Sitting of 1 June 1967

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

  MALTA (GIFT OF A BOOKCASE)
  The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address, as follows:
  I have received your Address praying that I will give directions for the presentation on behalf of your House of a bookcase containing Parliamentary and constitutional reference books to the House of Representatives of Malta and assuring Me that you will make good the expenses attending the same.
  It gave Me the greatest pleasure to learn that your House desires to make such a presentation and I will gladly give directions for carrying your proposal into effect.

  ZAMBIA (GIFT OF A SPEAKER'S CHAIR)
  The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address, as follows:
  I have received your Address praying that I will give directions for the presentation on behalf of your House of a Speaker's Chair to the National Assembly of Zambia and assuring Me that you will make good the expenses attending the same.
  It gave Me the greatest pleasure to learn that your House desires to make such a presentation and I will gladly give directions for carrying your proposal into effect.

PRIVATE BUSINESS
  GUILDFORD CORPORATION BILL
  Read the Third time and passed.
  MANCHESTER CORPORATION BILL
  As amended, considered; to be read the Third time.
  BRIGHTON MARINA BILL
  Consideration deferred till Thursday next.
ORAL ANSWERS TO QUESTIONS
  POST OFFICE

    Special Stamp Issues
    Mr. Stodartasked the Postmaster-General how long in advance of the issue of a special postage stamp he decides upon the subject of it.
    The Postmaster-General (Mr. Edward Short): There is no firm rule about this, but I followed normal practice when I announced the 1967 special stamp programme towards the end of 1966.
    Mr. Stodart: Is the right hon. Gentleman aware that in order to avoid the repetition of the situation whereby Edinburgh did not get a stamp celebrating its bicentenary this year, I am firing a warning shot across his bows to remind him that the Commonwealth Games are being held in Edinburgh in 1970?

    Vale of Evesham
    Sir G. Nabarroasked the Postmaster-General whether he is aware of unsatisfactory postal deliveries, notably from London, in the Vale of Evesham; and why mail posted in London up to 5 p.m. is not carried on the new 8.15 p.m. fast passenger train from Paddington to Evesham, for distribution from the Evesham head post office, serving a radius of 15 miles, and delivery first post the following morning.
    The Assistant Postmaster-General (Mr. Joseph Slater): My right hon. Friend fully explained this matter in his letter

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    of 12th May to the hon. Gentleman. As regards the use of the 8.15 p.m. train for mail posted in London up to 5 p.m., we cannot in this interval collect, date stamp, sort and make up into despatches the large number of items posted in the late afternoon and early evening.
    Sir G. Nabarro: Is the hon. Gentleman aware that that is a terrible answer? What is the use of British Railways inaugurating magnificent new fast, direct services, London-Oxford-Evesham-Worcester-Malvern-Hereford, if the Post Office, another nationalised industry, will not use them for mails posted before 5 p.m. in London for delivery first mail in the morning in Worcestershire?
    Mr. Slater: We have made a detailed examination of this position, spread over a month. We are not treating it lightly. That examination showed that a few mails were liable to suffer delay in transit. By rerouting we have reduced the delay.

    Grantown-on-Spey and Nethy Bridge
    Mr. G. Campbellasked the Postmaster-General whether he proposes to continue the system under which letters and parcels posted for delivery between Grantown-on-Spey and Nethy Bridge, a distance of six miles, have to be transported to Perth and back, a distance of approximately 184 miles.
    Mr. Joseph Slater: Yes, Sir, for the reason which I explained in my letter to the hon. Gentleman. If the hon. Gentleman has evidence of any specific cases of delay, I shall be glad to look into them.
    Mr. Campbell: Can the hon. Gentleman explain why this journey is really necessary? Can he say whether it is entirely by road or by rail also? If it is by rail, neither of the two places any longer has a railway. If by road, the journey goes through the Drumochter Pass twice, where the road is sometimes closed by snow in the winter.
    Mr. Slater: The hon. Gentleman knows from our correspondence that the number of items posted in Grantown-on-Spey is so small that it is more convenient for us to send them with other mail to Perth and to handle them there with the rest of the mail for Nethy Bridge.

    Warley (Postal Names)
    Mr. Archerasked the Postmaster-General whether he will reconsider his decision to discontinue the use of the names Old Hill and Blackheath for postal purposes, before the name of Warley.
    Mr. Joseph Slater: My right hon. Friend has written to my hon. Friend to explain the reasons for this decision; but further discussions about the matter are being arranged with the local authority.
    Mr. Archer: I appreciate the reasons intimated to me by my hon. Friend, and I am grateful for that Answer. However, will my hon. Friend bear in mind that the names Old Hill and Blackheath are known wherever in the world men study engineering and technological projects? If those names disappear from our letter headings, the export drive may suffer a serious diminution.
    Mr. Slater: I have already said that we are arranging for a meeting with the local authority. Our regional director in Birmingham is making the arrangements.

    London Postal District
    Mr. Berryasked the Postmaster-General why an increasingly large number of letters posted in the London postal district on Friday evenings before the last post and addressed to other parts of the district are not reaching their destinations until the following Monday morning.
    Mr. Joseph Slater: I am sorry that, due to heavy traffic and a shortage of staff, a very small percentage of such letters are not delivered until Monday. The position is, however, better than it was, and we are doing all we can to improve it still further.
    Mr. Berry: Does the Minister not agree that it is very important that, in view of the reduction in the number of deliveries in the London area, letters should arrive on a Saturday morning for those who have business to attend to? Is he aware that a letter which his right hon. Friend sent to me recently suffered a similar fate?
    Mr. Slater: Yes. It is only fair to say that millions of letters posted on Friday to places all over the country

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    are delivered first post the next morning. By comparison the number of failures are few but none the less it is regrettable.
    Sir W. Bromley-Davenport: Is this not typical of the nationalised industries—less facilities, worse service and increased costs?

    Sub-office Facilities, Midlothian
    Mr. Eadieasked the Postmaster-General how many complaints he has received from the general public in the county of Midlothian about inadequate facilities in sub-post offices.
    Mr. Joseph Slater: Seven during the last 12 months.
    Mr. Eadie: Would my hon. Friend not agree that, in view of the complaints about the sub-post offices, action should be taken to create more Crown post offices?
    Mr. Slater: We get few complaints about scale payment sub-post offices as such, and when we do, ways can often be found to meet the point of the complainant. I must also point out that the cost of Crown offices can only be justified in large centres of population.

    Corfe Castle, Wareham (Ower Quay)
    Mr. Evelyn Kingasked the Postmaster-General why letters addressed to Ower Quay, Corfe Castle, Wareham, are not delivered until ten minutes to ten in the morning.
    Mr. Joseph Slater: To reduce costs, the delivery round which takes in Ower Quay has been motorised with the result that we reach some addresses in the area earlier and some later than before. We could not improve the delivery time at Ower Quay without either making the time worse for other people or putting up our costs again.
    Mr. King: Does not a 4d. stamp entitle the user to some equality of service? Can the hon. Gentleman explain why Corfe Castle should be subjected to so monstrous an inconvenience when counties and cities get two or three deliveries a day?
    Mr. Slater: This area was being covered by cycle post and we introduced a motor post within the area. Although the motor van is faster than the cycles, which is understandable, it has further to go. [An HON. MEMBER: "Progress!"] This is progress, but the van has further to go. It will be seen that it reaches some points earlier on its route, but there are bound to be other places which will receive their mail later than was the case.
    Mr. King: I wish to give notice that in view of the unsatisfactory nature of that reply, I will seek leave to raise this matter upon the Adjournment at the earliest opportunity.

    Stamp Designs (Scottish Subjects)
    Mr. Hector Hughesasked the Postmaster-General if he will include scenes of Scottish historic interest or scenic beauty in his next issue of postage stamps.
    Mr. Joseph Slater: No, Sir.
    Mr. Hughes: Why not? Does not my hon. Friend realise that British, and particularly Scottish, history is rich in scenes which would be much more educational to the British people than some of the floral stamps which have recently been issued? Will he take this into account in connection with new issues?
    Mr. Slater: Yes, we will take into account my hon. and learned Friend's observations. He will, however, remember that last year we had the Robert Burns stamp and a stamp depicting the Cairngorms, but it must be remembered that if we have new stamps we must have variety in our issues.
    Sir G. Nabarro: If the Postmaster-General's policy is to be one of parochialism in the issue of postage stamps, could we not consider having a postage stamp bearing a pictorial representation of Malvern Priory, in Worcestershire?
    Mr. Slater: One thing which can be said for my right hon. Friend is that this is not a parochial matter. I say this in view of the hon. Member's previous question regarding the tower in his constituency.
    Sir G. Nabarro: We do not want a tower on postage stamps.

    Golden Jubilee Stop Accidents Year
    Mr. Huntasked the Postmaster-General whether he will now sanction a special issue of postage stamps to mark the Golden Jubilee Stop Accidents Year.
    Mr. Joseph Slater: No, Sir. My right hon. Friend had a large number of suggestions for the 1967 special stamp programme and inevitably many worthy subjects had to be omitted.
    Mr. Hunt: Is the hon. Gentleman aware that that reply will cause great disappointment to many people, and particularly to the 100,000 who work voluntarily for the cause of accident prevention? Is he seriously saying that wild flowers and free trade have greater priority in his Department than road safety?
    Mr. Slater: My right hon. Friend and I certainly recognise the importance of this work, but we could never hope to mark all such fine activities by the issue of a stamp. Our stamp programme for this year is already a heavy one.
    Mr. Molloy: Will my hon. Friend reconsider that reply? I do not say that he could immediately accept these proposals, but perhaps at a later stage he could seriously consider the proposals which have been made, which I believe to be very well worth while.
    Mr. Slater: Every consideration has been given to the proposals which have been submitted to my right hon. Friend, and I am sorry that at this juncture I cannot hold out any further hope.

    Unit Trusts
    Mr. Stratton Millsasked the Postmaster-General if he will make a statement on the sale of unit trusts at post offices.
    Mr. Edward Short: There is no current proposal for the sale of unit trusts at post offices.
    Mr. Mills: But could the Postmaster-General give the reasons why this has been turned down by his Department? Is it that he is against the sale of commercial units, or is it that he feels that it would interfere with the general collection of National Savings? Would he particularly bear in mind that the banks
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    themselves, who have unit trusts, sell Saving Certificates?
    Mr. Short: I think that the hon. Gentleman may be confusing this with the proposal recently from the Sub-postmasters' Federation to sell Abbey Bonds, not unit trusts. Why it was turned down was that it would be difficult to know where to draw the line. If we allowed unit trusts to be sold at post offices, it would give them the cachet of reliability and credibility. It would be difficult to know where to draw the line.
    Mr. Maxwell: Will my right hon. Friend consider setting up a Post Office unit trust, since this form of saving appeals to a great many people? Since the Post Office is now being set up as a trading corporation, here is a way of encouraging saving and increasing the profitability of the Post Office.
    Mr. Short: On savings matters, I am simply an agent acting for my right hon. Friend the Chancellor of the Exchequer. My hon. Friend will have to put that Question down to him.

  TELEPHONE SERVICE

    Subscribers (Advance Rentals)
    Dr. Winstanleyasked the Postmaster-General if he will remove the provision requiring regular telephone subscribers to pay a year's rental in advance on removing to a new address and transferring to a line already in existence at the new address, in those areas in which waiting lists are small, and in all areas when the back-log has been overtaken.
    Mr. Fisherasked the Postmaster-General whether, when a telephone subscriber of modest means moves to a new address, the year's rental in advance and the connection charge can be spread over four quarterly payments instead of being payable by a large initial lump sum as at present.
    Mr. Edward Short: In the light of the representations I have received from many quarters, including the Post Office Users Council, I have decided that as from tomorrow a year's rental in advance will not be required from customers who take over an existing telephone in situ provided that no work needs to be done on the installation.

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    I am sorry that I cannot spread the payment of connection charges and rental in advance, as suggested by the hon. Member for Surbiton (Mr. Fisher).
    Dr. Winstanley: Is the right hon. Gentleman aware that his reply will give great satisfaction to the citizens of Cheadle and to many hon. Members, including me?
    Mr. Fisher: Is the right hon. Gentleman aware that I am grateful to him for going as far as he has? But could he not extend the principle a little further? Is he aware that a constituent of mine living on a small pension has been asked to pay a lump sum of £25, which she cannot possibly find? Why cannot this be spread over four quarterly payments of £6 5s. each? Is there no heart or flexibility in his Department?
    Mr. Short: There is a great deal of heart and flexibility in the Department, but this proviso was introduced to restrain consumer demand as part of the measures announced by my right hon. Friend the Prime Minister on 20th July.

    Telephone Tower, Bredon Hill
    Sir G. Nabarroasked the Postmaster-General why he proposes to erect on the top of Bredon Hill, Worcestershire, a steel lattice tower, 80 feet high and 24 feet square at the base, which will be unduly prominent in an area of special scenic beauty; and, in view of the public protests for amenity reasons, whether he will seek an alternative site serving equivalent technical requirements without offending scenic and amenity considerations.
    Mr. Edward Short: The tower is to enable more telephone circuits to be provided between Bristol and Birmingham. Its design is still under consideration. I expect it to be neither massive nor prominent but quite inconspicuous and no threat to the scenery and amenity of the area. I have been unable to find any position other than Bredon Hill that would be so satisfactory both technically and in enabling the tower to be concealed.
    Sir G. Nabarro: We do not want this tower on Bredon Hill. Is the right hon. Gentleman aware that the Bredons and the whole of the area around the
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    Malverns is of special amenity value and landscape beauty, that no person is allowed to build a house in the area, including my constituents? Why should the right hon. Gentleman take unto himself a special position and defile this area of outstanding amenity and beauty?
    Mr. Short: We shall not defile any area of outstanding beauty. What we are trying to do is to provide the country with an efficient system of telecommunications, which the previous Government never did.
    Sir G. Nabarro: Put it somewhere else.
    Mr. Short: There is only one other site which is technically possible. It is near Cheltenham and there would be an extra cost of £500,000. I repeat that the design is not yet settled. We are not obliged to get planning permission, but we intend to get planning clearance and, if the local authority asks for a public inquiry, we shall be happy to agree.
    Sir G. Nabarro: Put the rotten tower somewhere else.

    Telephone Equipment (Supply)
    Mr. Hamlingasked the Postmaster-General what plans his Department has now made to speed up the supply of telephone equipment; and whether he will make a statement.
    Mr. Edward Short: This year we plan to spend, on exchange equipment, more than double the amount of two years ago. The supply position is being kept under constant review and I am satisfied that the manufacturers are making great efforts to step up their output to meet our requirements.
    Mr. Hamling: Why has the Post Office had to face this crisis in the last two years?
    Mr. Short: It has had to face this crisis because the capacity of the industry has not been great enough because in the 1950s the forecast of telecommunications demand was inadequate.
    Mr. Stratton Mills: Without going into the political comments of the right hon. Gentleman, can I ask him to refer to the number in arrears? Can he say whether there is a penalty clause in the contract?
    Mr. Short: The number in arrears, now running up to six months late, is 1,030 out of 1,292 contracts, so that it is serious. There is no penalty clause. I was not making a political point. I do not blame anybody for the inadequate forecasting. Forecasting telecommunications demand is extremely complicated. However, we are now planning with a very wide margin for the 1970s, and I hope that whoever is here in the 1970s will not have to answer questions of this sort.
    Mr. Bob Brown: Would not my right hon. Friend agree that his Answer to my hon. Friend the Member for Woolwich, West (Mr. Hamling) indicates the need for State participation in this industry? Will he look at the possibility of establishing factories in the development areas?
    Mr. Short: There is a later Question on that subject. Perhaps my hon. Friend will await my reply to it.

    Eltham
    Mr. Hamlingasked the Postmaster-General how many applicants for telephones in the Eltham area have been given telephones in the last six months; and how many are still on the waiting list.
    Mr. Joseph Slater: As at 30th April, 625 and 317, respectively. Of the latter, 50 were due to be connected this month, but I regret that shortage of exchange equipment will prolong waiting list problems in the area until the autumn of 1968.
    Mr. Hamling: I congratulate my hon. Friend on the improvement, which has been noted by some of my constituents. Can the date for ending the waiting list be brought forward?
    Mr. Slater: I regret not. Planning, manufacture and installation necessarily take time, but the measures which have become effective during the last six months have more than halved the waiting list, which is a very good achievement.

    Directory Errors (Bolton)
    Mr. Robert Howarthasked the Postmaster-General why the Blackburn telephone authorities have failed to list Messrs. Woods Limited of Manchester
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    Road, Bolton, accurately either in the alphabetical or classified directories over the period 1964 to 1967; and if he will offer compensation for the loss of business which this has caused.
    Mr. Joseph Slater: I regret that mistakes were made. The alphabetical directory has been corrected. The classified directory will be corrected at the next issue. My right hon. Friend has already offered a rebate of rental.
    Mr. Howarth: Is my hon. Friend aware that the offer of compensation of a rebate of six months' rental is totally inadequate in view of a story of incompetence going back nearly three years? Is he further aware that it is hoped that the offer of compensation can be considerably stepped up?
    Mr. Slater: I know the interest which my hon. Friend has taken in this matter. I have gone through all the correspondence and I have to point out that we have done our best to minimise the inconvenience to Messrs. Woods. We have supplied it with change of number cards, stick-on labels for its stationery and we advised directory inquiry centres of the correct number. I cannot agree to go beyond the offer already made.

    Telephone Tokens (Coin Boxes)
    Sir J. Langford-Holtasked the Postmaster-General if, as a means of cutting increases in telephone charges from telephone boxes in units of 3d. or 6d., he will introduce a telephone token which can be purchased anywhere and of which the price can be varied by small amounts as and when needed.
    Mr. Edward Short: No, Sir. Adjustment in charges need not affect the coins used. Tokens would have to be specially provided and would need to be unique to telephone coinboxes. The costs would be prohibitive.
    Sir J. Langford-Holt: Surely the right hon. Gentleman would agree that any future change in phone charges, which one presumes would be upwards and not downwards, would involve the use of two coins and an increase in costs of at least 50 per cent.? Is this what he intends?
    Mr. Short: No, the price can be varied by varying the time.

    Technical Equipment (Manufacture)
    Mr. Juddasked the Postmaster-General what plans he has in hand to encourage the Post Office to manufacture more of its own technical equipment.
    Mr. Edward Short: I have at present no plans to extend the manufacture by the Post Office of its own equipment.
    Mr. Judd: Would my right hon. Friend agree that the expansion of the Post Office has been seriously hampered by the inadequacy of private enterprise in responding to the opportunities? Would he not further agree that the Post Office should consider endeavouring to set the pace in this respect?
    Mr. Short: My hon. Friend may not be aware that the Post Office at present owns four factories and 20 per cent. of the output is devoted to manufacturing our own equipment. We are taking power, if given by Parliament, in the Corporation Bill, which will come before the House next Session, to enable us to manufacture everything that we require.
    Mr. Gardner: Is my right hon. Friend aware that there are considerable fears in the telecommunications industry about possible redundancy, particularly in one firm? Is he satisfied that the staff of the industry as at present constituted is capable of meeting future requirements of the Post Office?
    Mr. Short: Without commenting on the ability of the industry to meet our requirements, I can point out to the House that we have referred the telecommunications industry to the Industrial Reorganisation Corporation as its first job. We hope to have its report this year.
    Mr. Stratton Mills: If the Minister blames the telephone supply industry for delays, why has not the Post Office inserted a penalty clause in the contract?
    Mr. Short: We do not want to make any greater difficulties. The position is simply that the industry does not have the capacity. As I have said earlier, however, the industry is making great efforts, especially in the development areas, to improve its capacity.

    All-Figure Telephone Numbers
    Sir W. Bromley-Davenportasked the Postmaster-General whether, in view of the fact that most people find it more difficult to memorise seven-figure telephone numbers than those with three letters and four numerals, he will undertake to leave all relevant telephone dials with suitable letters of the alphabet against each number, so that subscribers can if they wish translate the new seven-figure numbers into three letters and four numerals as hitherto.
    Mr. Goodhartasked the Postmaster-General by what date he expects the transition to all-number dialling in the Greater London area will be completed.
    Mr. Edward Short: We have no plans for replacing lettered dials on existing telephones. We shall not provide lettered dials on new instruments when the change to all-figure numbering is complete.
    All London automatic telephones which previously had the first three letters of the exchange name in capitals will have been given all-figure numbers by September this year.
    Sir W. Bromley-Davenport: Is not the present system very unsatisfactory? How many people can remember seven-figure telephone numbers? Is it not possible to think up something simpler for the use of the customer?
    Mr. Short: We took advice from some highly qualified psychologists about this—
    Sir W. Bromley-Davenport: Is that the answer?
    Mr. Short: —and we found that arbitrary groups of letters are just as difficult to remember as figures. On the other hand, I agree that letters which look like the name of the exchange are much easier to remember. We have, however, no option in the matter. If international dialling has to develop, we must go on to all-figure numbers.
    Mr. Goodhart: Will the Postmaster-General go as slowly as he can in this direction? Will he bear in mind that in America, which has had years of experience in this connection, there is still grave dissatisfaction with all-figure dialling?
    Mr. Short: I quite agree, and I regret that it has had to happen, but it must happen. That is the way things are going in the world. We must move with everybody else. We will, however, move very slowly to give people time to adapt themselves to it.
    Mr. McNamara: Is my right hon. Friend aware that in the Hull telephone system we already have six-figure numbers and that this is working without any complaint whatever?
    Mr. Short: The problem facing telecommunications people is that no two telephone subscribers in the world must have the same number.
    Sir J. Rodgers: In addition to consulting psychologists, will the right hon. Gentleman consider conducting market research amongst consumers, when I think that he would find that there were real difficulties for the average person in remembering a long list of figures?
    Mr. Short: I quite agree. It is easier to remember a number if the first three letters look like a telephone exchange—ABB for Abbey, for example. If a purely arbitrary selection of letters is made—XYZ, for instance—we are told on expert advice that this is no more easy to remember than three figures.

    Telephone Boxes, Greater London
    Mr. Goodhartasked the Postmaster-General how many subscriber trunk dialling callboxes there are in Greater London; and how many were out of order on Friday, 12th May.
    Mr. Edward Short: About 9,300 and 900, respectively; 750 of the damaged boxes were usable for emergency calls.
    Mr. Goodhart: While welcoming the fact that there has been some improvement in the figures during the past 12 months, may I ask the Postmaster-General when he expects that the London telephone box service will be really effective?
    Mr. Short: I cannot say that. We are doing everything we can. We are strengthening the telephone boxes and have introduced a number of secret alarm devices. As a result, the number of boxes out of action in London decreased by one-third last year and by one-quarter
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    throughout the country. This is a social problem, however, and I cannot say when it will completely disappear.

  WIRELESS AND TELEVISION

    Secret Recording Devices
    Mr. Rowlandasked the Postmaster-General if he will introduce legislation to prevent the use by broadcasting organisations of concealed recording devices, unknown to the person being recorded, in order to obtain information for whatever purpose.
    Mr. Ian Gilmourasked the Postmaster-General if he will introduce legislation to prevent broadcasting organisations using secret recording devices to obtain information.
    Mr. Edward Short: No, Sir. I am satisfied that the Chairman and Governors of the B.B.C., and the Chairman and members of the I.T.A., are fully aware of the extreme gravity of using recording devices surreptitiously in order to get material for the broadcasting services for which they are answerable.
    Mr. Rowland: Does my right hon. Friend appreciate that it is widely felt that bugging should be practised if at all only by the police and security forces and not by any journalistic organisation however responsible, careful and illustrious it may be? Will he say a little more precisely what are the rules followed by the B.B.C. and the Independent Television Authority in this matter?
    Mr. Short: As my hon. Friend knows, the B.B.C. laid down new rules on 8th April arising out of the incident mentioned in the House previously. This is a matter for the B.B.C, but in essence the permission of the top management of the authority concerned has to be obtained before this can be done.
    Mr. Gilmour: I welcome the right hon. Gentleman's first reply as far as it went. However, will he say quite clearly that he thoroughly deplores the use of these devices by the B.B.C?
    Mr. Short: No. This is a matter for the B.B.C. and the I.T.A. I have seen their rules which they laid down on 8th April and I think that they will deal with the complaints which have been raised.

    Pirate Radio Stations (Political Broadcasts)
    Mr. Rowlandasked the Postmaster-General what proposals he has to deal with political broadcasting by pirate radio stations, which is at present outside the terms of the Representation of the People Act and the charters of the British Broadcasting Corporation and Independent Television Authority.
    Mr. Edward Short: My proposals for dealing with such broadcasting are contained in the Marine Etc., Broadcasting (Offences) Bill, which is intended to silence the pirate radio stations. I believe that this is the most effective way of dealing with the problem.
    Mr. Rowland: While we are waiting for the Bill to become effective and bearing in mind the slight possibility that some operators will try to circumvent its provisions, will my right hon. Friend institute or consider instituting discussions among all the political parties so that the spirit as well as the letter of the Representation of the People Act is observed?
    Mr. Short: To be fair, I do not think that the political parties as such have had anything to do with this. Individual candidates in local elections certainly have had something to do with it and have actually paid for time on some of the stations. I do not think that the party organisations as such have done so. However, I am willing to consider my hon. Friend's suggestion.
    Sir C. Osborne: Why should pirate radio stations be denied free speech on political matters?
    Dr. Winstanley: Is the right hon. Gentleman aware that Section 80 of the Representation of the People Act, which makes it illegal to use radio for the purpose of influencing elections, refers to Parliamentary elections and not in any way to local elections? Will he seek to remedy that defect?
    Mr. Short: That is a matter for my right hon. Friend the Home Secretary. Perhaps the hon. Gentleman will address his question to him.
    Mr. Ian Gilmour: Can the right hon. Gentleman say whether he and the Leader of the House still think that the colossal
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    local government disaster which the Government suffered in the recent elections was due to pirate radio broadcasts?
    Mr. Short: When the hon. Gentleman talks about a colossal disaster in local government terms, he should think in three-year cycles. Let him wait until the end of the three-year period.

    B.B.C. Programmes
    Sir W. Bromley-Davenportasked the Postmaster-General whether he will direct the British Broadcasting Corporation not to broadcast programmes containing blasphemy or blasphemous incidents.
    Mr. Edward Short: No, Sir. The broadcasting authorities are already under a duty to satisfy themselves that, so far as possible, nothing is included in their programmes which offends against good taste or decency or is likely to be offensive to public feeling. The B.B.C. is, of course subject, like everyone else, to the law of the land in this respect.
    Sir W. Bromley-Davenport: Is the right hon. Gentleman aware of the blasphemous dialogue that took place on "The Late Show" on 4th February of this year, which caused so much offence all over the country? Can anything be done to stop a repetition of this disgraceful behaviour?
    Mr. Short: If the hon. and gallant Gentleman felt that this was blasphemous, he could have it tested in the courts.

    Walkie-Talkie Sets (Licences)
    Sir J. Langford-Holtasked the Postmaster-General whether licences are issued by him for walkie-talkie sets used for private recreational purposes provided they are operated in the right frequency bands and meet minimum standards of performance.
    Mr. Edward Short: Yes, Sir. I do issue licences in such circumstances for activities like sailing and climbing, where radio-communication can help to save lives.
    Sir J. Langford-Holt: Can the right hon. Gentleman say that this includes individual recreational activities as well as communal recreational activities?
    Mr. Short: Broadly speaking, we issue licences to three categories of people: first of all the radio amateurs, who have to pass a test, and secondly business users, taxi proprietors and so on. The definition of "business" has now been extended very liberally to include Outward Bound Schools, walking clubs, mountain rescue teams, and so forth. If an individual could make out a case on these grounds, we would be willing to consider it.

    B.B.C. and I.T.A.
    Mr. Ian Gilmourasked the Postmaster-General what plans he has to reorganise the British Broadcasting Corporation and the Independent Television Authority; and whether he will make a statement.
    Mr. Edward Short: The instruments under which the two organisations are constituted run until 1976. I have no present plans to reorganise the B.B.C. and the I.T.A.
    Mr. Gilmour: While welcoming that assurance, may I ask the Postmaster-General to give a further assurance that, despite the possible implications of his otherwise very interesting speech, there is no intention whatever at any date of reimposing the B.B.C.'s television monopoly?
    Mr. Short: I would not be prepared to give an undertaking about anything of the kind. I would like to leave whatever Government is in office in 1976 quite free to deal with the problem. What I did in my speech at Edinburgh was to point out the basic problems which lie at the heart of our broadcasting organisation in this country.
    Mr. Maxwell: While agreeing with my right hon. Friend that reorganisation of the B.B.C. and I.T.A. may not be necessary, could he tell the House whether he is satisfied with their present performance on educational television and with the use of television and the radio networks for industrial training purposes? Can he say what steps he proposes in order to improve them?
    Mr. Speaker: Order. This is a question about reorganisation.

    Disabled Children (Wireless Licences)
    Mr. Boyd-Carpenterasked the Postmaster-General whether he has now considered the communication sent to him by a constituent of the right hon. Member for Kingston-upon-Thames about his Department's action in insisting under threat of legal penalities, on the obtaining of a separate radio licence, in respect of each transistor radio owned by physically disabled children at a residential college for such children; and whether, in view of the hardship likely to ensue, he will withdraw this demand.
    Mr. Edward Short: I have, of course, every sympathy for these children. I am considering the matter and will make a statement to the House as soon as possible.
    Mr. Boyd-Carpenter: I am obliged to the right hon. Gentleman for that Answer. Perhaps he could clear up the problem as to why this demand has suddenly been initiated at this stage?
    Mr. Short: There has been no change in the law at all. Children owning transistor sets at schools have always been liable to obtain sound receiving licences. What has caused the matter to come to the fore was a recent circular sent out by the Department of Education and Science.

    Colour Television
    Mr. Dempseyasked the Potmaster-General what new date he proposes for the introduction of colour television, in view of the dispute involving technicians; and if he will make a statement.
    Mr. Edward Short: None, Sir. The timing of the start of colour television on B.B.C.2 is a matter for the Corporation. I understand that there is now agreement between the Corporation and the staff association concerned about staffing procedures.
    Mr. Dempsey: In view of the agreement between the staff and Corporation, can my right hon. Friend say at this stage when colour television will be introduced in Scotland and when he intends to cover the main belt of Scotland with this service?
    Mr. Short: Scotland will get colour on B.B.C.2 at the same time as everybody else. It will be launched on 1st July and the programme will start officially on 2nd December.

    Television Licences (Retirement Pensioners)
    Mr. Longdenasked the Postmaster-General whether he will arrange for a reduction in the television licence fee for retirement pensioners who are in receipt of National Assistance.
    Mr. Edward Short: Although I understand the considerations which have prompted this Question, I do not believe that the granting of licence concessions on compassionate grounds is the right way of helping people in special need. Only those with television sets would benefit; and it would be unfair to make a concession to pensioners receiving supplementary benefits while denying it to other people in equal financial need.
    Mr. Longden: May I ask the right hon. Gentleman to reconsider that Answer, because television is of tremendous benefit to these people? Licence fees, like practically everything else, are likely to rise, and it would be a very good way of helping these people.
    Mr. Short: I agree that it would be a very good way of helping them, but if the hon. Member thinks about it a little, as I am sure he has done, he will realise that there are all kinds of difficulty. As I have said, only pensioners with sets would benefit to the extent of £5 a year, only those with supplementary allowances would benefit, and so on. In addition, the cost would have to be met by the generality of viewers, many of whom would be poorer than the people receiving the concession. There are, therefore, many difficulties.
    Mr. Maxwell-Hyslop: Will the Postmaster-General be more explicit about the cost being met? Surely, it does not cost any more to transmit a programme because more people are receiving it?
    Mr. Short: If the income of the B.B.C. is reduced, it has to be made up from some other source.

    Radio Advertising
    Sir J. Rodgersasked the Postmaster-General, in view of the fact that
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    Her Majesty's Government have applied for membership of the Common Market, in which radio advertising is allowed, he will now seek to allow radio advertising in this country in order to harmonise United Kingdom and European Economic Community policies.
    Mr. Edward Short: No, Sir. There is nothing in the Treaty of Rome of direct relevance to radio advertising nor, in practice, do the countries of the European Economic Community follow a common policy in this respect.
    Sir J. Rodgers: Does the right hon. Gentleman realise that there are already commercial radio stations in France beamed at this country? If we join the Common Market, does he think that his present ban on commercial radio in this country can be sustained?
    Mr. Short: The hon. Gentleman knows my views on this. I am very anxious to maintain the public service broadcasting principle in this country. However, he will remember the wording of the White Paper.
    Mr. Shinwell: Does my right hon. Friend realise that the Government have let themselves in for something, that gradually they will be forced to accept everything that Rome does, and that radio and television in this country will become commercial? How can that be avoided?
    Mr. Short: As I have said, there is no common practice on this in the European Community now.

  WALES

    Coastline (Oil Pollution)
    Mr. Gibson-Wattasked the Secretary of State for Wales what advice he is giving to Welsh local authorities to deal with oil damage to the coastline.
    The Secretary of State for Wales (Mr. Cledwyn Hughes): I have sent recently to all coastal local authorities a technical memorandum on oil clearance. This gives the latest available advice based on experience gained in Cornwall.
    Mr. Gibson-Watt: Can the right hon. Gentleman tell the House whether there is still any oil in the "Torrey Canyon"?

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    If there is any, what special instructions and advice has he given to local authorities in the Principality?
    Mr. Hughes: The hon. Gentleman must put a Question on that down to my right hon. Friend the Minister of Housing and Local Government. I have no authority or executive responsibility for oil in the "Torrey Canyon". Fortunately, no oil from the "Torrey Canyon" has landed on the beaches of Wales. There are small deposits, but not from the "Torrey Canyon", and no official representations have been made from Wales.

    Welsh Plan
    Mr. Gibson-Wattasked the Secretary of State for Wales when he intends to publish the Welsh Plan.
    Mr. Cledwyn Hughes: I intend to present a White Paper to Parliament in July. This document will seek to cover all the issues which affect the economic, social and cultural background of life in modern Wales.
    Mr. Gibson-Watt: I suppose that the right hon. Gentleman will issue this plan on the last day that Parliament sits. In the meantime, could he tell us why it has been so long delayed, and on what percentage growth rate in the economy is the plan based?
    Mr. Hughes: The hon. Gentleman must await the plan. The aim has been to make this a thorough and comprehensive study of the Welsh scene and to lay guide lines for the future and, subject to that, to present it at the earliest possible date.
    Mr. Gibson-Watt: But could the right hon. Gentleman answer the second part of my supplementary question, which is on what percentage growth rate is it based?
    Mr. Hughes: The hon. Gentleman must wait for the plan.

  EDUCATION AND SCIENCE

    School Meals (Prices)
    Mr. William Hamiltonasked the Secretary of State for Education and Science if he will now make a statement on the prices of school meals.
    The Minister of State, Department of Education and Science (Mrs. Shirley Williams): No, Sir.
    Mr. Hamilton: Can my hon. Friend say when she will be in a position to make a statement? Will it be a part of a package plan, and can she say whether purely economic considerations are being taken care of, or whether the very important social implications of an increase in the price of school meals will be set as a counter-force to the purely economic arguments?
    Mrs. Williams: Answering Questions in the House on 13th April, my right hon. Friend pointed out that there were so many social and economic factors to be borne in mind in reaching a decision on this question that he indicated that there would be no early answer to the question of when school meal prices would be reviewed.
    Mr. Roebuck: Is my hon. Friend aware that food prices will increase if we enter the European Economic Community? Has her Department had any discussions with the Ministry of Agriculture to establish whether this increase will be reflected in the price of school meals?
    Mrs. Williams: My hon. Friend will know that it is not our application to join the European Economic Community but, rather, the Report of the Estimates Committee which has led to a consideration of school meal charges by my right hon. Friend.
    Mr. Driberg: Does my hon. Friend recall that the last controversial announcement by her Ministry on the raising of overseas students' fees was made in reply to a Written Question on the eve of the Christmas Recess? Can we have an assurance that that will not be done again?
    Mrs. Williams: I shall be happy to give that assurance on behalf of my right hon. Friend.

    LOWER-PAID WORKERS
    Mr. Whitakerasked the Prime Minister whether he will now appoint a Cabinet Minister to be responsible for the overall co-ordination of the effects of

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    social welfare and fiscal policies, following his further consideration of the problems of the families of lower-paid workers.
    The Secretary of State for Foreign Affairs (Mr. George Brown): I have been asked to reply.
    I would refer my hon. Friend to the Answer given by my right hon. Friend the Prime Minister on 9th February, 1967, to Questions by my hon. Friends the Members for South Shields (Mr. Blenkinsop) and Meriden (Mr. Rowland) and the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis).—[Vol. 740, c. 1821.]
    Mr. Whitaker: Nevertheless, at a time when we are all agreed that the social services need more money, how can it be either economic or social sense for the Exchequer to be giving the largest housing and educational subsidies in tax rebates to the wealthiest people?
    Mr. Brown: In the earlier Answer to which I referred, my right hon. Friend made it clear that we would be presenting to the House, certainly by the summer, the Government's plans for assistance to families dependent upon lower-paid workers. That will, therefore, fit in with what we are now doing.
    Mr. Heath: Can the right hon. Gentleman give the House an assurance that, whatever plans are introduced, the lower-paid workers will not have to wait until next April before they get any of the benefits which the Government propose?
    Mr. Brown: I do not think that that arises out of the Question on the Order Paper. If the right hon. Gentleman can arrange for the appropriate Question to be put down, we will see what we can do with it.

    SPACE RESEARCH (INTERNATIONAL CONFERENCE)
    Mr. Bob Brownasked the Prime Minister whether he will seek to arrange an international conference on journeys by men into outer space in order to produce safeguards against the possibility of further disasters in space programmes, and to avoid the economic resources of a planet, with much of its population existing at starvation level or worse, being
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    wastefully expended by competition rather than co-operation in the field of space research.
    Mr. George Brown: I have been asked to reply. No, Sir. Whilst sharing my hon. Friend's concern. I believe that this is a matter which can only be dealt with by the two countries who have a manned space programme.
    Mr. Bob Brown: Would my right hon. Friend not agree that it would be a service to humanity if he could convince the Governments of the U.S.S.R. and the U.S.A. of the need for co-operation in space research? Can he indicate precisely how much money is being expended in the world on this matter?
    Mr. George Brown: I do not think that I have the answer to the last part of that Question. As to the first part of it, I agree with the spirit of what my hon. Friend is saying, but one of the problems is the lack of enthusiasm between the countries concerned. One of the sad features of this is that, when the Americans suggested that some of their astronauts should attend the funeral of Komarov, the Russian who died, the suggestion was rejected by the Soviets.

    VIETNAM
    Sir C. Osborneasked the Prime Minister if he will offer to the North Vietnamese Government visas for their representatives to visit Great Britain and to publicly put their view on the Vietnam war on condition that a similar number of British representatives are given equal facilities to put the British point of view publicly to the Vietnamese people.
    Mr. George Brown: I have been asked to reply.
    The need at the moment is to talk about peace, not about war. If the North Vietnamese Government were willing to accept our representatives for serious talks on ways and means of ending the conflict, or were willing to send their representatives here for this purpose, they would find Her Majesty's Government immediately responsive.
    Sir C. Osborne: I am obliged to the right hon. Gentleman for that Answer, but, while recognising the difficulties that he has in this problem, may I ask whether

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    he would not agree that the only hope for the peace which he seeks is for both sides to hear the other side's point of view, and will he do whatever he can to see that that comes about?
    Mr. Brown: Frankly, I do not want to become involved in a propaganda exercise here. When the hon. Gentleman talks about both sides hearing the other side's point of view, of course, we are not one of the sides. My concern is to give what help I can either to bring the parties together or to find some other forum in which means of ending or reducing the hostilities or moving on to talks can be found. I am willing to take any steps to do that, but I do not see much point in becoming involved in a propaganda exercise.
    Mr. Molloy: Would my right hon. Friend not agree that, in so far as we are not supposed to be one of the sides, it would be difficult to send official representatives here, but in so far as we might have some influence, official bodies coming here to explain the view of the Vietnamese and people from this country going to Vietnam, we could make a contribution to ending this disgusting tragedy of a war?
    Mr. Brown: A lot would depend on who went where and what they did when they got there, but, on the serious part of the question, the very fact that we are not one of the sides, and that we share with the Soviet Union responsibility as co-Chairmen, does give us the position to play a rôle in trying to bring this disgraceful war to an end. I want to keep that position. I want to be able to use it at the appropriate moment, and that is why I gave the hon. Gentleman the answer that I did.

    EUROPEAN ECONOMIC COMMUNITY
    Mr. Eadieasked the Prime Minister how far matters affecting the coal industry in Great Britain will constitute major or minor decisions in relation to negotiations for entry into the European Economic Community.
    Mr. George Brown: I have been asked to reply.
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    I do not, Sir, expect coal to give rise to any major issue in the negotiations but if my hon. Friend has any particular point in mind perhaps he would let my right hon. Friend the Minister of Power know of it.
    Mr. Eadie: Is my right hon. Friend aware that the Question was sparked off by the Prime Minister himself making a statement to the House that there would be major and minor decisions? Might I make my right hon. Friend aware of the fact that many miners in this country do not share the Government's enthusiasm for entering the Common Market, and that his Answer today will not allay their fears?
    Mr. Brown: Speaking as a Member with quite a large number of miners in his constituency—indeed, without them I would not be here; they just about equal my majority—my impression is that it depends on how the case is put to them as to what decision they come to. Seriously, however, while there are major, and, as my hon. Friend said, minor questions at issue, our information, both about our own industry and its likely trends, and about the coal industry on the Continent and its likely trends, suggests to us that the coal problem is not one of the major issues.
    Mr. Edwin Wainwright: Is my right hon. Friend aware that the heavy social obligations borne by the National Coal Board at the moment may be increased if we go into the Common Market, and does not he agree that it is time the Government took over the full financial cost of these obligations?
    Mr. Brown: I do not think that the latter half of the question arises out of the Question on the Order Paper. As to the first part, the answer is that it will involve some changes in the Board's pricing policies, and some problems about the E.C.S.C. levy, and so on, but we do not think that these raise major difficulties.
    Mr. Winnickasked the Prime Minister if he will make a progress report on the British application to join the European Economic Community.
    Mr. George Brown: I have been asked to reply.

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    Her Majesty's Government have no further statement to make to the House at this moment.
    Mr. Winnick: Can my right hon. Friend say whether it is now likely that the negotiations will actually start to enter the Community? If they start, do the Government intend to have some kind of time limit, say by the end of the year? Finally, can my right hon. Friend say whether serious consideration will now be given to the possibility of associate membership for Britain if this is offered to us?
    Mr. Brown: On the first part of the question, I have every reason to hope and believe that our application will be discussed at the meeting of the Council of Ministers which takes place early in June. We shall know more about the starting time for negotiations after that.
    As to whether we would set a time limit, I do not think that the public announcement of such a decision at this moment would be a very happy way of beginning the procedure. With regard to the third part of the question, my right hon. Friend and I have both said in this House and elsewhere that an arrangement which gave us many, if not all of the obligations, and hardly any, and possibly none, of the possibilities of changing the situation, would not be a very reasonable or happy one for us.
    Mr. Frederic Harris: If such progress was able to be made by the Government, would not they regrettably have to admit that at the moment President de Gaulle does not appear to have moved his ground one iota from the stand he took previously?
    Mr. Brown: I have no way of knowing what the hon. Gentleman's sources of information are, but from what reaches me I would not go along with him.
    Mr. Heath: The right hon. Gentleman is aware that the Prime Minister has appointed to lead the delegation and to take part in the negotiations a Minister who is not a Member of this House. Can he say who will give a detailed account of the day-to-day negotiations to the House?
    Mr. Brown: I have a Question on that point a little later.
    Later—
    Mr. Heath: When I asked just now who was to report to the House of Commons on the European Community negotiations the Foreign Secretary said that he had a Question on the Order Paper in reply to which he could give an answer to that supplementary question. In fact, it is not the same question that I asked. Will he now answer Question No. Q15?
    Mr. Brown—
    Mr. Shinwell: On a point of order—
    Mr. Brown: I was rising to a point of order.
    Mr. Speaker: I think that it would help the House if I conveyed to the Foreign Secretary the information that I think that I know the point of order that the right hon. Member for Easington (Mr. Shinwell) wishes to raise.
    Mr. Shinwell: My point of order is this—if it is a point of order: I deferred my Question earlier in the day.
    Mr. Speaker: That is why I allowed the right hon. Member for Easington to have precedence over the Foreign Secretary.
    Mr. Heath: If the Question has already been withdrawn, was it not improper for the Foreign Secretary—[Interruption.] I withdraw the word "improper". Was it not disingenuous of the Foreign Secretary to give that as a reason for not answering the supplementary question?
    Mr. Brown: That is one reason why I sought your permission to rise to the right hon. Gentleman's point of order, Mr. Speaker. I did not know that the Question had been withdrawn until just now. As I understand the rules of the House, it would have been out of order for me to anticipate an answer to a Question on the Order Paper, in reply to an earlier supplementary question. I hope that the right hon. Gentleman will withdraw what he said. I was neither improper nor disingenuous. I was conforming to what I understand to be the rules of order of this House.
    Mr. Heath: If my question had been improper you would have ruled it out of order, Mr. Speaker. As it was allowed, it was quite proper for the Foreign Secretary to answer it, and I suggest that he does so now.
    Mr. Brown: Since these exchanges are likely to go on, may I ask for your Ruling, Mr. Speaker? After 20 years or more in the House, am I not right in understanding that it would be out of order for me to anticipate a later answer in replying to a previous supplementary question?
    Mr. Speaker: The right hon. Gentleman is quite right—
    Sir J. Langford-Holt—
    Mr. Speaker: Order. I am ruling on a point of order. The hon. Gentleman must contain himself. The right hon. Gentleman was asked a question in answering which he thought he would anticipate a later Question on today's Order Paper. I gather from what he said that he did not then know that the right hon. Member for Easington (Mr. Shinwell) had withdrawn his Question. This is the state of the game at the moment.
    Mr. Heath: The question I asked is not the one that appears later on the Order Paper. I asked who will report to the House of Commons. The House knows who is handling the negotiations. A public statement has been made to that effect. I am asking the Foreign Secretary a question dealing with progress reports on the application to join the European Economic Community, namely, who will report to the House of Commons on these matters?
    Mr. Brown: I am sorry, but I still regard the right hon. Gentleman's original question—not his present rephrasing of it—as raising the issues involved in Question No. Q15. For that reason I did not answer it at the time. I have not sought your permission to answer it out of order, Mr. Speaker—and I could not, since it has been withdrawn. I therefore suggest that the right hon. Gentleman arranges for his question to be put on the Order Paper.
    Sir Harmar Nicholls: As the only victim of this misunderstanding appears to be the House of Commons, is there no way, even now, of the supplementary question put by my right hon. Friend—which is different from the one on the Order Paper—being answered, as it would have been in the ordinary working of Question Time?
    Mr. Speaker: Ministers are not compelled to answer questions. The hon. Member knows that.

    BRITISH TROOPS, GERMANY (FOREIGN EXCHANGE COSTS)
    Mr. Bruce-Gardyneasked the Prime Minister if he will define the precise areas of responsibility of the Foreign Office and the Treasury, respectively, for Her Majesty's Government's policy regarding the foreign exchange costs of British troops in Germany.
    Mr. George Brown: I have been asked to reply.
    My right hon. Friend the Chancellor of the Exchequer is responsible for the balance of payments and I am, of course, responsible for foreign relations. The problem of the foreign exchange costs of British troops in Germany attracts the responsibility of us both and we cooperate closely in working out and in implementing the policy of Her Majesty's Government. Which Minister takes the lead from time to time depends on circumstances.
    Mr. Bruce-Gardyne: In that case, can the right hon. Gentleman explain why he went back on his clear undertaking to my hon. Friend the Member for Blackpool, South (Mr. Blaker) in December that there could be no connection between the offset costs of British troops in Germany and the offset costs of American troops in this country? Has not this created a dangerous precedent for the future?
    Mr. Brown: I do not think that we have created a dangerous precedent. All the precedents that we create are very good ones. On the question raised by the hon. Gentleman, I believe that when we announced the outcome of the negotiations the House generally recognised that we had made a very good bargain, and a very much better one than had been made before about covering the costs of our troops in Germany.

    RHODESIA
    Mr. Sandysasked the Prime Minister whether he has received any recent information as to whether Mr. Smith would be willing to resume negotiations for a settlement of the Rhodesian

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    question on the basis of the "Tiger" constitution.
    Mr. George Brown: I have been asked to reply.
    No, Sir.
    Mr. Sandys: Are the Government still insisting on majority African rule as a condition for the grant of legal independence? If so, do they not realise that this totally destroys all prospects of a negotiated settlement?
    Mr. Brown: When the Smith régime rejected—in fact I do not think I am going too far in saying went back on—what was discussed on H.M.S. "Tiger", as they knew, they set in train some consequential results. One of those was that we were committed to the no independence before majority rule formula which the Commonwealth Prime Ministers had worked out. I cannot today go back on that.
    Mr. John Lee: Is my right hon. Friend aware that his Answer will give great general satisfaction, at any rate to this side of the House? Does he not consider that the time has come when steps should be taken to appoint a legal Government for Rhodesia to take over when the Smith régime is turned out?
    Mr. Brown: As we have said repeatedly, we are ready to discuss with anybody who is able and willing to take over the responsibility for leading Rhodesia back to the paths of legal rule. We are still ready to do that. What we are looking for is evidence that somebody is willing to do it.
    Mr. Maudling: As the Prime Minister accepted the "Tiger" constitution as suitable for Rhodesia, and as this is the only possible basis visible at the moment for further discussions, why do the Government insist on N.I.B.M.A.R. which makes any further negotiations totally impossible?
    Mr. Brown: Because that clearly followed on the Smith régime succumbing to the extremists in it and rejecting not only what had been offered, but what they had themselves worked out.
    Mr. Paget: When is my right hon. Friend going to wake up to the fact that Rhodesia has got independence, and that nobody is going to take it away from her?
    Mr. Brown: On the subject of waking up, I sometimes get the impression that my hon. and learned Friend is much more like Rip Van Winkle than I am.
    Mr. Burden: As it was the intention of the Government to bring the Smith régime to its knees by the measures they have already taken, and as all the evidence is that they are not succeeding and there will be no Government other than the present one with which to treat, when are they going to reopen negotiations with the present Rhodesian Government?
    Mr. Brown: I hope that we will have the support of hon. Members on both sides of the House in ensuring that this illegal régime, which is in revolt, is in fact brought down and replaced by a legal régime which will put Rhodesia's true interests first.
    Mr. Ashley: Would not my right hon. Friend agree that, far from negotiating with the Smith régime, the time is rapidly coming when we should seriously consider the intensification of sanctions against it?
    Mr. Ronald Bell: When are the Government going to take steps to get themselves released from this commitment which, so long as it lasts, is obviously a complete road block to preventing any further negotiations with the existing de facto Government in Rhodesia?
    Mr. Brown: I am afraid that that is not the road block. So far, the road block is the unwillingness of the Smith régime to face the fact that either they themselves have to work their way towards legality or they have to give way to some régime in Rhodesia which will do so.
    Mr. Whitaker: Does my right hon. Friend recollect that when the right hon. Member for Barnet (Mr. Maudling) and the right hon. Member for Streatham (Mr. Sandys) were Colonial Secretaries and there were similar revolutions in British Honduras, British Guiana, Borneo, Swaziland and Zanzibar, twice, on each occasion the Conservatives sent troops in immediately?
    Mr. Brown: There are a number of reasons why, in a number of parts of the world, I am trying to avoid following the bad precedents set for me by those who preceded me.
    Mr. Biggs-Davison: Is not the Foreign Secretary following the bad precedent of Lord North, whose portrait, I believe, adorns his room in the Foreign Office? Does not he think it rather a pity that when there was agreement on a constitution in H.M.S. "Tiger" it should be vitiated by this inflexibility and lack of statesmanship? Does not he realise that things are moving on? Will he take some initiative before the Constitutional Commission finishes its work in Rhodesia?
    Mr. Brown: If there is a comparison with Lord North, it is clearly with the hon. Member and his hon. Friends, who are arguing for taxation without representation. As for my room, Lord North has never been there. The gentleman I removed was the King at that time, and I replaced him with Lord Palmerston.

BUSINESS OF THE HOUSE
Mr. Heath: May I ask the Leader of the House to state the business of the House for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Richard Crossman): Yes, Sir. The business for next week will be as follows:
MONDAY, 5TH JUNE—In the morning—
Motions on the Greenwich Hospital Accounts and on the Cinematograph Films (Collection of Levy) and (Distribution of Levy) Amendment Regulations.
In the afternoon—
Motion to take note of the Command Paper entitled The Development Areas.
TUESDAY, 6TH JUNE, WEDNESDAY, 7TH JUNE, and THURSDAY, 8TH JUNE—Finance (No. 2) Bill:
Further progress with the Committee stage.
The business on Wednesday morning will be Motions on the Gas (Borrowing Powers) Order, the Calf Subsidies (United Kingdom) (Amendment) Scheme, and on the Agriculture (Tractor Cabs) Regulations.
Opposition Prayers on the National Insurance Amendment Regulations relating to Overlapping Benefits and Determination of Claims and Questions.
FRIDAY, 9TH JUNE—Private Members' Motions.
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MONDAY, 12TH JUNE—The proposed business will be:
In the morning—
Resumed debate on the Second Reading of the Anchors and Chain Cables Bill, the remaining stages of the Road Transport Lighting Bill and the Motion on the Industrial Organisation and Development Order.
In the afternoon—
Further progress with the Committee stage of the Finance (No. 2) Bill.
Mr. Heath: The Leader of the House will recall—indeed, it was mentioned again yesterday—that just before the Recess he promised a statement about Aden and said that there would be a full debate upon it. Can he now tell us when the statement will be made, and when the debate will take place, because of the urgency of both?
Secondly, can the right hon. Gentleman assure us that there will be a debate on the Army reorganisation scheme?
Mr. Crossman: On Aden, I hope to make a statement in my next week's business statement. I am bearing it in mind. It is a question of timing. It was slightly affected by our debate yesterday.
I cannot give any assurance that the second subject which the right hon. Gentleman mentioned will be debated in the immediate future, but I will discuss it through the usual channels.
Sir G. de Freitas: In considering whether to find time in future for a debate on the work of the Council of Europe, will my right hon. Friend bear in mind that the Government make more use of Council of Europe Conventions than all but three of the member States and have the worst record for providing Parliamentary time for debate?
Mr. Crossman: I will bear this in mind, but I would remind my hon. Friend that the Finance Bill will be discussed in the immediate future, and I see no opportunities in that time for that kind of debate.
Mr. David Steel: In the event of the Medical Termination of Pregnancy Bill not completing its Report and Third Reading stages in the private Members' time available tomorrow, will the right hon. Gentleman consider giving some

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time to enable the House to complete its deliberations?
Mr. Crossman: This matter has been under consideration and the Government have decided that, if the proceedings are not completed on Friday, they are prepared to give limited time for this, although I must make it clear that this in no way affects the Government's neutrality to the substance of the Bill. This is solely concerned with the House of Commons having spent so much time that we think it vital that we should come to a decision one way or another. On our side, I do not think that my right hon. Friend the Patronage Secretary will be giving any advice to anyone how to vote.
Dr. David Kerr: Further to that consideration, what hopes can my right hon. Friend offer of further progress on the Sexual Offences (No. 2) Bill?
Mr. Crossman: The Government will adopt a very similar attitude to that Bill, on which a great deal of time, also, has been spent, and on which we hope a decision can also be reached.
Mr. Burden: Before the Recess, the right hon. Gentleman undertook to consider the possibility of early debates on the very important Reports of the Little-wood and Brambell Committees. Can he now make any announcement about the dates or the possibility of having these debates in the near future?
Mr. Crossman: I would repeat to the hon. Gentleman that I do not foresee this in the immediate future. Next week and the week after we will be concerned predominantly with the Finance Bill, and there will be limited time for debates on other subjects.
Mr. Hector Hughes: Will my right hon. Friend find time at long last for my Motion No. 510, about sailors returning from sea to visit their families, realising that Sir Francis Chichester is not the only sailor returning from sea?
[That this House is of opinion that for social, family, economic and other reasons the withdrawal by British Railways of the cheap fare railway vouchers hitherto available to seamen and their families is wrong as it frustrates family re-unions, deprives British Railways of fares, diminishes British Railways income and
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now calls upon Mr. Chancellor of the Exchequer and the Minister of Transport, by legislation or otherwise, to restore to British seamen and their families the relevant facilities which they have hitherto enjoyed.]
Mr. Crossman: I appreciate to the full that my hon. and learned Friend now has a topical side to his Motion and I will certainly bear it in mind.
Mr. Sandys: In view of the very unsatisfactory answers given by the Foreign Secretary today on Rhodesia, would the right hon. Gentleman arrange for an early and full statement to be made about the progress of the operation of sanctions and the prospects of resuming negotiations?
Mr. Crossman: I do not accept the first part of the right hon. Gentleman's question, but I will certainly put his point to my right hon. Friend the Commonwealth Secretary when he returns from Canada.
Mr. Newens: When will the Order dealing with the siting of a third London airport at Stansted be debated? Will there be any delay in the placing of the Order as a result of the legal action initiated by Essex County Council?
Mr. Crossman: I have consulted my right hon. Friend about this. The position is not wholly clear, but I could possibly make a statement next week if my hon. Friend puts the question again.
Mr. Peyton: Would the right hon. Gentleman arrange for a debate on the validity of public inquiries, in view of the way in which the recent one on Stansted has been outrageously flouted by the President of the Board of Trade?
Mr. Crossman: I do not want to go into the substance of affairs, but Ministers have a duty to make up their minds after an inquiry and I see no question of something being flouted. I would rather that we waited. The matter is now, I think, sub judice, and we should leave it until it is clearer.
Mr. Pannell: Is my right hon. Friend aware that there will be general satisfaction on both sides of the controversy that the Government will take steps to give enough time to finish the controversy on the Medical Termination of Pregnancy Bill this Session? It is obviously a matter

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of great social importance. Would he understand that both sides of the case want the matter settled on its merits and not just through time running out or a mere Parliamentary stratagem?
Mr. Crossman: That was very much the Government's motive in deciding to give this matter time.
Mr. Kirk: Coming back to the subject of Stansted, will the right hon. Gentleman's statement next week cover only the legal aspect of the case? Will the Attorney-General be able to give the House some advice about what measures hon. Members may now take to pursue the interests of all their constituents?
Mr. Crossman: My statement will not concern the legal aspects, but only the possibility of debate in the House.
Mr. Winnick: Has my right hon. Friend any further information to give about a debate on colour discrimination, the P.E.P. Report and the need to extend the Race Relations Act, to which he made some reference just before the Recess?
Mr. Crossman: I cannot give an assurance about a debate on this subject in the immediate future.
Sir G. Nabarro: Whereas Wednesday morning's business, the Gas (Borrowing Powers) Order, is a relatively minor Order, what are the right hon. Gentleman's plans for a debate on the fuel and power matter of overwhelming importance, the increase in electricity charges of 10 per cent. and—including Coventry—of 15 per cent. promised in the Midlands?
Mr. Crossman: I am sure that my right hon. Friend will be relieved to hear that the hon. Gentleman considers that Order to be a minor matter, as it will no doubt mean that the discussion will be short. There will be an opportunity on a later Order to discuss electricity as well.
Sir Knox Cunningham: Now that Nasser is again breaking international conventions, when will we have the debate on Suez which the right hon. Gentleman promised?
Mr. Crossman: When we were debating the Adjournment for Whitsun, I said that the question of when we had the Suez debate was very much at the dis-
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posal of the House, and that I thought it was possible that we might await the publication of the book on Suez. I do not think that events lately have made any difference to the desirability of the debate.
Mr. Malcolm MacMillan: Has my right hon. Friend considered the terms of Motion No. 514, signed by nearly 150 hon. Members, on the violation of liberty in Greece?
[That this House, reaffirming its enduring friendship for Great Britain's gallantally against Fascism, the freedom-loving people of Greece, expresses its abhorrence of the brutal military mutiny against parliamentary and other democratic authority, the forcible seizure of Premier Canellopoulos and other political party leaders and the suppression of the free Press and freedom of speech and assembly on the eve of the elections; warns the rebel leaders against making any attempt at a violent or otherwise arbitrary solution in Cyprus; reminds them of Greece's binding democratic obligations under the North Atlantic Treaty and her ratified commitment to honour the Universal Declaration of Human Rights; would condemn any use of British-supplied or North Atlantic Treaty Organisation arms or equipment in the suppression of popular constitutional activities and expression; and urges a full return forthwith to civil democratic government and the holding of free elections, conducted under just procedures and the auspices of a caretaker government declared acceptable by the free decision of the elected Parliament.]
Will he give time for a short debate, so that the House can express its view before this evil régime is consolidated and democracy finally swept under the carpet, under the shadow of other events which have shaken the world outside Greece?
Mr. Crossman: My hon. Friend will be aware that, in the debate on the Whitsun Adjournment, a number of my hon. Friends and I expressed our views on the same subject. I see no opportunity of a debate in the near future.
Sir T. Beamish: Since the Minister responsible for the conduct of the Common Market negotiations is, unfortunately, a member of another place, will the right hon. Gentleman now answer

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the question which the Foreign Secretary so obstinately refused to answer and say which Minister will make regular progress reports to this House?
Mr. Crossman: If I did so, it would be a violation of business question time. I am discussing next week's business.
Mr. John Lee: On the subject of Rhodesia, is my right hon. Friend aware that many of us on this side are anxious to debate the progress of sanctions? Will he bear this in mind when fixing the timetable for the near future?
Mr. Crossman: It would not be candid if I did not tell the House that, in the next week or fortnight, we will not have time, at least not Government time, for that kind of debate. There will not be many Supply days available during that time either.
Mr. Biffen: When do the Government propose to publish a Bill incorporating their proposals for controlling prices and incomes from July onward, and when is the Second Reading of that Bill expected?
Mr. Crossman: I can only tell the House that publication will be next week.
Mr. Raphael Tuck: The Brambell Report gets dustier and dustier and my right hon. Friend makes certain promises about a debate in the not too distant future. Can we have a debate before we are all poisoned by the new methods of factory farming?
Mr. Crossman: I cannot go beyond what I said earlier. Part of the subject will, it is hoped, be covered by legislation in the not too distant future.
Sir F. Bennett: Further to the point made by my hon. and gallant Friend the Member for Lewes (Sir T. Beamish), surely the hon. Gentleman is being unfair to the House. There is nothing improper at all in his now saying when a statement will be made and which Minister will report on the regular progress of the Common Market negotiations? If it cannot be made today, can he at least say when that statement will be made?
Mr. Crossman: I think that I heard my right hon. Friend the Foreign Secretary say that, if the question were put down, it would be answered in the normal way.
Mr. Patrick Jenkin: While I do not wish to engage in disputations with my
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hon. Friend the Member for Worcestershire, Siuth (Sir G. Nabarro), may I ask the right hon. Gentleman to accept that many of us on this side do not regard borrowing powers Orders as suitable for morning business? Would he confirm that he does not regard the Order for next Wednesday as a precedent for similar matters?
Mr. Crossman: I will reflect on this, as I am always ready to reflect on what we should or should not put down for the mornings, but I should have thought that this was a suitable matter for discussion in the morning.
Mr. Maxwell: Will my right hon. Friend provide time for a debate about the recent disgraceful behaviour of the Chinese towards our diplomats in Peking, so that we may express our disgust at this sort of barbarious behaviour towards our representatives?
Mr. Crossman: I am very much aware of the strength of feeling that exists on this subject, but I do not think that I could give an assurance that we will be able to debate it next week or the week after.
Sir C. Osborne: Since the Government's rigid wages policy will come to an end in eight weeks' time, and both trade unionists and employers want to know what the policy will be when it comes to an end, will the right hon. Gentleman say when a statement will be made and whether he will find time for hon. Members to discuss this problem, which is of more interest than anything else to the industrial workers of the country?
Mr. Crossman: I thought that I made it clear in answer to a previous question that the new Bill will be published next week. No doubt the Second Reading of that Bill will give hon. Members an opportunity to discuss these matters.

HONG KONG (DISTURBANCES)
The Minister of State for Commonwealth Affairs (Mrs. Judith Hart): I wish to make a statement on the recent disturbances in Hong Kong.
The course of events was as follows. An industrial dispute in two factories producing artificial flowers led to minor disturbances during picketing on 6th May.

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But what began as a genuine labour dispute then changed its character on 11th May. It was taken up and exploited by local Communists with the aid of hooligan elements, some of whom were paid. Organised demonstrations were mounted as a direct and deliberate challenge to the authority of the Hong Kong Government. In some cases these were orderly, but in others they led to disturbances involving police action. There has been open incitement to violence and to disaffection.
Up to 17th May the demonstrations were confined to parts of Kowloon, but thereafter they spread to Victoria, on Hong Kong Island. Processions, large gatherings of people, and the sticking of posters on public buildings, while unlawful, were tolerated so long as the demonstrators remained fairly orderly, although noisy. On 20th May, disorder and violence became part of the pattern of demonstrations, and it was necessary to disperse further unlawful processions and assemblies, but orderly groups of 20 were able to present petitions at Government House.
Throughout the disturbances the Hong Kong police were able to control the situation with the minimum of force. Firearms were used on only one occasion, when a constable over whom petrol had been thrown fired three revolver shots and wounded one man. The greatest restraint was exercised throughout by the police, despite extreme provocation. The Secretary of State and I have already paid public tribute to them in Hong Kong, and I do so again now. I would like them to know how much we admire their restraint in these very difficult circumstances.
In all, 36 police and 70 demonstrators were reported as injured. Of these, three police and 14 others were admitted to hospital, but have since been discharged. There was one death, that of a bystander who was killed by a stone, and 815 persons were arrested, of whom 65 have been released or acquitted. Of the remainder, 565 have been convicted, and 185 cases are pending. All those arrested are being dealt with by the normal processes of the law. The House may feel that these facts contrast somewhat with other reports which have appeared elsewhere, alleging, for example, that on one day alone
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"… at least 200 compatriots were killed or severely injured".
Since 22nd May there have been no demonstrations, but there have been a series of token stoppages. There has been widespread and forthright public support in Hong Kong for the measures taken by the Government to deal with violence, intimidation and hooliganism and to preserve order. The Governor has received messages of support from over 500 representative organisations. My latest information is that work at both the factories involved in the original labour dispute has now been resumed.
The House may wish to know that for some time now improvements in labour conditions have been under consideration in Hong Kong, and that I am in consultation with the Governor about changes in the labour laws, which, I think we all feel, would be timely. They include such matters as hours of work for women and young persons, and conciliation machinery.
For the future, we must hope that good sense will prevail. The Secretary of State and I are, of course, in close and constant touch with the Governor. There have been statements alleging that the Hong Kong Government have been acting out of motives of enmity towards China. I do not need to say that we, like all sections of opinion in Hong Kong, have sought, and will continue to seek, friendly relations with China. But the Government of Hong Kong have the duty to maintain peace, order and good government there, for the benefit of all sections of the community, and we have given them clear assurances of our complete support and determination to fulfil our responsibilities in Hong Kong.
Finally, I want to pay tribute to the calm and courageous leadership during these difficult times of the Governor, Sir David Trench, to the ability and determination shown by the whole Hong Kong Administration, to the spendid behaviour of the police and to the spirit of the people of Hong Kong generally.
Hon. Members: Hear, hear.
Mr. Maudling: My hon. Friends and I wish to be associated with the tribute so rightly paid by the hon. Lady to the Governor and others for the remarkable job they have done in difficult times recently in Hong Kong and we would

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certainly like to echo the hope that good sense will prevail. Will she confirm that the processes of the law in Hong Kong and the proper dealing with these difficult circumstances will not in any way be affected by external pressures?
Mrs. Hart: I think that it will have been clear, from events of the last week or 10 days, that for all those arrested for various offences during the disturbances the perfectly normal processes of the law were followed in reference to the timing of their being brought to court and in every other aspect of the way they were treated. In other words, everything that would normally occur is occurring.
Mr. James Johnson: I thank my hon. Friend for dealing with this matter on a factual basis and I, too, join her in expressing admiration for what the police have done in Hong Kong and all down the line. Is it not a fact that the Government and the Governor have been asked for the last 12 months to do something to alleviate the economic conditions as well as the working conditions of trade unions in Hong Kong? Is it not a fact that if the Chinese people in Hong Kong were given more participation in their affairs, if not in the Executive Council then in other ways, such as the Municipal Council, and were allowed to have some say in what is happening, some of this mischief would be stopped at the source?
Mrs. Hart: As my hon. Friend may know, the aspect which he is raising was very fully covered in the Adjournment debate initiated by my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) not long before the Whitsun Recess. At the moment a report on local government in Hong Kong is being studied by all sections of opinion in Hong Kong. I expressed my views about that during the Adjournment debate, although I believe that this matter is not directly related to the occurrences of recent weeks.
Mr. A. Royle: I congratulate the hon. Lady on having made her statement. All hon. Members will join her in the tribute she paid to both the police and Government of Hong Kong. Will she give an assurance that she will resist any requests made by hon. Gentlemen seated behind her to involve the United Nations in what is happening in Hong Kong and will continue to give full support in the weeks
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ahead to the Hong Kong Government in their efforts to deal with hooliganism and demands made by Peking? Can she say what protests have been made to the Portuguese Government regarding the hooliganism against our Consul in Macao which took place last week?
Mrs. Hart: A number of the points raised by the hon. Gentleman are really for my right hon. Friend the Foreign Secretary. In so far as he discusses the question of resisting hooliganism in Hong Kong, I have made it clear that it is the intention of the Government here and in Hong Kong to take whatever steps need to be taken to preserve public order in Hong Kong.
Mr. Ogden: Would not my hon. Friend agree that the disturbances in Hong Kong after 11th May were principally politically motivated; that they were closely related to political demonstrations in Peking, Shanghai and Macao? Will she take this opportunity to express the admiration of the House for the servants of Her Majesty's Government in Peking, Shanghai and Macao?
Mrs. Hart: I agree with my hon. Friend that the original labour dispute gave way to something in which there was indeed a great deal of political motivation. We must bear in mind here that there are ideological debates going on about such matters as the cultural revolution among the local Communists in Hong Kong. I have found, as my hon. Friend has obviously found, a number of interpretations here about events in Hong Kong which have been very interesting indeed and I think that many of the interpretations have been considerably relevant to what we know has been happening.
Mr. Thorpe: I agree with what the hon. Lady has said about the police in Hong Kong, but would she not agree that whatever may have been the external political influences that arose, there are two causes of the frustration? First, there are appalling housing conditions in places like Lion Rock town, the Walled City and Aberdeen, whatever may have been the housing achievements of the past?
Secondly, there is the fact that in a British Colony of 4 million, not a single, solitary soul has a vote, save for 10 members of the town council. If direct

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elections, for cold war reasons, are impracticable, could we not move toward some form of indirect elections?
Mrs. Hart: This is where it is of the utmost relevance that we get the opinions of representative organisations and individuals in Hong Kong on proposals now under consideration for changes in local government. This would introduce much of the kind of thing which the right hon. Gentleman has in mind.
May I make one thing quite clear. There is no indication, paradoxical though it may seem, that either concern about the degee of democratic representation in Hong Kong or about the working conditions have been among the motivations at this time. They may be a part of the deep background, but there is no indication that it has been at this time anything other than what my hon. Friend has said, a degree of political motivation, arising mainly from the ferment of ideas that is taking place in that part of the world.
Mr. Sandys: Will the Minister tell us to what extent available information suggests that any of this trouble was instigated by the Government in Peking or other authorities in Communist China?
Mrs. Hart: All of our indications are that the origins were in Hong Kong. Local Communists in Hong Kong took opportunities which they saw arising from a genuine labour dispute. Certainly, there was later official Chinese Communist organisational involvement. For example, the Bank of China was one of the headquarters of Chinese propaganda, but in the early stages, as far as we can see, although it is very difficult to know precisely, there is no doubt that the origins were among the local Communists in Hong Kong.
Mr. Maxwell: Would my hon. Friend consider that, whereas the present manifestations and demonstrations were only a try-out, if she and her Department will do nothing to reorganise local government to enable the people, through political expression, to support the Governor and orderly government, we are likely to land ourselves into the kind of trouble which we may not be able to hold without a considerable amount of bloodshed and threat to the peace of the world?
Mrs. Hart: Without discussing the merits of the arguments that my hon. Friend has put forward, I would counsel him to read the Adjournment debate of a month or so ago, because, as he will see there, I said very clearly that we welcomed the publication of the report of the local government inquiry in Hong Kong. We are now waiting to see what the local reactions are, and are very much hoping that something can be done along those lines.
Sir D. Walker-Smith: Can the hon. Lady say what steps are being taken to prevent any repetition of the dangerous and improper use of the headquarters of the Communist Bank of China for incitement, following the occasion on which it evidently did much to increase the difficulties of the police and the authorities, to whom I would like to join in paying tribute?
Mrs. Hart: May I say that I know how very much the tributes that have been paid to the police and to the Governor, on both sides of the House, will be appreciated in Hong Kong.
As to the involvement of the Bank of China, the Governor has certain powers to deal as he thinks best with a matter of this kind. One of the most effective things that he did was to counter the propaganda from the Bank of China by what he called "light-hearted Chinese music". We must leave it to the Governor to exercise his discretion, knowing that he has powers to do whatever is necessary to be effective.
Mr. Fletcher-Cooke: Would the hon. Lady, besides stimulating further legislation in the labour field, have a look at the educational and youth services? Is she aware that a great number of the rioters leave school at the age of 12 and that, by existing legislation, they are not allowed to work until they are 16? Therefore, for four years they have nothing to do and nowhere to go. Is she aware that this is an expensive situation which requires attention, perhaps even more so than the labour situation?
Mrs. Hart: This is a very serious problem, as is housing, which the right hon. Member the Leader of the Liberal Party mentioned. We have in Hong Kong the situation of an exploding population, in which tremendous achievements have

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been made in the last few years, but where, even so, it is difficult to keep up with the needs. Certainly, one of the needs is for more educational opportunities for secondary school children. It is a question of buildings and teachers, as elsewhere.
This is a very general problem in many parts of the world, where one has the effect of a population explosion. The Government in Hong Kong are very much aware of this and are doing their best. I think that they are achieving some remarkable success in trying to minimise this problem.
Sir F. Bennett: While welcoming the Minister's firm adherence to the view that these were politically motivated disturbances, can she give an assurance that this country will not tolerate the kind of humiliating demands and actions earlier forced on the Portuguese in Macow to be perpetrated upon our officials serving abroad, especially when they are only doing their duty?
Mrs. Hart: If the hon. Gentleman reads my statement, he will see that I said very clearly that we intend to fulfil our responsibilities in Hong Kong. I am sure that, as I said, good sense will prevail and that the situation that he has described will not be one of the facts that we have to face.
Mr. Blaker: As regards the increasing population, to which the hon. Lady has rightly referred, would she not confirm that as well as an increasing birth rate the population is going up because of substantial immigration? Does this not suggest that conditions are not too bad?
Mrs. Hart: This is certainly one of the factors in the population growth. Obviously, one can always select those conditions about which more needs to be done faster. Equally, it is fair to point out how well the Hong Kong Government have dealt with the enormous problem. We have to keep a sense of proportion in making our judgment.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. I must protect the business of the House.

BILL PRESENTED
  BERMUDA CONSTITUTION
  Bill to provide for the grant of a new constitution for Bermuda, presented by Mr. Bowden; supported by Mr. Richard Crossman, the Attorney General, and Mrs. Judith Hart; read the First time; to be read a Second time tomorrow and to be printed. [Bill. 263.]

FINANCE (No. 2) BILL
Considered in Committee.
[Sir ERIC FLETCHER in the Chair]
4.8 p.m.
The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move,
That the Bill be considered in the following order: Clause 1, Schedules 1 to 5, Clauses 2 to 5, Schedules 6, 7 and 8, Clause 6, Schedule 9, Clauses 7 to 19, Schedule 10, Clauses 20 to 23, Schedule 11, Clause 24, Schedule 12, Clauses 25 to 30, Schedule 13, Clause 31, Schedule 14, Clause 32, Schedule 15, remaining Clauses, new Clauses, Schedule 16, new Schedules.
This Motion has been tabled to meet the convenience of the Committee. Its major purpose is to ensure that the Schedules of the Bill are considered immediately following the Clauses to which they relate. It means that we will be able to concentrate our minds upon one subject at one time, which is probably as much as most of us can ever achieve, anyway.
Mr. Joel Barnett: On a point of order. I had understood that we were to have a voluntary agreement, that there was to be a voluntary arrangement as to a timetable of the Bill. If there is any such voluntary agreement, perhaps other hon. Members of the Committee might be informed.
The Chairman: That is not a point of order.
Question put and agreed to.

FINANCE (No. 2) BILL

  Clause 1.—(TERMINATION OF SURCHARGE UNDER FINANCE ACT, 1961, s. 9, AND RELATED INCREASES IN DUTIES.)
  Mr. Terence Higgins: I beg to move Amendment No. 2, in page 2, line 7, to leave out from ' Act' to the end of line 13.
  The Committee will be aware that this Amendment seeks to change the Clause as it now stands and, in particular, to alter it with regard to renewal of the regulator powers. In moving the Amendment, we are effectively asking the Chancellor to justify the perpetuation of those powers. Ever since the regulator was introduced in 1961 the House of Commons has been fortunate in having
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  a number of illuminating debates which have customarily, though not always, taken place on the Question, "That the Clause stand part of the Bill," but on this occasion we felt for a number of reasons that it would be more appropriate to table an Amendment.
  The first reason is that the Clause is in a more complicated form than is normally used to refer to the regulator. The usual form is simply to renew the regulator powers, whereas this Clause does a number of other things. In particular, it consolidates the powers under last year's regulator.
  The second reason is that, as it now stands, the Clause gives to the Chancellor of the Exchequer somewhat greater powers than he had under the previous arrangements. Effectively, what he would have under the regulator if the Committee were not to accept the Amendment would be the right to increase or decrease Purchase Tax by 10 per cent., but this is 10 per cent. on an amount larger than it was last year, because the Chancellor of the Exchequer has meanwhile increased a number of Purchase Tax items by 10 per cent. Therefore, this is in some ways an extension of the regulator rather than a renewal.
  The third reason is very important. We must appreciate that the regulator is effectively a convenience for the Government. Without the regulator, if the Government felt, during the course of the following year, that it was necessary to make a change in the Purchase Tax, they would have to ask the House to pass new legislation to do so. We might well consider the regulator as a convenient arrangement for the Government of the day, and one of the reasons why it was introduced originally—
  Sir Gerald Nabarro: I should not like my hon. Friend to mislead any member of the Committee. It was ruled 10 years ago by Mr. Speaker of the day that Purchase Tax rates could be raised on the Adjournment of the House, for the precise reason that no new legislation is needed. It may be done by Treasury Order.
  Mr. Higgins: I am grateful to my hon. Friend, but my point is that if we are to give the Chancellor of the Exchequer the powers we are now considering it is right and proper that they should be debated

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  adequately and a reasonable justification given for them.
  First, I should like to clarify on the size of the regulator. There can be no doubt that the powers we are now asked to give are very considerable. The present Prime Minister, when shadow Chancellor of the Exchequer, described them as among the very largest powers that had ever been taken by a Chancellor of the Exchequer in time of peace. I should be grateful to the Financial Secretary if he would clarify precisely the sums involved.
  I pointed out last year that the taxation affected was divided into five main groups. The figures given last year of the estimated yield in 1966–67 were alcohol, £646 million; tobacco, £1,030 million; oil and petrol, £830 million; Purchase Tax, £670 million; and other duties, £20 million. That made a grand total of £3,200 million. Ten per cent. of that sum, plus or minus, would come to £320 million. In his reply—admittedly rather late at night—the Chancellor said that I had somewhat over estimated the amount and that it was something under £200 million. I appreciate that the right hon. Gentleman could not then give precise figures, but with this sort of difference between our estimates we must know exactly what the amounts of the individual components are. I should be grateful for an accurate reply.
  There is also a drafting point. I raise this question, because although I am sure that it is in order, these things sometimes do not go as well as they might. For example, Clause 20 appears to correct one of last year's drafting mistakes. I will be grateful if the Financial Secretary can confirm that although the regulator is to renew the amount of the duties that have gone up in the interim and the whole thing is embodied in a single Clause, there is no problem in renewing the full 10 per cent. on the increased amount.
  Section 9 of the parent Act of 1961 very clearly stated that the purpose of the regulator was to influence the economy, if it should appear expedient to the Treasury to do so, with a view to regulating the balance between supply and demand in the economy; in other words the relationship between the real resources or capacity or the United King-
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  dom economy and the demand for these resources. It is true that for a very long time the purpose of the Government has been not merely to raise sufficient taxes to meet the expenditure which the Government will incur, but to adjust demand to resources and, through the fiscal mechanism, to attain a number of other objectives such as full employment, restraint of inflation, and so on.
  4.15 p.m.
  But the Committee should be clear that though that is the ostensible purpose of the regulator, there should be some limits on its use. There would be a case, for example, for the regulator to be used if some emergency arose during the year which could not reasonably have been foreseen or, alternatively, to smooth the passage of the economy if there would otherwise be some sudden change in the level of taxation, or in the level of demand on the economy. On the other hand, I suggest that it is not right to use the regulator to make increases or decreases in taxation that could properly have been included in the Finance Bill and debated on the basis of the fact that they could be foreseen.
  We very definitely raised this point last year in the debate on the regulator, when we pointed out that it was likely that the economy was becoming overheated and that the effect of the Selective Employment Tax in taking steam out of the economy would be deferred. The Chancellor of the Exchequer then felt that all he needed was renewal of the regulator powers, and he saw no reason to take action through the Finance Bill. We had that debate in June, and within a matter of weeks the right hon. Gentleman produced the July measures and introduced the use of the regulator to control the economy.
  It would be wrong for us to feel that the regulator is an instrument to be used to meet foreseeable circumstances. Rather, it is an instrument to be used only to smooth the passage of the economy during the year or to meet unforeseen emergencies. For this reason, we very definitely believe that today we should have an indication of what the Government think the course of the economy is likely to be over the next year or 18 months.

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  There has been increasing pressure on the Chancellor of the Exchequer to publish explicitly the various components of his forecasts. I hope that on this occasion he will see fit to go a stage further in improving the amount of information we have. This need has been explicitly recognised. The Financial Times recognised it shortly after last year's debate on the regulator, when under the heading:
  "Squeezing the Facts from the Chancellor"
  Mr. Sam Brittain advocated full publication of official forecasts. Other people—for example, Mr. Andrew Shon-field in the current issue of Encounter under the title "The Pragmatic Illusion"—attack the right hon. Gentleman's reluctance to give more information on his forecasts, while this week's edition of the Economist puts forward the same argument. If we are to decide whether the regulator ought to be renewed we ought to know what expectations the Chancellor has about the economy.
  The disadvantages of not doing this are very considerable. The Economist, in the article to which I have referred, points out that if this is not done there is a grave danger that, far from foreign opinion in regard to sterling being reassured, the fact that the Chancellor is not giving a coherent forecast leads to a mistaken view that sterling is not strong. This, I suspect, was somewhat the case at the time of the regulator debate last year. It is also true that the whole of Government thinking tends to be not in quantitative terms but in terms of vague generalities. Therefore, events arise which should have been foreseen where the regulator would not have to be used, but it has to be used because of the lack of quantitative analysis which with an explicit statement of the forecast, would have been able to be appraised by the public at large.
  Real resources are not considered, but only the monetary magnitudes. We are dealing with ordinary accounting concepts and a few figures here and there rather than with major forecasts. This is particularly true in the case of the regulator, where the Chancellor is given the option of using these enormous powers. The real reason is that the country has a right to know when taxes are being imposed,
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  particularly by the use of the regulator, what estimates the Government make about the authority for imposing taxes and the need to impose taxes to maintain the economy in a state of balance.
  Again, as the Economist points out, the Revenue estimates presented to Parliament are necessarily dependent on the Government's estimate of what the money income will be. If these are made explicit it is unlikely that unforeseen events will occur which could have been avoided. I hope that we shall have a comprehensive answer, because we cannot hope to have the regulator balancing supply and demand if the Chancellor is not prepared to say what he thinks supply or demand are likely to be.
  The counter arguments are surely false. The first is that perhaps the Chancellor's estimate will turn out to be wrong. That is quite possible, but it does not appear to inhibit him. I shall not mention the National Plan again,but it did not seem to inhibit the framers of the Plan or the Chancellor in giving the Budget out-turn. This is a false reason for saying that he should not publish forecasts. The Chancellor forecasts many things, some of which turn out to be right and many wrong, but that is not a reason for not setting out forecasts in a coherent way.
  The second reason is that if a forecast of a wage increase is given it will encourage wage claims, but the Chancellor has already suggested what the change in wage rates is likely to be. None of these is really a coherent reason. Because of this, while we appreciate the right hon. Gentleman's attachment to the "Silent Service" and his nautical reference in his Budget statement to "Steady as she goes," he should consider being rather more forthcoming in this respect.
  One thing needs particular attention. We have to consider the need for a coherent view to be presented by the Chancellor. Hitherto, he has been much more forthcoming than some previous Chancellors, but the statements he has made have tended to be rather piecemeal. Individual figures have been forecast and they have not always been for the same particular period. The essential point is that we need to know all the variables, because otherwise we cannot work out whether the forecast as a whole hangs together.

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  The crucial element is the forecast of consumption expenditure, for two reasons. The first is because this is much the largest element of demand for which the Chancellor may plan for using the regulator. Secondly, it is because it is the element of demand which the regulator affects. To get an overall picture we need to analyse the whole pattern of demand, consumption, investment, either current or capital, and Government spending and exports.
  In winding up the Budget debate this year, the Chancellor, I think, was genuinely attempting to be more forthcoming. He said that he had been asked to give a forecast of incomes. It would be more accurate to say that he had been asked for a forecast of incomes and consumption. It is the relationship between these elements which is vitally important. One makes a first estimate of the gross national product and works out what it means in terms of personal incomes and relates that to disposable income and to a price index and real disposable income. This, after allowing for saving consumers' expenditure, gives the final consumption. This then gives the gross national product. Once one cuts out one part of the circle it is impossible to tell whether the odd statements which the Chancellor makes from time to time giving the individual components of demand are consistent and whether they hang together.
  Therefore, it is very important indeed that we should have a figure for consumption both because it is the consumption which will be directly affected by the regulator if the Chancellor uses it, and secondly, because consumption is the main element in the demand which the regulator is designed to control either upward or downward. In this respect, we should give some attention to individual components. The Chancellor has always been concerned only with the overall picture, for example, the question of motor car sales on which I know the hon. Member will be particularly interested—
  Sir G. Nabarro: Your hon. Friend, I hope.
  Mr. Higgins: Yes.
  Turning from consumption to the elements of demand we should consider also
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  the position concerning investment. This is an extremely gloomy picture. It seems that between 1966–67 the fall in real terms will be something like minus 10 per cent. in manufacturing, distribution and services. We need to know what the expectations are in this respect. The pattern is certainly very sad indeed. Again, the Chancellor has been more forthcoming. In a Written Answer on 16th February he gave some information which suggested that the change in public expenditure investment would be plus 8½ per cent. for 1966–67 and again plus 8½ per cent. in 1967–68. Nevertheless, the overall picture will be something like plus 2 per cent. over 18 months, when public expenditure is getting an increasing emphasis as against private expenditure.
  I turn for a moment to supply because, as I said, the regulator is designed to limit the resources of the economy or supply to the actual demand for those resources. We are still very concerned about the Chancellor's estimate of a 3 per cent. growth rate. I do not think that the Chancellor met this point in his winding-up speech on the Budget. He has said that he expects to see a 3 per cent. growth rate in capacity between December, 1966, and December, 1967, but he has not given us the figure for the year on year.
  4.30 p.m.
  In winding-up the debate on the regulator last year, the Chancellor suggested that I should have due regard for arithmetic. The relationship between these two is, I imagine, merely a matter of arithmetic, but we need some facts to go on. Therefore, I should be grateful if we could be told what the year on year figure for growth will be. Unless we are told this figure, we cannot tell whether the Chancellor's estimate, for which he has given us no real foundation, is consistent with those other outside forecasts which suggest that the rate of growth in capacity will be very much less.
  The Chancellor's December to December figure of 3 per cent. compares with the figure of 1·8 per cent. which the National Institute published in its last review—a difference of about £300 million. We cannot decide whether to give powers of the kind contained in the Clause, and which we seek to amend, unless we know where we are to a closer

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  degree than £300 million here or there. It is, moreover, £300 million of the taxpayer's money. Therefore, I hope that the Chancellor will tell us what the year on year figures are and whether he has any reason to suppose that his forecast has changed since that time.
  Finally, I think that we need to decide, in considering whether to accept the Amendment, what the circumstances are in which the Chancellor will actually use the regulator and in response to what indicators he would propose to do so. The country is at present in an extremely difficult situation, which was summed up, perhaps, in the concluding paragraphs of the London and Cambridge Economic Bulletin for March, 1967 in this way:
  "Clearly, he"—
  that is, the Chancellor—
  "need not now add to the overall tax burden to choke off an excessive growth of demand. Equally he cannot, in our view, reduce taxes in any appreciable way without the danger of stimulating a more rapid growth of demand than the external balance (and our creditors' good will) can sustain. In spite of protestations to the contrary, we see no evidence that the existing policies and practices have as yet achieved any significant improvement in our underlying rate of growth of productivity or in our propensities to import and our ability to export."
  It would seem that the Chancellor is in a dilemma. It is right that we should ask this question: in what circumstances, if he cannot go up and he cannot go down, would he expect to use the regulator during the period of the next year or 18 months? If unemployment continues to rise, it would be a reasonable assumption, judging from previous Chancellors, that he would use the regulator to reduce Purchase Tax and to increase consumption. Or, if the balance of payments seemed less good to him than he was hoping, he might take measures which would increase taxation by use of the regulator and, therefore, divert resources, as he might hope, to the export markets.
  But what will the Chancellor do if these two things happen together? Does he propose to put the regulator up, or does he propose to put the regulator down? At this point, we need to know very definitely what the Chancellor's objectives are. The general objectives of the regulator are set out in the parent Act. We are now in a situation where
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  we are not at all clear what the Chancellor's objectives are. Has he, as the popular Press and hon. Members have suggested in the past, been converted completely to the Paish doctrine, and does he propose to use the regulator to achieve the level of unemployment which has been advocated by Professor Paish? If this is so, when we come to consider the Amendment we need to have a clear statement upon this point.
  Moreover, what does the Chancellor propose to do in using the regulator as to the relationship between private and public investment? He told us in his Budget speech that, if by any chance private investment should increase, he would rein back public expenditure. The fact of the matter is that the right hon. Gentleman will recognise that it is extremely difficult to rein back public expenditure in the short run. If the Chancellor finds in the next year that private expenditure increases and that public expenditure cannot be reined back, does he propose to use the regulator to reduce consumption and, therefore, provide a gap which can be used to increase investment; or does he propose to use some other means? The Committee has a right to know whether the Chancellor proposes to use the regulator in circumstances where he finds that private investment is rising.
  I have asked the Chancellor a great many questions, but I do not think that it is unreasonable, when we are asked to approve a measure of this kind, and when we are considering an Amendment of this kind, which suggests that the Chancellor should not have the use of the regulator, that the Committee should examine very closely indeed what the Chancellor's views are, both as to his objectives and as to the circumstances in which he would use the regulator, and particularly what his views of the economy are. I hope that we shall have estimates from the Financial Secretary on the Chancellor's outlook for the future, and that we shall also have answers to the other various questions which I have asked, before we come to consider whether the Committee should or should not accept the Amendment.
  Mr. Barnett: The hon. Member for Worthing (Mr. Higgins) certainly made a meal of that. He started by telling us that one reason why he and his right

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  hon. and hon. Friends have tabled the Amendment is that the regulator was used last year. This is a very weak argument, because the small difference in percentage has no bearing whatsoever as regards the use of the regulator on demand. It is hard to understand why right hon. and hon. Members opposite have tabled the Amendment other than that it is probing or searching, or whatever term the hon. Gentleman cares to use. If he really means to press it to a Division, I shall find it extremely difficult to understand. Then it will begin to look as though the Opposition are standing on their heads the arguments used by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) when he introduced this measure.
  The crux of the argument on the regulator was put rather better by the hon. Gentleman from the Front Bench last year, when he said this:
  "… before the Committee approves the Clause it should look at the question in the light of what the economic situation is likely to be, because we should grant this power only if we consider it justified in the light of what is likely to happen both to the level of demand and resources in the United Kingdom."—[OFFICAL REPORT, 16th June, 1966, Vol. 729, c. 1831.]
  The hon. Gentleman made that point very clearly last year, because it was a shorter speech made late at night.
  The crux is whether we should grant this power for that reason, or whether we should have the additional regulator—the Purchase Tax and excise regulator—because it is a useful measure, as was outlined by the right hon. and learned Member for Wirral when it was first introduced.
  I will take, first, the argument as to whether the hon. Gentleman is right in asserting that we should grant this power to the Chancellor only if the economic circumstances are such as would seem to warrant it. The hon. Gentleman and others opposite could congratulate themselves on the fact that they were right when they agreed not to vote against the measure last year because, they said, they knew that the Chancellor would need to use it. They were right in forecasting that the regulator would be used, but that is not exactly the same as saying that the fact that it was used is right. Nor does it mean that the Opposition have some
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  unique powers of forecasting, merely because they were able to forecast one or two months ahead of the debate which we had last year. It would take a much wiser man or woman than many here in the Committee, or, indeed, in the country, to forecast the pattern of demand and the general economic picture over the next 12 months, which is what the hon. Gentleman was waxing so eloquent about.
  When the hon. Gentleman says that we should grant the power to use the regulator to the Chancellor, and that it should be used, only if there are unforeseen circumstances, I immediately ask: foreseen or unforeseen by whom? Who is able to foresee what circumstances are likely to be in the next 12 months? As I say, there are very few who could foresee whether we are likely to have to use the regulator, not that it is such a powerful weapon or a great power which we are giving to the Chancellor, although, as I shall try to show, it has considerable importance.
  One can hazard a guess about what might happen in the next 12 months. Very many hon. Members and forecasters outside are keen to hazard guesses about what will happen. They are likely to be right as often as not, perhaps three times out of four or even nine times out of ten. Even an uninformed person could hazard a guess and be right about the use of the regulator. In a sense, it is an even chance whether we use the regulator or not. It is rather like guessing whether something is Stork or butter; without even tasting it, one has an even chance of being right.
  One can guess—and many do—whether we are likely to have to use the regulator, but it would be a foolish man who said definitely that we should or should not need to use it in the next 12 months. It would, therefore, be most unwise to exclude use of this power from the Chancellor from the standpoint of our overall control of the economy. Guessing about the economy is a hazardous business. There are many factors apart from normal economic factors, which are difficult enough in themselves. When one thinks of what effect there could be on our economy from the Middle East situation, the Hong Kong situation, the Common Market situation or the Nigeria situation, one begins to appreciate how difficult it is to foresee—and this is what the hon. Gentleman wants—whether we

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  shall have to use the regulator in the next 12 months.
  Mr. Higgins: As the hon. Gentleman will find when he looks at HANSARD tomorrow, he has misunderstood my argument. Among the several points I made, the one relevant to the argument which he is now raising is that, unless we know what the Chancellor's view is, we cannot tell whether he proopses to use it for something which is foreseeable, or, at least, which he foresees, or for something which he does not foresee.
  Mr. Barnett: I think that even my right hon. Friend would agree that what he foresees as likely in the next 12 months is not likely to be any better as a forecast or guess than most other economists' guesses. This is a serious point. I doubt that there are many people who could be certain. They may make a forecast, as my right hon. Friend and others have done, but there are few who could be so certain as to say, "I shall only use the regulator if such-and-such happens". That is really asking too much of any Chancellor, no matter how able, as I believe the present Chancellor to be.
  There is an important question here, a question more of principle. The hon. Gentleman referred to what was said in 1961 by my right hon. Friend the present Prime Minister, and reference was made to it last year as well. My right hon. Friend made a very important point on that occasion. Speaking of the regulator, he said:
  "But it oversteps the margins of the relation between the Government and the House in the matter of taxing power."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1641.]
  Should any Government have such powers at all? As the hon. Gentleman says, this is giving power to a Chancellor not to raise that amount of revenue, but to be able to do so quickly and very much more easily than he could otherwise.
  As to amount, the hon. Gentleman is quite right to get away from some of the obscurities we had last year, with all sorts of figures mentioned—£300 million, £200 million and £150 million. One understands some of the reasons for the differences. In the first place, the figure, according to the 1967–68 Financial Statement, is based only from last July, so it is not a whole year, and the figure is
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  only £103 million because tobacco was excluded. But what is more important is how much the Chancellor can raise by the regulator, the total amount which he can raise. My understanding is that he could raise about £360 million. I would very much like to know precisely what the figure is. The Committee is entitled to know, if we are to give this power for use of the regulator, just how much money is involved in it.
  4.45 p.m.
  The next question is whether we should give power to use the regulator so that action can be taken quickly and easily, or whether we should leave it so that, other than for Purchase Tax, on Excise matters the Chancellor would have to come to the House with a new Bill. Nowadays, although, in theory, it is a matter for the House of Commons to decide, in practice it is one decided by the party with the majority in the House, so perhaps there is no great difference between giving this power under the regulator and insisting on the Chancellor bringing in a new Bill. Nevertheless, although that may be so in practice, I do not believe that we should give this power lightly. There is always a problem in a democracy in striking the right balance between the powers which the Executive should have in controlling a complex economy such as ours and adequate safeguards for this Committee and the House of Commons.
  The majority party, in practice, ought not to give power to exercise the regulator too lightly or too easily to a Chancellor, but this is not an argument for not giving it at all. It is a dangerous argument, in spite of the way the House of Commons works in practice, to say that a Government, democratically elected, should not be given adequate powers to control the economy, and one of the useful weapons which any Government can have today is an additional power of regulator such as these provisions have perpetuated since 1961.
  I have recently reread the 1961 debates. Some very good and cogent arguments were deployed by Conservative Members at that time. I cannot help wondering whether the present Opposition any longer accept those arguments. There were arguments of principle as to whether the regulator should be given at all. The right hon. Gentleman the

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  Member for Birmingham, Handsworth (Sir E. Boyle), then Financial Secretary to the Treasury, and his right hon. and learned Friend the Member for Wirral both made a powerful case, in my view, for any Chancellor having this sort of additional power to control the economy.
  I am wondering whether the Opposition will now vote for their Amendment. The hon. Gentleman did not say one way or the other. If they were to vote in that way against the arguments which were presented so cogently in 1961, they would make themselves idiots in the process.
  Mr. David Howell: I agree very much with my hon. Friend the Member for Worthing (Mr. Higgins) that, if we are to make a clear and sensible judgment about the renewal of the regulator and this Amendment, we must give an airing to the question of the evolution of demand in the short and medium term, and press the Chancellor to be a little more explicit about the view which he takes.
  I do not go along with the hon. Member for Heywood and Royton (Mr. Barnett) in the rather tortuous argument which he put. It seems to me quite fair to say, "Let us at least have a general view about what would happen". No one expects the Chancellor to be 100 per cent. right, but it is a genuine asset in considering public policy and the development of business decisions in industry if we have a clear general view about what is likely to happen. Of course, it may well be overtaken by all kinds of events, but that does not destroy my hon. Friend's argument. Therefore, in examining the question of the regulator it is fair that we should look closely at the Chancellor's short-term strategy as it now stands in relation to the way he set it out a month or so ago at Budget time.
  Whatever the Chancellor's views about long-term economic strategy, the long term which we curiously never seem to reach under this Administration, he can hardly be happy about the way the short-term strategy he outlined in his Budget is evolving and about the background to the regulator. The unemployment situation remains extremely tricky and dangerous, and it looks as though unemploy-
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  ment may be rising above the deadline or ceiling of 2 per cent. that was laid down. That seems to me an undesirable trend in our economy and economic policy.
  Secondly, the export situation in the immediate short term, which is the relevant background to the use of the regulator and other demand controls, is not shaping up in the way some of the more optimistic forecasts from Ministers on the Treasury Bench indicated only a few months ago.
  Thirdly, as my hon. Friend rightly emphasised, there is the critical question of the steep decline in private investment, which is supposed to pick up next year but is at present falling very fast. It is difficult to over-estimate the damage to the sensitive plant of private investment which that does to the whole shape of the economy and the present trend.
  What is happening with this sharp decline in private investment is that the Chancellor is reducing the room in which the regulator or any other controls of demand in the short term can be used. One cannot just say that private investment will pick up again and assume that no damage will have been done. In the meantime the whole process of innovation is being slowed up, and processes and methods are not being installed that should be installed, which will have a direct effect on our export performance in the coming years.
  That is closely relevant to the question of how the regulator should be used and the trend of demand in the coming months. The estimate from the National Institute of Economic and Social Research is that in 1970 private investment will be running at a rate of only 12 per cent. higher than in 1964. That is a tragic commentary on all our efforts to increase the efficiency of the economy and private investment, the elbow room within which the Chancellor must operate and control the economy and use the regulators, including that which we are considering.
  That is the trend which the Committee will agree must be reversed, and there should be a measure of reflation. That was not the Chancellor's immediate judgment at Budget time, but the general hint which seemed to emerge from what he said, was that he looked forward in due

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  course to a measure of reflation. He said that he wanted:
  "… a steady run up to a higher rate of growth …".—[OFFICIAL REPORT, 17th April, 1967; Vol. 745, c. 205.]
  The question we still face today, and will face on each Amendment dealing with this kind of matter, is how we have that steady run-up to a higher rate of growth without running into another balance of payments crisis in the next few weeks or months.
  As we look at this judgment on the evolution of demand, we see that it is, as my hon. Friend said, a judgment and strategy based on some very fine arithmetic. I have very grave doubts, particularly when considering the regulator, whether we have the knowledge, statistics, skill or understanding in our economy at present to proceed on those fine arithmetical judgments in making our economic strategy. Basically what is needed—this is a crude and not a scientific judgment—is a big revival in private investment. That is the central point of an economic policy designed to increase efficiency, raise exports and achieve the other aims which hon. Members on both sides of the Committee are always outlining.
  The question before us in examining the regulator and its renewal is how to fit into the jigsaw of the existing components of demand that essential boost to private investment. This subject has been raised before in the House and we shall have to follow it through in the Committee. How do we fit the boost to private investment into the unfolding pattern of demand within the overall limit which the Chancellor has given us as his estimate of a 3 per cent. rate of growth of productive potential? These are essential and relevant questions to our judgment on the renewal of the regulator under the Amendment.
  We must again question, as did my hon. Friend, that 3 per cent. rate of growth of productive capacity. I accept the very important proposition that I read in the recent D.E.A. memorandum, "Future Work on Planning". The authors, from the Department of Economic Affairs, wrote:
  "The greater the growth of demand the greater will be the increase in productivity, because, for example, of greater economies of
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  scale and because a faster growth of demand will justify the installation of a greater number of up-to-date machines."
  That is an extremely important policy statement, or statement relating to policy, coming from the Department of Economic Affairs, and it is very relevant to the question of immediate development of demand and regulators and controls to be used on it. It is saying that higher demand as from now and a higher rate of growth of demand will lead to lower costs and more efficiency. That drives a coach and four through the whole concept of fixed productive potential, divinely ordained and brought down on tablets from Mount Sinai. It says that where Government operates on demand it will influence the productive potential or capacity of the economy.
  It would be unkind to harp on intellectual inconsistencies in the Government's economic policies at this stage, but I hope that less emphasis is put on the whole question of there being that 3 per cent. productive potential, the elbow room within which demand can be controlled and operated. That was the first point I wanted to make when looking at the question of immediate variations in demand in the coming months and the use of the regulator.
  Secondly, as my hon. Friend said, there is the whole question of how the components of demand will move, I have already mentioned private investment and I do not want to go over the whole range of others but to deal with the one where we are supposed to know exactly what will happen and where it has been said that we know roughly how it will unfold—the development of public expenditure. It is right in examining the use of the regulator and the Amendment that we should look fairly closely at that component. It may well be that if we can produce more sensible ideas in this sphere the elbow room for the Chancellor will be enlarged to that extent, and the need to run the economy in the continuous cliff-hanging drama of a sensitive touch here and a sensitive touch there will be correspondingly reduced, because I doubt whether we have the equipment or sensitivity to run an economy in that way.
  A precise estimate has been made of the growth of public expenditure for the coming year. Throughout the coming

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  debates the Committee should ask itself whether that component need really be such a fixed and given quantity and whether we must be resigned to the tremendous growth of public expenditure, whether it is something we must grin and bear because basically it cannot be controlled. If that is so, instruments such as the regulator must, of course, be given closer consideration. But if it is not so and we can see ways of varying public expenditure within the general growth of demand we should do so.
  That is the one real growth area in the picture of demand at present, it is the one area where demand is whizzing up. Unless we can make sensible suggestions on the cost of Government and the whole range of public expenditure we are dooming ourselves to the kind of economic policy which rely on the regulator.
  The Chairman: Order. I do not want to interrupt the hon. Gentleman's argument, but on this Amendment we cannot have a far-reaching debate on economic policy generally. The hon. Gentleman must confine his remarks to the effect of the Amendment, which is related to the renewal of the regulator.
  5.0 p.m.
  Mr. Howell: I accept your Ruling, Sir Eric. I was trying to argue that, in order to assess the background against which the regulator must be used, we must have some idea of the way in which it is thought demand will move and the way perhaps in which the different components of demand could move with various changes in policy. I accept, however, that I may have been wandering into areas beyond that, and I shall try and confine my remarks to the question of the Chancellor's short-term strategy, movements of demand and the renewal of the regulator.
  There is no doubt that the future trend of overall demand and the use of the regulator are much related to the question of the way in which different components of demand will move and, as I said in mentioning the cost of government and public spending, a major contribution could be made towards easing the situation in which the Chancellor has to operate, and, in particular, overcoming the conundrum of what to do about private investment—given that public ex-
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  penditure is rising faster—by a far more intensive and firmer policy in the public sector of cost reduction and management improvements than anything we have seen so far.
  I know that there are those who say that policy determines expenditure and that no great economies can be achieved in the public sector except by changes of policy, but I believe that we could achieve our existing public policies by considerable improvements in our management of the public sector of a kind which would mean significant easement to the pressure of demand and give more elbow room to the Chancellor in the operation of the regulator. We have just had a very interesting report on the management of local government.
  The Chairman: Order. The hon. Gentleman really cannot go into this. I have indicated to him the limits of the scope of the Amendment and he must now omit from the speech which he is reading those parts of it irrelevant to the Amendment.
  Mr. Howell: I will accept your Ruling, Sir Eric, and leave aside the questions which I wanted to deal with and which are relevant to the evolution of demand but are, as you rightly said, outside the scope of this debate.
  The Chancellor has decided on orthodox strategy, as he said last month. He will now no doubt feel that the regulator is part of the equipment he needs. He has propounded the doctrine of what I call the "sensitive touch"—constant intervention in the economy. No doubt he will be using the regulator as part of that doctrine. I believe that he will have the greatest difficulty, as have past Chancellors, in getting this fine arithmetic right.
  I believe that the central aim of economic policy and the renewal of the regulator should be seen against this background and should be to get out of the cliff-hanging atmosphere in which our economic policy has to be conducted. I believe that, if we looked both at the questions I raised earlier and at the overall components of public demand, particularly public sector spending, we should be in a better position to make a judgment on the regulator and the Government would be better able to take some

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  initiatives in economic policy and move out of the situation of masterly inactivity for which they are so spendidly equipped.
  Mr. Robert Sheldon: The hon. Member for Guildford (Mr. David Howell) is asking for a measure of reflation over the next few months. The Amendment, designed to remove the regulator, would remove not only the power to increase the revenue but the power to reduce it and thereby the power to initiate reflation of a particular kind at any time over the next 10 or eleven months.
  I find the Amendment hardly serious. This power must remain with the Chancellor during the period between Budgets. [HON. MEMBERS: "Why?"] I shall show why. The reference by the hon. Member for Worthing (Mr. Higgins) to the increase in the amount that can be raised by the regulator, because of the 10 per cent. that has already been incorporated into Purchase Tax, was rather trivial. In the case of the 25 per cent. rate of Purchase Tax, by raising it to 27½ per cent. one is increasing the amount that the regulator can raise by only one-quarter of 1 per cent. In the case of the 10 per cent. rate, it is 0·1 per cent. These are hardly great increases in the powers of the Chancellor.
  Sir G. Nabarro: The hon. Gentleman has his sums wrong.
  Mr. Sheldon: No. If the hon. Gentleman looks at the financial statement, he will see that 27½ per cent. is 2½ per cent. more than 25 per cent. and that 10 per cent. of this is 0·25 per cent.
  This fine adjustment my right hon. Friend will need to make use of, given the case, which is becoming more readily accepted, that annual Budgets are not enough, that economic circumstances change, as the hon. Member for Guildford pointed out, and that it is difficult to be sure in advance over a long period that one has the situation just right. The right hon. Member for Barnet (Mr. Maudling) got it disastrously wrong on one occasion and the right hon. and learned Member for Wirrall (Mr. Selwyn Lloyd) knew that he could not get it right. The hon. Member for Worthing, if the country were ever so unfortunate as to have him conducting its economic affairs, would not get it right either.
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  This Amendment would reduce the ability of the Chancellor to lower the amount of revenue raised as well as to increase it. But the downward use of the regulator is a weapon that my right hon. Friend may possibly have to use for the first time, because of the possible need for reflation between now and the next Budget.
  My hon. Friend the Member for Hey-wood and Royton (Mr. Barnett) and I put down an Amendment which would have increased the amount of the regulator that could be of help in reflation. It would have allowed my right hon. Friend to increase the rates of Purchase Tax and Excise Duty by 10 per cent. and reduce them by 15 per cent. Unfortunately, that Amendment was not selected but I think that the Committee must accept that the ability to reduce taxation should be granted to a Chancellor of the Exchequer perhaps rather more easily than the ability to increase it.
  This is a very pressing problem because the amount of deflation may well prove to be rather larger than is required, and it may well be that reflationary policies will have to be pursued fairly shortly. No Chancellor could forgo certain advantages of weapons at his disposal.
  But the need to reduce the rates of Purchase Tax and Excise Duty may well be important for another reason—that the Chancellor now has many other taxes at his disposal. The introduction of Corporation Tax, Capital Gains Tax and Selective Employment Tax, added to the taxes which were already in existence, has given him a much wider range of instruments to use. As a result, it is possible Purchase Tax could more easily be reduced over the next 12 months.
  The hon. Member for Worthing pointed out that there were always certain unforeseeable emergencies and I assume from that that the Chancellor might be allowed by him to use the regulator on such occasions. Of course, it is largely for unforeseeable emergencies that the Chancellor needs some instruments. The hon. Member for Guildford doubted whether we had the equipment for so sensitive a control, but the whole point is that we need this sensitive control of the economy because of the very narrow constraints of our balance of payments position.

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  To remove what sensitive control we have at such a time would be extremely wrong. The Chancellor has very little room for manoeuvre because of the balance of payments situation. He will succeed in getting his 3 per cent, increase in growth rate only if exports expand at the rate for which we hope, if imports are restrained at about the present or even below the present level, and if improvements in productivity are obtained. In so tight a situation my right hon. Friend cannot be deprived of this very important instrument.
  If he were to be deprived of it, the consequences would be that we would have to return to much more stringent hire-purchase restrictions with the far more difficult position into which they would put certain manufacturing industries, discriminating quite unfairly between one industry and another solely because it is administratively more convenient to operate deflation in this way. He would have to place far more reliance on monetary measures with great difficulties for increasing industrial investment which we want to see, and there would be certain other disadvantages if other kinds of taxation were introduced.
  The regulator is required because in these sophisticated days we do not expect the Chancellor to get it all right. Even if he were to get it all right, the economy is not level throughout the year. The economy does not operate at a steady level from April to April. There are certain rises and falls. If he is to get any sensitive control, getting it right means getting it right over the whole of the period and not just at the end of the period when he has shown that his sums have all added up. This is not control. Budget totting exercises of this sort died long ago. What a Chancellor needs is to get it right throughout the whole of the 12 months. To deprive him of this weapon would be a very dangerous step.
  Mr. John Peyton: I began to suspect that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) was attempting to pull the collective leg of the Committee. It was only the serious expression on his face tha finally convinced me otherwise. He talked to us quite seriously about the Chancellor's unlimited opportunities for reducing taxation, as though the Chancellor had made a habit of it.
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  The right hon. Gentleman is distinguished for many things—I do not want to go into such painful matters now—but the Chancellor is not distinguished for the use he has made so far of the opportunities before him of reducing taxation.
  The hon. Member went on to entertain us further with the cautionary remark that we do not expect in these sophisticated days that the Chancellor should get it all right. I do not think I am breaking a confidence in any way when I say that such advice to the Committee was not necessary, because it is not a question of expecting at all. We know very well the Chancellor will not get it all right. What horrifies us is that the Chancellor only too often does not get anything right. For the hon. Gentleman to get up and make serious remarks like that is astonishing.
  There was another interesting touch. The hon. Member for Heywood and Royton (Mr. Barnett) got sharply to his feet and castigated my hon. Friend the Member for Worthing (Mr. Higgins) for having made a meal of this somewhat indigestible subject. My hon. Friend may have had a fairly heavy lunch, but the hon. Gentleman himself went on to have a pretty substantial high tea off it and he was not the one to make accusations of that kind.
  There is one serious question which we should ask ourselves. Can it be right to give such a power to such a Government when we know perfectly well that they have this ingrained habit of not making tax reductions but of increasing taxes? It is valuable for a Chancellor to have power to raise or decrease taxes in an informal manner, and no doubt we would be right to permit the regulator if the Chancellor's powers were limited and he could only reduce taxation. After all, he has put it on. By the standards of the Government, he has done only a minor piece of cheating. The Government slapped this bit on in the summer of last year and now they are incorporating it into the Finance Bill formally. This is not a proper use of the regulator which should be a temporary measure. Even if the tax is restored by some other legislative means, it is not right to confuse a temporary measure with the more permanent measures of taxation with which the Finance Bill deals.

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  I pause for a moment to think of the way in which the Government have gone on adding burdens on petrol, fuel oil, drink, and Purchase Tax, without pausing to think at all. I do not want to be distressingly funny on the subject, but we have recently read in a rather strange book, entitled "Pragmatic Premier", how the Prime Minister makes a habit of drinking gin out of a flower vase. Even the Prime Minister, well remunerated as he is, will not be able to continue to afford to consume his gin out of such large vessels if the Government continue in their present taxation habits.
  5.15 p.m.
  I am too defeatist to hope for any sensible answer to this question from the other side of the Committee, but the question which my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) should ask himself before deciding whether we should vote on the Amendment is whether we can trust the Government with it. Viewing the Government's record in this respect, I have the gravest doubts. However, I bow as always to the wisdom of my right hon. Friend and if he decides that it would be wrong to vote against the Amendment, with reluctance I would not do so myself. But I hope that he will address himself seriously to whether it is not the height of folly for the Conservative Party, knowing the Government's form as it does, to repose this method of informally increasing taxation in the hands of such a Government once again.
  Mr. A. H. Macdonald: I do not want to make a meal of this; just a little snack. I could not quite understand the arguments advanced by the hon. Member for Worthing (Mr. Higgins) but perhaps this was a defect on my part. When he intervened during the speech of my hon. Friend the Member for Heywood and Royton (Mr. Barnett), suddenly I understood it in a flash, or at least I think I did. He wants the Chancellor to make more forecasts in order that he may determine whether the regulator is to be used upon something foreseen, or on something unforeseen. If it is to be used on something foreseen, he rebukes the Chancellor.
  Mr. Higgins: It should be in the Budget.
  Mr. Macdonald: That is the little gap which he did not fill, although he has now. He says that there should be some other measure at the time, but surely the whole point of the regulator is that it is to deal with contingencies, not with things which are certain to happen. His argument is that there should be a provision in the Budget to provide for something which may or may not happen. The whole concept of the regulator is to be able to deal with contingencies. By this mysterious doctrine one is thereby debarred from using the regulator, which is designed to meet possibilities, and instead one must provide some alternative positive measure then and there for something that may never happen. I could not understand this argument and for that reason it seemed to me that the proposal to knock out the regulator altogether was entirely inconsistent with the arguments advanced.
  Mr. John Biffen: There is now a well-worn tradition that, when, in considering the Finance Bill, we debate the regulator, it turns on some kind of compact, whereby the Committee agrees to the Government having these very considerable powers of potential taxation, which, as my hon. Friend the Member for Worthing (Mr. Higgins) says, can amount to about £300 million, in return for which we hope that we might have some indication from the Government as to what they think the fairly immediate future state of the economy will be, within which we can see the possible likelihood of the regulator being used.
  It is not a lot to ask for. When we asked for the information last June, we suggested, in allowing the Clause to stand part of the Bill, that the regulator would have to be used in an upward direction because we believed that on the available evidence it would have to happen soon, and we were right. In July it was used, and that is the answer to the hon. Member for Heywood and Royton (Mr. Barnett). Of course it does not lie in the mouths of any of us here to say whether the regulator will have to be used at some stage during the year, but it is perfectly reasonable to say, on the existing evidence, whether it is likely to have to be used fairly soon. The Chancellor must be conscious of the advice that he has been getting this afternoon from below his own Gangway, from the hon. Member for Ashton-under-Lyne

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  (Mr. Sheldon), suggesting that the regulator would have to be used in a downward direction.
  I have some genuine support for this Amendment because, if it is carried and the Government are denied the regulator, they will be unable to use it in a downward direction, and on balance this could be advantageous at present. Although I am absolutely at one with my hon. Friend the Member for Gillingham (Mr. Burden) in looking for tax reductions, and I do not want to seem to be churlish in casting aside the possible benefits of the downward use of the regulator, it can only be a virtue if it is matched by reduction in public expenditure, and about that we cannot be certain.
  I hope that the Financial Secretary will give us a little clearer idea of how he sees the potential use of these powers, if they are to be granted by our not pressing the Amendment, because of one very important omission from the Budget speech. It is an omission which has since, to some extent, been rectified in Economic Trends, which is an official indication of what was expected to happen to personal consumption. Although the Chancellor gave us a great deal of information from which we could make some deduction upon the likely course of the economy upon which the regulator might operate he did not give us any specific figures on personal consumption.
  In Economic Trends, published within the last few days, there is reference to increases of personal consumption which:
  "… made possible an appreciable rise in the volume of consumers' expenditure, and this rise may amount to around 2½ per cent. between the second half of 1966 and the second half of 1967."
  It is important for the Committee to bear those figures in mind when considering this Amendment, because the regulator must have its most direct effect upon the levels of personal consumption. There is no doubt that all the pressure that will come in its most strident form upon the Chancellor to do something about personal consumption will come from those industries such as the motor vehicle industry and the consumer durable industry, which have felt most harshly the effects of the credit restraint over the last twelve months.
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  My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) quite rightly, is championing the cause of the motor trade, as we would expect. It is quite clear that if any boost is required in that direction, it need not—it probably should not—come from the use of the regulator. Much more effective will be the use of hire-purchase controls. The hon. Member for Chislehurst (Mr. Macdonald) looks surprised and aghast. That is the view of the motor industry. Does the hon. Gentleman wish to intervene?
  Mr. Macdonald: It has just occurred to me that, as long ago as the Radcliffe Committee's Report of 1959, the concept of tinkering around with hire-purchase controls was strongly condemned as a measure for regulating the economy.
  Sir G. Nabarro: Before my hon. Friend answers, would he observe that there was no regulator in 1959?
  Mr. Biffen: I would also observe that even such distinguished commentators as the members of the Radcliffe Committee do not have the last word on the subject. If the Chancellor would like to take this opportunity of saying that he fully accepts the observations of the Radcliffe Committee and that hire-purchase control regulations are out of the Government's range of weapons to reflate the economy, it will be news which would be noted with interest, to put it no higher, by people inside and outside of this House.
  Mr. Barnett: I am interested in the hon. Gentleman's argument, because I have always understood that he was an advocate of no interference whatever in the economy—that we should leave things alone. Is he now telling us that he is advocating controlling the economy on this question of deflation or reflation through hire-purchase controls rather than any other method?
  Mr. Biffen: No. If I were to start a speech advocating control of the economy through hire-purchase controls, I would very rightly be brought to order. What I am saying is that the regulator has most effect upon personal consumption, but there is ample evidence that non-durable personal consumption was holding up very well and that restraint on personal consumption comes largely from consumer durables and the motor vehicle industry. In those particular industries

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  it is the impact of hire-purchase control which has more effect than the use of the regulator.
  I am merely describing the situation which I believe to be of interest for the consideration of the Committee. May we leave it at that? One other point which I hope the Financial Secretary will comment upon is that touched upon by my hon. Friend the Member for Guildford (Mr. David Howell). I was concerned for his political virtue when he sought authority for his arguments by referring to the Department of Economic Affairs.
  That aside, it is the whole question of whether the use of the regulator can be seen to have much relation to the quantum or profitability of manufacturing investment. The Chancellor quite rightly has been under considerable pressure about the present situation regarding manfacturing investment. I hope that we will not be told that it shall be the aim of the regulator to somehow or other contrive an almost unqualified increase in total resources devoted to manufacturing investment. What matters is profitable investment.
  I hope, therefore, that when the Financial Secretary to the Treasury replies to the debate, he will indicate that his main concern is to use the weapons of economic policy which are being made available to the Chancellor by our possibly not pressing the Amendment, inasmuch as they can be effective to improve the profitability of industry, because I believe that it is through that method that we are most likely to see a much more successful outcome to our economic policy.
  5.30 p.m.
  The Financial Secretary to the Treasury (Mr. Niall MacDermot): I am emboldened to intervene at this stage in the debate for no other reason than that after an hour and a half no one has yet seriously argued that the regulator should not be renewed. That is the issue which is raised, formally at least, in the Amendment.
  The hon. Member for Worthing (Mr. Higgins) pointed out at the beginning that it has in previous years been more usual to have a general discussion at this stage on the renewal of the regulator when
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  debating the Question, "That the Clause stand part of the Bill", but he gave the reasons why the Opposition thought that it would be helpful this year to have a separate Amendment on the subject.
  The hon. Member accordingly finds himself in, perhaps, what is for him unusual company in that, I think I am right in saying, the only person who has previously moved an Amendment against the renewal of the regulator was my former hon. Friend the Member for Ash-field, Mr. William Warbey, who is no longer a Member of the House.
  Mr. Iain Macleod: I would not like there to be any misunderstanding about this. It is a purely technical point. The Financial Secretary will understand that a year ago the regulator power was the whole of the Clause and, therefore, we could take it on the Motion, "That the Clause stand part of the Bill." We could not do so this year because many other matters, including Purchase Tax, are involved and we could not be certain that there would be a debate on the Question, "That the Clause stand part of the Bill." Hence the necessity to do it this way.
  Mr. MacDermot: I was not challenging the reasons which led the Opposition to have a separate debate in this way.
  Although it has been the practice sometimes to have a general debate on this topic, it is important in approaching it to remember that what we are discussing is whether my right hon. Friend the Chancellor of the Exchequer should have the renewed power to use the regulator. We are not discussing whether, at this point of time, my right hon. Friend thinks that he will need to use the regulator and still less, if he had to use it, in which direction he would have to use it or for what particular economic purpose.
  The hon. Member for Worthing asked my right hon. Friend many questions and I suspect that he expected an answer to some of them rather more than to others. I will begin by answering those which are susceptible of a plain and clear answer. First, the hon. Member asked what was our estimate of the effect in the coming year of the use of the regulator one way or the other. The figures are, in our view, rather less than 10 per cent. of the amount that it is estimated will be

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  received by the various taxes to which they relate during the coming year. The reason for that is that the very use of the regulator affects the consumption of the goods in question.
  I will give the figures under the different groups to which the regulator can relate. They are now five groups. In Group A, tobacco, the estimate for the coming year is £1,020 million; Group B, which is spirits, beer and wine, £710 million; Group C, hydrocarbon oil, £950 million; Group D, Purchase Tax, £735 million; and Group E, other duties including those on betting, £80 million. These total £3,495 million.
  Owing to the effect upon consumption of a 10 per cent. increase by means of the regulator, especially on the consumption of tobacco and spirits, we estimate that the likely yield now of a 10 per cent. increase on all groups together would be about £200 million rather than the £340 million which hon. Members have suggested.
  Mr. Barnett: Is my hon. and learned Friend giving figures for the year 1967–68 or for the 12 months from now?
  Mr. MacDermot: Those figures would relate to a 12-month period. It would depend upon when the regulator was introduced. One can answer only in those terms.
  Mr. J. Bruce-Gardyne: When the hon. and learned Gentleman says that his estimate is £200 million, does that figure apply whether the regulator is used upwards or downwards? I should think that it would be rather more if used downwards.
  Mr. MacDermot: The estimate is given for a move upwards. I agree that the figure might be rather more for a move downwards.
  The second question put by the hon. Member for Worthing concerned a drafting point and whether, in the form in which the Clause is drafted, future use of the regulator would include a power to increase or decrease 10 per cent. in the rates as they will be as a result of the Clause or merely on the rates as they were last year. Subject to any point which the hon. Member may draw to my attention, I think that the drafting achieves the effect. It merely extends the power to use the regulator under the
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  1961 Act. At any moment when it is used, the limit is 10 per cent. upwards or downwards on any one of the Groups on the rates prevailing at the time when it is applied.
  Mr. F. A. Burden: I wonder why the Financial Secretary has not considered the effect of a downward move. This is something in which most people are extremely interested. Surely, the Government are thinking of removing or easing all taxes as well as increasing them. This should be considered.
  Mr. MacDermot: If the hon. Member would like the precise figure, I will try to get it for him. All that we are discussing is the renewal of the power, which is for a move of 10 per cent. upwards or downwards.
  The hon. Member for Worthing introduced what has been the general subject of the debate by asking some rather wide and general questions about my right hon. Friend's forecasts concerning the economic situation. As my right hon. Friend made clear in the Budget debates, he is anxious to assist the House of Commons and the public in general by forecasting and publishing his forecasts as far as he feels able usefully to do so. Indeed, in his Budget speech, as the hon. Member acknowledged, my right hon. Friend went a good deal further this year than Chancellors have done for many years past.
  In doing so, my right hon. Friend issued a clear caution and warning and invited the House to treat those forecasts with the scepticism which he felt that they deserved, because forecasting is such an exceedingly uncertain science. I certainly do not think that it would advance the general purpose which my right hon. Friend wants to serve if with great frequency he started to give revised forecasts on topics of this kind.
  It is only a few weeks since Second Reading and I have nothing to add to the information and general indication of trends which my right hon. Friend the Chancellor gave in his Budget speech and which my right hon. Friend the Chief Secretary gave in opening the Second Reading debate. In addition, the Treasury publishes every month the article on economic trends to which an hon. Member has referred. That is as

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  far as we can usefully go by way of forecasting. Certainly, nothing has occurred since the time of my right hon. Friend's Budget speech to lead him to change the general advice which he gave to the House at that time or the forecasts which he made with the limitations which he placed upon them at the time he made them.
  Mr. Biffen: Commenting on this article in Economic Trends, the Economist suggested possibly that it was a quasi- or semi-official comment on the likely development of personal consumption. Will the Financial Secretary take this opportunity to state clearly that it is an official Government view that personal consumption is likely to rise by 2½ per cent.?
  Mr. MacDermot: This is an official forecast put forward on the basis of the information which is available to the Treasury month by month. It is making public such forecasting information as can be given by the Economic Section of the Treasury. The hon. Gentleman will find that the passage to which he referred is in line with and in accordance with the trend which my right hon. Friend the Chancellor forecast in his Budget speech. He made reference to the fact that he expected there to be an upturn in consumption expenditure towards the end of the year, particularly when not immoderate wage rises began again at the end of the period of severe restraint in the second half of the year.
  Mr. Patrick Jenkin: Could the Financial Secretary confirm or deny the statement which appeared in the Financial Times that the figure of 2½ per cent. would have appeared in the Budget speech had it not been accidentally edited out?
  Mr. MacDermot: The hon. Gentleman will not expect me to make any reference to a comment of that kind—
  Mr. Callaghan: He would not know that, sitting on the Front Bench.
  Mr. MacDermot: The question which we are considering now, therefore, is not for what purpose the Chancellor requires the renewal of the regulator in the sense of the purpose for which he intends to use it. He has no present intention to use the regulator. As I think the right
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  hon. Member for Enfield, West (Mr. Iain Macleod) said, if there was now a purpose for which these taxes should be increased or decreased, they would find their place in the Budget, and that occurs to some extent in that we are consolidating the increases made by the use of the regulator last July.
  What any Chancellor is doing at this point of time is to say that the regulator is a useful and necessary weapon to have to hand in dealing with the management of the economy during the coming 12 months. When one looks back at the history of this power, it must become almost automatic now that, each year, any Chancellor will seek the renewal of it. If we did not have the tradition that our main taxes and taxation powers should be renewed annually, as we do with Income Tax, Corporation Tax, Surtax and so on, one might envisage a measure making it a permanent power. However, we do not do things in that way. We think it right that these main taxation provisions should be renewed annually.
  This power, which was introduced in 1961, has been used only twice since. One occasion was in 1961 and one was last year. The hon. Member for Yeovil (Mr. Peyton), in perhaps not one of his more serious speeches, questioned whether this power could be entrusted to the present Government. All I would do is remind him that he, like the rest of the Opposition, supported the Government in using the power as they did last July. As a responsible hon. Member of the House, I am sure that he must realise that it is a necessary power for any Chancellor to have.
  For those reasons, I hope and feel confident that the Opposition will not want to press this Amendment to a Division.
  Mr. Michael Alison: The most important point which the Financial Secretary made, which was accompanied by a point which he refused deliberately to make, was the assertion that nothing had changed very much in the last month to alter the Chancellor's view of the Budget judgement. However, if one looks at two recent statements, one made by the Chancellor and one appearing subsequently in Economic Trends, there is a contradiction in terms of the Budget judgment which he made.

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  The Chancellor said quite explicitly on 11th April, 1967, that the two main expansionary forces at work were higher exports and higher public investment. In his Budget speech, the right hon. Gentleman said that those were the generative forces at work for the forthcoming year. In the Economic Trends which came out about a calendar month later, we find that exports have been left out completely and that, under the heading "Aggregate Demand", over the rest of 1967, which means presumably the second, third and fourth quarters, we read:
  "The main expansionary elements look like being private consumption and public investment."
  There could hardly be a more fundamental change in the assessment of the character of the economy within four weeks, switching from exports as the main expansionary force to private consumption.
  5.45 p.m.
  In those circumstances, one is bound to question whether the regulator, is relevant to the problem with which we shall be faced in the next few months. We all agree that the regulator is a useful and good instrument in itself. However, it is possible for the good to be the enemy of the best. If the pattern of the economy for the next 12 months is not to be exports leading the expansion accompanied by public investment, but private consumption and public investment, it is undesirable to have the regulator as the main determining weapon for adjustment, because it means that it will operate on the one sector—namely, consumption—which holds out some prospect for encouraging growth, in private investment, profits of firms, and so on.
  The only instrument on which the regulator can be used here is this increase in personal consumption, but this increase I feel would be a good thing. I think that the prospects of getting back on target with our exports are at least partly dependent upon an increase in home demand for such things as motor vehicles, enabling industries to increase output and latter costs.
  The most serious change in the approach of the Chancellor and the Treasury is to have substituted private consumption for exports as an expan-
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  sionary force. Is it really the Government's view that they will get out of their balance of payments difficulties in the period which we are facing on the basis of a moderate rise in private consumption and a very substantial rise in public investment? Is that really the formula for getting out of our balance of payments difficulties? It is extremely unlikely. The weapon which we need at this time is a far more fundamental reappraisal of the Budget judgment. The whole prospect of exports, now explicitly dropped as an expansionary factor is far too gloomy, and the impact of increased public investment will be extremely serious.
  One of the items in the Financial Statement which struck me was the bland assertion that public investment would go up by 8½ per cent. as a sort of substitute for the decline in private investment. They are not the same at all. They are two quite different animals, particularly when one reflects that half the increase in public investment is not on economic services but really on the social services. Though it may be desirable in itself, as a contribution to our balance of payments and making our exports more competitive, that sort of increase in expenditure will not get us anywhere in the short term.
  The idea of an export led expansion is something to which the Government should get back. We want to know why it has been dropped. If it has been dropped and the whole emphasis is to be on public investment and private consumption, the one weapon which we do not want to use in the circumstances is the regulator.
  The Financial Secretary helpfully gave us the categories in which the regulator can apply and the sort of scale of revenue which it can impose, but he is in great difficulty on at least two of them. Tobacco and wines and spirits are becoming increasingly less buoyant, particularly tobacco, and, if he uses the regulator, he will have to focus the main impact on the duty on hydrocarbon oils and on Purchase Tax, for example, for consumer durables. It is precisely this sort of stop instrument in the present juncture of our economic life which is likely not to contribute to exports but to reduce them, in the same way as the

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  cutback in economic activity has reduced motor vehicle exports.
  If the pattern is to be public investment plus private consumption, we must avoid the use of the regulator to hold back private consumption thereby again reducing the output and activity of the main exporting industries. For these reasons I feel that the Chancellor, who invited us to be irreverent about his forecast, has given us as solid ground for irreverence as has ever been given. The enormous importance of an expansion in exports has been deliberately and explicitly replaced by a growth in private consumption with an unchanged, enormous increase in the scale of public investment. For this reason we feel that there is sound ground for questioning the whole philosophy of the regulator as a link in the "stop-go" apparatus at this juncture in our affairs, and we shall watch this very carefully during the next few months.
  Mr. Bruce-Gardyne: I confess that I have been interested in the way in which most of my hon. Friends have assumed that if the regulator is used during the next 12 months it will be used upwards. This is an understandable assumption for them to make in the light of the Government's record. But I should have thought that if the regulator was to be used during the next 12 months it would be used downward. It is for this reason that, while I sympathise with the reluctance of my hon. Friend the Member for Yeovil (Mr. Peyton) to give the Government powers of this nature, I do not entirely agree with him. The Government's powers of economic forecasting as are so deplorably limited that it will be almost criminal to leave them without this power to adjust their forecasts of demand.
  As my hon. Friend the Member for Barkston Ash (Mr. Alison) said, contrary to what the Financial Secretary said in his intervention, there has been a fundamental change in the Government's short-term economic judgment between the Chancellor's Budget speech and the latest issue of Economic Trends. My hon. Friend referred to the forecast in Economic Trends of aggregate demand. What it says about exports is that "there appears to be a pause in the growth of exports after the rapid increase in the
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  second half of last year", a pause "which was not unexpected". I do not know by whom it was not unexpected, but it certainly was not expected by the Chancellor when he made his Budget statement, because, as my hon. Friend said, the two pillars of reflation on which he was relying were the level of public sector expenditure and the rise in export demand.
  I take the view that we should allow the Government to have the regulator powers, because I believe that they will have to use them, and use them in a downward dirction, before many months are out. In fact, I suspect that not only have the Government already had to adjust their forecast since it was made, but that it was adjusted at the last minute before the Budget statement was made. I say that because if one examines the reports of the City editors on their background briefings during the days immediately before the Budget, one gets the feeling that the impression was created that the Budget would have a slightly reflationary bias.
  Mr. Callaghan: There were no background briefings of City editors immediately before the Budget, or for some days before. I hope that the hon. Gentleman will not give the impression that there were.
  Mr. Bruce-Gardyne: I accept what the right hon. Gentleman says, but I know that that impression was created, and I think it was created with some substance, at any rate by the City editors, that the expectation was a mildly reflationary Budget.
  Mr. Callaghan: I am sure that that was an impression which was created, but the hon. Gentleman said that it was created by the Treasury. That is not so, and I hope that he will not pursue the point.
  Mr. Bruce-Gardyne: If the Chancellor says that, I accept it, and I shall not pursue the point any further, but there were to my mind indications of a change of judgment at the last minute before the Budget statement was made.
  We still have not had any explanation from the Financial Secretary of what the forecast of a 3 per cent. growth rate year-end on year-end means in terms of growth of output, taking 1967 on

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  1966. I cannot see why the Government should be reluctant to give this forecast if they are prepared to give the other. On second thoughts perhaps I can see why. The forecast would be so modest. I suspect about 1 per cent. or possibly just over that, that they would rather not hand it to their critics on the back benches, and perhaps, also, as we have seen in recent weeks, their critics on their own Front Bench. This, I suppose, is the reason, but it seems to be an inadequate one. If they can give the forecast year-end on year-end I do not see why they cannot give the forecast calendar year on calendar year.
  If, however, the Government's short-term economic judgment was right, I suspect that they might still have been better advised not to have taken the 10 per cent. surcharge into the Budget as they are doing on this occasion, because I suspect that there were such deflationary forces built into the economy by the time of the Budget that the Government were likely to be forced to undertake a fair amount of reflation during the coming autumn and winter, and by starting it earlier they might have been able to make it less panicky and less dangerous when it came.
  But as my hon. Friend the Member for Barkston Ash said, I think that there are good reasons for believing that the Government's forecast is wrong. There are good reasons for thinking that the forecast of a 6 per cent. increase in exports is far too optimistic. This is hardly surprising, because if we look back at the mirror years of 1957, 1958, and 1962, we find that on each of these occasions there was either a positive drop in the level of exports, as in 1958, or a very much lower rate of increase than the trend figure would have led one to expect, as in 1962.
  What is ominous on this occasion is that whereas in 1958 and 1962 imports dropped or failed to rise even more markedly than exports, during the first four months of this year imports have risen pretty sharply, and it is interesting, and to my mind a little ominous, to see the way in which the Chancellor has been adjusting his forecasts. On 1st December last, at column 674, he said that "we would swing into a large surplus in 1967." By 11th April of this year he was saying:
  "We should move from last year's deficit of £189 million to a surplus in 1967 as a whole,
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  with an even bigger one in 1968."—[OFFICIAL REPORT, 14th April, 1967; Vol. 744, c. 994.1
  By 9th May he was saying:
  "As far as can be foreseen, the present position … is that last year's deficit.. will be turned into a surplus during the course of this year … I would expect a substantial balance of payments surplus in that year."—[OFFICIAL REPORT, 9th May, 1967; Vol. 746, c. 1308.]
  I think that "that year", in that context, was 1968. It is fairly clear from that that the Chancellor has already been revising downwards his forecast of exports, and hence revising downwards the reflationary influence which he was expecting exports to have.
  Therefore, it seems to me that on those grounds alone we should be expecting to see him use the regulator in a downward direction. I hope that I am not being too optimistic.
  Mr. F. A. Burden: My hon. Friend is.
  6.0 p.m.
  Mr. Brace-Gardyne: My hon. Friend says that I am. I cannot see that economic conditions later this year will be such as to lead the Government to use it in an upward direction. If it is to be used at all I think that it will be used in a downward direction.
  Mr. Burden: Does not my hon. Friend realise that there will be considerable wage increases when the squeeze is ended, and that it is, therefore, more likely than ever that the Government will have to mop them up by putting up the regulator to offset the increases in wages, which is what they have done for some time?
  Mr. Bruce-Gardyne: I was about to come to that. I am not so sure about the effect that these wage increases will have.
  The stagnation of exports is not the only factor in respect of which, I suspect, the Chancellor—by no means for the first time this year—has been over-sanguine about the prospects for the economy. Many of my hon. Friends have referred to the evidence that has come forward since the Budget statement—the figures of new car deliveries, the very sinister underlying rise in the level of unemployment—which directly contradicts the figures which the Chancellor gave us in the Budget statement—and the figures for retail trade, which are not very encouraging.

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  My hon. Friend has just referred to the prospect of wage increases, but we now also have the prospect of substantial price increases in some sectors, such as electricity charges. If we have the degree of underlying deflation—unemployment and short-time working—which I would have thought we could expect by the autumn, the effect of wage increases plus the substantial price increases which are already in the pipeline might have an overall deflationary rather than inflationary effect, because prices would be tending to run ahead of earnings, and it is the figure of earnings that matters. I would think it open to question whether, on this ground, the Government are not going to have to intervene to use the regulator in a downward direction later in the year.
  We have not heard any Government forecasts about the trend of international interest rates. There have been some recent indications that they may have bottomed out, and that there may even be a danger of their beginning to rise again during the summer. This, too, would obviously have an important impact on the Government's short-term economic judgment.
  Another aspect which has to be in all our thoughts is the recent trend of unemployment and, in particular, unemployment in the regions. The Government have made great play of the fact that their regional employment policies have cushioned the effect of deflation in the regions. I was staggered to see some figures in the latest edition of Economic Trends contrasting the movement of percentage increases in unemployment in Great Britain as a whole and the regions during this period of deflation and during the comparable periods of 1961–62 and 1957–58.
  The figures printed in Economic Trends are completely misleading. They put a very favourable complexion on what is happening. They suggest that the regions have been doing better than they have done before. They cover the periods, November 1957-November 1958; September 1961-September 1962; and July 1966-April 1967, which are not strictly comparable periods. I have made a quick calculation of the changes in unemployment in respect of the United Kingdom as a whole and Scotland—the
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  region with which I am specially concerned—between May-July, 1957 and March-May, 1958, the same thing in May-July 1961, March-May 1962 and, again, May-July, 1966 and March-May 1967.
  One finds in the case of 1957–58 an increase in unemployment in the United Kingdom of 57 per cent. and in Scotland of 53 per cent.; in 1961–62 an increase of 58 per cent. in the United Kingdom and 27 per cent. in Scotland, and in 1966–67 an increase in the United Kingdom as a whole of 109 per cent., and in Scotland of 60 per cent. There is no evidence here to suggest that the regions have in any way been sheltered from the effects of this deflation.
  Mr. MacDermot Mr. MacDermot indicated dissent.
  Mr. Bruce-Gardyne: The Financial Secretary shakes his head, but the figures are there to see.
  Mr. MacDermot: I am shaking my head for a different reason. I was wondering what relation this had to the question whether or not we should renew the regulator.
  Mr. Bruce-Gardyne: I can tell the Minister at once. If these trends are to be extrapolated and brought forward they mean that the Government would have to use the regulator, or some other intervention, to stimulate reflation of the economy. The level of unemployment in Scotland at the peak next spring, with normal weather conditions, will, I suggest, be at least 125,000 and in the United Kingdom as a whole at least 750,000.
  Unless the Government have the powers of the regulator to intervene so as to stimulate the economy I suggest that we shall be facing intolerable levels of unemployment by next spring. If the Government delay using the powers which the House of Commons may decide to give them under the Clause I suspect that they will, as usual—perhaps through the Chancellor's successor—reflate too late and too much. Therefore, I would like to see the regulator used in a downward direction, and soon.
  There may be balance of payments objections, but I cannot help suggesting that we are facing a classic devaluation situation with unemployment and imports rising and exports stagnating. However,

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  I accept that this is beyond the scope of this debate. But I am sure that we would be better advised to reflate on a small scale now than to reflate to a panicky degree later on and probably with very little effect on the level of unemployment at the peak next spring.
  Therefore, notwithstanding the understandable reservations of my hon. Friends about giving these powers to the Government, on balance I think that we should agree to give them the powers because, in view of the uncertainties of their judgments, we cannot afford to do otherwise.
  Mr. Patrick Jenkin: My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has already explained why we found it necessary to table this Amendment. In view of the number of other Amendments tabled to the Clause there was a risk that when we reached the debate on the Question, "That the Clause stand part of the Bill", the Chair might rule that the Clause had been adequately discussed.
  It has been a useful debate in many ways, although not for the information that we gained from the Financial Secretary. Apart from one figure—the estimate of £200 million as being the likely yield if the regulator is used in an upwards direction—there cannot be anybody inside or outside the Committee who is one wit the wiser for anything that the Financial Secretary has said.
  Of course, we generally favour the retention of the regulator as one of the weapons in the Chancellor's armoury. It was introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) and was made more flexible in 1964 by my right hon. Friend the Member for Barnet (Mr. Maudling), but I agree with my hon. Friend the Member for Yeovil (Mr. Peyton) that that does not mean that we should necessarily and automatically accord its renewal to whichever Government is in office—certainly not without question or without searching the circumstances in which the Government might feel it necessary to use the power.
  The Financial Secretary is right to say that the Amendment turns on the question whether or not the power should be accorded the Chancellor, but it will be use-
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  less to debate that question if we did not, at the same time, examine the factors which could bear on the Chancellor's decision on whether or not to use the power. The debate has demonstrated over this matter how correct was the leading article in The Times Business Section on 31st May, which said, referring to the House resuming after the Recess:
  "Few returning holidaymakers can ever have been confronted with so disagreeable and baffling a spectacle."
  Indeed, rarely has the economic outlook been less certain or the prospects more gloomy. This is the background against which we must decide whether or not the Government should have this power.
  One is bound to reinforce the complaint of a number of my hon. Friends about the paucity of the information which the Government have given, even now, on their thinking on the short-term forecast. This has been roundly condemned in the Press. A pungent leading article in the Daily Mail yesterday said:
  "An Estimates Committee of the House of Commons asks a Treasury official for more information about how the Government bases its economic forecasts, and is told: 'It would not be possible for us to reveal the particular forecasts on the basis of which advice was given to Ministers'."
  It went on:
  "No wonder practically every forecast given in official economic surveys and grandiose planning schemes has been wrong. The statistics are the cosy preserve of Whitehall and lack the corrective of outside knowledge."
  When the Government keep their cards close to their chest and disclose only here and there one or two figures, that is exactly the danger which they are courting.
  I hope that the Chancellor will go further than he has—he has begun—in disclosing the facts and figures of the forecasts on which Government policy is based. In his Budget speech, he gave us the 3 per cent. end-year to end-year growth figure, but little explanation of the figures on which it was based and most commentators have regarded it as most optimistic. In the article in Economic Trends, to which my hon. Friend the Member for Oswestry (Mr. Biffen) referred, the curtain was lifted another inch or two and we were vouchsafed the Government's indication of personal consumption, an increase of 2½ per cent. in the second half of 1967 over the second half of 1966.

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  But again, without any of the other factors, without the figures to close the circle to which my hon. Friend the Member for Worthing (Mr. Higgins) referred, it is difficult to see how this figure of 2½ per cent. can be justified. Some of the factors which would bear on it—these are the background factors to the question of whether or not the Chancellor uses these powers—show that the trend of unemployment is still unmistakably upwards, if the figures are seasonally corrected.
  Seasonally adjusted, the figures show that it was 10,000 up in May and that the average in the last three months has been 17,000 up each month. Those are substantial increases. Industrial production is only just creeping up. From the last quarter of 1966 up to the first quarter of 1967 there is an increase of only ½ per cent.
  Individual sectors of production show that, for instance, engineering orders continue to decline. At the end of 1965, the index stood at 165; a year later it was 153; by the end of March it was 150. Machine tool orders are still drifting down. In July, 1966, at the time of the squeeze, outstanding orders were £111 million; at the end of March they were down to £93 million.
  A number of references have been made to the level of car sales. All these are important indicators of how the economy will develop over the next few months. Car registrations in April were the lowest for five years and about 30 per cent. below those of the same month last year. This has been the worst month since the July measures of 1966.
  6.15 p.m.
  These indicators give little hope that the estimate of 2½ per cent. increase in personal consumption is likely to be achieved, yet this is the Government's forecast, and one wants to know its basis. We hope that the Financial Secretary, in response to a number of requests, especially from my hon. Friend the Member for Worthing, will give some of the facts and figures on which this forecast is based.
  Has it been based on higher wages with prices not falling, so that there would be a real increase in purchasing power? This might have been so until a few days ago, with the announcement of the
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  electricity price increase, an increase which was justified solely by the Electricity Council's need to maintain the return on its capital. Every manufacturing industry will now justify a price increase for the same reason. Any stability of prices after the period of severe restraint is rapidly becoming a forelorn hope.
  Will the increased consumption come from higher imports? We know very little of the Government's forecasts for imports, though there may be some evidence to suggest that they will increase. Certainly, the April trade figures for imports were very disappointing.
  In the absence of any evidence to the contrary in these factors which I have been quoting, one must conclude that the Budget was wrong and over-optimistic and that the National Institute and the London and Cambridge Bulletin were nearer the mark. The National Institute's next publication comes out tomorrow and we shall see what it shows. They forecast a lower increase in the National Product than the Chancellor did and called for a mild measure of reflation.
  That was the basis for my right hon. Friend's proposals in the Financial Times on 6th April. Once again, it seems that the Opposition are right and the Government are wrong. This has happened consistently over the last two and a half years and it looks like happening now
  Thus, the use of the Regulator would rest on the possible need later for a measure of reflation. But that is only half the picture. As The Times said:
  "The battleship is steering up the creek and it is likely to hit both banks at once."
  One must look now at the other bank, near which the Chancellor is steering the country. This is the balance of payments, on which there has been a remarkable shift of emphasis.
  I have mentioned factors which give rise to gloom. The April trade figures were the worst since last July, and this was due not to imports of raw materials, but to those of manufactures, which must give rise to serious concern. Although there was a balance of payments surplus in the first quarter of this year, this appears to have been largely due to capital movements on major items like the take-over of Pye by Philips and the

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  increased stake by Chrysler in the Rootes Motor Company.
  One hopes that this sort of thing will not be counted upon regularly as a means of writing off our balance of payments, because one cannot balance the house-holding budget by selling the furniture—
  Mr. Barnett: Would the hon. Member get away from furniture and tell us how the use or not of the regulator will affect the level of imports of manufactured goods? Perhaps he would relate his argument to the Amendment.
  Mr. Jenkin: The hon. Member is being too clever by half. The question whether or not the power is used must turn on the trend of the economy for the time being, for which the balance of payments and the level of imports are crucial. On this basis one is bound to assume that the Government have very little room for manoeuvre and, therefore, it might appear unlikely that the regulator will be used either upwards or downwards.
  It is hardly surprising that we are finding evidence of dissension in the Cabinet. When the Home Secretary addressed the London Labour Party conference on 13th May he called for
  "… a rapid rate of growth for the remainder of this Parliament".
  He said:
  "We must make up the ground which has been unavoidably lost"
  He was thereby clearly criticising the Chancellor's conduct of the nation's affairs and many newspapers assumed that the right hon. Gentleman was making a bid to take over the Chancellor's job. However he was swiftly slapped down, for the Chancellor, replying on 20th May when speaking to the Southern Regional Council of the Labour Party—what these members of the Labour Party thought at having these two speeches in successive weeks I shudder to think—said:
  "… the Government does not intend to be diverted from the path of maintaining a surplus and securing a steady rate of growth".
  The Chancellor indicated that he at any rate was determined to press on up the creek.
  This is all the result of two and a half years of Labour Government. The situation, as The Times stated, is "disagreeable and baffling" and, meanwhile, the condition of the people deteriorates, with rising unemployment and falling earnings
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  in many important industries. Without going into the figures, I will merely say that in engineering, shipbuilding, chemicals and steel earnings are lower than they were in July of last year. Prices are going up, notably of electricity, but also the promise of increased gas prices. In addition, the Government have had a massive vote of no confidence in them from the electorate.
  Speaking in a May Day rally in his constituency, the Foreign Secretary gave the answer to which we have become accustomed:
  "The people originaly elected us, and reelected us in 1964, because they wanted a Government that would govern … I hope they will accept the consequences."
  They have not and will not accept them and now we are faced with mounting incompetence and dissension in the Government. That being so, why in heaven's name should the people accept them?
  It is clear, from what the Financial Secretary said, that the situation is as baffling to the Government as it is to many commentators in the Press. The hon. and learned Gentleman has given no hint of what is in the Government's mind to deal with this situation. However, we agree that if the Chancellor's ship of State is to have any hope of remaining on course in the months ahead, the right hon. Gentleman must have all the powers and weapons open to him to manage and regulate the economy, including the use of the regulator. For this reason, I have no doubt that my hon. Friends will not seek to divide the Committee on the Amendment.
  This has been a useful debate, not because we have been given any information by the Government but because we have had an opportunity to air our views on a subject which is causing great concern to many students of the British economy.
  Mr. Higgins: I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Peyton: I beg to move Amendment No. 102, in page 2, line 39, to leave out paragraph (b).
  The Temporary Chairman (Mr. E. L. Mallalieu): I suggest that it would be convenient for the Committee to discuss,

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  at the same time, Amendments Nos. 90 and 103 and new Clause 24—Rebate on heavy oils.
  Mr. Peyton: Before explaining the purpose of this series of Amendments, I wish to tell the hon. Member for Manchester, Cheetham (Mr. Harold Lever), the Joint Under-Secretary of State for Economic Affairs, how pleasant it is to see him on the Government Front Bench. Remembering the wisdom which we got from him last year, as opposed to what we received from his two neighbours at the Treasury, we naturally have the highest hopes that when he contributes to our debates this year he will give us some satisfaction, information and enlightenment. We have the highest confidence in him. I wish that I could bestow the same compliment on his colleagues.
  I regret that at least in one respect the Government seem to have learned absolutely nothing. This discussion is germane to the whole fuel policy of the country. Despite that, we do not have on the Government Front Bench either the Minister of Power or his Parliamentary Secretary. If the Government will read the reports of last year's debate on this subject they will see that we raised precisely this matter.
  Mr. MacDermot: Before the hon. Gentleman works himself into a great state of indignation, he may care to know that my hon. Friend the Parliamentary Secretary will shortly be here. No doubt he was taken by surprise at the sudden termination of the debate on the previous Amendment.
  Sir G. Nabarro: Does not my hon. Friend recognise the evasiveness of that intervention by the Financial Secretary, in view of the fact that the Parliamentary Secretary was standing below the Bar of the House only four minutes ago and that, when my hon. Friend was called to move the Amendment, he promptly turned and left?
  Mr. Peyton: I take no cognisance of what goes on below the Bar of the House. I am concerned only with the occupants of, or absentees from, the Treasury Bench. When debating a matter of this importance it is incumbent on Ministers to show interest and courtesy and to be here before the debate starts.
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  This matter is of great importance to the Ministry of Power and I find it disturbing that, for the second year running, we are being treated in this way. One can almost hear the sharp remarks that would have been made if those who are at present on the Government Front Bench, including the Financial Secretary, had been accorded this treatment when in opposition. Merely to be told that a Minister will be here within minutes or hours is not good enough. This is the way in which the Government habitually treat the House of Commons and, by doing so, they egg us on to make protests about the lack of concern Ministers show in our arguments.
  Mr. Alison: Sheer incompetence.
  Mr. Peyton: How can I deny that?
  In the absence of the Minister of Power and the Parliamentary Secretary, and assuming their lack of interest, I will explain the purpose of this series of Amendments, which is to abolish the tax on fuel oil. I admit straight away that this was originally our misdeed. However, it is the opportunity of parties when in opposition to have a look at their record and, where they find that they were wrong, to announce their intention to put the matter right in future. We did precisely that last year, when we voted in favour of an Amendment to reduce the tax of fuel oil. This year we are going further; we are proposing to abolish the tax altogether. If the Government cannot offer us some reduction, then I will probably want to take the matter to a Division.
  I suppose that the Commissioners of Customs and Excise find complexity an agreeable thing. Whether or not they do, it is their constant companion. I wish that people would get things sorted out so that we would not be dealing with the increase in a rebate but with the reduction of the tax itself. We have this unnecessarily complicated business of a rebate on a tax on a substance such as oil, so that we must argue about the rebate being increased rather than reduced or the tax being reduced or abolished. I still live with the optimistic hope that at some time or another the party opposite will get over its pathological antipathy to the oil industry as a whole. We have had enough sermons

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  from the Government about the importance of our balance of payments. Very few industries make such a contribution to our balance of payments as the British oil investment. I hope that at some time hon. Gentlemen opposite will take on themselves the heavy task of educating their party in this matter.
  I also feel that the proper arguments of the oil industry fall on deaf ears in the whole edifice of the Treasury, which is properly concerned with its own creatures, the nationalised industries. So concerned is it with the performance of this very difficult duty that it allows itself to be led into discriminatory and unfair attitudes towards the oil industry. I hope that at some time this attitude will come to an end. I will not deal with this subject at length, but I would instance the Government's whole treatment of the oil industry's overseas investment, which, I believe, in the long run, will be absolutely disastrous. The Government have never given an adequate explanation nor been fully alerted to the consequences of their own actions.
  6.30 p.m.
  The Financial Secretary will remember last year's debate on this subject, and I would remind him of some of the quotations I then made from the Government's White Paper on Fuel Policy. We read, in paragraph 17:
  "Following this sudden reduction in demand for coal, a number of measures were taken to help the industry … In the 1961 Budget, a duty of 2d. a gallon (about £2 a ton, equivalent to protection in the region of 23s. 0d. per ton of coal used for steam-raising) was placed on oil used for burning."
  In paragraph 44 there is a clear statement, with which I do not quarrel at all, that the purpose of the fuel oil duty was protection for coal and not for revenue. The paragraph states:
  "The most important of the existing measures of protection, which are described in paragraph 17, are the duty on heavy oil (and other oil used for burning …"
  Later in the same paragraph we read this very interesting sentence:
  "… it can be argued that, on fuel policy grounds alone"—
  and it was on fuel policy grounds alone that the tax stood—
  "a reduction of the oil duty, and hence of the cost of fuel to industry, is in principle desirable."
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  Those were the Government's own words; their considered views as expressed in the White Paper. I find it very difficult in the face of that statement to accept that the Government are justified in retaining the tax.
  The coal industry, because of a failure to contract it quickly enough, faces a most uncertain future.
  Sir G. Nabarro: Hear, hear.
  Mr. Peyton: It has already had one very substantial measure of assistance during this or the preceding Parliament when it was relieved of debt amounting to £450 million. That burden was passed to the taxpayer. That was the time when it would have been equitable, reasonable and fair to say to the oil industry, "We will relieve you of this handicap, which we put on you because we felt that the coal industry had handicaps enough of its own." We have not had that response at all.
  Although we made this clear again this year, it is so very unreasonable that the Government—I understood from the Financial Secretary's reply just now that the Parliamentary Secretary to the Ministry of Power would be here in minutes, but, even now, though we are talking of purely fuel matters we have with us neither the Parliamentary Secretary nor the Minister. It is treating the House of Commons with singular disrespect. The problems we are now discussing are at the very heart of the responsibilities of the Ministry of Power, yet neither the Minister nor the Parliamentary Secretary can bother to turn up to take notice of arguments that we believe to be very important, and to which we had no satisfactory answer last year.
  The question I should like to ask the Minister of Power—and perhaps one of his colleagues will be good enough to pass it on to him—is: what is to happen when North Sea gas becomes available? There is a very heavy royalty to pay on North Sea gas, but is there or is there not a proposal to tax this raw material? It is on that sort of thing that we want information. As it is, I find the retention of this tax a piece of inexcusable, old-fashioned, real dyed-in-the-wool reaction.
  The Prime Minister is the great man, the great crusader of the technological

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  revolution, the man who was to prepare Britain for the 'seventies, the man who, in this House, instanced fuel as an especially fit subject for planning. Where are those words now? They have gone away on the wind—useless and worthless. I hope that now the Parliamentary Secretary has come in—
  Sir G. Nabarro: A quarter of an hour.
  Mr. Peyton: —he will not sit down so low at the Table. Pray let him rise a little higher.
  I shall not repeat all that I was saying before the hon. Gentleman arrived, but I had said that the Prime Minister had always in this House instanced fuel as a proper sphere in which an exercise in planning could profitably take place. Nothing has happened.
  We on this side always said that any dogmatic attitude to a fuel policy would be highly dangerous and misleading, because no one can foresee technological developments. We pointed out that if in 1956 anyone had made a hard-and-fast decision on which fuels should be developed and used, the gas industry would have been planned out of existence altogether. Yet here it still is—quite apart from North Sea gas. There was the Algerian methane, and then the I.C.I. process.
  The gas industry is now on the threshold of immense developments, with a capacity—
  The Temporary Chairman: Order. I hope that the hon. Gentleman will not pursue the gas subject too far.
  Mr. Peyton: I accept your Ruling at once, Mr. Mallalieu, but let me conclude my sentence by saying that the gas industry is on the threshold of a great opportunity to make a great contribution to our fuel policy. What we want to know is how the very valuable raw material from the North Sea is to be treated in comparison with or in contrast to fuel oil, which is taxed and which is its competitor.
  I have always understood that the intention of the Government was to lower costs by increasing efficiency. They have not done it. Here is a splendid opportunity for them to take at least one measurable step along that excellent
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  road. We have constantly listened, in the House and elsewhere, to Ministers' pleas to increase industrial efficiency—yet what kind of contribution do they make? All they do is first to impose and then continue the imposition of this kind of burden which, for the benefit of the Parliamentary Secretary, I repeat that I admitted quite frankly was something for which we on this side stand in the sackcloth of repentance for having originally introduced it. I believe now that it was a mistake.
  The Government have the opportunity of rectifying the mistake that was made by a previous Conservative Administration. It is a tax which, during the years between 1961 and 1967, has yielded a total of £385 million. It is expected that in the current year that the yield will be £90 million. It is a quite unnecessary burden on industry. The steel and metallurgical industry has to find £11½ million as its share of the tax, engineering has to find £7 million as its share, the bricks and pottery industry has to find £2 million, the glass industry £1¾ million, the textile industry £3¾ million, the food industry £4 million, agriculture £2½ million, the building and contracting industry £1¾ million, home heating £5¼ million and electricity generation £17 million.
  Only the other day the Electricity Council was faced with the necessity, under its masters, of putting up prices to meet its financial target. I do not quarrel with that, but would it not be a helpful thing to cease this discriminatory policy? The gas industry has at the moment no tax on its raw material, but the electricity industry has to face this tax. It seems absolutely wrong to tolerate these sort of burdens which the Government are now wantonly continuing on the shoulders of the industry which the Government constantly exhort to efficiency. The Confederation of British Industry has said:
  "We continue to advocate that the duty on heavy oils be abolished."
  Yet, like most of the sensible advice offered to this Government, it is treated with contumely and turned away without result.
  To impose discriminatory taxes upon any fuel is a mistake. Those who flatter themselves that by clever manipulations of fiscal and other methods they can

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  achieve a fuel policy are fooling themselves in a very big way. An efficient, effective, useful fuel policy depends upon flexibility and one of the principle aims should be cheapness of fuel. It may be that in certain respects we have to balance against cheapness the factor of security of supply, but I do not believe the Minister of Power should ever allow himself to become a social service Minister nor to act as the President of the Board of Trade has acted in respect of development areas.
  The main responsibility of the Minister of Power is to organise and to produce a policy which contributes to the efficiency of British industry by ensuring that the supply of fuel is as safe and cheap as is reasonably possible. I find it intolerable that the Government should still be continuing these quite unnecessary and gratuitous burdens on industry. I am glad to have support on this Amendment by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) with whom I have co-operated on a number of occasions. Nearly always in our campaigns we have had the goal of a reasonably cheap fuel very high on the list.
  6.45 p.m.
  Mr. Edward M. Taylor: It is a very great pleasure to speak on this Amendment after the speech by my hon. Friend the Member for Yeovil (Mr. Peyton). He has covered all the general points very fully and his case has been extremely convincing. Particularly when we bear in mind that the Government have said on previous occasions that this tax was under review and they considered its abolition, in view of the other points made by my hon. Friend it will be very difficult for them not at least to give an indication that they are prepared to reconsider this tax.
  My hon. Friend, with customary generosity and courtesy, he has left one aspect to be taken up by other hon. Members. That is the effect of the tax on Scotland, with which I propose to deal. Many of the measures which the Government have brought in by the Budget and previous financial legislation have not taken account of the implications in Scotland and other development areas. It is appalling that while many Ministers have said that Scotland has been sheltered from the freeze and the
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  Government's economic measures, at the same time we have received figures from the Minister of Labour which show that in the first quarter of this year unemployment in Scotland increased at twice the rate of that in the rest of the country. This tax, which we hope to abolish by this Amendment, may have been largely responsible for that fact. There has been no indication of the effect in Scotland. Even the small marginal increase which took place with the regulator could have a profound effect.
  The main purpose of the tax is to get industry and commerce to change from the use of oil to coal. If the price of coal were the same throughout the country there would be no discriminatory effect but that is not the case. I plead with the Financial Secretary to bear in mind the effect of the tax on areas where the price of coal is unreasonably high. For several years the Government have adopted a policy of differential prices for fuel. My hon. Friend mentioned the effect on the steel industry where the high cost of oil is a very considerable burden. In Scotland, we have a vital steel industry employing about 40,000 men. Unfortunately, a considerable tax on fuel oil results in the industry having to change to coal and if the price of coal is high that has a very significant effect.
  Steel works in Scotland have to pay about 133s. a ton for coking coal. This is the highest figure of any region in the country. In South Wales, where there is S.C.O.W., R.T.B., and Guest Keen, the price is 115s. 4d., almost £1 a ton less. If we have a tax on fuel oil which encourages industry to change over, it will have a dramatic effect on the Scottish producer who has to pay £1 a ton more than is paid in Wales. In Yorkshire, the price is 100s. a ton. So long as we retain the tax on fuel oil it has a discriminatory effect on Scotland and other areas where alternative fuels to which industry is channelled are very expensive.
  The same happens with regard to gas. It was pointed out recently in Answers to Questions put by me that the price of gas in Scotland is considerably higher than in the rest of the country. Since then there has been a 19 per cent. increase while other areas have had an increase which is not even half that amount. So long as the tax remains it has a very serious effect.

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  Quite apart from the Scottish aspect, which is very important, there is the general effect of the tax on prices. It is alarming to find the Government continually exhorting industry to restrain prices and not to allow inflation to go ahead while at the same time almost every financial measure the Government take has the effect of raising prices. There has been much inflation and there will be much more essentially because of actions by the Government. Before the Financial Secretary agrees to allow this tax to go on for one more year, I ask him to look at the implications and to try to get the facts and figures to see how it affects the regions. I believe that the information on which policy should be based is just not available in the Treasury, in the Ministry of Power, or elsewhere.
  I will give just one example. I am concerned with the future of the steel and coal industries in Scotland, particularly in view of the implications of our joining the European Coal and Steel Community, where chaos seems to reign at present. I have, therefore, tabled some detailed Questions to try to get figures. At the end of January I asked what information the Minister had about fuel prices in Scotland affecting the steel industry. The answer was that the Minister had no information more recent than that which I quoted during the Committee stage of the Iron and Steel Bill on 1st December, 1966,
  We are asked to agree that this tax on fuel oil should continue for one more year on the basis of inadequate information. It is on the basis of an inadequate appreciation of what the implications will be for the development districts and for the steel industry in particular. In view of the assurances which have been given in previous years about the Government's reconsidering this tax, now is the time to abolish it. We need a substantial boost to try to bring prices down throughout the country. This is one thing which would help. It would help the regions in particular, because they have been so shockingly neglected by the present Government.
  Mr. Eric Ogden: The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) asked
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  what the effect of this tax is on Scotland. My own writ does not run north of the Border, but I should like to put this question to the hon. Gentleman, through you, Mr. Irving. What effect would the Amendment have, if carried—I would hope that that is a big "if"—on the Scottish coal industry? Does the hon. Gentleman believe that the National Coal Board, Scottish Division, or the Scottish Division of the National Union of Mine-workers, would support the Amendment? I think that the hon. Gentleman has a fair knowledge of Scottish affairs. If he thinks that the Scottish miners would welcome the Amendment he has a big think coming.
  The hon. Member for Yeovil (Mr. Peyton) said that part of the business of the Minister of Power should be to look after security of supply—I think that we would all agree with that—but that his main purpose should be to provide low-cost power. As the Minister of Power is a member of the Cabinet, does not the hon. Member for Yeovil think that he should also pay regard to the effect on our balance of payments and to the effect that an Amendment such as this would have on our national fuel policy?
  I hope that the Government will give no consideration to this proposal. The arguments as to low costs may be attractive in the short term, but, if we are to have a national fuel policy based, to a large degree, on British indigenous fuels, this levy on imported fuels, which is the equivalent of 27s. a ton on the cost of coal, should be maintained for another 12 months.
  Sir G. Nabarro: I shall deal with the contribution of the hon. Member for Liverpool, West Derby (Mr. Ogden) later in my speech. I shall not directly follow him.
  I wish at the outset to go back to the peroration of the Financial Secretary on 15th June of last year, when we debated a very similar Amendment in Committee on the Finance Bill. That Amendment was also in the names of my hon. Friend the Member for Yeovil (Mr. Peyton), who led, and myself, who followed him, with a number of supporting speeches from others of my hon. Friends. The Financial Secretary then said this:
  "I hope that what I have said will be sufficient to assure hon. Members that the

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  whole question is open, and will be considered in the review and also by the Government in deciding what action to take after the completion of the review. It is because the review is in hand that I cannot say anything more specific and it would have wasted everyone's time to expect the Minister of Power to be able to contribute to our discussions."—[OFFICIAL REPORT, 15th June, 1966; Vol. 729, c.1530.]
  The hon. and learned Gentleman almost did not arrive today. Only after the most clamorous protest could we secure the presence of a junior Minister in the Chamber to listen to this debate which is concerned with fuel and power economics.
  The Minister of Power inaugurated nearly two years ago the review to which the Financial Secretary alluded last June. A few days ago we opened our morning newspapers to see a grinning Minister of Power, with a grinning Chairman of the National Coal Board, with a grinning Chairman of the Electricity Council, with a grinning Chairman of the Gas Council, having a weekend junket on their departmental expenses. What were they doing? They were trying to reconcile the conflicting interests of coal, gas and electricity.
  But the review has already taken nearly two years, and still the Minister of Power will give no indication as to the date of its completion. Meantime, this highly unsatisfactory position persists, with the coal industry being heavily protected against fair and commercial competition by oil. The degree of protection is variously estimated. It cannot precisely be assessed. It depends on the respective calorific value of the fuels, on transportation costs and other considerations, the one being an imported fuel and the other an indigenous fuel; but very roughly the degree of protection for coal is 23s. per ton.
  Last year, in my speech in Committee on the Bill, though we were then only half way through the year, I was shouted at in derision by coal mining Members on the benches opposite when I said that the bituminous coal output of Britain would drop from 186 million tons in 1965 to 175 million tons in 1966. In the event, I was 1 million tons out, or about ½ per cent. The final figure for coal output was 174 million tons. It will be much lower this year. The miners are leaving the pits in droves. I expect that the coal mining labour
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  force may come down to 400,000 before this year is out.
  Mr. James Dempsey: The pits are being closed in droves.
  Sir G. Nabarro: I will deal with closures, perhaps, in a few moments, but I do not want to go too far from oil.
  The Deputy Chairman (Mr. Sydney Irving): Will the hon. Gentleman deal with paragraph (b)?
  Sir G. Nabarro: Yes, Mr. Irving, but coal and oil are very closely related, and the output of coal this year is likely to be down to 160 million tons.
  My case is that it is no longer necessary to protect our coal industry by heavily taxing the principal commercially competitive fuel, which is fuel oil. The reason why it is not necessary to protect the coal industry any longer is that put into my mouth by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). He said a few moments ago, "The pits are being closed in droves". Of course they are. In the words of the late Mr. Aneurin Bevan, I would never subscribe to a policy of keeping open obsolescent coalmines as ancient monuments. My case today is that coal production is concentrated in efficient pits, most largely, and, therefore, the coal industry no longer needs the protection of taxation placed on fuel oil.
  7.0 p.m.
  Mr. Ogden: Will not the hon. Gentleman agree that it certainly needs and deserves protection at least for a limited period so that, while the closure of pits goes on, there is time and opportunity to take alternative employment to the areas concerned? If his Amendment were accepted now, there would be immediate and wide-scale closures without the opportunity to take alternative employment to the mining areas.
  Sir G. Nabarro: I do not want to be drawn too deeply into the economics of coal mining, and I reply to the hon. Gentleman in two sentences. Six years have passed since the fuel oil duty was imposed to protect the coal miners. The rundown has been steady and progressive, and there has been no heavy unemployment in the coal mining areas. Credit for that goes to the Tory Government

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  most largely because the Labour Government have merely carried on Tory Government policies to prevent unemployment in the coal mining areas.
  There is now no longer need to protect the coal industry. For almost six years we have suffered—my hon. Friend gave a magnificent figure here—the aggregation of revenue collected from this tax at £385 million. That has happened since the time when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), then Chancellor of the Exchequer, imposed the tax. He did not say that he was protecting the coal industry. Oh, no—he said that he wanted the revenue. I was then a Tory Member sitting on the Government side—corner seat, second bench below the Gangway—and I was aghast at his action. I divided the Committee against my own party. I took a ragbag of Members with me into the Lobby—one other Tory only, my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), a couple of Liberals—
  Mr. Eric Lubbock: Hear, hear.
  Sir G. Nabarro: Not the hon. Member for Orpington (Mr. Lubbock) because he did not arrive until 14th March, 1962, when he was first elected.
  Mr. Lubbock: I should have been with the hon. Gentleman if I had been here.
  Sir G. Nabarro: No doubt, the hon. Gentleman would have been with me. There were one or two Liberals and one or two Socialists with me then in 1961. I was castigated by the Whips in characteristic fashion for having voted against my own party, but, in the following year, 1962, when my right hon. Friend the Member for Barnet (Mr. Maudling) was Chancellor of the Exchequer, we did it again. My right hon. Friend, in his pronouncement, changed the reasons for the policy. He said quite candidly that it was temporarily to protect the coal industry; and he re-emphasised that—"temporarily to protect".
  It has gone on year after year, and now, with the removal of the regulator, the 2d. per gallon on fuel oil is to be made 2·2d. per gallon. Thus, wehavetwo considerations on this Amendment. My hon. Friend the Member for Yeovil and
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  I are opposing the consolidation of the regulator into the former level of fuel oil duty, and we are grateful to the Chair for combining in your selection new Clause No. 24, by which my hon. Friend and I seek the total abolition of the fuel oil duty.
  This year, I add one further and important reason to all the reasons which I have canvassed in speeches during the past six years about the iniquity of this form of taxation. It is highly inflationary for industrial users, but it is now very damaging in the context of electricity for domestic consumers. I shall be very careful here, Mr. Irving, not to incur your wrath, for I should not like you to check me again and suggest that electricity would be out of order. I have very respectable statistical precedent to quote.
  From the Annual Report and Accounts for the year ended 31st March, 1966, of the Electricity Council we learn that 5,819,000 tons of fuel oil were used in electricity generating stations during the year to 31st March, 1966. I repeat that for the benefit of the Financial Secretary—I should not like him to laugh it off as irrelevant—5,819,000 tons. The duty levied at £2 a ton means that the Treasury is charging this nationalised industry £11.6 million. It is nothing for the Parliamentary Secretary to the Ministry of Power to grin at. He ought to be crying not grinning.
  On 12th May, the Minister of Power made his startling pronouncement about electricity prices. He said that, on average, they would rise by 10 per cent. all over the country. Today, during business questions, I asked the Leader of the House when we were to have a debate about it. It is highly inconvenient for the Labour Party to have a debate on this issue, which touches the pocket of every elector in the country. This is why the Minister of Power announced it on 12th May, one day after the borough elections.
  Mr. Iain Macleod: It did not do him much good.
  Sir G. Nabarro: It did not do him any good at all.
  But had he announced it before the borough elections, the Tory gains would have been even bigger than they were. Electricity charges touch 97 per cent. of

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  the electors. They are fed up with the area boards. I take the Midlands Electricity Board, the worst of them all, as an example. The Midlands Board is putting up its charges, but not by an average of 10 per cent., in Dudley, in Stourbridge and in Coventry. It is nice to see the Paymaster-General listening to me. The right hon. Gentleman has gone now. I have driven him out of the Chamber.
  Mr. J. B. Symonds: He is bored with the hon. Gentleman.
  Sir G. Nabarro: No, he cannot take it.
  Mr. Symonds: Of course he is bored; we are all bored.
  Sir G. Nabarro: The Midlands Board is worst of all. It is putting up its charges by 15 per cent., according to the consultative council. I am not talking about industrial supplies alone; I am talking about the domestic as well.
  What does the Electricity Council think about this? It is paying £12 million of duty. If it did not have to pay the £12 million, it would not have to put up its charges so much, would it? I must hang my argument on the Amendment, Mr. Irving, so I return to the Report and Accounts of the Electricity Council for the year ended 31st March, 1966. In paragraph 12, on page 8, we read:
  "Apart from these unavoidable difficulties, which can broadly be categorised as problems of growth, the industry has throughout the quinquennium had to bear the burden of fuel oil duty, which cost nearly £12 million in 1965–66; over and above the fuel oil tax, it has also borne the extra costs involved in affording a degree of preference to coal over other fuels."
  That is why electricity charges are going up—the mismanagement of the Socialist Government, who cannot run their own nationalised industries.
  In the context of fuel oil again, in paragraph 67, the same Report continues:
  "At present, Electricity Boards are handicapped in competition (a) by stiffer financial objectives than the Gas Boards; (b) by the oil duty which the Generating Board pays but the Gas Boards do not; and (c) by the limitation of the Generating Board's freedom in the choice of fuel for new stations."
  Further, on page 22, paragraph 70, we read:
  "… the Electricity Council believe that the economic welfare of the nation demands
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  that the special cost of supporting coal should be borne by the community as a whole and not by electricity consumers, who include industries upon whose efficiency we are dependent for improving the nation's balance of payments."
  To whom is this Report addressed?—to "The Rt. Hon. Richard Marsh, M.P.", the Minister of Power, by the chairman of a principal nationalised industry appointed by the Minister of Power. Here is this chairman castigating and clobbering his own Minister—
  Mr. Ogden Mr. Ogden indicated dissent.
  Sir G. Nabarro: It is no good the hon. Member nodding dissent. The chairman is clobbering his own Minister for a policy inimical to the interests of electricity generation in this country. Really, the person he should be castigating personally and privately, in Select Committees and upstairs and by every means at his disposal is the Chancellor of the Exchequer, who is the principal culprit in pursuing a policy inimical to the interests of British industry, to domestic consumers for they use large quantities of fuel oil, and to our national economy.
  This will be the fifth time I have voted during the Committee stage of the Finance Bill on the abolition of fuel oil duty. There is hardly a Member who does not privately agree with me. Only the Whips on the Labour Government benches prevent hon. Members opposite voting with me, save only the 37 Members of the National Union of Mineworkers, who, of course, owe an allegiance to the union which sends them here. Dreadful! [Interruption.] Do I include the hon. Member for Liverpool, West Derby—
  Mr. Ogden: I am proud to be included.
  Sir G. Nabarro: I am delighted to defer to the hon. Gentleman. If I were sent here by the National Union of Mineworkers I should vote on a National Union of Mineworkers' ticket, but I do not have a National Union of Mineworkers' ticket.
  Mr. Dempsey: What union does the hon. Member belong to?
  Sir G. Nabarro: I have never needed a union ticket all my life. I am unlikely to acquire one now.
  This will be the fifth time I have voted on this matter, and I hope that this time

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  not only will the whole Conservative and Liberal benches vote in support of the Amendment but that we might also collect a few conscientious Socialist votes from among non-coal-mining Members. It is a good cause. Eventually, the Chancellor will have to admit that, economically and politically, he has been wrong in continuing the duty, and will accordingly abolish it.
  Mr. Alison: You kindly said that you would allow me to speak to Amendment No. 90, Mr. Irving. I hope that the Financial Secretary will note as I speak and confine myself to that Amendment that it is substantially different from, and more specific than, the points we have so far debated. I hope that he will therefore be in a slightly more flexible and liberal frame of mind than he would otherwise be in dealing with a more sweeping proposal.
  I apologise for the rather wordy nature of the Amendment, but it is wordy because I have "lifted" it almost verbatim from the Finance Act, 1961, when it applied to a similar relief given in that Act in respect of the fuel oil duty to horticultural producers. That is a useful precedent. Here we are dealing with a sector, the electricity generating industry, which is immeasurably more relevant to the economy than the horticulture sector, to which relief has already been given.
  I briefly remind the Financial Secretary of the special relevance at the present juncture of our economic affairs, when productivity is the key to our progress and expansion, of the need to promote and encourage the consumption of electricity and not to discourage it in industry. One of the most pertinent points here is that Britain is not very well placed in the amount of electrical energy which we put at the hand or elbow of working men in industry at the work bench. The latest figure suggests that the United States operative in manufacturing industry has at his elbow three times the quantity of horse power, which largely means electricity, compared with the British operative. In Germany the operative has about 25 per cent. more. In the interests of expanding the economy and raising producivity, we need to encourage industry to put more machinery, which, in the last analysis, means more electrical power, at the disposal of the operative in manufacturing industry.
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  7.15 p.m.
  It is against that background of the need to increase electrical power per operative that the Financial Secretary should remind himself of the paragraph in an interesting article in the latest issue of Economic Trends entitled, "International Comparisons of Costs and Prices", where we read this statement about the rising costs of energy as between the United Kingdom and Common Market countries. It says:
  "There is a substantial body of evidence to show that whatever the absolute level the United Kingdom's prices of energy have tended since 1958 to rise relatively to those in the Common Market countries and the United States."
  That is a Treasury statement from the Minister's own Department, published only yesterday. It is clear evidence that energy prices in this country are tending to rise compared with those in the United States and the Common Market.
  I need hardly remind the Financial Secretary that rises in electricity costs and prices have a very persuasive and permeating effect on the economy. The cost of electricity comes into the Index of Retail Prices and therefore tends to be a factor in wage claims based on the cost of living, and may very well enter into labour costs per unit of output in manufacturing industries. There is also the direct impact of higher electricity costs in industrial use and there is a further indirect result upon commercial users and users in the distributive services. As my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) pointed out, they are probably the most pervasive cost factor in the economy, applying directly or indirectly to the private consumer and to industry.
  It is against that background that one must register the shattering news which the Minister of Power broke to the House and the country on 12th May that the Government now propose to allow the Electricity Council to increase the energy costs of this country by increasing the price of electricity by an average of 10 per cent. next September. For some area boards that means an increase of 15 per cent. The Times estimated £50 million as the likely increase in industrial costs coming into effect in September, at the worst possible juncture for the economic performance of this country.
  The simple Amendment provides an immediate and concrete opportunity to

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  mitigate that substantial increase in costs which the Central Electricity Generating Board and the Electricity Council have been permitted to place upon the consumer. By reducing the fuel oil duty to the users of oil for generating electricity, there would be an immediate relief to the Central Electricity Generating Board, apart from the Scottish Boards, of £13 million. That is confirmed in an explicit statement given to me by Mr. Brown, the Chairman of the C.E.G.B. that the fuel oil duty for 1966–67, on the basis of 6 million tons of oil burnt, will be £13 million. That is the duty it will have to pay if the Amendment is not accepted, and one must add to that the Scottish figures.
  Mr. Peyton: If my hon. Friend is talking about Central Electricity Generating Board figures, there are two points. First, they would not cover any oil burnt in Scotland. Secondly, they would not allow for the effect of the regulator over the full year—that content of the figure my hon. Friend is quoting would only come from August last year to March of this year.
  Mr. Alison: I am grateful to my hon. Friend for pointing out that I have underestimated the burden placed by the fuel oil duty on the electricity generating industry at the present time.
  If the Government were to accept Amendment No. 90, they would immediately relieve the burden of electricity costs by £13 million to £15 million and possibly more. That is about a quarter of the debit which the Minister of Power said on 12th May was to be incurred as a result of the drop in electricity sale. He said that the gap would have to be closed by this sensational increase in prices. Thus, to reduce that debit by about £15 million is not something to be sniffed at. The burden can be reduced in this way simply by a stroke of revenue reform and my Amendment should therefore be given careful consideration.
  I hope that the Financial Secretary would agree that there are really no solid grounds on which the Government could object to relieving the generating authorities of this fuel oil duty. But I will deal with two of the grounds on which the hon. and learned Gentleman might possibly level objections. First, there is the revenue aspect. The revenue would be
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  reduced by about £15 million but the revenue from hydrocarbon oil, including light oils, is £880 million to £900 million a year, so surely to relieve electricity generation of duty to the extent of £13 million to £15 million—under 2 per cent. of the duty from hydrocarbon oils—would not make a serious dent in the revenue. It could easily be made up by the mere buoyancy of the revenue. There are plenty of places, shown in the Financial Statement, where the loss could be balanced by a cut in expenditure—for example, the proposal to spend £50 million this year on acquiring company securities. If the Government reduced that to £30 million or £35 million, they could offset the loss in revenue.
  Secondly, it may be that the Government consider that my proposal would contravene the explicit policy, set out in the White Paper on Fuel Policy and elsewhere, to afford a measure of protection to the coal industry. I remind the hon. and learned Gentleman, however, that, so far as the generating authorities are concerned, the question of a preference for coal does not in any way hinge upon the presence of the fuel oil duty. It is wholly irrelevant. The duty, in so far as it protects coal, does not apply in the case of the electricity generating authorities, because there is perfectly clear statutory authority vested in the Ministry of Power, to require the Central Electricity Generating Board and the Electricity Council to use coal as a fuel rather than oil. The Government can thus enforce the preference in that way.
  There is the obvious case of the Electricity Act, 1957, which explicitly gives the Minister power of a general character to give the electricity authorities a direction in the national interest if necessary to use coal instead of oil. But perhaps more directly relevant are the words of Mr. F. H. S. Brown, Chairman of the C.E.G.B.:
  "We are required to get Ministerial consent under Section 2 of the Electric Lighting Act, 1909, before we can build a power station. The Minister can, quite properly of course, and does use that statute, which requires us to get his permission to build a power station, also to define what fuel that power station should burn and to veto any proposal of ours to change the fuel of that power station."
  Thus, the £13 million to £15 million imposed on electricity generating in fuel

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  duty has nothing to do with the protection of coal and the idea that it has is mistaken. It is simply a revenue source.
  And it is obvious that the idea of taxing the electricity generating authorities, with the result that it is passed on in higher industrial costs and the cost of living, could hardly be more irrelevant to the economic needs of the country. I ask the hon. and learned Gentleman to weigh carefully whether he cannot accept my modest Amendment to relieve electricity generating of the need to pay fuel oil duty, just as the gas industry, horticultural users and the chemical industry have been relieved.
  Mr. MacDermot: We are discussing three separate but related topics. The first is the proposal that we should exempt heavy hydrocarbon oils from the consolidation of the regulator. The second proposal, in New Clause 24, is that we should abolish these duties completely. The third proposal, in Amendment No. 90, is that we should exempt it in relation to the electricity production industry. I will deal with these in turn, but perhaps, first, I could group the general proposals relating to hydrocarbon oils, because the arguments I put against New Clause 24 are basically the same as those against exemption from the consolidation of the regulator.
  The hon. Member for Yeovil (Mr. Peyton) began by asking whether the Customs and Excise likes complexity for its own sake and has to make a rebate of a tax it has already levied. I was surprised to hear him say that, since he is a former Minister in the Ministry of Power. It is for purposes of effective control that it is necessary that all these oils shall be taxed before they are released and distributed, otherwise it would be impossible to check evasion. This is done; and a rebate is needed to deal with those oils which are entitled to bear a lower rate of tax.
  Mr. Peyton: I would not like the fact that I was once in a subordinate position in the Ministry of Power to be thought to carry me along the road of total agreement and complete countenancing of all the practices of the Commissioners of Customs and Excise.
  Mr. MacDermot: Or perhaps even of all the practices of the Minister the hon. Gentleman served. I do not know.
  Secondly, the hon. Gentleman urged that we should get rid of what he called our pathological antipathy to the British oil industry and cease the continuation of a policy which he abhors but which was pursued by the Government of which he was a member. I have noticed some reluctance among the supporters of these Amendments to recall the history of the duties they are now attacking. They say that, although the duties were introduced originally for revenue purposes, they were retained solely for the purpose of protecting the coal industry. That is not correct.
  It is true that these duties, when originally introduced in 1961 by the then Chancellor of the Exchequer, were said by him to be on revenue grounds, but, in fact, Ministers in the last Government made it clear that they were being retained both for revenue purposes and for protection of the coal industry. Therefore, one has to look at this both from the point of view of fuel policy and from the point of view of revenue policy.
  We had a debate on this subject last year and, as we have been reminded, I said then that the whole question was open in the review of fuel policy which was taking place. This is a much pro-founder review of this extremely complex subject than has previously been carried out. As the hon. Member for Worcestershire, South (Sir G. Nabarro) pointed out, the review has continued for a considerable time, but my right hon. Friend the Minister of Power has given an assurance to the House that he will make a statement on it before the Summer Recess, and that a White Paper will be published later in the year. The Committee will, therefore, not expect me today to deal with the fuel policy aspects which have been raised.
  7.30 p.m.
  I entirely agree with my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) that it would be quite wrong and most disturbing to make an alteration of the kind which has been proposed quite independently and separate from and in anticipation of the results of that fuel policy review. It may be—I say

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  nothing one way or the other—that the outcome of this review will result in some changes of taxation in relation to fuel policy. Certainly that aspect will fall for consideration in the review. In something which was created to make a balance between different fuels, it would be wrong to make alterations in anticipation of the outcome of the review.
  Mr. Allison: The Financial Secretary will bear in mind that no firm date has been given for the presentation of the fuel review. Meanwhile, a firm date has been given—September, this year—on which electricity charges are to rise. I hope that he will address himself to that point when discussing taxation relief for electricity.
  Mr. MacDermot: I will deal with electricity charges in a moment. I will deal, first, with the general argument of the new Clause.
  The first and primary consideration which leads us to reject this new Clause at present is the heavy revenue cost involved. The return from these heavy hydrocarbon oil duties is estimated now to amount to £88 million in a full year. As my right hon. Friend said in his Budget statement, this is not a year in which he feels able to make any major changes of taxation and a change of that order would be major.
  While dealing with the cost aspect, I can give the figures of what is involved in the consolidation of the regulator in relation to this duty. If we were to exempt these fuel and other duties, we estimate the effect would be a loss of between £7 million and £8 million directly. I say "directly" because one of the factors involved here is that one cannot separate completely this duty from other duties which are involved. If we were to grant an exemption here, there would be pressures for extending exemption to other duties which are the subject of the consolidation of the regulator increases.
  The duty was imposed primarily to raise revenue and produces a major yield. It would not be appropriate to abolish it on revenue grounds except in the context of a full Budget review in which the claims of other candidates for tax reduction would have to be weighed and we would have to consider and survey
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  alternative means of recouping the revenue loss.
  It has not been argued that the existence of this duty acts adversely on our industry's competitive position for exports in relation to other countries. That could not be argued, because this is one of the duties which qualifies for rebate under the export rebate scheme. The effect of the duty is extremely widely and thinly spread over industry as a whole and is estimated to represent only 0·2 per cent. of the gross output of manufacturing industries.
  The existence of this duty is not something which is exceptional in relation to other countries. We have heard a lot in recent debates about the prospect of a need for harmonisation of indirect taxes between this country and the E.E.C. countries in the event of our application to join the E.E.C. being successful. To state it generally, our present level of fuel oil duty is about the same as the average of the Community as a whole. We reject this proposal, first, because any major alteration in the duty on fuel oil must await the outcome of the review of fuel policy, and, secondly, purely from a revenue point of view, we cannot in the present Budget treat separately a duty which is producing a revenue of this order.
  Sir G. Nabarro: A point was made by my hon. Friend the Member for Yeovil (Mr. Peyton) and myself which is a matter of fundamental principle. We are all agreed that it is undesirable to tax food or fuel. There is no other case known in this country of taxing fuel other than this fuel for production purposes. The only other form of fuel which is taxed is motor transport, which is an entirely different consideration.
  Mr. MacDermot: Although the hon. Gentleman is consistent in the campaign which he has always waged against any form of taxation of fuel, very many of his hon. Friends are urging us to change our indirect taxation system in a way which would model it on that prevailing in the E.E.C. countries.
  All I am pointing out is that in this respect what we do is already in line with what is being done in the E.E.C. countries. Whereas up to now it has been a general article of taxation faith in this country that we should not tax food or fuel—and there have been rare

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  exceptions to that, of which this is one—this is something which we shall have to review if we are asked to bring our indirect taxation into closer harmony with the systems which apply on the Continent—unless on entry into the E.E.C. we are able to persuade others to our way of thinking.
  On the Amendment of the hon. Member for Barkston Ash (Mr. Alison), dealing with the effect of the duty on electricity generation; I begin by confirming his figure. The burden of this duty on the industry amounts to about £13½ million. He is arguing that, whatever be the position in relation to the duty as a whole, this industry ought to be relieved of that burden. Purely from a revenue point of view, our objection is that in what is basically a taxation standstill year, we would not feel able on those grounds to accept an Amendment which would involve a reduction in revenue of £13½ million.
  If it were to be argued that some concession should be given, but at the price of recoupment elsewere in taxation, then a very strong case in these circumstances has to be made for singling out this industry for preferential treatment compared with other possible candidates for tax reduction, including, in particular, other users of heavy oil. The elimination of heavy oil duty in this respect would in itself undermine to some extent the protection afforded to the coal industry; but, more important, it would give rise to claims for exemption by other users of heavy oil and oil subject to duty leading ultimately to a complete extinction of that protection.
  To give an example. It would be argued that there is really no reason why oil burned to generate electricity to provide domestic heating should go free, when oil burned to provide central heating in the home should continue to be taxed.
  Mr. Alison: I do not think that the hon. Gentleman has taken the point, that there will be compensating reductions in costs to consumers in practically every sector, including the domestic users of oil for central heating, through the reduction in electricity lighting bills.
  Mr. MacDermot: The hon. Member has somewhat exaggerated the likely effect
  348
  of his proposal upon electricity charges. This point was also raised by the hon. Member for Worcestershire, South. The heavy oil duty element in electricity is a very small amount. It amounts to about 0·02d. per unit or just over 1 per cent. on average, of the revenue from sales of electricity. It is so thinly spread over industrial, commercial and domestic consumers of all kinds that elimination of the duty completely would not have any significant effect on electricity prices or industrial costs.
  Sir G. Nabarro: I did not make any assessment, I quoted from the Report of the Chairman of the Electricity Council. He gave the figure as £12 million a year for fuel oil duty charges and that has to be set directly against the £100 million recoupment envisaged by the Minister of Power in his statement on 12th May last. That is one-eighth, 1½d. in the 1s., 12½ per cent. and it is totally irrelevant to talk about 0·02d. per unit unless the Minister tells us what is the cost of electricity per unit against which he is setting off this tiny reduction.
  Mr. MacDermot: I am telling the hon. Member what is the potential reduction in electricity charges that could come from accepting the proposal of the hon. Member for Barkston Ash and pointing out that it is fallacious to think that it would have any significant effect on prices or that it could in any way affect the forthcoming price increases, which are attributable in the main to the need to make provision for heavy capital cost of building in the power stations.
  In this connection, the same points apply as I made earlier, about the competitiveness of British industry in relation to its competitors abroad. To sum up, a major alteration of this kind in the incidence of heavy oil duty could not be made prudently on fuel policy grounds in advance of the outcome of the review, on which the Minister has promised to make a statement in July. From a revenue point of view—and the duty was primarily introduced as a source of revenue and it has produced a major yield—it would not be appropriate to alter the duty except in the context of a general Budget review, in which these tests could be weighed and considered, together with the claims of other candidates for tax reduction.
  Mr. Lubbock: I am tempted to intervene as a result of the Financial Secretary's remarks on the electricity supply situation, because I thought that there was a great deal of force in Amendment No. 102, in the name of the hon. Member for Barkston Ash (Mr. Alison), if not for the case of removing fuel oil duty. I can understand what the Financial Secretary has said about the impossibility of reducing the revenue by £88 million in a stand-still year, but this cannot be applied to the case of the electricity industry, where, he has been telling the Committee, the amount is an extremely small one, so small that it would not have much effect on the price increases due to be placed upon the consumer in the middle of this year.
  I could not help thinking, as the hon. Gentleman spoke, that the consumer is never in a winning position. A few years ago we were told that price increases in the electricity supply industry were necessary because we had to keep old plant in commission to meet the demand which had been under-estimated. Now we are told that these price increases are necessary because of the vast programme of capital expenditure which has been undertaken by the generating boards. Whatever happens, we have to face these enormous price increases every year, and even if this does not go a long way towards eliminating them it is at least a step in the right direction.
  On another occasion we could argue for a relaxation of the financial targets of the electricity supply industry, but at least the hon. Gentleman could accept this Amendment and deal with a part of this increase which hangs over the consumer's head, and make it unnecessary. I wish that he had adopted a rather more accommodating approach towards this particular Amendment. I would not endorse his statement that an alteration in fuel duty affects the electricity supply industry, and that he must await the outcome of the fuel review later in the year.
  7.45 p.m.
  This is a complete nonsense because the capital expenditure programmes of the generating boards have been determined for many years in advance. The hon. Gentleman will probably know that under construction or planned at the moment we have over 25,000 megawatts
  350
  of coal-fired electricity, whereas we have only 4,000 megawatts of oil-fired electricity, and 2,000 megawatts of dual. So, whatever decision is made now will not affect the amounts of coal and oil respectively which are burned in these Central Electricity Generating Board stations over the next five to 10 years, because the stations are already planned and will be brought into commission, notwithstanding any changes in taxation policy by the Government in the meanwhile.
  I would refer to the comment of the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro) about an increase in coal prices. This is a serious matter for this country. If one looks at the comparison between Britain and the United States, one finds that since 1950 our prices have increased by something over 75 per cent., whereas in the U.S.A. the cost of coal has remained absolutely constant. I am taking this information from a paper by Mr. Donald Clark, the Chief Planning Engineer to the Central Electricity Generating Board. Here we have a situation in which oil has remained constant in price, or has been reduced in the last few years, whereas the Central Electricity Generating Board has had to pay 75 per cent. more for the coal which it is using.
  This means that electricity prices have had to go up practically every year. A very illogical situation will obtain in a short while when we start using natural gas, because then, as has been pointed out, we shall have coal, and natural gas, which are not subject to taxation at all, and oil which is. Yet oil and natural gas are both hydrocarbon products. I do not see how one can make this distinction between them in logic. That is a matter which remains to be settled—whether the electricity generating boards will be able to use natural gas in their power stations.
  I very much doubt whether the Minister will be able to withstand the pressures of Mr. Brown and his colleagues for such use, because it obviously makes economic sense today. It is a matter of some disappointment that the hon. Gentleman has not felt able to accede to this modest Amendment, which would put our electricity supply industry in a better financial position. It would help to mitigate the vast increases which are to be demanded of the consumer, and would have been

  351
  a step towards a more sensible fuel policy in the long term.
  Mr. Patrick Jenkin: I recollect that last year, when I intervened in the debate at this stage, on this subject, I had the misfortune to provoke the Financial Secretary. He put it down afterwards to his Irish temperament. I can assure him that I will avoid doing anything of the sort tonight. I intend to be extremely brief.
  The speeches made by my hon. Friends the Member for Worcestershire, South (Sir G. Nabarro) and Yeovil (Mr. Peyton), were characteristic and above all, as the Financial Secretary has acknowledged, were completely consistent with everything that they have been saying for many years in relation to the fuel oil tax. There is a very great deal in their argument in favour of the eventual abolition of this tax.
  My hon. Friend the Member for Barkston Ash (Mr. Alison) initiated a sub-debate within the debate which hon. Members on both sides have found interesting. They certainly found his speech persuasive. The figure of £13½ million as the cost of meeting his Amendment is certainly not large by the standards of the yield of the tax as a whole and of the Budget. As I listened to my hon. Friend, however, and to the hon. Member for Orpington (Mr. Lubbock), it was impressed upon me that almost the whole of the arguments which they were addressing about the type of fuel oil used in the electricity industry were equally relevant to the type of fuel oil as used in any industry. One is bound to say that this is a tax which puts up industrial costs. For that reason, it is a tax which sooner or later, and sooner rather than later, should be abolished.
  The Financial Secretary gave the cost of total abolition in reply to new Clause 24 as £88 million. One begins to wonder whether this will be yet one more tax which reaches the point that it becomes too expensive ever to abolish it. For that reason, we support entirely Amendment No. 102 to avoid its consolidation. At least, let us lay down a marker and say that the tax must not at this stage be increased and state firmly that when circumstances allow, it must be progressively reduced and eventually abolished.
  For those reasons, I hope very much that my hon. Friend the Member for Yeovil will feel it right to press his Amendment to a Division.
  Mr. Peyton: I intervene only briefly to say how obliged I am to my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) for his advice that we should divide in support of the Amendment. On this occasion, I am more than usually pliable and open to advice from such quarters and am very willing to accept it.
  I felt extremely sorry for the Financial Secretary. He stood there, pale and loitering, at the Dispatch Box, hesitating, most unlike himself, for words, ashamed that he had once again, on behalf of his wretched masters, to come here and expose the same unfortunate, negative, bankrupt case that he tried to defend before us last year.
  Neatly, and humbly, I accept the advice of my hon. Friend and will certainly divide the Committee in favour of the Amendment.
  Question put, That the words proposed to be left out stand part of the Clause:—
  The Committee divided: Ayes 189, Noes 122.

  Division No. 339.]

  AYES

  [7.53 p.m.

  Alfdritt, Walter

  Bradley, Tom

  Cullen, Mrs. Alice

  Anderson, Donald

  Bray, Dr. Jeremy

  Dalyell, Tam

  Archer, Peter

  Broughton, Dr. A. D. D.

  Davidson, Arthur (Accrington)

  Armstrong, Ernest

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

  Davies, Dr. Ernest (Stretford)

  Atkinson, Norman (Tottenham)

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

  Davies, G. Elfed (Rhondda, E.)

  Bacon, Rt. Hn. Alice

  Buchan, Norman

  Davies, Ednyfed Hudson (Conway)

  Barnett, Joel

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

  Davies, Harold (Leek)

  Beaney, Alan

  Butler, Herbert (Hackney, C.)

  de Freitas, Rt. Hn. Sir Geoffrey

  Bence, Cyril

  Callaghan, Rt. Hn. James

  Dell, Edmund

  Bennett, James (G'gow, Bridgeton)

  Cant, R. B.

  Dempsey, James

  Bidwell, Sydney

  Coleman, Donald

  Diamond, Rt. Hn. John

  Bishop, E. S.

  Concannon, J. D.

  Dickens, James

  Blackburn, F.

  Craddock, George (Bradford, S.)

  Doig, Peter

  Booth, Albert

  Crawshaw, Richard

  Donnelly, Desmond

  Boston, Terence

  Crosland, Rt. Hn. Anthony

  Driberg, Tom

  Boyden, James

  Crossman, Rt. Hn. Richard

  Dunnett, Jack

  Dunwoody, Mrs. Gwyneth (Exeter)

  Jackson, Peter M. (High Peak)

  Palmer, Arthur

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

  Jones, Dan (Burnley)

  Pannell, Rt. Hn. Charles

  Eadie, Alex

  Jones, T. Alec (Rhondda, West)

  Park, Trevor

  Edelman, Maurice

  Judd, Frank

  Parkyn, Brian (Bedford)

  Edwards, Robert (Bilston)

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

  Pearson, Arthur (Pontypridd)

  Edwards, William (Merioneth)

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

  Pentland, Norman

  Ennals, David

  Lawson, George

  Prentice, Rt. Hn. R. E.

  Ensor, David

  Ledger, Ron

  Price, William (Rugby)

  Evans, Albert (Islington, S.W.)

  Lee, Rt. Hn. Frederick (Newton)

  Probert, Arthur

  Fernyhough, E.

  Lee, John (Reading)

  Pursey, Cmdr. Harry

  Finch, Harold

  Lestor, Miss Joan

  Reynolds, G. W.

  Fitch, Alan (Wigan)

  Lever, Harold (Cheetham)

  Richard, Ivor

  Fitt, Gerard (Belfast, W.)

  Loughlin, Charles

  Roberts, Albert (Normanton)

  Fletcher, Ted (Darlington)

  Luard, Evan

  Roberts, Gwilym (Bedfordshire, S.)

  Foot, Michael (Ebbw Vale)

  McBride, Neil

  Robertson, John (Paisley)

  Forrester, John

  MacColl, James

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

  Fowler, Gerry

  MacDermot, Niall

  Rogers, George (Kensington, N.)

  Fraser, Bt. Hn. Tom (Hamilton)

  Macdonald, A. H.

  Ross, Rt. Hn. William

  Freeson, Reginald

  McGuire, Michael

  Rowlands, E. (Cardiff, N.)

  Galpern, Sir Myer

  Mackie, John

  Shaw, Arnold (Ilford, S.)

  Ginsburg, David

  Mackintosh, John P.

  Sheldon, Robert

  Gourlay, Harry

  MacMillan, Malcolm (Western Isles)

  Short, Mrs. Renée(W'hampton,N.E.)

  Gray, Dr. Hugh (Yarmouth)

  McMillan, Tom (Glasgow, C.)

  Silkin, Rt. Hn. John (Deptford)

  Greenwood, Rt. Hn. Anthony

  McNamara, J. Kevin

  Silverman, Julius (Aston)

  Gregory, Arnold

  MacPherson, Malcolm

  Slater, Joseph

  Grey, Charles (Durham)

  Mahon, Peter (Preston, S.)

  Snow, Julian

  Griffiths, David (Rother Valley)

  Mahon, Simon (Bootle)

  Steele, Thomas (Dunbartonshire, W.)

  Griffiths, Rt. Hn. James (Lianelly)

  Marquand, David

  Stewart, Rt. Hn. Michael

  Hale, Leslie (Oldham, W.)

  Mason, Roy

  Symonds, J. B.

  Hamilton, James (Bothwell)

  Maxwell, Robert

  Taverne, Dick

  Hamilton, William (Fife, W.)

  Millan, Bruce

  Tinn, James

  Hannan, William

  Miller, Dr. M. S.

  Tomney, Frank

  Harper, Joseph

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

  Walker, Harold (Doncaster)

  Harrison, Walter (Wakefield)

  Morgan, Elystan (Cardiganshire)

  Wallace, George

  Haseldine, Norman

  Morris, Alfred (Wythenshawe)

  Watkins, David (Consett)

  Hazell, Bert

  Morris, John (Aberavon)

  Wells, William (Walsall, N.)

  Henig, Stanley

  Moyle, Roland

  Whitlock, William

  Herbison, Rt. Hn. Margaret

  Murray, Albert

  Williams, Alan (Swansea, W.)

  Hilton, W. S.

  Norwood, Christopher

  Williams, Alan Lee (Hornchurch)

  Houghton, Rt. Hn. Douglas

  Oakes, Gordon

  Williams, Clifford (Abertillery)

  Howarth, Harry (Wellingborough)

  Ogden, Eric

  Williams, Mrs. Shirley (Hitchin)

  Howarth, Robert (Bolton, E.)

  O'Malley, Brian

  Wilson, William (Coventry, S.)

  Hoy, James

  Oram, Albert E.

  Winnick, David

  Huckfield, L.

  Orbach, Maurice

  Yates, Victor

  Hughes, Hector (Aberdeen, N.)

  Orme, Stanley

  Hughes, Roy (Newport)

  Oswald, Thomas

  TELLERS FOR THE AYES:

  Hunter, Adam

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

  Mr. Ioan L. Evans and

  Hynd, John

  Page, Derek (King's Lynn)

  Mr. Charles R. Morris.

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

  NOES

  Alison, Michael (Barkston Ash)

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

  Legge-Bourke, Sir Harry

  Awdry, Daniel

  Emery, Peter

  Lewis, Kenneth (Rutland)

  Bell, Ronald

  Errington, Sir Eric

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

  Bennett, Sir Frederic (Torquay)

  Fletcher-Cooke, Charles

  Lubbock, Eric

  Berry, Hn. Anthony

  Fortescue, Tim

  McAdden, Sir Stephen

  Bessell, Peter

  Gilmour, Ian (Norfolk, C.)

  MacArthur, Ian

  Biffen, John

  Gilmour, sir John (Fife, E.)

  Mackenzie, Alasdair(Rose&Crom'ty)

  Black, Sir Cyril

  Glover, Sir Douglas

  Macleod, Rt. Hn. Iain

  Blaker, Peter

  Goodhart, Philip

  McMaster, Stanley

  Body, Richard

  Goodhew, Victor

  Marten, Neil

  Bossom, Sir Clive

  Grant, Anthony

  Maxwell-Hyslop, R. J.

  Boyd-Carpenter. Rt. Hn. John

  Grieve, Percy

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

  Braine, Bernard

  Griffiths, Eldon (Bury St, Edmunds)

  Miscampbell, Norman

  Brinton, Sir Tatton

  Gurden, Harold

  Mitchell, David (Basingstoke)

  Hall-Davis, A. G. F.

  More, Jasper

  Bromley-Davenport, Lt.-Col. Sir Walter

  Harvey, Sir Arthur Vere

  Morgan, Geraint (Denbigh)

  Brown, Sir Edward (Bath)

  Hawkins, Paul

  Murton, Oscar

  Bruce-Gardyne, J.

  Heald, Rt. Hn. Sir Lionel

  Nabarro, Sir Gerald

  Burden, F. A.

  Heseltine, Michael

  Noble, Rt. Hn. Michael

  Campbell, Gordon

  Higgins, Terence L.

  Onslow, Cranley

  Carlisle, Mark

  Hiley, Joseph

  Orr-Ewing, Sir Ian

  Chichester-Clark, R.

  Hill, J. E. B.

  Osborne, Sir Cyril (Louth)

  Clegg, Walter

  Hogg, Rt. Hn. Quintin

  Page, Graham (Crosby)

  Costain, A. P.

  Holland, Philip

  Peel, John

  Craddock, Sir Beresford (Speithorne)

  Hornby, Richard

  Peyton, John

  Crosthwaite-Eyre, Sir Oliver

  Howell, David (Guildford)

  Pounder, Rafton

  Cunningham, Sir Knox

  Hunt, John

  Powell, Rt. Hn. J. Enoch

  Dalkeith, Earl of

  Hutchison, Michael Clark

  Pym, Francis

  Davidson, James(Aberdeenshire, W.)

  Jenkin, Patrick (Woodford)

  Ramsden, Rt. Hn. James

  Dean, Paul (Somerset, N.)

  Johnston, Russell (Inverness)

  Renton, Rt. Hn. Sir David

  Dodds-Parker, Douglas

  Kaberry, Sir Donald

  Ridsdale, Julian

  Drayson, G. B.

  Kirk, Peter

  Rodgers, Sir John (Sevenoaks)

  Eden, Sir John

  Langford-Holt, Sir John

  Rossi, Hugh (Hornsey)

  354

  355

  Royle, Anthony

  Taylor, Frank (Moss Side)

  Winstanley, Dr. M. P.

  Scott, Nicholas

  Thatcher, Mrs. Margaret

  Wood, Rt. Hn. Richard

  Sharples, Richard

  Tilney, John

  Worsley, Marcus

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

  Wainwright, Richard (Colne Valley)

  Wright, Esmond

  Sinclair, Sir George

  Walker-Smith, Rt. Hn. Sir Derek

  Wylie, N. R.

  Smith, John

  Weatherill, Bernard

  Younger, Hn. George

  Stainton, Keith

  Whitelaw, Rt. Hn. William

  Stodart, Anthony

  Wills, Sir Gerald (Bridgwater)

  TELLERS FOR THE NOES

  Taylor,EdwardM.(G'gow,Cathcart)

  Wilson, Geoffrey (Truro)

  Mr. Eyre and Mr. Monro.

  8.0 p.m.
  Sir G. Nabarro: I beg to move Amendment No. 4, in page 3, line 29, to leave out "27½" and to insert "16½".
  It will be well known within the Committee that it is not in order to seek to raise any level of Purchase Tax. An hon. Member may only seek to reduce a level of Purchase Tax, and I am thus confronted with considerable technical difficulties in the fact that this Amendment relates itself to the three existing rates of Purchase Tax after consolidation which become, including the regulator, 11 per cent., 16½ per cent. and 27½ per cent. I contend myself technically therefore, with seeking to reduce the 27½ per cent. rate to 16½ per cent. in order to precipitate a general debate on all Purchase Tax matters.
  You will note, Mr. Irving, that new Clause No. 1, though not selected by the Chair for association with the present Amendment, in effect deals with the same matter but in the context of the motor industry only; for motor cars pay Purchase Tax, after consolidation of the regulator, at 27½ per cent. New Clause No. 1 seeks to reduce the rate to 16½ per cent., and therefore I shall deal largely with motor cars this evening.
  There are, of course, a large number of other goods which are subject to the 27½ per cent. rate and which my hon. Friends may like to mention in the course of their speeches. They include furs, haberdashery, jewellery, fur rugs, mirrors, sewing machines, lighting fittings, hand lamps, garden ornaments, radio and television sets, musical instruments, gramophones and radiograms, gramophone records, umbrellas, smokers' requisites, luggage, cameras, diaries, calendars, stationery, road vehicles and bicycles, hair treatment materials, toilet requisites, perfumery and certain drugs and medicines.
  The aggregation of the revenue collected at the rate of 27½ per cent. from all those chargeable items would be £450 million in the year 1967–8. The aggrega-
  356
  tion of the revenue collected at the 16½ per cent. rate of Purchase Tax in 1967–68 is estimated at £75 million, and the aggregation of the revenue from the 11 per cent, rate at £210 million, making a total revenue from Purchase Tax after consolidation of regulator, of £735 million.
  It does not take any great mathematical acumen to work out that if the whole of the 27½ per cent. items were reduced to 16½ per cent., the cost to the revenue would be £180 million, and the total yield from Purchase Tax would be reduced from £735 million to £555 million.
  Mr. MacDennot Mr. MacDennot indicated assent.
  Sir G. Nabarro: I am glad to see the Financial Secretary nodding assent at this early stage.
  The element of Purchase Tax revenue in respect of motor cars is by far the largest of any of the goods on which Purchase Tax is chargeable. At the full rate of 27½ per cent., motor cars account for a revenue in terms of Purchase Tax of £148 million. Were the rate of Purchase Tax on cars reduced from 27½ per cent. to 16½ per cent., the loss of revenue would amount to £59 million, and the residual revenue in respect of motor cars would therefore be £89 million.
  I confine myself to motor cars because, as an hon. Member representing a Midlands constituency, I am concerned with the impact of the economic and financial measures of 20th July, 1966, on the motor car industry, which is largely though not entirely centred in the Midlands. These measures have had a dire effect there, as elsewhere, and we may have been reminded of it only this evening, because tonight's Evening Standard headlines the decline in motor car production during March of this year:
  "Sales of new vehicles during the month of March were 25 per cent. below the level of March, 1966, and sales of secondhand vehicles were down by 12 per cent. For the first quarter of this year, sales of new vehicles were 16 per cent. down on the first three months of last year."

  357
  If anything, the April figures are worse. The Daily Mail had this to say on 16th May:
  "Car sales in Great Britain fell last month to 96,735, almost 30 per cent. below the same month last year. This is the lowest April figure for five years."
  The Financial Times reported on the same day:
  "New car registrations in April fell to 96,735, the lowest April figure for five years and nearly 29½ per cent. below the same month last year. This was the worst month for the car industry since the squeeze began last July, and some industry leaders are putting heavy pressure on the Treasury and the Ministry of Technology for early relief."
  In fact, though no official pronouncement was made, it was reported that the motor car leaders went to the Treasury on 24th May. The Financial Times of 25th May said:
  "Representatives of the motor industry, led by Sir George Harriman, president of the Society of Motor Manufacturers and Traders, met Treasury representatives again yesterday in an extension of the discussions started last week."
  It went on to say:
  "It is believed that the Government has, in fact, conceded the industry's case for early relaxations of hire-purchase and/or purchase tax restrictions on car sales and that the negotiations are now concerned with details."
  There may be hon. Members of this Committee who, in their innocence, will argue that the home sales of motor cars have no bearing on export performance. There are a few naive creatures of that kind in the Ministry of Technology at the present time. It is interesting to recall that when the present Joint Parliamentary Secretary to the Ministry of Labour, the hon. Member for Birmingham, Spark-brook (Mr. Hattersley), was on the back benches he used to attack his Front Bench and the Minister of Technology on this very point, because, as a private Member, he took my view, that we cannot export motor cars successfully unless there is a buoyant home market. The Minister of Technology always denied that.
  I shall not go into this in depth at this stage, but I want to bring out for the first time in this House the figures supplied to me by the industry—and they may be confirmed from Board of Trade statistics—of the dramatic differences between Tory policy for the motor industry in this country, and Labour policy. During the 13 wasted years which the Prime
  358
  Minister and his helots talk about endlessly, they always omit to note that it was very difficult to get a motor car in 1951 for one's own use, but in 1964 one family in four in this country owned a motor car. Cars proliferated. A car was no longer a sign of affluence, it was a household necessity, and in every year that passed the motor industry of this country produced more cars for export and for domestic sales. The achievement was magnificent, and the curve of production was ever upward.
  When the Labour crowd got in, that was the end of those halcyon days, because 1965 and 1966 show a very dismal story by comparison, and I shall quote the figures both for exports and for home trade. If anybody doubts the importance of this industry to Britain, let me tell him that the vehicle industry, not motor cars only, now exports about £800 million worth of goods, representing about 16½ per cent. of all Britain's exports. I do not believe that motor car exports can continue to grow unless there is a steadily increasing demand from the home market, and not a downward trend of domestic sales of new motor cars.
  Here are the figures which seem to support my views: In 1964 the home production of motor cars was 1,161,886. In 1965, the first year of Labour Government it declined by 5·6 per cent. to 1,069,374 motor cars. In 1966 there was a further decline, a 10·6 per cent. reduction compared with 1964, and home sales were down to 978,684, so in 1964, 1965, and 1966, as a comparison, there was a steady downward trend in home sales.
  8.15 p.m.
  I now take the export figures, because the whole purpose of the squeeze, the tire-purchase restrictions, the increased taxation on cars, the increased taxation on petrol, and the remainder, was to get exports up. The following figures represent the measure of the failure of the Government's policy: In 1964 car exports were 705,754. In 1965 car exports declined by 7·5 per cent. to 652,671. In 1966 there was a further calamitous drop to 624,995, or a drop of 11·2 per cent. compared with 1964. That is the measure of the Government's failure to promote exports of motor cars. The squeeze at home on the motor car trade, on this narrow front, which has caused so much hardship in

  359
  the Midlands, so much dislocation of labour, and so much unemployment and short time working, has had no success whatever in the export field.
  Now let me consider overall production, for this is not only a matter of the Midlands. Let us consider the national resources entailed in building new motor car plants on Merseyside, in building new plants in Scotland, or at Luton, or Dagenham, or elsewhere. It is surely a question of the national resources entailed. Here are the detailed figures, which are even more illuminating: In the last year of Tory rule, in 1964, 1,867,640 motor cars were produced. In the first year of Labour rule that figure declined by 7·8 per cent. to 1,722,045. In the second year of Labour rule, in 1966, it further declined by a very large margin to 1,603,679. There was a 14·1 per cent. reduction in motor car output between 1964 and 1966. I say that that is the measure of the failure of the Labour Party to secure more vehicle exports by their policies.
  They said that they brought in all measures of 20th July last to get exports up, and to remedy the deficit in the balance of payments. At least on one-sixth, that being the vehicles industry of Britain, they have failed dismally in their motor car and motor vehicle policy to secure an increase in exports. The Midlands today are turgid. The Midlands are the industrial hub of Britain, and industrial activity there revolves around the motor trade. The Midlands are turgid because motor car output has gone down, and the culprit is, of course, the policy of Her Majesty's Government.
  I do not believe that Sir Patrick Hennessy, the President of the Society of Motor Manufacturers and Traders, is a good Tory. He may vote Labour for all I know. He has never done me any kindness, nor my party, but from time to time he makes speeches which approximate to what I say in the House of Commons at regular intervals about the motor industry. I quote him tonight for the benefit of the Financial Secretary. At the annual general meeting on 20th April Sir Patrick Hennessy said:
  "True, we earned a record £800 millions—or over £1,500 for every minute of every day—through the export of our various products; true, too, that we are the world's largest exporters of commercial vehicles and agricul-
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  tural tractors. All this is good and our ascendency must be retained. But we are not exporting nearly as much as we could, and this is especially the case with motor cars. For this there are a number of reasons quite apart from labour problems at our factories."
  Then he said:
  "The restrictions on our home market, by preventing the spread of production costs over maximum output, have already promoted price increases here and are threatening competitive price levels abroad. In addition, diminishing profits are tending to curtail essential investment. Because of the external duties, the lights are changing from amber to red at the valuable frontiers of the Common Market countries. Rhodesia is no longer open to us. The Commonwealth nations are more and more interested in local production and there are a number of developing countries outside the Commonwealth where this comment also applies. And lastly, E.F.T.A. is not, so far, what we hoped it would be. None of these factors is within the control of the industry. And our manufacturers are to be left to linger in low gear. That is clearly the message of last week's Budget proposals. It was a barren Budget, bereft of any encouragement whatever to industry. But we are, of course, still supposed to export to more and more."
  Let those words speak for themselves. I can do no better. They are far more eloquent, coming from a leader of this great industry, than any words I could pronounce in this Committee. But I give the Financial Secretary a warning from the Midlands. He is hardly a Midlander, perched on a branch at Derby. The motor trade is centred in and around Birmingham, and the motor workers live largely in Worcestershire, which is why they elected me as their Member. [Interruption.] I said "largely". I agree that there are a few motor car workers in Coventry. If I were the hon. Member for Dunbartonshire, East (Mr. Bence), who is a good "Brummagen" citizen, I would not draw attention to Coventry. There are three Coventry Members—all Labour. Where are they? Not one of them is here to hear me talking about the motor car industry.
  Mr. Cyril Bence: They are busy.
  Sir G. Nabarro: They are not busy. They should be supporting me in trying to knock the Treasury down in respect of the Purchase Tax on cars.
  I have alluded to the drop in home sales of motor cars in March—down by 20 per cent., and in April—down by 30 per cent. What the Committee has to

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  remember is that the first half of every year is the best and the second half the worst. Therefore, there may be far worse to come in the second half of this year than we have experienced in the first half, notably in March and April. I quote from the Financial Times of 17th May under the heading
  "The worst car slump since 1929?"
  "This end-year slump has grown sharply in recent years. Over the past five years the percentage split first half year and second half year has been as follows: 1962, 59 per cent. in the first half of the year and 41 per cent. in the second; 1963, 55 per cent. and 45 per cent.; 1964, 58 per cent. and 42 per cent.; 1965, 62 per cent. and 38 per cent. and 1966, 66 per cent. and 34 per cent."
  So if for 1967 the figures are 66 per cent. for the first half year and 34 per cent. for the second half year and the figures follow the trend of March and April, the motor car industry will be in a dreadful condition during the off-season period—the second six months of the year.
  Mr. R. J. Maxwell-Hyslop: Will my hon. Friend remind the Committee which Government were in office in 1929?
  Sir G. Nabarro: I am grateful to my hon. Friend. The Labour crowd were in. I had forgotten that. I must say, in fairness to the Labour crowd, however, that in 1929 motor cars did not loom so large in the economy as they do today.
  I want the Treasury to reinvigorate the motor trade. I do not say "invigorate" because we did that between 1951 and 1964. Let the Treasury bear in mind the fact that there are only two ways of doing it. One is by the relaxation of hire purchase, which is a relatively quick and relatively mild way, and the other way is by a reduction in Purchase Tax. If the Treasury reduces Purchase Tax on cars it takes a long time to have effect. We have had recent experience of that. I remind the Financial Secretary that my right hon. Friend the Member for Barnet (Mr. Maudling), when Chancellor of the Exchequer, gave us all a Guy Fawkes Day bonus on 5th November, 1962, and brought about the biggest single reduction in Purchase Tax on any commodity in one swoop. He reduced the Purchase Tax on cars from 50 per cent. to 25 per cent. But it took seven months for the Purchase Tax reduction, dramatic as it was, to work its way through the entire economic system.
  Mr. Macdonald: I well remember the episode to which the hon. Gentleman refers. It had the effect of taking £50 away from everybody who owned a car and also seriously jeopardising the prosperity of car hire firms, as I know very well. I have heard many bitter complaints about the abruptness of that reduction.
  Sir G. Nabarro: The hon. Member is a latter-day fiscal Scrooge. Who has ever heard of the community being unhappy when taxes are reduced? Only the hon. Member, and he is a fiscal Scrooge. I am not unhappy when that kind of thing is done.
  But I am being utterly serious in saying that there is a fundamental cleavage in our respective approaches to these matters. The Treasury Ministers take the view that it can get more exports by damping down and depressing the home market. I take precisely the opposite view. Until the home market is reinvigorated in motor cars—the most expensive and most sophisicated of consumer durables—it will not be possible substantially to increase our exports.
  I point out to the Financial Secretary the results of Government policy upon the British Motor Corporation, as shown in its accounts for the last six months, published a few weeks ago. The company lost £7½ million in half a year. I agree that some of the loss was due to industrial disputes, but it was most largely due to the freeze since 20th July last.
  I make no apologies for concentrating on the motor trade, because new Clause No. 1 is the motor trade, and although, Sir Ronald, you have not called it with the Amendment, it amounts to the same thing. I want what is in new Clause 1—a unilateral relief of Purchase Tax on motor cars—as infinitely the preferable recourse to relaxation of hire purchase as a means of raising once again home sales of cars and thereby reinvigorating an industry which, it should endlessly be repeated, is worth £800 million a year of British exports, or 16½ per cent. of the total.
  I hope that I shall have some support from Scotland. The hon. Member for Dunbartonshire, East was a neighbour of mine in the Midlands 15 years ago. We lived a few hundred yards apart, and we were always interested in the motor industry. Scotland is interested in the industry today. Bathgate is not doing so

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  well. Let the hon. Gentleman speak for Scotland and for British cars, for this is the means of driving the Volkswagen and the Mercedes and all these other wretched foreign vehicles off British roads.
  8.30 p.m.
  Mr. Bence: The traditional outlook of light engineering in Britain goes back to the nineteenth century—that the basis of successful exports is a sound home market. This was the traditional concept not of Liberalism, but of Conservatism—that a vast, protected home market gave the chance to market surplus products at a low price in world markets.
  I have always strongly advocated our joining the European Economic Community, on the grounds of the twentieth century demand that to satisfy a home market with an economic product one must manufacture for the world. I would reverse the proposition of the hon. Member for Worcestershire, South (Sir G. Nabarro). I believe that, to give the British consumer a good product, a manufacturer with all the latest techniques of automation must be able to market his product in the rest of the world.
  To think solely in terms of a huge production for a home market to get exports is to fail lamentably. The success of Japan, America and West Germany is that they have built up not a solid home market, but a good foreign market. Therefore, their manufacturers give the home consumer a better product than we can. This is the result of the twentieth century technical change.
  I was employed in the motor industry in the West Midlands for some years. This change is the reason that many of us advocate the breaking-down of tariffs to extend world trade so that we can manufacture for world markets instead of our own narrow national markets. I am very proud of the motor trade, which I think has made a great contribution to the world's economy, especially with the social revolution wrought by the internal combustion engine. I went into the trade in 1918, from which time we have made a great contribution in that way.
  One of the greatest problems in marketing many consumer durables, but especially the motor car, in the world, whether Europe or America, is the system of franchise established between manufac-
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  turers and distributors. It is almost impossible for a British manufacturer to get a franchise in France or Germany. N.S.U., in Germany, controls practically all the service stations. It is difficult to get agencies in Europe for B.M.C. or Rootes products.
  In our country, the manufacturers—B.M.C, Ford and Vauxhall—give a franchise to garage proprietors as sole distributors. This is done in the United States, Canada and Australia, also. Holdens are getting almost complete control in Australia. This is done in Europe. Through Total and N.S.U. and other agencies, garage proprietors in France have the same system. One of the difficulties for a British manufacturer is to distribute and service his product through a chain of service stations in world markets.
  The hon. Member for Worcestershire, South quoted figures for the export of motor cars, but they did not include the vast trade under what is called "C.K.D.". B.M.C. has an assembly plant in Europe, Canada and America where crated components are sent not as motor cars, but as light engineering products and assembled under this system of "complete knock down". That form of traffic has increased considerably because of the development of container terminals and container traffic. It is becoming more economical to export the 3,000 or more units that go to make up a motor car in containers and to assemble them in the countries in which they are to be marketed, where local labour can be employed—
  The Temporary Chairman (Sir Ronald Russell): Order. The hon. Gentleman is getting rather wide of the Amendment.
  Mr. Bence: I merely wish to point out that it is not fair to place on the present Labour Government responsibility for the difficulties experienced by the motor car industry during the past year. I wanted to mention some of the difficulties being faced by the industry and the techniques being employed to overcome them. I have mentioned one such technique and will, for the moment, leave the matter there
  Mr. MacDermot: I confess at the outset that I was somewhat misled by the remarks of the hon. Member for Worcestershire, South (Sir G. Nabarro) on

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  Second Reading about the purpose of the Amendment, because he then indicated that his intention was not to seek the wider adoption of 16½ per cent. as a rate which he described as being monstrously complicated. He said that his object was to get a major debate on T.V.A. and the means of rebating it for exporters. Perhaps he has transferred that intention to another Amendment.
  Sir G. Nabarro: I hope to launch that debate on Report. In view of the deplorable condition of the motor industry today and the fact that the industry's representatives visited the Treasury last week, I thought that I should give precedence and priority to the important matter of reducing Purchase Tax.
  Mr. MacDermot: I am grateful to the hon. Gentleman for that warning, but if I had had notification of it I would have come prepared to answer more fully the debate which he initiated. Instead, I came prepared to answer the debate of which he had given me warning.
  The hon. Gentleman began by saying that the Amendment is in its present from because he is able to make proposals only to reduce taxation and not to increase it; and he has, therefore, tabled an Amendment proposing to reduce the 27½ per cent. rate to the 16½ per cent. rate as a peg on which to hang a debate about the motor industry. In replying to that I must, however, look at the substance of the Amendment.
  The hon. Gentleman gave his estimate of the cost of the Amendment, if accepted, as £180 million. I think that, in making his calculation, he ignored what would be the effect on consumption if the tax change proposed in the Amendment were made; and our estimate is that the cost in a full year would be about £165 million. As to the effect of this rate of duty on the motor industry, he began by saying that the rate—and I believe that he meant, in particular, the regulator increase—had had dire effects on the motor industry. It is a matter for argument how much the effects of which he is complaining are due to the effects of the Purchase Tax duty and how much to the hire-purchase restrictions included in the July measures.
  The hon. Member for Worcestershire, South went on to give figures about the
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  decline in the sale of motor cars both in the home market and overseas. He described that as the measure of the failure of the Government to get car exports and to assist the motor industry. I am sure that he would be one of the first to assert that when any industry does well, be it in home sales or abroad, this is due, and due alone, to the wonderful efforts of those in the industry. It is only when an industry does badly that the whole responsibility for the achievement, or lack of achievement, of the industry is laid at the doors of the Government, particularly a Labour Government.
  I thought that the fallacy of the hon. Gentleman's position was exposed by the letter which he read from Sir Patrick Hennessy, which gave a much fairer appraisal of all the difficulties that have been confronting the motor industry's exports. As Sir Patrick said, very many of those factors are outside the control of the industry. Equally, they are outside the control of the Government.
  As my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) pointed out, to a very great extent these are marketing problems which the motor industry has had in other countries. One knows, for example, of the great efforts—and, a few years ago, the immensely successful efforts—of this industry in increasing its sales in the American market which is one of the markets that has been disappointingly hardening for the industry.
  In these circumstances, and in a situation in which the Government have had to take severe economic measures to reduce demand at home, it is very questionable whether to have attempted to exempt the motor industry at home from the restrictive effects of those measures would have assisted it materially to overcome those difficulties it has had in these foreign markets.
  I can see, and the Government understand, that from the long-term point of view, a large and prosperous home market is an extremely important factor for the industry's export trade, but it is not the only factor of which the Government could take account when they were having to contend, as we still are having to contend, with the balance of payments problem that has been confronting the country now for some considerable time.

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  The hon. Gentleman referred to a report that had appeared in the Financial Times alleging that Sir George Harriman had been received recently by the Treasury and that it appeared that the Treasury's attitude to Purchase Tax on cars was weakening. Perhaps the hon. Gentleman did not see, but that story has been corrected in the Press. It was incorrect. Sir George Harriman was not received at the Treasury. That may be some indication of the accuracy of the prediction that was contained in the report.
  It is true that, naturally, representations have been made by the motor industry to the Treasury, and these will be considered, as are other representations received about the effect of taxation and the other July measures upon different industries. In particular, the Treasury keeps under continuous review the effect of those measures upon an industry occupying as important a part in our economy as the motor industry does. The hon. Gentleman will not expect me, therefore, in a debate on whether the 27½ per cent. rate of Purchase Tax should be reduced to 16½ per cent., to comment any further upon that. I must advise the Committee that in present circumstances it would be quite inconcievable to accept an Amendment the cost of which to the Revenue would be at a rate of £165 million a year.
  8.45 p.m.
  Mr. Iain Macleod: One of the difficulties of giving advice to my hon. Friends the Members for Worcestershire, South (Sir G. Nabarro) and for Yeovil (Mr. Peyton) is that if one advises them to divide, they always do so—and do so with enthusiasm—while if one advises them not to divide one has much less certainty about the response one will get.
  On this occasion, however, I must say that I hope that my hon. Friend the Member for Worcestershire, South will not press his very cogent arguments to a Division. That hope is based on the point of cost alone. A sum of £165 million is most formidable, and, although we shall with enthusiasm at the appropriate time suggest a reduction in direct taxation, we feel that this can be and should be balanced by reductions in transfer payments and Government expenditure.
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  Nevertheless, I think that this short debate has been very well worth while because of the speech of my hon. Friend the Member for Worcestershire, South and because it has shown clearly that there is a fundamental difference between the two sides of the Committee.
  Indeed, there are two fundamental differences. The first is the one to which my hon. Friend referred which concerns the belief held by hon. Members opposite that the royal road to increasing exports is to damp down the home market. I agree with my hon. Friend that that is nonsense, particularly in relation to car manufacture. Car exports will come only from a buoyant home market, and it would be wise for the Government to take this into account.
  The other fundamental difference goes wider and I touch only briefly on it now. We are from time to time urging what one might call moderate reflation on the Government and, in my judgment, slowly the Government will give way to us. The reason, and this is the fundamental difference between us, is that we on this side take a gloomier view about it than do the Government Front Bench. We are not as optimistic about the 3 per cent. growth and we do not take the particularly complacent view about unemployment. The relevance of this to the Amendment before the Committee is that here is the tap which the Government can turn if they wish and the tap which always first leads into deflation and can lead out of deflation into renewed growth.
  I am very much more worried—I have said this many times—about the level of unemployment than the Government seem to be. I have prophesied, and I repeat it, that the June figures—we shall see whether I am right or wrong in less than three weeks—will probably be higher than in any June since 1939. If that is so, and succeeding months are like that, the Government must consider whether they are wise to be as obdurate as they are to suggestions which come from this side of the Committee.
  There are these two fundamental differences in relation to this matter, the one outlined by my hon. Friend and that which lies behind all these Budget debates. I quote from a Press notice dated today, issued by the Board of Trade, on the turnover of the motor

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  trades in March. It has come into my hands since my hon. Friend spoke on this Amendment. The first sentence is:
  "The total turnover of the motor trades in March was 13 per cent. lower than in March, 1966."
  It goes on to say:
  "This fall compared with a year earlier is considerably greater than any recorded during the last twelve months but trading in March last year was moving up to the peak recorded in April which included some pre-budget buying; in addition the comparison may be affected by the Easter holiday this year being within the March period whereas last year it was in the April period."
  Those qualifications are fair enough, but they do not take away the impact of the opening sentence that the turnover in March was 13 per cent. lower than in March 1966, and that the fall compared with a year earlier is considerably greater than any recorded during the last 12 months.
  I urge the Financial Secretary to reflect on this debate even if my hon. Friend the Member for Worcestershire, South decides not to press the Amendment to a Division, because here is a way to relieve the employment situation. I do not say that it is necessarily wise, because I understand the Government's position, but if they are as worried as some of us are about unemployment they should reflect very much on the statement made by my hon. Friend. If we agree to pass soon from this Amendment, I hope that the Government will not pass from it in their thoughts, because I believe it is later than the Government think.
  Mr. Alan Williams: I had not intended to intervene in this debate, but I have been distinctly upset by the rather pious arguments advanced by right hon. and hon. Members opposite about the sanctity of the level of demand in the car industry, because, if I recollect correctly, in October, 1958, right hon. Members opposite removed all hire-purchase restrictions on cars, to create a 30 per cent. boom in car sales, to create a pre-election boom to enable them to win the 1959 General Election.
  Sir G. Nabarro: Rot.
  Mr. Williams: "Rot", says the hon. Member for Worcestershire, South (Sir G. Nabarro). This is the level of con-
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  tribution we have come to expect from the hon. Gentleman.
  If it is rot to say that that was a carefully created boom, why, hire purchase restrictions having been removed 12 months before right hon. and hon. Members opposite held a General Election, were hire-purchase restrictions re-imposed six months after they had won that General Election on the boom created in the car industry? So let us not have any of the pious nonsense we have had from right hon. and hon. Members opposite. They do not care about the car industry. They merely care about a few petty political points they might be able to make at the moment.
  Sir G. Nabarro: I had not intended to intervene in the debate again. The hon. Member for Swansea, West (Mr. Alan Williams) has referred to a few petty local difficulties. If he thinks that the troubles of the motor industry in the Midlands today are a few petty local difficulties, he should resume his place on a parish council, where he would be in a more appropriate setting than in the House of Commons.
  I will answer his gibe about the Tory Party as a matter of historical fact. The Tory Party reduced the Purchase Tax on motor cars from 50 per cent. to 25 per cent, on 5th November, 1962, 23 months before the General Election held in October, 1964. Had it been an election gambit, the reduction would have taken place a few months before the election. The hon. Gentleman did not do me the courtesy of even listening to my speech. He has just entered the Chamber. He spoke from ignorance, innocence and inexperience of the House of Commons.
  With those few words of admonition to the hon. Gentleman, may I thank my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) for his propitious and happy advice as to my behaviour at the end of this debate on this important Amendment. I readily accept that advice. I shall continue my efforts on behalf of the motor trade during the next few months, which, I believe, will be critical to it.
  The Financial Secretary had not been briefed properly by the Treasury, save only as to the harmonisation of taxes. He displayed his lack of knowledge of the motor industry in what he said in his reply. Despite the inadequacy of the

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  reply, I shall on this occasion beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Clause ordered to stand part of the Bill.

  Schedule 1.—(SPIRITS (RATES OF CUSTOMS AND EXCISE DUTIES.))
  Mr. Gordon Campbell: I beg to move Amendment No. 5, in page 47, line 12, to leave out '16 1 3' and to insert'14 12 0'.
  The effect of the Amendment would be to reduce the proposed duty on British spirits per proof gallon to a figure corresponding to that which obtained before 20th July, when the 10 per cent. regulator was imposed. I am especially concerned with a spirit known as "Scotch whisky", a wholesome beverage, all of which originates in Scotland. It is also a commodity factor in this country's exports, particularly to the dollar area.
  Translating the proposed rate of duty to the bottle, it is 37s. 6d. as opposed to 34s. 1d. before 20th July, and as it would be again if the Amendment were accepted.
  The Bill was designed to consolidate the extra charge brought in last July into the Statute. My hon. Friends and I oppose this for two main reasons. The first is that recent increases in tax on Scotch whisky are producing very little extra revenue. The second is that, by imposing these heavy duties at home, we set an unfortunate example to other countries, which then raise their taxes also on Scotch whisky and make exporting more difficult.
  Mr. Sheldon: Will the hon. Gentleman explain why Governments abroad increase their duties on whisky as a result of action taken in this country?
  Mr. Campbell: I shall come to that point—I was intending to take the first reason first—but, in a sentence, I can reply to the hon. Gentleman in this way. After the increase in the Budget in April, 1965, 20 other countries, in the following weeks and months, increased their duties, and the relationship between these events was such that it was clear that they had their eye on what the Chancellor of the Exchequer had done in Britain.
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  Our first reason is based on the revenue which the Chancellor has been receiving. I say at once that the Amendment would help him to raise more revenue. In the financial year following the raising of the duty in the Budget of 1965, there was a fall in home sales of nearly 1 million proof gallons. That is measured by the home clearances from bond, the appropriate way to measure home sales.
  This was the first time for many years that there had been a reduction in volume at all, but the reduction was 900,000 gallons, from about 9½ million proof gallons in the previous year to about 8½ million. The amount of extra revenue which the Government received was derisory, and it could be argued that it was hardly worth putting up the tax, having regard to the consequent reduction in home sales and the very limited amount of extra revenue received.
  In trying to explain this fall in revenue during the financial year, the Government kept saying that it was because of Budget forestalling, that before April, 1965, the whisky trade had been making extra moves of whisky from bond because it thought that the duty would be increased. But the same thing applied a year later also. Taking a period of 12 months, one covers two periods of Budget forestalling when comparing two years. Therefore, that argument falls. Perhaps the trade thought that in one Budget there would be more of an increase than in the other, but nowadays, when there is Budget forestalling, everyone guesses what the Government will do and, with a Labour Government, the assumption is always that taxes will go up.
  Mr. Macdonald: Reverting to the point which the hon. Gentleman made earlier, about other countries putting up the duty, is it his case that there should be a reduction of duty here in the hope that other countries will reduce theirs?
  9.0 p.m.
  Mr. Campbell: I shall deal with that point later, leaving it until I reach my second argument.
  I now turn to the more recent event of the imposition of the regulator last July. The Chancellor replied to Questions of mine on this point as recently as 4th May. I inquired what had been the

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  reduction in volume of home sales of Scotch whisky since the regulator was used, that is, from August to February, the latest month for which figures were available, compared with the equivalent period of the previous year. The Chancellor's answer, less than a month ago, was that there had been a reduction of 8 per cent. in the number of gallons, and that only £1 million extra in revenue had resulted.
  In this case the Chancellor cannot sustain the argument that there was Budget forestalling, because he and the Government were saying only a short time before the 20th July measures that there was nothing wrong with our economy and everything was all right. The crisis blew up very quickly; to suggest that the whisky trade could have foreseen those measures in the weeks before would be to ascribe to it powers of second sight. It would have needed a phenomenal prescience to predict the sudden measures by the Government last July, if it is suggested that Budget forestalling for the emergency Budget last July could account for so much of that reduction.
  Mr. Maxwell-Hyslop: Has my hon. Friend observed the terrible things that happen when people are reduced to drinking water?
  Mr. Campbell: As I was speaking I noticed out of a corner of my eye that there had been an accident with some water on the Table. I was glad to note that it was water and not a more valuable spirit which had been spilled in that way. Whether the Financial Secretary has the same sort of views in his attitude to the Amendment we shall learn later.
  It has been demonstrated during the past two years, as I have shown, that when the duty is raised at its present level it reduces home sales. In the other direction, if the Government reduced the duty now the sales would be increased to a much greater extent. In the general euphoria which would thus be created it would undoubtedly lead to extra revenue for the Exchequer. I therefore hope that the hon. and learned Gentleman will recognise that the Amendment is a revenue-raiser and is not intended to cause the Government to find more money.
  I cannot believe that the Government put whisky into the category of cigarettes,
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  where there are medical considerations, and where it could be that the Government are trying to discourage consumption. I hope that the Financial Secretary will make it clear that there is no question of the Government's making a deliberate attempt to restrain the home consumption of Scotch whisky. If he does that, as I assume he will, his object in putting up the duty can only be to increase revenue, and, as I have shown, the amount of increase after last July and the previous increase of duty has been derisory.
  I now come to my second argument and the questions that have been asked about it. That is, the effect abroad of increasing the duty at home. Every time Britain has increased the duty, some other countries have followed suit. I do not suggest that in their legislation or in other ways they have directly tied themselves to what has happened in the United Kingdom, but it is clear to those who have been observing that the fact that Britain has increased taxation on her own product has had an important effect on Finance Ministers in the countries concerned. Because Scotch whisky is a remarkable dollar-earner, the Chancellor is taking very serious risks if he appears to penalise the industry in this country.
  The hon. Member for Chislehurst (Mr. Macdonald) asked about the effect on other countries of a positive reduction. The Amendment would not so much make a reduction as keep the duty where it was last July, preventing the increase proposed by the consolidation.
  If the Chancellor were to make this reduction, I would hope that other countries would do likewise, but we have not had recent examples by which to test this. I would encourage the right hon. Gentleman to find out by putting it to the test. But that does not alter the argument that, when Finance Ministers abroad see us increasing the duty here, they use this as an easy excuse to increase it in their own countries.
  There is no conflict here between the home market and these important export markets as regards supplies and, as a result of my inquiries, I am glad to be able to inform the Committee that there are plenty of supplies of whisky maturing in Scotland to provide the reserves for large expansion in the home market and abroad. I ask the Chancellor—indeed, I challenge

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  him—to be bold and accept the Amendment. If he did, he would gain, in my view, welcome additional revenue that might well surprise him.
  Mr. Bruce-Gardyne: I am delighted to support my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell). He is one of the most persistent campaigners against the penal increases in taxation which the Government have imposed upon the whisky industry and I hope that on this occasion, the Financial Secretary will show himself more amenable to an Amendment which should command the sympathy, if not the support, of all hon. Members, as it is a matter which concerns many of us very closely—one could almost say, intimately.
  My hon. Friend has admirably exposed the effect that the surcharge imposed last year has had on withdrawals from bond since August—the 6 per cent. drop in the period August to March as compared with the previous year—and has dealt effectively with the hon. and learned Gentleman's argument that there had to be a forestalling of the emergency in July by the wielding of an axe which the Government had protested all along that they had no intention of using.
  There is reason to think that the drop in home sales has been somewhat masked and that the real effect of the surcharge may have been greater than the figures suggest because of the big spread of cut-price sales since last August. One would normally have expected to see this leading to a substantial increase in withdrawals from bond. In other words, the 6 per cent. drop probably under-estimates the real effect of the 10 per cent. surcharge.
  Moreover, we see already the very serious effects of these constant increases in the burden of taxation on the whisky industry in Scotland. In the last two months, we have had the reports that the Distillers Company has decided not to go ahead with plans to build expansions to distilleries in Kincardineshire and Ross-shire. All the information suggests that this may be the beginning of an alarming trend.
  Thus, by accepting the Amendment, the Government would not only be giving themselves an opportunity to increase revenue from whisky through higher sales but doing something to reverse the dam-
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  age they are doing to the whisky industry and the economy of Scotland. These are substantial arguments in favour of the Amendment. I draw the Committee's attention to a book published today, "The Whiskies of Scotland" by Professor R. J. S. McDowall, of London University. In the course of this book, he reminds us of a minute by Sir Winston Churchill to the Minister of Food in 1945 when he said:
  "On no account reduce the amount of barley for whisky. It takes years to mature and is an invaluable export and dollar earner. Having regard to our difficulties about export, it would be improvident not to reserve this characteristic element of British ascendency."
  Those are sentiments which we would all support and I hope the Financial Secretary will say that he is prepared to support them.
  It would be wrong to suggest that the effect of the surcharge so far has been drastically to reduce the prospect of investment in the whisky industry in Scotland. My attention was drawn to an item which appeared in The Times Business News of 18th May about a series of television interviews—which I did not see—with the merchant bankers. The item appeared under the headline:
  "£500,000 for The Speaker"
  I hope that I am not trespassing on dangerous ground here. I am merely quoting from The Times Business News and if there is any breach of privilege, it is The Times Business News which must bear responsibility. It goes on to say:
  "Those who saw Leslie Kaufman, chairman of the wine and spirit merchants Block Grey and Block, discussing a loan over lunch at Hambros, in the A.T.V. programme on merchant bankers, will no doubt be relieved to learn that he got his money—£500,000. It will be used to build a new whisky distillery with a capacity of 750,000 gallons of malt for blending with his firm's product, The Speaker. Great secrecy surrounds the exact location of the site, which has been selected, along with the vital burn.
  "Block Grey and Block already own a distillery, the MacDuff. in Banff, providing 500,000 gallons of malt a year for the blending of The Speaker. Although the whisky is not tremendously well known in this country, a recent pilot campaign in California has revealed that it goes down well in America, and it is largely for this market that the new distillery will be producing."
  This is an example, and we are very glad to see it, of a capital project going ahead essentially for the export market. This is very much what we should have

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  in mind when considering the burden of taxation on the industry, and about that I agree very much with my hon. Friend the Member for Moray and Nairn.
  It is worth noting that since the 10 per cent. surcharge there have been demands for a countervailing duty in the United States on imports of Scotch whisky, and I suggest there is a clear connection between the two. Equally, in 1965 the Budget increase led to an increase almost immediately afterwards of £1 l1s. per gallon in the Australian duty, and this resulted in a drop of one-third in exports of whisky to Australia last year. These are some of the repercussions of the way in which the Government constantly raise the burden of Excise Duty on whisky.
  There is another aspect which I find totally incongruous. Whisky is charged at a rate of 3s. 2½d. per degree of alcoholic strength. By contrast, imported sherry is charged at a rate of 1s. l¾d. per degree of alcoholic strength. If we have any doubt about the effect of this remarkable bias against the home product, we should look at the figures for imports of wine, brandy and rum over the year ending April, 1967.
  9.15 p.m.
  Wine was down by about 3 per cent. in volume, but that meant up in price and in the cost of imports. Brandy was down by 1½ per cent. in volume, and again substantially up in terms of the cost of imports. For rum there was a 70 per cent. increase in volume between May, 1966, and April, 1967, compared with May, 1965, and April, 1966.
  This is over a period when home sales of whisky were down by 6 per cent. It is hard to conceive of any clearer indication of the way in which the burden of taxation on home-produced Scotch whisky is now diverting people to the purchase of imported wines and spirits. For a Government who are still labouring with an extremely awkward balance of payments problem could there be any greater irresponsibility? On all these grounds I find it hard to believe that we will not have a forthcoming answer from the Financial Secretary. If he accepts this Amendment he will get a substantial increase in revenue. He will help an export industry vital to Scotland and at the same time give enormous satisfaction to the vast majority of hon. Members of this Com-
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  mittee, and our electors in the country at large.
  Mr. Hector Monro: I should like to support very warmly the Amendment moved by my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) and supported by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). They have put the facts quite explicitly and even to Members opposite it must be obvious that this is an extremely good case. I am speaking with no constituency problem—unfortunately there is no distillery in my constituency. I am taking a dispassionate view, looking at it from the point of view of the Scots first and Britain secondly. Obviously the country is losing not only in exports but also in revenue.
  My hon. Friend the Member for Moray and Nairn has given us the figures. Following the years of steady rise and expansion we are very concerned to stop the likely fall in exports. This is partially due to the price in the European market. It is a very valid point that, when the price goes up in Britain, it is only logical for the European countries to say "Well, if they are prepared to have an expensive drink in Britain, we will have an expensive drink in France, Germany, Scandinavia and so on." It is very true that taxation abroad has followed increases in taxation here.
  Mr. Burden: There is also the point that by increasing the price of whisky in those countries, they are endeavouring to cut consumption down and to improve their balance of trade position by forcing people to buy wine and brandy.
  Mr. Monro: This is very true, and we are doing exactly the reverse by encouraging sales of wine at the expense of whisky No doubt with the appalling turnover of whisky the Chancellor will be losing the profits of the whisky companies. My hon. Friends have touched on the concern in the Highlands about the expansion in the building of distilleries. There is no doubt that there is a slowing down at a time when we are desperately in need of expansion in that part of the world, where there is very little alternative employment and where the service industries are being seriously hampered by the Selective Employment Tax. Not only in the Highlands is this so, but even in the Southwest, in Girvan and Wigtownshire, there

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  are distilleries, and they need employment just as do those further north.
  There is no doubt that this trend of falling consumption has been accelerated by the rising taxation over the past year. The sum of 36s. a bottle taxation has put a very severe handicap on consumption, and the dangers are very obvious. There is no doubt, as my hon. Friends have pointed out, that the unfair burden of duty as between imported wines at 114s. 9d. per gallon at 35 degrees and 321s. per gallon for proof whisky is extremely unfavourable to one of our most important home industries, and, indeed, for exports.
  Why do the Government give this favourable treatment to wine at the expense of our industry in Scotland? The increase in duty last July seems to have failed in its intention of increasing revenue, which is what all logical people can only assume is the reason for increases in taxation. It is essential for the Government to accept the Amendment and reduce the burden of taxation on the whisky industry and give it encouragement to expand and to export.
  Mr. George Younger: I should begin my brief remarks by declaring a personal interest, because, although some people might think otherwise, I have an interest in whisky matters and it is, therefore, right I should state this before I start.
  In reinforcing some of the remarks which have been made by my hon. Friends, I would like to address myself to the effects of this tax on what, I think we would all agree, is one of our most important export industries. The whisky industry accounts for about one-quarter of Scotland's exports. That is an important proportion of the exports of the United Kingdom as a whole.
  In considering the remarks which have been made in this debate, which has been held in one form or another many times in the past few years, I ask the Financial Secretary to grasp the essential fact that tonight we are discussing this matter against the background of a completely new situation. Over a period of many years, the duty on whisky has been increased on a considerable number of occasions. Much as most of us may have regretted that continual increase, one
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  factor which has always remained constant throughout that time is that the increase has nevertheless failed to prevent sales of whisky in this country from continuing to rise. All through the years, the arguments which have been presented by those who know this important industry have been made that much weaker because, despite the increases in duty, the sales of whisky have still continued to rise.
  The important thing tonight is that we are discussing this matter not merely against a failure of sales to rise since the last increase in duty, but against the background of a fall in sales which it would be fair to describe as drastic. A product which has been accustomed to increase its sales by a considerable percentage every year and which has benefited greatly, as the consumer also has done, from the economies which this has made possible, suddenly finds that it is crippled by a drastic reduction in sales due to the fact that, at long last, what so many of us have always feared has happened and the last increase of duty to the present staggering figure has resulted in the consumer giving up the struggle and deciding that it is altogether too difficult to go on paying such a terrific rate of duty on this drink.
  I hope that the Treasury Ministers will take this matter seriously. If they do, they will, no doubt, be reinforced by the fact that they have for once not enjoyed a substantial increase in revenue following the last increase in duty. Although I do not, perhaps, put that argument as high as the Treasury representatives may do, it might bear more strongly upon them than the argument which I am making. It is important that we should realise that we are debating this subject against a new background.
  Another matter which has not been covered fully in my hon. Friends' remarks and with which I agree entirely is that it is not sometimes realised by those not involved in it that the whisky industry requires a very long-term investment programme. It is well known that whisky has to be matured for at least three years before it can be blended and marketed and that the more important malt whiskies are matured for a good deal longer. As a result, the scale of capital investment is quite tremendous in terms of building, insurance and the cost of the

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  product sitting for a number of years unable to be sold but having to be looked after under careful and expensive conditions.
  In those circumstances, it is particularly worrying for an industry which has to look ahead three, four, five, six or more years suddenly to be faced with a drop in home sales last year of 6 per cent. because, as one of my hon. Friends said, probably this masks a real drop in sales of considerably more.
  The drop in sales and the latest increase in duty has not only resulted in a reduced consumption but is likely considerably to embarrass the industry in its future plans for expansion and development. It means, also, that the ability of one of our main exporting industries to sell abroad is likely to be threatened.
  I have always felt that the Treasury and successive Governments generally do not give enough weight to the fact, about which there is no doubt, in the minds of those who export whisky, that there is a definite relationship between increases in duty at home and increases imposed by foreign countries. Countries abroad which import whisky look to the home market as an example in many ways. It is a known theory in the industry that it is difficult to sell a product abroad successfully in the long term unless it is known to be successful at home. There is a link between home and export sales and, having been involved in this industry in a small way, I have no doubt that, when duty goes up at home, although other countries do not increase their duties by the same amount, within a few months one can detect a trend in other countries to raise their duties.
  I hope that the Financial Secretary will take note of these. points and bear with us in stressing that, although we have debated this matter many times in past years, we are debating it today against a new background. It is time for some new thinking from the Treasury, and I hope that the Government will accept the Amendment.
  Mr. MacDermot: It is an unhappy task for a Celt to have to advise the Committee to reject an Amendment which seeks to reduce the duty on whisky. Although I am not a Scottish Celt, I suppose that I have an interest as an Irish Celt. I must explain to the Committee the rele-
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  vance of that, because it would not be possible to accept the Amendment as it stands alone. To do so would involve a breach both of the E.F.T.A. Agreement and of the Anglo-Irish Free Trade Agreement unless the Customs duties on spirits imported from E.F.T.A. countries and from Eire were reduced at the same time and to the same level.
  But even if we were to do that it would not be the end of the story, because that would introduce a reverse preference of £1 9s. 3d. per proof gallon against other Commonwealth producers, for example, Jamaican rum and Canadian whisky. The introduction of a large reverse preference of that kind would give rise to serious objections, so the fact is that, as has been found in the past, there is no practical alternative to moving the various Customs and Excise rates in parallel together. This was done when the regulator was imposed, and it is embodied in the consolidation in the Schedule which we are discussing, and which the Amendment seeks to alter.
  9.30 p.m.
  Representations were made before the Budget both by the Scotch Whisky Association, which suggested the removal of the surcharge, and by the Wine and Spirit Association, which asked for reductions of duty on wines and spirits and stressed, in particular, the claims for spirits. Both Associations drew attention to the reduction in consumption which has taken place, and which has been referred to, I think by nearly every hon. Member who has spoken to the Amendment.
  The hon. Member for Moray and Nairn (Mr. G. Campbell) challenged the contention which has been made by Government spokesmen that the figures of the clearances since the introduction of the surcharge somewhat overstate the actual fall in consumption which has taken place since the introduction of the regulator. The hon. Gentleman thought that our argument about forestalling was false, but I assure him that there is clear evidence that there was heavy forestalling by withdrawals in June before the introduction of the regulator, and these contentions have, I think, been borne out by the figures which are becoming available of the actual fall in consumption. Whereas the level of clearances showed a

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  reduction of 8 per cent., it seems that the figure for the fall in consumption is about 5 per cent.
  Mr. G. Campbell: Is the hon. and learned Gentleman seriously suggesting that in June the whisky trade was foreseeing an emergency Budget in July, about which, at that time, the Chancellor appeared to have no inkling?
  Mr. MacDermot: There is clear evidence—and others anticipated that measures would be required—that the June clearances were abnormally high.
  The hon. Gentleman asked me to confirm that there was no intention on the part of the Government to reduce the consumption of whisky. That is not our intention. The intention of the measures, of which this forms part, was to restrain demand, and that is an operation which is bound to affect consumption, and to affect it particularly in matters such as this.
  The hon. Gentleman went on to argue from the effect of these increases in consumption that to accept this reduction in the duty would produce an increase in revenue. This is a contention which we cannot accept. The estimate which we have is exactly to the contrary. The estimated revenue in 1967–68, at post-Budget rates, from spirits is £275 million. We estimate that the loss of revenue which would result from a reduction of the kind proposed in the Amendment, with the consequential reductions in Customs duty which I have explained would have to come with it, would be about £12 million in a full year.
  Indeed, if it were practicable to confine the reduction to Excise spirits and spirits imported from E.F.T.A. and the Irish Republic, the cost would be about £9 million to £10 million, depending on the extent to which the consumption was switched to British, E.F.T.A. or Irish spirits at the expense of the more heavily dutied brandy, rum, and so on, from other countries.
  Mr. Bruce-Gardyne: Are the estimates that the Financial Secretary is giving us based on the assumption that home consumption of whisky would not be affected by a change in the level of duty? If so, how can he produce such an argument when he has admitted that even home
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  sales, since the incidence of the surcharge, are down by 5 per cent.?
  Mr. MacDermot: Unlike the estimates given by hon. Members to the Committee to-day, the estimates that I am giving take into account the great experience which Customs and Excise have in judging the effect of revenue changes upon the pattern of consumption.
  Sir Douglas Glover: Will the hon. Member tell the Committee when Customs and Excise ever had any experience of a reduction in the tax on spirits?
  Mr. MacDermot: I should need notice of that question in relation to whisky.
  Some hon. Members argued that the increases in duty on spirits made by other countries were in some way a retaliation for the increases in duty which took place in this country. One hon. Member used the phrase "a countervailing duty". With respect, there is no evidence for that. Other countries may have experienced the fact that has been experienced by Chancellors in this country, that whisky is an article that can bear a high rate of duty and sustain a high level of consumption. Other countries may be guided by considerations similar to those which guide Governments here. There is no evidence that it is in any way a retaliatory measure. If any view of that kind were taken we should know about it and receive representations from other countries. Nothing of the kind occurs.
  One hon. Member raised the question of the Selective Employment Tax in relation to this matter. I thought that that was an odd argument, because the production of whisky is a manufacturing activity which attracts the premium. This industry benefits rather than suffers from the introduction of that Tax.
  The main argument has been put forward on the basis of the pattern of consumption as it is affected by the duty. We shall certainly watch this. I undertake that that will be done before my right hon. Friend frames his next Budget. But for this year the item forms part of the total decision for the consolidation of the regulator increases. The total amount involved is about £150 million. We see no reason to make an exception here, or to take the view that a sufficient case has been made out for an exception

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  to be made in respect of the whisky industry. As the cost of making such an exception would be about £12 million, together with the other consequential reductions which would be necessary, it is not something that I can advise the Committee to adopt.
  Mr. Bruce-Gardyne: Can the Minister deal with the important question of the enormous disparity between the duty on home-produced whisky and the duty on imported spirits, and the changing trend in spirits and wines?
  Mr. MacDermot: That question is not involved in the regulator increases. The point that the hon. Member is raising goes to the pattern of the duty in relation to different kinds of wines and spirits. In that respect nothing is altered by the increase in the regulator.
  Mr. Higgins: I think that, just now, when the water was spilled on the Table, a voice with a Scottish accent behind me said, "Water, water, everywhere, and not a drop to drink."
  I do not wish to curtail the debate, but want to support the Amendment and add to the comprehensive case put forward by my hon. Friends, which was a clear example of our complaints earlier that the regulator is being used by the Government to introduce a general increase in taxation. It is significant that we are debating this increase after it has been imposed for a number of months. The point made by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) about the balance of payments is important, and should not be overlooked, but the Financial Secretary failed to cover it.
  We should not assume that all increases under the regulator which are made and then consolidated justify a claim later that one cannot discriminate between increases in duty on different items. If the proposals had been made as individual increases, we should have considered them on their merits. It is right that my hon. Friends should put forward this Amendment so that this case can be made.
  The Financial Secretary's answer was not satisfactory, as my hon. Friend the Member for Ormskirk (Sir D. Glover) clearly brought out. Our experience of reductions in taxation on spirits is extre-
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  mely limited. We need to probe—if not now, in the future—the exact extent to which the Government feel that a change in taxation is likely to effect the sales of whisky and the Chancellor's consequent revenue—
  Mr. Russell Johnston: The hon. Gentleman may be interested to know that the last time that the duty on spirits was reduced was in 1895.
  Mr. Higgins: I am grateful for that intervention, which shows the extent to which we receive topical, modern information from the Government. We have not had a satisfactory answer from the Financial Secretary—
  Sir D. Glover: Will my hon. Friend remember that that reduction took place under a Tory Government?
  Mr. Higgins: Indeed it did.
  One point which is worrying us is the way in which any increase in competition which leads to a reduction in the price of a product tends to be offset by an increase in taxation imposed by the Government. The effect of the ending of resale price maintenance has been to reduce the cost of whisky on retail and increase sales, but this favourable effect, which might have given increased encouragement to the Scottish whisky industry to expand has been largely offset.
  Then we come to the important question of regional development. A total of 95 per cent. of those employed in this industry, both in distilling and packaging, are in Scotland, and whisky accounts for one-quarter of all Scotland's exports. This surely makes it a very important factor in the consideration of the kind of regional policy which the Government say they wish to advocate.
  It is not good enough to say, on the one hand, that perhaps we could have a regional employment premium—this, clearly, will not get industry from elsewhere to move to Scotland in the whisky trade—and, on the other, that there must be a serious effect on the Scottish industry by the imposition and perpetuation of this kind of tax.
  The Government appear to be following an inconsistent policy towards Scotland, a policy which my hon. Friends are absolutely right to oppose. For that reason I trust—naturally, after this matter

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  has been further discussed because I have no doubt that other hon. Members will wish carefully to consider the issue—that my hon. Friends will press this matter to a Division unless we are given a more satisfactory answer by the Government.
  9.45 p.m.
  Mr. Ian MacArthur: My hon. Friends will join with my hon. Friend the Member for Worthing (Mr. Higgins) in regretting the reply of the Financial Secretary. I go further and say that it was not only a disappointing reply but an alarming one, for the hon. and learned Gentleman sheltered behind such feeble defences. He said that it would be unthinkable for the Government to remove this surcharge because of the effect it would have on our imports of drink from E.F.T.A. and Commonwealth countries. This is a sudden recognition of a delicacy of feeling which did not exist in the Government's heart some months ago. I recall how the Government threw aside our E.F.T.A. rules soon after they took office in 1964. Wht effect does the hon. and learned Gentleman think that our application to join the Common Market may have on imports of spirits and drink from Commonwealth countries? The hon. and learned Gentleman was not advancing a reasonable argument, particularly at this time.
  The Financial Secretary also adduced other astonishing arguments. He said that the whisky trade had, in some clairvoyant way, anticipated the Prime Minister's statement of 20th July of last year. That is one of the most remarkable tributes I have ever heard paid to the Scotch whisky industry. I recall how we were told day after day, before 20th July, that there was no need for the Government to take emergency measures. The Chancellor of the Exchequer said that there was no need for them; but the Scotch whisky industry, in its wisdom, knew that such measures were coming. The Prime Minister openly—and, I understand, in other ways, too—let it be known a few days before his statement in July of last year that there would be no emergency measures because there was need for them. Now the Financial Secretary tells us that the Scotch whisky industry knew all about these measures a month or more before they were taken.
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  When the Prime Minister appeared in the House some days before the statement of 20th July was made he confessed, in effect, that he was so surprised at the need for such measures to be taken that he could not tell the House just then what they would be—and then he went to Moscow. For the Financial Secretary now to suggest that the Scotch whisky trade shaped its commercial judgment and forestalled the measures of 20th July because it knew in advance about the temporary surcharge is to make a completely bogus argument.
  Mr. Bruce-Gardyne: Would not my hon. Friend agree that the only conclusion to be drawn, if one accepts the Financial Secretary's argument, is that the Scotch whisky trade knew that there would be an emergency Budget on 20th July simply because, under a Labour Government, we need an emergency Budget every 20th July?
  Mr. MacArthur: My hon. Friend advances a good argument. The Financial Secretary has been assuring us that the surcharge was well known to the Scotch whisky trade—an argument which, to put it mildly, makes nonsense.
  I emphasise that we are in a new situation. The Financial Secretary knows that year after year the Scotch Whisky Association and hon. Members on both sides state, at the time of the Budget and in discussing the Finance Bill, that the duty on whisky must come down. This is a natural and perfectly proper exercise Over the years it has become something of an annual ritual, but I hope that the hon. and learned Gentleman recognises that in the last year or two the ritual has become something more serious in nature.
  The whole nature of the market has changed, and the Minister himself recognised this. Although he quibbled with some of my hon. Friends about the figures they quoted, he said that domestic sales had fallen. The reason is that consumption is falling, and it is falling because the duty has gone up yet again—it has gone up several times during the lifetime of this Government—yet the increase in the yield has been derisory.
  I ask the Minister to pay more attention than he has done so far to what my hon. Friends have said about the way in which foreign countries follow our

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  pattern. I have spoken to a number of people abroad, in the whisky trade and outside it, and I am satisfied that foreign Governments watch the trend here. Whisky is one of our great national drinks, and if the British Government find that the revenue is increased by increasing the duty more and more foreign Governments feel that they can follow our lead and increase the duty domestically.
  The hon. and learned Gentleman may dismiss this agument, but I ask him to ponder it carefully. Whisky is not the only drink available to the foreign drinker. Fashions change. An area which today is a whisky drinking area because whisky has become fashionable may not be a whisky drinking area tomorrow, under the pressure of competition, under the pressure of changing tastes, and under the pressure, above all, of changing fashion.
  Fashion changes very often because of pressure of price, and if the price of whisky goes much higher we will find it very much harder to convert drinkers from their native whisky, or vodka or whatever the fashionable drink may be, to the Scotch whisky which we sell to them, and which we must continue to sell to them in ever-increasing quantities if we are to retain the enormous contribution that this great trade makes to our balance of payments.
  I ask the Financial Secretary to reflect on this further point. If, in the national interest, he is, as I hope, to give some consideration to the position of the consumer abroad—who is not compelled to buy our whisky, who is influenced by fashion and changing tastes and, above all, by the price of the product he is asked to buy—will he give some thought also to the consumer at home, who has been mentioned very little in this debate?
  There is in Scotland widespread resentment, and this resentment has continued for years under successive Governments, at the way in which the Scottish people feel their national drink is flogged by Governments year by year. This has now reached an intolerable situation. The Scots, who produce this great drink, are largely unable to afford it any more. This is quite wrong. They see it as unjust, and as yet another insult to Scotland. It may or may not be—
  Mr. Dempsey: The hon. Gentleman knows that a very great event occurred in Scotland last Thursday night. It was celebrated in Scotland, in England and Wales, in Northern Ireland and in the Republic of Ireland, in America, Canada, Malta, Cyprus—even in Portugal. Can he give some figures or facts of how much Scottish whisky was consumed on that occasion?
  Mr. MacArthur: I suspect that more and more beer was drunk, because beer is not subject to the same swingeing and increasing rate of duty. I know that the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) leads a very sober life, but if he were to look at some of the public houses in his constituency, and some of the hotels in the country districts, he would find, as I have, that more and more Scottish people are not any longer able to afford what they quite rightly regard as their national drink. That is because the rate of duty has been increased so steeply. I therefore ask the Financial Secretary to give some thought to the consumer at home, and particularly to the consumer in the country which produces this great drink.
  One important point made by my hon. Friend the Member for Dumfries (Mr. Monro) was completely misunderstood. He reminded the Financial Secretary that several hon. Members had referred to the way in which these increases in duty have affected the expansion programmes of the Scotch whisky trade. My hon. Friends have reminded the Committee that several important ventures are not going ahead because of the increase in duty and the effect which this has already had on domestic consumption. This is yet another problem which the people of the Highland have to face on top of the other problems they face as a result of Selective Employment Tax. Of course the distilling trade gets the premium. I wish that many more industries would get the premium. But there is very little manufacturing industry in the Highlands and the people there will suffer if the Scotch whisky trade declines.
  I ask the Financial Secretary to reflect on the fact that the position has changed because consumption is falling. Will he also consider the indisputable evidence that foreign countries follow our lead? Will he remember in that connection that

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  fashions and tastes change, and that an important part is played in this by the price of the product. If by the duty he forces up the price he is damaging the prospects for a great currency earning product.
  Sir D. Glover: Tonight, the Financial Secretary made the weakest reply we have heard in a debate on a Finance Bill for a long time. He has apparently accepted advice from the Customs and Excise and from an officer who, if he were only 23 at the time when the duty was last reduced, must be at least 95 today. I am glad to know that the Government are accepting the advice of a nonegenarian, but it is ridiculous to say that a reduction on the duty in spirits would not affect consumption.
  Mr. MacDermot: I never said that. I said the contrary, that we recognise that it affects consumption and we take that into account in the estimates put before the Committee.
  Sir D. Glover: I listened with the greatest attention to what the hon. and learned Gentleman said. He said that if we altered the duty we would lose £12 million.
  Mr. MacDermot: That is not true.
  Sir D. Glover: We shall all read HANSARD and perhaps we shall have another debate on this matter later.
  "Whom God wishes to destroy, he first makes mad."
  We know that we have a mad Government, but they do not need to be quite so mad. We have done with retail price maintenance. The one great imaginative reduction in price in all the shops in the price of whisky made the public realise that this policy was biting, and then the Government immediately increased the duty so that it cost the public as much as before the abolition of retail price maintenance. What encouragement have other firms and other lines to reduce prices when they can expect the Government to increase the tax? This cannot be a sensible way of running our affairs.
  The most important point I have not heard made is on the question of international sales. I suppose that Members of Parliament go abroad probably as
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  much as any other section of the population. We go to Mauritius, or to Turkey, or to some other country. What we do first when we get there is to try the local drink. [Laughter.] I am being serious. This is the general thing. Tourists visit a country and say, "What is the local beverage?", and they try it. If they like it, that country then gets an export market here.
  10.0 p.m.
  The sales of French, Italian and Spanish wines have increased enormously during the last 15 years because of the number of British tourists who have gone to those countries, tried their wines, liked them, and on their return to this country bought them here. Five to 6 million people each year visit this country as tourists. On reaching here, they find that what they had always thought was one of our national drinks is so expensive that not only can they not afford to buy it themselves, but none of the English friends they make can afford to buy it for them. Many of them, when they return to their own countries, instead of having gained a liking for Scotch whisky, have never tried it and never experimented. That makes it far more difficult for our salesmen in those countries to increase the sales of Scotch whisky overseas.
  I ask the Financial Secretary to think about the question of duty. There is now a reduction in consumption. I do not believe that the whole of this reduction is accounted for by decreased consumption on the part of nationals. I believe that many tourists who come here now decide, on entering a bar, that whisky is far beyond their reach and they are not even trying it. This means that we lose a potential export market in the countries these tourists come from.
  If the Government keep the duty at its present level, with home consumption beginning to drop, not only will fewer people here drink whisky, which will mean that home turnover will decrease, but many of our nationals who go abroad will not drink whisky. If they do not drink whisky when they go abroad, the demand for it will be reduced in the countries they visit and whisky will be relegated to the backs of bars and hotel shelves. As a result, turnover amongst the nationals in those countries will decrease. Our best export—Scotch

  393
  whisky—then faces a declining market overseas. Of all the things that we export, the one that shows the greatest profit is Scotch whisky. It is an almost entirely home-made product. There is no import to counterbalance its export potential. It is an easily exported item. It does not weigh a great deal. It is easily handled. It brings us an enormous amount of foreign currency, compared with the activity which is involved in its production.
  As my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur made clear, the Government are making it far more difficult in the long run for us to go on exporting Scotch whisky, because the price in foreign countries is very much governed by the price which obtains here. If the price in this country rises, I notice that the price rises overseas as well, because they alter the duty. If the Government carry on with this policy, the sales will begin to drop and it will become less fashionable to drink Scotch whisky, because the price will be too high.
  I have seen this happen in foreign places. People then begin to talk about something else—perhaps vodka. They begin to talk about something else because that then becomes fashionable. Once it gets a grip upon the public, people will be surprised how quickly a big market such as we have will almost disappear. It will disappear far more quickly than the Financial Secretary thinks. because once its price rises beyond that which the vast majority of people can afford to pay, and once they suddenly take a dislike to the price and are no longer willing to pay it, the sales will immediately decrease, and not by 5 per cent. They could begin to drop very rapidly, and, if they once begin to drop in this country, they will begin to drop in all the countries to which we export whisky, not only because English tourists will not be drinking it but because it will have lost that fashionable cachet which, let us face it, is one of the biggest reasons why Scotch whisky is sold all over the world.
  I urge the Government again to accept the Amendment.
  Mr. Michael Clark Hutchison: The hon. and learned Gentleman said that the agreements with the Irish and E.F.T.A. precluded this re-
  394
  duction in duty. I suggest to him that he gives due notice and asks for an alteration in the agreements.
  Second, will he explain why this Socialist Government, by their vicious tax on whisky, should put it out of the reach of the ordinary working man in the United Kingdom?
  Earl of Dalkeith: I am extremely disappointed that the Financial Secretary's Celtic spirit has become so diluted by his over-long association with his own Front Bench that he is forced to give such thoroughly unsatisfactory excuses for rejecting this Amendment.
  If the Government are genuine in their desire to help regional development in places such as Scotland, this Amendment gives them a heaven-sent opportunity to do just that. If they wish to prove themselves, this is the moment when they could do so.
  My hon. Friend the Member for Ormskirk (Sir D. Glover) made a most important point about tourists coming to this country and finding the price of whisky as it is now. It occurs to me that, when one goes to Italy, one can apply for special cut-rate petrol coupons. Even if the hon. and learned Gentleman will not accept the Amendment in its entirety, would he, perhaps, consider issuing tourists with coupons for cut-rate whisky—and, if I may extend the suggestion a little, perhaps he would have such coupons made available to the local inhabitants as well? If anybody looks as though he really needs a stiff whisky at the moment, it is the hon. and learned Gentleman himself.
  Mr. G. Campbell: I had hoped that the Amendment would receive sympathetic consideration by the Government, and I have been shocked by the Financial Secretary's feebly reply. The most important point which my hon. Friends and I have made is that last year, for the first time for many years, there was a fall in home consumption of Scotch whisky, a fall recorded last year after the period of 12 months following the 1965 Budget increase. The Government must recognise that this is a new and serious situation for the industry.
  The hon. and learned Gentleman rejected the Amendment largely on technical

  395
  grounds, one being that the increase in duty is inextricably linked with the increase in other Excise duties and the regulator. When the regulator was brought in the home sales of Scotch whisky were expanding. It was a different situation. It is the new situation which requires the Government to look at the matter in a different light.
  The hon. and learned Gentleman also mentioned the E.F.T.A. and Irish agreements. The time has come for the Government to look at them and make arrangements to enable the Scotch whisky position to be considered separately, so that decisions can be taken in the light
  of the merits of its own case. I hope that the Government will immediately set in train arrangements for doing that.
  This is a matter of great concern for Scotland. The product is of high quality coming from Scotland only, and it provides valuable employment in parts of Scotland where manufacturing industry cannot easily settle. I therefore hope that in view of the importance of the matter my right hon. and hon. Friends will join in dividing the Committee upon the Amendment.
  Question put, That "16 1 3" stand part of the Schedule:—
  The Committee divided: Ayes 186, Noes 117.

  Division No. 340.]

  AYES

  [10.12 p.m.

  Altdritt, Walter

  Fitch, Alan (Wigan)

  Mackenzie, Gregor (Rutherglen)

  Anderson, Donald

  Fitt, Gerard (Belfast, W.)

  Mackie, John

  Archer, Peter

  Fletcher, Ted (Darlington)

  Mackintosh, John P.

  Armstrong, Ernest

  Foot, Michael (Ebbw Vale)

  MacMillan, Malcolm (Western Isles)

  Atkinson, Norman (Tottenham)

  Forrester, John

  McMillan, Tom (Glasgow, C.)

  Barnett, Joel

  Fowler, Gerry

  McNamara, J. Kevin

  Beaney, Alan

  Fraser, Rt. Hn. Tom (Hamilton)

  MacPherson, Malcolm

  Bence, Cyril

  Freeson, Reginald

  Mahon, Peter (Preston, S.)

  Bidwell, Sydney

  Galpern, Sir Myer

  Mahon, Simon (Bootle)

  Bishop, E. S.

  Garrett, W. E.

  Marquand, David

  Blackburn, F.

  Ginsburg, David

  Mikardo, Ian

  Booth, Albert

  Gourlay, Harry

  Millan, Bruce

  Boston, Terence

  Gray, Dr. Hugh (Yarmouth)

  Miller, Dr. M. S.

  Boyden, James

  Greenwood, Rt. Hn. Anthony

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

  Bradley, Tom

  Gregory, Arnold

  Morgan, Elystan (Cardiganshire)

  Bray, Dr. Jeremy

  Grey, Charles (Durham)

  Morris, Alfred (Wythenshawe)

  Broughton, Dr. A. D. D.

  Griffiths, David (Rother Valley)

  Morris, Charles R. (Openshaw)

  Brown, Rt. Hn. George (Belper)

  Griffiths, Rt. Hn. James (Lianelly)

  Morris, John (Aberavon)

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

  Hamilton, James (Bothwell)

  Moyle, Roland

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

  Hannan, William

  Murray, Albert

  Buchan, Norman

  Haseldine, Norman

  Norwood, Christopher

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

  Henig, Stanley

  Oakes, Gordon

  Callaghan, Rt. Hn. James

  Herbison, Rt. Hn. Margaret

  Ogden, Eric

  Cant, R. B.

  Hilton, W. S.

  O'Malley, Brian

  Coleman, Donald

  Houghton, Rt. Hn. Douglas

  Oram, Albert E.

  Concannon, J. D.

  Howarth, Harry (Wellingborough)

  Orme, Stanley

  Conlan, Bernard

  Howarth, Robert (Bolton, E.)

  Oswald, Thomas

  Corbet, Mrs. Freda

  Hoy, James

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

  Craddock, George (Bradford, S.)

  Huckfield, L.

  Page, Derek (King's Lynn)

  Crawshaw, Richard

  Hughes, Roy (Newport)

  Palmer, Arthur

  Crosland, Rt. Hn. Anthony

  Hunter, Adam

  Pannell, Rt. Hn. Charles

  Crossman, Rt. Hn. Richard

  Hynd, John

  Park, Trevor

  Cullen, Mrs. Alice

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

  Parkyn, Brian (Bedford)

  Dalyell, Tam

  Jackson, Peter M. (High Peak)

  Pearson, Arthur (Pontypridd)

  Davidson, Arthur (Accrington)

  Janner, Sir Barnett

  Pentland, Norman

  Davies, Dr. Ernest (Stretford)

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

  Prentice, Rt. Hn. R. E.

  Davies, G. Elfed (Rhondda, E.)

  Johnson, Carol (Lewisham, S.)

  Price, Thomas (Westhoughton)

  Davies, Ednyfed Hudson (Conway)

  Jones, T. Alec (Rhondda, West)

  Price, William (Rugby)

  Davies, Harold (Leek)

  Judd, Frank

  Probert, Arthur

  de Freitas, Rt. Hn. Sir Geoffrey

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

  Pursey, Cmdr. Harry

  Dell, Edmund

  Lawson, George

  Reynolds, G. W.

  Dempsey, James

  Leadbitter, Ted

  Roberts, Albert (Normanton)

  Diamond, Rt. Hn. John

  Ledger, Ron

  Roberts, Gwilym (Bedfordshire, S.)

  Dickens, James

  Lee, Rt. Hn. Frederick (Newton)

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

  Doig, Peter

  Lee, John (Reading)

  Roebuck, Roy

  Donnelly, Desmond

  Lestor, Miss Joan

  Rogers, George (Kensington, N.)

  Dunnett, Jack

  Lever, Harold (Cheetham)

  Ross, Rt. Hn. William

  Dunwoody, Mrs. Gwyneth (Exeter)

  Lewis, Ron (Carlisle)

  Rowlands, E. (Cardiff, N.)

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

  Loughlin, Charles

  Shaw, Arnold (Ilford, S.)

  Eadie, Alex

  Luard, Evan

  Sheldon, Robert

  Edwards, William (Merioneth)

  Lyons, Edward (Bradford, E.)

  Short, Mrs. Renée(W'hampton,N.E.)

  Ennals, David

  McBride, Neil

  Silkin, Rt. Hn. John (Deptford)

  Ensor, David

  MacColl, James

  Silverman, Julius (Aston)

  Evans, Albert (Islington, S.W.)

  MacDermot, Niall

  Slater, Joseph

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

  Macdonald, A. H.

  Snow, Julian

  Finch, Harold

  McGuire, Michael

  Steele, Thomas (Dunbartonshire, W.)

  Stewart, Rt. Hn. Michael

  Wellbeloved, James

  Wilson, William (Coventry, S.)

  Taverne, Dick

  Wells, William (Walsall, N.)

  Winnick, David

  Tinn, James

  Whitlock, William

  Yates, Victor

  Urwin, T. W.

  Williams, Alan (Swansea, W.)

  Wainwright, Edwin (Dearne Valley)

  Williams, Alan Lee (Hornchurch)

  TELLERS FOR THE AYES:

  Walker, Harold (Doncaster)

  Williams, Clifford (Abertillery)

  Mr. Walter Harrison and

  Wallace, George

  Williams, Mrs. Shirley (Hitchin)

  Mr. Harper.

  Watkins, David (Consett)

  NOES

  Alison, Michael (Barkston Ash)

  Goodhew, Victor

  Nabarro, Sir Gerald

  Awdry, Daniel

  Grant, Anthony

  Noble, Rt. Hn. Michael

  Bell, Ronald

  Grieve, Percy

  Onslow, Cranley

  Bennett, Sir Frederic (Torquay)

  Griffiths, Eldon (Bury St. Edmunds)

  Orr-Ewing, Sir Ian

  Berry, Hn. Anthony

  Gurden, Harold

  Page, Graham (Crosby)

  Bessell, Peter

  Hall-Davis, A. G. F.

  Peel, John

  Biffen, John

  Hawkins, Paul

  Percival, Ian

  Birch, Rt. Hn. Nigel

  Heald, Rt. Hn. Sir Lionel

  Peyton, John

  Black, Sir Cyril

  Heseltine, Michael

  Powell, Rt. Hn. J. Enoch

  Blaker, Peter

  Higgins, Terence L.

  Pym, Francis

  Body, Richard

  Hiley, Joseph

  Ramsden, Rt. Hn. James

  Bossom, Sir Clive

  Hill, J. E. B.

  Renton, Rt. Hn. Sir David

  Boyd-Carpenter, Rt. Hn. John

  Hogg, Rt. Hn. Quintin

  Ridsdale, Julian

  Braine, Barnard

  Holland, Philip

  Rossi, Hugh (Hornsey)

  Brinton, Sir Tatton

  Hornby, Richard

  Royle, Anthony

  Bromley-Davenport.Lt.-Col.SirWalter

  Howell, David (Guildford)

  Scott, Nicholas

  Brown, Sir Edward (Bath)

  Hunt, John

  Sharples, Richard

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

  Hutchison, Michael Clark

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

  Bruce-Gardyne, J.

  Jenkin, Patrick (Woodford)

  Sinclair, Sir George

  Campbell, Gordon

  Johnston, Russell (Inverness)

  Smith, John

  Carlisle, Mark

  Jopling, Michael

  Stainton, Keith

  Chichester-Clark, R.

  Kaberry, Sir Donald

  Steel, David (Roxburgh)

  Clegg, Walter

  Kershaw, Anthony

  Stodart, Anthony

  Costain, A. P.

  Kirk, Peter

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

  Crosthwaite-Eyre, Sir Oliver

  Langford-Holt, Sir John

  Taylor, EdwardM.(G'gow,Cathcart)

  Cunningham, Sir Knox

  Lewis, Kenneth (Rutland)

  Taylor, Frank (Moss Side)

  Dalkeith, Earl of

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

  Thatcher, Mrs. Margaret

  Dean, Paul (Somerset, N.)

  Lubbock, Eric

  Tilney, John

  Dodds-Parker, Douglas

  MacArthur, Ian

  Wainwright, Richard (Colne Valley)

  Drayson, G. B.

  Mackenzie, Alasdair(Ross&Crom'ty)

  Ward, Dame Irene

  Eden, Sir John

  Macleod, Rt. Hn. Iain

  Whitelaw, Rt. Hn. William

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

  Marten, Neil

  Wills, Sir Gerald (Bridgwater)

  Emery, Peter

  Maxwell-Hyslop, R. J.

  Wilson, Geoffrey (Truro)

  Errington, Sir Eric

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

  Wood, Rt. Hn. Richard

  Eyre, Reginald

  Mills, Stratton (Belfast, N.)

  Worsley, Marcus

  Fletcher-Cooke, Charles

  Miscampbell, Norman

  Wylie, N. R.

  Fortescue, Tim

  Mitchell, David (Basingstoke)

  Younger, Hn. George

  Gilmour, Ian (Norfolk, C.)

  More, Jasper

  Gilmour, Sir John (Fife, E.)

  Morrison, Charles (Devizes)

  TELLERS FOR THE NOES:

  Glover, Sir Douglas

  Murton, Oscar

  Mr. Monro and Mr. Weatherill.

  Goodhart, Philip

  Schedule agreed to.

  Schedule 2 agreed to.

  Schedule 3.—(WINE (RATES OF CUSTOMS DUTIES).)
  Question proposed, That this Schedule be the Third Schedule to the Bill.
  Mr. Maxwell-Hyslop: On a point of order. Would it be possible for us to debate Schedule 3 and Schedule 4 together, although, if necessary, having separate Divisions, Sir Eric? There is a distinct relationship between the two and it would be more convenient in deploying arguments if they could be debated together rather than separately.
  Mr. Peyton: Further to that point of order. While my hon. Friend may wish to discuss the two Schedules together, there are nevertheless distinct points to be made on both, and I hope that Schedule 3 can be considered first, although I have no wish to restrict my hon. Friend's desire to speak on both Schedules.
  The Chairman: If objection is taken, we must take each Schedule separately.
  Mr. Peyton: I do not want to prolong my remarks on the subject. I want to make the point that, as a result of their persistent policy of increasing duties, the Government are putting a penalty upon the cheaper wines. This is not a policy which can be pursued indefinitely with credit to themselves, or benefit to anyone else.
  The words of this Schedule reduce an otherwise interesting and engaging subject to a fairly prosaic level. What worries me about the Government's attitude to these things is that persistently they take the view that there must be something wrong with anything which affords pleasure. People should have been warned that that was part and parcel of the Socialist creed. Unfortunately, shortness of memory being a more or less constant human failing, it has turned out to be substantially on the side of the Government and people forgot when they made their decisions at the last two elections.
  But here, laid down in language which one immediately associates with the prose which always comes from the Commissioners of Customs and Excise, lacking inspiration but nevertheless firm and de-
  400
  pressing in its effect, we have the whole spirit of Socialism condensed into dull words. I am sure that the Financial Secretary's personal tastes do not lead him in these dreary directions.
  Seriously, I wonder whether the Government ought to go on loading these burdens on wines. My hon. Friends from north of the Border have made a very eloquent plea that Scotch whisky should be treated more mercifully. That plea fell on deaf ears and it is unlikely that any plea from this side of the Committee, however eloquent, will receive much better attention when it is made on behalf of wines from foreign sources. Nevertheless, I hope that, some time, the House of Commons will rise in its wrath against the Government, who seem to be permanently against anything which can afford any pleasure or joy to any one. They are in favour of a sort of endless, dull vista of gloomy austerity of their own making, and I find it abominable.
  Not only that, but I think that in the exercise of their discretion they may be wrong, in that there will come a time when the rates upon these things impose such a burden that the consumption goes down and the return through duty diminishes. Looking at the benches opposite the only things of beauty are the empty spaces. [An HON. MEMBER: "There are plenty of those."]
  I do so hope that before it is too late the Government might show some signs of repentence, some signs that they are not determinedly and for ever opposed to anything which will give us pleasure. So often we have heard their eloquent pleas on behalf of those who are not so well off. Can they not see that these added burdens bar for ever those who are not well off from the enjoyment of small quantities of wines or spirits from time to time? I hope that the hon. Gentleman will at least let humanity creep in for a moment.
  Mr. MacDermot: The speech to which we have just listened by the hon. Member for Yeovil (Mr. Peyton) is one of the best arguments that I have heard for a long time for sending the Finance Bill upstairs. The hon. Gentleman did not really direct any arguments to the Schedule against which he was speaking,

  401
  other than to say at the outset that he throught that it imposed too heavy a duty on the cheaper wines. But the increases recorded are proportionately the same for all different types of wine, and this is not altering the relative burden of taxation of one kind in relation to another.
  For the rest of his speech, all that he did was to expound the fallacious thinking on this subject of many ignorant people, and I would not have thought that he was one of them, who believe that any article which is the subject of revenue taxation is being visited with some moral judgment by the Exchequer. Quite the contrary. The Exchequer is not concerned with passing moral judgment on the way in which people spend their money. Through indirect tax, one levies a certain amount of revenue on people's expenditure. It is by the choice that people make in their expenditure that they decide which are the things upon which they want to spend their money and, not unnaturally, they become the target of indirect taxation.
  The Revenue does not regret the fact that people spend their money in this way, and therefore enhance the Revenue. I, as a non-smoker, rejoice when I see people smoking. I do not pass any moral judgment on them. The hon. Gentleman is confused in his ideas as to what constitutes Socialism.
  Lieut.-Colonel Sir Walter BromleyDavenport: I should like to support the remarks in the excellent speech of my hon. Friend the Member for Yeovil (Mr. Peyton), which brought forth such an immoderate reply from the Financial Secretary. Every year both sides of the House—although not on this occasion I regret to see—ask for the duty on imported wine to be reduced. Every year the same arguments are put forward, and every year, with certain wonderful exceptions, of course, when the Conservatives governed the country, the Chancellor has turned a deaf ear to our pleadings. Indeed, only one thing, in my experience, ever seems to move the Chancellor, and that is the law of decreasing returns.
  10.30 p.m.
  With the enormous increase in our population today, revenue from the consumption of wines ought to be increasing. What is actually happening? Let us take
  402
  the example of port. In 1966 the import of port wine was only 1·29 million gallons. In 1938–39 we were importing nearly three times as much as we are importing today. We have already had examples of how the consumption of whisky is going down, but let us take the example of light wines. That, I think, is pretty stable, but let us take the price of light wine in bottle. The value of the wine in a bottle of white wine retailing at 7s. or 8s. a bottle cannot be more than a few pence, but what is the result of this huge charge put on a bottle of wine? The result is that comparatively few people can afford to drink it. The consumption of all wine imported into Great Britain still amounts to barely three bottles per head per year. Compare that with France, where they consume well over 100 bottles per head per year. Why should the poor people of this country be denied the pleasure of drinking wine?
  I should like to repeat what I said about the deplorable Budget speech of the right hon. Gentleman the Chancellor on 11th April, when I said that we often hear of Chancellors of the Exchequer talking about the law of diminishing returns, but I do not think that I have ever heard a Chancellor of the Exchequer of any party talk about the law of increasing returns.
  I should like to give an example which I gave then regarding indirect taxation in Germany. I am informed that a firm called Henkel Trocken, in Wiesbaden, turned out an excellent sparkling wine on which the tax was three marks a bottle. As a result, 13 million bottles were sold in the market. But then the shrewd German Chancellor of the Exchequer reduced the tax to one mark per bottle and as a result they sold not 13 million but 85 million bottles. In other words, the tax was reduced by two-thirds, and six and a half times as much wine was sold. Not only did the German Treasury get more revenue, but think of all the poor people who were able to enjoy the wine. Here we work on different principles. We have high taxation so that comparatively few people can afford to drink it.
  Therefore, my final plea is that the duty should be reduced on imported wines and spirits. What would be the result? We would give more pleasure to everyone, rich and poor alike—and nowadays,

  403
  under the present Government, people want to drink as much alcohol as they can to forget their troubles. Secondly, not only would everybody be as happy as people can be under existing conditions, but the Chancellor of the Exchequer would get more revenue.
  Mr. Maxwell-Hyslop: We must judge the Schedule on two grounds: the rates of tax which it imposes, on which I need not add to what my hon. Friends have said, and its effect on imports and on alternative consumption. Comparing the figures for heavy wines—those above 27 degrees of proof spirit—at the last Budget and now, we find that as a result of the 10 per cent. regulator and the Chancellor's rounding-off, the duty on foreign imported wines has gone up in the last year by 7·5 per cent. and on heavy wines from the Commonwealth, which the Schedule also covers, it has gone up by 10 per cent., but on home-produced heavy wines the Chancellor has increased it by 16 per cent., by more than twice as much as the duty on foreign wines and by more than half as much again as increase in duty on wines originating in the Commonwealth.
  It is important, therefore, that the Chancellor—if I may have his attention for a moment; perhaps the Chief Whip, to whom he is speaking, is wondering how the debate is going. If he listens to the debate, he might find out. I wonder, in passing, whether it is the Financial Secretary's intention to intervene on each item rather than at the end of the debate, which is the more conventional practice.
  I was endeavouring to draw the Chancellor's attention to the way he has written the Schedule compared with Schedule 4. It is now more attractive comparatively than it was after the last Budget to drink foreign, imported heavy wines than heavy wines emanating from the Commonwealth or produced in this country. This is an extraordinarily bizarre way of contributing to our balance of payment problems or to our level of employment at home. I ask the Financial Secretary to comment on why his right hon. Friend has achieved this somewhat bizarre result.
  Mr. Iain Macleod: We are discussing, in a sense, four Schedules concerned with
  404
  spirits, wine and beer. On Schedule 1, my hon. Friends from north of the Border in particular made what we regarded as an extremely convincing case, on which we registered our view on the Division Lobby. Schedule 2, relating to beer, we let pass without comment. Obviously, the regional argument does not apply. We are discussing Schedule 3, and we are coming to Schedule 4, on British wines.
  My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), speaking on Schedule 3, has been allowed to refer to the point which he hopes to make presently on Schedule 4. I suggest to my right hon. and hon. Friends that it would be consistent both with our action on Schedule 1 and our lack of action on Schedule 2 to have our vote expressing our views on this matter on Schedule 4, which deals with the rates of duty on British wine, and not on Schedule 3, which is now before us.
  Mr. MacDermot: With respect, we would agree with that course. I take the point which the hon. Member for Tiverton (Mr. Maxwell-Hyslop) has been making. He is in a difficulty because he wants to discuss the effect of Schedule 4 in relation to Schedule 3. I ask him to accept that I take his point, and perhaps we can discuss it further on Schedule 4.
  Sir D. Glover: The Financial Secretary said when he intervened in the debate that he did not think that moral judgment had anything to do with the rate of tax on wines and spirits. I am not blaming him or the Chancellor, because this is something which runs through the thread of British history. There is no doubt that the original reason for the heavy burden on wines and spirits had a great deal to do with moral judgment. It came from the Nonconformist conscience. But we are now living in a freer society, and the Government should realise that they have not the support from the country which they would have had 50 years ago.
  The rate of tax is a severe burden on the enjoyment of ordinary people who, as the world gets smaller, go overseas for their holidays and become more used to drinking these wines. Any Government should begin seriously to look at the problem. It has nothing to do with moral judgment, though it certainly had originally. Wine drinking is becoming

  405
  a much more accepted practice among the ordinary people of this country and is no longer the privilege of the wealthy.
  Question put and agreed to.
  Schedule agreed to.

  Schedule 4.—(BRITISH WINE (RATES OF EXCISE DUTIES).)
  Question proposed, That this Schedule be the Fourth Schedule to the Bill.
  Mr. Maxwell-Hyslop: I want to draw the attention of the Committee to a major point of substance. In the Chancellor's Budget speech. he said something which, taken in conjunction with Schedule 4, grossly misled the House and, had it not been for that statement, I should certainly have divided the House on one of the Budget Resolutions.
  In the course of his Budget speech, the right hon. Gentleman referred to the economic regulator, and said:
  "I therefore propose broadly to consolidate the surcharges at the existing rates with effect from tonight and, at the same time, to bring the current surcharges themselves to an end."
  Here are the important words:
  "The final result will be roughly the same, and there is nothing in the changes that I am making which would justify any increase in the price level."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1003.]
  That is quite specific, I think. What the Chancellor has done is to slap on a tax increase of 1s. 0½d. per gallon on home-produced heavy wine, which represents more than 2d. a bottle, contrary to the statement which he made in his Budget speech.
  I know of one firm producing heavy British wines and, for that firm, this represents over £100,000 a year. It cannot possibly carry that extra load. If it puts up its price by 2d. a bottle, when the Chancellor has told the country that he has done nothing to the duties which would justify a price increase, naturally the public will think that the firm concerned is breaking the price freeze and profiteering.
  It is grossly wrong for the Chancellor to put an individual firm in that position. In addition, it must be remembered that hon. Members never have time to study the figures in the Budget Resolutions before they are put to the Committee. It means that hon. Members have been mis-
  406
  led into thinking that, inside that mass of figures, there is no significant increase, when the Chancellor has made an increase quite deliberately. Not only has he made a significant increase, he has picked out the British producers for the largest single increase of any of the ones in the Third and Fourth Schedules.
  The Chancellor owes the Committee an explanation why he misled the House so grossly, and he owes the House the opportunity of honouring the words which he used in column 1003 by agreeing to the withdrawal of the Fourth Schedule and then coming back to the House at a later stage with a new Schedule adjusted to make it compatible with the undertaking which he gave. This is the only respectable thing that he can do, and if he does not do it he has no right to expect either the courtesy or the co-operation of this Committee.
  10.45 p.m.
  Mr. Peyton: I want to remind the Committee of some immortal words which the Chancellor of the Exchequer spoke in June, 1964, when he said:
  "That really began from 1961 and the pay pause and although I know that the Government are acting purely in the knowledge that there is nobody left who wants to drink their health, they are now making it more expensive for us to drown our sorrows."—[OFFICIAL REPORT, 2nd June. 1964; Vol. 695, c. 945.]
  I think that nothing could be more satisfactory from our point of view than to hand those words back to the Chancellor tonight on a plate and say that we only wish they were worth a drink to him, but they really are not. It shows how dangerous it is for Ministers who believe and think as the right hon. Gentleman does to get up and say the sort of things he did then.
  I am sorry that the Chancellor now finds himself in a position in which he cannot give way at all, either to the pleas of those who, like my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) have spoken on behalf of imported wines, or my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) who has spoken on behalf of British wines and rightly pointed out the vicious swipe which the Chancellor and his colleagues are taking at British beverages.

  407
  It really is sad to think that we can extract nothing from the Government, and that no assurances they can ever give will carry any weight until we have some indication from the Front Bench opposite that they will engage in policies which will make a reduction in taxation profitable and welcome to themselves. We are coming increasingly to regard their opposition to tax reductions as stemming from two things: first, their obstinate adherence to policies which cannot work because they are too expensive, and secondly from a dreary, dull conviction that all enjoyment is wrong, a conviction with which we had to live in the almost endless twilight of war, and which arose from the close companionship which they mentally keep with austerity and dullness.
  Mr. MacDermot: The hon. Member for Tiverton (Mr. Maxwell-Hyslop) quoted a passage from the Chancellor's Budget speech and suggested that my right hon. Gentleman had misled the House and the trade in what he said. I hope to satisfy the Committee that that is not the case, and to explain the reason for the distinction which there is between the steps taken in this Consolidation Measure in the Fourth Schedule in relation to British wines, and those in the Third Schedule which we have just been discussing.
  Shortly after the passage which the hon. Gentleman quoted my right hon. Friend said:
  "As regards alcoholic drink, I propose to incorporate the surcharge into the substantive rates of duty with the least possible alteration, taking account of international commitments."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1003.]
  There are a number of international obligations affecting the duties on wines and British wines which were disturbed by the imposition of the 10 per cent. surcharge last July. The revised rates which are contained in these two Schedules are designed to restore the differential between the full, Commonwealth and British rates without causing any substantial loss in the total amount of revenue. That is in accordance with the policy stated by the Chancellor in the passage which the hon. Member quoted.
  This has been effected by rounding the surcharge-inclusive Commonwealth rate to the nearest 3d. and applying the
  408
  differential margins to determine the other rates. This results in a reduction in the surcharge-inclusive full rates and an increase in the British wine rates. The new rates involve increases amounting to 1s. 0·6d. per gallon on heavy wine. The reason is the combination of the need to comply with these international commitments and the need to avoid a substantial loss of revenue.
  Some representations have been received, including one, I believe, from the company to which the hon. Member was referring, saying that the effect would be a consequential increase in cost of 2d. a bottle for certain of its wines. In reply the Chancellor reiterated that he saw no reason for any overall increase in the price of wines as a result of these measures in the regulator, and that if the company feels that it can and wishes to make out a case for a specific increase during the period of severe restraint that is a matter for it to take up with the Minister of Agriculture, Fisheries and Food.
  But these measures do, as I hope the Committee will now accept, follow the statements of policy made by my right hon. Friend the Chancellor in his Budget speech. The increase in the duty on British wines is an unfortunate and unavoidable consequence of the consolidation measure.
  Mr. Maxwell-Hyslop: If what the Financial Secretary says was accurate there might be some merit in it, but it has not even the merit of accuracy. He says that we wanted to restore the ratios to what they were before the 10 per cent. regulator was put on.
  Mr. MacDermot: I said we wanted to restore the differential.
  Mr. Maxwell-Hyslop: To restore the differential, certainly. If we take the basic rate of 17s. for home-produced wines before the regulator was put on as 100, the index for wines of Commonwealth origin would be 156 and the index for foreign would be 214. If we take the rates in Schedules 3 and 4 on British heavy wines as 100, the rate for Commonwealth wines has been reduced from 156 to 148 and the rate for foreign from 214 to 199. That is not restoring the differential.
  Mr. MacDermot: It is the difference between the ratio and the differential.

  409
  The hon. Member is still thinking and speaking in terms of ratios, but the differential which exists by agreement with Australia is that the difference between the Commonwealth and British rates may not exceed 9s. 6d. a gallon. It is a flat sum, and it is in order to restore that differential that the difficulty arises.
  Mr. Maxwell-Hyslop: If so the Financial Secretary needs to explain why it was possible to distort the differential by the use of the regulator and not possible to maintain the distortion subsequently. The Committee is entitled to an explanation why it is right to do it in July and wrong to do it in April.
  Secondly, the Financial Secretary has not yet fought his way out of the definite commitment given by the Chancellor:
  "The final result will be roughly the same, and there is nothing in the changes that I am making which would justify any increase in the price level,"—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 1033.]
  unless he is putting forward the proposition that an increase in Excise duty does not justify an increase in price to the consumer. If he is putting that argument forward it is an entirely novel doctrine, which has not been put forward in the Committee before. When petrol duty, cigarette duty and beer and whisky duty go up under the regulator, that justifies an increase in price. Thus, when the right hon. Gentleman puts 1s. ½d. a gallon on home-produced heavy wines, he wants us to believe that they are in some strange category in which, for imperceptible reasons, no increase is justified. He may make such a bizarre case if he wishes, but he should not ask the Committee to take it on trust—
  Mr. MacDermot: The hon. Gentleman still does not understand. In the passage he quoted, my right hon. Friend was referring not just to the surcharge on alcoholic drinks but to the whole range of surcharges and he was saying that the consolidation measures would bring the total revenue to the same position as it was before consolidation, and that, therefore, these measures would not justify an increase in the price level, which is, of course, an average of many different prices—[Interruption.]—of course it is. He said later that there was a particular difficulty in relation to alcoholic drinks.
  I do not want to say anything which might be thought to prejudge the matter,
  410
  but I have explained that if, because of this measure—I have explained why it had to be taken in relation to British wines—a company felt that an increase in the price of some of its products was justified, it should take that matter up with the Minister of Agriculture. But this would be no justification for an overall increase in prices, which would affect the price level.
  On the hon. Gentleman's first point, whereas other countries, in a temporary matter like the introduction of the Regulator, will accept a slight and temporary breach of the agreement, when we are consolidating them into a permanent measure, of course they will not.
  Mr. Maxwell-Hyslop: The hon. and learned Gentleman, therefore, is stating an obvious proposition, that an increase in tax on one item does not justify an increase in the price of another. I concur utterly, although I should not have thought that it needed saying. His other proposition was that the statement that there is nothing in the changes meant that there is something in them. This also is a somewhat unusual construction. And the phrase about justifying any increase in the price level means, he told us, that one may increase prices but that this does not mean that one has increased the price level. This is a naive interpretation.
  I do not see the point of making this general proposition if all it meant was that, when duties have been put up, we expect prices to go up and vice versa, and that, as the overall sum is neither plus nor minus, the overall effect will be neither. But hon. Members who heard the Budget speech certainly did not think that the right hon. Gentleman intended to put 1s. 0½d. a gallon on British heavy wines; nor did the public take that statement to mean that duty would be increased substantially.
  None of us realised this until we heard from the manufacturers who had listened to the Budget on the radio that the Commissioners of Customs and Excise had notified them that 1s. 0½d. was to go on at midnight. Although his junior Minister tried to talk his way out of it, it is because the Chancellor presented this increase in such a way that it was concealed from the Committee that anyone

  411
  who values accurate presentation, if nothing else, would do well to vote against Schedule 4.
  Question put, That this Schedule be the Fourth Schedule to the Bill:—
  The Committee divided: Ayes, 174; Noes, 106.

  Division No. 341.]

  AYES

  [11.00 p.m.

  Alldritt, Walter

  Galpern, Sir Myer

  Morris, John (Aberavon)

  Anderson, Donald

  Gourlay, Harry

  Moyle, Roland

  Archer, Peter

  Gray, Dr. Hugh (Yarmouth)

  Murray, Albert

  Armstrong, Ernest

  Gregory, Arnold

  Norwood, Christopher

  Atkinson, Norman (Tottenham)

  Grey, Charles (Durham)

  Oakes, Gordon

  Barnett, Joel

  Griffiths, David (Rother Valley)

  Ogden, Eric

  Beaney, Alan

  Hamilton, James (Bothwell)

  O'Malley, Brian

  Bence, Cyril

  Hannan, William

  Oram, Albert E.

  Bidwell, Sydney

  Harper, Joseph

  Orme, Stanley

  Bishop, E. S.

  Haseldine, Norman

  Oswald, Thomas

  Blackburn, F.

  Henig, Stanley

  Page, Derek (King's Lynn)

  Booth, Albert

  Herbison, Rt. Hn. Margaret

  Palmer, Arthur

  Boston, Terence

  Hilton, W. S.

  Pannell, Rt. Hn. Charles

  Boyden, James

  Houghton, Rt. Hn. Douglas

  Park, Trevor

  Bradley, Tom

  Howarth, Harry (Wellingborough)

  Parkyn, Brian (Bedford)

  Bray, Dr. Jeremy

  Howarth, Robert (Bolton, E.)

  Pearson, Arthur (Pontypridd)

  Broughton, Dr. A. D. D.

  Hoy, James

  Pentland, Norman

  Brown, Rt. Hn. George (Belper)

  Huckfield, L.

  Prentice, Rt. Hn. R. E.

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

  Hughes, Roy (Newport)

  Price, Thomas (Westhoughton)

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

  Hunter, Adam

  Probert, Arthur

  Buchan, Norman

  Hynd, John

  Pursey, Cmdr. Harry

  Callaghan, Rt. Hn. James

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

  Reynolds, G. W.

  Cant, R. B.

  Jackson, Peter M. (High Peak)

  Roberts, Albert (Normanton)

  Coleman, Donald

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

  Roberts, Gwilym (Bedfordshire, S.)

  Concannon, J. D.

  Johnson, Carol (Lewisham, S.)

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

  Conlan, Bernard

  Jones, T. Alec (Rhondda, West)

  Roebuck, Roy

  Craddock, George (Bradford, S.)

  Judd, Frank

  Rogers, George (Kensington, N.)

  Crawshaw, Richard

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

  Ross, Rt. Hn. William

  Crosland, Rt. Hn. Anthony

  Leadbitter, Ted

  Rowlands, E. (Cardiff, N.)

  Crossman, Rt. Hn. Richard

  Ledger, Ron

  Ryan, John

  Cullen, Mrs. Alice

  Lee, Rt. Hn. Frederick (Newton)

  Shaw, Arnold (Ilford, S.)

  Dalyell, Tam

  Lee, John (Reading)

  Sheldon, Robert

  Davidson, Arthur (Accrington)

  Lestor, Miss Joan

  Short, Mrs. Renée(W'hampton,N.E.)

  Davies, Dr. Ernest (Stretford)

  Lever, Harold (Cheetham)

  Silkin, Rt. Hn. John (Deptford)

  Davies, G. Elfed (Rhondda, E.)

  Lewis, Ron (Carlisle)

  Silkin, Hn. S. C. (Dulwich)

  Davies, Ednyfed Hudson (Conway)

  Loughlin, Charles

  Silverman, Julius (Aston)

  Davies, Harold (Leek)

  Luard, Evan

  Slater, Joseph

  de Freitas, Rt. Hn. Sir Geoffrey

  Lyons, Edward (Bradford, E.)

  Stewart, Rt. Hn. Michael

  Dell, Edmund

  McBride, Neil

  Taverne, Dick

  Dempsey, James

  MacColl, James

  Tinn, James

  Diamond, Rt. Hn. John

  MacDermot, Niall

  Urwin, T. W.

  Dickens, James

  Macdonald, A. H.

  Wainwright, Edwin (Dearne Valley)

  Doig, Peter

  McGuire, Michael

  Walker, Harold (Doncaster)

  Donnelly, Desmond

  Mackenzie, Gregor (Rutherglen)

  Wallace, George

  Dunnett, Jack

  Mackintosh, John P.

  Watkins, David (Consett)

  Dunwoody, Mrs. Gwyneth (Exeter)

  MacMillan, Malcolm (Western Isles)

  Wellbeloved, James

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

  McMillan, Tom (Glasgow, C.)

  Wells, William (Walsall, N.)

  Eadie, Alex

  McNamara, J. Kevin

  Whitlock, William

  Edwards, William (Merioneth)

  MacPherson, Malcolm

  Williams, Alan (Swansea, W.)

  Ennals, David

  Mahon, Peter (Preston, S.)

  Williams, Alan Lee (Hornchurch)

  Ensor, David

  Mahon, Simon (Bootle)

  Williams, Clifford (Abertillery)

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

  Marquand, David

  Williams, Mrs. Shirley (Hitchin)

  Finch, Harold

  Mikardo, Ian

  Wilson, William (Coventry, S.)

  Fitt, Gerard (Belfast, W.)

  Millan, Bruce

  Winnick, David

  Fletcher, Ted (Darlington)

  Miller, Dr. M. S.

  Yates, Victor

  Foot, Michael (Ebbw Vale)

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

  Forrester, John

  Morgan, Elystan (Cardiganshire)

  TELLERS FOR THE AYES:

  Fowler, Gerry

  Morris, Alfred (Wythenshawe)

  Mr. Walter Harrison and

  Fraser, Rt. Hn. Tom (Hamilton)

  Morris, Charles R. (Openshaw)

  Mr. Alan Fitch.

  Freeson, Reginald

  NOES

  Alison, Michael (Barkston Ash)

  Boyd-Carpenter, Rt. Hn. John

  Dalkeith, Earl of

  Awdry, Daniel

  Brinton, Sir Tatton

  Dean, Paul (Somerset, N.)

  Bell, Ronald

  Bromley-Davenport, Lt.-Col. Sir Walter

  Dodds-Parker, Douglas

  Bennett, Sir Frederic (Torquay)

  Brown, Sir Edward (Bath)

  Drayson, G. B.

  Berry, Hn. Anthony

  Brace-Gardyne, J.

  Eden, Sir John

  Bessell, Peter

  Campbell, Gordon

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

  Biffen, John

  Carlisle, Mark

  Eyre, Reginald

  Birch, Rt. Hn. Nigel

  Chichester.Clark, R.

  Fletcher-Cooke, Charles

  Black, Sir Cyril

  Clegg, Walter

  Fortescue, Tim

  Blaker, Peter

  Costain, A. P.

  Gilmour, Ian (Norfolk, C.)

  Body, Richard

  Cunningham, Sir Knox

  Glover, Sir Douglas

  Goodhart, Philip

  Lewis, Kenneth (Rutland)

  Rossi, Hugh (Hornsey)

  Goodhew, Victor

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

  Royle, Anthony

  Grant, Anthony

  MacArthur, Ian

  Scott, Nicholas

  Grieve, Percy

  Mackenzie, Alasdair(Ross&Crom'ty)

  Sharples, Richard

  Griffiths, Eldon (Bury St. Edmunds)

  Macleod, Rt. Hn. Iain

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

  Gurden, Harold

  Marten, Neil

  Sinclair, Sir George

  Hall-Davis, A. G. F.

  Maxwell-Hyslop, R. J.

  Smith, John

  Hawkins, Paul

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

  Stainton, Keith

  Heald, Rt. Hn. Sir Lionel

  Mills, Stratton (Belfast, N.)

  Steel, David (Roxburgh)

  Heseltine, Michael

  Miscampbell, Norman

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

  Higgins, Terence L.

  Monro, Hector

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

  Hiley, Joseph

  More, Jasper

  Thatcher, Mrs. Margaret

  Hill, J. E. B.

  Morrison, Charles (Devizes)

  Tilney, John

  Hogg, Rt. Hn. Quintin

  Murton, Oscar

  Wainwright, Richard (Colne Valley)

  Holland, Philip

  Nabarro, Sir Gerald

  Ward, Dame Irene

  Hornby, Richard

  Noble, Rt. Hn. Michael

  Whitelaw, Rt. Hn. William

  Howell, David (Guildford)

  Onslow, Cranley

  Wills, Sir Gerald (Bridgwater)

  Hunt, John

  Orr-Ewing, Sir Ian

  Wilson, Geoffrey (Truro)

  Hutchison, Michael Clark

  Page, Graham (Crosby)

  Winstanley, Dr. M. P.

  Jenkin, Patrick (Woodford)

  Peel, John

  Worsley, Marcus

  Johnston, Russell (Inverness)

  Percival, Ian

  Wylie, N. R.

  Jopling, Michael

  Peyton, John

  Kershaw, Anthony

  Powell, Rt. Hn. J. Enoch

  TELLERS FOR THE NOES:

  Kirk, Peter

  Pym, Francis

  Mr. David Mitchell and

  Langford-Holt, Sir John

  Ramsden, Rt. Hn. James

  Mr. Bernard Weatherill.

  Legge-Bourke, Sir Harry

  Renton, Rt. Hn. Sir David

  Schedule 5 agreed to.
  Clause 2 ordered to stand part of the Bill.

  Clause 3.—(DISCLOSURE OF INFORMATION BY COMMISSIONERS.)
  Mr. Sheldon: I beg to move Amendment No. 12, in page 4, line 32, after first 'Commissioners' to insert:
  'providing that the goods are not so limited in number that details of quantity and price may be deduced from this information in conjunction with that available from official returns '.
  The Deputy Chairman (Mr. Sydney Irving): With this Amendment we may discuss Amendment No. 13, in page 5, line 3, leave out paragraph (e).
  Mr. Sheldon: The purpose of Clause 3 is to permit disclosures of goods imported to this country for the benefit of the D.E.A., amongst others, which can thereby find out that certain goods are imported and so come to certain decisions in that respect. The purpose of the Amendment is to achieve a consistency which is at present not in the Clause.
  Subsection (3) states:
  "The Secretary of State may by order add to the descriptions of information to which this section applies any further description of information contained in any document … other than the price of the goods …"
  In fact, what can happen already is that this information can be deduced from the information given under the Clause in conjunction with that given in the Overseas Trade Accounts of the United
  414
  Kingdom or other sorts of official returns. This can be very important in a number of cases. The Amendment seeks to give the Commissioners the right to withhold this information which subsection (3) says should be withheld.
  If one looks at the Overseas Trade Accounts in conjunction with Clause 3 we are able to deduce information about goods, including a detailed description, quantities, name of the maker, country of origin and—this I find difficult to understand and it is the reason for Amendment No. 13—the country from where the goods are consigned. This Clause together with official returns might disclose the price. From last January's Overseas Trade Accounts I give an example of how this might be done. Under division 71 machinery other than electrical, metal working machinery, we see that physico-chemical machines imported in January, 1967, were imported at a cost of £12,000 and the total number was six. It does not need much deduction to come to the view that the machines were £2,000 each. This information is at present available, but very few categories are quoted by number. Most are quoted by tonnage and this sort of information is not then available.
  By passing Clause 3 unamended we shall be providing precisely that kind of information and anyone who has the returns will be able to deduce exactly the cost in those cases where the quantity is small; he can accurately judge the value of each machine imported. I am not against this disclosure. I think that

  415
  Governments and civil servants have been far too secretive and their atmosphere of secrecy has perhaps spread to the private sector, but the way to overcome the secrecy is not through permitting an oversight in legislation. To make the Clause consistent we put forward this Amendment.
  The Joint Under-Secretary of State for Economic Affairs (Mr. Harold Lever): I am sure that we welcome the constructive approach of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) in moving this Amendment. He and I have often moved Amendments together from the position he now occupies and as everyone, particularly the Chancellor, is aware, we always did so in a most constructive spirit. Therefore without any surprise I note the moderate way in which he put the Amendment and argued in its favour.
  I am glad that he welcomes the Government action, taken at the request of the E.D.C.'s for the machine tool and the mechanical and electrical engineering industries to give some information to our own manufacturers and some means of assessing the demand which they should try to meet which at present is met by imports. My hon. Friend is in favour of that, but he feels that we should not give information of such a detailed kind as to give the actual cost and price of imports in appropriate cases. The Government have no intention of breaching in any way the confidentiality of import documents on which they will rely, and upon which alone they will rely, for this information to be provided.
  11.15 p.m.
  Secondly, there will be not merely the protection incorporated in the Clause, which strips away anything which is confidential in the individual documents so that in the aggregate nothing confidential is disclosed. But in addition, the Government, who will not automatically operate the power to give this information, will vet every category of information before operating the power and ensure that there will be full and adequate consultation with all the relevant trade and industrial representative bodies before they authorise release of any category of information. That will be a check in addition to the careful stripping
  416
  of confidential matter from what is publishable under the Clause.
  To be quite sure that even in such odd cases as that which my hon. Friend cited nothing unfair or unwise will result, we have made this not mandatory but subject to individual examination by the Government, and in every case there will be consultation with the relevant trade bodies. In the kind of case my hon. Friend mentioned of an import of six articles amounting to £12,000, there is no question that the Government would authorise the provision of this information in any event. What we are trying to do is to communicate to our own manufacturers where there is a very substantial and repetitive demand which they should be trying to meet. We are not interested in picking up bits like £12,000 and six articles. Whether my hon. Friend thinks the inference could be accurately drawn or not is open to argument.
  The first great protection is that the release is not automatic. The second is that the trade bodies will be consulted in every category of information before any is released. The third is that the Government are instituting very careful machinery for vetting each of these categories before any information is released. That machinery will be very thorough and my hon. Friend can rest assured that in no circumstances will information be given which would amount to the kind of damaging, trivial breach of confidence implied in the kind of figures he cited.
  Finally, I emphasise that the Government has a vested interest in maintaining the trust that industry has in the confidentiality of all matters communicated to the Government. This would be seriously damaged if the Government were to authorise any information to be given that was a breach of the confidence entrusted to it.
  In all these circumstances, I -think that my hon. Friend's fears are hypothetical, and he need not be so anxious as to be disabled from withdrawing the Amendment.
  Mrs. Margaret Thatcher: I wish to say a few brief words on the Amendment, but to reserve one or two comments for the debate on the Question, "That the Clause stand part of the Bill".

  417
  May I also say how delighted I am to see the hon. Member for Manchester, Cheetham (Mr. Harold Lever) on the Government Front Bench? I imagine that the rest of the Front Bench is very relieved that he is there and not on the back benches. I hope that he is urging the same sort of advice behind the scenes as he would be urging if he were still on the back benches.
  The Minister has sought to say that the Clause offers great protection, particularly with reference to the Amendment. In fact, the Clause does not offer great protection. It is drafted very widely and I believe that that is the reason for the Amendment. I have no doubt that the Minister would operate it strictly in accordance with the assurances he has given. But that is no guarantee that anyone else would operate it in that way.
  I have particularly in mind the case of a company importing goods to test the market before setting up in manufacturing itself. It might import goods to test the market and make considerable inroads into that market. But a company would probably be readily identifiable and the information as to its importing, the catalogue number and the deduction that it was going to set off into manufacturing would be useful to any competitor.
  It is not enough in such a case to say that the Government would consult the industry. Some of this information would be unfair to any particular firm. Many companies in an industry would like to have more information about other firms in that industry. I think that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) would be well advised to press the Amendment, if not now then on Report, on the Government, so that the Clause may offer greater protection than it does.
  Mr. Barnett: It is nice to see my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) on the Front Bench, although it was pleasant to have him back here with us. I hoped that he would accept the Amendments in the same constructive spirit that he suggested that we withdraw them because, if the assurances he gave are valid, they would surely be equally valid and appropriate for him to accept the Amendments. He has not really presented any arguments for not accepting
  418
  them. All he has said—although, of course, we accept it—is that they will be dealt with.
  Mr. Sheldon: Although I think that this matter can be examined further, possibly on the Report stage, as a token of my friendship for my hon. Friend the Joint Under-Secretary of State for Economic Affairs, my former colleague on these benches, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Question proposed, That the Clause stand part of the Bill.
  Mr. Biffen: I would not like it to be thought that there was universal acclamation for Clause 3. I have grave doubts about the virtue of this kind of Clause because I suspect that it results from the activities of the economic development committees. That does not of itself render the Clause necessarily unacceptable but it puts into my mind some suspicions.
  These arise from a belief that we are obsessed with the supposed problem of import substitution. In fact, we should be much more concerned with the competitive environment in which British industry should operate, and far from encouraging people like the Machine Tool Trades Association to try and get the Government to hand things to them on a plate about the kind of competition they are meeting, we should be hoping that the Machine Tool manufacturers should themselves be aware of the kind of competition they are facing.
  There is no doubt that the Clause arises in part as a result of representations by a number of economic development committees. The Economic Development Committee of the machine tool industry was foremost amongst those pressing for this kind of legislation. I have here the progress report for the first two years, 1964–66, published by the Committee. It says:
  "The study of imports generally is considerably hampered by the lack of detail in the published import statistics, which at present show only the broadest categories. The E.D.C. has confirmed that details required can be obtained from existing information in the Government's hands, and has made strong representations to the Government for it to be made available to the machine tool manufacturers so that an effective attack on imports may be mounted."

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  The hon. Member for Manchester, Cheetham (Mr. Harold Lever) has just been talking about consultations with the relevant trade bodies. What is the relevant trade body if we are dealing with machine tool imports? Is it the British machine tool manufacturers, or the machine tool importers? In many instances, the companies are one and the same. However, I took the precaution of discussing this Clause with a machine tool importer this morning and he was very eloquent on the disadvantages which he thought would flow from the Clause. I share his scepticism about the extent to which this provision will encourage a protectionist attitude among industrialists in this country.
  We have some signs of the extent to which the incipient protectionism which exists in this country, an attitude which is encouraged by bodies such as the economic development committees, is causing concern among our trading partners in that in February a good deal of concern was expressed by the Swiss machine tool manufacturers' association.
  The Times of 15th February said that the Swiss machine tool manufacturers' association had issued a statement saying that official policy in Britain was against the letter and the spirit of the E.F.T.A. treaty. The burden of their argument was that the Government had urged British users of machine tools to buy British. The statement referred to the 1965 "Little Neddy" programme which, it contended, could be interpreted as an invitation to British manufacturers to copy foreign machines and thus reduce imports.
  It is particularly undesirable that this country, the Government and British industry should be exposed to charges of that sort, but I have a sneaking sympathy with that kind of charge against the average British machine tool maker who on the whole knows all his customers or potential customers and who is not dealing with a vast market which he cannot conceivably encompass with his own sales organisation—if he has a sales organisation worthy of the name.
  At one stage I worked for a body called the Economist Intelligence Unit and I remember talking to the managing director of a very large machine tool company in this country who laughed at the thought
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  of someone like the E.I.U. doing a market survey for him. He said, "We know the market", and I am sure that he was right. It was a company with an extremely good reputation in the machine tool industry, not a company to be held up to ridicule. It happened to be Alfred Herbert.
  My concern is that once we start having this kind of disclosure we encourage the worst element in British management, which is to ask, "If we are subject to competition from imports, what will the Government do to help us?" It is not as though this information is not within the scope and ability of any competitive manufacturer to find out for himself and if we believe that we increase the competitive efficiency of British manufacturers by trying to pass this kind of information to them via the Customs and Excise, we underestimate the kind of environment in which we are operating.
  Mr. J. T. Price: Perhaps it is better that I should intervene on my feet than interrupt the hon. Member for Oswestry (Mr. Biffen), who has just spoken about the machine tool industry. His argument may be valid in a general sort of way with a smaller circumference industry like the machine tool industry where individual units are identifiable within the trade, but it does not apply generally to every industry in this country. I have never appeared as any sort of crude protectionist, but I hope that it will be recognised that the machine tool industry is a very different kettle of fish from the textile industry, of which I have some local knowledge as a Lancashire Member of Parliament.
  I have noticed recently that leading members of the Conservative Party, impressed by the cases that we have occasionally put up on behalf of the industry, are beginning to make very friendly noises towards the Lancashire textile industry, which has never asked for any kind of protection, but which has asked, and this is the proper occasion to raise the matter, not for less disclosure, but for more.
  11.30 p.m.
  This is an industry which has been more than two-thirds destroyed within the last decade by the unrequited imports coming into the country, willy-nilly, under our present system of import controls. I am entitled to remind the Committee

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  that the textile industry has, through its official bodies, asked for more disclosure because of the very grave practices which are going on, and which do not represent fair international trade, as some of us understand it.
  While I disown any charge of being a protectionist in the narrow sense, I also disown any charge of being a crude laissez-faire man, who wants to let the free play of the market settle everything, because that leads to all kinds of happenings that Members on both sides of the Committee know perfectly well every civilised state in the world, except ours, takes very stern measures to deal with.
  I would advise my hon. Friend the Joint Under-Secretary of State for Economic Affairs, who has appeared in this new rôle for the first time—the poacher turned gamekeeper—and who is sitting there looking very pleased with himself, to bear in mind, as a Lancashire Member, that there is a case for Lancashire that does not equate with the sort of consideration that has been put to us in support of this Amendment.
  Mr. Harold Lever: It is apparent from what my hon. Friend the Member for Westhoughton (Mr. J. T. Price) says, that anxiety often disguises itself in the most remarkable ways. He implies that I have the appearance of being exceedingly pleased with myself. I welcome the very kind comments which have been made upon the responsibility which has been cast upon me. I think that the hon. Lady the Member for Finchley (Mrs. Thatcher) was a little mistaken in thinking that my colleagues on the Front Bench are relieved by my presence. Their full attendance is, I think, to be attributed to anxiety rather than relief.
  The hon Member for Oswestry (Mr. Biffen) carries his normally attractive support for the principle of self-help beyond the bounds of what is reasonable on this occasion. When he says that the average machine tool manufacturer ought not to be helped in this way, ought not to be handed this information on a plate, he is really caricaturing his own position as an ardent admirer of virile businessmen.
  I do not really think that he would, on reflection, believe that machine tool manufacturers should institute a national survey in order to find out what kind of
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  machines are selling well, so that they might get a full appreciation of the market that is being supplied by imports, and compete accordingly. There is nothing shameful, either in seeking to find what are the best selling items that are sucking in imports to the country, which could well be met by existing capital equipment and existing U.K. manufacturers. It is an entirely competitive, non-protectionist situation which we are seeking to encourage. We are not giving them a price advantage, or a tariff advantage.
  What we are doing is to assist them, with reasonable information, stripped of all its confidential aspects, of the kinds of machinery and goods which are coming into the country. We are saying to them: "This is what is coming in; can you match it competitively by your energy?" The hon. Member said that they know their own customers. Of course they do. What we are trying to do is to tell them what people who are not their customers are buying from abroad and what they might well supply from their own capital equipment, "know-how," intelligence and work force.
  I welcome the comments of my hon. Friend the Member for Westhoughton (Mr. J. T. Price), although some of them were not directly related to the powers which we are seeking. I assure the Committee that the undertakings which have been given against breaches of confidentiality will be effectively honoured. The Clause has been drafted with the intention that all the figures which would be given, even if there were no supervision from the Government's point of view, would not in any event result in a breach of confidentiality, because they would be aggregates and not individual figures, and the aggregates would be stripped of the name of the importer and the prices of individual items of goods. Consequently, even if the Government exercised no further supervision they would involve nothing which was confidential.
  To give a simple example, if it were desired to know how many Renault 1·5 litre cars were being imported into this country in a quarter, this could be announced and the figures given. There is nothing confidential in that information, which is given in every country in the world about manufactured imports. It is

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  right that we should have that information, but to make sure that in no instance will anything which is confidential be disclosed, the Government will not automatically disclose the information and will maintain consultations with the relevant trade representative bodies.
  I was asked which bodies they would be in respect of machine tools. Clearly, they would be the machine tool importers, not solely those who have an interest in finding out this information. Before we would authorise this information we would consult the kind of people who might be affected if there were any breach of confidentiality. The Committee's fears ought to be laid at rest, therefore, and I hope that the Committee will accept the Clause.
  Mrs. Thatcher: I should like a little more information about the Clause, which is rather wide. I am, in part, asking for information and in part making comment, and I hope that the Minister will correct me if I say anything which is incorrect.
  The normal position is that the information in these documents is given for one purpose only—to ensure that the right amount of tax, imposed by Statute, is collected on that class of goods. Information given for that purpose is normally absolutely confidential and is not disclosed for any other purpose. Between that information and the ordinary statistical information in the trade return there is a wide gap. The hon. Member is seeking to bridge that gap in this Clause, which I think is a far-reaching Clause, and I want him to define more closely than he has defined so far what are the objectives which he hopes to achieve, as they are not at all clear.
  If we are to breach confidentiality, there must be a good reason for doing so and we should know what we are hoping to achieve. I understand that "Neddy" thinks that if every manufacturer in this country knew what was being imported he could create, or would be more likely to create, a competitive substitute for that import. Going through the trade and navigation returns, I earnestly hope that every country in the world will not go in for import substitution because that would have a very damging effect on much of our export trade.
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  I know the chemical industry very well, and I know that we could go through the list and cut out export after export if other countries adopted the policy which I think is inherent in the Clause. If that is not the purpose of the Clause, then I do not know what is its purpose.
  The implication is that if a manufacturer knows what is being exported and where it is being exported from he is more likely to produce a competitive substitute. That is not necessarily the case. Hon. Members will see that if they go through the list of basic chemicals. Sodium chlorate is one example and potassium carbonate is another. Everyone knows that they are produced in this country, but they are, nevertheless, also purchased from other countries for very good reasons. They are sometimes purchased and converted into other chemicals which are exported.
  Cut glass is another example. Many women buy Czechoslovakian cut glass. It is well known that we produce excellent cut glass in this country, but the knowledge that it is produced both in Czechoslovakia and here does not cut down the amount of imports. Indeed, the increase in world trade has come from an increase in trade between importers of manufactures, and I think the N.E.D.C. Report was operating on an outmoded view of trade. I think we should go for an increase of manufactured imports and exports between countries.
  Now I ask the hon. Gentleman, therefore, what is the purpose of this Clause? Is he saying that he is giving more knowledge to manufacturers on the basis that if they have that knowledge they will produce similar goods? If he is not, why does he so particularly want this Clause? I do not accept his assumption at all, and I do not think it is borne out by the facts.
  We may wish to return on Report to subsection (3), because I think it is most important that the hon. Gentleman and the Secretary of State should not have powers of the kind taken in subsection (3) which, again, are extremely wide. The subsection enables more information to be given to anyone; not just N.E.D.C.; give it to N.E.D.C. and it can be given to anyone. For example, I know a good many manufacturers in the chemical industry who

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  would be delighted to have more information about the quantities and countries of origin; then they would trot along to the Board of Trade with a flimsy application for anti-dumping duty. I shall be very interested to see if the number of applications for anti-dumping duty goes up.
  I am very suspicious of this Clause. I hope the hon. Gentleman will give us more information about its purpose. Also, will he give us a strict account now of the precise powers which exist to give information and what is the source of those powers? If not, we shall wish to return to this on Report.
  Mr. Biffen: I am encouraged to make a few more brief comments by the answer from the Government and particularly by the remarks by my hon. Friend the Member for Finchley (Mrs. Thatcher), remarks which I fully endorse. If we are asked to pass a Clause which will give greater disclosure to the Government we must know the purpose to which this policy is directed. One does not need to be congenitally suspicious to have some considerable reservations about extending the area of Government intervention and Government knowledge. We are here as protectors of our constituents against this kind of activity, and the philosophy which prompts us is specially prompted by this kind of Clause and the coalition between departments like the Department of Economic Affairs and trade associations, an unhappy coalition if ever there was one.
  Let us suppose that the purpose of the Clause is to encourage import substitution, to encourage British machine tool manufacturers, British chemical plant manufacturers, or even British textile manufacturers, to make the kind of products which are now being imported. Will the vital information of price also be revealed to those companies who wish to compete against the interests of their fellow citizens who act as importers? Because if this vital factor of price is not also to be included, will they not be back in the same difficulties in which they now find themselves, where they do not know about this factor?
  It is still, in my opinion, the legitimate function of the machine tool manufacturer to get out and know his market, and not have this kind of information passed to him.
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  If this information is passed to him and still excludes the vital factor of price, of how much more value is it?
  11.45 p.m.
  If, however, the vital factor of price is also to be included, I suspect that we may find that in the Clause we are stumbling across far greater degrees of disclosure than we ever imagined. All the pressures from now onwards, particularly from the trade associations which proliferate around the new Government Departments—which have given many of them cause for existing, whereas often in the past they found it damned difficult to justify the subscriptions for which they called from their members—will be to know more and more, including descriptions and designations, and to try to fill out our statistical knowledge, so that we will no longer be conducting the economy with the crude and imperfect weapons of the past.
  I feel deeply suspicious about this development. Nothing which has been said so far disarms those suspicions other than the charm and urbanity of the Joint Under-Secretary of State for Economic Affairs, but even that cannot cover up what, I suspect, is a thoroughly bad case.
  Mr. Sheldon: I would not wish to intervene at this late hour, but I am concerned about one aspect of this disclosure. As I have said, I am in favour of much greater disclosure, but I am doubtful why this disclosure is being required. There are far better methods for manufacturers to get the information which they require rather than the statistical returns which come a few months later when they should have the information. What should matter to a machine tool or any other manufacturer is information of what is going on now and what customers will do in the future and not about what happened a few months ago.
  I am also worried about the whole question of import saving. This may well turn into a discussion to see what competitors are doing and trying to copy them. That is not the rôle of a country like ours. It is a rôle of underdeveloped countries or countries which want to imitate. That imitative rôle is suitable for a country which is starting to industrialise, for a country like Japan in

  427
  the 1920s, and it is what is happening in certain African countries today. It is hardly a rôle for us. Our rôle is that of innovation. I am disturbed at this concentration on what other people are doing and why they are buying rather than on what we ourselves should be doing.
  Mr. Harold Lever: First, let me say with unmistakable clarity that the purpose of the Clause is to allow the Government to provide information to our manufacturers of the size and nature of certain manufactured imports, with the intent that those manufacturers, being apprised of the larger-scale imports of manufactures, shall be alerted with precision to the nature of demand which exists at home which they might well satisfy in many cases by their own efforts and their own production.
  It is not, of course, the Government's intention to pursue this in detailed minute quantities, but where there is a major scale of imported goods which manufacturers believe that they can replace by home production, or where they can make a contribution to replacing by home production, it is well that they should have at their disposal the kind of information concerning the nature of imports that is available in most other countries and which alerts and apprises domestic manufacturers of the areas where the market for their own products might be extended.
  There is nothing shameful or backward in this. There is nothing here in terms of talking of copying and imitating backward nations. Many hon. Members would be well advised not to adopt patronising expressions about the industrial production and habits of countries like Japan. There is much that we might learn from other countries.
  Mr. Sheldon: I referred to Japan in the 1920s.
  Mrs. Thatcher: As the Joint Under-Secretary of State has referred to Japan, may I remind him that in the last five years, although our imports of manufactures have increased by 50 per cent., Japan's have increased by 100 per cent.?
  Mr. Lever: This is not a matter of reducing the total imports of this country.
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  It is a matter of alerting our own manufacturers to possible markets which are being satisfied, in some cases unnecessarily, by imports of foreign manufactures which we would seek to replace, so far as reasonably and competitively can be achieved, by our own manufactures.
  There is no mollycoddling of British manufacturers. There is no question of giving them an improper preference. They will have to fight for their markets. We are arming them in the fight with information which is available in almost every other country in the world. It is information which will enable the British manufacturer to conduct his battle for the domestic market with the best possible knowledge of what is being imported into the country. That is not improper, undesirable or protectionist, and I cannot see why the hon. Members for Oswestry (Mr. Biffen) and Finchley (Mrs. Thatcher) are so anxious that British manufacturers should be deprived of the information.
  Information will be given to them, and nothing else. It is quite ill-advised to suggest that the response of British manufacturing industry to full statistical information of this kind will be to run bleating and moaning to the Board of Trade for further protection. That is an unfair inference, and I am sad to find the Opposition Front Bench so ready to imply that there will be such an unsatisfactory reaction from British industry if we provide them with more information of this kind.
  At any rate, British manufacturers can be satisfied that, whatever lack of confidence some hon. Members opposite have about their reaction to getting fuller information on what is selling in the way of imports, this Government are confident that the provision of this information will add to the efforts and zeal of British manufacturing industry to play a full part in competing for its own domestic market. I do not know why the British should think that there is something shameful or hangdog in encouraging their manufacturers to supply their own domestic market with manufactured goods in competitive conditions.
  We have heard a number of conflicting criticisms. The hon. Member for Oswestry thinks that we go too far, and then implies that the information which

  429
  we produce will be of no use because we do not intend to breach confidentiality by giving prices of goods or names of importers to British manufacturers. The point is that they must find these facts out for themselves in the ordinary course of commerce, but there is no reason why this perfectly proper information should not be available to them for the purpose of encouraging them to make their maximum effort to supply the domestic market in manufactured goods from their own manufacturing capacity.
  It is a perfectly legitimate objective. It is not in conflict with our international obligations or with our pride. It is very much in the interests of the economy of the country that our manufacturers should be successful, and that we give them all proper and reasonable aid, purely by way of information, to support those efforts.
  Question put and agreed to.
  Clause ordered to stand part of the Bill.
  Mr. Callaghan: I beg to move,
  That the Chairman do report Progress and ask leave to sit again.
  It is nearly midnight, and we have had a long day. The House expressed itself quite clearly about our arrangements, agreeing that the Finance Bill should be regarded as falling within the compass of an ordinary day's business. We have gone well over the top of that. I confess that I had hoped that we should have made more progress, but there it is. It is a Thursday night, and, therefore, I hope that the Committee will accept this Motion.
  Mr. Iain Macleod: This is a rather unusual state of affairs. Normally these Motions are moved by agreement. I make it quite clear that there is no agreement of any sort here. Naturally I do not advise the Committee to reject the Motion. If the Chancellor wished to report Progress at 3.45 in the afternoon I would accept a Motion to that effect, but the right hon. Gentleman's notion of progress seems very odd.
  I make no secret of the fact that no more Divisions are likely to be called from this side of the Committee. A number of drafting Amendments—little more than that—lie ahead of us, and we could have made progress and reached, as we all try to do on these occasions, a real
  430
  natural break, which, of course, might have been the big debates on Income Tax and Surtax which lie ahead.
  The Chancellor may say that if these are trifling points—perhaps not trifling points, but drafting ones—they can be taken quickly next week. I should have thought that he had too much experience of the House to suggest that that is possible. Next week, when my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) comes back refreshed after a weekend's sleep, and my hon. Friends return from Yeovil and South Worcestershire, these points, which could easily be dealt with at this time of night, could take very much longer to deal with.
  However, if the right hon. Gentleman wishes us to adjust to this pace, who am I to object to it? We note that he thinks a day's work is three Clauses of the Finance Bill. There are 47 Clauses in the Bill, and if the Chancellor thinks it appropriate we can occupy a suitable amount of time, but I seriously suggest that this is a mistake. This is a very unusual way of doing things, because it is normally the Opposition who want to go home and the Government who feel that we should push forward a little. I think that in order to save three-quarters of an hour tonight he will lose a day on the Bill.
  If the right hon. Gentleman wants to handle the Finance Bill in that way, who am I to stop him? I think, however, that he is making a very serious mistake in treating the Committee in this way and treating the Opposition in this way at the end of the first day. I do not suggest that we should carry on this debate. We can accept the Motion and go home, but I regard this as a sad start to the Committee stage of the Finance Bill.
  Mr. Callaghan: I do not regard three Clauses as a satisfactory day's work. What I am taking into account is what the House itself thinks to be a satisfactory day's work. The House believes, and has so expressed itself in a Motion, that sitting from 3.30 to 10 or 11 at night is a satisfactory day's work. We have sat until midnight, and in the light of that direct expression of the House I think that we have done a satisfactory day's work. It is not the number of Clauses which has been covered.

  431
  We are going to be in some difficulty about this. I do not want to break any confidences, but there is no agreement between the right hon. Gentleman and myself about the conduct of the Finance Bill. There is a Motion which has been passed by the House which might lead one to think I should have endeavoured to obtain it, but I have not done so. I have understood that the Opposition and ourselves will operate, without agreement, within the general basis of the Motion passed by the House, namely, that we should expect to finish somewhere between 10 o'clock and midnight every night. That is what I had understood was the Opposition's view, and I am operating completely within that agreement.
  It is now two minutes to midnight. If the right hon. Gentleman really believes that these Amendments, which have yet to be moved—and there are four or five of them—can all be covered within a quarter of an hour—
  Mr. Iain Macleod: I said three-quarters of an hour.
  Mr. Callaghan: Three-quarters of an hour from now would go well beyond what I understood to be the general agreement of the House, namely, that the House did not want to finish at a quarter to one but wanted the Finance Bill to be regarded as an ordinary Measure. I am trying to operate within the wish of the majority of the House, and I suggest that the right hon. Gentleman should reconsider his position in the matter.
  There is no doubt that we can make very rapid progress on these Amendments. They should be given no greater and no less consideration whether they
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  come at the beginning of the day or at the end of the day. I understand that the right hon. Gentleman wanted to start the Income Tax debate. I certainly was not out to prevent him starting on that. I always think it is the right of the Opposition, and I always took it myself, to adjust the Clauses so that we started on the ones on which we wanted to start. But the concomitant of that was the cooperation of hon. Members to ensure that we got through the Clauses broadly agreed within a reasonable period of time on the previous day. We cannot have it both ways. On this I am operating on the general basis of the understanding certainly expressed by the House, and the right hon. Gentleman ought to reconsider his position.
  Question put and agreed to.
  Committee report Progress; to sit again this day.

  PARLIAMENTARY COMMISSIONER FOR ADMINISTRATION
  Mr. Antony Buck, Mr. Charles Fletcher-Cooke, Mr. Douglas Houghton, Mr. George Lawson, Mr. Kenneth Lomas, Mr. Alexander Lyon, Mrs. Margaret McKay, Sir Hugh Munro-Lucas-Tooth, Mr. Arthur Probert, Dame Irene Ward, and Dr. Winstanley to be Members of the Committee:
  Five to be the Quorum.—[Mr. Whitlock.]

  ADJOURNMENT
  Resolved, That this House do now adjourn.—[Mr. Harold Walker.]
  Adjourned accordingly at two minutes past Twelve o'clock.

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Preamble
The House met at three of the clock, The Lord Chancellor on the Woolsack.
Prayers—Read by the Lord Bishop of Ripon

HOSPITAL WAITING LISTS
3.6 p.m.
Lord ST. HELENS: 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 studies are being made with a view to reducing the average length of time spent by patients in hospital so as to speed up the clearance of surgical waiting lists.]
The PARLIAMENTARY UNDERSECRETARY of STATE for COMMONWEALTH AFFAIRS (Lord Beswick): My Lords, a joint Working Party of the Ministry of Health and the Joint Consultants' Committee on the organisation of medical work in hospitals is studying these questions among others. Studies on various aspects are also being made by a number of institutions, including universities.
Lord ST. HELENS: My Lords, while thanking the Minister for his reply, may I ask whether he is aware that my Question was based on a Press report of a speech which was made to the B.M.A. by Dr. Robert Logan, of Manchester University? Is the Minister further aware that in that speech Dr. Logan claimed that dramatic reductions in surgical waiting lists can be made by comparatively small reductions in the turnover of patients at a hospital? May I also ask whether Her Majesty's Government have any concrete plans for speeding up the turnover of surgical patients?
Lord BESWICK: My Lords, I was not aware of the reason for, or the origin of,
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the noble Lord's Question, but I am aware that the Medical Care Unit of Manchester University is among the organisations which are carrying out research in this matter. I shall look at exactly what the doctor said, but I should be very doubtful indeed whether we can get anything spectacular from this development; although, as the noble Lord will know, the trend is towards a shorter stay.
LORD ST. HELENS: My Lords, in thanking the noble Lord for what he has said, may I say that I will let him have a copy of the Press report?
BARONESS SUMMERSKILL: My Lords, as women in childbirth are being discharged from hospital 24 hours after giving birth, may I ask my noble friend not to apply this to the process of obstetrics, because I do not think that any speeding-up process can take place there?
LORD BESWICK: My Lords, I am surprised to hear that the facts are as stated by my noble friend. The average figure which I gave on a previous occasion in this House for a stay after childbirth was, I think, ten days. Certainly I agree with my noble friend that in our endeavour to cut costs we do not want to endanger the condition of the patient.
BARONESS SUMMERSKILL: My Lords, may I ask my noble friend to examine the conditions in, for example, the North-East?
LORD BESWICK: My Lords, certainly I will look at them.

HONG KONG
LORD SHEPHERD: My Lords, my noble friend Lord Beswick will be making a Statement on Hong Kong at a convenient moment after 3.30 p.m.

PUBLIC RECORDS BILL [H.L.]
House in Committee (according to Order).
House resumed; Bill reported without amendment; Report received.

THE MIDDLE EAST
3.10 p.m.
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (LORD CHALFONT)THE MINISTER OF STATE FOR FOREIGN AFFAIRS (LORD CHALFONT) rose to move, That this House takes note of the situation in the Middle East. The noble Lord said: My Lords, I beg leave to move the Motion which stands in my name on the Order Paper. When the State of Israel was born in May, 1948, its first Prime Minister, David Ben Gurion, said:
"We extend our hand in peace and neighbourliness to all the neighbouring States and their peoples, and invite them to co-operate with the independent Jewish nation for the common good of all."
On the same day, at a Press Conference, the Secretary-General of the Arab League said:
"This will be a war of extermination and momentous massacre which will be spoken of like the Mongolian massacres and the crusades."
I do not quote these statements to suggest that they represent two easily identifiable political attitudes—that would be naive—but simply to say that it would be difficult to imagine a less auspicious setting for the launching of a new State and of a new phase in the turbulent affairs of the Middle East, and to suggest that it can really be no surprise to any of us that to-day the whole peace of the world is threatened, the whole fragile structure of international relations is being shaken to its foundations, by this explosive confrontation between Israel and the Arab States.
There is little to be gained now by raking over the débris of the old argument about the end of the Palestine mandate and the creation of the State of Israel. In those days I was in the Middle East as an infantry soldier, and I know something at first hand of the bitterness and hatred that poisoned the air in those days in Cairo and in Tel Aviv. But the fact is that the State of Israel exists; and it is a fact, too, that the Arab/Israel conflict is one of the most intractable problems of our time. In 1956 and early 1957 it gave rise to the traumatic events of the Suez operation and the international crisis that flared up around it. We have in fact lived with a time bomb ticking away for twenty years in that crucial triangle which lies between Europe, Africa and Asia.
I remember being told in 1948, when I was discussing the events in Palestine, that they were historically inevitable. A distinguished foreign statesman supported his view with a rather brutal quotation:
"Force is the midwife of every old society pregnant with a new one."
As this doctrine still seems to inform a great deal of policy and action in the Middle East, it is perhaps not irrelevant to recall that that quotation is from the celebrated work entitled Capital by Karl Marx.
In the tense and difficult situation of the last ten years, one of the most encouraging factors until now has been the constructive role played by the United Nations. It was owing to the efforts of the United Nations and to the comparative effectiveness of its peacekeeping machinery in the area, that after the events of 1956 until about a year ago serious clashes on the borders between Israel and the Arab States were avoided.
The peacekeeping efforts of the United Nations were particularly successful on the frontier between Egypt and Israel. The establishment of the United Nations Force there brought calm to what had previously been a dangerous flash point, and the stationing of a United Nations detachment at the point where Egyptian guns had previously dominated the Straits of Aqaba was a material factor in obtaining Israeli agreement to withdraw her troops from Sinai in 1957. This agreement was given on the understanding that the United Nations post would remain, and on the basis of firm declarations that there would be free passage for the ships of all nations through the Gulf of Aqaba. On the Armistice Lines between Israel and Jordan and between Israel and Syria there were more incidents, but even there the observers of the United Nations Truce Supervisory Organisation played an important role in preventing these incidents getting out of hand.
Unfortunately, however, the relatively stable situation which existed on the frontiers between Israel and the Arab States has been eroded during the last year by the training, mainly in Syria, of Arab sabotage groups aiming at a popular liberation war within the frontiers of Israel. "War of liberation" is another familiar phrase. These groups of terrorists have conducted sabotage

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operations within Israel which have led on occasion to loss of life and damage to property. The Syrian Government, under whose supervision most of these attacks have been carried out, have denied responsibility for these Palestinian groups who, they claim, cannot be prevented from seeking to regain their former home in Palestine.
Much as we deplore these terrorists attacks, and much as we have sympathised with Israel's dilemma in confronting them, we have always made plain to the Israelis our view that retaliation by force is unwise and that it could have incalculable consequences. But the Government and the people of Israel may, I think, be forgiven for believing, with Burke, that there is a limit at which forbearance ceases to be a virtue; and the more so when last October the Israeli Government took to the Security Council a complaint about a raid in the North of Israel, and any hope of effective action by the Security Council to deal with the situation was frustrated by a Soviet veto. We could understand Israel's dissatisfaction at this situation, when the Soviet attitude made it quite impossible for the Security Council to function properly. But we do not consider that this justified the Israeli attack on the Jordanian village of Samu.
After a further spate of incidents on the Syria/Israel border, the Secretary-General of the United Nations appealed to both sides to meet in the Israel-Syria Mixed Armistice Commission which had been boycotted for many years by Israel. The Commission met but nothing effective was achieved, and after an incident in the demilitarised zone south of Lake Tiberius in early April Israel made a further retaliatory attack, this time by air against Syrian gun positions. This attack, although militarily successful, did not stop terrorist attacks, and in May the Prime Minister of Israel and other leaders gave a warning that if such attacks inspired from Syria continued a more severe retaliation would follow.
It may have been on account of these statements, and of misleading reports of an Israeli military build-up, that the United Arab Republic began to make large and ostentatious military moves. The criticism of the United Arab Republic for taking no action when the Israeli
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Air Force attacks on Syrian positions took place in April may also have played its part. Then on May 16 President Nasser demanded the withdrawal of the United Nations Force, which had so successfully maintained peace on the frontier between Egypt and Israel, and in the Gulf of Aqaba, since 1957.
We sympathise with the difficulties of the Secretary-General when he was confronted with this demand, and we can understand, too, the reluctance which he may have felt to expose members of the United Nations Force to unnecessary risks. Perhaps I may add that I have a great personal admiration, and indeed affection, for U Thant, whom I have come to know well in New York. He is a man dedicated to the cause of peace; a man to whom violence and war are almost painfully repugnant. But, having said that, I must also say that we very greatly regret the hasty withdrawal of the Force without further discussion in the United Nations. We regret also the effect which the sudden disappearance of this Force may have on the whole credibility of United Nations peacekeeping elsewhere in the world. The sudden removal of the United Nations Force meant not only that the screen on the U.A.R./Israel frontier was removed, with a consequently much greater risk of a local flare-up, but also that the way was clear for the Egyptians to occupy the positions overlooking the Gulf of Aqaba from which they had sought to control shipping there before 1956. This they proceeded to do, and President Nasser announced that he would prevent Israel flag ships and strategic cargoes in other ships from passing through the Straits of Tiran which lead into the Gulf of Aqaba.
This attempted reimposition by the United Arab Republic of a stranglehold on the Israel port of Eilat, which the Israelis had successfully fought to break in 1956, has produced a situation fraught with the gravest risks of war. In 1957 the Israel Government declared that they would regard interference with their shipping as an aggressive act entitling them to take measures of self-defence under Article 51 of the Charter of the United Nations. But this is a matter which concerns countries other than Israel. Her Majesty's Government regard the principle of free passage through the Straits of Tiran as well established under International Law. Our delegate

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to the General Assembly of the United Nations said in 1957:
"The Straits of Tiran must be regarded as an international waterway, through which the vessels of all nations have a right of passage.
"Her Majesty's Government will assert this right on behalf of all British shipping, and they are prepared to join with others to secure general recognition of this right."
Other delegates made similar statements. As your Lordships know, the Prime Minister reaffirmed Her Majesty's Government's position on this subject last week, and again last night in another place.
It is against the threatening background which I have outlined that Her Majesty's Government have had to consider what to do to secure a peaceful settlement for the problem of the Straits of Tiran and the Gulf of Aqaba. But, my Lords, as was once said in an entirely different context, determining a point of law is less important than restoring tranquillity. There is much more at stake here than a simple juridical argument about territorial waters. It goes without saying that we should like to see a peaceful, negotiated settlement, not only of the specific problem of freedom of passage into the Gulf of Aqaba but also of the wider tensions in the area. We are under no illusions about the difficulty of this task at a time when passions have become dangerously inflamed. In any efforts we make we certainly do not wish to take sides between Israel and the Arabs, nor between different Arab groups. Our aim is to see peace and stability in the Middle East in which orderly and fruitful development can go on in the interests of all the peoples of the area. We can understand Arab feelings about Palestine, and we should like to see a final settlement taking account of their interests. But we cannot ignore the fact that the State of Israel has existed for nearly twenty years; and, my Lords, her 2½ million people cannot simply be blotted from the map.
We believe that in this difficult situation the United Nations has a most important part to play. As I have said, the United Nations Force made a most important contribution to keeping the peace for ten years, and we now have to look for some alternative way of bringing the United Nations effectively into the Arab/Israel situation. We welcomed the
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initiative of U Thant in going to Cairo, and we agree with him that what is now needed is a breathing space to allow the United Nations to work in a moderating and conciliatory way. The Secretary-General referred in his report to the need for all concerned to
"exercise special restraint, to forgo belligerence and to avoid all other actions which could increase tension";
and, as my right honourable friend the Foreign Secretary has made clear in another place, we should consider as acts of belligerence any unilateral act to close the Gulf of Aqaba or any acts of aggression committed by either side on the Israel/Arab border.
My Lords, there are many tasks which the United Nations might perform in the present situation. A reduction of forces at an early date on either side of the frontier between Israel and her Arab neighbours is desirable. There is an urgent need for some new kind of United Nations presence in the area. The Secretary-General might send to the area some prominent person on a conciliatory mission as his personal representative. These and other possible ideas and openings we shall pursue vigorously at the United Nations if we think they may lead to improved machinery for keeping the peace in the area. But as we cannot be certain of the outcome in New York, we have also been keeping in direct touch with other Governments, through our Ambassadors in their capitals, and on the crucial question of freedom of navigation through the Gulf of Aqaba we have been in the closest touch with other maritime countries which share with us a vital interest in the freedom of the seas.
As the Prime Minister reaffirmed recently, our position is that the Straits of Tiran must be regarded as an international waterway through which vessels of all nations have a right of passage. He also said:
"Her Majesty's Government will assert this right on behalf of all British shipping and is prepared to join with others to secure a general recognition of this right".
We are now discussing with other Governments which share our views on this right of free passage exactly what we and they can do together to assist and secure this right. We are consulting with these countries with a view to issuing a declara-

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tion that the Gulf of Aqaba is an international waterway through which the vessels of all nations have a right of passage. We believe that such a declaration would be conducive to restraint and would give us the time needed to find longer-term solutions.
We must, of course, face the fact that all these diplomatic initiatives may fail, and we shall consult with others concerned about the situation that will arise if that is the case. We hope, however, that the United Nations, or the declarations made by countries outside the framework of the United Nations, will be enough to secure the right of innocent passage to which we and all maritime nations attach such importance; and we shall use every diplomatic effort to this end.
In the last few weeks we have been reminded yet again of the precarious balance on which the peace of the Middle East has rested for the last ten years. In this area, where so many political, economic and strategic interests compete and coincide, where passionate nationalisms clash and where sophisticated armouries have been built up on either side, it is difficult to believe that fighting, once it starts, can be confined to the countries concerned. With armies mobilised in Israel and in the United Arab Republic and other Arab States, and with so much depending upon the advantages of striking first, the smallest incident could rapidly have the whole region in flames; and it is with this wider threat to peace in their mind that the Government have taken so grave a view of the present crisis.
My Lords, there is a more serious menace lurking just below the surface of this crisis. In the negotiations I have been engaged in over the last two and a half years to try to achieve a treaty to prevent the spread of nuclear weapons there is one theme that I have returned to again and again. It is that if the nuclear weapon spreads outside the main political confrontations of the world into areas of local conflict, the dangers of nuclear war will increase almost beyond calculation. I do not want to sound a note too self-consciously apocalyptic, but I would remind your Lordships' House that Israel is one of the most advanced countries in the world in terms of the development of its nuclear technology.
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Its nuclear reactor at Dimona is of the most modern type, and there is absolutely no doubt in the minds of our experts that Israel will be in a position to explode a nuclear device within a few years of taking the political decision to do so.
If this should happen let us be in no doubt that much will be violently and perhaps irrevocably changed. Apart from the effects on international relations as a whole and apart from the irretrievable damage that will be done to any prospect of serious disarmament, we should have the beginnings of a situation in the Middle East that would be infinitely more perilous than anything even in the present crisis. Israel and the Arab countries would be subjected to all the familiar pressures of nuclear confrontation—the instability, the arguments about preemptive strikes and counter-city strategies, and all the rest of the panoply and paraphernalia of nuclear weapons. Whatever one may say now about the inevitability of Great Power involvement in an Arab/Israel war, if nuclear weapons come into the picture there can be very little doubt that we would all be involved and that we might, what is more, be involved in nuclear war.
That is why, my Lords, it is important not simply to damp down the present crisis in the Middle East and leave its causes festering at the roots. We must tackle the basic causes of the disease and not just treat its symptoms. I do not pretend to offer any simple plan for this; but of one thing I am certain. We shall not solve the awful problems of the Middle East so long as it remains a cockpit for Great Power politics. The concept of pouring armaments into the area in some vague hope of preserving a balance of power is doomed to failure and disaster. And it is clear that the Great Powers on their own are reluctant to abandon this particular modern technique of wielding strategic influence. But unless they do abandon it, unless they are prepared to co-operate imaginatively within the framework of the United Nations, we should be under no illusion. The dangers will not go away even if we succeed now, this week or this month, in taking the fuses out of the explosive charge that lies across the Middle East. And next time, perhaps in months, perhaps in years—and there will be a next

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time—it may be that the wiser counsels that have prevailed on this occasion will be overwhelmed. There will be those who will argue, especially in Israel, that the problem can be permanently settled only by a sudden, paralysing military blow. And if there are nuclear weapons to be used, who can say with certainty that they will not be used?
This situation, my Lords, is a vital test for the United Nations and for the whole great experiment in international cooperation. Already there is bitter disappointment that the United Nations has failed to exert any decisive influence upon the course of events in Vietnam; there is dismay that the whole concept of the peacekeeping force has been put at risk by the withdrawal of the United Nations force from the Middle East; and if it now becomes clear that the solution to the desperate problems of the area must be sought outside the framework of the United Nations, another blow will have been dealt to the whole great idea of international co-operation and authority.
Those of us who still believe passionately, as I do, that the only real hope for a world of sanity and peace lies in the United Nations—imperfect and frustrating as its operations may sometimes be—will pray that somehow it will find the strength and the support to take the lead in bringing a lasting peace to the Middle East. It is in this spirit and with this aim that Her Majesty's Government continue to take their own share of the burden. I beg to move.
Moved, That this House takes note of the situation in the Middle East.—(Lord Chalfont.)
3.35 p.m.
LORD CARRINGTON: My Lords, no-one in this House having heard the noble Lord, Lord Chalfont, or having listened yesterday to the Foreign Secretary or the Prime Minister, will under-estimate the gravity of the situation in the Middle East and the dangers that may arise unless a settlement—and, as the noble Lord has just said, a permanent settlement—is found in the near future. I think the House will be grateful to the noble Lord opposite for the very careful way in which he introduced this Motion. As I think this is the first occasion since the House has resumed on which the noble Lord has
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made a speech, on behalf of those who sit on these Benches may I be allowed to wish him good fortune in the job he has just undertaken in connection with the Common Market negotiations.
My Lords, this crisis seems to have blown up rather suddenly; and one wonders why it should have happened at this particular moment. Perhaps we have had our heads in the sand over these last few years and have not sufficiently appreciated, or have not allowed ourselves to appreciate fully, the strength of feeling which exists in the Arab world about the very existence of Israel, and the determination and passion with which Israel, as a State, intends to defend what she has. No doubt the crisis could have come about at any time in the past ten years, but I should have thought that there was no doubt that the particular timing is not unconnected with the Soviet Union in the Middle East.
Over the last ten years the sympathy of Russia towards the Arab cause has been plain. It seems recently that this support has become rather more active and may well have been one of the factors which caused President Nasser to choose this moment. Russian motives are usually very logical, and the Russians may have decided that this is the right time to increase their influence in the Middle East. Perhaps, too, it is not unconnected with Vietnam and the hope that trouble in the Middle East may induce the Americans to take a softer line in Vietnam. Who knows? But we can hope that the Russians realise the dangers in what has been happening and can still decide before it is too late on a policy of restraint.
But however that may be, we are still left with the Arab-Israeli hostility which has existed since the formation of the State of Israel. It seems to me to be profitless to discuss whether or not the British Government were right or wrong in what they did in the post-war years, or to enter into legalistic arguments as to the exact status of Israel vis-à-vis the Arab countries. The fact remains that the State of Israel exists (and has existed for nearly twenty years) and has been recognised by the United Nations, and that some way of mediation and moderation must be found in order that she may continue to exist.
Naturally, one turns first of all to the United Nations. Here I

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must say that I agree with the noble Lord, Lord Chalfont—and I am sure that the House agrees also—that we have all been profoundly disappointed at the performance of the United Nations in the last fortnight or three weeks. It is very easy to criticise the Secretary-General. U Thant has a Herculean task. He has now, and has had, the, support of all of us who remember the notable speech that he made in the Palace of Westminster some months ago and the impression that he then made. No one should underestimate the difficulty of his position. Nevertheless, he undoubtedly took the wrong decision in withdrawing the United Nations Force from the Gaza Strip and from the position overlooking the Straits of Tiran.
Of course, all sorts of complications arise if a sovereign State does not wish to have United Nations troops on its soil. But, after all, the Government of Egypt did enter into an understanding with the United Nations on the establishment of this Force, and in the aide-mémoire which followed that agreement it stated:
"… that when exercising its sovereign rights"
that is, Egypt's sovereign rights—
"on any matter concerning the functioning of the United Nations Force it will be guided in good faith by its acceptance of the General Assembly resolution of 5th November."
Your Lordships will remember that that resolution referred to the need to secure and supervise the cessation of hostilities.
My Lords, the Secretary-General did not authorise the establishment of that Force, nor was he responsible for its continuance. It was set up under the United Peace procedure of the General Assembly, and before the Secretary-General agreed to the withdrawal there should certainly have been discussions in the General Assembly, for the Force was set up precisely to ensure that the situation which has now arisen should not arise. It was part of the settlement reached by both sides after the Suez affair, and I do not think that the members of the United Nations should be put in the position of having to accept the unilateral action of Egypt in a matter in which they have been so greatly concerned over the past ten years.
I very much agree with the Foreign Secretary, who said, in so many words, that action of this sort made a farce of
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the peace-keeping activities of the United Nations. Certainly it is a lesson which we should all learn for the future and must take to heart. As Mr. Heath said yesterday in another place, it might have the most serious repercussions in other parts of the world where United Nations forces are stationed, notably in Cyprus. The United Nations Force at Gaza and in the Straits of Tiran was a model, until recently, of how the United Nations could keep the peace, and it is sad indeed that it has ended—I hope that it has only temporarily ended—in this fashion.
But the most important problem, as the noble Lord, Lord Chalfont, indicated in his speech, seems to be the question of the Gulf of Aqaba and the right of access through the Straits of Tiran. Anybody who has been concerned with the problems of territorial waters and the rights of innocent passage—and I was concerned in some degree when I was First Lord of the Admiralty, though not nearly so much as my noble and learned friend, Lord Dilhorne—knows how thorny are the legal problems and pitfalls. In this case, however, certain things are abundantly clear. There can be no doubt as to what are the effects of closing the Gulf to Israel. She is deprived of the usual route for her oil supplies. I believe about 90 per cent. of those supplies come from the Gulf of Aqaba. For ten years Israel's shipping has used the Gulf of Aqaba and has done so under the auspices of the United Nations. The establishment of the United Nations Force in that area of itself makes plain that the United Nations considers the Straits an international waterway, and unless some settlement can be arrived at it is difficult to see how the Israelis can do absolutely nothing and submit to an alteration of a position which was guaranteed to them in the settlement of 1957. For it must be remembered that the Egyptians were prepared to agree to the establishment of the United Nations Force in the Straits of Tiran and consequently to the right of Israeli shipping to use the Straits; and President Nasser's declaration last week was clearly a breach of that agreement. I must say, my Lords, that for myself I think it says a great deal for the restraint and moderation of the Israelis that so far they have not taken any action other than to appeal to their friends to help them.

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We must also realise that there are other consequences, possibly far-reaching consequences, which may result from a tacit acceptance of the Egyptian action in closing the Straits. They go much further than the immediate problem of an Israeli-Egyptian conflict or clash, for to a very large extent we rely for our livelihood on the freedom of the seas. As a maritime country our right of passage in the international waterways of the world is vital to us. There are a number of other straits which in similar circumstances might be closed by the action of a single country if the 12-mile territorial rule were applied. The Sunda Straits are one example. There are many others.
This is a problem which simply cannot be ignored by the maritime countries of the world and we should seek, as I understand we are seeking, to get the United Nations to reaffirm the position as it was before President Nasser's action. For the last ten years the Straits have been accepted by the United Nations, and by Egypt, as an international waterway. This cannot be changed by the action of one country, and the United Nations should make it absolutely plain that there can be no tame acceptance of a fait accompli just because it is easier and less controversial. I was very glad to hear what the Foreign Secretary said yesterday in the House of Commons, that we would not be satisfied with an inequitable solution of this problem.
My Lords, it seems to me—and this too was said by the noble Lord, Lord Chalfont, though in different words—that unless the members of the United Nations apply the Charter of the United Nations fairly and without fear, that organisation itself will become weaker and weaker and more and more discredited. If a settlement of the kind outlined by the Government were to be achieved, that would do something to restore the rather tarnished reputation with which the United Nations has, so far, emerged from this crisis. As the noble Lord says, if this fails, the maritime nations should band together and do what the United Nations should have done in the name of the maritime nations of the world. Here again, I greatly welcome what the Prime Minister and the Foreign Secretary said yesterday.
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Of course it is right that we should consult our friends on what needs to be done if the United Nations fails to do it. This is surely prudent and proper, and I do not think that any of your Lordships would wish to press the Government further as to what exactly they would propose to do, and how they would act, at this particular moment. If we do not support the view expressed originally by Sir Alan Noble in 1957 and repeated by the Foreign Minister at the start of this crisis, it seems to me that British interests and the interests of all maritime nations will have suffered a considerable set-back. I do not know, but it may be that in the end—I very much hope not—it will be necessary to threaten force or to use force in some international arrangement.
I notice, my Lords, that we have an aircraft carrier in the Red Sea and an aircraft carrier in the Mediterranean. I would say only this, though I realise that it is not strictly relevant to this debate; that it becomes more and more noticeable as time goes on how, in every succeeding crisis, the first thing that any Government of whatever political complexion does is to ask the Minister of Defence, "Where are the Royal Navy aircraft carriers?". They are vital units which can support British policy. They are mobile airfields on which on every occasion the Government seek to rely; and I should not be a bit surprised, if and when the Government decide to leave Aden, if they find it necessary to support whatever Government they leave behind with airpower from the sea. I hope that the crises have done something, if nothing else, to make Ministers think again about their decision to let the Fleet Air Arm die. It was always a bad decision, and each succeeding crisis underlines it. Perhaps the events of the last few weeks may bring home, even to the most diehard opponents of naval power, that if the country is to exert any influence throughout the world, air power deployed from the sea is essential.
There is one other matter I should like to touch on and about which I think that something ought to be said. The noble Lord, Lord Chalfont, did say something about it. It concerns a letter printed in yesterday's Times by Mr. Alastair Buchan, in which I think he put a most important point. I do not know how near to becoming a nuclear Power

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Israel is. The noble Lord gave us to understand that a political decision on this had not been made. He may well be right—I do not know. But there can surely be no question that if Israel feels herself isolated, and if she feels that she has suffered a reverse of considerable magnitude, there will be an increasing temptation for her to develop nuclear weapons as a deterrent, and perhaps, in the last resort, for use. If she lets it be known that this is what she proposes to do the consequences may be catastrophic. For what will Egypt do? What will the Soviet Union do? And how will they react? What will happen to the nonproliferation agreement, for which the noble Lord, Lord Chalfont, has worked so laboriously? I very much hope that this aspect of the problem will be forcibly brought home to the United Nations, and that the possible consequences of inaction will be underlined, for it could be that out of this crisis the most dangerous result will be the proliferation of nuclear weapons. Should that happen, it would be a truly disastrous thing for the whole world.
To sum up, it seems to me that we are really faced with a decision whether or not to let a small country be snuffed out of existence by its neighbours. This is not to be pro-Arab or pro-Israeli. It seems to me that it is just to take a realistic view of the pattern of events in the world. None of us wishes to be other than friends with both Arabs and Israelis. We seek nothing from either, save friendship and trade. But if the United Nations allows Israel to be destroyed, what happens next? I think that a leading article in the Daily Mail yesterday spelt this out very clearly in saying that if the present situation was allowed to stand, Israel might well be in the position of Czechoslovakia in 1938. This, clearly, should not be allowed, and I entirely agree with what the Government are trying to do to prevent this happening.
Let us first of all try to persuade the United Nations to take the action which has been outlined over the Gulf of Aqaba and to restore the United Nations Force on the Gaza Strip—on both sides of it, if possible. If that fails, I think that the Government will be quite right to consult with other maritime Powers to make clear what we consider to be the important principles
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at stake in the Gulf of Aqaba. I am sure that we on this side of the House will do all that we can to help the Government in following this policy, which I believe to be in the best interests of Britain.
3.54 p.m.
LORD GLADWYN: My Lords, I am sure that we all greatly appreciated the grave, constructive and, I think, farsighted speech of the noble Lord, Lord Chalfont, who introduced this Motion. May I also extend my personal congratulations to him on his new appointment, because he is there embarking on a realm which is very dear to my own heart. May I say also that noble Lords on these Benches very much appreciated the speeches of the Foreign Secretary and the Prime Minister in another place yesterday, particularly their calm and rather cautious attitude towards the terrible problem which besets us now.
But I think that we must admit that the rôle of Britain in the present Middle Eastern crisis, though of course it is important, is not decisive. Perhaps it would have been more decisive if by this time he had succeeded in making in Western Europe some kind of entity which could have a policy of its own. I am sure it is in that direction that the noble Lord, Lord Chalfont, will be working in the months and years to come. But it is not so, and though, as I say, our rôle is important, we cannot delude ourselves in thinking that it is in any way decisive.
I suggest, in fact, that any peaceful settlement of this terrible dispute in the Middle East depends primarily on the relationship between the two super Powers, America and Russia—in other words that if it is going to be solved, it will have to be solved in accordance with the unwritten rules of the famous "balance of terror". The theory of this balance is that in areas where they are directly opposed to each other, where there is military confrontation, neither side does anything to provoke a military clash, whereas in areas where they both have interests but are not directly present militarily, they are, so it would appear, at liberty to pursue their own interests and promote those of their friends and allies only up to the point at which there is a real risk of their becoming directly involved themselves.

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So tar as the Middle East is concerned, it is an unfortunate fact that most of the Arabs have now chosen the Soviet Union as their ultimate protector, while the Israelis rightly look primarily to the United States, which, after all, was largely responsible for the setting up of the State of Israel. If, therefore, the game is to be played in accordance with the rules each of the super-Powers will see that there is a point beyond which it cannot legitimately go in furthering the interests of its own friends to the detriment of the friends of the other.
If one thing is certain, for instance, it is that should the Arabs attack Israel and show signs of wanting to push the Israelis into the sea, which in a sense is their declared intention, the United States would either have to intervene and give military aid to the hard-pressed Israelis or suffer a major defeat which would endanger American interests all over the world. Equally, if hostilities should break out, and the Israelis showed signs of chasing the Egyptians back to the Suez Canal, and beyond, the Russians would probably in the circumstances be forced to intervene and send their planes, materials and even troops—so-called "volunteers"—in order to maintain the position of the Egyptians. So if logic is any guide, it would seem that neither one super-Power nor the other can afford to see actual large-scale hostilities breaking out between Israel and her neighbours. For if this happens the situation might get out of hand, with the really dangerous consequences alluded to by both the noble Lords who have spoken.
It would also seem to be in accordance with the theory that if by any chance one side scores a heavy success at the expense of the other in one of these areas, it is legitimate for the protector of the side unfavourably affected to insist on its having some kind of compensating advantage with the object of maintaining the status quo, and preventing the spread of hostilities. The sudden advance of the Egyptians in Sinai, coupled with the immediate disbandment of the United Nations Emergency Force, in accordance with the wishes of the Secretary-General (which I may say I join with the two previous speakers in deploring), and, most importantly, the blocking of the Straits of Tiran which had been open to Israeli shipping
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since the settlement of 1957, has put Israel in a weak strategic position and has thus increased the danger of uncontrolled hostilities. Therefore it is here that something has to be done.
No doubt the Egyptians took action, as was suggested by the noble Lord, Lord Carrington, only after secret negotiations with the Russians—possibly when Mr. Gromyko was in Cairo at the beginning of April—and they must have considered very carefully their riposte to any move on the American side. I think it is very possible that they assumed that the moment was ripe for some successful Egyptian coup owing to American preoccupation with Vietnam. But it is most improbable that the Russians actually informed the Egyptians that they would risk war with the United States of America if the Americans, by any chance, did take some kind of forceful action on behalf of Israel as a result of the Egyptian moves. The Russians have, of course, implied that they might, and I am afraid it looks as if the suspicion that America will not take any effective action to support her protégé has resulted in the remarkable, though perhaps not very durable, reconciliation of King Hussein and President Nasser. If Nasser is really going to be allowed to raise the banner of the Holy War, obviously no Arab State can afford to be elsewhere than on the bandwagon.
So there is, I think, only one way to rectify this imbalance, and, as I see it, it is one which would be in accordance with the rules of this extraordinary game. It is for the Americans, in association no doubt with ourselves and any other maritime Power that can be induced to join us, to insist by one means or another on the opening of the Straits of Tiran to international shipping. Presumably they are at this moment so insisting with the Egyptians; and if they are, they should certainly enjoy, if they are not already enjoying, our full support. But if this diplomatic procedure does not succeed, then it should be clearly indicated—and in diplomacy it is always desirable to be clear on essential points—that the maritime Powers, with America at their head, would take such measures as are necessary to open the Straits by any means that seem good to them. For, I repeat, it is only if this is done that we

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shall have a chance of avoiding the outbreak of hostilities which would certainly be difficult to control, or, alternatively, the collapse of the State of Israel, which would imply a major victory for one super-Power over the other and a grave blow, therefore, to the balance of terror, and, in the long run, a real increase in the danger of general war.
It may be said that if they get to the point of issuing such an ultimatum, and still more of carrying it out, the Western Powers would be trespassing on the preserve of the United Nations. This is no doubt true in theory; but if anything has been quite clear since 1947 it is that in the event of a major confrontation between its most powerful members the world Organisation is really helpless, at any rate from the point of view of the preservation of peace. It will certainly have a role to play as an intermediary and as a body making for peace generally when such a clash is not absolutely manifest; that is to say, when it is disguised in some way or other. For instance, it can, with the consent of all concerned, put observers or non-combatant troops in a given area so as to hold the fort; and no doubt it will do this in the future. Of course, nothing I say should be taken as meaning that I am against the United Nations or suggesting that it is totally useless and we should not back it up. Naturally we back it up to the limit of our power, but we should recognise that in some defined circumstances it just cannot function. If indeed the confrontation really takes place—as it did over Cuba, or previously over Berlin—then I repeat that it can be only the super-Powers themselves who can deal with the crisis by employing the rules of this game of the balance of terror to which I have already alluded.
I hope your Lordships will forgive me these remarks of a rather theoretical nature, but I think it is necessary, when we consider the immediate crisis, to try to see the situation as a whole and the real reasons behind it. At any rate, the conclusion which I draw as to our immediate conduct in this dispute is that we should fully support any eventual American action designed to open the Straits of Tiran, supposing that negotiations have failed to do so. Maybe the Government should not say this now, but those who are not in the Government can, and I think they should. How exactly we, for our
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part, could help the Americans would seem to depend, in the first place, on the nature of any action which they may be contemplating if peaceful negotiations for the freeing of the Straits fail, and on the disposal of such units as we may have in the immediate neighbourhood. But obviously it is not the time or place to consider such matters this afternoon.
Two things would seem to stand out fairly prominently when such a move is under consideration. First, the United Nations itself is entirely unlikely to come up with any formula which would lead to a solution of the present dispute between Israel and her neighbours; and secondly, the longer the delay in bringing the issue of the freeing of the Straits to a head the more likely it will be that there will be some desperate action on the part of the Israelis. There is no doubt, therefore, to our way of thinking on these Benches, that though the Government should rightly be cautious, they should also be firm in expressing their point of view, at any rate in their dealings with the Americans and with any of the other maritime Powers involved. For though the situation is still very dangerous, there is no doubt room for a continuing diplomacy.
As I see it, for instance, it would be desirable for the Israelis, provided the Straits are effectively opened to shipping bound for Eilat, to agree to the exclusion of Israeli warships and of vessels actually flying the Israeli flag. There may also be other reasonable conditions which could be negotiated. It might well help if the Israelis could now agree to some kind of United Nations body—observers or whatever it might be—being stationed on their own territory.
More generally, I agree with what the noble Lord, Lord Chalfont, and indeed the noble Lord, Lord Carrington, said about the enormous danger of the nuclear element if things get out of control, even if not immediately. Unless we can find some way of arriving at a more constructive, peaceful solution than seems at present possible, that is something that will always be hanging over our heads.
But, as I see it, the maintenance of peace and the uninterrupted flow of oil supplies to the West depend primarily on the maintenance and operation of the

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balance of terror, which both the superPowers—though there have been some nerve-racking moments—have successfully operated up till now. In this process we can play a useful but in no way a determining part. It is still probable that if we all play our cards correctly the position of Israel, though no doubt weakened, will be preserved, while the present Arab bloc—many of whom really do not want to come under the influence of Communism—will be likely once again to disintegrate from a practical, if not from a theoretical, point of view.
In the long run, the idea of some balance of power in the Middle East as a whole probably still holds good, but the Arabs must be persuaded, in the first place, that Israel is not really a menace to them; and, in the second place, that even if they wanted to, they would not be allowed to push the Israelis into the sea. In human affairs we are admittedly often the victims of the irrational; but provided that we in the West—and that primarily means the Americans—stick firmly to the principle that the State of Israel must continue to exist and to trade in peace with the rest of the world, and do not lose our nerve, I believe we should avoid a general, or even a local war and emerge successfully from the present crisis.
4.10 p.m.
THE EARL OF AVON: My Lords, I should like to join with the other speakers in thanking the noble Lord who opened this debate for the lucidity of the account which he gave us, and also to congratulate him on his new activities. Unhappily, there cannot be any disagreement this afternoon in this House about the extreme gravity of the situation which we have to discuss. In these conditions, it seems to me, we have, all of us, a certain obligation; and if we have opinions about the present situation, and any counsel to offer, it is our duty to say so in this place and at this time. It is in that spirit that I propose to detain your Lordships for only a comparatively short time this afternoon.
Several reflections have been made, in the debate in another place yesterday and by my noble friend this afternoon, about the suddenness of the impact of the crisis in which we now find ourselves; and a variety of explanations have been given.
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One which my noble friend gave was the influence of Russia on the proceeding. That may well be so. But I think there is another reason, one which has perhaps not been attended to as it should have been over recent years; that is, the forgotten war, the terrible slaughter and devastation which have taken place in the Yemen over the last five years.
In this country, naturally enough, those hostilities have not been closely observed. But it is fair to say that their duration and their cost have been phenomenal, even by modern standards. I have seen figures—I do not know whether they are correct—that in what I may call the first phase of the hostilities, that is, up to the period of the armistice of 1965, there were something like 100,000 dead in the Yemen. Whether that be true or not, it is certain that the efforts of the United Nations, and even the terms of the armistice made between President Nasser and King Feisal, never came to fruition. And I think it not unfair to say that this was on account of the reluctance (shall we say?) of the Egyptian Government to reduce their forces at any time.
That fighting, and the cost of it, has had its effect throughout the Arab world; and I think it not at all unlikely that one of the influences which led to this revival of a strident anti-Israel call—which is what this really is—was the desire to some extent to escape from the tragedy of the Yemen. At least I think that may have been so. And if any of your Lordships is interested in what has happened there, may I say that I happened to read the other day a book by a distinguished Swedish General, General Von Horn, who, as your Lordships know, was commanding the United Nations forces there at one time. However that may be, that situation has also its effect for us.
Nobody so far this afternoon has mentioned Aden, and I do not want to go into the situation there at any length. I think I saw something Lord Shackleton said on his return which seemed to me very wise. I imagine—I do not ask, but I imagine—that the Government are considering the situation afresh in the light of recent developments in other parts of the Middle East. I can understand and share the wish that we should not be involved in a lasting commitment once a decision has been taken that at some date we have to withdraw. The question

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is whether we can find some way through which gives to Aden a fair chance of survival in freedom to run its own affairs, without at the same time landing us with an indefinite and, shall we say, unsatisfactory commitment. There are various possibilities, and I have no doubt that several of them are in the noble Lord's mind.
It has seemed to me that in the present situation it would not be unreasonable for us to guarantee against external interference for a fixed and definitely limited period, with the added proviso that the commitment would at once disappear the moment that all Egyptian forces were withdrawn from the Yemen. At least that is a possibility which, without injuring anybody, could assist to loosen up a situation which is so full of danger at the present time. I think there can be little doubt either way in our minds that the present situation would not have arisen in respect of Israel if these troops had not been in the Yemen for all this time, not for the immediate objective but in search of something much wider—that is, Aden and beyond.
Now, my Lords, I come to the actual immediate situation as it is now. We are told from time to time that it is very important to gain a period for a breathing space. I think that was mentioned this afternoon. But of course, unfortunately, the right moment for that exercise, with which I thoroughly agree, was before, and not after, the United Nations troops were withdrawn from the Middle East. The immense difficulty which the Governments now face is that the best defensive arrangement they have has disappeared overnight, as it were, and they are now told to conjure up something which will find a solution for a situation that ought never have been allowed to arise. I have no desire at all to join in criticism of the United Nations Secretary-General, but I must say that I do think it quite extraordinary that there was no summoning either of the Security Council or of the General Assembly—the latter, certainly—as I think there should have been, before this devastating decision—for such it was—was taken. But, that being so, what, unfortunately, we cannot escape is that, that decision having been taken, it cannot be put back overnight, and the Governments have to face far greater difficulties than would otherwise
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have been there. And it is no use trying to belittle now the consequences of that action and the Egyptian President's declaration about the Gulf of Aqaba.
What is evidently aimed at by the Egyptian Power now is not the question of their rights to their own territorial waters, but whether they can take some action which will finally strangle Israel. That is the issue, and we must not delude ourselves or get lost in very fine arguments about the rights in the international waters. My noble and learned friend Lord Dilhorne is going to talk with authority on that subject later. But I find it most astonishing to see our Russian friends announcing their support for the Egyptian doctrine in the Gulf of Aqaba. I remember in 1936 the very prolonged negotiations which we had in order to enable the Treaty of Montreux to be agreed, under which at this very moment Russian ships, not her peaceful merchant ships, but large, thumping warships, are passing through the Bosphorus and Dardanelles to the Mediterranean. That Russia, of all countries, should say that Israel is to blame for aggression because she complains when her right to free access to the ocean is denied to her seems to me the most extraordinary doctrine—an extravagant doctrine, shall we call it? If it were followed through in Russia's case, as she wants to follow it through in poor Israel's case, I do not suppose the Russians could ever come out of the Gulf of Finland at all; they would be bottled in there for ever. It just shows the lengths to which distortion can go in a desire to put somebody in the wrong. I would say that there is no reason in equity or in law why Israel should not enjoy exactly the same rights in the Gulf of Aqaba as the Russians enjoy in the Sea of Marmora, the Bosphorus and the Dardanelles to-day—the more so as Israel has been given this very definite undertaking which was mentioned by the right honourable gentleman at the beginning of his speech, and more particularly by the United States of America.
My Lords, the question that now arises —the difficult question which was broached by my noble friend just now—is what is to be done in the face of this deliberate threat to the life of Israel, couched in such menacing terms. I think there are certain things that we should remember: first, that Israel is, and has been for many

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years, a member of the United Nations, with all the rights and obligations that that membership entails. Incidentally, I think I am right in recalling that the Soviet Union was the first country to recognise Israel. However that may be, we have also to recall that the declaration to which I referred just now, about free passage in the Straits of Aqaba and Tiran, was publicly stated ten years ago, and was finally and firmly endorsed by the maritime Powers, who have therefore a special responsibility which they cannot escape, even if they should want to. Personally, I do not believe they want to escape that responsibility, because I agree with my noble friend that what is at stake here is so important for the future of world trade that it is inconceivable that a great maritime nation like ours should not feel a direct interest as well as an interest on behalf of Israel, for whom we engaged ourselves.
Obviously it is right that this state of affairs in the Gulf of Aqaba should be brought to the United Nations, and that every possible effort should be made to try to get agreement there, even though the prospects may be dim. I lay emphasis on this argument for another reason. There is another threat to Israel's life which is almost as important as the question of the Gulf of Aqaba, and that is the activity of the Arab Liberation, or Palestinian Liberation movements—whatever they are called—and the danger of the revival of these raids into Israel. That would be as important to Israel, and in certain circumstances more important, than the Gulf of Aqaba. Therefore, it is right that the United Nations should not only be seized of this, but should also continue to be seized of it in addition to whatever other steps ate taken.
Before I turn to the question of what is to be done, I should like to mention one argument which I know has to be met. We hear a great deal about the Palestinian refugees, and quite rightly so. It is a tragic problem, and it may be that neither Israel nor the Western Governments have done as much as they should in the past to try to help to solve this problem. Certainly large sums of money have been spent—we have spent large sums ourselves as has the United States of America—but when that has been said I think it is also true that the Arab
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States themselves might have done rather more on behalf of their Arab brothers than in fact they have done. There has been perhaps a little too much of the attitude of: "Well, this is something which ought not to have been done to us, but since it has been done to us we will keep it there as a grievance, if for no other reason". Although I feel there is power in that argument, I do not feel it is one which should cause us to consent to some injustice to Israel.
I now come to the question which I mentioned just now. If the Security Council cannot find a course to agree upon in respect of the Gulf of Aqaba—perhaps because of the Soviet veto or for some other reason—then as I understand it the right course, and the course which apparently the Government contemplate, would be to call a meeting of the maritime Powers and to determine there the course of action which ought to be followed to restore the Straits to free navigation once again. I was glad to hear from the noble Lord that contacts with the other maritime Powers are already under way against that eventuality. I am sure that is wise and necessary, because time is not on our side in this business.
We must remember the tremendous stress and strain to which Israel has been put in these circumstances. She has been asked, and I think rightly asked in these conditions, to hold her hand. Mobilisation for Israel, a small democratic country, is a much greater strain upon her in every sense than upon her wealthier and more numerous neighbours. So we are asking Israel to do something which we should not count upon being continued indefinitely. For my part, if the Government took counsel with the maritime Powers, I should be willing to support whatever action they and the United States of America and, I hope, some other maritime Powers, thought necessary in order to ensure that freedom of navigation is restored once again.
My Lords, the noble Lord who opened this debate made a reference to something which has also been very much in my mind in this present crisis, that is, the nuclear aspect. I think his warning was fully justified, but in it all—as I think he meant to mark, and certainly I feel—there is a warning for us. History does or does not repeat itself. I will be frank; I do not feel myself in the time of ten

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years ago, but very much in the 'thirties at the present time; and if we were to try to do as we did in the 'thirties in respect of Czechoslovakia, at the expense of Israel, we should deserve all we got. And all we should get would be the very nuclear danger to which the noble Lord referred. So while I endorse every word he said on that point, I think also it has a message for us all. Perhaps he meant it to have a message. That message is that not only must we do justice in this business, but that we must play our part in seeing that justice is done. Otherwise we shall suffer, as others will suffer, too. Perhaps that is a selfish argument, but it is one that works occasionally when others do not.
To me the most tragic feature of this affair is the declaration—as it were the attempt—to make a holy war out of an endeavour to exterminate these unfortunate Israeli people who have suffered more than any other race upon the earth in our lifetime. It is also (is it not?) a very grim commentary upon modern methods of propaganda and their power, if those methods know no scruple. It is terrible that it should be thought a Godly deed to butcher a whole people or to call by radio for genocide. Yet this is what is happening as we sit here in this House to-day.
Israel is a member of the United Nations, with a right to live. Israel cannot be deprived of that right. This is something which must never be allowed to happen. It is quite true, as the noble Lord said just now, that ours is not the greatest responsibility, still less an exclusive responsibility, but we must be ready to bear our full share and we must encourage others to do the same, so that this crime will not be perpetrated. There can be no free conscience for this country of ours otherwise.
4.29 p.m.
LORD ROWLEY: My Lords, I should like to commence by saying how much I agree with what the noble Earl said in his concluding sentences. Like him, I have paid a number of visits to Israel, and while I share the view expressed by the noble Lord the Leader of the Opposition that in these matters we are both pro-Israel and pro-Arab in the sense that we are pro-peace, I think it would be a crime against humanity if the United
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Nations (and when I talk about the United Nations I do not mean as an organisation, but as an association of 120 nations, practically every nation in the world except China and one or two others) should be party to any policy which has the slogan, "Drive the Jews into the sea". The noble Earl made some reference to the fact that the Jews have suffered possibly more than any other people in history. He and I served in the National Government during the war years, and we must, as we do, remember the stories that came through and were afterwards substantiated which showed that something like 4 million Jews had been slaughtered by Hitler and his minions. What has Israel done to justify any attempt being made to drive 2¾ million Jews, men, women and children, into the sea, even though it may be just a propaganda slogan?
The Prime Minister yesterday in his great speech—and I thought both he and the Foreign Secretary made speeches which indicate the statesmanlike approach which has characterised the actions of our Government at the present time—said that we are faced not with a state of war but with a state of confrontation; and that is perfectly true. We must not get too excited and too hysterical, or even too afraid of the fact that this confrontation exists. It does not necessarily mean war. We have been in a state of confrontation between the NATO Powers in the West and the Warsaw Pact Powers in the East for the past 18 years, and thank heavens we have not yet had war! It is very doubtful, in my opinion, whether the Arabs would be foolish enough to take the initiative against Israel.
I hope also that Israel does not make a mistake herself. She suffered great provocation in 1955–6. I remember visiting Israel in April, 1955, and through the courtesy of Mr. Ben Gurion, the then Israeli Prime Minister, being allowed to accompany a squadron of armoured cars forming part of the Jewish border patrol along a large section of the border between Israel and Jordan. I came back completely convinced that something had to be done to interpose a force between Israel on the one hand and the Arab States on the other. If I may be allowed to make a personal reference, I would say that I made a speech—and I think

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perhaps I was the first one to make it—in December, 1955, months before the Suez affair, in which I advocated that a United Nations police force should be deployed along the borders, but on both sides; and if I have any regrets to express about my friends in Israel I must be frank and say that I regret that they never agreed to the establishment of UNEF on their side of the border with the Arab States. President Nasser and the rest of them could have come to the Secretary-General and said, "We want you to take your forces away from our territory", but that would have had no effect upon the forces that would have been deployed on the Israel side of the border.
Be that as it may, when one realises the fantastic progress that has characterised the twenty years' existence of Israel one can only say, as I said a few moments ago, that it would be a crime against humanity, a calamity, for the eight or ten Arab States, with a total population of possibly 40 million, who are now ganged up against a small country of 3 million, to make any attempt to destroy that country. I agreed a great deal with what the noble Lord the Leader of the Opposition said, but I was sorry that he referred to a "tarnished" United Nations. I, like him and others, have known U Thant for a good many years. I have the greatest admiration for him. I think he is a man who is dedicated to the cause of international peace, and I regret that he seems to have been guilty of an error of judgement in being a party to responding to the demands of the Egyptian Government for the withdrawal of UNEF. I understand that he did consult the United Nations Emergency Force Advisory Council. I should like to ask the Minister who is to reply to this debate if this is so. Our Government is not of course responsible for, and maybe it is not a member of, the United Nations Emergency Force Advisory Council, but U Thant has stated in his report to the General Assembly that he actually consulted with that Advisory Council before he took his decision to withdraw the Emergency Force. That is an extraordinary position. It does not alter the consequences, but it does mean that U Thant did not take the decision entirely on his own without regard to any of the
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member States of the United Nations who were associated with him in the maintenance of this Force in Egypt.
The Prime Minister said yesterday that what was required was patient diplomacy, and I am bound to say I agree that that is much more than a platitude, because the alternative to patient diplomacy is to have a war. No-one wants war, unless of course in the last resort there is no alternative—for example, to force the Straits of Aqaba. I found myself in complete agreement with the noble Earl in his reference to Russia and the Treaty of Montreux. I am not sure the noble Earl did not play a considerable part in that conference; I believe he was Foreign Secretary at the time. I do not know whether the noble Viscount, Lord Dilhorne, is going to inform the House about the views expressed in Oppenheim's International Law. What does he say? He says that in the 18th century before Russia was a unified State it was not regarded as a littoral State in the Black Sea. Turkey completely ignored it and refused to permit Russian ships free access into or egress from the Black Sea through the Straits of the Bosphorus, the Dardanelles. Then, later on, when Russia became a littoral State, the position in International Law changed, and, as we know, various conventions were arrived at, which result today in the fact, as the noble Earl said, that Russian warships freely leave the Black Sea and go into the Mediterranean.
But surely this is not merely a legal point; it is not a point of theory. This is something that is fundamental to the rule of law; it is fundamental to the existence of the United Nations. The Charter of the United Nations, whether or not we consider it is impotent to-day, and in one sense it is impotent—I think the noble Marquess, Lord Salisbury, was one of those present at San Francisco and I believe he would agree with me—always contemplated that the United Nations organisation that was to be formed could operate effectively as a peace-keeping organisation only if there was co-operation and agreement between the four Great Powers. We have not got that. We were told by the noble Lord who opened the debate where the Soviet Union stands, and it was echoed by speakers from the other side. It is really inconceivable to me that the Soviet Union,

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with its historical background in relation to the Dardanelles Straits, should be supporting the Egyptian Government in relation to the Gulf of Aqaba. I was there in the port of Eilat myself in 1955, 12 years ago. Israel to-day is a littoral State of the Gulf of Aqaba, and therefore so far as International Law is concerned, in my opinion (I hope I carry the noble and learned Viscount with me), there can be no doubt that the Gulf of Aqaba and the Straits of Tiran leading into the Gulf constitute an international waterway, and that the Egyptian Government have no right to seal it off even from ships going to and from Israel.
One has to remember that the international position is a concern of the United Nations. I do not think it would help matters if I were to suggest that the proposed declaration of the maritime Powers which was referred to by the Foreign Secretary yesterday, and supported by the noble Earl this afternoon, should be delayed by referring to the International Court the legality of the act of the Egyptian Government, but I should like to see the declaration supplemented by such a reference. I see no reason why that should not be done. After all, if we expect Israel not to go to war, she is entitled to exercise her right to go to law; and while, from the realistic point of view, it may be that Israel cannot wait the weeks and months that may pass before the International Court can give either an advisory opinion or decision, the declaration that is proposed should not be delayed.
I would differ from the noble Earl—or perhaps add to what he said and to what my noble friend who opened the debate said—only by saying that I hope that the Soviet Union will be invited to any conference that is proposed to bring about this declaration of maritime Powers. Russia is vitally interested and, whether she likes Israel or not (I do not know whether she does; and in any case it is irrelevant), as a maritime Power she should be given the opportunity to participate in any such conference, and in the opportunity to sign a declaration such as the Government are considering. Whether that is likely to make much difference to the Soviet Government and to Communist Governments throughout the world I do not know. But certainly, if they are nothing else, they are realists, and may consider it to be in their interests
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to stand by the Arabs and not be associated with anything that will be opposed or disliked by the Arabs.
My Lords, the world is facing a difficult and complicated problem to-day. We must do everything we can to promote a United Nations presence in the Middle East. I should like to support the proposal of U Thant himself. He suggested, in his report to the General Assembly, that the Government of Israel should be invited to return to the Egyptian-Israeli Mixed Armistice Commission which for a good many years has been more or less boycotted by the Government of Israel. That, supplemented or augmented, could constitute a United Nations presence. It might not prevent the Arabs from launching their armies against Israel, if that is what they intend to do anyway—I do not know; no-one knows; they may not know themselves. But at any rate, it is an alternative to the withdrawal of the United Nations Emergency Force. May I remind noble Lords that the fact that the Emergency Force has been withdrawn from the Gaza Strip, together with the 40 Jugoslavs from the forts that overlook the Straits of Tiran, does not give the green light to the Arabs to make war, nor does it give the green light to the Israelis to make war. It merely brings us back to the position that there is no United Nations armed peace-keeping force in Egypt as there has been for the last ten years.
There are those who say that the United Nations is a tarnished organisation. I am sorry that that phrase was used. I do not agree that the United Nations is a tarnished organisation. It may be weakened; it may to some extent be impotent, for the reasons I have given. But it is not a tarnished organisation, and I hope that we do not accept the view that, because U Thant and the members of the advisory committee made an error of judgment, the United Nations Organisation itself has in some way become tarnished. After all, the United Nations has not one mind. It is not an entity; it is an agglomeration of 124 separate nations, eight or ten of whom are at the present time ranged on the other side to Israel. Is the U.N. to be blamed for what the eight or ten Arab States are doing, or what they may propose to do? No, my Lords. I hope that we shall agree that it must be the policy of our Government to

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strengthen the efforts of the Secretary-General, and those members of the General Assembly who want to prevent a conflagration, to see that Egypt and the other Arab States are invited with Israel—who I certainly hope will reverse this part of her policy—to take their place in the Mixed Armistice Commissions.
May I give one personal experience? In 1959 I was in Amman. I was talking to the then Prime Minister of Jordan and to his Foreign Minister, together with our own British Ambassador. I had just come through the Mendelbaum Gate, and I had five points given to me by Mr. Sharett, who was the then Israeli Foreign Minister. They were small points, because I was but a humble Back-Bencher. I had said to him, "Give me some points about which I can talk to the Arabs." When I started talking, the Prime Minister of Jordan said: "But Mr. Henderson, there is no such country as Israel. We do not recognise Israel's existence." I said: "Mr. Prime Minister, I have just come from there. I was the other side of Jerusalem 24 hours ago. I have spent a week in Israel, yet you tell me there is no such place." It is that fundamentalist Arab point of view which is causing, and is the background of, the problem we are facing to-day.
On the other hand, I also visited some of the refugee camps. There are 1½ million refugees in the Gaza Strip and in Jordan. Perhaps it is their own fault that they are, because had the Arabs not attacked Israel in 1947 and got the worst of it they might still have been residents of that great little country. But they are a problem and, as the noble Earl said—and I agree with him—more could have been done for them. But let us be fair to Israel. The Prime Minister of Israel has officially stated in the past that Israel would be prepared to provide at least £100 million to help resettle the refugees in these countries. Perhaps that sum is not sufficient, and it may be that it would be spurned by the Arabs. If there is to be a Holy War, no reason at all will influence them.
But, my Lords, that does not alter the fact, as the Prime Minister said last night, that in these circumstances we must follow a policy of patient diplomacy as an alternative to armed conflict. There is no conflict at the moment; there is con-
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frontation. But it is part of the problem that if the Gulf of Aqaba is not reopened not only will it cut the lifeline of Israel but the result, if there is war, will affect the fate and future of these 1½ million refugees.
I wish my noble friend Lord Chalfont well in his new responsibilities. I would say, in conclusion, that I do not remember in the House of Commons and in the House of Lords—the British Parliament—such a high standard of constructive approach to this very complicated world problem as has characterised the debates in both Houses yesterday and to-day. We can go forward together in the belief that we, as a nation, have a contribution to make in maintaining the peace of the world.
4.51 p.m.
LORD CACCIA: My Lords, I rise as an individual from these Cross Benches to lend such support as an individual can give to the aims, the strategy and the tactics which have been set forward yesterday by the Foreign Secretary and the Prime Minister in another place and by the noble Lord, Lord Chalfont, today in this House. After the leaders of Parties have spoken and given their support to the Government and, above all, after the speech of my former chief, Lord Avon, it would perhaps be quite sufficient if I were to leave it at that and sit down. If I do carry on briefly, it is to say that I hope the noble Lord, Lord Chalfont, will not be too disappointed if he cannot, at least in the near or foreseeable future, reach the wider settlements he so rightly said should be borne in mind. After all, there has been a Jewish problem for some 3,000 years, and perhaps it would be as imprudent as it might be arrogant for us to think that this should necessarily be resolved in any complete sense during our lifetimes. So if the worst dangers can be averted now, we should be grateful and at least partially satisfied. In addition, I should like to say a few things which may perhaps be easier for an individual to say who has no responsibility than it might be for a member of the Government.
We are met to take note of the situation in the Middle East. This situation, like all other situations, has its roots in long history, but let me say what I have to say without going back even to the Balfour Declaration and the various

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statements made at that time which have so unhappily added their bit to the confusion and conflicts which have since taken place. I would only ask what are the present elements which have made this potential go critical. The basic ingredients have been there for some years. Short of the annihilation of Israel, they will remain. I would say unequivocally a combination of two elements, Nasser and the Russians. Nasser alone was not enough. His Syrian experiment in federalism, the United Arab Republic, failed. His attempt to topple the regimes of Jordan and Saudi Arabia have so far been abortive. His Yemeni adventure has got bogged down.
But the scale of the present threat, when backed as he is by word and deed by the Soviet Union, is of a totally different order. True, the Russians have been involving themselves deeper and deeper with Nasser for some time. It started, as your Lordships will remember, in 1955, with the sale of arms and the purchase of cotton. These have gone on. But by now there is far more besides cotton—the Aswan dam and debts to it. There are a considerable number of Russian technicians in the Yemen, based on Sana, and there are reports of Russian naval facilities in the Red Sea, perhaps at Hodeida. I recognise that it may not be profitable for the Government to be too plain in public at this moment about these aspects, and I would not expect any details of the extent of Russian involvement. What is already common knowledge is quite enough, and it does not require any help from the C.I.A. to know that the Soviet Foreign Minister did not visit Nasser in March only to get away from the climate of Moscow at that time of the year.
What follows from this? I suggest one thing, and one thing inescapably. It is that if there is to be an outcome of the kind that Her Majesty's Government would regard as satisfactory in the terms of the careful words used by the Foreign Secretary yesterday in his speech in another place, our actions must have, and be known by the Russians to have, the full backing of the United States. Whether the United States Government will want to come out in the lead or not is a tactical question. But with Russian commitments of the kind already announced, this is the reality of power. I have great personal sympathy for President Johnson.
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So far as I know, he is the record-holder in the number of I.O.U.s he has had to pick up from previous Presidents. It was not he who started the Vietnam affair. This was started in the time of President Eisenhower and was carried to a further stage in the time of President Kennedy. This bill is a very considerable one already. Now there is the Middle East. There he is faced by commitments made in the time of President Eisenhower and these may now be of a particularly large order. He also has inherited from President Kennedy the commitments of the New Frontier, or, as President Johnson would say, the Great Society. That, unhappily for him, has had to be put off while these other bills come to maturity. But, like it or not, the American President cannot, in my view, avoid his responsibility for the commitments made towards Israel and towards the freedom of navigation in the Straits of Tiran.
Here I would say that it is not only the reality of power that makes this so but United States actions and abstentions in the past. There was a period when France and we could have made ourselves principally responsible in this area. At that period the United States Government preferred to walk, like a cat, alone. The final epitome of this attitude was when Mr. Foster Dulles, giving evidence in public on Capitol Hill, said that if things came to a show-down he would prefer not to have a British soldier at his right or a French at his left. But Mr. Dulles changed his view shortly afterwards, and the United States and ourselves joined in a successful operation in the Lebanon and in Jordan. Whatever the rights and wrongs of the past; whatever those of us who, unlike myself, disagree with American policies elsewhere may think; however much this may confirm President de Gaulle in his view of our attitude, I would urge the Government to be ready to encourage and support the Americans to assume this responsibility which is theirs whether they or we like it or not.
Having said this, I, of course, accept that the Government are right to try first to work through the United Nations—indeed, to repair the United Nations, who have become, as Sir Alec Douglas-Home said yesterday, the first casualty in this

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crisis. They are right to work also outside the United Nations, and in particular to try to get the support of the maritime Powers for a declaration of the freedom of the Straits of Tiran and, if need be, for effective physical means of ensuring this freedom. They are doubly right in trying to secure that this responsibility should be shared as widely as possible. But if, in the end, the choice is for us to back the United States alone in this or back out, I would myself urge that we should stand up and be counted in. We cannot pretend that we have no forces in this area for such a supporting role. We have forces in Cyprus, Aden, Bahrein, Shajah and at sea. This would be a question of will. In this I would partially disagree with the emphasis which the noble Lord, Lord Gladwyn, gave to our note. Otherwise I hope that your Lordships would note this afternoon that you have been addressed by two diplomats who, for once, sing in unison.
Let me end as I began, by adding my support to the Government in the priorities which they have laid down and in the strategy and tactics which they have so far followed. I hope they will be fortified by the support which they received in the other place yesterday and in your Lordships' House so far to-day. On that I would join entirely in what the noble Lord, Lord Rowley, has just said to your Lordships. However, in these affairs there may come a moment of critical decision and commitment where courage and clarity are demanded, and these qualities are particularly necessary in dealing with the Russians.
Here, in so far as it is proper to talk to your Lordships with history present to our recollection, I should have thought the two outstanding examples of when disaster was averted by clarity and determination were, in the last century by Lord Castlereagh, and in this century by President Kennedy. It is for that reason that I have detained your Lordships with my view of the basic responsibility of the United States, for reasons of history and the reality of power. It is for that reason that I hope, if the crunch comes and all the steps now rightly being taken by the Government are insufficient, we will be ready to support such action as the United States may take to maintain freedom of
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navigation through the Straits, and prevent the annihilation of a fellow member of the United Nations.
5.2 p.m.
THE MARQUESS OF SALISBURY: My Lords, while all of us, I am sure, welcome the constructive suggestions which have been made in to-day's debate, those of us who are taking part in it cannot, I am afraid, hope to add anything very new to your Lordships' consideration of the difficult issues with which we are all faced. The importance of this debate, as I see it, is to show the virtual unanimity which at present exists in this country with regard to the critical situation which has arisen in the Middle East.
We meet to-day in circumstances anxious, indeed grave, but not unfamiliar. For we, whose lot it has been to he born in the present century, have come to recognise the technique of ambitious dictators who wish to extend their power and prestige and, possibly, their territories. It seems to follow a standardised pattern and this, I should have thought, could be regarded as a classic case. First, the dictator in question accuses some other nation, which very likely has no such intentions, of being a potential aggressor and danger to peace. Next, he himself takes some action of an aggressive character—some action which perhaps he has long wished to take—on the pretext that it is necessary to restrain the other nation from a breach of the peace. Then he makes a spectacular announcement that the last thing he wants is to start a war, but that if that other country takes any step to restore the status quo, which he has himself upset, even though that status quo may have the support of international law, he will regard that as a casus belli.
The present crisis, I suggest, is a very good example of that technique. There is no reason, so far as I know, to suppose that Israel has wished in any way to disturb the status quo. She was not mobilising her forces or taking any of the steps necessary for a country contemplating war: and why should she? She is a satisfied country, whose energies have been of recent years wholly devoted to developing her own territories. I am not suggesting that the very existence of Israel as a State in the Middle East has not been a constant irritant to her Arab neighbours. We all know it has.

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But that does not mean, I repeat, that Israel has herself been contemplating any breach of the peace.
On the other hand, there is no doubt that if one were an ambitious dictator aspiring to leadership of the Arab world, Palestine is by far the best issue on which one could possibly hope to rally the united support of that world. That is no doubt the main reason for the action which President Nasser has taken. He has chosen it and the moment for it with considerable acumen, for not only has he judged correctly that Palestine was the only issue on which he could count on receiving the united support of the Arabs, but he knew that he could also pretty certainly count on the support of Russia, whose traditional policy it has always been, from long before the arrival of the Soviets, to fish in troubled water, and who in the present case, as has been pointed out in this debate, has the additional inducement that trouble in the Middle East is likely to prove a serious embarrassment to the United States, while her forces are pinned down in the Far East.
It is clearly a situation which Egypt and the Russians in conjunction have every interest in exploiting, and now, having marshalled their troops, they are beginning to disclose their whole plan. They are, in effect, as the Prime Minister said yesterday in another place, and I think the noble Earl, Lord Avon, re-emphasised it to-day, preaching a kind of holy war. Israel is being denounced not only as a potential aggressor, but also as a State whose very existence is an offence to humanity and which must be stamped out of existence. That is the formidable position which is now emerging.
Whether or not this is a gigantic bluff, we do not know. But I feel that the time has very evidently come when we must make up our minds to state clearly that we (and by "we"—and here I fully agree with what the noble Lord, Lord Caccia, has said—I mean not only us but the United States who are to-day the greatest power in upholding international law) intend to stand firm in the face of what, however wrapped up, can only he regarded as a deliberate snapping of fingers at that law. As I understand it, this is in effect what the Foreign Secretary said in another place yesterday,
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when he indicated that it must be British policy that the ships of all nations should continued to use the Gulf of Aqaba as an international waterway, whatever the Egyptians may have said. That was re-emphasised by Lord Chalfont this afternoon.
I am sure that all of us in this House, whatever may be our general views on Government policy, have welcomed that statement most warmly. For make no mistake, my Lords, if President Nasser is allowed to get away with this we shall never have a moment's peace again, any more than we did with Hitler before the War. I know there are those who would say, as they did at the time of another similar crisis not long ago, to which I do not intend to refer this afternoon, that this is not a matter on which we ought to take an individual line of our own: it is a matter for the United Nations, and we should act only in accordance with the decisions of the United Nations. And I am sure we all share the hope of the Government that, in the words of the noble Lord, Lord Chalfont, the United Nations will act as a moderating influence. But I am afraid—and I must say this—that I do not feel we ought to pin too much faith on that institution. For it has become more and more obvious with every day that passes that the United Nations itself is split from top to bottom on this particular issue. There are already very evident indications of this; and the stark truth is—and I am afraid we must all face it—that the cleavage of view between those who broadly support the rule of international law and those who take the contrary view stretches right up into the Security Council itself. To leave this issue entirely to the United Nations therefore means only too probably that nothing will be done. In that event Nasser will get away with his aggression, and that will strike a far more deadly blow to the rule of law, upon which, above all, the survival of civilisation depends, than any action that we and the United States could take by ourselves in support of our own solemn obligations.
Surely, my Lords, there are very respectable precedents for steps to be taken by individual nations, or by groups of nations such as the maritime Powers, in support of the principles of the Charter and in anticipation of action by the

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United Nations; which groups, in the present case, as has been emphasised by the noble Lord, Lord Caccia, must include the United States. If I am told that there are risks in standing firm now, the truth is, my Lords, that there are risks whatever we do, and to fail to make a stand now will, I believe, only pave the way to even more dangerous situations later on. A world that had become a kind of stamping ground for the internationally lawless would not be worth living in at all.
That being the position, I beg we shall not let ourselves be led astray into dissociating ourselves from any firm line in this crisis. We in this country, as has already been said, are neither pro-Jew nor pro-Arab: we have many good friends in both camps. No doubt it would be very easy to find reasons for doing nothing. We could say, as some do, that the former state of war between Israel and Egypt has never technically been ended by a peace treaty, and that Egypt, therefore, by taking the steps she has, is only exercising her legitimate rights of belligerency. Or we could say, as I understand one speaker did in another place yesterday, that we are no longer a great Power and, that being so, there is no obligation on us to act as if we still were one.
My Lords, to my mind all such arguments ignore two hard, inescapable facts in the present situation. The first is that this is a clear case of threatened aggression against a small country. And the second is that it is to protect small countries from just such aggressions as this that the United Nations Organisation itself exists, and we, by our signature of the Charter, have, by that very fact, assumed an obligation to do all in our power to assist towards that end. So long as that is also the firm determination of the Government—and I understand it is—I hope that they will have the support of us all, in whatever part of the House we sit.
5.13 p.m.
BARONESS GAITSKELL: My Lords, I am very happy to follow the noble Marquess in this debate. I do not always agree with what he says, but to-day I have agreed with almost everything he has said; and the clarity of his mind and his staunchness have won my complete admiration.
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My Lords, if a documentary were to be made in, let us suppose, about a year's time, there would be four quick sequences, as has already been pointed out by many speakers. There was the sacking of the U.N. forces by Nasser; there was the closing of the Gulf of Aqaba to Israel; there is this talk of establishing the pre-Suez position; and now there is further talk of establishing the pre-1948 position. I do not wish to add further reproaches to those already made to U Thant for his very obedient response to Nasser's ordering the U.N. forces out. The Secretary-General is a man for whom I have a great respect and admiration but. because this act was so out of character for him, I wish to add only one thing. I wonder whether there were hidden pressures on him which we do not know about.
I do not want to mention Suez, with a kind of "I told you so" attitude. In fact, I think that our guilt about Suez should not now confuse the issue. And here may I say how very pleased I am to see the noble Earl, Lord Avon, in his place to-day, how much I enjoyed his speech and, again, how much I agreed with it. Nations and countries make mistakes—many of them—and at the moment Colonel Nasser is himself making a great many. If in many parts of the world a spirit of revenge is to reverse the status quo every ten years, I think that we can look forward to continuous wars and to crises always on the boil.
This also applies, I believe, to the question of the Palestinian refugees. If the European refugees—and I am thinking particularly of those who were found in the camps in Europe after the last war (although there is no doubt that the state of refugees anywhere always affects the conscience of the world)—had insisted that only repatriation would be considered, I think they would still be flooding the camps in Europe. So, because the Palestinian refugees made this condition, that nothing short of repatriation would satisfy them, what has happened is that Nasser has used this human misery as a completely political pawn, and has done nothing but inflame their feelings of revenge and hatred.
My Lords, this question of the Palestinian refugees could have been negotiated, as could the question of other refugees anywhere in the world. Means

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could have been found to settle them, and to compensate them. After all, the Israelis themselves took a great many Middle East refugees, Jewish refugees, and did very well by them. They also have a great many Arabs still living in Israel itself. It would not have been beyond human competence to discover a way of settling the Palestinian refugees. Cairo Radio has poured out streams of hatred and incitement to revenge, day in and day out, ever since Nasser has taken office. I hope that in the future Israel will try and try again to contribute something to the settlement of these Palestinian refugees. I have spoken to Israelis, and many of them are very willing to do this. They want to sit round a table and talk about these things.
So we have the unique position of a very small country surrounded, ringed round, by a great many Arab States making continuous propaganda for its destruction. Israel has no territorial ambitions; and whatever the problems between Israel and her neighbours, surely it is not impossible to negotiate them. As the Foreign Secretary said in another place, and as other speakers have said, Britain, France and America have tried not to take sides. I am not suggesting that self-interest has no part in this. We all have interests in the Middle East which we must look after and try to maintain. But we have tried, perhaps in an imperfect way, to maintain some kind of balance. There has been very little enmity towards Nasser since Suez, whereas Russia has gone back on her acceptance of the State of Israel and has come out plainly on one side—for the Arab States only. It is possible to analyse the reasons for this attitude of one of the greatest Powers in the world; but it is not so easy to understand it.
But, my Lords, all this is no surprise to me after my experience in the United Nations. During the last session there I saw the alignments emerging and crystallising. I watched the Soviet Union, my neighbours-but-one, cultivating the Arab delegation, whatever the issue, standing shoulder-to-shoulder in the voting line. One needed no crystal ball to count the votes of the Soviets and Arab States. I wish that some of the gullible Members of Parliament who have visited Nasser recently would go to the United Nations and learn some of the inter
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national facts of life. Recently some of them have returned to tell the British public, through television and radio, that Nasser wants only peace. They hear Cairo radio clamouring for the extermination of Israel; they hear Nasser say openly that he is not going to rest until he destroys Israel. Then he coos like a dove, although he speaks and acts like a hawk; but still they tell us that he wants peace.
My Lords, whichever way we look at this crisis, whatever be our views or emotions about the Arabs or the Israelis, there is one central issue: the survival of Israel. This is the problem on the plate of the big Powers to-day; and not only of America, Britain and France but also of Russia. Many speakers have said that time is not on our side in settling this crisis. One Arab State after another has signed on Nasser's dotted line. This is a great encouragement to Russia and we are all aware of the weight that the Soviet Union places on spheres of influence. No one in the Afro-Asian world attacks "spheres of influence"—after all, there are spheres of influence in Europe which were never there before the last war. All that they attack is colonialism. We should all think very seriously about the complete dominance of the Soviet Union in the Middle East.
The Government have come out plainly to maintain the Gulf of Aqaba as an international waterway and as essential to maintaining the well-being of Israel. We do not remember to-day that Israeli ships are not yet allowed through the Suez Canal. Many people remember my husband's bitter opposition to the Suez operation. What they do not remember is that while he thought the seizure of the Suez Canal did not justify the use of force, he firmly stated in his speech of August 2, 1956, that if there was anything which Nasser had done which did justify the use of force it was stopping the passage of Israeli ships through the Suez Canal.
My Lords, it is very difficult to get a feeling of reality about war, even when it is most imminent—and certainly it is very imminent today. The Israelis have behaved with unbelievable restraint. Nasser's prestige has increased. I believe that a preoccupation with prestige by ambitious nationalist leaders is a very dangerous thing, that it is always a

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stumbling block to negotiations and that it is always a spur to war. There is a real danger in prolonging the tension in Israel. Those who know the Israelis know also that they will, if need be, fight and die to the last man to defend their country. Personally I am not against Nasser; he is a very great nationalist leader. History will still tell whether he will be a very great man, because revenge and hatred is still the spur to all his actions to-day; and if we try to cleanse ourselves of all bias we must realise that there are times when this kind of exercise leaves a person—or a country—devoid of principle or judgment. Central to this debate to-day, and to the conscience of the world, is simply the survival of Israel.
3.25 p.m.
VISCOUNT DILHORNE: My Lords, just after the last war—so long ago that I expect most noble Lords, if not all, have forgotten about it—an Anglo-American Commission was appointed to consider and report on the problem of European Jewry and Palestine. I was a member of that Commission with Mr. Crossman—we were the only two Members of Parliament on it—and there were two things about it that I have never forgotten. One was what we saw, learned and heard about in Europe; the other—when we went round the Arab States—was the bitterness and hostility, to which the noble Lord, Lord Chalfont, referred in the course of what I thought was an excellent speech, evinced at that time towards the Jews in Palestine. It was clear then that every effort would be made by the Arabs, if they thought it could succeed, to prevent the establishment of Israel. That hostility has remained; and, unfortunately, over the years it has not grown less.
We on that Commission produced a unanimous Report (which was rather remarkable for an Anglo-American Report on those subjects) which I and Mr. Crossman signed—and that again was remarkable—and which made a number of recommendations. It was a package deal. I think I am accurately reflecting the views of all the Members of that Commission when I say that we thought that if those recommendations had been accepted and endorsed by the United States and the United Kingdom there would be
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a real chance of a peaceful settlement, despite the hostility then apparent. Our hopes were dashed. Only two of the recommendations were accepted by the United States, and that chance—which think has been until now the last chance—of a peaceful settlement disappeared.
I cannot believe now that the great problem to which the noble Lord, Lord Chalfont, referred—not just the Gulf of Aqaba but the relations between Israel and her neighbours in the Middle East—can improve unless and until we can get it recognised among those neighbours that the existence of Israel is a fact and that the existence of Israel is going to continue. No-one in these days, whatever views he may have had or now has, could possibly contemplate 2½ million people, no matter to what race they may belong, being driven into the sea or exterminated. I should like to throw out the thought to the noble Lord for consideration, if it has not been considered already, whether perchance there are not ways in which it can be brought home to the Arab nations—it may be through the statements of other States—that Israel is a fact and Israel will continue to be a fact. Once that is established, then I believe that there is a chance, in the course of years, that the hostility which now exists will diminish. One now feels that the Arabs, believing that Egypt and Russia are behind them, believing that Israel is alone, think the opportunity has come to achieve that which they have long sought to achieve. I hope the Arabs will remember that when we gave up the mandate their spirit of optimism over what they were then going to achieve was just about as great as it is to-day. Their hopes were not realised then; nor do I believe they will be to-day.
My Lords, at that time—it was in 1958—I also had the honour of leading the United Kingdom delegation to the Law of the Sea Conference convened under resolution of the General Assembly, and I should like to say something about that. The Conference was asked to consider, as a basis for its recommendations, a Report compiled by the International Law Commission. It was a purely legal Conference. We had not to consider any political questions. Our task was to formulate in the clearest possible language, and to embody in Conventions, what we believed to be the

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International Law in relation to the sea. My Lords, we did that; and of the five Conventions that we put forward the Convention on the Territorial Sea was signed by at least 52 nations, including the Soviet Union. That, to my mind, clearly means that the Soviet Union then thought—and that, as I say, was in 1958—that the Articles of that Convention embodied International Law.
I have heard it said in this debate that Egypt has claimed to extend her territorial sea over the Straits of Tiran and over the Gulf of Aqaba, as if that meant that ships of foreign States were denied passage through those straits and over that sea. I think there was an observation from my noble friend Lord Carrington which rather implied that. But, my Lords, that is not the case. If one looks at Article 14(1) of the Convention one sees in the clearest terms that ships of all States are entitled under International Law to enjoy the right of innocent passage through the territorial seas. And so Egypt, just by saying, "This is my territorial sea", has no right whatsoever to deprive the ships of any State of the right of innocent passage. Again, Article 15(1) goes on to emphasise that the coastal State must not hamper innocent passage through the territorial sea. I should have thought it was clear beyond doubt from those Articles that it would be a breach of International Law for Egypt to deny any State that right of passage; and the Soviet Union, as it signed that Convention, can hardly deny that this would be a breach of International Law.
My Lords, Article 14(4) states that passage is innocent "so long as it is not prejudicial to the peace, good order or security of the coastal State." Traffic to or from Eilat, or Aqaba, the carriage of goods, even the carriage of oil, really cannot be regarded as "prejudicial to the peace, good order or security" of Egypt. I think it right that I should call attention to the fact that under Article 16(3) a coastal State may—and I would emphasise these words—without discrimination among foreign ships, suspend temporarily the innocent passage of foreign ships if such suspension is essential for the protection of its security. However, I do not think it could possibly be contended that the prevention of this exercise of the right of innocent passage through these straits
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is essential for the protection of the security of Egypt. Indeed, it would be a breach of this Article if the ships of only one State were prevented from exercising that right.
I think I am right in saying that the noble Lord, Lord Gladwyn, suggested that a possible solution would be for an arrangement whereby ships of all States other than the State of Israel would be allowed through the Straits of Tiran. My Lords, I think that would be a deplorable and a wholly unacceptable solution to this problem. There is the right of suspension of this right of innocent passage, but that right cannot be suspended through straits which are used for international navigation between one part of the high seas and the territorial sea of another State. And the Straits of Tiran have been used just for this for many years. So, to my mind, it matters not whether Egypt's claim that these are part of her territorial waters is valid, and it makes no difference if you say that these are international waters. For, whichever it be, Egypt has no right under International Law, as I see it, and as declared by that Convention in 1958, to interfere with the right of innocent passage. She has no right to stop a ship or to search a ship, because that is hampering the right of innocent passage.
I thought it right, my Lords, to draw attention to these matters, to the terms of this Convention, to which, as I have said, the Soviet Union is a party. It may be asserted that Egypt is a belligerent and, as such, has the right to stop ships of her enemy and the right to search ships of all nations in various circumstances. I do not think that such a claim is in the least degree tenable. There has been no fighting between Egypt and Israel for ten years, and in the circumstances I think it ridiculous to assert that Egypt has the right of a belligerent.
There have been many statements made and threats uttered. The movement of troops right up to the Egyptian border is a clear threat and a serious threat to peace. There have been statements about closing the Gulf of Aqaba and the Straits of Tiran. My Lords, threats are one thing; action is another. I do not know whether those threats have yet been carried into action. I have seen one report—I do not know whether it is true—that a Liberian ship was turned back. I hope

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that those threats have not been turned into action, because until they have been, I think it gives a hope that we, the world at large, may be able to take action to prevent those breaches of International Law.
I support what the Government have proposed, but I should like (I am not sure whether I understood him aright) the declaration to which the noble Lord, Lord Chalfont, referred, regarding the Straits of Tiran, to be put into the most positive language—not that these are international waters; I do not think we used that phrase in the Convention: but a positive statement that there is, and always has been and will continue to be, the right of innocent passage for all ships of all States, including Israel, through the Gulf of Aqaba and through the Straits of Tiran. That is the statement I should like to see. And all those 52 States, including the Soviet Union, which signed that Convention ought, if the Convention means anything, to endorse such a declaration.
My Lords, I hope indeed that the efforts made by the noble Lord, with other Governments, will succeed. I do not think that we can just leave it to the United Nations. Nor do I think this a problem, as has been said in one or two speeches, which chiefly concerns the maritime nations. They are, of course, concerned, but this problem concerns every single nation, be it land-locked, be it maritime, which has any faith or belief in International Law. Here is a Convention which has been signed by all these States and which has never been challenged. If we allow this Convention to be breached, great injury will be done to the rule of law, and great harm will be done to the hopes of peace throughout the world. I hope that the noble Lord will make it clear beyond doubt that, whoever joins us and whoever does not join us, and however long it may take, it is the firm intention of this country to maintain the rule of law and to see that these rights of passage—rights under International Law which in my belief are conclusively established—are capable of being exercised.
5.41 p.m.
LORD SIEFF: My Lords, I stand before you in rather strange clothing, because I am not usually engaged in international politics. I am more conversant
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with productivity and human relations. But I should like to intervene in the discussion to-day because I visit Israel frequently, and before the war I visited Egypt frequently. I believe that before we can claim to know how best to prevent dire disaster falling upon us, we should examine the approach of Israel to the problem that confronts her. Every Israeli believes that Israel is a sovereign State, and is convinced that at no time has any other nation been threatened by its independence. Israel has steadily concentrated on the economic and social development of her population, which has now reached a total of 2½million. The majority of them came from Hitler's death camps, and a great many from Arab countries where they were being expropriated and oppressed.
The Israelis are threatened by the Arabs with complete annihilation. We may sit comfortably in London and contemplate the threat of annihilation because it is something which is at a distance, but the people who live in Israel are genuinely afraid of being swept off the face of the earth, as the Arab leaders have said so frequently. I have relatives there, and I know their fears and how they regard this danger which confronts them. The people of Israel, whether they are in khaki or in ordinary clothing, appear to me to be exceedingly brave. I can think of no case of a sovereign State such as Israel being eliminated by the threat of brute force exercised by its neighbours. I think your Lordships will agree that this is not a moment when the people who have to bear the brunt of threat and attack will be pleased to discuss with us the niceties of international law.
I believe that this should be regarded fundamentally as a moral question. I cannot think that we in Britain, along with many other countries, will stand idly by in the face of a situation where practically the whole population have brought to their minds pictures of what happened in the 'thirties in another country. Of course, we are facing international issues. Modern Israel and its inhabitants are facing their gravest hour since the Nazi holocaust. My words may sound exaggerated, but I am only repeating the threats of the leaders of the Arab peoples. It is difficult to foresee that the world may be witnessing the beginnings of a World War which can

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leave nothing but ghastly evils in its train, but Israel believes that the point has been reached where there is no time to lose.
One noble Lord said that the present crisis was not of Israel's making. But some elements of this crisis reside in the very existence of Israel, because its civilisation and cultural pattern differ somewhat from its neighbours. Surely Israel's approach to life and the development of its industry and agriculture are not sufficient reasons for threats of war or for invasion. It may be that many differences are found in the geographical, historical and political situation of modern Israel, but these elements alone need not have led to a progressive worsening of the situation between Arabs and Israelis. Behind them all was the determination and malevolence of President Nasser, bound on the destruction of Israel.
Ten years ago the Government of Israel agreed to withdraw from the unchallenged position which they held at the entrance of the Gulf of Aqaba. They did this because they had received a written undertaking from the Governments of the United States, Britain and France that the inviolability of the Gulf of Aqaba as an international waterway would be ensured by them and the United Nations. This undertaking has now been broken. One cannot accuse Israel of impatience if she presses on the three great Powers speedily to restore this situation, which Israel had abandoned at their request, when the very existence of Israel is being threatened by the closing of the Straits of Tiran. It is only natural that if they do not, then Israel may have no alternative but to do it herself, with all the terrible and, at this moment, unforeseen dangers.
It is interesting to note that during the debate on the Middle East in January, 1949, Sir Winston Churchill said:
"The coming into being of a Jewish State in Palestine is an event in world history to be viewed in the perspective, not of a generation or of a century, but in the perspective of a 1,000, 2,000 or even 3.000 years. That is a standard of temporal values or time values which seems very much out of accord with the perpetual click-clack of our rapidly changing moods and of the age in which we live."
It is this creation of history, the scene of so much valuable work and achievement, which is being threatened. As I have mentioned before, the threat is not a new one, and President Nasser, like another
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dictator before him, has already put his plans down in his book. Those of your Lordships who have read Nasser's book will have read the whole story. It is not accidently achieved; it planned in advance, just as Hitler's book planned in advance. The possibility present at that time in the case of Hitler was carried through to the bitter end, and had it not been for the strength, the morale and spirit of the Allies, it may have been successful, to the terror and dire distress of the whole civilised world.
My Lords, this state of unstable equilibrium that has existed, in so far as the Gulf of Aqaba is concerned, is now disturbed by the removal of the United Nations Force and the closure of the Gulf of Aqaba by the Egyptians. It is an historical paradox that, after ten years of valuable though uneventful service, the peace not only of this area, but of the whole world, is now at stake because the United Nations Force has been withdrawn.
I do not desire to discuss the legalistic aspect of the action of the Secretary-General of the United Nations, but I doubt very much whether there was not some other way to deal with this matter. The Secretary-General of the United Nations reported to the Security Council that the withdrawal of the United Nations Force would be carried out in an orderly, deliberate and not precipitated manner. He concluded this report with this warning, however:
"I do not wish to be an alarmist, but I cannot avoid the warning to the Council that in my view the current situation in the Neat East is more than disturbed, indeed, I may say more menacing than that at any time since the fall of 1956."
That may indeed be an understatement. If the world is passing through the gravest crisis since the Second World War, it is tragic that the United Nations, like the League of Nations, has failed to come to grips with the situation. Admittedly, the United Nations withdrawal could be justified in narrow legal terms, and the Secretary-General of the United Nations has argued the case at some length. But, my Lords, in this world of conflict, where so much is at stake, a legalistic explanation is not enough. The withdrawal of the United Nations Force at a time of tension and danger may definitely outweigh, on behalf of peace, all that the United Nations has achieved.

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The action of President Nasser in the Gulf of Aqaba is intended to strangle the life out of Israel by a blockade. If we are to prevent extreme dangers, the Gulf of Aqaba must be kept open and, as has been repeated here, the mines must be removed. This is not only necessary for the survival of Israel, but for the preservation of world peace. To do less—that is, to appease President Nasser—would be to court another aggression. In the past Hitler has shown the world how it is operated. To appease Nasser would be to court another type of aggression.
My Lords, if we avoid another Munich, can we also avoid another war? I think so, if Israel is not left to act alone. This is an international situation which calls for international action. This time the world surely will remember the lesson of the last war. As Sir Winston Churchill said in the debate from which I quoted earlier, it is obvious that both Jews and Arabs must have access to the Red Sea through the Gulf of Aqaba. The Gulf of Aqaba is, in fact, to the Red Sea as Trieste is to the Adriatic. The outlet here is certainly not to be monopolised by either of the nations who have dwelt together for so long. It is therefore a place of special significance. Let us hope that, if these words are prophetic, the significance of Aqaba, like that of Cuba, will be as a place and a point in time when the world came near the brink and when good sense prevailed.
I would conclude, my Lords, by quoting an extract from an appeal to the conscience of the world:
"We cannot believe that the Great Powers, which took the historic decision some twenty years ago to recognise the right of the Israelis to live in freedom in the land of their ancestors, will deny Israel the right to and means of defending itself in its hour of danger and leave it to stand alone against forces that threaten its destruction and imperil the peace of the world."
These are the basic ideas which activate the Israelis. I believe it is of the utmost importance that we should realise what they are. At the present moment, they are following a lead which is set to them. But there will come a time when terror, translated into a desire to face the situation, to attack it, will come into being, and that will be a dangerous period for us all.
5.58 p.m.
LORD WELLS-PESTELL: My Lords, having listened to the previous speakers, and finding myself in substantial agreement with what they have said, I think there is little new that I can say at this stage of the debate. I should like to congratulate my noble friend Lord Chalfont upon his masterly survey of the situation, but if there is any point at which I disagreed with him, it was when he said that we do not wish to take sides in this matter—and I think I have quoted him correctly. I believe that this is something of such great importance that we have to face the fact that it is necessary to take sides if this matter is to be resolved successfully.
I am sorry that the noble and learned Viscount, Lord Dilhorne, is not in his seat, because I wanted to say how much I enjoyed and benefited from his exposition of the legal position of the maritime situation. To a layman like myself it is good to have such an authority put this matter in very simple English. I cannot remember a time since I have been a Member of your Lordships' House when there has been so much agreement among your Lordships, and if I touch on a number of matters that have already been mentioned it is because I feel very strongly about them and want to associate myself with what has been said.
One matter which causes me grave concern is the disastrous—and I say advisedly "disastrous"—action of the Secretary-General of the United Nations in withdrawing the peace force so quickly and not playing for time. I am not unmindful of the demand made on him by the President of Egypt, but it would have been of supreme value if the peacekeeping force had been kept in position while the matter was referred either to the Security Council or to the General Assembly. I think that, to put it at its lowest, it was a hasty decision on the part of the Secretary-General, a decision which in the future will lead some people to question the effectiveness and value of the United Nations in time of emergency and crisis. At the risk of being misunderstood, I would say that I think it may well be a decision deserving of censure. It was all the more unfortunate for, while I recognise that the force was not on Israeli territory, Israel was not consulted about the withdrawal, although she was a party to the international

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agreement reached in 1957, which resulted in the peacekeeping force being in that particular area.
I believe that the real problem, from Nasser's point of view, is not just the sovereignty of the Straits of Tiran or the Gulf of Aqaba. The real problem, I think, from his point of view is, who owns Palestine? It is this aspect of the situation which is to me more worrying. We need to keep in the forefront of our minds the fact—and this point has been made by a number of Members of your Lordships' House—that both Nasser and the other Arab countries have made no secret over the years of the fact that it is their intention to destroy Israel. I think it was the noble Lord, Lord Gladwyn, who repeated a phrase used by Nasser some years ago: "push Israel into the sea". This is, and has been—he has been consistent about this—his professed mission and avowed intention. Are we really expected to stand by and watch this happen?
Some people say that our prestige today in international affairs is not very high. But I ask your Lordships: will it be higher if we fail to take action of some definite kind in the matter now before us? Will not our prestige be lower if we cease to do anything in it, if we seek to appease—and I want to say this, because I believe it—this man who seems bent on assuming the mantle of Hitler? And Nasser's intentions are very reminiscent of Hitler. Any success he may have in this war of nerves, any concessions which other countries may make to him, can be only at the expense not only of Israel but of the reputation of the United Nations. The present position of Israel, as a number of noble Lords have said, is not unlike that of Czechoslovakia in 1938. Any concessions made at this time to Nasser would lead to bolder demands in the future—and from a greater position of strength.
I do not think for one moment that, in respect of peace in the Middle East, time is on our side. I do not think we can wait for the United Nations to plough its way to a decision. The late President Kennedy acted swiftly in the Cuban affair. Why cannot we and America, if possible with the other maritime nations, do something similar without further delay? Having regard to what Israel has had to put up with over the
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years, we should recognise that she has shown commendable restraint. From 1965 to May, 1967, last month, there have been 113 mine-laying and sabotage attempts and operations on Israel's soil, for which Syria was responsible. In addition, there have been scores of shootings and shelling outrages against Israeli farmers, as well as the shelling of Israeli villages. Since July, 1966—a period of only ten months—Israel has sent no fewer than 34 Notes concerning these incidents to the Security Council, an average of over three Notes of protest per month.
The point has already been made that Israel is the only democratic and reliable State in the Middle East, and is no doubt solely on that account a source of annoyance and grievance to the Arab countries, and I think we ought to do everything in our power, and do it quickly, to sustain her. Her achievements in the twenty years of her existence are unrivalled in the modern world. The Soviet Union did not achieve as much progress in her first twenty years as a Communist State. Many of us have seen at first hand something of the progress and determination to build, not only a just society but a society dedicated to the wellbeing of the individual. Israel is a State where—and let us face this fact, my Lords—the remains of a destroyed Jewry have created a haven for all Jews who may wish to go there. When I was there, not long ago, I saw a large number of aged and maimed Jews from every part of the world who were going to be for the rest of their lives a liability upon the Israeli State. But because they were Jews they had a right to go there. They have created—not "are creating"—a haven for all Jews of that kind and condition to which they can go if they wish. If it is a question of earning their right to exist, then they have earned it; and we should see that Israel has the right to live in peace.
It is in my view quite unrealistic to require or expect Israel to compromise on the shipping issue, or to accept the Egyptian blockade—and this point has already been made by a number of your Lordships. The continuation of the blockade could mean economic disaster to Israel. The Port of Eilat is vital to Israel for oil supplies from Iran and for her trade with Asia and with Africa. I do not feel it sufficient to say that

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she managed before 1956 and will no doubt manage again. She did not manage, at any rate in the sense of being economically viable, before 1956. Both the Prime Minister and my noble friend Lord Chalfont have said that the Government would promote and support international action to uphold the right of free passage for shipping in the Gulf of Aqaba. This free passage must, of course, include Israeli ships. But what I would ask the Government to do is not to wait for the United Nations to discuss this matter over a long period of time—because I do not think that time is on anyone's side at the moment, except that of the Arabs and of Egypt—but to take a decision in the very near future; and, if necessary, that we and America should act independently to see that the Strait of Tiran and the Gulf of Aqaba are kept open.
6.10 p.m.
VISCOUNT WATKINSON: My Lords, the situation is clearly too grave and too difficult for any of us in this House to try to say anything but words that would help the Government, so far as possible, in the situation in which they find themselves. But I do not think it is wrong that some of us who have looked at this trouble spot in the world before should search our experience to see whether there is any helpful counsel that we can put forward at this time. In this I am glad to follow my noble friend Lord Avon, who said much the same at the beginning of his remarks, and the noble Earl will know in what affection he is held by a good many of us in this House.
There are certain matters which I should like to put forward. Obviously one does not expect the Government to give answers, because it is better that they should keep their own counsel at the moment, but perhaps at least they will listen. The noble Lord, Lord Chalfont, and I were not always entirely in accord when he represented a great newspaper and I was Minister of Defence, but we are entirely in accord in what he said to-day and, if I may say so, I think he was wise, as also was my noble friend Lord Carrington, to raise this question of nuclear weapons.
Let us face it, the world is armed with an over-kill capacity of these weapons, and it is utterly unrealistic to
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expect that a situation like this, which is gaining the backing of one country after another, and of the two great nuclear Powers on opposing sides, is one where the threat of nuclear war can be dismissed as unimportant. I think it is important, not from the point of view of trying to bring alarmist talk to a grave problem, but because I believe it is gravely to the disadvantage of the Russians that they should seek to drive on this situation. I see the advantages to the Russians of what one might call a "two-way stretch" on the Americans. Anyone can see the advantages of dabbling in troubled waters, but I wonder whether the Russian Minister of Defence to-day (who is new to his post) is really considering whether his Government wishes to face the Russian nation with another direct confrontation like Cuba. Yet this is the end of this business, if Russia does not have some care with the somewhat reckless commitments which she is making to a situation which is certainly not under her control.
So I think it was wise for both the opening speakers to bring in this issue, and I hope that through the normal channels of diplomacy (such as they are) the Government will seek, if they can, to bring to the notice of the Russians, as strongly as they can, the real dangers to which they themselves are bringing their nation if they force this to a confrontation with the Americans on one side and themselves on the other. I think perhaps having muddied the waters a bit they might be wise to play for the pause which we all so badly need.
I want to raise another question, which is, I expect, difficult for the Government. It seems to be the general consensus of view in this House and in the other place that these consultations between maritime Powers with a view to setting up some sort of consortium, which presumably would send some form of convoy with some form of escort into the Gulf of Aqaba, is a matter of considerable urgency and vitally important. I agree, too, that there are some of us in this House to whom this brings rather sad memories of the ill-fated Suez Canal Users' Association. Perhaps my noble friend, Lord Carrington, will remember this sad body which, if it had succeeded, might well have saved the world a great deal of trouble. I suspect it is very much in

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President Nasser's mind at the present time that a similar consortium was formed, and it failed. It never went into operation. I do not think this is so in the present circumstances: America and ourselves are clearly aligned together in this issue, and I for one am grateful for it.
There is no division in this House, in the other place or in the country, but none the less I think we must realise that if we are to form that consortium (and it may well be a consortium, in the end, consisting of America and ourselves) it is no good talking about it any more unless through the channels—about which I do not want to know at the present time—there is clear agreement that it will operate and that it will not brook any opposition of any kind. If we do not do this, then our situation will be much worse. If we go on talking about it; if we say, "This is a good thing, let us do it", and then nothing happens, we shall give the maximum possible encouragement to a situation which, as I have indicated, could well lead to a major confrontation, with nuclear weapons at risk. So, while I strongly support this concept and think that we should go ahead with it, if we have to, even if only the Americans and ourselves will operate in these particular circumstances—but, one hopes, with the backing of a large number of maritime nations—all I say is that we must not promise it unless we are quite certain that we can fulfil that promise.
Of course, as almost every other speaker has said, we should seek to solve this problem through the United Nations. I pray that we can, and frankly I do not know enough about the circumstances that pressed on the mind of the Secretary-General when he took, as many other noble Lords have said, what seemed to many of us to be a somewhat amateur and precipitate action. I do not express any view whatever. The United Nations is seized of this problem and, as I understand it, the problem is now in front of the Security Council. I think it was Sir Winston Churchill who said, "Jaw, jaw is better than war, war." This may be so, but if this talk goes on indefinitely and becomes a cloak for the present status quo—and after all Egypt claims that she is in control of the Gulf of Aqaba at this moment—it seems to me
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that it would impose an almost intolerable burden on the Israeli nation.
Personally I do not take either side. I think the interests of this country will best be served by a return to the status quo at the earliest possible moment. I think, too, that we would be unrealistic, as the noble Lord, Lord Caccia, said, if we thought that some long-term solution of the age-old problem of the Jews and the Arabs could come out of this particular circumstance. It is in Britain's interests that this problem should be solved, that the Gulf of Aqaba should be reopened to the shipping of all nations—and certainly to those flying the Israeli flag—and that the patient and somewhat thankless tasks of diplomacy should be able to go forward again.
I want to say again, if I may, particularly to the noble Lord and his colleagues on the Government Bench, that they have to operate on a basis where in many cases it may be that those who to-day lead the Arabs, and lead them I fear to destruction if they do not look out, may well be judging that our resolution is not nearly as strong as our words. Let us face it, they might well have some excuse for so believing. I hope the Government, therefore, are taking this possibility most carefully into account and will do all they can to show that if we say we will force the Straits and preserve the international right of the martime nations we mean to do it, and very soon after we say we are going to do it.
There is one last matter I want to raise. There is another area where I think the Government now must show that they mean to honour their obligations exactly and precisely, and that area is Aden. Again, as an ex-Minister of Defence I have some knowledge of this part of the world, and while no decision is easy there and I see the pressures on a Minister of Defence to cut his commitments where he may—that pressure has been on every Minister of Defence and always will be—the situation has changed. Again one does not ask the Government to come forward and say, "Of course we have changed our mind"; but what one does ask the Government to do is, in the light of what I am sure is the very up-to-date and accurate advice that the noble Lord, Lord Shackleton, has brought back—I think he is perfectly competent to judge the

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facts of the position—to re-examine the whole Aden situation. I am one who has tried very hard to keep quiet about Aden because I felt it was a difficult enough situation without too many added difficulties by criticism over here. But I must say this: if the Government now appear to disregard their obligations as they are publicly thought to be in that part of the Arab world, I, for one, shall find it very difficult to forgive them, and I, for one, shall feel that they bear a great share of the blame if this, in turn, reacts on the more direct confrontation to-day between Israel and the Arab countries.
So there are three issues where I hope the Government are thinking very hard on what they might do: first, what could be done to bring before the Russians the real problem of the confrontation in which all is at stake. The issue in a way might be small; it might just be the Straits of Tiran; but the real issue will be who will back down—the Russians or the Americans. I cannot believe that the Russians at this stage want to get into that position. Perhaps we could help them, because we are not so directly involved, to slide out. And I beg the Government—I hope they do not need begging—not to embark on forcing the Straits in words unless they are going to do it in deeds. I am sure they will, and I am sure they should, and I do not think there is a single noble Lord in this House or anybody in the other House who will not support them. But do not talk unless you are going to do it. Lastly, I believe the situation in Aden has now fundamentally changed and what may have been right in the Government's mind three months ago cannot be right to-day. They really will have to think again very carefully, for I am afraid a much longer period than at one time they thought possible, how they are going to preserve at least some balance between the Federation and the Aden Government and to keep some rule of law against these constant attempts to subvert the country from outside.
We are not the major Power in the issue now, but we are there. We cannot escape our responsibilities, and the sooner we say we are going to fulfil our responsibilities, as I believe the Government intend to do—and all honour to them—the more likely we are to get some
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pause in this most dangerous situation. It is dangerous not only within itself—that is dangerous enough—but because I cannot see that it will go on much longer without engaging America and Russia as direct protagonists in an issue in which one or the other will have to give way. One can only wish the Government well and say that they have the support of this House and I believe of the country if they will pursue their policies, as they have indicated, with firmness and courage; and perhaps then we may get a return to peace in this most dangerous situation.
6.25 p.m.
LORD SOPER: My Lords, at the end of the debate in another place yesterday the Prime Minister indicated that he interpreted the general burden of the speeches as a mandate for the further search for a peaceful and just solution to this present emergency. I am confident that when this debate concludes it will be interpreted by the Prime Minister and every other reasonable person as an extension of that mandate or further confirmation of it. In the various relationships in so many fields of this most acute and dangerous problem I venture to say something about the religious aspect of it, and I dare say on this occasion I can speak for my absent, but interested, ecclesiastical friends. To set that out, perhaps I had better declare myself.
I can find evidence of many mistakes and difficulties on both sides in this acrimonious dispute, but I am unreservedly committed in moral principle to the Israeli side, for a simple and quite sufficient reason. When any country or group of countries is committed to the extermination of another contry it puts itself outside the moral code, and any reasonable and moral person, whatever his religious beliefs, must take the side of those who are so threatened. Therefore in principle I am quite convinced that we ought to give our support to the Israelis; but not to give our support to the Israelis as though this is a problem of which the political antecedents are of fairly recent growth, but to include—and this may be some of the light we can help to shed upon this problem in your Lordship's House—the religious incompatibility between the two sides which goes back to Biblical times. It is no irrelevance to remind ourselves that the

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case for the Arabs, which is not of course Biblical but a derivation of the Biblical story, is that these Arab countries are the sacrosanct homeland of the children of Allah and that those who intrude are essentially colonisers; and the process of decolonisation, though it may not stand up very well in law or in the more sophisticated debates in your Lordships' House, is very present to the mind of many Arabs to-day, and has been continuously trumpeted by the radio from Cairo and in the speeches of Nasser himself. It is rubbish, but it has a very strong and religious appeal in which rubbish has often a greater power than ordered belief. Therefore to ignore this basic religious conviction that the Israelis are intruders and that the Arabs have a divine right finally to get rid of them if they can is an incompatibility, and it does not suffer I think any immediate or proximate political or economic solution.
The same, of course, is true on the other side. I believe the Israelis have an existential right, and, of course, as the Prime Minister said in another place, it would be a crime to deny them a living and a place to live in which many of them have lived in for twenty years. But they have no divine right, and this can be very easily proved if one makes an excursion into that somewhat bloodthirsty book the Book of Joshua. No doubt it is true that the Jewish people, the Hebrews, were there before the Arabs, but there were a lot of people there before the Hebrews, including the Hivites, the Hittites, the Jesuites, the Ammonites, the Canaanites and others as well. The story is of this initial aggression by the people of Israel into somebody else's territory to which they forged the signature of God and went on to do even worse things; if you read Joshua 11.20 you will find one of the ways in which the wretched aborigines were denied any chance at all. It says:
"The Lord caused their hearts to be hardened, so that they opposed the children of Israel so that he destroyed them".
That really does not give the Ammonites and Hittites and Canaanites a dog's chance.
I believe Zionism in its cruder form is another of those religious obsessions which has produced a kind of incompatability which will not be solved by political means and will finally be solved only in
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a different kind of climate and principally by the processes of education. Therefore I believe this has to be introduced into the argument; otherwise we are dealing with superficial or semi-superficial issues, when so many of these issues go right back to those primitive, obscure and very often irrational processes, of which some of your Lordships may be guilty as I very often probably am.
What then are we to do? I heartily endorse what has already been said—and I think I speak for every Christian believer in this country, and every member of the Christian Church: that to endeavour to seek a just solution through the United Nations, through appeals to both sides, through an attempt to bring the Arab peoples to sense over the Gulf of Aqaba, seems to me to be admirable. I earnestly hope that the present emergency will not flare up into war. But if it does, or if, indeed, our best intentions are prevented from solution; if indeed the Arab remains obdurate, if indeed Russia remains threatening (and from now on I know your Lordships will listen to me with your customary courtesy, though you may find what I have to say entirely preposterous and perhaps extremely unpleasant to your ears and your thoughts), I am myself committed to the belief that, in the final analysis, it would be completely and utterly wrong to go to war, even for the salvation of Israel.
I know that this view is incompatible, or is hostile to almost every thought that has been expressed or that has been half hinted at in your Lordships' House today; but I venture to say, I hope without truculence, that if these words of mine are remembered in fifty years' time, which is most unlikely, we shall look back at this period as yet another example of the way in which we are tricked into the assumption that we can solve any of these problems by recourse to that process of war which has already been indicated in your Lordships' House to-day and will escalate into total disaster. This is a pacifist faith. I indicate it as a witness. It cannot, obviously, be a programme at the moment. I realise that quite clearly, and would not press the point beyond your Lordships' indulgence.
The fact remains that I am committed to the conviction that anything, even for the Israelis, would be better than the

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plunging of that country and the surrounding countries into strife of a military nature. And though I can see little hope at the moment of a solution in other ways that would be in any way compulsory or likely, yet in this dilemma, when your Lordships venture to hope that this will eventuate into some kind of peaceful solution, I venture at least to bring into this debate and to this discussion an idea which is to me far more than an idea; it is an utter conviction: that only when a community such as this community is prepared to put the fact and the project of war completely outside its programme will there be any real break-through in what otherwise seems to be a hopeless situation. What can be done? Immediately, very little. But supposing we do emerge from this particular calamitous situation—please God we shall; and I have every hope that we may—nothing dims my ardour for the work that is already being done and the preparations that are in hand for further projects and co-operative efforts—who knows? At least it is part of my religious faith that this will not be the end of the matter.
I would commit to you, if I may, what emerges from the kind of argument which I have deployed. It is this. I do not see in the proximate future any resolution of this basic religious problem. I wish I did. I think it would take a long time to convert the Arab to the belief that he should live in amity and concord with the Israeli. God knows how sympathetic one must be, without any kind of patronage, to the Israeli in his fear that he is about to see another persecution only a few years after being delivered from the last one. Yet, if it is impossible in the near future to see any major change in the attitude of individuals, is it not possible to see a change in our administration, so that when the quarrel continues, those lethal and dreadful weapons which have brought so many people to their death may not be included in that quarrel? As I see it, this is the true hope, the unilateral process of disarmament by which those who do quarrel are no longer committed to killing one another because they do not have access to the kind of weapons which do it. This is the faith I hold, and I should not have intruded on this debate unless I had felt that it was a responsible faith. At least
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it is a growing faith among many of the Christian Churches. It is part of the argument: it is part of the prospect.
I would conclude, if I may, by reading to your Lordships part of a letter written by T.E. Lawrence to his mother in 1909. It says:
"… then I walked down the lakeside to the southern end of the lake"—
This is the Lake of Tiberius, and he reflected
"that the country was not a bit like this in the time of Our Lord."
that is, under the Romans—
"There were not twenty miles of thistles behind Capernium. And on the way round the lake they did not come upon dirty, dilapidated Bedouin tents.… Palestine was a decent country then"—
that is, in the time of the Romans, maybe, but at any rate it was a highly cultivated one—
"and could be so easily made so again. The sooner the Jews farm it all the better; their colonies are bright spots in a desert."
This is germane to the final argument. It is a fact that the Jew has made the desert blossom like the rose, and that within Palestine, within Israel itself, 250,000 Palestinian Arabs have found co-operation and a higher standard of living, and many of the amenities of the good life, in co-operation with the Israeli. There is no final reason why Israeli and Arab should not live together and cultivate so much more of the desert that still needs to be cultivated.
But that will not happen, my Lords, until weapons are put away. How shall we persuade them to put away their weapons? I have only one constructive answer to that question: by putting away our own weapons. In such a process we may well get into a great deal of trouble. I cannot but believe that the trouble which will follow such an adventure in demilitarisation and disarmament would be infinitely less than the colossal tragedy of entering upon even what appears to be a small conflict, with the prospect, as I believe it to be a real one, of starting a third world war. In that respect I make this testimony. I hope that it has not sounded too solemn, but I make it because I am convinced that this is the end of the matter so far as our immediate programmes are concerned. We now have to await events and do what we can. It is the beginning of the matter, as I see

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it, if we are prepared to take an entirely new line; and at least I am sure that my noble friend will take what I say into consideration though he may have to repudiate it, as many other realists will feel they must do at the moment. But I believe that, sooner or later it must come.
6.38 p.m.
BARONESS ELLIOT OF HARWOOD: My Lords, we have listened with great interest to the most moving speech made by the noble Lord, Lord Soper, and indeed to many speeches that have been made this afternoon. I hope that the noble Lord will not think me discourteous if I do not follow him on his line. I hope that I am a good Christian, perhaps not so good as he is; but in any case I am not a pacifist, and I could not agree with the arguments which he has made. I agreed with the argument at the beginning of his speech, but I could not understand how, holding those views, he could also hold views which must inevitably, if you are not prepared to fight for what you believe in, end for everyone in defeat by some force or other—in this case the Nasser forces—which I should find altogether humiliating and utterly wrong. However, we are not here to argue the pacifist case against that of the non-pacifist. All I can say is that I, as I am sure we all do in this House, respect the views of the noble Lord, but could not subscribe to them.
We have had an extremely interesting debate. I should like to add my congratulations to those of many other noble Lords to both Lord Chalfont for his opening, and to Lord Carrington for his response on this side. I think we have had a debate in which many contributions have been of the first order and of enormous interest. I thought that the speech of the noble Earl, Lord Avon, was particularly interesting, and also that of the noble Baroness, Lady Gaitskell, who, like me, speaks from her experiences at the United Nations. I was also deeply moved by the speech of the noble Lord, Lord Sieff, who outlined to us so vividly the make-up, the texture and the history that goes into the present State of Israel.
I make my contribution to-day simply on the ground that I must be one of the very few people in either House of
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Parliament who was a delegate to that Assembly, the Eleventh Assembly of the United Nations, in 1956, when the suggestion of the United Nations peacekeeping force was first brought forward by the leader of the Canadian delegation, Mr. Lester Pearson, now the Canadian Prime Minister. I remember the occasion clearly, because it followed on events to which we have not to-day referred in great detail but which are vivid in our minds—the difficulties which arose between delegations during the time of that Assembly and the events which led to the Suez crisis. The proposal which came from the Canadian delegation for a peacekeeping force, which calmed the atmosphere and eased the dangerous positions which had been taken up by so many people, including the acute difficulties between Israel and Egypt over the Gaza Strip, was supported at that time by everybody, and was a remarkable event. I think that it was the only great event which came out of the United Nations Assembly at that time.
The proposals were discussed in Plenary Session of the Assembly. I remember that, although I did not take part in discussion, I took part in the voting, and it was my clear impression that when that Force was set up it was set up with the support of the Security Council and of the Plenary Session of the Assembly. I do not believe any of us thought that the Secretary-General would ever take that Force away within a very short space of time, as the present Secretary-General has done. I am certain that the then Secretary-General, Mr. Hammarskjöld, was acting for the Assembly, for the Security Council, and not as an individual when that Force was set up. I do not believe that that Force should have been removed without consultation with the Assembly and the Security Council which set it up. Therefore, I feel very strongly that it was an extremely unfortunate action on the part of the present Secretary-General.
During the years in which this Force has been operating in Jordan and on the Gaza Strip in the difficult frontier areas, I have twice been to Jordan and once to Israel, and I have seen the way in which the Force has operated. I have seen the groups of soldiers in their blue berets and shoulder flashes. I have flown in an aircraft piloted and crewed by United

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Nations Forces. It all worked excellently, and I believe that it was the one good suggestion which came out of all those disrupted times during that Eleventh Assembly. It is a tragedy that this should have been eliminated so quickly. I feel that some delegation at the General Assembly might have moved a resolution of thanks to those soldiers who for ten years have been doing an excellent job under the direction of a commander approved by and under the auspices of the United Nations.
I entirely agree with those speakers in this debate who have said that we cannot stand by and see the State of Israel driven into the sea, or whatever phrase President Nasser uses in his broadcasts. It is a terrible thing once again to hear these bombastic ravings of a dictator coming over the radio. It sends shivers down one's spine. Those of us who experienced these things in the past know what a terrifying experience it was to hear such words from the dictator, Hitler. To hear again now the same kind of words, coming over in the way in which we have heard them only recently, is a terrifying experience.
One tries to take a dispassionate view of the situation. Perhaps it is difficult for me to do so, as I am a committed person; but I have been to Israel and to Jordan, and I have seen the situation there. The Arab nations have millions of acres, stretching almost from the Atlantic to the Himalayas, and yet they grudge to the State of Israel this tiny part of the Middle East which is no bigger than the Principality of Wales. This is a terrible point of view when one remembers the people who for centuries have given to the world so much in science, in medicine, in art, and scholarship—in everything that makes for the development of civilisation; people who. as the noble Lord, Lord Sieff, said, have suffered in ways one can hardly bear to think of to-day. To stand by and listen to the kind of broadcasts which are being put out, and the kind of words used by the President of the Arab Republic, makes one feel very unhappy indeed.
I was re-reading only last night an article written by my husband in 1949 after his first visit to the new State of Israel. He wrote in the article:
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"I asked my guide in Tel Aviv, 'What is the main shortage in this country?' My guide replied, 'The chief shortage is peace'".
In this article my husband went on to say:
"The keys to peace are three: stable boundaries, vigorous development, and lasting good will."
That was in 1949.
Now there is no doubt that the Israelis have achieved vigorous development. What Israel has done in the desert areas—in areas with no better land than the thousands of acres which the Arab nations control—and in other development is nothing short of miraculous. They have done this to give to Jews from all over the world a home. They want to have the opportunity to develop, and, tiny as they are, they want the chance to become a great civilised State. Their efforts have been nothing short of a miracle, and one must pay homage to them, because the achievement has been astonishing. They are searching for good will, and we in this country and in other Western countries must realise that they are the people who want the good will. They are the people who have achieved the development; they are the people who want peace. They do not want to enlarge their country. They only want to make their country a great State, almost as the Phoenicians did, a State which has turned to the sea for its trade. They do not want an aggressive policy towards their neighbours, as they have said over and over again, and it is entirely true. This is one of the things which makes the present situation so painful for one to read about.
I have visited the refugee camps, many of which have been helped by funds raised all over the world, and not least by funds raised in this country during World Refugee Year; I have seen the training centres which have been set up for the training of Arab refugees. I have walked among them. I have seen them. There is a whole generation in those camps which never knew Palestine. They were born long after 1948, and I do not believe they want to go to Palestine.
I believe that many of them are being kept in those huge encampments at a much higher standard of living than if they were living in much less well-cultivated areas in some of the Arab countries. They are in those camps, sitting on the

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borders of Israel, and this is a kind of blackmail. But many of the young people who are trained have gone out into the world and have found work for themselves. They have gone into other Arab countries, too, and anyone who looks at the situation and understands what has been done in the State of Israel, and who realises what could be done with the great potential in many of those UNWRA Palestinian camps, knows that a great deal could be done to give those people work and a new life in the kind of conditions under which they want to live; namely, in a Moslem country. I feel very strongly about the attitude of Egypt towards the refugees, because it is not true to say that Israel has not taken some refugees. I think the noble Lord, Lord Soper, spoke of 250,000. I have been given a figure of 100,000 Arab refugees taken in 1949, and there were quite a number after that who went back to Israel and who are living there perfectly happily.
The other point which I should like to mention—I do not think it has been mentioned in this House, but I heard it yesterday in another place—is on the question of compensation. I remember Mrs. Golda Mayer, who was the Foreign Secretary of Israel for many years, telling me that compensation had been offered to many Palestinian Arabs but that it was not the policy of Egypt to allow that compensation to be taken because it meant recognition of the State of Israel. This kind of hatred, this kind of wickedness which exists, is very unfortunate, and I am glad that all of us in this House and in another place show ourselves to be thoroughly dissatisfied with it.
Of course, we are in a difficult situation. It has been said that we are not strong enough to act on our own, nor do I think we should act on our own. The noble and learned Viscount, Lord Dilhorne, and the noble Viscount, Lord Watkinson, have both given very good reasons why we should act in concert with the United States and with the French. If one could only persuade the Russians that the interests of the world, which after all are their interests, are involved, what a miracle might happen. But as the noble Baroness, Lady Gaitskell, has said—and I can confirm this—when it comes to taking an active part in the
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United Nations in a move for peace in the world, you may count on it that straight away the Russians will be on the other side in practically every vote. This happened on every vote in the United Nations when I was present, and evidently the noble Baroness has had the same experience.
So we are in a very difficult position indeed. But nothing can be done by prevaricating. Time is not on our side. When we look back at the difficult and chequered history of the world, and the failure of Governments, from the days of the Peel Commission, to take any decisions, I hope we shall not wait too long. But if we are not going to take a decision, I hope that we shall persuade our friends to come and take a decision with us, to let the world know for certain that we are anxious and determined not to let this act of closing the Gulf of Aqaba and the Straits of Tiran go by as though it were not of importance. It is a matter of importance to the whole world and I should like the world to know where we stand, because that might well clarify the situation and make it very much more difficult for the Egyptians to take any irrevocable step. We are united here. Let them know that we arc united.
6.55 p.m.
LORD BROCKWAY: My Lords, I do not think there is any subject on which I am conscious of such divided loyalties as the issue which we are debating to-night. I am one of those who have been to Israel, and I think I was more inspired by what I saw there than by what I have seen in any other country. The quite wonderful way in which desert has been converted into fields and towns, in which swamps have been converted into fishing lakes and fertility, has been almost a miracle. Israel also had an appeal to me which perhaps Members on the other side of the House will not share, in that it seemed to have gone further towards a Socialist society than any territory which I have visited. One cannot have had these experiences without having a feeling of identity with the people.
But there is not only what has been done in Israel. I suppose that from our childhood, reading the Biblical revelations, we have learned to think of the Jewish people as associated with Palestine, despite what my noble friend

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Lord Soper said about the Book of Joshua. I want to emphasise, also, what the noble Baroness has just said in tribute to the contribution which the Jewish race has made to mankind. I think that intellectually and artistically—perhaps specially in music—it has given us more than any other race. Also, none of us can possibly think of this issue without remembering the persecution which the Jewish race has suffered and which found its terrible climax in Poland and under Hitler when 6 million Jews were exterminated. No one can possibly have either the experience of a visit to Israel, or a sense of history, or recognition of the contribution of the Jewish race to us all, without feeling identity with them.
On the other hand, if we are looking at this issue from a human point of view, we must also have a great sense of identity with the Arab peoples. For over fifty years they have been engaged in a struggle for their own rights and their own freedoms. In the First World War they were our allies against Turkey in helping to end the Ottoman Empire. Very many of them are now carrying through a struggle not only for their political rights, but against the feudal system which has kept the many poor and a few rich over the years; against monarchical and sheik wealth, side by side with their desperate poverty. Not only have we seen what the Jews have done in Israel: we have seen the quite extraordinary progress that has taken place in Egypt in the regions of the Aswan Dam, in the fertilisation of the desert and in the beginning of co-operation among peasants. In the U.A.R. we have seen probably the biggest contribution there has been anywhere towards the conquest of the desert. Therefore, no one who is approaching this issue to-night with a sense of what is happening in the world can say that all our sympathies should be on one side, with no sympathy on the other, or that all that is right is on one side and all that is wrong is on the other.
My Lords, this country has a very great responsibility for the conflict which has grown up between the Jewish and the Arab populations in the Middle East. It dates from the First World War, when two promises were given by the British Government which were contradictory.
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On the one hand, we said to the Arab peoples; "Overthrow the Ottoman Empire and you shall possess this territory". At the same time, we said to Chaim Weizmann, for whom I have a very great regard, "Palestine shall be the national home of the Jews". Those were inconsistent pledges, and from those two contradictory promises the subsequent conflict between the Arabs and the Jews has arisen.
I cannot share the view—and I think that what I have said about Israel indicates this—which the Arabs have held, that the settlement of the Jews in Israel was simply a repetition of colonialism. The great majority of its immigrants have been poor workers, and many of them have been refugees. They have gone there not to exploit others but to contribute to the construction of the society to which they are so much dedicated. Nevertheless, one can understand the view of the Arabs who resisted their coming into the Middle East as racial occupation. One can understand the deep bitterness which resulted from the eviction of one million Arabs in the Jewish War of Liberation, and the bitterness which is still there. Like the noble Baroness, I have been to these refugee camps, and, like her, I take the view that the refugee problem is soluble, because the younger generation are leaving those camps to take work in Kuwait, Iraq and elsewhere; and because the majority of the older generation, if they were given a choice with compensation, would, I believe, prefer to live the rest of their days in Arab communities rather than in Israel.
One of my great regrets is that over these years we have allowed this bitterness to remain. I accept the view that the Arabs have used it for political purposes, but I also take the view very strongly indeed that the Israeli Government have been wrong in saying that they would not negotiate a settlement of the problem except as a part of the total problem of peace. In my view, if we had made a contribution to the settlement of the refugee problem and the problem of the Jordan waters—which I will not expand upon now—we should have done something to change that psychology and probably avoided the situation which has now arisen in the Middle East.
BARONESS GAITSKELL: My Lords, may I—
LORD BROCKWAY: I did not interrupt the noble Baroness, but still—
BARONESS GAITSKELL: May I interrupt? I apologise for interrupting, but I should like my noble friend to say where he has got this information that the Israelis would not consider a settlement of the Palestine refugee problem. Whenever I have talked to them they have always said that they have asked the Arabs to sit round a table, but they have never been allowed to do so.
LORD BROCKWAY: But it has always been as part of a general peace settlement.
BARONESS GAITSKELL: No.
LORD BROCKWAY: I differ from the noble Baroness. I have read their public statements, and I have also had my talks with Mrs. Golda Mayer, their Foreign Secretary. So far as the refugee problem is concerned, I think it is true to say that they have insisted that it shall be regarded as part of a general peace settlement. I recognise that they have been quite prepared to sit round the table in that wider context.
My Lords, repeatedly during this debate the danger of the present situation has been emphasised. I am perfectly sure that our Government, the American Government, and also I think the Russian Government, are exerting an influence of restraint at the present time. I regretted very much the fact that the Russian Government did not accept the proposal which President de Gaulle made for a conference between the four Powers—America, Britain, France and Soviet Russia. But, despite that refusal, I think there is very considerable evidence that Russia's contribution to this situation has been to bring restraint to bear; and I do not believe for one moment that Russia wants war in the Middle East, any more than America or the United Kingdom do.
The immediate difficulty arose from the withdrawal of the United Nations forces. I regretted that that was done so expeditiously. Undoubtedly Egypt had the right to ask for it, though I do not think the request should have been accepted without some consultation with the Security Council or the General
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Assembly. And when we are thinking about this we must also have in mind that while Egypt was prepared for the United Nations forces to be on its territory at the frontier, that proposal has always been rejected by the Israeli Government. I am trying, if I can, to balance this situation, because I think it would be dangerous if we got into the emotion of thinking that all the right has been on one side.
My Lords, following the withdrawal of those forces, there was the occupation of the head of the Straits at the Gulf of Aqaba by the Egyptian forces. The danger now is of the breaking of what is a lifeline for the Israeli economy if ships are not allowed to pass through those Straits. I would just say—and I listened with great care to the noble and learned Viscount, Lord Dilhorne, and other speakers—that, despite what has been said in this House, there is considerable doubt in the highest legal circles on the question of International Law and the Gulf of Aqaba. One had only to read the article in The Times of yesterday to appreciate the different views held on that issue by high legal authorities. I should like to see the issue submitted to the International Court at The Hague. The difficulty about that is one of time. It might be six months, it might be a year, or even two years, before it was settled; and, obviously, if that course were taken we should have to advocate some policy and seek to obtain its acceptance before a judgment by the International Court could be made.
My suggestion—and I agree that there would have to be accommodation and compromises on both sides to get through the situation—would be that we should say to Egypt: "We will maintain through the Straits all foreign shipping; we will maintain through the Straits the tankers which take the oil to Eilat, which is so important to Israel; we will maintain through the Straits all the ships which take trade to Africa and Asia; but we will accept one limitation", a limitation which would not affect the economy of Israel. We should say that, without prejudice to consideration by the International Court, and without prejudice to its decision, we would limit, during that consideration, the movement of Israeli ships themselves through the Straits. That would have very little effect on the economy of Israel. The actual

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number of Israeli ships passing through the Straits is very small, and the transport of oil and the trade which is essential to its life could still be carried on. I recognise that this is a compromise; but I believe that to seek an accommodation of that kind would be better for Israel and better for the peace of the world than to risk the dangers of war resulting from the situation in the Gulf.
Finally, I want to look at the long-term situation. If we get through this crisis there must be continued effort, with great patience, to find a solution to the Arab/Jewish issue in the Middle East. To do this, it seems to me there have to be two changes in attitude. Israel must begin to think of itself in terms of the Middle East rather than in terms of its association with the West. Israel must begin to think in terms of inter-racialism, so that it will no longer be a racist State. On the other side, among the Arabs there must be a recognition of the Jewish historical right, deep and long-standing, to a presence in that territory. I believe that if those two changes were to take place on the two opposing sides then, by a continuous effort to bridge the gulf that divides those peoples, we might find a solution—though not at an early date—and move towards a federation of the Middle East in which both Jews and Arabs would be joined.
7.15 p.m.
THE EARL OF ARRAN: My Lords, after the doves the hawks. May I make a brief, brisk, abrupt speech on the lines recommended' by the noble Lord, Lord Egremont, when he told us to speak shortly? I do not propose to speak about the Middle East—it is, so to speak, not my area. I propose instead to say one simple thing; and it is this. Once again we find ourselves forced back to the horrid truth that in the last resort it is strength and armed preparedness which counts; that in international affairs the weak will always go to the wall and that appeasement never pays—particularly in the Arab countries, where the strong is regarded as the good.
I believe in the high purposes of the United Nations. I do not—after the latest most lamentable failures—any longer believe in its effectiveness; although, of course, that does not mean that we should abandon it or write it
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off. Frankly, I should prefer a couple more aircraft carriers or ten battalions of anti-missile missiles to a dozen new hospitals or a hundred new schools. Those noble Lords who know me at all will realise that I am not against hospitals or schools. But what is the point of these splendid things, what is the point of our new social Utopia, if we cannot defend them when the time comes?—and it may come. Which of us does not sleep more comfortably in bed because "Hermes" is at Aden and "Victorious" at Malta?
Which of us is not grateful for the awesome presence of the American Sixth Fleet? I except those noble Lords like the noble Lord, Lord Soper, who are saints—but, if I may say so. foolish saints. I ask the most dedicated peace-lover—and we are, on the whole, I believe, a peace-loving House—to agree that we are grateful for the strength that is still there.
I believe—and I have said this in this House before—that we are slowly moving to a new age of compassion, tenderness and tolerance; and I believe this profoundly. But these things as yet apply to individuals only and not to nations. It will take perhaps fifty years before we have a United States of Europe, let alone of the world. Meanwhile, should we not, as a country, vow ourselves to protect those things, the good things we have and in which we believe? Should we not learn from this crisis, even if it does not become more than a crisis, that virtue in international affairs is not enough unless it is backed by strength? Can we not resolve, whatever Government is in power, that they will never leave Britain so defenceless as not to be able to protect herself and also those who still look to her for protection?
7.20 p.m.
LORD SEGAL: My Lords, we are now reaching the end of a long and remarkable debate. Yesterday, too, the debate in another place was remarkable for the general consensus of opinion in all parts of the House that Israel must not be destroyed—and if the speeches from the Government Front Bench yesterday were somewhat less emphatic than those from the Opposition, everyone must recognise the heavy weight of responsibility that rests on our Government to-day. No one, I think, would

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willingly be in their shoes and face the agonising decisions with which they are now confronted.
In his opening speech yesterday the Foreign Secretary spoke of the need for a lowering of the temperature. On that, of course, we all agree. But has he not got his priorities somewhat wrong? The first essential is for an accurate diagnosis to be made. Only then can we proceed with a deliberate lowering of the temperature. Otherwise we run the risk of a recurring temperature, each successive bout higher than the preceding one, until the patient is consumed in a temperature so high that treatment becomes too late.
Is it not the case that in his diagnosis the Foreign Secretary appears to have been somewhat at fault? He said yesterday:
"We would consider as acts of belligerence any unilateral act to close the Gulf of Aqaba or any acts of aggression committed by either side on the Israel/Arab border."—[OFFICIAL REPORT, Commons, col. 112.]
But he has chosen to omit entirely a third act of belligerence far greater than either of those two, an act of belligerence which has already been committed; namely, the wanton destruction of the United Nations peace-keeping force. I cannot conceive of any graver act of aggression against the whole of humanity. Not only has this act of aggression already been committed, but the destroyer of the United Nations peace-keeping force has openly boasted of his aggression. Do not let us be mealy-mouthed about all this. The holding of an inquest, the blaming of U Thant or anyone else, is utterly futile in the face of this wanton act of aggression; and it is on Colonel Nasser that the real blame must lie for demanding the removal of the peace-keeping force.
The first act of aggression, the closing of the waterway of the Straits of Tiran to shipping of all nations, including Israel, already been committed; and in this, too, its author has gloried in his act. The second act of aggression on either side of the Israeli /Arab border may or may not be committed in the very near future. But, as we know already to our cost, it can always be precipitated or provoked even by reports which are of doubtful accuracy—as in the case of the mobilisation on the Syrian border—at any moment which might suit the whim of a dictator. This technique has long been known. It
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was known even in the days of Hitler, and it has been perfected by subsequent dictators. But the greatest aggression of all for which any nation must always stand condemned, the destroying of the peacekeeping force, that surely our Foreign Secretary should have added to his list of acts of aggression, for that action alone has caused this crisis and brought the whole world to the brink of the precipice. Furthermore, if I may say so with great respect, has not the Foreign Secretary also got his priorities all wrong? I quote from his words yesterday:
"…the centre of the present crisis seems pretty clearly to be the Gulf of Aqaba. The immediate crucial problem is the freedom of navigation there."—[c. 113.]
Surely a greater mistake could hardly have been made. The immediate crucial problem is the concentration of Arab arms on Israel's frontiers. Perhaps Israel could survive without the use of the Gulf of Aqaba for a month or two, but with each day that passes while Arab armies remain concentrated on the frontiers of Israel, the danger of a spark which might ignite a shooting war becomes greater. if you wait until you have solved the problem of the Gulf of Aqaba very valuable time will have been lost.
Of course, my Lords, it is wise of U Thant to have called for a breathing space to enable passions to cool. But what is happening during this breathing space? On the one side there is the breathing of fire and war and destruction: exhortations for the final extinction of Israel. Perhaps time will allow these passions to cool—we all firmly hope so; but no signs of this are apparent as yet. On the other side, there is a breathing space which leaves the victim more and more gasping for breath in a vice-like grin on her one pipeline for the supply of oil. Of course it is wise to call for restraint, but Israel has earned the gratitude of the whole world by the superb restraint she has already shown—restraint almost beyond all human endurance.
Let us face the hard facts, my Lords. At this moment the Arab nations of 40 million souls have their armies mobilised on the Israel frontier. Some 4 million Arabs may be under arms, but some 36 million Arabs remain behind, and life continues more or less normally in Cairo and Alexandria, in Amman and Riyad, in Mecca, Algiers and Morocco; save only

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for the demonstrations in their streets. But in Israel to-day the position is totally different. A whole nation of 2½million souls, men, women and children, has been mobilised to man its frontiers. The streets of Jerusalem and Tel Aviv are deserted. All public transport has been requisitioned Factories are idle; fields are unharvested. The whole economy is slowly grinding to a halt. Colonel Nasser knows that he has only to stay poised on Israel's frontiers for three months for the whole country to fall into his lap like a ripe orange.
A policy of restraint—except restraint in their words—may be all very well for the Arabs, but a policy of indefinite restraint spells suicide for Israel. It may well be Massada all over again. One can hardly expect a people which has survived for 5,000 years to take kindly to a policy of self-immolation. By each day of its restraint the Israeli Government is driving another nail into its own coffin, and no country can be expected to do that for very long. Are we prepared to stand by and watch Israel go down amid a chorus of pious hallelujahs? What then can we do to avert the risk of a holocaust? We know that our Government will not weary in their efforts to save the world from catastrophe. What then should our Government do?
I suggest that four immediate steps can be taken. First, let us be absolutely frank, as they were in another place last night. Let us drop the pretence of refusing to take sides. We are only deceiving ourselves. We convince no-one else, certainly not Colonel Nasser. The whole Government Front Bench to-day—they were then in Opposition—are committed Labour friends of Israel. Do our Government really hope to convince Colonel Nasser that now, with agonising decisions to make, they will become enemies of Israel? Of course we are friends of both sides. We trade with both sides and shall continue to do so. But on the day the Labour Government declared themselves the friend of both sides they became the enemy of the Arabs. So long as we continue to trade with Israel we are black-listed as enemies of the Arab people. To-day we are bracketed by Colonel Nasser, together with the United States, falsely, as enemies of the Arab cause. To-day the Arabs are claiming that the only true friend of the Arab
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cause is Russia—Russia, who has never lifted a finger to aid the Arab refugees, who has been maintained by us as a member of the United Nations without paying any of its contributions, to torpedo the United Nations decisions by the use of her veto, while we, who have for over twenty years saved hundreds of thousands of Arab lives by our aid to the refugee camps, are now branded with America as enemies of the Arabs. Could bitter irony ever go farther?
Secondly, we must replace at once the destroyed peace-keeping force of U.N.O by another international force, composed of maritime and peace-loving Powers, and on Israeli soil if need be, to act as a buffer, as a shock-absorber, between the two opposing armies. I believe that Israel would now welcome the presence of any peace-keeping force on her soil to avoid a shooting war and enable her to continue living in peace. But today the United Nations no longer commands any confidence in the Middle East, neither in Egypt nor in Aden or Israel, whatever the confidence we may still retain in it ourselves. Its machinery is too slow and too cumbersome, and the present situation is far too grave to permit of any delay.
Thirdly, if we wish the State of Israel to continue to show restraint, we must offer her aid in her hour of trial, instant, immediate aid—oil to enable her economy to keep going, food to replace her abandoned harvests, and other aid in every possible way to compensate for the destruction of the peace-keeping force and for her confrontation by the Arab enemy, aid to enable her to continue indefinitely her present policy of self-restraint and non-aggression. This aid must come from us, as well as from America and from all peace-keeping countries of the world.
Fourthly and lastly, we must join with other maritime nations to break the blockade in the Straits of Tiran. And if, as a result, President Nasser again carries out his threat to block the Suez Canal, as he did in 1956, then he forfeits all claim to be left in control of it. For there can be no hope of peace in the Middle East so long as he remains in charge of the Canal and continues to exclude the passage of Israeli shipping. The use of any great international waterway as an instrument of national policy

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should be banned by all maritime countries.
For ten years we have brushed the Suez Canal issue under the carpet, a procedure even more inept than Canute's attempt to order back the waves. Can anyone else have endured such a policy of feebleness and appeasement? If Turkey had blocked the Bosphorus and the Dardanelles to Russian shipping, or Denmark her entrance to the Baltic, does anyone imagine that Russia would have waited for ten years and taken it all lying down? Or if the Republic of Panama had decided to block the Panama Canal to the shipping of all nations, does anyone imagine that the United States would have endured passively ten years of shame and humiliation? Yet this is the policy that all the maritime nations have adopted with the Suez Canal. For how long can appeasement be endured, even at the expense of Israel?
And so I end with these four immediate steps, which I urge our Government to take now, at once, and in that order of priority. And of those vast glowering armies facing each other across the borders of Israel, face to face with death and destruction, let us ask: who is the aggressor? Who destroyed the peace-keeping force, and who gloried in its destruction? To the Arab nations seething with hatred of Israel let us say: "Turn back, turn back now while there is yet time. Turn your swords into ploughshares and your machine-guns into pruning hooks. Your people have greater need of these than of all your arms of destruction. Turn back now, before it is too late, before in your eagerness for the kill and your sharing of the spoils, you destroy yourselves and destroy each other".
And to Israel let us say: "Have no fear. Already you know who is the aggressor, who has destroyed the peace-keeping force, and who has gloried in its destruction. You have not survived for 5,000 years to be liquidated by President Nasser. Others have encompassed your downfall in the past, and you have sat at the graves of your oppressors. Through all the centuries they have come and gone, and you have survived as a living witness to their destruction. Men of iron and men of straw, they have vanished into oblivion. But you will survive to bring a testament of peace and hope to mankind".
7.38 p.m.
LORD FRASER OF NORTH CAPE: My Lords, I hate a lot of talk and legal argument. I like action and simplicity. The solution of this problem is so simple that it can be put in about five words. The United Nations will guarantee the frontiers of Israel and the Arab countries. Then we can be friends with both or enemies of both, as they like. It may be said that somebody may apply the Veto to such a proposal. If a nation applies the Veto to such a resolution, it means that they have demonstrated to the world that they want to exterminate 2½ million people and cause hundreds of thousands dead and wounded. That is what they do if they veto this proposition. I cannot think why our representative has not got up and said, "I propose that we guarantee the frontiers of Israel and Egypt and the Arab countries". Then the whole problem is solved. We can send our observers and ask the Arabs and Jews to demobilise.
I do not think that the Gulf of Aqaba is so important at the moment. I remember the precedent of the Spanish Civil War. All that has to be done is for the United Nations to see that any ship going through the Straits of Tiran flies the United Nations flag at the mast-head and to put a United Nations observer on board. If the Arabs fire on the ship, they are firing on the United Nations, which I do not think they will dare to do. I would strongly oppose trying to force ships or a convoy through the Straits. I have been through these Straits dozens of times and I know that it is very difficult to force a convoy through, unless you occupy the shore and safeguard shipping from mines. That is my solution in five words. The only other thing I want to say is that I think the Government must now see their folly in abandoning Malta, evacuating Aden and giving up aircraft carriers.
7.40 p.m.
LORD MORRIS OF KENWOOD: My Lords, I rise to intervene briefly at this late stage in the debate because, while it is difficult to contribute anything new to it, as one of the Jewish members of your Lordships' House I feel most strongly about the danger facing Israel at this time; also, I do not believe too much emphasis can be laid on the problems arising from the confrontation in

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the Middle East. The position in that troubled area is both complex and at the same time starkly simple. What are the facts? Israel is a land of about 8,000 square miles; Syria, Lebanon, Jordan and Egypt between them cover an area of many millions of square miles. The Arabs outnumber the Israelis by 17 to 1, and there is a great discrepancy in troops and weapons. The difference in morale and fighting spirit cannot totally compensate for this discrepancy.
It is the declared intention of the Arabs, particularly Egypt and Syria, to erase Israel from the map of the Middle East. This has been stated not once, but many times, and bears direct analogy to Nazi Germany. Hitler's solution of the Jewish problem was to wipe out the Jewish people. Nasser's intention is to exterminate Israel and, by implication, its inhabitants, also. Those, my Lords, are the simple facts. In order to implement these intentions and to detract from his failures in other fields Nasser, with the collusion of Russia, took the steps which your Lordships well know.
In my opinion, any arguments as to the legality of the closing of the Gulf of Aqaba to Israeli ships are frankly immaterial, since President Nasser has stated categorically that he does not intend to be moved from his position there and will retain a stranglehold on an important part of Israel's economy. This position is intolerable. But so far as Nasser sees it, he has not been challenged on it, and, indeed, the whole operation has been carried out with ridiculous ease, thanks primarily to the co-operation of the United Nations. Such was the boosting of Nasser's standing in the Arab world that King Hussein, whom Shukari had only ten days previously been urging the Jordanian people to rebel against and to kill, came running to Cairo to claim his share of the spoils. The vultures were gathering for the kill. What happens to-day to Hussein could happen to-morrow to Feisal, who has already declared against Israel but has not yet met with his foe, Nasser.
The provocation on the Israelis has been immense. There are those in that country who have been, and are, advocating immediate military action, and it is to the everlasting credit of the Israel Government that, so far, they have
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resisted these pressures and have heeded the external urging to stay their hand. But time is running out: not only are the Arabs mobilising their forces, but the longer that Israel has to maintain its forces at a state of standby the greater the strain on her economy. Indeed, to take it to its theoretical extreme, if the wait was too lengthy, the war could be lost without a shot being fired, due to the collapse of the economy.
Obviously, then, there is not much time left. The situation in the Gulf of Aqaba has to be resolved, and to be resolved quickly. If diplomatic attempts to persuade Nasser to withdraw his restriction on shipping should fail—and, on the face of it, it would seem that they surely will—then the maritime nations must soon implement their promise to take the appropriate action. As was stated with such clarity in the Daily Telegraph last week:
" Any act interfering with Israel shipping would be an act of war, and any retaliation by Israel would be an essential act of self-defence and not an aggression."
Nobody wants to see that statement proved one way or the other. but should the Israeli air force strike at Sharm el Sheikh, these are about the only words which will still be relevant.
There is not merely a need to save little Israel from being squeezed into oblivion by her bigger neighbours; there is the more long-term need to stop Nasserite aggression in the Middle East. Should we fail in this task, then this in time will inevitably and inexorably lead to total Russian domination of that area. My Lords, this must not happen.
7.46 p.m.
VISCOUNT MONCKTON OF BRENCH-LEY: My Lords, I apologise for arriving late and, therefore, not having been present for the earlier part of the debate, but to-day is the first day that I have earned my living as a civilian, and I had to put in my full time in my new job. When France left NATO, and America and England cast doubt upon her future in it, my Commander-in-Chief sent for me and said: "Within one year we shall have a probe outside Europe". I believe this last trouble is a sign of that probe. I believe, also, that there are other reasons.
President Nasser (I feel that we should give him his title, but as a colonel of the

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regiment I rather resent calling him colonel) has been in difficulty on three or four counts. First, he has been in difficulty on the religious side. I have many friends of the Moslem faith, and particularly those of the Moslem Brotherhood, and the slaughter and ill-treatment of the Moslem Brotherhood throughout Egypt has caused great resentment among the Moslem religious throughout the Middle East. By having an enemy who can be common to the Arabs and seen to be hated by the Arabs, Nasser diverts attention from the religious struggle, and, as Hitler did, gives a common purpose of enmity and hate. Secondly, as I know has already been said in the House, he has done badly in the Yemen. But thirdly, he is at the moment doing all too well in the Yemen by the use of poison gas and bombing the Royalist stronghold. By having this crisis at this particular time he is diverting attention from what ought to attract the attention of all of us; that is, the appalling goings on and the use of gas in the Yemen.
I think that these are the reasons which have caused the crisis. The idea that Russia is trying to de-escalate the situation (whatever that may mean) within days of sending ships through the Bosphorus I find difficult to understand. But one thing I am sure of is that we cannot have moral leadership from this country without some force behind it, and some committed force behind it. T must admit that I was under the happy illusion that under the old tripartite agreement we had an agreement to come to the aid of Israel and Jordan if they were attacked. I believe, unlike so many in your Lordships' House, that by being committed to the defence of a country, or two countries, war is much less likely than by sitting back and waiting for the thing to develop and some of us saying: "Well, we shall come in if it goes badly." It is the risk of commitment and with the power behind it that very often will save war.
I believe that Israel is a country that has a right to live: so has Jordan a right to live, and so have the other State; around. Let us make sure that we do not opt out of all our duty and commitments. I believe we still have a duty; and, I could not agree more with the noble Lord sitting in front of me. We have just heard that Cyprus has put a restriction on the use of our forces. Malta has not done so. I know I return once more to my
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old love, Malta; but let us keep our troops in Malta. I said the last time I dared to stand up that the Army accepted that there must be cuts. But is this the time to cut our forces, when we may be called upon to do our duty—because duty I think it is—to ensure that Israel has a right to live
7.50 p.m.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, it is certainly a pleasure to follow the noble Viscount, Lord Monckton of Brenchley. It was a privilege which never came to me in the time of his beloved father, because he was never induced to make a maiden speech; while the noble Viscount, who has not been with us very long, has already made two speeches. I am sure that the time will come when he makes a speech and does not refer to Malta, but that perhaps is still some way off, and we are always most anxious to listen to him.
My Lords, it is with a deep sense of responsibility and anxiety, shared by every noble Lord of the twenty or more who have spoken, that I rise to say these final words in the debate. It must have been clear to all, certainly all in the House, how very close we were last week to war. Those in the Government, I suppose, were still more aware than others of the imminent dangers. Certainly, if a war had broken out—and it would apply if a war broke out in the future—it would be very hard to see where such a war would end. Restraint has been shown by many countries in recent days. I am not going to single out any one country except Israel. But when I single out Israel's restraint, I must plead quite diffidently with the noble Lord, Lord Segal, who spoke with such deep feeling, to ask himself whether the words he used about restraint, when he reads them to-morrow, were quite the happiest, and whether he might not wish to modify them on some future occasion. If I understood him aright, he said that restraint for Israel was suicide—may I just finish this sentence before the noble Lord intervenes—and I cannot believe that that is a message which any of us here would want to send out to the Middle East to-night.
LORD SEGAL: My Lords, I quite sincerely believe that restraint carried on indefinitely would lead to a halt of

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the Israeli economy, and unless we go to its aid we should be encouraging it to commit suicide.
THE EARL OF LONGFORD: My Lords, I have made my submission to the noble Lord, and he has modified his statement. But, personally, I hope that restraint will continue to be shown by all countries, Israel not least. But, of course, the countries which are threatening Israel are still more in need of restraint. Certainly we have not gone over the brink and found ourselves involved in actual fighting, but we should realise that no nation has drawn back, and the longer the nations stand where they stand the greater is the danger that this edge where we rest may itself crumble and we may slip into war. So nobody here, I am sure, is in the least content, let alone complacent about the position.
As was said by the noble Lord, Lord Carrington, who spoke so well at the beginning, this is not an occasion when time is on the side of peace. It is certainly not a moment for any sort of dramatic strokes or any kind of spectacular postures, but a quiet diplomacy; and that has been the mood in which the House has found itself, and in which it has supported the Government. It is not, in one sense, very easy to comment on most of the speeches, because the great majority of them agreed very powerfully with the Government. The policy of the Government has been already stated three times—twice yesterday, and once most cogently by my noble friend Lord Chalfont—in the last two days. I am sure that no one wishes me to reaffirm or to run over that policy in any detail now. But, of course, we are grateful—and when I say "we", I mean that the Government have reason for gratitude—to those who have supported them. But I feel that our nation and other nations have also reason to be grateful to so many of the speakers to-day. I have mentioned the noble Lord, Lord Carrington, but I should also say what a pleasure it was to listen to the noble Earl, Lord Avon, who came here with a characteristic sense of duty, at much personal inconvenience; and also to Lord Salisbury and Lord Dilhorne, both of whom, like Lord Avon, have been compelled to leave this debate; and to great ex-Ambassadors like the noble Lord,
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Lord Gladwyn, and the noble Lord, Lord Caccia, and of course to many others, all of whom spoke with much knowledge and feeling.
But before I come to what may be felt to be the central theme, there are one or two aspects which perhaps can be dealt with separately. The noble Lord, Lord Carrington, wondered why the crisis had erupted so suddenly; and I share that puzzlement. I sit, as the House knows, in the Cabinet, and I cannot pretend that I, whatever may be the case of my colleagues, was in any way prepared for a crisis of this kind; and I think it would be the same for most of us, however advantageously placed. The noble Earl, Lord Avon, felt that the fortunes of the Egyptian forces in what he referred to as the forgotten war in the Yemen had a good deal to do with it. That may also be true. I would not set aside the opinion of the noble Earl at all lightly. But others, such as Lord Carrington and Lord Gladwyn, laid much stress on the role of the Soviet Union, and this was also the view of Lord Caccia and others. And I think we can have little doubt that the Soviet Union has had a great deal to do with these lamentable developments.
I am not going to follow the noble Lord, Lord Gladwyn, along his expert analysis of the operation of the balance of terror. On the whole he seemed to reach an optimistic conclusion—and may it indeed be so! But I noticed—and I say this on a somewhat lighter note—that his policy of total abandonment of the Middle East as rapidly as possible on the part of Britain seems to have been modified to fit in with his latest argument. But I say that in this grave debate merely to show the noble Lord how closely I follow all his speeches.
LORD GLADWYN: My Lords, my thesis was that peace was likely to be preserved more by the balance of terror than by any intervention on our part.
THE EARL OF LONGFORD: I thought we were supposed to do something about it. If the noble Lord had had his way a little while back, we should not be there to do it. But I do not want to make too much of it.
The noble Lord, Lord Carrington, pointed out that the United Nations Emergency Force was skilled in keeping

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the peace between Israel and Egypt and was a model in peace-keeping operations. I certainly share with the noble Lord and others a very great regret at the decision of the Secretary-General that these forces should be withdrawn so precipitately at the request of the Egyptian Government. I am afraid that I cannot agree with the noble Lord, Lord Segal. I am sorry to seem to be picking on him for everything, but I thought he went much too far in saying that the withdrawal of these forces, on the instructions of the Secretary-General, represented an act of aggression and belligerency—may I finish this sentence also?—because I think there is no ordinary use of words that could justify the language that was used by the noble Lord.
LORD SEGAL: My Lords, what I hoped to point out quite clearly was that the demand by Colonel Nasser for the withdrawal of the peace-keeping Force, which resulted in the virtual destruction of that Force, was in fact an act of aggression on the part of Colonel Nasser against all the peace-loving nations of the world.
THE EARL OF LONGFORD: My Lords, again I can only ask the noble Lord to read his words to-morrow and, on reflection, to see whether he feels they were altogether well chosen. I think there are few of us in this House who feel much sympathy for Colonel Nasser—I am sorry to keep using the word "Colonel", but as the noble Viscount, Lord Monckton of Brenchley, is a General I do not see why he should be so upset about it. Few of us to-day feel any sympathy for Colonel Nasser, but I do not think we should exaggerate his enormities by talking about his destroying the Force.
The noble Lord, Lord Rowley, who spoke with such balance, asked me a specific question, and as I have not been asked many questions I think perhaps I should answer this one. He asked whether it was the case that U Thant had consulted his Advisory Council before withdrawing the Force. The answer is that he did consult the Advisory Council and, in addition, three countries which were represented in the Force itself. So, if we are to try to be fair, as we all wish to be, I am afraid that to talk as though this Force was destroyed in the way that Hitler might have wrecked Czechoslovakia, is quite wrong and unfair to
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Colonel Nasser. What happened is that U Thant was asked to withdraw the Force, and in fact he withdrew it after consultation.
LORD SEGAL: My Lords, may I point out that I took great care to use the words "virtually destroyed", in the sense that the Force was prevented from achieving its objective.
THE EARL OF LONGFORD: My Lords, we are both on record. I have made my point and the noble Lord has made his.
There have been a good many comments about the United Nations to-day. Some, I am afraid, have almost despaired of the United Nations, and I was glad that the noble Lord, Lord Rowley, put the record right. It seems to me that this is a time when those of us who believe in the United Nations—and I hope that every one of us here believes in it—are under a particular obligation to keep our faith alight. It may be difficult, but these are the times when, in after-years, if the United Nations fulfils our hopes we shall be proud not to have lost our faith in that great hope for the world.
The noble Earl, Lord Avon, and I believe the noble Viscount, Lord Watkinson (although I am afraid that I missed his speech), referred to Aden and South Arabia. We have the greatest living authority on that subject sitting within a few inches of me, but I think it would be contrary to the Rules of the House to ask him to step into my shoes and to deal with this question. He has just come back from having rendered a notable service in South Arabia, and I am sure he will shortly give the House a very clear account of matters. At the moment I will only say that it is obviously true that the wider Middle East problem could affect the situation in South Arabia. The Government will be watching carefully for any effects of the Middle East crisis on South Arabia, but I hope that nobody will misunderstand me in any way when I say that it is much too early to talk about a change of policy as a result of events further North. However, I am sure we can obtain the help of the noble Lord, Lord Shackleton, on another occasion.
When we come to the central theme—what may be called the tragic core of this debate—we are in one way or

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another concerned to discuss these terrible threats to Israel. I am not saying that Israel is perfect, any more than any country is perfect, but this is certainly very close to the heart of the debate. It has come up in more speeches than one, and, indeed, it has never been out of this Chamber at any time this afternoon. However, I hope we shall be completely fair to both sides in these discussions. It should be quite clear that we are friends of the people of Israel and also of the Arabs. I hope it is completely clear that this is the attitude of the Government—and, indeed, it was brought out as being our duty by the noble Lord, Lord Brockway. I am not sure whether one or two noble Lords would actually dissent from that as a desirable proposition. But certainly the Government do not favour one side or the other. We are anxious to be completely fair and well-disposed towards both sides.
I am not going over past histories, which were dealt with yesterday by Ministers in another place and by my noble friend Lord Chalfont here to-day. I hope we can claim that Her Majesty's Government have shown sympathy for the Arab peoples of Palestine in the most practical way they can, by being among the foremost contributors to the humanitarian work of UNWRA. May I emphasise on behalf of the Government that we wish the Arab peoples well. We are not enemies of Arab nationalism, and we sympathise with their aspirations towards a greater unity.
THE EARL OF ARRAN: My Lords, I am sure Her Majesty's Government will not—
THE EARL OF LONGFORD: My Lords, may I just finish the sentence?
THE EARL OF ARRAN: My Lords, I only wanted to say—
SEVERAL NOBLE LORDS: Order!
THE EARL OF ARRAN: My Lords, am I making a mistake? I will make my point later.
THE EARL OF LONGFORD: My Lords, I am ready to give way after one more sentence, but as noble Lords know, if a noble Lord who is on his feet, whether it be at the Box or at one of the Back Benches, does not give way, the
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other noble Lord, if I may venture to say so, has to wait. The noble Earl, Lord Arran, will not have to wait long. I was only going to say that I hope no one will carry away the idea that we in the Government or anyone in the House of Lords are hostile to the Arabs.
THE EARL OF ARRAN: My Lords, I just wondered whether Her Majesty's Government, while not being hostile to the Arabs, were at all in sympathy with their avowed intention to drive the Israelis into the sea.
THE EARL OF LONGFORD: My Lords, if the noble Earl will wait, I think he will be left under no misapprehension about that point of view. If he really thought that I was going to argue along that line he would assume that I was going to depart totally from the speeches of Ministers and of the noble Lord, Lord Chalfont. Of course the present threat is a threat to Israel. There is no doubt about that. We recognise also that Israel is a State which exists and flourishes, and in the foundation of which we played a part. Here are 2½ million people who will certainly not allow themselves to be driven into the sea, and who will fight to the death if any infamous attempt is made to strangle them. May I add that from our point of view we should consider any attempt to eliminate Israel as being unthinkable and utterly nauseating. So I think the noble Earl, Lord Arran, will realise that I was coming into line, at least with some of his sentiments. We are anxious to be helpful to both sides.
The dangers of the present threat to Israel have, of course, been much aggravated by the arms race between Israel and her Arab neighbours, which has gathered a terrifying momentum since the Soviet Government, despite its earlier recognition—and, as the noble Earl, Lord Avon, mentioned, I think Russia was the first to recognise Israel—started supplying sophisticated weapons to the Arab States, some of which at least are pledged to the total destruction of Israel.
So we reach the present situation. The U.A.R. claim to deny access to the Gulf to Israeli flag ships and to strategic cargoes to Israel. This poses a threat of strangulation to Israel, and a threat to freedom of navigation generally through an international waterway; and

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as a maritime nation we cannot accept this. If war had come—and it could have come within the last week or so; and I repeat my approbation of Israel's restraint—it is a total illusion to suppose that it could have been confined to the Arab countries and Israel.
It is against that background that the Cabinet have been discussing this matter, as the House will probably have been aware, on several occasions in recent days. The Government have repeatedly made it clear that they deplore threats of force, subversion, hostile propaganda and terrorism, from whichever side they come. We also have made it clear that we regard the United Nations as primarily responsible for the maintenance of peace in the Middle East, and it is in the United Nations forum that we believe a solution must first and foremost be found, both for the Straits of Tiran and for the wider problem of Arab/Israel relations.
I said that some noble Lords seem almost to despair, to be altogether too pessimistic, about the United Nations, but my old colleague in the Admiralty, the noble Lord, Lord Fraser of North Cape, does not suffer from that kind of delusion, because I think he is more optimistic about the United Nations than any leading figure I have encountered. He seems to suppose that all we have to do is to propose that the United Nations takes over the defence of the area and the thing is done. He may be aware that if any attempt of that kind were made, it would be vetoed by the Russians within the hour.
LORD FRASER OF NORTH CAPE: My Lords, I think I said that. What I really said was that no one proposed it. I have seen people talking on the television, but nobody has got up and proposed that we shall guarantee the frontiers of Israel and Egypt. Then somebody else can shoot it down, but nobody has proposed it, so how does anybody know whether it is wanted? If Russia vetoes that motion she is saying she wants to exterminate 2½ million Jews and have hundreds of thousands of other people killed. Somebody ought to say, "If you veto this proposal, that is what you are doing".
THE EARL OF LONGFORD: My Lords, I am afraid it is not quite as simple as that. As the noble Lord is aware, there
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has been this relatively small Force, which was a move in that direction, but even that has now been withdrawn. So to suggest now that all one has to do is go to the United Nations and get a very much bigger project carried out without interference from the veto I am afraid is far removed from reality.
LORD FRASER OF NORTH CAPE: But why does not somebody propose it?
THE EARL OF LONGFORD: My Lords, I will not put the answer too clearly, because I should then find myself accusing the noble Lord of being, along with the noble Lord, Lord Soper, in the words of the noble Earl, Lord Arran, a foolish saint. I do not know whether that language introduced by the noble Earl, Lord Arran, could be applied to the noble Lord.
LORD FRASER OF NORTH CAPE: My Lords, I may be foolish, but not a saint.
THE EARL OF LONGFORD: I must preserve my own opinion that both words would apply.
At any rate, the noble Lord, Lord Caradon, has been in continuous consultation in New York, making every effort along every conceivable line to work out effective measures to safeguard peace. We believe that if all countries refrain from belligerent acts—and I mean interference with free passage—there can be time for diplomatic consultation to take effect. We certainly believe that Britain has a vital part to play in those consultations. We are labouring most strenuously to produce this firm declaration asserting the right of freedom of passage. There seems to be almost unanimous support for what the noble Lord, Lord Caccia, called this strategy and this tactic. There remains the question, which must haunt so many, of what happens if these diplomatic efforts fail. I think the Government must be grateful to the Opposition Leaders and Members of the House generally for not pressing us on that point. I feel we should express our thanks for not being pressed.
LORD ROWLEY: My Lords, may ask the noble Earl one question? Would he make it clear that in the view of the Government the withdrawal of the United Nations Emergency Force, as I said, does not give the green light to either side to

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commit a breach of the Charter and commit aggression?
THE EARL OF LONGFORD: My Lords, I am sorry; I thought I had made it plain. I thought I had said that. We believe that if all countries refrain from belligerent acts there can be time for diplomatic consultation to take effect. I denounced every possible kind of aggression. In the course of one or two little exchanges I may not have made it as clear as I should have wished. Certainly we are entirely opposed to any aggression; the withdrawal of the Force does not give any excuse for aggression of any sort at all. But there remains this grave possibility, and no one can suppose the Government are not working immensely hard to cover that situation. The noble Lord, Lord Caccia, and the noble Viscount, Lord Watkinson, and others have suggested, if I understood them aright-as I said, I missed Lord Watkinson's speech—that in the last resort it would be very wrong to separate ourselves from the Americans. I can only say that we should be most anxious to keep in closest touch with the Americans. The Prime Minister will be seeing President Johnson almost immediately and I should have thought that up to now the closest and most cordial contact had been maintained in regard to this particular matter.
There the matter rests. The debate, I think, can have done nothing but good. The House has made it absolutely plain, beyond any question whatever, that we are utterly opposed to any aggression, any strangulation of Israel, any interference with shipping; and we are working hard along lines which the House seems to approve to deal with that very grim situation. Those who carry at the moment the responsibility, sitting for example in the Cabinet, are going to have very testing decisions, but I can assure the House—I am sure my noble friend the Lord Chancellor will agree with me—that as we sit there in these future discussions we shall be strengthened by
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the debate that has taken place this afternoon. I believe that whatever differences of opinion I may have had with one or two noble Lords about the formulation of our ideas, we are at one. I cannot remember a time when the two Houses of Parliament on a great issue can have been said to be more solidly united; and certainly the Government must be thankful that there is so much patriotism abroad in the land.
LORD FRASER OF NORTH CAPE: My Lords, did the noble Earl think of that question of flying the United Nations flag on ships to go through the Straits?
THE EARL OF LONGFORD: My Lords, I am ready to discuss any proposals the noble Lord will suggest, to me. I do not want to treat the noble Lord as a pure theorist. A man of his tremendous record can afford to ignore any flippancy of mine on that subject. I can assure him that I will consider anything at any time that he raises.
On Question, Motion agreed to.

EPPING FOREST (WATERWORKS CORNER) BILL
Report from the Standing Orders Committee, That the Standing Orders not complied with in respect of the Petition for the Epping Forest (Waterworks Corner) Bill ought to be dispensed with, and leave given to introduce the Bill: read, and agreed to.
Bill presented (pursuant to leave given this day), and read 1a.

GUILDFORD CORPORATION BILL LONDON TRANSPORT (No. 2) BILL
Brought from the Commons; read 1a, and referred to the Examiners.
House adjourned at eighteen minutes past eight o'clock.