by cancelling aircraft orders and buying from the United States instead, or by expecting shipowners to buy their ships in Germany, Sweden or the Far East. British shipowners must be encouraged to buy in British yards, and industry must be encouraged to expand and to start new factories in the development areas. That is what is required. That is where the Government are failing the nation.
  8.57 p.m.
  Mr. R. B. Cant: Because of the small amount of time available to me, I want to condense a brilliant speech, consisting of an affirmation of Government policy and principle, to four out of ten suggestions that I would otherwise have offered.
  It is quite wrong for hon. Members on either side to suggest that a stop-go policy is something discreditable. We can see quite clearly that the nations that have progressed fastest have, in effect, had some controls. For a period they have gone forward but have then had to go

  741
  more slowly. I am quite optimistic about the future. I do not think we shall plunge into the deep gloom that some hon. Members have suggested for a long time. I still think, as I did in July, that unemployment will reach 700,000 in February but that by the second quarter of 1967 we shall have moved out. We shall not have an export-orientated, or an investment-orientated or a consumer-orientated reflation, but a public consumption orientation.
  In connection with this critical area of the balance of payments, we have to turn our backs on import controls, but the Government should look at suggestions made from all sides on a number of occasions with regard to advance deposits for imports. If we can get rid of U.D.I., I hope that we shall examine A.D.I., because I think that it is compatible with international obligations. Let the Chancellor of the Exchequer talk to the Japanese. Other countries have found this out recently.
  I have a note here on great financial assistance to exporters, but that has been settled.
  We should definitely go in for selective consumer reflation in the motor car industry, which is vital to our export future. Already Japan is moving into third place. This is a growth industry, and it depends on long runs. The motor car industry is probably more important to our economy than it is in the United States, where it produces five times more cars than we do with 31 per cent. more manpower.
  Having applied the very effective shock remedy of the July measures, and, in particular, Part IV, the Government should accept that after July this year they should let the trade unions and the C.D.I. approach the whole business on a voluntary basis.
  9.0 p.m.
  Mr. Iain Macleod: I am sorry that the hon. Member for Stoke-on-Trent, Central (Mr. Cant) had to reduce his ten points to four. I would very much like to hear the other six at some time, because, as I remember writing recently, he is the only one of the tribe of university lecturers on the other side of the House who makes any sense to me. That is perhaps because I regard
  742
  him as being on the extreme right wing of the party opposite.
  We are coming to the end of a two-days' debate. It seems the custom to have two-day debates in the House in these days. We are to have another one next week. When I was Leader of the House I never thought them a good idea. I certainly find it twice as difficult to wind up a two-day debate as I do to wind up an ordinary debate, because there is so much to take into account.
  I am sorry that so many Members on both sides of the House were not able to be called. There cannot be anything more depressing than waiting for a long time to make a speech and then, on being called, to make it to an audience the members of whom are only looking for one to sit down so that they can make their own speeches. I am in the position of having only the First Secretary to follow me. He asked if he could have 35 minutes, so the House will understand if I push on very quickly with my speech.
  The two main themes that have dominated the debate—apart from the general economic survey which the Chancellor gave us this afternoon and to which I shall refer, in part—have been the White Paper on severe restraint and the question of unemployment and everything that that means.
  It is a pity that we have to submit the mangled corpse of the White Paper to one final post mortem, especially as I find that my reactions to it now are very much the same as my impromptu reactions to the statement made by the First Secretary on 22nd November. The White Paper has two main aims in establishing criteria for the period of severe restraint. In my view both are worthy, and both are nonsense, in the terms that they are dealt with in the White Paper. I take, first, the advances for the lowest-paid workers. Everybody asked the simple question: who are the lowest-paid?—and answer there came none. There came none in two senses. Not only was no answer given to the question; it became abundantly clear that the lowest-paid workers have no comfort to find in this White Paper.
  First of all, the largest group of lowest-paid workers in this country are women. The average male wage is £20 a week,

  743
  whereas the average female wage is £10 a week. It is not in the Government's thought that this White Paper should be the lead-in to an advance in pay directed particularly to women. Secondly, there is the question of the Wages Council, which has been established for many years under the supervision of successive Ministers of Labour to look after the wages of those who are thought to be, at any rate, amongst the poorest paid in our community.
  I ask the First Secretary whether he will repeal, or anyway make no further use of, Section 31 of the Prices and Incomes Act. He did not directly refer to that point. I am glad to see that some pressure has been brought to bear upon the Minister of Labour and that he has yielded to some of the representations made to him. He would be well advised not to use the powers available to him under Section 31 in this period of severe restraint. If he does, I cannot see how the Government can claim that they are protecting the lowest-paid workers.
  What has happened is something more important; the Labour Party's dream of freedom and social justice—which is something with which anybody can sympathise—has come into conflict with the T.U.C.'s reality of the rate for the job. These two forces are in direct collision in the White Paper. Poverty does not arise primarily from wages but from family or other considerations which affect the wage earner. It follows that the solution cannot be found in wage negotiation or structure but is one for the social policies of the Government, particularly for the Minister without Portfolio and the Minister of Social Security.
  Like the Government, we have been making a careful study of the problems of poverty, with particular relation to the circumstances of the family. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has been devoting a great deal of time to this. At an appropriate time we would wish to take a Supply Day, before or after Christmas, to discuss the particular problems of the family and poverty as they affect the wage earner. I hope that I carry the House with me in suggesting that it is not within the structure of this White Paper to put those problems right.
  744
  Indeed, the First Secretary almost unnecessarily went out of his way in replying to me to show what a charade this was, when he said:
  "The right hon. Gentleman has suggested that a wage agreement of that kind is very unlikely"—
  That is to say, one for only the lowest-paid worker.
  "This is now a matter for those in industry to consider. But the trade union movement was very anxious that account should be taken of this criteria and if, as a result, we find agreements put before us which help the lowest paid and those alone it would be possible to say 'Yes' to them. If, in the event, no such agreements can be devised this criterion would not come into play."—[OFFICIAL REPORT, 22nd November, 1966; Vol. 736, c. 1153–4.]
  So it is fairly clear that the lowest-paid workers have little to hope for from this White Paper. Indeed, wage negotiations from my experience are often, in theory, negotiated for the lowest paid but, in practice, on a very different basis.
  It is common practice for unions which are really seeking an advance for people who may be more highly paid to make their claim first for a basic wage for the lower-paid workers and then, by the pyramid of differentials and so on which we know about, to bring up the structure throughout the industry. We all know that this is what happens. The Minister of Labour is nodding in agreement with me. This is really how wage drift starts.
  The First Secretary thinks that he can take care of those inevitable consequences by a lengthy process of Orders under Part IV. I simply do not believe that this is possible. Apart from any other reasons, it is not possible because it would put an intolerable strain on the House of Commons if we had to debate an endless series of Orders, all of which were subject to negative Resolution in this form.
  I turn now to productivity. Again, it seems clear enough if we break it down. Of course we all want to see increased productivity, but it seems a hopeless task for the Government on any rational basis to decide, particularly with reference to a vague phrase like "the national interest", which productivity agreements are in the national interest and which should be allowed.

  745
  My hon. Friend the Member for Oswestry (Mr. Biffen), in a very penetrating speech, pointed out that I.C.I. had starred with the idea of a productivity increase and had had to abandon it. The complexities are so obvious. One of them was put forward by the hon. Member for Central Ayrshire (Mr. Manuel) when he rightly said that, in the industry which he knows best and in many others, productivity is simply not related—or not necessarily—to the work that people do.
  A typical problem would be that which arose if O and M staff decided that a certain job could be done vastly more swiftly. The productivity of that worker would go up, but the same study might reveal that the man working next to him was working as efficiently as he possibly could. Clearly, on that basis, that man's wage would stay where it was. We will face a whole complex of anomalies on this basis throughout every firm and in every industry.
  It is riot an answer to say that we spread productivity over the work force, because that again brings in great problems of who comprises the work force, whether it includes foremen, office workers and the rest. The only true answer is that an agreement is a good agreement, or should be, if it suits both sides. People have said much about the Esso agreement and about buying the rule book. The reason why that was a good bargain was that it was good for both sides. The employers got rid of a lot of restrictive practices, work went forward and the workers benefited vastly from the increase in their wage packets. It does not need Governments to do that but sensible negotiating between employers and employees.
  The Government should recognise that after next June, although they have in the national interest to study what the position will be overall, they should not attempt to concern themselves with the details of wage negotiations. My hon. Friend the Member for Finchley (Mrs. Thatcher) was absolutely right when she said that merit had no part in this White Paper, and that was a most severe criticism of it. I hope the First Secretary of State will look at the point which was made also by my hon. Friend the Member for Somerset, North (Mr. Dean) about
  746
  the effect on pensions. It would be most unhappy if as a result of what, we hope, will be a temporary economic situation those who retire in future may for many years of retirement have their end pension affected by what the Government are doing at present. I am sure that a way can and should be found round this.
  The First Secretary of State claimed in proof of the success of his policies that prices from June to October had gone up by only one-quarter of 1 per cent. and the wage rate index had gone up by only two-thirds of 1 per cent. He claims too much. In relation to prices his claim is actually worse than usual over the last 10 years. In the R.P.I. series of 1956 to 1962, seven years—comparing like with like, June to October—two show nil and the others cancel each other out by going up three points and down three points. The total was nil, and in that case it was better than the performance of what the Government are so proud today. In the more recent years, 1963–64–65, the average was almost identical with the claim which the right hon. Gentleman made. There is nothing in the claim about prices. As the Minister of Labour knows well, this is always the easiest time of the year for prices and this is reflected in the index.
  The same is true of wages. It is true that wages increases are slightly less than last year, but how much is due to freeze and how much to squeeze is a matter for debate, because deflation affects wage rates. Many people have done some scientific or economic work on this. Professor Phillips has calculated that a rise in unemployment from 1 per cent. to 2 per cent. reduces the rate of wage increases from 9 per cent. to 3 per cent. per annum. That is what is happening. If we have further and more severe unemployment from 2 per cent. to 3 per cent. we reduce wages rates on what is called the Phillips curve from 3 per cent. to 1 per cent. per annum. The Government are creating unemployment and, as a result, it is not surprising that the wage rate is more stable for this particular time of year.
  I wish this was the last of the dreary series of White Papers we have had, but I am afraid that Government by White Paper is here to stay and that next year we shall have another as thoughtless and as useless as this. I turn to the question

  747
  of unemployment. This afternoon the Chancellor gave us a lengthy, but useful, account of the general economic position. I had intended to cover that and many other subjects as well, but I changed my mind after what I am afraid I must regard as an absolutely deplorable speech by the Minister of Labour when opening this debate.
  It is becoming too tedious to say that the right hon. Gentleman is a very nice chap, which he is, and that he hates his job, or at any rate the present circumstances of the job, which must be true. What was abundantly clear yesterday was not only that he did not know what to do but, more seriously still, that he did not know what the real position was; and, until we analyse that, it simply is not possible to decide on such matters as future reflation. This is the reality of the debate.
  For four years I was Minister of Labour, which is longer than anyone on either side of the House has held that office. In that time I saw it all. Until recently hon. Members opposite used to boast that they had the best figures for ten years. It was in 1956 that I was at the Ministry of Labour. They talk and worry about the figures now, but I can remember an almost comparable curve in 1958 and 1959 when I was Minister of Labour.
  The one thing I am certain about is that it is not the absolute figure of unemployment which worries people. It is the trend and the sharpness of the line on the graph. This is what is causing so much worry at present. While there is fear in the country, we are wasting our breath talking about restrictive labour practices; we are wasting our breath talking about demarcation disputes; and we are even wasting our breath talking about a voluntary incomes policy. These things will not happen until fear goes. The surest way of dispelling fear is to try to analyse the situation and to put before the House, which the Minister of Labour signally failed to do yesterday, an accurate account of the position and a forecast of what will happen.
  In the last two months unemployment has risen by 200,000. That is an increase of 59·2 per cent. Let me make it quite clear that I am absolutely certain that
  748
  there is no question whatever of a return to the days of the 1930s or the 1920s, if only because our knowledge of techniques and of central bank co-operation are so much superior now. However, it remains a fact—I have here the figures for 50 years going back to the end of the First World War; I have been through all these figures carefully—that only once, and that was in 1921, has the increase over the same two months been higher than it is now. In only one year—1920, 46 years ago—was the percentage higher than the 59·2 per cent. increase which has just occurred. In 1920 the increase was 66·1 per cent.
  The point is—I ask the Minister of Labour to take this up—that at a similar time in a cycle, when on 17th November, 1958, unemployment was running at 536,000, almost exactly where it is today, I made a prophecy to the House. Having analysed the position and having given the special reasons—the Christmas trends, the weather, and the peak leap in January, I said:
  "even if I assume that the figures for the next few months"—
  I was saying this in November—
  "will be rather worse than the normal seasonal decline—which I am assuming—on the evidence present before me I expect that the unemployment figure will not be as much as 3 per cent. in the early months of next year. Indeed, if today I had to forecast the figure I would put it at 2·8 per cent. after the big increase in January has taken place."—[OFFICIAL REPORT, 3rd November. 1958; Vol. 594, c. 732.]
  When January came the figure was exactly 2·8 per cent. The Chancellor of the Exchequer knows very well from his experience of getting estimates right, if he ever does—it is extremely difficult—that it is usually the result of two wrong guesses which correct themselves. In this case the underlying trend was slightly better than I had thought and the weather turned out to be slightly worse.
  It made an enormous difference to confidence at that time, because it is only the unknown that people fear. If the Minister of Labour would take his courage in his hands and give us a proper and adequate analysis of the figures and tell us where he thinks the trend, disturbing as it is, will go, he would do a great deal to restore the confidence that is so lacking in industry at the moment. The very lack of that confidence, in the absence of such a statement from the

  749
  Minister of Labour, will snowball the unemployment figures as people's plans move against them.
  There are two possible causes of this catastrophic rise. First, there is the question of the relation of output to unemployment. I shall not go into the arguments, but there is a recognisable and assessable link between output and the level of unemployment. There is even a formula which one can, if necessary, use. I assume that the volume of output has stopped rising. Indeed, I assume that it has fallen by 1 per cent. But even this fall cannot begin to account for the great leap in unemployment. One would have had to have a fall in output of about 5 per cent., but that is fantastic and has not happened.
  It follows that there is another major factor at work. It could be that a once-for-all shake-out has taken place. If so, the future rises in unemployment will be very moderate. It could be, on the other hand, that there has been an appalling slide in confidence, in which case the normal analysis is of little value, and, if this is so, future rises could be unacceptable—unacceptable, I mean, to both sides of the House, which are equally pledged to full employment.
  It is a difficult matter to decide. It is easy to go wrong, but that is no excuse for not trying. I do not take too gloomy a view. I share the view of my right hon. Friend the Member for Flint, West (Mr. Birch). I do not talk in terms of unemployment at seven figures. But I am sure that the Government have consistently underestimated the loss of confidence in our economic affairs.
  I believe that pressures are forcing industry to use wastage as a means of reducing its labour force. It looks to me, therefore, if for that reason alone, that unemployment will go up more than would be accounted for by seasonal factors.
  I am by no means as pessimistic as many people who have studied this matter with full knowledge are, but having said that, I strongly urge—indeed, I challenge—the Minister of Labour to take me up on this and follow the lead which I gave in 1958. If I may counsel him, he should not ask his officials because they will advise him against it, as they advised me against it in 1958. If he would tell the
  750
  people of this country what is happening, it would have a great and steadying effect upon confidence and upon the level of unemployment.
  Very swiftly, because of the time, I turn to one or two other factors. We know what has happened to production. The only comparable fall came between December 1962 and January 1963, during the most severe winter for 100 years.
  We know what is happening to investment. Whether we take the Board of Trade estimate or the C.B.I. estimate, the position is gloomy. I heard with interest what the President of the Board of Trade had to say this afternoon. It may be of help—I am not niggling here—to say that I believe that the hon. Member for Bosworth (Mr. Wyatt) put his finger on the difficulty. It is no good offering someone a loss of £95 as against a loss of £100, which, basically, is what the offer amounts to, because he is not interested in either until he can see a profit, and he will not see a profit until there is confidence. This is why the word "confidence" has come ringing through all the speeches in these two days. Business plans will remain in the pending tray until confidence returns.
  We know the situation in regard to growth. As my hon. Friend the Member for Worcester (Mr. Peter Walker) said yesterday, we are at the bottom of the league table.
  There is a somewhat brighter side. The Chancellor of the Exchequer has been wrong in the past in his balance of payments forecasts, and I do not want to twit him about that. I think and hope that he will be in surplus next year on the balance of payments. But at what a price. He is going to achieve strength through stagnation. We have had two years of stagnating and, indeed, declining production, and unemployment has soared up.
  The Chancellor speaks of the strength of sterling, and there may well be special factors at work. But, even so, with all the help it has had, for sterling to be at 2·79 and a fraction—one-16th I think—is very depressing. There are two bullish factors. One is exports, and we are delighted to see the good performance in exports. We welcome it very much. The other is the question of public expenditure. I do not want to go into that,

  751
  because I must hurry to a conclusion for the first Secretary of State.
  The Chancellor is wrong, however, in twitting us with being against public expenditure. Some of it is exempt—for example, expenditure on roads, docks and many other things, too. But public expenditure is, I am certain, one of the greatest worries of the Chancellor at the present time.
  One word has dominated this debate—confidence. This is not just because it is in the Motion, but because every single crisis is, in the last resort, about confidence. The Chancellor is somewhat surprised that my right hon. Friend was not more violent in moving the Motion of censure. If he is surprised at that, he must be astounded at the moderation of my speech. But there is very good reason. Both my right hon. Friend and I have been Minister of Labour, and if one is Minister of Labour in a particularly sombre time and dealing with unemployment it is not possible to discuss this except in terms of utter seriousness, which I have tried to do tonight.
  I do not wish to go into all the points that have been made, but ever since November, 1964, we have basically been in a crisis of confidence. There was no crisis of confidence either in sterling or in this country during the election—not even when it seemed likely that the Socialists would win, and not even when they did win. Not until a month after did these special factors of confidence, of which the Prime Minister then spoke, come. Basically, ever since then, because of the incompetence of the Government, we have been in this particular crisis. There is all too little confidence in the Government abroad, there is all too little confidence in the Government at home, and the Opposition wish to record by our vote tonight our utter lack of confidence in the Government.
  9.28 p.m.
  The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart): The right hon. Member for Enfield, West (Mr. Iain Macleod), like the hon. Member for Worcester (Mr. Peter Walker) and the right hon. Gentleman the Leader of the Opposition, has, as he said, delivered a serious speech and he took some pride in the fact that it
  752
  was not too polemical. But one of the reasons for that emerged in the last remarks he made, when he referred to events immediately before the 1964 election. He said that there was no crisis of confidence. [Interruption.] No—there was a mounting deficit accompanied, as it mounted, by a series—[Interruption.]
  Mr. Speaker: Order. I hope that the hon. Gentleman who has not listened to the debate will listen to the final speeches.
  Mr. Stewart:—accompanied, as it mounted, by a series of progressively more euphoric statements from members of the last Government. It was not only that inheritance of a deficit, mention of which naturally so vexes the party opposite. There was the inheritance also of a totally uncontrolled defence programme. Do right hon. and hon. Members opposite really suggest that there would be the least chance of balancing our balance of payments and therefore providing the conditions of growth if anyone had attempted to go on with anything like the defence programme with which they left us?
  If right hon. and hon. Members opposite make a virtue of not being too polemical, we must remember that it is partly their past memories and even their consciences that inhibit them in moving the Motion.
  The debate has ranged in subject over the whole financial and economic field and in time back at least to 1964 and sometimes to the 'twenties. But, recognising the susceptibilities of hon. Members opposite to the mention of the period prior to October, 1964, I will make a start on what I have to say with the July measures. They included measures of deflation, of reduction of demand, and measures to control prices and incomes. The necessity for these measures at that time has not been seriously disputed during the debate.
  It is true that the right hon. Gentleman the Leader of the Opposition seemed to criticise the control of prices. If the measures were meant to be deflationary, he asked, why control prices. But surely he is not suggesting that it would have been right or possible to impose any kind of freeze or restraint on incomes

  753
  without at least something comparable on prices. Indeed, if there had not been control of prices, one would not have secured the confidence abroad which was so essential at that time.
  It is true that some of the deflationary measures were in themselves of a nature which would put up prices, and that was made clear at the time. The effect of the Selective Employment Tax and certain other measures it was known must cause some prices to rise—and this is a matter which the right hon. Member for Enfield, West left out of his calculations when he was trying to belittle the degree of control over prices, despite these measures, which has been secured during this period.
  But now what we are rightly asked is what course we pursue from here. The right hon. Member for Flint, West (Mr. Birch) made very merry with nautical metaphors and explained that we did not know how to navigate. When we remembered how he got on with his own shipmates in the Conservative Government, it was a little like listening to a lecture on navigation from the prophet Jonah.
  Clearly, the course which we pursue from here must be one, as the Chancellor of the Exchequer said this afternoon, which combines a proper care for the balance of payments with a proper care for growth and a proper care for the maintenance of employment. I heartily agreed with the Leader of the Opposition when he pointed out that if we were to do this, there had to be structural changes in industry. He rightly argued that the extent to which we could be successful in reconciling growth and balance of payments and a tolerable figure of unemployment depended on the structure of the economy. He pointed out that it varied from one nation to another and that to get the right answer one must seek to remove certain blocks and obstructions which prevented one from reconciling balance of payments, growth and employment.
  I will give the House just one figure which illustrates how serious is the need for these structural changes. In the making of transport equipment it takes two men in this country to produce the result which is produced by one man in Sweden. One gets similar alarming
  754
  figures in comparisons with many industries in a good many industrial countries.
  This situation is not the result of anything which may be held against the Government who have held power for the last two years. These figures are plainly the result of years of failure to understand and neglect of opportunity and of closing one's eyes to a problem. The right hon. Member for Enfield, West took up the tale begun by the hon. Member for Worcester by referring to the O.E.C.D. league figures and complaining, not unnaturally, of our position in them. But if both the right hon. Gentleman and his hon. Friend had read the report a little further and looked not only at the figures, but the reasons affecting growth which the report gives, they would have found that it was pointed out that one of the reasons was the comparatively low level of investment in this country. When? During the last decade.
  One must heartily agree with the Leader of the Opposition that there is need for structural change. This means that in our course from here we have to combine steps which must he carefully timed with an eye on the balance of payments, steps which will be capable first of restraining and then of reversing the down-turn, both of investment and employment that we have seen.
  Next we must, simultaneously with this judgment of the prior timing of particular steps to meet the present investment and employment situation, combine with that the steady and continuous promotion of structural change. Thirdly, we must combine both of these things with a prices and incomes policy. Prices and incomes policy at the moment means standstill. It will shortly mean severe restraint. In future it should mean planned growth, recognising the connection of prices and incomes to productivity.
  It is those things with which I want successively to deal. First, there are the timed steps to deal with the situation over investment and employment: secondly, there is the steady promotion of structural change and, thirdly, I want to deal with the prices and incomes policy. All of the steps it will be necessary to take but it is unwise to anticipate them or to set dates in advance because they have to be taken with an eye to the balance of payments.

  755
  One of the first measures is to arrest the down-turn in investment. An important statement on that was made by my right hon. Friend the President of the Board of Trade just before today's debate. It is interesting to notice what the reactions of industry are to this. A spokesman for the C.B.I. points out that it had previously asked for investment incentives. It says without qualification that it welcomes the 5 per cent. increase in cash grants, which should be worth about £100 million to the industry over the next two years. It goes on to indicate that this is the right kind of step to take and not the step of an immediate demand reflation. The T.U.C. says that it welcomes the announcement of the grant and adds:
  "Apart from the direct effects that this will have upon stimulating investment it provides reassuring evidence that the Government does not intend to let the economic situation deteriorate. The decision should therefore help to maintain general confidence among businessmen and trade unionists and prepare the way for renewed economic expansion."
  I contrast those comments which come from the people who will do the work in industry with the rather niggling complaints which came from the benches opposite when this statement was made. The Leader of the Opposition argued: can a man in two years plan an investment, get the assets installed and therefore get any benefit out of this? That is not the point. What we have to look at immediately are decisions which are on the point of being made, decisions whether to go ahead as previously planned or to postpone action.
  There can be no doubt that the statement is a valuable help in seeing that those decisions are made in the right way. In addition to that statement there is the recognition in the White Paper on Prices and Incomes that in handling prices we must have regard to the need for enterprises to be able to maintain investment. It cannot be said that our treatment of the matter in the White Paper is in any way a discouragement to investment.
  There is the question of getting such immediate redeployment as one can where unemployment has occurred. Here, the Department of my right hon. Friend the Minister of Labour has been at work. Large numbers of vacancies which had
  756
  not previously been notified were discovered as a result of the Ministry's work and many men were able to be directed to jobs. My hon. Friend the Member for West Lothian (Mr. Dalyell), who has been much concerned about Bathgate, will know that even in that difficult area the situation has been markedly improved recently.
  Next, we must consider how all this works out with regard to regional policy. The House is aware of what has been done to ensure that in a generally difficult time the more vulnerable areas of the country are not too seriously hit. Provisions have been made about investment grants, building controls, different instructions to banks and advance factories. All these have helped the regions. Also, there is what was said by my right hon. Friend the President of the Board of Trade yesterday evening when he indicated further ways under, for example, the Local Employment Acts in which regional unemployment could, at any rate pending a general recovery, be alleviated. As the House knows, further measures which may help the regions are now actively under consideration.
  In addition to investment, immediate redeployment and regional policy, there is the promotion of exports. Today the House heard a statement of my right hon. Friend the Chancellor of the Exchequer about export rebates. The House will be aware—I referred to it during Question Time today—of the special concern which the little "Neddies" have over activities which will help the balance of payments either by promoting exports or by saving imports.
  There is, further, the declared intention of the Government to seek entry to the Common Market. Industry has laid great stress on this as a factor promoting confidence. When the Prime Minister made his announcement about Europe the Front Bench leaders of the Conservative Party said that the Government would have the great advantage of an Opposition who were solidly behind them. But every mention of Europe today and yesterday from the benches opposite has been one of hostility to and denigration of what the Government are trying to do. On this as on other matters there is a widening gap between the leadership of the Conservative Party and some of its back-bench Members.

  757
  I turn to the structural changes which the Leader of the Opposition mentioned and which, in my judgment as in his, lie at the heart of the problem. It will not be enough merely by timed immediate measures to move from recession to reflation unless, during the process, we have taken the more fundamental steps which will make the economy permanently more healthy. It is that which this country has failed to do during previous periods of stop-go.
  I want to take some of the measures of structural change which the Leader of the Opposition mentioned and to add others to the list. He spoke first of retraining and redeployment—what one might call permanent redeployment, the training of a man in a new skill or to acquire a greater degree of skill so that he is permanently in a position in which he can be of more value to the economy.
  The right hon. Gentleman said that this was crucial to the whole question, and so it is. What we find, however, is that, although so much still remains to be done about this, the present Government have done more about retraining in two years that the last Government did in 10 years. The Leader of the Opposition says, "This is crucial. I have always said so." I am sure that he always said so. Why did not his colleagues listen to him? It is no good his saying that they have always said so. They have never done so.
  I do not dispute that this matter cannot be handled—no one thinks that it can be handled—by an increase in the number of places in Government training centres alone. They are important. They may well be the pacemakers and example setters for the process of retraining, but a great deal has to be done in industry. That is why we have been promoting the industrial training boards. Let it be noticed, however, that to get industry to co-operate in this means increasing partnership between Government and industry. It means people in industry being willing to do what the hon. Member for Ealing, South (Mr. Batsford) so bitterly reproaches them for doing—being willing to serve with the Government on committees in order to solve important national problems.
  It is no good the leader of the Opposition calling for retraining and for other
  758
  measures which require increasing partnership between the Government and industry if the back-benchers are to say of every industrialist who will work in partnership with the Government that he is somebody who is betraying a cause in which they believe.
  Similarly, the Leader of the Opposition urged a faster running-down of the number of men employed in coal mining. I do not know whether the rate could be accelerated. What is not in doubt is that the National Coal Board has done an extremely good job in this difficult task. Those of us who remember the run-down of men in the coal industry in the 'thirties, when the industry was privately owned, will contrast the way in which the two processes were carried out. It could not have been carried out with the humanity that has accompanied it at this time if it had not been in public ownership and if it had not been assisted by a publicly provided housing programme.
  Another structural change is to get in industry as far as we can the right pattern of firms—not the growth of great monopolies, or of industries fragmented into so many firms that none can afford proper research and training. The instrument to that end, however, an instrument that would have helped this process of structural change, was the Industrial Reorganisation Corporation. When it came to the point, the party opposite voted against it.
  Another form of structural change will be to pay greater attention to management education. There are in colleges of further education some 50,000 people taking courses in management. The extent to which this country took the matter seriously in the past can be judged by the fact that we know the present figure of 50,000 as a result of a special survey but we just do not know the comparable figures in the past. They are not available. In the last few years, however, both at universities and colleges of further education, there has been a very gratifying advance in the number of people undertaking these studies.
  Above all, what are called the "Little Neddies" will be our main instrument for structural change. They are important both for the discovery of methods of efficiency and, what is perhaps still

  759
  more needed, the spread of knowledge about discoveries which have been made, whether the discoveries are administrative in the way of better control over stocks, whether they are more technical in the way of the reduction of unnecessary varieties of product so that we can get standardisation, or whether they are, as they are in building, the discovery of new methods of construction.
  When one considers the record of the valuable work being done by the "Little Neddies" now, one is obliged to ask time and time again why this was not in train 10 years ago when there was no grave economic or financial reason that would have made it impossible.
  If the party opposite do not care to have that charge made against them, if they accept their leader's doctrine of the importance of structural change, and if they know, as they must if they have studied the facts, the valuable work being done by the "Little Neddies", why is it that my colleagues and I at the Department of Economic Affairs, week after week, have had to answer questions from the party opposite, each one of which was designed to denigrate the "Little Neddies" and make mischief about them?
  All of these measures require public expenditure and increasing co-operation between the State and private industry, which is exactly the point to which the hon. Member for Weston-super-Mare (Mr. Webster) took such strong exception in his speech. It is no good the party opposite talking about public expenditure as if it was either bad in itself or, in its nature, worse than private expenditure. What one has to ask about public expenditure at present is whether it contributes to help the country out of its difficulties, and public expenditure on technical education and on Government training centres is valid.
  The criticism that has been made from the party opposite all the time has been to talk about public expenditure as if the growth of it were bad in itself, without asking on what the money is spent.
  Sir Edward Boyle: Why did the party opposite cut expenditure on technical college and university building last year? So
  760
  far from supporting them, we took the earliest opportunity of debating it.
  Mr. Stewart: The party opposite will always demand—[HON. MEMBERS: "Answer."] Those reductions were made because, quite clearly, the total amount of public expenditure has to be related to the total growth of wealth. The point which I was making is that the continual demands for reduced public expenditure by the party opposite are not consistent with a modern State, and it is here that the gap between the Leader of the Opposition and his followers becomes most apparent.
  The Leader of the Opposition is a civilised man—
  Hon. Members: Oh.
  Mr. Speaker: Order. When compliments are exchanged across the Floor of the House, I hope that no one will object.
  Mr. Stewart: With time and patience, he will become a modern man. But he leads a horde of Vandals and Visigoths. "Visigoth" was the name applied to himself by one of the hon. Members opposite.
  They complain that we are trying to manage a private enterprise system in which we do not believe. The truth is that they have not yet learnt that they are living in a mixed economy. Until they grasp that the general abuse of public expenditure and public enterprise on which they were brought up has no relevance to the twentieth century, we shall get nowhere on the process—[Interruption.]
  On the prices and incomes policy, my hon. Friend the Member for Huddersfield, West (Mr. Lomas) was worried about the public sector. He will find that, wherever there are comparable cases, public and private sectors are treated alike, but certain instances arise where things occur in the public sector which have no true parallel in the private sectors—for example long-term restrospection—and on these matters it is clearly necessary to state what will be done with these particular problems, but in no case where the things are comparable has there been discrimination.
  The hon. Lady the Member for Finchley (Mrs. Thatcher) was concerned about pensions. I would only say that

  761
  either one of my colleagues at the Department, or myself, will be meeting representatives of the National Association of Pension Funds. I cannot at present say more than that, or promise anything more, but I note what she said.
  Dealing next with productivity agreements, I think that the right hon. Member for Enfield, West tried to prove too much. Of course it is difficult to say exactly who is contributing to productivity, and who is not, but this difficulty is there whether one is framing a productivity agreement in time of severe restraint, or at any other time. If the right hon. Gentleman's argument were conclusive, we would never frame them at all, but the policy is not discouraging them. I know already of firms and local authorities which are vigorously pursuing the establishment of genuine productivity agreements. The House should notice that there could be a producitvity agreement where productivity was obtained at such a price that the unit cost of the product at the end was higher. That shows clearly what would be meant by not considering the national interest.
  Mr. Iain Macleod: I think that the right hon. Gentleman has missed by point. Of course we want to see productivity agreements. My point is that this is a matter which employers and employees can judge, and a matter which it is impossible for the Government to judge in relation to all the issues involved.
  Mr. Stewart: On that I would say—and this applies to the whole future of prices and incomes policy—that in a period of standstill or severe restraint clearly the Government must judge, and the more successful we are in getting to a period of growth, then the whole administration of prices and incomes policy, though still difficult, becomes a great deal more manageable, and I would say that as a general rule for prices and incomes policy it will always be necessary for the Government to state what they believe the norm of increase
  should be, and that must be related to productivity.
  Secondly, we must have advance notice of proposed increases. There must, where necessary, be the possibility of challenge, the necessity to justify claimed increases, and there must be continuous consultation between Government, management, trade unions, and the National Board for Prices and Incomes.
  It is those general principles which we have to hammer into a definite code of conduct in the discussions which I am pledged to undertake in the coming months.
  Sir C. Osborne Sir C. Osborne rose——
  Mr. Stewart: I cannot give way.
  Finally, I propose to say just a word about the two words which vexed the Leader of the Opposition so much—social justice. Here again is something which the party opposite has not understood. If we try to live in a modern society, it is not enough merely to talk about the size of men's material incomes. We are trying to get men and women to live in a changing society, and change involves for us all greater risks than a purely static society does.
  To get people to accept those risks, and to accept change, they must believe that the general out turn will be socially just. That means that the gap between the richest and the poorest must not be too wide. That in my view justified the Surtax increase. Secondly, differences in income from one man to another must be functionally justified.
  Mr. Brian Batsford rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly:—
  The House divided: Ayes 246, Noes 329.

  Division No. 217.]

  AYES

  [10.0 p.m.

  Alison, Michael (Barkston Ash)

  Bennett, Sir Frederic (Torquay)

  Boyd-Carpenter, Rt. Hn. John

  Allason, James (Hemel Hempstead)

  Bennett, Dr. Reginald (Gos. & Fhm)

  Boyle, Rt. Hn. Sir Edward

  Astor, John

  Berry, Hn. Anthony

  Braine, Bernard

  Atkins, Humphrey (M't'n & M'd'n)

  Bessell, Peter

  Brewis, John

  Awdry, Daniel

  Biffen, John

  Brinton, Sir Tatton

  Baker, W. H. K.

  Biggs-Davison, John

  Bromley-Davenport, Lt. Col. Sir Walter

  Balniel, Lord

  Birch, Rt. Hn. Nigel

  Brown, Sir Edward (Bath)

  Barber, Rt. Hn. Anthony

  Black, Sir Cyril

  Bruce-Gardyne, J.

  Batsford, Brian

  Blaker, Peter

  Bryan, Paul

  Beamish, Col. Sir Tufton

  Body, Richard

  Buchanan-Smith, Alick (Angus, N&M)

  Bell, Ronald

  Bossom, Sir Clive

  Buck, Antony (Colchester)

  Bullus, Sir Eric

  Hawkins, Paul

  Orr, Capt. L. P. S.

  Burden, F. A.

  Hay, John

  Osborn, John (Hallam)

  Campbell, Gordon

  Heald, Rt. Hn. Sir Lionel

  Osborne, Sir Cyril (Louth)

  Carlisle, Mark

  Heath, Rt. Hn. Edward

  Page, Graham (Crosby)

  Carr, Rt. Hn. Robert

  Heseltine, Michael

  Page, John (Harrow, W.)

  Cary, Sir Robert

  Higgins, Terence L.

  Pardoe, John

  Channon, H. P. G.

  Hiley, Joseph

  Pearson, Sir Frank (Clitheroe)

  Chichester-Clark, R.

  Hill, J. E. B.

  Peel, John

  Clark, Henry

  Hirst, Geoffrey

  Percival, Ian

  Clegg, Walter

  Hobson, Rt. Hn. Sir John

  Peyton, John

  Cooke, Robert

  Hogg, Rt. Hn. Quintin

  Pink, R. Bonner

  Cooper-Key, Sir Neill

  Holland, Philip

  Pounder, Rafton

  Cordle, John

  Hooson, Emlyn

  Powell, Rt. Hn. J. Enoch

  Corfield, F. V.

  Hordern, Peter

  Price, David (Eastleigh)

  Costain, A. p.

  Hornby, Richard

  Prior, J. M. L.

  Craddock, Sir Beresford (Spelthorne)

  Howell, David (Guildford)

  Pym, Francis

  Crawley, Aidan

  Hunt, John

  Ramsden, Rt. Hn. James

  Crosthwaite-Eyre, Sir Oliver

  Hutchison, Michael Clark

  Rawlinson, Rt. Hn. Sir Peter

  Crouch, David

  Iremonger, T. L.

  Rees-Davies, W. R.

  Crowder, F. P.

  Irvine, Bryant Godman (Rye)

  Renton, Rt. Hn. Sir David

  Cunningham, Sir Knox

  Jenkin, Patrick (Woodford)

  Ridley, Hn. Nicholas

  Currie, G. B. H,

  Jennings, J. C. (Burton)

  Ridsdale, Julian

  Dalkeith, Earl of

  Johnson Smith, G. (E. Grinstead)

  Rippon, Rt. Hn. Geoffrey

  Dance, James

  Jones, Arthur (Northants, S.)

  Rodgers, Sir John (Sevenoaks)

  Davidson, James (Aberdeenshire, W.)

  Jopling, Michael

  Roots, William

  d'Avigdor-Goldsmid, Sir Henry

  Joseph, Rt. Hn. Sir Keith

  Rossi, Hugh (Hornsey)

  Dean, Paul (Somerset, N.)

  Kerby, Capt. Henry

  Royle, Anthony

  Deedes, Rt. Hn. W. F. (Ashford)

  Kershaw, Anthony

  Russell, Sir Ronald

  Doughty, Charles

  Kimball, Marcus

  St. John-Stevas, Norman

  Douglas-Home, Rt. Hn. Sir Alec

  King, Evelyn (Dorset, S.)

  Scott, Nicholas

  Drayson, G. B.

  Kirk, Peter

  Sharples, Richard

  du Cann, Rt. Hn. Edward

  Kitson, Timothy

  Shaw, Michael (Sc'b'gh & Whitby)

  Eden, Sir John

  Knight, Mrs. Jill

  Sinclair, Sir George

  Elliot, Capt. Walter (Carshalton)

  Lambton, Viscount

  Smith, John

  Errington, Sir Eric

  Lancaster, Col. C. G.

  Stainton, Keith

  Eyre, Reginald

  Langford-Holt, Sir John

  Steel, David (Roxburgh)

  Farr, John

  Legge-Bourke, Sir Harry

  Stodart, Anthony

  Fisher, Nigel

  Lewis, Kenneth (Rutland)

  Stoddart-Scott, Col, Sir M. (Ripon)

  Fletcher-Cooke, Charles

  Lloyd, Ian (P'tsm'th, Langstone)

  Summers, Sir Spencer

  Forrest, George

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Talbot, John E.

  Fortescue, Tim

  Longden, Gilbert

  Tapsell, Peter

  Foster, Sir John

  Loveys, W. H.

  Taylor, Sir Charles (Eastbourne)

  Fraser, Rt.Hn. Hugh (St'fford & Stone)

  Lubbock, Eric

  Taylor, Edward M. (G'gow, Cathcart)

  Galbraith, Hn. T. G.

  McAdden, Sir Stephen

  Taylor, Frank (Moss Side)

  Gibson-Watt, David

  MacArthur, Ian

  Teeling, Sir William

  Giles, Rear-Adm. Morgan

  Maclean, Sir Fitzroy

  Temple, John M.

  Gilmour, Ian (Norfolk, C.)

  Macleod, Rt. Hn. Iain

  Thatcher, Mrs. Margaret

  Gilmour, Sir John (Fife, E.)

  McMaster, Stanley

  Thorpe, Jeremy

  Glover, Sir Douglas

  Macmillan, Maurice (Farnham)

  Tilney, John

  Glyn, Sir Richard

  Maddan, Martin

  Turton, Rt. Hn. R. H.

  Godber, Rt. Hn. J. B.

  Maginnis, John E.

  van Straubenzee, W. R.

  Goodhart, Philip

  Marples, Rt. Hn. Ernest

  Vaughan-Morgan, Rt. Hn. Sir John

  Goodhew, Victor

  Mathew, Robert

  Vickers, Dame Joan

  Gower, Raymond

  Maude, Angus

  Walker, Peter (Worcester)

  Grant, Anthony

  Maudling, Rt. Hn. Reginald

  Walker-Smith, Rt. Hn. Sir Derek

  Grant-Ferris, R.

  Mawby, Ray

  Wall, Patrick

  Gresham Cooke, R.

  Mills, Peter (Torrington)

  Walters, Dennis

  Grieve, Percy

  Mills, Stratton (Belfast, N.)

  Weatherill, Bernard

  Griffiths, Eldon (Bury St. Edmunds)

  Miscampbell, Norman

  Webster, David

  Grimond, Rt. Hon. J.

  Mitchell, David (Basingstoke)

  Wells, John (Maidstone)

  Gurden, Harold

  Monro, Hector

  Whitelaw, William

  Hall, John (Wycombe)

  Morgan, Geraint (Denbigh)

  Wills, Sir Gerald (Bridgwater)

  Hall-Davis, A. G. F.

  Morrison, Charles (Devizes)

  Wilson, Geoffrey (Truro)

  Hamilton, Marquess of (Fermanagh)

  Mott-Radclyffe, Sir Charles

  Wolrige-Gordon, Patrick

  Hamilton, Michael (Salisbury)

  Munro-Lucas-Tooth, Sir Hugh

  Wood, Rt. Hn. Richard

  Harris, Frederic (Croydon, N.W.)

  Murton, Oscar

  Woodnutt, Mark

  Harris, Reader (Heston)

  Nabarro, Sir Gerald

  Worsley, Marcus

  Harrison, Brian (Maldon)

  Neave, Airey

  Wylie, N. R.

  Harrison, Col. Sir Harwood (Eye)

  Nicholls, Sir Harmar

  Younger, Hn. George

  Harvey, Sir Arthur Vere

  Noble, Rt. Hn. Michael

  Harvie Anderson, Miss

  Nott, John

  TELLERS FOR THE AYES:

  Hastings, Stephen

  Onslow, Cranley

  Mr. R. W. Elliott and

  Mr. More

  NOES

  Abse, Leo

  Atkins, Ronald (Preston, N.)

  Benn, Rt. Hn. Anthony Wedgwood

  Albu, Austen

  Atkinson, Norman (Tottenham)

  Bennett, James (G'gow, Bridgeton)

  Allaun, Frank (Salford, E.)

  Bacon, Rt. Hn. Alice

  Bidwell, Sydney

  Alldritt, Walter

  Bagier, Gordon A. T.

  Binns, John

  Allen, Scholefield

  Barnes, Michael

  Bishop, E. S.

  Anderson, Donald

  Barnett, Joel

  Blackburn, F.

  Archer, Peter

  Baxter, William

  Blenkinsop, Arthur

  Armstrong, Ernest

  Beaney, Alan

  Boardman, H.

  Ashley, Jack

  Bence, Cyril

  Booth, Albert

  764

  765

  Boston, Terence

  Gray, Dr. Hugh (Yarmouth)

  Manuel, Archie

  Boyden, James

  Greenwood, Rt. Hn. Anthony

  Mapp, Charles

  Braddock, Mrs. E. M.

  Gregory, Arnold

  Marquand, David

  Bradley, Tom

  Griffiths David (Rother Valley)

  Marsh, Rt. Hn. Richard

  Bray, Dr, Jeremy

  Griffiths, Rt. Hn. James (Llanelly)

  Mason, Roy

  Brooks, Edwin

  Griffiths, Will (Exchange)

  Maxwell, Robert

  Broughton, Dr. A. D. D.

  Gunter, Rt. Hn. R. J.

  Mayhew, Christopher

  Brown, Rt. Hn. George (Belper)

  Hale, Leslie (Oldham, W.)

  Mellish, Robert

  Brown, Hugh D. (G'gow, Provan)

  Hamilton, James (Bothwell)

  Mendelson, J. J.

  Brown, Bob (N'c'tle-upon-Tyne, W.)

  Hamilton, William (Fife, W.)

  Mikardo, Ian

  Brown, R. W. (Shoreditch & F'bury)

  Hamling, William

  Millan, Bruce

  Buchan, Norman

  Hannan, William

  Milne, Edward (Blyth)

  Buchanan, Richard (G'gow, Sp'burn)

  Harrison, Walter (Wakefield)

  Mitchell, R. C. (S'th'pton, Test)

  Butler, Herbert (Hackney, C.)

  Hart, Mrs. Judith

  Molloy, William

  Butler, Mrs. Joyce (Wood Green)

  Haseldine, Norman

  Moonman, Eric

  Callaghan, Rt. Hn. James

  Hattersley, Roy

  Morgan, Elystan (Cardiganshire)

  Cant, R. B.

  Hazell, Bert

  Morris, Alfred (Wythenshawe)

  Carmichael, Neil

  Healey, Rt. Hn. Denis

  Morris, Charles R. (Openshaw)

  Carter-Jones, Lewis

  Heffer, Eric S.

  Morris, John (Aberavon)

  Castle, Rt. Hn. Barbara

  Henig, Stanley

  Moyle, Roland

  Chapman, Donald

  Herbison, Rt. Hn. Margaret

  Mulley, Rt. Hn. Frederick

  Coe, Denis.

  Hilton, W. S.

  Murray, Albert

  Coleman, Donald

  Hooley, Frank

  Neal, Harold

  Concannon, J. D.

  Horner, John

  Newens, Stan

  Conlan, Bernard

  Houghton, Rt. Hn. Douglas

  Noel-Baker, Francis (Swindon)

  Corbet, Mrs. Freda

  Howarth, Harry (Wellingborough)

  Norwood, Christopher

  Craddock, George (Bradford, S.)

  Howarth, Robert (Bolton, E.)

  Oakes, Gordon

  Crawshaw, Richard

  Howell, Denis (Small Heath)

  Ogden, Eric

  Cronin, John

  Howie W.

  O'Malley, Brian

  Crosland, Rt. Hn. Anthony

  Hoy, James

  Oram, Albert E.

  Crossman, Rt. Hn. Richard

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Orbach, Maurice

  Cullen, Mrs. Alice

  Hughes, Emrys (Ayrshire, S.)

  Orme, Stanley

  Dalyell, Tim

  Hughes, Hector (Aberdeen, N.)

  Oswald, Thomas

  Darling, Rt. Hn. George

  Hughes, Roy (Newport)

  Owen, Dr. David (Plymouth, S'tn)

  Davidson, Arthur (Accrington)

  Hunter, Adam

  Owen, Will (Morpeth)

  Davies, Dr. Ernest (Stretford)

  Irvine, A. J. (Edge Hill)

  Padley, Walter

  Davies, G. Elfed (Rhondda, E.)

  Jackson, Colin (B'h'se & Spenb'gh)

  Page, Derek (King's Lynn)

  Davies, Ednyfed Hudson (Conway)

  Jackson, Peter M. (High Peak)

  Paget, R. T.

  Davies, Harold (Leek)

  Janner, Sir Barnett

  Palmer, Arthur

  Davies, Ifor (Gower)

  Jay, Rt. Hn. Douglas

  Pannell, Rt. Hn. Charles

  Davies, S. O. (Merthyr)

  Jeger, George (Goole)

  Park, Trevor

  Delargy, Hugh

  Jeger, Mrs. Lena (H'b'n&St.P'cras,S.)

  Parker, John (Dagenham)

  Dell, Edmund

  Jenkins, Hugh (Putney)

  Parkin, Ben (Paddington, N.)

  Dempsey, James

  Jenkins, Rt. Hn. Roy (Stechford)

  Parkyn, Brian (Bedford)

  Dewar, Donald

  Johnson, Carol (Lewisham, S.)

  Pavitt Laurence

  Diamond, Rt. Hn. John

  Johnson, James (K'ston-on-Hull, W.)

  Pearson, Arthur (Pontypridd)

  Dickens, James

  Jones, Dan (Burnley)

  Peart, Rt. Hn. Fred

  Dobson, Ray

  Judd, Frank

  Pentland, Norman

  Doig, Peter

  Kelley, Richard

  Perry, Ernest G. (Battersea, S.)

  Donnelly, Desmond

  Kenyon, Clifford

  Perry, George H. (Nottingham, S.)

  Dunn, James A.

  Kerr, Mrs. Anne (R'ter & Chatham)

  Prentice, Rt. Hn. R. E.

  Dunnett, Jack

  Kerr, Russell (Feltham)

  Price, Christopher (Perry Barr)

  Dunwoody, Mrs. Gwyneth (Exeter)

  Leadbitter, Ted

  Price, Thomas (Westhoughton)

  Dunwoody, Dr. John (F'th & C'b'e)

  Ledger, Ron

  Price, William (Rugby)

  Eadie, Alex

  Lee, Rt. Hn. Jennie (Cannock)

  Probert, Arthur

  Edelman, Maurice

  Lee, John (Reading)

  Pursey, Cmdr. Harry

  Edwards, Robert (Bilston)

  Lestor, Miss Joan

  Randall, Harry

  Edwards, William (Merioneth)

  Lever, Harold (Cheetham)

  Rankin, John

  Ellis, John

  Lever, L. M. (Ardwick)

  Redhead, Edward

  English, Michael

  Lewis, Arthur (W. Ham, N.)

  Rees, Merlyn

  Ennals, David

  Lewis, Ron (Carlisle)

  Rhodes, Geoffrey

  Ensor, David

  Lipton, Marcus

  Richard, Ivor

  Evans, Albert (Islington, S.W.)

  Lomas, Kenneth

  Roberts, Albert (Normanton)

  Evans, Ioan L. (Birm'h'm, Yardley)

  Loughlin, Charles

  Roberts, Goronwy (Caernarvon)

  Fernyhough, E.

  Luard, Evan

  Roberts, Gwilym (Bedfordshire, S.)

  Finch, Harold

  Lyon, Alexander W. (York)

  Robertson, John (Paisley)

  Fitch, Alan (Wigan)

  Lyons Edward (Bradford, E.)

  Robinson, Rt. Hn. Kenneth (St. P'c'as)

  Fletcher, Raymond (Ilkeston)

  Mabon, Dr. J. Dickson

  Robinson, W. O. J. (Walth'stow, E.)

  Fletcher, Ted (Darlington)

  McBride, Neil

  Rodgers, William (Stockton)

  Floud, Bernard

  McCann, John

  Roebuck, Roy

  Foley, Maurice

  MacColl, James

  Rogers, George (Kensington, N.)

  Foot, Michael (Ebbw Vale)

  MacDermot, Niall

  Rose, Paul

  Ford, Ben

  Macdonald, A. H.

  Ross, Rt. Hn. William

  Forrester, John

  McGuire, Michael

  Rowland, Christopher (Meriden)

  Fowler, Gerry

  McKay, Mrs. Margaret

  Rowlands, E. (Cardiff, N.)

  Fraser, John (Norwood)

  Mackie, John

  Ryan, John

  Fraser, Rt. Hn. Tom (Hamilton)

  Mackintosh, John P.

  Shaw, Arnold (Ilford, S.)

  Freeson, Reginald

  Maclennan, Robert

  Sheldon, Robert

  Galpern, Sir Myer

  McMillan, Tom (Glasgow, C.)

  Shinwell, Rt. Hn. E.

  Gardner, Tony

  McNamara, J. Kevin

  Shore, Peter (Stepney)

  Garrett, W. E.

  MacPherson, Malcolm

  Short, Mrs. Renée (W'hampton, N.E.)

  Garrow, Alex

  Mahon, Peter (Preston, S.)

  Silkin, Rt. Hn. John (Deptford)

  Ginsburg, David

  Mahon, Simon (Bootle)

  Silkin, Hn. S. C. (Dulwich)

  Gordon Walker, Rt. Hn. P. C.

  Mallalieu, E. L. (Brigg)

  Silver-man, Julius (Aston)

  Gourlay, Harry

  Mallalieu, J.P.W. (Huddersfie1d, E.)

  Silverman, Sydney (Nelson)

  766

  767

  Skeffington, Arthur

  Tuck, Raphael

  Williams, Alan (Swansea, W.)

  Slater, Joseph

  Urwin, T. W.

  Williams, Alan Lee (Hornchurch)

  Small, William

  Varley, Eric G.

  Williams, Clifford (Abertillery)

  Snow, Julian

  Wainwright, Edwin (Dearne Valley)

  Williams, Mrs. Shirley (Hitchin)

  Steel, Thomas (Dunbartonshire, W.)

  Walden, Brian (All Saints)

  Williams, W. T. (Warrington)

  Stewart, Rt. Hn. Michael

  Walker, Harold (Doncaster)

  Willis, George (Edinburgh, E.)

  Stonehouse, John

  Wallace, George

  Wilson, William (Coventry, S.)

  Strauss, Rt. Hn. G. R.

  Watkins, David (Consett)

  Winnick, David

  Swain, Thomas

  Watkins, Tudor (Brecon & Radnor)

  Woodburn, Rt. Hn. A.

  Swingler, Stephen

  Weitzman, David

  Woof, Robert

  Taverne, Dick

  Wellbeloved, James

  Wyatt, Woodrow

  Thomas, George (Cardiff, w.)

  Wells, William (Walsall, N.)

  Yates, Victor

  Thomas, Iorwerth (Rhondda, W.)

  Whitaker, Ben

  Zilliacus, K.

  Thomson, Rt. Hn. George

  White, Mrs. Eirene

  Thornton, Ernest

  Whitlock, William

  TELLERS FOR THE NOES:

  Tinn, James

  Wigg, Rt. Hn. George

  Mr. Lawson and Mr. Grey.

  Tomney, Frank

  Willey, Rt. Hn. Frederick

  BUSINESS OF THE HOUSE
  Ordered,
  That the Proceedings on the Bus Fuel Grants Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. McBride.]

  BUS FUEL GRANTS BILL
  Order for Second Reading read.
  10.13 p.m.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Stephen Swingler): I beg to move, That the Bill be now read a Second time.
  The House will know that when my right hon. Friend the Prime Minister on 20th July announced that a 10 per cent. surcharge on motor fuel duties was to be imposed under the regulator, he said that this increase would be refunded to bus operators in the same way as this Government had refunded the 6d. per gallon increase imposed in the autumn, 1964 Budget. The Prime Minister said that the necessary administrative arrangements would be made as soon as possible, and that Parliamentary authority would he sought in the ordinary way.
  The Finance Act, 1965, gave the Minister of Transport power to make grants to bus operators in respect of the 6d. increase in 1964. Under this power the Minister introduced a scheme of payments, after consultation with the bus industry, and the scheme is available to make the extra payments now promised. But the Minister's powers under the Finance Act, 1965, are specifically limited to the 6d. increase. At the time of the Prime Minister's announcement in July, this year's Finance Act was too far advanced for it to be practicable to include an alteration of this limit, and in the ordinary course this would need to wait for the Finance Bill next year. So it was thought right to put before the House this short Bill, to enable the payments to begin without this delay. The Bill will extend the Minister's existing power to pay grants by raising the limit of 6d. per gallon to cover the additional amount payable by virtue of the Order which imposed the 10 per cent. surcharge, this
  770
  power being retrospective to 21st July, 1966, the date of the surcharge.
  It will also give my right hon. Friend a continuing permissive power, subject to the approval of the Treasury, to pay grants for any surcharge imposed under any future use of the regulator. This provision has been included to avoid any future difficulty of this kind. I must make it clear, however, that this does not suggest that the Government would, in all cases, accept that grants should be paid. This would depend on circumstances at the time and the provision implies no automatic commitment to make the repayment.
  Bus operators are already receiving grants totalling about £4½ million a year because of the 6d. increase. Under the present Bill, in respect of the surcharge, it is estimated that they will get additional grants of just over £1 million in the current financial year. These additional payments can begin as soon as Parliamentary authority has been obtained under the Bill. Future payments will naturally depend on decisions yet to be taken, which the House will not expect me to anticipate.
  These grants to offset taxation increases have been given to the bus industry as an earnest of the Government's intention to help the stage bus services—the essential short distance services in town and country—which are a vital part of public transport, which it is our policy to strengthen. I hope that the Bill will have general support and a speedy passage.
  10.17 p.m.
  Mr. Peter Walker: We are grateful to the Parliamentary Secretary for his explanation of this Bill, which we welcome and support. We are pleased that it gives the Government power to provide a rebate for the increase which they imposed on 20th July last. We agree that the Government should have the power for the future to provide such grants.
  However, we hope that taking this permissive power in no way indicates—when the hon. Gentleman mentioned this in no way indicated, I hoped that this assurance was to follow—that they have in mind any further increase in the petrol tax, but apparently it was decided that if there were an increase, it was not

  771
  automatic that such a grant would be provided.
  We hope that taking this power will give the Government no temptation to increase still further the petrol tax and the tax on fuel oil. We will give the Bill the swiftest possible passage. I committed our side of the House to this only a few days ago, when the matter was raised at Question Time.
  Presuming that the Bill goes through all its stages in the next seven days, how soon will the industry obtain the considerable payments which it has already made in the 19 weeks since the imposition of this extra tax? My information from the bus companies concerned is that, during that period, they have paid £1,250,000 in duty which is due to be repaid to them. This relates to Derv alone. The payment in petrol duty over that 19 weeks was £178,000. This is a considerable sum which the bus companies have had to pay during a period of very high interest rates. Many of them have to work on overdrafts and to borrow to meet the additional charge. We should make it perfectly clear that the Government are giving away nothing at all tonight. What they are saying is that in future they will not continue taking away, as in the last 19 weeks, additional taxation from the bus companies.
  I ask about the seemingly rather extraordinary procedure of dealing with this Bill. Why was it not possible between 20th July and the time when the House rose for the Summer Recess to introduce the Bill? It was a very easy Bill to draft and the Government must have known that it would have the full agreement of the House. They must have known that the delay would cause extra cost and difficulty to the bus services. No action was taken before the Summer Recess and, much to our surprise, no action was taken when the House returned.
  On 17th November I put a Question to the Minister of Transport, which was replied to by the Parliamentary Secretary. I asked when we could expect the Government to provide these rebates. The Parliamentary Secretary replied:
  "As soon as the necessary Parliamentary authority has been obtained."—[OFFICIAL REPORT. 17th November, 1966; Vol. 736, c. 187.]
  772
  No further information was given. A week later a similar Question was put by the hon. Member for Orpington (Mr. Lubbock) to which the reply was given that the Government were soon to introduce legislation. This was the subject of one of those many Press notices from the Ministry of Transport, which gave the impression that it was a most important announcement made by the Minister, with all the usual appropriate wording of such Press notices.
  Why the difference in treatment between the Question I put on 17th November and the almost identical Question a week later? Was it because the Government preferred to make the announcement that at last they were to take action to the Liberal Party rather than to ourselves? Or is the more likely explanation that the Government had completely forgotten to introduce the Bill; that when asked about it on 17th November they woke up to the fact that this was something they should do, and a week later they announced that they would do it? We should like to have an explanation why there was the considerable delay of 19 weeks before the Second Reading of the Bill.
  The Bill is important. When introducing it the Parliamentary Secretary said it was a further indication of the Government's wish to assist the bus companies involved in public transport. There is little need to remind the House that those same bus companies have the very difficult task of meeting the Selective Employment Tax for which they will obtain no rebate for six months and in those six months, I am told, they will loan to the Government an interest-free payment of no less than £8 million. That is a very considerable burden on the companies and, added to that, the Government by their quite ruthless decision have done away with investment allowances for bus companies and they are not to provide investment grants. We heard during the economic debate today a Government announcement that investment grants were to be increased.
  In view of what the Parliamentary Secretary said when introducing the Bill, I urge the Government, especially in view of the delay in introducing it, to reconsider the whole question of investment grants for buses. Doing away with investment allowances has cost the companies

  773
  more than £2½ million a year. The Government have put up the fuel tax to bus companies, given them no rebate for 19 weeks, taken away investment allowances and taken an enormous interest-free loan from the companies. The combination of all these events has added considerably to the cost of public transport in many areas, particularly rural areas.
  Although we welcome the Bill, we regret the necessity for its introduction. We think that it should have been introduced within a few days of the 20th July measures. We regret all of the additional burdens which the Government have imposed upon bus companies. We very much hope that there will be no future increase in fuel duty but, if there is, that the facilities offered by the Bill will be put into immediate operation.
  10.25 p.m.
  Mr. Eldon Griffiths: My constituents have been very hard hit indeed by the imposition of the charge. Therefore, we are very glad that at long last the Government are taking it away. It should never have been imposed in the first place. It should have been removed much earlier. Now that it is being removed, the Government should go much further in alleviating the problems of rural bus companies. I cannot deal with the wider problem tonight. I merely want to ask one or two questions.
  First, the Government indicate that £1·1 million is to be paid back retrospectively in the financial year 1966–67. We must suppose that this sum is what the Government consider they owe to the bus companies in respect of the surcharge. My hon. Friend the Member for Worcester (Mr. Peter Walker) put the cost to the bus companies considerably higher, at £1¼ million. Which of those two figures is correct? If my hon. Friend's figure is correct, what is to happen to the further £150,000, which is a considerable sum for rural bus companies? Are they to get it back? Does the Minister have intentions in respect of the very large sums of interest which small rural bus companies have been forced to pay over the last few months to meet this very high, this iniquitous, tax on their movements?
  I want to ask about the procedure whereby bus companies will be able to
  774
  get back the amount of surcharge which has been taken from them. I understand that the method will follow that laid down in Section 92 of the Finance Act, 1955. Under subsection (3) the operator of a bus company, in order to recover this money, is apparently required to compile, preserve and produce
  "running sheets, accounts or other records".
  He must give facilities
  "for the inspection, removal or copying of such records".
  All bus companies keep records. It is reasonable that inspectors should have access to them. However, how much additional cost does the Minister think will fall upon operators in once again taking on much more paperwork to get back money which was theirs in the first place? When is it likely that the individual bus operator will get his money? In many cases in my constituency bus companies are in real need. They are hard up. They are waiting for this money. I hope that the Minister will take steps to expedite repayment.
  A third question arises about the projection in the Bill, which I find worrying. Not only are the Government asking that the money should be paid back, with which we are in entire agreement. They are asking for powers to repay any such additional duties as may be imposed in the future
  "by virtue of any later order".
  To my suspicious mind this suggests that the Government will increase the surcharge on fuel to bus operators yet again. I hope that the Minister, though he has explained his purpose, will at least go as far as to say that the Government have no intention of adding to this tax, which has already done a very great deal of damage.
  In rural Suffolk, where there are 135 small villages, many people, particularly the elderly and the disabled, have been held up and unable to travel, in the worst of weather, in the most difficult of conditions, because the bus operators are unable to provide services that they were providing two years ago. There has been the removal of the allowances, the Selective Employment Tax, and. of course, this surcharge on petrol and Derv.
  I do hope that the hon. Gentleman will recognise that in the country districts village people have to be cut off

  775
  from their weekly visits to market, and have not been able to have their groceries delivered by buses, as often they were. We shall be relieved when this tax is paid back. That cannot come too soon, and I hope that the Minister will put out of his mind any intention of imposing such an iniquitous surcharge again.
  10.30 p.m.
  Mr. Hector Monro: I should like warmly to support my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths). Everything he has said about England is twice as important for Scotland, where, of course, the majority of the route mileage is in rural areas.
  I was very suspicious when the Joint Parliamentary Secretary spoke about short-distance bus routes, because, after all, a great many of the routes in Scotland are extremely long. There are three routes through my own constituency—Carlisle to Stranraer, Carlisle to Glasgow, Carlisle to Edinburgh—all of 100 miles. I wonder whether these are short routes in his opinion, and whether or not there is any difference between what he calls a short route and what I would call a fairly long route.
  I would, too, support my hon. Friend's plea for the rural areas, because paragraphs 78 and 79 of the White Paper published in August, dealing with rural transport, made out that the people who were most affected were those who had the lowest incomes and were the most economically weak. Therefore, I hope that in Committee on the Bill we shall, if anything, help the rural bus services further.
  The Joint Parliamentary Secretary is well aware of the extreme problem of the area of Leadhills. I know that the hon. Lady the Member for Lanark (Mrs. Hart) has spoken to him about it and written to him about it, and I join with her, because my neighbouring village of Wanlockhead is in exactly the same position. These are the two highest villages in Scotland and therefore in Britain. They are extremely high up, and a great amount of fuel is required by buses grinding up and down to and from those villages. The Joint Parliamentary Secretary may make out that the higher their consumption of fuel the more sixpences
  776
  they will get back, but I do not think that is at all logical in this respect.
  I hope that some consideration is given to the rural areas of Scotland and that some concessions will be given in the very near future, because there is no doubt at all that buses are being reduced in number and in frequency and the people of Scotland are suffering very severely indeed.
  10.34 p.m.
  Mr. Geoffrey Wilson: I, too, wish to support this Bill and to endorse everything that has been said by my hon. Friends, particularly my hon. Friend the Member for Worcester (Mr. Peter Walker). I want to add only one very brief sentence. I hope that in producing this Bill the Ministry is not under the impression that it is doing any great service to the bus industry. If the Ministry really wants to help the bus industry it will have to do much more than just pay back this extra charge. The best thing the Ministry can do—and this must be well known to the Ministry, because it has been the request of the bus industry for many years—is to persuade the Chancellor of the Exchequer to make some general reduction in Derv taxation. It does not matter so much about petrol because buses as a rule do not use petrol. If that could be done it would do more to help rural services than anything else.
  10.35 p.m.
  Mr. Eric Ogden: My hon. Friend the Parliamentary Secretary will have noted that it is becoming more and more difficult to please the Opposition. They say they welcome the Bill and support it. They appreciate that, at a time of great national crisis and economic difficulty, there is here £1 million which might well have stayed in the Exchequer. But then they grizzle and grouse and take up the time of the House of Commons with points which really do not arise.
  I have two questions on the Bill. First, are the rebates to the bus companies to be based on the details and machinery to which the hon. Member for Worcester (Mr. Peter Walker) referred, and will they be made yearly, half-yearly or quarterly?
  Second, although most of the bus companies have co-operated fully in trying to

  777
  hold their fares, some of them, a minority, have based claims for increased fares wholly or partly on these increased costs even though it was made clear that a rebate would be coming at some time. Will this point be taken into account when decisions are made about allowing fare increases?
  This is a simple Bill. if we want it to go through speedily, as hon. Members opposite have suggested it should, let us give it a speedy Second Reading and send it on its way without more ado.
  10.36 p.m.
  Mr. Peter Mills: I support what my hon. Friends have said, and I assure the hon. Member for Liverpool, West Derby (Mr. Ogden) that we have constantly complained about the treatment meted out to the rural bus operators. We have done so for the last two years, and even before then. Some of us have been concerned about these matters for a very long time. My predecessor in the House constantly raised the problems of the rural bus operator. We know only to well what the problems are because we live in the countryside.
  Is what the Minister is doing enough? I am sure that it is not. It will not save the rural bus operators. They have suffered continuing harm during the past 18 months or two years, and they now have no more finance left. They have no reserves. In my constituency, many bus operators are heavily overdrawn, and I cannot believe that this Measure will do enough to save them.
  This is a sad state of affairs. After the rail closures in many parts of the country, the only alternative means of transport is the rural bus. For those whom I call the hard core, the elderly and people with small incomes, the bus service is the only means of transport. It will be denied them in the years to come.
  The Government's measures are insufficient and too late to overcome the rural bus operator's acute problems. The future for people living in the countryside will be grim, especially for those I call the hard core of people who use the rural bus services, unless the Government are prepared to do a good deal more.
  10.38 p.m.
  Mr. Paul Hawkins: My constituency is very similar
  778
  to those of my hon. Friends the Members for Bury St. Edmunds (Mr. Eldon Griffiths) and Torrington (Mr. Peter Mills). It has many small villages lying a long way from the main bus routes which are served by small private bus operators. These bus operators have suffered tremendous blows over the last two years, through increases in fuel duty, the Selective Employment Tax, and in other ways. I welcome the palliative which the Bill will give, but it will not cure their troubles.
  In my constituency, many of the villages and small towns have seen quite an influx of elderly and retired people from London and the bigger towns of the Midlands. These people, who retire at the age of 65 or 70, have never had cars and they rely on the buses to get them to the local small market towns. More and more bus routes are being discontinued. More and more bus operators are going out of business. A lot more must be done about bus operators in rural areas if we are to keep open these lifelines for the elderly and retired living in many of our villages in Norfolk. Although I support the Bill, I feel that it is only a very small move towards making up the losses these people have had over the last few years.
  I understand that the Bill will apply only to stage services, but many of our routes are what are called express routes and I understand that the addition will not be given to operators running these routes. But our towns are far apart and these express routes are very important to the area; they carry people for long stages. Will the money help these express routes as well as what are called stage services? I hope that the Bill is but the first step only of really big assistance to our rural bus operators, who do a first-class job in providing the only means of transport for many elderly and retired people.
  10.42 p.m.
  Mr. Alick Buchanan-Smith: I remember the hon. Member for Liverpool, West Derby (Mr. Ogden) in earlier debates discussing the question of living in the remoter areas of the north of Scotland. I suggested to him that it might be worth his while coming to the north of Scotland and seeing for himself some of the difficulties. I hope he will still feel that the offer is

  779
  open. We would welcome him and let him see the great problems with which people in that part of the country have to contend.
  Mr. Ogden: The hon. Gentleman will remember that I also invited him to come to Liverpool, but other arrangements intervened. That offer is also still open.
  Mr. Speaker: Order. I am interested in this exchange of amenities, but we must get back to the Bill.
  Mr. Buchanan-Smith: Thank you, Mr. Speaker. I am glad to hear that the hon. Gentleman's invitation is still open. My offer is still open as well.
  What concerns us, following what the Government have done, is the rise in the cost of living in the remoter areas. Transport costs have risen and the rise in fuel tax has hit the car owner as well. It has placed a burden on social life in these areas. That is something that the Government must take into account. We in Scotland know what depopulation and emigration mean and the rise in these costs is one of the factors contributing to them. We want to see the movement reversed. We welcome the Bill in that it helps in some way to alleviate some of the other measures the Government have introduced.
  It is important to realise the effect of the increased fuel tax on bus operators in rural areas. Not only do they have greater distances to cover but they are operating in a time of declining demand. While many elderly people do not have cars, an increasing proportion of younger families do and the bus operators face declining demand.
  But that does not detract from the fact that it is vital that bus services should remain for those who do not have cars—the old, the very young and the infirm, who are dependent upon them. This is a dual problem—that of those without cars and of the bus operators facing higher costs and falling income on their services.
  Rail closures have been mentioned. In my constituency the passenger station of Laurencekirk, on the main line, has been closed. We are disappointed that it has been closed. Much of the problem resulting could be overcome if adequate alternative bus services were provided.
  780
  The bus company is naturally unwilling to provide these services for the same reason that the railways wished to close the station. The bus operator is not anxious to take on the job of providing a service because the custom is not very great. However, there is not an alternative bus service, people in the town of Laurencekirk will be denied transport to enable them to get to the neighbouring town of Montrose, which is the only place in which many of them can find employment. Therefore, an added burden is placed on the bus operator in rural areas in which station closures have taken place. He is obliged by the Minister who has allowed rail closures to take place to put on extra bus services.
  Mr. Speaker: Order. The hon. Gentleman will not be out of order if he refers to the Bill.
  Mr. Buchanan-Smith: I apologise, Mr. Speaker. I am pointing out the extra burden which bus operators in rural areas must face as a result of Government action. I welcome the Bill in that it alleviates the burden put on them.
  Secondly, I wish to emphasise a point made by my hon. Friends the Members for Dumfries (Mr. Monro) and Norfolk, South-West (Mr. Hawkins) about longer-distance services in rural areas. This relates again to railway closures. Extra express bus services will have to be provided if the Strathmore line is closed, as is proposed. I welcome the Bill in that it will enable bus operators obliged to put on these extra services to recoup some of the extra costs which the Government have laid on them.
  I come now to the White Paper and the sections on rural transport. Can the Minister give some indication when the proposals contained in the White Paper to help rural bus operators will be implemented? One of my hon. Friends earlier indicated that he felt that what was being done was not all that could be done to help such operators.
  10.47 p.m.
  Mr. J. E. B. Hill: If all the Members representing rural constituencies who have spoken have given the Bill only a qualified welcome in that it does too little not soon enough, it is simply because we are all faced with the fact that public transport in the

  781
  countryside is scanty and is not as frequent or cheap as our constituents would like. In my constituency, fair criticism is often made by Londoners who have moved to Norfolk as part of the G.L.C. town expansion scheme, and they frequently tell me how difficult and expensive public transport is in the countryside compared with public transport in the big cities. I therefore very much hope that the Minister will look, perhaps not straight away, into the economics of rural transport yet again and will use the powers in the Bill to make increased grants.
  As has been said, there is the progressive cancellation of railway services, particularly stopping services. The Railways Board often says, "We hope that the difficulties caused by the closure of railway lines will be overcome by the provision of further bus services". Although the bus company in Norfolk is owned by the Railways Board, it is not all that willing to run further rural services as often they have to be run at a loss. If a factor in the loss is simply central taxation, I would hope that the Minister will use to the full the powers given to him by Parliament to reduce the effect of that taxation.
  Secondly, will the benefit of the Bill extend to school bus services? I am not clear whether school bus services, which cost a very great deal, will get any benefit from it. Yet again, there is some pressure in the countryside for an extension of school bus services. I do not want to go into all the difficulties, the dangers, and the hardships, because they are well known, and you would soon call me to order, Mr. Speaker; but, equally, I know that the matter of children getting to school safely and punctually is very dear to your heart.
  I should like to know, first, if school bus services receive the benefit of the Bill, and, secondly, if they do get the benefit of the Bill, will the Minister consider giving them perhaps more than sixpense rebate so that they can be more widely used? If they do not get the benefit of the Bill, will he consult with the Minister of Education to see that they do?
  10.51 p.m.
  Mr. Jasper More: Although most hon. Members on this side of the
  782
  House would wish to give an unqualified welcome to the Bill, some of the comments made in the debate by hon. Members opposite make it difficult to do so. The hon. Member for Liverpool, West Derby (Mr. Ogden) thought that any criticisms were made for party political purposes. I, for one—in company with a number of hon. Members on this side of the House—have been criticising for years the policy of rural bus services, even when Conservative Governments were in power.
  When the Minister has the effrontery to say that the present Government are doing this to support the bus companies, that is the type of hypocrisy that is hard to swallow. Whatever the Conservative Government may not have done, they did not go out of their way to make worse the position of the bus companies as the present Government have done. The Bill will not be of benefit to the bus companies. All it does is, in fact, to make tardy reparation for one of the items of damage which these companies have, suffered at the hands of the present Government.
  I should like to say to the Parliamentary Secretary that, in view of this Bill having been presented to the House, it is time that the Ministry of Transport really took time to consider what they are trying to do about bus services, and rural bus services in particular. All hon. Members on this side of the House must have welcomed the Answer to a Written Question that appeared in yesterday's HANSARD, which said that an experimental Post Office bus service will operate in Wales. I should like to commend that proposal as the type of idea which could well be pursued. I hope this will be done as part of a sensible and co-ordinated policy to do something for rural areas.
  In my own constituency, not a month passes without some new item being published about a bus service being withdrawn. That is a problem to which the hon. Gentleman's Ministry must give attention. I am sorry that this debate should have been spoiled, so to speak, by speeches by hon. Members opposite on the two matters to which I have referred, but nevertheless I give the Bill my support.
  10.54 p.m.
  Mr. Swingler: By your leave, Mr. Speaker, and the leave of the House, I think I should reply to some of the points raised by hon. Members.
  I rather resent the arguments of the hon. Member for Ludlow (Mr. More). I did not claim that what we were doing is of great benefit to the public transport operators. I simply explained quite plainly that the Government had taken the decision in 1964 to rebate an increase in duty, and this was the policy that we were continuing.
  I should explain, for the benefit of the public, that I did not invent the duty on petrol and Derv; nor did I invent increases. Having been in this House for 20 years, I think that the duty on petrol and Dery has accrued over a long period. I can claim that the present Government have recognised the important rôle of public transport to the extent that, having found it necessary, for the sake of general revenue—I am frank about that—to impose increases in the duty on petrol and Derv, they decided to rebate the duty in respect of those people who are stage-carriage operators. That is what we are now discussing.
  I take the criticism of the hon. Member for Worcester (Mr. Peter Walker) about delay. We had hoped to include this provision, as would be the normal practice, in the Finance Bill. That was not possible because of the time factor, and we have, as he will see, now produced the Bill in a slightly extended form which gives the Minister of Transport this permissive power, with the Treasury's approval, to continue, if it is found desirable by whichever Government are in power, to rebate any increase in duty that may be imposed on petrol and Derv. That has taken a little time and has involved some consultations. I apologise for any extra delay that has been involved, but I hope that the House generally agrees that this is a desirable Bill.
  In reply to other hon. Members who have put interesting points, I will only say that they will find from the White Paper on Transport Policy that this is only one of the steps that we intend to take in order to stimulate the rôle of public transport, especially in the rural areas. Next year, we shall be taking two further steps. One will be to provide
  784
  State grants for transport infra-structure by increased capital investment in public transport supported by grants from national funds.
  The other step, which we are quite specifically discussing with the local authority associations, is to provide for subsidies for rural transport on a 50–50 basis between State and local funds to enable the services to continue. It would be beyond the rules of order, Mr. Speaker, and I see you are getting restless in your Chair, to go further into those matters, but they show that this Bill is part of a developing programme, especially in support of transport in the rural areas.
  Many hon. Members will remember the Jack Report, which was published some years ago. The previous Government sat on that Report for quite some time, but we have decided that action should be taken on it. I can tell the hon. Member for Ludlow that we intend to experiment with the Post Office vans and the school buses, and with other forms of transport in the rural areas—
  Mr. Geoffrey Wilson: The Minister has mentioned the Jack Report. Will he bear in mind the minority Report of Mr. James?
  Mr. Swingler: Certainly. We have spent some little time in studying these Reports very carefully, and we are carrying out various experiments, as I announced recently to the hon. Member for Wycombe (Mr. John Hall) in an Adjournment debate. I shall be delighted to inform hon. Members of the places where the experiments will be carried out.
  Mr. Peter Walker: As the hon. Gentleman has moved from the content of the Bill, may I ask him to answer the point raised by myself and by my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths) about the amount of money involved in this Bill? The amount referred to in the Explanatory and Financial Memorandum is £1·1 million for the financial year 1966–67 I do not see how this can possibly be a correct figure. The official statistics show that in 1965 the amount of fuel tax paid was over £47 million.
  Mr. Speaker: Order. The hon. Member may not make a second speech in the debate. This is an intervention.
  Mr. Walker: May I have the permission of the House to speak again? If we take the fuel tax paid at £47 million, it means an increase on Derv alone of £4·1 million for a full year. From 20th July, there are eight months involved, so that the sum of £1·1 million on that calculation must be wrong.
  Mr. Swingler: This is the best advice that I have. The power in the Bill is retrospective to 21st July this year for this financial year and our calculation is that this amounts to just over £1 million of payments. As soon as the Bill becomes law, the payments will start and they will be made on a quarterly basis—the same basis as the rebate of the 6d. increase in duty which was made in 1964. I am prepared to check the calculation. No doubt we shall have an opportunity in Committee to go into this matter further, but the advice which I have is that a sum of just over £1 million is involved in this year.
  Mr. Eldon Griffiths: This Bill gives power for the payment of that sum during the financial year. If there are further moneys still to be paid, are we to assume that some operators will not get their money until after this financial year?
  Mr. Swingler: I think that the time has come, Mr. Speaker, when I should sit down, and this is my final paragraph—
  Mr. J. E. B. Hill Mr. J. E. B. Hill rose—
  Mr. Swingler: I will not give way. There is a Committee stage to every Bill when points of detail can be raised.
  The provisions of the Bill are quite clear in providing for the rebate of the surcharge announced by the Prime Minister on 20th July. We are prepared to re-check any of the calculations which have been made. The payments will be made on a quarterly basis. The sooner the Bill becomes law, the sooner we can get on with the job of paying to the bus operators the rebate to which they will be entitled. I have given the best information I can to the House and I hope that the Bill will be given a Second Reading in order that we may go into any details which hon. Members wish to raise.
  Mr. Hill: Before the Minister sits down—
  Mr. Speaker: Order. I think that the Minister has sat down.
  11.3 p.m.
  Mr. David Webster: I thank the Parliamentary Secretary for helping us in this way although I am in some difficulty about the sum of £1·1 million in the Explanatory and Financial Memorandum because it seems that this is a very small amount and I hope that nothing we do limits the sum to that amount. The figures given by my hon. Friend the Member for Worcester (Mr. Peter Walker) and my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths) show that this is an under-estimate, and we should like later to look at the sum very closely.
  As I said in another debate today, the Prime Minister's statement of 20th July was made a week too late. He talked about moaning dismal Jennies who were running down the economy, then went off to Moscow, then returned and made his statement. Had he made the statement a week earlier he would have been able to make it on the Report stage of the Finance Bill and these people would not have had to go without their money for this considerable length of time. It may seem to the hon. Member for Liverpool, West Derby (Mr. Ogden) that this is a short time and that this is a small amount that these people are out of pocket. In some respects I agree with him, certainly when it is compared with the £2·8 million which they have lost on investment allowances. It compares with. £8 million, which is the Selective Employment Tax payment out from operators alone at the peak period before they start getting their rebate.
  It has been said that one of the main methods of keeping life going in the countryside is by public transport, but when one reads the White Paper that claim sounds very hollow. Bearing in mind the fact that the investment allowance approved by the Conservative Government was £620 the bus operators are losing a substantial amount of money. In addition there is the S.E.T., which is also penalising the service industries. My hon. Friends who have spoken on behalf of country constituencies have been very moderate indeed, in view of the way in which the bus operator has been seriously afflicted by the Labour

  787
  Government. They talk about the drift from the land, and it is clear from the National Plan that this drift has accelerated immensely because of S.E.T.—
  Mr. Speaker: Order. I thought that the Second Reading debate would follow the usual pattern, and that if hon. Members wished to speak they would do so before the Second Reading debate was wound up by the Minister. The hon. Member must keep to the terms of the Bill.
  Mr. Webster: I apologise, Mr. Speaker. Normally in a Second Reading debate there are two Ministers, one to start and one to wind up. That is the convention, and we wanted to hear what the Minister had to say. When the Road Traffic Bill went to a Second Reading Committee we had the wrong Minister, and so we had great difficulty. We had to go away for a whole week and rewrite our speeches and rethink the matter. I was glad that in the following week both Ministers came, although one only was chosen. We were glad to see their great enthusiasm. I understand there is only one Minister here tonight.
  I have referred to these matters for a purpose. In Committee, having heard what the Minister has said and not having heard the precise detail of when the repayment will be—and the figures in the Explanatory Memorandum give us extra doubt about this—we shall wish to put down Amendments not only to make sure that we get the right amount at the right period and the right interval but also to achieve some compensation for the way in which the bus industry has been sorely treated by the loss of the investment allowances. That is why I wanted to hear what the Parliamentary Secretary had to say in this respect.
  We know there will be legislation as a result of the White Paper, but it will not be in this Session. It cannot be until 1968 or 1969. That is a long time to wait. For those reasons we shall want to scrutinise and amend the Bill in Committee.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Fitch.]
  Committee tomorrow.

  BUS FUEL GRANTS [MONEY]
  [Queen's Recommendation signified]
  Considered in Committee under Standing Order No. 88 (Money Committees).
  [Sir ERIC FLETCHER in the Chair]
  Motion made, and Question proposed,
  That, for the purposes of any Act of the present Session to extend section 92 of the Finance Act 1965 so as to enable grants to be made under that section in respect of surcharges under section 9 of the Finance Act 1961 on customs and excise duties charged on fuel used in operating stage carriage services, it is expedient to authorise any increase in the sums payable out of moneys provided by Parliament under the said section 92 which is attributable to the making of such grants, including grants for any period before the passing of the said Act of the present Session and after the coming into operation of the Surcharge on Revenue Duties Order 1966.—[Mr. Swingler.]
  11.9 p.m.
  Mr. J. E. B. Hill: I wonder whether the Parliamentary Secretary can tell us whether the Money Resolution will enable the Bill to be amended so as to give the Government power to make grants in respect of school bus operators, should the Bill in its present form not include school bus operators. This is a very important matter. The Government are taking powers to make grants to bus operators not only in the immediate future, but in the long-term. It would be satisfactory if it were possible so to amend the Bill, if it needs amendment, to give the Government wider powers to extend the benefits they propose which, in our view, at the moment, are on too narrow a basis.
  Mr. Peter Walker: I ask the Parliamentary Secretary to give an answer to my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill), who has asked a very important question. The Parliamentary Secretary must surely know whether the Money Resolution will allow of an amendment to include school buses, or whether they will already benefit.
  Hon. Members: Answer.
  Mr. Eldon Griffiths: I am astonished that the

  789
  Parliamentary Secretary should so discourteously fail to answer questions which have been put by my hon. Friends and myself. We are not asking anything unreasonable. We are not asking him to make policy, but merely to say whether, in Committee, the Bill can be amended to take account of the needs of rural bus companies taking children to school. He could surely have the courtesy to give his view on this matter.
  Apparently, he is unsure whether the financial amount will be £1,100,000, or £1,200,000, and he is not able to give a precise answer on when the payments will be made. Now, apparently, he is not willing to give an indication of his thinking on the question raised by my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill). It would be courteous and proper for the hon. Gentleman to reply to the questions put to him.
  11.15 p.m.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Stephen Swingler): I am always willing to reply, but it is normal—and I think that I showed myself quite prepared to give way—to observe certain customs of debate, which usually include the custom that a Minister winds up a debate.
  I do not know whether the Opposition have quite finished on this Motion, or wish to keep us to enable certain splenetic points to be made. That does not worry me much, but I did say, in the Second Reading debate, that I was prepared to give way, but for the purpose of a certain amount of trickery another course was pursued, which is not normal in the House.
  I said quite clearly in our previous debate—and we have discussed this matter before—that the Bill applies to the stage operators. It applies only to stage operators. That was introduced in 1964 in respect of the additional 6d. per gallon for those providing public transport services. This Bill applies to the surcharge made in the measures announced in July, and allows a rebate on the increase in duty, whatever it may be, to the stage operators. That is what it is for. It applies to no more than that. It is for the assistance of the provision of public transport services.
  In Committee, we can discuss what the money actually amounts to, but I
  790
  hope that it is clear that about £4½ million has been rebated by the Finance Act of 1964 on the 6d. per gallon. This pledges the Government to rebate the additional amount of the surcharge announced by the Prime Minister in July this year.
  Mr. David Webster: This is the Committee stage, and there is no intention of trickery at all. If the Parliamentary Secretary thinks this is so I apologise to him, but it certainly was not my intention to trick him. However, if the hon. Gentleman intends to cast "polite" remarks like that around, he probably will not get as much co-operation from the Committee as he might have got.
  If I have made a mistake I apologise, but to have an allegation of trickery made against me is something that I resent. I have always acquitted the Parliamentary Secretary of any discourtesy in debate in the House or Committee, although things have gone funnily sometimes. To be accused of trickery, however, is something which I cannot accept, and I hope that the hon. Gentleman will withdraw it.
  Mr. Swingler: The hon. Gentleman really wants to have this out, apparently. He says things have gone funnily sometimes. We have had this upstairs, and we had better thrash this out. I am not aware of things having gone rather funnily, but I am aware that in a Second Reading debate it is normal for the Minister to open and close the debate. That is exactly why, on our previous proceedings—
  The Chairman: Order. I think that it would be inappropriate to pursue this matter any further in this Committee.
  Mr. Webster: I think that we had better have that misunderstanding out another time. I have apologised if I have unwittingly tricked the Parliamentary Secretary. It was not my intention.
  To come back to the Money Resolution, this is a Committee stage, in which hon. Members are allowed to ask questions. Can the Parliamentary Secretary assist us? I gave notice that I wished to move Amendments to make rebates to deal with the loss of investment allowances and with the Selective Employment Tax, and I asked whether it would be necessary to extend the Money Resolution to bring this into order.

  791
  I want to keep in order, and that is my intention, but I wonder whether if it is possible for the Parliamentary Secretary to give me an answer to this and say whether or not we have to amend the Money Resolution?
  Mr. Robert Cooke: While the Minister is getting ready his reply to my hon. Friend, I want to support what my hon. Friend has said. I did not come here with any intention of intervening in this debate, but to keep a watching brief on the next matter before us. But I was so appalled by the remarks of the Minister about my hon. Friend that I could not let this go by without saying that the reason I rise on this occasion—
  The Chairman: Order. As I intervened to prevent the Minister proceeding on these lines, it is right that I should intervene to prevent the hon. Gentleman from doing so.
  Mr. Cooke: I will not refer further to what the Minister said, but come back to what my hon. Friend said.
  The reason that my hon. Friend and so many of my hon. Friends are here this evening is because we are passionately devoted to this cause, and we are not satisfied with the Government's replies on this or the previous stage. I hope that the Parliamentary Secretary will give my hon. Friend satisfactory answers, because we are all anxious that this Measure, which is basically a good one, should proceed with all speed. Perhaps the Minister could give us more help at this stage.
  Mr. J. E. B. Hill: Before the Minister does speak on this again, may I say that I am not trying to be tricky, but am trying to elicit some information to repair my own ignorance. The Minister said that this referred only to stage carriage services, but he did not say specifically that school bus services are ruled out of the Bill as it stands. Neither did he say whether or not the Bill could be amended to include school bus services if the House thought it was desirable for the Government to be given these powers.
  To prove, I hope, that this is not a frivolous inquiry, I think that it can
  792
  come about in certain circumstances that school buses, where there is room in them, are allowed to carry fare-paying passengers. This, I think, is the important point, because we may well find this very helpful to a school bus operator who has to meet the cost of running a bus, if he has fare-paying passengers, and that could get him within the definition. That, obviously, is a very desirable thing to do, but what I hope is the position is that the school bus operator would be within the scope of the Bill and that the Bill could be so amended that the Government could have power to make grants in the future and benefit the local authorities trying to run school buses.
  That is all I am asking for, but if we do not get the answer at this stage it may be that the Government are letting a Money Resolution go through which prevents them from having the power which the Opposition would like to give them. This is a very rare situation in this Committee. Here are some hon. Members of the Opposition—I apprehend, most of them—wishing to give a Labour Government extra powers. This, surely, is really something not to be sneezed at. I have twice asked a question. I am not hoping for bread, but I had at least hoped for one stone, at any rate.
  Mr. Eric Ogden: Some of the questions from hon. Members opposite seem to be a little strange. It was suggested at first that unless the Government had these specific powers local education authorities would not be able to get the school bus services they required. Bus operators in rural or city areas tender to the local authorities for specific services. If the local authorities go without this power of rebate they will have to give the operators less for their services, but there is nothing in this Bill to prevent an operator, wishing to operate buses for schoolchildren, from providing that service. Everything else hon Members opposite talked about is irrelevant.
  Mr. Paul Hawkins: I think that it will prevent local authorities. I am a member of the Norfolk education authority, and we have constant pressure on us to expand our school services in the rural areas, so the

  793
  question as to whether we can run them more cheaply and whether we obtain this rebate or not is most important. If the local authority did not pay so much we could run more services to other villages and so be able to expand our services. That is why we want to know the answer to the question whether local education authorities are going to get this rebate or not. It is a simple question.
  Mr. Robert Cooke: This really must be the very last time that I intervene in the debate. I was hoping that the Minister would have got the answer to the question posed. This is a matter of resources. If the resources are being increased by the provisions of the Bill, then we shall all be very happy. If they are not, we shall be extremely unhappy. Can we have an answer to that simple, straightforward question?
  Mr. Swingler: Yes, hon. Members can. I think that I should begin by saying that I think that the hon. Member for Weston-super-Mare (Mr. Webster) and myself are perhaps quits on the exchange up to now.
  The hon. Member for Norfolk, South (Mr. J. E. B. Hill), who was a member of the previous Government, and who, I remember, quite early in my experience as Joint Parliamentary Secretary to the Ministry of Transport, came along to us to get subsidies for his local railways, now wishes us to commit ourselves to additional subsidies for school buses and other kinds of buses in addition to the subsidy for stage carriage services in his area. The Government of which he was a distinguished member provided none of them. Because that was the Government who proposed to close the railways, as well as being responsible for a decline in other transport services.
  The Money Resolution deals with the operation of stage carriage services. We have dealt with this previously in relation to the rebate of the 6d. fuel duty in 1964, and now it is in relation to the Surcharge on Revenue Duties Order, 1966. I am interested that hon. Members opposite now wish to extend the subsidy system, presumably, beyond what we propose here. [HON. MEMBERS: "No."] Yes, the hon. Gentleman proposed that the system of rebating tax should go beyond the public transport services here
  794
  defined as stage carriage services and the rural transport grants and transport infrastructure grants for which the Government will provide legislation next year. We are very interested in this pressure from the Opposition for additional rebates. I undertake seriously to consider, with my right hon. Friend, whether the system should be further extended in that way.
  But let us at least take this first step, not provided for by any previous Government, of discriminating in favour of public transport, by rebating increases in tax. We can consider later possible extensions to other kinds of services such as have been suggested.
  Mr. Robert Cooke: The hon. Gentleman has introduced several new types of transport into the discussion, the possibility of people travelling on Post Office buses, school buses, and so on. He must not put words into my hon. Friends' mouths and accuse them of starting a new and highly revolutionary scheme. It is he who has introduced all sorts of new ideas. Before we pass the Money Resolution, we want to be sure that the things we want to do for the rural communities will be possible.
  Mr. Swingler: If they become stage carriage services, as we hope some of them will, they will come within the terms of the Money Resolution and the Bill.
  Mr. Eldon Griffiths: The Parliamentary Secretary must be very careful in using the word "subsidy". He said also that this was the first step in discrimination in favour of the bus operators. If someone steals the silver from my house and then gives me a candle-stick, am I supposed to be grateful? The Government have taken something from the bus operators. They now propose to give some of it back.
  I want to know whether the buses which carry children to school, no matter who owns them—they are not necessarily stage operators—will have the tax rebated. If the school authorities or the owners are not to have the rebate in respect of children's buses, I shall not regard this as a satisfactory rebate.
  Mr. Swingler: The Money Resolution applies to the operation of stage carriage services. It applies to all such services.

  795
  What we are doing is to be contrasted with what the hon. Gentleman's Government did. This is discrimination in relation to the tax system in favour of public transport inasmuch as an increase of tax imposed on the rest of the community is not imposed on public transport operators.
  Question put and agreed to.
  Resolved,
  That, for the purposes of any Act of the present Session to extend section 92 of the Finance Act 1965 so as to enable grants to be made under that section in respect of surcharges under section 9 of the Finance Act 1961 on customs and excise duties charged on fuel used in operating stage carriage services, it is expedient to authorise any increase in the sums payable out of moneys provided by Parliament under the said section 92 which is attributable to the making of such grants, including grants for any period before the passing of the said Act of the present Session and after the coming into operation of the Surcharge on Revenue Duties Order 1966.
  Resolution to be reported.
  Report to be received Tomorrow.

  CIVIC AMENITIES [MONEY]
  Resolution reported,
  That, for the purposes of any Act of the present Session to make further provision for the protection and improvement of buildings of architectural or historic interest and of the character of areas of such interest; for the preservation and planting of trees; and for the orderly disposal of disused vehicles and equipment and other rubbish, it is expedient to authorise the payment out of moneys provided by Parliament of any such increase in the sums payable out of moneys so provided under any enactment as may be attributable to or may arise from provisions of the said Act of the present Session—

  (a) for securing the designation of areas of special architectural or historic interest and regulating the exercise in relation to such areas of functions under Part I of the Historic Buildings and Ancient Monuments Act 1953, the Local Authorities (Historic Buildings) Act 1962, and Parts III and IV of the Town and Country Planning Act 1962 and the corresponding enactments relating to Scotland;

  (b) for extending in relation to buildings listed as buildings of special architectural or historic interest the powers of compulsory purchase conferred by section 69 of the Town and Country Planning Act 1962 and the corresponding enactment relating to Scotland and regulating the management, use and disposal of such buildings;

  796

  (c) for securing by the imposition of conditions and otherwise the preservation or planting of trees in connection with the grant of permission for the development of land in Great Britain;

  (d) for conferring or imposing on local authorities in Great Britain further powers or duties with respect to the removal, storage and disposal of abandoned vehicles and other articles or material.

  Resolution agreed to.

  BACON INDUSTRY
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
  11.30 p.m.
  Mr. Alick Buchanan-Smith: I imagine that you for one, Mr. Speaker, will be glad to exchange buses for pigs after the events of the last hour-and-a-half. The only thing I can see in common with our earlier debate is the fact that, as I said then, I represent a constituency in the north-east of Scotland. It boasts many famous and efficient pig herds and, close by, is the biggest bacon factory in Scotland, the well known and progressive firm of Robert Lawson, of Dyce.
  I have a considerable interest in this matter as a bacon producer. That is why I am glad to have the opportunity to discuss the present crisis in the bacon industry. I use the word "crisis" advisedly. The industry is facing a crisis. I am not exaggerating when I say that the situation is probably the most critical which the industry has faced since the end of the war.
  During the six months to the end of September, curers have been losing an average of 24s. on every pig they have handled. It is estimated that the present loss is running at a figure much nearer 35s. per pig. Over the same period, curers have paid out for pigs £1,600,000 more than what they have received in the sale of bacon from those pigs. The total to date is likely to be much nearer £2 million.
  At the same time, bacon production has fallen by almost 25 per cent. from 2,900 tons a week in the spring to 2,100 tons, which is the figure the Ministry announced today of the estimated production of bacon for next week. This

  797
  tonnage represents about 16,000 fewer pigs a week going to bacon production.
  As a result of this, there is no hope of home producers taking up their share of the bacon sharing understanding. Any talk in present circumstances of increasing our share becomes nothing more than an academic exercise. I deplore that this should be the case and the situation into which the bacon industry has been forced.
  In the light of this, it is no wonder to any of us concerned with the industry that there is talk of a crisis. It is no wonder that there is talk of bankruptcy among firms. Many factories are going on short time. Men are being paid off—sometimes in areas where, as my hon. Friend the Member for Ayr (Mr. Younger) will vouch, there is little alternative employment. Some factories have already been closed at Reading, Cirencester and in Yorkshire.
  It is true that, at Question Time on 2nd November, the Minister of Agriculture acknowledged the difficulties in which the industry finds itself. But, after all, so he should—
  Mr. J. E. B. Hill: He caused them.
  Mr. Buchanan-Smith: —because the facts are there for him to see and, as my hon. Friend says, he has created the situation. The facts are staring the right hon. Gentleman in the face and the industry has lost no opportunity of letting him see how serious they are.
  Where the Minister has failed is in his diagnosis of the situation and in believing that the action he is taking is adequate to deal with it. In the agricultural debate on 3rd November, the right hon. Gentleman said:
  "The remedy for the present troubles is simply more pigs."—[OFFCIAL REPORT, 3rd November, 1966; Vol. 735, c. 702.]
  That statement demonstrated the folly and the incompetence of the Minister. Does not he recognise the basic imbalance between the pork and bacon market? Is he not aware that curers have two forces to deal with—the high price of pork, and competition from the import of overseas bacon—over which they have no control? Therefore, for guarantee price purposes, is it right to treat pork and bacon as being the same
  798
  commodity? I hope that the Joint Parliamentary Secretary will answer that question.
  Even if the shortage of pigs is the whole problem—and I do not accept that it is—does the proposal to raise the middle band answer it? If the Minister believes that it does, he must be a very simple man, and he shows himself to be naive and complacent. He is naive if he accepts that this is the whole answer and complacent if he believes that this solution will work.
  I ask the Parliamentary Secretary to look at the Price Review of last March. Then the Minister raised the middle band. I should like briefly to go over the events which followed. They demonstrate beyond doubt that this action by itself is totally inadequate to deal with the kind of situation facing the industry.
  I should like to refer to the report, which must have been available to the Minister, by the group of leading economists who give independent advice to the Pig Industry Development Authority. This group produced its most recent report on 15th November, only two weeks ago. In that report, these economists from all over Great Britain point out that the total number of breeding sows in the United Kingdom in September this year was 14 per cent. below the comparable level at the same time in 1965. They also point out that the total number of sows and gilts fell by 4 per cent. between June and September. In other words, the decline in the size of the breeding herd was still continuing.
  I wish to project this further into the forecasts of slaughterings over the next few months because these figures show that this decline still continues. It is estimated that 400,000 fewer pigs are likely to be slaughtered in December this year than in December last year. We find that in the first quarter of next year, particularly in February and March, it is expected that this decline will still continue. It is forecast that in each of the months of February and March total slaughterings will fall below 1 million. This will be the first occasion for a very long time that they have fallen to such a drastically low level.
  Mr. Eldon Griffiths: Does my hon. Friend realise

  799
  that the Government describe this as selective expansion?
  Mr. Buchanan-Smith: If this is selective expansion, it is time that the industry noted what it means.
  If this is not a deteriorating situation, I challenge the Parliamentary Secretary to tell us what it is. If this is the pattern of events which followed the last Price Review when the middle band was raised, and when the forecast of slaughterings falls to a rate at which we cannot even reach the middle band as it stands at the moment, it bodes very ill for the Minister's decision to raise the middle band again next spring.
  Like so many pronouncements we have heard from the Minister—over the last few months we have had pronouncements on credit and other very important matters affecting agriculture—it looks all very well on paper; but I remind the Parliamentary Secretary that the pig industry cannot survive on paper. What we need is tangible results, and that is what we look for from the Government. But we certainly do not see them.
  The Minister must be realistic. He has to face the facts of the situation. He should go out and talk to some of the producers. If he did so, he would find that talk in general terms about the middle band, and so on, means very little to the ordinary producer. If it is related to prices and the producer was told what the prices were to be, he would be more likely to understand the situation. The Minister must act now and act quickly. He must give a categorical assurance to producers about what the prices will be, an assurance that they will get a fairer return from their outlay than they are getting at present. He must take action of a positive nature. If he does not do that, he has no hope of regaining the confidence of producers, a confidence which he has so sadly lost. If he does not do this, I believe he might just as well fly to the moon if he thinks that raising the middle band will answer the problems of the industry.
  In any case, if he does raise the middle band, it does nothing at all to help the curers in their present crisis. Nor does it deal with the basic imbalance between the pork and bacon markets to which I referred earlier. Even if this were some-
  800
  thing worth while, the effect would be so long delayed—the time factor is so great in the production cycle that very great damage will be done to the industry before any good can come out of it.
  While the Minister sits back and basks in his complacency, factories are closing. Secondly, the Danes and others are increasing their strong hold on our bacon market. Does not the Minister recognise that during the first eight months of this year imports of bacon cost £10 million more than the same period in the previous year? Does he not know that there is a balance of payments crisis?
  The third point is utterly vital to producers. Next year, curers will be extremely unlikely to enter into long-term contracts, and this is where the real crunch comes for producers. Most of this pressure on the Minister so far has come from the curers, but let me warn him that when the present contracts run out in April he will be subjected to far greater pressure from the whole industry and not simply from the curers.
  In the north-east of Scotland the factory of Robert Lawson & Son has already announced that it will not enter into contracts next year. Who can blame them? But what a tragedy this is for producers. In Committee on the Agriculture Bill a number of hon. Members laid emphasis on the importance of contracts in order to bring stability to the industry, and what industry needs it more than the bacon industry which is subject to so many fluctuations and to so many cycles? We stand to lose an important stabilising influence.
  What should the Minister do? I should like to suggest four things. All of these things have to be done. It is no use doing just one and believing that one will work. The Minister has to tackle the short-term and the long-term problems. I suggest that these four things are: first, in dealing with the short-term problem he has to assist the curers. They need financial help if they are going to get out of their present plight. I would warn him that if the confidence of the curing industry is lost, then the bacon industry in Britain is finished.
  Secondly, he has to gain the confidence of the producers, and the only way to do that is to relate his proposal to increase

  801
  the middle band to prices, to give a categorical assurance that producers' returns will be improved. If he does not do this, he has not a single hope of expanding production in any way.
  Thirdly, he has to look seriously at the question of separate pork and bacon markets with regard to the guaranteed price scheme. Finally, if the United Kingdom producers are to increase their share of the bacon market, and I believe that they should, I would ask the Minister to examine in detail the price at which the Danes send bacon into Britain. Can he, for example, explain how, during the first nine months of this year, when 180,000 tons of British barley were exported to Denmark, on which the Danish farmer paid a levy, and which went in part to the pig producers there at a cost of £27 per ton—I obtained those figures from the Ministry—yet despite those figures, they can still undercut the price of our pigs?
  Is the Minister satisfied that competition from abroad is fair? I believe that it is to these matters that the Minister has to apply himself. We know the way he dealt with the hill farmers. Pressure was put on him from this side of the House, and despite all that he said to begin with, he eventually gave in to the pressures that we put upon him. He took some time to do it, and it will take some time to get this through to him, but it is not too late if he acts soon—
  Mr. J. E. B. Hill: Does not my hon. Friend agree that a new factor has come into the situation? The consumer is now wanting more quality British bacon and is willing to pay a premium over Danish bacon ranging in Suffolk between 19s. and 6s. according to quality over the Danish equivalent? Is it not highly important that this home demand for home produce should be satisfied?
  Mr. Buchanan-Smith: I hope that the Parliamentary Secretary will answer that point.
  If the Minister does not take action such as I have suggested, he will go down in history as the man who murdered our bacon industry and sold it to the Danes. Nowhere will his reputation be worse than in Scotland, where 80 per cent. of pigs slaughtered have to go for bacon.
  11.46 p.m.
  Mr. Ron Lewis: I cannot claim a personal interest in the subject, but I have in my constituency one of the largest independent bacon factories in the country and it, like most others, is suffering from the present crisis. The products of the firm are well known throughout the country under the "Cavray" brand-name, and the firm plays a very useful and important rôle in the City of Carlisle and in the country as a whole.
  The management has stated that although at the moment there is no redundancy, if the present problem is not solved quickly redundancy may rear its ugly head, because, inevitably, bacon production will have to be stopped, and that would be a sad day for the workers there, and for Carlisle as a whole.
  As I see it, the position is one of shortage of pigs to meet the requirements of the pork and bacon manufacturers. Something must be done quickly, and I appeal to the Minister to raise the middle band forthwith instead of waiting until the February price review so as to stimulate production to meet the shortage. That would be at least a first step towards solving a problem which has been with us for a considerable time.
  11.48 p.m.
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): I am grateful to the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) for raising this topic. Even though I do not seek to compete with his extravagance of language, I treat the matter very seriously. I note the point made by my hon. Friend the Member for Carlisle (Mr. Ron Lewis), and hope to be able to convince him, at least, and the House that we do not regard this problem lightly.
  I accept that the industry is facing real difficulties. I recognise that the curers have been losing money on every pig turned into bacon, because the price they have been paying for pigs is too high in relation to the price they have been getting for bacon—high though this is—to cover costs. We should consider the reasons for it. Clearly, it would not exist if the curers could get more for the bacon they sell, or paid less for the pigs they buy, or materially reduced the costs of their operations.

  803
  Within an industry the size of this one, it is to be expected that there will be some firms which are less efficient than others and, therefore, scope for reducing costs through greater efficiency. But that cannot be done in the short term. I believe that our curing industry has considerably improved its efficiency and competitiveness, but in the present conditions even the most efficient firms are unable to make bacon except at a loss.
  What, then, about increasing prices of bacon? Prices at present are high, and have been for much of this year. Supplies of imported bacon are not running in excess of allocations under the Bacon Market Understanding. In practice, therefore, prices could be raised only if we were deliberately to try to cut back supplies from overseas below these allocations. Higher prices for imported bacon would obviously be to the disadvantage of our balance of payments, and I was glad to note that hon. Members gave some importance to that. To force up prices by cutting supplies could only be to the detriment of the British consumer, and I do not think that any hon. Member would deny that.
  This leaves the cost of pigs. The present supply of pigs is not sufficient to meet the needs of the bacon, pork and manufacturing markets. We have said that frequently. As a result, prices are high, and to obtain supplies curers have had to offer high prices under contract or even on the open market. Because pig prices are high, guarantee payments have been reduced until at present they are nil, and this has increased the difficulties of curers who purchase pigs on inclusive contracts. I think that it will be seen from this analysis that the fundamental solution lies in getting more pigs.
  It was for this reason—and I am sorry that the hon. Member thought that this was unimportant—that my right hon. Friend announced that the middle band of the flexible guarantee would be raised by 400,000 at the coming Review.
  Mr. J. E. B. Hill Mr. J. E. B. Hill rose—
  Mr. Hoy: I listened carefully to the hon. Member, and I hope that he will not mind if I now make my speech.
  The importance of this quite exceptional step of announcing a major
  804
  change in advance of the Review has not, perhaps, been fully appreciated. The current forecast annual level of marketings is just over 12 million pigs. The Minister's announcement therefore means that production can increase in the months ahead by some 1½ million pigs above this forecast without the flexible guarantee operating on that account to reduce the price below the full guaranteed price.
  It has been pointed out that the announcement was made without prejudice to the other determinations to be made at the Review, and that is right. At the Review the Government must look at all the relevant circumstances and make their determinations in the light of them. If, for example, they should then decide that a further increase is necessary, they will be free to make it. It has also been suggested that the decision to raise the middle band should have been implemented at once.
  The present need is not for higher returns to producers, but rather to assure producers that if they expand their herds to produce more pigs, the flexible guarantee will not operate forthwith to cut back returns below the guaranteed price. The Minister's announcement gives this assurance. As hon. Members will have noted, since the Minister made his announcement the flexible guarantee has itself operated automatically to raise the standard price to 9d. above the basic guaranteed price, so that the standard price, as adjusted under the flexible guarantee, is now 3s. higher than it was at the beginning of the year.
  Although greater production is a prerequisite of better times for the curing industry, it must be some time before more pigs will come forward to the market. Production has indeed been slower to respond than we had hoped. The recent forward look by independent economists—mentioned by the hon. Member for North Angus and Mearns—advising P.I.D.A. suggests that the size of the total breeding herd may continue to fall until at least this month. This is not out of line with our own analysis of the figures, which indicates that the previous downward trend in the herd is being checked, although a positive upturn has not yet begun to show itself.

  805
  In the meantime, the curers are faced with immediate difficulties. Bacon production has been cut back. There are fears that it may be reduced still further. Producers, particularly those who have gone in for specialist production geared to the requirements of the bacon trade, and who rely on contract sales, are concerned about their future. These very anxieties may be holding back the expansion of production necessary to bring about conditions in which both curers and producers can operate successfully and with confidence.
  The Government have made clear that although we cannot accept the suggestions previously put to us by die curers and any suggestions for a direct subsidy to curing, we are ready to consider new ideas for meeting present difficulties. The Minister is examining as a matter of urgency new proposals recently put to him by the British Bacon Curers' Federation. I am not going to speculate about the outcome, but I can say that the decision will be announced as soon as possible. Moreover, we shall be considering with the producers whether any changes should be made in the guarantee arrangements themselves at the coming Review.
  I have taken note of the points made in the debate and I will keep the suggestions in mind. All industries must expect some ups and downs in their fortunes. Last year, the curing industry did not have too bad a time, but producers were feeling the pinch. This year, it is the other way round. The Government's aim is to create conditions in which both may see a reasonable prospect of earning a proper reward for efficiency and enterprise. Both curers and producers have been concerned lest a temporary shortfall in British bacon production should lead to a permanent reduction in our share of the market under the Bacon Market Understanding.
  I am glad to be able to announce that there will be no change in the shares for next year. Each country's percentage is to remain as it was before. In other words, the United Kingdom industry will again be entitled in the year beginning on 1st April next to supply 36·88 per cent. of the minimum total quantity and of any addition that may be made to that total out of the reserve. We have also decided, after international consultation, to
  806
  make no change in the minimum total quantity required from all the participants. So the target set before each participating country, including our own, will be the same next year as this in tonnage as well as in percentage terms.
  Our obligations of consultation have only just been completed and we had not expected to be able to make an announcement until tomorrow. My Department will, of course, be publishing the details then, but I thought it right in a matter which I know has been affecting the confidence of producers and curers alike to make this report now to the House.
  Mr. Eldon Griffiths: How can the curing industry reduce its costs? S.E.T. makes no sense at all for slaughtermen.
  Mr. Hoy: I shall take note of what the hon. Member said, but the decision I have just announced must be seen together with the decision to raise the middle band. This is important to the industry with the guarantees which go with it. The two indicate clearly that it is the Government's desire to see a viable home bacon industry making a direct contribution to our food supplies and in so doing assisting our balance of payments.
  For their part, the Government have committed themselves to underwriting at the full value of the guarantee the increased level of pig production necessary to maintain adequate supplies of raw material for the bacon industry as well as for other users of pigmeat and at the same time have given to producers of pigs an assurance against which they can build up their herds with confidence.
  I repeat what we have done. The Government have promised to raise the middle band by 400,000 at the next Review. This means that production can expand substantially above its present level before there is any reduction in price on account below that the level of the full guaranteed price. Secondly, there is no change in the United Kingdom share of the market under the Bacon Market Understanding next year. The minimum total quantity is also unchanged. These decisions surely give real assurance to both producers and users of pigmeat. Thirdly, we are studying, as a matter of urgency, proposals made to us for relieving the immediate difficulties of curers.

  807
  I want, finally, to say that no one needs to remind us of the difficulties——
  The Question having been proposed after Ten O'clock and the debate having
  808
  continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at Twelve o'clock.

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  European Free Trade Association
  European Free Trade Association
  National Plan
  National Plan
  South Hampshire Study
  South Hampshire Study
  Occupational Pension Schemes
  Occupational Pension Schemes
  Industrial Production
  Industrial Production
BOARD OF TRADE
  European Free Trade Association (Motor Vehicle Duties)
  European Free Trade Association (Motor Vehicle Duties)
  Exports (Delivery Dates)
  Exports (Delivery Dates)
  Anglo-Swedish Trade
  Anglo-Swedish Trade
  Industrial Development Act (Payments)
  Industrial Development Act (Payments)
  Duty-Free Liquor and Tobacco (Airport Sales)
  Duty-Free Liquor and Tobacco (Airport Sales)
  Trade Discussions (Bonded Debts)
  Trade Discussions (Bonded Debts)
  Exports to Formosa
  Exports to Formosa
  Arms (Import Licences)
  Arms (Import Licences)
  Export Credits (Florence Shopkeepers)
  Export Credits (Florence Shopkeepers)
  Anglo-South African Trade
  Anglo-South African Trade
  Consumer Complaints (Tribunals)
  Consumer Complaints (Tribunals)
EDUCATION AND SCIENCE
  Audio-Visual Aids (Evaluation)
  Audio-Visual Aids (Evaluation)
  Manchester College of Art and Design (Landscape Architecture Course)
  Manchester College of Art and Design (Landscape Architecture Course)
  Teachers
  Teachers
  Physical Education (Accidents)
  Physical Education (Accidents)
  Universities (Agricultural Courses)
  Universities (Agricultural Courses)
  Infant Schools
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  Sport and Physical Recreation (Capital Investment)
  Sport and Physical Recreation (Capital Investment)
  Library Books (Authors' Remuneration)
  Library Books (Authors' Remuneration)
  Primary Schools, Cardiff
  Primary Schools, Cardiff
  Youth Service (Capital Expenditure)
  Youth Service (Capital Expenditure)
HOME DEPARTMENT
  Motor Vehicles (Licensing Convictions)
  Motor Vehicles (Licensing Convictions)
  Imported Toys (Safety Standards)
  Imported Toys (Safety Standards)
  Drugs (Convictions)
  Drugs (Convictions)
OVERSEAS DEVELOPMENT
  Rhodesia
  Rhodesia
  African Countries (Aid)
  African Countries (Aid)
  Private Investment
  Private Investment
TECHNOLOGY
  Hydrofoil Craft
  Hydrofoil Craft
  Motor Industry (Nationalisation)
  Motor Industry (Nationalisation)
  Fairfields (Glasgow) Limited
  Fairfields (Glasgow) Limited
NATIONAL FINANCE
  Draughtsmen (Pay Scales)
  Draughtsmen (Pay Scales)
  Balance of Payments (Seamen's Strike)
  Balance of Payments (Seamen's Strike)
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  Public Servants (Pensions)
  External Liabilities and Banking Advances (Interest)
  External Liabilities and Banking Advances (Interest)
  Mortgages (Interest Rates)
  Mortgages (Interest Rates)
  P.45 Forms
  P.45 Forms
  Standard of Living
  Standard of Living
  Nationalised Industries
  Nationalised Industries
  Selective Employment Tax (Retirement Pensioners)
  Selective Employment Tax (Retirement Pensioners)
LOCAL GOVERNMENT
  Policy Committee, Camden
  Policy Committee, Camden
  Garage Crossings (Charges)
  Garage Crossings (Charges)
HOUSING
  Council Houses (Authorities)
  Council Houses (Authorities)
  Mortgages (Interest Rates)
  Mortgages (Interest Rates)
  WESTERN EUROPE (INFORMATION AND CULTURAL SERVICES)
  WESTERN EUROPE (INFORMATION AND CULTURAL SERVICES)
AGRICULTURE, FISHERIES AND FOOD
  Bread (Distribution)
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  World Food Programme
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MINISTRY OF DEFENCE
  Meteorological Office (Cloud Physics Branch)
  Meteorological Office (Cloud Physics Branch)
  Missile Base, Penang
  Missile Base, Penang
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  Middle East (Expenditure)
ROADS
  A68 (Stagshaw Crossroads)
  A68 (Stagshaw Crossroads)
  Motorways (Catering Facilities)
  Motorways (Catering Facilities)
TRANSPORT
  Public Transport (Northumberland)
  Public Transport (Northumberland)
RAILWAYS
  Gilsland Station (Closure)
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  Railway Workshops (Staff)
BERMUDA
  Parliamentary Register (Expert's Visit)
  Parliamentary Register (Expert's Visit)
MINISTRY OF LABOUR
  Christmas Bonuses
  Christmas Bonuses
  Collective Bargaining
  Collective Bargaining
  Crane Accident, Brent Cross (Report)
  Crane Accident, Brent Cross (Report)
TELEPHONE SERVICE
  Connection Charge
  Connection Charge
WIRELESS AND TELEVISION
  Post Office Radio Station
  Post Office Radio Station
MINISTRY OF POWER
  Oil (Sales to South Africa)
  Oil (Sales to South Africa)
SCOTLAND
  Council Houses (Authorities)
  Council Houses (Authorities)
WALES
  Spoil Heaps, Porth
  Spoil Heaps, Porth

Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bristol

COMPETITIONS IN MATHEMATICS
3.5 p.m.
LORD SNOW: 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 institute official mathematical competitions, on the lines of the Olympiads in the U.S.S.R.]
BARONESS PHILLIPS: My Lords, the Government's view is that it is best left to independent organisations to promote mathematical and, for that matter, other competitions. The Government appreciate the importance to this country's technological progress of a high standard of mathematical education and the stimulus which competitions on Olympiad lines can give to mathematics students. But the educational system of the country is based on devolution, and the Government consider that it would be a mistake to attempt to take over these competitions or to supersede them by officially run contests.
LORD SNOW: My Lords, I am grateful to my noble friend for that Answer. May I ask the noble Lady to suggest to the Government that there may be a case for looking again at this matter? We all know that private initiative has done a great deal, and we are grateful both to the Guinness Foundation and to eminent mathematicians for running these competitions, but they have gone as far as they can go. May I ask the Government to consider whether the results of extending them may be worth while? May I also ask Her Majesty's Government to remember that Government participation in such competitions would suggest an interest in intellectual excellence which at this moment it is very desirable that they should be appearing to encourage?
BARONESS PHILLIPS: My Lords, I thank my noble friend for his questions. I would remind him—possibly in reply to both his supplementary questions—that the local education authorities are jealous of their rights and privileges in this connection. I will certainly take his suggestions to the Minister. The encouragement given by Her Majesty's Government shows that they agree with him in connection with the stimulus given to mathematics students.

AIR-SEA AND MOUNTAIN RESCUES BY R.A.F. UNITS
3.8 p.m.
LORD PEDDIE: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government how many incidents involving Air-Sea Rescue and Mountain Rescue Units of the Royal Air Force occured in 1964, 1965 and during 1966, and the cost involved.]
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, the annual cost to the R.A.F. of the Search and Rescue Helicopter Organisation in the United Kingdom, together with the Mountain Rescue Teams is currently estimated to be £1 million. This figure excludes the cost of certain other R.A.F. units which are not established primarily for search and rescue tasks; for example, the Shackleton Maritime Reconnaissance aircraft. I regret that a similar figure for search and rescue units overseas is not readily available. In 1964 the R.A.F. were involved in a total of 653 search and rescue incidents at home and over seas; in 1965, 719; and up to October 31 this year, 838. The numbers of people rescued were 257 in 1964, 257 in 1965; and 352 this year, up to October 31. Approximately 85 per cent. of those rescued were civilians. The helicopter organisation, the marine craft units and the mountain rescue teams exist to meet Service requirements, and the assistance they give to the general public is generally speaking, as it were, a by product, although a very large one.
LORD PEDDLE: My Lords, may I thank my noble friend for that most illuminating reply which reflects great credit upon the R.A.F. rescue units? Many of these rescues have been conducted at great personal danger, and I should be glad to know how many, if any, awards have been granted to members of these units.
LORD SHACKLETON: My Lords, I am grateful to my noble friend for that tribute to the gallantry, in particular, and also to the professional skill of the personnel involved in these humanitarian duties. The actual number of awards in the period is 25, which includes one George Medal, three Air Force Crosses, the D.F.C. and many other awards.
LORD PEDDLE: My Lords, may I ask my noble friend a further question dealing with the expense involved? May I ask whether any charge is made for the use of the helicopters involved in air-sea rescue?
LORD SHACKLETON: No, My Lords, we do not charge for carrying out any rescues where life may be in danger in the case of either civilians bathing or ships at sea. This is consistent with the long-standing maritime tradition that aid is always offered without thought of monetary reward. We make charges for evacuation cases where we fly civilians to hospital. These are charges which are met by the local authorities. Generally speaking, there is no charge either to individuals or to other bodies for such rescues.
LORD PEDDIE: My Lords, I thank my noble friend.
LORD BRECON: My Lords, could the Minister tell us what happens when mountaineers get into difficulty? Are charges made on these occasions?
LORD SHACKLETON: No, my Lords, I should say that both these types of operation also carry a bonus of training experience. The mountain rescue teams are composed almost wholly of volunteers with, perhaps, a senior N.C.O. as leader. Again, no charge is made. Perhaps I might add, in fairness, that the Fleet Air Arm also takes part in air-sea rescues.
LORD CHORLEY: My Lords, can the Minister tell us how many of these rescues are mountain rescues, as opposed
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to others? is he aware how very good is the co-operation between the volunteer rescue teams and the Service rescue teams?
LORD SHACKLETON: My Lords, the figures are a little difficult to interpret. They are a comparatively small proportion. The number of people rescued this year so far by mountain rescue teams is 16. Last year the figure was 18, and the year before, 10. There is again that same camaraderie of the mountains, although some of these rescues, like others, are made necessary by the folly of individuals.

HIGH BUILDINGS IN LONDON
3.14 p.m.
LORD FARINGDON: 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, if any, is their policy with regard to high buildings in London.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, policy On high buildings in London is primarily the responsibility of the local planning authorities, the Greater London Council and the London boroughs. When buildings over 150 feet, in the central area, and over 125 feet elsewhere, are proposed, boroughs must refer applications to the Greater London Council if they wish to grant permission.
The development plan for the former London County Council area requires the planning authorities to ensure that high buildings are properly sited. The present arrangements are not, however, the last word. The Greater London Council are required to formulate a policy for high buildings as part of the Greater London development plan which they must submit for my right honourable friend's approval by the end of 1968. Their preliminary report on the plan, which was published last week, has a section on this subject and I commend it to the noble Lord's attention.
LORD FARINGDON: My Lords, I do not think that the noble Lord, Lord Kennet, will expect me to thank him very much for that Answer. I should like to

799
ask whether the noble Lord or Her Majesty's Government are aware of the extreme anxiety felt by the public generally about the crushing up in an apparently quite incoherent manner of these tall buildings? I would ask, in particular, whether the noble Lord would not agree with me that the value of our parks for the purpose of recreation depends to a large extent on the fact that they are able to produce the illusion to those who frequent them of a contact—too difficult to obtain in most cities—with Nature, and that this is immediately vitiated when tall buildings come up over the horizon of the parks? May I ask the noble Lord whether one would not conclude from this that it is desirable that high buildings should be situated in such a way that they are not visible from the parks?
LORD KENNET: My Lords, the Government are aware of the existence of doubt, and even disquiet, in the public mind about the siting of high buildings in London. On the special question of the parks, I should say that my right honourable friend the Minister of Public Building and Works has to be consulted—although he has no veto—about the siting of tall buildings within 50* yards of any Royal Park or Palace. However, I would assure my noble friend that this whole policy is under discussion at the moment, in preparation for the submission of the Greater London Plan by 1968, between the Greater London Council and the borough councils, and that my right honourable friend's officials in the Ministry of Housing and Local Government will do what they can to enable the best possible policy to be devised in 1968.
LORD OAKSHOTT: My Lords, refer ring back to the original Answer and the responsibilities of the Greater London Council, can the noble Lord say, in regard to the immediate area of Whitehall, whether this responsibility still exists within the competence of the Greater London Council in parts of it where the 50-yard rule would not apply? If the responsibility does lie with them, will Her Majesty's Government pay great attention to any possible redevelopment in the area of Whitehall so that the
800
beautiful silhouettes which exist in certain parts of it may be preserved?
LORD KENNET: My Lords, the greater part of what we think of as Whitehall is Crown property, and the Crown, as the House will know, is exempt from planning permission. But there exists a procedure whereby development on Crown property is discussed between the Ministers concerned and the local authority, generally under the ægis of my right honourable friend's Department, and agreement is reached in accordance with this procedure.
LORD CONESFORD: My Lords, does the Minister recall the very valuable comments on the point raised by the noble Lord, Lord Faringdon, which were made some time ago in a Report of the Royal Fine Art Commission which drew particular attention to the importance of avoiding the destruction of what is a uniquely valuable feature of London, the illusion which you can get in some of our parks of being in the country? Will he bear that Report of the Royal Fine Art Commission very carefully in mind?
LORD KENNET: Yes, my Lords.
LORD CHCRLEY: My Lords, did I hear the noble Lord, Lord Kennet, refer to 50 yards? If so, does he think that with a building which is going to be well over 50 yards high there is any point in a regulation of this kind? Would it not be better to extend the distance to 500 yards, or even 5,000 yards?
LORD KENNET: My Lords, we shall bear the noble Lord's question closely in mind in the consultations which are proceeding.
THE MARQUESS OF SALISBURY: My Lords, I understood the Minister to say that in cases of areas like Whitehall, which are largely Crown property, discussions take place between the Minister concerned, or the Department concerned, and the Greater London Council. With whom does the final decision rest in such cases?
LORD KENNET: My Lords, I am not aware, without preparation, of cases where, as a practical matter, the question of where the final decision rests has ever arisen. Agreement, I think, is always reached.
LORD FARINGDON: My Lords, may I enlighten the noble Lord? It has

801
occurred. One of the very worst offences against the amenities of the Parks was the result of ministerial action taken against some other authorities.
THE MARQUESS OF SALISBURY: My Lords, supposing a further Question was put down on the point I raised, would the Minister do his best to answer it? It seems to me to be a point of some importance.
LORD KENNET: My Lords, of course, I will do my best to answer it, but the proceedings under Circular No. 100 are normally confidential.
LORD HASTINGS: My Lords, would the noble Lord say why buildings 150 feet high are allowed in the central area of London without special attention while outside that area the limit is only 125 feet? Would it not be better if the regulations were framed the other way round, and tall buildings kept to a minimum in the central area?
LORD KENNET: My Lords, this point, too, is under consideration at the present time between the Greater London Council and the boroughs.
THE EARL OF SWINTON: My Lords, does the Minister's answer to my noble friend Lord Salisbury really mean that Parliament is not to be taken into the confidence of the Government and the Greater London Council on Whitehall, which after all is a great national institution?
LORD KENNET: No, my Lords, I think not. Ministers are responsible to Parliament, and they conduct consultations and reach joint decisions with local authorities which immediately become public property.

HUMBER BRIDGE
3.22 p.m.
LORD PEDDIE: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the recent Yorkshire and Humberside Economic Planning Council Report, which urges construction of a Humber Bridge as vital to Humberside development, they will announce at an early date plans for proceeding with this project.]
THE MINISTER WITHOUT PORT FOLIO (LORD CHAMPION): My Lords, my right honourable friend the Minister of Transport hopes to be able to make a statement soon about the A.1 to Humber side trunk road network and to deal with the Humber Bridge in the course of that statement.
LORD PEDDLE: My Lords, would my noble friend be prepared to indicate that Her Majesty's Government support the recent statement made by the Economic Planning Council, that the full development of Humberside needs a bridge that will span the North and South banks?
LORD CHAMPION: My Lords, I know that the decision of that body has been communicated to my right honourable friend. I cannot here make any announcement in advance of the statement, which she hopes, as I said, to make soon.
LORD INGLEWOOD: My Lords, could the noble Lord tell us which authority will be responsible for the design of this bridge, since it will have its two ends in different counties with separate planning authorities?
LORD CHAMPION: My Lords, a very good question, but very wide of the Question on the Order Paper.
LORD DERWENT: My Lords, are Her Majesty's Government fully seized of the urgency of this particular matter at this particular moment, because if we intend to enter the Common Market in the near future, this bridge will be essential for expanding trade with the Continent.
LORD CHAMPION: My Lords, this is one of the considerations which the Government have in mind at this very moment.
LORD PEDDIE: My Lords, in view of the sympathetic statements which have been made by Her Majesty's Government, may I ask my noble friend whether any approach has been made in recent months to the bridge consortium which is available for the building of a bridge?
LORD CHAMPION: My Lords, all I know in this connection is that there was an Act of Parliament in 1959 which set up the Humber Bridge Board, and that since that date the Board have continued to urge on the Government the necessity for providing money. But this, of course, is a matter for consideration, for there

803
is some little difficulty in providing the £12½million or so required for this purpose.
LORD PEDDIE: My Lord, may I ask whether money is the sole factor at this moment that is causing the Government to be somewhat reluctant to commit themselves?
LORD CHAMPION: My Lords, money is always a matter of some difficulty for any Government, even where we have acceptable priorities. We are not absolutely sure whether this is one of the first major priorities for the expenditure of such a vast sum of money. But, as I have said, the Government are going into the matter at this very moment.
LORD CONESFORD: My Lords, has it not been the practice for a number of years to consult the Royal Fine Art Commission on the design of any new bridge of this importance; and should we not make certain that that practice will be followed in this case?
LORD CHAMPION: My Lords, I certainly hope that it will, because I feel that the design of bridges is of enormous importance in the development of our roads. I am bound to say that in travel ling on our motorways I am delighted, in the main, with the design of the bridges I pass under.

MINISTERIAL STATEMENTS
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 o'clock, my noble friend the Leader of the House will be making a Statement on Rhodesia. This will be followed by a Statement by my noble friend Lord Brown on investment incentives.
LIVERPOOL CORPORATION BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.

ROSS AND CROMARTY (STRATH CARRON-SOUTH STROME ROAD) ORDER CONFIRMATION BILL.
Brought from the Commons; read 1a, and pursuant to the Private Legislation Procedure (Scotland) Act 1936), deemed
804
to have been read 2a and reported from the Committee.

NATIONAL HEALTH SERVICE (SUPERANNUATION) (SCOTLAND) AMENDMENT REGULATIONS 1966
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, I beg to move that the National Health Service (Superannuation) (Scotland) Amendment Regulations1966, a draft of which was laid before this House on November 8, be approved. May I suggest to your Lordships that it might also be convenient to discuss at the same time the similar Regulations for England and Wales which, with one exception, introduce the same provisions as the Scottion Regulations? The one exception is a relatively minor provision in the English Regulations which is not required in the Scottish Regulations.
The Regulations amend the principal Regulations of 1961 and revoke the 1962 amending Regulations. The main changes are given in the explanatory note on page 41, but, like all superannuation regulations, they are complex and I hope it will be acceptable to your Lordships if I outline the more important of the pro visions. These Regulations follow the valuation at March, 1962, by the Government Actuary of the superannuation scheme in England and Wales which disclosed a surplus. The report on the Scottish scheme has not yet been received but we have been assured by the Government Actuary that it will not differ materially from that for England and Wales. A direct result of the report is that it has been possible in Regulation 30 to discontinue the employers' supplementary contribution of 1½ per cent. which was introduced in 1962 to meet, in part, a deficit in the scheme at March, 1955, when the scheme was previously valued by the Government Actuary.
A number of the Regulations improve the benefits payable to doctors and dentists in general practice. As the remuneration of a general dental or medical practitioner drops in his later years of service his pension has been calculated as a flat-rate percentage of his total remuneration during service and not, as for officers in the health service, in relation to his final

805
salary. We have now agreed with the professions, who have represented that pensions of practitioners are low compared with officers, the new formula in Regulation 8. The percentage of earnings used to calculate the pension will now increase as service increases, that is 1½ per cent. of earnings in their first ten years, 1¾ per cent. in the next ten years, 2 per cent. in the third ten years, 2¼ per cent. in the fourth ten years and 2½ per cent. for any years beyond the fortieth. Regulations 4to 12 make similar adjustments to other benefits to practitioners.
A further provision relating to practitioners is at Regulation 42. When a person retires from the Health Service and is later re-employed or takes up some other employment in the public service his pension is reduced if necessary so that he does not receive more by way of pension and salary than he was earning be fore he retired. This Regulation provides that the level of abatement applied to a practitioner shall be related not to his earnings when he retired but to his best three consecutive years of earnings.
The benefits of part-time specialists in hospitals are at present calculated on the same basis as for doctors and dentists in general practice, but the new formula for practitioners to which I have referred would not be appropriate for them. Regulations 13 to 20 therefore provide that, for future service, their benefits will be calculated in the same way as for officers in the Health Service with the necessary adjustment to take account of the fact that they are part-time and not full-time officers. If, however, the present basis is more favourable in the case of any individual practitioner it will continue to apply.
We have found it possible to introduce an optional improvement in the level of widow's pension provided. A married man at present surrenders two-thirds of his lump sum retiring allowance to provide a widow's pension equivalent to one-third of his own. Regulation 21 gives him—or his widow if he should die in service—the Option of surrendering the remaining part of the lump sum in return for an increase to the widow's pension from a third to a half of the husband's pension.
Regulation 23 introduces allowances in respect of dependent children of officers
806
who have at least ten years' service and who die either in service or following retirement on pension on or after the operative date of the Regulations. The rates of the allowances are given in Schedule 1, and I would draw the attention of the House in particular to the fact that the rate for wholly orphaned children is double that for children with a surviving parent or step-parent.
The last change I should like to mention concerns redundancy which, though not a major problem in the Health Service, occurs from time to time. The 1962 amending Regulations introduced immediate pensions for officers with ten years' service or more who were made redundant after age fifty-five. A man or a woman with at least ten years' service but who is under fifty-five years of age when made redundant will now be en titled by Regulations 24 and 25 to a pension at age sixty or, for certain special classes like nurses, at age fifty-five; in other words, his pension will be frozen until he reaches that age. I should like to say, in conclusion, that all the staff interests have been fully consulted. While they would have liked us to go further than we have felt able to go in some instances, they have generally welcomed the changes incorporated in these Regulations. My Lords, I beg to move.
Moved, That the Draft National Health Service (Superannuation) (Scotland) Amendment Regulations 1966, laid before the House on November 8, 1966, be approved.—(Lord Hughes.)

RHODESIA
3.34 p.m.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, with permission, I should like to make a Statement on Rhodesia, using the words of my right honourable friend the Prime Minister in another place. His words were:
"As the House will already know, I shall be leaving this afternoon, together with my right honourable friends the Commonwealth Secretary and the Attorney General, for a meeting with the Governor of Rhodesia and Mr. Ian Smith.
"The purpose of this meeting is to ascertain whether, within the programme of action to which the British

807
Government are committed by the communiqué issued at the end of the recent meeting of Commonwealth Prime Ministers, a settlement of the Rhodesian problem can be reached on the basis of the principles to which successive British Governments have throughout adhered.
"I must make it clear to the House that the fact that this meeting is taking place should not be allowed to disguise the fact that despite the signs of movement we have had in the last week there is still, as far as I can at this moment judge, a considerable gap to bridge. The House will wish us to do everything in our power to get a settlement, and this we shall seek to do; but the House equally will insist, as the Government are insisting, that there can be no question of a settlement which does not honour the principles which all of us in this House stand by. The House will agree that a decision one way or the other cannot be delayed any longer. If no settlement on the terms which we are prepared to commend to this House is possible, then it is right that this fact should be known and known quickly.
"I shall, of course, make a full report to the House after my return."
My Lords, that concludes the Prime Minister's words.
LORD CARRINGTON: My Lords. I must thank the noble Earl for repeating this Statement. This is obviously not the occasion for a debate or questioning, and I would confine myself to only saying that I am sure everybody will wish the Prime Minister well and earnestly hope that out of this will come a settlement.
LORD WADE: My Lords, I should like to thank the noble Earl the Leader of the House for this Statement. I note that the Prime Minister will be making a full statement on his return. Is it possible for the noble Earl to give us any indication of when this full statement will be made? Is it likely to be on Monday?
THE EARL OF LONGFORD: My Lords, I am grateful, and I am sure the Government will be, both to the noble Lord, Lord Carrington, the Leader of the Opposition, and to the noble Lord, Lord Wade, speaking for the Liberal Party, for
808
their good wishes. This is a time when the earnest good wishes of all Members of this House are of special value.
The noble Lord, Lord Wade, asked me when I thought that a further statement would be made after the return of the Prime Minister. I would suppose—of course, in a situation as flexible as this one cannot give any guarantees—that there would be some statement on Monday, although I cannot promise this. I should also think it likely that this House might wish to debate Rhodesia during next week, and, after some discussion, we are at the moment earmarking next Wednesday. But the situation is so flexible that here again I think it would be unwise for me to commit the Government, and I do not suppose the House would wish to be committed, to holding a debate on a particular day.
LORD ALPORT: My Lords, will the noble Earl find some means of conveying to His Excellency the Governor the admiration that a great many people in this country feel for his staunchness and wisdom over the very trying period of the last year?
THE EARL OF LONGFORD: My Lords, I feel sure that what the noble Lord has said will be immensely welcome to the Governor. When the noble Lord says that this admiration is felt by a great many people, I should think it is felt by everybody who has studied the matter at all.

NATIONAL HEALTH SERVICE (SUPERANNUATION) (SCOTLAND) AMENDMENT REGULATIONS 1966
3.39 p.m.
Debate resumed.
LORD WINDLESHAM: My Lords, from this side of the House I should like to thank the noble Lord, Lord Hughes, for his explanation of these Regulations, and to say that they are welcome to us. They represent an improvement to an important occupational pension scheme covering many thousands of people in the public service. Particularly welcome are the provisions mentioned by the noble Lord for dependent children of deceased officers—the first time children of deceased officers have been included within the scheme—and the

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wider option given to widows of deceased officers, who can now receive up to one half of their husband's pension, in place of one-third, taking a correspondingly smaller lump sum benefit in consequence.
The lack of transferability—although there are some improvements contained in the new Regulations—into private schemes, while understandable, is nevertheless a matter for regret. This is relevant to the one Regulation mentioned by the noble Lord which is not in the Scottish Amendment Regulations, but is in the Regulations for England and Wales—namely, the provision concerning the Medical Research Council's employees. There are two points in particular I should like to put to the noble Lord opposite. The first is with regard to the position of the older practitioners. These are the practitioners who joined the Health Service in 1948 when they were already over the age of 45. It is a large group—approximately one-seventh of the total number of practitioners are in this age category, and both the British Medical Association and the British Dental Association have made representations to the Minister of Health on their behalf. These are the people who have carried much of the burden of the National Health Service. They do not receive any great benefit from the new Regulations, because the escalating scales in Regulation 8 depend on the length of service, and not on the age of the practitioner. Therefore, the practitioner who comes into the scheme later in life gets a low pension simply because he does not have the opportunity of serving long enough to get to the higher rate of pension.
I should be interested to know whether the noble Lord opposite has any more accurate figures, but I understand that the practitioners in this group who retire to-day are receiving a pension only of the order of £700 to £800 on average. So their actual income on retirement is extremely low. I would suggest that funds to increase this could have been found from within the scheme. Had Regulation 30(2) of the Scottish Regulations—29(2) of the England and Wales Regulations—not discontinued the employers' supplementary contribution there would have been funds available to benefit the older doctor.
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This leads into my second point. As the noble Lord, Lord Hughes, has said, these Regulations are intensely complex, and although they represent some useful improvements, in a number of ways that have been discussed, it is nevertheless extremely unlikely that they will be at all widely appreciated by the Health Ser vice employees who are to benefit from them. The negotiating panels and a few others will certainly understand them, but whether the older doctors, nurses and others will appreciate the changes that have been made because of the extreme complexity of the wording and the length of Regulations must be extremely doubtful. The impact of regulations of this sort in any event is only likely to affect the general atmosphere within the National Health Service. No young man is going to decide to train as a doctor just because of the quality of the pension scheme.
Nor do I think pension arrangements affect to any great extent whether doctors, dentists and other Health Service employees remain within it or not. The level of superannuation is not a strong enough motive to determine decisions which are as important as that. None the less, they do affect the relationship between the Government and the Health Service, and the confidence, or lack of it, between the two.
And so I should like to ask the noble Lord whether it would not have been better to try to use the surplus to benefit the older doctors, in one generous, easily understood gesture, either by weighting the proportion that they receive, or by giving a larger lump sum on retirement. Action on these lines would have done something more significant to improve relations between the Government and the National Health Service employees.
3.45 p.m.
LORD HUGHES: My Lords, I am grateful to the noble Lord, Lord Windlesham, for the welcome he has ex pressed to the Regulations. I would agree with him that the Government do not expect that improvements in super annuation benefits which people will receive some forty years ahead will have any effect on the recruitment of young doctors or other people into the Service. The effect, so far as the Service generally is concerned, must obviously be the total

811
one, and the general impression which is created in the Service is that superannuation arrangements are better than they have been.
The noble Lord suggested that people, particularly older people, might not appreciate the changes which have been made because of the complexity of the Regulations. I submit to your Lordships that what the Government have done in these new Regulations has not been to increase their complexity. They have always been complex. What we have done is to improve benefits. I think that when individual doctors, nurses or others concerned know—as they will fairly speedily know—the effect of the new Regulations on their own personal position, they will at least concede that the position is better than it was. In the negotiations and, finally, at a meeting with the Minister—this is on the point about the older practitioners—both the B.M.A. and the B.D.A. represented that something more than what is provided by the formula should be done for the older doctor. The actuarial advice—and one must remember that these schemes proceed very largely on actuarial advice, if not almost entirely—is that the older doctors are getting full value for their contributions and that there are no superannuation grounds for giving them more.
When my right honourable friend met the professions' representatives, he told them that no more could be done for the older doctor. He referred to this actuarial advice. He pointed out that doctors and dentists were not alone in that their superannuable service reckons only from 1948. Many nurses and other National Health Service employees, as well as employees outside the National Health Service, are in the same category. He had sympathy with them on human grounds, but he could not make an exception for one group, however deserving they might be. Nevertheless, I would point out that there is a benefit to these older doctors, because one of the things they get is the backdating of the 1¾ per cent. for, I think, four years, from 1962 to 1958. It may not be worth a great deal in actual money, but it adds a little to the pensions which these older people will now get.
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My final remark is related to what could have been done if we had not discontinued the 1½ per cent. supplementary contribution. I would remind your Lordships that the 1½per cent. supplementary contribution was for the specific purpose of making good a deficiency which was shown in the scheme as a result of the valuation. That position no longer arises, and it would not, I submit to your Lordships, be proper to continue a contribution for a deficiency which no longer exists and then apply it to purposes which in fact recreated a deficiency.
On Question, Motion agreed to.

NATIONAL HEALTH SERVICE (SUPERANNUATION) (AMEND MENT) REGULATIONS 1966
3.49 p.m.
BARONESS PHILLIPS: My Lords, I beg to move that these Regulations be approved. The noble Lord, Lord Hughes, has, with your Lordships' consent, spoken for England and Wales as well as for Scotland. There is, however, one Regulation for which there is no corresponding Scottish Regulation and to which I should perhaps draw your Lordships' attention. Under Regulation 48 no new employee of the Medical Research Council will, after a date to be specified, be admitted to the National Health Service Scheme. The Council are introducing their own superannuation scheme which new staff will join. An employee who was covered by the previous direction may be released from it to join the Council's own scheme if he gives notice to that effect in writing and if the Minister is satisfied that the Council will make adequate provision for his superannuation. This amendment has the full agreement of the Medical Research Council. I commend these Regulations to your Lordships. My Lords, I beg to move.
Moved, That the Draft National Health Service (Superannuation) (Amendment) Regulations 1966, laid before the House on November 8, 1966, be approved.—(Baroness Phillips.)
LORD WINDLESHAM: My Lords, not only has Regulation 48 the "full agreement" of the Medical Research Council but, as the noble Baroness, Lady Phillips, will know, the Council has in

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fact been pressing it for four years, ever since 1962. So she is putting it in a lukewarm way. There are about 2,000 employees of the Medical Research Council involved here. They were not in the National Health Service super-annuation scheme until 1959. The academic staff were in the F.S.S.U. for universities, and joined the N.H.S. scheme only in 1959. By 1962 the Medical Research Council was anxious to return the academic staff to the F.S.S.U. for two reasons. First, the F.S.S.U. benefits, as a result of the recommendations of the Hale Committee, had increased substantially in value because of the additional supplements from the Treasury. Secondly—and this relates to the general point I mentioned earlier in relation to the whole National Health Service super-annuation scheme—the academic staffs found it extremely difficult to move from universities into the employ of the Medical Research Council because they could not transfer their pension rights from one scheme to the other. This underlines the necessity for full transferability.
Since it is four years ago that the Council first made representations on this matter to the Ministry of Health, I have no doubt it will be extremely pleased by this Regulation. It is likely that almost all the academic staff will take advantage of the option to transfer out of the N.H.S. scheme in order to return once again into the improved F.S.S.U. scheme.
BARONESS PHILLIPS: My Lords, I should like to thank the noble Lord for his courteous response to this amendment. On a purely personal note, I could not agree with him more about transferability, speaking as a member of another profession where the same problems have arisen. I have been given a note to the effect that those in the F.S.S.U. were allowed to stay in it despite the direction; a transfer payment will be made from the National Health Ser vice scheme to the F.S.S.U. for those who transfer to it. I am not sure whether the noble Lord will understand the point; I do not. Perhaps it would be safer if I say that I will write to the noble Lord. I am glad the. Medical Research Council's employees are in agreement.
On Question, Motion agreed to.

EXPIRING LAWS CONTINUANCE BILL
Read 3a (according to Order), and passed.

INDUSTRIAL REORGANISATION CORPORATION BILL
3.53 p.m.
Order of the Day for the Second Reading read.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE ROYAL NAVY (LORD WINTER-BOTTOM): My Lords, in this country, where the Industrial Revolution started, we have perhaps a heavier burden of industrial history to carry than any of our competitors abroad. Our pattern of towns, communications, and the location of our basic industries, was determined by factors which were dominant one or two centuries ago but which have less validity to-day. And this is also true of industrial undertakings. Some old, good and respected undertakings are what they are, not because of rational decisions made on the basis of long-term economic forecasts, but simply as the result of a series of historical accidents.
For example, the company in which I started my working life was founded by my grandfather in the middle of the last century to make artificial leather. designed to replace real leather used in the book-binding industry. It prospered, won a monopoly in one item of industrial textiles, then made even more money which had to be invested in other industries because there was little room left in the original field of growth. Our most profitable subsidiary was Obtained in settlement of a debt—completely by accident—and when I left the successor organisation to take up my present appointment, the company which started making artificial leather in Salford in the middle of the 19th century was involved in the technical textile, the drawing office, the plywood, the industrialised building, the aluminium tube, the copper insulating and the surgical equipment industries. It is, in fact, a large historical accident, and, I would venture to say, typical of a number of the older British companies.

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The need to rationalise and modernise the inherited pattern of British industry is an idea which is generally accepted. We have to compete at home and abroad with the industries of our competitors, which have often been founded with the most modern plant after a detailed study of our successes and mistakes, and which may be larger than their opposite numbers in the United Kingdom. Competitive pressures have forced units of British industry to merge; this trend has been assisted by the great financial institutions of which this country can rightly be proud. And manufacturing industry itself has acted as a catalyst; for example, Imperial Chemical Industries, considering, in my opinion rightly, that the cotton textile industry must be rationalised, backed the English Sewing Cotton Company with many millions of its money to achieve this end.
Since so much is being done by existing institutions, your Lordships may per haps ask why should the State intervene, and enter the merchant banking business. The answer to this question is given in paragraphs 4 and 5 of the White Paper (Cmnd. 2889), outlining the Government's proposals for the Reorganisation Corporation, and with your Lordships' permission I shall read these clauses to you:
"Paragraph 4: There is no evidence that we can rely on market forces alone to pro duce the necessary structural changes at the pace required. Some of the industries most in need of rationalisation have an in-built tendency to stay as they are. Either there are a few large firms which are tempted to live and let live; or there are a number of small ones, none of which alone is strong enough to achieve the scale of operations needed for international competition. More over. some mergers simply lead to a concentration of ownership without securing a more effective deployment of the assets of the merged companies and result in loosely-knit groups of comparatively small production units ranging over a wide variety of manufacturing activities.
"Paragraph 5: Although there is now a large number of institutions which can provide specialist services to meet the financial and other needs of industry, there is no organisation whose special function is to search for opportunities to promote rationalisation schemes which could yield substantial benefits to the national economy. Merchant banks and issuing houses carry through a great many mergers every year, but they can in general only act at their clients' request".—
and that is the key point.
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"Desirable regroupings fail to take place through lack of initiative and sponsorship, or because, when opportunities arise, there is no one ready to grasp them. The Government consider that this gap in the institutional framework needs to be filled and they propose to set up a new statutory body for the purpose, to be called the Industrial Reorganisation Corporation. The necessary legislation will be introduced as soon as possible."
This White Paper was published at the end of January, and had it not been for the General Election the Bill would have been brought forward earlier. The Government are now anxious that it should receive the Royal Assent as soon as possible, so that the Corporation can get ahead with its urgent task of promoting the rationalisation of British industry.
There was some discussion of the White Paper during the debate in your Lordships' House on 9th February on the Economic Situation. At that stage noble Lords opposite showed no great enthusiasm for the Government's proposals. By now, their attitude may have changed, for, after an initial period of hesitation and doubt, the City and industry generally seem to have accepted that the Corporation will play a very useful part in strengthening the private sector of the British economy. The correctness of this statement is surely confirmed when we look at the impressive list of the names of those gentlemen who have consented to serve on the Board of the Corporation. Very few people now dispute that structural changes are needed in many sectors of industry if we are to continue to compete effectively in international trade.
The Bill is relatively short and straightforward. A number of its provisions are common form in legislation establishing public corporations. Clause 1 establishes the Corporation as a statutory body and provides for the appointment of its chairman and members. The then First Secretary announced in January that Sir Frank Kearton had agreed to become the Corporation's first chairman; and in May he was able to report that Mr. Ronald Grierson would be the deputy chairman and managing director and that nine other distinguished men with a wide knowledge of industrial affairs had accepted invitations to serve as members. Sir Frank Kearton and his colleagues have already begun preparatory work and are planning the Corporation's initial programme. The

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Corporation cannot, of course, move into top gear until the Bill becomes law; but the groundwork for rationalisation schemes in one or two key sectors of the economy can be prepared in the next few months, so that there will be as little delay as possible before the Corporation becomes fully effective.
Clause 2 of the Bill sets out the Corporation's functions and describes its powers. A distinction has been made between schemes for promoting or assisting the reorganisation or development of any industry or section of an industry (which are covered by Clause 2(1)(a)), and schemes for establishing or developing an individual industrial enterprise (which are dealt with in Clause 2(1)(b)). The Corporation will have complete freedom to carry out schemes of the first sort—that is, rationalisation schemes involving several firms—subject only to any directions of a general character which it may be given under subsection (4). But it will not be able to carry out schemes affecting only one company unless it has been specifically requested to do so by the Secretary of State.
LORD HAWKE: My Lords, before the noble Lord leaves that point, could he expound to us the relations between this new set-up and the various monopolies and mergers legislation? Will it have to go before that Commission or not?
LORD WINTERBOTTOM: Perhaps it would take a better form in the debate if my noble friend on winding up answered that particular question. I think the point is a valid one, but my noble friend will give the answer.
Circumstances will almost certainly arise in which the Reconstruction Corporation will need to give its backing to a single company if it is to achieve the objectives for which it is being set up. For example, the White Paper said that the Corporation might need
"to provide capital for new projects or expansions of special importance to the economy".
The Government believe that the Corporation should be able to support desirable projects of that kind, but they recognise that Parliament may wish to keep a closer watch over this part of the Corporation's activities than over its main function of promoting rationalisation. This distinction has therefore been made in the Bill, so that the Secretary
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of State will be directly accountable to Parliament for any requests he makes to the Corporation.
Subsection (2) of Clause 2 confers on the Corporation the usual general power to act in ways which will enable it to discharge its functions, and also gives a number of specific examples of the Corporation's likely fields of activity. It will obviously need to acquire, hold and dispose of securities, both fixed-interest stock and equities. For example, after studying the situation in a particular sector of industry, the Corporation may decide that there is one existing company which has the managerial talent and other resources necessary to form the nucleus for are organisation scheme. But this company may not have sufficient financial reserves to make cash offers for other companies in the same field, nor a high enough market rating to enable it to bring about mergers by means of share-exchange arrangements. The Corporation will therefore have to give it financial backing so that the reorganization scheme may be carried through. This financial support might well take the form of a fixed-interest loan, carrying with it the option to convert into an equity holding in the new grouping which would be created if the scheme was successfully completed.
The Corporation's power to take up equities has created some controversy and it has been claimed that the Corporation will be able to use this power to bring about nationalisation "by the backdoor". This is not the case. The Corporation will have no compulsory powers and will have no more right than any existing company or institution to compel shareholders to accept any proposals it may make to them. But it is not unusual for merchant banks and other institutions which assist with the development of companies or the formation of new groupings to be given an opportunity to take a stake in the equity, and it is expected that the same will hold true in the case of the Corporation.
At this point may I interject a personal observation? Surely, my Lords, the time has come when we should banish emotion from our thinking when we consider the proposals of any Government to intervene in our economic and industrial affairs. In our complex society it is a necessity; on both sides of the Iron

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Curtain we have to learn to live with the mixed economy. One of the truest things said recently on this subject was said by a Conservative Peer, the noble Lord, Lord Melchett. When asked why he, as a Conservative, was willing to preside over the nationalised steel industry he replied:
"The Capitalist label is a little outdated, don't you think? The country now has a modern mixed economy. If one can help in any way in the national interest, then one must do so."
This attitude, I am certain, serves this country far better than does the inverted Marxist thinking of Mr. Enoch Powell, with his determination to continue the class war and his bitter attacks on those distinguished individuals whose sense of duty has compelled them to serve the society in which they live.
Clauses 3 to 7 contain this Bill's financial provisions. The White Paper said that if the Corporation was to operate on an effective scale, it would need to have large financial resources at its disposal; and proposed that in the first instance the Corporation should have the right to draw up to £150 million from the Exchequer. This proposal would be given effect by Clause 7 of the Bill. The ceiling of £150 million imposed by the clause is an absolute one—there is no provision for raising it by order. During the last few months there have been some conflicting opinions expressed about the figure of £150 million. Some people have said that the Corporation will be able to make a significant impact on our structural problems without drawing on its funds at all rapidly; others have argued, on the contrary, that £150 million will be needed within a year or two. It is very difficult, I think your Lordships would agree, to make firm forecasts, but the Government expect the financial pro vision being made in the Bill to be sufficient to enable the Corporation to operate successfully for several years. By that time, it will probably have become to some extent self-financing, as the in vestments it will have made in its early years achieve full profitability. The White Paper made it clear that the Corporation will not act as a general holding company, and the faster it turns over its capital the greater will be its capacity to promote rationalisation. On the other hand, it is not the intention that the
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Corporation should be forced to dispose of its profitable investments at the earliest possible moment, when for good commercial and industrial reasons it might wish to retain them. If experience shows that the Corporation needs funds in excess of the present limit of £150 million, amending legislation would be introduced.
Clause 7 envisages that there will be four separate elements to the Corporation's finances. These are: loans from the Consolidated Fund, investments of Exchequer dividend capital, guarantees given by the Corporation in respect of loans made to companies by third parties, and temporary borrowing, principally by way of overdraft. The overdraft element is not expected to be a very significant one and in any case Clause 3(2) enables the Secretary of State to put a limit on the total amount which the Corporation may seek to borrow in this way.
The Corporation's liability in respect of guarantees on loans from third parties will also be subject to any limitation the Secretary of State may place on it, under the powers given to him by Clause 2(3). The ability to give guarantees may prove to be very useful to the Corporation, particularly as a means of providing short-term financial assistance to new groupings while more satisfactory permanent arrangements are being worked out. However, any guarantee which the Corporation gives will add to the contingent liability on the Exchequer. It has therefore been thought right that the total value of guarantees should be included within the ceiling of £150 million which Clause 7 imposes on the Corporation's funds.
The major part of the Corporation's financial resources will take the form of Exchequer loans, which are provided for in Clause 4 of the Bill. The Secretary of State, with the approval of the Treasury, will settle the terms and conditions on which such loans are to be made, but the Government's intention is that the rate of interest charged to the Corporation will be no less than the rate which the Government themselves would have to pay at the time in question on market loans of a similar term.
Finally, there are the arrangements for making payments of Exchequer dividend capital to the Corporation, which are set out in Clause 5. By providing the Corporation with part of its funds in the form

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of Exchequer dividend capital the Government will, in effect, be taking an equity stake in the Corporation. There will not be a fixed return, but dividend payments will be made at a rate which will depend on the profitability of the Corporation's activities. It is not anticipated that the Corporation will earn big profits in its first few years, since rationalisation schemes inevitably take some years to have their full effect. But after this initial period the Government will expect to receive a very satisfactory return on their investment of Exchequer dividend capital.
Under Clause 5, the Secretary of State will be able to recommend to the Corporation in advance the rate of return which he considers it should aim to earn in any future period on its drawings of Exchequer dividend capital. Thus the members and staff of the Corporation will not be in any doubt about the nature of the Corporation's financial objectives—it will have to aim to earn the fixed rate on Exchequer loans and the recommended rate on Exchequer dividend capital. At the same time, it will be possible to vary the recommended rate to take account of changes in the Corporation's financial circumstances. A low rate will probably be appropriate in the early years, which will then he increased as the Corporation's operations realise more profits. By means of this procedure the Government will be able to achieve the right balance between flexibility and control in their financial dealings with the Corporation.
At the end of each accounting year the Corporation will be under an obligation to consider the amount of any dividend it should propose to pay to the Government in respect of its Exchequer dividend capital drawings. But the Government will not be obliged to accept the Corporation's proposal. Subsection 3(b) of Clause 5 enables the Secretary of State, after consultation with the Corporation and with the Treasury's consent, to determine that a larger or smaller dividend should, in fact, be paid. This arrangement follows the precedent set by the Air Corporations Act in revising the financial obligations of the British Over seas Airways Corporation.
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There is only one further aspect of the Bill to which attention might be drawn: the provisions relating to the Corporation's annual report contained in Clause 9. In the Government's view—and I believe it to be in your Lordships' view, too—the Corporation's annual report will be a very important document, which should be full and informative and provide all the facts necessary to enable the Corporation's performance to he fairly assessed. The Corporation will in some ways be a new and experimental kind of public body, and in some of its activities it may be unable to avoid creating controversy—not controversy necessarily of a political kind, but argument about the commercial and industrial wisdom of particular courses of action. Parliament and the public at large will rightly expect to receive a full and prompt account each year of the Corporation's activities. Clause 9 puts the Corporation under a legal obligation to produce such a report; this obligation goes a good deal further in certain respects than that imposed by the present Companies Act, especially so far as the provision of information about share holdings and the speed of publication are concerned.
My Lords, the Labour Party in the two recent Election campaigns, stressed the need to modernise the British economy at every level and in every sense. We have not been deterred by the economic difficulties that have beset the country, nor shall we be. No one with any sense of history or knowledge of public administration will expect changes overnight, but I am convinced that various acts of this Government, such as the creation of the Ministry of Technology and the Corporation which we are discussing to-day, will help those elements in British industry who recognise the need for change to overcome the inertia which is preventing this country from using to the full the potential which we all know is there. I commend this Industrial Reorganisation Corporation Bill for your Lordships' approval. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Winterbottom.)

INVESTMENT INCENTIVES
4.17 p.m.
THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN): My Lords, with permission, I should like to repeat a Statement made in another place by my right honourable friend the President of the Board of Trade. The Statement is as follows:
"Since the National Productivity Conference in September the Government have been considering whether it is necessary to give some additional stimulus to industrial investment during the period immediately ahead. We have discussed this question with representatives of industry in the light of recent surveys of investment intentions, which suggested that there was likely to be a fall in private industrial investment next year.
"We have now decided to effect a temporary increase in the rates of investment grant payable by the Board of Trade under Part I of the Industrial Development Act 1966. The standard rate in respect of eligible capital expenditure incurred between January 1, 1967, and December 31, 1968, will be increased from 20 per cent. to 25 per cent. and the rate for development areas from 40 per cent. to 45 per cent. These higher rates will apply to eligible plant and machinery used by manufacturing, extractive and construction industries; and also to mining works, scientific research equipment and certain computers. The rate for ships, hovercraft and most computers which is at present 20 per cent. throughout the country, will be correspondingly increased to 25 per cent. Under the Act expenditure is regarded as having been incurred when the sums of which it consists became payable. This is explained in more detail in the booklet I have recently issued for industry. I should emphasise, however, that the mere placing of a contract within the two year period will not in itself attract the higher rates of grant on expenditure under the contract. Such expenditure will qualify for the higher rate only in so far as it is incurred before the end of 1968.
"There will be no change in the coverage or other features of the invest-
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ment grants scheme. Claims made during 1967 in respect of expenditure incurred during 1966 will qualify only for the existing rates of grant of 20 per cent. or 40 per cent. The booklet on investment grants which I published earlier this week describes the details of the scheme and makes clear that the standard long-term rates will be 40 per cent. in the Development Areas and 20 per cent. in the rest of the country.
"The necessary Order under Section 7 of the Industrial Development Act will be brought before Parliament as soon as possible.
"We also intend to speed up the payment of claims as soon as we have had sufficient experience next year to judge what is practicable. My right honourable friends the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland will be making corresponding arrangements for increased grants for agriculture and fishing vessels."
That concludes my right honourable friend's Statement.
4.22 p.m.
LORD DRUMALBYN: My Lords, I should like to thank the noble Lord for having repeated in this House the Statement of his right honourable friend. I wish to ask one or two questions. The first is, does he not think it is most unfortunate that, almost before the scheme has come into operation at all, it is necessary to change it? Does this not reflect very seriously on the Government's economic policy? Secondly, I would ask whether he considers that the difference which is being made in this scheme is adequate to balance the anticipated decline in investment expenditure in the coming year.
The noble Lord spoke about speeding up the payments. What we must ask him from this side of the House is from what speed he is going to speed them up. What is the expected speed at present? I understood that it was a matter of eighteen months, and this in itself is surely a considerable deterrent to investment expenditure. Would it not have been better if at the same time as making this improvement he had arranged for interest to be paid on the amounts outstanding at the time the expenditure is incurred?
LORD SHAWCROSS: My Lords, before the noble Lord replies to that

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question, I wonder whether I might say a few words on this matter, as this is a subject in which I am deeply interested and concerned and in which I do not want to inject any note of Party political recrimination. I am grateful for this relief, small as it is. I think it is too small. I think that, before long, the Government will have to consider whether either an increase in the actual amount of grant should be made, or whether they should give far more serious consideration than has hitherto been done to the possibility of allowing, on a selective basis free depreciation in connection with new capital investment. But does the noble Lord not appreciate that financial assistance alone at this time is not going to be enough to secure any massive fresh investment in the private sector? What industrialists now need to be assured of is that they are going to have markets in which they can sell the goods they produce with their new equipment, and that if indeed they succeed in selling them in those markets they will be allowed to retain a reasonable proportion of the profits they may hope to make from them.
LORD WADE: My Lords, in thanking the noble Lord for his Statement, may I say that I welcome it so far as it goes. Would the noble Lord not agree that additional stimulus to industrial investment will be of particular importance in 1967, in view of the anticipated fall in private industrial investment? What steps do the Government propose to take to try to ensure that this stimulus will be of some real effect in the coming year 1967 and that it will not be too late for that year?
LORD BROWN: My Lords, as it is freshest in my mind, perhaps I may take first the question which was asked by the noble Lord, Lord Wade. The whole purpose of the scheme is indeed to stimulate investment in 1967. Perhaps the point has been misunderstood. The scheme provides an addition of 5 per cent. to investment which is entered into in 1966 and where the expenditure is incurred before the end of 1968. If any body wants to get advantage from the scheme during the two years, they will have to move pretty quickly to a commitment during 1967.
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May I turn to some of the other questions which were put to me? The noble Lord, Lord Drumalbyn, referred to the fact that before the original grant level was introduced the scheme had been changed. I think this is a welcome sign on the part of Her Majesty's Government of flexibility to circumstances as they arise. I do not accept it as a matter for criticism that they have been ready to act so rapidly on the stimulus of a possible decline in investment. The question was asked whether this is an adequate amount. The actual amount involved in extra expense to the Exchequer is roughly £60 million a year. That is £120 million over the two years, although these additional amounts will not arise in this financial year or in 1967–68. This will give some idea of the scale of the incentive which is proposed.
As to the comments made about speeding up payments, the original provision is that they should be paid eighteen months after claim, with the undertaking that this will be brought down, if possible, to six months. It is too early to say what can be done about speeding this up. The administration of the scheme is complex, but we hope to be able to say something about it later. Certainly it is our intention to reduce the lapse of time between claim and payment as rapidly as possible.
In regard to the remarks of the noble Lord, Lord Shawcross, I think the only point he made which was special and separate from those I have already answered related to the securing of markets which was needed to correct the situation. The Government intend to adhere to the policies which have been explored at such length in this House and elsewhere, so long as it seems necessary to ensure that inflation is grappled with. These measures are intended to stimulate investment, because it is the Government's view that whereas we must reduce consumer demand—and by those means we inevitably reduce temporary market possibilities—we must at the same time make certain that investment does not fall.
BARONESS ELLIOT OF HAR WOOD: My Lords, may I ask the noble Lord to what fields the investment grants apply? He mentioned agriculture and fisheries and said something about vessels. Does he mean agriculture and fisheries from the point of view of seagoing craft,

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or does the word "agriculture" in this sense also mean agricultural investment grants?
LORD BROWN: My Lords, would the noble Lady excuse me from answering this question? It means going into a great deal of detail, all of which is dealt with in the booklet which is available to noble Lords in the Library. Does that answer the noble Lady?
LADY ELLIOT OF HARWOOD: My Lords, it does, and I thank the noble Lord.
THE EARL OF SELKIRK: My Lords, am I correct in thinking that no investment grants of any kind will be paid until after the end of next year? Is that the current position?
LORD BROWN: Under the 20 per cent. and the 40 per cent. levels, it is planned to start paying investment grants arising on capital expenditure in the first quarter of 1966 in mid-1967. Thereafter it is hoped to begin closing the gap of eighteen months as quickly as possible.
LORD HAWKE: My Lords, do I take it that Her Majesty's Government still treat the service industries as pariahs, in spite of the fact that service industries can mop up at little expense the purchasing power of the consumer in imported goods?
LORD BROWN: I think it would be wiser not to become involved in that issue at this stage.
LORD DRUMALBYN: I thank the noble Lord for answering all the questions so conscientiously. May I ask him about the possibility of allowing interest during the outstanding period between the time when the expenditure is actually incurred and payment is made, and the time when grant is received'? This would act as a considerable incentive to the Department, and I am sure the Treasury would watch it very carefully indeed to see that payments were made quickly.
LORD BROWN: My Lords, I will undertake to have a look at it. It has probably been looked at and discarded, because the complexities of the grant system are considerable. It would certainly add to the cost to the Exchequer and I think this would be frowned upon. But if the noble Lord wishes, I will have it looked at.

INDUSTRIAL REORGANISATION CORPORATION BILL
4.30 p.m.
Debate resumed.
LORD DRUMALBYN: My Lords, should like to thank the noble Lord, Lord Winterbottom, for the most interesting exposition which he has made of this Bill. I have read through all the proceedings in another place, and, if I may say so, he gave in a comparatively short space of time a much clearer ex position of the Bill than I was able to derive from all those proceedings. My only comment is that if the Industrial Reorganisation Corporation moves as fast as he did in his speech, we shall by the end of next year have completely reorganised the economy. For that reason, it is perhaps a little difficult to follow everything he has said. So I propose to make a rather probing speech, and I hope that some of the points I make will be dealt with.
This Bill has been graded in many different ways. I have seen it described, always in cliché, as a landmark in our economic development; I have seen it described as a milestone to Socialism, and I have seen it described as a spanner in the works. The justification given in the White Paper, to which the noble Lord drew our attention, for setting up the Corporation is that there is a need for more concentration and rationalisation to promote the greater efficiency and competitiveness of British industry. I was not quite certain, when the noble Lord referred to his own "firm", whether he saw room for greater efficiency and greater competitiveness in his own Ministry, but it certainly was an example from his own experience. Secondly, the pace and scale of such change, it is claimed in the White Paper, do not match the needs of the national economy. Thirdly, there is no evidence, according to the White Paper, that we can rely on market prices alone to produce the necessary structural changes at the pace required. From this, the White Paper concludes that such a body as the Industrial Reorganisation Corporation should be set up.
Of course, that seems to beg some questions. For example, what is the pace required? It is recorded that, of the 200

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largest firms in the world outside the United States of America in 1964, Britain headed the league with 58, Japan came next with 34, and Germany had 32, despite its wider market in the E.E.C. In medium-sized firms there seems to be a close correlation between ourselves and Germany, if one looks, for example, at the machine-tool industry. Secondly, what evidence is there that market forces will not produce the necessary structural changes? I would only comment that none is offered, and I shall give some reasons for thinking that, given the necessary information, a great deal more can be done as things are. It has to be remembered, of course, that we are here committing ourselves to a maximum of £150 million expenditure.
Thirdly, if there are industries which are in need of rationalisation, and in which rationalisation is not proceeding apace, what are they? I shall revert to these problems. If there is a need for some new initiative to promote mergers, is a body of the type and structure pro posed in this Bill the right organ to promote them? If this is the main need, is it wise to give it other powers and duties such as "establishing industrial enterprises"—that is, new ones—and acquiring and placing at the disposal of others plant, machinery and other equipment? Lastly, is it worth up to £150 million?
At what pace have mergers been taking place? The White Paper says that:
"the process has been accelerating in recent years and may be expected to continue."
Mr. Nicholas Stacey, in Mergers in Modern Business, says that in the ten years to the end of 1963 there were 655 quoted companies and 4,344 private companies that were acquired by take-overs—4,999 in all in those ten years. The rate of take-over of public companies in 1963 was nearly double the rate in 1954, while the number of private companies acquired increased from 233 to 808. These figures do not include the mergers, small in number, between two or more companies, as distinct from acquisitions by one company of another. The Government have also stated that between 1959 and 1963 publicly quoted companies spent an average of £335 million a year on acquisitions involving cash payments of £145
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million or so a year. This is quite considerable and is, as the White Paper says, an accelerating activity.
Viewed from the celestial heights of Government, many of these mergers may have appeared haphazard because the Government did not know the motives for them. In the main, they took place because one or other of the parties, or both, had been confronted with some particular problem, whether it was management, succession, procurement, manufacture, marketing, research or finance. Some may have succeeded; others may have proved failures. In some the purchaser may have paid too much; in others he may have paid too little. But one thing is quite certain. The same will continue to apply whoever brings the merger about and whatever the motives for it.
Given this rate of reorganisation, how many more mergers a year do the Government estimate should be promoted, and how many do they estimate this new Corporation, by itself, will promote a year? The Government must have some idea of the size and nature of the gap to be filled. I am quite certain that the noble Lord who is to reply will say that it is not so much the quantity as the quality of mergers that matters. I could not agree more. Mergers must be between compatible companies—unless, of course, the object is to close down the company acquired. As Sir Donald Stokes has said, it is one thing to launch a merger; it is quite another to make it work. But if it is the Government's intention that in certain industries mergers are required and should be encouraged, what are those industries? The Government cannot any longer be coy about telling the public. As the noble Lord said in his speech, the board-designate has already been considering this matter.
In introducing the Bill in another place, the Secretary of State said that there would be two tasks immediately facing the Corporation. The first was to deal with projects that will be ripe for action straight away; and the second was to estimate priorities among a number of different possibilities. What are these projects ripe for immediate action? The nearest the Government have come to any pronouncement was at the Third Reading in another place, when the

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Minister of State for the Department of Economic Affairs said:
"The sort of firms to which the Corporation will have to pay attention in the first place—firms which should be making a greater contribution to our export-import balance—will, I think, be found in the engineering industries."
He went on:
"…one of the tasks which the Corporation may well perform will be the creation of consortia for specific export jobs, assisting British firms, for instance, to co-operate against foreign rivals."—[OFFICIAL REPORT, Commons, Vol. 736 (Vol. 101), cols. 1234–5; 22/11/66.]
No doubt there is room for such consortia between willing partners in appropriate circumstances. But why is it necessary to set up a £150 million Corporation to achieve this? Is the Corporation itself to form specialist export houses and market the products of consortia abroad, for example? Can the noble Lord give us more information on this point? The White Paper claims that what are called "desirable re-groupings" fail to take place because there is no organisation whose special function it is to promote rationalisation schemes which possesses the know-how and finance to clinch them. The White Paper says that there is a "gap in the institutional frame work" which needs to be filled—a gap both functional and financial.
May we look first at the functional gap? In the last decade or so, in addition to merchant bankers and others skilled in negotiating industrial marriages, there has grown up a new type of expert known as a corporate counsellor, who not only advises on mergers but looks for opportunities of rationalisation and amalgamations. Quite apart from this, the truth is that it is not so much lack of experts as lack of access to information about private companies that has hampered those who would like to bring about more industrial mergers. The obligation laid by the Companies Bill on private companies to submit their balance sheets, profit and loss accounts and directors' reports would remove this obstacle—and remove it just as effectively if it incorporates the Jenkins Committee's recommendation that they should not have to include details of emoluments, turnover and rents as if it does not. The information will then be open to inspection by all interested in promoting fusions. Indeed, without this the Indus-
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trial Reorganisation Corporation will be at a grave disadvantage vis-à-vis those who already have wide experience and copious files of information.
What we are entitled to ask is that the Industrial Reorganisation Corporation will not enjoy any special privilege in regard to access to information. First, will the noble Lord who is to wind up the debate (I believe it is the noble Lord the Chief Whip) give an assurance that information supplied in confidence to Government Departments will not be passed on to the Industrial Reorganisation Corporation? Secondly, will he confirm that, since the Industrial Reorganisation Corporation is not to have any status, privilege or immunity of the Crown, it will be an offence for a Government Department, or any member of it, to pass on to the Industrial Reorganisation Corporation information obtained under the Statistics of Trade Act?
Thirdly, will the Industrial Reorganisation Corporation enjoy any privilege in obtaining information from the Registrar not available to the public in general, and to other would-be promoters of mergers in particular? Fourthly, will the Indus trial Reorganisation Corporation be in any privileged position in consulting the Board of Trade in advance about pro posed mergers, particularly on the mono poly aspect—the point about which my noble friend behind me asked? I noticed that this was the point which was made in the speech of the Secretary of State in opening the debate in another place, and I was perhaps a little surprised that the noble Lord, Lord Winterbottom, did not refer to it this afternoon.
LORD SHEPHERD: My Lords, may I say, on the point which the noble Lord made when he spoke about mergers, that presumably he means mergers in which the Industrial Reorganisation Corporation is interested, and not other mergers that may be taking place.
LORD DRUMALBYN: Yes; the mergers in which the Corporation is interested. What I am asking is that the Industrial Reorganisation Corporation should not be in any privileged position in going to the Board of Trade and consulting them about mergers in advance, and getting clearance—a position which would not be equally available to any other merchant bank, to any consultants, or, indeed, to the firms themselves.

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My Lords, so much for the alleged functional gap. What of the alleged financial gap? Here, if I may again refer to Mr. Stacey, he says:
"There is no gainsaying that some desirable company mergers have not and are still not taking place; the simple and justifiable explanation of these instances is that such proposals fall below the criterion of commercial viability".
The question follows: is it, then, the intention of the Government that the Industrial Reorganisation Corporation should carry through company mergers that are not commercially viable; and, if so, how is the Corporation to pay its way? The Bill, in Clause 2(2)(d), gives power to the Industrial Reorganisation Corporation to acquire and place at the disposal of others not only premises but plant, machinery and other equipment. This could be interpreted as giving them power to do what the Cotton Reorganisation Commission (or is it "Board"?) did—in effect, to give grants on plant and machinery even if it could not give more direct encouragement to the scrap ping of old plant and machinery.
If it does this, again, how is it going to pay its way? If a fusion is commercially viable, there should be no difficulty in raising any necessary finance, provided the Government ensure the appropriate eoonomic climate. If, on the other hand, the Government continue to squeeze credit and reduce profits by in creased taxation, coupled with an economic policy designed to reduce demand and raise overheads, they can hardly expect the requisite finance for investment, including investment for mergers—and the little contribution that has been made this afternoon will not go very far and certainly will not have much of an immediate impact—to be forthcoming. What I am saying is that if there is a financial gap it is a gap of the Government's making.
I turn now to the proposed structure of the Industrial Reorganisation Corporation. Just by the way, the noble Lord referred to the Industrial "Reconstruction" Corporation, which I thought was a very nice name.
LORD WINTERBOTTOM: It was a slip of the tongue.
LORD DRUMALBYN: I should just like to pick out these points, because I want to relate what I have to say to them.
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The Corporation is to enjoy the status and privileges of a statutory corporation, but not any status, immunity or privilege of the Crown. I speak here as a layman, but according to the Bill it is not to be regarded as "enjoying Crown status". I do not know whether the noble Lord can answer this point to-day: perhaps it is more a Committee point, but it seems an important one. We are not concerned merely with what the law would regard; we are concerned with the fact, and in Committee we shall have to examine the subtle distinction between "not enjoying" and "not to be regarded as enjoying" such a status. The same applies—even more so—to the words "not to be regarded as the servant or agent of the Crown". Either the Corporation is or it is not the servant or agent, however it may be regarded. In some respects it plainly is the servant, because under the Bill it must at least comply with directions of a general character as to the exercise and performance of its functions.
Thirdly, as to finance, as the noble Lord said, the Corporation can borrow short-term where it pleases, subject to a limit to be imposed from time to time by its sponsoring Department, the Department of Economic Affairs. Then, it is to derive its long-term finance from, first of all, Exchequer loans, which I think the noble Lord said would be its major source of finance, the interest on which, he said, was to be not less than (he added the words "not less", which I do not think have been used before) that at which the Treasury itself can raise money. Then there is the Exchequer investment capital—that is, the Exchequer is to place the taxpayers' money at risk—subject to a limit of £50 million, "or such greater sum as" the Secretary of State for Economic Affairs "may from time to time by order specify." In other words, within the total of the £150 million Parliament is being asked to enter into an open-ended commitment on this score. Incidentally, the order is to be subject to approval by the Commons House of Parliament alone.
Whether noble Lords agree or disagree with my description of Clause 5, dealing with Exchequer investment, as an open-ended commitment, there can be no dispute that the Bill gives the impression that the Board will have to pay interest on its loan capital and will

835
be expected to aim at a level of dividend to be agreed with the Government, and to pay dividends to the Government. I think it is right to ask: how is it going to do it? How is it going to pay its way? First of all, I take it that the Corporation will need to have an "intelligence unit", which is bound to be costly. It will have to examine a fearful number of balance sheets and do an immense amount of research. Or is all this—and I put this question deliberately—to be done gratis for it by some Government agency or Department? The noble Lord wags his head in denial, so I take it that this is going to be a cost to the Corporation.
Then again, the actual negotiation of mergers is a highly skilled operation, and is generally conducted in return for fees to be paid by the acquiring company, fixed in relation to the work done and not generally—though it is so sometimes—as a percentage of the capital or the assets of the companies merged. In any case, the Corporation could hardly represent both sides simultaneously in negotiations.
The Corporation is also empowered to give guarantees—in particular, to guarantee loans raised by companies elsewhere. The Minister of State said in the Standing Committee of another place:
"The Corporation will not lash money about. The object is, indeed, not to spend any of its money at all if it can avoid it".
It it does that, I am afraid it will not pay its way—and how can it avoid it? How will it be able to meet these commitments and at the same time pay its way? Surely the answers are clear. Will it not exact payment for its services (and I think what the noble Lord said would confirm this) in promoting a merger by taking an equity interest in the new groupings; that is, if the amalagamated undertaking agrees? Some companies may refuse to acquire on such terms. Secondly, will it not seek opportunities for investment in private enterprise? Thirdly, will it not seek opportunities to use its powers under Clause 2(1)(b) to
"establish or develop, or promote or assist the establishment or development of, any industrial enterprise…"?
And will it not try to persuade Departments to request it to do so in order that
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it may pay its way? We are told that the Corporation will not act as a holding company; that it will be expected to turn over its capital. But in order to meet the finance requirements of the Bill, it will not merely have to nurse the groupings it creates or encourages until they become profitable, but have to hold on to its investments after they have become profitable.
Is it not clear from this Bill that the Government are trying to satisfy too many conflicting aims of too many conflicting people, of too many conflicting supporters? If we need a Government-sponsored industrial matchmaker, in addition to the marriage brokers who already exist, why clutter it up with all these other jobs? The establishing, developing and the running of industrial enterprises is a different sort of job from promoting mergers, as is the purchase and leasing of premises plant and machinery, and acting as an industrial bank, like the I.C.F.C. This is to be matchmaker, midwife, mother and moneylender, all in one.
How far shall we see the Industrial Reorganisation Corporation taking over some of the functions of the Board of Trade Advisory Committee and the Board of Trade—providing equity capital under this Bill instead of making loans and grants to industries setting up in the development areas under the Local Employment Acts? That is a question to which I should like to know the answer. How far is this envisaged? We know that many members of the Party opposite believe that if public funds are made available, the State should have a share in the profits. How many reflect that it may be losses, perhaps of the entire equity capital, and not profits that have to be shared?
The noble Lord invites us to banish emotion from this debate. That does not mean that we can afford to banish sincere differences of opinion. There are Departmental interests which dislike having to come to the representatives of the taxpayers and ask for money when they want to launch a big new enterprise or participate in the launching of one, as the Conservative Government came to Parliament when it was a question of loans to Wiggins Teape at Fort William. How much easier to pass a Bill making up to £50 million available, with the prospect of an almost unlimited amount more without further legislation!

837
We on this side believe that it is right for the State to encourage industry to go to the less prosperous areas by giving financial assistance in the form of loans or grants, and to give free depreciation allowances to compensate them for the higher cost of setting up and operating in these areas. But we do not believe that it is right, except for defence or in other special circumstances, for public money to be too readily available by way of investment in private enterprise. Still less do we believe in the State having a controlling interest in private enterprise (as it has been suggested the Corporation might have in some instances) because we fear the inherent dangers of unfair competition, unfair preference and the economic distortion involved.
I am quite ready to accept that the noble Lord, Lord Winterbottom, genuinely believes that this Bill is intended to make, and will make, private enterprise and the economy as a whole more efficient and more profitable. But I believe there are very serious dangers that will have to be faced; that as time goes on the purposes to which this Bill is being put will tend to be widened beyond recognition and that in consequence, through growing State intervention, the judgment, the sense of responsibility and the self-confidence of industry will be weakened. We are bound to assume that the Prime Minister and the Secretary of State for Economic Affairs meant what they said about setting up State companies in backward and declining industries and in the new scientific industries, on what was described as a really massive scale, not to mention the machine tool industry, when they ex pressed their belief in the famous Clause Four.
One of the insidious aspects of this Bill is the tacit assumption that something will be in the national interest because the Industrial Reorganisation Corporation thinks it will be. It is the tacit assumption that those who resist the advances of the I.R.C.—those who do not, to use that word which is of such danger to the independence of judgment, "co-operate"—will be acting against the public interest with all the implied undertones of Government favour or disfavour. Parliament can provide money; it cannot provide infallibility.
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So far as the match making side of this is concerned, I, for one, think that the Government choice of Sir Frank Kearton, of Courtaulds, and Mr. Ronald Grierson, of Warburgs, is about as good as could be made. Certainly, Sir Frank has plenty of experience of mergers. The Observer stated last January that in the previous eighteen months he had acquired 60 cotton mills; and, of course, he conducted the most celebrated anti-merger operation of our times. So he has the experience and no doubt the sympathy of both sides. The board which the Government have appointed—perhaps to observe the constitutional niceties I should have said, "designated"—contains many men Whose reputations are secure whether the experiment succeeds or fails, pro vided that they discharge their functions, whatever they may be, with fairness and a respect for the independence and judgment of others. For my part, I wish them well, whatever they have to do. But what I want to know, and what we are all entitled to know, is: what are they to do?
The Bill says that they can do any thing whatever for the purpose of promoting industrial efficiency and profitability and assisting the economy of the United Kingdom—anything whatsoever. So far we have not been told anything like as much as we should have been told of the alleged gap to be filled so far as mergers are concerned. Has the chair man-designate been told? If so, why should we not all know? Is the Industrial Reorganisation Corporation to have some kind of privilege or priority in promoting what are called desirable mergers? Or is the plain truth that the Government have not the slightest idea, and that the promotion of mergers is simply a cover for other activities or, at the best, a comparatively minor accompaniment to them?
The noble Lord sighs; but we have not had an answer to this. He must for give us for having some suspicions on this matter when the Bill has gone through all the stages in another place and no answer has come from the Government at all, except for the small one I mentioned before. We want a case to be made out for this official matchmaker. Neither in the White Paper, nor in the debates in another place, nor in the speech of the noble Lord has a case been made

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out. We shall continue to press for answers to our questions. If we do not get them to-day, then we shall press again for them on the remaining stages of the Bill. Whatever the case for a match maker, there can be no justification for turning the Corporation into a maid-of all-work.
I would say this in conclusion. Let the noble Lord beware! He was emphatic that only persuasion will be used to pro mote mergers. We have seen all too clearly how what starts as voluntary co-operation is apt to end with compulsion. Our anxiety about this Bill—which we shall not vote against—is threefold: first, that the Industrial Reorganisation Corporation will be an obsessive rather than a discriminating matchmaker; secondly, that voluntary co-operation will end with compulsion here, too—although not necessarily under the Board as at present designated; and, thirdly, that the systematic intrusion of the State into the area of private enterprise will grow apace from these small beginnings.
5.0 p.m.
LORD HENLEY: My Lords, the Liberal Party gives this Bill a very much warmer welcome than did the noble Lord, Lord Drumalbyn. I am bound to say I believe that if I had access to the files of the Conservative Party I should find somewhere in them a Bill very like this Bill. I am encouraged to think so when I am reminded by one of the Sunday newspapers—I forget which and when—of what Mr. Harold Macmillan said on industrial reorganisation about thirty years ago. One hesitates to quote some thing which might appear to he out of context, but in a book which Mr. Harold Macmillan wrote, The Middle Way, he devoted a great deal of thought and a very long chapter to industrial reconstruction. What he proposed was an industrial reorganisation Bill. Under the Bill, among other things, he proposed that some authority might not be content to play a passive role, but would itself assist in the drafting of schemes and in efforts to persuade the industry to accept them. Mr. Macmillan does in fact use the word "compulsory". He refers to:
"Special schemes requiring separate legislation for the compulsory reorganisation of industries and services regarded as being of key importance to general economic prosperity, and where the nature of the reorganisation might
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involve the interests of more than one industry."
Your Lordships may say that that is a very long time ago, that it was written in 1938 about conditions that then appertained. Nevertheless, as I say, it is a for midable suggestion from a very formidable man, and I cannot help thinking that the Conservative Party would bring in a Bill of this nature.
We on these Benches support this Bill. We feel that there is a need for it and that this is the right way to do it. We do not think that this Bill goes too far. The noble Lord, Lord Drumalbyn, although he says he might accept the match-making part, does not like to accept the maid of-all-work side of it. Well, I think we accept both the match-making and the maid-of-all-work. We feel that the Government have made out a good case. Incidentally, I should like to congratulate my very old friend and comrade-in-arms on a really excellent exposition of this Bill. It is vital in many respects to have something like this, if we are to compete with the rest of the world and again, from the point of view of those on the Liberal Benches, when we go into Europe it will be all the more important.
Another aspect for which we like it very much has been mentioned before—the question of trying to cope with the relationship between monopoly and public interest. The noble Lord, Lord Hawke, raised this point and the noble Lord, Lord Drumalbyn, partially answered his question. I think it has been stated in terms that the Corporation will not pro mote mergers without a clearance from the Monopolies Commission. I think this very valuable. After all, we are trying to build up firms and organisations into much bigger units and there is the extraordinarily difficult problem of making corporations and firms bigger and, at the same time, balancing that against the public interest. It seems to me that probably the I.R.C. is better placed to deal with this difficult problem of balance than any other institution.
With regard to the maid-of-all-work side, we on these Benches very much welcome that aspect of the Corporation which is to deal with new ventures. We think that is one of the most important aspects. The noble Lord, Lord Drumalbyn, was worried that there would be a danger of its becoming widened beyond

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all recognition or of its being cluttered up with other jobs. I do not feel so. I welcome that aspect. Then, from a purely Liberal point of view again, we welcome the aspect of its being able to help with the balance of the economy between the regions. I know this is a very small part of the functions of the Corporation, but nevertheless I think it is a significant part. We on these Benches feel that the work proposed cannot be done either by a market economy or by merchant bankers alone.
Increasingly we do not live in a market economy, and I hope that some of your Lordships have been listening to the Reith Lectures by Professor J. K. Galbraith. I will not attempt to summarise what he said, but in fact he did say this, and I entirely agree. We are living less and less in a market economy and still less and less will a market economy be able to help. The long-termplanning and complexity, and the number of different things involved in a modern industrial undertaking are so long-term and difficult that a Corporation which is designing some new project, plans it not only in relation to every piece of the thing they are making, but from the price onwards. We are geared to the kind of price to which they work; it is not the other way round. In such a world it is doubtful how much can be done by a market economy in promoting the sort of mergers we have in mind.
The same applies to the merchant banks. I liked the word used by the noble Lord, Lord Winterbottom, about this new super merchant bank, as the Corporation is going to be, being purposive. So far as the ordinary merchant bank is concerned, as he said, it has to take orders from its clients and work that way round. Here we are going to work from the point of view of a super-purposive merchant bank using exactly the same methods as a merchant bank with, added to them, that degree of specialisation and indeed long-term thinking which would be outside the scope of a merchant bank.
My Lords, what seems to me interesting is that this new proposal appears to be acceptable to a great many industrialists and also to a great many people in the City, not least, so far as I can make out among those friends I have in the City, among merchant bankers them-
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selves. So I do not understand why the Conservative Party is against it at the moment. I hope that this is not part and parcel of the business of attacking a Government all the time on all fronts for no very good reason. It surprises me. As I say, my friends in the City and a great many industrialists whom I know seem to accept this idea. Thinkers in the Conservative Party, if I may refer to Mr. Harold Macmillan in these terms, have been talking about this for many years; yet now the Conservative Party attack it right, left and centre on grounds which do not seem to me to add up to very much.
I agree that they may say, in reply to my suggestion that they have just such a Bill in their files, "Well, yes we have, but that Bill would not allow a Government or a corporation to take up the equity." This is a point on which one can, of course, differ. I accept the Labour view that Governments or corporations should be allowed to pick up the equity and this is in fact the right way for Governments to conduct business; and that if the public has in vested money it should have some profit. My own feeling is that this would be a far better way of collecting betterment than that proposed in the idiotic Land Commission Bill. However, to return to the Conservative Party, not only have they in the past been thinking of it but actually on a number of occasions have been moving in the same sort of direction with regard to particular industries. I think they are making much too much of this aspect of market economy and I hope they will pay some attention to what Professor J. K. Galbraith has to say.
On the question of nationalisation, which I think worries the Conservative Party, I feel that in so far as the nationalisation of certain industries under certain conditions is suitable, this seems to be the sensible way of dealing with them. I am speaking very much for myself, be cause I do not know how far that would be acceptable to my noble friends.
There are one or two other small criticisms I should like to make. There is a general feeling that the Government do not quite know where they are going with this and whether it will work at all. I do not accept that. This Corporation is going to work as a super-merchant

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bank. We know how a merchant bank works, and presumably a super-merchant bank will work in much the same way. But in so far as this is not altogether true, this applies to any new venture. In regard to the feeling which the noble Lord, Lord Drumalbyn, expressed, which boils down to wondering how the actual members of this Corporation are going to interpret their functions, I agree there is enormous scope for them to do so in all sorts of different ways. But the first thing that strikes me is what a remarkably able and imaginative lot of people the Government have chosen. I think that we could well risk it so far as they are concerned.
There is one other point, which strictly is irrelevant to the Bill, but which I throw out as something worth thinking about. I know that the Industrial Re-organisation Corporation has nothing to do with agriculture and land owning. But agriculture is an industry, and one which is in grave need of reorganisation, in grave need of mergers and in grave need of having its structure put right, and, after all, this is what this Bill was meant to do with regard to other industries. In view of the fact that this Corporation can do almost anything, I wonder whether it might be worth thinking about using its activities in the field of agriculture, where we are in such difficulties and seem to have got bogged down, and whether the Corporation could also apply its functions to land-owning where again units have been fragmented until practically all landholdings are much too small. Could not the Corporation operate somewhat like the Forestry Commission or, outside the Government, like the National Trust and build up something, either on the marriage broking or the maid-of-all-work side, which might be significant in the landowning field. That might be a much better way of approaching this problem than through the Land Commission, which, so far from welcome, I think is—well, we have been talking about it all this week and will be next, and I will say no more.
In conclusion, my Lords, may I say that we on these Liberal Benches think that this Corporation is a good idea. The need is expanding and cannot be met by the market economy and merchant
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banks alone. If the Government had not introduced such a measure, the Conservative Party, if they had been in their position, would have had to do so in their stead. We support it.
5.15 p.m.
LORD SHAWCROSS: My Lords, I must begin, I think, by declaring an interest. I have a business association with a large international wholesale bank and also with an issuing house. Both of these, I suppose, might be considered to be affected and might indeed be affected by these proposals. I shall try not to allow that to prevent my approaching the matter with reasonable objectivity, and I should add that I speak in this matter entirely for myself and not for my associates.
Of course, what is understood by "objectivity" is a matter upon which different people take different views. I remember that in the last economic debate in your Lordships' House I made the rather trite observation that I thought that in these grave times these matters ought to be treated in a non-Party political way and without political recriminations. From the nods I received from the Government Benches, I gathered that that met with approval, but when in the course of my argument I proceeded to develop—and who could avoid it?—some criticisms of Government policy, I realised that noble Lords on the Government Benches regarded objectivity as something which meant being objectionable to the opposite side of the House and not objectionable to them. I shall not allow myself to be discouraged by that and I hope that I shall not be driven from my Cross-Bench approach to this and indeed to other proposals.
I think that a good many Committee points are likely to arise on this rather loosely drawn Bill and, indeed, already some Committee points have very properly been raised. I would prefer, if I may, to confine myself to the real principle behind this measure as it is, I think, understood in the country and particularly perhaps in industry and in the City. The objection to this Bill is that it is thought to be, or at least that it could be, an instrument of State Socialism. There is force in that objection, and I quite understand it. I ought to. After all, twenty years ago I was a Socialist myself,

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and had been one for over twenty years. But five years of very active experience in Government convinced me that, whatever might be the position from an idealistic point of view, Socialism just did not work in practice. My experience since then in the law, in industry and in business has made me the more sure of it.
So my approach to this Bill is frankly this. I do not think that the Members of your Lordships' House who are not supporters of the present Administration need feel called upon to assist in the passage of any obviously Socialist measures. On the contrary, I think that the time is coming, if it has not already come, when the leaders of private enterprise, in this House and outside it, will have to consider whether, in the light of recent events, they should not more actively assert the advantages of the system in which they believe rather than collaborate in measures which are intended to undermine it. The question I ask myself on this occasion is whether this is such a measure; and I agree with the noble Lord, Lord Drumalbyn, that this is a matter which we ought to approach without any undue emotion.
My Lords, there are already in existence a number of measures by which the Government of the day do, or can, intervene in the activities of private enterprise. Some of them were introduced by Conservative Administrations. Many of them are capable of being used to the disadvantage of the private sector—and, indeed, some are. But while there is no doubt that this proposed Industrial Reorganisation Corporation could be used in a way which would impair the useful and normal functions of the merchant banks and take away equity control from private enterprise, it does not of necessity follow that the machinery would be used for such a purpose. This is a possibility. But the fact that a knife may be used for the purposes of murder does not lead us to reject all uses of knives for other and more legitimate purposes.
I think we must assume in regard to this Bill two things. We must assume, first of all, that the distinguished gentlemen who have been appointed, provisionally, to the board of this proposed Corporation will not abuse the powers
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they have been given. There may be some who think that the chairman is still under some illusions in regard to the benevolence of the Labour Party towards private industry—I do not know. But I do not think anyone would suspect him, or any other of the members of the proposed board, as being dedicated Socialists.
I would make only one point in regard to the board; it is quite a small matter, and really a Committee point. I believe there is nothing in the Bill as to their tenure of office. I should have thought it ought to be made clear that they cannot be dismissed by the stroke of a pen. One would not suspect for a moment that Her Majesty's present advisers would be guilty of any such chicanery, but it would be unfortunate if the legal position were such that they could all he dismissed and other persons of a very different complexion could be put in their place. But there is another safeguard, and that is the safeguard of Parliament. I think we must assume that Parliament—and if the Government continue on their present courses it may before long be a Parliament of a different political complexion—will be able to ensure that this Corporation will not abuse the powers they have been given by using them for Socialist purposes.
This Bill marks a significant change in Government policy. Only a short time ago "bigness" in industry was regarded as a dirty word. I am certainly not one of those who think that all small firms are bad; of course they are not. There are a great many, particularly, I think, specialist firms, which are highly successful. But there are many which are not. I am familiar with the table which one often hears read out about the 200 biggest firms outside the United States of America. Relative positions in this league table are changing very rapidly. But it is not really in point to compare the firms in the United Kingdom with those on the Continent of Europe, some of them quite new firms, with access to unlimited capital, and very often without the same need that our firms have of competing in the export markets of the world. In any event, the fact that we have 58 of the leaders amongst the 200 big firms is really no reason why we should not have many more.

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I believe—I have been saying this for a long time, and, indeed, I said it in the days when I was a member of the then Labour Government—that one of the great weaknesses in this country is that we are conditioned or accustomed to doing things by penny numbers. We talk about modernising Britain, and what do we do? Apart from the "blue chip" firms, we remain content to have a multiplicity of small firms, unable to afford adequate re-equipment; lacking perhaps the courage and perhaps the capital to take a long-term view on the pay-off; too small to take advantage of economies of scale-flow production, multiple shift working, computers, automatic controls and all the rest of it. But these are the essential tools of modern industry if we are to compete successfully in the markets of the world.
Just consider two of our most important industries—namely, engineering and building. In the engineering industry there are believed to be no fewer than 27,000 firms, employing more than five employees each. That really is quite a nonsense. In the building industry the number is so great that nobody has been able to count them: it is something of the order of 90,000 or 100,000 similar firms. I am a great believer in competition, but not competition between penny farthings.
LORD SHEPHERD: Hear, hear!
LORD SHAWCROSS: The noble Lord says "Hear, hear!", but, after all, it is the noble Lord's Government (I am glad that they are now having second thoughts) which not so long ago encouraged this—if I may change the metaphor—"horse and buggie" philosophy by introducing legislation which imposed a prima facie bar on any mergers involving a joint capital of more than £5 million. Five millions pounds, in these days when it costs more than that to build a single aircraft!
We really must now go for bigness. In industry after industry I believe the only future lies in rationalisation, or in mergers into units sufficiently large to justify the capital investment and permit the techniques of management, control and organisation on which efficiency and success in modern industry depends: and, I would add, which are able to give to
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the workers in industry that degree of security which they not unreasonably nowadays demand.
Can we be sure that, without some such machinery as that proposed in the Bill, we can accomplish this, as I believe it to be, desirable reorganisation? I am not sure that we can. The merchant bankers, in spite of a great deal of discouragement from the Government, have done a lot. Several wealthy and far-sighted industrialists, in spite of a great deal of public obliquy, have effected some very useful take-overs which have improved the overall efficiency of the industries with which they have been concerned. A great many mergers have taken place—one big merger is under discussion to-day—and British industry as a whole is no doubt better for them. But the merchant banks are not always able to bring about mergers which would in themselves be desirable. In the negotiations they are of necessity, and in the nature of things, acting for one side or the other, and in consequence they do not always command the complete confidence of both sides. They will not always have full information about the whole field of some particular sector of industry which this Corporation, as I anticipate, would be able to study in depth.
It is not quite true to say that the merchant banks can never take initiatives in these matters; very often they do take initiatives. But I have no doubt that this Corporation would be in a better position in many cases to take a completely impartial and authoritative initiative. It is not intended that this Corporation should have compulsory powers. They ought not to intervene at all except, perhaps, by way of suggestion to the merchant banks, where the ordinary market processes are capable of producing the necessary results; they should not put up capital where capital is available in the market on ordinary commercial terms; and they certainly ought not to attempt to compete with the merchant banks in the ordinary functions of the market.
But there remain cases, I believe, in which the merchant banks, useful as they are, cannot be wholly effective: cases where complacent managements will not listen to their advice; cases where a rather longer term view has to be taken of the pay-off than would be possible on

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a merely commercial basis; and cases where the Corporation, acting impartially and with the high authority that I think this Corporation should possess, will be capable of providing a kind of catalyst. Still more—and this, perhaps, is really the most important point about this piece of legislation—the very existence of this Corporation, the studies it will make of particular sectors of industry, the opportunities it will have and which it will be able to point out, should bring about a complete change of climate from those days of the £5 million limit introduced by the present Government, and will encourage an atmosphere in industry as a whole which is favourable to mergers and to bigness—an atmosphere of which the merchant banks can then take advantage and in which those banks can then themselves help to bring about the mergers which appear so desirable.
I venture to think that the Bill is very much the child of the present Foreign Secretary, and no doubt when he conceived it he had very much in mind the larger markets in which he hoped that Britain would eventually compete, particularly, as the noble Lord, Lord Henley, said, the Common Market into which he is pledged to carry us. It may be some time before our entry into the Common Market is accepted. I wish we could have made a rather more unequivocal declaration of our desire to join now. But the Foreign Secretary is, if I may be permitted without impertinence to say so, a man of great energy, of great enthusiasms and of great sincerity, and I believe this is a legitimate ambition of his which he will do his utmost to fulfil. We must be ready in British industry for that day; ready to meet the big and efficient units, not only those on the Continent of Europe whose structure may not be vastly different from our own, but also those in the United States of America and now in Japan with whom we shall have to compete in Europe and in the markets of the world.
As I have said, this Bill is no doubt loosely drawn, and I daresay many improvements can be made to it in Committee. That is one of the useful functions of your Lordships' House, but in broad principle, and in so far as this Bill will encourage a change in climate and promote bigness and rationalisation in industry, I commend it to your Lordships.
5.33 p.m.
LORD ALDINGTON: My Lords, I find myself in such almost complete agreement with the noble Lord, Lord Shawcross, that in the last few minutes I have been wondering whether it would be right for me to detain your Lordships further, but as I happen to take a somewhat different view from that of my noble friend Lord Drumalbyn I think it would be right to explain myself.
I suppose that I should start by saying that I might or might not have an interest to declare—I do not think it is possible for anyone connected with industry or with banking to know at this stage that he has—but I hope noble Lords will acquit me of having said things or adopted an attitude to this Bill which is tinged by any of my interests. I do not think I have. I have tried to take a broad general view of the economy, and the value to the economy and the efficiency of industry of an idea like this, and I have come to the conclusion that the idea of an Industrial Reorganisation Corporation definitely has merits. I would add my belief that the purposes behind the creation of this Corporation might perhaps better have been achieved by an extension of one of the private enterprise financial corporations, such as the Finance Corporation of Industry or the Industrial and Commercial Finance Corporation. I think if that had been done it would have avoided the difficulties that arise from using public money, and avoided the fears of back-door nationalisation and of unfairness.
Incidentally, I do not think that the main problem in the majority of cases of desirable mergers is that of finding funds. The main problem lies in some of the other points which my noble friend Lord Shawcross has mentioned, but since the course of using private enterprise corporations has (if it has been examined at all) been rejected, or at any rate has not been adopted by the Government, I certainly do not reject the possibility that a statutory corporation like the one proposed to us to-day—though it has some disadvantages because it is a statutory corporation—may have a valuable role. For it may well be that in cases where the normal machinery has failed to bring about what is needed, the initiative—and I think it is initiative that is important here—that can be taken by a body like

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this, which is manifestly impartial as between one industrial company and another, may lead to mergers, amalgamations, rationalisations, or whatever they may be called, being achieved sooner than they would have been achieved in other circumstances.
I agree with the noble Lord that speed is important in this matter, particularly as we come towards the Common Market. I think the I.R.C. may be particularly useful in arranging for stronger industrial units in fields of industry where the organisation of business has grown. The noble Lord who very agreeably introduced the Bill used the expression "has grown historically" I would go further and say "has grown higgledy-piggledy", which a great many of our companies have done. For example, a number of our large or medium-sized industrial groups or companies owe their size not so much to one particular activity as to a number of different, though related, activities in some of which greater size would give greater strength and efficiency.
My noble friend suggested that it would be desirable for Parliament to be informed by the Government and by the Corporation, when it is set up, of the spheres in which they propose to operate. I would, with respect, suggest to him that, just as in human affairs the earlier stages of courtship are not normally conducted in public, so in industrial courtships it is also normally desirable not to conduct them in public.
LORD DRUMALBYN: My Lords, may I intervene for a moment? What I was asking was in connection with the broad fields in which these activities are carried out. We have been told many times that it is within certain industries that this kind of amalgamation is required. I certainly was not suggesting that particular amalgamations should be ventilated in this House.
LORD ALDINGTON: My Lords, I am glad to hear from my noble friend what he had in mind, but I think there is a limit to the amount of information that can be required in advance of any action of this kind. Those of your Lordships who believe, as I do, in the efficacy of market forces may well ask me the
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pertinent question: why is it that market forces do not produce desirable rationalisations, mergers, and so on, without the intervention of a statutory corporation? As has been said already, we have no absolute proof that they do not, and indeed, as the White Paper which has been quoted, Cmnd. 2889, acknowledges, they usually do.
But I think most of us who have studied the problems of industry have concluded, from our own studies in the spheres in which we work and from reading about other people's problems, that all is not absolutely perfect in this respect. I do not think that we can expect to get absolute, cast-iron evidence of this proposition, but most of us rely upon the feelings or the hunches that have come to us in the course of our experience in these matters in reaching this conclusion. But I think that is only part of the answer to that question about market forces. Incidentally, I was almost horrified to hear the spokesman for the Liberal Party seeming to tell us that he as a representative of the Liberal Party in this House no longer believed in the efficacy of market forces or that we were living in a market economy. Indeed we have moved a long way if that is the modern, up-to-date view of the Liberal Party.
I think the other part of the answer to that question is to attack the premise. The premise is that the I.R.C. will be going contrary to market forces. I do not believe it will do any such thing.
LORD SHEPHERD: It is not meant to.
LORD ALDINGTON: As the noble Lord has said—I was hoping he was going to say it—it is not meant to do that. It is on this point that I should like to address a few remarks to your Lordships. While I think that the I.R.C. has merits as an idea, I must confess that the Bill as at present drawn invalidates a great many of those merits. It invalidates them because it is drawn very vaguely, rather sloppily, and is a bit slovenly. I will explain what I mean. It has appeared to commend itself to the noble Lord. Lord Henley, who found it convenient that all sorts of things might be done, but I am bound to say it does not commend itself to me. I do not like the idea of Parliament setting up a new

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statutory Corporation which has no duty at all. It has functions, it has powers, but it has no duty. Perhaps there I should correct myself when I say it has no duty. The only duty it has under the Bill is in Clause 2(4) under which it has to carry out the general directions of the Secretary of State. The noble Lord shakes his head, but there is a difference between function, which is broad, and duty, and I think it important for reasons I am coming to that a statutory Corporation should have its job clearly defined.
I think it also important that criteria should be laid down by which it should govern itself in carrying out its function. After all, one of the objects of the Corporation is to increase efficiency in industry, and it surely is regrettable, to say the least of it, that Parliament should be contravening all the simplest tenets of commercial and industrial efficiency in failing carefully to outline duties and responsibilities and in failing to insist that the Corporation must itself carry out its activities with the utmost efficiency, the only criterion for which in the long run is profit: of course, not profit at once—no one involving themselves in activities like this can expect that—but at the end of a reasonable period, a profit achieved because its investments and loans are themselves profitable.
There is no great mystery about what the Corporation is intended to do. The former First Secretary of State has outlined it quite clearly in speeches and it is outlined in the White Paper in the two paragraphs which the noble Lord, Lord Winterbottom, in introducing this debate so agreeably—I would congratulate him on that—read to us this afternoon. It is my submission to your Lordships that the Bill would be strengthened, and should be strengthened, by the inclusion of a clause setting out quite clearly what the duty is and doing this by using the words that are used in the White Paper. Just to show noble Lords what I have in mind, a possible clause would read like this:
"It shall be the duty of the Corporation to identify those industrial activities where reorganisation, by amalgamation or otherwise, of production units is likely to lead to increased efficiency and profitability, and to encourage, and in appropriate cases to participate in, such action as is necessary to achieve that end and
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in all respects to conduct its own activities in a commercially profitable manner."
I do not say that particular form of words is absolutely right, but I commend to your Lordships the desirability of having the duty clearly laid down in the Bill.
I believe that if the duty had been clearly laid down many of the doubts and fears outlined to us this afternoon so clearly and so forcibly by the noble Lord, Lord Drumalbyn, would not have been necessary. It is because of the absence of this duty, the absence of following up, and, as it were, codifying what has been laid down in the White Paper, that many people, I think, with respect, fail to share the view which the noble Lord who preceded me and I myself hold about the merit of the idea of an Industrial Reorganisation Corporation. There are, incidentally, some other points in the White Paper which at the Committee stage I think we might give consideration to embodying in the Bill also.
It may be said, and it has been hinted, that the distinguished and able men who have been recruited for the Corporation, and in particular the chairman and managing director elect, need no such written instructions. That may be so, indeed it is so, but we are not legislating for Sir Frank Kearton and Mr. Ronald Grierson; we are setting up a statutory body which, like other statutory bodies, is subject to Parliamentary control. And, as I reminded your Lordships, we are setting up a body which is concerned with industrial efficiency, and we must see that we ourselves are efficient in creating it.
This leads me to ask the Government I how is it proposed that this new body should be accountable to Parliament for its activities. Is the Secretary of State's account to the Comptroller and Auditor General (I think it is provided for in Clause 8) and the certificate of the Comptroller and Auditor General to be the only channel of accountability? Or is the I.R.C. to be subject, for example, to inquiries of the Select Committee on Nationalised Industries in another place? Mention of that Committee will perhaps indicate to your Lordships why it is, with my experience of seven years, or about that, as chairman of that Committee in another place, that I am stressing some of these points.

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If it is to be so subject to inquiry of that kind, is there to be no limit set upon the information which that Committee may require the Corporation to disclose? Such information might, for example, affect the affairs of a number of privately owned companies with whom the I.R.C. was doing business, and might go far beyond the information which had to be disclosed and was normally disclosed under the Companies Act or the new Companies Bill when it becomes law. This might become a serious point, because unless it is quite clear what is involved in Parliamentary accountability we might find that quite inadvertently we have built in deterrents to rationalisation and merger operations, rather than incentives, as we all wish. Incidentally, I followed with full support the questions which the noble Lord, Lord Drumalbyn, asked about confidentiality of information in the hands of the Government. I would say it is just as important that information that gets into the hands of the I.R.C. should be kept confidential to them and should not be available to the Government. I think my noble friend would agree with that point as well.
I leave to the end the question of Government interference. I hope it is agreed on all sides that the Corporation will work best and most effectively in the interests of industrial efficiency and profitability if it is not subject to interference by the Government; and by interference by the Government I do not just mean directions, because that is not the way in which Governments have interfered in the last fifteen years with nationalised industries. It is much more interference by exhortation and persuasion. One would like to be assured, for example, that the general directions which the Secretary of State may give under Clause 2(4) will not relate to any specific proposals that he or his Department may have thought up for amalgamations and mergers, and, in particular, to the participation of Government funds in the resulting merged companies or corporations.
However, it is my belief that we should ensure in this Bill that commercial and industrial considerations are at all times dominant, and that Government requirements which run counter to economic sense, whether advocating subsidised rates
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of interest or whether they are directions about the way in which investments should be made, cannot be imposed on I.R.C.
I have mentioned the Select Committee on Nationalised Industries, and I think it is true that none of us here can avoid the conclusion that, in a way, this is a nationalisation Bill. For whatever may be the emotive force of that word, this is a nationalised Corporation, though it involves no expropriation of an existing body as most nationalisation Bills have done. It is because this is the first nationalisation Bill that has come before Parliament since I gained my experience as Chairman of the Select Committee on Nationalised Industries in another place that I have been making these points to your Lordships. My opinion—and this was supported by all-Party agreement in our discussion there—was, and still is, that many of the early failings of some of the older post-war nationalised industries were due to mistakes, and to vagueness and ambiguities in the drafting of the early legislation—mistakes which were put right by some of my noble friends in the course of later years.
If we now want to make the I.R.C. work properly we must, I submit, attend much more closely than the present draft of the Bill has attended to the delineation of the duties and the setting down of the governing criteria. For we must know by experience that all public bodies are subject to persuasive influences of Ministers, to the dogma of their political Parties, to public opinion as expressed through newspapers, serious and less serious, and to the influence of Parliamentary questioning and debate. Unless the originating Statute is absolutely clear on what has to be done, and how what has to be done is to be judged, there are great dangers that men, however good and however well-intentioned, who are in charge of the affairs, may drift off course.
I hope, therefore, that the Government, and others of your Lordships, will support me if I try, I hope in company with others, to improve the drafting of the Bill during the Committee stage. But, with that proviso, I should like to give my humble support to the idea behind the Bill.
5.53 p.m.
LORD BARNBY: My Lords, on reading the White Paper I, like many others, got the impression that something really promising was being worked out. Then, when the Bill itself was published, like many others I found a development of the kind of anxieties that the noble Lord, Lord Shawcross, has so clearly put to us, a fear that this meant an extension of nationalisation. Many of us feel exactly as he does, that that is not necessarily going to contribute to efficiency.
We were somewhat relieved when the name of Frank Kearton was published as the chairman: that gave some reassurance. One must have a whimsical reflection on the liberalities of his recent expressions, verbal and written. But again it seems paradoxical that a really constructive thing, such as the merger of the great company of which he is the head with I.C.I., was opposed by him. That seems quite curious, because there were many (and I certainly was one among them) who felt that on grounds of research particularly, and again particularly in the fibre divisions, there was great advantage in the possibility of integration, and particularly because, in the possibilities then thought of, of our entry into the European Community, the size of the merged undertaking would be able to match that of the great Continental companies.
My noble friend Lord Aldington, who has just sat down, voiced many of the anxieties, which are justified; and he went so far as to make definite recommendations of improvement. But this is a Second Reading debate. Generally, on Second Reading of a Bill we discuss the basic principles, and not so much the actual details. It is natural now that anyone with any responsibility who has sat watching for a period of time the evolution of industry should ask, "Well, what other moves of a similar character have been developed in other, let us say, English-speaking countries?" Our minds can go back to our own Trade Facilities Act. We have the individual attack on industries like the cotton and the shipbuilding industries.
The noble Lord, Lord Winterbottom, in moving the Second Reading, referred to the cotton industry. That industry, in particular, from which evolved the Lan-
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cashire Cotton Corporation, was the result of specific action through legislation, and it achieved some success. Shipbuilding difficulties have been recognised by the present Government in special legislation. Speaking of having responsibility for controlling an industry, I look back to my time, some years ago, in a Government Department which was responsible for the administration of an industry. It is extraordinary how that can develop one's belief that collective activity is much better than activity under private enterprise. But one soon recovers from that noxious influence on the termination of one's appointment.
My noble friend Lord Aldington quite properly referred several times to the I.C.F.C., and I believe to the Commonwealth Finance Corporation and other bodies which exist here, and asked why they could not have been adequately reinforced in relation to anything that this Bill is proposing to do. One can look further afield, to Canada. I think the Canadians have a system of what they call Crown companies. They have achieved a great deal of what this Bill is, I suppose, aimed at. I would look in another direction, one which I think is the most effective, looked at from its speed of results—to the Industrial Development Corporation of South Africa, which has already shown the diversity into which legislation of this kind can go without impinging on the private enterprise principle.
I listened with great interest to the speeches which have been made in this debate to-day; it was a rewarding experience because this is a great proposal for the development of industry. I had intended to probe, so that when the noble Lord, Lord Shepherd, comes to reply he could give me some further information. But my noble friend Lord Drumalbyn put forward a series of inquiries for elucidation which I am sure Lord Shepherd will need to take a long time to answer. So pointed and wide-ranging were Lord Drumalbyn's questions that, they left little for anybody else to add.
Lord Drumalbyn said that he hoped that only persuasion would be used to produce mergers. While echoing that broad hope that any other measures should be avoided, I should like to ask Lord Shepherd how Clause 2 of the

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Bill, which appears to indicate that there must be direction from the Secretary of State, would apply to a particular sector of an industry where the fragmentation of small firms prevented any movement which would eliminate competition and lead to the survival of the fittest. This looked like happening in the shipbuilding industry, and it may also happen in other industries. I should like to ask the noble Lord how that problem will be tackled. Is the D.E.A. to have the power, responsibility or authority of indicating to the Industrial Reorganisation Corporation that it should move into such an industry? And, if voluntary action does not work, at what point, and in what way, will the power under this Bill be used to achieve progress? One can readily picture situations in industry where that sort of movement not only would be profitable, but would also be desirable in contributing to the health of the economy of the country as a whole.
One is inclined to compare the proposed powers under this Bill and the way in which they will function with other examples which we have had before us. For example, the Port of London Authority can raise money independently of Government funds; and I recall my own experience in the Central Electricity Board (of which I was a member for seventeen years until the noble Lord, Lord Citrine, empowered by a nationalisation Act, took it over and became its head, and great success attended his direction of it) which achieved a great integration of private firms without resort to Government financial assistance. It operated under the statutory powers of civilian management without Government finance, and I believe that it did a pretty good job and provided a good foundation for what the noble Lord, Lord Citrine, took over.
I hope that examples of this sort will be scrutinised by this Corporation so that it can avoid the grave misgivings voiced by the noble Lord, Lord Shawcross, that this Bill might move towards nationalisation on a larger scale than has occurred hitherto. But certainly in regard to fragmented industries, I believe that there is much room for improvement. My Lords, it is in that spirit that I suspend any misgivings, and
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hope that we shall see a constructive attitude behind this Bill. I therefore give it my support.
6.5 p.m.
LORD ER ROLL OF HALE: My Lords, we have had a most interesting debate this afternoon upon what in another place proved to be a very controversial Bill. The contributions from the noble Lord, Lord Shawcross, and others indicate a fairly substantial measure of support for what is an imaginative and interesting Bill. I had prepared a good deal of material this afternoon on matters which I should have liked to raise, but they have already been covered by earlier speakers. Therefore, as there is another Bill to be discussed to-night, I will be brief; although that does not mean to say that I am not interested in the Bill and would not have said many things about it had they not for the most part been said already.
My first anxiety is how the Corporation can be a profitable Corporation. The noble Lord who introduced the Bill in such an interesting way emphasised that the Corporation was to be profitable over the long-term, not the short-term. But the difficulty which besets the Corporation, as I see it, is that the really profitable, good mergers will take place in any event, assisted, where necessary, by existing institutions. It will always be operating on the margins, on the ones which the existing institutions are not quite prepared to take on and which may or may not be profitable. Or the Corporation may even have to go into an area where mergers are not likely to be profitable but which should be undertaken for some reason other than profit-making.
Much the same problems arose between 1945 and 1951 for two bodies which were set up by the then Labour Government. The first was the Colonial Development Corporation which was faced with exactly the same problem. If there was a profitable development in a Colony, private enterprise took it on. Therefore, the C.D.C. were left with only the doubtful starters, such as the mineral bodies which no mining company thought worth while exploiting, or the hotel project in British Honduras which no hotelier thought worth risking his money on. The result was that the C.D.C. had a very

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shaky time. The other body was the National Research and Development Corporation—again an imaginative scheme which sounded good at the time—a national body set up to take over the great task of exploiting Britain's many unused inventions which were lying mouldering in the files of the Patent Office. It was going to take over inventions developed in Government Departments and so on. It was a great concept, but they had great difficulty, and I think still do, in using up the money which was granted to them because they, too, operate on a very narrow band. All the good inventions are eagerly taken up by industry, and, apart from the inventions of the cranks, there are only a very few which merit the attention of this Corporation.
I feel that the real difficulty which is likely to face the I.R.C. is that of finding groups of firms suitable for merging which will produce a profit in the long run. Furthermore, of course, there will be the danger that the powerful board, in desperation after two or three years at having got rid of only three or four million pounds of public money, may be tempted to take greater risks than they should normally undertake. They will say, "We have not made much progress. We ought to do more. Perhaps we have been too cautious. Perhaps we should go for this merger proposal which a year ago we thought was not likely to be profitable." If they succumb to that kind of temptation, then before long the Corporation will get a bad name, and in a few years' time we shall be having a debate in your Lordships' House to discuss the appalling losses of the Industrial Reorganisation Corporation. I hope that this will not arise. Indeed, I make the point in my speech so that we can all help the Corporation to guard against this danger.
Now I wish to turn to the matter which was mentioned by the noble Lord in opening, when he said that we should not bring emotion into this discussion. My noble friend Lord Drumalbyn touched on that. I hope that if we have a difference of opinion with the Government it will not be dismissed as being emotional. After all, they have done enough to us in the last two years for us to feel very emotional about the Government as a whole. I think we are quite entitled to
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express in strong terms what we feel about Government policies, and particularly about whether or not the Industrial Reorganisation Corporation is to be an instrument for nationalisation.
I know it can be a somewhat esoteric argument, but the point I should like to make is that it is always a one-way traffic. The Government are always taking on a bit more in one way or another: they never relinquish anything. They never put back to private enterprise what they once have held, although there are a number of cases where they could perfectly well do so. That is why we must watch very closely indeed any further extension of State intervention into the field of British industry and commerce.
The intentions of the Labour Government were quite clearly expressed in Signpost to the 'Sixties. With your Lordships' permission, I should like to quote one sentence from it:
"Already we can see public ownership developing in various forms, nationalisation for a whole industry or firm, State participation in industrial companies on a partnership basis, the establishment of State-owned undertakings competing with private firms, municipal enterprise and, finally, co-operative ownership."
The Labour Party are perfectly entitled to hold this as their view. I think that the Industrial Reorganisation Corporation slots very neatly into that sentence which I have just read out. Noble Lords opposite nod in assent. This is what we complain about; this continual encroachment into the field of private industry and commerce, under the thin excuse that such intervention is needed in order to create a greater measure of industrial efficiency.
I have looked at much comment in the Press and elsewhere on the Industrial Reorganisation Corporation. I think it should be realised that, although most noble Lords have this afternoon given a favourable wind to this Bill, there are important elements of industrial opinion which are opposed to it, as I am. I should like to quote what the board of Imperial Chemical Industries had to say when the White Paper came out. This was a very unusual statement. It is rarely that one gets a board of a large public company making a united statement on a matter of Government policy. This was not just Sir Paul Chambers speaking as a public figure in his own

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right; here is the board of Britain's largest public company making a statement as follows:
"Although the Board of I.C.I. have consistently followed a policy of assisting the Government of the day in any measures which might be in the interests of the country, they feel bound to make known their attitude to the proposed Industrial Reorganisation Corporation. In their view, while further rationalisation of some section of British industry is desirable in order to accelerate the rate at which productivity can be increased, the method proposed by the Government is undesirable and will prove to be ineffective. The general tone of the very brief White Paper on this subject and the reference to Exchequer Dividend Capital confirm the impression that the Government Intends to extend its control over industry, to interfere still more with individual initiative, and to further the policy of the public ownership of the means of production which the Government is committed to implement in one form or another."
I will not elaborate on that, but I think your Lordships should know that that is the considered view of the whole board of Britain's largest industrial company.
The noble Lord, Lord Henley, wanted to know why we as a Conservative Party were attacking the Bill so much. Our answer is that it is not because of the way in which the Government say it will be used, but for the way in which it is capable of being used. I was reassured to be told that the Industrial Reorganisation Corporation will use only persuasion. But, of course, persuasion can take many forms. I can quite see the situation arising where there are perhaps five firms which the Corporation wishes to merge, but one chap does not want to be merged. He is doing quite well, he has a good little business exporting its fair share, and giving steady employment to perhaps 200 or 300 work-people. So the Corporation will say to him, "Well, of course, it is going to be very difficult for you if you are the odd man out, because you will be a small man competing against the merged giant. Hadn't you better come along in and join us?" I do not see how the Industrial Reorganisation Corporation can resist that form of coercion, and I think it will be most unfortunate—
LORD HENLEY: My Lords, would not the noble Lord agree that this same state of affairs arises when an ordinary merchant bank produces a scheme of this nature?
LORD ERROLL OF HALE: My Lords, that is usually only a merger between two. It is very rarely—in fact, I cannot think of a case on the spur of the moment—that a merchant bank has successfully produced a merger of five or six companies simultaneously, or of virtually the whole of a particular branch of industry.
LORD SHEPHERD: My Lords, would the noble Lord refresh my memory? Did not the Conservative Party assist rationalisation in the aircraft industry by threats or otherwise, with the possible withdrawal of orders unless there were amalgamations within that industry? True, it was for the national interest, but this was the case, was it not?
LORD ERROLL OF HALE: Yes, my Lords. But there the situation was rather different, because the Government were using their power as the industry's largest customer. There is a very big difference if you are a customer. Undoubtedly, although some mergers take place by what are called "market forces", they are, of course, the combined activities of customers, in buying or withholding their custom from some firms and not from others. It is on quite a different footing from the proposals about the way in which the Industrial Reorganisation Corporation is to act.
I hope very much, therefore, that the Corporation will be scrupulously careful in the way it approaches small firms as well as big ones. The noble Lord. Lord Shawcross, said a great deal about the importance of size, but we must also remember that although there may be many firms in the engineering industry that is because it is a very big industry. There are small firms as well as big ones, and particularly there are those which serve individual localities. I can quite see that for the sake of so-called tidiness, one will get mergers between a number of scattered firms in the country, and the benefit will be that they are bossed by some remote head office of the group. An engineering firm in Gloucester, for example, may be very well placed to supply its customers, and will not stand in any need of being merged with other companies in other parts of the country, even though they are making similar products. So let us not go in too much for

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tidiness, in the belief that marriage for its own sake is necessarily a good thing.
Before I sit down, I should like to deal with the rather unpleasant remark—the only unpleasant remark which the noble Lord, Lord Winterbottom, made in the course of his speech—about my esteemed friend and colleague, Mr. Enoch Powell. Mr. Powell expresses his opinion forcefully and vigorously, but it is sincerely held. At no time in his recent statements has he indulged in what the noble Lord has called "class warfare". I think it is very important that he should remind the country that there are alternative solutions to those proposed by the Government. This is a growing disease, if I may say so, among members of the Government to complain if we venture to differ from them and to suggest alternatives. The noble Lord, Lord Champion, may not have been in the Chamber when we were told that we must not be emotional because we ventured to disagree with the Bill. We intend to be emotional when required, and give notice that we shall do so as often as we wish if we are sufficiently provoked. Having said that, I would say that we will not oppose the Bill on Second Reading, but we will, of course, return to it on Committee stage and hope to introduce some modest improvements.
6.19 p.m.
LORD SHEPHERD: My Lords, may I first of all say to the noble Lord, Lord Erroll of Hale, that if he were a salmon he would not survive very long; because, I must say, of all noble Lords in this House, I have never known any noble Lord to be so quick to rise to the fly which is cast upon the waters. But I am quite sure that this is really due to the noble Lord's desire to enjoy the debates of this House.
This has been to me a most interesting debate, although I must confess not an easy one to wind up on Second Reading. Many of the points should perhaps be explored in detail in Committee. May I say, particularly, to the noble Lord, Lord Shawcross, that I enjoyed his speech, and I agreed with a great deal of it. I think it was the noble Lord, Lord Conesford, who the other day accused me of generalising. I thought that the noble Lord, Lord Shawcross, was falling into that trap when speaking so freely and so warmly of the free enterprise
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system, as though the tree enterprise system is one of all virtue and no vice, and as though we who sit on these Benches, and perhaps loosely describe ourselves as Socialists, have no virtue. I think that we can all fall into the trap of generalising. I wish the free enterprise system had all the virtues which the noble Lord, Lord Shawcross, now believes it to have. In a few days' time we shall be debating the problems of redeployment and the problems of retraining, and I hope the noble Lord, Lord Shawcross, will be here, because this subject provides, perhaps, one of the best examples, of the failure of free enterprise—the failure to nurture and develop what is one of our greatest assets, the use of our manpower. But at this late hour I do not wish to go on debating the virtues of one system or the other characteristics of the other.
May I say to the noble Lord, Lord Shawcross, and to the noble Lord, Lord Aldington, in regard to their criticism about the loose drafting of this Bill, that that has been done for a purpose? We felt that the Corporation should have as wide an authorisation as possible. I well remember how, when we were in Opposition (the noble Lord, Lord Drumalbyn, in particular, will remember this), we moved Amendments to a number of Bills, which the noble Lord, Lord Drumalbyn, had in his charge on behalf of the Conservative Government, so as to try to lay down the duties of certain Boards. He was right—although we did not necessarily agree with him at the time—when he said then that when you try to lay down a duty the problem is how you define it. Do you put it in such a wide way that all the possible requirements are in the Bill? I will read very carefully the suggestion of the noble Lord, Lord Aldington, as to a proposed Amendment. I should be very happy to discuss it with him, as would the Department, because if he wishes to improve the quality of this Bill then I am with him 100 per cent. But I think we must watch very carefully that we do not put constraint upon this Corporation.
In reply to the noble Lord, Lord Shawcross, in regard to tenure of office and his fear that members of this Corporation might be dismissed by the Secretary of State if he disapproved of their actions, I would point out that the

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specific grounds under which the Minister can dismiss a member of the Corporation are laid down in the Schedule. The noble Lord was quite right in saying that there is no period of office mentioned. I understand that one of the difficulties here is that members of this Corporation may wish to serve for varying periods of time. I have no idea how long the chairman himself wishes to serve as chairman of this Corporation; or, indeed, any of the other distinguished members of it. I understand that the view of the Government at the present moment is that there should be a period of three to five years; but I think one must try to leave it to the discretion of the chairman of the Corporation and the Secretary of State to say what the period should be. Whether we can give the protection the noble Lord has in mind is a matter which I shall certainly consider with my right honourable friend.
I would certainly agree with the noble Lord, Lord Shawcross, about bigness of industry. Bigness is not always a sign of efficiency, nor do small companies necessarily have less to contribute. But, unlike the noble Lord, Lord Shawcross, I came from business into politics, and, as the noble Lord, Lord Barnby, knows—I have spoken to him many times about the industry in which he is particularly concerned—I am quite sure from my own experience of selling overseas that if there had been amalgamations, mergers, between companies in the wool industry their position in many markets would have been infinitely stronger, not merely on the grounds of production but through their ability to carry out research, and even in the designing of materials and colours.
On Lord Aldington's point about the Corporation's accountability to Parliament, may I say that clearly its report could be a subject for debate. It is a report that will have to be published within four months from the end of the accounting period. Moreover, the Minister himself will be responsible to Parliament for any instructions or directions that he may give to the Corporation; and certainly I should have thought that the occasions when the Minister or the Treasury are making funds available to the Corporation would provide opportunities for accountability through the
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Estimates Committee of the House of Commons. But I will see that the noble Lord has a fuller reply on this point.
I would assure the noble Lord, Lord Aldington, that the Government and the Minister do not intend to interfere with the everyday running of the Corporation. In fact, it must be taken of great significance that although, under Clause 2(1)(b), the Secretary of State may request the Corporation to undertake an enterprise, the Corporation is not obliged to carry out that request. Subsection (1) says the Corporation "may" do it. Furthermore, the words in subsection (4) are, "of a general character". To those who fear that the Secretary of State might instruct the Corporation to nationalise a particular industry, I would say that I do not think that such an instruction would come within the phrase, "of a general character". I am quite sure that the fears of those noble Lords who are afraid that this Corporation will be used for the nationalisation of one company or of a number of companies are entirely unfounded.
I was very grateful to the noble Lord, Lord Henley, for his support, and for his quotation from the comments and views of a very distinguished member of the Conservative Party—and I hope the noble Lord, Lord Drumalbyn, will take note of them. There are times, as the noble Lord, Lord Henley, knows, when the Conservatives do come up with good ideas. One of their greatest failures, I think, is the implementation of such ideas—and this is perhaps one of the matters which we shall be able to discuss when we come to debate retraining and, in particular, the Carr Report, which was issued in 1958 but the legislation on which we did not get until 1963.
LORD DRUMALBYN: Who blocked that?
LORD SHEPHERD: We shall be able to debate that in a short time.
My Lords, I listened very carefully to the noble Lord, Lord Barnby. He, again, I think, was interested in the power of direction by the Minister and the use of public and private funds. In its promotion of mergers this Corporation will not necessarily be using public funds. As I said in a debate some time ago, when we were discussing the proposal to set up

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this Corporation it may well be that mergers could be brought about through the initiative of the Corporation, although any capital needed would be provided by the merchant banks, or even by other market institutions. Indeed, in some cases the guarantees which this Corporation will be able to give will ensure that private money becomes available for a proposed merger. There may be occasions when public funds will also be of benefit to companies, but it will be for the Corporation to decide how best to bring about mergers.
I think it was the noble Lord, Lord Drumalbyn, who used the terms "marriage broker" and "mother-in-law", in the sense that the Corporation will arrange the marriage and will then find out how best to make the marriage a success. Clearly, the Corporation's task will be to bring about a merger, but there are various problems involved in mergers, or, perhaps, reasons why a merger needs to take place. One has merely to look at Clause 2(2)(d), in regard to the supply of plant and equipment—and I am thinking here particularly of engineering industries; those industries which prefabricate and carry a considerable quantity of spare parts. Here you would have an amalgamation of two or three companies into quite a large organisation. Clearly, a computer would be of great value for stocktaking, processing, and anticipating sales developments and the like. It might be that in that amalgamation initially there would not be sufficient funds, and the Corporation might help by providing a computer.
There is another point—and I hope the House will not think that this is wrong. It might be that in an amalgamation the I.R.C., by supplying particular equipment, would be able to help other industries that are producing new forms of equipment, such as computers. This could be a two-edged way of assisting industry.
LORD DRUMALBYN: My Lords, I am not clear about this. Could the noble Lord explain what are the advantages of supplying machinery, rather than supplying money to buy the machinery? The only advantage that I can see would be if a stock of materials and plant were held and an entirely new kind of leasing business were entered into.
LORD SHEPHERD: My Lords, the noble Lord is quite right. It might be advantageous to the merger that money should be provided—and money can be provided. On the other hand, it might be that the firms concerned would prefer to receive equipment, either on loan, on rental or on lease. So the Corporation has this flexibility to assist in a particular merger in whatever is the most suitable way.
May I say to the noble Lord, Lord Drumalbyn, that I thought much of his speech had a familiar ring; it was very much like a speech that was made in another place. I am sorry he was not satisfied with the answers that my right honourable friend gave, and I hope I can go some way to satisfying him. I will not say that I can go all the way, because he put his questions so quickly that I was not able to take a note of them all. But I will see that the noble Lord receives replies, either this evening or by letter. The main fear of the noble Lord was with regard to information. He thought that the Corporation might be in a privileged situation; that it could obtain information from Government Departments. I think he had in mind the Statistics of Trade Act. I would assure the noble Lord that this Corporation will be no more in a privileged position than any other commercial organisation in this country. I think those words will be sufficient to cover all the various questions he asked in regard to information. The Corporation will be in no special privileged position.
The noble Lord went on to ask whether, in the case of bringing about a merger, the Board would have to obtain approval from the Board of Trade in regard to the Monopolies and Mergers Act. This was the point the noble Lord, Lord Hawke, made. The noble Lord will remember that the Monopolies and Mergers Act defines a monopoly situation as that which obtains when a company or a group of companies provides 33⅓ per cent. of the home market.
LORD DRUMALBYN: Or where the merger will result in its doing so.
LORD SHEPHERD: Yes, my Lords, the noble Lord is correct. It is when the merger will result in that situation. As I understand it, under the Act ordinary companies who wish to undertake a

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merger may consult with the Board of Trade. It is true that the advice that the Board of Trade may give may not be 100 per cent. binding and that the merger may still be referred to the Monopolies Commission, but, in practice, I think the advice of the Board of Trade would be such that a company could decide whether to go on with the merger or not. As I understand it, the I.R.C. would be very much in a similar position. It is clear, when you look at the requirements of Clause 2(1), that the Board would be in close consultation with the Board of Trade on any possible mergers and that advice would be sought. I do not expect this Corporation to undertake or permit or encourage a merger which is clearly contrary to the public interest.
LORD SHAWCROSS: My Lords, is the noble Lord quite right in what he said about monopolies legislation. Is not the position this: that the noble Lord's own Government introduced legislation making it possible for the Board of Trade to refer to the Monopolies Commission any merger involving a joint capital of over £5 million? There is no question of having two-thirds of the market in that provision. Of course, these matters go to the Monopolies Commission only on reference by the President of the Board of Trade, and presumably there would be discussions before any such mergers were arranged.
LORD SHEPHERD: My Lords, I am grateful to the noble Lord. He is quite correct in terms of the £5 million capital.
LORD DRUMALBYN: My Lords, is the noble Lord certain that the noble Lord, Lord Shawcross, is correct? Is it not £5 million worth of assets taken over, and not that the joint assets will amount to £5 million?
LORD SHEPHERD: My Lords, this is one of the occasions when my carrier pigeon has not come to my assistance. I will look into it. I was under the impression that it was 33⅓ per cent. of the market; the noble Lord, Lord Shawcross, thinks it is a joint capital of £5 million. I will look into it and write to the noble Lord.
LORD ERROLL OF HALE: My Lords, we should all like to know.
LORD SHEPHERD: My Lords, the matter will be raised in Committee.
In regard to Clause 1(6), the noble Lord wanted to explore the situation of the status of the Corporation. It is clearly not protected by Crown status. Subsection (6) makes it perfectly clear that this Corporation will remain in the same category as any other merchant bank or, to use the phrase used by the noble Lord, Lord Henley, any super-merchant bank.
I should like to take up one point with the noble Lord, Lord Erroll of Hale, in regard to profitability. The Government hope that this Corporation will be profitable, that it will earn, particularly from equity capital, a reasonable and fair return on the money invested; but I do not think we should judge this Corporation only on its profitability in terms of profit on capital. I see it very much as the servant of industry. I think we shall have to judge it in the years to come in relation to the mergers that have taken place and the results of those mergers. I do not take quite the view of the noble Lord, Lord Erroll of Hale, that only broken-down organisations are likely to be affected by this Corporation and that virile companies will go to the private merchant banks. I know, from my own commercial experience, of a number of very good companies that could well be merged but for difficulties in the way of finance. I believe that the noble Lord, Lord Erroll of Hale, was right in one regard: that we must be patient in seeing the operation of this Corporation. I hope we shall be able to judge its success not only on the profit it earns for the community but also, and above all, on the effect it has on the structure of industry.
My Lords, I am quite sure that I have not answered all of the questions of the noble Lord, Lord Drumalbyn; but I will see that he is supplied with answers to them; particularly as I hope the House will agree that we should take the Committee stage of this Bill on Thursday, December 8. That is only about a week from now; but, as my noble friend Lord Winterbottom said, the members of the Corporation though it is not yet formerly established, have been undertaking some work; there have been a number of very important inquiries. I

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am quite sure that the noble Lord, Lord Aldington, as a merchant banker will agree with me that some mergers, if they are delayed, may well be lost. Therefore, I think there would be considerable advantage, not only to this House but also to industry and to the country, if we could try to have this organisation in existence by the New Year.
LORD ALDINGTON: My Lords, may I interrupt the noble Lord to ask whether it is absolutely essential that we have the Committee stage on Thursday next? The noble Lord has kindly asked me to have consultations with him, which I propose to do, but the time is short in which to get the consultations over—presumably they will not start until Monday or Tuesday—and then get something on to the paper which we can discuss on Thursday. It seems very quick when we are dealing with a major problem.
LORD SHEPHERD: My Lords, I have had consultations. I did not realise there was any particular difficulty, but I will certainly have a conversation with the noble Lord, Lord Aldington, to see what can be arranged with regard to business. At the same time, I hope that the noble Lord takes my point about the need to try to ensure that this Bill receives the Royal Assent by Christmas, recognising also that if the noble Lord is successful in amending the Bill there will be need to send it back to another place for approval. But we can look again at the timetable.
LORD ALDINGTON: They will agree with it automatically.
LORD DRUMALBYN: My Lords, there seems to be rather a vital question at issue here. If I understand him aright, the noble Lord, Lord Shepherd, is saying that there are some possible mergers which might fail unless this legislation is enacted. If no public money is involved there is nothing to prevent those mergers from going on whether or not the Corporation has a legal status. On the other hand, if public money is being pledged now, without any Act of Parliament, is this constitutionally correct?
LORD SHEPHERD: My Lords, I have not said anything of the sort I said there have been a number of inquiries, which means that there are organisations
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which are interested and which would like to merge and receive assistance from the Corporation within the terms of this Bill, when it becomes an Act. There is no impropriety here at all. What I said was that if there is delay there is always the possibility that possible mergers may fail. Therefore, I am very anxious to see this Bill on the Statute Book by Christmas. But I certainly will do my best to see that all opportunities for discussion are provided between now and the Committee stage. I will always be available to any noble Lord who wishes to see me or to see the Department concerned. With those rather inadequate remarks, I hope that your Lordships will give this Bill a Second Reading.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

NATIONAL COAL BOARD (ADDITIONAL POWERS) BILL
6.42 p.m.
Order of the Day for the Second Reading read.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE, (LORD STONHAM): My Lords, I beg to move that this Bill be now read a second time. This simple Bill deals with one aspect of an exciting national prospect. Its purpose is to increase the nation's participation in the fruits of United Kingdom territorial waters, and the United Kingdom's share of the Continental Shelf, by enabling the National Coal Board to search there for oil and gas. Before dealing with the provisions of the Bill, I would sketch in briefly the background of development in the search for oil and gas off our shores.
The 25 companies or groups who hold licences to explore there are spending over £100 million on initial exploration work alone. Thirty-one wells have been drilled, there are now 10 drilling rigs at work, and soon there will be 12. It gives me great pleasure to announce that so far six potentially commercial gas fields have been discovered. This is a great achievement for the beginning of the search, and we hope that it will continue as a success story. Oil has also been found in one well, and although it is not yet known whether there is enough for commercial exploitation, it is certainly encouraging.

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No one yet knows the extent of the resources in the North Sea because many more appraisal wells must be sunk to establish the full extent of the fields already found and many "wildcat" wells will be required to probe for other fields. One pipe-line has already been laid on the sea bed from B.P.'s gas discovery 42 miles East of the Humber to a point North of the Humber at Easington. Gas should begin to flow through this pipe in the early months of next year. More pipe-lines are planned. Starting next year gas supplies are expected to build up, until by 1970 we confidently expect to be getting from the North Sea at least 1,000 million cubic feet a day. This is approximately equal to all the town gas now being supplied in the whole of Britain. In terms of heat value it is equivalent to about 13 million tons of coal a year.
In the Government's view it is right and proper to let our own fuel industries compete on equal terms with existing Continental Shelf operators both British and foreign. The Gas Council are already participating, and we propose to put the National Coal Board in the same position. In this way we can increase national participation without the State itself joining directly in the enterprise, and without creating any new organisation. We recognise, of course, that this is sensible only if the National Coal Board can take on this new responsibility without detriment to its present important function of supplying coal. My right honourable friend the Minister of Power has been assured that the Board can do this.
The British subsidiaries of two large American companies, Gulf Oil and Allied Chemical, have given the National Coal Board options to join them in their licences. To take up these options, as the Board and the Government wish, the Board needs the additional powers provided in the Bill.
The extent of the powers to be given to the National Coal Board has required careful thought. The Government have 'wished to give proper scope for the Board to conduct a successful commercial enterprise, while limiting it to the search for oil and gas and activities directly connected therewith. A point to which I would particularly invite your Lordships' attention is that the powers pro-
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posed to be given to the National Coal Board by the Bill do not include those of refining the crude oil or gas, of distributing petroleum products, or of making petrochemicals. The Board is to be empowered only to search, bore for, and get, oil and gas in the sea bed and subsoil of our territorial waters and our share of the Continental Shelf; to make the oil or gas saleable in its crude form, and to sell it.
The Board will be able to operate in partnership or alone. It will also be able to operate in relation to any international agreement for the joint exploitation of fields extending across the international boundaries of the Continental Shelf, so that it may secure its full share of the oil or gas in the areas in which it is licensed. While precluded from refining, petroleum distribution and petrochemical manufacturing, the Board will be able to use any oil or gas got under this Bill in works or installations it already operates under its main powers contained in the Coal Industry Nationalisation Act 1946.
Under the Coal Industry Act 1949, the Board is prohibited from operating outside Great Britain, unless with the Minister of Power's consent. A similar restriction is contained in this Bill, with the result that any oil or gas got under the proposed powers may not be treated or disposed of other than at the well head, or in Great Britain, unless the Minister makes an Order authorising it to be done elsewhere. Such an Order, if made, would require the approval of Parliament. In using or supplying any natural gas found, the Board will be governed, as are all other North Sea operators, by the somewhat complex provisions of Section 9 of the Continental Shelf Act 1964. Thus it will need the Minister of Power's consent to sell the gas other than to a Gas Board, or to use the gas itself. I am bound to say that under this section the Minister has to give his consent to the supply or use of gas for industrial purposes as set out in subsection (4).
The activities of the Board under the Bill will be governed by licences on the same model as those which bind all other operators in the United Kingdom part of the Continental Shelf. In addition, the Board will operate under the general provisions of the Coal Industry Acts.

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Thus the Board will be required to settle the lines of expenditure on capital account with the Minister from time to time, and any borrowings by the Board must be within the statutory limits on borrowings which are at present laid down by the Coal Industry Act 1965. The Minister has power to direct the form in which the Board's accounts shall be kept, and as the Board's activities under this Bill will be regarded as a main ancillary activity, the Board will distinguish them separately in its annual accounts. The House can be assured that there will be a full disclosure, in the Board's accounts, of the money it invests in oil and gas activities and the return it receives.
Your Lordships are entitled to ask what the scale of expenditure by the Board on these activities is likely to be, but as the House will appreciate, financial plans can be made only when the Board has the powers sought under the Bill and can negotiate with its partners. Purely as an indication of the expenditure on exploration over the first few years, my right honourable friend the Minister of Power has given a figure of not more than £6 million. If, as we hope, the Board and their partners are successful in finding oil or gas, expenditure by the Board on development could substantially exceed this figure.
Coming to the provisions of the Bill, I feel that there is little that I need add about the provisions of what is virtually a one clause Bill. The clause is an addition to the National Coal Board's existing powers to enable it to search for, and bore for, natural gas and oil; to make such products saleable and to sell them; provided that it cannot sell overseas without the agreement of the Minister. Any borrowings necessitated by the exercise of these powers will be governed by the Coal Industry Act 1965, and are subject to the overall limit on all the Board's borrowings set out in that Act. This is a small but important Bill, likely to increase the benefit to the nation of the treasure lying hidden in the sea around our shores, and it is in that belief that I commend it to your Lordships. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Stonham.)
6.54 p.m.
EARL FERRERS: My Lords, we are grateful to the noble Lord, Lord Stonham, for introducing this Bill and for explaining its purpose to us. As I see it, the Bill has two great merits: it is short, and one can understand it. Therefore I have no hesitation in wholly commending it to your Lordships—on those two grounds only. I wish that my enthusiasm for the way in which it was drafted could be matched by enthusiasm for its contents, but there are one or two drawbacks of a major nature to which I should like to draw the attention of your Lordships. I listened carefully to the noble Lord's justification of the Bill, and from what he said one might consider that it was a perfectly innocuous Bill. But what in fact does it do? The noble Lord explained that its sole purpose was to allow the Coal Board to drill for oil and gas in the North Sea. This poses a whole posse of questions, such as: should a nationalised industry drill for oil and gas? If so, should the nationalised industry be the Coal Board? And if so, why?
The drilling which has been done in the North Sea and the strikes which have been obtained are thrilling and stimulating to everyone. It opens up the whole possibility of finding cheaper gas over the next decades, far cheaper than from the fuels which we have had to use. This is wholly good, and one would like to see much—and more—British participation in this. The noble Lord argued forcibly that the Bill offers just that. It can be argued that outside the Civil Service the National Coal Board is the biggest employer of labour, second only to General Motors. In terms of assets, it is the third largest concern outside the United States. In terms of sales, it is the third largest outside the United States. This may probably put it in a good position to enter the gas prospecting field. But is this so?
The Coal Board was set up in 1946 for one specific purpose, which was to take over the coal mines, run them and sell the coal which they produced. If we look at the Coal Industry Act 1946, we see in the very first paragraph that its purpose is the "working and mining of coal", "to secure the efficient development of the coal mining industry","to make supplies of coal available", "to search and bore for coal". It was set

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up not to run the railways or atomic energy or, indeed, to prospect for gas. This is a wholly different purpose from that for which the Coal Board was set up.
LORD PARGITER: My Lords, may I suggest to the noble Earl that we live in a changing world. Because the Coal Board was set up for a certain purpose in connection with the securing of coal, must it be tied to that purpose for all time?
EARL FERRERS: My Lords, that, with respect, is what the Act says.
LORD PARGITER: My Lords, I said that we are living in changing times. No one envisaged at the time of the Act—or did they'?—the drilling of the North Sea for oil.
EARL FERRERS: My Lords, I dare say they did not. If this is to be an extension of nationalisation, we should be told so. Because this Bill is really introducing the nationalisation of oil drilling. That may be a suitable thing to do, but let us be perfectly clear that this is what is happening. My noble friend Lord Erroll of Hale said in the debate on the last Bill, "We must watch closely for any further State intervention in industry". And that is what is being done by this Bill. It could well be argued that it is desirable for more British participation in the oil drilling industry, but, if that is so, why do the Government choose the Coal Board. Would not the drilling for gas be better done by the Gas Council? After all, the Gas Council is concerned in the manufacture of gas and in the economics of gas extraction; it is concerned with the economics of natural gas versus manufactured gas. It was set up to deal with gas. It must know more about gas than the Coal Board. It is facing increasing demands for gas and is confronted with an enormous potential of raw material on its doorstep, but yet, for some reason, the Government choose to allow the Coal Board to do this drilling. One wonders why.
I have come to a number of conclusions, and one of them is that in all probability this is an attempt to shore up the finances of the Coal Board, because, let us face it, the coal industry is a shrinking industry. This is a fact which I think the noble Lord, Lord Blyton, at
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least, would not like to acknowledge; but, nevertheless, it is a fact. This does not mean to say that it is a defunct industry, because it is not; but it is a shrinking industry. When one looks back to the post-war years and thinks of how we could not get enough coal, it seems almost ironical that nowadays we are producing less and requiring less. About ten years ago we were producing something like 223 million tons of coal a year, and this year we are down to 170 or 175 million tons.
The Coal Board are seized of this situation and are trying, like a prudent business organisation, to diversify their assets and diversify their interests. It may be prudent for a public company operating on commercial terms with private money to diversify its interests, but I question whether it is prudent for a nationalised undertaking, operating with public money obtained at cut-price rates, which has just had £415 million written off, has been allowed to increase its borrowing up to £700 million, and has, at the same time, had its worst financial year since its inception, making a loss of £24.8 million.
But this is, of course, stated Coal Board policy. Indeed, the noble Lord, Lord Robens of Woldingham, says in Coal News:
"The whole object of our diversification is to defend the vast investment back at the pits. We are not branching out into any business which does not clearly serve this end."
I am bound to say that I fail to see how investing in the gas business and stimulating the development of a rival fuel is defending the vast investments back at the pits. But in order to find out how this is defending this investment we have to look a little further into the Coal Board's perambulations, and we look into some of the other ways in which the Coal Board have made investments. I wonder whether many noble Lords would know that the Coal Board have, for instance, a vast stake in Barcross Ltd., or the British Creosote Company Ltd., or Pitch Polymer Products Ltd.; whether, indeed, many people are aware that the Coal Board even owns shares in a firm called Farm Way Ltd., which used to be the Northern Farmers' Trading Association. This seems to be an extraordinary firm for the Coal Board to invest in.
Indeed, how many people would know that the Whittlesea Central Brick Company is owned 90 per cent. by the Coal

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Board, with an investment of nearly £2 million; and J. H. Sankey is owned 60 per cent. by the Coal Board, with an investment of something like £1 million. Of course, the argument goes that Sankey's, for instance, make boilers; boilers use coal, and therefore it is a good idea that Sankey's and the Coal Board should join up. But if you look into that further, you find that Sankey's are not just boiler builders; they are building material manufacturers who manufacture a great range of things like plaster board, and I think baths and flush lavatories, which are far removed from anything to do with coal.
Then there are other companies which the Coal Board have taken and absorbed into their subsidiaries. So gradually the Coal Board have been putting out their fingers further and further into industry. One of the companies in which the Coal Board are interested—and I would stress that this is germane to this Bill—is a company called Staveley Chemicals. This is a harmless enough sounding name, and in fact it is a company which was set up jointly by the Coal Board and Stewart & Lloyds in June, 1965. So when Stewart & Lloyds become nationalised this will be a wholly nationally owned company. If one looks at the memorandum of association of Staveley Chemicals Ltd., one sees that the company has very wide powers indeed—powers far wider, I might say, than the Coal Board have. They are allowed:
"To manufacture, prepare and sell chemicals and chemical products and to treat, refine, process and deal in all such substances and to buy, sell, export, import and deal in all substances, apparatus and things capable of being used in such business as aforesaid."
They are allowed:
"To manufacture, buy, sell, improve, repair, alter, prepare for market, treat, and deal in all kinds of plant machinery, implements, tools, utensils, apparatus, hardware, rolling stock, materials, products, fittings, appliances, substances, articles and things necessary or required in, or useful, or capable of being used, in any of the above specified businesses, or in connection therewith, or usually dealt in by persons engaged therein.
"To carry on any other businesses, whether manufacturing or otherwise, which may seem to the Company capable of being conveniently carried on in connection with any of the above-specified objects, or calculated directly or indirectly to enhance the value of or render profitable any of the Company's property or rights."
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And so it goes on.
As I say, this Company has very wide powers indeed. But, according to the Coal Board's report of 1965–66, the company is being set up to make benzene and cyclo-hexane. Cyclo-hexane is a derivative of benzene and is used as a raw material in the production of nylon. Benzene comes from benzole, which in turn comes from coal, and so we get back eventually to the slender link with the Coal Board. It would be a perfectly valid argument, which I do not propose to pursue this evening, to discuss whether the Coal Board should be allowed to enter the field of petro-chemical business, even when the chemicals so derived are coal-based. But the memorandum of association of Staveley Chemicals gives the Company wide powers for the manufacture of any chemicals, even those from gas.
Your Lordships know that all the drilling in the North Sea is guided, constructed and legalised by the Continental Shelf Act, 1964. Under Section 9(2) of the Continental Shelf Act the holder of the licence may not use the gas which he produces in Great Britain without the consent of the Minister. Anyone who drills for gas may not use this gas in Great Britain without the Minister's consent. But the holder of a licence may apply for consent if the gas is to be used
"for a process in which the gas is used otherwise than as a fuel."
So if you are going to use it in that way, you may apply for a licence to the Minister; and in this case, the Minister, under subsection (3), shall give his consent. Your Lordships will note that it is not "may" give his consent, but "shall"; he has no option. Then subsection (5) of Section 9 states that:
"For the purposes of this section gas provided by a company for the use of any subsidiary or holding company thereof, or of any subsidiary of such a holding company shall be deemed to be used by that company."
LORD STONHAM: My Lords, may I interrupt the noble Earl? I think he should add that when the Minister has given his consent he does not discriminate between whether the owner or user of the gas is a public undertaking or a private enterprise undertaking.
EARL FERRERS: No, my Lords; the noble Lord must contain himself a little longer. I am aware of that, but the

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point is that under this Bill as it is now drafted the National Coal Board may drill for gas and may subsequently pass the gas to its own company of Staveley Chemicals, which may in turn produce petro-chemicals. In other words the State, under the ægis of the National Coal Board, is entering the field of oil drilling and the field of the petro-chemico business in direct competition with private industry. Again, this may be desirable. We on this side of the House do not think it necessarily is, but let us be perfectly clear that this is what the Bill is doing, and therefore it is not quite so innocuous as the noble Lord, Lord Stonham, made out when he made his opening speech. It is an extension of the nationalised industries into the field of oil drilling and chemical manufacturing, and the great difference between this and private enterprise is, of course, that this is to be financed out of public money borrowed at advantageous rates for purposes wholly different from that for which it is going to be used.
In my opinion, the National Coal Board is hugely involved financially in the coal industry. It has a tremendous operation of closing down many pits, rehousing miners, retraining them, re-placing them. This is a vast undertaking economically, socially and politically and it seems to me that the National Coal Board has enough on its plate without going into this new and differing sphere.
When the Bill was in another place the Parliamentary Secretary to the Minister of Power said, when the Opposition were objecting to this, that they were looking for lions under the bed. I thought this was rather a graphic description, but of course the Minister was quite right; we were, and I think we found some. It is sometimes necessary to look under the bed to see what is there, and I think in this Bill there is a lion sitting there and I hope we have been able to pull him out a bit. Naturally, we do not intend to divide the House on this Bill, but I cannot pretend that we can give it quite the blessing that the noble Lord would like us to give it.
7.13 p.m.
LORD AUCKLAND: My Lords, like my noble friend I have a good many misgivings about this small measure. First of all, I should like to ask the noble
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Lord, Lord Stonham, how many personnel are expected to be employed in this operation, which has far-reaching implications, and added to that it is going to need a considerable amount of training which will presumably be financed with public money, so that the cost to the Exchequer will be a good deal larger than is implied in the Bill.
I should also like to ask the noble Lord (and I apologise for not giving notice of the question) whether there have been any consultations with the oil companies, such as B.P., regarding these operations, because presumably the oil companies have sunk a good deal of private capital into this project, and I do not know what the legal position here is regarding compensation for any work which may be taken from them.
I agree with my noble friend Lord Ferrers when he says that the National Coal Board is already very much committed, as it is; one reads of the problems at Bevercotes colliery. I am the last person to run down the National Coal Board which under the noble Lord, Lord Robens of Woldingham, has been doing a very good job; but so much remains to be done within its own industry. For these reasons, while we would hesitate to divide the House on Second Reading a good deal more examination of the Bill will be necessary during its further stages.
7.15 p.m.
LORD STONHAM: My Lords, perhaps, with your Lordships' permission, I may reply briefly. The noble Earl, Lord Ferrers, spoke about discovering lions under the bed. If he discovered them I do not think he really produced them. He raised my hopes when he started off by highly commending the Bill, but then dashed them by expressing extreme displeasure and unhappiness throughout his speech. That was the very reverse of the mongrel at the dog show, who, of course, was not highly commended but highly delighted; and I should have preferred it that way.
I expected the noble Earl in his very interesting speech, to discuss the Bill, but almost the whole of his remarks were devoted to what I feel is the exploitation of a deep-seated difference of opinion in these matters which exists between the Government and the Opposition. The noble Earl asked: should nationalised

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industries drill for oil and gas? If so, should it be the National Coal Board? If so, why? He said he would like to see more British participation. How much more British could you have your participation than to have the National Coal Board participating, which has ancillary undertakings but which in the main exists to exploit Britain's one major indigenous mineral? It could hardly be more British than that.
With regard to the nation benefiting, in what more direct way can the nation as a whole, meaning the people of this country, benefit than if the exploitation of this discovery is in the hands, in large measure, of a national, publicly-owned undertaking? I put this forward with some diffidence, but it seemed to me, as I listened to the noble Earl, Lord Ferrers, to be more and more clear that his fundamental objection to this Bill and to the acquisition by the National Coal Board of a share in these two licences is that it will limit the possible area for private profit. If that is the main objection, it leaves me quite unmoved. In fact, I and the Government rejoice in the possibility that the British participation in this enterprise should have a greater percentage of public ownership through the National Coal Board than would have been the case if they had not been offered these two licences and if we did not have this Bill. And before the noble Lord, Lord Auckland, considers opposing the Bill to the extent of rejecting it, I hope, since I agree with him so much on many matters, that he will search his heart on this particular point.
LORD AUCKLAND: My Lords, may I assure the noble Lord, Lord Stonham, that I have no intention of opposing it; I was merely stating the reservations which I have regarding it. I would certainly not advise a Second Reading Division.
LORD STONHAM: I am very glad to hear that; it was a misunderstanding of what I heard the noble Lord say about opposing the Second Reading, but obviously that was not his intention. The noble Earl, Lord Ferrers, asked me why the Gas Council were not to be the people concerned. He must surely be aware that the Gas Council are already very much concerned in this field, and in fact—
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again I rejoice in this—the three fields in which the Gas Council are participating and have a share are so far likely to be the three most productive ones of all. I should hope that if these two also turn out extremely well the noble Earl will rejoice with me, because it is something for the British people.
EARL FERRERS: My Lords, may I interrupt the noble Lord for one moment and ask him to explain, if the Coal Board is going to do so well out of this, to whom it is going to sell its gas? Is it going to "milk" the Gas Council?
LORD STONHAM: The noble Earl must be aware that the Coal Board, for other than the uses for its industries to which he has referred, must offer it to the Gas Council.
EARL FERRERS: In other words, make the Gas Council help to pay for the business of the Coal Board.
LORD STONHAM: If the noble Earl is not aware he ought to be that in this matter, whether these wells are explored by private enterprise or by public money, there must be an agreement, which the Minister must approve, about a reasonable price. There is no question of exploitation, as the noble Earl ought to be aware, because his noble friend Lord Erroll of Hale made the original arrangement, and it is a very good arrangement. I think it is a good arrangement, even if it was made by a Conservative Minister. After all, one gets very few opportunities to praise the Opposition, and I think one should do so whenever possible.
EARL FERRERS: It was opposed by noble Lords opposite when they were in Opposition.
LORD STONHAM: Not completely, and certainly not in this House. Part of that arrangement is that the State gets a 12; per cent. royalty on the proceeds of all these wells or boreholes, whoever owns them, and after six years 50 per cent. of the enterprise reverts to the State anyway. So that basically, in the arrangement made originally by the noble Lord, Lord Erroll of Hale, when he was Minister, he, too, felt that although it was right in the first instance to have diversification of enterprise, public and private, everybody having a fair opportunity to

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apply for licences, in the end if this thing was going to do well the State should profit.
The noble Earl asked me why the Coal Board got this opportunity. The answer is, simply because it was offered to them by two commercial firms, doubtless because it suited them, just as it suited the Coal Board. I should have thought that a very happy amalgam of interests. Then he spoke about the Coal Board's diversification—and I congratulate him on his research, which I shall read again with the greatest of interest and I am sure approval; in fact, my approval was growing the more he went on.
But there is some inconsistency, because where he was talking about a firm named Sankey, which manufactured everything from the kitchen stove to "what-have-you", obviously that was good because it was enterprising. But I cannot understand why the noble Earl thinks that when the Coal Board diversifies it is not in the national interest. The noble Earl said he could not see why the Board should concern itself with gas, when its main job was to get coal. But I should have thought the connection was obvious: because so much coal is used for the production of gas, and all coal for the production of heat and energy. So the connection is a very direct one. With regard to the Gas Council, they will be very fully occupied in this matter, and I am quite certain that, although, as I understand it, the options were not offered to them they have no kind of objection to the Coal Board's taking part in this way.
The noble Lord, Lord Auckland asked me two questions; first, what would be
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the number of personnel employed. I am sorry to say I cannot give him that figure, not because it is not immediately available but because so far it is not possible to make an estimate; and in any case, as I said in my opening speech, the Coal Board itself cannot get down to the final negotiations until after this Bill is on the Statute Book. The noble Lord asked whether there had been consultations with other companies, such as B.P. Everybody had a chance to apply for a licence and to have apportionment of an area of exploration, and the two companies, Allied Chemical and Gulf Oil, were two of the successful applicants. They have decided that they would like to have the participation of the National Coal Board. So that the question of consulting B.P. or some other enterprise does not arise. All companies had the same chance; and, subject to their skill, efficiency and enterprise, I hope, that they will have the same good luck.
My Lords, this is, in total, one of the most exciting economic discoveries, I think, of our lifetime, at least in or around our own country; and this Bill will provide that a great industry, headed by a great public corporation, will increase its prosperity—or, shall we say, in view of the losses that were mentioned, get nearer to viability. And, despite what the noble Earl said, it is still a great industry and will be for many years to come. I hope that, despite your criticisms, and the misgivings that have been expressed, your Lordships will welcome this Bill and give it a Second Reading.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

  CONVENTION ON FEE-CHARGING EMPLOYMENT AGENCIES
  CONVENTION ON FEE-CHARGING EMPLOYMENT AGENCIES