Sitting of 9 November 1966

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

  INCOME TAX
  The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address, as follows:
  I have received your Address praying that on the ratification by the Swiss Federal Council of the Protocol set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Switzerland) Order 1966, a draft of which was laid before your House, an Order may be made in the form of that draft.
  I will comply with your request.

ORAL ANSWERS TO QUESTIONS
  SCOTLAND

    Unemployment
    Sir C. Osborneasked the Secretary of State for Scotland, in view of the increasing unemployment in Scotland, what particular steps he is taking to implement the Government's policy not to allow the return of heavy unemployment; when he anticipates his action will reverse the growing unemployment in Scotland; and if he will make a statement.
    The Secretary of State for Scotland (Mr. William Ross): Measures taken to this end include preferential treatment in the deferment of public investment announced in July and the exclusion of Scotland from the control of office building. All forms of private building are unrestricted, except in the Edinburgh area. Government advance factory building is continuing, with seven further advance factories for Scotland announced
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    last week. As regards credit, the Scottish banks have been asked to make allowance for different conditions in Scotland. The reversal of present trends will depend on our success in overcoming the national problems with which the Government's economic policy is designed to deal.
    Sir C. Osborne: Without the Secretary of State hiding behind Tory kilts, will he tell the House why he is satisfied that unemployment in Scotland should be three times what it is in England? How much longer does he think that this Government-organised unemployment will last?
    Mr. Ross: The hon. Gentleman is about as mixed up with his kilts as he is with his facts. Scottish unemployment is not three times higher than that in England. Indeed, after the recent changes it was shown that it had risen proportionately less in Scotland than in England over the past month.
    Mr. Buchan: Does my right hon. Friend not agree that there is a case for selective reflation in the regions, particularly in Scotland, and that the injection of Government investment, preferably the beginnings of Government-owned industry, would help to reverse this trend, which is serious in areas like Linwood?
    Mr. Ross: The Government are not unaware of the need for reflation and of the need to take any of the steps which my hon. Friend mentioned when the time comes. He will appreciate that the step announced last week by the President of the Board of Trade in respect of advance factories in development areas, with particular reference to Scotland, is an indication of our thoughts in this direction.
    Mr. G. Campbell: In what parts of the public investment in Scotland is Scotland specially exempted from the measures of 20th July other than in advance factory building?
    Mr. Ross: The cut in central and local authority investment was £55 milion over the whole country, against which the cut in Scotland was only £3·5 million.

    Forth Road Bridge (Motorway Sign)
    Mr. Dalyellasked the Secretary of State for Scotland what representations he has received on the subject of signs

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    on the Forth Road Bridge Motorway to advertise the Royal Burgh of South Queensferry.
    The Under-Secretary of State for Scotland (Dr. Dickson Mabon): There have been representations from West Lothian County Council, Queensferry Town Council and local business interests suggesting the erection at the Dolphington junction of a motorway type "services" sign. My right hon. Friend considers that an advertisement sign off the highway would be more appropriate and probably more effective.

    Teachers' Salaries
    Mr. Dalyellasked the Secretary of State for Scotland if he will make a statement on the simultaneous negotiation of teachers' salaries between Scotland and England.
    The Under-Secretary of State for Scotland (Mr. Bruce Millan): No, Sir. This issue does not arise immediately.
    Mr. Dalyell: Do I understand that, in any future negotiations, Scottish teachers will not be at a disadvantage compared to their colleagues in England?
    Mr. Millan: There is no reason why they should be at any disadvantage. They are at no disadvantage at the moment.

    A92 (Dundee-Stonehaven)
    Mr. Buchanan-Smithasked the Secretary of State for Scotland what representations he has had regarding his proposal to de-trunk route A92, Dundee to Stonehaven; and if he will make a statement.
    Dr. Mabon: My right hon. Friend has had objections from the county councils of Angus and Kincardine and town councils of Arbroath, Montrose and Monifieth. Their views will be fully considered before a decision is taken.
    Mr. Buchanan-Smith: Does the hon. Gentleman recognise that the two main Toads to the North-East, the A92 and the A94, serve quite different purposes? Before reaching any final decision about this, will he bear in mind the very good reasons for maintaining both those roads as trunk roads, as this would be in the interests of the best development of the North-East?
    Dr. Mabon: I am sure that my right hon. Friend will want to keep in mind all the factors drawn to his attention, including, of course, the views of both the North-East Consultative Group and of the North-East of Scotland Development Committee.
    Mr. Woodburn: Would my hon. Friend consider arranging for better directions to be given on how to reach these trunk roads? After leaving the north end of the Forth Bridge, there is no indication of how one gets to the recently-built Tay Bridge.

    Hill Farmers
    Mr. Buchanan-Smithasked the Secretary of State for Scotland if he is aware of the losses incurred by producers of store stock; and what action he proposes to ensure a fair return for those in this sector of the agricultural industry.
    Mr. Alasdair Mackenzieasked the Secretary of State for Scotland, in view of the drop in prices of livestock in the Highlands this autumn and the consequent fall in incomes, he will give a direction to the Department of Agriculture to expedite the payment of all grants and subsidies due for 1966.
    Mr. Bakerasked the Secretary of State for Scotland what plans he has in mind for the necessary assistance to hill farmers in view of the poor prices received for lambs and weaned calves at the autumn sales.
    Mr. Monroasked the Secretary of State for Scotland what steps he intends to take in the immediate future to recompense hill and upland farmers for the losses suffered in the autumn store sales.
    Mr. Russell Johnstonasked the Secretary of State for Scotland what measures he proposes to alleviate the position of hill farming in Scotland.
    Mr. Ross: I am aware that hill farmers have had a difficult year. My Department is undertaking in conjunction with the N.F.U. of Scotland, and at their request, a special survey in order to provide a full and accurate picture of the position. The results of this survey will be taken into account in our review of the assistance to hill farmers at the 1967 Annual Review.
    Mr. Buchanan-Smith: Does the right hon. Gentleman think that such expressions of sympathy make the lot of these farmers any easier? Does he not realise that what is needed is action? Will he not do something, such as a special Price Review, to help these people?
    Mr. Ross: The hon. Member should appreciate that we debated this subject last Thursday.
    Mr. Buchanan-Smith: There was no answer on that occasion.
    Mr. Ross: I went into this matter pretty fully then in relation to the limitations which exist about making special payments.
    Mr. Mackenzie: In view of the position in the upland areas, does not the Secretary of State agree that it is very important indeed that all subsidies and deficiency payments should be paid immediately to relieve the people in those areas?
    Mr. Ross: We are governed by Statute. As the hon. Member knows, in certain of the payments we cannot act until we get the returns. In respect of hill sheep, it will, I think, be some time in December before the returns are available. I think that we are pretty well on the way to getting the payments made for the hill cow subsidy. We shall speed the payments which can be made as far as we can within our statutory obligations.
    Mr. Baker: Does not the Secretary of State agree that basically the trouble here is lack of confidence among the primary producers—the hill farmers? Could he not give an assurance here and now that the cattle producers, calf producers and sheep producers will have an increase in their subsidy at the Price Review, if not before?
    Mr. Ross: I think that the best thing to do is to wait and see what are the facts in relation to this matter before we make up our minds on what will be the hill sheep subsidy. That decision will be taken at the Price Review.
    Mr. Monro: Does the Minister remember the hon. Member for Leith (Mr. Hoy) saying in May, 1965, about the hill sheep subsidies, that the Government would take action if a disaster occurred? Why have they not taken action?
    Mr. Ross: The hon. Member should appreciate what we did. We gave a very considerable advance in respect of the hill sheep subsidy, very much beyond anything that had been given before. As against an average of 9s. 6d. over the previous four years, we advanced the figure to 17s., and it has been up to that figure since then.
    Mr. Johnston: Is the Secretary of State aware that comparisons may be odious and do not necessarily help in the present situation? Would he not reconsider the possibility that some retrospective payment should be made, for example, of the hill sheep subsidy?
    Mr. Ross: The hon. Member should appreciate that the payment of this subsidy is retrospective anyway.
    Mr. Emrys Hughes: Is my right hon. Friend aware that many hill farmers had difficult times last year because of the rather heavy increases in rents charged by landlords? Is he aware that recently sheep farms have sold at enormous prices and that farmers have had to borrow money from the banks? One of the biggest sales was by a very prominent Member of the Front Bench opposite.
    Mr. Ross: There is certainly evidence that there is no lack of long-term confidence. What I am most concerned about is the effect of this very bad year on the hill lands and the farmers there.
    Mr. Stodart: Does the right hon. Gentleman recall that he himself expressed anxiety about this matter in the debate last Thursday? In view of the urgency, which I am sure he appreciates, will he not take up the suggestion made by my hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith) of a special Review? In order to do this, could he not perhaps consider the low returns, as well as possibly the higher costs, such as those caused by a 9 per cent. Bank Rate?
    Mr. Ross: My answer is the same as it was last Thursday—"No, Sir".

    School-Leaving Age
    Mr. Edward M. Taylorasked the Secretary of State for Scotland by what year he estimates that a supply of teachers, schoolbuildings and other educational facilities, adequate to provide

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    for the raising of the school-leaving age, will be available in Scotland.
    Mr. Millan: The Government intend to proceed with the raising of the leaving age in session 1970–71. I do not underestimate the difficulties, particularly over the supply of teachers, but the Government are making every effort to ensure that the provisions made by education authorities are adequate.
    Mr. Taylor: Does not the Minister agree that all the indications are that these facilities will not be available? Does the Minister agree that it would be criminal folly to go ahead with raising the school-leaving age if we are not able to make provision for those required to teach the additional pupils?
    Mr. Millan: There will be no difficulty at all with the school-building programme, because that programme has been recently very substantially increased. As I have said, there are difficulties about the supply of teachers, but the Government are at present considering this matter.
    Mr. Buchan: Does not my hon. Friend agree that the time has come to resume the open-ended discussions begun with the teachers' representatives a year ago, which might lead the way to achieving the kind of relationship in which the immediate problems facing the Teaching Council could be resolved?
    Mr. Millan: No, Sir. I do not think that it would be appropriate for the Minister to enter into discussion with the teachers' organisations. At the moment the Secretary of State is awaiting recommendations and advice from the General Teaching Council.
    Mr. MacArthur: The Secretary of State merely sits back and waits and does nothing, or appears to do nothing, about a problem which is growing very urgent indeed. Will he not seriously re-examine the question of the open-ended discussions, about which he held such high hopes in May, and see that they are resumed in order to do something to meet this ever-growing, ever-present problem?
    Mr. Millan: I remind the hon. Gentleman that the decision to raise the school-leaving age was taken by the last Conservative Administration in 1964, and that they then did absolutely nothing about
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    increasing the supply of teachers. Quite apart from the representations and advice which we shall receive from the General Teaching Council, only a week ago I started another publicity campaign for the special recruitment scheme. There has been an improvement in the incentives to married women to come back to teaching, and a number of other developments are going on at the moment.

    Rates
    Mr. Edward M. Taylorasked the Secretary of State for Scotland by what percentage the amount of revenue raised in rates by Scottish local authorities in respect of the year 1966–67 will exceed the amount raised in respect of the year 1965–66.
    Mr. Clark Hutchisonasked the Secretary of State for Scotland what has been the average increase in rates in Scotland during the current year; and which were the highest and lowest.
    Dr. Mabon: On present information, I estimate that the amount of revenue raised in rates by Scottish local authorities has risen in the current year by about 16·5 per cent. The range is from an increase of 57 per cent. to a reduction of 15·6 per cent.
    Mr. Taylor: Is not this a staggering figure in view of the promise by the Under-Secretary of State that he was exhorting local authorities to be prudent in their spending this year? Why have these representations failed, and precisely what does he intend to do about it?
    Dr. Mabon: I do not agree that the representations have failed, although I hope to get the hon. Member's support for one point here. The figure in 1961 was 19 per cent., and there was not then, as there is this year, an increase in teachers' salaries, which accounts this year—let us be fair—to 3 per cent. In the Government's opinion, another 9 per cent. or so can be regarded as due to the expansion and improvement of local services. But I agree with the hon. Member and other critics of local authorities that there seems to us to be a tendency in a revaluation year—and we think that this might amount to 4 or 5 per cent. this time—to put on additional projects and improvements. I

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    have appealed to local authorities not to indulge in this practice.
    Mr. Hutchison: Does the Minister realise that this rate burden weighs heavily on many people who are not at all well off, and that this increase in rates and prices is quite contrary to what was promised at the General Election? If the hon. Member cannot deal with it, why does he not resign?
    Dr. Mabon: I did not notice any antagonism on the other side of the House to the teachers' salary awards. I cannot see how people can quarrel with the 9 per cent. which is due to the expansion of services, and we have certainly heard nothing to that end. It seems a perfectly fair point that local authorities must have these forward planning programmes. There is nothing here which the Government have accepted which is not reasonable, except for the comments which I made towards the end of that reply. The Rating (Interim Relief) Act, which was passed in the last Parliament, has now been very much welcomed by lower-paid workers and those with small fixed incomes.
    Mr. Baxter: As my hon. Friend's appeal to the local authorities has not been very effective, what further action is he proposing to take about it?
    Dr. Mabon: We are in a much stronger position in relation to future matters because of the Local Government (Scotland) Bill, which will be discussed later today, and, under the rate support grant machinery, which we will also discuss later, we are in a position to influence these matters much more effectively than hon. Gentlemen opposite ever did.

    Highland Development Board
    Mr. Hamlingasked the Secretary of State for Scotland what plans have been made by the Highland Development Board for educational projects in Scotland.
    The Minister of State, Scottish Office (Mr. George Willis): The planning of educational projects in the Highlands and Islands is not primarily a responsibility of the Board, but my right hon. Friend is, of course, very willing to consider any views and recommendations the Board may put forward.
    Mr. Hamling: Would my hon. Friend direct his attention to the Scottish Plan, and particularly to the missing paragraphs following the section on education, with a view to filling in this missing space by writing in projects for a much-expanded educational effort for the Scottish Highlands?
    Hon. Members: Answer.

    Escaped Prisoners (Information)
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland why he will not change the rule which prevents him and his Department from issuing full descriptions of an escaped prisoner or other dangerous inmates from similar institutions, in order to enable innocent citizens in the locality to take due precautions.
    Mr. Ross: I am sending the hon. Gentleman a copy of my letter of 25th October to the hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) about the information which my Department issues on escaped prisoners. Additional information, including a description of an escaped prisoner, may be issued by the police if they consider it necessary to assist his recovery.
    Mr. Wolrige-Gordon: I am glad to hear that that is possible, because is the right hon. Gentleman aware that in the recent past prisoners or mental patients have escaped from institutions and the police have not been allowed to issue their descriptions or even give the public any record or note of their backgrounds? Does not the right hon. Gentleman consider that all the information possible should be made available to the communities concerned for their own safety in matters of this kind?
    Mr. Ross: The important point is that it should be possible to give the information that is necessary both in the public interest and in the interests of the police in recapturing the person concerned.
    Mr. Wylie: Will the right hon. Gentleman accept that this change of practice on the part of the Scottish Information Office has been widely welcomed by the Press in England and in Scotland and by the people of Scotland as a whole? Will he further accept that my only criticism is that this should have been done a long time ago?
    Mr. Ross: Things get done under this Government, anyway. I thank the hon. and learned Gentleman for his interest and help in this matter.

    North-East Scotland (Selective Employment Tax)
    Mr. Bakerasked the Secretary of State for Scotland if he is yet in a position to assess the effects of the Selective Employment Tax and the credit squeeze on all aspects of industry in the North-East of Scotland; and if he will make a statement.
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland what has been the effect of the Selective Employment Tax on the Highlands and on the North-East of Scotland.
    Mr. Ross: It is too early yet to assess in any detail the effect of the July measures and the Selective Employment Tax on the Scottish economy as a whole or on any particular part of Scotland. The Government are, however, keeping the position under close review.
    Mr. Baker: Would the right hon. Gentleman ally the North-East of Scotland with the reported statement of his noble Friend the Joint Under-Secretary of State for Scotland; that, if necessary, action will be taken to safeguard the Highlands against the effects of S.E.T.? Does this indicate a change in Government policy?
    Mr. Ross: No change in Government policy was indicated in that statement. We have always said that we would keep a close watch on this matter. The hon. Gentleman will appreciate, of course, that the latest figures for Aberdeen, which many people thought would be very badly and immediately hit by S.E.T., show that the unemployment situation is better now than at this time last year.
    Mr. Wolrige-Gordon: May I assist the right hon. Gentleman in his failure to make estimates by telling him that the effects of S.E.T. have been disastrous on these areas because the service industries represent the main proportion of the provision of employment in these areas?
    Mr. Ross: Let us measure the extent of the disaster as we know it. The unemployment
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    percentage for the North-East and Aberdeen last year was 2·6. This year it is 2·8 per cent. I do not think that those figures justify the remarks of the hon. Gentleman.
    Mr. Dewar: While accepting what my right hon. Friend says about estimating the effects, would he not accept that what can easily be estimated is the fact that this tax bears more heavily on the North-East of Scotland than on any other part of the rest of the country? Will he therefore give an assurance that he will watch this matter very carefully indeed?
    Mr. Ross: I accept my hon. Friend's remarks. The assurance for which he asks has already been given.
    Mr. G. Campbell: Does the right hon. Gentleman still think that S.E.T. is good for Scotland?
    Mr. Ross: In that S.E.T. as a whole was related to the nation and gave an advantage to manufacturing industry, and in that S.E.T. will help us in Scotland to get more manufacturing industry, the answer is "Yes, Sir."
    Mr. Grimond: Is not the Secretary of State's original Answer a prime example of Government inaction? Does the right hon. Gentleman really believe that S.E.T. will bring industry to the Highlands and the North-East of Scotland? If so, will he examine the facts, one of them being that unemployment in these areas has been consistently—[Interruption.]
    Mr. Speaker: Order. We must have questions at Question Time, even from the leader of a party.
    Mr. Grimond: Is the right hon. Gentleman aware that unemployment in these areas has been consistently higher than the Government's targets for these areas, and is this not a strong case for varying the credit squeeze and removing it from these areas?
    Mr. Ross: I can think of nothing better than to tell the right hon. Gentleman that for the first time we have an instrument in the Highlands directly and specifically designed to bring industry in, and that will receive the full support of the Government.

    A709 and A708
    Mr. Monroasked the Secretary of State for Scotland why the A709 Lockerbie-Langholm road and the A708 Moffat-Selkirk road will not be treated in the future as principal roads for grant purposes.
    Dr. Mabon: Preliminary proposals have been made to Scottish highway authorities for the composition of the future principal road system. No firm decisions will be taken until my right hon. Friend has the views of the highway authorities on these preliminary proposals.
    Mr. Monro: Is the hon. Gentleman not aware that the Selkirk and Dumfries County Councils strongly opposed this? Is he not further aware that, at a time when we are trying to encourage tourism and industry to come to these areas, it is ridiculous to be down-grading these two main roads?
    Dr. Mabon: I would not like to get involved at Question Time in discussing the roads affected in Dumfriesshire, including the two roads mentioned in the hon. Gentleman's Question. I prefer to wait until such time as we are able to consider the county councils' views.

    Annual Price Reviews
    Mr. David Steelasked the Secretary of State for Scotland what steps he takes to ensure that the particular circumstances of Scottish farmers are adequately considered when fixing guaranteed prices at the Annual Price Review.
    Mr. Willis: Economic and statistical data about the current position of Scottish farming are compiled by the Department of Agriculture and Fisheries for Scotland for each Annual Price Review and Scottish farmers are represented at the Review by senior office bearers of the National Farmers' Union of Scotland. My right hon. Friend maintains close touch during the course of the Review and senior officers of the Department participate throughout.
    Mr. Steel: Is it not a fact that no Scottish Minister takes part, on behalf of the Government, in these discussions?
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    If so, is adequate care taken to assess the particular difficulties of Scottish farmers; and is this not a case for having a separate Price Review?
    Mr. Willis: The hon. Gentleman is misinformed. My right hon. Friend the Secretary of State for Scotland sits in during the Review discussions—[Interruption.]—and participates.
    Mr. Rankin: Does my right hon. Friend the Secretary of State give consideration to the position of consumers when fixing guaranteed prices for farmers?
    Mr. Willis: My right hon. Friend the Minister of Agriculture, Fisheries and Food is, of course, always giving evidence of his concern for consumers.
    Mr. Stodart: Will the Minister of State regard as a matter of importance relating the efficiency factor to Scotland, because obviously in a livestock-producing country the efficiency factor bears more hardly?
    Mr. Willis: Certainly. The material that is compiled on the profitability of different farms in Scotland comes from independent surveys carried out by the agricultural colleges. These figures are discussed and agreed in advance of the Review by all concerned, including the economists of the Department, the farmers' representatives and others.

    Western Borders (Report)
    Mr. David Steelasked the Secretary of State for Scotland what will be the cost of preparing the report on the development in the Western Borders to be submitted by the planning consultant.
    Mr. Ross: About £55,000.
    Mr. Steel: Does the Secretary of State agree that this planning survey will not be carried out on the same scale as the Falkirk-Grangemouth survey, in that it does not involve the Department of Social Science? In view of the concern, rightly or wrongly, now being expressed in the Western Borders, might it not be wise to have a more widespread survey?
    Mr. Ross: The hon. Gentleman should appreciate that this is not the only thing being done in this area. We now have the interim report and the full report

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    will, we hope, be available by September 1967. We have been anxious to get as much information as possible on this issue. We desired to get the interim report stage over so that we can study the implications of the full report in due course. However, I accept that we will always get objections.

    Glenfeshie Forest (Road)
    Mr. James Davidsonasked the Secretary of State for Scotland what are the Government's proposals in regard to construction of the proposed road across Glenfeshie Forest to Link Deeside and Speyside; and if he will make a statement.
    Dr. Mabon: Our view is that this project is worthy of further examination along with several other proposals for new roads in the Highlands and Islands. The Highlands and Islands Development Board is now doing this, and my right hon. Friend looks forward to having its views.
    Mr. Davidson: Is the hon. Gentleman aware that this road would be a tremendous asset to the tourist industry in particular, and also to the forestry industry, which are the only two industries in North-East Scotland which are now capable of mopping up the shake-out caused by the Selective Employment Tax and the other redundancies due to the credit squeeze in the area?
    Dr. Mabon: I am aware of the road's importance, and I met the county councils about it in, I think, 1965. The matter has been discussed for some time, and I understand that on 18th October both the county councils involved met the Highlands and Islands Development Board to discuss not only the road and its importance but its priority in relation to other new roads.

    Forestry Land (North-East Scotland)
    Mr. James Davidsonasked the Secretary of State for Scotland if he will initiate a rural development survey, on the lines of the survey now being carried out in Sutherlandshire, to establish the location and extent of land suitable for forestry development in North-East Scotland.
    Mr. Willis: A survey of part of Upper Aberdeenshire and Upper Banffshire, on similar lines to the survey which is being made in Sutherlandshire, has already begun.
    Mr. Davidson: Is the Minister of State aware that this survey is meeting with an extreme lack of co-operation on the part of many of the landowners concerned; that there are only 18,000 or 20,000 acres of suitable planting land left in reserve, and that even the reduced rate of planting which the Eastern Conservancy is undertaking will give only about four or five years of planting reserve, when those concerned like to bank on six years or more?
    Mr. Willis: I am not aware of hostility on the part of owners. My information is that they have agreed to this survey being undertaken. We are aware of the shortage in the area, and that is why we are taking these steps.
    Mr. Maclennan: Is my hon. Friend aware that the survey being carried out in Sutherlandshire is giving rise to some concern amongst local agriculturists that it is being carried out with a view to determining what land is suitable for afforestation?
    Mr. Willis: Sutherlandshire is rather a different question; the main question is about North-East Scotland.

    Agricultural Securities Corporation (Loans)
    Mr. Stodartasked the Secretary of State for Scotland why the Scottish Agricultural Securities Corporation is being restricted in its ability to make loans to farmers.
    Mr. Willis: I understand that the Corporation is now in a position to continue to approve applications for loans which it considers acceptable.
    Mr. Stodart: Is the Minister of State aware that that reply is precisely contrary to what the secretary of the organisation has said? Is not this a clear example of his right hon. Friend's not sheltering Scotland's agriculture in any way from economic difficulties and an absolutely appalling example of his complete indifference to agriculture?
    Mr. Willis: Special arrangements have now been made to continue to approve

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    applications for loans, as I said in my original Answer. As to safeguarding Scotland, I would remind the hon. Gentleman that the Scottish Agricultural Securities Corporation was running short of the ability to be able to borrow when he was a Minister.

    Royal Infirmary, Edinburgh (Deaths)
    Mr. Stodartasked the Secretary of State for Scotland why he made no announcement about the deaths of the six patients at the Royal Infirmary, Edinburgh, until after a report had appeared in a Scottish newspaper.
    Mr. Ross: I did not consider it appropriate to make any announcement about this occurrence while investigations were being conducted and the question of a fatal accident inquiry was being considered.
    Mr. Stodart: Does the right hon. Gentleman realise that at the time there was newspaper speculation and it was reported by the newspapers that the fatalities were due to post-operative treatment? Is it not the case that the Royal Infirmary was extremely vexed about this slur on its reputation and wanted to make a statement denying it, but was forbidden to do so by his Department?
    Mr. Ross: I am not commenting on that last remark. If the hon. Gentleman wants a comment on it he will be far better to put down a Question. I deplore, as I am quite sure he does, premature leaks of information that cause widespread anxiety: the statement had to be made in order to reassure patients. The hon. Member will appreciate the difficulty in respect of those who had been through a very, very trying time and to whom further agony was being caused. I hope that the hon. Gentleman, like myself, deplores these premature leaks of information.

    Local Authorities (Rents and Equalisation Grants)
    Mr. Galbraithasked the Secretary of State for Scotland what arrangements he is making to compensate local authorities who have acceded to his request not to raise rents, thereby making themselves ineligible for grant.
    Mr. Youngerasked the Secretary of State for Scotland if he will take action to ensure that those local authorities who hold back rent increases as requested by the Government do not thereby lose Exchequer equalisation grant which they would otherwise have had.
    Mr. Ross: I hope to announce a decision soon.
    Mr. Galbraith: Does not this place local authorities in an intolerable position in that if they agree to the right hon. Gentleman's suggestion that rents should be kept down they forfeit the right to have the grant? Will he not come clean and tell the local authorities exactly where they stand? Perhaps he can tell us what was the view of the meeting that I understand he had with local authorities at the end of last month to discuss this very subject? This matter has been going on for a long time.
    Mr. Ross: This is a new line for the hon. Gentleman, because the formula that has got us into this trouble was introduced by his Government. I have discussed this subject with local authorities and have said that I will be reconsidering it towards the end of this month and will let them know my decision then. I can go no further than that here.
    Mr. Younger: Is not the Secretary of State for Scotland aware that a lot of local authorities are extremely disturbed about this situation and that it is not possible for them to plan ahead until they know the answer? Will he please bring forward his decision and let the local authorities know where they stand?
    Mr. Ross: The decision must be related to the facts. The hon. Gentleman must appreciate that there are 233 housing authorities in Scotland. About 59 of them have written to me—that is, much less than one-third of them. They are not all affected in the same way, because it will depend entirely on the period. In respect of the amount involved, the hon. Gentleman will find that for some local authorities the sums are very minimal, indeed.
    Mr. G. Campbell: In coming to his decision, will the Secretary of State ensure that no local authority loses any part of the grant because it has acceded to the Government's request on rents?
    Mr. Ross: I cannot give that decision today.

    Emigration and Employment
    Earl of Dalkeithasked the Secretary of State for Scotland what is his latest estimate of the number of men and women of working age, who emigrated from Scotland over the past two years; how many persons he estimates to be out of work at the present time; and how far these figures conform with the estimates in that part of the National Plan which applies to Scotland.
    Mr. Willis: The latest available estimates are that the net loss by emigration of men and women of working age was 59,000 in the two years to June, 1965. There were 67,300 persons out of work on 10th October, 1966. These figures cannot be directly related to the National Plan because it covered the six-year period to 1970 and year by year figures were not given.
    Earl of Dalkeith: Does not the Minister of State realise that these figures make a complete mockery of all the Labour Party's promises during the last election? Can he say what emergency action he will take in order to try to alleviate the hardship that is bound to arise if we have even an average hard winter following on top of the Government's economic policies?
    Mr. Willis: I do not agree that it makes a mockery of Labour Party policies. The Government have already taken a number of measures to alleviate the position in Scotland, and the results of them were shown in the figure I quoted—67,300 persons out of work on 10th October, 1966. That, of course, was lower than for the last three years of the Tory Government.
    Mr. Bruce-Gardyneasked the Secretary of State for Scotland whether he has now completed his study of the Scottish Council (Development and Industry) Report on emigration; and if he will make a statement.
    Mr. Ross: The report by the Scottish Council (Development and Industry) was far from exhaustive; but the conclusions on the need to reduce net emigration from
    1300
    Scotland are in accord with the Government's policy.
    Mr. Bruce-Gardyne: What is the right hon. Gentleman doing to bring this famous Government policy into effect? Has he noticed that the Scottish Council has pointed out that since Labour has been in power a new trend of net decline in population in Scotland has set in? Has he also noticed that 50 per cent. of the emigrants are now going abroad? Is not this a fair commentary on his Government policies?
    Mr. Ross: The trend may be there, but the hon. Gentleman should not mistake when it started. When the Central Scotland Plan was announced there was a figure which caused his Government concern of 25,000 a year. When we became the Government, we discovered the figure for that period was not 25,000, but over 40,000.

    Teachers
    Earlof Dalkeithasked the Secretary of State for Scotland what is the present net annual increase in the Scottish schoolteacher force; and, on this basis, what he estimates to be the average size of classes after raising the school-leaving age to 16 years as compared with the present time.
    Mr. Millan: Between 1964–65 and 1965–66, the latest session for which figures are at present available, there was a net increase of 444 in the number of certificated teachers in public and grant-aided schools. A significant expansion of the teaching force is in prospect with the increasing number of teachers entering training, but it is impossible at this stage to give an estimate of the average size of classes when the school-leaving age is raised in 1970–71.
    Earl of Dalkeith: Will the hon. Gentleman give an assurance that, even if it means having temporarily larger size classes, the Government will not abandon the principle of raising the school leaving age?
    Mr. Millan: We have no intention of abandoning the principle of raising the school-leaving age.

    Electricity Supplies (Connection Charges)
    Mr. Alasdair Mackenzieasked the Secretary of State for Scotland, in view of the number of potential consumers of electricity in Ross and Cromarty who are still unsupplied because of the substantial sums asked by the North of Scotland Hydro-Electric Board for connections, if he will take action, by legislation or otherwise, to help those people to get a supply.
    Dr. Dickson Mabon: I understand from the North of Scotland Hydro-Electric Board that, except for a small number of isolated areas, Ross and Cromarty is already connected but if the hon. Member has any particular cases in mind the Board will be glad to investigate.
    The rate of connection charges is a matter for the Board, but any consumer can make representations to the Electricity Consultative Council about these charges. I am not contemplating action which would reduce their general level.
    Mr. Mackenzie: Would the Under-Secretary agree that while most of Ross and Cromarty is already connected up that is no consolation to those who still have to go without? Will he do something to speed it up?
    Dr. Mabon: I most certainly agree with that. I understand that one of the areas concerned has been visited and that a report by the Board is available. I am willing to write to the hon. Gentleman about it.

    Educational Needs
    Mr. Galbraithasked the Secretary of State for Scotland what account he takes of the views of local authorities in planning to meet future educational needs.
    Mr. Millan: Responsibility for planning to meet the future educational needs of different areas lies primarily with the education authorities concerned and my right hon. Friend considers their individual proposals very carefully in fulfilling his own statutory responsibilities.
    Mr. Galbraith: If that is so, can the hon. Gentleman explain why, when
    1302
    Renfrew County proposed a partial two-tier system for the county, because of the conditions in the county and because it was in the interests of education there, the Secretary of State refused to give his permission? If he is going to brush aside the wishes of local authorities and local people in this way, why should they pay any of the cost of education at all?
    Mr. Millan: There is no question of brushing aside the wishes of local education authorities. As I have said, the Secretary of State also has certain statutory responsibilities. He has asked the Renfrewshire authority to look again at its proposals, because he does not think they provide the best system of comprehensive education there. I am very glad to say that the authority is looking again at its proposals and is to supply us with amended proposals in due course.
    Mr. Maclennan: Will my hon. Friend bear in mind, when he is considering the proposals from local authorities for the reorganisation of education on comprehensive lines, the necessity to take into account considerations of future industrial and other development in the area as well as purely educational needs?
    Mr. Millan: Certainly, and we have asked the Highlands and Islands Development Board to give us a report about the Highland area specifically from that point of view, as well as from the educational point of view.
    Mr. MacArthur: Why is the Secretary of State insisting on a straight-through comprehensive system for Renfrewshire? Is he not usurping the rights of the education authority to determine the shape of its own local education and thus flying right in the face of the consultative terms of Circular 600?
    Mr. Millan: No; my right hon. Friend the Secretary of State is not insisting on an all-through comprehensive system for Renfrewshire. In fact, in a part of the county where the two-tier system has been proposed it has already been agreed, but there are other parts of the county where an all-through comprehensive system would be, in the Secretary of State's view, a much more preferable system, and that is what is now being considered.

    Doctors (Pay)
    Mr. MacArthurasked the Secretary of State for Scotland why the increase in doctors' salaries effective from 1st April, 1966, had not been paid by 20th July, almost four months later.
    Mr. Millan: The report of the review body set out only the broad principles of the award and it was necessary for a joint working party of representatives of the professions and the health departments to work out its detailed application to hospital salaries. The award could not be implemented before the working party had completed its task, which was on 27th July.
    Mr. MacArthur: Is the hon. Gentleman aware that this upset is in direct breach of the undertaking given by the Prime Minister to the House on 4th May? Is he further aware that one of the anomalies created by the statement of 20th July was that the doctors failed to receive their increase, whereas the dentists received theirs, while both stemmed from the same recommendation? Is he aware further that this administrative delay has caused widespread concern amongst and much financial distress to doctors?
    Mr. Millan: I do not accept what the hon. Gentleman said in the first part of his supplementary question. In the case of the dentists, the discussions with the profession were rather less protracted, but in the case of the doctors I remind the hon. Gentleman that the profession itself accepted the Review Body's recommendations only on 14th June, so that there was a considerable delay there from the Prime Minister's announcement on 4th May. I can assure the hon. Gentleman that the particular negotiations on the working party I have referred to were carried out with all speed on the Departments' part.

    Highlands and Islands Development Board (Expenditure)
    Mr. MacArthurasked the Secretary of State for Scotland what is the estimated expenditure this financial year by the Highlands and Islands Development Board on projects in the Highland counties.
    Mr. Willis: The estimates for grant-in-aid to the Board in this financial year include £320,000 for grants and loans to industry and other projects. The whole of this provision is likely to be used for grants and loans, and my right hon. Friend may have to seek a supplementary provision.
    Mr. MacArthur: Is the Minister of State aware that the cost of the Selective Employment Tax in these same Highland counties will be between £2 million and £3 million in a full year? Is he aware further that this is nearly 10 times as much as the aid, welcome as it is, being provided by the Board? Will he look again seriously at the impact of this monstrous tax on the Highlands?
    Mr. Willis: That is the hon. Gentleman's estimate. There are a number of factors here. The hon. Gentleman asked about the Highlands and Islands Development Board. He has the answer.
    Mr. Russell Johnston: Is the Minister of State aware that it is not the hon. Gentleman's estimate but one provided by the Government themselves, who said that £2 million a year would be removed from the Highlands by the Selective Employment Tax?
    Hon. Members: Answer!
    Mr. Willis: I answered this question many months ago in the Scottish Grand Committee. There are a large number of factors involved in calculations of this kind, which make it exceedingly difficult.

    Procurators Fiscal
    Mr. Wylieasked the Secretary of State for Scotland what proposals he has for increasing the number of full-time procurators fiscal, in view of the existing delay in the trial of criminal cases.
    Mr. Willis: The Lord Advocate is responsible for the staffing of the procurator fiscal service. Increases depend on the volume of work in a particular district and new posts are created whenever necessary. During this year two districts have received an additional depute procurator fiscal.
    Mr. Wylie: Is the Minister of State aware that the delay in the prosecution of criminal causes in Scotland is causing a great deal of alarm, that it has drawn

    1305
    comments from the High Court bench, and that at the moment in Dundee, for example, it appears to take over a year for an indictable case to come to trial? Will he at least assure us that he is alive to the serious danger of the system of public prosecution breaking down unless something is done about the staffing of the procurator fiscal service?
    Mr. Willis: I know that there are delays in the courts, but they are not all attributable to the procurator fiscal service. I have given the facts about this. If there is shown to be a need for additional procurators fiscal, my right hon. and learned Friend the Lord Advocate will give authority to recruit more. As the hon. and learned Gentleman knows, there is a general shortage of legal civil servants.
    Mr. Hector Hughes: Will the Scottish Minister who is dealing with the problem of procurators fiscal also extend their powers so as to make them more commensurate with the needs of today?
    Mr. Willis: I am not quite sure what that means. In any case, it is a different question.

  HOUSE OF COMMONS (ANNUNCIATORS)
  Mr. Hamlingasked the Lord President of the Council what steps are being taken to provide an improved annunciator system for the use of the House of Commons.
  The Lord President of the Council and Leader of the House of Commons (Mr. Richard Crossman): A closed-circuit television system of annunciators is being installed in the new Star Court building as an experiment. When Members have had an opportunity to comment on this system, a final decision will be taken for a uniform system throughout the building.
  Mr. Hamling: Will my right hon. Friend give the Members of the House an opportunity of seeing an improved annunciator system? Does he agree that a decision on these matters ought to be a decision by the House?
  Mr. Crossman: Certainly. I have already said that this will be put in as an experiment in the Star Court building
  1306
  and no decision will be taken until there has been plenty of time to see how it works.
  Sir D. Glover: If it is in the Star Court building, presumably only certain Members will be able to see it without great inconvenience. Can the right hon. Gentleman therefore put it somewhere where the great body of Members of the House can see how it is working?
  Mr. Crossman: This was done by the Accommodation Sub-Committee. Very wisely it said that it would take the opportunity of the new Star Court building for an experiment on a limited scale. When we have tested it there, we can decide whether to have it made universal. This seems to me to be a sensible thing to do.

  HOUSE OF COMMONS (TELEPHONES)
  Mr. Doigasked the Lord President of the Council if he will take steps to provide each Member on the upper committee corridor with a telephone, instead of the present arrangement whereby one is shared by seven Members.
  Mr. Crossman: It would not be possible to provide a telephone for each desk in rooms in the upper committee corridor with the existing switchboard and equipment, but it would be possible to provide one or two extra telephones if requested. The whole telephone system of the Palace of Westminster is at the present time under investigation, both by a working party of the Post Office and the House of Commons (Services) Committee.
  Mr. Doig: Is my right hon. Friend aware that hon. Members spend a considerable amount of time in having to answer the telephone for calls which are not for them at all? If, therefore, he can increase the number of telephones, will he do so?
  Mr. Crossman: I am aware that the evidence provided by my hon. Friend proves the need for a further investigation of the system and we will look into it.
  Sir H. Harrison: Is the right hon. Gentleman aware that the same conditions apply to the North and South

  1307
  Rooms, where hon. Members work in Westminster Hall? If he does this for one section of the House, will he be fair and do it all round?
  Mr. Crossman: We are all aware of the unsatisfactory nature of the present situation. That is why we are looking into the design of a new system.

  HOUSE OF COMMONS CATERING
  Mr. Rankinasked the Lord President of the Council if he is aware that the sales of light refreshments such as tea, coffee, cakes and other sundries in the Refreshment Department have fallen seriously; and if he will recommend to the Services Committee that the prices should be reduced, in order to increase sales again and so help to reduce existing losses.
  Mrs. Braddock: I have been asked to reply.
  Sales of these items fluctuate at different times of the year and a reduction of prices would not appear to be justified.
  Mr. Rankin: May I thank my hon. Friend for that helpful Answer? Will she assure us that she will do everything possible to get an increasing number of hon. Members and others who are able to use the catering services in the House to do so?
  Mrs. Braddock: Proposals for increasing sales and profits will be examined in the review which is being conducted of the Department's finances.
  Lieut.-Commander Maydonasked the Lord President of the Council if he will make a statement on the present staffing position of the Catering Department of the House of Commons.
  Mrs. Braddock: I have been asked to reply.
  The full establishment of all grades in the Refreshment Department is 205. Owing to difficulties in recruitment, the staff employed by the Department at the moment numbers 183, that is 22 below establishment. Casual labour is engaged at hourly rates to bring the number of staff up to full strength whenever possible.
  Lieut-Commander Maydon: Whilst thanking my hon. Friend for that reply, may I take this opportunity on my own behalf to thank Mr. Roberts, who has just retired, for the great service he has done for hon. Members of this House? I am sure that many other right hon. and hon. Members on both sides of the House will echo my thanks.
  Hon. Members: Hear, hear.
  Mr. Frederic Harris: Does the hon. Lady appreciate fully that there is a fantastic turnover in the catering staff? Is there anything more that can be done to arrest this unfortunate trend?
  Hon. Members: Give them more pay.
  Mrs. Braddock: I agree with what the hon. Member for Wells (Lieut.-Commander Maydon) has said about Mr. Roberts. He has done an excellent job under very difficult circumstances. The question of the number of staff and of keeping them is giving great concern to the Catering Sub-Committee. One of my hon. Friends has just whispered to me "Pay me properly", but the scale of pay has been agreed with the trade union. The salary scale is under investigation and a statement will be made as soon as possible.
  Mr. Rankinasked the Lord President of the Council why employees of the Catering Department are required to sign for their wages on a blank sheet of paper.
  Mr. Crossman: Employees of the Refreshment Department sign above their names on the wages sheet for the receipt of a wage packet. Full details of the calculation of the individual's wage are set out on a slip attached to the packet. This practice has been accepted by the union representing employees in the Department.
  Mr. Rankin: If I follow my right hon. Friends Answer correctly, he is not denying that employees in the Catering Department sign a blank sheet of paper for their wages. Is that the fact? Has it any legal justification?
  Mr. Crossman: The system has been agreed with the trade union. When handed their wage packets, the staff are asked to sign a sheet of paper which is then taken back. The system has worked amicably in the past.

  MEMBERS AND LOBBY CORRESPONDENTS
  Mr. Martenasked the Lord President of the Council what proposals he has to improve the conditions under which hon. Members and Lobby correspondents meet in the House.
  Mr. Crossman: I would refer the hon. Member to an answer given by my predecessor to the hon. Member for Woolwich, West (Mr. Hamling) on 13th July last[Vol. 731, c. 1455–56.]
  Mr. Marten: While recognising that there is a shortage of accommodation, may I ask whether the right hon. Gentleman would agree that it would make for easier contact and perhaps even better results with Lobby correspondents if there were a room in which we could create a smoking room atmosphere? Will he consider reviving what was called "Annie's Bar".
  Mr. Crossman: I had half a thought that that would come into it. All I can say about "Annie's Bar" at the moment is that the whole question is in a very fluid state and under consideration.

  FINANCE BILL
  Mr. Henigasked the Lord President of the Council what plans he has now formulated for ensuring that parts of the Committee stage of the Finance Bill 1967 will be dealt with in Standing Committee.
  Mr. Crossman: The Select Committee on Procedure is considering the House's methods of dealing with the Finance Bill. I understand that it has invited a Treasury Minister to submit evidence. My hon. Friend will not expect me to anticipate the Committee's recommendation.
  Mr. Henig: Can my right hon. Friend treat this as a matter of some urgency? I believe that, in the past, the Select Committee has made certain recommendations on the subject which were neither discussed by the House nor apparently heeded.
  Mr. Crossman: It is not only urgent but essential to the whole question of
  1310
  the reorganisation of business. Nevertheless, we have to go through the procedures and this is something on which the Treasury and we must agree. But I do agree that, if this matter cannot be taken seriously, very little can be done to improve our procedure.

  LEGAL AID CASES (COSTS)
  Mr. Ellisasked the Attorney-General if he is aware that cases are occurring where, despite judges' recommendations concerning costs in certain legal aid cases, the whole amount awarded is being taken in legal charges; and if he will take steps, by legislation or otherwise, to remedy this.
  The Attorney-General (Sir Elwyn Jones): The Legal Aid and Advice Act, 1949, provides that damages recovered by legally-aided plaintiffs shall first defray any costs of the case that have not already been met from a contribution by the assisted person or from costs paid by his opponent. Only the residue shall be paid to the assisted person. It very occasionally happens that there is no residue. To waive this provision, even at the request of the judge, would place assisted persons in a much better position than ordinary litigants, and might encourage litigation which would otherwise be fruitless and discourage settlements. My noble Friend the Lord Chancellor regrets that he cannot intervene.
  Mr. Ellis: Is my right hon. and learned Friend aware that this Question arises out of the tragic incident involving one of my constituents, Mr. George Simmonds, who sustained a broken back? Is my right hon. and learned Friend further aware that Mr. Justice Havers said that the case was so tragic that, in the circumstances, the £300 awarded as an ex gratia payment should not be taken in legal charges and that he would recommend accordingly to the Lord Chancellor? I have been in communication with my noble Friend the Lord Chancellor and the answer of my right hon. and learned Friend the Attorney-General does not satisfy the main point. Will my right hon. and learned Friend comment?
  The Attorney-General: I am aware of that most unfortunate case, which was

  1311
  one of the exceptional happenings I have referred to, but for the reasons I have given I regret that my noble Friend the Lord Chancellor is not able to intervene in the case.

  MAGISTRATES (SELECTION)
  Mr. Whitakerasked the Attorney-General what proposals he now has for altering the selection of magistrates.
  The Attorney-General: None, Sir.
  Mr. Whitaker: I warmly welcome the changes my noble Friend the Lord Chancellor has made, but would it not be preferable to have as a criterion for selection the best possible people from all walks of life and not political nominations?
  The Attorney-General: My noble Friend the Lord Chancellor has emphasised that the over-riding consideration in the selection and appointment of justices is that they should be personally suitable in character, integrity, understanding and ability. Subject to that, justices should be drawn from all sections of the community and more and more steps are being taken to achieve that result.

  JOHN BLOOM
  The following Questions stood upon the Order Paper:
  44 and 45. Mr. ARTHUR LEWIS: To ask the Attorney-General (1) for how long investigations have been going on into matters connected with the John Bloom affair; how long the police have been inquiring; and when their present inquiries will end;
  (2) what further steps are envisaged as a result of the Report now being investigated by the Director of Public Prosecutions on the John Bloom affair.
  Mr. Speaker: Mr. Arthur Lewis—Question No. 44.
  Hon. Members: Where is he?
  Mr. Winnick: He was here yesterday.
  The Attorney-General: Under the circumstances, I refrain from saying, "For this relief, much thanks."
  Mr. Speaker: Mr. Whitaker—Question No. 46.

  LORDS OF APPEAL (EX-LORD CHANCELLORS)
  Mr. Whitakerasked the Attorney-General if he will introduce legislation to provide that ex-Lord Chancellors no longer have the right to sit as Lords of Appeal unless specifically appointed as such.
  The Attorney-General: No, Sir.
  Mr. Whitaker: Is my right hon. and learned Friend aware that litigants are considerably disturbed as to the possible chances of litigation which may go on appeal to the House of Lords when ex-Lord Chancellors may communicate their views to newspapers on litigation on which they may be called to pronounce?
  The Attorney-General: My hon. Friend can rest assured that my noble Friend the Lord Chancellor would not invite an ex-Lord Chancellor to sit judicially in any case on which he had already expressed an opinion elsewhere. Communication with newspapers is, of course, entirely a matter for the individual member of the judiciary concerned.

  SCOTTISH QUESTIONS
  Mr. W. Baxter: On a point of order. You will know, Mr. Speaker, that very seldom do Scottish Questions come to the top of the list of Questions. On this occasion they did, and they were answered as far as Question No. 34. There was then what I would term an unwarranted intrusion of English Questions.
  Mr. Chapman: Rubbish.
  Mr. Speaker: Order. Hon. Members must curb their nationalist sentiments and listen to a point of order.
  Mr. Baxter: My hon. Friend the Member for Birmingham, Northfield (Mr. Chapman) does not know Scotland very well. It is a very important nation and there should be full liberty for Questions appertaining to it to be answered. I would like you, Mr. Speaker, to look into this matter and consider whether the difficulty can be obviated in future so that Scottish Questions come in their proper sequence.
  Mr. Rankin: Further to that point of order. I am a helpless victim of the occasion, but I have no association with England.
  Mr. Emrys Hughes: Further to that point of order. May I draw your attention to the fact, Mr. Speaker, that 18 Scottish Questions have not been answered and that that situation has been aggravated by the fact that eight Questions to the English Attorney-General have been brought into the middle of Scottish Questions? What remedy do we have?
  Mr. Speaker: The allocation of dates and places on the Order Paper for Questions is not a matter for Mr. Speaker. The Questions to the Lord President of the Council and the Questions to the Attorney-General are in their proper place, as fixed by the usual channels. I can understand the concern of Scottish Members, but it is a matter which they must take up with the Leader of the House, to see whether some rearrangement of the timetable can be made. I have no power to alter it.

MORRIS RADIATORS, OXFORD (STRIKE)
Sir K. Joseph (by Private Notice)asked the Minister of Labour if he is now considering intervening in the strike at Morris Radiators, Oxford, in view of the proposed discussions between B.M.C. and the union concerned.
The Minister of Labour (Mr. R. J. Gunter): I understand that at a meeting this morning between representatives of the British Motor Corporation, the Amalgamated Engineering Union and the Transport and General Workers' Union, the Corporation's representatives felt unable to make an exception in the case of the 24 redundant employees at Morris Radiators Ltd., Oxford, by reinstating them in the company's employment. I understand that the Amalgamated Engineering Union Executive will be meeting at York tomorrow.
I am keeping in close touch with both sides.
Sir K. Joseph: Will the Minister tell the House, first, about how many thousands of men are out of work on account of these 24 men? Secondly, will
1314
he will tell us whether, in his opinion, the men at Morris Radiators would be back at work if Sir William Carron had attended the meeting last night? Thirdly, will he answer my Question and tell us whether he is considering intervening in the strike at Morris Radiators?
Mr. Gunter: The question of Sir William Carron's appearance on the Executive is entirely a matter for Sir William and has nothing to do with me. The number of employees affected by the strike at Morris Radiators is approximately 27,760. As for my intervention, a meeting is taking place at Oxford this afternoon. The A.E.U. Executive is meeting tomorrow and I am in close touch with both sides and will consider what action I might take tomorrow.
Mr. Hector Hughes: On a point of order. Would you be so kind, Mr. Speaker, as to give the Secretary of State for Scotland an opportunity to answer Question No. 66, on the ground that it refers to an inquiry which will be taking place before Scottish Questions can again be reached and which deals with a matter involving the loss of the lives of citizens of Aberdeen?
Mr. Speaker: I venture to say that it is almost discourteous of the hon. and learned Gentleman to intervene with this point at this stage, when another Question is before the House. The answer to his point of order is that I have no power to request the right hon. Gentleman to answer the hon. and learned Gentleman's Question. I have had no intimation from the Secretary of State for Scotland that he desires to answer the hon. and learned Gentleman's Question at the end of Question Time.
Mr. Chapman: Does not the situation at Oxford again indicate to my right hon. Friend that discussions about the precise number to be made redundant at this factory having to take place at this very late stage is a very grave reflection on the consultation procedure which has been followed up to this very late stage? Would not my right hon. Friend consider what I have already suggested—that when all this is finished there ought to be a full inquiry into the industrial relations in this firm?
Mr. Gunter: I have already given my opinion that the industrial relations in

1315
B.M.C. have left a lot to be desired and that when the dust has settled over the present row it may be that we can look at the situation again. But the main point to be remembered in this argument about Morris Radiators is that the attitude of the Corporation—I neither defend nor attack it—is that the 24 men involved ought not to have preferential or favourable treatment over men who have already been made redundant with longer service. One of the facts which has emerged is that not one of the 24 who are in dispute at Morris Radiators has as yet even 12 months' service with the firm.
Mr. Eyre: Is the right hon. Gentleman aware that the Government's measures and the strike are having a devastating effect on Birmingham homes? Will he assure the House that he will intervene in this strike at the earliest opportunity, to bring about a settlement?
Mr. Gunter: I understand the effect which it is having on many working-class homes in the West Midlands area. I am as desirous as anybody that the matter should be settled and I undertake that as soon as I see the result of what is now taking place I shall not hesitate to intervene if I think that intervention can be useful.
Mr. Ogden: Would not my right hon. Friend agree that it is not a matter of how soon he can intervene, but of his intervening so that he gets the best result, and that the House must accept his judgment about when to intervene?
Mr. Gunter: I am grateful for that assessment of the situation. I said some days ago in the House that the most difficult think was the balance of judgment of when to move and when not to move. It is always a bit of a nightmare to know whether one is leaving undone things which ought to be done, or whether it is the other way round. As previous Ministers of Labour know full well, there is no monopoly of virtue or knowledge at the Ministry of Labour, particularly the former.
Mr. Frederic Harris: Is the right hon. Gentleman aware that it is the result of the Government's policy which has brought all this about in the first place?
Mr. Gunter: I do not accept that allegation. The hon. Gentleman wants me to be tempted into false trails, as to whether the planning in terms of manpower or anything else has been adequate or proper in the past. I shall not be tempted.
Mr. Maxwell: As my right hon. Friend may be aware, several hundred of my constituents are engaged in work at Vauxhalls. The new management of those works has been trailing its coat for a fight with the trade unions in the works. What steps does my right hon. Friend propose to take now to prevent the threatened closure of that works?
Mr. Gunter: The original Question is directed to the dispute with B.M.C. Vauxhalls is an entirely different matter.
Mr. Marten: As my constituents are involved in this strike, will the right hon. Gentleman clear up one point for me? He referred to a meeting at Oxford this afternoon. A meeting between the strikers and whom?
Mr. Gunter: I think that it is a meeting of the strikers on their own.

BALLOT FOR NOTICES OF MOTIONS
  House Purchasers (Protection)
  Mr. Brooks: I beg to give notice that on Friday, 25th November, I shall call attention to the need for protection of house purchasers against shoddy building, and move a Resolution.
  House of Lords Reform
  Mr. William Hamilton: I beg to give notice that on Friday, 25th November, I shall call attention to the need to reform the House of Lords, and move a Resolution.
  Problems of the Countryside
  Mr. Carol Johnson: I beg to give notice that on Friday, 25th November, I shall call attention to the problems of the countryside, and move a Resolution.

MUNICIPAL DOCKS
3.42 p.m.
Mr. Robert Cooke: I beg to move,
That leave be given to bring in a Bill to prevent the nationalisation of municipal dock undertakings.
Bristol, part of which I have the honour to represent, has been a thriving port since the days of the Romans and the city and county——
Mr. Speaker: Order. Perhaps the hon. Gentleman would wait a moment, until hon. Members have left the Chamber quietly.
Mr. Cooke: As I was saying, Bristol gained its first charter from Edward III. The city docks and their extensions are the result of civic enterprise over the centuries. Bristol Docks belong to the citizens of Bristol, and the Bill which I ask leave to introduce would ensure that this public ownership remains undisturbed. It would protect all municipal dock undertakings from Government intervention and enable municipal docks to develop along the lines suggested by the National Ports Council.
The House will recall that it reported in favour of a third major port at Port-bury, near Bristol, a 1,000 acre site with unrivalled communications to all parts of the United Kingdom. My Bill would enable public enterprise to proceed with this adventurous scheme. Statistics are now produced as a major obstacle to the success of Portbury. I would remind the House that statistics were against John and Sebastian Cabot when they sailed from Bristol in a small ship with 18 men in the year 1497 to discover the New World. Statistics proved that Drake could not possibly defeat the Armada and in his day Lord Nelson had, on occasion, to disregard statistics. Dunkirk was statistically impossible.
My Bill would enable the citizens of Bristol, and other municipalities with the same guts and determination, to make their contribution to our much-needed industrial revival. Municipal docks are a proved success;
1318
even Antwerp and Rotterdam are so owned.
In this time of depression we must enable those on whom our future depends to prepare for the expansion of trade that Britain must have if she is to survive. The Government have long favoured the public ownership of all that is important in modern life. My Bill will ensure that nothing disturbs the fine record of public ownership of the Port of Bristol. It would enable it and others like it to bring immeasurable benefits to Britain's economy.
3.43 p.m.
Mr. Eric Ogden: The hon. Gentleman the Member for Bristol, West (Mr. Robert Cooke) has chosen a simple and straightforward way to make his point. He has brought to his aid Lord Nelson and the Armada, but I do not think that this is a reason why his Motion should go through quite so simply as he was hoping that it would. It is not within the terms of the normal Ten-Minute Rule; it is limiting legislation and it is a direct attack on many of the things that we on this side of the House believe in.
The hon. Gentleman has not argued in detail the case for his Motion and I believe that he would agree that this is too large a subject to be argued in the space of 10 minutes. For these and other reasons, upon which we on this side of the House agree, I would suggest that we oppose the Motion.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nominations of Select Committees at commencement of Public Business), and agreed to.
Bill ordered to be brought in by Mr. Robert Cooke, Mr. Dean, and Mr. Webster.

MUNICIPAL DOCKS
Bill to prevent the nationalisation of municipal dock undertakings, presented accordingly and read the First time; to be read a Second time tomorrow and to be printed. [Bill 127.]
LOCAL GOVERNMENT (SCOTLAND) BILL
As amended (in the Standing Committee), considered.
LOCAL GOVERNMENT (SCOTLAND) BILL

  New Clause 1.—(RATING OF CERTAIN OFFICE PREMISES OF NATIONALISED BOARDS &C.)
  (1) For the year 1967–68 and subsequent years, an authority to which this section applies shall, notwithstanding anything in Part V of the Local Government Act 1948 section 24(2) of the Valuation and Rating (Scotland) Act 1956 or section 3(1) of the Gas Act 1965, be liable to be rated in respect of any office premises occupied by the authority which are not situated on operational land of the authority; and accordingly any such premises shall be included in the valuation roll for the area in which they are situated.
  (2) This section applies to the following authorities, that is to say, the British Railways Board, the British Waterways Board, the Gas Council, any area board constituted for an area in Scotland under the Gas Act 1948. the North of Scotland Hydro-Electric Board and the South of Scotland Electricity Board.
  (3) in this section—
  'Office premises' means lands and heritages which are used wholly or mainly as an office or for office purposes; and
  'operational land', in relation to an authority to which this section applies, means land which is used for the purpose of the carrying on of the authority's undertaking and land in which an interest is held for that purpose, not being land which, in respect of its nature and situation, is comparable rather with land in general than with land which is used, or in which interests are held, for the purpose of the carrying on of statutory undertakings;
  and for the purposes of this subsection 'office purposes' includes the purposes of administration, clerical work, handling money, telephone and telegraph operating and the operation of computers, and 'clerical work' includes writing, book-keeping, sorting papers, filing, typing, duplicating, punching cards or tapes, machine calculating, drawing and the editorial preparation of matter for publication, and 'statutory undertakings' has the same meaning as in the Town and Country Planning (Scotland) Act 1947.—[Mr. Ross.]
  Brought up, and read the First time.
  3.47 p.m.
  The Secretary of State for Scotland (Mr. William Ross): I beg to move, That the Clause be read a Second time.
  This Clause requires the nationalised industries to pay rates in the ordinary way on offices which are not on their operational land.
  The nationalised industries pay sums in lieu of rates which depend more on the level of production—or in the case of the railways the number of miles travelled—than on the quantity of premises they possess. There has thus been complaint in Scotland and England, that if, say, an Electricity Board or British Railways construct large offices in a particular local authority area this brings virtually no additional rateable resources to the local authority, while comparable commercial offices would be fully rated.
  After reviewing the rating liability of the nationalised industries, the Government have decided that it would not be unreasonable if they were rated in respect of their offices in the same way as commercial undertakings and this Clause is the consequence.
  The determining factor is whether the offices are on operational land. The object is to draw a distinction between general administrative offices, which would be rated, and such things as station-masters' offices and managers' offices at gas and electricity works. The definition used in the Clause is one which has operated for some time in the town and country planning sphere; operational land is defined as not including land with the buildings on it, which is comparable with "land in general".
  Broadly speaking, if it is not essential that a nationalised industry's office should be in a particular place such as a station or production unit, it will be separately rated; otherwise not.
  The rating liability for administrative offices will be a net addition to the liabilities of the nationalised industries. There will be no reduction in the "standard amount" to offset it. Although it is obviously desirable not to add to the rating burden of publicly-owned properties if this can be avoided, the Government take the view that local authorities should not be denied this reasonable extension of rateable resources. We have at present no estimate of the amount of rateable value involved; this will depend on negotiations between the nationalised industry boards and the local assessors.
  Mr. Edward M. Taylor: The Secretary of State, in presenting the new Clause, has dealt with

  1321
  a long-standing grievance felt by many local authorities for some time. Although it is apparent that he has no estimate of what this might involve, we all know from our practical experience that the sums will be very substantial. There are, however, a few obvious questions which we must ask about how the Clause will be applied and what its effect might be.
  One obvious question concerns the total rating liability of the public corporations. I think that we are well aware that while certain local authorities have complained rather bitterly about the exemption of commercial premises from rates, there is a feeling on the part of some Scottish nationalised industries that they are carrying a heavier total burden in their payment in lieu than similar nationalised industries in England.
  Let me take the example covered in the Clause, the electricity boards. The Secretary of State will no doubt be aware that it was stated in the annual Report of the South of Scotland Electricity Board that the Board considered that it was paying too much in local rates by comparison with electricity boards in England and Wales and with Scottish industry generally, and its feeling was that its rate payment in total was excessive to the extent of about £750,000 a year. To this extent, therefore, if it is the Secretary of State's intention that these office premises should be rated without a comparable adjustment in the payment in lieu, there will be a very heavy burden in addition to what it feels is an unjustified sum.
  It is clear that if the Clause is applied along the lines indicated by the Secretary of State, there will be a very substantial addition to the costs of the public corporations and this will add to the problems of the Scottish nationalised industries. We are all aware of the longstanding grievance in Scotland concerning certain nationalised industries, particularly coal, which is not covered by the Clause. In the gas industry there is a substantial differential cost in the gas supplied to people in Scotland. Clearly, the Clause might well make the position more difficult.
  The second question, which is quite important, is this. As this addition is to be applied to local authorities, would it make a practical difference in the
  1322
  amount which they would be able to receive in rate support grant in relation to the resources element? Clearly, if the rateable value is to go up it is possible that the grant in respect of the resources element will be reduced.
  There are a number of other points. One of them is how the Clause will apply to certain commercial premises. The ones which immediately come to mind are various developments which have taken place recently in railway premises, particularly commercial developments within the railway stations. Are we to assume that this Clause will cover, for example, shops and office premises located directly within railway premises or very near to them? We appreciate that each case will be considered on its merits, but a broad undertaking on offices and shops within railway stations would be of great help to us.
  By and large, we on this side of the House very much welcome the Clause, although we are a little concerned about the additional liability which will devolve on certain nationalised industries in Scotland which are already in serious financial difficulties and are charging a higher price for their product compared with the rest of the country.
  Mr. William Baxter: I should like some clarification of the new Clause. It provides in line 14, that
  "'operational land' … means land which is used for the purpose of the carrying on of the authority's undertaking and land in which an interest is held for that purpose …"
  Does that include, or should it include, pylons and boosters or transformer stations? If it excludes pylons and boosters and transformer stations, is not this an injustice to the local authority on whose land they are situated? If they are excluded, the only local authorities which will get the benefit of the Clause are those in which the principal undertaking of the electricity board is situated. That would be grossly unfair.
  The setting up of pylons throughout the country decreases the value of the agricultural holdings through which they go and, therefore, ultimately decreases their value as rating units to the local authority. I ask my right hon. Friend whether the items to which I have referred are covered by the Clause.
  Mr. Ross: Pylons and boosters, to which my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) referred, are not covered by the new Clause. He might have been concerned if I had said that the additional cost of the valuation were to be taken out of the standing grant. It might well be that people already receiving certain sums might be concerned at a reduction thereof, but that is not the case.
  I come to the point raised by the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor). The standing grant aspect is not covered. If there is any injustice—and I am not prepared to say an injustice at the moment, although I have heard the claims made—it could not be dealt with in this Clause. One cannot have it both ways. This is what the hon. Gentleman really wants, particularly in connection with the rate support grant.
  The purpose of the rate support grant is to support the rates in respect of the weakness or otherwise of the valuation. If the valuations are raised, an authority is much more self-supporting. It would be unfair to all others who receive rate support grant that a particular local authority which received the benefit of the Clause also received the benefit of extra rate support grant.
  It is recognised that this matter has caused trouble over the years. We can all recollect instances within our own local authority areas, especially in connection with the development over past years of special new showrooms which, for all practical purposes, are the same as other commercial private ventures. It is right that they should be put on this new footing.
  I am glad there is no obvious animosity to the new Clause and a recognition that what the Government are doing is right.
  Mr. W. Baxter: Would my right hon. Friend elaborate on why parts of an organisation such as those I have indicated which, if they were part of a private undertaking, would be subject to the appropriate proportion of rates should not be subject to the same proportion of rates if owned by a public authority? The principle seems to be conceded in respect of office or workshop accommodation. Why is it not conceded in respect of pylons, boosters and transformer stations?
  Mr. Ross: My hon. Friend will appreciate that these are taken into account with all the other land considerations and are worked out in a formula in relation to the electricity itself. This has been passed in Statute and recognised as the fair way of dealing with the matter.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.
  Mr. Speaker: The Opposition have indicated to me that they would welcome the taking of new Clauses 3 and 4 together. I hope that the Government will think about that suggestion while we discuss new Clause 2.

  New Clause 2.—(GAS AND ELECTRICITY BOARDS: RATING OF SHOWROOMS.)
  (1) For the year 1967–68 and subsequent years, an authority to which this section applies shall, notwithstanding anything in Part V of the Local Government Act 1948, section 24(2) of the Valuation and Rating (Scotland) Act 1956 or section 3(1) of the Gas Act 1965, be liable to be rated in respect of any shop, room or other place occupied and used by the authority wholly or mainly for the sale, display or demonstration of apparatus or accessories for use by consumers of gas or, as the case may be, electricity; and accordingly any such shop, room or other place shall be included in the valuation roll for the area in which it is situated.
  (2) In determining whether any such shop, room or other place is wholly or mainly occupied and used as aforesaid, use for the receipt of payments for gas or electricity consumed shall be disregarded.
  (3) This section applies to the following authorities, that is to say, any area board constituted for an area in Scotland under the Gas Act 1948, the North of Scotland Hydro-Electric Board and the South of Scotland Electricity Board.—[Mr. Ross.]
  Brought up, and read the First time.
  Mr. Ross: I beg to move, That the Clause be read a Second time.
  At the same time as administrative offices of the nationalised industries are being rated, the opportunity is taken in this Clause to bring Scotland into line with England and Wales as regards gas and electricity board showrooms. In England, these have been rated since 1959. The justification is that the boards' showrooms are exactly comparable to the shops and showrooms of private firms. In this case, unlike the rating of offences, it is intended to offset the new rating liability by a reduction in the global sums payable by the gas and electricity boards.

  1325
  This was done south of the Border in 1959 and it would be wrong to treat the Scottish boards more harshly than the English boards were treated.
  4.0 p.m.
  Mr. Edward M. Taylor: Again, we welcome the new Clause, because there has clearly been a considerable extension in the activities of both boards in the provision of demonstration showrooms, particularly since the Clean Air Act came into operation and people were encouraged to make the best use of new and modern equipment. We are also pleased to learn that the effects on the boards will probably be a little less harsh than we envisaged, because there was no general indication that an adjustment would be made in the global sum.
  On the other hand, the position is made clear about the previous new Clause that there will be no adjustment in the global sum. We can consider this when we come to new Clause 5. By and large, however, we welcome the Clause and will support it.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

  New Clause 3.—(APPLICATION OF SECTION (NOTIFICATION OF UNOCCUPIED DWELLING-HOUSES).)
  (1) The provisions of section (Notification of unoccupied dwelling-houses) of this Act shall come into operation or cease to be in operation in the area of a rating authority if the authority resolves that those provisions shall apply or cease to apply to their area, and shall come into operation or cease to be in operation in that area on such a day as may be specified in the resolution.
  (2) The day to be specified by a resolution under subsection (1) above shall be—

  (a) in the case of a resolution providing that the said provisions shall apply to the area in question, a day not being earlier, if those provisions have previously applied to the area, than the expiration of the period of seven years beginning with the day when those provisions ceased or last ceased to apply to the area or of such shorter period as the Secretary of State authorises in any particular case;

  (b) in the case of a resolution providing that the said provisions shall cease to apply to the area in question, a day not being earlier than the expiration of the period of seven years beginning with the day when those provisions came or last came into operation in the area or of such shorter
  1326
  period as the Secretary of State authorises in any particular case.

  (3) As soon as may be after a resolution under subsection (1) above is passed by a rating authority the authority shall cause a copy of the resolution to be published in two successive weeks in one or more newspapers circulating in their area, and while a resolution providing that the said provisions shall apply to their area is in operation shall cause a copy thereof—

  (a) to be published annually in one or more such newspapers; and

  (b) to be kept prominently exhibited at their offices in a place to which the public have access.

  (4) A documents purporting to be a copy of the minutes of a resolution passed by a rating authority under this section and to be certified under the hand of the clerk of the authority as a true copy of the minutes of the resolution shall be sufficient evidence that the resolution was passed by the authority.—[Dr. Dickson Mabon.]
  Brought up, and read the First time.
  The Under-Secretary of State for Scotland (Dr. J. Dickson Mabon): I beg to move, That the Clause be read a Second time.
  Mr. Speaker: I think that it would be for the convenience of the House to discuss at the same time new Clause 4—Notification of unoccupied dwelling-houses. Does this suggestion commend itself to the Government?
  Dr. Mabon: Yes, Mr. Speaker; that is very convenient. There are later Amendments which impinge on this subject, but we can discuss them in the proper sequence. These two new Clauses arise from our discussions concerning those later Amendments.
  New Clauses 3 and 4 stem from the Government's conviction that local authorities will not be able to take effective steps to get empty houses re-occupied unless they have power to make owners notify them when the property is empty. We discussed this matter considerably in Committee, when I promised to discuss it at length with the local authorities, and I have done so on behalf of my right hon. Friend.
  New Clause 3 provides that the notification system takes effect only when the local authority resolves accordingly. The system has been made adoptive rather than mandatory because there may well be many areas in Scotland where the pressure for housing is not so

  1327
  great and where houses are only left empty for good reason, for example, because of the difficulty of getting tenants of farm cottages or because of the slowness of the market. It will, therefore, be up to each local authority to decide whether to adopt a notification system in the light of the local circumstances.
  Subsection (2) of new Clause 3 provides that once adopted, the notification system must last for seven years, and if abandoned it may not be readopted for another seven years. This is to avoid swift changes which would leave house-owners uncertain of their position, which would be onerous, particularly as there is a penalty for failing to notify in any area where the system has been adopted. There may, of course, be occasions when either of these seven-year periods is too long, and the Clause gives the Secretary of State power to authorise a shorter period whenever he thinks it justifiable.
  So that it shall be clearly known when owners have a duty to notify empty houses, subsection (3) of new Clause 3 provides for the adoption of the system to be advertised in two successive weeks, and every year thereafter, and a copy of the resolution is to be posted up in the public offices of the local authority, for example, in the rating department or the housing factor's department. A prudent local authority would also take steps to circularise the associations of property owners in its area or the solicitors and house factors.
  New Clause 4, which naturally follows from new Clause 3, requires the owner of any dwellinghouse which is unoccupied for two months to notify the rating authority when a resolution has been adopted under new Clause 3. The two months' period of grace is enough to exempt the ordinary house-letting or house-selling transaction, where the new occupant normally comes in a short time after the premises become vacant. Local authorities for their part will not be impeded by the two months' period, since another month must elapse before they can levy rates on the owner.
  Owner-occupiers are exempted under subsection (3) because, for the most part, it is not owner-occupiers' houses which remain unused for long periods, but houses which are kept empty in the expectation
  1328
  of an exorbitant rent or exorbitant sale price. There must necessarily be a penalty attached for failure to notify an empty house, and subsection (2) provides for a fine not exceeding £20. In addition, the local authority would be able to levy 75 per cent. rates once the house had been unoccupied for more than three months. That, however, is a matter which we shall be discussing later.
  Mr. Gordon Campbell: As the Under-Secretary of State has said, we discussed this question in Committee. No indication was given at that time, however, that a whole system would be introduced in this way. No indication was given to us of the possibility of two new Clauses. New Clause 3 is to apply the system which is contained in new Clause 4. We have, therefore, looked at the position carefully and we have been somewhat surprised at what we have found.
  The Under-Secretary has explained the seven-year gap and I followed his explanation. Subsection (3) of new Clause 3 aims, as the hon. Gentleman has said, at circulating information about the system. There will, however, be a great many ordinary people in Scotland who may be affected if their local authorities adopt this system and who may well never discover until too late that they are under an obligation to register a house after it has been empty for two months.
  Simply to lay down as a method of keeping the public informed that the information about the system is to be published annually in one or more newspapers and is to be kept prominently exhibited in an office in a place to which the public have access, is not sufficient for a great many persons who are not in the property business. The Under-Secretary accepted this to a certain extent by advising that, in addition, local authorities which adopt this system should notify property associations and factors in their areas.
  The people about whom I am thinking are home owners who, for one reason or another, will have had to leave their houses. [Interruption.] I know that there is another provision. When the hon. Member for Central Ayrshire (Mr. Manuel) has heard the examples which I

  1329
  am giving, he will find that I have read it. There is a provision concerning home owners whose houses were last occupied by the owners, but that is not the case that I am considering.
  There are small property owners who may not hear about these requirements and who, if we pass the two new Clauses, will later find that they have committed an offence. My first example is of Service men and others who own homes in Scotland, who are abroad or elsewhere on duty and have either to leave their homes empty or to let them. There is very often a combination of these circumstances. They let their homes for perhaps six months, the tenants leave and the homes then stand empty. For the benefit of the hon. Member for Central Ayrshire, I would point out that the Service man in such a case would not have been the last occupier of his home, because there would have been a subsequent tenant who had since departed.
  It is no good anyone from the Government Front Bench telling me that these are infrequent cases, because a great many Service men who have homes in my constituency are in that position. Some of them are men from Morayshire and Nairnshire. Others are men who, wisely, after having served in stations in my constituency, have decided to live there and have bought homes in the area on the basis that they will return when they are posted back and will eventually, I hope, settle there on retirement. These are one category of person who will certainly be affected.
  Then I would suggest another category of person, particularly, again, living in the North of Scotland, or other areas not immediately close to the industrial areas—a person such as the export salesman, or businessman of some other kind, who has to move because, in his firm's business, it is necessary for him to live for a time, say, near Glasgow. He may be in the same position; he does not want to give up his home; he lets it; the tenant departs; and he then has to leave the home empty. He may be perfectly willing, as probably will the Service man, to pay the rates, in full, or 75 per cent. of them, or whatever is required of him; but what he obviously will not know about, particularly if he is in Singapore or Hong Kong, is that he is required to register with the local authority two
  1330
  months after the house has become unoccupied by the tenant.
  However much we try to publicise this, by discussion today, and by the rather meagre provisions set out in new Clause 3, there will be a great many such persons who simply will not know they are under an obligation to do this. If they fail to do so, then, according to new Clause 4, they
  "shall be guilty of an offence"
  and they may be subject to a fine of £20. Well, that may not be very much, but the Service men of whom I am particularly thinking—and their wives—who are very law-abiding people, will be very upset to be informed they have been guilty of an offence simply because, being in Singapore or some other place, they have not been able to keep in touch with these events and do not know that, two months after letting them, their homes have become vacant because the tenants have gone, and they have not been able to relet them, and they should have notified that on the appropriate form from the local authorities.
  I am sure that all hon. Members will agree that it is essential nowadays that we in Scotland should combine home ownership, which the Government themselves are endorsing as something to be encouraged, with mobility. It is necessary that people, be they Service men or businessmen or others who have to move because of their work, or to find work, should be able to leave their homes let, and not thereafter be worried if the tenants depart, perhaps through no fault of the owners, or find that they are committing an offence, as this new Clause would have them do.
  Particularly in the North of Scotland it has always been true that people of special aptitudes and abilities have gone out into the world, into England or abroad, but have kept their connection with those localities, kept their homes, perhaps empty for periods, so that they can go back to them for holidays, or eventually move back to them and settle there. We must allow a connection of this kind to continue.
  A later Amendment affects this. It provides that occupation of a house for less than six weeks within the three-months period shall not count as part

  1331
  of that period, and I can see that this is to remove a possibility of abuse—of a one-day occupation interrupting the three months. But this is just the kind of thing which would disqualify a person of the kind I have described coming back to live in his house, or for a holiday, if for not more than six weeks. This, therefore, is likely to concern a large number of businessmen in the sort of position I have described, a position which, I submit, we in the House of Commons, and particularly Scottish Members, wish to encourage.
  The system proposed in these two new Clauses seems to me to be much too cumbersome and penalising for the purposes which they set out to implement. I believe that the Government should have been able to find a much simpler method of registration, not involving persons being guilty of an offence if they have not heard about this provision, and not involving a fine, and unless the Government produce a far better explanation than we have heard from the hon. Gentleman so far, I, and, I am sure, a number of my hon. Friends will find these two Clauses unacceptable.
  4.15 p.m.
  Mr. W. Baxter: I am concerned about these two new Clauses being introduced at this stage of our deliberations on the Bill. They are very important Clauses which require much more serious consideration, if need be by Amendment in Committee on the Bill, rather than at this stage. I do not think that this should be treated lightly from either side of the House, because here is a very important principle being enumerated, a principle which, in more than 30 years' experience of county administration in Scotland, I do not consider is necessary. I have never seen this problem arise, in all the years I was associated with a local authority, and why we should try to make criminals out of people I am at a loss to know.
  In these new Clauses we give power to a local authority either to apply or not to apply the Clauses. Again, I would say that if this is to be a more or less criminal offence it is wrong in principle that the application of the Clauses should be permissive. If this is to be a criminal offence in one area it must be a criminal offence in another area, and that should, therefore, apply or not apply to all local government
  1332
  areas in Scotland. This permission as to whether one is to be a criminal or not is, in my opinion, not a proper step in the right direction.
  New Clause 3(3) says that the local authority shall publish in one or more local newspapers its decision to apply the Clause, but in certain outlandish areas—in Stirlingshire, for example, in Argyle, in the Highlands—many people do not get these so-called local newspapers, and they may be at a considerable disadvantage, as I see it. This, again, is not at all good practice and I do not think it should be accepted by the House. The Clause talks about keeping prominently exhibited, in the local authority's offices, notices of these things. Again, I say that is a place where very few people from the outlandish areas go.
  I am thinking primarily of the persons in many country areas who, over the years, have got little cottages, or double cottages. Somebody goes away from his cottage for some very good reason, and he keeps it empty for a fairly long period, perhaps hoping that his daughter or son will come back from another part of the country or from abroad and take up occupation of the cottage.
  Then there are cottages which have been condemned by the local authorities. It is not clearly and explicitly stated here that even those cottages should not be notified to the town council or county council. If people have to notify them, notwithstanding the procedure gone through by local authorities in condemnation of the premises, it means duplication of effort, duplication of time, duplication of energy—all of which I deprecate in this busy and go-ahead age in which we are supposed to live.
  But it is even worse, because there is the stipulation of the time in which the notification must be done, a period of two months:
  "… the owner of every dwelling-house which has remained unoccupied for a period of two months shall, within 14 days thereafter, give to the rating authority for the area … notice in writing. …"
  The penalty if one does not do this is £20.
  So innocent people, who have committed no crime, good, law-abiding people, God-fearing people throughout the length and breadth of Scotland, become almost criminal—because they

  1333
  possess a little property and leave it empty for a period, only a few months. But if they do, if they leave it empty for a year, what business is it of ours?
  Who are we to take upon ourselves the responsibility for saying, "If you leave the house unoccupied by someone else, if you leave it empty, we shall put upon you the stigma of criminal and fine you £20"? This is far too important a Clause to have introduced at this stage of our deliberations. If it goes to a Division today, I shall definitely be voting against it.
  Over the years, we have put into operation too much legislation with the main purpose in view of designating many of our law-abiding citizens criminals. Later, we shall be discussing a Bill appertaining to the Scottish police. I ask all hon. Members to think twice before they add more problems to the burden of the Scottish police by designating another group of innocent people criminals.
  Mr. James Davidson: I want to say only a few words on this new Clause and, in doing so, I endorse everything said by the hon. Member for West Stirlingshire (Mr. W. Baxter). He put it far better than I could have done.
  In Committee, I opposed the whole conception of the derating of unoccupied houses, for the very good reason that we on the Liberal Bench support the idea of rating by site valuation, which would of itself lead to an incentive to occupy empty houses. In that event, all the details outlined in the two Clauses would become unnecessary. If properties were rated on the basis of site valuation, the result would be to force unoccupied dwellings into occupation and to force unimproved sites into improvement.
  New Clauses 3 and 4 introduce an unnecessary element of compulsion and complication. They will result in the proliferation of regulations and interfere considerably with the individual. In addition, there would be extra costs thrown on to the ratepayer of the various newspaper advertisements. Finally, as has already been pointed out by the hon. Gentleman, after a mere matter of two months an individual would become liable to a fine. That seems to be quite monstrous.
  Anyone who has had experience of getting farm cottages or any other type of dwelling renewed, modernised or redecorated knows that by the time he has waited weeks for someone to do the necessary work and then the work has been completed, the buildings have remained unoccupied for three, four and sometimes five months, in any case.
  Even if the Clauses are forced through, I ask the Government Front Bench seriously to reconsider the minimum period of two months. However, I would much prefer to see them withdrawn.
  Mr. Archie Manuel: I appreciate the point made by the hon. Member for Aberdeenshire, West (Mr. James Davidson) about site values, but, frankly, it is no use discussing that subject because we are dealing with the law of rating as it is. That sort of discussion does not take us very much further forward.
  I was surprised by the vehemence of my very good Friend the hon. Member for West Stirlingshire (Mr. W. Baxter). It is surprising these days, to see him jumping in with both feet without thinking too much about what he intends to say.
  Mr. W. Baxter Mr. W. Baxter rose——
  Mr. Manuel: I will give way presently to my hon. Friend, when I have rounded off my argument. It is not very often that my hon. Friend jumps in to the rescue of right hon. and hon. Gentlemen opposite. In the very nature of things, new Clauses 3 and 4 are against all the principles—or lack of them—held on the benches opposite.
  The hon. Member for Moray and Nairn (Mr. G. Campbell) indicated that the provisions of the Clauses did not apply to the type of person indicated by my hon. Friend. Owner-occupiers vacating a house for a while, waiting for a son or daughter to come into it are outwith the scope of the new Clauses altogether.
  Mr. W. Baxter: If my interpretation of new Clause 4 is correct the owner of a cottage cheek by jowl with the cottage which he occupies is caught by the new Clause. If that cottage is empty for the period stipulated in the Clause, and the owner does not notify the local authority, he is liable to a fine. My hon.

  1335
  Friend the Member for Central Ayrshire (Mr. Manuel) says that is not so. If it proves to be so, will be join me in my protest?
  Mr. Manuel: The Clause is quite clear. Subsection (3) of new Clause 4 says:
  "This section does not apply to a dwelling-house owned by a rating authority or to a dwelling-house which was last occupied by the owner thereof."
  In other words, unless an owner-occupier is out to make money by reletting his house, he is excluded.
  Mr. W. Baxter: I should be the last to want anything to go on record that was wrong. If I am wrong, I hope that I shall be corrected. I will bow to anyone who tells me that what I have read into the new Clause is incorrect.
  I have said nothing about an owner-occupied house. What I said was that in my constituency there are a number of owner-occupiers who, in addition, own the cottages next to them. Sometimes, they are little double cottages. If the house which one of them does not occupy is empty, although he owns it, and he does not notify the local authority after it has been empty for two months, he is liable to a fine of £20.
  Mr. Manuel: But he would not be the owner-occupier of that house. That is the point that I am making.
  Neither my hon. Friend nor I had the privilege of being a member of the Committee upstairs. I understand that there was a definite demand from hon. Members on the Government side to bring in a provision of this character. Why was that done? All of us are aware of the companies up and down Scotland who own vast tenement properties. Quite deliberately, they are escaping the onus of paying rates by keeping properties empty over the years hoping to sell them.
  The situation is not, as was suggested by the hon. Member for Aberdeenshire, West (Mr. James Davidson), that it will cost the ratepayers money to advertise and make these provisions known. In many areas, it is already costing the ratepayers large sums of money. They are losing rates on property which is deliberately kept empty by companies who want to sell their tenement property.
  1336
  That has been the position for years about which many of us have asked for action.
  If some of the provisions apply unfairly to innocent people, I should be the first to say that that is something which should be rectified. Knowing my right hon. Friend the Secretary of State, I am sure that it is something which will be rectified if it is borne out in today's debate. But I am all for our dealing with speculators in house property, much of it old, who are putting families out well knowing that the local authority will rehouse them into better types of property, so that they can leave their properties empty for years if necessary until they sell them. They want them to be sold; they do not want to let them again because they wish to get rid of the onus of repairing them.
  There is not an hon. Member who does not know that this goes on. There can be no one who has not had complaints from constituents about it. We have all met it in our work in our constituencies—the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) shakes his head. Are we to take it that all these complaints are manufactured, and that he never gets them from his constituents?
  Mr. T. G. D. Galbraith Mr. T. G. D. Galbraith (Glasgow, Hillhead) rose——
  Mr. Manuel: The hon. Member for Glasgow, Hillhead (Mr. Galbraith) has such a deplorable record in connection with Scottish housing that I do not feel inclined to give way to him.
  Mr. G. Campbell: The hon. Member for Central Ayrshire (Mr. Manuel) referred to the examples which I gave. Every single one of them was a case where the owner had not been the last person to occupy his house, because he had gone away as a result of his Service career or his employment. He let his house, and then his tenant departed and he had to leave his house empty. By this new Clause he would be penalised. It is not a question of wanting to avoid paying rates. I am not arguing with the hon. Gentleman about that. But such an owner is penalised because he does not know about the system.
  4.30 p.m.
  Mr. Manuel: I am on record as saying that if there is inequity or injustice of that kind to the Servicemen, something

  1337
  will have to be done to help him. I am pleased that the hon. Gentleman agrees with me that these houses are deliberately kept empty by property companies while others pay the rates. The main reason for bringing in the Clause is to right that state of affairs.
  Mr. Galbraith: Can the hon. Gentleman tell me how many instances of this occur in his constituency, and how many houses there are in his constituency? This will give us some idea of the size of the problem, which I think he has enlarged considerably by his own imagination.
  Mr. Manuel: I am sure that the hon. Gentleman will find enough in Glasgow, if he does not know his constituency sufficiently well to know the answer. I could not give the number for which the hon. Gentleman asks, but when I was a member of the little Burgh of Ardrossan, which had a population of 8,000——
  Mr. Galbraith: How many?
  Mr. Manuel:—there may have been 100 or 200, I would not know. Taking my constituency as a whole, the problem is quite considerable. Many people want houses, and would occupy them if they were given the chance, but, because they are in the lower income groups, they cannot afford to buy, and they cannot get into rented houses. If injustices occur, I am sure that my right hon. Friend will put them right. We are trying to get justice for all the ratepayers.
  The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) is the standard bearer for the property owners of Scotland. He has been brought on to the Opposition Front Bench to hold the torch aloft so that property owners will be safeguarded with regard to the nonpayment of rates. I am here to see that these people whom I am castigating for keeping their houses empty pay their rates.
  Mr. Edward M. Taylor: There are a large number of empty houses in my constituency, but the only property company concerned is the Corporation of Glasgow, which is not affected by this provision.
  Mr. Manuel: I am aware of that, and no doubt this will be dealt with by my Glasgow colleagues, but is the hon. Gentleman saying on his soul and honour
  1338
  —I understand that he is a bit of a Bible puncher—that there is not one private rented house in Cathcart which is being kept empty so that the owner can sell it? Is that what the hon. Gentleman is saying?
  I think that I have spoken for too long. I have made my point. I support the Clause, feeling sure that if there is any injustice it will be remedied as soon as possible.
  Mr. George Younger: I think that we ought to come down to earth. In these two Clauses we are proposing to bring in a new offence which can be committed by the ordinary citizen. To justify doing this—and it is something that we do reasonably often—we have to show that there is an over-riding need for this type of measure. It seems to me that what the Under-Secretary of State did not make clear is the reason which has given rise to the necessity for these provisions.
  As I see it, the hon. Gentleman has to show that there are a large number of properties lying empty on which rates are being paid—and I ask the hon. Gentleman to note my words carefully—and therefore the local authority does not officially know are empty. I think that I am correct in saying that. After all, if rates are not being paid, the only way to avoid paying them is to inform the local authority that the house is empty and thereby be exempted from paying them. Rates have to be paid in respect of every dwelling-house in the hon. Gentleman's constituency, unless the owner or occupier informs the local authority that the property is empty, and applies to be exempted from paying rates.
  Mr. Manuel: Property which could be rented is deliberately being kept empty. Whether the local authority knows about it is beside the point. I know that rates are not being paid, and this is being done deliberately to enable the owner to sell the house.
  Mr. Younger: The hon. Gentleman has again missed my point. Nobody—not the hon. Gentleman, nor I, nor anyone else—can avoid paying rates without telling the local authority. If the local authority is not informed, rates have to be paid. An owner has to notify the local authority if he wants to avoid paying rates, and it

  1339
  follows, therefore, that if someone is paying rates, and his house is empty, he is under a disadvantage in that he is paying rates for a house which he is not occupying. This is, of course, a deterrent to him leaving his house unoccupied.
  These Clauses are obviously aimed at ensuring that a large number of houses are not left empty. We all applaud that object, because it will enable a local authority to know which houses are empty and to try to make better use of them, but I ask the hon. Gentleman to justify the necessity for getting this information, which I suggest the Minister already has in 95 per cent. of the cases. I say that because very few people will leave a house empty for long and continue to pay full rates on it. These are the only people who will have to give additional information as a result of these two Clauses.
  I think that we should hesitate before putting this burden of an offence on the ordinary shareholder. Let us get this quite clear. It may be that property companies in some parts of Scotland are abusing the law. If there are, let us, on both sides of the House, do what we can to close any loopholes, but in doing so let us make sure that we do not put an unreasonable burden on ordinary people. I suggest that the burden proposed here is unreasonable, and I ask the House to bear with me while I reinforce what was said by my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell).
  My hon. Friend referred to people in the Services. A man who lets his house often does so through an agent or lawyer. In many cases an agent or a lawyer will be involved, but Service people are subject to the most unpredictable moves, and have a most difficult job in keeping their homes going in this country when they are serving abroad. They frequently let their houses to a friend or to a friend of a friend, because it is easier to do it this way, and because they know who will move into the House. It simplifies what for them is a difficult administrative problem.
  If a man is serving in Brunei, and is separated from his wife and family, it is unreasonable to expect him, within two months of it happening, to learn that the
  1340
  friend to whom he let the house—or in some cases the friend of a friend—has left the house and it is unoccupied.
  Mr. G. Campbell: It is even more unreasonable to expect a Service man to know that he has to register in this way.
  Mr. Younger: I agree with my hon. Friend. I am not saying that the object behind these Clauses is necessarily bad. I can see what the Government are trying to do, but I suggest to the Minister that he has to some extent been overridden by the wishes of the Executive. I can see the object behind these Clauses, but it will make things very difficult for ordinary people who are not necessarily very efficient, nor necessarily well-equipped with advice and technical assistance. They will make themselves liable to an offence without there being reasonable need to put them in this position.
  I am not trying to be controversial, or to make a party point, but I think that this proposal is unreasonable. The hon. Gentleman should look at it again with a view to trying in another place to produce something better and more watertight so as to get a better result.
  Mr. Alex Eadie: I have found it very difficult to form conclusions about the arguments which have been taking place on both sides of the House, because in the process a welter of emotion has been shown on both sides. For example, the word "criminal" has been used in this debate. I say frankly that I regard it as criminal that a house should remain empty while people are homeless. The purpose and motive of this part of the Bill is that that should not happen.
  I concede arguments that have been advanced in relation to certain anomalies. The hon. Member for Ayr (Mr. Younger) conceded the point about vast blocks of tenement properties remaining empty. He probably would associate himself with me in believing that to be criminal. The hon. Member and I have had long associations. We opposed one another in a General Election. My hon. Friend the Member for Glasgow, Gorbals (Mrs. Cullen) reminds me that he beat me in that election. He did defeat me, and that must be due to the qualities of the hon. Member.

  1341
  The hon. Member expressed concern about the fact that property should remain empty. When I was campaigning in Ayr in the 1964 General Election I came across many anomalies in relation to housing in Ayr some of which if it had been in operation then this Bill would have redressed. One very important point has not been made in this debate. I read somewhere that some local authorities have been calling for this kind of provision. We have to realise that there is nothing mandatory written into it. It is purely permissive for the local authority to use as it wishes.
  If we talk about persecution and making criminals of people we should remember that local authorities would not seek by resolution to put forward a proposition which would mean, in essence, that they would make criminals of their ratepayers and persecute individuals.
  We have had discussion in the House about the great need for local democracy and for consultation with people who are at the very fountain head of affairs. Members of local authorities know the minds of local people because they are nearer to them. To argue that there would be irresponsibility and persecution as a result of this proposal would be a gross slander on members of local authorities. Before a local authority decided to pass such a resolution putting into effect the terms of these Clauses it would have to give very careful consideration to the matter.
  We should not indulge in a welter of emotion but should look at the proposition sensibly and sanely. We should see that there is a problem here and address ourselves to alleviating it. Then, I am convinced, we should be able to go some way towards housing people who are at present homeless.
  4.45 p.m.
  Mr. Patrick Wolrige-Gordon: I agree with much that has been said in this debate, but there is a point which I do not feel has been answered satisfactorily. As the hon. Member for Midlothian (Mr. Eadie) pointed out, this is a permissive Clause. It is left to the discretion of local authorities. Presumably, they would bring in this provision if they believed that there
  1342
  was impropriety and abuse, that there was accommodation available and unused which could be used and needs to be used because of the demands of the homeless or badly housed people in the area.
  If that is true I imagine we would all support the proposition, but why should it not be carried a stage further? Why should the local authority not investigate and ask the circumstances of the property and the property owners in cases where it is thought that an abuse exists? Why should it be left to a private individual who, as my hon. Friends have pointed out, may have no chance of knowing what is happening to his property within two months, or no chance of dealing with it satisfactorily? Why should it not be left to the responsibility of the local authority to deal with the property in that condition instead of to a person who may not be able to deal with it?
  Mr. Peter Doig: At this stage the Government should seriously consider the proposition put forward in these two new Clauses. I do not know whether it is possible now to amend them, or whether they have to be accepted or rejected as they stand. If they must be either accepted or rejected as they stand, I think that it would be better to withdraw them.
  Certain property owners and property companies have exploited a serious shortage of housing at various times in my constituency. It is impossible to put a figure on this, because the position changes from day to day. This has been a serious problem in my area. While families could not get homes houses were standing empty for considerable periods, solely because their owners could make bigger profits by withholding them from the market for a period and then getting higher rents or selling them for a higher price after holding them back. This should be stopped.
  It would be quite wrong for those owners not to pay rates and, in a sense, to rob local authorities of legitimate rates so that they could make increased profits. It is even worse that they should cause people to be homeless while homes are available and could be occupied. But I do not think that these two Clauses, as at present worded, are

  1343
  the right means of rectifying this genuine grievance.
  As the hon. Member for Ayr (Mr. Younger) said, the numbers of houses on which rates are paid are not known, and they are the only ones which are not known. As this is the position, I am certain that property owners and property companies do not pay rates on houses which are not occupied in order to keep them empty. If they keep them empty for any time they are defeating their own purpose.
  Therefore, I can see no valid reason for dealing with those people who are paying rates. I am concerned with those who keep houses empty and do not pay rates. I should like to see these new Clauses worded in such a way that we could take care of this. I imagine that local authorities know which owners are not paying rates and it should not be administratively difficult for the authorities to find them out and sort them out, provided that they are given the legal power to do so.
  I should like the Clauses altered or, if necessary, withdrawn and new ones produced to take care of this point. It would be wrong to pass them as they stand, knowing their weaknesses and knowing that it might—I put it no higher than that—penalise and turn into criminals some people who have done this quite innocently.
  If it were possible to alter them, such an alteration might be, after the words "… last occupied by the owner thereof" to add "or was his sole permanent address in this country". This would at least take care of some of these anomalies. I would, however, prefer the Government to alter or withdraw the Clauses altogether at this stage.
  Mr. Galbraith: I cannot help feeling that we are making a mountain out of a molehill. Do the Government know the extent of the problem and how many houses there are in this condition? We recognise that we do not want houses to remain empty, but how big is the problem? In solving the problem by bringing pressure to bear on people, we do not wish to damage innocent people. This is the trouble, and, as the Clauses are drafted, it is likely to happen.
  1344
  The hon. Member for Midlothian (Mr. Eadie) thought that it was disgraceful for houses to be kept empty when there was a need for housing. I agree, but I do not think that the private landlord—this is the trouble with hon. Members opposite—is nearly as guilty as local authorities. I should like some figures. The hon. Gentleman must have these figures: he cannot legislate without knowing. If he does not have the figures, he ought not to be legislating——
  Mr. Manuel: Does the hon. Member include all local authorities in this criticism? This would be exceptional in small burgh areas. We know that there is a problem in Glasgow and the hon. Member knows the reason for it—he ought possibly to give it—but he should not include all local authorities or he would get an even worse Press than he had yesterday.
  Mr. Galbraith: I am not making any allegations, but only asking the Government for the figures. They ought not to legislate without knowing. If they know the figures, they should tell the House, so that we can make up our mind.
  I have the figures for Glasgow. For many years, between 4,000 and 5,000 houses have been empty. The figure has not increased, but has been fairly steady. Then, in the last couple of years, the figures suddenly shot up to about 7,000. I asked the Secretary of State whether he could give any explanation. He was a little uncertain in his reply, but gave the impression that one of the reasons was that so many houses were being closed for demolition. These houses are empty and are included in the figures as being empty, but people cannot live in them.
  This problem of empty houses not being lived in and being kept empty by wicked landlords has been exaggerated by hon. Members like the hon. Member for Central Ayrshire (Mr. Manuel) without any real thought about it. The hon. Member for West Stirlingshire (Mr. W. Baxter), in that part which I heard—I came in, unfortunately, only halfway through—made an absolutely first-class speech. I hope that that will not be the kiss of death to him. The hon. Member put his finger on the matter when he said that there are many people living in one half of a small cottage

  1345
  and owning the other half, who will simply not be aware of this obligation. It is all wrong that, in trying to catch a few scoundrels—I do not think that there are many of them—we will do damage to many innocent people——
  Mr. W. Baxter: I was speaking with some experience, having been a member of Stirling County Council for over 30 years, serving as vice-convener of the county and convener of the health department, dealing with all these sort of matters from time to time. I did not see the problem there. As I said in an intervention, the truth will come out. I appreciate the complement which the hon. Gentleman paid me.
  Mr. Galbraith: The hon. Member and I could perhaps form one of those groups which we have been hearing so much about.
  I now see why the onus should be put upon the individual. This is something which the local authority ought to find out for itself——
  Mr. Younger: It knows.
  Mr. Galbraith: To a large extent, it knows. It could send people round to inspect houses and revalue them and could easily find out what it wants to know. The numbers which would slip through the net must be very small.
  There has been a little emotionalism—but also some reasonable speeches from both sides of the House—from the hon. Friends of the hon. Member for West Stirlingshire, who usually support him to the hilt, and who are very concerned about this sign of unnecessary—I almost said "dictatorial"—government. I would urge the Under-Secretary to take this away and reconsider it. If the does not remove it altogether, it should be amended and reintroduced in another place. He should not try to force it through the House tonight. That would be utterly wrong and I hope that he will not do it.
  Mr. William Hannan: I want to support my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter). The hon. Member for Aberdeen, West, (Mr. James Davidson) gave the impression that he thought that the proposals before us were wrong and reactionary. Yet he said in Committee that the Amendment moved by the hon.
  1346
  and learned Member for Edinburgh, Pentlands, (Mr. Wylie) was reactionary and said that he would not have a house rented at 25 per cent., 50 per cent., or 75 per cent., but at 200 per cent.
  What has happened between Committee and now? I do not know, unless the Liberal Party has had a new conference or consultation and the hon. Member wants to withdraw now from the earlier position which he took——
  Mr. James Davidson: I said at the beginning of my speech that I spoke in Committee against the whole principle of derating unoccupied houses. I then went on logically to explain why I was opposed to the two new Clauses. There was nothing illogical in what I said and if the hon. Member had followed my argument, he would know this.
  Mr. Hannan: With respect, that is not what the hon. Gentleman said in Committee. He spoke then of property and said:
  "The hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) said that the Clause represented a radical change of policy. To me it is an incredibly Conservative Clause."
  With that, he was criticising the Government's proposal.
  The hon. Gentleman went on:
  "With the possible exception of that of the hon. Member for Glasgow, Central (Mr. Tom McMillan), all the speeches have been extremely conservative. I would have liked the Clause to be washed out."—[OFFICIAL REPORT, Scottish Standing Committee, 14th July, 1966; c. 310.]
  The hon. Gentleman then went on to describe it and say that it did not go far enough.
  5.0 p.m.
  Mr. James Davidson: The Clause under discussion was that which proposed the derating of unoccupied buildings. This was the matter which I was opposing in my speech in Committee.
  Mr. Hannan: I have given the hon. Member an opportunity to clear it up. It was no surprise to me to find a typically Conservative speech coming from my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter), because this is nothing unusual, whether on building or agriculture, or the interests in which he has a personal interest.
  Mr. W. Baxter: I have no personal interest in this at all. At any time that I speak in the House I declare my interest in the subject on which I am speaking. By virtue of having an interest, I try to bring my experience to bear on the problem that confronts the House. I think that my hon. Friend's remarks are very unworthy of him, to say the least. As for this Clause, I have no interest whatever in property. I have an interest in justice and fairness, and that is what I raise my voice upon. Members of the Labour Party in the past were prone to do this. If they do not do it now, that is their responsibility.
  Mr. Hannan: My hon. Friend is entitled to his opinion. It is a matter of opinion.
  Mr. W. Baxter: On a point of order. There was an imputation in the remarks made by my hon. Friend and I ask that he be asked to withdraw that statement. I have no personal interest in the subject matter under discussion other than the interest of an ordinary Member of the House.
  Mr. Deputy Speaker (Sir Eric Fletcher): I understood the hon. Member for Glasgow, Maryhill (Mr. Hannan) to impute some improper motive to the hon. Member for West Stirlingshire (Mr. W. Baxter). If he did so, he should withdraw it.
  Mr. Hannan: I used the word "interest". If there is an emphasis put on that word which was not my intention, then, of course, I withdraw it. I withdraw any imputation which could be construed from the use of the word "interest".
  One point which has been missed in new Clause 3 is that it is for each local authority to decide whether it passes the resolution requiring that this information should be provided by the people concerned. I have no doubt whatever that in Glasgow and some other cities such procedure is necessary if we are to obtain more information about the houses and the property which should be available for letting.
  The hon. Member for Glasgow, Hill-head (Mr. Galbraith) is right in saying that there are over 7,000 empty houses, although it is true that some of them are not habitable. It is difficult to put a
  1348
  definite figure on the number which are habitable. In my constituency I know of no fewer than 10 houses in one block of building which, as far as I could ascertain, were being deliberately kept vacant so that the trust which owned the building could at some future date develop a commercial interest on the ground floor right round that building.
  It seemed to me and to my friends on the local authority that this was an abuse of the property. I described the circumstances in Committee.
  Mr. G. Campbell: This is dealt with in a later Clause about the rating of empty property. We are dealing with the question of supplying information. If the hon. Member knows about these cases, presumably the local authority knows about them, and it is not necessary to supply the information.
  Mr. Hannan: I have here correspondence between the local authority and the Department. The local authority, for reasons which some of us understand, was faced with difficulties in acquiring the property.
  Mr. G. Campbell: All this is dealt with later in the Bill, where it is proposed that empty property should be rated at a certain percentage instead of being derated. We are dealing here with the supply of information. What the hon. Member is saying, I submit, does not apply to this argument.
  Mr. Hannan: It is part of the background—part of the reason why this information is required. I take the view that, irrespective of whether rates are being paid on the property, there is a great social need for accommodation in which people can live. If the ultimate purpose here is what I and some of my friends suspected, then derating would make no difference to the argument advanced by the hon. Member for Moray and Nairn (Mr. G. Campbell). It seems to me that if there are 7,000 houses empty—and in this instance it was good property—which are available to let, then the requirement is on the people concerned to furnish the information.
  We have heard a great deal about the individual. I would answer the argument by pointing out that the local authority for the area must first pass a resolution.

  1349
  If they feel that they do not require the information or that the people for whom they cater would make certain difficulties about it, then they need take no action.
  The second point is that the action takes place and the matter is brought to the surface. I agree in large part with the reasonable argument of the hon. Member for Ayr (Mr. Younger), and I recognise that there are some of these houses on which rates will be paid. But the case is always argued of the owner of a single house, the owner-occupier or the widow. There was a tacit admission in his speech that it is the trusts and the big property owners which are the chief culprits in these matters. It is unfortunate but true that much of our legislation is calculated to catch only some people but that in the process the individual, the owner-occupier, is suffering.
  No one will pretend to me that an owner-occupier who has a solicitor or lawyer is not made aware of the legislation which is being passed. The responsibility is placed on the lawyer to keep his client informed about the demands being made by the local authority.
  In view of the long and protracted discussion in Committee, I hope that my hon. Friend will now say that he sees no need to change his mind and that he will insist on these Clauses.
  Mr. N. R. Wylie: We have had a long discussion on two very important Clauses. First, we must be clear what exactly the Clauses will do and, secondly, we must ask whether these provisions are necessary in the circumstances.
  I agree that we must approach the problem unemotionally. On the other hand, we must remember that we are creating a new statutory offence and that we are dealing with people's lives. I am not so much concerned about the big property owner, for I agree that he has his lawyer, accountants and factors and that he will not be caught by this kind of legislation.
  The only people who will be caught out by this kind of legislation are the small people who do this on a small scale, usually each with one house which they own but do not occupy. In my submission, Parliament should be very careful before it adds to the 13,000 or 14,000
  1350
  statutory offences which are already on the Statute Book.
  I should like to draw attention to the provisions of subsection (2) of new Clause 3. Subsection (2) provides that the day to be specified will
  "in the case of a resolution providing that the said provisions shall apply to the area in question, a day not being earlier, if those provisions have previously applied to the area, than the expiration of the period of seven years …"
  We know what it means. But it does not mean that there is no provision about when the appointed day will come into play for the first time. The appointed day can be brought in as a result of the resolution; and within 14 days of that day an offence will be committed if the owner of any property affected does not give the necessary information. We are not here concerned with the question of rating or derating of unoccupied property.
  We are concerned with the notification of unoccupied property and I am merely pointing out—and it is obvious that hon. Members on both sides of the House feel the same—that the Government should be careful before adding new statutory offences, especially when we are adding a new offence in a Clause about which we have heard nothing before and which we are now reading for the first time. Is it necessary for this step to be taken? We are aware that Parliament must frequently pass legislation embodying statutory offences, but is this one necessary?
  Mr. Manuel: While I would not accuse the hon. and learned Gentleman of being over-emotional about this, I suggest that he is rather over-stating the case when he says that the resolution of the local authority will take effect in 14 days, because new Clause 3 states:
  "As soon as may be after a resolution … is passed … the authority shall cause a copy of the resolution to be published in two successive weeks in one or more newspapers circulating in their area …".
  Surely this would mean that the matter would remain open for more than 14 days?
  Mr. Wylie: I agree that there must be a statutory notice. That is in contrast with subsection (2,a) of new Clause 3, which refers to
  "… the expiration of the period of seven years beginning with the day when those provisions ceased or last ceased to apply …".

  1351
  I am obliged to the hon. Member for Central Ayrshire (Mr. Manuel) for raising the question of the newspaper advertisement. Is it right that people should be capable of contravening a statutory offence on the basis of a newspaper advertisement? If the Government intend to incorporate this sort of thing, I should have thought that the only fair way of doing so would be for them to make sure that the matter is brought to the notice of the person who is liable to commit the offence, and the best way to do that would be in the valuation notice. If a notification of this kind were incorporated in the valuation notice the objection on the newspaper advertisement point would fall and there would be no doubt that, so far as is reasonably practicable, the local authority had brought the present state of affairs to the notice of the ratepayer.
  5.15 p.m.
  We return to the question: is this all really necessary? I do not know the ratio of unoccupied houses throughout the country, but I imagine that it is very small. I believe that in Glasgow, for example, one house in every 55 is unoccupied—and there may be a variety of reasons for many houses being unoccupied, remembering that many of them must be local authority houses.
  From my experience in Edinburgh, I assure the House—and these cases are brought to my attention when I meet my constituents to hear their problems each Friday night—that I am often told, "There are a couple of local authority houses up the road and they have been empty for weeks." I have never been able to understand why local authority administrators cannot evolve a system which prevents local authority houses from lying unoccupied for weeks, even months, when housing is urgently needed. Part of the problem is a local authority problem to which the new Clauses do not apply.
  Is it necessary to have the provisions of Clause 20, remembering that that Clause provides that one will get 50 per cent. derating if one has unoccupied property? As hon. Members have pointed out, it is often in the interests of the owner to notify his local authority to get the derating. However, one wonders
  1352
  whether it is justified to impose a statutory obligation of this nature on the whole community of people who happen to own unoccupied houses. I do not wish to elaborate this point now. I hope that the Minister will take both Clauses away and think about them again because, as drafted, they are iniquitous.
  Dr. Dickson Mabon: I will do nothing of the kind, and I will explain why. It is clear from the proceedings in Committee that the Government took this problem very seriously. I regret, indeed I am surprised at, the division of opinion which there seems to be among hon. Gentlemen opposite on this issue. The hon. Member for Ayr (Mr. Younger) stated the position as I understood it to apply, but now I begin to wonder if hon. Gentlemen opposite are agreed about this problem.
  The Government agree that there is a problem. Do hon. Gentlemen opposite suggest that we should do little or nothing particularly effective about it because we cannot measure it? I have explained why we did not have the figures to quantify the problem in any part of Scotland or in Scotland as a whole. Some people might make projections or guesses, but I am not content to give the House of Commons simply that sort of information. I prefer to give more accurate information and when we get the processing done from the housing survey, to which I referred the other day, we will get more precise figures.
  Much play has been made by hon. Gentlemen opposite of the penalty aspect of this provision. We discussed this with the local authorities, and I was under an obligation to discuss it with them. Not all my hon. Friends who spoke on this issue in Committee have spoken today. They made determined speeches in Committee and, while they may have sat silent today, they are keenly aware of this problem. It was in response to the speeches made in Committee that I felt obliged to consult the Secretary of State and the local authorities about this matter.
  It is true that the arguments were different, first about the onus of proof, on which I thought we had persuaded hon. Gentlemen opposite that we were right and they were wrong. They had the onus of proof on the local authorities in the 1956 Act and that did not work.

  1353
  That is not merely my opinion but the view of the local authorities. If the hon. and learned Member for Edinburgh, Pentlands. (Mr. Wylie) will read our Committee proceedings he will see that at our Sixth Sitting he said:
  "I understand that difficulty, but it could be overcome in a moment by shifting the onus from the local authorities to prove absence of reasonable cause on to the owner to prove reasonable cause."
  I responded:
  "That is exactly what we are seeking to do. We are leaving it to the local authority permissively to decide whether the owner concerned has conducted his affairs in a reasonable way."—[OFFICIAL REPORT, Scottish Standing Committee, 14th July, 1966; c. 316.]
  The important thing is that we must make a change. Local authorities complained that the Act passed 10 years ago was ineffective and unworkable and that, therefore, a change must be made, Hence, the Government moulded their later Clause on this switch from one onus of proof to another. I thought that that argument was all over and that we had convinced hon. Gentlemen opposite of the necessity for this change. If the argument is not all over, it is news to me.
  Mr. G. Campbell: The hon. Gentleman will recall that when we were arguing at that time, we were discussing Clause 20, which is concerned with the whole question of whether or not empty houses should be rated at a certain percentage. We talked about the onus of proof and the reasons why houses may remain empty, perhaps because they are being modernised or improved or because they are being kept empty for an agricultural worker. The two new Clauses, however, place on the individual the responsibility of supplying information—to give notification—and it is the heavy penalty attaching to that to which we are objecting.
  Dr. Mabon: The hon. Gentleman has not described the Committee proceedings accurately. Clause 20, to which we all will come later, is not concerned merely with that percentage. That was argued out in Committee. The hon. Member for Glasgow, Hillhead (Mr. Galbraith) felt strongly that it should not be 50 per cent. but much less. I insist, and the local authorities back me to a man, that Clause 20 has a more important aspect; that by switching the onus
  1354
  of proof we have made the provision live and sustainable in the courts, and workable, which is more than can be said about the 1956 Act.
  Mr. Wylie: What has that to do with new Clauses 3 and 4, which are the machinery for obtaining information?
  Dr. Mabon: If hon. Gentlemen opposite will stop interrupting me I will get on with my explanation. I apologise for being rather irritable about this. I have been disappointed by hon. Gentlemen opposite and by my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) and the hon. Member for Aberdeenshire, West (Mr. James Davidson). I thought that a great deal of this had been agreed in Committee. I am disappointed at this response to the Government's reasonable attempt to complement what they propose to do in Clause 20, to which we will come later. I regret this sequence of events. It might have been better had we discussed the Clause 20 argument first and taken these new Clauses later, but that could not be done because of the procedure of the House. We must take the two Clauses now, and they are complementary to what is proposed in Clause 20.
  A number of points were made about Clause 20. Some of my hon. Friends—the hon. Member for Aberdeenshire, West cannot run away from this; he supported them—wanted the figure of commitment to be 100 per cent. and did not want a time limit of three months. They wanted it to take effect immediately.
  Mr. James Davidson: I have been accused of inconsistency once or twice already. This is quite unjustified. I opposed the whole principle of derating of unoccupied houses. I pointed out that rating on site valuation would force unoccupied houses into occupation and force the development of undeveloped sites. If rating were on site valuation, the whole question of forcing individuals to report that their houses were unoccupied would disappear. Rating on site valuation would continue right through. I cannot support Clauses which impose penalties on those who fail to report that their houses are unoccupied, particularly as I have said that I disagree with the whole principle of derating of unoccupied houses.
  Dr. Mabon: The hon. Gentleman cannot skate away on an argument about site value rating. We discussed this topic on Second Reading. It was then recognised that we could not make this change in the Bill. The hon. Gentleman may regret that; but, the decision having been taken not to include it in the Bill, he cannot use it as an alibi for failing to measure up to the demands made by different Clauses. I did not make the hon. Gentleman say that. He said in Committee, to my surprise and delight, that he believed that unoccupied property should carry its full share of the rates and that the landlord ought to pay what the occupier previously paid.
  Mr. James Davidson Mr. James Davidson rose——
  Dr. Mabon: I am constantly being interrupted.
  Mr. Davidson: I am sorry. This is an important point. I am being accused of inconsistency. I deny this. If unoccupied property should continue to bear the full rating value, the whole point of reporting if it is unoccupied does not arise. I most strongly oppose the Clause which compels information to be given if a property is unoccupied and imposes penalties if the information is not given. If rating continued whether property was unoccupied or not, this would not arise.
  Dr. Mabon: If the hon. Gentleman wanted that to be the case, he could easily have moved a new Clause to make it mandatory, not permissive, on the local authority to secure that all landlords should pay for empty property where these circumstances are applicable. The hon. Gentleman was free to do that but chose not to do so, presumably because he thought that the half-baked compromise, as I think he called it, which the Government proposed here was acceptable. He even said that it was a conservative Clause and was not adequate for him. If it is not adequate for the hon. Gentleman, why did he not seek to improve it?
  I come to the purpose of new Clause 3 and 4 in relation to the hon. Gentleman's own argument and to show the inconsistency of it. Ex-occupiers do not tell the local authority that they have left their houses until they receive a demand. This is done from October to December, so there are only three months or so in
  1356
  the year when a local authority knows from its rating accounts whether property is empty. We took the view that this is just not good enough. Local authorities with a severe housing shortage should have a right to know as soon as possible so that they can take steps to get empty houses tenanted. This was argued out in Committee and accepted.
  Mr. Galbraith Mr. Galbraith rose——
  Dr. Mabon: I have been interrupted so often. I must be given a chance to make a consistent statement, comprehensive in its nature, because it all hangs together.
  It has been argued that somehow or other local authorities get this information. They do not. In my discussions with the local authorities they protested that they lacked information and lacked the ability or the statutory right to get it. They can get it in retrospect, admittedly, but we are not talking about getting it in retrospect. We are talking about the moment of action. The purpose of the Clause is not financial. The local authorities recognise that. They are not primarily concerned with getting money out of landlords.
  An Hon. Member: What do they want it for?
  Dr. Mabon: They want it to ensure that the social crime does not occur through criminal negligence, as some people have described it—call it what you will—of houses being unreasonably kept empty.
  Mr. Galbraith: Will the Under-Secretary explain how local authorities, having got the information, will proceed to prevent the social crime? What are they to do?
  Dr. Mabon: The fact is that they will proceed under new Clauses 3 and 4 and then they will be able to decide, as they have a right to decide, whether the landlord concerned has behaved reasonably or otherwise. If they take the view that he has behaved otherwise than reasonably, they can charge him rates, or a percentage which we shall no doubt later agree, for the time that they think that the property has been kept vacant unreasonably.
  The onus of proof now lies on the landlord. This is a major shift. I am

  1357
  disappointed that we are not getting an endorsement of this from the Opposition. I thought that this had been agreed. If it is not agreed—the Opposition, by voting against these Clauses, as they intend to, will make it clear that it is not agreed—the Tory Party is once again back into its old posture of defending landlords and not giving a damn for tenants or anybody else, for that matter.
  Mr. G. Campbell: I should like to respond to that. As I said before, it was on the question of why the house was empty that we talked about the onus of proof, not simply notification that a house has been empty after three months. The Under-Secretary has raised a new point, which is that local authorities wish to have this information so that they can help to get a house re-tenanted. In the case of the Service man I mentioned, will the local authority help him to re-let his house? If so, this is a new concept.
  Dr. Mabon: I cannot remember if the hon. Gentleman was present through all the stages of the Rent Bill. I sat through them all. I remember the argument about Service men being raised many times unreasonably to weaken the provisions of the Bill. A Service man is no different from other owners of property. A Service man letting his house must ensure that someone is left in charge to look after the house, quite apart from the person coming in in a contractual relationship with him as a tenant. There must be someone, perhaps a bank manager who is responsible for the payment of various charges on the house, perhaps running payments of different kinds. There must be a friend, if not a bank manager, who is responsible in case the house is damaged or in case the tenant behaves unreasonably while the service man is serving his country out in Brunei, or wherever it may be. One would expect that the local authority would try to ensure that these owners were properly notified.
  One of the few constructive points which have been made was that made by the hon. and learned Member for Pentlands about valuation notices. I take this point. I do not know whether the hon. and learned Gentleman is right. He usually is. I will certainly look into it and see if it is a fair point. In reply to my hon. Friend the Member for Dundee,
  1358
  West (Mr. Doig), if there are defects in the procedure we should naturally want to look into that aspect. If some of my hon. Friends who have not spoken care to write to me about any points of doubt they have, we shall certainly consider the points they raise. We shall improve the Clause, if it is possible.
  In our discussions with the local authority associations it was made clear to us that, if we were to have any change in Clause 20, but not the full change demanded by my hon. Friends and with no change in the time interval, we had to have some system of retrospection.
  As for the penalty, about which several points were made, may I ask this question? If it is reasonable for us to have this procedure or some modified form of this procedure on which to hang new Clauses 3 and 4 and make Clause 20 sensible, is it suggested that we should strike out the penalty? Perhaps I may repeat a question put to me by one of the treasurers. He said, "If that is the case, is there to be a penalty? If there is not to be a penalty, it will not work". The treasurer was impeccable in his logic. If there is no penalty it is conceivable that this will not work.
  5.30 p.m.
  The Government make this provision with great reluctance. We do not want to introduce penalties if they can be avoided. The impression must not get about that the Government have been indolent about this. I have worked very hard on it and my right hon. Friend has been most concerned to get the right answer. These two new Clauses, with Clause 20, are essential parts of the Bill. Some of my hon. Friends may have reservations as to procedure in one or two cases, but I ask them to stand with the Government on this issue for the sake of the local authorities and of those desperate for houses.
  Mr. Wylie: Does not the hon. Gentleman appreciate that, in the example he gave of the bank manager administering property in the absence of the owner, if the bank manager fails to notify the vacancy of the property then the owner is automatically guilty of a statutory offence, and not the bank manager? My understanding of the Summary Jurisdiction Act is that if there is failure to pay a fine of £20, imprisonment will follow. Is that right?
  Dr. Mabon: I have a list here of all the people who might be involved-solicitors and others—in charge of property. It would be an imprudent owner who decided that he would not leave anyone in charge of his property. That would be a remarkable situation. There are other Acts which impose penalties for various things which landlords fail to carry out but I will not go into that list now, for it is so long.
  The hon. and learned Member for Edinburgh, Pentlands is usually very good on these matters but I do not understand him on this. Does he say that there is a defect in the penalty and that there should be some other form of procedure? There is no other way than simply to adopt a procedure of this kind. This is the best that the Government and the local authorities have been able to devise and I commend it to the House.
  Mr. Edward M. Taylor: We have listened with no small annoyance to the hon. Gentleman. Throughout his reply he referred to the basic problem contained in Clause 20 later on and not to the detailed questions we put to him about the way in which the notification procedure will be administered. He has failed to answer many specific points.
  The tragedy is that, while we are going forward with a procedure which could drive some innocent people unknowingly into a situation of committing an offence, the hon. Gentleman has little if any idea of the nature and extent of that procedure. We have been told that the
  local authorities and others have been complaining about the extent of the problem but he has given no indication as to how many of the houses involved were municipal houses, how many were in redevelopment areas where it would not be appropriate to have new tenants, and how many were properties of such low assessments that the Clause would not be a deterrent.
  What concerns us is that innocent people will be put in a position, if they are not aware of the provisions, of being guilty of an offence if their property remains empty and they do not inform the local authority. It is all very well to say that people can read items in the newspapers but there are many statutory notices already in the Press, particularly under this Government. This is another example of the Government's obsession with regimentation and proposals which will drive people into the position of being criminals.
  The Government have not proved their case and as usual the hon. Gentleman, instead of paying attention to the case put by us and the reservations expressed by his hon. Friends, has blustered his way through without answering the questions put to him. In these circumstances, I ask my right hon. and hon. Friends and all others who see the injustice of this Clause to vote against it.
  Question put, That the Clause be read a Second time:—
  The House divided: Ayes 223, Noes 143.

  Division No. 197.]

  AYES

  [5.33 p.m.

  Abse, Leo

  Butler, Herbert (Hackney, C.)

  Dobson, Ray

  Albu, Austen

  Butler, Mrs. Joyce (Wood Green)

  Doig, Peter

  Allaun, Frank (Salford, E.)

  Cant, R. B.

  Donnelly, Desmond

  Alldritt, Walter

  Carter-Jones, Lewis

  Driberg, Tom

  Allen, Scholefield

  Chapman, Donald

  Dunn, James A.

  Archer, Peter

  Coe, Dennis

  Dunnett, Jack

  Armstrong, Ernest

  Coleman, Donald

  Dunwoody, Mrs. Gwyneth (Exeter)

  Ashley, Jack

  Concannon, J. D.

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

  Atkins, Ronald (Preston, N.)

  Conlan, Bernard

  Eadie, Alex

  Bacon, Rt. Hn. Alice

  Craddock, George (Bradford, S.)

  Edelman, Maurice

  Barnett, Joel

  Crawshaw, Richard

  Edwards, Rt. Hn. Ness (Caerphilly)

  Bence, Cyril

  Crosland, Rt. Hn. Anthony

  Edwards, Robert (Bilston)

  Bennett, James (G'gow, Bridgeton)

  Cullen, Mrs. Alice

  Ellis, John

  Binns, John

  Dalyell, Tam

  English, Michael

  Bishop, E. S.

  Davidson, Arthur (Accrington)

  Ensor, David

  Blackburn, F.

  Davies, Dr. Ernest (Stretford)

  Evans, Albert (Islington, S. W.)

  Blenkinsop, Arthur

  Davies, G. Elfed (Rhondda, E.)

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

  Boardman, H.

  Davies, Ednyfed Hudson (Conway)

  Faulds, Andrew

  Booth, Albert

  Davies, Ifor (Gower)

  Fernyhough, E.

  Boston, Terence

  Davies, Robert (Cambridge)

  Finch, Harold

  Braddock, Mrs. E. M.

  de Freitas, Sir Geoffrey

  Fitt, Gerard (Belfast, W.)

  Bradley, Tom

  Dell, Edmund

  Fletcher, Raymond (Ilkeston)

  Brooks, Edwin

  Dempsey, James

  Fletcher, Ted (Darlington)

  Broughton, Dr. A. D. D.

  Dewar, Donald

  Foot, Michael (Ebbw Vale)

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

  Diamond, Rt. Hn. John

  Ford, Ben

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

  Dickens, James

  Forrester, John

  Fowler, Gerry

  Mabon, Dr. J. Dickson

  Pursey, Cmdr. Harry

  Fraser, Rt. Hn. Tom (Hamilton)

  McBride, Neil

  Rankin, John

  Galpern, Sir Myer

  McCann, John

  Redhead, Edward

  Gardner, Tony

  MacColl, James

  Rees, Merlyn

  Garrett, W. E.

  Macdonald, A. H.

  Rhodes, Geoffrey

  Garrow, Alex

  McGuire, Michael

  Roberts, Goronwy (Caernarvon)

  Ginsburg, David

  Mackenzie, Gregor (Rutherghen)

  Robertson, John (Paisley)

  Greenwood Rt. Hn. Anthony

  Mackie, John

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

  Gregory, Arnold

  Mackintosh, John P.

  Rose, Paul

  Grey, Charles (Durham)

  Maclennan, Robert

  Ross, Rt. Hn. William

  Griffiths, David (Rother Valley)

  McMillan, Tom (Glasgow, C.)

  Rowlands, E. (Cardiff, N.)

  Griffiths, Rt. Hn. James (Lianelly)

  McNamara, J. Kevin

  Sheldon, Robert

  Hale, Leslie (Oldham, W.)

  MacPherson, Malcolm

  Silkin, Rt. Hn. John (Deptford)

  Hamilton, James (Bothwell)

  Mahon, Simon (Bootle)

  Silverman, Julius (Aston)

  Hamilton, William (Fife, W.)

  Manuel, Archie

  Silverman, Sydney (Nelson)

  Hamling, William

  Mapp, Charles

  Slater, Joseph

  Hannan, William

  Marsh, Rt. Hn. Richard

  Small, William

  Harrison, Walter (Wakefield)

  Maxwell, Robert

  Snow, Julian

  Haseldine, Norman

  Mendelson, J. J.

  Spriggs, Leslie

  Hazell, Bert

  Millan, Bruce

  Steele, Thomas (Dumbartonshire, W.)

  Heffer, Eric S.

  Miller, Dr. M. S.

  Summerskill, Hn. Dr. Shirley

  Henig, Stanley

  Milne, Edward (Blyth)

  Thomas, George (Cardiff, w.)

  Herbison, Rt. Hn. Margaret

  Molloy, William

  Thomas, Iorwerth (Rhondda, W.)

  Hooley, Frank

  Morgan, Elystan (Cardiganshire)

  Thornton, Ernest

  Horner, John

  Morris, Alfred (Wythenshawe)

  Tinn, James

  Houghton, Rt. Hn. Douglas

  Moyle, Roland

  Tomney, Frank

  Howarth, Harry (Wellingborough)

  Newens, Stan

  Tuck, Raphael

  Howie, W.

  Noel-Baker, Francis (Swindon)

  Varley, Eric G.

  Hughes, Emrys (Ayrshire, S.)

  Oakes, Gordon

  Wainwright, Edwin (Dearne Valley)

  Hughes, Hector (Aberdeen, N.)

  Ogden, Eric

  Wallace, George

  Hughes, Roy (Newport)

  O'Malley, Brian

  Watkins, David (Consett)

  Hunter, Adam

  Orme, Stanley

  Watkins, Tudor (Brecon & Radnor)

  Hynd, John

  Oswald, Thomas

  Wellbeloved, James

  Jackson, Peter M. (High Peak)

  Owen, Will (Morpeth)

  Whitlock, William

  Janner, Sir Barnett

  Padley, Walter

  Wilkins, W. A.

  Jeger, George (Goole)

  Page, Derek (King's Lynn)

  Williams, Alan (Swansea, W.)

  Johnson, Carol (Lewisham, S.)

  Paget, R. T.

  Williams, Alan Lee (Hornchurch)

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

  Palmer, Arthur

  Williams, Clifford (Abertillery)

  Jones, Dan (Burnley)

  Pannell, Rt. Hn. Charles

  Williams, W. T. (Warrington)

  Jones, J. Idwal (Wrexham)

  Park, Trevor

  Willis, George (Edinburgh, E.)

  Judd, Frank

  Parker, John (Dagenham)

  Wilson, Rt. Hn. Harold (Huyton)

  Kelley, Richard

  Parkin, Ben (Paddington, N.)

  Winterbottom, R. E.

  Kenyon, Clifford

  Pavitt, Laurence

  Woodburn, Rt. Hn. A.

  Kerr, Dr. David (W'worth, Central)

  Pearson, Arthur (Pontypridd)

  Woof, Robert

  Lawton, George

  Pentland, Norman

  Yates, Victor

  Lipton, Marcus

  Perry, Ernest G. (Battersea, S.)

  Zilliacus, K.

  Lomas, Kenneth

  Perry, George H. (Nottingham, S.)

  Loughlin, Charles

  Price, Thomas (Westhoughton)

  TELLERS FOR THE AYES:

  Luard, Evan

  Price, William (Rugby)

  Mr. Alan Fitch and

  Lyon, Alexander W. (York)

  Probert, Arthur

  Mr. Harry Gourlay

  NOES

  Allason, James (Hemel Hempstead)

  Dodds-Parker, Douglas

  Holland, Philip

  Astor, John

  Doughty, Charles

  Hooson, Emlyn

  Atkins, Humphrey (M'tn & M'd'n)

  Eden, Sir John

  Howell, David (Guildford)

  Baker, W. H. K.

  Elliot, Capt. Waller (Carshalton)

  Hunt, John

  Batsford, Brian

  Elliott, R. W. (N'c'tle-upon-Tyne, N.)

  Hutchison, Michael Clark

  Baxter, William

  Errington, Sir Eric

  Jennings, J. C. (Burton)

  Bell, Ronald

  Eyre, Reginald

  Johnston, Russell (Inverness)

  Bennett, Sir Frederic (Torquay)

  Fletcher-Cooke, Charles

  Jopling, Michael

  Black, Sir Cyril

  Fortescue, Tim

  Kaberry, Sir Donald

  Blaker, Peter

  Galbraith, Hn. T. G.

  King, Evelyn (Dorset, S.)

  Boyd-Carpenter, Rt. Hn. John

  Gibson-Watt, David

  Kirk, Peter

  Braine, Bernard

  Gilmour, Ian (Norfolk, C.)

  Kitson, Timothy

  Brinton, Sir Tatton

  Goodhew, Victor

  Knight, Mrs. Jill

  Bromley-Davenport, Lt.-Col. Sir Walter

  Gower, Raymond

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

  Bruce-Gardyne, J.

  Grant, Anthony

  Lubbock, Eric

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

  Gresham Cooke, R.

  McAdden, Sir Stephen

  Bullus, Sir Eric

  Griffiths, Eidon (Bury St. Edmunds)

  MacArthur, Ian

  Burden, F. A.

  Grimond, Rt. Hn. J.

  Mackenzie, Alasdair (Ross&Crom'ty)

  Campbell Gordon

  Gurden, Harold

  Maclean, Sir Fitzroy

  Cary, Sir Robert

  Hall, John (Wycombe)

  Maginnis, John E.

  Cooke, Robert

  Hall-Davis, A. G. P.

  Maude, Angus

  Cooper-Key, Sir Neill

  Hamilton, Michael (Salisbury)

  Mawby, Ray

  Corfield, F. V.

  Harris, Frederic (Croydon, N. W.)

  Maxwell-Hyslop, R. J.

  Costain, A. P.

  Harrison, Col. Sir Harwood (Eye)

  Maydon, Lt.-Cmdr. S. L. C.

  Craddock, Sir Beresford (Spelthorne)

  Harvey, Sir Arthur Vere

  Mille, Peter (Torrington)

  Crawley, Aidan

  Hawkins, Paul

  Mills, Stratton (Belfast, N.)

  Cunningham, Sir Knox

  Heald, Rt. Hn. Sir Lionel

  Monro, Hector

  Currie, G. B. H.

  Heath, Rt. Hn. Edward

  More, Jasper

  Dalkeith, Earl of

  Heseltine, Michael

  Morrison, Charles (Devizes)

  Dance, James

  Hiley, Joseph

  Mott-Radclyffe, Sir Charles

  Davidson, James (Aberdeenshire, W.)

  Hobson, Rt. Hn. Sir John

  Murton, Oscar

  Dean, Paul (Somerset N.)

  Hogg, Rt. Hn. Quintin

  Nabarro, Sir Gerald

  1362

  1363

  Nicholls, Sir Harmar

  Rossi, Hugh (Hornsey)

  van Straubenzee, W. R.

  Onslow, Cranley

  Royle, Anthony

  Walker, Peter (Worcester)

  Osborne, Sir Cyril (Louth)

  Russell, Sir Ronald

  Walter, Dennis

  Page, Graham (Crosby)

  Scott, Nicholas

  Weatherill, Bernard

  Page, John (Harrow, W.)

  Sharples, Richard

  Webster, David

  Pardoe, John

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

  Wells, John (Maidstone)

  Pearson, Sir Frank (Clitheroe)

  Smith, John

  Whitelaw, William

  Percival, Ian

  Steel, David (Roxburgh)

  Willis, Sir Gerald (Bridgwater)

  Pike, Miss Mervyn

  Stodart, Anthony

  Wilson, Geoffrey (Truro)

  Pink, R. Bonner

  Summers, Sir Spencer

  Winstanley, Dr. M. P.

  Pounder, Rafton

  Talbot, John E.

  Wolrige-Gordon, Patrick

  Prior, J. M. L,

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

  Wood, Rt. Hn. Richard

  Pym, Francis

  Taylor, Frank (Moss Side)

  Wylie, N. R.

  Ramsden, Rt. Hn. James

  Temple, John M.

  Ridley, Hn. Nicholas

  Thatcher, Mrs. Margaret

  TELLERS FOR THE NOES:

  Ridsdale, Julian

  Thorpe, Jeremy

  Mr. David Mitchell and

  Rodgers, Sir John (Sevenoaks)

  Turton, Rt. Hn. R. H.

  Mr. George Younger.

  Clause read a Second time, and added to the Bill.

  New Clause 4.—(NOTIFICATION OF UNOCCUPIED DWELLING-HOUSES.)
  (1) Subject to subsection (3) below, the owner of every dwelling-house which has remained unoccupied for a period of two months shall, within 14 days thereafter, give to the rating authority for the area in which the house is situated notice in writing of the date when the house became unoccupied, or in the case of a newly erected dwelling-house (including a dwelling-house produced by the structural alteration of a building), notice in writing of the date when it became available for occupation.
  (2) Any person who fails to give a notice which is required to be given under the foregoing subsecton shall be guilty of an offence and shall be liable on summary conviction to a fine of £20:
  Provided that it shall be a defence in any proceedings under this section that the dwelling-house in question became occupied during the period of 14 days mentioned in the foregoing subsection.
  (3) This section does not apply to a dwelling-house owned by a rating authority or to a dwelling-house which was last occupied by the owner thereof.—[Dr. Dickson Mabon.]
  Brought up, read the First and Second time, and added to the Bill.

  New Clause 5.—(PAYMENTS IN LIEU OF RATES BY ELECTRICITY BOARDS.)
  (1) For the purpose of calculating the payments which are, under the provisions of Part V of the Local Government Act 1948, to be made year by year by the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board respectively for the benefit of local authorities in Scotland for the year 1967–68 and subsequent years, the standard amount referred to in sections 96 to 98 of that Act (which relate to payments by the South of Scotland Board) and the standard amount referred to in section 99 of that Act (which relates to payments by the Hydro-Electric Board) shall be such sums as may be respectively prescribed by order made by the Secretary of State.
  (2) The power to make an order under the foregoing subsection shall be exercisable by
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  statutory instrument and any statutory instrument containing such an order shall not have effect unless approved by a resolution of the Commons House of Parliament.
  (3) As respects the year 1967–68 and subsequent years the said Act of 1948 shall have effect as follows—

  (a) section 96(2) shall be omitted;

  (b) proviso (b) to section 97(2) shall be amended by substituting for the words 'as defined by the last preceding section' the words 'as prescribed by order made under section (Payments in lieu of rates by Electricity Boards) of the Local Government (Scotland) Act 1966';

  (c) in proviso (d) to section 97(2) and in section 99(2)(c) for the reference to the year 1947–48 there shall be substituted a reference to the year 1966–67, and in sections 98(2) and 99(3)(a) for the reference to the calendar year 1947 there shall be substituted a reference to the calendar year 1966:

  (d) in section 98(6)(b), after the words 'North of Scotland District' there shall be inserted the words 'or by the United Kingdom Atomic Energy Authority';

  (e) in section 99(1). for the words from 'calculated' to the end of the subsection there shall be substituted the words 'prescribed by order made under section (Payments in lieu of rates by Electricity Boards) of the Local Government (Scotland) Act 1966';

  (f) in section 99(4)(c). after the words 'North of Scotland District' there shall be inserted the words 'or from the United Kingdom Atomic Energy Authority'; and

  (g) in section 145(2), in the definition of 'rate', the reference to Part V of the said Act of 1948 shall not include a reference to sections 96 to 99 of that Act.

  (4) As respects the year 1967–68 and subsequent years, local water authorities shall have power to make charges by way of meter or otherwise in respect of water supplied to any such premises occupied by the South of Scotland Electricity Board or the North of Scotland Hydro-Electric Board as are described in section 17(2) of the Water (Scotland) Act 1949, and accordingly the said section 17(2) shall cease to apply to those premises.—[Mr. Ross.]
  Brought up, and read the First time.
  Mr. Ross: I beg to move, That the Clause be read a Second time.
  I hope that we are now moving into much quieter waters. The Clause has two main purposes. The first is to enable the standard amount, which is one of the main factors determining payments made by electricity boards in lieu of rates, to be increased by Order to take account of revaluation. Standard amounts can be regarded as analogous to rateable values and if they did not go up in proportion to other rateable values, electricity boards would naturally pay a much smaller proportion of the total rate bill than before. They themselves have accepted that increases in the standard amounts cannot be resisted for that reason.
  The object of fixing new standard amounts by Order instead of by Statute, as was done after the 1961 revaluation in the 1962 legislation, is to give time for detailed discussion with the electricity boards and local authority associations and to prevent the need for a further statutory alteration at the next revaluation. By virtue of subsection (2), the Orders will be subject to an affirmative Resolution of the House of Commons.
  The second purpose, covered by subsection (3,c), is to change the base year for electricity production from 1947 to 1966. Electricity production in the base year sets the pattern for calculation. Most people will agree that a year as far away as 1947 is clearly somewhat unfair, especially in the case of the North of Scotland Hydro Board which was producing very little electricity in that year. The updating of the base year to 1966 does not in any way reduce the electricity boards' payments, but merely moderates the yearly increase. The local authority associations agree that the updating is reasonable.
  The other minor objections of the Clause are to take account of the electricity provided by the United Kingdom Atomic Energy Authority—subsections (3,d) and (3,f)—and to allow local water authorities to charge for water supply to electricity boards. I can assure the House that these arrangements are mutually acceptable to the local authority associations and to the electricity boards.
  Mr. Edward M. Taylor: The arguments put forward by the Secretary of
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  State are extremely reasonable, so far as they go, but there are several aspects of this which cause us concern. For example the right hon. Gentleman suggested that in using his new power to vary the amount on which the payment is made, account is only going to be taken of the factor of revaluation. It is obvious that if changes are being made in the valuations of other properties then a similar change should be made in the rates paid by the nationalised industry.
  I was rather alarmed to see that the right hon. Gentleman made no reference to the fact that account would also be taken of the new provision which we have just passed, that the commercial premises of all the electricity boards will now be paying rates quite separately, and this could be a very hefty sum.
  If this is to be the case and account is only to be taken of the factor of revaluation, then the electricity boards in Scotland will be paying a much greater sum in rates in future years than they are at present, far more than could reasonably be taken into account by the increase which we have just had in local authority spending, although this year it fell by 16·5 per cent.
  We need some clarification from the Secretary of State about whether he will take other factors into account as well as this simple factor of revaluation, because this could be a very considerable increase in totality.
  Could the Secretary of State tell us just how much is involved in the increase over these commercial premises, because, again, this is an important factor? Apart from that, may we know whether the Secretary of State will also take into account the very valid views put forward in the annual report of the S.S.E.B., to which I have referred, in which it is suggested that under the calculation of the 1948 Act, as it has since been amended, it believes that it is paying an additional £750,000 in rates compared to other electricity authorities in England and Wales?
  If we are to make a major change of this character, which will involve the electricity board carrying a much heavier percentage of rates then, either account should be taken of other factors, or it should be done in a gradual way.

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  From my reading of this Clause the Secretary of State has far more discretion and he can vary the Order quite considerably. I would like an assurance that he will take account of these factors. It is all very well talking about the interests of the local authorities, but at the end of the day if the S.S.E.B. and the North of Scotland Electricity Board have to pay considerably more, then the consumers will have to pay.
  We know that very considerable concern was expressed by both sides of the House, in a debate a few days ago on electricity, about the present financial situation of the South of Scotland Electricity Board. Could we have an assurance from the Secretary of State that the factors that I have mentioned will be taken into account, apart from the question of revaluation? We think that these should be taken into account to some degree and we would also like to know whether these matters have been discussed with the electricity boards and their approval obtained.
  We have no objection to the principle in the Clause, but we would like some clarification on the specific points to which I have referred.
  Mr. Ross: I can give the hon. Gentleman the assurance that all relevant factors will be taken into account. I am sorry to say that I cannot answer the question that he ought to have asked on another point, about the value of commercial premises. He did not get an answer then and he will not get one now. What I said then was that offices on operational ground would be additional to the standard amount. I can give an assurance that there would be a reduction in respect of that.
  The hon. Gentleman mentioned in the annual report of the S.S.E.B. and suggested that £750,000 more would be paid by the Scottish boards than by the boards in the South. This is one of the things that is now possible under the new way that we are doing this. We will be able to vary the standard amount by Order without waiting for legislation. I can tell him that if the boards prove their case to me, and the Treasury, then it will be possible to make an adjustment.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

  New Clause 6.—(AMENDMENT OF SECTION 42 OF THE LANDS VALUATION (SCOTLAND) ACT 1854.)
  For the purpose of the valuation roll for the year 1967–68 or any subsequent year, the definition of 'lands and heritages' in section 42 of the Lands Valuation (Scotland) Act 1854 shall not include electrical appliances for space heating which are situated in a building other than one occupied for any trade, business or manufacturing process and which are only so fixed that they can be removed from their place without necessitating the removal of any part of the building.—[Mr. Ross.]
  Brought up and read the First time.
  Mr. Deputy Speaker (Mr. Sydney Irving): It would be for the convenience of the House if we took with this Clause the two Amendments in the name of the hon. Gentleman the Member for Shettleston (Sir M. Galpern), after 'electrical', insert 'or any other'; and leave out from 'process' to end of line 6; and new Clause 8.—Domestic heating or washing machinery plant or appliances.
  Mr. Ross: I beg to move, That the Clause be read a Second time.
  This Clause deals with the Amendment of Section 42 of the Lands Valuation (Scotland) Act 1854, and in putting it on to the Notice Paper we demonstrate how carefully we listen to the debates that take place in Committee and show that we are prepared to be persuaded by reasonableness.
  Mr. J. Bruce-Gardyne: The right hon. Gentleman is scared out of his wits.
  Mr. Ross: I can assure the hon. Gentleman that it would take more than him to scare me out of my wits. This provides for electric heaters, especially night storage heaters in houses to be exempted from valuation. The Government have taken careful note of the representations to this effect made during the discussions in Committee and have consulted the local authority associations.
  The House will recollect that the Lands Valuation Appeal Court confirmed in November, 1965, the contention of the assessors that night storage heaters are rateable under present law because they are pertinents of the house. On the other

  1369
  hand, they are attached to the house in a very tenuous way—merely a special electricity lead—as compared to central heating systems requiring radiators and water pipes which necessitate structural alterations. There are about 40,000 houses with night storage heaters, which add about £5 to the rateable value of each, and the assessors' action in rating these has aroused much opposition, particularly as in England there is no addition to rateable value.
  The County Councils' Association, Edinburgh Corporation and the Assessors' Association do not approve the idea of overturning the decisions of the Lands Valuation Appeal Court by legislation. On the other hand, all the other associations consulted think that in practical terms night storage heaters cannot be regarded as fixed pertinents of the house.
  The Government accept the general principle that the courts must continue to decide what installations are rateable in the light of the general principles of valuation law but there is justification for Parliament overturning a decision in this case. The Lord Advocate points out that where a change in the law has practical advantages the fact that it results in some degree of untidiness in the code of valuation law is of secondary importance.
  The Government have also carefully considered the solution proposed by the hon. and learned Member for Edinburgh Pentlands (Mr. Wylie), which was to amend the section of the Lands Valuation (Scotland) Act, 1854, dealing with the valuation of industrial plant and machinery. We are satisfied that this Amendment would not have achieved the effect it intended, and could even have had the contrary effect, but the Government's Amendment proceeds on very similar lines.
  Electric heaters in houses, and some other residential buildings will be exempt from valuation if they could be removed without removiing any part of the structure of the building, just as industrial plant, except heating and lighting appliances—and this was where the hon. and learned Gentleman's Amendment went wrong, are exempted if they can be removed without affecting the structure of the building. Night storage heaters will clearly be exempt under this, and
  1370
  so will other types of electric heater which are only fixed by two or three screws, for example strip heaters fixed to skirting boards.
  The Clause does not, however, specifically exempt washing machine appliances, as the hon. and learned Member for Pentland suggested, first, because the court's decision, now being overturned, related to electric heaters only; secondly, because very few washing machines are fixed and plumbed in to the house; thirdly, because the rateable value, if any, would be negligible; and, fourthly, because it might create, as I am sure that it would, a demand for the specific exemption of all sorts of other appliances fixed to the walls or floors of houses.
  With this explanation and appreciation of the difficulties of even making this change and how it might lead to consequential demands for other changes which have to be resisted I hope that the House will accept the Clause. We have made this move which is consistent with the pledge of re-examination given by my hon. Friend in Committee. We are limiting ourselves to the change made by the decision of the court.
  6.0 p.m.
  Mr. Wylie: I think that what the Secretary of State said will be widely welcomed throughout the country. As he pointed out, the decision by the Lands Valuation Appeal Court came as a surprise to many people. I am not questioning in any way the decision, which was clearly right, in my view, but many lay people, in particular, were surprised by it. As the right hon. Gentleman said, in England these appliances are not rated, and it seemed to us only equitable that the same situation should prevail in Scotland.
  I was interested to hear what the Secretary of State said, in his very long explanation, about how difficult it has been, and is, to amend the law. I agree that any amendment of the law is bound to result in some anomalies. One cannot interfere with any aspect of the law without creating certain anomalies. But the whole of our valuation law is a series of anomalies. It is all artificial. I congratulate the Government on agreeing at long last that this can be done, and it

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  has been done without the fearful complications which were forecast.
  I am glad that the Secretary of State is present so that I can remind him of what happened on 22nd December last year. I asked him whether he proposed
  "to introduce legislation to amend the law of valuation in Scotland following the recent decision of the court that off-peak electric storage heaters fall to be regarded as heritable for valuation purposes."
  The right hon. Gentleman replied:
  "No, Sir. I do not think that it would be wise to attempt to define by Statute which installations and other improvements to property are heritable and which are not."—[OFFICIAL REPORT, 22nd December, 1965; Vol. 722, c. 2091.]
  That was not an answer to the Question. As often happens, the right hon. Gentleman did not give an answer to the Question.
  Mr. Ross: It was a very good answer.
  Mr. Wylie: It was a very good politician's answer. All that I was asking was whether something could be done to overturn or modify the decision of the court. It could easily be done, and it has been done, and for that we are grateful.
  I do not accept the criticisms made here and in Committee of my attempt to draft a Clause dealing with the matter. I have looked at it carefully since. It may be a matter of opinion, but I am satisfied that the wording which I put forward was adequate, However, that does not matter in the slightest; the job has been done.
  On plumbed-in washing machines, it is quite true that at this moment they are not subject to valuation. But there is a danger that on the basis of the decision to which the Secretary of State referred they may be subject to valuation one day. It may be that the extent to which plumbed-in appliances are used is not sufficient to justify an assessment by an assessor. All that I should like to say is that we would have preferred the Secretary of State to go the whole way and to deal with this matter as well. If the day comes that plumbed-in washing appliances are to be valued, we shall take the same steps as we have taken in this matter and ensure, even after a lot of trouble, that the matter is put right.
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  We are obliged to the Secretary of State for the way in which he proposed the Clause.
  Sir Myer Galpern: I beg to move, as an Amendment to the proposed Clause, after "electrical"——
  Mr. Deputy Speaker: Order. The hon. Gentleman's Amendments have only been selected for debate. He cannot move them.
  Sir M. Galpern: I am sorry, Mr. Deputy Speaker.
  I welcome the new Clause, because it indicates that my right hon. Friend the Secretary of State realises the need for a review of the entire system of valuation. The purpose of my Amendment is to cover all forms of space heating in household property. I fail to see the distinction between the form of space heating which the Clause proposes to exempt from rateable valuation and any other form. Does the Clause go far enough? Apart from the exemption which is proposed by the Clause, if a householder or house owner decides to install some other form of space heating he can find himself liable to an increased valuation of up to 10 per cent.
  We all recognise that in this modern age central heating is not regarded as a luxury, any more than one would regard a refrigerator or washing machine as a luxury. Since the passing of the Clean Air Act, 1956, which empowers local authorities to designate smoke controlled areas, thousands of owner-occupiers have been compelled to address themselves to the problem of how they are to meet the statutory requirements of the Act. I know of many cases in which owner-occupiers had no thought of installing central heating until the local authority designated the area in which they resided as a smoke controlled area. Then they decided, on examining the propositions put before them, to install, say, a gas heating system.
  Surely what those people are achieving is exactly the same as is achieved by night storage heaters. Why should they be penalised by a 10 per cent. increase in valuation when, first, they are complying with the Act, and, secondly, merely achieving exactly what the people will who have night storage heaters are achieving and who are to get exemption?

  1373
  As soon as the assessor discovers that a form of central heating has been installed, whether it be night storage, gas-fired or oil-fired central heating, he increases the valuation of the property. The remarkable feature is that the Government make a substantial contribution to house owners for the conversion of old fashioned systems of heating to modern forms of heating, and this is completely swallowed up by the increased valuation which the local assessor makes. Surely this is folly.
  It is in the national interest that we should do whatever we can to combat smoke pollution. During the last few years people in Glasgow who have not been there for a number of years have remarked on the tremendous transformation which has taken place in the cleanliness of the air in the city which has been brought about by people who have been subjected to the provisions concerning smoke controlled areas and who have, to a large extent, installed central heating systems in respect of which they have to pay additional sums in rateable value. If anything is needed in the national interest, it is a wider adoption of more modern methods of heating than the old-fashioned coal fire.
  I accepted what my right hon. Friend the Secretary of State said on Friday, when opening the new headquarters of the Coal Utilisation Council, in Glasgow. He criticised people in Scotland for not being as central heating minded as people in other parts of Britain. He said:
  "The era of central heating is here, but not fully, because only one home in 10 in Scotland has this amenity. Householders, however, are insisting on standards of heating that are more worthy of modern days."
  My right hon. Friend went on to say:
  "One of the interesting things is the growing provision and demand for better housing and better amenities in these houses. There is no doubt that the days when we used to get round one fire in the house are no longer acceptable."
  Why is it thought that a house-owner who does not install night-storage heating and decides that to meet his needs some other form of central heating is more suitable or practical should not obtain a similar exemption from increase in valuation as is proposed in the new Clause? I cannot see the logic of it.
  Why does my right hon. Friend the Secretary of State give added emphasis
  1374
  to one nationalised industry as against another? It is conceivable that gas boards may one day, if they have not already done so, be able to evolve a form of storage heater operated by gas, but under a Clause like this it would not be exempted. Only if house owners install night-storage heaters run by electricity is there to be exemption. This is unfair, particularly because my right hon. Friend, when making his remarks about people's failure to adopt central heating, was showing favouritism or bias wholly in favour of electricity boards when opening an establishment the purpose of which was to boost the sale of coal and associated products. A wider concession would be in the interest of every homeowner. Local authorities, for example, provide under-floor heating and various other forms of space heating, and I cannot see why these other versions of space heating should be excluded.
  It may be argued that certain types of central heating which are installed form part of the building. The new Clause refers to appliances
  "which are only so fixed that they can be removed from their place without necessitating the removal of any part of the building."
  There might be an argument that the installation of space heating by gas or by oil would involve the removal of part of the building, but what exactly is meant by this expression? I have gas-fired central heating, which I could remove if I wished without removing any part of the building. To install it I might have to bore a few holes in the floor to pass up pipes and to screw down a few radiators, but I could remove the whole installation without moving any part of the premises.
  I therefore appeal sincerely to my right hon. Friend the Secretary of State not to discriminate between one type of space heating and another and to show in a practical fashion that he meant what he said on Friday, when opening the new showrooms, that he wants to encourage home-owners or others, perhaps even tenants, to install or to go in for space heating rather than the old coal fire. He could do so by accepting my two Amendments to the new Clause.
  6.15 p.m.
  Mr. Bruce-Gardyne: It is always a pleasure to have signs of repentance from the Government Front Bench, and we certainly had a very different speech from

  1375
  the Secretary of State this evening from the one that we were given by the Under-Secretary of State when we discussed this matter in Committee. Indeed, when we listened to the hon. Gentleman on that occasion, one had an impression that the whole law of rating in Scotland would fall apart if any concession were made in this respect. I am delighted to find that the Secretary of State has eventually decided that that is not so and that it is possible to make a concession in connection with space storage heaters, which will be regarded as a very reasonable concession by a great many people in Scotland who felt that the decision of the Lands Valuation Appeal Court the year before last was unreasonable.
  I prefer the broader based Amendment of my hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Wylie), which, it seems to me, could eliminate any danger of a recurrence of that sort of problem. I do not, however, know whether the adoption of the Government's new Clause, which, in effect, will overturn the decision of the Lands Valuation Appeal Court in this matter, might discourage the courts from assessing for rating purposes items such as washing machines, which would be included by my hon. and learned Friend's new Clause. The Secretary of State said that most washing machines were not plumbed-in. I do not know the figures, but I should have thought that plumbed-in washing machines were frequently used.
  My own view would be that the Government's Clause might give rise to further complications. Nevertheless, in view of these signs of good will by the Government, and of the explanation given by the Secretary of State for not widening the scope of the Clause, it would be churlish to press him much further, at least until we see whether the courts might be inclined to extend the rating and valuation rule to cover washing machines. Meanwhile, the substance of the case which was made from both sides of the Committee—and I pay tribute to hon. Members, like the hon. Member for Midlothian (Mr. Eadie), who pressed the Government hard on this matter—seems now to have been accepted by the Government and I am glad to see it.
  Mr. W. Baxter: While I welcome a step in the right direction such as has been
  1376
  conceded by my right hon. Friend the Secretary of State for Scotland in excluding from valuation electrical appliances used for space heating—and apparently this concession is based upon what is more or less the practice in England—I think that a glorious opportunity to go much further concerning the heating of houses has been missed.
  As my hon. Friend the Member for Glasgow, Shettleston (Sir M. Galpern) has said, there are difficulties even in giving a proper interpretation of the Clause. In Canada, frequent and effective use is made of space-heating appliances by which the warm air is channelled through ducts beneath the floor. These appliances can be made of compressed paper, they are easy to affix and they can be worked from a small central heating plant based more or less upon electricity. Would that type of installation come within the scope of the Clause? If not, why not?
  Again, why should a concession like this, although I welcome it, be given to electricity as against gas and coal? In practice, a certain degree of electricity is needed in other heating installations to generate the water circulation and to get the water supply through even the standard piped system of heating a house. Why should we give a concession to electricity as against those other forms of heating?
  Another question which presents itself to me is whether the new Clause recognises the full facts of life about local authority houses, because many of them are being built with a dual-purpose back boiler in the living room fireplace, and the dual-purpose back boiler heats not only the domestic water supply but also the little central heating plant which heats three radiators on the standard system of water heating. Should they be within the ambit of higher valuation? It is no more expensive for the local authority to build those houses in this more modern and up-to-date manner than in the stereotyped manner of putting in flues and fireplaces in all the bedrooms in a house.
  Has sufficient consideration been given to this? Cheek by jowl with that local authority house is a house with under-floor electric or gas heating, and another which has central heating, or space heating as it is generally called. It is all space heating. All the systems enumerated are space heating systems. Presumably

  1377
  the electrical appliances for space heating include those for night storage heating in which one puts in a wire for night storage. Why should there be a discrimination between a house on which there is extra expense for structural work, as against another where there is no need to make such structural alteration? Why should the one get this concession?
  For the benefit of my hon. Friends I declare my interest, that I happen to have knowledge of central heating plant through being associated with the building industry. I mention this in case anybody thinks I am trying to get something over, which I am not entitled to.
  However, to my mind, here was a great opportunity for the Secretary of State for Scotland, and for this Parliament, to deal with this matter in a more realistic manner and on a more sensible basis. All heating is space heating. Why differentiate between one and another? In my opinion, this was the time to say that all space heating must be treated in like manner, and a house should not be evaluated on the basis of its heating system, but of its structural composition plus other aspects laid down by the valuators.
  This, to my way of thinking, is a niggling way of doing the job of evaluating. It will give rise to nothing but discontent and dissatisfaction, because one person will find he is rated for his heating while the person next door is not because he has a different system. This seems to me a stupid and nonsensical manner of doing the job.
  Earl of Dalkeith: It is so very seldom that one has occasion for patting the Secretary of State on the back that I, for one, would like to jump at this opportunity of recording my own congratulations to him on the step which he has taken in the right direction.
  Obviously, one has sympathy with some of the arguments put forward by the hon. Member for West Stirlingshire (Mr. W. Baxter), but I am not sure that he is carrying logic with him, because I believe that a number of the appliances which he mentioned, such as back boilers, are appliances which would necessitate pulling down half one's house if one were to remove from that house to another and remove the appliances, too. I think that the qualification in the new Clause,
  1378
  that removal of the appliance does not necessitate removal of any part of the building, is a fairly important one.
  Mr. W. Baxter: The hon. Member will surely recognise that if one is taking away one's night storage heating unit one may be compelled to take away completely a certain amount of wiring?
  Earl of Dalkeith: We could have a technical argument about this for a long time, but I think it is comparatively easy to withdraw wire from a piece of tube, but not so easy to remove a back boiler without knocking down half the chimney.
  With the extension, over the years, of smokeless zones I think we want to keep a reasonably open mind for the future as to what we consider should or should not be exempted for rating purposes, and although some of the arguments which both the hon. Gentleman the Member for Glasgow, Shettleston (Sir M. Galpern) and the hon. Member for West Stirlingshire put forward do command a certain amount of sympathy, I think we should thank the Secretary of State for having gone as far as he has at this stage.
  Mr. Eadie: It is rather remarkable that during the whole course of this debate there has been nobody on this side of the House who has congratulated my right hon. Friend the Secretary of State for Scotland——
  Mr. Manuel: We leave that to you.
  Mr. Eadie:—and I want to associate myself with the hon. Member for Edinburgh, North (Earl of Dalkeith) in expressing my thanks——
  Mr. Manuel: An unholy alliance.
  Mr. Eadie: Yes, it is an unholy alliance, but Dalkeith is in Midlothian. I want, in any case, to express my thanks to my right hon. Friend the Secretary of State.
  This does to some extent demonstrate that the Department of which he is the administrative head listens to the debates which take place in the Committee. As has already been mentioned, we had a rather long argument in Committee about this particular aspect of valuation, of night storage heaters. Many people are very grateful to my right hon. Friend. There are many miners I know who will be very grateful to him.

  1379
  In the debate in Committee I referred to the fact that there were hundreds of houses in which were discovered structural defects because the chimneys had corroded, and because it would have cost far too much money to have new solid-fuel systems installed, the tenants got what was, after all, second best—night storage heaters. They accepted the night storage heaters rather relucantly because that was a second best system, but there was added something more to the wound when the assessor came along and decided that the valuation of the houses would increase as a consequence of their having night storage heaters.
  Therefore, my right hon. Friend has shown remarkable sense in this, because by no stretch of the imagination could any argument have been made that the installation of a night storage heater requires structural alteration in the house.
  I shall not lengthen my speech because I want my hon. Friends to have a chance to speak if they want to. I simply want to say that I personally am grateful to my right hon. Friend, and I hope that other hon. Members will join in these sentiments.
  Mr. John Robertson: The discussion which gave rise to this new Clause was about electrical night storage heaters. Of course, there was a sense in which there was logic in exempting them from valuation, because the argument was, and it is true, that they are, in a sense, portable, although I agree with my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) that there is no purpose in just getting a night storage heater unless one has a special meter and special apparatus from the electricity board to get the benefits of it. Indeed, it is not just a matter of connecting it up with the electricity system. No matter; the heater itself is portable, and consequently there was some basis for the argument that it should not give rise to a new valuation. I do not think there will be any serious argument that it should be excluded in this way.
  6.30 p.m.
  There is some force in the arguments used by my hon. Friend the Member for Glasgow, Shettleston (Sir M. Galpern). This Clause gives a definition which goes far beyond night storage heaters. It
  1380
  includes almost all the better-known types of electrical space heating, including the warm air systems. Depending on the situation of the house, that system can be installed without any great structural alterations and can be withdrawn without removing any part of the house. However, it is a fully fledged space heating system, and the definition in the Clause would cover that kind of apparatus. It goes far beyond what it is intended to do.
  It could be said that this is a form of discrimination against all other fuels. If the word "electrical" had been left out so that the Clause applied to all kinds of space heating that could be withdrawn without removing any part of the building, there would have been an element of sense in it, but, if it is confined to electrical space heating, it would seem to suggest some discrimination. I am quite sure that the electrical industry will devise new forms of space heating to meet the words of the Clause.
  To deal with the point raised by my hon. Friend the Member for Midlothian (Mr. Eadie), I can sympathise with the problem of the people whom he describes, but there are thousands of people going into local authority houses who have no choice. They are getting central heating which will not be covered by the Clause, whether they like it or not. They might choose to have night storage heating, but that choice is not open to them.
  The Clause will favour the owner-occupier. The council tenant will not benefit from it at all, and again it is a form of discrimination which should be looked at carefully. Many council houses have underfloor electrical heating which, in my opinion, does nothing to enhance the value of the house. If the tenant of such a house wishes to put in night storage heating and not use the underfloor system already installed, why should he not do so? Why should he not have the advantage of this? The Clause favours a certain section of the community, and that is perhaps one of the reasons why it finds so much support on the other side of the House.
  Mr. Eadie: My hon. Friend the Member for Paisley (Mr. John Robertson) is trying to develop the argument that the Clause will favour the owner-occupier. Will he accept what I am saying, that

  1381
  there are hundreds of houses in Scotland which will benefit as a consequence of the Clause proposed by my right hon. Friend the Secretary of State, the occupants of which are not the owners?
  Mr. Robertson: My hon. Friend the Member for Midlothian (Mr. Eadie) is describing a situation which has developed in certain houses, but I understand that it relates to temporary housing and will not be a permanent feature. In a little time, that problem will disappear.
  Mr. Eadie: That is not so.
  Earl of Dalkeith: The hon. Member for Paisley (Mr. John Robertson) bases his argument on the fact that underfloor heating does not enhance the value of a house. Does he really mean that?
  Mr. Robertson: That is my opinion, but it is nevertheless a good argument. I do not consider that underfloor heating in high flats is a good form of heating. It is very expensive to run and a form of heating which most people in high flats would prefer to be without. They would rather find other forms of heating. When I say that underfloor heating does nothing to enhance the value, it may be that the very high cost of running such a system could be a deterrent and the rent of such a flat would decrease as a result of having it.
  Mr. Adam Hunter: Would not my hon. Friend the Member for Paisley (Mr. John Robertson) agree that there are thousands of people living in local authority houses who have night storage heaters because they have no other heating system in their bedrooms?
  Mr. Robertson: I accept that, and many houses have a form of space heating which carries warm air from the back of a fireplace installed in one of the downstairs rooms, so that the bedrooms upstairs are heated by a warm air duct, but that is not considered to be a space heating system.
  In any event, no one is arguing about night storage heaters. We are saying that this definition goes far beyond night storage heaters and describes almost all the popular systems of space heating based on electricity. The only two systems that I can think of which would not be exempted are the underfloor system
  1382
  and the hot water system of pipes and radiators. However, the electricity industry has not been selling the hot water, small-bore pressure type of central heating. It has been selling the warm air system. In my opinion, that system would be exempted by the words of the Clause, and it would not be the intention of my right hon. Friend to exempt such systems.
  We are not arguing about night storage heaters or heaters which are screwed down to the floor and plugged into an electrical circuit. I am saying that the Clause goes far beyond describing that kind of heater and includes many other types, and it will discriminate unfairly against other types of heating by gas, oil and solid fuel.
  The Clause requires to be looked at again to confine it to night storage heaters and the skirting board heaters described by my right hon. Friend.
  Mr. Doig: Once again, I find myself in agreement with the principle behind the Clause but in disagreement about the wording of it. Like my hon. Friend the Member for Paisley (Mr. John Robertson), I believe that, as worded, the Clause can be construed to go far beyond storage heaters. In my own house, I have an electrical hot air central heating system which would comply with the terms of the Bill. I can withdraw it without removing any part of the building, though it may well be that I should have to add on some parts to the building. If I removed a vent, I should have to replace it with a piece of wood, but I should not have to remove any part of the building.
  The Clause is not worded to carry out my right hon. Friend's intention. I, too, think that he ought to have another look at it. I agree with the principle of what he is trying to do. He wants to exempt storage heaters, but the wording is so framed that the Clause could be construed quite easily to include systems such as the one that I have. In case anyone thinks that I am arguing for myself, let me assure the House that I am doing the opposite. I am making sure that I do not benefit from the Clause.
  The words should be made watertight so that they cannot be construed to include an electrically heated system with

  1383
  hot air coming through vents, such as the one which I have.
  Mr. James Dempsey: I want to ask the Secretary of State for further information about the operation of night storage heaters. My right hon. Friend seems to have arrived at a very fine distinction as to which heating systems can be rated and which systems can be excused from rating by saying that, if it is plumbed in it is rated, but if it is screwed in it can be exempted. This, basically, is the general point of view which my right hon. Friend has attempted to present to the House. I am sure that everyone here appreciates very much my right hon. Friend's gesture in going so far to relieve this type of heating from rating, but I think that it leaves a certain amount to be desired.
  In Coatbridge, in my constituency, there has been a tremendous development to set up a clean air zone, but the type of heating provided by the local authority is not electric heating. In many cases it is a certain type of smokless fuel, and in others gas is used, and, as I understand it, not only owner-occupiers but the tenants of local authority houses are compelled to adopt these systems.
  If they provide night storage heating, as I understand my right hon. Friend's statement, they will not be exempt from rating. This seems to be positively unfair, because although I do not think that my right hon. Friend has set out deliberately to discriminate between one form of heating and another, this is what the Clause will accomplish. I feel, therefore, that my right hon. Friend should look again at this whole question, because we are all anxious to encourage not only owner-occupiers, but the tenants of local authority houses, to take a keen interest in their property and do the best they can to provide, even at their own expense, such things as space heating. If we are thinking of an area where electricity heating is not the type of heating that is encouraged, but where smokeless fuel is not only encouraged, but demanded, it seems that we will not achieve what the Clause hopes to achieve, namely, to relieve night storage heating from rateable valuation.
  I was not a member of the Committee which considered this matter. I did not
  1384
  hear the arguments, and I am anxious to be guided by my right hon. Friend. I have always taken the view that, if someone seeks to improve his house, he should not be penalised for doing so. I think that this is why my hon. Friend the Member for Glasgow, Shettleston (Sir M. Galpern) has asked that the whole question of space heating should be considered from the point of view of owner-occupiers.
  If someone decides to improve his home, it is not a commercial enterprise. His home is his castle, and I have always thought it unfair that a man who improves his home should be penalised by being rated on the improvements. A man who carries out such work not only invests his capital holding to provide comfort in his little castle, but invests his life in it, because he will pay for the improvements during his working life.
  I have some sympathy with the argument advanced by my hon. Friend the Member for Shettleston. I think that this question of being rated on space heating should be examined as soon as possible, but I do not take the view that that should be allowed to stand in the way of this well earned reform which my right hon. Friend has mentioned. I therefore earnestly request my right hon. Friend to examine the possibility of ceasing to discriminate between one form of space heating and another, because in many parts of Scotland people, be they owners or tenants, have no choice with regard to the type of space heating they use. They are restricted to the type provided by the corporation. If we are proposing to exclude night storage heaters from rating, we should exclude them in their entirety, irrespective of the type of heating which is used.
  6.45 p.m.
  Mr. Edward M. Taylor: In presenting this Clause to the House the Secretary of State for Scotland has had rather a tough time. Instead of the gratitude which he might have expected, he has received a certain measure of criticism. The hon. Members for Glasgow, Shettleston (Sir M. Galpern), West Stirlingshire (Mr. W. Baxter) and Coatbridge and Airdrie (Mr. Dempsey), suggested that the Clause did not go far enough. On the other hand, the hon. Members for Paisley (Mr. John Robertson) and Dundee, West

  1385
  (Mr. Doig) suggested that it went too far, and in particular the hon. Member for Dundee, West paid the right hon. Gentleman the fine compliment of suggesting that he was an expert on built-in hot air systems.
  We on this side of the House welcome the Clause because it concedes the point for which we have been agitating for a long time. It represents a real victory for those on this side of the House who fought for it, in particular my hon. Friends the Members for Glasgow, Hill-head (Mr. Galbraith), South Angus (Mr. Bruce-Gardyne) and my hon. and learned Friend the Member for Edinburgh, Pent-lands (Mr. Wylie). However one looks at this, it is clear that the Clause represents another victory for tough, penetrating, gritty, and purposive opposition, which we of course provide. This provision will be a real relief to those who have been concerned with this issue and to those who use night storage heaters. It might, for the latter, be some small compensation for the great increase of 16·5 per cent. which we have heard is to be made on the rates.
  There is a danger of under-estimating the change which has taken place here, because, when, in Committee on 28th July, at column 499, my hon. and learned Friend the Member for Pentlands asked whether a different form of words would be acceptable to the Government, the Under-Secretary of State said that when the Secretary of State was questioned about this in Parliament he made it clear he was not in favour of it, and that he was still of the same view, and, so, indeed, was the hon. Gentleman.
  Sir M. Galpern: Apart from crowing over what the hon. Gentleman claims to be a victory, can he say categorically whether he is against the suggestion contained in the Amendment to which I have spoken?
  Mr. Taylor: I hope to come to that very soon, and I promise the hon. Gentleman that I shall deal with it very fully. I must emphasise that we on this side fight hard on occasions, and in this case we are grateful that the right hon. Gentleman has conceded our point.
  Mr. Eadie: I do not think that the hon. Gentleman wishes deliberately to mislead the House. I am sure that he will
  1386
  concede, and indeed it is on record, that in Committee my hon. Friends the Members for Dunfermline Burghs (Mr. Adam Hunter), Glasgow, Gorbals (Mrs. Cullen) and myself were equally vociferous in trying to get this Amendment accepted? Will he please give some credit to this side of the House for putting forward an argument in favour of this proposition?
  Mr. Taylor: I am sorry if I appeared not to be courteous. It was my intention to congratulate the hon. Gentleman, and I apologise for not having done so soon enough.
  The hon. Member for Shettleston advanced his argument very ably in support of his Amendment. It is clear that people who have one form of heating will think it unjust that people with other forms of heating are to get relief, but the point to remember is that what we are doing here is removing an anomaly within the rating system. However unjust it might appear, we are putting right an anomaly in the rating system itself, because one type of heating did not involve what was normally regarded as a fixture, whereas other forms of heating, such as central heating, were fixtures in the context of rating law. We asked, not for a dramatic change in the rating system, but for the removal of an anomaly.
  We on this side of the House accept that many aspects of the rating system are unfair, and we hope at some time in the future completely to reshape it. This was guaranteed by the Labour Party when it was fighting the election.
  We have had a reshaping, the result of which has been to impose a heavier burden, and to make no difference to the shape of it. On the other hand, we have a situation at present when what should concern us is simply the removal of an anomaly. If we want a major change in the system to take account of all the arguments put forward by the hon. Member, we must wait until we have a Government prepared to look at the whole rating system and to see what changes should be made.
  One point which concerns us a great deal is that related to washing machines. The Secretary of State said that this provision does not apply to washing machines, which he thought a very small item

  1387
  in the total rating poundage, but if something is unjust the question of how much money is involved and how many people are concerned should not prevent it being put right. I was very concerned when the Secretary of State put forward the view that there was not a great deal of concern about washing machines. If something comes before the courts which results in people being penalised because they have washing machines of a certain sort we shall regard it as an injustice. Hon. Members on this side of the House would pursue the matter and hope to get the injustice put right.
  We very much welcome the new Clause. We are glad that the Government have accepted the arguments put forward from both sides of the House. The Amendment involves more than rectifying an anomaly. Rectifying the whole system will be one of the first tasks to which a Conservative Government will turn.
  Mr. Ross: I think that I should be moving a vote of thanks to the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) for the able way in which he handed out the prizes. He is very good at that so long as he is handing most of them to his own side. He said that he was waiting for a Government to come in which would sweep all the anomalies away from the rating system in Scotland. I remind him that the Conservative Government did try that in 1956, just 10 years ago, but they resisted every radical change in the fundamental anomalies of the rating system. If we are in power as long as they were, we shall introduce a really radical change in the rating system.
  The hon. Member spoke of what the "tough, gritty Opposition" managed to gain. This Clause is in my name. I was the person who had to be persuaded that it was right. I was persuaded by the joint efforts of the Scottish Standing Committee when its wishes were interpreted by the Joint Under-Secretary because I thought this was the right thing to do. Some of my hon. Friends were surprised that I did not go further. What we were dealing with was the situation arising out of a decision by the Valuation Appeal Court. It was that decision which led to the feelings of injustice about this particular form of central heating.
  1388
  The hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) said that it was a surprise decision on my part and he quoted something which I had said in December, 1964. This was to prove how easy it was to change the law. I told him that the first thing we had to do was to get a Bill to do so. There was no Bill before us then. We seized the first opportunity of doing what was right when we had a local government Bill before us in which this could be readily done. If we had not had this Bill before us the matter might have been further delayed. The hon. and learned Member has not been long in the House, but he will appreciate that one thing we have to be ready for is to seize an opportunity when legislation is before us.
  The hon. and learned Member admitted that the case about washing machines is hypothetical at the moment. We have a serious enough time dealing with anomalies we know of, without starting to think others up and legislating against hypothetical situations. His hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) would agree that the interpretation of the Amendment which the Opposition put forward would have given whatever hypothetically there was to give in respect of washing machines which are, will be, or might never be, in houses right away to washing machines in launderettes and commercial premises. I do not think that any of us would suggest that that is the first thing we should attempt.
  Mr. Wylie: I think the right hon. Gentleman is referring to the Amendment discussed in Committee, but new Clause 8 is specifically tied to domestic premises.
  Mr. Ross: I do not want to go into the matter too fully. It may be that I have been considering the Amendment which the hon. and learned Member moved in Committee, but my hon. Friend the Member for Glasgow, Shettleston (Sir M. Galpern) suggested that in logic we ought to extend this relief to all other forms of central heating.
  Sir M. Galpern: Space heating.
  Mr. Ross: Space heating, which includes central heating of all kinds. He suggested that we were discriminating by

  1389
  limiting the provision in this form. He went on to point out that it was wrong to penalise by increased rates owners who improve their property by installing central heating.
  Sir M. Galpern: I did not use the word "improve". I did not refer to it as an improvement.
  Mr. Ross: If we take an existing house without central heating and install central heating I suggest that we are improving that house. My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) went even further, and suggested that any kind of improvement should be regarded. What we are up against here is the Valuation Act itself. The basis of valuation is what someone would be prepared to pay annually to live in that house. The more one improves the house, automatically the greater the assessor's valuation.
  Mr. W. Baxter Mr. W. Baxter rose——
  Mr. Ross: My hon. Friend need not jump up to argue. This is the basis of valuation in Scotland at the moment.
  Mr. W. Baxter: May I——
  Mr. Ross: No, not at the moment.
  The Government's view is that it would be wrong to make a major breach in the rating resources of local authorities by exempting forms of central heating which undoubtedly involve considerable structural work on the premises. It is suggested that the pipes can be removed, but the assessor considers the pipes as part of the structure. By removing them one is removing part of the structure. It is a matter of the interpretation of, "the house and its appurtenances".
  The Government cannot accept the proposition that improvements to property should be exempted from rates as things stand because this is the basis of the rating system and we must put up with it until an alternative is found. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) mentioned many of these points and the answer to him is exactly the same. I wonder whether or not he read the new Clause, because he said that it should not be space heating as laid down in the Clause but structural considerations. But this is where we start from. It is the structural considerations
  1390
  which are important in relation to valuation, which is why we limited our new Clause to space heating.
  7.0 p.m.
  I should like to read the words, to show that this is not limited to any particular type or brand but includes whatever interpretation is placed upon the words by the assessors and, if necessary, by the court, It refers to any space heating appliances
  "… so fixed that they can be removed from their place without necessitating the removal of any part of the building."
  I do not think that there is justification, therefore, for saying that we are discriminating. We are removing an anomaly which arose from a decision of the Valuation Appeal Court.
  I am surprised that gratitude was not heaped on my shoulders as I expected. On second thoughts, I did not expect any. I know the Scots in Parliament. They always feel that if something which is being done is right, it should have been done anyway a long time ago. I was never very good myself at expressing gratitude. But even if hon. Gentlemen know nothing about Scottish history and Scottish tradition, the truth is that we do not show our gratitude so openly in Scotland. Indeed, the phrase "Scots love" is used when a husband and wife are narking at one another. We show our feelings for one another in an entirely different way.
  I thank my hon. Friend the Member for Midlothian (Mr. Eadie) for his kind words, which we certainly welcome. I am sure that my other hon. Friends will support this Clause, if demanded, in the Lobby.
  Question put and agreed to.
  Clause read a Second time and added to the Bill.

  New Clause 7.—(AMENDMENT OF SECTION 339 OF THE LOCAL GOVERNMENT (SCOTLAND) ACT, 1947.)
  Section 339 of the Local Government (Scotland) Act, 1947 (which relates to expenditure by county and town councils on special purposes), shall have effect as if in subsection (1A) thereof for the word 'Scotland' in each place, except the last, where it occurs there were substituted the words 'the United Kingdom'.—[Dr. Dickson Mabon.]
  Brought up, and read the First time.
  Dr. Dickson Mabon: I beg to move, That the Clause be read a Second time.
  This Clause seeks to extend the 1961 Act to permit Scottish local authorities to make payments to funds relating to events in the United Kingdom outside Scotland, whereas, as we know, they are confined at present to events or occurrences in Scotland and to funds of direct benefit to persons residing in Scotland. Section 339 of the Local Government (Scotland) Act, 1947, originally did not allow local authorities to contribute to disaster funds and so on, except those relating to their own areas. This was obviously too narrow, as was revealed at the time by the Auchengeich disaster a few years ago, when the then Government sponsored the 1961 Act.
  Even this, however, did not allow contributions to anything but Scottish funds. As a result, Scottish local authorities have been unable, because of the Statute, to contribute to the Churchill and Kennedy Appeals and the British Olympic Games Fund. More topically, Scottish local authorities cannot contribute, because of the Statute, to the Aberfan Disaster Fund. The sympathy felt throughout Britain for the survivors of the Aberfan disaster cannot be given expression by Scottish local authorities. Whether this is something which they wish to do is a matter for each individual authority to express, but, whatever their wishes, they can do nothing about it.
  I commend this useful Clause to the House and hope that it will have support from both sides.
  Mr. G. Campbell: We have come across this problem in the past and know to what the hon. Gentleman was referring. It is clear that some local authorities might want to contribute to the sort of disaster funds which he has mentioned, but are debarred from doing so by the present law. Clearly, a local authority might extend this to all kinds of funds and bodies not of the kind which the hon. Gentleman mentioned, which might not be in accordance with the wishes of all the ratepayers. Would he confirm that the approval of the Secretary of State is also necessary when a local authority intends to make a contribution of this kind?
  Mr. Adam Hunter: I happily congratulate the Government on the new Clause. Last Session, I tried to introduce a Private
  1392
  Member's Bill dealing with the same subject and I waited in the House on four Fridays in the hope that I would gain a Second Reading of the Bill. Unfortunately, I was obstructed on those four occasions by hon. Members opposite. I hope that they will not be so recalcitrant tonight as they were then.
  Mr. Michael Clark Hutchison: I think that I support the new Clause, but I would be glad if the hon. Gentleman would say exactly what is in his mind. Of course, I should be glad for local authorities to support disaster funds, but I am not sure that I would pay for their support to the Olympic Games, or something of that sort. What standards and guide rules will the Secretary of State follow?
  Dr. Dickson Mabon: I would say to my hon. Friend the Member for Dunfermline Burghs (Mr. Adam Hunter) that I appreciate his concern. There was originally some misunderstanding about this, which prompted some of the opposition at that time. I am sorry that he spent four fruitless days dealing with this matter. We have clarified the point to some extent.
  My answer to the hon. Member for Moray and Nairn (Mr. G. Campbell) is that the Secretary of State is consulted about this. I hope that will answer the point of the hon. Member for Edinburgh, South (Mr. Clark Hutchison), bearing in mind the local authority's own discretion and the Secretary of State's judgment—this can only be empirical; one cannot assess the nature of these things at the time.
  As amended, the Statute would mean that such moneys would be confined to events or occurrences in the United Kingdom or funds of direct benefit to persons residing in the United Kingdom. In the case of the Olympics, obviously, the people concerned will be going abroad, or, in the case of the next Commonwealth Games, coming to Edinburgh. I hope that we are all agreed that this is desirable.
  Mr. Galbraith: Is there any limit on the rate poundage? Is it 1d? I have that feeling, but I may be wrong.
  Dr. Mabon: I am sorry, but I cannot say whether there is a statutory limit——
  Mr. Hannan: Twopence.
  Dr. Mabon: I am grateful to my hon. Friend. The rate is 2d.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

  New Clause 9.—(NON-PROFIT-MAKING OPEN AIR SPORTS CLUBS.)
  Section 4(2) of the Local Government (Financial Provisions, &c.) (Scotland) Act 1962 shall be amended by inserting after the words 'are held on trust for use as an almshouse' the words 'or
  (c) are occupied for the purposes of a club, society or other organisation not established or conducted for profit and which are wholly or mainly based for the purposes of, or in connection with, open air games or for open air athletic sports', and in subsection (5) of the same section 4, for the words '(a) or (b) of subsection (2) of this section' there shall be substituted the words '(a) (b) and (c) of subsection (2) of this section'.—[Mr. Monro.]
  Brought up, and read the First time.
  Mr. Hector Monro: I beg to move, That the Clause be read a Second time.
  I was astonished that we took 65 minutes to agree that we all agreed with the last Clause and I hope that this friendliness and co-operation will continue for another five minutes, while I explain this one. Broadly and simply, the Clause sets out to make it mandatory for local authorities to reduce the rates on amateur sports grounds, recreation areas and on the buildings attached by 50 per cent.
  The practical purpose is to further the interests of and help sports and recreation in Scotland. We all know that there are grants from central funds and from local education committees to sports bodies and clubs, and that many councils give remission of rates to village halls. Some authorities give 50 per cent., including Dumfriesshire, so I am not speaking on behalf of my own constituency: it already does what I seek to provide that others shall do.
  Some authorities give a lower percentage—15 per cent. to 20 per cent. At the moment the power is permissive, and only a few local authorities use their power to give this relief. I am a great believer in giving local authorities the right to make their own decisions and to
  1394
  use their own discretion wherever possible, but on this subject some authorities seem unable to see the wood for the trees.
  I have moved the new Clause for four reasons. The first is the value to the community of good recreational facilities. The second is to encourage sport and thereby to help youth clubs and sports clubs through the provision of opportunities to fill in the evenings and Saturdays and Sundays. I am very much aware that by giving help in respect of these facilities we may also be saving local authorities a great deal of capital expenditure in the provision of youth clubs. Thirdly, there is a feeling that the present situation is unfair because some authorities give this relief and some do not, and it would be very much better if all gave the same remissions.
  Fourthly, it is important to realise that the cost would be relatively low, particularly in relation to the advantages. I remind the Minister that some clubs—for instance, a miners' welfare institute, of which I have the highest opinion—are derated entirely by Section 2 of the Charities Act, 1958. It is important to remember, too, that in England 50 per cent. remission of rates is given. I think that there is nothing that England can do that Scotland cannot do a good deal better.
  I will give some specific instances to show the burden of this situation. I start by mentioning the Gala Rugby Club, which has an assessed value this year of £235. Last year, on the old valuation, the club had to pay £314, and it would be considerably more this year. At Hawick, the valuation is £265; again, it will be higher this year. At Selkirk, a relatively small burgh, the valuation is £125; they paid £115 last year and it will be higher this year. At Jedforest, the figure is £135 and at Gala Cricket Club, £75. At the Hawick Junior Club Ground, Volunteer Park, the assessment is £210. They paid that amount last year and presumably will be asked for more this year.
  Mr. Manuel: I do not know too much about rugby clubs. We have not many of them in my part of the country. In connection with the well-known clubs which the hon. Member has mentioned, is there an admission charge to the game,

  1395
  or is the game open for anybody to see it without paying?
  Mr. Monro: We are delighted to have as many spectators as possible, but there is a small charge at the gate. But these are non-profit-making amateur clubs. That is the point.
  I will contrast this situation with that which exists in authorities which gave remission of rates. At Melrose, there is an assessed value of £245. Last year, they had to pay over £200 and they had a 15 per cent. relief from Melrose Town Council. At Langholm the valuation is £120 and they received a 50 per cent. relief from Dumfriesshire. At Kelso, a small burgh, last year the valuation was £180 and it is likely to go up in future. They would have had to pay no less than £208 last year. They had a 50 per cent. remission from the town council who appreciate the value and attraction of having first-class facilities available at the rugby ground there.
  I want the Minister to take this Clause seriously. I do not want him to advance the argument which he has advanced in the past that he cannot accept it because it would include clubs with exclusive membership. By this I expect he means the Edinburgh and Glasgow Former Pupils Clubs. The point is that these clubs play on school grounds and use school pavilions, and they therefore do not pay rates. He cannot use that argument to defeat the new Clause.
  If the Minister does not particularly like the wording of the Clause, I will inform him that I will accept the wording of Section 5(c) of the Local Government Act, 1962 which would cover most of the points which I am raising. I hope that he will accept this simple addition to the Bill. It is a worthwhile Clause and it will cost local authorities extremely little in comparison with the advantages which will be received.
  7.15 p.m.
  Mr. David Steel: I rise very warmly to commend to the House and the Minister the proposal in the new Clause so ably moved by the hon. Member for Dumfries (Mr. Monro). I am not certain that he declared his interest as president of the Langholm Rugby Club, but he
  1396
  has been deeply concerned particularly with amateur rugby for a very long time. We have both at different times taken up the matter with the "Minister of Sport", the Joint Under-Secretary of State, Department of Education and Science. If the Government go to the trouble of appointing a "Minister for Sport", with the object of encouraging the spread of amateur sports facilities and interest in sport among the young, it seems rather strange that they should resist this fairly logical demand which we have made.
  I should like to give some examples not only of the rugby grounds, which the hon. Member mentioned, but of other sports facilities. I think in particular of non-profit-making clubs such as bowling clubs, which have a very small membership. I had a meeting recently with two such clubs in my constituency. Their rating assessments have gone up considerably and, from a membership mainly of old-age pensioners of between 20, 30 and 40 people, they are asked to raise between £56 and £70 in rates.
  An even greater injustice arises here, as the hon. Member explained in relation to rugby grounds, in that different clubs are treated in different ways by local authorities under the present law. In Peeblesshire there are two bowling clubs in very similar circumstances, one in the Burgh of Innerleithen and the other two miles away in the landward area of Peeblesshire; and they are treated differently by the respective local authorities, but both face the same problems and provide the same facilities for the community.
  I believe that the hon. Member has put forward a very sensible and moderate suggestion and I hope that the Secretary of State will consider it sympathetically.
  Mr. G. Campbell: I hope that the Under-Secretary of State will consider sympathetically the principle of the new Clause. My hon. Friend the Member for Dumfries (Mr. Monro) might also have had to declare an interest as a selector of the Scottish Rugby XV, because the Borders have at times supplied as many as half of that XV. Clearly, anything that will make it more difficult for rugby to continue in the way that it is carried on in the Borders is something which Scotland as a whole would regret.
  Dr. Dickson Mabon: I do not dissent from the general point of the argument about the usefulness of this 50 per cent. rating relief to non-profit-making sports clubs. Indeed, although we do not have the figures—local authorities are not obliged to notify them to central Government—I know from communications which we have received that in the majority of cases where such application is made, it is granted. Very few complaints have come to our notice. The hon. Member for Dumfries (Mr. Monro) has long carried this ball very persuasively and at times even effectively, but he has never quite scored a goal.
  Mr. Monro: A try.
  Dr. Mabon: I am not a rugger man, but a soccer man, coming from a good school.
  What the hon. Member seeks to do by the new Clause is by mandate, by dictate of Parliament, to tell local authorities that, without their having a discretion, they would have to give rating relief, no matter who applied as long as the application qualified under the definition.
  I admit that I would like to see many clubs getting rating relief, but we must remember that many clubs are rich and successful—[Interruption.]—although I am not talking specifically about rugby clubs. The new Clause would apply to sports clubs generally and there are more sports clubs than rugby clubs, which may come as a surprise to the hon. Member for Dumfries. The Government must be fair and must consider all the possible consequences of a proposal of this kind.
  I have given the matter considerable thought, as have my officials, and we have tried to see a way round this difficulty. The simplest way to meet the objections specified by the hon. Member for Dumfries, who is able to quote certain clubs—the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) quoted other clubs—is to persuade the local authorities concerned to give consideration to this matter.
  I will not say that all the clubs mentioned tonight deserve rating relief, since I have not studied their circumstances or know the views of the local authorities concerned. If these authorities are doing their work efficiently, I am sure that they are giving due consideration to
  1398
  this matter, in which case we would, if we accepted the new Clause, be imposing on them a decision which they disliked.
  It is difficult to construct a provision which will not favour those clubs which do not deserve to be favoured and which should not be embraced in the general motives of the hon. Member for Dumfries in seeking this kind of mandatory relief. I am willing to urge local authorities—as I have done at meetings with the local authority associations—to be sympathetic to the requests of sports clubs which are not financially prosperous but which serve a useful social need.
  If the hon. Member for Dumfries or any hon. Member can think of some other way of bringing pressure to bear on local authorities which are, perhaps, not doing their duty in judging the local situation and any applications that may be made, I am prepared to listen and see if I can be of any help. However, I counsel the House not to make the mistake of imposing by mandate on local authorities something which, on the whole, I believe they are carrying out successfully in the exercise of the discretion which Parliament has given to them.
  Mr. David Steel Mr. David Steel rose——
  Mr. Speaker: Order. The hon. Member has exhausted his right to speak, but the hon. Member for Dumfries (Mr. Monro) who moved the new Clause, may speak again.
  Mr. Monro: I welcome what the Minister said in reply, although it did not satisfy me. After all, if this can be dealt with by Statute in England I cannot see why it cannot be done in Scotland. I cannot believe that Scotland cannot provide Parliamentary draftsmen of equal merit. For that reason I do not propose to ask leave to withdraw the new Clause.
  Question put and negatived.

  Clause 2.—(RATE SUPPORT GRANTS.)
  Dr. Dickson Mabon: I beg to move Amendment No. 1, in page 2, line 10, to leave out 'relevant' and to insert 'reckonable'.
  It might be convenient, Mr. Speaker, if, at the same time, we discussed Amendments Nos. 3, 4, 6, 8 and 12 which

  1399
  are, in substance, concerned with the same point.
  Mr. Speaker: If there are no objections, so be it.
  Dr. Mabon: The Bill at present refers to "relevant expenditure" in Clause 2 and "relevant local expenditure" in Schedule 1. These very similar phrases relate to very different things, however; gross expenditure in Clause 2, as against net expenditure after grants have been paid in Schedule 1. It is desirable to differentiate more clearly between these two quite distinct matters. The Amendment is, therefore, a tidying-up operation.
  Mr. G. Campbell: I am grateful for that explanation because the term "relevant local expenditure" has almost become a technical term which is understood by everyone concerned with local authority finance. I was not sure whether the hon. Gentleman would say that all this had been changed. If I understand his remarks aright, that position remains and the Amendment is designed to make it clear that the similar phrases relate to different things.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 2, in line 14, to leave out 'provided by local authorities'.
  This is a technical Amendment to ensure that the calculation of rate support grant is done on correct lines. To arrive at the aggregate of rate support grant, the Bill at present provides that there is to be deducted from total Exchequer assistance
  "… that portion which the Secretary of State estimates will be allocated to grants in respect of such services provided by local authorities as the Secretary of State may determine."
  The Amendment removes the words "provided by local authorities" because of the existence of services such as probation, which are not technically provided by local authorities, although financed by them.
  Amendment agreed to.
  Further Amendments made: No. 3, in line 28, leave out 'relevant' and insert 'reckonable'.
  No. 4, in line 30, leave out 'relevant' and insert 'reckonable'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 5, in line 36, at the end to insert:
  ', and for the purpose of determining the said amount and portion the Secretary of State may make such adjustments in respect of reckonable expenditure and grants as appear to him to be required to offset the effects on those factors of the constitution or alteration after the passing of this Act of any joint board'.
  This, too, is a technical Amendment. It is necessary to ensure that the amount of rate support grant is not affected by the creation of a joint committee or board. The example might be given of a joint police committee set up under the proposals announced for the amalgamation of police authorities. So long as the authorities are separate, the gross expenditure of each of them goes into the calculation of the aggregate of Exchequer grants, and the specific police grant is paid as a later transaction. If, however, two or more authorities are combined, the specific police grant is paid to the joint committee, and only the net expenditure of the constituent local authorities goes into the calculation of aggregate Exchequer grant. This would be wrong, and the Amendment therefore allows the Secretary of State to make any necessary adjustment.
  Mr. G. Campbell: Was this overlooked in Committee, in which case the hon. Gentleman and his Department have now decided to put the matter right, or did it arise out of the hon. Gentleman's discussions and negotiations with the local authority associations on the formulae?
  Dr. Mabon: The genesis of many of our Amendments—apart from the undertakings which we gave in Committee, to which we will come later—is our desire to deal with matters which we had not resolved or, alternatively, to clear up technical points which have arisen since. This is a point which my Department appreciated and which we desired to correct to make the provision perfectly sound.
  Amendment agreed to.
  Further Amendment made: No. 6, in page 3, line 14, leave out 'relevant' and insert 'reckonable'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 7, in line 27, at the end to insert:
  'Before making any determination under this subsection the Secretary of State shall consult with such associations of local authorities as appear to him to be concerned'.
  Following an undertaking given in Committee, this Amendment provides for consultation with the local authorities before the precise details of what expenditure ranks for rate support grant is determined by the Secretary of State. Among the things to be determined are housing subsidies and trading accounts. This might seem straightforward, but there are so many different kinds of payments towards housing and so many kinds of accounts which are partly in the nature of trading and partly in the nature of rating services that the details are best prescribed in the rate support grant Order, after consultation with the local authority associations.
  7.30 p.m.
  I was pressed to say why the Secretary of State proposed to take power in lines 22–24 to determine that certain payments should not rank for rate support rank. I then explained that this is a precaution because of the great number and variety of local authority services. It might be advantageous to local authorities if certain payments were excluded, because the result might be to increase the percentage rate of grant on the remainder, as hon. Members will appreciate might be and in fact is the case with housing subsidies. In Committee I promised to consider this and I am now meeting my obligation.
  Mr. G. Campbell: We are glad that the Government have tabled this Amendment, which we regard as an improvement to the Bill. The question of what may or may not be treated as a trading account could be important to local authorities. The Amendment will ensure that there will be consultation with local authorities before the Secretary of State takes these decisions.
  Amendment agreed to.

  Clause 4.—(VARIATION OF ORDERS ETC.)
  Amendment made: No. 8, in page 4, line 5, leave out 'relevant' and insert 'reckonable'.—[Dr. Dickson Mabon.]
  Mr. G. Campbell: I beg to move Amendment No. 9, in page 4, line 6, to leave out 'substantial' and to insert 'material'.
  The hon. Gentleman will recognise this Amendment as arising from discussions in Committee. We had hoped that the arguments we then deployed would have persuaded the hon. Gentleman to table an Amendment to meet our points. The Clause concerns the rate support grant Orders which will come forward if there are increases in costs which make them necessary. The Clause provides that it will be increased costs which were unforeseen and which could not have been foreseen when the original grant Order was made that will be taken into account and which will affect the amount of the rate support grant increase Order.
  We had hoped after putting our case in Committee that we had reminded the Secretary of State of the view which he himself had previously expressed about the necessity in future to consider more factors in deciding the amount of an increase Order than those which had previously been considered under the existing general grant system.
  We think that in this simple Amendment, which would change only one word, and in a later one, we have neatly performed for the Under-Secretary the change which was necessary. The Secretary of State will not simply have to consider that there has been a substantial increase in costs. He will also be able to decide on a rate support grant increase Order if there has been such an increase in costs, even if it is not substantial, as to affect local authorities and their services.
  I hope that I have reminded the hon. Gentleman of what we said in Committee. I have not seen any Government Amendment which seeks to deal with this point. About two years ago the Secretary of State said that when the time came for a change of the kind the Bill is making more factors ought to be taken into account. I hope that the Government will be more forthcoming tonight.
  Dr. Dickson Mabon: I would much prefer to meet the principal point of this argument in the discussion on Amendments Nos. 10 and 11. Hon. Members will recall that in Committee the hon. and learned Member for Edinburgh,

  1403
  Pentlands (Mr. Wylie), who made many good suggestions in Committee and who has even made one tonight, said that I ought to
  "consider the use of the word 'material'"
  in place of the word "substantial". I said:
  "Without commitment, I should like to think about that and see what can be done on Report, if anything."—[OFFICIAL REPORT, Scottish Standing Committee; 7th July, 1966, c. 154.]
  I can think of no more neutral a commitment that a Minister could make in Committee.
  Despite that, I took advice. Sticking narrowly to the question whether "material" is superior in this context to "substantial", we are advised not merely by the experts in semantics or in etymology but also by the lawyers, that it would be better to stick to "substantial". The Government accept this advice. I hope that the House will endorse the Government's view and not incorporate "material" into the Bill, because I am told that "material" is, if anything, open to slightly more misunderstanding than is "substantial".
  I should prefer it if the hon. Gentleman would raise the larger point on Amendments Nos. 10 and 11, when I will willingly give him a reply.
  Mr. G. Campbell: In the hope that in our discussion on Amendments Nos. 10 and 11 the Under-Secretary will say something helpful, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Edward M. Taylor: I beg to move Amendment No. 10, in page 4, line 21, to leave out "only".
  In view of what the Under-Secretary has just said, we approach this matter rather more hopefully than we otherwise would have done, because it is clear that the hon. Gentleman has given considerable thought to these Amendments. We are concerned about the prospects of local authorities which find themselves confronted with a sudden increase in their expenditure which could not reasonably have been foreseen.
  The Bill makes provision for unforeseen increases in the level of prices, costs and remuneration. We are considerably
  1404
  worried, because there can be other unforeseen increases in expenditure which are not directly related to, although they may be associated with, increases in prices, costs and remuneration. When we put forward this suggestion in Committee, the Under-Secretary very kindly said that he was prepared to consider this matter, again without commitment. He expressed the view that in regard to acts of God—these were amongst the matters we had mentioned—there was flexibility in relation to specific grants, although he could not give any guarantee in relation to plagues.
  This is a serious point. A situation could arise in which there could be unforeseen increases in local government expenditure. What better proof of this could there be than what we heard today from the Secretary of State? On the basis of the best estimates which we had and on all the advice of the experts about which the Under-Secretary has told us, it was indicated only a few weeks ago that it was probable that local government expenditure in Scotland would rise by about 9 per cent.
  This is what the Secretary of State said in introducing the Bill in June, 1966. Today, we learned that there has been an increase of over 16 per cent. This is just the kind of thing which cannot be foreseen. If we had a Government who had a good record in prophecy, if they had a good idea of estimating, and if their estimates had proved to be reasonably accurate, we might be prepared to leave this matter. The tragedy is that in almost every single aspect of Scottish affairs the Government's ability to prophecy and estimate has not been 100 per cent. In the matter of prophecies they have not borne comparison with Old Moore's Almanack and other less reputable prophets. In these circumstances, we must, for the sake of local authorities, have some kind of reservation to protect them.
  What kind of unforeseen things do we think of? For example, there is the question of the raising of the school-leaving age. This would involve a dramatic increase in spending. With a shortage of teachers and other difficulties in some areas about school building, it might be difficult to estimate even a year in advance when the decision will take place. If it were to take place in one of the periods

  1405
  of two years covered by an order, this would not be covered by Clause 4(1), because it would not be related to an increase in costs, prices or remuneration although, of course, there would be some increase for teachers. Basically, however, the dramatic increase involved would not be covered.
  Then there could, perhaps, be an unforeseen increase in the number of children voluntarily staying on at school. We have all been impressed by the larger number staying on. Indeed, the rate of increase has taken both the Conservative and Labour Governments by surprise. We could see a dramatic increase in this in future and there must be some safeguard for local authorities which would spend so much more on this should the situation arise.
  Then there is the problem of bad weather, which could seriously affect local authority expenditure. My hon. Friend the Member for Dumfries (Mr. Monro) has been agitating recently and effectively about problems experienced by some of his constituents as a direct result of bad weather. This involved the local authority in considerably increased expenditure. Is there provision in the Clause for such an eventuality? If there is severe bad weather, particularly in the north or in some of the agricultural areas, this can involve a considerable increase in local authority expenditure, yet there is no provision for it in the Clause.
  We appreciate that, in the case of a major epidemic, probably provision would be made by way of a special grant by the Government, but what about extra expenditure through such things as an influenza outbreak, which may be considerable and can involve local authorities in considerable expenditure? In these circumstances, we feel that some provision should be made for this.
  In Committee, the Under-Secretary of State, suggested that this was not the kind of thing which would happen nor be taken too seriously now. If he feels that, why cannot the Amendment be accepted? If this kind of situation is not likely to arise, why not have the Amendment in order to safeguard local authorities whose interests might be adversely affected? If there was a small increase in the services and expenditure of local authorities, we
  1406
  would not press this unduly, but the rate of increase in local authority expenditure is alarming and some provision must be made for the kind of circumstances we have mentioned.
  We cannot look to the future with any definite point of view. We do not know exactly what will happen but this kind of situation could well arise and we should make provision accordingly. If the hon. Gentleman feels that the Clause makes full provision already, I remind him that, in the various estimates and prophecies made by the Government on all kinds of subjects, from housing to unemployment and rate expenditure, their ability has not been of an acceptable standard. We know how difficult it is to make estimates but please let us make provision for local authorities which might find themselves with unforeseen increases. If the hon. Gentleman feels that this will not arise there surely can be no difficulty in accepting the Amendment and we hope that he will.
  7.45 p.m.
  Mr. Speaker: The House will have gathered that we are taking at the same time Amendment No. 11, in page 4, line 23, at end insert:
  'or an unforeseen expansion in the services provided by the local authorities'.
  Dr. Dickson Mabon: There is considerable resentment in the Scottish Office, and not only among Ministers, of allegations about the figures for estimating. The hon. Gentleman said that my right hon. Friend, in his speech in the debate in Committee on the Second Reading principle, estimated a 9 per cent. increase for the current year and that I had given today a figure of 16·5 per cent.
  If the hon. Gentleman the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) will do himself the courtesy to read what Ministers actually said, he will find that the Secretary of State's words were:
  "The figure for 1965–66 is likely to be about 9 per cent."—[OFFICIAL REPORT, Scottish Grand Committee, 14th June, 1966; c. 6.]
  In fact, it was 9 per cent. The figure I gave today is for the current year, 1966–67, and I explained what was meant.
  The hon. Gentleman does a tremendous discourtesy, not only here but elsewhere, in constantly misrepresenting figures we

  1407
  give him, through his constant misuse—and I must put my objections on record—of the words and figures we use. We are not always right by any means, and I do not mind the hon. Gentleman complaining when we are wrong, but I resent it when he misrepresents us and misleads everyone.
  Mr. Edward M. Taylor: If I have taken this wrongly, then I unreservedly withdraw. But it is fair to say, and I am sure that the Under-Secretary of State will agree, that a clear indication was given that every endeavour would be made by the Government to limit the increase in expenditure so that we would not have the kind of dramatic increases which took place on the last revaluation. But that is a separate point. If I have misunderstood these figures and have interpreted them incorrectly, I entirely withdraw, and I am sorry.
  Dr. Mabon: I am glad to have that withdrawal, although it was qualified by partisan political points. The hon. Gentleman's argument is that, since the Scottish Office—and I do not just mean Ministers—is incompetent in making estimates, so he thinks, being cleverer than most of us, we must have an element of the unforeseen written into the Bill. I can think of no more disastrous argument.
  The practice as between the Government and the local authorities is to try and get a reasonable understanding of what public expenditure will be involved, coupled with prices, costs and remuneration, the three essential elements which are kept as a fair reserve to be negotiated whenever an increase order is required between the rate support grant orders.
  The hon. Gentleman argues for a fourth element. I said in Committee that I would think about it again in the light of the arguments which were advanced. I was thinking particularly of such things as acts of God—flooding, and so on, and even plagues. I did not regard the word "plague" as being humorous but rather as extraordinary in being mentioned in this context. But, having considered the matter, I realise that if we introduce such a fourth element which is so ill-defined as this—the words "unforeseeable expansion" could not be more unclear—
  1408
  we would ensure very great difficulties for the Government in arguing their case on increase orders. The same circumstances applied to the previous system, which the hon. Member for Moray and Nairn (Mr. G. Campbell) knows very well.
  I cannot accept the view put by the hon. Member for Cathcart. If local authorities are to expand their programmes we hope that they will do so in a planned way. My complaint earlier today was that they were loading on to a revaluation year about 4 or 5 per cent. of expenditure because they wanted in some way or other to have it carried with less objections, which they thought would be the case in a revaluation year.
  I cannot understand the logic of that view. The ratepayers, never mind what the rate poundage is, know whether the rates have gone up or not when the bills come in. That is why I invited the hon. Member for Moray and Nairn to be with us on this and ask for the ironing out of these projects. I do not quarrel with the projects as such, but with the bunching of them together in one particular year in five. We should try to get a gradually rising graph without peaks. That would allow us sensibly to plan the expansion of services.
  Planning expenditure on services is difficult enough in the compass of two years and there may be an argument for having three or four years, but a period of two years is the option which we have taken. I plead with the hon. Gentleman to recognise that while we have given the points which he has made every consideration, we think that two years is a reasonable time in which to make these judgments. If any of the three elements now in the Clause is affected, then of course we will have an increase Order, but there should not be a fourth element. If a new service is introduced, it will almost certainly require legislation and the Government would then try to make special provision for a grant, which would be one of several ways of dealing with the matter.
  I hope that we can deal with roads and floods, and so on, later and show that we have other means without having to resort to an increase Order to meet the expenditure. Such a provision would not fit here without disrupting the harmony

  1409
  between the Government and local authorities, however, and I hope that the House will not accept the Amendment.
  Amendment negatived.
  Amendment made: No. 12, in page 4, line 27, leave out 'relevant' and insert 'reckonable'.—[Dr. Dickson Mabon.]

  Clause 5.—(REDUCTION OF GRANTS IN CASE OF DEFAULT.)
  Dr. Dickson Mabon: I beg to move Amendment No. 14, in page 4, line 34, after 'boards', to insert:
  'which are, in the opinion of the Secretary of State, of a similar type to the local authority or, as the case may be, joint board concerned'.
  Mr. Deputy Speaker (Sir Eric Fletcher): I think that it would be for the convenience of the Committee if with this we discussed Amendment No. 13, in page 4, line 33, after 'other', insert 'such'.
  Dr. Mabon: Amendment No. 14 implements an undertaking which I gave in Committee and makes it clear that when the standard of performance of a local authority is being compared with those of other authorities, regard shall be had only to authorities of a similar type. For example, a small county council would not be compared with a large county council and a small burgh would not be compared with a large burgh.
  Amendment No. 13 is another attempt to make the same point, but, having considered it, I counsel the Opposition that we have fulfilled our pledge and that our own Amendment is a little better.
  Mr. Wylie: As the Under-Secretary has said, Amendment No. 13 was aimed at the same problem. I entirely accept what he said about the desirability of his wording, and in the circumstances I agree that his Amendment is preferable.
  Amendment agreed to.
  Mr. Edward M. Taylor: I beg to move Amendment No. 15, in page 4, line 37, to leave out 'resources'.
  When we were considering this matter in Committee, the Under-Secretary said that he would consider the phrase "financial resources" to see whether he could be a little more definite. This is reported at col. 171 of the OFFICIAL REPORT of the Committee proceedings. During our discussion in Committee, several hon. Members agreed that financial resources
  1410
  ought not to be the sole yardstick and that a more appropriate yardstick would be the phrase "financial or other circumstances". With the phrase "financial resources" there is a danger that, whereas some poor authorities might have a more limited expenditure than others with substantial financial resources, those who were overspending might not be captured by the Clause.
  The Clause provides that the Secretary of State can reduce grants to an authority which is overspending. We want to make sure that that provision is fairly applied and that an authority will not be penalised simply because the total rateable value of its area is relatively low. If overspending is the crime with which the Clause will deal, we want to make sure that the Clause will be fairly applied throughout the country and not simply with regard to the financial resources available. I hope that, even if he cannot accept the Amendment, the Under-Secretary will ensure that the matter is covered.
  Dr. Dickson Mabon: As I said that I would, I have looked at this matter again and all that stands between the hon. Gentleman and me is what would appear to be excessive and unreasonable expenditure by a local authority. The hon. Gentleman argued with me that rate burden per head of the population was an index worthy of consideration and I insisted that it was better to look at rate burden per household and so on. The Amendment simply leaves out "resources" and as far as I can see does not make any discernible difference to the issue between us and I am happy to accept it.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 16 in page 5, line 12, to leave out subsection (3).
  The Amendment omits the definition of "joint board" from the Clause and the definition is transferred by a later Amendment to the Interpretation Clause.
  Amendment agreed to.

  Clause 6.—(SUPPLEMENTAL.)
  Mr. W. H. K. Baker: I beg to move Amendment No. 75, in page 5, line 47, after 'circumstances', to insert:
  'and in particular where it appears to the Secretary of State that in any county, because

  1411
  of the preponderance of small burghs, the formula does not truly reflect the intention of giving adequate grant for the additional expense of administering services in scattered rural areas, the Secretary of State shall have specific power to adjust the weighting for that particular county to such extent as in his opinion will secure for that county a fairer distribution of grant having regard to all the circumstances'.
  I am perfectly certain that the Under-Secretary is aware why the Amendment is suggested. He is also perfectly aware that during the course of the last two years he and I have had considerable correspondence on the subject and that I have spoken about it in the House and in Committee on several occasions. The effect of the Amendment would be that the Secretary of State would be able to make adjustments to the formula for the distribution of the grant in special cases. One special case is that of Banffshire, but there are probably examples in other counties.
  In a Written Answer to the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown), the Secretary of State, in dealing with the needs element of the rate support grant, said:
  "The remainder of the needs element will be distributed between counties, including all burghs, on the one hand, and cities on the other, in proportion to weighted population. Weighted population will consist of actual population plus a number of pupils at education authority schools (differently weighted according to stage of education plus children under 5, plus all persons under 15, plus all persons over 65, plus two weightings for sparsity. These latter will depend on:—

  (i) proportion of population to miles of road, and

  (ii) ratio of landward to total population."—[OFFICIAL REPORT, 26th October, 1966; Vol. 734, c. 182.]

  The operative phrase for the Amendment is the second of those two dependencies—ratio of landward to total population.
  8.0 p.m.
  It is pertinent to quote my own constituency in this respect. The population of Banffshire, landward and burghal is 45,000. Within that population we have 11 small burghs with a total population of 27,000 giving a landward population of 18,000. The population of the county is predominantly burghal through a sheer accident of history. The whole of the county suffers because of this. On the other hand, the background of the county is predominantly rural. The county
  1412
  cannot hope to benefit from the formula in the terms given in the Written Answer. I should like to remind the House what the Secretary of State had to say in a debate on the Local Authorities Scotland (General Grant) Order on 15th December, 1964. He said:
  "It may well be—I hope that it will be the last time we shall have a General Grant (Increase) Order of this type, because"—
  This is the point that I wish to bring out—
  "the equity of apportionment is, to my mind, suspect as between the central authority and local authorities and, indeed, as between services."—[OFFICIAL REPORT, 15th December, 1964; Vol. 704, c. 278.]
  That is the burden of this Amendment. Here we have again the same kind of formula as we had under the old General Grant system and again my constituency, and other like it, with a burghal population far out of proportion to the landward population, suffers as a result. I should like to make a comparison with the neighbouring county, Kincardineshire, which is similar, to all intents and purposes. It is not an exact comparison, but it is a relevant one. Kincardineshire is equal to Banffshire in its devotion to agriculture. It has a number of small industries, as has Banffshire, but its proportion of burghal to landward population is considerably different.
  The landward population in Kincardeshire is very much greater in relation to the burghal population than it is in my county. In the old context of the Genernal Grant Order, Kincardeshire received 73 per cent. of General Grant relative to the local expenditure. Banffshire received only 57½ per cent., making a difference of 16½ per cent. To say the least, that is a considerable amount when one compares the two counties, both from, the point of view of population and the turnover of cash.
  I understand that the new system will give a rate reduction to both counties of 4d. If both counties are getting the same advantage from this new Order it must follow that Banffshire is still as badly off, compared to other counties, as it was previously. The Government may not agree with the wording of the Amendment, but I trust that they will see the underlying principle and be able to accept it. It is necessary to alleviate the

  1413
  position because as time goes on it will get worse.
  Mr. W. Baxter: I should like to support the plea made by the hon. Gentleman the Member for Banff (Mr. Baker). This is not a compulsory power which would be vested in the Secretary of State; it would be a permissive power enabling him to increase grant to very rural areas, especially in the Highlands, and this would be in the best interests of all concerned. We all want to subscribe to the point of view of the hon. Gentleman for Banff, namely that we must not allow the burden of taxation in those rural areas to weigh too heavily upon them and militate against developments in those areas which we so much desire. This is not a constituency problem, it is one affecting; the rural areas of Scotland, and I advise my hon. Friend to accept the Amendment, as it gives the Secretary of State space to work in. In my opinion he is not compelled to do anything unreasonable.
  Mr. G. Campbell: The House has only a limited amount of information about the effect of the new formula on various local authorities in Scotland because, although we had the information in the Written Answer referred to, that does not take us very far. We are promised, in the Answer that we shall have further information after the Bill has become law.
  My hon. Friend the Member for Banff seems to have obtained some information about the effects upon his own county. The position of Banffshire under the previous formula was a difficult one and I am very conscious of this. For the historical reasons which my hon. Friend has given, Banffshire found itself getting less than other counties which ought to have been considered, so it thought, similarly.
  I hope that the hon. Gentleman will look at this, because in the Written Answer referred to it is stated that it was agreed,
  "that the formula should be one which would not give rise to major changes in grant as between different authorities …".
  This means that the position under the new formula will not make great changes between different authorities, and that they will be much the same, vis-à-vis each other as on the existing formula.
  1414
  I hope that the hon. Gentleman will consider the position of a county like Banffshire very carefully, not only for the sake of that county but for other counties which may find themselves worse off, compared to counties of similar size.
  Dr. Dickson Mabon: In the first place, even if the hon. Gentleman the Member for Banff (Mr. Baker) was absolutely right in principle, we should not need to accept this Amendment. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) urged that my right hon. Friend ought to have additional powers in this respect. We do not really need this Amendment, because the Secretary of State already has such powers. I draw the hon. Gentleman's attention to the Written Answer, part of which he read out. In addition to a very long description of the grant there are two more sentences, one at the beginning and one at the end which I should like to read. The first is:
  "… which will be submitted for the approval of the House after the Local Government (Scotland) Bill becomes law"
  and later on:
  "The whole formula will be subject to reconsideration when a further Rates Support Grant Order is made."—[OFFICIAL REPORT, 26th October, 1966; Vol. 734, c. 181–2.]
  It is important that we realise that because of the nature of this Bill the formula is flexible and can be altered as circumstances demand. The working party has been working hard on this matter for a long time. It is made up of men of immense knowledge drawn from all over Scotland who are trying to work out some kind of agreement which local authorities might make with the Government and acquaint themselves with many facts. The case of counties like Banff is discussed specifically.
  I was surprised that the hon. Member for Banff was able to give the figure of 4d. That was interesting. I must go into the matter more deeply because he has information denied to me. I am told that because of the nature of matters it is not easy—in fact it is almost impossible—to make any comparison with the previous system until the expenditure figures for 1967–68 are known. I should not like to give estimates in view of what we heard earlier. I am counselled that, if anything, Banff will do slightly better, but

  1415
  that again is a matter of conjecture and I should not like to be held to it.
  The matter has been discussed quite thoroughly in the working party and the formula published in HANSARD is what has been agreed so far. I have done my best to keep the Committee and the House informed of developments.
  The best way of dealing with the matter is to take the average rate bill per household. There is not much point in talking about how much comes from the Government-borne share as distinct from the local authority's share because there are some counties—for example, Sutherland—where a very high percentage of the rate bill is covered by Government grant. I do not think that that gives a proper reflection of Sutherland's position. The best guide is to work out the average rate bill per household.
  I gave the hon. Member for Banff some earlier figures, but the figures which I have now are as follows. In 1965–66, for Banff it was £20 17s. In Inverness County it was £21. In one of the counties of the hon. Member for Moray and Nairn, namely, Nairn, it was £20 4s. When one compares that with the average rate bill per household in Scotland, which is something over £36, one sees that the ratepayers in Banff are not unduly burdened compared with the position of ratepayers in other parts of Scotland. This is the proof of the pudding.
  I cannot accept the hon. Member's Amendment. If what he says is true, we can make the adjustment without writing the Amendment into the Bill. I will draw this discussion to the attention of the local authority associations in the talks which we shall shortly have with them. If the hon. Member's point is not taken by the local authority associations on this occasion, when the figures become clear in 1967–68, there is no reason why, if he feels that his case is still solid, he should not pursue the matter again in the hope that when the next grant order is produced it will take account of his point.
  I do not share the hon. Gentleman's view, although I admire his tenacity. It is perfectly right that he should pursue this matter if he feels that he has a case. This is the best that I can do at the moment. We shall consider the point in relation to the rate support grant
  1416
  order which is to come. If, in the hon. Gentleman's view, we make a mistake we shall have an opportunity later to correct it.
  Amendment negatived.

  Clause 7.—(REDUCTION OF RATES ON DWELLINGS BY REFERENCE TO THE DOMESTIC ELEMENT.)
  8.15 p.m.
  Dr. Dickson Mabon: I beg to move Amendment No. 18, in page 6, line 36, at the end to insert:
  and premises which would have been so entered if domestic water rate had been leviable in respect of them.
  (4) For the purposes of this section the gross annual value and rateable value attributable to the last mentioned premises shall, in accordance with the provisions of section 6 of the Valuation and Rating (Scotland) Act 1956, be determined by the assessor for the area in which the premises are situated and shall be entered in the valuation roll; any such determination shall be subject to appeal under the Valuation Acts and shall accordingly be notified to the occupier of the premises and to the rating authority concerned within the times for the issue of notices set out in Schedule 2 to the said Act of 1956'.
  Mr. Deputy Speaker: It would be convenient, I think, to discuss, at the same time, Amendment No. 17, in page 6, line 34, after 'dwelling house' insert:
  'means premises used wholly or mainly for residential purposes and'.
  Dr. Mabon: Clause 7 ensures that domestic rate relief is given, not only on ordinary dwelling houses, but also on the domestic part of mixed properties—for example, a house and shop combined—which are not entered in the ordinary valuation roll as dwelling houses but are, fortunately, so entered for purposes of water rating. The Amendment extends these arrangements to the domestic part of mixed premises which are not entered for water rate purposes for the simple reason that they do not have a public water supply. The typical example would be a house-cum-shop in the Highlands, or other country areas. It is not expected that there will be many in this category, but it is only fair that their occupants should get domestic rate relief on the part which they occupy as a house.
  The hon. Member for Galloway (Mr. Brewis) drew this matter to my attention in Committee, and I am grateful to him for doing so. He criticised our device

  1417
  of using the Water (Scotland) Act. The first defect of his suggestion was that full domestic rating relief was given on the entire premises, even if a considerable part was not domestic. Secondly, it would not provide any means of deciding what premises were mainly used for domestic purposes. By using the machinery of water rate assessment as proposed in the Bill and this Amendment we get over both these difficulties at considerably less length than in the English Bill, which prescribed separate machinery.
  Amendment No. 17 is paralleled by a Government Amendment in more precise terms. The purpose is simply to cover the point which was made in Committee. The defect of the Amendment is that if a property is used only as a house to the extent of, say, 60 or 70 per cent., the property as a whole would still get the full domestic relief, whereas under Amendment No. 18 the rateable value attributable to the domestic part is properly apportioned by the assessor and the domestic relief is payable on that only.
  Another material defect of Amendment No. 17 is that it might well extend the benefit of rates reductions far beyond what is understood by the term "dwelling-house". For example, hotels and lodging houses are premises used for residential purposes, and it is certainly not intended that they should get the benefit. It was not intended by hon. Members opposite, and certainly it is not intended by us.
  While I accept that Amendment No. 17 seeks to make the point which was made in Committee, I hope that the Opposition will agree that Amendment No. 18 proposes a better way of dealing with it.
  Mr. Wylie: In the context of Clause 7, we feel that Amendment No. 18 is the more appropriate Amendment. Amendment No. 17 was merely a feeler to draw attention to what appeared to be a gap in the drafting.
  Amendment agreed to.

  Clause 8.—(GRANTS FOR DEVELOPMENT BY PLANNING AUTHORITIES.)
  Dr. Dickson Mabon: I beg to move Amendment No. 19, in page 6, line 39, after 'Treasury' to insert:
  1418
  'and after consultation with such associations of local authorities as appear to him to be concerned,'.
  Mr. Deputy Speaker: It would be convenient if the Opposition's Amendment No. 20, in page 6, line 39, after 'Treasury' to insert:
  'and after consultation with such associations of local authorities'.
  were considered at the same time.
  Dr. Mabon: The Amendment is self-explanatory. It meets an obligation which I accepted in Committee.
  Mr. G. Campbell: We are glad to see the Amendment on the Notice Paper, but it does not entirely meet our suggestion. There is a difference between the Government's Amendment and our Amendment No. 20.
  The reason why the Government's Amendment goes only halfway is this. Perhaps the Under Secretary of State will be able to meet us on the other half. The specific grants to which the Clause refers will be deducted from the aggregate under Clause 2(2). All the local authorities are concerned about this because if one particular group of local authorities were to receive large specific grants that would automatically reduce what is left over to be divided among all the local authorities as rate support grant.
  If the Under-Secretary of State can tell us that his interpretation of
  "local authorities as appear to him to be concerned"
  is that it includes the three local authority associations with which he normally negotiates, this would meet the point. But we think that our Amendment would have covered it much better.
  Dr. Dickson Mabon: We wished to be consistent. It is conceivable that the Association of District Councils, or some regional grouping of local authorities—for example, the northern burghs or Border counties—might also demand audience of the Secretary of State on this subject even though they may have no locus standi. We therefore thought it better to say
  "with such associations of local authorities as appear to"
  the Secretary of State to be concerned. In this way, the question of who comes to the meeting is placed firmly in one corner, namely, with the Secretary of

  1419
  State, rather than be left to the associations to argue. I hope that the hon. Gentleman will accept this. We did it in previous Amendments in response to some of his objections in Committee. We thought that we should be consistent.
  Amendment agreed to.
  Mr. Wylie: I beg to move Amendment No. 21, in page 7, line 18, at the beginning to insert:
  'Without prejudice to the generality of the preceding provisions of this section any.'
  The Clause gives the Secretary of State certain powers to proceed by regulation. Those powers are broadly stated in subsections (1) and (2) and subsection (3) goes on to state that
  "Regulations under this section may provide",
  after which follows a number of detailed examples.
  This is purely a drafting Amendment. I do not regard it as essential, but in legislation of this nature it is common practice to have a proviso of this sort; and the Minister undertook to consider whether it was necessary or desirable to insert it. The Amendment is presented for that reason.
  Dr. Dickson Mabon: I am happy to accept the Amendment. Since the hon. and learned Member feels that we ought to make this further clarification, I do not quarrel with him and I recommend that we incorporate it in the Bill.
  Amendment agreed to.

  Clause 15.—(VALUATION ACCORDING TO TONE OF ROLL.)
  Dr. Dickson Mabon: I beg to move Amendment No. 24, in page 12, line 4, to leave out
  'manner of occupation and use'
  and insert:
  'mode or category of occupation'.
  This is a drafting Amendment to ensure that Clause 15, on valuation according to the general tone of the valuation roll, works as intended. Under the tone of the roll procedure, the "relevant factors" are to be taken as they actually are at the time the property is valued, while general market values are to be taken as at the time of the previous general revaluation,
  1420
  and subsection (2) of the Clause includes among relevant factors
  "the manner of occupation and use"
  of the lands and heritages.
  The inclusion of the word "use" might be taken to mean that the assessor is to assume that the premises which he is valuing can be used only for the purpose for which they are actually being used, which would considerably depress the value they would attract in the open market. The Amendment therefore substitutes the phrase
  "mode or category of occupation".
  This is a phrase which has been used by the Lands Tribunal, and it forms a useful precedent.
  Mr. Galbraith: I do not know whether I understood clearly what the Under-Secretary was saying. Does the Amendment mean that a building which was being used as a house might, for the purpose of valuation, be turned into an office? I thought that in valuation a house had to be valued as a dwellinghouse and that its use could not be changed. I may have misunderstood the hon. Gentleman, but he seemed to me to indicate that a valuer could consider a change of use. If the change were merely from one kind of shop to another, I would not quarrel, but if the alteration means that a dwellinghouse could be used as a shop or office this would be a very great change.
  Dr. Mabon: It is not really a great change, but I am advised that it is a question of interpretation of the words. The phrase
  "mode or category of occupation"
  is a phrase which was used in a recent Lands Tribunal case, admittedly an English case, but it makes a useful precedent in clarifying the position.
  Because of the word "use", we feel that there is danger that the assessor is to assume that the premises which he is valuing can be used only for that one purpose. I will not go into all the social complications with which the hon. Member is concerned. It is important to make sure that the assessor does not make his judgments on false assumptions because of bad Parliamentary phraseology. I am sure that the hon. Member will endorse this object right away.
  Amendment agreed to.

  Clause 17.—(AMENDMENT OF SECTION 22 OF THE VALUATION AND RATING (SCOTLAND) ACT 1956.)
  Dr. Dickson Mabon: I beg to move Amendment No. 25, in page 12, line 24, to leave out from beginning to 'and' in line 31 and to insert:
  'In section 22(1) of the Valuation and Rating (Scotland) Act 1956 (which relates to the exemption of churches, etc. from rates) for paragraphs (a) and (b) there shall be substituted the words "any premises to which this subsection applies, which belong to or are held by a religious body, so long as the use of the premises is wholly or mainly for purposes connected with that body and no profit is derived by the body from the use of the premises for any other purpose.
  This subsection applies to any church, chapel, meeting place, church hall, chapel hall or other similar building"'.
  Mr. Deputy Speaker (Sir Eric Fletcher): I think that it would be convenient if we were to discuss at the same time Amendment No. 26, in page 12, line 30, leave out 'use' and insert 'letting or renting'.
  Dr. Mabon: Yes, Mr. Deputy Speaker. During the sixth meeting of the Committee, we discussed the question of liberalising the rating exemption of churches—that is to say, the actual place of worship. I explained in reply to the debate that the local authority associations had been most unwilling to go further than the Bill as originally introduced, but I undertook to consult them further. This has been done and the Amendment is the result.
  The effect of the Amendment is to place churches in the same position as church halls were placed under the Valuation and Rating (Scotland) Act, 1956. Those of us who were in the House at the time will recall the arguments that were then used, but I considered that it was a wise step taken by the previous Government and it seems to me to be quite consistent that we should bring places of worship as well as church halls into this category. No rates will be payable on a church or church hall so long as the premises are used wholly or mainly for purposes connected with the religious body in question, and no profit is derived for use for any other purposes. The effect of this is that churches, like church halls at present, will be able to be used for functions other than church services
  1422
  without losing their exemptions from rates.
  In Committee I gave the example of the Arts Council's anxiety concerning music concerts being held in Paisley Abbey. I am glad to say that if the Amendment is incorporated in the Bill, it will be possible to use churches at all times for events such as religious concerts and religious dramas even if a profit is earned from them. No profit must go to the church organisation, however, if the building is used for non-church activities.
  Our Amendment follows a great deal of consideration and thought with the local authorities. It is more acceptable to the local authorities, and certainly to the Government, than the Opposition's Amendment No. 26. I hope that hon. Members opposite will support our Amendment in favour of their own.
  Mr. Edward M. Taylor: We very much welcome the Government's Amendment because it appears to deal fully with the points advanced in Committee by my hon. Friends the Members for Glasgow, Hillhead (Mr. Galbraith) and Edinburgh, North (Earl of Dalkeith) and South (Mr. Clark Hutchison).
  I have only one small point of clarification. We all know that in some new communities the church is also a place where people can gather for meetings. If the church is used by outside organisations, will "profit" cover only the balance of income over expenditure? In some of our new communities where public halls are not available, the church premises are used for meetings or organisations such as tenants' associations. It is always considered reasonable, and, I believe, is the practice, that payment is made simply to cover the cost of heating and lighting but making no contribution which could be regarded as profit. Subject to this one point of clarification, we very much welcome the Government's Amendment.
  Dr. Dickson Mabon: The words are deliberately drawn, I want to assure the hon. Gentleman. We understand the local authorities' concern that there may be abuse. We are confident that there will not. The answer to the hon. Gentleman's question is, Yes: provided they are legitimate overheads, the answer is yes.
  Amendment agreed to.

  Clause 20.—(LIABILITY TO BE RATED IN RESPECT OF CERTAIN UNOCCUPIED PROPERTY.)
  8.30 p.m.
  Mr. G. Campbell: I beg to move Amendment No. 27, in page 13, line 25, after 'months' to insert:
  'and unless the owner of the property can establish that the vacant state of the property is caused by the carrying out of modifications or improvement of the said property'.
  This is another of the points raised in Committee which the hon. Gentleman said he would put his mind to, to see if there was any way in which he could meet us. I observe that there is a later Amendment, No. 68, and I would say to the hon. Gentleman that if that is intended to meet our point, we do not think it does; we think it meets another point which is a good one, but not the one we are making here.
  I think that hon. Gentlemen on both sides of this House are in favour of properties being improved—of bathrooms being put in, and so on—and of modifications and improvements which bring houses and flats up to date and make them more habitable. I do not think there is any argument about that. The question is whether an owner of property should be charged what looks like being, if another Amendment goes through, three-quarters of the rates if, through no fault of his own, he is held up and cannot get done within the three months the improvements which need to be done to his house and at the same time cannot occupy the property—or it would be very inconvenient to occupy it.
  We believe that this should be one of the exceptions to be allowed, and included in the Bill. There are other exceptions included in Clause 21. They are reasonable ones, and we believe that this is also a very reasonable case—where a person can show that it is not his fault that the property is empty. It may be that he has done all that he possibly could to get the job started at the right time, but we all know of cases where unfortunately the builders do not come, or cannot come, at the time when those who are employing them wish them to come. We believe there should be an exception in this case.
  Amendment No. 68, which we shall come to, deals with the situation where
  1424
  there are structural alterations taking place and the house or flat disappears as a result—three houses get converted into two. That is an entirely different situation. Clearly, it is one which it is reasonable to meet, but that does not meet the point which we are making here, and I hope that the hon. Gentleman can tell us that he is sympathetic to this Amendment and that, if he cannot do something about it tonight, he will be able to make an Amendment in another place in due course.
  Dr. Dickson Mabon: With reference to the last point the hon. Gentleman made, I think that if he looks further at the Notice Paper—he probably has—he will see that we have taken this point in relation to the point of conversions——
  Mr. G. Campbell: That is exactly the point. I was referring to the hon. Gentleman's Amendment No. 68, and saying that I have seen that, and recognise that it is a good point, but that it is a different one from this.
  Dr. Mabon: I accept that. What I was going to say, in commenting on the hon. Gentleman's last point in relation to the Amendment later on, and which we shall discuss, was that we have given great consideration to this point, and have gone into this thoroughly, but the more one studies this the more the fear I expressed in Committee becomes even greater, that if it were written into the Bill that there should be exemption while modifications are being carried on, that would drive too large a loophole into the new provision for the rating of empty property.
  We have looked to see how we could tighten this up, but I am still of the same view that it is better to leave it to the local authority to exercise discretion in each individual case. It is very difficult to try to describe a general circumstance which we make mandatory on local authorities. In fact, the more one attempts to describe it, the more one gets into difficulties.
  Therefore, one must fall back, I believe, on the discretion of local authorities not to levy rates in cases where alterations are genuinely being carried out. I do not think local authorities will misuse the discretion.

  1425
  I do not see that we can make mandatory a provision giving exemption on the basis of modifications, however slight, being carried out. We have struggled quite a lot with this and have even looked into various cases, but it defeats us. I think it is better to leave it to the local authorities to take each individual case. After all, they are obliged to exercise a discretion, even after registration and the rest, because the local authority must still decide in each case whether or not the case is unreasonable in its eyes.
  That being so, public debate is the best safeguard that the individual concerned will not be unfairly treated but, on the other hand, that the existence of this will not be misused by the landlord to defeat the provisions of the Clause.
  Mr. Wylie: The Under-Secretary of State has put his finger on the difficulty which inevitably flows from the wording of the whole Clause. It was something which was argued at length in Committee upstairs. What we have said all along is that, if we remove the criterion of reasonableness that stood in Section 17 of the 1956 Act which is being repealed by the Clause, it is very difficulty to spell out the circumstances in which Clause 20 will not apply. The hon. Gentleman has described this difficulty very well. His concern about Section 17 of the 1956 Act is and always has been that it was unworkable because the onus was on the local authority to prove that the premises were being left vacant without reasonable cause.
  At an earlier stage, we sought to accept a shifting of the onus to put it on the occupier to show that the premises were being left vacant with reasonable cause, and an Amendment of that kind would have solved all the problems to which the hon. Gentleman has drawn attention.
  I am not happy about the wording of this Amendment, for the reasons which
  I have suggested. It is not satisfactory to have to spell out the detailed circumstances in which the provisions of the Section will not apply. But, unless something along those lines is done, the result may well be a great deal of hardship on an occupier who has to leave a property vacant for those reasons.
  What the Secretary of State is saying is, "We will rely on the local authorities to use their discretion in the matter, and they will not act unreasonably." In 1956, Parliament thought fit to incorporate a criterion on this matter, but the Government had departed from that criterion, and that is their difficulty.
  Even at this late stage, I ask the hon. Gentleman to consider the Amendment again and possibly consider whether it might be better to put in some general criterion of reasonableness which would probably solve the whole difficulty.
  Mr. G. Campbell: The reply which the hon. Gentleman has given us is not satisfactory. We believe that Parliament should guide local authorities in these matters, leaving it to their discretion to deal with individual cases. For that reason, we propose to press the Amendment.
  Mr. James Davidson: To prove our consistency in this matter I support the Government view on this, because I do not believe that the Amendment is well worded, and it will force a hole into the Clause. I have made the point emphatically enough already that we on the Liberal bench are opposed to the conception of the derating of unoccupied property, and the Clause goes some way towards the rating of unoccupied property.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 105, Noes 192.

  Division No. 198.]

  AYES

  [8.39 p.m.

  Alison, Michael (Barkston Ash)

  Bullus, Sir Eric

  Dean, Paul (Somerset, N.)

  Allason, James (Hemel Hempstead)

  Burden, F. A.

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

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

  Campbell, Gordon

  Dodds-Parker, Douglas

  Baker, W. H. K.

  Cary, Sir Robert

  Doughty, Charles

  Batsford, Brian

  Chichester-Clarke, R.

  Eden, Sir John

  Biffen, John

  Corfield, F. V.

  Elliot, Capt. Walter (Carshalton)

  Blaker, Peter

  Costain, A. P.

  Elliott, R. W. (N'c'tle-upon-Tyne, N.)

  Brinton, Sir Tatton

  Craddock, Sir Beresford (Spelthorne)

  Eyre, Reginald

  Bruce-Gardyne, J.

  Currie, G. B. H.

  Fletcher-Cooke, Charles

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

  Dance, James

  Fortescue, Tim

  Galbraith, Hn. T. G.

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

  Russell, Sir Ronald

  Gibson-Watt, David

  MacArthur, Ian

  Scott, Nicholas

  Gilmour, Ian (Norfolk, C.)

  Maginnis, John E.

  Sharples, Richard

  Gilmour, Sir John (Fife, E.)

  Maude, Angus

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

  Gower, Raymond

  Mawby, Ray

  Sinclair, Sir George

  Grant, Anthony

  Maxwell-Hyslop, R. J.

  Stodart, Anthony

  Cresham Cooke, R.

  Mills, Peter (Torrington)

  Summers, Sir Spencer

  Gurden, Harold

  Mills, Stratton (Belfast, N.)

  Talbot, John E.

  Hall, John (Wycombe)

  Mitchell, David (Basingstoke)

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

  Hall-Davis, A. G. F.

  Monro, Hector

  Taylor, Frank (Moss Side)

  Harris, Frederic (Croydon, N. W.)

  Morrison, Charles (Devizes)

  Temple, John M.

  Harvey, Sir Arthur Vere

  Nabarro, Sir Gerald

  Tilney, John

  Hawkins, Paul

  Onslow, Cranley

  Turton, Rt. Hn. R. H.

  Heald, Rt. Hn. Sir Lionel

  Osborn, John (Hallam)

  Walker, Peter (Worcester)

  Heseltine, Michael

  Osborne, Sir Cyril (Louth)

  Weatherill, Bernard

  Hiley, Joseph

  Page, Graham (Crosby)

  Webster, David

  Hobson, Rt. Hn. Sir John

  Page, John (Harrow, W.)

  Wells, John (Maidstone)

  Holland, Philip

  Pearson, Sir Frank (Clitheroe)

  Whitelaw, William

  Howell, David (Guildford)

  Percival, Ian

  Wills, Sir Gerald (Bridgwater)

  Hunt, John

  Pink, R. Bonner

  Wilson, Geoffrey (Truro)

  Hutchison, Michael Clark

  Pounder, Rafton

  Wolrige-Gordon, Patrick

  Jennings, J. C. (Burton)

  Prior, J. M. L.

  Wood, Rt. Hn. Richard

  Jopling, Michael

  Pym, Francis

  Wylie, N. R.

  Kirk, Peter

  Ridsdale, Julian

  Kitson, Timothy

  Rodgers, Sir John (Sevenoaks)

  TELLERS FOR THE AYES:

  Knight, Mrs. Jill

  Rossi, Hugh (Hornsey)

  Mr. Jasper More and

  Mr. George Younger.

  NOES

  Albu, Austen

  Ellis, John

  McCann, John

  Allaun, Frank (Salford, E.)

  English, Michael

  MacColl, James

  Archer, Peter

  Ensor, David

  Macdonald, A. H.

  Armstrong, Ernest

  Fernyhough, E.

  Mackenzie, Gregor (Rutherglen)

  Atkins, Ronald (Preston, N.)

  Finch, Harold

  Mackie, John

  Bacon, Rt. Hn. Alice

  Fitt, Gerard (Belfast, W.)

  Mackintosh, John P.

  Baxter, William

  Fletcher, Raymond (Ilkeston)

  Maclennan, Robert

  Bence, Cyril

  Fletcher, Ted (Darlington)

  McMillan, Tom (Glasgow, C.)

  Bennett, James (G'gow, Bridgeton)

  Foot, Michael (Ebbw Vale)

  McNamara, J. Kevin

  Bishop, E. S.

  Forrester, John

  MacPherson, Malcoim

  Blackburn, F.

  Fraser, Rt. Hn. Tom (Hamilton)

  Mahon, Simon (Bootle)

  Blenkinsop, Arthur

  Galpern, Sir Myer

  Manuel, Archie

  Boardman, H.

  Cardner, Tony

  Mapp, Charles

  Booth, Albert

  Garrett, W. E.

  Mendelson, J. J.

  Boston, Terence

  Garrow, Alex

  Millan, Bruce

  Braddock, Mrs. E. M.

  Ginsburg, David

  Miller, Dr. M. S.

  Brooks, Edwin

  Courlay, Harry

  Milne, Edward (Blyth)

  Broughton, Dr. A. D. D.

  Gray, Dr. Hugh (Yarmouth)

  Morgan, Elystan (Cardiganshire)

  Buchan, Norman

  Gregory, Arnold

  Morris, Charles R. (Openshaw)

  Cant, R. B.

  Grey, Charles (Durham)

  Moyle, Roland

  Carter-Jones, Lewis

  Griffiths, Rt. Hn. James (Lianelly)

  Newens, Stan

  Chapman, Donald

  Hale, Leslie (Oldham, W.)

  Noel-Baker, Francis (Swindon)

  Coe, Denis

  Hamilton, James (Bothwell)

  Norwood, Christopher

  Coleman, Donald

  Harming, William

  Oakes, Gordon

  Concarmon, J. D.

  Hannan, William

  O'Malley, Brian

  Conlan, Bernard

  Haseldine, Norman

  Orme, Stanley

  Craddock, George (Bradford, S.)

  Hazell, Bert

  Oswald, Thomas

  Crawshaw, Richard

  Heffer, Eric S.

  Owen, Will (Morpeth)

  Cronin, John

  Henig, Stanley

  Page, Derek (King's Lynn)

  Crosland, Rt. Hn. Anthony

  Hooson, Emlyn

  Paget, R. T.

  Cullen, Mrs. Alice

  Howarth, Harry (Wellingborough)

  Palmer, Arthur

  Dalyell, Tam

  Howie, W.

  Pardoe, John

  Davidson, Arthur (Accrington)

  Hughes, Roy (Newport)

  Park, Trevor

  Davies, Dr. Ernest (Stretford)

  Hunter, Adam

  Parkyn, Brian (Bedford)

  Davies, Ednyfed Hudson (Conway)

  Hynd, John

  Pearson, Arthur (Pontypridd)

  Davies, Iford (Gower)

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

  Pentland, Norman

  Davies, Robert (Cambridge)

  Jackson, Peter M. (High Peak)

  Perry, George H. (Nottingham, S.)

  de Freitas, Sir Geoffrey

  Jeger, George (Goole)

  Price, Thomas (Westhoughton)

  Dell, Edmund

  Johnson, Carol (Lewisham, S.)

  Probert, Arthur

  Dempsey, James

  Johnston, Russell (Inverness)

  Pursey, Cmdr. Harry

  Dewar, Donald

  Jones, Dan (Burnley)

  Rankin, John

  Dickens, James

  Kelley, Richard

  Redhead, Edward

  Dobson, Ray

  Kenyon, Clifford

  Rhodes, Geoffrey

  Doig, Peter

  Kerr, Dr. David (W'worth, Central)

  Robertson, John (Paisley)

  Donnelly, Desmond

  Kerr, Russell (Feltham)

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

  Driberg, Tom

  Lawson, George

  Rodgers, William (Stockton)

  Dunn, James A.

  Lestor, Miss Joan

  Rose, Paul

  Durnnett, Jack

  Lomas, Kenneth

  Ross, Rt. Hn. William

  Dunwoody, Mrs. Gwyneth (Exeter)

  Loughlin, Charles

  Rowlands, E. (Cardiff, N.)

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

  Luard, Evan

  Sheldon, Robert

  Eadie, Alex

  Lubbock, Eric

  Shore, Peter (Stepney)

  Edwards, Rt. Hn. Ness (Caerphilly)

  Lyon, Alexander W. (York)

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

  Edwards, Robert (Bilston)

  Mabon, Dr. J. Dickson

  Short, Mrs. Renée (W'hampton, N. E.)

  Edwards, William (Merioneth)

  McBride, Neil

  Silkin, Rt. Hn. John (Deptford)

  1428

  1429

  Silverman, Julius (Aston)

  Tinn, James

  Williams, Alan Lee (Hornchurch)

  Silverman, Sydney (Nelson)

  Tomney, Frank

  Williams, Clifford (Abertillery)

  Slater, Joseph

  Varley, Eric G.

  Williams, Mrs. Shirley (Hitchin)

  Small, William

  Wainwright, Edwin (Dearne Valley)

  Willis, George (Edinburgh, E.)

  Spriggs, Leslie

  Wainwright, Richard (Colne Valley)

  Winterbottom, R. E.

  Steel, David (Roxburgh)

  Wallace, George

  Woodburn, Rt. Hn. A.

  Steele, Thomas (Dunbartonshire, W.)

  Watkins, David (Consett)

  Woof, Robert

  Stewart, Rt Hn. Michael

  Watkins, Tudor (Brecon & Radnor)

  Zilliacus, K.

  Summerskill, Hn. Dr. Shirley

  Whitlock, William

  Thomas, George (Cardiff, W.)

  Wilkins, W. A.

  TELLERS FOR THE NOES:

  Thornton, Ernest

  Williams, Alan (Swansea, W.)

  Mr. Ioan L. Evans and

  Mr. Walter Harrison.

  Dr. Dickson Mabon: I beg to move Amendment No. 28, in page 13, line 33, after 'Act', to insert:
  'the amount of any rates payable by an owner in respect of a dwelling-house by virtue of this section shall be three-quarters of the amount which would be payable if he were in occupation of the dwelling-house, and'.
  I suggest, Mr. Deputy-Speaker, that we should take, with this Amendment, Amendment No. 29, in page 13, line 34, after 'of', insert 'other'.
  Mr. Deputy-Speaker: I think that it would be convenient to take that Amendment at the same time.
  Dr. Mabon: Thank you, Mr. Deputy-Speaker.
  We have to some extent, in our discussion of new Clauses 3 and 4, anticipated the argument here, but hon. Members who were on the Committee will recollect that the Government were urged by many of my hon. Friends to raise the 50 per cent. in respect of empty property under this Clause to 100 per cent. For various reasons, we have decided that it would be fair and reasonable in the circumstances that the charge leviable on owners of empty houses shall be three-quarters of the normal rates, while remaining at 50 per cent. of the normal rates in respect of other types of property.
  As I said in our earlier debates, we are satisfied that keeping houses empty without good cause is such a social evil that it must be made plain that it will attract a higher penalty. I hope that, with the rephrasing of Section 17 of the Valuation and Rating (Scotland) Act, 1956, now Clause 20 of this Act, with the two new Clauses which we incorporated into the Bill earlier and with this Amendment, we have reached a reasonable stage in trying to make this part of the law workable and, we hope, salutary in its effects on this social evil.
  Mr. G. Campbell: We do not see any reason why the Government should suddenly
  1430
  have decided to "bump up" this rate from 50 per cent. to 75 per cent., but, as we have made clear tonight, we are more concerned with possible injustice to citizens who may not know about the notification procedure and with people who have perfectly good reason for exemption, if their house is empty because of reasons outwith their control. These are important points. We see no particular reason for the change.
  Amendment agreed to.
  Further Amendment made: No. 29, in page 13, line 34, after 'of', insert 'other'.—[Mr. Ross.]
  Dr. Dickson Mabon: I beg to move Amendment No. 30, in page 14, line 3, to leave out from 'part' to 'and' in line 4.
  This Amendment modifies the definition of the lands and heritages on which the empty property rate can be charged. In the present Bill, these lands and buildings are stated to include all machinery and plant in or on the building. This is misleading in the case of industrial buildings where there is a corpus of statute and case law—of which I reminded the hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) earlier—determining which types of machinery and plant are rateable. It is not desired to disturb this. Therefore, the Amendment proposes to omit the reference to machinery and plant.
  Amendment agreed to.
  Mr. Dickson Mabon: I beg to move, Amendment No. 31, in page 14, line 12 to leave out subsection (5) and to insert:
  (5) Where lands and heritages which are unoccupied become occupied on any day and become unoccupied again on the expiration of a period of less than six weeks beginning with that day, then, for the purpose of ascertaining any period of three months during which the lands and heritages have been continuously unoccupied and any relevant period of vacancy in respect of the lands and heritages, they shall be deemed to have remained unoccupied on that day and during that period.
  This is a drafting Amendment, which simplifies and shortens the subsection.
  Mr. G. Campbell: This seemed to me to be a consequential Amendment following from new Clauses 3 and 4 and I thought that it meant that if, during two months or the full three months, there were a token occupation and therefore an abuse—if the owner came back for one day or a tenant occupied the house for one day and therefore technically terminated the period of the house being empty—this would deal with it. Why has the period been made six weeks? This seems a long time.
  I mentioned earlier the case of Service men or others who might have to move away because of their work, who let to a tenant who left, and who were then unable to relet, and left the house unoccupied. If they came back for a holiday, I said, it was likely to be for less than six weeks. Why has six weeks been chosen? It was presumably only a token occupation with which the Amendment was meant to deal.
  Dr. Dickson Mabon: The effect of the Amendment is to leave the position exactly as it was in the Bill. I thought that this was agreeable. The broad effect of both the previous position and this is that if empty property is reoccupied for periods of under six weeks, this does not count and the 50 per cent. or 75 per cent. rate can still be levied three months after the building first became unoccupied. I thought that we had clarified the reason for having a period of six weeks. It is virtually half of the appropriate period. I do not think that a day or anything like that would be at all appropriate. It has to be a term of weeks. It was thought best that it should be six weeks.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 32, in page 14, line 34, after 'for' to insert:
  ', or for any part of the three months beginning with the day following the end of,'.
  This Amendment ensures that when property which is exempt from the empty property rate for one of the reasons set out in subsection (23) loses its exemption because of a change in circumstances, it will still have the usual three months' grace. For example, the empty property rate cannot be levied on a building which is subject to a building preservation order, and if the order is rescinded
  1432
  the rate cannot be levied until three months later.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 33, in page 14, line 37, to leave out paragraph (b) and to insert:
  (b) the lands and heritages are kept vacant by reason of action taken by or on behalf of the Crown or any local or public authority with a view to prohibiting the occupation of the land and heritages or to acquiring them.
  This is a drafting Amendment, which simplifies the provision about the exemption from empty property rating of lands which are vacant as a result of action taken by the central or local authorities to acquire them or to prohibit their occupation.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move, Amendment No. 34, in page 15, line 2, to leave out 'or'.
  May I suggest that we should discuss, at the same time, Amendments Nos. 35 and 36?
  Mr. Deputy Speaker: If the House agrees we can discuss Amendments Nos. 34, 35, 36 together.
  Dr. Mabon: Amendments Nos. 34 and 36 taken together exempt manses and other clergymen's houses from empty property rating. There was a statutory exemption agreed in the proceedings on the English Bill. One of the Churches in Scotland asked for this exemption. Naturally we looked at the matter. While we thought that local authorities could be trusted not to levy rates on empty manses, we felt it not unreasonable to incorporate this provision in the Bill. I commend it to the House.
  Amendment No. 35 exempts from empty property rating buildings which are the subject of an interim preservation notice under the Ancient Monuments Act as well as those that are the subject of a final preservation order. I would stress there is no connection between ancient monuments and manses. We felt that we ought to make these Amendments.
  Mr. Edward M. Taylor: We quite understand the reasons why the hon. Member has moved this Amendment and we well understand that, particularly among professions which are scarce, there might well be serious difficulties. That

  1433
  is probably why Amendment No. 36 has been put down.
  On the other hand, in view of what he said, will the hon. Member give an indication why he thinks this should be limited to this category of person employed in the community? We are all aware of the valuable contribution made by clergymen to our community, but it seems strange that this category alone has been singled out. Were applications received from other categories of person in the community? If so, why were these refused?
  Dr. Dickson Mabon: The great danger of making a valid and agreed concession, one which is well endorsed by every hon. Member, is that other people also want concessions. We have to take these matters each in turn. My own Church, the Church of Scotland, asked for this exemption. It was considered fair that it should apply to all Churches, and since the English had made a similar alteration in their Bill and we want to make one in our Bill, I thought it reasonable to make it at this stage. Other people have asked for a concession, but we do not think that we should necessarily proceed from this alteration to give all others who ask the same exemption.
  Amendment agreed to.
  Further Amendments made: No. 35, in page 15, line 4, after 'order', insert 'or an interim preservation notice'.
  No. 36, in line 6, at end insert:
  '; or
  (e) the lands and heritages are being held available to provide a residence from which a full-time clergyman or minister of any religious denomination may perform the duties of his office'.—[Dr. Dickson Mabon.]

  Clause 22.—(ROAD GRANTS AND CLASSIFICATIONS.)
  Dr. Dickson Mabon: I beg to move Amendment No. 37, to leave out 'For' and to insert:
  'The Secretary of State, may for all or any of the following purposes, that is to say,'.
  May we take Amendment No. 38 at the same time, Mr. Deputy Speaker?
  Mr. Deputy Speaker: If the House agrees.
  Dr. Mabon: These are drafting Amendments to make it clear firstly that
  1434
  the Secretary of State can classify roads for one or both purposes—that is, for the purposes of grant or of other enactments and not only for both purposes at the same time; secondly, that the Secretary of State will not become involved in classifying roads for the limited purposes of local enactments; and thirdly, that future as well as existing enactments are covered.
  Amendment agreed to.
  Further Amendment made: No. 38, in line 35, leave out from 'and' to 'classify' in line 37 and insert:
  'the purposes of any enactment or instrument (whether passed or made before or after the passing of this Act) which refers to roads or highways classified by the Secretary of State,'.—[Dr. Dickson Mabon.]
  9.0 p.m.
  Mr. Baker: I beg to move Amendment No. 76, in page 15, line 43, after 'ferries', to insert:
  'except insofar as the Secretary of State is satisfied, having regard to the exceptional expenditure to be incurred by a local highway authority on snow clearing, road gritting and reinstatement works arising from frost damage, flood damage or other exigencies, that such expenditure creates a burden greater than the authority can reasonably be expected to bear unaided'.
  This is an extremely important Amendment, not only for the North-East of Scotland but for the Highlands and virtually the whole of Scotland. It seeks to make funds available for such things as snow clearance, the gritting of roads and, possibly more important, the damage caused by frost or flooding. The bill for such reinstatements is by no means a small item in these areas and I will give an example from my constituency to underline the point, since I gather that Banffshire will be extremely badly off under the roads part of the needs element.
  Grant will be based on the 1964–65 figures, although that was an extremely good winter compared with other winters we have had—notably last year—when no extraordinary expenditure was incurred and, therefore, little damage was caused because of frost. To fix grant aid on a fixed formula is basically wrong and is bound to lead to anomalies. It is not equitable if this portion of the grant is based only on area, population and road mileage, leaving out of account the extraordinary expenditure incurred by the natural phenomena of frost and flooding.

  1435
  To give the current position in my constituency, after the very hard and long winter of 1965–66, the normal roads estimate for the County of Banff was £147,000. Flood damage entailed a further expenditure of £9,000 and frost damage no less than £43,500. Therefore, the exceptional expenditure was over one-third of the original estimate for roads for the whole year in the County.
  I understand that the Scottish Development Department is prepared, under the present grant system, to accept 50 per cent. of this exceptional frost damage expenditure and that that will become payable in 1967–68. In addition, the Scottish Development Department has promised to look sympathetically at the other half, the £4,500, at the end of the current financial year.
  Even if only 50 per cent. of this exceptional expenditure is received it will be a great help but, as I see it, special assistance will be wiped out under this Bill. It is obvious that if we are to have developments in the remoter areas we must have good communications. If we do not have funds available for road repairs and maintenance after a difficult and long winter we are bound to see a rapid deterioration in the state of our roads and, therefore, ipso facto, less likelihood of development in the areas concerned. The Amendment is designed to combat the absence of any provision to deal with exceptional expenditure.
  Mr. Ian MacArthur: The House will be grateful to my hon. Friend the Member for Banff (Mr. Baker) for moving the Amendment, which calls attention to the very special problems facing local authorities in parts of Scotland which are particularly subjected to the hazard of snow.
  My constituency is in one such area. Over the last six years the extra expenditure involved in gritting and snow clearing has varied from £33,000 to £108,000 in the severe winter of 1962–63. The worst year—1962–63, when we had a long, snowy winter—resulted in an expenditure of £108,000. Of this, under the present system £80,000 was subject to grant, but the county council had to meet a burden of £28,000. Of this total, £18,000 fell on the rates for the whole county area, except Perth City, and
  1436
  £10,000 in respect of classified roads fell on the landward area.
  The size of the burden is illustrated by the fact that the rate cost for the landward area was 3d. for classified roads and between 2d. and 3d. for unclassified roads, making a total rate of nearly 6d. in the pound in respect of gritting and snow clearing. This cost was slightly reduced by the Exchequer equalisation grant, which I believe was about 10 per cent. to 20 per cent. of the total cost borne by the county. This would have eased the rate for the landward area by only ½d. or 1d. in the pound.
  The difficulty is well known to me. My home is in a very snow-prone area of Scotland. I know the problem this presents. I know, too, of the splendid service given by employees of this and other county councils and by many public-spirited individuals who keep the roads open, often in the most trying conditions.
  I hope the Secretary of State will be able to tell us more than we know of the future pattern. It would be intolerable if the full burden of these costs were to fall upon the county council, because this, in the case I have given, would represent an additional cost of £80,000 on top of the £28,000. If the cost of the trunk roads were fully covered but the classified roads were not, the additional cost would still be about £40,000 on top of the £28,000.
  It is clear that there must be provision for this extraordinary and almost annual hazard in the special needs element. I hope the right hon. Gentleman will be able to reassure us on this point.
  Mr. W. Baxter: I apologise for rising once again, but a Member who is not selected to serve on Standing Committees dealing with very important matters pertaining to Scotland is at a disadvantage and naturally wants to ask questions when the matter reaches the floor of the House.
  Generally, I would accept the contents of the Amendment, with the proviso that in the past, when grants for this work were earmarked for local authorities, for snow clearance, there was, if the money was not fully used up, a rush at the end of the financial year to spend the money on some other purpose. One of

  1437
  the objects of the exercise in this part of the Bill may be to obviate the necessity for that in the future and to plan the expenditure in a more rational and sensible way.
  I cannot say I am happy about the general set-up as contained in the Clause as a whole, but as I am speaking only to an Amendment to the Clause I must make my remarks acceptable to the Amendment.
  I would like to feel that this money is not being denied to local authorities under the Clause but paid to them in such a way that, if it is not wholly utilised in that financial year, it will be carried over for the benefit of roads which may have deteriorated because of bad winter conditions in the previous year.
  In many county areas, such as Stirlingshire, there is a long mileage of unclassified roads. The conditions in winter can play havoc with them. Notwithstanding certain monetary grants in the past for winter snow clearance work, because of the conditions written into the grant the money has had to be spent hurriedly without proper utilisation in the best interests of the roads. I hope that my hon. Friend will give an assurance that the new method of handing out this money w ill be in a manner more in keeping with good business practice.
  Mr. Monro: I support the Amendment, which is fairly worth while. Most local authorities are prudent in budgeting for snow clearance and only in exceptional conditions do they need help. But I do not think that any local authority budgets ahead for flood damage. As the Secretary of State knows, in one night in Dumfries-shire, in August, there was £144,000 worth of damage to roads and bridges.
  I appreciate that there is a difficulty in helping private owners over damage to houses and property, but when it comes to roads and bridges I would like more than the sympathetic letters I have had from the right hon. Gentleman. What the local authority needs is cash and, while the right hon. Gentleman has stated that grants will be available for the repair of bridges and roads in relation to their classification, something over and above that is needed if roads are to be brought back to their original conditions and the existing maintenance programme continued for that year.
  1438
  This is where the Amendment would be so valuable in that a special sum could be made available immediately to local authorities to get on with the work, for road maintenance and improvement is vital in an age when transport is one of the most important things in Scotland. I warmly support the Amendment.
  Dr. Dickson Mabon: The hon. Member for Dumfries (Mr. Monro) was kind enough to refer to the additional assistance the Scottish Office is seeking to give his county to repair the frost damage to classified roads and we are grateful to him for putting it on the record that we are also willing to look at the whole position when further information is available.
  We have this power without incorporating the Amendment. The danger of including it in the Bill is that it is contrary to the idea of Part III. In dealing with disastrous events such as occurred in Dumfries-shire in August, we already have power not under the 1919 Act but under a previous Act to give grant aid for works in certain special circumstances. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) made a good point in saying—and it was emphasised by the hon. Member for Perth and East Perthshire (Mr. MacArthur)—that many of these things occur annually, as distinct from the disastrous episode in Dumfries-shire which we hope will not return perhaps for another century, and should be taken into account in a businesslike way and budgeted for accordingly.
  We intend to cover this through the rate support grant itself. We already have powers at our disposal. What the Amendment seeks is to give a specific grant for exceptional expenditure incurred by a local highway authority because of abnormal weather conditions on the roads. The Amendment would be contrary to Part III which limits the principle of the grant to principal roads.
  9.15 p.m.
  This is the provision which has to be preserved if Part III is to have any meaning at all. Apart from running against the principle of Part III, the implication of the Amendment, namely, that local highway authorities will have to bear unaided expenditure on clearing snow and repairing frost damage and so on, is not

  1439
  correct. Within the rate support grant we hope to be able to make a reasonable adjustment for what might be called the consequences of normal bad weather and to take that amount within the formula. But it would be impossible to include in the formula a factor in respect of abnormal weather.
  These matters have been discussed, although financial assistance towards the cost of snow damage was not discussed because the conclusions from the first discussion were that it would not be right to have a special factor in the formula. I think that this decision by the working party was wise. Bearing in mind that the Secretary of State will still have a reserve power, I think that we ought to see how the rate support grant works out when dealing with "normal conditions", frost, snow or any other of our different climatic conditions, and to see whether the working party has been wise in accepting the generally accepted relevant factors in the agreed formula without having a special weighting or seeking a specific grant. We are by no means ignoring the other considerations, but we think that ours is the right way of going about this matter.
  Mr. W. Baxter: Before my hon. Friend sits down; I am interested in this aspect of local government administration because in my long experience I have found that much money has been wasted by attempts to spend £30,000 or £40,000 in the last month or two of a financial year, often on roads which do not require expenditure. I hope——
  Mr. Speaker: Order. I understand that the hon. Gentleman has already spoken once. He cannot do so again, although he can intervene.
  Mr. Baxter: I appreciate that, Mr. Speaker, but this is a rather complicated intervention. It is difficult to follow the full implications of what is contained in the Clause and I am most anxious to be helpful to my hon. Friend the Under-Secretary.
  Mr. Ross: Do not strain yourself.
  Mr. Baxter: I shall not reply to that in case I give a false impression. If the formula which is stipulated by the Clause does not deal with the position which I
  1440
  have mentioned, this will be a bad provision.
  Dr. Dickson Mabon: That is the substance of the argument for making the change. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) has made a good case and that is what we have taken into account. We may seem to have gone too far, but we have gone in the right direction. I am grateful to my hon. Friend for his generous support.
  Mr. G. Campbell: If the Amendment is completely out of place in Part III, as the Under-Secretary has suggested, we hope that none the less the Government will consider how in other ways provision can be made to deal with the situations which have been described. The hon. Gentleman said that in future the rate support grant would be considered to see whether such a provision could be included. However, our proposals in previous debates this afternoon and in Committee for adding words about unforeseen circumstances and for considering the effects of storms and other weather conditions, have not been acceptable.
  My hon. Friends have shown that there is need for providing for assistance to be given—and it will often be needed at short notice—to authorities which have spent a great deal of money because of the effects of the elements. The Under-Secretary mentioned the Secretary of State's reserve powers, but we hope that some way will be found to deal with this problem even if the Amendment is not the way.
  Mr. Baker: I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. G. Campbell: I beg to move Amendment No. 39, in page 16, line 18, at the end to insert:
  'A road in the landward area of a county shall remain vested in a county council when it ceases to be a classified road'.
  This is an Amendment that we moved in Committee when the Under-Secretary said that he would try to meet us. He said that he would consider this and I understood that he intended to put down a declaratory Amendment if he felt that the position was already covered, to make

  1441
  it clear to the local authorities concerned. As we have not seen such an Amendment we have put down this one.
  I would remind the hon. Gentleman that local authorities are worried about this. In other Amendments passed in Committee the position was arrived at whereby county councils are not responsible for roads in small burghs when those roads cease to be classified. We believe that there should be a parallel provision making it clear that when roads in landward areas, that is, outside the burghs, cease to be classified, then the county council is still responsible. If this is made clear there can be no case of ratepayers in the burghs having to contribute towards rates outwith the burghs and not their concern.
  Mr. W. Baxter: I would like to support this point of view, because in my experience many roads that have not been classified in landward areas of a county, and, even in certain burghal instances, have become a bit of a nuisance, not only to the inhabitants adjacent to that road, but to the community as a whole. It seems that an unclassified road in a county area will not be the responsibility of the county. I hope that I am wrong in this, and that it would still be the responsibility of the county council, because this could affect a great many roads in rural areas.
  If the road ceases to be the responsibility of the county council it can be a great nuisance to the rural areas and to many of the people who from time to time use them. I hope that my hon. Friend can give us an assurance that when a road becomes unclassified it does not fall into disrepair and disuse.
  Dr. Dickson Mabon: May I make clear, first of all, what I said in Committee about this. I said:
  "We think the law is perfectly straightforward. I have since taken advice on this and my advisers are still of the same view. However, I am perfectly willing to discuss this matter. If what the Amendment seeks to achieve is necessary, we will probably put down an Amendment, which is declaratory in form, to this Clause or to some later one."—[OFFICIAL REPORT, Scottish Standing Committee, 21st July, 1966; c. 379.]
  I discussed this with my advisers, including the lawyers and the Local Government Finance Working Party. Everyone was satisfied with the present
  1442
  Bill, and did not wish to make a declaratory provision, so I think that I have fulfilled my undertaking.
  My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) raised the point of what happens to the road. That is why we must read Clause 22(5), ensuring that upon declassification, a road in a small burgh will revert to the town council and the county council will not exercise any function in a small burgh in respect of the road. It will cease to have any right to requisition on the small burgh for a declassified road in the landward area. The proposed Amendment would not, in any case, achieve the movers' intention. I take it that their intention is to ensure that upon a road in the landward area losing its classification, the county council will not requisition on the small burgh for its upkeep. That is not what the Amendment will achieve. The point is not whether the responsibility for the road remains with the county council, as my hon. Friend the Member for West Stirlingshire said, but who should pay for its upkeep.
  At present a county council could claim that it exercised a function in a small burgh in respect of a road which had been classified and for which it had retained responsibility when it ceased to be classified. It might therefore requisition under Section 210 of the Local Government (Scotland) Act, 1947, on the small burgh for all roads in the county which were declassified, including those in the landward area. In practice, one county council is known to have done so. This is now prevented by Clause 22(5).
  I hope that I have acquitted myself of any apparent discourtesy. I consulted those whom I said I would consult. We are convinced that this is the right procedure. I hope that subsection (5) gives some reassurance to my hon. Friend the Member for West Stirlingshire and other hon. Members.
  Mr. G. Campbell: I am glad for the Under-Secretary of State's assurance. He quoted from column 379 of the OFFICIAL REPORT of the Committee's proceedings, but at column 380 he said:
  "So with the assurance that I will once again take advice on this to see whether or not it is the view of my advisers that the law is the law as we understand it, and as it stands at

  1443
  the moment, and therefore that we should insert a declaratory provision; or, alternatively, that we should amend the Bill in some other form, I hope that the hon. Gentleman will see his way to withdrawing the Amendment."—[OFFICIAL REPORT, Scottish Standing Committee, 21st July, 1966; c. 380.]
  It seemed from the hon. Gentleman's later words that he would table an Amendment. That was why we were surprised that it did not appear on the Notice Paper.
  The hon. Gentleman's explanation covers the point, although we should have preferred to see it written in the Bill.
  Dr. Dickson Mabon: Perhaps the hon. Gentleman will read the sentence in column 379 of the OFFICIAL REPORT which begins:
  "At the same time, if we do not amend the law at all …".
  I hope that he will not fall into the error of one of his hon. Friends who quotes only bits rather than the whole speech. If the hon. Gentleman reads that sentence, he will see that I have met the point. However, if I have misled him, I apologise.
  Mr. G. Campbell: I did read it. I thought that the hon. Gentleman's later words were his last words on the subject.
  Amendment negatived.

  Clause 27.—(SPECIAL PROVISIONS AS TO FOOTWAY LIGHTING SYSTEMS.)
  Mr. Ross: I beg to move Amendment No. 40, in page 20, line 4, to leave out 'subsection (1)' and insert: 'subsections (1) and (2)'.
  Perhaps we could take, at the same time, Amendment No. 41.
  Mr. Speaker: Very well, if the Opposition have no objection.
  Mr. Ross: These Amendments are consequential on the addition of the new subsection (2) of Clause 26 in Committee.
  Amendment agreed to.
  Further Amendment made: No. 41, in page 20, line 17, leave out 'subsection (1)' and insert: 'subsections (1) and (2)'.—[Mr. Ross.]

  Clause 29.—(AMENDMENT OF SECTION 119 OF THE LOCAL GOVERNMENT ACT 1948. 1948 c. 26.)
  Mr. John P. Mackintosh: I beg to move Amendment
  1444
  No. 42, in page 21, line 12, at the end to insert:
  (4) In the said section 119, after subsection (2), there shall be inserted the following subsection:—
  '(2A) Allowances may be paid by county, town or district councils in respect of expenses reasonably incurred by their members in connection with the installation or use of telephones for the purpose of the performance of their official duties'.
  The Association of County Councils has written to me personally on this subject. I should like to make it clear that I do not put the Amendment forward because it did so. I am distinctly unhappy about the tendency which I have observed in the House for hon. Members to say that because they have fixed something up with an outside pressure group it should be settled and carried through the House. Hon. Members should act only on something in which they believe and which they would have raised in any case.
  I have been doing some work on this issue, and so have a number of people interested in local government. Unfortunately, the work on the question of expenses and time as a restriction on people serving local authorities has not yet been published, but, as hon. Members know, the Maud Committee has been working on the question of personnel in local authorities and examining why elected members tend not to include certain broad sections of the community among their representatives.
  9.30 p.m.
  Similarly, in Scotland, Mr. Gerald France, of the University of Strathclyde has done work on this. He is now director of intelligence for the Royal Commission and the material is being processed. We cannot, therefore, give facts, but I assure the House that on all types of local authority there are broad bands of the community who do not seek to stand, who do not serve, and that when attempts are made to discover why, the reasons that come forward are partly those of time and partly those of expense. The order in which these reasons are given and are emphasised varies among different types of authority.
  In this case, however, in county councils a tremendous amount of work is done by members who do not live near the county town and who wish to contact

  1445
  officials and have to do so by telephone. This speeds up their activities enormously, but it leads, especially if they are conscientious, to very large telephone bills. This is one of those unfortunate situations in which an elected member who does nothing has a small bill but the more one does, the more active one is and the more cases one fights and takes up, the more one's postal and telephone charges grow.
  Therefore, although this is only a small matter, and I would like to have gone further and provided more adequate remuneration for those who serve on local authorities, and a fuller expense account, the Amendment would meet a genuine need. For this reason, I was glad to put forward the Amendment, with the support of hon. Members on the Liberal bench and the private support, although not the signatures, of some Conservative Members.
  I appreciate that certain hon. Members may wish to probe a little and ask how the procedure would work. I would point out to them that this is a permissive provision. Secondly, it would have been possible to set out a procedure for keeping a book of telephone calls which were to be charged or a percentage of a telephone account or for striking an actual figure which would be met, but it would be a little unfair and presumptuous of us to prescribe to local authorities in this manner. They are elected authorities and should be allowed to devise their own rules about what they would regard as reasonable within the terms of the Clause. Unreasonable expenditure would, presumably, be taken up by the district auditor in the same way as unreasonable expenses on other local government items are examined. I therefore regard this as a reasonable if small point which would alleviate the burden on certain categories of councillors, particularly in the larger landward areas.
  I recognise that there is an argument, to which, up to a point, I succumb, that most changes in local government should await Royal Commission Reports. On the other hand, it may be two or three years before we get a complete recasting of our local government system. Until then, the Amendment represents a reasonable small alleviation of the personal expense which councillors have to bear.
  1446
  I should like from my own constituency, as, I am sure, other hon. Members would agree from their constituencies in which there are large areas, to pay tribute to the tremendous amount of work which many local councillors do at considerable cost to themselves in terms of time and of their own pockets. The Amendment is a small step that we could take to help them.
  Mr. Clark Hutchison: I oppose the Amendment, as I told the Association, which wrote also to me, that I would. I do so on two grounds. This matter was never discussed on Second Reading or in Committee and I do not see why it should be raised now. I do not see why councillors cannot conduct their business from either the town hall or the county hall as the case might be.
  We heard only this afternoon of the great increases in rates in Scotland. Many people in the nation as a whole are having to bear immense burdens of taxation and I am not at this moment prepared to add to that burden which is borne by those people. Hence I oppose the Amendment.
  Mr. Manuel: I have very much pleasure in supporting the case put by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) for this Amendment. I also was asked by the County Councils' Association—I may say, acting on behalf of all the local authority associations, including the Convention of Royal Burghs of Scotland—to support an Amendment on Report of this Bill, because, whether we like it not, the present position has caused decided annoyance to many local authorities who previously were able to give their councillors telephone facilities.
  The law has been tightened up, and now the local authority which has a common good fund which it can draw out of can meet this perfectly legally, and without any quibble at all by Government auditors appointed to examine burgh and county books, but where there is no common good fund the councillors are placed in a comparatively worse position in trying to accomplish the quite onerous duties which now fall upon an active councillor.
  I know, from the days I served as public health committee convener in Ayr County, previous to the hospitals being

  1447
  taken over, that that was onerous enough, but long before that, during my fourteen years' experience on the Burgh Council of Ardrossan, we had for many years no telephone facilities. I can remember quite vividly my early years as a councillor and coming home from my work on the railway, at a time when housing was a big, crying need in that district, and how there would be people to meet me on the steps of my home.
  My wife and daughter, a big lassie now but only a little girl then, I did not see all night when I was interviewing those callers at my home. In contacting the burgh surveyor, the town clerk and the town chamberlain about the many queries I was getting, telephone facilities would have been invaluable to me.
  I very often had to try to get changes of duty on the railway and to lose seniority in my grade, because if I shifted to another shift I might be stepping in front of someone of a higher grade in locomotive work, and so I had to forgo seniority with consequent financial loss. I had to make those changes of duty on the railway in order to do my local authority work.
  There is no doubt at all that a telephone can be invaluable to a busy councillor. I do not think that the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) would dispute this, even although he was comparatively nearer to the city chambers, possibly, when he was on the Glasgow authority—or possibly he had convenerships which endowed him with the possibility of being snowed under with a great deal of work. I believe that the hon. Member for Dumfries (Mr. Monro), who is also an ardent local authority man, and did very good work in local government, can support some of the things I am saying.
  I do not agree at all with the hon. Member for Edinburgh, South (Mr. Clark Hutchison), when he said they should meet their own expense. He says they can work from county hall. Is he thinking of a county like that of Ayr, and of councillors travelling from the landward parts of Ayrshire right from Skelmorlie, in the north, all the way down to Girvan, in the south, and saying this is a feasible proposition?
  Mr. Clark Hutchison Mr. Clark Hutchison rose——
  Mr. Manuel: Let me round this argument off.
  Do not forget that the whole of these people, with the exception of a minority of retired persons, are also doing their daily work, and they may have to get days off to do their local authority work, especially if they have two meetings running together.
  A councillor may get a day off from his employment once a month to attend his county council meeting, but where a telephone is of great benefit is in dealing with individual cases, trying to get anomalies wiped out, some injustice righted or something put right by an official who has his hand on the trigger.
  Mr. Clark Hutchison: May I make it clear to the hon. Member for Central Ayrshire (Mr. Manuel) that I am not thinking about Ayr particularly, but about the unhappy ratepayers and taxpayers. I do not want to add to what is already a heavy burden upon them.
  Mr. Manuel: I might point out to the hon. Member for Edinburgh, South (Mr. Clark Hutchison) that, later in my experience as a councillor, telephone facilities were provided by the burgh which I had the privilege of serving for 14 years. In the course of that time, I addressed many ratepayers' meetings in the area and never once was this question raised.
  This comes ill from the hon. Gentleman. I do not know what local authority experience he has, but, if he is merely trying to lower the rate burden in this niggling sort of way which will not matter at all in the aggregrate, does he suggest that the same rule of thumb should be applied to local authority officials, large numbers of whom have telephones in their houses? I am not complaining about that, because many of them have to deal with urgent calls, and such people as sanitary inspectors, burgh surveyors, and so on, should be on call.
  Does the hon. Gentleman exclude the many local authority officials who not only have telephones in their offices to do their jobs but also at their home addresses in order that they should be more competent to deal with the various matters that need attention in their local authority areas?
  We should not be more skrimping and cramping in what we do for elected

  1449
  councillors than we are in the case of local officials. We should try and equip them in such a way that the best type of person from every walk of life and every individual party, if necessary, is attracted to serve on local authorities. An indirect result will be more vibrant, stirring elections, and more people will take an interest in local authority work. There is far too much deadness about local authority work all over the country. If we go along on this line, trying to be parsimonious in the way indicated by the hon. Gentleman, we shall not have the revivifying effect which we want to see in Scottish local government.
  I do not know what my right hon. Friend will say in reply to this debate. He may go some way to meet us; I do not know. However, there are plenty of ways in which protective action could be taken to see that expenses are kept to a reasonable level. Telephone rentals could be paid, and there could be a limit of £1 a quarter placed on local telephone calls. There will not be huge telephone bills run up in connection with this provision.
  It gives me great pleasure to support the Amendment. If it is accepted, I am quite sure that our action will be greatly appreciated by the large body of councillors serving in the various communities throughout Scotland. I hope that our efforts are successful.
  Mr. Monro: There is a great deal of merit in what has been said by the hon. Member for Berwick and East Lothian (Mr. Mackintosh) and the hon. Member for Central Ayrshire (Mr. Manuel). As a representative of a rural constituency, I know that considerable sums of money can be saved in local government work by using the telephone rather than using a car and charging car expenses, which amount to much more than the cost of a telephone call. For these reasons I hope that the right hon. Gentleman will accept the Amendment, provided that there are clear accounting recommendations so that there is no abuse of the system. If it is made quite clear to all councillors that they must not abuse this provision, it might in the long run be an economical move for the county councils concerned.
  9.45 p.m
  Mr. W. Baxter: I hesitate to keep the House for any length of time, but I did
  1450
  not serve on the Committee, and I must be permitted to express my point of view.
  This is a serious and difficult question, and I agree with the hon. Member for Dumfries (Mr. Monro) that if it is necessary to supply telephones, their use must be restricted to some extent. This cannot be an open-ended commitment. It must not be thought that all telephone calls made by all councillors, be it district, town or county, will be paid for by the general ratepayers. I agree that calls made, and expenses incurred, on behalf of the community should be met by the community, but I think that my right hon. Friend——
  Mr. Eadie: I do not want to interfere with the debate, but I want to put a question to my hon. Friend because I know that, like me, he has long experience of local government. He has 30 years' experience against my 20. Would he agree that if the House were to decide not to provide phones for councillors, we would probably be doing them a favour, because many of them——
  Mr. Speaker: Order. This is more like a speech than an intervention. The hon. Member will have an opportunity of making a speech if he wants to. He must be brief now.
  Mr. Eadie: Mr. Speaker, I know that you are right to call me to order, but I want to know whether, because of his vast experience of local government, my hon. Friend would agree that we would probably be doing councillors a favour if we did not provide them with phones, because they can be a nuisance and waste a lot of one's leisure time.
  Mr. Baxter: If the telephone is a nuisance, and it probably is, so is the motor car, but they are singularly necessary inventions in this modern society.
  It is suggested that phones should be supplied to members of town and county councils and that they should be paid all expenses "reasonably incurred" in their use. This is a rather vague phrase. I agree that phone calls made on behalf of the community should be paid for by the community, but I do not want this to be violated to such an extent that every phone call has to be paid for by the local authority.
  I ask my right hon. Friend to look at this with greater care than seems to have

  1451
  been the case so far, judging from the bald words of the Amendment. I think that we should write in a provision that telephones can be provided, but they must be used with some degree of care for the public purse. Here I agree with the hon. Member for Edinburgh, South (Mr. Clark Hutchison). We have a duty and a responsibility to show that we are alive to the saving of the pennies, because if a penny is saved, it soon becomes a shilling, and that shilling sometimes becomes a £. If we remember the old Scots maxim, we will do well not only on our own behalf, but on behalf of the people who sent us here. I believe that we have a responsibility to look after the interests of the community.
  Mr. Ross: In moving the Amendment, my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) referred to the quality of, and the service given by, members of local authorities in towns, in county councils, and in cities throughout Scotland. I think that it is far too easy at times to mock their efforts and to under-rate their services. If we appreciate the kind of job they do, unpaid and pretty well unthanked, we begin to realise that we have to look with a certain measure of sympathy at an Amendment such as this.
  I can well appreciate the remarks of my hon. Friend the Member for Central Ayrshire (Mr. Manuel). I have often said that fewer people call at my house to see me as a Member of Parliament than called when my father was a local councillor. That is an indication of the amount of work which councillors have to do. Our decision on this Amendment may affect how well they can do that work. Can they carry it out better if they can use the telephone to call the local offices? It is not just a matter of telephoning city halls.
  I point out to the hon. Member for Edinburgh, South (Mr. Clark Hutchison) that the offices of the county council for Lewis or Stornoway are in the county hall in Dingwall. It takes a long time to get there. For Skye, the county hall is in Inverness. In March this year the Court of Session ruled that it was illegal for a local authority to pay out of the rating account any expenses in respect of telephone calls made by councillors, but it could still be done in the City of Glasgow.
  1452
  I do not know whether Edinburgh does it or not, but it could and any of the Royal burghs could if they had a common good fund or a county council could if it had a fee fund.
  It is justice we want here on the basis of is it right, would it be abused, would it be efficient for them to have the facility? If so, we should try to provide it. My hon. Friend mentioned pressure groups, but he must not call the County Councils Association a pressure group, although at times it may border on that. I confess that it may be that I have had a little to do with this because I saw all the associations, the County Councils Association, the Counties of Cities, the Convention of Royal Burghs, the District Councils Association. This topic came up and they asked whether something could be done about it, and done quickly.
  The hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) will remember that on an earlier Amendment I said that things can be done if there is a Bill through which they can be done. I hesitated for the reason mentioned by the hon. Member for Edinburgh, South—that we were late on in the progress of the Bill—but I had pretty well made up my mind that I would do this when I saw my hon. Friend's Amendment. It is permissive. It leaves the question to local authorities. It is up to them to decide whether to introduce it or not. That is fair enough. I should be fair to Edinburgh Corporation. I think it was not all that keen on the proposal. I may be wrong, but that is in my mind.
  If local authorities decided to pay all or part of councillors' telephone expenses incurred in the course of their duties as councillors, under this provision they would be able to do so. A number of local authorities already do it. I fancy that there would not be very much abuse. The telephone must be regarded as a normal facility. Particularly when we are trying to get efficiency into local government, it would be unreasonable for us to deny this, provided we are satisfied that there would be no abuse. I am satisfied that abuse would be prevented because any unreasonable payment would be reported by the auditor. On this basis, I am very glad to suggest that the House should accept the Amendment.
  Mr. G. Campbell: We are sorry that the Amendment has come before us so late, as it has deprived us of a full discussion in Committee. Nevertheless, the hon. Member for Berwick and East Lothian (Mr. Mackintosh) has pointed out that it is particularly valuable to members of county councils in widespread areas. There is no doubt about this, when distances of 20 or more miles are concerned, as well as the exceptionally long distances mentioned by the Secretary of State. Clearly, this would be helpful in those circumstances more than to any other authorities.
  Where hon. Members have expressed doubt is on the question of accounting. Clearly, as the hon. Member for West Stirlingshire (Mr. W. Baxter) pointed out, if this were to mean that the whole installation and bill of a councillor, including his private calls, were to be covered, that would not be acceptable to the House. I know that it would be objectionable to the hon. Member for Berwick and East Lothian. To this end, the words "reasonably incurred" occur in his Amendment.
  The hon. Member told us that this would be looked after in any case by the auditors' inspection later. But this is what worries us and hon. Members opposite. This is something which we should have gone into at greater length if we had had more time. This is a reasonable expense in modern times. The use of a telephone over long distances can save money and avoid unnecessary meetings. This is something which should be covered in this way, provided that the possibility of abuse can be completely eliminated.
  Amendment agreed to.

  Clause 32.—(AMENDMENT OF CERTAIN ENACTMENTS RELATING TO LICENCES.)
  Dr. Dickson Mabon: I beg to move Amendment No. 43, in page 21, line 30, after 'hawkers', insert
  ', passage brokers, emigrant runners'.
  Perhaps it might be convenient to discuss also Amendments Nos. 69 and 72.
  These Amendments repeal archaic provisions for the licensing of passage brokers and emigrant runners. I had hoped in Committee that we might be
  1454
  able to do something like this, but we wanted to verify that no Commonwealth country had included these provisions in its merchant shipping legislation and that their repeal will have no effect on other provisions of the Merchant Shipping Acts which need to be retained. We have now received such verification.
  Amendment agreed to.

  Clause 33.—(DOG LICENCES.)
  Dr. Dickson Mabon: I beg to move Amendment No. 44, in page 22, line 44, after 'section', to insert '(other than subsection (4))'.
  Perhaps it would be convenient to discuss at the same time Amendment No. 45.
  These Amendments bring into force on the passing of the Act—instead of on 16th May, 1967—the provision in subsection 33(4) repealing the requirement for sheep dogs to get a certificate of exemption from dog licence duty. If the Bill becomes law before the end of the year, this means that owners of sheep dogs will not have to apply for exemption from licence duty for the year 1967.
  Amendment agreed to.
  Further Amendment made: No. 45, in page 22, line 44, at end insert 'and subsection (4) shall come into force on the passing of this Act'.—[Dr. Dickson Mabon.]

  Clause 34.—(GAME LICENCES.)
  Dr. Dickson Mabon: I beg to move Amendment No. 46, in page 23, line 2, after '1860', insert
  'and section 5 of the Customs and Inland Revenue Act 1883'.
  Perhaps it would be convenient to discuss at the same time Amendment No. 70, which is on the same point.
  The Customs and Inland Revenue Act of 1883 instituted a short period game licence in addition to the annual licences specified in the 1860 Act. The short period licence is valid for 14 days, specified in the licence, and the current fee is £1.
  Amendment No. 70 allows us to vary the fee. We have put forward these Amendments at this stage to correct an omission from the list of enactments which specify licence fees.
  Mr. Speaker: It helps the Chair to know what Amendments the Government propose to take together.
  Amendment agreed to.
  It being Ten o'clock, further consideration of the Bill, as amended, stood adjourned.
  Ordered,
  That the Proceedings on Government Business may be entered upon and proceeded with at this day's Sitting, at any hour, though opposed.—[Mr. McBride.]
  Bill, as amended (in the Standing Committee), further considered.

  Clause 36.—(GENERAL INTERPRETATION.)
  Dr. Dickson Mabon: I beg to move Amendment No. 47, in page 23, line 39, at the end to insert
  "joint board" includes a combination or joint committee of local authorities;'.
  We have discussed this Amendment with an earlier Amendment dealing with joint bodies.
  Amendment agreed to.
  Further Amendment made: No. 48, page 24, line 11, at the end to insert
  "Valuation Acts" means the Lands Valuation (Scotland) Act 1854, and the Acts amending that Act;'.—[Dr. Dickson Mahon.]

  Clause 38—(AMENDMENTS AND REPEALS.)
  Dr. Dickson Mabon: I beg to move Amendment No. 49, in page 24, line 40, at the end to insert
  the Road Traffic Act 1934, the Trunk Roads Act 1936,'.
  May we take Amendment No. 73 at the same time, Mr. Speaker?
  Mr. Speaker: If the House agrees.
  Dr. Mabon: As Clause 23 gives highway authorities adequate powers to light the roads, the powers in the 1934 and 1936 Acts are no longer necessary and should be repealed. These Amendments do so.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move, Amendment No. 50, in page 24, line 41, after '1947', to insert 'sections 1, 8 and 10 of'.
  This is a drafting Amendment, consequential on the Amendments in page 22,
  1456
  line 44, dealing with the abolition of exemption certificates for sheep dogs.
  Amendment agreed to.

  Schedule 1.—(RATE SUPPORT GRANTS.)
  Dr. Dickson Mabon: I beg to move Amendment No. 51, in page 25, line 32, after 'may' to insert:
  'after consultation with such associations of local authorities as appear to him to be concerned'.
  This Amendment provides forconsultation with the local authority associations before regulations are made under paragraph 5(2) of Schedule 1. This paragraph deals with what is generally termed pooled expenditure, namely expenditure on specified purposes which is reimbursed in full to the local authorities concerned, and taken out of the agregate of rate support grant.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 53, in page 27, line 2, to leave out from 'be' to the end of line 6 and to insert:
  'determined in the manner provided by regulations made by the Secretary of State after consultation with such associations of local authorities as appear to him to be concerned.
  Any statutory instrument containing regulations made under this paragraph shall be subject to annulment in pursuance of a resolution of either House of Parliament'.
  This Amendment provides for the method of distributing the domestic element of rate support grant to be specified in regulations. The Bill at present specifies that the distribution is to be in proportion to the amount of rate reductions given to domestic ratepayers, but the Institute of Municipal Treasurers and Accountants have pointed out that this may be difficult, especially in the first year, when the full amount of the rate reductions may not be known for some time. They have suggested that the distribution should be in proportion to the domestic rateable values of the different local authorities. This comes to much the same thing in the end but can be calculated earlier in the year.
  To allow flexibility in the distribution formula, as in other aspects of the rate support grant distribution, it is now proposed to leave the matter to regulations made after consulting the local authority associations. I commend this procedure to the House.
  Mr. G. Campbell: We were interested in whether the formula had been dropped by the Amendment. It seems that flexibility has been introduced, and it looks as though the House will have more opportunity of discussing the question from time to time. We therefore approve of the Amendment.
  Amendment agreed to.

  Schedule 2.—(VALUATION OF WATER UNDERTAKINGS.)
  Dr. Dickson Mabon: I beg to move Amendment No. 54, in page 28, line 4, to leave out 'supplied' and to insert 'produced'.
  Since Amendments Nos. 54, 55, 56 and 57 are all on virtually the same point and are drafting, may we take them together?
  Mr. Speaker: If there is no objection.
  Amendment agreed to.
  Further Amendments made: No. 55, in line 5, after 'undertaking', insert 'and supplied for use'.
  No. 56, in line 23, leave out 'supplied' and insert 'produced'.
  No. 57, in line 23, after 'them', insert 'and supplied for use'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 58, in page 28, line 37, at the end to insert:
  7.—(1) The Assessor shall, in respect of each year of revaluation, determine anew the cumulo rateable value pertaining to each water undertaking and for that purpose shall apply the provisions of paragraph 5 above, so however that for the reference in that paragraph to the year 1967–68 there shall be substituted a reference to the year of revaluation, and for any reference in that paragraph to the year 1965–66 there shall be substituted a reference to the year last but one before the year of revaluation.
  It is obviously necessary at each year of revaluation to make sure that the assessor of public undertakings redetermines the cumulo rateable value of each water undertaking. The Amendment remedies an omission from the Bill in this respect.
  Amendment agreed to.
  Further Amendment made: No. 59, in page 29, line 1, leave out second 'in' and insert 'for'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 60, in page 29, line 37, at the end to insert:
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  12. Where an amalgamation takes place which involves the division of an existing water undertaking into separate parts the cumulo rateable value pertaining to each part shall, for the years referred to in paragraphs 9 to 11 above, be determined in such manner as may be directed by the Secretary of State, and in those paragraphs any reference to a separate undertaking shall be construed as including a reference to the part comprised in the amalgamated undertaking.
  This Amendment deals with the possibility that existing water undertakings will not be amalgamated as complete units, but that divisions and changes of boundary may take place. In such cases the Amendment leaves it to the Secretary of State to determine how the cumulo rateable value of the former undertakings which are split into parts shall be divided.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 61, in line 45, to leave out 'succeeding that'.
  This is a drafting Amendment.
  Mr. G. Campbell: I am not sure that it is a drafting Amendment, because it seems to change the year, from one year to another. Would the hon. Gentleman care to explain the reason for the change?
  Dr. Mabon: I had intended to explain the matter later. We want to correct an error relating to the determination of rateable value of amalgamated water undertakings once they have become fully established. I had intended to explain this when we come to Amendments No. 62 and 63.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move, Amendment No. 62, in page 30, line 38, to leave out:
  'as respects the previous year'.
  It might be convenient, Mr. Speaker, if, at the same time, we discussed Amendment No. 63.
  Mr. Speaker: If there are no objections, so be it.
  Dr. Mabon: These two Amendments ensure that the capital expenditure to be taken into account in determining the apportionment of the rateable value of water undertakings shall be that for the most recent period, while the income from public water rate and so on shall be that for the previous year,

  1459
  as being the last year for which the data will be available.
  Amendment agreed to.
  Further Amendment made: No. 63, in page 30, line 44, after 'income', insert 'for the previous year'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 64, in page 31, line 38, to leave out from 'undertakings' to the end of line 39.
  Paragraph 23 of the Schedule allows the Secretary of State, in the transitional years 1967–68 to 1971–72, to modify the cumulo rateable values of water undertakings. The Bill at present provides for the modification to be done by relation to percentages, but this may not always be appropriate and the Amendment omits these words. I hope that the hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) will not ask me any further awkward questions about this at any other stage of the Bill.
  Amendment made: No. 65, in page 32, leave out lines 20 and 21.—[Dr. Dickson Mabon.]

  Schedule 3.—(RATING OF UNOCCUPIED PROPERTY.)
  Amendment made: No. 66, in page 33, line 34, at end insert:
  'and the notice shall be deemed to be withdrawn'.—[Dr. Dickson Mabon.]
  Dr. Dickson Mabon: I beg to move Amendment No. 67, in page 34, to leave out lines 14 and 15 and to insert:
  (6) In the application of section 349 of the Local Government (Scotland) Act 1947 to the service of notices under this paragraph, any reference to sending a notice by post shall be construed as a reference to sending it by registered post or by the recorded delivery service.
  The Bill at present provides that the completion notice may be served by post. The Amendment requires that it shall be sent by registered post or recorded delivery since the latter provides a cheap and secure method of transmission. This was a suggestion I made to myself in Committee. I am very glad that we have adopted it.
  Amendment agreed to.
  Dr. Dickson Mabon: I beg to move Amendment No. 68, in page 35, line 8, to leave out from the first 'to' to end of line 9 and to insert:
  'a newly erected building or dwelling-house include references to a building or dwelling-house produced by the structural alteration of a building included in relevant lands and heritages which by virtue of paragraph 5 of this Schedule have ceased or will cease to exist on the completion of the structural alteration and, in relation to a building or dwelling-house so produced, references to erection of a building shall be construed as references to the structural alteration producing it'.
  Hon. Members who served on the Standing Committee will recall that at the seventh sitting we discussed an Amendment pressed on us by the Opposition to exempt empty property from rating so long as its vacant stage was caused by the owners carrying out modifications or improvements. I touched on this during our earlier discussion. I think that the Amendment commends itself to the Opposition and I hope that it will be incorporated into the Bill.
  Mr. G. Campbell: We touched on this matter briefly on an earlier Amendment. I must again make it clear that this is a separate question. If structural alterations are taking place which will result in a house or flat disappearing completely, it is reasonable that it should be exempted from rates in this way. That is different from our proposal which is that there should be exemption where improvements to a house or flat were taking place as a result the period of three months was continued. The Amendment does not meet our point, but it meets another point, and we accept it.
  Amendment agreed to.

  Schedule 4.—(LICENCES ETC.)
  Amendments made: No. 69, in page 35, line 17, at end insert:
  4. Sections 341 to 352 of the Merchant Shipping Act 1894, in section 365(1) of that Act paragraph (d) and the words '(e) emigrant runners', and section 23 of the Merchant Shipping Act 1906'.
  No. 70, in line 24, at end insert:
  3. Section 5 of the Customs and Inland Revenue Act 1883.—[Dr. Dickson Mabon.]

  Schedule 6.—(ENACTMENTS REPEALED.)
  Dr. Dickson Mabon: I beg to move Amendment No. 71, in page 38, line 5, at the end to insert:

  31 & 32 Vict. c. 110

  The Telegraph Act 1868.

  Section 22.

  This is consequential on some of our earlier work. It is a tidying-up Amendment.
  Amendment agreed to.
  Further Amendments made: No. 72, in page 38, line 19, at end insert:

  57 & 58 Vict. c. 60

  The Merchant Shipping Act 1894.

  Sections 341 to 352. In section 365(1), paragraph (d) and the words "(e) emigrant runners".

  6 Edw.7. c. 48.

  The Merchant Shipping Act 1906.

  Section 23.

  No. 73, in line 24, at end insert:

  24 & 25 Geo. 5. c. 50.

  The Road Traffic Act 1934.

  Section 4(8).

  1 Edw. 8 & 1 Geo. 6. c. 5.

  The Trunk Roads Act 1936.

  Section 6(4).

  No. 74, in page 39, line 12, leave out from 'words' to end of line 16 and insert:
  '"an authorised officer or", the words "officer or", and the words from "In this section" to the end of the section'.—[Dr. Dickson Mabon.]
  Motion made, and Question proposed,
  That the Bill be now read the Third time.—[Queen's Consent, on behalf of the Crown, signified]
  10.15 p.m.
  Mr. G. Campbell: I must just say a few words at this point because some matters have occurred since the Committee stage in the summer which we have been unable to consider during the Report stage. The Bill provides financial assistance to local authorities. That is its main concern. Rates in Scotland will continue to be of great concern. The Under-Secretary of State told us earlier today that, in the current year, the rising burden will cause an increase of an estimated 16 per cent. in the rates and this is a matter which all of us must be greatly anxious about.
  1462
  The Allen Committee, specially set up to consider the impact of rates, in a general conclusion found that, in Scotland, rates were high, rents were low and that the former subsidised the latter. During the Committee stage of the Bill, we were in the extraordinary position that discussions and negotiations were going on with the local authority associations about matters in the Bill at the same time. As a result, the formula of distribution of the new grants was not known while we were discussing the Bill in Committee and, indeed, it appears it has not yet been worked out or agreed upon.
  We have had some enlightenment about the formula in a Written Answer to a Question on 26th October, when we were told that we shall hear more in the House after the Bill has been passed. So we still do not know the effect of the rate support grant of individual local authorities and I ask the Government how we are to have the opportunity of discussing the formula later, as we were promised. Will it be in order for us to discuss this when the first rate support grant order comes before us? When we have tried to do this in the past, Mr. Speaker, your predecessor has ruled it out of order.
  I want to mention briefly the question of roads and the new system of classification. There is no doubt that this also is causing concern among the local authority associations but it is not yet clear how the new system is to be worked out and it may be some time before we can see the financial effect on local authorities.
  Another point concerns the decision of the Secretary of State on what is the notional reasonable rent which a local authority should prescribe. In Part II of Schedule 1 there is still a blank, because the Secretary of State has to prescribe what a reasonable rent should be. Perhaps we can be told about that as we leave this Bill.
  In general, the Government have adopted our system of general grants which we brought in some years ago and have expanded and refined it. To that extent we support them. The old proposals that the Labour Party put forward previously from time to time for a return to specific grants for education and other subjects have been dropped. Again we applaud this.

  1463
  We have made it clear, throughout the passage of the Bill, where we differ with the Government and they have accepted some of our Amendments, many on important points such as the agreement not to include rating of off-peak storage heaters and the question of rating of Church property. We look forward now to discussing in the House the first rate support grant order for Scotland under this Bill.
  10.19 p.m.
  Mr. James Davidson: I welcome the opportunity to put briefly the Liberal view of the Bill. I have sat through most of its proceedings. It was pointed out by right hon. and hon. Members opposite that the Bill is, in effect, an interim Measure pending the findings of the Royal Commission on Local Government and on this basis we are prepared to accept it. Although it is full of disappointments and omissions, what it does it does quite efficiently. We particularly welcome the new system of rate support grants for local authorities. This has been very successfully managed through the medium of the Bill.
  During the debate tonight it was said that a whole new system of rating was required. I could not agree more with that sentiment. I have tried to explain the advantages of rating by site valuation, particularly the encouragement which that would give to the occupation of empty properties, the development of underdeveloped sites and the encouragement which people would be given to develop their own properties. There would be no disincentives in such a scheme of valuation.
  I hope that the Bill will not be used as an opportunity to downgrade Class A roads. I hope that most of them will become principal roads. If they do not, a heavy burden will fall on counties, particularly those in the North-East of Scotland and on the Border, where there is a high proportion of back roads to main or trunk roads.
  I want to refer to one or two omissions, although it is rather unfair to call them that. They are matters which ought to be considered in future, when we finally get the report of the Royal Commission on Local Government. I am disappointed that no effort as been made to make
  1464
  some link between the advisory committees which have been established and elected representatives on local authorities. It is a great pity and I hope that that omission will be rectified in future.
  10.21 p.m.
  Mr. Clark Hutchison: In Committee I asked what the words "educational units" meant and the Under-Secretary said that he did not wish to explain the phrase, because he was still having conversations with the local authorities about the formula which appears in Schedule 1, but we were assured that we would be told what the formula was. We still do not know.
  This matter concerns Edinburgh very much, particularly in its expenditure on education, because under the general grant as at present all children under the age of 15 are in the weightings, whereas, I suspect, under the Bill only children at corporation schools will be included. I think that that is what is in the Government's mind and the result will be that Edinburgh will lose about £50,000 a year in grant. I must protest at not having been told what we were assured we would be told and I protest on behalf of the Edinburgh citizens who will be swindled out of this money. I hope that when the Unionist Government are returned to office this injustice will be put right.
  10.22 p.m.
  Dr. Dickson Mabon: I am sure that the hon. Member for Edinburgh, South (Mr. Clark Hutchison) did not want to be unfair, but he should recall that just before or during our discussion of Schedule 1 in Committee, I made a statement fulfilling my promise—the hon. Member for Moray and Nairn (Mr. G. Campbell) complimented me on it at the time—when I specifically referred to the hon. Gentleman. I presume that he was detained elsewhere on that occasion, for he was a faithful attender of the Committee and he may not have heard what I said about the discussion on 15th July with the local authorities when it was clear that they were not in favour of the proposal promoted by the hon. Gentleman and the Edinburgh Corporation. Since then, on 14th October, the local authorities have overwhelmingly

  1465
  confirmed that, with the exception of Edinburgh, they endorsed the formula as announced in the Written Answer to my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown).
  I am not anxious to take sides in this matter. We promised that we would consult the local authorities about this formula and in a situation in which all the local authorities bar one are agreed, it is impossible to defend the position of the Edinburgh Corporation. I promised that we would drop the phrase "educational unit" during the progress of the Committee stage and I can assure the hon. Gentleman that I meant no discourtesy when I said to him that we would tell him about this matter at some appropriate moment. I am sorry that he was not present on the morning of the relevant debate, but I can assure him that this matter has been discussed at length with the representatives of Edinburgh Corporation.
  I am grateful to the hon. Member for Aberdeenshire, West (Mr. James Davidson) who has been very helpful during the stages of the Bill and I endorse what he said about the Bill's interim nature. We are seeking to achieve what we set out in the White Paper on Local Government Finance, published in February. Hon. Members will recall that the Government gave an undertaking, set out in paragraph 7, that the percentage of Exchequer grant to estimated expenditure will rise each year instead of being virtually static, as it has been for almost a decade.
  The greater part of the extra percentage grant will be devoted to assisting the householder in quite a new way, by giving him a lower rate poundage than applies to commercial, industrial and other types of ratepayers. We are collecting information from the local authorities on their likely expenditure for the next year and detailed dicussions will start soon on the amount of grant.
  Despite the comments of the hon. Gentleman the Member for Moray and Nairn, I feel that we have had a unique experience. I do not mean just this Government but any government in its dealings with local authority associations. During the current year, for the first time, we are passing into Statute, unlike the English Measure, a Bill which relies for the formula upon agreement outside of
  1466
  the Bill. It is rather commendable that we should have this trust between local authority associations and the Government. Perhaps the case in England and Wales could be explained by the fact that there is a larger number of authorities to deal with, while we in Scotland are a very tightly-knit, close and intimate community. That can hardly be said of a population of 45 million which is the case in England and Wales.
  We have perhaps taken advantage of our comparative smallness to have this intimate consultation. As I said in Committee on 22nd July, this is unanimously welcomed by the local authorities. Hon. Gentlemen opposite have pressed on us in Committee the need to have written into the Statute provisions that would ensure that we will always consult the local authorities in certain circumstances. We have readily agreed to this and this is a testimony of our belief that we should work closely with local authorities in carrying forward the Rate Support Grant.
  I may say, perhaps a little boastfully, that this Government have provided more information during the passage of this Bill than the previous Government did during the passage of the 1963 Bill. I have looked up the relevant passages. We have done this for the very good reason that hon. Members opposite have been willing to accept the difficulties facing the Minister putting a Bill of this kind through, without having reached agreement with the authorities, and having to carry out this concurrently. I have thanked hon. Members before for their co-operation in this regard and I thank them again.
  I am very glad that my hon. Friends gave us their co-operation too. We are reaching a stage when we shall discuss the rate support grant and I hope that we will be pretty well unanimous in our support of local authorities. Even though some will lose here and there in certain matters and gain here and there in others, we hope that that which we seek to propose in an Order consequent upon the passing of this Bill will be seen to be in the best interests of Scotland and in the best interests of good local government also.
  Mr. G. Campbell: Can the hon. Gentleman tell us now how we will be able to discuss the formula?
  Dr. Mabon: I have inquired into this and the ruling depends upon the appreciation of Mr. Speaker, but it is my understanding that, because last time we had so much written in Statute, the hon. Gentleman was disbarred from speaking, I think very properly, by the Chair. On this occasion, when there is not so much written into a Statute it is fairly desirable that we should be able to discuss the principles which are not written into the
  1468
  Act but which are within the Order. I am quite certain that the Chair will look at the new situation created by the passage of this Bill in relation to what has passed and will perhaps be willing to allow us to discuss these matters, which I would certainly like to discuss with those concerned.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

POLICE (SCOTLAND) BILL
Not amended (in the Standing Committee), considered.
POLICE (SCOTLAND) BILL

  Clause 1.—(AMENDMENT OF SECTION 18(2) OF THE POLICE (SCOTLAND) ACT 1956.)
  10.29 p.m.
  Mr. N. R. Wylie: I beg to move, in page 1, line 17, after 'scheme' to insert:
  'publish in one or more newspapers circulating in the areas of the authorities a notice of the general nature of the proposed scheme and the general nature of that objection and shall'.
  This Amendment is substantially, although not wholly, in the same terms as the Amendment discussed upstairs, when this Bill was in Committee. What it seeks to do is to preserve one of the features of the existing legislation which we consider to be important. The Bill is a very short one, and it seeks to replace the provisions of subsection (2) of Clause 18 of the Police (Scotland) Act, 1956, which in turn is a re-enactment of the provisions of the 1946 Act.
  I do not wish to go into the other provisions of Section 18(2) of the 1956 Act which are being repealed and to which we have no objection, but I wish to stress that the provisions in that legislation, with which we have been familiar for 20 years, with regard to the advertisement in local newspapers of schemes of amalgamation, are a feature of the existing legislation which ought to be retained.
  10.30 p.m.
  There is and always has been in Scotland a close link between local police authorities and the people in the locality, and we feel, rightly or wrongly, that, having regard to the very small amount of expense involved, it is appropriate that those provisions for advertisements should be retained. The only qualification to that is that we are seeking in this Amendment to include in the advertisements of the proposed amalgamations a statement not only of the general nature of the proposed amalgamation scheme but also of the general nature of the police objection, if there has been one, which has been taken to it.
  Something was said in Committee about delay and expense. I do not think
  1470
  it is a valid point. I do not think any real delay would be occasioned, because if there is a police objection under the legislation there has got to be an inquiry. If there is an inquiry, then under the practice, although not strictly required by law, there will be an advertisement of the inquiry.
  All that we seek in the Amendment is to see that that advertisement includes a general outline of the scheme and of the objection to the scheme, so that the people in the locality who are most directly affected by the proposed amalgamation will know what is afoot.
  Mr. William Baxter: I do not see any real objection to the Amendment, but I hope that even this small Bill will not be too restrictive with regard to amalgamations in another respect than these amalgamations between town and country forces——
  Mr. Speaker: Order. The hon. Gentleman may not raise this point at this stage. We are discussing an Amendment in specific terms. Mr. Willis.
  The Minister of State, Scottish Office (Mr. George Willis): The hon. and learned Member for Edinburgh, Pent-lands (Mr. Wylie) has moved an Amendment very similar to the Amendment that he moved in Committee, the only difference being that he has put in the words "the general nature" in front of "of that objection". I do not know the reason for that, but it does not seem to me to make a great deal of difference.
  The answer briefly is very much the same as in Committee, namely, that there is really, in our view, no need for this Amendment if, in fact, the object is that the public should be informed that the scheme is being made and there has been an objection to it. Under the Local Government (Scotland) Act, 1947, Section 355(3),
  "The person appointed to hold the inquiry shall cause notice of the time and place of the inquiry to be given to the bodies and persons appearing to him to be interested."
  The hon. Member for Perth and East Perthshire (Mr. MacArthur) challenged this in Committee and said that that did not mean that there would be an advertisement in the Press. But it is the only way by which the person appointed to hold the inquiry can inform the persons interested.

  1471
  The burden of the argument of hon. Members opposite is that the public is interested. If that argument is sound, the only way in which the person holding the inquiry can inform them is through an advertisement in the Press. Like an Act of Parliament, it has to be interpreted, and in practice the precedent has supported the interpretation which I am placing upon it. Therefore, it seems to us that this Amendment is quite unnecessary.
  The hon. and learned Member for Pentlands argued that all he was asking for was simply a statement in the Press of the general nature of the proposed scheme. Unfortunately, however, if he reads the proposed new subsection (2, a), he will see that the words
  "the general nature of the proposed scheme"
  govern what the Secretary of State must send to the local authority. That being so, it would mean that once again we would enter into long advertisements specifying what the Secretary of State told the local authority. We had long discussions of this in Committee, when I quoted a number of cases in which we thought that it was undesirable to give people the unnecessary job of doing this when it was not necessary.
  I do not want to go into the details of the other objections to the Amendment. They were rehearsed fairly fully in Committee. The Amendment was voted upon in Committee and on that occasion the Committee supported the Government. I hope that the House will do the same on this occasion.
  Mr. Ian MacArthur: I am very disappointed in the Minister of State—not, may I say, for the first time. In Committee, and even earlier, the hon. Gentleman gave us, despite a certain blustering, a reason to hope. He confessed in his happier moments of debate that the thought behind the Amendment had at one time appealed to him. My hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Wylie) and I hoped that in the week or two which has elapsed since Committee the hon. Gentleman would have thought a little more about this and seen that there is good reason for our proposal.
  1472
  The hon. Gentleman has rightly said that there is no need to go over all the arguments—we covered them in Committee—but I question some of the points which he has just made. He says that there is no need for the advertisement described in our Amendment if its purpose is to inform the public. He went on to say that there was no need for this because the Local Government (Scotland) Act, 1947, requires the person holding the inquiry to bring it to the notice of those concerned in it. He then said that, on our argument, those concerned in it would be the public. I listened to that argument with interest but it has no substance whatever.
  By the very nature of the Bill, the persons interested in the objection at the inquiry are the members of the police authority. I say that because the inquiry is limited to the objection made by the police authority. It follows, therefore, that the person in charge of the inquiry could quite properly communicate with the members of the police authority only without any question of advertisement while keeping within the requirement of the Bill.
  Mr. Willis: The past practice in connection with the Local Government Act is that there has always been an advertisement. We are now putting before the House the present position in England.
  Mr. MacArthur: I appreciate that. The Minister has throughout made the point that even if our Amendment were not accepted, an advertisement would appear because it is the administratively convenient way of bringing the inquiry to people's notice. There is, however, no statutory requirement for an advertisement.
  I repeat the point which I made in Committee that the law on this matter, as on other matters, must be precise. My hon. Friends will, I am sure, agree that it is not sufficient to leave the question of an advertisement simply to administrative convenience or even to administrative whim. There should be a statutory requirement. That is the view not only of hon. Members on this side of the House. It is supported outside the House. However, there is no need to go into that argument any more.
  In Committee, the Minister of State made great play with the length of the

  1473
  advertisement. He produced an advertisement, published under the existing legislation, in one of the Ayrshire papers. He waved a piece of paper at us and said that it was a long and complicated advertisement. I was able to see, however, that the advertisement was stuck on that piece of paper and I calculate the advertisement as being 8 inches of a single column. I have made inquiries and I find that there are two newspapers circulating in the local area. One is the Ayrshire Post and the other is the Ayr Advertiser. If the advertisement was in fact 8 inches long its cost in the Ayrshire Post would have been £6; its cost in the Ayr Advertiser would have been £4 8s.
  I think that that disposes of the argument which was advanced by at least one hon. Member opposite that this process would involve undue cost. The only addition to existing practice our Amendment would require would be a statement about the general nature of the objection to the scheme. This might require another inch or two, and an inch or two would cost 11s. in one paper and 15s. in the other, per inch. I do not think this question of cost has much substance.
  The basic reasons for our Amendment are that if an objection is made to a proposed scheme it is important that the public should know of the dispute, if only because they will be closely affected by its outcome. Further, I believe that acceptance of this Amendment would assist the maintenance of good relations between the police and the public. Finally, the law must be precise and, whatever the form of advertisement, the question of its publication should not be left as a matter of administrative convenience.
  Amendment negatived.
  10.41 p.m.
  Mr. Willis: I beg to move, That the Bill be now read the Third time.
  In view of the hour I do not wish to speak at any great length, but I should like to express my thanks to hon. Members on both sides of the House for the manner in which they have assisted us to get this Bill through quickly. I think it will be a useful piece of legislation. I think, too, that it will be of value to us in helping us with the scheme of
  1474
  amalgamations which the Secretary of State announced a short time ago. I would again thank the House.
  10.42 p.m.
  Mr. Hector Monro: On the Second Reading we on this side welcomed the Bill, and we want to do so again on Third Reading, and just to ask one or two questions which the Minister has not yet replied to and which are very important in relation to these amalgamations which the Secretary of State announced on 6th July.
  The first question was about the position of the chief constable who is displaced by an amalgamation. The Minister said in August that he was considering representations and hoped to give more generous treatment. I wonder if he can now give details of that. Secondly, there was the position of the chief constable, who after an amalgamation becomes deputy chief constable doing perhaps a superintendent's work. Can he now give the assurance that the deputy chief constable will receive pay as if he were promoted and till he retires? This is most important. At least 10 chief constables will lose their positions, and we want to make sure that their financial future is secure.
  I have asked questions about senior officers. There is one in relation to the policemen themselves. Under the burgh amalgamations, covered by Regulation 60 under the Police (Scotland) Act, 1956, compulsory transfer from one house to another is dealt with. I wonder if this is to be extended to deal with county forces——
  Mr. Deputy Speaker (Sir Eric Fletcher): Order. I do not think the hon. Member can go into this on Third Reading of the Bill, which relates only to Section 18 of that Act.
  Mr. Monro: I am sorry, Mr. Deputy Speaker. One feels that the consequences of these amalgamations will be very important, but I shall leave that, if that is your Ruling.
  In general we warmly welcome the intentions, and I hope that the police authorities will go forward in a spirit of co-operation, and in a constructive atmosphere, because that is most important to amalgamations. In general, I warmly applaud this Bill.
  10.45 p.m.
  Mr. James Davidson: On behalf of the Liberal Party, may I welcome the Bill? We welcomed it on Second Reading, not the least for its brevity. I hope that it is one of the first steps in the whole scheme of regionalisation, and I commend it for its contribution to the greater efficiency of our police forces and greater opportunities for promotion to police officers serving in small forces.
  10.46 p.m.
  Mr. William Baxter: While I agree with the main purpose of the Bill, the amalgamation of police forces is a process which has been going on for a number of years in Scotland. I hope that the Bill will not be restrictive in its nature and that the Secretary of State will think that it is the be all and end all of the reorganisation of our police forces.
  Notwithstanding that amalgamations have been taking place and have given a degree of efficiency, they have also brought a degree of dissatisfaction, not the least because of ordinary police officers being moved considerable distances away from their original bases. I suggest that that is a matter which must be looked at carefully when amalgamations take place.
  As I say, we have to go further than the reorganisation of police forces in Scotland, and I should like to think that the Bill gives the Secretary of State power to look at the possibility of a central police force for the whole of Scotland.
  It may be that that is outwith the ambit of the Bill, but regard must be had to the individual policeman in not moving him 30 or 40 miles away, as a result of an amalgamation, from a position which he took up believing that he would be within that area when he joined the police force originally.
  Mr. Willis: Mr. Deputy Speaker, it would be out of order for me to attempt to reply to the hon. Member for Dumfries (Mr. Monro) now. I will send him a letter about the points which he raised.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

POST OFFICE (CHARGES)
10.48 p.m.
Mr. Paul Bryan: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Inland Post Amendment (No. 3) Regulations 1966 (S.I., 1966, No. 911), dated 22nd July 1966, a copy of which was laid before this House on 28th July, be annulled.
Mr. Deputy Speaker, as the background of all these six Motions in the names of my hon. Friends and myself are fairly similar, it might be for the convenience of the House to debate them together; and they are as follows:
That an humble Address be presented to Her Majesty, praying that the British Commonwealth and Foreign Post Amendment (No. 2) Regulations 1966 (S.I., 1966, No. 912), dated 22nd July 1966, a copy of which was laid before this House on 28th July, be annulled.
That an humble Address be presented to Her Majesty, praying that the British Commonwealth and Foreign Parcel Post Amendment (No. 2) Regulations 1966 (S.I., 1966, No. 913), dated 22nd July 1966, a copy of which was laid before this House on 28th July, be annulled.
That an humble Address be presented to Her Majesty, praying that the Postal Order Amendment (No. 1) Regulations 1966 (S.I., 1966, No. 914), dated 22nd July 1966, a copy of which was laid before this House on 28th July, be annulled.
That an humble Address be presented to Her Majesty, praying that the Telephone Amendment (No. 2) Regulations 1966 (S.I., 1966, No. 857), dated 15th July 1966, a copy of which was laid before this House on 28th July, be annulled.
That an humble Address be presented to Her Majesty, praying that the Telephone (Channel Islands) Amendment (No. 3) Regulations 1966 (S.I., 1966, No. 858), dated 15th July 1966, a copy of which was laid before this House on 28th July, be annulled.
Mr. Deputy Speaker (Sir Eric Fletcher): It is possible to debate them together, with the consent of the House. If the House agrees, then so be it.
Mr. Bryan: My hon. Friends and I oppose these Statutory Instruments by the Postmaster-General more on principle than merely on the increases which are laid down therein. We object to the deceptive ways in which these increases were introduced.
The Postmaster-General knows and the Prime Minister knows that, ever since

1477
the 1961 Act, no longer has the Post Office been tagged on to the apron strings of the Treasury. In the White Paper which preceded the Act of 1961, we read in paragraph 3:
"It is now proposed to give the Post Office greater commercial freedom."
It goes on:
"Its current finances will be severed from the Exchequer."
Then we see, referring to the Postmaster-General:
"He will have greater scope and responsibility for running the Post Office as a self-contained business."
Later, it says:
"The proposed status should be a renewed spur to enterprise within the Post Office."
It is not only since 1961, but for the last 10 years or so, that every postal increase announced by the Postmaster-General has not been announced by the Chancellor of the Exchequer or by the Prime Minister, but has been brought forward by the Postmaster-General in his rôle as head of this business which the White Paper described, uncamouflaged by or mixed up with any other nonsense, and these charges have been duly considered by the House and open to debate.
These increases have been introduced in quite another way. On 20th July we listened to the catalogue of restrictions read out by the Prime Minister, which marked the final collapse of Socialist economic policy. All the "stop-go" phrases which were never going to be used were mumbled out. We heard all the old phrases, such as activating the regulator, duties on beer, wines and spirits, Purchase Tax, petrol tax, and the rest, and then, all of a sudden, to everybody's astonishment, the Prime Minister said:
"In addition, a further £20 million will be taken out of the economy as a result of changes announced by my right hon. Friend the Postmaster-General …"—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 630.]
We know why this was done. We were not meant to notice this little insertion within all the other mysteries. The Prime Minister knew that this was wrong, but he could not resist the trick. Did the Postmaster-General object to this treatment? Or was he in the same position as the Minister of Agriculture when he suddenly found that the agricultural industry was landed with S.E.T.? Later
1478
it was murmured around that he had not been consulted.
Let us be quite clear about this. The postal charges have been used as a budgetary instrument. At Question Time on 20th October last the Under-Secretary of State for Economic Affairs said in answer to my hon. Friend the Member for Chigwell (Mr. Biggs-Davison):
"The increases in postal charges were an integral part of the measures necessary to remedy the economic situation …"—[OFFICIAL REPORT, 20th October, 1966; Vol. 734, c. 377.]
There it is. It could not be straighter than that. Postal charges are to be used like a regulator, like hire-purchase restrictions, and so on. Will the right hon. Gentleman tolerate that? Is it right? A regulator goes down as well as up. When we have a million unemployed, will postal charges go down, with the tax on beer, as an integral part of the measures necessary to remedy deflation?
This sleight of hand confuses all the true costs and charges, and goes against all the new trends of Post Office policy. The whole trend has been towards a commercial undertaking. The 1961 Act, and the statement by the Postmaster-General on 3rd August, were towards a more commercial, a more business-like approach. This manoeuvre has gone right against that.
Let me hurry on, since time is short, from deception to the unfairness in making these increases during a statutory prices freeze. In his new rôle as "businessman", as described in the White Paper, why does the right hon. Gentleman evade the rigours that go with that status? Why does he allow his commercial undertaking to be singled out for cushy treatment?
In the Labour Party election manifesto, as amended on 20th July, we were told that for the good of the country wages and prices should be frozen, and bank balances reduced except in the case of exporting firms. What logically followed, and I agree it logically followed, was that it was bad for the country if laundries raised their prices. So bad was it considered to be that the full force of Part IV was invoked. So bad was it for the country that the Government were willing to risk a breakdown in relations with the C.B.I., despite the fact that the

1479
consequential increase following the increase in laundry prices was minimal.
We were very puzzled, indeed, when we found that although that was bad for the country, it was good for the country for postal charges to go up; Postal charges affect literally every cost and person—old age pensioners, exporting industries, and all manufactures. Everything is affected by this increase. Indeed Statutory Instrument No. 912 singles out exports. Postage abroad is put up by 50 per cent. or so. Last time, in 1965, when the letter rate went up by 33½ per cent., the then Postmaster-General said:
"The extent of this increase has been decided in the light of the decision on productivity prices and incomes."
That was not believable. This time we are told that it is an integral part of the necessary measures. How does the Postmaster-General answer the straight question: why is the Post Office immune from the prices freeze? He could answer, "Because we are a Government Department", but in Statutory Instrument No. 1021 on Prices and Incomes, we read in paragraph 32:
"The Government intend to apply the principles of the standstill to all prices, charges and fees of Government Departments."
The right hon. Gentleman may say, "We are a nationalised industry, so we are immune". but we read in paragraph 34:
"The nationalised industries will be subject to the same restraints as the private sector in relation to prices and incomes."
So by what right is the Post Office singled out as the only industry which is immune from the prices freeze? On both these answers the right hon. Gentleman would be shot down.
I do not believe that the Postmaster-General honestly understands what has occurred. In answer to a Question I put the other day, asking why, if he agreed that this was a budgetary measure, it should take place in this way, he said that if it was not done in this way the taxpayer would have to pay the cost in his tax just the same. He therefore either agrees that Post Office charges should be a budgetary regulator, or if not, that the finances of the Post Office after two years of the no alibi era are in such
1480
a parlous state that it cannot hold its prices, like lesser mortals have to do, for six months. It has to be immediately recouped from the taxpayer to put the finances right. Despite the fact that there is a profit of £40 million and 8 per cent. on its capital, the charges must go up straight away. Imagine what would be said if a laundry contended, "We must put up prices because we are getting only 8 per cent."
Now that the Postmaster-General has become a businessman he must realise that all over the country businesses have precisely the same problems as the Post Office.
Mr. James Dance: Is it not true that the Post Office has put up charges by 30 per cent. to 50 per cent.? What would happen if private enterprise tried to do that?
Mr. Bryan: Part IV would be invoked. The Post Office, nevertheless, goes on as the only institution with its life unchanged; it cannot wait six months. I ask the Postmaster-General if all other Post Office charges are to go up. I have had a letter from Messrs. Turnbull of Leeds, removal contractors, which tells me that the advertisement in the Leeds, Bradford and York Classified Telephone Directory has risen in cost. from £53 to £66—a rise of 25 per cent. If this is so, may I ask if, under the Government freeze, any other advertising contractor is allowed to raise his prices.
I have concentrated on the method and background of these price increases, first because they appear to be a part of a plan, or at any rate an irresistible instinct, to insulate nationalised industry from all the normal yet freakish hazards of commercial life under Socialism, and secondly, because we believe that if the Postmaster-General must raise charges he should announce them himself, debate them without fear, and not allow them to be mixed up with a bundle of the Prime Minister's dirty washing.
10.59 p.m.
Mr. Ray Mawby: I am as amazed as my hon. Friend the Member for Howden (Mr. Bryan) that this great Department should be singled out to be used as a pawn. One can use no other word to describe the way in which it has been used by the Prime Minister in his statement of 20th July, in which he said

1481
that the Post Office would be used to take £20 million out of the economy. Probably hon. Gentlemen do not realise that he went on to say that the telecommunications changes would mean no net increase to the Post Office. Therefore, in the midst of a so-called economic crisis, the Prime Minister was using this opportunity to shuffle about telephone charges, which would in the end mean no net increase to Post Office revenue. This was announced by the Prime Minister rather than by the head of the Department, the Postmaster-General.
But taking this further brings us to the economics of Bedlam. The Post Office "jumped the gun". Either it was used as a pawn to take £20 million out of the economy, or this opportunity was taken to raise prices generally within the Post Office, which was quite contrary to the Second Schedule to the Prices and Incomes Act, to which every trade unionist and manufacturer is expected rigidly to adhere. One can only repeat what my hon. Friend said about paragraph 32, which ought to be framed.
Let us remember that that Schedule was introduced into the Bill only after the House had dealt with the whole Bill. Incidentally, I asked in Committee why the Schedule was not changed, as it was out of date. I was told that there was no need to change it, when, as we now know, the new Second Schedule was already in print to replace it.
Nevertheless, paragraph 32 makes it clear:
"The Government intend to apply the principles of the standstill to all prices, charges and fees of Government Departments."
Yet the Prime Minister said, "We are using the Post Office to take £20 million out of the economy."
All right. If we were in such dire straits—this was the principle followed by the Prime Minister—could he not have got us out of them more quickly, on this formula, by raising the price of coal, electricity, gas or railway fares? This would have been just as justified as the action which he took in singling out the Post Office for charges to be raised. Why is it such a marvellous social benefit to the nation that the Post Office should raise its charges, while everyone else in the country is called upon to exercise wage and price restraint, regardless
1482
of the increases which have gone on?
Another valid question in this mixed-up situation is this: has the Post Office agreed to pay any increase to its carriers, the contractors who carry the mails all over the world, who have also had additional costs to meet? After all, if the Post Office is allowed, by special treatment, to raise certain charges by between 20 or 30 per cent., surely the carriers ought to have some little share of it. I would like to lay odds that none of these carriers will ever see any of this increase.
So we come back to the basic point, that this Minister of a great Department of State has been reduced to nothing more than a pawn by the Prime Minister's deciding that he will solve the economic situation which he created by his own action. It reminds me of a wife, who always gets one out of difficulties which one would never have got into if one had not married. This is the problem of the present Government, that they have put up all sorts of Aunt Sallies and then seek to convince the nation that they are very expert in knocking them down.
I believe that we are right to move these Prayers. I hope that my hon. and right hon. Friends will press this to a Division, to show how strongly we feel about this whole sordid affair.
11.5 p.m.
Mr. Ian Gilmour: My hon. Friends have pointed to the dilemma in which the Postmaster-General finds himself this evening. Either he has to defend these charges on the ground that they were needed to put the Post Office finances right, in which case he convicts his right hon. Friend the Prime Minister of double talk on 20th July, or he has to say that they were made necessary by the economic crisis caused by the Government, in which case he will be saying something which is plainly untrue.
This is a very dangerous dilemma for the Postmaster-General, because on 20th July these changes were put forward very much as part of the deflationary package. The Prime Minister filled 12 columns of HANSARD with the details of changes in Post Office charges. I hope that the Government's foreign paymasters

1483
were suitably impressed, as they scrutinised HANSARD, to find the Prime Minister taking such an intimate interest in raising the charge of an alarm call from 9d. to 1s. It was the first time for a very long time—in any case since 1955—that the Post Office had been trundled out as part of the Government's armoury to deal with the economic crisis, a crisis caused by this Government.
Unfortunately for the Prime Minister, as my hon. Friend said, he lent himself to this fiction by saying that these measures were an integral part of the measures necessary to remedy the economic situation. This is quite the most absurd part of the Government's economic doctrine, and one cannot say more than that. When private industry puts up its prices, that is inflation. When the Post Office or the Government or a nationalised industry puts up its prices, that is deflation. We are well used to double standards from this Government but this is a bit more than double standards; this is taking opposite standards and making complete nonsense of the entire economic policy of the Government.
It is in complete contrast to what the Government do with other industries. For example, the road hauliers are treated in a totally different way by the Minister of Transport whenever there are any maintenance troubles in that industry. They are revealed publicly, and quite rightly so, but the failures of Post Office maintenance are treated very privately indeed.
What is the case that the Postmaster-General has for saying that these measures were caused by the Government's economic mismanagement? Although the economic mismanagement is an undoubted fact and although these increased charges are also an undoubted fact, that these two are connected is plainly not a fact and does not stand up to examination. On the day before these charges were announced, the Post Office said that it needed tariff increases. As time is short, I will not read them out. Although coincidences happen, this is a fairly considerable coincidence. On one day, tariff changes are said to be necessary. On the next day the Prime Minister suddenly imports into a major economic statement the 12 columns in
1484
HANSARD about Post Office charges and alarm calls.
The Postmaster-General, in his truthful way, revealed completely the folly and fallacy of all this, because on 25th July my hon. Friend the Member for Richmond, Surrey (Mr. A. Royle) asked the right hon. Gentleman what the effect of these increases would be, and he was told that these charges would remove £1 million of purchasing power in the three months following the Prime Minister's statement. Not even the Postmaster-General—I am sorry; nobody would say that this was an important deflationary measure or that £1 million was an important part of the freeze. By that factual statement the Postmaster-General revealed quite plainly that these charges had nothing to do with the economic crisis into which the Government had led the country.
The contrast between the way in which the launderers are being treated—with the full rigmarole of the Prices and Incomes Act being thundered out against them—and the way in which the Post Office behaves is marked indeed.[Interruption.] If the hon. Member for Liverpool, Walton (Mr. Heffer) wishes to intervene he should get to his feet. I think that the hon. Gentleman is a good long way from standing up.
I will not refer to the services having deteriorated, because it is lamentable that the Postmaster-General should have made these increased charges without giving an indication that the services would be improved. It is merely a question of the public having to pay more and more for less and less and worse and worse.
11.11 p.m.
Mr. Stratton Mills: I wish particularly to draw attention to the extent of these increased charges, a subject which has not been fully adduced. There was a 20 per cent. increase in the cost of parcels, a 30 per cent. increase in the cost of registered letters and recorded deliveries, a 20 per cent. increase in the remittance services and a 20 per cent. increase in the cost of overseas letters. These, by any standards, are substantial increases. On a turnover of £92 million in 1965–66, an additional £20 million of charges has been added; so that the Post Office is increasing its charges in this limited sector of the postal services by

1485
the massive amount of over 20 per cent. I notice the Postmaster-General beckoning. Does he wish to intervene?
The Postmaster-General (Mr. Edward Short): The hon. Gentleman's hon. Friend, the Member for Norfolk, Central (Mr. Ian Gilmour), was arguing that we had taken almost nothing out of the economy.
Mr. Stratton Mills: The right hon. Gentleman misunderstood the point my hon. Friend was making. He was referring to the first three months after 20th July, as the right hon. Gentleman will sec when he consults the report of my hon. Friend's remarks in the OFFICIAL REPORT.
There is one piece of obnoxious skulduggery to which I particularly wish to draw attention. On 3rd March, 1966, Cmnd. 2931, Post Office Prospects 1966–67, was published. That came out 27 days before the General Election. The four items in the postal services covered by these Statutory Orders were shown in that White Paper to be making a loss of £11.4 million in 1965–66; £11.4 million on a turnover of about £92 million. It was fairly clear from the White Paper that parcels, registered post, overseas mails and the remittance services were already making a substantial loss. Meanwhile, in a Written Answer which the right hon. Gentleman gave me today, it was shown that his forward estimates for these four services in the postal sector would show a loss in 1966–67 of £17 million.
Was any hint given in that White Paper published 27 days before the General Election that we would see these increases in postal charges?[HON. MEMBERS: "No."] I think my hon. Friends are being a little unfair in saying "No". After all, in the middle of a paragraph on page 6 appeared these words:
"… postal income will need to be reinforced over the next five years if the financial target is to be met".
I suspect that the cunning of those words came not from the Post Office but from Downing Street. It bears that touch ! The former Postmaster-General accused Reginald Bevins of holding back information before the 1964 General Election.
I turn that accusation and say, if Reginald Bevins was guilty, then the Postmaster-General, now Minister of
1486
Technology, is equally guilty in having given the information but holding back the increases until after the General Election, 1966. I remind the House of the words of the First Secretary of State in the election campaign:
"This time there will be no more alibis."
I repeat that to the Postmaster-General. The facts were perfectly clear in the White Paper before the election that there would be increases in this sector of the postal services. The Government did not act at that time, but held them over until after the election and for that reason alone are to be condemned.
11.15 p.m.
The Postmaster-General (Mr. Edward Short): The hon. Member for Howden (Mr. Bryan) said that we had used the postal charges as a budgetary instrument. There is nothing contrary to the spirit of the 1961 Act in that. All Government Departments and all public corporations have played their part in putting right the economic mess left to us by the party opposite. Mr. R. A. Butler, as he then was, did this on a number of occasions. There is nothing unusual about it.
The hon. Member accused me of deception. I shall not accuse him or his party of deception. What I accuse him and his party of is sheer, downright incompetence in running the Post Office. What we have had to do stems directly from the utter neglect of the party opposite—and the hon. Member for Totnes (Mr. Mawby) was Assistant Postmaster-General in that period.
Mr. Mawby: Will the right hon. Gentleman now finally answer the point that I have put again and again to the First Secretary of State: who made the challenge that we had issued fraudulent figures? I have issued this challenge in debate and never been answered.
Mr. Short: I shall reply in the time I have left.
The hon. Member for Totnes has called me a pawn. But he is the classic pawn—the trade union pawn in the hands of the Conservative Party.[HON. MEMBERS: "Cheap."] The hon. Member for Norfolk, Central (Mr. Ian Gilmour) said that we had only taken £1 million out of the economy. His hon. Friends argued that we had taken a massive amount out.

1487
They cannot have it both ways. The hon. Member for Belfast, North (Mr. Stratton Mills)—a Belfast Member of all people—accused us of skulduggery. That is just about as thick as the hon. Member for Totnes calling me a pawn.
Hon. Members opposite have made great play with what they describe as inconsistencies on the part of the Government in increasing postal charges at the same time that we impose the prices and incomes freeze. This only indicates that they have failed to grasp some very simple economic facts. The measures my right hon. Friend the Prime Minister announced on 20th July were aimed at two objectives.
The first was to relieve excessive pressure on demand and the second was to prevent that pressure building up again. The postal rate increases are helping towards the first of these objectives. The freeze is part of a comprehensive policy covering both prices and incomes and designed to achieve the second objective.[Interruption.] I did not interrupt the hon. Member for Howden. If he wants a reply, perhaps he would have the good manners to listen to it.
There are various ways in which a Government can remove purchasing power from the economy—by direct taxation, by higher duties on drink or other forms of indirect taxation or by charging more for services they themselves provide. Let me now explain why it was particularly appropriate to choose to raise some postal charges to contribute to this policy. It was simply and solely because of the appalling failure of the party opposite when it was in power to do what was necessary to keep the postal services on a sound financial footing.
Mr. Bryan: Will the right hon. Gentleman give way?
Mr. Short: No. I have very little time.
As the House well knows, the problem of the postal finances had been put on one side for far too long by the party opposite. In 1961, the postal services made a small surplus of £1 million; in 1962–63, they made a loss of £8 million and right hon. Gentlemen opposite did nothing; in 1963–64, they made another loss of £8 million and right hon. Gentlemen opposite took no action. In 1964–65
1488
—it was too late for us to take any remedial action—the loss was £20 million, and still nothing had been done. For far too long right hon. Gentlemen opposite allowed large and vital sectors of the postal services to go into heavily increasing deficit.
In the end, they chose one measure to take to put it right, and the hon. Member for Totnes knows what it was. They refused to do anything about postmen's wages. That was their only contribution to putting the postal services right—holding down the wages of postmen. As a result, when we came into office we found the services being run on a basis which no management with a pretence to efficiency would have tolerated. The services were manned by staff whose morale was at the lowest ebb ever known in the history of the Post Office. The situation was such that it could not be dealt with at one go.
In 1965, we took the first two remedial steps. First, we dealt with postmen's wages and put them on a decent footing. Secondly, we increased some charges for the inland letter service. The increase in charges was no more than a holding action and was barely sufficient to arrest for a time the steadily worsening financial position.
Mr. Bryan: Will the right hon. Gentleman give way?
Mr. Short: I have very little time and I did not interrupt the hon. Gentleman.
Without the new tariffs, which hon. Members are challenging, the postal services this year would have lost £8 million and next year would have lost £19 million. These estimates take full account not only of the modifications which we are making in the services, but also of the great increases in productivity which we are getting, partly because of the help of our consultants, McKinsey and Co.
Faced with this financial outlook, I could do one of three things. First, I could have reduced the services. I went into this and found that it would have meant reducing the services to one delivery a day for the whole country, and that delivery a good deal later than now. Secondly, I could have borrowed against current losses but kept the present services going. The third course was to

1489
put up charges. I think that hon. Gentleman will agree that at the present time, at any rate, the public would certainly not be prepared to accept drastic cuts in services of this kind.
Of course, we could have continued with a large deficit and asked for loans. Is that what the party opposite would have done? Would right hon. Gentlemen opposite have run a deficit and borrowed, or cut the services, or increased the charges?
Mr. Bryan Mr. Bryan rose——
Mr. Short: No other course is open to them. Is that what they would have done?
Mr. Bryan: I tried to explain to the right hon. Gentleman that this is a situation which every business in the country is facing. This is an exceptional year. We are all asked to hold our prices until Christmas, but the Post Office alone will not.
Mr. Short: The hon. Gentleman has not attempted to answer the question. If he aspires to do my job, he must say what he would have done. The deficit is the result of the mismanagement of right hon. Gentlemen opposite. What would they have done—cut services, borrowed, or put up prices? The hon. Gentleman knows quite well that he would not have carried a deficit of £20 million.
Some people have suggested that we should use the telephone profit to subsidise the postal side, but that profit is needed to finance the expansion of the telephone service and surely no one would wish that expansion to be put in jeopardy. My own view, and it is the view of everyone who has looked at this, is that the postal service ought to stand on its own feet. This is the reason why the increased postal charges had to come and why they were a highly pertinent measure for the Government to take on 20th July, as part of their determined effort to get the economy right. I make no apology for them; I will defend them anywhere.
In deciding which rates to put up, I had to bear very much in mind the increasingly heavy losses of some very important services, for example, the loss on the overseas services next year was expected to have reached as much as
1490
£5½ million and this on only £40 million worth of business and on inland parcels the loss was over £9 million. To continue with this policy of gross under-pricing and subsidising certain sectors of the business community was, in my opinion, out of the question, and it was to these services that I principally turned for the extra revenue. Indeed it is only fair—[An HON. MEMBER: "After the election."] Before the election. If hon. Members had listened, I said that before the election we put up postmen's wages and we put up inland parcel rates. We had the guts to do that.
It is only fair to remind the House that along with the increased charges I introduced some useful additions and refinements to our service. Local parcels cost us less to handle than other parcels and I passed this benefit on to the public by charging a shilling less for them. I have also introduced a new minimum weight for inland parcels of 1½ lbs. at 2s. 6d., which is cheaper than the old minimum of 2s. 9d. With the increases in registration charges I put up the old £20 compensation to £100.
Hon. Members will agree that the proper solution to the postal problem is a sound pricing policy, which will preserve the services at their present level, consistent with the efficient running of the Post Office and the commercial life of the country, and this is what I am determined to have.
I would remind the House, that overall, the telephone regulations will involve no net increase in Post Office revenue. They are designed simply to rationalise charges on a basis which is more related to costs. The increases here fall mainly on the public call office sector. Broadly speaking, what we have done is to reduce the price of S.T.D. calls, where the labour content is very much smaller. These calls are now pretty much the same as they were before the war.
I would like the House to reject this Prayer and to regard the policy we have followed as a sensible policy, and one which will maintain the services in their present efficient state.
Mr. Bryan: Before the right hon. Gentleman sits down, and as there are still two minutes left, will he answer the three main questions asked of him? He has not touched upon them. One of them is——
Mr. Brian O'Malley: On a point of order. Is it in order for an hon. Gentleman to be able to speak twice in this debate when other hon. Gentlemen who wanted to speak have not been called?
Mr. Deputy Speaker: It is in order for the hon. Member who moved the Prayer to speak a second time.
Mr. Bryan: I quoted these two conclusive paragraphs in the White Paper on Prices and Incomes, which said:
"The Government intend to apply the principles of the standstill to all prices charges and fees of Government Departments."
Secondly, I quoted:
"The nationalised industries will be subject to the same restraints as the private sector in relation to prices and incomes."
In the economic lecture given to us by the right hon. Gentleman, he has not got over this problem, why his Department should be immune from and
different from, the rest of the public and private sector. Why should it be all on its own?
Mr. Short: I have explained to the hon. Gentleman that there were two alternatives to this policy. One was to borrow and the other to cut the services. Does the hon. Gentleman want the services cut? Does he want us to borrow to finance this service? What we have had to do——
Mr. Bryan: I beg to move, That the Question be now put.
Mr. Short:—was a direct result of the incompetence and mismanagement of the party opposite.
It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 100 (Statutory Instruments. &c. (Procedure)).
The House divided: Ayes 89, Noes 162.

Division No. 199.]

AYES

[11.30 p.m.

Allason, James (Hemel Hempstead)

Hall-Davis, A. G. F.

Pink, R. Bonner

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

Harrison, Col. Sir Harwood (Eye)

Pounder, Rafton

Baker, W. H. K.

Harvey, Sir Arthur Vere

Pym, Francis

Batsford, Brian

Hawkins, Paul

Rossi, Hugh (Hornsey)

Bennett, Sir Frederic (Torquay)

Heald, Rt. Hn. Sir Lionel

Russell, Sir Ronald

Biffen, John

Heseltine, Michael

Scott, Nicholas

Blaker, Peter

Hiley, Joseph

Sharples, Richard

Brinton, Sir Tatton

Hobson, Rt. Hn. Sir John

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

Bryan, Paul

Holland, Philip

Sinclair, Sir George

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

Howell, David (Guildford)

Smith, John

Burden, F. A.

Hunt, John

Stodart, Anthony

Campbell, Gordon

Hutchison, Michael Clark

Summers, Sir Spencer

Chichester-Clark, R.

Jopling, Michael

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

Corfield, F. V.

Kirk, Peter

Taylor, Frank (Moss Side)

Currie, C. B. H.

Kitson, Timothy

Temple, John M.

Dance, James

Knight, Mrs. Jill

Tilney, John

Dean, Paul (Somerset, N.)

MacArthur, Ian

Turton, Rt. Hn. R. H.

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

Maginnis, John E.

Walker, Peter (Worcester)

Dodds-Parker, Douglas

Maude, Angus

Walters, Dennis

Doughty, Charles

Mawby, Ray

Weatherill, Bernard

Eden, Sir John

Maxwell-Hyelop, R. J.

Webster, David

Elliot, Capt. Walter (Carshalton)

Mills, Peter (Torrington)

Wells, John (Maidstone)

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Mills, Stratton (Belfast, N.)

Whitelaw, William

Fortescue, Tim

Monro, Hector

Wilson, Geoffrey (Truro)

Gibson-Watt, David

More, Jasper

Wolrige-Gordon, Patrick

Gilmour, Ian (Norfolk, C.)

Morrison, Charles (Devizes)

Wood, Rt. Hn. Richard

Gilmour, Sir John (Fife, E.)

Nicholls, Sir Harmar

Wylie, N. R.

Grant, Anthony

Osborn, John (Hallam)

Gresham Cooke, R.

Page, Graham (Crosby)

TELLERS FOR THE AYES:

Griffiths, Eldon (Bury St. Edmunds)

Pearson, Sir Frank

Mr. David Mitchell and

Curden, Harold

Percival, Ian

Mr. Reginald Eyre.

NOES

Albu, Austen

Booth, Albert

Conlan, Bernard

Allaun, Frank (Salford, E.)

Bottomley, Rt. Hn. Arthur

Craddock, George (Bradford, S.)

Alldritt, Walter

Braddock, Mrs. E. M.

Crawshaw, Richard

Allen, Scholefield

Brooks, Edwin

Cullen, Mrs. Alice

Archer, Peter

Broughton, Dr. A. D. D.

Dalyell, Tam

Armstrong, Ernest

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

Davidson, Arthur (Accrington)

Baxter, William

Buchan, Norman

Davies Dr. Ernest (Stretford)

Bennett, James (G'gow, Bridgeton)

Cant, R. B.

Davies, Ednyfed Hudson (Conway)

Binns, John

Carter-Jones, Lewis

Davies, Ifor (Gower)

Blackburn, F.

Coe, Denis

Davies, Robert (Cambridge)

Blenkinsop, Arthur

Coleman, Donald

de Freitas, Sir Geoffrey

Boardman, H.

Concannon, J. D.

Dempsey, James

Dewar, Donald

Jackson, Peter M. (High Peak)

Perry, George H. (Nottingham, S.)

Dickens, James

Johnson, Carol (Lewisham, S.)

Price, Thomas (Westhoughton)

Donson, Ray

Jones, Dan (Burnley)

Probert, Arthur

Doig, Peter

Kenyon, Clifford

Pursey, Cmdr. Harry

Driberg, Tom

Lawson, George

Redhead, Edward

Dunnett, Jack

Lestor, Miss Joan

Rhodes, Geoffrey

Dunwoody, Mrs. Gwyneth (Exeter)

Loughlin, Charles

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

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

Luard, Evan

Rodgers, William (Stockton)

Eadie, Alex

Lyon, Alexander W. (York)

Rose, Paul

Edwards, William (Merioneth)

Mabon, Dr. J. Dickson

Ross, Rt. Hn. William

Ellis, John

McBride, Neil

Rowlands, E. (Cardiff, N.)

English, Michael

McCann, John

Sheldon, Robert

Ensor, David

MacColl, James

Shore, Peter (Stepney)

Fernyhough, E.

Macdonald, A. H.

Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

Fitch, Alan (Wigan)

Mackenzie, Gregor (Rutherglen)

Short, Mrs. Renée (W'hampton, N. E.)

Fitt, Gerard (Belfast, W.)

Mackie, John

Silkin, Rt. Hn. John (Deptford)

Fletcher, Raymond (Ilkeston)

Mackintosh, John P.

Silverman, Julius (Aston)

Fletcher, Ted (Darlington)

Maclennan, Robert

Slater, Joseph

Foot, Michael (Ebbw Vale)

McMillan, Tom (Glasgow, C.)

Small, William

Forrester, John

McNamara, J. Kevin

Steel, David (Roxburgh)

Fraser, Rt. Hn. Tom (Hamilton)

MacPherson, Malcolm

Summerskill, Hn. Dr. Shirley

Galpern, Sir Myer

Mahon, Simon (Bootle)

Thomas, George (Cardiff, W.)

Gardner, Tony

Manuel, Archie

Thornton, Ernest

Garrett, W. E.

Mapp, Charles

Tinn, James

Garrow, Alex

Mendelson, J. J.

Varley, Eric G.

Ginsburg, David

Millan, Bruce

Wainwright, Edwin (Dearne Valley)

Courlay, Harry

Milter, Dr. M. S.

Wallace, George

Gray, Dr. Hugh (Yarmouth)

Milne, Edward (Blyth)

Watkins, David (Consett)

Gregory, Arnold

Morgan, Elystan (Cardiganshire)

Watkins, Tudor (Brecon & Radnor)

Grey, Charles (Durham)

Morris, Charles R. (Openshaw)

Whitlock, William

Hamilton, James (Bothwell)

Moyle, Roland

Williams, Alan (Swansea, W.)

Harrison, Waiter (Wakefield)

Newens, Stan

Williams, Alan Lee (Hornchurch)

Haseldine, Norman

Noel-Baker, Francis (Swindon)

Williams, Clifford (Abertillery)

Hazell, Bert

Norwood, Christopher

Williams, Mrs. Shirley (Hitchin)

Heffer, Eric S.

Oakes, Gordon

Williams, W. T. (Warrington)

Henig, Stanley

O'Malley, Brian

Willis, George (Edinburgh, E.)

Hooley, Frank

Orme, Stanley

Winterbottom, R. E.

Horner, John

Oswald, Thomas

Woodburn, Rt. Hn. A.

Howie, W.

Page, Derek (King's Lynn)

Woof, Robert

Hughes, Roy (Newport)

Palmer, Arthur

Yates, Victor

Hunter, Adam

Park, Trevor

Hynd, John

Parker, John (Dagenham)

TELLERS FOR THE NOES:

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

Pentland, Norman

Mr. Ioan L. Evans and

Mr. Edward Bishop.

MOTOR INDUSTRY
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]
11.40 p.m.
Mr. Evan Luard: I should like, first, to make clear that in asking for this Adjournment debate this evening I am not primarily concerned with the unhappy labour dispute at present affecting the industry centred in my own constituency of Oxford. I regret as much as anybody this dispute, and that it has not been possible to find a solution to it. I would like to see it brought to an end as soon as possible, and I would welcome any action which the Government may be able to take to this end at an appropriate time, but I am mainly concerned with the problems which have been created for the motor industry as a whole as a result of the Government's measures introduced on 20th July this year.
The first point I want to make is that the difficulties which have been created for the industry are, in my belief, much
1494
greater than the Government themselves anticipated when they introduced those measures in July. I think that the evidence for that is given first of all by the fact that the present rate of unemployment in the country as a whole, mainly concentrated in the Midlands and the motor industry areas, is already at the level which the Government anticipated would be the rate at the very worst moment of the present economic difficulties. I think that he would have to be a very great optimist who believed that we had already reached the very worst moment of our difficulties.
It is evidenced, I think, also in the catastrophic drop in the sales of the motor industry which already in August had dropped by 23 per cent. and had then reached the lowest level since December, 1963, and there has certainly been no upturn since that time. Finally, it is evidenced by the considerable degree of redundancy which has been created in this our most important exporting manufacturing industry, including a considerable degree of redundancy in my own constituency of Oxford, where, I believe,

1495
at the latest count, it had reached 9 per cent. Admittedly, this includes some only temporarily stopped, but this is some indication of the difficulties which have been created for constituencies of this kind.
I want to try to show what I believe are the reasons why the Government under-estimated the difficulties which were to be created for the motor industry. The main reason, I think, is the fact that the industry was already at the time undergoing very considerable difficulties. Some of those difficulties were of a long-term rather than a short-term nature. The industry was, for example, suffering increasing difficulties in its export markets. The figures which I obtained only a week or two ago from the President of the Board of Trade showed that, in fact, exports of cars from this country during the first nine months of this year were only 440,000 against a figure of 477,000 for the same period of last year and 513,000 for the year before; in other words, a drop of about 15 per cent. in two years.
I think that most of us know what are the reasons for this decline. There is the growth in manufacturing capacity in many foreign countries, the growth of assembly plants and manufacturing under licence. There is the rise of the Japanese motor industry. In particular, there is the increasing interest of American motor firms in the European motor car industry and the benefits which they have had of their superior sales and service capacities, and I think that it is perhaps not a matter of great consolation to many of us that it is the motor firms in this country which are mainly controlled by American firms which have been able to withstand the difficulties in the British motor industry better than any other part of the industry. So there were considerable difficulties before the measures of July.
Next, there was some difficulty in the home market. It may be that this was long-term and cyclical, quite apart from the normal seasonal trend. The motor industry had fairly good years in 1963 and 1964, and not at all a bad year in 1965, and possibly, in any case, it would have had to anticipate some difficulties this year.
1496
Whatever the reason, it is a fact that most motor car firms in the country, though not B.M.C., I regret to say, had already read the signs correctly and, in June and July, before these measures were introduced, were taking steps to cut down their schedules. It does not need much imagination to realise the impact of these very severe measures of July coming on top of this situation.
These measures almost exactly coincided with the normal seasonal decline this year. Normally, it begins about the end of July or the beginning of August, and there is usually a decline in sales in August. Even in a good year, it is normal for motor car workers to be working a certain amount of short time in the autumn and winter months. With these measures on top, the difficulties have been magnified into the proportions of something like a disaster for the industry.
Another reason why these effects have been much worse than anticipated by the Government—and this is one of the major points which I want to raise—is that hire-purchase restrictions and Purchase Tax changes are always likely to have a far more serious effect on the motor car industry than almost any other manufacturer of consumer durables.
The reasons are quite simple. It is clear that the purchaser of a major and very costly item such as a motor car will be far more deterred by a rise in Purchase Tax than will be the purchaser of a less expensive consumer durable. The purchaser of a motor car will almost certainly try to postpone his purchase until the tax situation is more favourable to him. In particular, he will be very much more deterred by the very high deposit rate of 40 per cent. which has now been imposed.
A measure of this kind has a particularly serious effect on the motor car industry, and that alone should give the Government cause to consider whether they should not introduce some more variable form of Purchase Tax and hire-purchase restriction to take account of the varying needs of different industries in this respect.
There is yet another reason why these measures have had a more serious effect than was anticipated. Measures of this kind and the drop in production which results from them have a particularly

1497
serious effect on any industry which is highly capitalised and has heavy facilities of the kind that the motor industry does. An industry of this kind is not producing efficiently or effectively if it is producing below its normal capacity. Therefore, the effect or the motor industry today, when in addition to having restricted export markets it has had its home market curtailed considerably, is that it is producing at a highly uneconomic level. That is another reason why these measures have had an excessive effect on our industry.
One of the effects of this is that the unit costs of each car are raised and, far from it being more easy for the industry to export cars, as the Government believe to some extent, it becomes more difficult for our most important exporting industry to export its product than it was before.
Those are the main reasons why the Government underestimated the impact that these measures would have on the motor car industry, and I want to say something about the steps which I should like the Government to take now to remedy the situation which they themselves have created.
First, I hope that as soon as possible they will relax the hire-purchase restrictions which they have imposed on the industry and so relieve the calamitous effect that the restrictions have had, particularly on the important home sales of the industry.
Secondly, I hope that they will get right away from the system by which they impose a uniform rate of Purchase Tax or hire-purchase restrictions on a very wide range of products having entirely different needs and requirements in that respect. In any future crisis of this kind, I hope that there will be special consideration for the motor industry because of the particularly harsh impact of hire-purchase restrictions on an industry of this kind with very expensive products.
Thirdly, I hope that the Government will give serious consideration to the introduction of a system by which there are regular seasonal variations in both Purchase Tax and hire-purchase restrictions, if necessary, to counter the normal cyclical seasonal variations in this industry, which has the serious effect that we know, the difficulty of maintaining
1498
full regular production throughout the year.
Finally, I hope that the Government will seek to draw up a long-term plan for this industry which will make it much more possible than it has been up to now for the manufacturers to be sure of a level of production which they will be able to maintain in the future, and make it easier for both employers and employees to be able to calculate the long-term labour needs of this industry, because one of the great difficulties at the moment is that with these perpetual variations in demand, partly deliberately introduced by the Government, it is difficult to calculate long-term labour needs. I hope that in any future crisis variations in Purchase Tax and in hire-purchase restrictions will only be made with due regard to this national plan for the industry and to the levels of production which have been laid down in advance.
I have no doubt that there remains a prosperous and, indeed, brilliant future for this major industry, but I do not believe that that future will be realised unless the Government take it on themselves to create the circumstances in which that future can come to pass.
11.52 p.m.
Mr. Tam Dalyell: Both my hon. Friend the Member for Oxford (Mr. Luard) and I are concerned about the co-ordination of the mechanism by which a Government approach problems like my hon. Friend's at Oxford or mine at Bathgate. We are not criticising individual civil servants. We are not criticising individual ministries. I thnk that probably both of us believe that when a problem is clearly devoted to one Ministry or another the Civil Service tackles it rather well.
What we are concerned about is a problem such as that at Oxford or at Bathgate, where the solution can only be found in terms of very many Whitehall Departments, and it is at this point, where a new kind of problem arises, that we become very concerned about coordination of the Civil Service in the face of a desperate situation.
11.53 p.m.
The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Peter Shore): I am grateful to my hon. Friend

1499
the Member for Oxford (Mr. Luard) for raising this very important subject in the House today. He speaks with knowledge and close acquaintance with the motor car industry, which is, of course, such an important factor in the life and work of his constituency. He has, I think—and I am grateful to him for it—spoken much more widely about the problems of the industry as a whole, rather than dwelt on what I am sure are his great and natural constituency anxieties following the redundancies in the Cowley works, in Oxford.
Before I turn to the main subject of my reply, I should like for a moment to take up the point made by my hon. Friend the Member for West Lothian (Mr. Dalyell), who also has a keen constituency interest in the motor car industry. I have heard my hon. Friend before on this point about the need for co-ordinating the work of Government Departments to deal with complex problems which arise when a major industry is experiencing a period of great difficulty and redundancy, as the motor car industry is doing today.
I would only say to my hon. Friend that his points are well taken, and that there has been, and no doubt there will be further developed, a great deal of co-ordination between the Government Departments concerned with all the manifold aspects of production, employment, the bringing of new work into areas, and so on, but my hon. Friend is right to stress this point.
I should like, first, to give a brief survey of the recent background to, and the present state of, the motor car industry, and then to take up the arguments which were so strongly deployed by my hon. Friend the Member for Oxford.
Motor car production reached its peak in 1964, when we produced more than 1,860,000 motor cars. In 1965, as my hon. Friend said, production was lower, although it was still at the high figure of more than 1,720,000. This year, before the July measures, production was running at just about the same level as in the corresponding period of 1965. With exports of complete vehicles the story is broadly the same. Nineteen hundred and sixty-four was a record year, with 680,000 vehicles; 1965 saw a decline of 7½ per
1500
cent., and this year so far there has been a similar decline compared with the same months of 1965.
As the House will recall, various measures were taken in 1965 to reduce domestic demand and in the spring of this year bank credits were limited to 5 per cent. above the 1965 level. Then came the July measures which, apart from the 7 per cent. Bank Rate, raised hire purchase deposits from 25 per cent. to 40 per cent., shortened the period of repayment from 27 to 24 months and increased Purchase Tax from 25 per cent. to 27½ per cent. These measures had, of course, a sharp effect on the industry. During the third quarter new registrations were 10 per cent. lower than in the same quarter in 1965 and hire purchase contracts on new cars were 19 per cent. down. The provisional figures for October were worse.
While much of this must be attributed to the July measures, the full effects are difficult to gauge at the present time. There have been a number of strikes, notably those of the car delivery workers at Longbridge and at the radiator factory in Oxford, which have dislocated production and have led to heavy temporary unemployment and to short-time.
The third quarter of the year, as my hon. Friend pointed out, is traditionally a period when there is a sharp fall in demand and this autumn, even without the July measures, it might well have been accentuated owing to an element of anticipatory buying in the first part of the year. There is some reason to believe that the real economic impact of the July measures may have been reinforced in the short-term by their psychological effect on consumer buying generally. However, allowing for these facts the following picture emerges.
Production this year will be about 6 per cent. lower than last year. Looking to 1967, on current policies, we expect domestic demand to pick up over the present depressed level, but total sales are likely to be lower than in 1966. Exports are always difficult to predict, but we expect the 1966 level to be maintained and that of commercial vehicles and parts and components to be increased.
As for employment, the firms have already reappraised their plans for 1966–67 and the main redundancies have already been declared. The House will

1501
know that these amounted to about 12,000 men at B.M.C. and Rootes, accounting for 4½ per cent. of the 262,000 men employed by the seven motor car manufacturing companies. Apart from the current discussions at Rootes, Coventry, we know of no further plans for large-scale redundancies.
So much for the broad picture of me industry. I now turn to the two main lines of criticism expressed by my hon. Friend—first, that the effects of these measures have resulted in excessive redundancies. These redundancies, painful and repugnant as they are, are not to be considered as purely short-term. They are not to be considered as the effects of measures which, as soon as demand picks up again, will result in the men being sucked back into the industry.
The point mainly concerns the British Motor Corporation. We discussed its employment prospects with that firm in great detail. Its labour force was geared to a substantial increase in production. In the event, in 1964–65 and in 1965–66—both before the July measures—the actual achievement was well below planned production. There are many reasons for this, but, again before the July measures, B.M.C. had had to undertake a radical review of its production plan for 1966–67.
Inevitably, therefore, in the late summer of this year, it was overstaffed in relation to foreseeable demand. Nor could this situation be expected to change, given quite favourable assumptions about future Government policy and production prospects. As the management has made clear, it is satisfied that the reduced labour force is adequate for foreseeable needs and is indeed capable of coping, without reinforcement, with a significant increase in production.
No doubt, longer-term factors lie behind this: the introduction of more productive equipment and perhaps new methods of assessing labour requirements. This should not come as a great surprise to those who recall that the motor manufacturers, in their contribution to the National Plan, envisaged a growth of production by 1970 of not less than 36 per cent., with only a 6 per cent. increase in the 1964 labour force——
Mr. John Horner: Perhaps my hon. Friend can help me in this. My recollection is that Sir George Harriman, the Chairman of
1502
B.M.C, has said in a public statement that the 12,000 men made redundant ought not to look for re-employment in the "foreseeable future". During the discussions that my hon. Friend's Department has had with B.M.C, does "foreseeable" extend to next year or the year after, or is it to go on indefinitely, with no hope of re-employment for these men?
Mr. Shore: I cannot give a completely clear answer to that. As far ahead as the motor manufacturers can see, they are satisfied that they will not be needing the men who have been made redundant during the past few weeks.
My point, therefore, is that the redundancies which have been declared are not a temporary shake-out. They represent a longer-term reappraisal of the firm's labour needs. Hon. Members will have noted that other car firms faced with the same economic problems, but who have been able to take a different view about production prospects, have retained their labour even where this has meant the introduction of short-time working.
The second criticism I want to answer is basic and concerns the effects of the July measures on the economics of the motor industry. The major aim of the July measures was rapidly and substantially to strengthen our balance of payments by cutting domestic demand and redeploying productive resources. An important part of this policy was to cut consumer expenditure, through the medium of hire purchase, by £160 million a year. The aim was, directly, to reduce imports and, indirectly, to promote exports, by reducing home demand on our export industries.
While most hon. Members would accept that, over a broad range of industry—including capital goods of all kinds—cuts in domestic demand, whatever their other disadvantages, release capacity for export, there is considerable doubt whether these measures have the same effect on mass production industries, of which the motor car industry is a leading example.
The point made is that, if total production falls far below capacity, overhead costs remain, unit costs rise and it becomes increasingly difficult to remain price-competitive in export markets. Perhaps at the back of my hon. Friend's mind there is the fearful memory of the

1503
export debacle of 1961. This is an argument which should not be lightly dismissed; it deserves and is getting close and detailed study. Yet I am sure that the House will agree that, while a strong and growing home market can provide a base for a strong assault on the export market, there is no certain correlation between the two. In our post-war experience, periods of rapidly rising home demand have been accompanied by quite modest increases in exports, while periods of restriction at home have coincided with a rapid growth in car exports. Whatever the answer may be, there are two points which I want to make which, I hope, will give some grounds for confidence about our export prospects.
First, although a sudden and dramatic diversion of car production to exports is not possible, the prospects this year and next for world trade in vehicles are good. Again, an increasing part of the total of our vehicle exports now consists of parts and components, the production of which is geared to the export rather than to the home market. Today, they have reached about £200 million a year, nearly a third of our total exports, and there is every prospect of continued growth.
Secondly, the argument against cutting home demand is convincing only if we were to assume that there is no scope for an increase in exports of British cars. This is not so. Of course, there are great difficulties to be surmounted, particularly in the Common Market as the common external tariff falls into place. But it should be remembered that over 80 per cent. of our car exports are directed elsewhere and, as we all know, quality, service and design, as well as price, are major factors in car sales.
It would be wrong to accept that there is a fixed, immovable ratio between home and export sales or that there is some absolute limit to our total exports. Such a view is contradicted by the recent history of our own car industry, which has, over the past 10 years, seen exports of complete vehicles fall from over 50 per cent. to 38 per cent. of total production. It is contradicted when we look at the individual export performances of different British car firms, ranging, as they do from 30 per cent. to 50 per
1504
cent. of production. It is contradicted again when we look at the experiences of other car industries in Europe and, in particular, Germany, which now exports 55 per cent. of its total output.
I am confident that the British car industry has the will, the capacity and the engineering excellence to raise its exports. The key is costs, and here I am sure that there is room for improvement. The Government's contribution, contrary to what has been suggested, has not been wholly negative. While I would not wish to exaggerate their impact, the export rebate scheme, the special refunds to manufacturing industry under the S.E.T. and the severe restraint on incomes now being exercised are all contributing to cost reduction.
Whatever may be said about the immediate future, the prospects for the industry are sound. It is, after all, one of our healthy growth industries—competitive, modern and highly efficient. It is the world's second largest exporter of cars and the largest exporter of commercial vehicles.
Inevitably, there is little that I can say about the duration of the present measures—much as I should like to oblige. The Chancellor of the Exchequer has already told the industry that there can be no question of relaxing hire purchase until the balance-of-payments position is right. This must be accepted. When the balance of payments has been secured, we shall all look forward to some easing in the home market. But we do not intend to repeat the errors of the past, when periods of tough restraint were followed, as in 1958 and again in 1962, by deliberately fostered domestic booms. Our aim will be to create conditions in which the industry can look forward to a reasonably steady growth without the violent oscillations of the past. I accept that this is vital.
In all this, the policy of the Government will be to assist the industry to develop both its production and its markets. Although the motor car industry is virile and technologically developed, there are areas in which the help and co-operation of the Government will be needed. These include assistance in the expansion of exports, co-operation in the development of producer-user relationships as between manufacturers and the

1505
suppliers of components and the development of technical co-operation in research, development and in production techniques.
My hon. Friend can be certain that the Government, and the Ministry of Technology in particular, will be keeping
1506
in very close touch with the industry and will be exploring every possible way in which they can help it to further success.
Question put and agreed to.
Adjourned accordingly at nine minutes past Twelve o'clock.

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  Freedom from Hunger Campaign (Funds)
  Freedom from Hunger Campaign (Funds)
EDUCATION AND SCIENCE
  Scottish Universities (Grants)
  Scottish Universities (Grants)
NATIONAL FINANCE
  Wartime Marine and Fire Insurance (Premiums)
  Wartime Marine and Fire Insurance (Premiums)
  Bristol and West Building Society
  Bristol and West Building Society
  Fire Prevention Equipment (Investment Grant)
  Fire Prevention Equipment (Investment Grant)
  Selective Employment Tax
  Selective Employment Tax
  Mortgage Interest Rates
  Mortgage Interest Rates
  Entertainment (Government Expenditure)
  Entertainment (Government Expenditure)
MINISTRY OF HEALTH
  Homeless Families
  Homeless Families
  Pregnancy (Oxygen Starvation)
  Pregnancy (Oxygen Starvation)
HOSPITALS
  Capital Expenditure
  Capital Expenditure
LOCAL GOVERNMENT
  Rate Support Grants
  Rate Support Grants
  Rates (Brighton)
  Rates (Brighton)
HOUSING AND LOCAL GOVERNMENT
  Departmental Committees
  Departmental Committees
MINISTRY OF LABOUR
  Shipbuilding and Ship Repairing Industry (Employees)
  Shipbuilding and Ship Repairing Industry (Employees)
  Unemployment (Doncaster)
  Unemployment (Doncaster)
  Redundancy Payments
  Redundancy Payments
  Adult Male Disabled Persons
  Adult Male Disabled Persons
  Construction Industry (Unemployed Persons)
  Construction Industry (Unemployed Persons)
  Unemployment (Brighton)
  Unemployment (Brighton)
  Motor Industry, Scotland (Redundancies)
  Motor Industry, Scotland (Redundancies)
  Redundant Workers, Scotland (Vacancies)
  Redundant Workers, Scotland (Vacancies)
  Government Training Centres
  Government Training Centres
COAL
  Overseas Sales (Contracts)
  Overseas Sales (Contracts)
GAS
  Scottish Gas Board (Surplus Per Therm)
  Scottish Gas Board (Surplus Per Therm)
MINISTRY OF POWER
  Gas and Electricity Supplies (Winter Months)
  Gas and Electricity Supplies (Winter Months)
SOCIAL SECURITY
  Unemployment Benefit and National Assistance
  Unemployment Benefit and National Assistance
  National Insurance Benefit (Hospital Patients)
  National Insurance Benefit (Hospital Patients)
BOARD OF TRADE
  Hartley Baird Limited and H. J. Baldwin & Co. Limited
  Hartley Baird Limited and H. J. Baldwin & Co. Limited
  Local Employment (Assistance)
  Local Employment (Assistance)
WALES
  Migration
  Migration

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

ACCIDENTS: HOSPITAL FACILITIES AT WEEKENDS
2.36 p.m.
LORD AUCKLAND: 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 steps they are taking to ensure the provision of adequate facilities to deal expeditiously with accident cases at hospitals during weekends.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, hospital authorities in England and Wales are planning the development and staffing of accident and emergency services in the light of the recommendations of a sub-committee of the Standing Medical Advisory Committee, under the chairmanship of Sir Harry Platt, whose report was published in 1962. The sub-committee recommended the concentration of these services in a pattern of units which would each serve a population of at least 150,000 and which would be fully staffed and equipped to deal immediately with major injuries and other emergency cases at all times of the day or night and on every day of the week; with smaller hospitals receiving less serious cases. These recommendations were commended to hospital authorities by the then Minister of Health. Progress reports from Regional Hospital Boards have recently been called for. In Scotland developments are being planned on broadly similar lines following a Report to the Scottish Health Services Council in 1962.
LORD AUCKLAND: My Lords, I thank the noble Lord for that full and fairly reassuring Answer. May I ask him whether he is aware that recently one general hospital in Kent had no one available on a Sunday to answer the telephone at one time in the afternoon, and a patient took the call? Would he not agree that this is a disturbing state of affairs, and could he say whether this Committee will try to ensure that sufficient senior consultants are available, as well as the junior registrars who so often on a Sunday have to cope with serious road accidents?
LORD CHAMPION: My Lords, I was not, of course, aware of the circumstances of the incident which the noble Lord mentioned, and if he will let me have the name of the hospital, the time and so on, I will of course take it up with my right honourable friend. Of course, the job of ensuring that sufficient staffs are available for these hospitals specially marked out for this service is one for the Regional Hospital Boards, and it is their task—and I am sure they are trying to do it—to ensure that this service is adequate.
LORD SEGAL: My Lords, while the plans outlined by my noble friend are admirable, could not some arrangements also be made in the areas where hospitals are known to be seriously undermanned to cope with weekend casualties by enlisting the help of local practitioners who happen to be on duty in their own practices during the weekend, so that they are available at certain hospitals for emergency accident calls?
LORD CHAMPION: My Lords, this is a suggestion which I will bring to the notice of my right honourable friend. I have not had this suggestion made to me before, but I will certainly see that he receives it for consideration.
LORD AUCKLAND: My Lords, arising out of the noble Lord's reply, may I ask him whether he would convey to all these very overworked doctors concerned a very warm tribute for what they are doing at the present time?
LORD CHAMPION: Certainly, my Lords.

NUCLEAR-POWERED SUBMARINE FLEET
2.40 p.m.
EARL JELLICOE: 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 what plans they have for further extending the nuclear-powered attack submarine fleet.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE ROYAL NAVY (LORD WINTERBOTTOM): My Lords, the precise rate at which we shall continue to build nuclear-powered Fleet submarines has not yet been settled, but we plan to order a sixth boat early in the New Year.
EARL JELLICOE: My Lords, I should like to thank the noble Lord for his reply, and to express appreciation at the fact that the Government have decided to order a further Fleet submarine. I, for one, am very glad to hear this. In view, however, of the time which was taken by the Government to incubate the Defence Review, and the time which has elapsed since the Defence Review, is it not time that the Government reached a firm decision about their future plans for the build-up of this very important element in the modern British Navy?
LORD WINTERBOTTOM: My Lords, as I am certain the noble Earl knows, the Future Fleet Working Party is reaching the end of its studies, and I expect that my colleagues will be able to make a statement on the subject in the not too distant future.
EARL JELLICOE: My Lords, again, I am grateful for the information given by the noble Lord in his reply to my supplementary question. May I take it there from that we shall have a statement on this matter before the Defence White Paper is issued?
LORD WINTERBOTTOM: My Lords, I am afraid that that is another question. I cannot answer about the exact timing of such a statement.

THE P.1127 AIRCRAFT
2.42 p.m.
EARL JELLICOE: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what production orders have been placed for the British V.T.O.L. P.1127 aircraft.]
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, initial contracts have been let to enable production of the P.1127 to proceed according to the planned programme. Negotiations with the contractors on the terms of contracts for full production have reached an advanced stage.
EARL JELLICOE: My Lords, I thank the noble Lord for his reply, but I must express some disappointment at its terms. May I remind the noble Lord that it is now over eighteen months since the Government reached their decision to cancel the advanced P.1154 aircraft and to order instead the P.1127 and the Phantom, and is not eighteen months a sufficient time for placing of the full production contracts?
LORD SHACKLETON: My Lords, the answer to the noble Earl is, No.
EARL JELLICOE: Therefore, may I perhaps remind the noble Lord that in this matter—
SEVERAL NOBLE LORDS: No!
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, may I, with great respect, venture to suggest that this formula, "May I remind …", is not the right introduction to a supplementary question?
EARL JELLICOE: May I therefore ask the noble Lord whether he is aware that in these matters procrastination is often the enemy of true economy?

CENOTAPH SERVICE FOR RHODESIAN DEAD
2.44 p.m.
LORD GRIMSTON OF WESTBURY: 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 why permission was refused for the Scots Guards Band to provide music at the laying of a wreath at the Cenotaph in memory of Rhodesian troops who died fighting side by side with our own troops in two world wars.]
LORD SHACKLETON: My Lords, the request was from the Anglo-Rhodesian Society. There is a rule that military bands should not accept engagements with bodies having partisan or controversial aims.
LORD GRIMSTON OF WESTBURY: My Lords, whilst, of course, I thank the noble Lord for his reply, may I ask him this further question? Is he aware that very many people in this country are ashamed and distressed that a British Government should have introduced this note of politics into an act of remembrance at the Cenotaph? Is he further aware that the Salvation Army have accepted an assurance that this service is neither political nor racial; and does he not think that that would be a better example to follow than that set by Her Majesty's Government? And may we have an assurance that Her Majesty's Government will not seek, either directly or indirectly, to influence the Salvation Army to follow their own very had example?
LORD SHACKLETON: My Lords, I must say that I regret the terms in which the noble Lord has asked his supplementary question. I must give him the facts, of which he appears to be unaware. There is a longstanding rule—the noble Lord can look it up in Queen's Regulations—that Army bands should not play for any body or society having political or controversial aims. They could not, for instance, play for the Conservative Party or for the Labour Party. I should like to correct what must be a misapprehension—otherwise I do not think the noble Lord would have asked his
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supplementary in those terms. The ceremony at the Cenotaph is in memory of the dead of the British Commonwealth. The wreaths that are laid there are laid by the representatives of Governments in memory of all the dead of the Commonwealth. In the absence of a legal Rhodesian Government representative in London, a wreath is to be laid by the Commonwealth Secretary, representing the legal Government. My Lords, I very much hope that this will not become a subject of great controversy.
THE MARQUESS OF SALISBURY: My Lords, I suppose that in intervening on this subject I ought to declare an interest, because I am the President of the Anglo-Rhodesian Society, from whom the idea of laying the wreath originated. I do not imagine that it ever occurred to anyone in the Society that the laying of this wreath could be regarded as anything but an act of simple piety by the Rhodesians towards their own war dead; and if it is suggested from any quarter that any political flavour can properly be attached to this occasion, which I deny, that, I am afraid, has been imported by the Government themselves by their original attempt to differentiate for political reasons between the Rhodesians and the other—
SEVERAL NOBLE LORDS: Order! Order!
THE MARQUESS OF SALISBURY: I am coming to my question. It is just coming now. In these circumstances, may I ask the Government whether they will give an assurance, whatever their general rules are, that they at any rate do not suggest that on this occasion the Society has been actuated by any unworthy motive in holding their service?
LORD SHACKLETON: My Lords, the fact that the noble Marquess is President of the Society does not of course guarantee that it does not have partisan aims. This is a very simple issue. Queen's Regulations in fact forbid the use of the band in these particular circumstances. It is Her Majesty's Government who have been accused of politics in this matter, and I hope the noble Marquess will himself play a part in limiting the extent to which this controversy has developed. No one, least of all Her Majesty's Government or anyone who has been associated with the Armed Forces, would

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wish to do anything other than honour the dead of all the Commonwealth, including all those gallant men from Rhodesia.
THE MARQUESS OF SALISBURY: But the noble Lord has not answered my question. I asked for an assurance that the Government did not suggest that this Society was actuated by anything but the most worthy motives in holding their own service. He can, at any rate, answer that question.
LORD SHACKLETON: My Lords, I have no knowledge of the motives which induced the Anglo-Rhodesian Society to hold this particular ceremony.
BARONESS WOOTTON OF ABINGER: My Lords, may I ask my noble friend whether the answer he has already given means that the memory of Rhodesian troops who lost their lives in the war will, in fact, be commemorated through the action of the Commonwealth Secretary?
LORD SHACKLETON: I am grateful to my noble friend. This is entirely true. Every wreath that is laid on the Cenotaph is in memory of all the dead of the Commonwealth on behalf of the inhabitants of the particular territory.
THE MARQUESS OF SALISBURY: My Lords, I am sure the hedging answer which the noble Lord has given will be received with shock by many thousands of people in this country, and I am sure that it will react much more against the Government than against the Society.
THE EARL OF LONGFORD: My Lords, since the noble Marquess refused to give way to me, I could not, of course, interrupt him; but, with all deference to one who occupies a special position in this House, I would suggest he has abused Question Time on at least two occasions this afternoon.
LORD GRIMSTON OF WESTBURY: My Lords, is the noble Lord aware that nobody will think that those who framed the Queen's Regulation, which quite properly stops bands from playing at political functions, would ever have thought that its interpretation would be twisted in order to bring politics into a ceremony at the Cenotaph?
LORD SHACKLETON: My Lords, I really think the noble Lord can help no one by that remark. The Regulations specifically relate to bodies having partisan or controversial aims. I have no wish—and I would say this to the noble Marquess, Lord Salisbury—to attack the Anglo-Rhodesian Society, but it is not possible to suggest, when you see some of the literature that has been produced, that they do not have partisan aims. They are perfectly entitled to have partisan aims; it is just that it is highly desirable that the bands of Her Majesty's Forces should not be seen in any way to be involved with politics, and this includes not solely the purpose for which a band is invited but the nature of the society who asked them to play.
VISCOUNT DILHORNE: My Lords, was not this engagement for the band originally accepted; and was it not accepted that it was in order for the band to play at this service at the Cenotaph? If that was so, what instructions were given, and by whom, to cancel that engagement?
LORD SHACKLETON: My Lords, it is correct to say that it was accepted. But it was accepted in error because the authority who accepted it, not surprisingly, was unaware of the particular application of this rule in relation to the Anglo-Rhodesian Society. I do not wish to criticise or embark on exchanges about the Anglo-Rhodesian Society, but I must point out that the Society do have controversial and partisan purposes. When this was discovered, the actual under taking was withdrawn.
VISCOUNT DILHORNE: With respect the noble Lord has not answered the second part of my question. On whose instructions was the undertaking with drawn? Was it on the instructions of Her Majesty's Government?
LORD SHACKLETON: The noble Viscount is surely familiar enough with the procedure to know that any instruction which is delivered or performed is done in the name of the Government, and Her Majesty's Government, of any complexion, accept responsibility. He knows perfectly well that it is no use probing me on this particular matter because any Minister in your Lordships' House must take responsibility personally for the decision.
VISCOUNT DILHORNE: My Lords, whilst not wishing in any way to relieve the noble Lord of such responsibilities as he may have, I would ask the question whether the Government in fact gave the instruction, because I thought it conceivable that someone else might have discovered that there was an error.
LORD INGLEWOOD: My Lords, since there was a squadron of Rhodesians integrated with the Northumberland Hussars, would the band of the Northumberland Hussars be allowed to play at the Cenotaph in memory of their own regimental dead?

LONDON BRIDGE BILL
Read 2a, and committed to a Select Committee.

STERLING AND WORLD TRADE
2.53 p.m.
LORD ALDINGTON LORD ALDINGTON rose to call attention to the role of sterling in world trade and as a reserve currency, and to the impact of this role on Britain's economy; and to move for Papers. The noble Lord said: My Lords, I must at once declare an interest in that I am chairman of one of the British overseas banks, and your Lordships may wish to judge my words accordingly. But it is my contention that the interest which bankers may have in the international role of sterling is, in fact, a widely shared national interest. This may look to some noble Lords as a rather technical subject. It is, however, the national policy aspects rather than the technical points that I wish to emphasise; and in any case, as some of your Lordships may know, I am not competent to enter into any technical debate on this subject. My principal purpose is to provoke discussion in the search for the truth on the place in our affairs to-day of the pound's international role, and not even just to advocate the preservation of something because it has proved good in the past. In provoking this discussion I hope to draw from the rich well of knowledge and wisdom that there is in this House.
The Motion refers to two apparently distinct parts of the international role of sterling; first, as a reserve currency; and, second, as a currency widely used
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in financing world trade. My information is that over forty countries hold a substantial part of their currency reserve in sterling; but, of course, holdings of sterling by people who do not live in Britain and by Governments are far larger than the relatively small sums needed to back these countries' currencies. I prefer to base the importance of sterling in its international role not just as a reserve currency but rather as a key international currency which is used to finance a very large part of the world's trade.
The best estimate I have been able to find of the proportion of world trade financed by sterling in the immediate past is something over 25 per cent. It is well known that the proportion of world trade financed in sterling has fallen in the last twenty years; but the total amount in money value has risen with the steady increase in world trade. In 1960, for example, sterling, I am told, financed £12,000 million worth of world trade; in 1965, the rather more than 25 per cent. of world trade financed by sterling amounted in value to some thing like £17,000 million. Obviously, many people in many different countries will require to hold sterling, for a short period at least, in order to cover the financing of trade of this order.
The sterling balances, the external sterling liabilities, of the United Kingdom, which are an important consideration, amounted in June of this year to something just under £3½ billion, excluding liabilities to international organisations, most of which was the Inter national Monetary Fund. Of this £3½ billion, £2·8 billion—these are astronomical figures—were liabilities to persons in the sterling area and £634 million to persons outside the sterling area. I give these figures now so that they may be kept in mind; but I propose to return to the sterling balances for a short comment a little later in my speech. Both these figures of the balances and the large amount of trade which is financed in sterling are a sign of the importance in world finance of the City of London which is the centre of Britain's financial mechanism.
There is no need, I think, to rehearse the history of all this in this House. Many things have contributed to the importance which the world has

895
attached over the centuries to sterling and to the City. The world power and the prestige of Britain, her earlier Imperial role and the reliability which the world learned to attach to the handling of Britain's economic and business affairs and, therefore, to her pound, clearly form one important part of the explanation of how this has come about. But it would be wrong to omit from the explanation of how this has come about the existence in London over so many years of a free and open market for money and the development of a most efficient and reliable money mechanism with a good investment market based, of course, on highly skilled and highly experienced individuals.
In the last thirty years or so part of that freedom has been mitigated by exchange controls. Nevertheless, compared with most other countries movement of the pound has remained free, and within the sterling area, subject to recent edicts about overseas investment, almost entirely free. I mention this point now because some of your Lordships may have heard a report during the week-end that a group of distinguished French people are presently urging the French Government to relax exchange controls and other restrictions in Paris so that the franc can be used more widely as an international currency. In other respects the London market has remained enviably free and open, and whatever may have been the historical causes of the international acceptance of the pound sterling, the survival of that role into the second half of the twentieth century has clearly depended mostly upon the openness and accessibility of the London market, coupled with the efficiency, skill and experience of Britain's bankers and of those who have been in charge of Britain's financial and economic policy. It is dependent upon these things rather more than upon Britain's dominance as a world Power.
The one remaining fact which I wish to quote to your Lordships before I come to deal with some arguments is this. A recent authoritative estimate of the annual earnings that accrue to Britain out of the City of London's activities gives a figure of £200 million a year. It appears that these earnings have more than quadrupled in the last twenty years. This sizeable contribution to the British
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balance of payments, which flows, I think, directly from sterling's international role, is not, as I shall shortly try to show, the only advantage that comes to Britain from this role.
I will now, if I may, turn to the general arguments against me, arguments which I hope I shall put quite fairly even though I may summarise them, and which I think are like these. It is said that Britain is sacrificing people to save the pound. The Governor of the Bank of England, in his masterly speech at the bankers' dinner on October 20, dealt with this point quite simply. He said:
"On the contrary, the pound is being protected for the sake of the people. I do not believe in the future of any economy where nothing ever gives way except the exchange rate. The Government's firm stand on this subject is most heartening."
I would strongly agree with all that, including the last point.
The same argument can be put in a number of different ways, but I think it all amounts to the same thing in the end. There is a feeling, which is sometimes expressed quite openly, but more often lies rather low, as a tacit assumption in arguments about our economic affairs, that our economic troubles, particularly those of 1964 to 1966, are at least in part due to the burden of the pound being an inter national currency. And three or four years ago, when anyone who spoke about economic affairs in your Lordships' House or in the other place tended to concentrate upon growth in our economy, there was a feeling that the growth rate of Britain was held down by the wider roles of sterling. The argument goes on to suggest that we should abandon the international role of the pound. I do not believe that we can adandon that role, if we want to, and I do not believe that we ought to want to. This was, I think, the conclusion reached by the Radcliffe Committee which reported in 1959. Right in the last paragraph of its Report the Committee says this about the economy: that it
"is not so placed that it can by its own choice abdicate its responsibilities as the financial centre of the Sterling Area or determine the use of sterling as a means of international exchange."
In other words, the Radcliffe Committee are saying that if we want unilaterally to abandon our role, we are not so placed as to be able to do it.
If I may continue from there, I should like to deal with some of the breakdowns of this general argument. It is certainly true that when confidence in the pound wavers, more people may want to sell larger sums of the pound than they would if the pound were not an international currency. But, my Lords, it is not the numbers of people who hold sterling, or the amounts of sterling that they hold, which causes the initial loss of confidence in the pound. In every case of crisis that we have known since the war the trouble has been caused by the worsening in our balance of payments or by manifest signs of inflation at home, or by both together. If the international role of sterling may be said to bring into sharper relief the evils of bad economic management at home, is that really in the long run a disadvantage? Is it not possible that this additional element of discipline might be an advantage?
In this connection it is said that a large part of these volatile balances which react to confidence so quickly are speculative in nature. In fact—and I have tried to check this—the amount of funds moved for speculative reasons is relatively small. There is plenty of evidence that the influential movements in times of crisis of confidence have a different origin. They are dictated by caution—for example, what are called the "leads and lags" in connection with the financing of our own trade and the financing of world trade. Perhaps I may explain this further. It is estimated—and this estimate I think has been given on behalf of the Government—that if every British importer decided to pay for his imports one week earlier than usual, that would cost the country's reserves £150 million. So your Lord ships can see how important this "leads and lags" factor may be.
But then it is said that there must be some part of the sterling balances, the size of which I quoted earlier, which are not, as it were, balances on call, available for immediate withdrawal, but are of a longer-term nature and ought to be funded or taken over by an international organisation such as the International Monetary Fund. We should, some people say, tidy up our sterling balances so as to protect us from the fear, which affects other people's confidence, too, that large
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amounts of sterling will suddenly be withdrawn. There may be a case for tidying up the sterling balances in this way, and this may be particularly relevant to our entry into Europe, but so long as the pound sterling is a key international currency there are bound to be large balances on call for which this tidying up process may not be suitable; and even after the tidying up, even after, if that were decided upon, the handing over of parts of these balances to an international organisation, such as the I.M.F., that would not relieve this country of ultimate responsibility. The credit, as it were, would be transferred from the present holder of a sterling balance to the I.M.F., but the sterling obligation would remain with us.
I should like to make one other point about sterling balances. These balances are vastly different in origin and in shape from what they were in 1947. In those earlier days, there was often a good deal of emotion about the large war-time balances built up, for example, by India and by Egypt. There are no such large balances there to-day. To-day's sterling balances arise from much more recent developments and, with the exception of Government holdings and some other special cases relating to oil and such like things, they are by their nature not necessarily of great permanence. Put another way, the holders of the balances expect to be able to call on their balances quickly.
Then there is another point, a point made by some, that interest rates in a country whose currency is international are often bound to be governed by international considerations rather than by purely domestic considerations. Put in simple terms, the interest rates in this country may be higher because of our international role than they might other wise have been. For it follows, of course, from the international nature of sterling that if the rate of interest here was not affected by other outside interest considerations, foreign holders of sterling might find it more profitable to switch their money to another centre. There is, of course, a point about this argument; but even if we accept the point, it is not all bad. And there is certainly no evidence that countries with high commercial interest rates have low rates of industrial

899
expansion. Indeed, such evidence as there is is far otherwise. Both Japan and Germany, who have performed economic miracles of growth in the last fifteen years, have been noticeable in international circles for the high rate of interest charged on commercial advances. Compared with those countries we are not a high interest country.
In fact, this argument, like some of the others, is all part of the general argument that, because the pound is an international currency, we are not able to conduct our economy on autarchic lines. Even those who really believe that it is a good thing in economic terms to make England little England, and to seek autarchy in her economy, even those who believe—and I am not here casting accusations against the Front Bench opposite—that Whitehall does know best and should not be interfered with in doing best, must surely accept that the pound is not the only thing that keeps the windows of Britain wide open to world economic forces.
There is, as your Lordships know, the little matter of having to import more than half our food and nearly all of our raw materials for industry, both of which have to be paid for. And for a country which has to do that, may it not be a good thing, rather than a bad thing, that its currency should be so widely accepted? Can it really be argued that it is of no help to exporters that the pound is so widely accepted? Many of your Lord ships will know that the sterling area system still enables Britain to pay for the import of a very large quantity of our food and raw materials for industry with out having to find any foreign currency at all.
There is another consideration which greatly matters to Britain's economy—the consideration that there should be sufficient international liquidity. I can not see how the abandonment of the international role of sterling would do anything but reduce international liquidity at least so far as Britain and its trading partners are concerned. In this I am supported by the Radcliffe Committee's Report in the same paragraph as that from which I quoted earlier. Another consideration is that, with the complete break of the sterling system, if that should come about before the establishment of an international currency
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system, every member of the currency area would have to form special reserves for himself by taking more gold and convertible currency off the market. I would say that it is not impossible in those circumstances that Britain, left alone with no sterling area, might find it necessary to build up a much larger reserve of gold and other currencies than it was necessary for her to have when the sterling area system was working. All these arguments, of course, may well be different if and when one truly world currency has been introduced, but there is no evidence at all that the abandonment of sterling's international role would bring the achievement of that aim any nearer.
I have left until nearly the end of the argument the point made by some, and made in your Lordships' House during, I think, the economic debate in August, that the international role of the pound is an impediment to Britain's entry into Europe. I have no doubt at all that a weak pound, due to a weak balance of payments, will always be adduced as an obstacle to our entry into Europe, and I would say quite rightly, too. Moreover, convenient though it may be for us to argue that the best way of getting our balance of payments sound is first to get into Europe, would it not be wiser, and certainly sensible for our European colleagues, if we first showed that we can get our balance of payments in order—as I know we are trying to do? But, assuming that our balance of payments has been got into order, then I should have thought that, against the background of this assumption, certainly the wide use of sterling for financing world trade will be found to be a help to Europe and not a hindrance, and, in the end, will help us to get into Europe and not hinder us.
I am supported in this view, I think, by an interesting article in The Times Supplement of October 28, by Herr Hermanns Abs, a director of the Deutsch-bank, writing with all his authority about German and European finance. Having stressed the importance of Britain's getting her balance of payments put right, he said:
"It is, I believe, apparent from all this"—
what he had written before—
"that if the United Kingdom joins the E.E.C., sterling will have a chance to preserve and indeed strengthen its position in Europe and in

901
world trade. It does not seem appropriate to rely solely on the dollar as the key currency in world trade and no currency on the European Continent stands a chance in the longer run of being a key currency."
Those I regard as very important words by a leading German authority on world, European and German finance.
What I have referred to earlier as the tidying-up of some part of the sterling balances may be found to be wise before our entry into Europe. There must certainly be discussions on this point, but I prefer not to rush into a decisive conclusion before we are able to see what is the climate of European financial opinion when Britain has again shown that it can run its economy with a surplus on its balance of payments. When that has been done, there may be no need to make any significant changes. On the other hand, there may be—we should wait and see.
I submit that all these points add up to evidence that Britain enjoys substantial advantages—substantial direct economic advantages—out of the pound sterling's international role. And it seems fairly clear that other members of the sterling area believe that they too enjoy advantages from the existence of the system. And there does not seem to be any lack of evidence that the United States themselves consider that a strong sterling in its present role is very much in the American interest.
I have not argued, and shall not argue, that the use of sterling in the world or the techniques employed in the City of London for financing our own trade, our own capital investment and investment in other parts of the world, must always remain the same. Manifestly this has not been so. There have been changes and developments all the time. Many of your Lordships will know that the City of London is adept at arranging finance for investment and trade, even for our own exports, in currencies other than sterling. Nor have I thought it necessary to deal at length with the charge that the supporters of sterling's international role are antiquated flag-waggers living in a bygone age, or with the other version of that charge that, in order to sustain sterling in this role, we in Britain have to incur very substantial defence and aid costs all over the world. It may be that aid
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programmes and defence commitments are part of the world role which those who criticise sterling's international role would rather Britain did not have, but those aid programmes and those defence forces are justified, or not justified, by considerations quite different from those which I have been mentioning to-day.
To sum up, the very substantial invisible earnings that accrue to Britain from what may be called City of London functions are perhaps strong enough arguments in themselves. To them it is right to add the wider advantages on which I have touched, to ourselves and to many other countries, that flow from the efficiency of the pound sterling system and the efficiency of those who are the professional financiers in London. In my submission, all these together justify in full measure the importance given by the present Government and their predecessors to the maintenance of sterling in this international rôle. Perhaps I may add to this my own personal belief that the powerful magnet of London as a financial centre attracts to Britain not only financial dealings, but also actual visible trade in manufacturing export orders. Those in the manufacturing and those in the financing side of our industry and trade are not two nations, but one. May I, who happen to have a foot in both camps, say quite simply that I see no economic or moral justification for regarding either one as of greater human significance than the other.
It may be that your Lordships will quarrel with one or many of the points that I have made, but I hope that at least this debate will result in its being accepted here, and perhaps by a wider audience, that neither the activities of the City of London nor the existence of sterling's international currency role are any part of the real cause of the economic difficulties which have struck Britain so sharply in recent years. And perhaps this debate may help, too, in a more general battle which our nation has to fight. That is why, whatever we as a country or as individuals think, where we are in the wrong we should acknowledge that we are wrong and set about correcting ourselves. We should not seek comfort in false excuses, and age-old defence of the immature and the irresponsible. My Lords, I beg to move for Papers.
3.18 p.m.
LORD GLADWYN: My Lords, may I say straight away that I do not intervene in this debate for the purpose of supporting with technical arguments any particular theory regarding the role of sterling, since I am by training not particularly qualified to do anything of the sort, though I must say, as perhaps some of your Lordships know, that I am a director of one of our leading merchant banks. Nor would I wish anything that I say to be taken as expressing any final judgment by the Liberal Party on the complicated question before us to-day. But I think one thing is evident, that is, that the role of sterling has a considerable bearing on something with which I am directly concerned—namely, the gradual unification of Western Europe. So it is chiefly on that aspect that I should like to make a few observations this after noon, which I hope will not be particularly controversial.
Before embarking on that, however, I should like to say in a general way that I personally support most of the points which the noble Lord, Lord Aldington, has made, in what I think we should all agree was a most admirable and constructive speech. In particular, I should like to support the noble Lord in his suggestion, if I heard him aright, that the famous sterling balances are not some thing which should be used as a kind of excuse for our present difficulties, or even as something which we could repudiate without very unfortunate consequences. Even funding some of these balances, which is constantly mentioned in the Press and elsewhere, from what I hear would be a most difficult operation and, indeed, I think that many would say that it is not possible to do this even without a great loss of confidence.
It is true, as Sir Siegmund Warburg pointed out in an article in the Sunday Times on October 2, which no doubt some of your Lordships read, that these balances, in so far as they represent what he called the
"enormous liabilities of the United Kingdom, which were fixed towards what was then India and Egypt"
were not
"cancelled or funded on a long term basis"
but, as he said,
"misguidedly treated as short-term debts and discharged by unrequited exports ".
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That was something which should no doubt have been done in 1945. But it was not done and, for the reasons which the noble Lord, Lord Aldington, has given, the situation is totally different today. In any case, it is certainly not my personal view that the unfavourable situation created by some of the balances would be improved if, as some people now suggest, sterling was simply devalued, if only by a small percentage. For as I see it this would clearly not improve our exports if others quickly followed our example—and there is considerable reason to suppose that they would—while as for our imports, most of these are essential, and devaluation would, after all, simply mean that we should have to pay more for them. As your Lordships are aware, there are many other arguments in favour of the maintenance of the present rate of sterling.
As your Lordships are also aware, there are some who believe that you could profitably arrange devaluation by stages. But while respecting the views of some economists on this point, I confess that I simply do not see how such a gradual devaluation of, say 2 or 3 per cent. per annum for a certain period could be accomplished in practice. I suspect that if you did adopt that policy the "gnomes of Zurich" might well be in for a field day. Anyhow, if your Lordships have been reading the Daily Telegraph lately, as no doubt some of you have, you will have seen that devaluation, as such, does not seem to appeal very much to my own leader Mr. Jo Grimond.
I am, therefore, an unrepentant advocate of the general prices and incomes policy, however difficult this may be to achieve and although the actual way in which the Government may be seeking to gain this end may well be open to strong criticism—and we Liberals often subject it to strong criticism—I believe that they were, and are, right to choose the tough way, and not be tempted to wander down the primrose path which, wherever else it led, would not lead us into Europe.
This brings me, as I said at the be ginning, on to a very few reflections on the prospects for sterling if we do go into Europe, which I think is hardly irrelevant if indeed we are to discuss the whole future role of sterling this

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afternoon. In his article in The Times European Supplement of October 28, Herr Abs said, broadly speaking (and the noble Lord, Lord Aldington, quoted his actual words), that if the United Kingdom joined the European Economic Community, it would be basically a good thing for sterling. It seems to me, having read the article with attention, that Herr Abs arrived at this conclusion on the assumption (a), that before joining the E.E.C. we had got our balance of payments situation more or less straight, and (b), that, on balance, entry into Europe would improve our exports and consequently the position of British industry as a whole, from the efficiency of which, we all agree, sterling ultimately derives its strength. I suggest that there is no doubt that Herr Abs is right, both in his assumption and in his conclusion. But not only that: I believe that the entry of Britain into the Common Market would increase trade all round and thus prove a great stimulus, not only to Britain, but also to the countries in the Common Market, whose economies, as we all know, are now enjoying a rather lesser rate of growth than they did two or three years previously. Is it indeed obvious that, whatever the inherent strength of sterling may be now, it would be even stronger if we joined the European Economic Community, if only for the fact that it is difficult to see how we could maintain an efficient British industry going at full blast if we were to a large extent cut off from the Continent and had to rely on increasing our exports to the markets of the Common wealth, some of which clearly now have a marked tendency to prefer trading with countries other than ourselves.
But it is as regards the possible position of sterling if we do join the Common Market that some of the remarks of Herr Abs, in the article to which attention has already been drawn, seem to me to be open to some question. He thinks that it is
"quite improbable …that within the foreseeable future a uniform currency will be introduced in the E.E.C.—and this also goes for the time when the United Kingdom will have joined."
Notice, my Lords, that he says, "will have joined", so he is optimistic. He went on:
"Neither can I conceive of the majority of currencies in the E.E.C. countries being more
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or less displaced by the currency of one particular member. … In order to institute a uniform currency within the E.E.C. it would be necessary to pursue a uniform economic and financial policy within the community, which would clearly not succeed except under a supranational federation. Such a thing is of course not envisaged."
As I see it, it all depends on what is meant. Herr Abs is quite right in saying that a supranational federation is not now envisaged, and the idea that the Community, even if we go in, will ever develop in the direction of the formation of a sort of copy of the United States Constitution, with a President, a sovereign Congress and States which would have only a very limited jurisdiction, is clearly out. Any political system which would emerge in Europe could in practice be formed only on the basis of our ancient nation States, with their separate histories, personalities, languages, and so on.
However, if you accept the idea of an Economic Union—and this, after all, is inherent and explicitly laid down in the Treaty of Rome which our Government now say they want to sign, provided only that it has suitable guarantees regarding our specific interests—then one thing leads to another. How can you have common agricultural, energy, transport, and migration policies, and many other policies, unless you have some guarantee that individual members of the group will not suddenly devalue or revalue their currencies? Even at this very moment when only the first of these policies—that is, the agricultural policy—has as yet been achieved, how could a member of the group change the value of its own currency when common prices have now been agreed on which will be valid from Lubeck to Messina? I quite agree that it will take a long time to hammer out even the policies to which I have referred, and of course there are others too. But if we come in fairly soon they will have to be hammered out with our concurrence in the Brussels machine, and eventually approved by the Ministers, including our own Ministers.
At some stage therefore—and this may, I agree, take a considerable number of years—the question of the possible formation of some European reserve currency which would necessarily include sterling must, as it seems to me, be considered, and I am sure that it is in evitable that it will be considered if we I come in. But I quite agree that this

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will appear evident only when all the States concerned have performed what one might call a common act of will to constitute something which is an entity in itself, and not a collection of individual and sovereign national States. I repeat that when and if this act of will occurs we shall not produce anything which is broadly equivalent of America but we shall, I am convinced, produce a political community in which certain decisions will be taken in common by certain new techniques.
This, surely, is the ultimate future of sterling which we can hope for and envisage. I quite agree that at the moment it is only a dream. But quite often in the practical world of affairs dreams do come true or, rather, they are often made to come true by the sheer pressure of world political events. In the mean time, I am convinced that sterling will have a most valuable role to play, both in the maintenance of world economies and in supporting the economy of these islands; and, further, that the right way to support it is to go forward, perhaps through a period of trial and error, with a prices and incomes policy that really does work.
3.37 p.m.
THE EARL OF LONGFORD: My Lords, I know that the House has greatly appreciated both the speeches to which we have listened: the noble Lord, Lord Aldington, strong and buoyant, and combining a knowledge of industry, finance and politics for which one can not easily find a parallel on the contemporary scene; the noble Lord, Lord Gladwyn, dedicated and inflexible in the pursuit of the European vision. Both have indicated an interest which they felt it right to mention to the House. I suppose in an excess of humility I should indicate also the interest of a Minister in these questions, which is not usually mentioned on these occasions. But the tone has been so non-partisan that I think we have all to put our cards on the table and approach these matters without any suggestion that one is trying to argue in favour of one group rather than another.
We must all be grateful to the noble Lord, Lord Aldington, for raising this great issue. The noble Lord, Lord Gladwyn, will forgive me if I do not spend very long on the European issues
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to-day. I have paid tribute to him before now for his unsurpassed services to the European cause, and I will say a word or two before I close about Europe. These are matters, as I think the general public are aware, into which the Government are delving very deeply at this moment, and therefore the noble Lord will understand if I do not say very much now.
LORD GLADWYN: I thought you were probing.
THE EARL OF LONGFORD: We can probe and delve and generally examine the matters, but all, the noble Lord will understand, in a forward-looking spirit. But I am not concerning myself with that topic this afternoon.
There is no doubt that the role of sterling is a subject which is well worth the attention of your Lordships for one day, and perhaps it should be more than one day. There are other features of our economic policy, some of them controversial, which we have frequently debated before and no doubt shall frequently debate again. If to-day I say nothing about productivity or the incomes policy—mentioned so generously by the noble Lord, Lord Gladwyn—if I refer hardly at all to economic growth or full employment, it is not because these things can be, as it were, separated off altogether from the consideration of sterling. But I feel that the noble Lord, Lord Aldington, was absolutely right to concentrate our thoughts for this one day at least on this major aspect of economic policy.
I would say one thing to anybody who becomes at all impatient in the course of these discussions about sterling and who wonders whether this is separating ourselves off from human life. Speaking of my own experience—and everybody has had experience of different kinds—I had considerable experience when I was responsible for the affairs of Germany in 1947–48 under Mr. Ernest Bevin, and everyone who remembers the transformation that took place in Germany when a sound currency was substituted for a non-existent currency will realise that one cannot divorce the soundness of one's currency from the standard of life of the mass of the people. The two are connected so intimately that this topic of sterling must be of interest to everybody in the country if only they

909
could understand it, and admittedly it is a very technical topic.
Letme agree straight away with many of the important things said by the noble Lord, Lord Aldington—indeed, with the general line of his speech. In some cases I am afraid I shall repeat things which he has said, which is perhaps the sincerest form of compliment. He has stressed, as has the noble Lord, Lord Gladwyn, the vital importance of the role which sterling plays in international finance, and certainly that is absolutely right. We estimate that sterling finances about 30 per cent. of the world's trade. The noble Lord, Lord Aldington, seemed to be a little more pessimistic than that; he thought it was 25 per cent. plus, but perhaps he will allow me to inform him that according to the Treasury we calculate that 30 per cent. of the world's trade is still financed by sterling. It still accounts for the bulk of the reserves of sterling area currencies and for about 30 per cent. of the official currency reserves of the world.
If we have any knowledge of these matters we must be aware that the world needs an adaptable medium backed by a range of modern financial services for financing the ever-growing number of transactions between countries, and the world also needs a flexible medium backed by a wide range of what are some times called "investment opportunities"—in our case Treasury Bills or British Government securities, for example—for holding official reserves to supplement gold. Certainly we can see now that gold in itself is quite inadequate to meet the world's need for reserves. There are only two currencies which have been able to supply these needs—the dollar and the pound. No other national currency plays a comparable part; no financial centre elsewhere can offer facilities comparable to those of New York or London; and indeed some Governments have shown themselves actually unwilling to see their currencies being used for this international purpose.
Within the sterling area the pound is of course the currency predominantly used both for the holding of official reserves and for every kind of trading and commercial purpose. Large balances are held by Governments and by private firms and banks, but outside the sterling area also a great deal of sterling is held,
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especially by firms and banks in Western Europe, North America and the Middle and Far East. Central banks in a number of sterling countries also maintain balances in London, sometimes as an element in their reserves and sometimes in order to meet the demands from private banks and traders. All this is worth emphasising, and it is worth bringing out the extent to which sterling is held and used by the rest of the world, because there has been a tendency in some quarters—certainly not in the speeches to which we have listened to-day—to speak as if sterling was fading out as an international currency, and that is certainly not in any way the case.
Over a long period now since the early post-war years the net amount of sterling held by the rest of the world has remained fairly stable at somewhere between £3,000 and £3,500 million. The noble Lord, Lord Aldington, himself indicated the magnitude. That is on a net basis, deducting the United Kingdom claim from liabilities, but I am advised that the importance of sterling in international trade and financeis better indicated by the gross amount held abroad, and this gross amount held abroad is now substantially larger than it was in the early post-war years.
Despite the difficulties through which we have come, the rest of the world still holds well over £4,000 million of our currency, and that is certainly a colossal sum. It is true—and this is worth saying, although I think it has been said fairly often in the House—that these liabilities are much larger than our liquid reserves, but if we take all our assets and liabilities together, long-term and short-term, this country is a net creditor on quite a substantial scale. That is well known to every expert, but it cannot be said too often for the sake of the general public. There have also been sharp reductions in holdings from time to time when our balance of payments has been under strain, but these holdings have been built up when conditions improved, usually with less publicity.
The long-term trend in the gross amount of sterling held by the rest of the world has been upward. The increase has been mainly in private and commercial holdings, reflecting the continued need for traders to finance a growing volume of world trade. The amount of

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sterling held by central banks has not, on balance, changed very much since the war. It is not difficult to find reasons and all this was very well explained by the noble Lord, Lord Aldington. The advantages of holding sterling are many. They include the fact that it is a well-established and acceptable commercial currency; and then there are the comparatively high rates of interest, which were also mentioned by the noble Lord, Lord Aldington, and the great variety and flexibility of investment opportunities in London. The noble Lord, Lord Aldington, spoke enthusiastically, as he had every right to do, about the work of the City. I take this opportunity, on behalf of the Government, of paying cordial tribute to the immense diversity and world-famous efficiency of the services rendered by the City of London.
The noble Lord, Lord Aldington, has referred to the City's invisible earnings, and it may be that the subject will be raised in the debate and my noble friend Lord Shepherd may wish to deal with that in greater detail, but it is a reasonable estimate that the net earnings of this kind now amount to about £200 million a year. Certainly this is a substantial contribution to the balance of payments, and it is fair to say, though it might be difficult to work out precisely, that the greater part of this very large sum earned by the City is associated with the international role of our currency, both in the past and now. For the Government's part we fully recognise the value of these earnings, and we shall support all efforts to ensure that they make a maximum contribution to our external accounts.
The Motion of the noble Lord, Lord Aldington, refers not only to the rôle of sterling, but also to the impact of that rôle on our economy. It is important to keep this in perspective, and I certainly do not quarrel with the way in which that was handled just now. The international rôle of our currency brings both benefits and burdens.
The first point we make is that the condition of sterling depends first and foremost on the health of the United Kingdom balance of payments. That is, of course, a point that has been made already. Most of the periods of weak confidence since the war have been asso-
912
ciated with deficits in our balance of payments. I am aware that 1957, for example, was an exception, but usually the trouble has come when we have had a deficit on our balance of payments. There are some who think that the measures the Government took last July were forced on us because the wide international use of our currency placed us at the mercy of bankers abroad, but we in the Government do not believe it is right to try to shift the responsibility on to others in this way, as was said very clearly by the Chancellor of the Exchequer at the Labour Party Conference. No country with a deficit in its balance of payments of the size that we have had for over two years, to go no further back, could avoid taking corrective measures.
If I differ from the noble Lord, Lord Aldington, on one point, it is almost my only point of difference: he seemed to feel that this international role of sterling could bring an additional element of discipline into the management of our affairs. It may be so, but I am bound to point out that things have not worked out that way very often in the past. If we take the first nine months of 1964, for example, there was a large inflow of short-term funds bolstering the reserves, and that presumably would not happen to a country which was not an international currency centre, and a good deal of trouble followed thereafter. I must disagree with the noble Lord on something, otherwise people would feel this was a collusive affair.
The main point is that if we can maintain a consistently strong and healthy balance of payments, but only if we can, we have no need to fear, or at any rate much less need to fear, the backward and forward flow of short-term funds from which we have suffered quite recently. So it is quite wrong to suppose that if we could shed the international functions of sterling all our problems would be over. But it is true, and one must face this candidly and not pretend there is nothing to be said on the other side, that because of the very large amounts of sterling held overseas we are more vulnerable in difficult times than others are. I think we must all ask our selves the question, "Why should fate pick on us?", so to speak. And it is true that there is something to be set on the other side of the argument. This

913
vulnerability can be a source of instability not only for our own financial position but for the whole international reserve system of the world. The vulnerability of our reserves to large flows of short-term capital is clearly something everyone would like to see reduced.
I pose, therefore, in the forefront of our discussion this afternoon, the question of whether there is some kind of reform by which a change of this sort could be achieved. Here I must refer again to the familiar distinction drawn by the noble Lord, Lord Aldington—not familiar to everybody; certainly not familiar to the man in the street—between sterling as a trading currency and sterling as a reserve medium. Broadly speaking, one can judge the extent to which sterling is used for commercial purposes by looking at the amount held here by private firms and banks abroad as opposed to central banks and similar institutions. On a gross basis something approaching half of the balances is in the hands of non-official holders—there are refinements there, but that is putting it in very round terms. For the reasons I have already mentioned, sterling, and the dollar too, is bound to continue in use for as long as we can foresee as an international medium of exchange for commercial purposes. I have not come across any serious argument that sterling should be replaced, that the use of the pound and the dollar as the world trading currencies could be terminated. Proposals which are discussed from time to time for relieving sterling of some of its international functions refer to its role as a reserve currency, and these arguments usually go on to criticise or seek to modify the reserve currency system in general.
This question has to be seen very much in the context of the development of the international monetary system as a whole. We in the Government have been taking part in negotiations with the other members of the Group of Ten—that is, the main industrial countries. These discussions have been aimed at agreement on new methods of expanding international liquidity, and have now been extended so as to bring in the views of all members of the International Monetary Fund. We can surely all agree that the world does need a growing volume of liquidity if the growth of trade and output is to be sustained. A shortage of liquidity could
914
drive many countries into policies restrictive of output and trade, and world trade would suffer, and so would everyone's prosperity. But we have to face the fact that world stocks of liquidity seem inadequate if we look to the future. The world's liquidity should certainly not depend on how much gold we can dig out of the ground, and in any case the amount of gold which has been finding its way into official reserves has been falling. And there does not seem to be much scope for adding to reserves by expanding the reserve currency holdings of the world. Official reserves of sterling have not increased over the last fifteen years or so, as I have said, and it does not seem that one can think of any way of rectifying this position by expanding our reserves or those of the U.S.A.
So we must find something new. There is now a wider measure of agreement among Governments that plans should be worked out for the creation of a new type of international asset. This would be held in the reserves of Governments and used for settlements between them. The precise form which the new asset should take and the conditions which should govern its holding and use are among the subjects on which detailed discussions are still going on; also the circumstances and manner in which it should be brought into being. Her Majesty's Government have made their views on this matter very clear. We think this should take the form of a specially created reserve unit—this is our proposal—managed by the International Monetary Fund or some closely related agency, and backed by deposits of the currencies of all the participating countries. This would be a great break-through for those who believe, as we do, that the world monetary system must evolve towards some new form of asset with international backing and away from excessive dependence on gold.
But we must not expect a miracle over-night. Clearly, gold will not be supplanted as a reserve asset for many years to come; neither will the reserve currencies. These two will certainly continue to furnish a large part of the world's liquidity. But the establishment of new types of monetary assets in the hands of central banks and Governments will affect the role of the reserve currencies. There are various complications which could

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arise and which would not always be beneficial but which I need not go into now. The Chancellor of the Exchequer, however, has made it plain that, in our view, if we can establish a new asset of this kind, provision will be needed to accommodate the ebbs and flows which would be unavoidable in a mixed asset system. But whatever the technicalities of this, and certainly in these remarks of mine I cannot carry them very far this afternoon, the urgent need is to press ahead with the preparation of a plan for the creation of new international reserves which we hope will be completed by next September.
These negotiations are by no means the only way in which the international monetary system can be developed and improved. There have been already some very significant innovations. One obvious example is the network of new arrangements including swap facilities which have been devised in recent years to help preserve order and stability in the international financial structure. I will not go into all the various steps of this kind or of analogous character, but I would just mention arrangements such as those announced last June for the support of sterling. Under these short-term assistance can be provided to offset pressures which do not arise from the United Kingdom's own balance-of-payments deficit. Some may say advisedly that this relieves us in some measure of the risks which are involved in running an international currency. As time goes on we hope it will be possible to carry this process further. Certainly we are always interested in constructive ideas in this field. Different proposals are often brought forward. We are sometimes urged, for example, to transfer the sterling liabilities to the I.M.F. or to some other international body.
I have spoken about our hopes for the reform and development of the world monetary system; but on this particular point about the future of the sterling balances I must make one thing perfectly clear, echoing, I think, the general philosophy of the noble Lord, Lord Aldington, and I think also the point of view of the noble Lord, Lord Gladwyn. We cannot simply off-load liabilities which represent the continuing debt of the United Kingdom. We recognise that
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these liabilities represent the liquid re serves of a large number of countries, and obviously there can be no question of abrogating them or diminishing their liquidity in the hands of the holders. The interests and wishes of those holders are of the greatest importance. Indeed, in the whole of this field we could advance only on the basis of the widest international co-operation.
I have nearly done. The noble Lord, Lord Gladwyn, asked me a number of questions about the effect on the development of the Community of the emergence of a European currency. I am not referring now to our own position, which I am sure will need to be discussed at Greater length on another occasion, but, taking the Community, I should certainly expect that they would move gradually towards some form of monetary union, which might lead ultimately to a common currency, to common external reserves and a common budget. But in practice the Six have made but slow progress in monetary co-operation, as the noble Lord, Lord Gladwyn, is well aware, and it is reasonable to suppose that a move towards a common currency still lies several years ahead.
My Lords, I would turn, in conclusion, for just one moment to the immediate outlook for sterling. I am sure that we are all pleased to see that things have taken a turn for the better, that confidence is reviving. The reserves in October rose by £20 million, even after some repayment of debt. The main reason for this improvement is the far-reaching policies which the Government have put into operation to restore the balance of payments, and these steps should carry us into a comfortable surplus next year. The measures affecting domestic demand, painful though they be, should soon show a marked improvement in the balance of trade. The invisibles account will be helped by the measures affecting travel and the cuts in Government expenditure overseas; and the steps we have taken to improve the balance of long-term capital flows are already showing results. These policies directed to the stability of the pound are confirmation of our repeatedly expressed determination to maintain the strength of sterling. As I say, the measures have already had a beneficial effect on sterling, and I am sure that in the next few months any

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remaining doubts about the future of our currency will be finally dispelled.
Sterling, as we should all agree, is not an end in itself. We are not here dedicating ourselves to a symbol of prestige or to a dogmatist's abstraction. We agree, as does Lord Aldington, with the Governor of the Bank, who said recently that
"The pound is being protected for the sake of the people."
That cannot be said too often. We are convinced that the safety and stability of our money at home and abroad is the prime requisite and an indispensable condition of any social or economic progress, and only with the help of a strong and stable money shall we begin to achieve our social dreams.
4.5 p.m.
LORD HARLECH: My Lords, we have just listened to a speech from the noble Earl the Leader of the House which contained some most important things, particularly about international liquidity, and I find myself in profound agreement with him on that part of his speech. I hope to develop this point later on in my remarks. The noble Earl said earlier in his speech that the subject which we are discussing to-day is a great issue. I think the subject of this debate may well be of greater importance to the future of our country than any to be discussed in your Lordships' House this Session. I will start by saying that I think we should be particularly grateful to the noble Lord, Lord Aldington, for drawing in his opening speech such a clear distinction between sterling as a trading currency and, on the other hand, sterling as a reserve currency. This was a point which was also made by the noble Earl. I think this makes it much easier for us to see where the true interests of this country lie.
Broadly speaking, we derive considerable advantage from the role that the City of London plays as the centre from which the manifold activities connected with the workings of a great trading currency are controlled. We derive little or perhaps no benefit, as some would say, from the fact that sterling is used as a reserve currency; indeed, as has been said, under certain conditions it has been a positive hindrance to us, although I would agree with my noble friend that sometimes this hindrance has been
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exaggerated—for instance, under the conditions in which we found ourselves in the earlier part of this year. The need for deflation arose from internal events and was not really forced upon us, as I think the noble Earl said. It was not forced upon us by the reactions of banks in the rest of the world.
The noble Lord, Lord Aldington, this afternoon, and others, have calculated that the invisible earnings which accrue to us as a direct result of the trading activities of the City of London are not far short of £200 million per year. I was particularly glad to hear the noble Earl, Lord Longford, say that the Government fully appreciate this, and indeed intend to give the City every encouragement to do better in this respect, because if these earnings were to dwindle the task of righting our balance of payments would be harshly increased. But why are people anxious to use these services which are based on sterling? It is because over generations it has been found convenient to carry out transactions in a currency that has proved strong and stable; a currency that is in almost universal use and can be converted quickly and easily into other currencies. Take away these attributes of sterling and the rest of the world would have little use for it. That is why successive Governments have fought to maintain the exchange value of the pound, and have made it clear that though they might in certain circumstances be forced into a devaluation, they would never deliberately or voluntarily seek one.
I am sure that they have been right. I doubt greatly whether London's role as a financial centre for the world could survive another devaluation, let alone one indulged in as a deliberate act of policy. Those who urge on us such a policy have a duty to explain why they think other nations should continue to have faith in the stability of the pound, or alternatively how we would make up for the £200 million a year we should in the end lose in invisible earnings.
Nor should we be blind to the fact that others would be only too delighted to step into our shoes and scoop the benefits which at present come to us. The noble Lord, Lord Aldington, has already made some reference to this. It is very significant, I think, that it is reported from France that President de Gaulle has

919
asked for a scheme to be prepared which would enable institutions in Paris to take over progressively the role now played by London. Nor is this in any way a fanciful concept if the pound continues to be weak and unstable in comparison to the franc.
In any case, my Lords, there has been very little evidence that devaluation is necessary in order to cure our balance-of-payments difficulties. Every action that would need to be taken to strengthen our economy after devaluation can be taken before and if taken before would make devaluation unnecessary. Generally speaking—though this is not the time to go into this matter—our prices are not too high in the world's markets, but too often our delivery dates are too long. This is an indication not of British industry in general being uncompetitive, but of excessive spending at home and abroad, particularly by Governments.
My own impression is that this Government's actions, although some of them we regard as grossly misconceived, will at least, in the aggregate, right our balance of payments next year. If the correct actions had been taken in 1965 we could have cured the imbalance by now with far less damage to the strength of our economy, and with measures far less Draconian than those resorted to in desperation on July 20 this year. However, I do not intend to pursue this matter to-day. I will merely say that I think it was right to spurn devaluation as a way out of our difficulties, and that the sooner we achieve a surplus in our balance of payments the better for sterling and the greater the role we can play in the reorganisation of the free world's monetary system. This is a matter that is becoming daily more urgent, and I now turn to it.
I believe that there is now a very real danger of a technically induced world trade recession, and I will try to give my reasons, as shortly and as simply as I can. It has been estimated that in order to meet the rising level of world trade the equivalent of an extra 3 billion dollars of money is required each year to finance it. But the amount being added to the free world's currency re serves from newly mined gold has rarely exceeded 1 million dollars a year. I will come later in my remarks to some more
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recent figures. The shortfall has largely been made up by the United States and ourselves running deficits resulting in an outflow of dollars and pounds into other countries' reserves with the dollar until recently providing about three-quarters of the increase in such reserves. However, this process has now gone as far as is reasonable and practicable—indeed, in our case it has already gone too far.
The result is that both we and the United States Government are taking strenuous measures to halt the outflow. We expect to be in balance next year, and America may be not very far short of the same target. While, as for gold, the lack of total confidence in any major currency has meant that more and more of what has been newly mined is going into private hoarding and less and less into nations' reserves. I have seen a figure as low as 250 million dollars mentioned for gold going into reserves in the past year. Already finance for capital investment in Europe and elsewhere is desperately short, and there has been a general and substantial rise in lending rates. Our own bank rate has been at 7 per cent. for longer than in any post-war period, but rates elsewhere are so high that it is not going to be easy to reduce it substantially or speedily. All this is hampering expansion in most industrialised countries, and making it desperately difficult for the poorer countries to borrow money at a time when they are already finding it extremely hard to meet their obligations on earlier loans.
I can see no good reason why this situation should not get worse as the American and British deficits are progressively reduced, and as gold is increasingly siphoned off into private hands. This is the precise prescription for a world-wide recession in trade, and Heaven help this country if we are forced to wrestle with such a recession in our present rather delicate economic condition. To my mind, everything points to the urgent need to devise a scheme to increase world liquidity, not in order to bail us out once more, not in order to allow us to relax once more into a comfortable policy of drift, but in order to stop the free world from carrying out a self-inflicted wound, possibly of fearful dimensions.
We come to the much harder question of how it should be done. There will

921
always be those who urge that the simplest way would be to increase the price of gold—and quite a formidable case can be made out for this. The fact that South Africa and the Soviet Union would be major beneficiaries would not seem to me to be a conclusive disadvantage if it really solved our problems. But in fact it is not worthwhile arguing the case, because the decisive voice in this matter rests with the United States, and they are not going to increase the price of gold and so devalue the dollar, and "There's an end of it", as Dr. Johnson would have said. In any event, it is perhaps high time we took some action to deflate the whole mumbo-jumbo surrounding gold and gradually organised a more rational monetary system. As the noble Earl indicated, digging up gold in South Africa at great expense and reburying it in Fort Knox ought not to be the main foundation for the world's credit structure.
What then is the alternative? The most generally acceptable proposal would seem to be one under which the I.M.F. would have the power to create and steadily expand the supply of some new reserve unit. The objective must be to devise a reserve unit which countries will be as willing to hold as, say, dollars. But it must not be substantially more attractive or we might see a flight from the dollar and sterling and a disruption of the existing system. It must, in the first place, be an addition to the dollar and sterling as a reserve, not a substitute, although as the years went by it might be expected to take some of the strain off these currencies, and off the pound sterling in particular.
I am sure that the new unit should not be directly convertible into gold, as some people in France from time to time suggest, or we shall find ourselves once more with the free world's credit facilities rigidly tied to the store of gold in central banks. It should be based on all the major usable currencies, and this really means the currencies of the Group of Ten, plus Switzerland; and it might have, in addition, some kind of gold guarantee as to its value. It would be the duty and the purpose of the I.M.F. to ensure that the availability of this addition to the world's reserves would increase as the potential of world trade increased. It is because I believe that the exactly opposite process is now at work that I suggest
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that action to increase liquidity is the most urgent task of Governments in the Western World. The noble Earl said that we must not expect miracles, but we are certainly not getting them out of the discussions which have been going on so far. Indeed, I think the sterile squabbling that has been going on in the Group of Ten in the past three years is a scandal, and shows how little progress, in my view, is to be expected if all the negotiations are left to experts.
Let us hope that better progress is made in the next few months. Let us hope that a solution is found by next September. But if our hopes are dashed once again, then surely we should consider urging on our friends the need for convening a new, and to some extent political, conference of the free world Powers to hammer out a reformed monetary system attuned to the needs of this generation. After all, it is now more than twenty years since the great, conference at Bretton Woods, and although what was achieved there has served us well, there must be some improvements we can make in the light of our experience in recent years. Of course, such a conference would need very careful preparation, but if it were now set for, say, 1968, I believe that it would concentrate Governments' minds wonderfully.
Heavy responsibilities lie upon Her Majesty's Government in this whole field. First of all, they have the responsibility of making sterling strong again, and of maintaining its stability. Only then can it continue to play a key role as a trading and transaction currency. Only then can we be sure of maintaining, and per haps expanding, the benefits we now obtain through the invisible earnings of the City of London. Secondly, Her Majesty's Government have the responsibility of playing a significant part in reshaping the world's monetary system, so that the non-Communist countries are able to generate their full economic potential. These countries must not be hampered in their expansion for outdated technical reasons. But Britain cannot play her part, and cannot have great influence in these matters, unless she has fulfilled the first responsibility of regaining the world's confidence in sterling.
4.22 p.m.
LORD ROBBINS: My Lords, in rising to speak on this Motion, I should first like to associate myself with preceding

923
speakers in thanking the noble Lord, Lord Aldington, for proposing it. The subject is, indeed, one of great practical importance, yet of almost intolerable intellectual difficulty. It is a subject which is bound to be in our minds at the present time, and if it is not ventilated in public in a calm and responsible manner there is simply no end to the dangerous misconceptions which may prevail in the underworld of gossip and have a very unfortunate effect on action.
I do not wish to duplicate what has been so eloquently said by the noble Lord, Lord Aldington, of the international importance of sterling. The fact that in the recent troubles we received such extensive assistance from abroad is proof enough of that. It was not because of their appreciation of our superior virtue that so many central bankers, with their Governments behind them, were willing to come to the support of sterling; it was because of a lively appreciation of the adverse repercussions which would hit them if a major international currency were to collapse.
But while I do not wish to dilate on the international importance of sterling, I do wish to emphasise its advantages to our economy. In recent years, as the noble Lord, Lord Aldington, hinted, there has grownup a habit among some who ought to know better of blowing cold on any claim for advantages arising from the position of London as an international centre. Estimates are made, usually with a rather strong downward bias, of invisible earnings, and the question is then posed how trumpery this is in relation to the gross national product, with an implication that if it were to evaporate very little harm would be done.
I submit that this is very shallow thinking. I do not think we should make light of the direct contribution made by the invisible services. The figures which have been mentioned this afternoon are not small figures in relation to the balance of payments, and if this contribution were not there, there would be that much more to make some other way if we were not to be that much more out of balance. But I confess I find it difficult—indeed, almost impossible—to understand the frame of mind which does not see what a substantial indirect con-
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tribution is made in this way to the support of our export position in general.
Is it really to be supposed that we should get all the contracts we do get, if there were no international business in London? It is difficult to assess these matters quantitatively, but for me, at any rate, it is just plain common sense to believe that there is a substantial connection between finance and commerce in this respect. I think we do less than justice to the advantages of the position of sterling in world trade if we fail to take this into account. I think our economic development in the past would have been less considerable if it had not been for the City and the international business which goes with the position of the City. What is more to the point, I think our position will be much less satisfactory in the future if we throw away that position, or impair it by policies based upon a lack of under standing of what we owe to it.
Nevertheless, like most positions of privilege, it carries with it certain obligations and inhibitions which do not beset less exalted roles. It involves both greater responsibility in general policy and an increased sensitiveness to internal and to external shocks. It involves greater responsibility because we are handling other people's money as well as our own; and, quite apart from the morals of the subject which I hope are obvious, considerations of pure expediency compel greater prudence than if we were concerned simply with local finance. At the same time it involves greater sensitiveness, because if things go wrong there is a wider area of holdings to which the repercussions may spread.
This brings me to the subject of the sterling balances, which has been discussed already this afternoon in your Lordships' House and which is at the heart of much recent discussion of the advantages and disadvantages of the present position of sterling. Your Lordships will doubtless remember a debate last summer in which the noble Lord, Lord Snow, in a very memorable speech, confessed to increasing doubts on the suitability of the position in which we were liable to the withdrawal of such large amounts at such short notice. Let me say at once that, although I am arguing against short-sighted views and hasty recommendations for action in this

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respect, I do recognise that there is a problem here which deserves to be discussed with candour and with cool heads.
The essence of this problem, as I conceive it, is a change in our position as regards short-term debt. During the days when the ascendancy of sterling was being built up, the days before the catastrophic wars of this century, the world at large was indebted to London not only on long-term but also on short-term account. The volume of bills financed by London was such that it was comparatively easy to rectify any position of strain: a hardening of rates here and money flowed in more or less automatically. There was a spectacular demonstration of that, of course, at the outbreak of the First World War in 1914, when in a few weeks money was flowing into London at an overwhelming rate. Nowadays, whatever our position as regards long-term investments—and, with great respect, I do not think in the context of this problem that it is very helpful to add the long-term investments to discussion of the short-term debt problem—we have an immense short-term debt to overseas holders. Sterling balances are loans made to us. They are entitlements to payments which have not been cashed; and, clearly, if it were attempted on the part of our creditors to cash a large volume at any one time, it would be a source of immense embarrassment—and if things go wrong this is always a possibility. That it constitutes a position of great sensitiveness is certainly not to be denied.
At the same time, however, as the noble Lord, Lord Aldington, pointed out it is fundamental to realise that it is not the ultimate cause of trouble. The troubles of our day have been caused by deficiencies or, as in the case of 1957, expectations of deficiencies, in the balance of payments on current account. I do not deny that if out of the blue the owners of sterling balances wish to turn them into gold on a large scale, that would in itself be a cause of trouble. But that is not the way the world has worked—at least not in the years since 1947. The successive sterling crises have been made more dangerous by the fact that the balances were here and might be the subject of a chain reaction of great danger. But the cause of the trouble lay in the condition, or the prospects, of the balance of payments, not in the existence of the balances.
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May I say in passing that when there were speculative influences operating against sterling in recent months, in the main it was not the large holders, the central banks and the rulers, who were acting in this way. There has been great loyalty and special consideration shown on the part of such clients. It was much more the vast mass of dealers and traders seeking in a way which was only to be expected to protect their own positions against anticipated payments. Nevertheless, the sensitiveness is there, even if it is not the ultimate cause of the trouble, and it no doubt enhances the difficulties of any psychological disturbance when it occurs. The question therefore arises: what can be done to diminish it? What can we do to get out of a situation in which fluctuations in the current account are attended by such grave potentialities?
It is sometimes thought—and perhaps I detected a shade of such implications in some of the things that have been said this afternoon—that these difficulties are just a local manifestation of a world liquidity problem, and that the solution of these difficulties is to be sought in some general solution of this problem. The financial corridors of power echo with esoteric talk about alternative schemes for the improvement of world liquidity; and it is all too easy to think that our troubles will all come right when one or other of these schemes has been adopted. But if we think this, my Lords, I am afraid we are living in a fool's paradise.
I do not in the least deny that there exist future problems of international liquidity. I am more sceptical, perhaps, than some noble Lords of the existence of an international liquidity problem up to date. Having regard to the fairly brisk inflation which has been going on in most parts of the world since the completion of the war, I find it difficult to believe that up to date a problem of this sort has been very urgent; but, of course, it is quite easy to see, as the noble Lord, Lord Harlech, has so well demonstrated, how such a situation could come about. It could come about if the majority of the important financial centres sought on a large scale to increase (or to protect, even) their metallic reserves, and if the increase of gold production was not great enough to sustain this movement without a general deflation of prices. This has not yet happened—we have not

927
had world deflation since the war, and world deflation is not going on at the moment—but it easily may happen, and it is a tribute, I suggest, to the increased insight of the central banks and treasuries of the world that they are willing to consider the possibility in advance and to consider measures to meet it.
Of course, my Lords, if such measures are taken—and I hope they will be—we shall share in the common benefit. Situated as we are, we cannot fail to benefit from improvements in the arrangements for international financial stability. But I submit that we deceive ourselves if we do not recognise the existence of a special sterling problem—a problem which is much more urgent and much more deep-seated than any contemporary problems of international liquidity in general. No doubt the general problem of international liquidity is immensely complicated by the special position of sterling: but the sterling problem has its roots in particular causes arising outside the problems of the supply of gold or the general adequacy of means of international settlement.
The plain fact is that the perils of our position on capital account derive essentially from a disproportion between our short-term liabilities and the reserves we have to meet them—a disproportion far transcending that of any other leading financial centre. We are bankers to a large part of the world, and our reserves by themselves have proved insufficient to maintain confidence if anything looks like going wrong. It is true that in the recent crises the skill of our expert representatives and the belief of the rest of the world in their good faith and probity have been effective in providing extraordinary reinforcements sufficient, in combination with measures taken at home, to restore confidence. But this is not something that we can count upon as a matter of right. We cannot retain our position as one of the world's bankers on the basis of continued support from the rest. Somehow or other we must diminish the special potential sensitiveness of our international position.
Let me say at once that I do not know of any quick or easy solution to this problem. During the war, when we were spending money like water in the interests not only of ourselves but of our Allies,
928
there was some talk in high quarters of special measures to deal with the sterling balances which had piled up as a result of our spending—the by-product of the defences of Egypt and India, for example. Our American friends, who had lent to us on such a prodigious scale and who had cancelled so much, were anxious that we should seek similar treatment at the hands of other creditors; and, as some of your Lordships will know, the expediency of alternative ways of doing this was the occasion of much controversy at high levels. But all that is past history—it is utterly irrelevant. There is no analogy to that state of affairs in the present position.
The war-time accumulations have long ago been used up. Look at the position of India and Egypt to-day. The balances of 1966 are for the most part funds which have been accumulated since the war—funds whose loan to us has to that extent made easier the day-to-day position of the balance of payments. They represent money which has been left in our hands, not in the exigencies of total war but in the circumstances of peaceful trade. It is doubtless a convenience for their owners to keep them here if things are not going wrong. But there is no special service which we have rendered to them individually which would warrant us in asking for any but the normal restraints customary in the relations between client and banker. It is quite clear that we are not entitled to expect any solution of our difficulties by some sacrifice on the part of our creditors.
Nor do I think that we should base policy on the possibility of some ambitious settlement of the kind proposed in the first drafts of the original American plan for post-war settlement, drafts which suggested a taking-over by the proposed fund of responsibility for the then-existing sterling balances—a proposal which had vanished by common consent by the time we came to Bretton Woods. Whatever the merits of that proposal at that time, circumstances have now so changed as to render it not immediately relevant.
Needless to say, I am sure that for some time to come we shall need in the back ground of our efforts at recovery the assurance of the friendly support in special emergencies of the kind that has been so splendidly forthcoming in recent months. It may well be that the main

929
central banks of the world will come to formalise—as has been hinted in the course of this debate, either inside the Fund or without, in the ambiance of the Group of Ten—arrangements for mutual assistance in the event of extraordinary crises on capital account. I hope we shall play our part in those discussions; I hope we shall contribute to the general sense of the urgency of the solution there; but I am clear that we should not base our own policy on the assumption that we solve this entire sterling problem that way. I hope we shall not base our own policy on the assumption that we shall necessarily be included in these beneficial arrangements unless we continue to convince the world that we ourselves are taking steps to prevent a recurrence of the trouble.
We show a naïve unawareness of our position in the present world perspective if we imagine that, regardless of how we behave, we have a right to expect continual succour from the international community. After all, they have already advanced upwards of a billion of sterling. If this is so, then I submit that the conclusion follows that there is no way out of this situation but the hard way of earning more and so strengthening the capital position. In the last resort it is the current account which matters, both in relation to the strengthening of the debt position and in relation to the day-to-day confidence in sterling.
This view is surely amply supported by the evidence of the recent past. In the past, disproportionate as has been our short-term indebtedness, confidence in sterling has never been seriously shaken save when the current account was adverse or was expected to be adverse. Although one can think of all sorts of hideous possibilities, I see no reason to suppose that they need happen, given international good-will and good sense. In any case, I am sure that they are less likely to happen if we are once more paying out way and accumulating reasonable surpluses to pay our debts and strengthen our reserves.
For this reason, together with other speakers I welcome the continued efforts of the Government to put the economy once more on a paying basis. I hope it will not be thought by this that I am prepared to support every detail of Government policy. I adhere to my view that the present measures hit investment too
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hard and consumption and certain kinds of Government expenditure too little. I think some measures are too severe and some too easy, and I should be hard put to it to find an apologia for the selective employment tax. But the broad policy of adjusting aggregate expenditure to the volume of production and to our overseas obligations so as to avoid domestic inflation and external unbalance is surely the correct policy and one which deserves the support of all men of good will regardless of Party.
4.45 p.m.
VISCOUNT HALL: My Lords, let me say that unhappily I have no interest to declare in relation to the City of London, but I should like to conjoin with the remarks made here to-day of the vital importance of the City of London and the part it plays in its eminent position in the international financial field. As we have already found from our expert speakers here to-day, this topic is one of the most complex of the post-war era, and I want to reassure noble Lords that I do not wish to make it more complex by perhaps giving a rather lay view on certain of the complexities. However, to touch for a moment upon the past history of a chronic problem of all currencies—for sterling is not alone—I would say that the commonest fallacy has been to judge the health of the currency by looking only—and I emphasise "only"—at the visible trade account; that is, the monthly figures of imports and exports. Although the current account is an important element in sterling's overall position, it is not necessarily vital to the "above the line" balance of payments, nor does it always indicate a need for review of long-term national financial policies.
It is the capital account that calls for close and more consistent attention than has been paid to it among the financial fraternity to-day, quite simply because a surplus must be available to finance items of net long-term capital exports, in which the United Kingdom has yet a major role to play. Nevertheless, the international standing of sterling will not continue to meet the ad hoc difficulties unless these items in capital account are supported by a healthy day-to-day current account. Two of the seven post war sterling crises took place at a time when our export-import position (and,

931
therefore, the current account) was relatively favourable. In 1947, we suffered from an overseas sterling deficit plus the problems of convertibility. In 1957, we were hit by an external crisis of confidence following French devaluation, plus the prospect of revaluation of the German mark. The causes of both these crises were effectively out of our hands; indeed, four years later, in March, 1961, the appreciation of the Deutschmark produced a wave of speculation causing a tremendous capital outflow from this country, and the consequent depression of the overall balance of a basically strong United Kingdom balance of payments for that year.
The contagion of an overseas sterling area shortage of U.S. dollars caused a crisis in 1949. Adverse movements in terms of trade during the Korean war were also beyond our control, but events such as stock-piling after the relaxation of import controls in 1960 and the heavy steel imports of 1964 were well within our control. What then are the lessons to be learned from this mixed bag in relation to our international well-being at the present time, and in relation to the pitfalls of our economic road in the immediate future? For I can assure your Lordships that pitfalls will occur in both the current account and the reserve account, and in spite of the new reserves union.
One thing is certain. Monetary stability, as we have heard this afternoon, begins at home. The economic performance of the United Kingdom provides the only fundamental base for the international assessment of the reputation of sterling and of the international trading level resulting from sterling. Ipso facto rapid inflation here at home not only ravages the home economy but has a disastrous effect on the international level of the currency. I am aware that inflation exists abroad, too, but in this respect and certainly on the inflation front it is a race in which the slowest horse wins.
So where do we stand to-day, my Lords, in strengthening sterling from now? It is important that we give London, and I mean the City of London, all the support that we can in continuing to hold this country as one of the two main reserve centres in the world. First, I think it is important to be quite clear
932
that in this country we do not deserve the self-imposed label of second-grade exporters or international laggards; for, as the Chancellor recently declared, in 1965 our exports per head of the population were three times those of Japan and twice those of America. Our gross investment income from abroad has risen from £500 million annually in 1952 to the order of a billion pounds annually at the present time. In this country we spend roughly £10 per head annually in Government expenditure on military and aid programmes; that is against America's £11 per head and Germany's £3 per head. Sterling is willingly held as a reserve currency by foreign monetary authorities and represents the financing of a surplus or a deficit from the stand-point of the country holding them. So I, for one, do not think that for the present programmes here at home we owe the world any apology for those elements of sterling accounts over which we can exercise control. But, my Lords, the question is, can we as bankers to nearly half the world do more to contain those events which are largely beyond our control?
We in this country, as do people in many other countries, depend heavily upon the confidence in sterling, yet only two days ago I received a letter from an old friend, sophisticated in the field of international finance, with whom I have been discussing this problem for the past two years. He wrote:
"The uncertainty regarding sterling makes it difficult to visualise a loan in Australian currency against a sterling collateral, as both currencies may not be moving in sympathy in the case of a sterling devaluation which is quite likely."
LORD SHEPHERD: My Lords, may. I ask my noble friend—did he say that he thought a devaluation of sterling was likely? I just want to get that correct.
VISCOUNT HALL: My Lords, that is so, but it was not I who said it. May I repeat this? I received a letter from an old friend in the international field and he wrote:
"The uncertainty regarding sterling makes it difficult to visualise a loan in Australian currency against a sterling collateral, as both currencies may not be moving in sympathy in the case of a sterling devaluation which is quite likely."
The actions taken by the present Government and the level of unemployment we are prepared to tolerate provide more

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convincing evidence to gentlemen such as this of our political will not to devalue than public pronouncements from senior Ministers which, I venture to suggest, on this subject have in themselves been devalued over many years. So I hope that official comments will be withheld on this point for the duration of the present crisis. But something is required to contain two quite possible events that may occur in the near future, for in the future I foresee that sterling is going to be called on to play a larger international role than it ever has.
The increasingly determined efforts by America to put her payments in balance is draining dollars slowly out of the rest of the world, and so long as there is only one other acceptable commercial international currency—that is, sterling—then sterling must come into greater international use, even in spite of the reserves union. We all know that the redistribution of gold and the creation of reserves of U.S. dollars associated with the U.S. balance of payments deficit have in the past made it easier for us to achieve a balance-of-payments surplus. What if the United States brings its balance of payments into balance rapidly as the whole world has been so warned? Then the scope for surpluses outside the U.S. will be greatly narrowed and our own efforts necessarily all the more pertinent to a strong pound if the "above the line" balance-of-payment calculations are to provide realistic pointers to our future well-being.
Furthermore, there is mounting talk of an approach by Great Britain for entry into Europe. Britain's entry must be related to the strength of sterling and its repute as a reserve currency. The letter to which I earlier referred came from the capital of an E.E.C. country—not France—but as I outlined some months ago in your Lordships' House, entry into Europe, which I strongly endorse, is fraught with negotiating difficulty. For instance, we hear that France can be expected to make matters difficult by requesting that the sterling area be dissolved prior to Britain's entry, rather than gradually afterwards. This, together with the weekend action in Paris, seems to be the rumblings of an anatomy struggling with indigestible gold.
I believe that in sterling we have, not a liability, but a major asset in the
934
negotiations; for Europe is well aware of its lack both of an international currency and of an international capital market. Certainly, as we have heard this afternoon, no individual currency in the Continent of Europe has a hope of being a key currency like sterling. I go further, and prophesy that the European currencies that we are faced with to-day will not in our lifetime merge into a European Monetary Union, so that no base will be provided for a new international unit comparable with the standing of sterling.
These two impending circumstances in themselves, especially the importance of our E.E.C. entry negotiations, pretty well forbid us from allowing sterling to devalue, either for intrinsic reasons or from external pressures. The Government's recent action makes talk of devaluation seem like idle chatter. Even now I doubt that our 1949 devaluation was necessary. It was certainly not the nostrum it was then held out to be. Its value as a stimulant to exports was limited by the shortage of substantial spare capacity in British industry. Nor did it have any worthwhile effect on the commodity sales of the overseas sterling area, as the noble Lord, Lord Harlech, pointed out.
These arguments remain valid to-day, strongly reinforced by two others. Since 1949, Government spending has more than trebled, and the annual return we pay on foreign investments in the United Kingdom rose from £112 million in 1950 to £530 million in 1965. Devalue, and we impose upon ourselves far heavier burdens on these accounts than we are ever likely to gain as benefits on others.
Once having killed the spectre of devaluation, which (I mean the spectre) is pretty well with us now, we must effectively lay its shadows, for far too much speculative attention, at home and abroad, is focused upon the bank rate and its movement. Against this, speculative operators have the warm security of knowing that an all-out effort will always be made nationally—and, as we have recently seen, internationally—to maintain the pound/United States dollar rate, within the two cents range at as near 2·80 U.S. dollars as possible. What have the speculators to lose for their money? When the weather is good, they

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are in and when it is bad, they are out, and we lose heavily in subventing their gains.
I believe that there is a great deal to commend the idea that we should declare bank rate fixed for a given period of time, and I hope that the present rate will be declared to exist for at least a further term of months, irrespective of any public relations gestures which we may need at home, and which are likely to be misinterpreted abroad. Such a declaration will allow banks to discharge their market functions with some certainty of the limits beyond which the rates for money will probably not move and will provide them with a stronger base for looking more closely at the international sterling market.
At the same time, let us consider—and I would emphasise the word "consider"—the long-term objective of widening the limits inside which sterling is allowed to fluctuate on the exchanges. The two cent. range put speculators virtually on a winner-to-nothing, whenever there is a crisis of confidence. The gradual development of the hazard in the speculative market of a range of, say, 2·75 to 2·85 dollars—that is, a 10 cent range—gradually introduced over the next two or three years, would help to dispose of this very troublesome aspect of fine-weather friends for sterling. Also, it would reflect realistically moves in the relative prices of our imports and exports, and as the pound moves to full recovery, as I believe it soon will, its international level of strength will be all the more evident to the world as a future stable international banking currency.
Finally, my Lords, it is my view that we should reconsider the degree of encouragement we give to foreign investment in this country. The initial impact of all these investments is admittedly a windfall for the reserves, but an increasing encouragement of foreign investment here, combined with the discouragement of United Kingdom investment abroad, is, in my convinced mind, sowing disastrous seeds for the future. The servicing problems are giving us a continuous and serious drain on our current account, and it is upon the current account that we depend for our capital account. We cannot do both. I have maintained, and
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always shall, that battle-scarred sterling remains firmly a currency of prime inter national standing and does not recognise the word "devaluation". If we this afternoon are firm in our defence of her, we defend also the flag, both in areas where it has flown in the past and in areas where it has not flown, and the result can be nothing but complementary and parallel to the stringent efforts we are now all making here at home.
5.11 p.m.
VISCOUNT WATKINSON: My Lords, thanks to my noble friend Lord Aidington, we are this afternoon touching the heart of the matter. I think it has been extremely painful and frustrating to all of us, in whichever Party we may be, or in whichever Government we may serve, to see, time after time since the war, these crises forced upon us, by one cause or another often outside our control, at least to some extent. Along with my noble friend Lord Harloch I feel slightly despondent about the outlook for world trade, unless we can make rapid progress—and this seems unlikely—in the sphere of some new move towards better international liquidity.
As one noble Lord after another has said, we are moving into a difficult situation. Countries like the United States are, quite rightly, seeking to put their own balance of payments right, but perhaps not entirely counting the cost of this on the rest of the free world's trade pattern. So it seems to me that one may liken our position at the moment to the man running up the descending escalator. We have to run extremely hard to stand still, and if we relax our efforts for a moment we are inexorably carried down to the depths below again.
Nobody, however, is sorry for us—and there is no particular reason why they should be. As the noble Lord, Lord Robbins, said, we do not get any credit now for what we did during the war. Our external and internal debts and owings, so to speak, are matters that have largely arisen since the war. But I believe that our failure to rebuild our balances over the years since the war has been one of the great causes of the difficulties that we are facing now.
But I want for a short time, not to get into these long overall problems, so ably discussed by noble Lords who have

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spoken before me, but to turn for a moment to the short-term problem; be cause, as the noble Lord, Lord Robbins, said, it is the short term by which we are judged. If one takes what I might perhaps call "the poor man's view", the non-technical view, of this problem of sterling, then it is really our current sterling balances, our current balance of payments, which the average man takes as the criterion of the health of sterling.
There are, I am sure, many things that we ought to do in the long term. I hope that the Government—and I would entirely support them if they did—will try to produce some new initiative on international liquidity. But what I should like to deal with for a few moments is what could be done now to try to strengthen sterling, and give those of our overseas trading partners and customers a greater confidence in our currency. I think that the letter which the noble Lord who has just spoken read out represents a fairly general view of some of our overseas trading customers and partners on the stability of our country at the present time. If this is so—if it is the short-term problem that we have to examine, and if measures to improve the short term are of the most immediate importance—then I think one must raise this question of whether we are doing enough at the moment to improve our balance of payments by selling as much as we can overseas and by rebuilding our position overseas.
Again I agree with the noble Lord who has just spoken: it seems the wildest of folly to encourage a massive foreign investment in our own country while applying the maximum disincentive to our investments overseas, on which, incidentally, we are still drawing adequate returns, very often on relatively small capital injection.
Looking at these two problems, one is clearly exports and whether we could do more in the short term and long term; and the second is the problem perhaps better described as overseas trade and our overseas trading position. I do not in any sense want to argue whether or not the present measures produced by the Government were to cure self-inflicted wounds. They are very bold and painful measures, but I hope they will not lead to a belief that we can cure our troubles, reinforce sterling and keep it as a world
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trading currency, by continually cutting back. If this is the answer, then our country will be able to support only 30 million people and not 55 million. If we can face that, then we can support sterling by continually cutting back, but if not, we must seek expansion.
Here the answer lies, I think, in over seas earnings and direct exports. I wonder what we can do to put these on a firmer footing and thus buttress the short-term position of sterling. I would make only one or two suggestions which I hope might at least be looked at. I am not asking for immediate replies from the noble Lord who is to wind up the debate. These probably need to receive as long-term examination as the problems of liquidity and all the rest. But I must say again—and I do not want to add to the slight air of gloom which I feel rather lies over this debate—that if you take as an example our export position to the United States, with which I am somewhat intimately concerned, on the surface it looks good.
If I may here pay this tribute, that is certainly the greatest possible credit to those who formal the export team in the United States, from the Ambassador downwards, the businessmen who go out and all the rest. Great credit is due to all those concerned in that way, and very little to my Committee, which only tries to point the way. We are 28 per cent. up on our exports to the United States at this moment on last year, and last year was 23 per cent. up on the year before. We could have a very happy air of euphoria and say, "How wonderful!" But when you begin to examine these figures you find, for example, that the current figures owe a good deal to sales of B.A.C. 111 passenger aircraft—and they are expensive things. I do not see any more of these aircraft on American order books.
I must say to the Government that, when we look at this export problem, we must ensure that in the export mix there is a proper proportion of British capital goods. If it is really thought by the Government—I do not think it is—that you can make up for these capital goods in mini skirts or socks or other things, then they are deluding themselves. These are necessary, and they take a great deal of hard work; but unless we get the right mix and sell enough British capital

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goods abroad we cannot reinforce sterling by paying our way in the world. This is not an easy problem.
I hope that I have said enough to show that I do not think the export position is any more encouraging than the position of sterling, which we are examining this afternoon. Therefore, I should have thought that we should re-examine any possibility of reinforcing the position. I should like to draw attention to just a few things. I think that corporation tax should be modified to avoid penalising overseas earnings. I have nothing against corporation tax as a whole, but I think it would be better if it were modified to encourage more overseas investment. I can give chapter and verse of a company that will earn £2 million overseas this year for a capital investment of under £1 million; and they will bring nearly £1 million of that money home, and so will nearly recover their capital investment in one year. This is overseas investment which at the moment is penalised, anyway in some countries, by corporation tax.
LORD SHEPHERD: My Lords, I presume the noble Lord is referring in this particular case to investment in a non-sterling area?
VISCOUNT WATKINSON: I am really referring to investment in both sterling and non-sterling areas.
LORD SHEPHERD: I am quite sure that if that company wished to put that investment into the sterling area there would be no difficulty.
VISCOUNT WATKINSON: Far be it from me to say anything about my own interests, because this is not the place to do it, but if the noble Lord wants to pursue this matter I will give him chapter and verse and I will show him quite plainly that the present tax system which I have described is a considerable disincentive to my company and to many others, earning quite large sums of money overseas for very little direct capital investment, by licence arrangements and franchise arrangements. I do not want to pursue this now, but I will gladly do so if the noble Lord desires me to.
To return to what I was saying, I think S.E.T. should be scrapped or modified or changed into some form of
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tax which will offer a direct export re bate. For example, if it had been an added value tax I believe it is entirely within GATT to allow the added value tax to contain a direct export rebate. I must say frankly that there are a large number of exporters who will do this job because they think it is in the national interest (I hope I am included among them) but there are others who do not see why they should do it unless they can make something out of it. That is not an entirely improper point of view; therefore some direct export incentive must be provided in our taxation system, and provided fairly soon. As a measure of rough justice perhaps one could do something in a tax sense to help those who have to travel abroad. It is hard work and there is very little glamour in it.
The British National Export Council is exactly the right instrument to pro mote exports, and I think the Council is grateful to the Government for backing it very well in various direct ways, through the Board of Trade and so on; but I wonder whether the Government listen enough to the B.N.E.C. when it talks of certain broader Government policies which could help exports and at the moment are not being pursued. In other words, if we want to reinforce sterling in the short term the Government must apply a total export concept to all its major policies. If it does not, then it is not doing the best it can to support sterling in the short term.
Overseas expenditure should always be a tied loan; it should always be tied to exports. I think all Governments have been at fault in this in the past, but we ought to learn from our mistakes. We should not lend money abroad unless it is tied to British goods. We should remember that we are not in breach of GATT in anything we do if it is done for the direct purpose of reinforcing our currency and avoiding any possible devaluation, which I agree with all other noble Lords is now improper, impossible, undesirable and unlikely. I think we have this short-term problem, and I hope noble Lords will excuse me if I have strayed a little from the previous tenor of the debate to try to indicate some ways in which an immediate strengthening of sterling could be made. For example, if our export figures continue

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to show a good expansion in foreign markets, particularly in difficult markets like America, our foreign creditors take note of it and add their belief in sterling to them.
I would say to the Government—and I hope the noble Lord, Lord Williamson, an old friend and colleague of many years ago in the Ministry of Labour, will not feel I am saying the wrong thing—that they should not be afraid of the late Mr. Hugh Gaitskell's 3 per cent. unemployment figure, provided it is purely transitional. It is not something we seek, but something we may have to accept for a transitional period, as part of the operation to make ourselves more competitive and to meet our export targets. My Lords, I have tried to look at this very narrow aspect of our debate because I fear myself that the long term measures which my noble friend Lord Aldington so clearly and ably set out (and he has been followed by many other noble Lords) may not have time to reach their predestined conclusions unless it is seen in these next few months that the Government, apart from taking tough and brave measures, are also passing to a policy of planned and practical expansion which will lead to more exports, more business overseas of a profitable nature. Only if our creditors see this will they have complete confidence and trust in sterling in the short term as well as in the long term.
5.25 p.m.
LORD SHERFIELD: My Lords, one of my main reasons for intervening briefly in this debate is that I have been more or less involved in several of the nine principal exchange crises which have occurred since the war. I was present with Lord Franks and Lord Plowden, in a room in the British Embassy in Washington in 1949, when Mr. Ernest Bevin, in dressing gown and pyjamas, settled with Sir Stafford Cripps the rate of the devaluation of the pound; and I certainly should not wish any British Ministers or officials to go again through that experience and the subsequent explanations and discussions which followed it in and around the International Monetary Fund. I suppose we have learned a good deal more now about the problems involved since that evening in Washington seventeen years ago. Certainly there are more statistics, though
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some would say they are still not enough and others might say that we are not much the wiser.
At this stage of the evening it is not appropriate to hash over the arguments used by previous speakers, or to produce figures. It is only possible to indicate briefly a view on three or four points which have been discussed. The first, on which I fancy there is little disagreement, is that the present deflationary measures are absolutely necessary to protect the position of sterling, and that if they are maintained they should bring about a surplus in the balance of payments in the course of next year. If there is a lesson here from previous sterling crises it is that the restrictive measures have not been maintained sufficiently long, and that understandable pressures have forced Governments to permit expansion more or less prematurely. On this occasion I hope the Government will be able to resist these pressures for long enough—and in saying that I do not, of course, deny the force of the case for short-term constructive measures to which the noble Viscount, Lord Watkinson, has just referred.
The second point which has emerged from recent studies is the extent to which overseas and particularly defence expenditure has been a decisive element in our worsening external position in recent years. In the past I have had plenty of experience of the appalling difficulty of reconciling our obligations with our resources in the face of ever rising costs, and I think successive Governments have been perfectly justified in going to great lengths to carry out their obligations to Commonwealth countries in terms of defence and aid, and to our allies and the United Nations. It was clearly right, for example, to sustain the confrontation in South-East Asia, which seems to have accounted for a high percentage of the recent increase in defence expenditure, and in respect of which a reduction will now presumably be possible. I feel more strongly about the failure to resolve the question of the cost of our forces in Germany, which has for so long been an unacceptable drain. I do no more than mention it, as the Government seem to be pressing this matter as far as they can.
The complexity of the role of sterling in the world and the ramifications of its

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use are perhaps the greatest deterrent to the adoption of many of the specific proposals which have been made to alleviate its supposed troubles. The freezing or funding of the sterling balances and devaluation are frequently canvassed, but in my opinion their adoption would have effects quite different from those which might be predicted on theoretical grounds. They would shatter the confidence which is the basis of the strength of a reserve or indeed a trading currency and involve action by other countries which cannot be accurately foreseen. Moreover, I think there is some considerable doubt, as regards the sterling balances, whether they have been in recent years such a serious millstone around our necks. Their hard core, the balances held by the overseas sterling area, has changed in composition but has in the main remained remarkably stable in amount. I doubt whether their holders are likely to bring on a crisis by precipitating a run on the bank, and if, as may be the case, they are run down in the course of time by countries diversifying their reserves, I think we are entitled to hope that this will be done at such a rate as not to place an intolerable strain upon us, though of course that danger exists.
The strains which can be imposed by the running down of foreign balances held in London as banking deposits or short-term investments are a rather different matter. But the risk of sudden and massive withdrawals surely does not really exist when we are in surplus and living within our means. Meanwhile, a useful profit arises from those balances. As for devaluation, I only hope that the fact that it is now being more freely discussed means that there is less danger of our having to resort to it.
Turning to the wider field, there is the question of the price of gold and the question of liquidity. As regards the price of gold, there are many theoretical reasons for contemplating the step of raising its value, but there is one decisive practical argument against it, already given by the noble Lord, Lord Harlech—namely, that the United States would not agree. If the dollar were to get into real difficulties, then I believe that the United States might resort to another policy which would not benefit
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the main gold producers, holders or hoarders in the world, be they governmental or private. But as a matter of fact I do not consider the dollar will get into that kind of difficulty. Indeed, there is some reason to think that at the present time the United States balance of payments may be running near to equilibrium.
There used to be talk about the need for the pound to look the dollar in the face, but it is much more important that the two currencies should go hand-in-hand, as indeed they have been doing in the recent past. They depend on each other to a marked degree, and few things have been more encouraging in our chequered financial experience lately than the effective collaboration and mutual understanding between British and American Treasuries and between the Bank of England and the Federal Reserve Bank.
LORD BOOTHBY: My Lords, if my noble friend will forgive me, one hand has been giving an awful lot of money to the other.
LORD SHERFIELD: Nevertheless, they have been hand-in-hand. This leads me very briefly, because it has already been very fully covered, to the question of liquidity. I accept the view of the noble Lord, Lord Robbins, that there is no shortage of international liquidity at the moment, but this may not remain the case, and the noble Lord, Lord Harlech, put this position much more strongly. The French position that no negotiations or even serious discussions of means of increasing international liquidity are possible until American and British payments are in balance is difficult to follow, for it may then be rather late to decide upon and set up the necessary mechanisms. It would surely be more logical to have an agreed plan ready, no doubt preferably on the lines of the one referred to by the noble Earl, Lord Long ford. The French refusal, like their efforts to encourage funding of the sterling balances or talk about sterling devaluation or both, is a measure of the seeming desire of General de Gaulle to use for political ends such financial weapons as he can lay his hand on to weaken the Anglo-Saxon currencies, though those weapons might be thought to be rather double-edged. As the noble Earl, Lord Longford, indicated, almost

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any of the plans for improving international liquidity would involve an alteration, and I suppose some might say a diminution, of the position of sterling as a reserve currency. But this can surely be accepted in return for the stability and the scope for increasing world trade which an improved international monetary system would bring with it. Finally, I would certainly agree with what has been said about the need to put our balance of payments right before we can come to terms with the Common Market.
So, I find myself in very broad agreement with the general thesis expounded by the noble Lord, Lord Aldington, the noble Lord, Lord Robbins, and others who have spoken on similar lines. And I am not ashamed of saying "me, too" to those distinguished authorities. Sterling should not be the scapegoat for our present ills. Our balance of payments, especially on invisible account, depends on the maintenance of the value of sterling both as a reserve and as a trading currency. The benefits of the sterling system outweigh the disadvantages, and I suggest that the prime causes of our present difficulties lie elsewhere. To conclude, the measures of restriction now in force should right the balance of payments if they are adhered to long enough. If we can control inflation at home and can limit and then reduce our overseas expenditure we can run a surplus and there is no sterling problem. If we cannot, then I think that any or all of the prescriptions for dealing with the sterling problem, and other ills which will then beset us, will be palliatives insufficient to effect a cure.
5.38 p.m.
LORD FRASER OF LONSDALE: My Lords, we are indebted to the noble Lord, Lord Aldington, for having introduced this important subject, and I myself have benefited much from listening to him and to the noble Earl, Lord Longford. I feel somewhat of a layman amongst great experts, and offer my brief speech with some diffidence. But there are some thoughts which I wish to contribute for what they are worth, and if they are in some sense controversial I hope noble Lords will believe that they are sincerely thought by me and are made, as I believe, in the hope that they will be a contribution to thinking about this very important matter.
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The first thought is an ethical one, which arises out of the consideration that it is a very nice question how far you ought to ruin yourself on this earth in order to make sure, if you can, of being in line for a place in Heaven. We are supposed to have a great reputation for being an empirical country, a country that plays the hand the way it should be played; and it has been one of our characteristics and one of our sources of strength that in terms of history we have not been wholly unsuccessful. But there is growing up in this country now an adherence to what are called ideals or ideologies or, as I believe, woolly-headed thoughts, which lead us astray from our best judgment as to what is best for us and what is best for all whom we try to serve in the world. It is a good thing to wish to help the poor in your own country. It is a good thing to wish to help the poor in undeveloped or developing countries. But you cannot help either of them unless you have the strength to do it and we are rapidly losing our strength, not only in a material sense but the strength of our voice as well, because the voice of Britain is as nothing if Britain is known to be in a bad financial position. I am afraid that is what is generally believed of us.
Now I want to make some practical suggestions as to how we can help ourselves and thereby help all the good causes in the world that we want to help. In the course of what I will say, I shall talk about Africa, and more particularly South Africa, not to stray away from the strength of sterling, but rather to make suggestions as to ways in which we can strengthen sterling from parts of the world that I know particularly well and where, as your Lordships know, I have interests which are the reason for my knowing those parts so well.
We refuse to sell aeroplanes to South Africa. Those aeroplanes are primarily coastal defence aeroplanes. Of course it cannot be denied that they could he used for some other purposes, but that is what they are, and were; and they were linked up with the Simonstown Agreement. I will not develop this theme, but merely point out that we lose trade in aeroplanes by refusing to sell those weapons of war to the South Africans. We not only lose trade in aeroplanes, but we also lose trade in motor cars and

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in every other sphere. We may even lose a footing in Simonstown, which is of vital importance to us if we are to play any role in the Far East, and even any role in the Middle East, as those who served in the war or who were in public affairs, or indeed in military affairs, in the last twenty years will remember.
But in addition to this, we quarrel with Rhodesia in a vain attempt to secure what is, for all practical purposes, an unobtainable ideal. We thereby weaken ourselves and make ourselves less able to help our many friends throughout Africa, and indeed in other places in the world. In the process we ruin one of our best friends, Zambia. It strikes me that we are paying too dearly for the ideal, whatever the ideal may be. It also strikes me that there is a great hypocrisy in all this. Did we not supply arms to Russia? And did not Russia use them to subjugate the Baltic States? Who complains about that? Who takes it to The Hague or to New York, even to be considered? Did we not until recently, and perhaps do even now, supply arms to Cyprus, to Aden, to the three Territories which are part of Southern Africa and are adjacent to South Africa—arms for police purposes and arms for the maintenance of law and order? Do we not do that? I think so. Yet we do not supply them to South Africa.
South Africa says, "We want to be thought of as being part of the West." If there were a war between the West and Communism, South Africa would want to be on the side of the West, and we surely would want that important ally, for strategic reasons as well as for their innate strength and courage. But we do not hesitate to quarrel with them in peace time, and to hope that they will stand by us in war. In my judgment, not only is that crazy and unfaithful to old friends, but it also weakens sterling. What the bill must be for quarrelling with South Africa and Rhodesia, I do not know, but it must be hundreds of millions of pounds, and it must seriously have affected our balance-of-payments position as well.
I will now make three, I hope, positive suggestions whereby we can strengthen sterling. The first is that we sell arms or, if the Front Bench opposite are too squeamish to talk about "selling" arms,
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shall we say, "deal" in weapons, or perhaps defence equipment. I noticed the other days that the Front Bench speaker ran away from "selling arms "and talked about "defence equipment". Never mind what it is called. I suggest that we sell defence equipment to all nations with whom we are in diplomatic relations, rather than not sell to some of them for reasons that are not sound, not sensible and, as I have already said, in my judgment hypocritical. Thereby, by the sales that we make, we should help sterling. Lord Watkinson made an appeal for every conceivable legitimate and proper export. Is it wrong to sell arms to your friends? Somebody else will if you do not. If you lose all your trade all over the world, in penny numbers here, there and everywhere, you will soon be unable to sell anything to anybody.
My next suggestion is, I fear, going to be rather like a voice crying in the wilderness, perhaps the only voice, except that I did discern in Lord Sherfield's remarks, to which I listened with great interest, that he half, or a quarter, went along with the question of dealing with gold as one means of increasing liquidity. He said that there is one good reason why it should not be done—namely, that the Americans will not have it. I wonder whether that is a good reason. If lie had other reasons he did not give them to us. But let us deal with that one reason, that the Americans will not have it. My suggestion is that we talk to them now about raising the price of gold. If they will not do it, let us do it ourselves. I would put forward the argument, first, that the sterling area has in it more gold than any other part of the world. It therefore must benefit sterling. Secondly, history has shown us that wherever and whenever a new gold field has been found there has been an upsurge in world trade, currencies have become balanced. prosperity has risen and it has lasted for a long period. It is unlikely that a new gold field of any magnitude will now be found, but much gold could be mined if the price was realistic, and that gold would be included in the contribution that gold makes to liquidity.
Almost every speaker has said that the world lacks liquidity. So what are we doing about it? I am bound to say that the noble Earl, Lord Longford, made me

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wonder whether perhaps they are really getting to something in the I.M.F. and elsewhere now. Let us look at the history of this matter. Ever since Keynes, and probably long before him, the world has been looking for a symbol to take the place of gold, presumably a bit of paper. The importance of this bit of paper will be that everybody believes in it. But the truth is that nobody believes in policians anywhere. Nor do they believe in Treasuries—not even their own, let alone the other fellow's. Nothing is so good as gold; managed money is as distasteful and as suspect as managed news, and the world is becoming more and more full of both kinds. Gold alone commands the respect of all men; and even if a rise in the price of gold and an increase in the amount of gold are not the whole solution they may make some contribution towards solving the problem, and it seems to me to be better than a symbol.
Better still, rather than raise the price of gold, I should like to see the price of gold freed altogether from a fixed price. No doubt the price would rise at the moment, which no doubt would help Russia and also help South Africa. I should like briefly to examine those two propositions. The Americans would not like it if it helped Russia—Heaven knows why not. Nothing would seem to me to be more likely to help to contain Communism, and prevent it from creeping all over the world, than that Russia should prosper. Therefore if a rise in the price of gold would help Russia to prosper, as I think it would, then surely that would be meeting one of America's main aims, that of trying to contain Communism. If it helped South Africa, then South Africa would do more trade with the whole world, and that would bring benefit to Britain, especially to British shipping, insurance, and other British trade in every respect.
I have yet to learn that it is a good policy to cut off your nose to spite your face, and it seems to me that the idea that the price of gold cannot be raised because it would help the Russians or help the South Africans—and many people do not like Russia; and many others do not like South Africa—is one which is utterly selfish and foolish. The advantages of freeing gold, rather than its being fixed at a standard price,
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would probably result in its price rising now, but it would never again be blocked at a price which puts everything out of equilibrium. There would be automatic and gentle control, and self-adjustment of the strains between the currencies.
When I was a young man and read a little economics, I was told that in a world where trade and behaviour is generally free it is possible to tie up one or two elements of the economy, and that the others which are still free will bring about equilibrium. But we do not live in a world where trade and economic affairs are generally free. We live in a world in which they are tightly controlled; in which prices are controlled, dividends are to be controlled, wages are controlled; a world in which there are tariffs, trade quotas and all the rest of it. In addition, the relationship between the currencies is itself controlled. I was taught that where you try to apply controls to everything, unless you can control man completely, as they have tried to do in Russia (and very possibly some in the Party opposite are thinking about it; there, are signs that they are doing so) you cannot control all man's activities. If you try to do so, something will break. I fear that what will break will be the exchange. I would much rather see Britain take a course in which she tries to manage her affairs by sensibly making use of her enormous assets. There is all this gold in the sterling area which is not to be found elsewhere in the world in anything like that quantity. Thus she should help to make herself even stronger, so that her voice can be heard and so that she can help all those peoples of the world for whom we have a sense of trusteeship, history, and a sense of honour, as well as a great desire to be friends.
5.55 p.m.
LORD HANK EY: My Lords, I should like to join those who have thanked the noble Lord, Lord Aldington, for putting down this Motion on these very important issues. I regret that I have an engagement of many weeks' standing and may not be able to remain until the end of this debate. I warmly agree with what has been said about the importance to this country of sterling and the sterling area. At this time of night I will not try to repeat what has been said on the technical aspects, but I should like to say

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a few words about the broader and more fundamental aspects of the use of sterling in world trade, and to turn more to the future than to the past.
In 1965 we sent over 35 per cent. of our exports to the sterling area. By comparison we sent only 19 per cent. to the Common Market, and 14 per cent. to EFTA. This is hardly surprising. The Commonwealth contains 25 per cent. of the population of the world and it does 25 per cent. of world trade. We have a long association with the largest and most developed countries in the Commonwealth. If we join the Common Market, as I hope we shall, it is essential that we do not turn our back on the Commonwealth and the sterling area. This is essential not only for ourselves, but also for Europe, and for the Commonwealth. I should like to take these three elements in turn.
First, as regards ourselves, if, by joining the Common Market, we were to disrupt our trade with the sterling area we should certainly lose far more than we gained. The resulting unemployment here would not facilitate our entry into Europe; nor would it increase the popularity of the European idea with our own people. However, if we handle matters right, I see no reason why our entry into Europe should in fact disrupt our trade with the sterling area. The other members of the Common Market have carefully protected themselves against any such disruption in their own trade.
The French do not apply the common external tariff to their trade with former French territories, including Algeria, Morocco and Tunis. The Germans do not apply it to trade with Eastern Germany. The Dutch, the Belgians and the Italians have similar special arrangements. When some Europeans ask us to sign the Treaty of Rome on the dotted line, they expect us to endorse those pro visions; and so we shall, of course. But unless they deliberately want to keep us out, as General de Gaulle did in 1963, they will hardly ask us to do with 30 per cent. of our trade what they avoided doing with a smaller percentage of their own. They must fully realise that our own position requires analogous if not similar arrangements to be made. Let us not be under any illusion but that special
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arrangements of some sort or other are essential for our entry, if sterling is to maintain its position in the new Europe.
But I do not think this should be too difficult, because our European partners know that a prosperous and expanding United Kingdom economy and balance of payments are essential if we are to repay the enormous sums which they have lent us, and also because the continuance of trade and payments facilities with and for the overseas countries of the sterling area, as of the franc zone, is of great importance to the Common Market and also to EFTA. I should like to develop this point.
Hitler used to say that Germany was Ein Volk ohne Raum—a people without space. I venture to think that Europe without access to these vast overseas areas, with which we are all connected, will just be Viele Völker ohne Raum—a lot of peoples without space. We do not want to shut ourselves in, as the Germans felt shut in before the war. Nor, as a matter of fact, do most of the Europeans. We Europeans, and this goes for the whole of Europe, the Common Market, EFTA and all the rest, need these overseas countries as sources of raw materials, as markets and as areas in which to deploy our abundant European genius. And the less developed countries, both in the sterling area and in the franc zone and all the others, need Europe as a rich and growing market for their products, as a source of capital, machines, investment goods of all sorts, and ideas; and more especially as a source of technical help and friendly advice from countries which know their technical background and understand their ways.
In short, what I am saying is that an inward-looking Europe, without extensive continuing relations with the sterling area and other overseas countries, would not make a great deal of sense as an economic entity. We cannot use fully divide the world into bits. I hope, therefore, that the Common Market will avoid inward-looking tendencies and all philosophies of neo-isolationism. One hopes that the outward-looking trend will be firmly set by a successful Kennedy Round agreement, in spite of the great difficulties and delays which the Kennedy Round has hitherto met with. Meanwhile, it is interesting that some members of the Commonwealth are making, and are

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able to make, direct arrangements with the Common Market.
This brings me to the overseas sterling area and Commonwealth countries themselves, whose strong interest in the United Kingdom and Europe as a source of capital, technical assistance and ideas, and as a growing market I have already mentioned. The sterling area offers remarkable and highly-valued facilities to the member countries. It provides enormously valued and appreciated facilities for making current trade payments, for capital movements, short and long term, and for all the essential financial facilities on which modern trade and commerce depend. Anyone who does not believe this has only to look at the payments difficulties of many other overseas countries, or for that matter of countries behind the Iron Curtain.
It is a sad fact that the economic weakness or sluggishness of the United Kingdom has begun to undermine the value of the sterling area for the moment. We can no longer maintain our exports of capital to the developed areas like Australia and New Zealand. But this is not a reason for decrying the value of the sterling area system as a whole and when some extremists do so, they render a poor service to this country, to Europe itself and to the overseas countries. But it is true that the United Kingdom alone, even if it were more prosperous, could hardly continue to be an adequate economic base for the Commonwealth in this era of general economic expansion.
I believe that when the dust of Rhodesia settles it will be seen that the Commonwealth, with its new Secretariat in Marlborough House, has begun a new period of development. The amorphous organisation we had before—or the lack of it—was probably all right when there were only five or six Commonwealth countries, though I doubt even that. It is essential, anyhow, to have a proper organisation with the present membership of 28 countries. We have found at O.E.C.D., with 21 member countries, that you cannot get agreement to do any thing at all without long preparation. Whatever is proposed, someone is sure to get up and object, or make conditions, or have to refer home; and time must be taken to clear the objection or find a way round it. It requires much study and application at official levels before
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proposals can go to Ministers. Therefore, to deal with this, a continuing organisation is essential, and at last we have it. The Common Market also has at Brussels an excellent system of consultation with its associated overseas countries with a very powerful technical secretariat.
It follows from what I have said, I think, that when we join Europe we must preserve in some form or other the essential facilities of the sterling area. That is one of the best contributions we can make to Europe and to the world. The sterling area provides to some degree a system of shared liquidity, of aiding each other with our reserves. But we have to recognise that our own reserves, which have been obstinately stationary for years, are getting increasingly slender or inadequate to finance the growing trade of the sterling area. With the aid of the International Monetary Fund we can no doubt hope to make the grade for some time yet.
It is not, I believe, just a coincidence that, with present convertibility, the two countries with the most highly-developed capital markets—namely, the United Kingdom and the United States—feel the most strain on their balance of payments and on their reserves of gold and foreign exchange. It is very good to hear that the French are considering re-creating their formerly very active capital market. I hope that other developed countries will do the same. There is a growing problem here, because the amount of trade to be financed is increasing continually and so are the amounts of money for transfer or awaiting employment and liable to move at short notice; in particular, the sterling and dollar balances, Euro-dollars and so on. This situation is going to get more awkward and more complicated as trade increases, as the world gets richer, and as this and future Development Decades continue.
To-day we have heard a good deal about the sterling balances. I must say that I have frequently been annoyed when serving abroad in the Foreign Service to hear Continental economists speak as if the sterling and dollar balances were in themselves hopelessly unsound or undesirable. Someone has to perform a banking function for the whole world, and I have not met anyone who mistrusted a

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bank for receiving large deposits. More often criticism is directed at a bank for giving too large advances at the expense of its liquidity, or for borrowing short and lending long. I entirely agree with what the noble Lord, Lord Robbins, said in this general connection, and that we have no alternative but to rectify our current balance, even if we have to do it the hard way. I think we also have to recognise that in the sterling area—and also outside it—there is probably an optimum relationship between the current level of our own trade, the size of our reserves and the amount of funds, short and long term, that we can safely allow to swing to and fro across the exchanges.
I should like to give an example to illustrate this. The Atlantic and sterling area economy is like a truck driver with a rather "ropey" old truck and a huge tank of liquid behind, The truck bumps and swings across potholes in the bad road, and the windscreen is dirty so that the driver cannot see very much of the road ahead. Consequently, the liquid in his tank swings to and fro and is in danger of upsetting the whole truck. What can be done to make the poor fellow's journey less hazardous? One very old-fashioned French member of the board of the company which owns the truck wants to make the cargo solid; in real terms, to make payments in gold. I think that is a really bothersome solution, and I am surprised that the noble Lord, Lord Fraser of Lonsdale, should favour it.
A better answer has been to put baffle-plates in the tank, for the liquid can then move freely to and fro, though it cannot all move in the same direction at the same moment. These "baffle-plates", in real terms, are the remaining restrictions on capital movements which prevent too much liquidity moving all at once. They are agreed internationally and are contained in the O.E.C.D. Code of Capital Movements. In the United Kingdom we have had to maintain, and even increase, the size of the baffle-plates. In the United States they have had to do the same, but on a voluntary basis.
But, my Lords, we want something better than restrictions. Eventually, I feel sure, there will have to be a better or
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at least an improved world-wide system for regulating or creating reserves and liquidity, in which the developed and also the underdeveloped countries will all join. It will be sure to affect or include the sterling area. Perhaps our entry into Europe will be the occasion for a meeting of minds over this problem. It cannot for very long be left to chance. I warmly agree with what the noble Lord, Lord Harlech, and also the noble Lord, Lord Sherfield, said in this connection. I am quite sure that the principles of the sterling area will be of inestimable benefit as guidance in this connection, more especially for making the most fertile relationship between the developed and the underdeveloped countries.
I have one final thought on all this. The developed countries in O.E.C.D. are never tired of reminding each other of the duties of surplus and deficit countries towards each other in the state of economic interdependence in which we now find ourselves. We tell each other that the deficit countries must keep their internal economies in order and not create difficulty for the others or export inflationary tendencies to other countries. The surplus countries, on their side, must not by their internal policies make it harder for others to pay them; they must pursue generous and liberal trade policies, and be prepared to help others by lending.
Now Europe as a whole, and O.E.C.D. as a whole, has a large balance-of-payments surplus with the rest of the world. We must apply to the rest of the world the advice which we give to each other. We must be willing to buy their products. And that goes for manufactures as well as raw materials. We must also be willing to lend and to facilitate a solution of their payments problems. In the payments field the sterling area provides the background and mechanisms which are necessary, economically and in equity, to the underdeveloped countries. When we enter the Common Market it is essential that we carry something like the sterling area with us, or that something similar survives, to enable the less developed countries to face their payments problems.
My Lords, I hope that we shall be able to adopt as our motto the old French saying, "Plus ça change, plus c'est la mëme

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chose." The sterling area is probably going to be more necessary in the future than it ever was before.
6.14 p.m.
LORD BARNBY: My Lords, I am glad that I put my name down to speak to-day because it gives me the opportunity to congratulate my noble friend who has just sat down. Over a period of two decades he had the good fortune to be an observer of an interesting scene, and we appreciate hearing from him. I remember very well his last contribution, which whetted my appetite for what we should hear to-day. We have not been disappointed.
After the notable contributions which have been made this afternoon, it is not my intention to digress from the appeal for short speeches late in the debate. Like everybody else in the House, I am grateful to the noble Lord, Lord Aldington, for initiating this debate. All of us who had the chance to come into contact with him when he was a Minister realised then that in whatever field of activity he worked he would be successful. Now, having had ministerial responsibility, he brings with him great experience in the City and in business which qualifies him to initiate this debate. I thought he made a rather interesting, veiled indictment of the Government when he said that, whatever might be the causes of the weaknesses in sterling, they certainly were not caused by the sterling balances in London. He emphasised the size of these sterling balances and their vulnerability should their holders, because of anxiety, draw them out. He also spoke a great deal about the tidying-up of these balances.
My Lords, I come straight to one of the three points I particularly want to make, which deals with the leads and lags of sterling, to which the noble Lord, Lord Aldington, made reference. If I remember rightly, he said that if in either case the adverse feelings of operators were turned against sterling it would in one week produce a disadvantage to sterling of £110 million. I have just come back from Canada. There, I met a good friend of mine who is a very large importer into Canada. He said, "In the past I have been in the habit of paying for everything I got from Britain within 30 days. To-day, I buy nothing from my suppliers unless it is on a six-month bill". I
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naturally asked why, and he said, "Because, of course, I have no confidence that sterling will not be devalued within some measurable time." Again I asked why, and he said, "Because of the disregard by the present Government of certain principles which I have—the market price economy, the profit motive—and I am against nationalisation, too." I suppose that man might be representative of a great number of people overseas, and if many thought like him it might have a substantial effect upon sterling.
Like everybody else, I think that stopping inflation at home is the best way to avoid adverse feelings about sterling. Certainly the aggregate of the measures taken by the Government ought to correct things; but my surprise—I cannot resist saying this—is that the aggregate of those measures has not brought about much more effective results by now. I remember 1920 very vividly, and I remember 1931 very vividly. The medicine took effect very much more quickly then than it is doing now, and one might have expected a picture of handsome unemployment by this time. But what hypocrisy there is when aplying measures like these! I am not accusing the Government here, but in other circles there seems to be a ready expression of surprise that there will be great unemployment. I find myself completely unable to understand it.
The problem we are all talking about is the balance of payments, but the interesting thing is that a close examination seems to show that in 1964 the trouble lay not in the private sector but in the public sector. The deficit was undoubtedly due to Government overseas spending because, taking one year with another, the private sector has always more than paid its way. This deficit of £750 million-odd was more than covered by the United Kingdom's drawings from the I.M.F. Had these facts been made clear, and had the Government been able to halt internal inflation, there might have been no cause for the recent crisis.
We certainly had a most impressive contribution to our debate by the noble Lord, Lord Robbins. Incidentally one of the reasons why I want to be brief is that I do not want to stand between the noble Lord, Lord Boothby, and the House, for

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he always make a contribution which is interesting not only in fact but even more so in presentation. The noble Lord, Lord Robbins, emphasised that the Bretton Woods Agreement was out of date and that there was nothing in its place. Surely at that time the U.S.A. wanted to see the break-up of the Empire, as it then was, the break-up of sterling influence, and so on. Now the U.S.A. is obviously behind the wish to make sterling strong. My noble Deputy Leader, Lord Harlech, made a strong appeal for a new international review. That, surely, is what we want.
Britain, with her wide experience, can surely make a great contribution in solving these matters. The present weakness of sterling appears to arise from the mismanagement of the home economy. The erosion of the purchasing power of the pound is understood to be proceeding at a quicker pace than that of currencies of other countries with which we compete. My Lords, I will conclude with Lord Aldington's remark, that when confidence in the pound wavers the balances are imperilled.
6.24 p.m.
LORD FRANCIS-WILLIAMS: My Lords, I must apologise for the fact that an official meeting that I could not escape kept me from the opening part of this debate. I am extremely sorry to have missed Lord Aldington's opening speech. I always listen with the greatest interest to what he says, and to what other noble Lords say. Therefore if, in what I hope will be rather a brief intervention, I touch on matters which have already been touched upon, I can only apologise.
Some 35 years ago, when I was much younger, slimmer and a great deal more optimistic than I now am, I combined with a friend of mine, a writer on foreign affairs. Mr. W. N. Ewer, in writing a pamphlet called The World Muddle. It seemed to us an appropriate title at that time and, on the whole, it seems more appropriate now. We were much more optimistic than perhaps either of us would be now; and we concluded, writing after the breakdown of the gold standard in 1931 and the world-wide economic crisis, that at least it was probable that out of all this the world had learned, and could be expected to devise an international exchange system that would be
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more helpful in avoiding future crises. We even optimistically put forward some suggested alternatives which have since become somewhat more respectable than they were then.
But, in fact, although the old gold standard in its impurity has gone from us in this country, all we have done is to retain it at one remove in a gold exchange standard. We do not have gold behind the counter but have it as a brooding presence: not "Gold the father" but "Gold the holy ghost". It is a thought which I leave with your Lordships that if we had found gold instead of gas under the North Sea our exchange crisis would immediately have been over. The guarantee of a plentiful supply of this metal (whose only real value, so far as I am concerned, is that wedding rings can be made from it) would have brought not only every "gnome" in Zurich but every currency speculator right across the world rushing back to the pound. Because so long as it is believed that your currency can be changed for gold at a fixed price or, with a gold exchange standard, into another currency, the dollar, which can, at the last resort, be so exchanged, you are all right; if not, then not.
I do not want to pretend that our balance of payments is not important. Of course it is. We must do, as we are doing, everything we can to get it right. But the plain fact remains that so long as we continue to try to operate an international reserve currency based ultimately on gold, then even the most minimal and temporary imbalance of our international exchange position is capable of magnifying a minor exchange problem into a major economic crisis.
This is not matter of theory; it is a matter of historical record. It happened in the 'twenties; it happened in 1931; it is happening now. Under an inter national monetary system which in my view might have been deliberately designed to make every problem, the cost of maintaining the pound as a reserve currency has repeatedly to be paid for in the standard of living of ordinary people and the common-sense developments of sound business management. This is what always happens; and this, of course, is what is happening again.
When William Jennings Bryan stumped the United States appealing to the people

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of America not to allow humanity to be crucified on a cross of gold, no doubt he talked a good deal of nonsense. He was the mouthpiece of a silver lobby that would have made things no better, and might even have made them worse. But almost against his judgment, he uttered a profound truth. It is time not only that demagogic politicians but intelligent economists, businessmen and bankers all over the world rallied to that cry—and, to be fair, they are now doing so in increasing numbers. The academic and professional case for replacing the gold exchange standard, by which the pound, along with other reserve currencies, is imprisoned, is so strong that it is now practically impossible to find a reputable witness to defend the present system.
Not only does this gold exchange system make periodic exchange crises in evitable; but we have surely had enough of them to convince us (or to convince anybody but the economically illiterate) that that is so. The system makes it certain that the world will suffer over a period from a congenital lack of monetary liquidity. The noble Lord, Lord Robbins, holds the view that there is no lack of liquidity at the present time. I do not think anybody would agree with him on that; but t think even more—
LORD ROBBINS: My Lords, with respect, I submitted that there had not been a lack of liquidity since the war. I said I could easily conceive a lack of liquidity emerging quite shortly. But my contention was that it is not very relevant to talk about a lack of liquidity in a period of rapidly advancing prices which has been the case in nearly every great country of the world since the conclusion of hostilities.
LORD FRANCIS-WILLIAMS: I must apologise. Unfortunately, I came in during the middle of the noble Lord's speech. Perhaps I did not get the whole of his meaning; but I think it cannot be doubted that this present system makes it practically inevitable that there will be an insufficient volume of credit which is regularly available for developing countries. I am glad to see that this was emphasised in the report of the group of eminent people appointed to examine the matter by the United Nations Conference on Trade and Development, of which the noble Lord,
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Lord Kahn, was one of the distinguished members.
I believe that we—and by "we" I mean not only this country but the world as a whole—are trying to operate a system of international exchange on a base which is far too small. It is a remarkable fact that the price of gold in dollars, which is the foundation of the international monetary exchange system, has not changed since the 'thirties, although the average price of commodities, which re presents real wealth and genuine supply and demand, has risen two-and-a-half times in that period.
This has already been mentioned; and there are many who argue in the light of this—as the noble Lord, Lord Fraser of Lonsdale, did—that what is needed is simply to raise the price of gold. "Stick with gold", they say in effect, "but let's pretend it has a quite different value". As I say, this, and the objections to it, have been dealt with here by the noble Lord, Lord Harlech, the noble Lord, Lord Sherfield, and others; but so illogical are the procedures by which we govern our monetary affairs at present that an arbitrary rise in the price of gold might well, by raising the value of gold reserves, increase world liquidity, stimulate economic activity, improve world trade, increase the flow of capital and financial aid to under developed countries—and all by putting a different value on every ounce of a useless metal hidden away in vaults in the ground. What a way to run a railroad! But it would also quite arbitrarily devalue currencies and haphazardly present gold holders with capital gains out of all proportion to their deserts or the real needs of world economy.
I suggest—and I am not by any means alone in suggesting this—that even if it were done, even if there were these immediate results, it would offer no permanent solution to the problems of inter national exchange. We should merely confirm ourselves in our monetary in sanity. We should be back again at the same place on the golden roundabout in a few years' time. The time has surely come to move towards a more intelligent system of ensuring that world liquidity—the volume of internationally accept able currency and credit needed to finance world trade and development—shall be regularly adjusted according to a

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sensible appraisal of the world's needs. I think that Britain, as the guardian of one of the two great reserve currencies of the world, with a knowledge and experience of international banking and investment scarcely equalled and certainly not rivalled anywhere, should take a firm and positive lead in bringing this about.
Practically everyone who has studied the matter at all agrees that such a reform is now needed. So do most political leaders. President Johnson has said so; Mr. Macmillan said so; Mr. Maudling has said so; Mr. Wilson has said so. So, I dare say, has Mr. Heath—although he says so much on so many things that I am not always able to keep up with him. Even President de Gaulle has said so. But nothing practical gets done. Of course there are difficulties, and General de Gaulle is one of them. In this, as in so much else, he thinks primarily of French prestige. He wants to demote the dollar and the pound from their position as the chief international trading currencies, and he will not be happy with anything that does not have this among its prime objectives. But if de Gaulle will not co-operate except on terms unacceptable to everyone else, let us proceed without him, at least in plotting the course we could take in the future.
I know that the International Monetary Fund and the Group of Ten have both been studying this, and that is all to the good. But where is the "head of steam"; where is the real energy behind trying to do something? I believe that this is one of the most vital matters in the world to-day. It is on this that we should be having summit conferences. There are, of course, several alternatives to the present system which are worth some examination. There are the Stamp Plan, the Triffin Plan, the commodity index plan and several others. I do not want to seek to discriminate between them here and now. All I say is that it is time they were brought out from the seclusion of academic lecture halls and turned into the raw material of serious and positive examination at the highest political levels.
So far as Britain is concerned, as I have said, we have manifestly, as the first step, to get our balance-of-payments
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position right. We cannot go preaching reform, as if we are doing so as part of a rescue operation, from a weak position. We have first to show ourselves strong, and that is what I believe we are now beginning to do, and what we shall show ourselves to be before very long. But we ought to be planning ahead in this matter with a much greater drive and intensity than we seem to be doing; and in the course of it I suggest that we probably ought to be taking a fresh look at the whole structure of many of our traditional City institutions and their place in the modem world. I do not doubt that they have as great a place in the future as they have had in the past, but it may well be, in many ways, in a very different form from that of the past.
I do not doubt that sterling as a currency of international trade, backed by the immense and accumulated experience of the City and industry in these matters, will continue to have a great part to play in the world, whatever addition to, or substitution for, sterling is found in a new international re serve currency. What I do say is that we can no longer continue to pretend that we can operate reserve currency functions alone, or even in conjunction with the United States, any more than we can afford to police the world, either alone or in conjunction with the U.S.A. It is an international job, and we must give a definite lead in making it international, if we do not want to run ourselves into repeated bankruptcy.
As I say—and this is my concluding thought—we may well need to take a fresh look at the institutions of the City, and the relationship of finance and banking internationally in the process of doing so. I think that the City needs to re-examine itself and to be examined, just as much as a great deal of the rest of our economic structure does. I suggest that there is a good case for a new Committee on Finance and Industry like the extremely valuable Macmillan Committee in the 1930s. The Macmillan Committee may not have produced any thing very concrete, but it threw light in a great many dark places, and it started a good deal of thinking about problems. I think that is what we need to do now. I do not think that there is any need for the City to be apprehensive about

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such a Committee. I belong to a profession, or an industry, that has been the subject of two Royal Commissions in the space of sixteen years since the end of the war. I think that is a record.
LORD ROBBINS: My Lords, may I inquire whether the noble Lord dismisses altogether the value of the labours of the Radcliffe Committee which quite recently did exactly what he is now suggesting?
LORD FRANCIS-WILLIAMS: My Lords, I agree that the work of the Radcliffe Committee was very valuable, but I think that we want something with a much broader base, a Committee which is looking at the whole financial operations of institutions of this country in relationship to their place in what I conceive will be—and in many ways ought to become—a quite different international pattern, and certainly a different inter national exchange pattern. I think that we need intense rethinking upon that. I believe that this question of considering the place of sterling as an exchange currency in the world, and of our place as a nation in the world in regard to the whole of monetary movements of the future, is one of the most urgent that faces us. There is a great deal of thinking about it. What I find lacking is a sense of political urgency on the part of the Government and of political Parties about the need to do it as a first priority of thinking and planning. My Lords, I believe that it must be done as a first priority, and I do not believe that we have a great deal of time to waste.
6.41 p.m.
LORD BOOTHBY: My Lords, a few years ago I attended a concert at which the conductor was an old friend of mine, the late Sir Thomas Beecham. The first part of the concert was devoted exclusively to works of Wagner, and at the end of the interval, as was his custom, Sir Thomas said a few words to the audience. He said, "Ladies and gentle men, this has been pretty heavy slogging. Now let us have some lollipops". I do not think that any noble Lord would suggest that this afternoon has been any thing but pretty heavy slogging; and I only wish that I could give your Lord ships a "lollipop". I will try to brighten it a bit, but I rise without any sense of exhilaration at all. One of the reasons is that I find myself in agreement with
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almost everything that has been said, and that always depresses me.
I should like to echo the thanks which every noble Lord has expressed to the noble Lord, Lord Aldington, for raising this subject, which, as the noble Lord, Lord Harlech, said, is certainly the most important that now confronts us. But do not let us delude ourselves. It is not a gay subject. There is nothing we can laugh at. I have been playing the record I am about to play again for the last forty years. Few people have ever been anxious to listen to it. It is now very old and scratched, and I can hardly blame those who want to turn it off now forever; but it remains a fine record, true and justified over and over again by the events of those forty years.
Posterity will marvel at our abject failure to deal adequately with monetary problems or to evolve a rational monetary system from the end of the First World War right down to the present day. I am afraid that my uncle the late Lord Cunliffe, who was Governor of the Bank of England during the First World War, started it. By recommending that we should return to the gold standard at the pre-war parity of exchange, he set us on the deflationary course which we pursued relentlessly for ten years and which all but ruined British industry and agriculture and kept between 1½ and 3 million men on the dole. But Lord Cunliffe had not at his disposal the rich fund of knowledge which emerged after his time.
The nearest approach we ever got to a rational currency system and one which would have given us a good start was the Genoa Conference of 1922, which, in a series of currency resolutions—and I am going to read them out because the Treasury may read them to morrow and I do not suppose that they have read them before—recommended, first, a conference of central banks of issue; secondly, the subsequent practice of continuous co-operation between them; thirdly, a monetary convention based on a gold exchange standard; fourthly, restriction of the circulation of gold; fifthly, a redistribution of gold reserves; and, sixthly, the regulation of credit with a view not only to maintaining currencies at par with one another, but also to preventing undue fluctuations in the purchasing power of gold.

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This was far in advance of anything we have achieved since. I am proud to say that I have in my possession, thanks to my friend, Mr. Siepmann, of the Bank of England, the original draft of the Genoa Resolutions, drafted by the late Sir Basil Blackett.
The Genoa Conference crashed for political reasons. The Conference of the central banks was never held, and the currency resolutions were never put into operation. Rathenau went home to be assassinated, and Lloyd George came home to be overthrown. And the reins of the Bank of England fell into the hands of Montagu Norman, with hot support from the Treasury.
I do not need to tell the noble Lord, Lord Francis-Williams, about Montagu Norman. But he was a far greater sinner than my uncle, because he had at his disposal the theories evolved by the greatest economist of our time—perhaps of all time—John Maynard Keynes. He could not answer him before the Macmillan Committee on currency, but contented himself by saying, with an almost sublime arrogance, "The dogs bark, but the caravan passes on". That was the attitude of the Governor of the Bank of England—in perpetuity, at that time. Keynes was defeated before the war by the Bank of England and the Treasury.
He was defeated again at Bretton Woods in 1945, when he tried to give the International Monetary Fund adequate liquid reserves, and was prevented from doing so by Vinson and Harry Dexter White. I must say to my noble friend Lord Robbins that I think he was a bit smug about Bretton Woods—I am not saying for a moment because he took part in it. I think he made out that it was a very splendid affair, and that it has kept us going during the last twenty years jolly well. That was not the view of Keynes at the time.
LORD ROBBINS: My Lords, would the noble Lord be kind enough to give me the reference to that utterance.
LORD BOOTHBY: My Lords, I think my noble friend said that clearly. He suggested that Bretton Woods had been extremely satisfactory and worked extremely well, and that we are not suffer-
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ing now from any international illiquidity, though it might happen. I think that the noble Lord will find that he said it.
LORD ROBBINS: My Lords, with the deepest respect, I did say that I did not think the world had suffered from a lack of liquidity in the years since the war, but my thoughts on Bretton Woods are considerably more complicated than the noble Lord is giving your Lordships' House to believe.
LORD BOOTHBY: In that case, I can only say that I am delighted to hear it. The more complex they are, the happier I shall be. We are now suffering from international illiquidity. As the noble Lord, Lord Harlech, said, the danger is going to be much greater if we do not do something about it; but the whole drain on dollars, the whole outflow of dollars and sterling, is caused by lack of international liquidity. Dollars and sterling have had to do what I.M.F. should be doing, and that is causing a great strain. The time is now coming—and I am sure that here I carry the noble Lord with me—when the United States and ourselves are bound to say, "We have had enough of this; we cannot spare any more." Liquidity is drying up. It is not going to dry up—it is drying up now, and we have been able to save it only by placing this tremendous strain on both the dollar and sterling.
I say that we are back to "square one". These days, I date all my letters "B.K."—that is, "Before Keynes". For that is where we are. Interest rates, both here and on the Continent of Europe, are far too high. This in itself throttles back production and productive investment, at home and overseas. Here I should like to say how impressed I was with what the noble Viscount, Lord Watkinson, said about overseas investment. He was right about the way the Government are penalising companies which are earning money overseas. I am not talking about private investment in dollar securities, but about companies which are being grossly penalised; and often their earnings are enormous by comparison with the initial capital outlay. I beg the noble Lord, Lord Shepherd, to make a specific answer to this question and tell us that Her Majesty's Government will examine carefully this question of companies which have invested overseas, not

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simply to make a capital profit or to speculate, but to earn money overseas, which is brought back to this country and which makes a tremendous difference to our balance of payments.
This is the penalty exacted by the attempt to retain sterling as an international reserve currency, at a fixed rate of exchange, without any cash reserves of our own, and with inadequate inter national liquid reserves. The noble Lord, Lord Robbins, was perfectly right to draw attention to the short-term liabilities of this country, and to remind us that any bank that has enormous short-term liabilities and no cash reserves is liable, sooner or later, to get into trouble. I have known one or two cases of banks getting into trouble for that reason: they lend, and then they cannot pay. That is bad for any bank.
To put it bluntly, we are now heading for a severe deflation by order of the Treasury; and as the noble Lord, Lord Harlech, said, this could turn into a major world recession. Squeezes, freezes, inordinately high taxation on earned incomes and earnings generally, a clampdown on any increase in wages or dividends—these are the only remedies the Treasury can think of to deal with a cost inflation which has risen in the last three years from 2½ per cent. to 6 per cent.
The results stare us in the face. A decline in productive investment, and with it a temporary cessation of economic growth, and very little prospect of the streamlining and modernisation of British industry—which, incidentally, was one of the main planks of the Labour Party at the last Election.
Gone with the wind are the carefully negotiated agreements to relate wages to productivity. The prospect of many more was rosy. Frank Cousins himself was an ardent supporter of this. But for the time being, with the present freeze, nothing can be done to relate wages to productivity, which was one of the most hopeful signs in the British economy six months ago. Have the Treasury, I sometimes ask myself, forgotten Keynes's famous basic theories: that the rate of interest by itself is powerless to equilibrate savings and investment; that savings are governed by total community income; and, perhaps most important,
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that investment is governed by the expectation of profit? I do not think the Treasury have ever remembered anything that Keynes has said.
I am reminded, when I survey this rather gloomy scene, of a debate in another place in October, 1957. I made a speech. It was, as the noble Lord, Lord Barnby, said, very good indeed. I said:
"The right honourable Member for Huyton"—
that is the present Prime Minister—
"asked, towards the end of his speech, who was the eminence grise behind the economic policy of the Government. He thought that some strange figure, shrouded in the recesses of the Treasury, or perhaps not in the Treasury at all, might be directing the economic policy of the Government."
On the face of it, this is a more plausible argument to-day than it was then. How ever, I pass over that and content myself with saying that I think I was probably right when I went on to say:
"Let me assure the right honourable gentle man that it is just the dear old Treasury, and nobody else. I hope that the Chancellor of the Exchequer will not take umbrage if I say that sometimes when I lie awake at night, I think what a good Chancellor I would have been myself; and when I do I feel quite sorry for the country. Then I remember something that was told to me by a high Treasury official thirty years ago"
when I was Parliamentary Private Secretary to the Chancellor of the Exchequer and incidentally, that high Treasury official was the late Sir James Grigg, who was then Principal Private Secretary.
"He said to me—'There is something which you, as a young, promising politician' "—
because that is what I once was—
"ought to know. There is only one man who has ever made the Treasury do what it did not want to do, and that was Lloyd George. And let me tell you something else; there will never be another'. It is all very well for the right honourable Member for Huyton to laugh, but I understand that he has designs on that office. He may well find himself in the same position, and, if so, I will be very interested to see what happens. I am inclined to think it will be the same old story."—[OFFICIAL REPORT, Commons, Vol. 575, col. 263;30/10/57.]
Well, my Lords, that was nine years ago. It is still the same old story, and the scratched record still goes on playing, in the somewhat forlorn hope that someone one day will hear it.

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What is to be done? I can tell the Government in a few crisp sentences what they should do, and after that I will sit down. First of all, they really must stop the Treasury clobbering industry blindly every time we have a balance-of-payments crisis, which is all they can think of. Mentally they cannot get beyond that. Secondly, I think the Government should tackle what has been called the "structural" deficit in the balance of payments. This can be done in four ways. First of all, it can be done by reducing Government expenditure, particularly on overseas defence. I see the difficulties, especially in the recent "confrontation" between Malaysia and Indonesia: but I agree with those who think that we cannot maintain these forces in Germany against a menace which at the moment is non-existent. Generally, we cannot act any longer as a policeman of the world.
Secondly, I think they can do much more in the way of direct measures to encourage exports, as the noble Viscount, Lord Watkinson, so rightly said. Thirdly, I think there should be a more serious attempt, by means of voluntary agreement, to put an end to restrictive practices, on both sides of industry. And, finally, I feel that we can put a far greater curb on unnecessary imports to this country, which are already running wildly in excess of our requirements. This can be done quite legally by quotas and restrictions. A 10 per cent. general all-round tax on imports was, first of all, against the rules of GATT, and, secondly, has not turned out to be very effective. All this would undoubtedly increase the demand for domestic products, but not at the cost of a further deterioration in our balance of payments. I still maintain that, in the long run, deflation is death. Growth is essential. And this can be attained and retained only by increased production and increased productivity.
Finally, as every speaker this afternoon has said, let the Government tackle the basic illness at its source and not the symptoms to which it gives rise. I still have no doubt in my own mind that it is the lack of adequate liquid reserves to sustain the potential volume of world production and trade, that is at the root of the trouble. I think the noble Lord, Lord Harlech, put his finger right on the spot about this. I agree with every other
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speaker that unilateral devaluation of the pound is absolutely ruled out. It would do no permanent good. In any case, we cannot do it, because we should be defaulting on the enormous debts that we have incurred. And I think the Government are to be congratulated most sincerely on holding firm against this.
I have just one further point. Two alternatives remain. The first is to in crease the liquid reserves of the Inter national Monetary Fund, turning it at the same time into a Central Bank for central banks, with similar powers of credit creation and contraction, as was recommended by the Radcliffe Committee, and also by various chairmen of banks—Lord Franks, Lord Monckton of Brenchley, and others; and I think probably it is also the considered opinion of the City of London. The second alternative—and it has been raised by the noble Lord, Lord Fraser of Lonsdale—is to increase the price of gold as the best starting point for international liquidity reform. And we ought to bear in mind that this is quite different from unilateral devaluation. There is a growing volume of opinion which is rather turning to the second view, if we do not get any further on the first.
I see the Government's difficulties to the first course—increasing the liquid reserves of the International Monetary Fund. There is great opposition in France, and considerable opposition in Germany and other Western European countries, who have substantial stocks of gold. There is also great opposition in the United States to an increase in the price of gold, as the noble Lords, Lord Harlech and Lord Sherfield, have said. At the moment we are afraid of both France and the United States. I think it is a fear that, in one case or the other, must be overcome. We can say to France: "We are going to try to negotiate, with or without you, an increase in the liquid reserves of the I.M.F., and we hope that if you do not feel able to participate now you will come along later"; or we can say to Washington—and I do not think I should capitulate quite to the extent that the Ambassadors have done: "We are sorry, but we do not seem to be making any headway at all in the International Monetary Fund. We are going to join our Continental neighbours and raise the price of gold."

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I prefer the first alternative; but, in default of international agreement to re form the I.M.F. pretty quickly, of which there is at present no sign, I would re value gold, as a short-term rather than a long-term solution. It is significant that when the President of the Board of Trade remarked in Australia the other day that although
"a theoretical, technical case could certainly be made out for a gold price increase"
it was ruled out by
"practical political considerations".
He was immediately "slapped down" by the Chancellor of the Exchequer, and he hastened to say that he had not meant it at all.
This is the measure of our fear of the United State of America—the fear, I suppose, of almost anyone who is heavily in debt, as we are to them. But we should bear in mind sometimes that, with out consulting anybody else at all, at the beginning of the 1930s President Roosevelt stopped the greatest world rescession that has ever taken place by revaluing the price of gold just on his own. The New Deal followed—and it was interesting and important and did a lot—but the thing that stopped the recession was the unilateral revaluation of gold by the United States. As a matter of fact, I think that this reluctance to revalue gold by the United States is dictated by political prejudice against the Soviet Union and South Africa, though it is, I believe, trivial in comparison with the issues at stake.
One cannot ignore gold. It remains the only medium of international exchange which commands universal and total trust, and seems likely to go on doing so for centuries to come, just as it has done for centuries past. The noble Lord, Lord Francis-Williams, may not like gold. I take a different view. The more gold I have, the happier I am. Those who talk about the demonetisation of gold are living in "Cloud Cuckoo-land." Nor do I think that a revaluation of gold would lead to increased hoarding. On the contrary, I believe it would lead to considerable dis-hoarding, caused by the desire to take profits and to reinvest them in productive industry which would once again hold out the prospect of profit. At least it would give us all a breathing space for a number of years during which
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we might be able to work out a better international monetary system, such as the noble Earl, Lord Longford, and the Government desire.
The fact remains that the dollar of 1966 is not the dollar of 1934 (I take that from Sir Frederick Leith-Ross: it is a plagiarism; it is not my own remark but it is a very good remark: and I repeat it), and by seeking to maintain the price of gold at the ludicrous level fixed at Bretton Woods we have greatly reduced the volume of international liquidity. As the noble Lord, Lord Francis-Williams, said, gold is the only commodity in the world which has not risen in price by 2½ per cent.—
SEVERAL NOBLE LORDS: Two and a half times.
LORD BOOTHBY: Yes, 2½ times. I wish to God it was 2½ per cent., but it is 2½ times! My Lords, I have finished on the subject of gold, but I feel quite strongly about it, and I feel that we ought not to chuck it out of the window just because Washington tells us to. We have got to be tough with somebody; it is about time the Government decided whom they are going to be tough with and then be tough.
Your Lordships will not expect me to sit down without saying a word or two about Europe. I am more firmly convinced than ever that our only hope for the future lies in and within Europe. I was absolutely furious when the noble Lord, Lord Aldington, "cribbed" from Hermann Abs the quotation which I was about to make. I have it all pasted in here, and it is so good that I am going to read it again. He said:
"It is, I believe, apparent from all this that if the United Kingdom joins the E.E.C. sterling will have a chance to preserve, and indeed strengthen, its position in Europe and in World trade. It does not seem appropriate to rely solely on the dollar as the key currency in world trade, and no currency on the European continent stands a chance in the longer run of being a key currency. Therefore I feel it would be in the interest of the Continent if there were such a propitious development for sterling."
So I think we have nothing to be afraid of, so far as sterling is concerned, as an international trading currency, if we enter Europe.
Where do the Government stand in all this? Where does the Prime Minister

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stand? Is he a Brown and Jenkins man, or a Jay and Peart man? That is what I should like to know. We cannot be sure. He blows hot and he blows cold, and he does not seem to have quite made up his mind yet. Perhaps I have made it up for him this evening. I realise the difficulties and the dilemmas confronting the Government, but there are moments when it seems to me that Her Majesty's Government are not sure what they are doing, where they want to go, where in fact they are going, or what the hell they are going to do when they get there. That thought crosses my mind from time to time.
As Leader of the Opposition the Prime Minister demanded, in the House of Commons, an international conference on monetary policy and the international monetary system at the top level. Many of us on both sides of the House supported him, but he has not demanded it since he became Prime Minister. He had better get along, and do what he wanted to do. In his remarkable speech to the Economic Club of New York he said that if we failed to solve this monetary problem we should bring upon our heads the curses of future generations. All I say, my Lords, is let him act in that spirit!
7.5 p.m.
LORD SHEPHERD: My Lords, I am quite sure the House will agree that the noble Lord, Lord Boothby, has ended a fascinating debate in a fascinating way. He and other noble Lords have thanked the noble Lord, Lord Aldington, for introducing this Motion. I do not intend to be a hypocrite; I could not find it in my heart to thank him, at least to-night, in the sense that I have to wind up on what is obviously a difficult, complex and, I think it will be generally recognised. sensitive subject. I have to wind it up in the presence of the noble Lord, Lord Cobbold, for twelve years a very distinguished Governor of the Bank of England; three Ambassadors; the noble Lord, Lord Aldington, a City prince; my noble friend Lord Francis-Williams, a City editor, and, of course, the noble Lord, Lord Boothby.
LORD BOOTHBY: What is the noble Lord going to call me?
LORD SHEPHERD: I think I should need to have notice of that question. The only connection I think there is between the noble Lord, Lord Cobbold, and my self is that we both have the honour to serve in Her Majesty's Household.
It is a very difficult task which con fronts me, but I am reassured to this extent: that over the week-end I have been reading a large number of very interesting tracts and articles on the problems of sterling and economics. Each of them alone is utterly conclusive, and then one lays the articles side by side to see whether the conclusions agree. My Lords, it is true that if there were ten economists in a room there would be nine different answers. We have had an example of that this afternoon with the chit-chat that has been going on between the noble Lord, Lord Boothby—although I am not quite sure whether the noble Lord, Lord Robbins would regard the noble Lord, Lord Boothby as an economist.
LORD BOOTHBY: He would be wrong if he did not.
LORD SHEPHERD: Anyway it is a very difficult subject. But one thing is quite clear, and that is that the question which the noble Lord, Lord Aldington, set out to ask this House, whether it was their view that sterling has an important and overwhelming role in world trade, and whether the United Kingdom itself gains from its position within the sterling area, I think has been answered in the affirmative completely. I have not heard any dissenting voice in this matter. The figures that have been given, of 30 per cent. of the world trade and some £4,000 million held by overseas countries, I think is sufficient evidence.
But, my Lords, I think we should not forget, and there were times when, as a layman, I thought we were forgetting, that currency is not a god. Currency is merely an agency, a sort of oil, through which trade can function. It is not by accident that the City of London has banking. Banking flowed from the establishment in the very early days of the commodity markets, and the Industrial Revolution, in which we ourselves led the world; and as a natural consequence with banking came insurance and shipping. Trade undoubtedly requires a recognised currency, and sterling is

977
certainly one of the major currencies; and it is true that as trade increases so will the need for increased liquidity of the currencies capable of providing an easy flow of trade.
I also thought that this debate overlooked the composition and the development of the sterling area, because although the United Kingdom is a linchpin to the sterling area, the sterling area itself has undergone quite considerable changes since it came into prominence. I suppose its prestige was at its highest prior to 1914 when Australia, New Zealand and South Africa were the independent members within it. The others were mainly colonial or dependent territories. During 1939 to 1945 we saw a considerable change, in the sense that it became a very closely knit organism, and so it was during the post-war years, due to the shortage of dollars, and fairly tight controls were required. Since then colonial territories have become independent countries with a desire for an increased freedom to trade, and one of the most significant figures, if one were to look at one's papers, is the increased trade of the overseas sterling area with the non-sterling area. It is the same way in regard to increased investment. This is due to urgency for industrialisation. We see not only a major increase in non-sterling area capital coming into the overseas sterling area but following that by increased imports.
Countries have also changed in their attitude to reserves. I am thinking in particular of Malaya, which has now decided to hold part of its reserves in gold and dollars. This is a natural consequence. If you are a member of the I.M.F. it is natural that you should wish to hold some of your reserves yourself. I do not think we should criticise here, but recognise that the area is changing. But the basic features of the sterling area remain, and it is extraordinary to remember that the sterling area is not held together by any formal treaty; there is no international agreement. We are held together by common interest. I should have thought those words were enough to indicate the importance of sterling, not only to the sterling area but to the rest of the world, since the sterling area is more and more trading with the outside or non-sterling area.
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Therefore, we can agree with the two propositions that the noble Lord, Lord Aldington, put before us. I confirm what my noble friend the Leader of the House said in his own speech about the role of the City of London. They play a very important part in our invisible earnings. The noble Lord, Lord Watkinson, thought that we were being rather foolish in putting restraints upon the City in terms of overseas investment. We had a very long debate many months ago, and if I remember rightly I said to him on that occasion that the Government were not opposed to overseas investment. We recognise that it makes an important contribution, not only to this country and its exports but also overseas. But in the circumstances that faced us and still face us there must be a degree of restraint in overseas investment. A general criterion was laid down, that investment could be made where there was a favourable return, and in particular an early return on income. I personally hope that the time will come, and I hope it will not be too far distant, when we shall be able to recommence, particularly within the sterling area, the free flow of capital.
LORD BOOTHBY: My Lords, will the noble Lord forgive me for one moment? It is the companies that have already invested overseas that are being discriminated against at the moment, and we want to see them taken care of.
LORD SHEPHERD: This is connected with the corporation tax, a subject which the noble Lord, Lord Watkinson, raised. I will not avoid it, but I will come to it in a moment. When one considers the sums that are available for investment, as I am sure the noble Lord, Lord Boothby, will agree with me, one realises that British industry itself at this stage is in urgent need of new monies for new forms of investment, for new machinery from which only productivity can arise. We have this difficult balancing problem: where best will our money help the general economy of this country?
The noble Lord, Lord Robbins, drew our attention to the short-term liabilities as compared with our short-term assets. It is perfectly true that our liabilities, if we think in terms of the sterling balances, are very large, particularly in comparison with the gold and dollar reserves. But

979
I think it is right to say, and I think the noble Lord, Lord Robbins, himself said, that the sterling balances that we had after the war have changed completely. The sterling balances of to-day are of quite a different character. I believe if one were to carry out a major research into our present sterling balances one would find that they were in no way volatile; a very large proportion of them are firmly entrenched within the sterling area economy. When we are thinking of our sterling balances from the point of view of the amount of money that is likely to move very quickly one way across the exchange, the figures, in terms of the overall balances available, are relatively small.
I think it is agreed to-day that the gold and dollar reserves and the international agreements which this Government have been able to negotiate with the I.M.F., through the Basle Agreements and quite a number of others, ensure that there are sufficient reserves, substantial reserves, to deal with any immediate pressures upon the pound. Therefore, I should like, before leaving this point, to deal with the letter which the noble Viscount, Lord Hall, received. I think one thing came out very clearly in this debate: that there was no member who spoke who did not say that devaluation was not only undesirable but was unnecessary. I think this should be said as often as possible. I am not one who is opposed to a discussion of devaluation: it depends how you approach the subject and the information that you have. I often hear of the rumours that float around the City of London, that someone has died or someone has resigned, and shares seem to drop or move merely on rumour. I should have no objection to discussion on devaluation if it were discussed in relation to fact. I believe that the reserves that are available for the short-term pressures are quite substantial and will meet any immediate pressure.
However, the position is that this country is not a debtor nation. There are many who think that we are in debt. Too many politicians talk this way for political advantage. They speak of this country being in debt; yet we are a creditor nation. We have increased our creditor position since the war. From the figures that I have ascertained, we emerged from the war with about £350 million of
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liabilities, and with about an equivalent amount in long-term assets overseas, to which of course, in addition, we could put the gold and dollar reserves. To-day, from the figures that I have been given, our overall assets represent a figure of some £16,000 million whereas our long term liabilities are some £13,000 million. I believe that this sum includes the figures of our borrowing during the past few years. Therefore, from those figures, if one were to debate this matter, one could see quite clearly that this country was in a position to sustain the pound sterling.
But I agree with the noble Lord, Lord Robbins, that our real problem is that our immediate reserves are too uncomfortable in relation to the types of pressure that occasionally arise. This is why it is of vital importance that we should move into surplus and increase our reserves. I am glad that the noble Lord, Lord Robbins, agreed with the measures taken, although he was not prepared to pat us on the back all the way. In broad principle, he agreed with what we were doing in this matter. It may be of interest to the House to know that the Commonwealth Ministers, meeting in Canada in September, took the view that the whole of the sterling area should be moving into surplus during 1967. This would have a significant effect upon our reserves.
I should like to come to the matter of liquidity which the noble Lord, Lord Harlech, raised. I thought his was one of the best speeches that I have heard him make in this House. He has made many good speeches, but to-day's was one of his best. One of his friends said, "Well, at least I understood it." I think that is a great compliment to him. Not only the noble Lord, Lord Harlech, and the noble Viscount, Lord Watkinson, but I believe the noble Lord, Lord Boothby, spoke with a sense of despondency about world trade, and the shortage of liquidity. It is perfectly true that if the two reserve currencies of the United States and the United Kingdom succeed in correcting their balance of payments, in the long run world trade will feel its consequences. But in the immediate future it does not seem that there is likely to be a drastic curtailment in world trade, provided that the momentum of expansion is maintained in continental Europe.

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This is the point that I would make to the noble Lord, Lord Harlech. If the countries which have a substantial reserve, and which have for years been in substantial surplus, were prepared to run their economies in deficit for a period, this would give us a period of adjustment and would provide the necessary liquidity for us to continue our negotiations towards finding a solution or a new asset. But this is not an easy problem. As the noble Lord, Lord Boothby, well knows, there is a dispute between the monetary authorities of Western Europe and the United States with the French. We take the view that liquidity may be shortby 1970. The French take the opposite view, and believe that there is too much liquidity at the moment.
Certainly from what I have read, I believe that there is no immediate likelihood of a depression. I should like to correct the impression that the noble Lord, Lord Harlech, may have given, that we are walking into an immediate depression. If one were to look merely at the expansion in trade between the sterling area and the non-sterling area one would see a quite significant increase in that trade. I do not think we should over-emphasise the difficulty, but we should recognise that steps will have to be taken by 1970 to find a new currency. But I think one can say that, even if you were able to obtain an agreement for a new asset, perhaps attached to the I.M.F., in the early days at least this will not replace the pound or the dollar as a trading currency. It is more likely to be an asset which Governments can move to other Governments or to central banks. Therefore, even if you were able to obtain a new asset, it is quite clear that there will be a continuing need for sterling and the dollar.
I should now like to come to the point made by the noble Lords, Lord Sherfield, Lord Harlech, Lord Fraser of Lonsdale, and others, in regard to the price of gold. Undoubtedly, you would increase liquidity if you were to increase the price of gold. But—and it is no good avoiding it—the United States Government would recognise this, as it would be, as a deflation of the dollar. I well believe—and I do not think I shall be contradicted in this belief—that if the dollar were de valued, so would all the other currencies
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be devalued. What would be the consequences of that? Those countries which are already strong and rich would gain, and the countries which are weak and poor would suffer. Many of those countries are to be found within the Commonwealth. For that reason, therefore, Her Majesty's Government share the view of the United States Government that the raising of the price of gold is not the right way of going about it.
The noble Lord, Lord Boothby, may be right in what he says because initially it may be of some help, but if we were to agree to this it would stop all forms of negotiation or possible agreement towards finding a new asset. If you had found an increased liquidity all the Governments would say, "Why proceed with this? It is too difficult." The noble Lord, Lord Boothby, has enough experience of many Governments to know that difficult problems are pushed away if there is an excuse for doing so. Therefore, I do not believe that there is anything we should do in regard to the price of gold.
Again, I can hold out no encouragement to my noble friend Lord Hall regarding his suggestion that we should increase the exchange rate margins. It is perfectly true that speculators might get hurt, but so also would responsible traders. They would be just as exposed, perhaps in practice even more exposed, because they would not know all the things that are going on in the market, unlike the racketeers, who might use this new rate for their own advantage.
To the noble Lord, Lord Gladwyn, I would say that the Government do not believe that the role of sterling as a reserve currency or as a trading currency is any bar to our entry into the Common Market. As I understand it, that point was never raised as an issue during the previous negotiations. I would point out to the noble Lord, Lord Boothby, who seems to he rather worried about where exactly my right honourable friend the Prime Minister stands in this matter, that the noble Lord may not have to wait a great deal of time. I think I am authorised to say that a statement will be made fairly shortly and that the noble Lord will be satisfied with that.
LORD BOOTHBY: Thank you very much.
LORD SHEPHERD: The noble Viscount, Lord Watkinson, drew our attention to the importance of exports. No one can speak with greater authority on this subject than the noble Viscount. The Government have already done a considerable amount in regard to incentives. It is difficult to see what more we can do without infringing GATT. We have to consider also EFTA, and the rules and regulations of that Association in regard to export incentives are a good deal tougher.
As to the matter of the selective employment tax, the Government have always recognised that this was a blunt instrument and that in course of time it would be refined. I appreciate that it is the City services, particularly those in the export field, which are affected; but, on the other hand, I think noble Lords will agree that the premiums, the extra sums available to manufacturers, will improve their position in the field of industrial development, and in particular in regard to production for exports. The matter of the selective employment tax will be looked at, as in fact the Chancellor of the Exchequer promised to do after a period has elapsed to see how the tax was working. He also said that consideration would be given to the operation of the corporation tax. The noble Viscount, Lord Watkinson, said that he himself was not opposed to the general principle of the corporation tax. It is a new tax. We have to learn from it, and no doubt it, too, will be refined in course of time.
The noble Lords, Lord Harlech, Lord Robbins and many others, drew our attention to Government expenditure and its effect upon the balance of payments. The first part of Government expenditure which hits one, of course, is defence expenditure. The present Government realised this from the day we took office, and set out to make a big defence review. We were bitterly criticised because we decided to contain defence expenditure within £2,000 million. This meant considerable cuts. It does not lie in the mouth of the noble Lord, Lord Harlech, or his supporters to attack us on this, because I well remember a Wednesday just before the General Election when the noble Lord's friends went into the Division Lobby against the Government
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for an increased aircraft carrier expenditure. We appreciate the problems involved, but we cannot just unilaterally make cuts. Therefore, a matter of this sort takes time. I repeat that the Government are determined to reduce as speedily as possible overseas expenditure which, in their view, is unnecessary. But we must not do it unilaterally. We must not leave countries exposed until alternative arrangements are made.
I agree with practically every noble Lord who has spoken in the view that we must deal with our balance-of-payments problem. We made considerable progress in 1965, following the mammoth deficit of £761 million in 1964. We did not do quite as well this year because of a number of factors, but at least we had the guts to take unpopular measures. One of the surprising things is that those unpopular measures are not only being accepted by the public but being approved by them. It may be that we shall have to do more in the way of public relations when we move into the next six months or the next twelve months, in relation to increased productivity and new arrangements in production. I would say to the noble Lord, Lord Boothby, that there is nothing during this period which will, or which should, prevent negotiation on productivity agreements. Productivity agreements are not made in a week or in a month. They take a great deal of time and, as we have made quite clear, in future such productivity agreements should be costed so that not only is there a clear advantage to the worker and to management but an advantage to the general public, the consumer. It will take time for that to be done. Therefore I say to Lord Boothby that there is no reason why these negotiations should not start and continue.
To the noble Lord, Lord Barnby, may I say that the "handsome unemployment" he expected has come in some districts. It is not the size we saw in 1960and 1961. This is largely due to the fact that the Government measures were designed to cushion the development areas, quite unlike previous deflationary measures. The immediate impact, of course, is to be seen in the Midlands. We do not wish to see unemployment as such—it is merely wasted

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assets. Initially, what we want to see, to use a crude phrase of the Prime Minister's, is a "shake-out" We want men to leave industries which most observers would say are overmanned and to move out to those industries which are in growing need of labour. But one cannot move those men just like that; it takes time. Some of them will have to be retrained; some will have to move. The Government recognise this, and we are doing what we can in the Ministry of Labour to speed up the assimilation of these workers, but it will not be easy. Undoubtedly, there will for a time be higher unemployment figures than we in our heart of hearts should like to see. That is the explanation I would give to Lord Barnby in regard to" handsome unemployment".
LORD BARNBY: My Lords, would the noble Lord permit me to say that surely the influence of unemployment under conditions of intentional deflationary measures must extend to every board room in the country. It is the atmosphere of thought which, at least in 1920 and 1931, developed throughout the country as a result of the intentional action of those who imposed the restrictive measures.
LORD SHEPHERD: My Lords, this is not 1931;this is 1966. What we deliberately did—and I hope that we have succeeded: there is every appearance that we have—was to cushion those development areas where we wish to see industrial development in the future.
I should like to conclude by saying this. We must—and I believe we shall, because the climate now exists in this country—stimulate our industries, our management and our workers to a different approach. We can get higher productivity from that, since investment will flow from that stimulus. If we then go out deliberately for exports (and I think it was the noble Viscount, Lord Watkinson, who said that it is not to-day a question of price in the export field; it is a question of delivery, which is very true, as I found from my own experience recently in Canada), and if we have a sense of discipline in the field of imports and try to hold them down, we should then be able to move into surplus. After
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a period of being consistently in surplus, I do not believe that the pound sterling will then be under threat. But the pound will not, by itself, sustain trade. What we have to find is an agreed basis, from all the major trading and industrial Powers, as to the best method of financing and expanding world trade, not just for the benefit of Europe or America, but for the benefit of the emerging countries of Africa and Asia.
7.42 p.m.
LORD ALDINGTON: My Lords, I should like very briefly to thank the noble Lord who has just sat down for the trouble he has taken in winding-up what I think has been an interesting and useful debate and, certainly for one who sought to start just such a debate, a real reward. I should also like to thank the noble Earl the Leader of the House for the interesting statement which he made almost at the start of the debate, after the noble Lord, Lord Gladwyn, had been good enough to support me and to widen a little the ambit of the debate. I must, if I may, with humility, add a special word of thanks and tribute to my noble friend my Deputy Leader, Lord Harlech, for his speech. I think that those of us who have listened to him in this House have come to expect from him speeches of the highest standard—and this one was even higher than that.
Finally, may I thank the Cross Benches and their leader, my noble friend Lord Robbins, for the contribution which he has made, based on his wisdom and the experience he has gained over the years. I feel extremely flattered that a man whom I regard as the most distinguished economic thinker in the country should have taken the trouble to intervene in this debate. So, in short, I should like to thank all noble Lords who have taken part in the debate, and as my contribution I should now like to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

EXPIRING LAWS CONTINUANCE BILL
Brought from the Commons; read 1a, and to be printed.
  BRITISH ARMY OF THE RHINE
  BRITISH ARMY OF THE RHINE