Sitting of 14 June 1967

Preamble
The House met at Ten o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

INVESTMENT GRANTS
10.5 a.m.
The President of the Board of Trade (Mr. Douglas Jay): With permission, Mr. Speaker, I should like to make a statement.
On 21st March I announced that payment of claims for investment grants for expenditure in the first quarter of 1966 would be brought forward three months, and begin on 1st April. Since that announcement the rate at which claims have come in has more than doubled, and already £26½ million of grants have been paid. Payment of the second quarter's claims will begin next month.
I am now able to announce a further measure of acceleration. On 1st July, the five Investment Grants Offices will be ready to receive claims for the whole of the second half of 1966—that is for a period of six months instead of three—and they will begin to pay these claims on 1st October. This will increase the cash flow to industry, and the fact that firms will be able to claim for two quarters on a single form will, I hope, save them some trouble. They will then be able to complete their applications for the whole of their 1966 investment. This may be particularly convenient for some smaller firms who may perhaps claim only once a year.
The average delay between investment and payment of grant will now be reduced to twelve months, as compared with 18 months under the old investment allowance system. I believe that these two instalments of speeding up should reinforce the incentive to increased investment provided by the temporary increase in the rates of grant to 25 per cent. generally, and 45 per cent. in development areas, for expenditure in 1967 and 1968 which I announced in December.
These accelerations will mean additional expenditure in the current year and
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the necessary supplementary provision is being sought.
Sir K. Joseph: Although we have reservations about the Government's major changes in this system, will the right hon. Gentleman accept that we welcome these improvements? However, since the estimates of the increased expenditure to which he referred involve a judgment about what expenditure will be undertaken by industry this year, what is his expectation now of the difference in level between private manufacturing investment during 1967 and that of 1966?
Mr. Jay: The actual figures which we have available for the first quarter show that the fall was a good deal less than some of the forecasts had suggested. We have conducted a further survey and we shall be publishing shortly an additional forecast, and I had better not anticipate that.
Mr. Cant: Is this acceleration in the payment of grants an aspect of general reflationary policy this year?
Mr. Jay: Yes, Sir, in a sense it is. It is as a result of our having speeded up this organisation and of the staff having worked very hard and efficiently, that we were able to do this, but, of course, it is necessary to do it and the decision to do it is certainly intended to accelerate investment by industry.
Earl of Dalkeith: Is the right hon. Gentleman aware that some of us are very disappointed that he has not taken this opportunity to announce that Edinburgh and Leith will be included in the development areas, since the differences which he has announced today in the rate of repayment will accentuate the slow and steady strangulation of Edinburgh? Will he reconsider this in the light of the increasing number of representations which are being made to him?
Mr. Jay: This acceleration applies to Edinburgh as well as to everybody else.
Mr. Wylie: Does the right hon. Gentleman not realise that Edinburgh is the only part of the whole of Scotland excluded from the advantages of development area status and that this is becoming increasingly serious for business there?
Mr. Jay: Yes, but the greater part of the country is so excluded. Only a relatively small and needy part is included in the areas and a great number of places could argue that they are excluded.
Mr. Edward M. Taylor: Has the right hon. Gentleman closed his mind to removing the obvious anomalies in Scotland, for example, on the question of plant hire on building construction, and would he not consider including Leith, with its vital port development?
Mr. Jay: All these questions relate to the detailed administration of the grant and do not apply to my announcement, which was about acceleration of the payments, which apply everywhere to all sorts of expenditure which receive the grants.

BUILDING RESEARCH STATION
10.10 a.m.
The Minister of Public Building and Works (Mr. R. E. Prentice): With your permission, Mr. Speaker, I would like to make a statement.
On April 20th my right hon. Friend the Prime Minister announced that responsibility for the Building Research Station would be transferred to me on July 1st. I have been considering the arrangements needed, both to maintain the scientific integrity of the station's work and its close links with the building industry and to enable research and development related to the industry to be co-ordinated.
We are all concerned to improve the quality and efficiency of building, to get the best value for money and to develop techniques of design, management and construction. Prospects of doing this depend on increasing the amount of research, and of getting a closer and more effective link between research, development and production. We therefore require arrangements which will take account not only of the work of the Building Research Station itself, but of other research into construction, and of the role of my Ministry in promoting research and carrying out development work.
With a view to encouraging more research into construction and to improving the co-ordination between the work
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of the station and of other agencies engaged in research, I propose to set up a Construction Research Advisory Council. This Council will report to me. Its terms of reference will be:
"To survey the national need for construction research, to review existing facilities, to consider measures necessary to encourage the expansion and more effective deployment of available resources and to advise on the dissemination of research results."
I shall appoint members drawn from both sides of the industry, the appropriate professions, Government Departments, the universities and others concerned in building research. I hope that the new Construction Industry Research and Information Association will be represented. The Chairman will be Sir Antony Part, the Permanent Secretary of my Department.
Programmes of work for B.R.S. will need to be framed in the general context of policies endorsed by the Advisory Council. There will also be, as at present, a Steering Committee for the station. This Committee will include representatives of other Government Departments with major building responsibilities and an increased number of independent members. The Committee will have an independent chairman.
Executive control of the station will remain in the hands of its Director. He will answer for the overall running of the station to the Permanent Secretary who will, however, delegate his responsibility for finance, administration and contractual matters to the appropriate branches of Ministry headquarters. The Directorate of Research and Information at the Ministry, working under the general guidance of the Director General of Research and Development, will be the main centre for the formulation of Government policy on scientific research for the construction industry.
The station now works not only on materials and structures, but on constructional economics, operative skills, user requirements and urban planning. I agree with this broadening of its scope and shall seek to encourage it.
I am anxious to dispel the doubts which have been expressed in some quarters about a possible threat to the scientific integrity of the station under the new arrangements. The station will maintain —and, I hope, enhance—its status as a

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research establishment. There is no intention of interfering with its detailed day-to-day working, or of curtailing its accustomed freedom to publish the results of its scientific work. It will be encouraged to preserve its existing contacts with the industry and its own structure of specialist committees by which relationships with outside interests are developed.
I hope that the new arrangements will enable the station to play an even more effective part in construction research than it has done in the past.
Mr. Chichester-Clark: I will, of course, wish to study more closely the right hon. Gentleman's announcement. Is he aware that, for some time, we have wanted the strands of so many research organisations drawn more closely together? What is the relation, financial or otherwise, between C.I.R.I.A. and the Government? Is it unaltered? We welcome any assurances about the independence of the B.R.S., but it seems that the right hon. Gentleman has not gone far enough in that direction.
For instance, what criteria covered his decision to appoint an independent chairman for the Steering Committee of the B.R.S. and a distinguished civil servant for the Advisory Council? What proposals, if any, are there for the future to link the work of the Agrement Board with some of these other organisations? Should we not be trying to cut down on boards and committees generally?
Mr. Prentice: I thank the hon. Gentleman for his general expression of good will. C.I.R.I.A. has only just been formed and is an organisation of the construction industry itself. The Government are represented on it, but it is not a Government organisation. It will, of course, get financial grants from the Government on a £ for £ basis for research and, for the time being, on a £2 for £1 basis for information. I hope that it will grow and that the industry will give it maximum support.
The hon. Gentleman asked why I had decided on an independent chairman for the Steering Committee of B.R.S. and a civil servant for the Advisory Committee. We had to weigh both decisions in the balance of advantage. The Advisory Council will report to me, and I
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thought that the appointment of the Permanent Secretary of my Ministry as chairman ought to be seen as an example that we were very keen that the Ministry, at top level, should be concerned in research and the formation of research policies. As I said, its membership will be widely drawn.
On the Steering Committee for B.R.S., we are planning a committee of a chairman and 10 members which will be slightly larger than the old committee, which will mean that other Government Departments with building interests will be represented. For that reason, I wanted to achieve a balance by having more independent members, and the appointment of an independent chairman might give some extra assurance that the B.R.S. would have the right kind of technical assistance. The Agrement Board uses the facilities of B.R.S., and this will continue.
Mr. Hilton: I think that we will all be encouraged by my right hon. Friend's statement. In his examination leading up to this announcement, did he gain any impression of the research facilities sponsored by private interests in the industry? How widespread are they and to what extent does he think that they will fit in with these new arrangements?
Mr. Prentice: I am grateful for my hon. Friend's view, particularly in view of his wide experience in the industry. On research sponsored by firms, there is, of course, a certain amount going on and some very good work is being done, but the total is almost certainly inadequate. The amount of research in construction is about 0·4 per cent. of the total output of the industry, as against 2·6 per cent. in industry generally. This is not quite a fair comparison, because related research takes place in the construction material industries, but nevertheless the amount is too small. I hope that the new arrangements will stimulate more research by the industry and organise it more to help itself, in addition to the help which it gets from the Government in this respect.
Mr. Costain: As the Minister has got back into his Department a brainchild of his own making, will he arrange for flags to be flown on 1st July to show this victory? Will he also consider the

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fact that the efficiency of the industry is very much affected by stop-go types of policy on the part of its clients, including Government Departments, which results in getting a surplus and a shortage of material at the same time? Will the research organisation have the necessary powers to investigate these matters, including the Treasury's attitude towards the building industry?
Mr. Prentice: The hon. Gentleman is asking me to go somewhat wider than the terms of reference would indicate. As to stop-go, this industry, along with others, obviously could not escape the effects of the economic measures introduced last July. I am making no apology for those measures. It is worth noting that, taking 1966 as a whole, the output of the industry has been about the same as, or marginally higher than, that in 1965. It is not true to say that an undue burden has been placed on the industry.
Mr. Urwin: I welcome my right hon. Friend's statement, which will be widely appreciated by the industry. Will he assure the House that there will be no overlap between the B.R.S. and the existing research establishment in his Department? Will they operate separately or become a single entity?
Mr. Prentice: There has been some comment in the technical Press about this, and I think that much of it has been based on a misunderstanding of the situation. The Directorate General of Research and Development in my Ministry does not do scientific research itself, but stimulates research, gives guidance and co-ordination to research that is going on elsewhere and places some research contracts with universities and others. This side of our work will continue and we have plans for it to grow. The emphasis is on development work and applying the results to our building programmes. This will continue and it will in no way overlap.
Mr. Boyd-Carpenter: Under the new arrangement, who will be the accounting person for the expenditure of the B.R.S.?
Mr. Prentice: The Permanent Secretary to the Ministry of Public Building and Works.
Mr. Channon: Without being thought to be carping, would the right hon. Gentleman say how many committees are now working in this field of operation? Would it not have been better to have had a committee to organise research rather than to survey the national need for research? Will this new body be able to carry out research into, say, the development of building materials to help our export trade?
Mr. Prentice: I am sympathetic with any view that there may be too many committees nowadays. However, research into the construction industry is bound to be carried on at a number of different places—by firms themselves, through the industry's own Research and Information Association, by universities, the B.R.S., and so on. This means having a number of committees, and this is inevitable. It is right, for the reasons I have given, that we should have an Advisory Council for research as a whole; to survey the whole field of activity, to co-ordinate it, identify research needs, consider future priorities, and so on. The Advisory Council will certainly be able to look into the question of research, including building materials, if it thinks fit.
Mr. Robert Cooke: Now that the station is to come under the right hon. Gentleman's eminently civilised Department, will it be giving its attention to the better use and conversion of older buildings and will the Advisory Council contain people who are skilled in this art?
Mr. Prentice: Although I have announced the chairmanship of the Council, I have not made any decisions about the whole membership of it. Certainly, we want people who have broad experience of the industry, and they will have to advise on the needs for research in the construction industry. I would not at present try to specify the problems which they may think will require priority.

NATIONAL INSURANCE ACT 1965 (AMENDMENT)
10.22 a.m.
Mr. Gwilym Roberts: I beg to move,
That leave be given to bring in a Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty.
The provisions of my proposed Bill are simple, and I can state them briefly. They reduce the pensionable age for men to 60. This would mean that a man could either retire at this age, on pension, or, if he wished, could obtain additions to his pension by going on working until he eventually retired.
I shall remain true to my racialist and religious background by developing my case under three heads. The first is to point out the anomaly which at present exists between men and women. Women already qualify for pension at 60, although from 1925 to 1940 both sexes obtained a pension at the same age. It is rather surprising that pensions should be given to women earlier than to men when one considers the devastating fact that at 60 the life expectancy of a woman is about four years in excess of that for a man.
The pensionable age for men is 60 in many countries. Without going into a great deal of detail, I will merely say that in France, Italy, Hungary, Japan, Turkey and the Soviet Union the pensionable age is 60, while in Yugoslavia it is only 55. In many of these countries the qualifying age for men is the same as for women. But that is only the first of my arguments.
The second is that if we believe in technical change—in a computer revolution—the whole aim of a change of the type I propose is to make life easier for our fellow human beings; in other words, to make their working week and working lives a little shorter Our aim in the long-term, if not in the short-term, should be towards earlier retirement. It can be argued that in the short-term this is not an easy object to achieve and that at present people are tending to work well beyond the age of 60, and even beyond 65. Nevertheless, changes in this pattern will have to be made; and I will develop this theme on 26th June when I will put a Parliamentary Question to the Minister of
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Social Security asking her to allow men to continue working after the present pensionable age and still draw their full pension. This Measure does not force men to retire at 60. It merely gives them the alternative of doing so.
My third argument is a humanitarian one. It is that there is already great need for a Measure of this kind. The figures show that a great many people are being forced to retire between the ages of 60 and 65. The Census of 1961 showed that of people already retired, 128,000 were under 65 while only 41,000 were under 60. This means that about 80,000 were compelled to retire between the ages of 60 and 65. I have received many hundreds of letters from people who have been forced to retire due to ill-health when aged about 60. It is often cynically suggested nowadays that young people think only of themselves. I assure the House that many of them have written to me asking for this alteration to be made on behalf of the elderly.
At Mosley Colliery, workers were offered early retirement. They could retire at 60, and it was found that the great majority of them, as long as they knew that they would have ample or substantial provision made for their later years, chose to retire at the earlier age.
The only argument that can possibly be made against my proposal is on the grounds of cost. If the Minister does not feel inclined to implement the whole of my Bill, I hope that she will agree to cater urgently for those who are obliged to retire at the age of 60 because of ill-health or people who are forced to go on working and, by so doing, make an early grave for themselves. When considering the question of cost one must consider whether there should be a limit on expenditure on the social services. In some cases there must obviously be a physical limit, such as for education, where one is limited by the number of schools and teachers available. Similarly with the medical services. However, in this case the only limit is that of political intent. It has often been said that if we can spend £2,000 million on arms we can afford anything. Many of my hon. Friends would suggest that the money we spend on Polaris should be used for other purposes.
From the point of view of the social services, our national problem is not a

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shortage of resources but the redeployment of the resources we have in the interests of social welfare. It is in this spirit that I introduce my Motion.
Question put and agreed to.
Bill ordered to be brought in by Mr. Gwilym Roberts.

NATIONAL INSURANCE ACT 1965 (AMENDMENT)
Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty, presented accordingly and read the First time; to be read a Second time upon Friday and to be printed. [Bill 275.]
ORDERS OF THE DAY

  BERMUDA CONSTITUTION BILL
  Order for Second Reading read.
  10.30 a.m.
  The Secretary of State for Commonwealth Affairs (Mr. Herbert Bowden): I have it in Command from the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
  The Minister of State for Commonwealth Affairs (Mrs. Judith Hart): I beg to move, That the Bill be now read a Second time.
  The object of this very short but important Bill is to enable a new Constitution to be established for Bermuda in a convenient and comprehensive form. The present Constitution is, frankly, archaic. It resembles, on the whole, those of the North American Colonies before the War of Independence. Indeed, some of its features date back to that period and before. They date back to the early part of the seventeenth century. The Bermuda Parliament is justifiably very proud of its position as the oldest Parliament in the Commonwealth outside the British Isles.
  There have been changes over the years. Some of these have been achieved by Instruments issued under the Royal Prerogative, some by Acts of the local Legislature, and others by unwritten constitutional convention. As a result, Bermuda now has a very complicated Constitution. It is not contained in any single comprehensive document and it is one in which the written provisions may give a misleading impression of the real situation.
  To give an example of this, under the present Constitution the Governor is assisted in the exercise of his executive functions by an Executive Council whose advice he need not follow, and Government Departments are controlled either directly by the Governor or by statutory boards. Members of the Executive Council and of the statutory boards are appointed by the Governor and are not

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  responsible to the Legislature. Thus, in theory, the Government's executive powers are virtually unlimited and the elected House of the Legislature has no say in executive government. That is the Position as it would seem to be.
  However, because the Legislature is supreme in the field of legislation, and because all expenditure needs the approval of the elected House of Assembly, effective government depends on co-operation between the Executive headed by the Governor and the Legislature In practice, members of the House of Assembly play a very prominent part both in Executive Council and in the Government boards. Therefore, in effect Bermuda enjoys, and has long enjoyed, a wide measure of internal self-government.
  As regards the Legislature, the nine ancient parishes of Bermuda, ever since the early days of the settlement of the Islands, have each returned four members to the House of Assembly. Before 1963, the franchise was based entirely on property, and property owners could vote in every parish in which they owned land. In 1963, for the elections at which the present House was elected, the franchise was extended to all those over 25 and property owners were restricted to a single additional vote. Early in 1966—three years later—the additional vote was abolished and the voting age was reduced to 21. So, within three years, there was completed a transition in the electoral arrangements which, in the United Kingdom, took well over a century to achieve.
  Since these changes in the franchise, there have been two developments which I should draw to the attention of the House. First, at the Constitutional Conference held in London last November, my right hon. Friend the Chancellor of the Duchy of Lancaster offered to send to Bermuda an expert who could look at and make recommendations for the improvement of their system of electoral representation. The Bermuda Government gladly accepted the offer and the visit was made last March. I believe that the Report which was submitted by the expert to the Government of Bermuda will be of immense value to them.
  The second development follows the decision of the Constitutional Conference on the establishment of a Boundaries
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  Commission. The conference decided that the Commission should be presided over by an eminent person from outside Bermuda with knowledge of, but no vested interest in, Bermuda. The second member of the Commission was to be a person who held, or had held, high judicial office in any part of the Commonwealth. The three other members were to be members of the Legislature, appointed by the Governor, two on the advice of the leaders of the largest party in the House of Assembly and one on the advice of the leader of the second largest party.
  Sir Newnham Worley, formerly Chief Justice of Bermuda, accepted the Government of Bermuda's invitation to preside over the Commission, and I should like to take this opportunity of thanking Sir Newnham for so public-spiritedly coming out of his well earned retirement to carry out this important task. Sir Donald Jackson, formerly Judge of the Caribbean Court of Appeal, accepted the Government of Bermuda's invitation to be the other "outside" member, and our thanks are due to him also for the valuable services he rendered.
  The Commission began its work in April and its Report has, I understand, keen adopted by the House of Assembly in Bermuda.
  From this very brief account of the changes which have occurred over the last several years, the House will appreciate that, while the Constitution retains some ancient features, there has been no lack of progress, particularly in recent times. Nevertheless, and however well this ancient Constitution has worked in the past, the time has now come for the introduction of a new Constitution which provides clearly and unambiguously for the responsible Government which all bodies of opinion in Bermuda say they wish to have.
  At the Constitutional Conference held last November, the form of such a Constitution was decided and at the same time it was agreed that the best course would be to embody its provisions in an Order in Council. Since Her Majesty's existing powers of legislating for Bermuda are very limited, the Bill now before the House is necessary to empower Her to make such an Order in Council. If and when the Bill is passed, a draft Order embodying a constitution on the lines

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  decided at the conference will be submitted to Her Majesty in Council. It will follow the full outline given in Appendix A to the Conference Report, of which the House has had copies.
  I need not trouble the House with a detailed description of the provisions to be included in the Order in Council, since they are set out in the Report, but, in brief, while the Governor will retain responsibility for external affairs, defence, internal security and the police, on all other matters he will normally be bound to act in accordance with the advice of the Executive Council—the old title is to be retained to describe what in effect will be the new Cabinet. That body will in future consist of members of the Legislature appointed on the advice of the member of the House of Assembly best able to command the confidence of a majority of his fellow members. Provision will also be made to safeguard fundamental rights and freedoms of the individual and to ensure the independence of the judiciary and the public service. In short, the new Constitution will provide for a modern form of Government with a Government leader and Executive Council responsible to the elected Legislature.
  In fairness I should make it clear that, as is not unusual on such occasions, there were differences of view between various groups of delegates at the conference where all shades of opinion in the Bermuda Legislature were represented. Indeed, in addition to the majority report endorsing the proposed Constitution, the report of the conference contains two minority reports, one arguing that the constitutional decisions go too far and the other that they do not go far enough. This indicates the difficulties which were presented by the conference. In fact, the decisions eventually reached were in the form of a compromise and were accepted by a majority of delegates on this basis —that is, as the best compromise which could be reached and agreed.
  A number of my colleagues on both sides of the House have visited Bermuda in comparatively recent times. They will agree with me, I am sure, when I say that my impression, when I visited it just before Easter this year, was of an island which is very small in area, which is very beautiful, and which is compara-
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  tively prosperous in terms of Caribbean life. It has one of the highest standards of living in the world, and the prosperity extends throughout the community.
  I should like to give the House some facts and figures. There are two television stations and four radio programmes —and this in a territory with a total population of under 50,000. Ninety-six per cent. of all households have a refrigerator, 82 per cent. have radio and 66 per cent. have television. It is, perhaps, not surprising that the people of Bermuda, possessing so many of the material things of the modern age, have been cautious in their approach to constitutional change.
  During my visit I met many people. I met representatives, I think, of all the major political groupings in Bermuda. I was impressed by the attitude of all, whatever their political views, to the problem of colour. Indeed, whether they wanted to go more slowly or more rapidly, they were all concerned that Bermuda should not be dogged by colour prejudice, should not be haunted by the problems of colour that have arisen in so many other parts of the world.
  I should also mention what I said in public in Bermuda about the Constitution —really as a comment on the disagreements that there had been about the pace of progress as represented by the constitutional proposals because, of course, members of one or two groups out there had represented to me that they wished that the Constitution would go further. What I said to them, and I quote now from the Royal Gazette of Saturday, 18th March of this year, was:
  "Any Constitution is an interim Constitution. I think that you must regard constitutional development as a steady process. Bermuda's new constitution is a very big advance on the previous one. It will be a good thing if people are interested enough to discuss how it will evolve further. If there is a demand for further change, then further change will no doubt occur."
  Frankly, I do not think that one could put the position more fairly.
  The Bill now before us will enable the new Constitution to be introduced. It gets rid of many of the archaic features of the old Constitution. It embodies a number of very important steps forward. But of course, even in our own society our though we do not have it by Order in Constitution is continually evolving—al-

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  Council or by a Bill going through the House of Commons—and I think that it is quite clear that in the situation in Bermuda there will be people who will wish to put forward ideas for further evolution of the Constitution.
  These we shall be ready for, and shall be glad to listen to representations when there has been experience of this constitution and if and when new proposals are put to us.
  10.43 a.m.
  Sir Frederic Bennett: I was very glad that the Minister of State mentioned, as is the fact, that of all the territories within the Commonwealth, Bermuda has been visited as much as any by very substantial numbers of hon. Members on both sides of the House, not only in their personal capacities but in attending the very many international conferences that have been held there.
  If I can claim nothing else, I can perhaps claim an even closer association with Bermuda than anyone else here, because I bought a cottage there about 15 years ago and have been a very frequent visitor. In fact, I am one of the casualties along the road of democratic advance, in that I have lost a vote which I used to possess because of my ownership of the cottage, although in view of what has just been said I must add that I never exercised that vote.
  Speaking on another personal note, I was on one occasion asked to stand as a Member of Parliament for a constituency out there. When I add proudly that it included one of the most racially integrated elements, that in St. David's Island, and does not consist only of one race, hon. Members will understand that it was with great reluctance that I felt bound to refuse in that my electors in Torbay might well not greatly appreciate my taking such a step, of divided loyalties.
  It is no part of the Opposition today to accept responsibility—nor would we be asked to—for the detailed results of the conference, but studying the results of that conference I think that, on the whole, one can say that this Bill is a very logical, natural and creditable step forward along the road to self-government for this very small territory.
  I add, because this has been a difficult matter to deal with and one should pay
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  tribute to all for having achieved this compromise, that in some other territories larger in population and area the process has been simpler because the normal advances in self-government have been much more of a reality than we know in our hearts is necessary or feasible in Bermuda, with its small area and a total population of under 50,000. Those facts have made the task much more difficult than has been the case in the steady advance we have been able to make towards self-government, and eventual complete independence, elsewhere in the Commonwealth.
  The hon. Lady spoke of Bermuda's economic conditions representing very much a special case. To a large extent this reflects very seriously on the sort of political future which the island has. I did not think that she was quite generous enough when she said that Bermuda had a very excellent standard of living in comparison with the Caribbean generally, although she added, as I do, that the standard of living compared favourably even with that of the island's giant United States and Canadian partners, and with our own.
  One has only to go to Bermuda and then travel to the southerly Caribbean territories—with the exception of the Bahamas, which even so is not so economically advanced as Bermuda—to appreciate that Bermuda is much better off than those southern areas; that in Bermuda, cutting across all questions of race, there is exceptional economic prosperity. We in this House would be very foolish if we were to encourage any steps that would damage such a notable achievement—
  Mr. James Johnson: Would the hon. Gentleman confirm that there is no poverty in Bermuda, as is stated in the Amendment to Motion 273, to which he has put his name, in today's Order Paper? It sounds a little sweeping to me to say that there is no poverty at all.
  Sir F. Bennett: I have not said that there is no poverty at all. I have never said that there is no poverty in this country, or in the United States. I have said, endorsing the Minister's remarks, that the standard of prosperity compares favourably with that in this country, in Canada or in the United States of

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  America and is a great deal better than it is anywhere else in the Caribbean area.
  What we have to consider is the basis of this widely spread prosperity. It is based on two features, and two alone, because Bermuda as a result of her size and for other reasons has virtually no natural resources. The first feature that sustains the island's prosperity is the chance historic one of the presence of an American base and the enormous spending power that that has engendered throughout the island. That has enabled Bermuda to develop an almost North American standard of living. But in thinking of this American base, and what it means in terms of highly-paid employment for all races at the base, and in work associated with it, we have to remember world strategic and military conditions alter, and although there is no sign yet of the U.S.A. cancelling or wishing to give up its base facilities in Bermuda, those facilities have been reduced.
  As we in this House know when we have discussed parts of the Commonwealth with a view to reducing our military commitments, such changes can lead to economic disturbances such as have taken place in Malta. It is altogether wrong to encourage Bermuda to believe that she may always have the opportunity to rest a large part of her prosperity on the continuance of the American base.
  We have, therefore, to turn to the other source of income and capital growth for Bermuda, which is tourism. I am sure that I carry the House with me when I say that, in the world today, quite apart from the climate with which Bermuda is blessed, there is one feature above all which encourages tourism, that is, political, social and racial tranquillity. Without that, the tourists simply do not come, and, to put it bluntly, if they do not come to Bermuda, she will suffer a steep decline in her standard of life, which could be quite horrifying.
  Having known Bermuda for many years, I must say that there have, in recent years, been regrettable signs of a slight entry of racial tension, signs which hitherto were, fortunately, notable for their absence. I have tried to determine what the causes of this development are. As the hon. Lady said, they are not to be found in the realm of
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  holding back political or economic advance, because progress in both these directions has been marked. We have seen, for example, how the old-fashioned property vote developed within a short time into an overall franchise.
  In my view, certain aspects of what has been happening in Bermuda are a reflection of the race troubles in the United States. American newspapers are distributed much more frequently than English ones in Bermuda, and, naturally, descriptions of race rioting and so on in the United States have had an unhappy impact upon an island so closely associated in both geography and tourism with the United States.
  Apart from that—I do not want to spend too much time on the point—there have been certain other external rather mischievous elements entering the Bermuda political arena, elements which in the past have not been closely associated with the development of true democracy elsewhere in the Commonwealth. Unfortunately, they have reared their heads in Bermuda.
  Mr. Marcus Lipton: Who are they?
  Sir F. Bennett: I have referred to external forces of the sort I have described, and I shall content myself with that observation. The House can form its own conclusion.
  The Minister very fairly pointed out that, although the outcome of the conference had substantial majority support, there were strong minority opinions expressed, particularly by members of the Progressive Labour Party. It is only fair to say a word about their objections now. Some of them, I think, have lost some of the force which was felt at the time when the Report of the conference was issued.
  In paragraph 3 of the P.L.P. minority Report, strong objection is expressed to the Constitution as a whole because it was felt that it compared very closely with the Bahamas Constitution and, at the time when the findings of the conference were prepared, the P.L.P. members felt that Bermuda would be unlikely to be able to secure the sort of political advance which they wanted within a Bahamas-type Constitution. I think that that is a fair interpretation of their view.

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  In fact, the Bahamas has since then, under a Constitution not greatly dissimilar, seen a remarkable political change in Parliament and Government, so that it cannot now be said that the Constitution proposed for Bermuda will stand in the way of any one party achieving power in Bermuda any more than it has in the Bahamas.
  There was strong criticism on the question of taxation. On this point, one must always bear in mind that, in dealing with the economy of a country which has no natural resources but which depends almost entirely on tourism and what is allied with tourism—it being an international tax haven—one cannot apply the rules of taxation which are relevant in a modem industrial society with its own resources. One must be very careful not to damage, for the sake of a political theory, a structure which is of great value to the island. It would be very hard to recover from such damage because there are so many other places in the sun which are all too ready nowadays to take over Bermuda's position in this respect.
  There has been criticism also of the three years' residence rule which will allow non-Bermudans to vote in future. Again, I regard this as shortsighted. If the island is to continue to prosper, more people must go to it, taking their ability to develop its potential and to help in local employment, apart from seasonal tourism. It would be selfish to think that in Bermuda—we do not do it vis-à-vis our other Commonwealth partners—we should prevent non-Bermudans having a vote if they decide to live in the country under its laws.
  Another question in that context is raised by the objection to the retention of boards. I hope that I carry the hon. Lady with me when I say that, although we in this country have tended, naturally and strongly, because of our traditions, to favour the departure of such boards and to feel that ordinary Government Ministries should take over their rôle—sometimes, nowadays, we do not seem to be following this precept in Britain as we should—when there is a population of only 50,000, including men, women and children, to be taken into account, there is, inevitably, a limit to the number of people of skill in govern-
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  ment who can devote their whole time to the work of government.
  In my view, it would be likely to harm development if we excluded entirely those who can help in governing the island only on a part-time basis. In saying that, I have very much in mind what we do in this country when dealing with a population of only 50,000 or so. We do not insist on a form of ministerial government in such circumstances, precluding everyone who can help only on a part-time basis.
  Now, the question of constituencies. When one looks at them carefully, one sees that the objections apply only to the large constituency of Pembroke, which will in future have double the number of members of the other parishes. On a strict proportional basis. obviously it should have rather more, but I do not believe that it is worth upsetting a Constitution because of a question which would, after all is said and done, give two more members for one parish if the P.L.P. had its way and a strictly mathematical basis were adopted.
  I took the average of all the other parishes and I found that, apart from Pembroke, they will have about 530 constituents on average per member, and Pembroke will have about 1,100, a little over double. That may be unjustifiable in strict mathematical terms, but one must recognise that there are quite wide electoral discrepancies of population in other parts of the world, and even in this country. I believe that my own constituency of Torquay has nearly double the number of constituents of Montgomery, yet I have not so far decided to go to the stake in order to make quite sure that there is a fair proportion as between one constituency and the other.
  Mr. Christopher Rowland: Does not the hon. Gentleman agree that the anomalies which occur in the British electoral system (a) are in time put right, and (b) tend to cancel one another out as between the parties, whereas in Bermuda neither of these factors seems to operate?
  Sir F. Bennett: I think that the hon. Lady gave the answer to that question in advance by saying that no constitutions are entirely static. They are in the process of being put right. They

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  have already been put right 50 per cent. of the way at the conference she attended, as compared with the situation before, when the number of members for Pembroke was doubled. Therefore, the constitution is on the way to being remedied.
  I do not think that we do any service by stressing racial differences in Bermuda. If we do, we shall perhaps get a certain amount of self-satisfaction, but we shall do a great deal of damage to the economic structure in Bermuda which is dependent for a large degree of success on the lack of racial tension.
  Finally, I wish to say a word about independence, which people in Bermuda did not mention much at the Conference. But it was mentioned in a letter written to The Times afterwards by the leader of the P.L.P. Any territory must, in due course, decide which way it shall go, but there seems to be a practical limit to what can form an independent sovereign country in this day and age as regards the numbers involved. I do not accept for a moment that our granting independence to Bermuda, with its total dependence on outside resources concerning tourism, and so on, and the presence of the American base, would make independence in any way a reality when we talk in terms of sovereign countries elsewhere with substantial populations.
  The hon. Lady concluded by saying that this was not the end of the road. We on this side of the House agree with that, but we think that it is a marked step forward. From now on all our efforts should be concentrated on making the constitution work. Such tensions and suspicions as have arisen within Bermuda can best be overcome and disproved, as has been shown elsewhere in the Commonwealth, by the two races working even more closely together in the future than they have in the past.
  It is worth mentioning that, unlike parties in other parts of the Commonwealth, the U.B.P. in Bermuda has a substantial number of people of races other than Europeans in its membership. I believe that if they were here today they would endorse every word I have said, in that the path forward in Bermuda is not by making comparisons on strictly racial lines, but by trying to get the
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  races working together. The ratio of numbers between the races is not even two to one, leaving out the tourists and the base personnel. There is no other part of the Commonwealth where the discrepancy between the two races is so small, and it is essential that they work together and not apart because Bermuda, if they are working apart, is nothing at all.
  Therefore, I have no hesitation—and I believe that I can also say this on behalf of my right hon. and hon. Friends —in endorsing the Bill and the Order in Council which is to flow from it, and I wish the people of Bermuda well and hope that they will work in amity.
  11.4 a.m.
  Mr. Tom Driberg: All of us in the House have a high regard for all the people of Bermuda, whatever their racial background. Some of us wish that they all had equal rights. The hon. Member for Torquay (Sir F. Bennett) appears not to wish that, judging from what he says. He says that we should not stress any racial inequalities. But it is impossible not to draw attention to them when they are felt as keenly as they are by the coloured people of Bermuda who, after all, despite what has been said about the very small difference in numbers, are a majority who succeed in obtaining only a minority of seats in the House of Assembly because of the way in which the constituency boundaries have been managed.
  I do not know in this connection what the hon. Gentleman meant when he said that we should not take any step which could damage the economy of Bermuda —I am trying to paraphrase him fairly, presumably by keeping away either tourists or the base personnel, or something like that. But surely he is not suggesting that American tourists would refrain from going to a beautiful island for their holidays if it had a coloured Government, or anything like that?
  Sir F. Bennett: The hon. Gentleman misquoted me once at the beginning of his speech and I decided to let it go. But I must emphasise that I did not say that. I said that American and other tourists would not go if there were a state of non-tranquillity in political and racial terms on the island. That is, in effect, what has happened disastrously for other economies in the world.
  Mr. Driberg: I entirely accept that. I said that I was paraphrasing the hon. Gentleman. He says "non-tranquillity". Presumably he means riots and disturbances, but who is going to start them? Presumably if this Constitution went a bit further and gave real justice—what the hon. Gentleman called, perhaps ironically, "true democracy"—to the people of Bermuda, he means that the dominant white oligarchy would resort to violence to prevent the coloured people from getting their rights and a just constitution. Is that what he means? If so, it does not say much for their sense of true democracy.
  Sir F. Bennett: I do not want to weary the House by constantly answering these rhetorical questions. I am content to let my speech rest on the record.
  Mr. Driberg: I think that the hon. Gentleman is right, and HANSARD will show tomorrow exactly what he said. But I wanted to draw out some of the implications of what he said, because they seem to me to be a little dangerous.
  In introducing the Bill my hon. Friend explained that the Bill says practically nothing, as is evident to the House. There is nothing of substance in it about the Constitution. I should like to ask her whether the Order in Council embodying the Constitution will be debatable when we see it. Although she assured us, I am certain in good faith, that the summary of the provisions of the proposed Constitution represents roughly what will be in the Order in Council, there may be second thoughts. Changes may be made, and we should like to see the actual terms of the Constitution before we decide to support it. If she replies by leave of the House, perhaps she will answer that point.
  I am not quite sure that I accept the way in which both my hon. Friend and the hon. Gentleman seemed to equate the two minority Reports. My hon. Friend said that there was one minority Report which said that the Constitution goes too far and another from the Progressive Labour Party which says that it does not go far enough. Of course, I suppose that the first minority Report, the one which says that it goes too far, must come from a relatively small minority of the dominant race, whereas the other comes from the P.L.P., which represents a much
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  larger proportion of the population of Bermuda. It is not altogether fair to seem to equate those two minority Reports. The conference was dominated by people from the majority party elected on the old unjust boundaries.
  There are three important aspects of the report. First, there is the question of the registration of electors. My hon. Friend has referred to that. A promise was made to send an expert. The P.L.P hoped that something on the lines of the custom in this country of registering electors would be adopted. It was promised that an expert on such matters would be sent, and an expert was sent. I am sure that he did his best and gave the best advice that he could.
  But the expert who was sent was an expert from the Colonial Office accustomed to advising the peoples of—perhaps through no fault of their own— semi-literate developing countries on constitutions and so on. Surely an expert should have been sent from the Registrar-General's Office, since it was desired that the system adopted there should be something like our system here. I gather that he has reported but his report is not as yet available. I believe that it has not been published in Bermuda either. If I am wrong, perhaps my hon. Friend will correct me.
  The second most important aspect of the Report is the promise of consultations to widen the basis of candidature. At present—and this is a most extraordinary aspect of the undemocratic system in Bermuda—all public servants are debarred from standing for the House of Assembly. This is extremely unfair because it means that some of the most educated and articulate people are debarred from standing—school teachers, for instance—because so many people are public servants in Bermuda, as the hon. Gentleman no doubt knows.
  If one looks at paragraph 15 in the Report of the conference, one sees that
  "The Conference agreed that the present law by which all persons paid from public funds are disqualified from membership of the Legislature should be reconsidered. The United Bermuda Party representatives"—
  that is, even the dominant white minority—
  "said that their Party would consult with the Progressive Labour Party and the Independents in the House of Assembly on this matter with a view to the alteration of the law."

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  I draw my hon. Friend's particular attention to the words,
  "… with a view to the alteration of the law."
  I understand that an all-party committee was set up, consulted—of course, it was naturally dominated, as one would expect, by the U.B.P.—and, I gather, has recommended that there should be no change in the law. This is utterly false to the promise given to the Constitutional Conference and I would like to hear what my hon. Friend has to say about that and whether anything can be put into the constitution embodied in the Order in Council so as to ensure that all adults otherwise qualified shall be able to stand for election, whether or not they are in receipt of public funds. It is fantastic that, for instance, school teachers should be so debarred.
  The third most important issue—and this is the one which I think the Report itself somewhere says is the most important issue—is the question of the division of constituencies. Incidentally, it is extremely inconvenient that we in this House have not got available in the Vote Office the Report of the Boundaries Commission. There are two copies of it in the Library which we are not allowed to remove and bring into the Chamber. This is most inconvenient and my hon. Friends' Department should have made sure that copies were available in the Vote Office.
  At any rate, there is no doubt that, although the hon. Member for Torquay brushed aside the distinction between constituencies, between electors and the numerical size of electorates, this is the crux of the inequalities that undoubtedly exist in Bermuda and will continue to exist, although in a somewhat modified form. The constituency boundaries will continue in many cases to be rigged. Originally, the rigging cannot properly have been so described. It was a byproduct of historical circumstances probably. But the deliberate perpetuation of it is, of course, rigging or gerrymandering in the interests of the oligarchy. This is almost as bad in some respects as the rigging of the boundaries in Northern Ireland.
  Whereas in the past it would be correct to say that, at any rate in some parts of the island, if one was a coloured
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  man one's vote was worth one-ninth of the vote of a white man, now it would be worth one-third. It is not a case of one man one vote but of one third of a man one vote—which, of course is a sensational advance.
  No doubt because she wanted to speak briefly and get the Bill through quickly, my hon. Friend did not say much about the debate which took place in the Assembly on the Report of the Boundaries Commission. She said that it had been agreed by the Assembly. She did not say that it was very strongly opposed and that there was a vote on it which had a quite substantial minority against it. The vote was 21 to 11. I understand that this is so, but perhaps my hon. Friend will correct me if I am wrong.
  Apart from the Pembroke constituency referred to, Devonshire, South is one of the most important constituencies. It is practically all white and happens to be the constituency of the Speaker of the Assembly. Unlike the totally impartial occupant of our Chair, he behaves rather like our Lord Chancellor in another place and descends from the Chair to take part in partisan battles on the Floor of the House—only rather more so than the Lord Chancellor.
  The Speaker of the Assembly itself, I understand, was one of those who voted for the adoption of the Report of the Boundaries Commission, which guaranteed him his safe white seat in Devonshire, South constituency. In this House, even if we had the same system as they have in another place, with the Lord Chancellor taking part in the debate in a partisan sense, I think that our Speaker would think it unwise or improper that he should vote for the perpetuation of his own comfortable majority.
  Incidentally, this is, of course, another answer, apart from the one that my hon. Friend gave, to the hon. Member for Torquay's point about constituencies in this country not being altogether equal. The constituencies in Bermuda are unequal on a racial basis. That is how the boundaries are rigged and will continue to be rigged to a considerable extent.
  I wonder why the Labour Government have paid so little regard to the views of the highly responsible Progressive Labour Party of Bermuda. It is a party whose ideological outlook is rather

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  similar to that of the British Labour Party, perhaps rather more moderate even, perhaps rather more to the centre than to the left. It has applied for membership of the Socialist International and I believe that its application may be considered favourably but I am not sure about that.
  The Socialist International has as its member parties the British Labour Party, the S.P.D., the Scandinavian parties and a number of other parties of unimpeachable respectability. I wish that a little more attention could have been paid by a Labour Government here to the views and aspirations of our comrades in Bermuda who are, at this moment and will continue to be, discriminated against, even if they are discriminated against a little less extremely than in the past. I do not believe that it would have been impossible to take a further step and do the whole thing in one instead of just cautiously step by step.
  I understand—and I am sure the hon. Member for Torquay would confirm—that the oligarchy in Bermuda are relatively civilised, gentle people. They are not savages like the Rhodesia Front extremists. They would not have started shooting, rioting, and so on, if we had given the coloured population equal electoral rights. I certainly hope not. It would speak very badly for them if anybody thinks they would. Anything which enhances racial tension is bad. I maintain that this Constitution, retaining these gerrymandered elements of racial privilege, will tend to enhance racial tension. The P.L.P. is not a racialist party, but if, on the one hand, there are these privileges and, on the other hand, people are debarred from equality, inevitably feelings will get worked up and people will vote according to colour, which is a very deplorable thing.
  Fifty-nine hon. Members of this House signed a Motion, which said:
  "That this House will decline to enact any legislation enabling additional powers to be granted to the Legislature of the Colony of Bermuda until such time as that Legislature has provided by law that the House of Assembly of the Island shall be composed of members elected from constituencies of approximately equal population delimited without regard to colour or social status."
  The Report says that no regard is to be paid to racial considerations. On the face of it, that looks very fine, but as the
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  whole basis of the electorate, at any rate in some of the parishes, is racial, some regard should have been had for racial considerations in an effort to carve up the parishes, the constituencies, more equitably between the races so that people would not be tempted to vote according to colour but according to party.
  I hope, therefore, that even at this moment, my hon. Friend the Minister of State will consult her colleagues and decide to take the Bill back and have another go at giving true equality and true democracy to the people of Bermuda.
  11.23 a.m.
  Mr. Nigel Fisher: The new Constitution for Bermuda has been criticised, not on this ground by the hon. Member for Barking (Mr. Driberg), but by the Progressive Labour Party in Bermuda, partly because it follows the same lines of the Bahamas Constitution. This is not unusual, as these two Colonies have always tended to move in step constitutionally, with the Bahamas perhaps a few years in advance of Bermuda. But as I presided over the Bahamas Constitutional Conference and was responsible for its decisions, I feel bound to say a few words in defence of the Bermuda Constitution on this occasion.
  The main Bermuda Opposition objection to the Constitution is—just as the main Bahamas Opposition to their Constitution was—simply and solely—and I hope that hon. Members will not think I am being too critical about this—a party political objection. I do not criticise that: we are all politicians. But the objection, in essence, is that the smaller constituencies are over represented and that the larger constituencies are under-represented and that this favours the ruling party in each of these Colonies. It was almost inevitable in the Bahamas, because of the number of out-islands which wanted to return their own member or members as compared with the main island of New Providence.
  The same general considerations apply in Bermuda where the parish tradition, as the hon. Lady pointed out, is still very strong. Indeed, they apply in Britain, too. The scale is different in Britain, but, strangly enough, the discrepancy is not. In Bermuda, 28,000 voters return 40 Members of Parliament—an average

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  of one Member for every 700 votes. I rather envy any Member of Parliament anywhere who has an electorate of only 700.
  Under the new Constitution, I understand that 400 electors will return a member in Hamilton, which is the smallest parish, while in Pembroke, the largest parish, 1,100 electors will return one member. That is less than a three to one difference between the two extremes.
  In Britain, the two smallest constituencies numerically are the Western Isles and the Ladywood Division of Birmingham, with less than 23,000 electors each. Merioneth and the Exchange Division of Manchester are not much larger with about 25,000 electors each. The largest constituencies are Billericay, with 103,000 electors, and the Langstone Division of Portsmouth, with over 97,000 electors. So, in Britain, there is more than a four-to-one difference between the two extremes as compared with less than a three-to-one difference in Bermuda.
  If hon. Members opposite are basing their objections on numbers—as the P.L.P. leader, Mr. Robinson, did in Bermuda—then 1 suggest that the United Kingdom figures are, to say the least, not particularly helpful to their argument.
  Mr. Driberg: The hon. Member has not grasped the point that I tried to make — perhaps inadequately — earlier. The population of Billericay is not totally coloured.
  Mr. Fisher: The hon. Gentleman always makes his points with admirable clarity, but it is not particularly helpful, in the context of Bermuda, to keep underlining the colour aspect.
  I cannot remember what the exact discrepancy is between the largest and smallest constituencies in the Bahamas; but, as my hon. Friend the Member for Torquay (Sir F. Bennett) pointed out. with the same sort of Constitution and the same Opposition objections to it, the P.L.P., led by Mr. Pindling, defeated the U.B.P., led by Sir Roland Symonette, in the recent General Election, so there is, on the face of it, no reason why the Opposition in Bermuda should not achieve power under their new Constitution.
  Sir F. Bennett: In furtherance of the valid point my hon. Friend has made, may I remind him that the discrepancies between the two extremes of constituency in the Bahamas is about six-to-one, compared with three-to-one in Bermuda?
  Mr. Fisher: I thank my hon. Friend very much. I should have remembered that myself.
  The truth is that the Bermuda Constitution, like the Bahamas Constitution, was, as the hon. Lady said, a compromise, and rightly so. The hon. Member for Barking criticised the hon. Lady for not taking sides with the P.L.P.; but, with great respect—the hon. Members knows that I have a great respect and indeed, if I may say so, affection for him—I think that shows a misconception of the British Government's rôle at these conferences. Ministers here are not supposed to take sides according to party affiliations. They are in the middle; they are umpires between the two different parties.
  Constitutional conferences always depend on a willingness to compromise and make concessions on both sides. Anyone who has had experience in the old Colonial Office, or, more recently, in the Commonwealth Office, knows that perfectly well.
  Mrs. Hart: Does the hon. Gentleman agree that the only alternative is to impose a constitution upon a territory?
  Mr. Fisher: I thank the hon. Lady very much. She brings out the point I am trying to make about either imposing a settlement by an arbitrary decision taken in Whitehall, or trying to bring the parties together and acting as a mediator between them. The United Kingdom Government—of any party—is always in the position of an umpire between different political parties in the Colony concerned, and the British Minister in charge of the conference has to act as a mediator between them.
  Mrs. Hart: This has been said once or twice, so I should set the record in HANSARD straight. I was not actually responsible for the Constitutional Conference. I moved over to this side of the Commonwealth Office after the conference had been completed in January.
  Mr. Fisher: I realise that. I should have remembered that the conference was held before the recent amalgamation. I think that the former Secretary of State for the Colonies was in charge. I am sure that his experience was the same as mine. When I dealt with these things, I never expected to get agreement at the conference table at Lancaster House. I used to try to identify the main points of difference and then bring the two parties together to resolve them. I used to invite first the leaders of one political party and then the leaders of the other political party round to my house.
  I would say to Party A, "If you will move a little closer towards the centre on this issue, I will try to get the leaders of Party B to move a little nearer to the centre from their point of view." I tried in that way to bring about a compromise, calling for a sacrifice from both parties of some of the tenets they held very dearly.
  Sometimes I succeeded in securing agreement. Sometimes I did not. But neither side should ever be encouraged to win 100 per cent. of its case, because that would mean total humiliation for the other side. It seemed to me that the job of the British Minister in charge was to devise a package deal which was reasonably fair to both sides but about which neither side was very enthusiastic.
  I have no doubt that the same technique was employed by Her Majesty's Ministers at the Bermuda Constitutional Conference. Indeed, the very fact, as the hon. Lady said, that some delegates at the conference thought that the Constitution went too far and others thought that it did not go far enough is some evidence that the compromise between these different views was probably roughly right, although I must point out to the hon. Member for Barking that neither the hon. Lady the Minister of State nor my hon. Friend the Member for Torquay equated the two minority Reports. Although I was no longer in any way responsible, I remember urging the U.B.P. leaders when the conference started to accept a compromise which went further than they had wanted to go, because, as I told them at that time, the then Colonial Secretary could not possibly propose any settlement which was
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  not a compromise, and that is how it worked out.
  I do not want to say anything contentious or controversial from a party point of view, because that is not the atmosphere of this debate, but I venture to suggest that the compromise proposed by the Secretary of State at the conference might well have been accepted by both sides but for the extreme and very uncompromising advice given to the Bermuda Opposition by their own constitutional adviser. As the hon. Lady said earlier, one must move gradually in matters of this kind. It is always a process of evolution.
  I know that my hon. Friends particularly will agree, but I also believe that the whole House will agree, that, fortunately, we have in Bermuda a very middle-of-the-road Governor, a former colleague of ours here who understands all the politics of the matter very well indeed, who himself, as I think will be universally accepted in the House, has no vestige of colour prejudice, whose whole career has been devoted to the Commonwealth, and whose tact and good sense has been, and I think will be, a sheet anchor of stability combined with progress in Bermuda.
  Under his guidance, I am sure that Bermuda will have a happy and a prosperous future; and we all wish her people well in the years ahead.
  11.34 a.m.
  Mr. James Johnson: I have listened with some fascination to the two opening speeches. Clause 1(4) of the Bill seems quite straightforward in its provision that Orders in Council will be laid before Parliament so that we shall be able to have another look at some of these settlements later. However, the speeches of my hon. Friend the Minister of State and of the hon. Member for Torquay (Sir F. Bennett) caused me some moments of alarm, as they did my hon. Friend the Member for Barking (Mr. Driberg). Not the least cause for concern was the exchange between my hon. Friend the Minister of State and one of her predecessors at the Colonial Office, the hon. Member for Surbiton (Mr. Fisher). I almost began to think that they were

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  forming a union of past and present Colonial Ministers.
  It is not my custom to speak in a colonial debate on an island or colony which I have not visited. Apparently, I am one of the few Members present this morning who has not been to the beautiful island of Bermuda. However, I had the pleasure of meeting many of the delegates at the conference at Lancaster House. Even more important, I listened for a long time to the members of the Opposition, people such as one lady who, I think, was a former Lady Mayoress of Bradford, and a very charming and distinguished coloured lady barrister whose name was Mrs. Lois Browne-Evans. I was impressed by the calibre of the delegates and by the content of their conversations with me. I have checked up on some of the facts they mentioned.
  At the time of the November conference some of us asked Questions about the settlement or the Constitution. Last November, we tabled the Motion to which my hon. Friend the Member for Barking has referred. In reply to our Questions, we were told that this Constitution was the best Bermuda ever had. I accept that, because there has been no alteration to Bermuda's Constitution since about 1620. We therefore expect a move forward but we really expected a longer step forward than this.
  We appreciate that my hon. Friend the Minister of State must defend this Constitution, or at least accept it and explain it, but she is the legatee of those decisions who have gone before. I agree with my hon. Friend the Member for Barking, having met the delegates to the conference, that we could have done much more than we have done to help the Opposition. I say to the hon. Member for Surbiton that this is not a matter of party. This is a matter of helping the Bermuda have-nots. As I understand colonial society, they are the have-nots, and, on whichever side of this House we sit, we should be concerned with helping those living in this distant island who need our help. This is how I approach this question, not according to whether the Opposition in Mauritius, in Hong Kong or, as in this case, in Bermuda, is sympathetic to my party
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  or to somebody else's party. These people need help.
  I want to refer to the objection that this Constitution is based upon the Bahamas Constitution. I am told that the only coloured member of the United Bermuda Party, Mr. Rattray, following the conference in London, has left the United Bermuda Party on the ground that he does not like this Constitution because it is modelled on the Bahamas one.
  Mr. Rowland: If I understand my hon. Friend correctly, he is saying that Mr. Rattray is the only coloured member of the U.B.P. and has left the party. If that is his statement I am sure that he is wrong. He has overlooked the existence of the Hon. E. T. Richards.
  Sir F. Bennett: The hon. Member for Kingston-upon-Hull, West (Mr. J. Johnson) may have ignored the fact that at least 12 non-European candidates will be among those adopted by the U.B.P. in the forthcoming elections.
  Mr. Johnson: I will defer to those of my colleagues who know the facts better than I. This was my information. I retract my statement if I am assured that it is wrong, and of course, the information was second-hand. The hon. Gentleman the Member for Surbiton said that it was possible for the Opposition to gain power. Nothing is impossible, and much depends upon the composition of the constituencies, but it does appear that unless there is an enormous shift in public opinion, the dice is loaded against the Opposition party ever winning.
  Paragraph 7 of the last Government Report, with which the Opposition were in complete disagreement instances the most populous parishes of Pembroke, Devonshire and Sandys. They contain about 23,672 persons out of a total of 42,640 and they return 16 Members to the Assembly. Six other parishes, containing a minority of the population 18,968, send back 24 Members. I listened to the hon. Gentleman the Member for Surbiton comparing Welsh and Irish constituencies, but figures like this are much more than merely marginal.
  We have to have a policy which will allow the Progressive Labour Party to have a better chance of gaining power, as, I am told, the former Opposition have

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  gained power in the Bahamas. In Devonshire parish, I understand that the parish should have been equally divided on the basis of the local population, coloured or otherwise. Instead, to suit the convenience of the majority United Bermudan Party, the division is along the highway, giving an almost entirely white constituency south of the highway which has returned Mr. Speaker. Is it a fact that the Boundary Commission's findings have been debated in the Bermuda Assembly and have been passed?
  Mrs. Hart: Yes.
  Mr. Johnson: Then we are faced with a fait accompli, and we are being asked to sign a blank cheque.
  Mr. Robert Howarth: Since the Speaker of the Assembly has been mentioned, may I say that my understanding is that the old Speaker. if I may use the term, is not standing again?
  Mr. Johnson: I have nothing against Speakers, young or old. My concern is about the Constitution which allows a procedure so alien to the customs of this House. I hope that the position where Mr. Speaker can actively affect the decision at the end of a long debate will be ended. It is quite out of order, and against our Anglo-Saxon traditions.
  I am also told that teachers, bus drivers and conductors, and other manual workers in public employment will not be allowed to stand as candidates in the election. This will bar hundreds of able, capable artisans, mechanics, shop stewards and the leaders of unions, whose views ought to be heard on the Floor of the Assembly. Instead, the Assembly is to be dominated by a white, monied, landed element. This is an element which our reading of history shows us, is not helpful to mechanics, busmen, conductors or teachers. Can the Minister say in what other Colony this state of affairs prevails?
  I would like to protest against the debarring of large sections of the working population, who would make fine members of the Assembly. Government employees should be allowed to stand as candidates. We have also been told that in colonial constitutional discussions it is unusual to make large changes in the constitution against the will of the majority party in power. I suggest that in this case we should pay a little more attention
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  to the minority, and a little less to the past oligarchy, which has been in power for so long. I sincerely hope that we shall have a second look at these matters, and will be able to debate in this House some of the proposed changes.
  11.50 a.m.
  Mr. Bryant Godman Irvine: Having had the good fortune to be in Bermuda on three occasions during the past 12 months, I have found the greatest difficulty in recognising any reflection of the happy island which I visited in the speeches which we have just heard from the hon. Members for Barking (Mr. Driberg) and Kingston upon Hull, West (Mr. James Johnson).
  I have found it particularly difficult to reconcile my recollection of some of the functions which I attended in Bermuda with the observations which have just been made. One happy occasion which I remember vividly was the presentation of the cups at the end of last year's football competition. It seemed to me that the atmosphere prevailing then was in no way reflected in the speeches of the two hon. Gentlemen.
  My hon. Friend the Member for Surbiton (Mr. Fisher) spoke of the position in our own constituency of Billericay, referring to the number of people there who have to cast their votes in order to send a Member to this House and comparing those numbers with the numbers in other constituencies in the United Kingdom. That was all brushed on one side. It did not seem to matter to hon. Members opposite if there was such a situation in Billericay because the faces of the people there are white.
  Apparently, it is a matter of no great importance that so many people in Billericay are entitled to a vote for only one Member of Parliament. In Bermuda, on the other hand, where a similar, though relatively much smaller, situation can arise, a large number of people whose faces happen to be of a different colour having to vote for their Member in one constituency, it is said that a vital principle is involved.
  It seems to me that a wrong emphasis is being put on that comparison. In my view, the principle should be the same, whether the electorate is in Billericay or in Bermuda. That is the first point I make. I have, as I say, found it difficult

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  to reconcile the views just expressed with the Bermuda which I have had the good fortune to visit on a few occasions recently.
  It seems to me that the White Paper giving the Report of the Bermuda Constitutional Conference contains the answers to most of the points which the two hon. Gentlemen made. For example, in paragraph 6 it is said:
  "There was general agreement, the Progressive Labour Party representatives dissenting, that all shades of political opinion in Bermuda were represented at the Conference."
  Hon. Members have been making a case on behalf of the P.L.P. in Bermuda, but it is clear that there was general agreement at the conference that all shades of political opinion were represented.
  Next, at the end of paragraph 10, with reference to the proposed terms of reference for a Boundaries Commission, it was said that,
  "subject to the foregoing, the Commission should ensure that the constituencies contain as near as may be equal numbers of adult persons, as determined by the immediately preceding census".
  It seems, therefore, that, whatever point was being made by either of the two hon. Gentlemen who have just spoken, the answer is given in paragraph 10.
  Again, in the middle of paragraph 19 we read:
  "It was pointed out on behalf of the United Kingdom Government that the form of the new constitution could be made an election issue and that if a majority of members were elected to the House of Assembly who were opposed to some or all of its features the new Government would then have a mandate from the electorate to seek further changes which the United Kingdom Government would, of course, consider."
  Thus, we have the view of representatives from Bermuda that all shades of political opinion were represented at the conference. It is stated that the Boundaries Commission would ensure that the constituencies contained as near as may be equal numbers. Finally, it is stated that if, in due course, as a result of the democratic processes of election, a new Constitution were desired, this would be considered by Her Majesty's Government.
  Mr. Driberg: The hon. Gentleman is speaking almost as though it were an agreed Report. All shades of opinion
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  were represented, but there was dissent and disagreement about the Report.
  Mr. Godman Irvine: Yes, but what I am pointing out is that, on an objective view of what is stated in the Report, even the three representatives who dissented have legitimate democratic methods available to them of dealing with the problems which they emphasised. I do not agree that there is any reason why we should complain about the Report in the House today.
  On another and happier note, I endorse what was said by my hon. Friend the Member for Surbiton about our former colleague. I had the good fortune to hear Lord Martineau make a speech at the Royal Commonwealth Society just after the Constitutional Conference had taken place. I felt then that, if that speech had been read by Members of this House and by people in the Commonwealth, not only would it do a great deal of good to those who read it, but its influence would be very beneficial in all parts of the Commonwealth. I did not want to let this opportunity pass without saying how highly I regarded that speech and how much appreciation I found in Bermuda, in all parts of the island, for the work which he is doing.
  I add my good wishes to the people of Bermuda in their next step forward, expressing the hope that they will have a very happy future under this new Constitution.
  11.56 a.m.
  Mr. Christopher Rowland: Unlike the hon. Member for Torquay (Sir F. Bennett), I have neither the pleasure of owning a cottage in Bermuda nor the agony of having to decide in which House to sit, the Bermuda House or this House of Commons; but I think that I am the last person in the Chamber to have been in Bermuda, and I wish to contribute to the debate on that basis.
  As everyone who has been to Bermuda recognises, the island has many unique features. It receives no aid from this country and, therefore, feels more able to look us in the eye in determining its own future. It is not a poor Colony by any standards. The colour bar, so far as it exists at all, is being chipped away gradually but remorselessly by the Governor and those who serve with him and under him. What is, perhaps, the

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  most significant feature of all has not yet been mentioned. Bermuda has, so far as I know, proportionately the largest white minority—38 per cent. of the population—of any country in the world, certainly of any country in the British Commonwealth. This fact raises certain considerations which I wish to put to the House.
  There are other features, also, such as that it cannot be federated with any neighbour. There have been several references to the Caribbean, but it is quite improper even to mention Bermuda in the Caribbean context. It is nowhere near the Caribbean. It is on its own. Partly on that account, Bermuda can never, in my view, look forward to total sovereign independence. I do not believe that an island of 50,000 people, by itself and where it is, can look forward to that prospect. Those are all considerations to be borne in mind in the context of this debate.
  Like other hon. Members who have visited the island, I have been struck by two features which must occur to anyone with reasonably progressive tendencies. First, Bermuda needs a revision of its tax policies. A situation in which revenue is raised, basically, by a tax on imported goods, which bears more heavily on the poorer sections of the community, and in which no tax is raised from income or from inheritance is one which cannot be tolerated in the modern world, although it has an incidental advantage in making the foreign tourists, who buy goods in the shops, contribute to the revenue. I am certain that some revision of tax policy is required. The second feature which strikes a visitor is the disparity in voting strength between the various parishes. It is a fair assumption that revision of voting patterns will gradually lead to a revision of the tax structure.
  I found particularly noteworthy the caution and, in some quarters, the apprehension of the white "Establishment", if one may use that term, a caution not entirely without foundation. They realise that Bermuda's very prosperous economy is based on three potentially fragile elements: on tourism, mainly from North America; on being a centre of international investment, for tax reasons which I do not pretend to understand—this was recently high-lighted by the existence of
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  the Barracuda Tanking Corporation in Bermuda, which owns the "Torrey Canyon"; and, third, on the existence of the United States bases.
  All three of these ingredients in their prosperity could be affected if there was violent change and I think that because of this the white "Establishment" fears the emergence of party politics based on colour, whether it is their colour or the colour of the coloured community. Because of this fear some do not want any party politics at all, though I believe that they are spitting in the wind in that hope.
  I must report what I thought was a slightly disturbing event while I was in Bermuda. It was advertised in the local Press that a meeting was to be held by the Opposition party and to be addressed by a "black power" representative from the United States. Had I known about the meeting I would have attended it as an interested politician but I am glad that I did not because I understand that no white people were admitted and that, in fact, a white journalist was asked to leave.
  Those are factors which we have to take into account. I believe that the more sensible and far-sighted members of the white community realise that true democracy, to use a phrase which has been used already, is coming, and they are anxious to have multi-racial parties and some tax reform. It may be that they are making a virtue of necessity, but whatever the spur they are trying to be virtuous. This is not a South African situation where there is a large white minority of about 32 to 33 per cent. of the population arresting the development of the coloured majority.
  No one would pretend that it can be equated with that situation. On the other hand, it is not a Kenyan situation where the white minority was so small—and, of course, it was even smaller elsewhere—that its interest could be rolled over by the British Government of the day. It is in neither of those categories and I think that this determines the speed at which the British Government are deciding to go.
  By Bermudan historical standards, I think that the white "Establishment" has accepted quite rapid change already. Only four years ago there was only the property vote. Now there is universal suffrage for everybody over 21, with no property vote. I think that only four years ago the idea

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  of there being any move towards justice in the number of seats being granted would have been thrown out of court. Some move has been made in the case of Pembroke. For a country which has had a restricted franchise for the previous 343 years and with the Legislature the size of which has been fixed for the previous 267 years, this is quite fast progress in four years.
  Mr. Fisher: Hear, hear.
  Mr. Rowland: I am not trying to advance the doctrine of "unripe time", that time is never right for any change. What I am suggesting is that so long as some movement is assured one can accept a policy of one step at a time.
  As my hon. Friend the Member for Barking (Mr. Driberg) has said, the boundaries were not rigged in the sense that people sat down and decided consciously to rig them. They are the by-product of the history of the parish system, but hon. Gentlemen opposite who may share many of the views which I have expressed do not serve their argument by trying to defend the present disparities in electoral sizes by referring to this country. I think that the only reason why they remain defensible is that change overnight would mean a pace of change which would give rise to some apprehensions in some quarters in Bermuda. This is the only reason for going slowly and not by trying to show that it is no worse than Ladywood and Billericay. With respect, I think that this is a dangerous argument to use.
  I have some reservations even about the Bill as proposed. It seems to me that in conjunction with the Bermudians we are landing them with a somewhat large superstructure of government, with a non-elected Legislative Council of 11 members and an elected Executive Council of seven or more members. There will be two chambers, the lower one consisting of 40 elected members. I cannot help but reflect that as more people voted for me in Meriden than voted in the whole of Bermuda at the last election, and that if I add my opposition vote there were more votes than the whole population of Bermuda, 40 members is probably rather high.
  The last point of my intervention is really to ask my hon. Friend to reiterate
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  in unequivocal terms something which she probably thinks she has done. I would like an assurance that there will be further movement. Paragraph 17 of the White Paper says:
  "An assurance was given that the Secretary of State would not advise the making of any Order in Council to revoke or amend the new Constitution, without consulting the Bermuda Government…".
  The implication of that is that a revoking or amending may take place even if the Bermuda Government do not like it, because the consultation does not imply that agreement is necessary.
  I hope that that is roughly the situation, but paragraph 19 says:
  "It was pointed out on behalf of the United Kingdom Government that the form of the new Constitution could be made an election issue and that if a majority of members were elected to the House of Assembly who were opposed to some or all of its features the new Government would then have a mandate from the electorate to seek further changes which the United Kingdom Government would, of course, consider."
  I think that that gives the impression that if the majority of elected members do not want change there may be none. What hon. Members on this side of the House are trying to get clear is that if the party representing the majority of the popular vote, which may have only a minority of members in the new Legislature, want change the British Government will consider it even if the majority of members are still reluctant to go any further forward.
  I support the cautious advance which the British Government are making. I think that this is almost a unique Colony, certainly unique in its racial balance. I think that this is a good reason for going carefully, but I give my support to the Bill in the belief and hope that we are in no way qualifying our determination to go ahead eventually to the true democracy in which I am sure hon. Members on both sides of the House believe.
  12.8 p.m.
  Mr. Neil Carmichael: I was one of the Members who had the privilege of being in Bermuda earlier this year. I would not claim that a six-and-a-half or seven-day visit gives me any kind of authority to speak for Bermuda, but I think that one's interest in a place is increased considerably

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  if one has been there and talked to people about the problems of the new Constitution with which many of them were concerned at the beginning of March.
  I am slightly horrified at what my hon. Friend the Member for Meriden (Mr. Rowland) said about a "black power" meeting from which all white people were excluded. I hope that this is not a general trend in the island. I think that we should be careful when we talk about politics in Bermuda becoming a matter of colour, because it has been very much a matter of colour up to now. The only difference is that it has been absolute white control. We sometimes take the view that white is not a colour, but I think that this is a matter about which we must be very careful.
  I agree with what my hon. Friend said about this being rather an elaborate Constitution for an island of fewer than 50,000 people. This is a point which the P.L.P. raised in its minority Report. It also questioned the power of the governor to appoint a chief justice, and I think that this matter should be looked at again. Its suggestion that the Privy Council should appoint the Chief Justice may remove some difficulties which possibly have a legitimate basis.
  I want to deal for a few moments with the Report of the Lancaster House conference and with the P.L.P. minority Report. As been mentioned by some of my hon. Friends, we are all aware that the conference comprised a group of people who were apparently representative of the parties in Bermuda, as they were elected. But the P.L.P. claims to speak for the majority of the people of Burmuda, though only a free franchise would prove it; vet it had a very small representation. Had democracy as we are trying to frame it now been in vogue in Bermuda, the representation at that conference would have been very different, and another Constitution might have emerged creating different conditions for the advancement of Bermuda.
  I agree with the criticism about the elaborateness of the Constitution. In a country the size of Bermuda, it is impossible to think in terms of full-time members, and an Assembly of 40 Members on a part-time basis is probably a good idea. Such part-time members have an intimacy with the people, and they meet
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  about once a fortnight, very much like a local authority in this country.
  Mention has been made of the disparity between electors in this country when making a comparison between our Constitution and that proposed for Bermuda. I think that it is completely false, not least because Bermuda happens to be an island where there are colour differences. That is something which, to an extent, affects how people vote. It may be reprehensible that decisions should be made on that basis, but perhaps some people will do so, just as people in Britain make decisions on a basis which is not completely rational or political. However, in Britain, where there is a disparity between electors, apart from colour—and I exclude Northern Ireland, which is completely beyond my understanding—surely it is because we are a fairly large nation needing to rebuild and change the face of the country, with huge masses of people moving from one part of the country to another.
  The process of bringing the electoral register and constituencies up to date is a continuous one. In addition, for reasons of geography, we have to make special arrangements for places like the Western Isles, Orkney and Shetland and certain Welsh areas. From the electoral point of view, none of us who have small neat city constituencies envy people like my hon. Friend the Member for the Western Isles (Mr. Malcolm MacMillan) who has to take a plane, boat or car to address a single meeting. There are physical difficulties involved in the disparity between constituencies in Britain, so it is unfair to make a quick and facile comparison such as that which was made in the minority Report by the U.B.P.
  There is a case for looking closely at the minority Report of the Progressive Labour Party when it refers to the multiplicity of boards in Bermuda. It occurs to me that some method might be evolved whereby a neater and more manageable Civil Service was established to obviate the necessity for so many of these boards.
  Like my hon. Friend the Member for Barking (Mr. Driberg), I am concerned to know who went out to show the people of Bermuda the method which is used in this county to bring our electoral register up to date. When I was there, I was told that there is comparatively little illiteracy and that perhaps, on a pro rata basis,

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  it is very close to our own rate. It would appear to me that someone from this country representing the Registrar-General who had served on some of Mr. Speaker's Panels would be better than someone who had been at the Colonial Office, where, no matter how impartial one may be, certain attitudes are built up, and who would be inclined to take with him attitudes from some other part of the world which are not necessarily applicable to Bermuda.
  There has been some discussion about the qualifications of candidates. Even local authorities in this country will need to waive a great many of the old restrictions which were introduced for good reasons but which have now become ridiculous whereby people who are extremely well qualified are prohibited from election to local government. In an island the size of Bermuda, it seems to be even more ludicrous that even minor public servants are not allowed—
  Mrs. Hart: Since it seems unlikely that we shall finish the debate this morning, perhaps I might correct one false impression voiced by my hon. Friend the Member for Barking (Mr. Driberg) and repeated by my hon. Friend the Member for Glasgow, Woodside (Mr. Carmichael). It was suggested by my hon. Friend the Member for Barking that the Select Committee which was looking into the qualifications of members of the public service to be candidates in elections had reported against making any changes. However, according to our latest information received from the Governor last night, that is not the case. The Select Committee is still looking into it and has not yet reported.
  Mr. Carmichael: That is something which we all welcome, bearing in mind particularly what I have been trying to say in relation to our own local government.
  There are many of these old-established conditions which are not suitable for life in modern Britain, and I hope that that can be said of Bermuda as well. For example, obviously there are considerable objections to the division of constituencies, and I will not weary the House by going through the arguments again.
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  I hope that what has been said in the debate this morning will be accepted in Bermuda in the spirit which most of us intend. We are looking for the best Constitution which will allow the people of Bermuda to continue to enjoy their present high level of prosperity, at the same time ensuring for the future that the divisions which exist there are given proper political expression and that nothing is done by this House which will cause that political expression to create anything disturbing to the tranquillity and prosperity of the island.
  12.20 p.m.
  Mr. Robert Howarth: I wish to be brief, as, if I take only a few minutes, it will still be possible to secure the Second Reading—
  Mrs. Hart: I should not like my hon. Friend to be under that impression. I, and, probably, the hon. Member for Torquay (Sir F. Bennett), will need a considerable time—perhaps a quarter of an hour or 20 minutes—to reply, which means that we could not possibly finish this morning and would be bound to resume another time.
  Mr. Howarth: I thank my hon. Friend for that information.
  Like my hon. Friend the Member for Glasgow, Woodside (Mr. Carmichael), I had the privilege of attending the Anglo-American Annual Conference in Bermuda in March, when we toured the island and met the people in the political movements. I would confirm that it appears to be a friendly and happy island, with a high standard of living. When many of my colleagues went golfing in the afternoon, I would wander around the island—not being as energetic as they—and visit parts which I do not think they saw, like the rear suburbs of some of the main towns, talking to people and watching the school children at play.
  I saw no poor housing like that in my industrial constituency and which is a feature of all our old industrial areas. It has an impressive standard of living for all sections of the population. I recognise that the basis for this could disappear, if events discourage tourism or—the island will eventually have to face this—if the Americans withdraw from their base in the north.

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  We were entertained by representatives of the old white oligarchy, but it was also possible at receptions and on other occasions to meet a broader representation of the population. The comfortable Victorian existence of the old white rich families in the past is slowly changing. I recognise that, as an old Colony, they have a form of Constitution which has only recently been brought more into line with our thinking and I suppose that many representatives of the old order do not welcome this. I appreciate that. At one reception, I was buttonholed by a number of these people who said that they were disgusted not only with us, but presumably with hon. Members opposite who began the wind of change in Africa under a previous Prime Minister. This was not to this group's liking.
  From my contacts and discussions, I formed the impression that there is a liberal wing of progressive people in the United Bermuda Party who recognise that changes are inevitable in their interests and those of the island, and are engaged in a constant struggle with the more conservative elements in the party. It appears to be a multi-racial party. Although it is still dominated by the old order, changes are being made in the right direction. It these are gradual and acceptable to the majority, the liberal wing has good prospects, but if events go too fast, this will only strengthen the more reactionary elements and lead to difficulties.
  My first contact with the representatives of the P.L.P. was at a meeting in this House, to hear their report on the situation after the Constitutional Conference earlier this year. I was staggered at their choice of constitutional adviser, which was most unfortunate, to say the least. My hon. Friend the Member for Barking (Mr. Driberg) referred to the P.L.P. as having similar ideas to ours. This is true, possibly, for most of the representatives that I met, but not, I believe, of their constitutional adviser—
  Mr. Driberg: He is still a member of the Labour Party.
  Mr. Howarth: That may be so, but his rôle in Africa, from which he did not dissociate himself—he was thrown out after the changes in Ghana—makes him very suspect. I wish that the P.L.P. had chosen better, which might have led to a better result from the conference—
  Mr. Driberg: My hon. Friend has made a very serious attack on a former colleague of ours in the House, who gave a very good service here, and who is still, as far as I know, a member of the Labour Party. Would my hon. Friend at least not suspend judgment until this gentleman's book comes out shortly, when he will give a full account of his experiences in Africa and can then be judged?
  Mr. Howarth: I will be interested to read this book, but the events in Ghana and the development of Nkrumah's dictatorship—that is not in dispute, although the role this man played is open to various interpretations, I agree—still leads me to believe that the P.L.P.'s choice of adviser was most unfortunate and did not help the conference. I told them so when I met them in Bermuda in March and gave my reasons. This is now part of history, but I felt that I ought to say it.
  There have been splits in the P.L.P. since the Constitutional Conference, I understand, perhaps because some members of the party are wedded to the ideas of democratic Socialism and others are far removed from them. In discussing this sort of political change in this House calmly and dispassionately, we must remember that this is not always the atmosphere of some developing countries—although Bermuda is not in that category—where political development is not always at our level. This must be considered.
  I support the Bill. I have the reservations of my hon. Friend the Member for Meriden (Mr. Rowland) and we should be happy to have answers to these questions from my hon. Friend. We look forward to her reply. Her intervention in the speech of my hon. Friend the Member for Woodside is encouraging and seems to contradict information given to hon. Members—
  Mr. Driberg: I find that both the Minister of State and I were right in our different ways. The Committee is still technically sitting, but the U.B.P. majority has decided to make no change. It is thought to be holding back the report until after this debate, so that the debate may not be adversely influenced.
  Mr. Howarth: Someone may have miscalculated, because the debate is continuing.

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  Bermuda is a multi-racial society with inherent problems, but I am confident that its general prosperity—because of the accidents of geography and development over the last 20 years—offers the prospect of progress if the changes are evolutionary and roughly in line with those advocated—
  It being half past Twelve o'clock, the debate stood adjourned.
  Debate to be resumed Tomorrow.

  TELEPHONE SERVICE (ROTTINGDEAN EXCHANGE)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Howie.]
  12.30 p.m.
  Mr. Dennis Hobden (Brighton, Kemp-town): The matter which I wish to raise is a disgraceful state of affairs and a glaring example of an ordinary citizen's harsh treatment by a Government Department. A constituent of mine, Mr. Cyril Woodcock, owns a property known as Poet's House, because the poet Sir William Watson used to own it. It is a charming property, consisting of a maisonette with five rooms on the upper floor, and a shop below bringing in £416 per annum. It is in Marine Drive, Rottingdean, overlooking the sea. Rottingdean is an old-world suburb of my constituency in Kemptown, Brighton.
  My grievance arises from the erection of an automatic telephone exchange immediately behind this property. Some years ago, part of the rear garden of Poet's House was sold and a bungalow built on the site. This caused no difficulties or complaints from neighbouring property owners, but the G.P.O., to expand their telephone services, bought the site after a long period, demolished the bungalow and built the new exchange.
  This started the trouble for Mr. Woodcock. The exchange eventually drove him elsewhere, as it was three and a half feet from the back door of Poet's House and, when it began operating, it produced flashing lights, continuous noise and interference with television reception and, worst of all, overshadowed his premises. These factors drove him to find peace of mind elsewhere.
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  But it was one thing to move and another to sell the house. It had been valued at £8,500, but despite having been on the market for almost two years, it has not been sold. He has reduced the price to £6,000, but still cannot sell it. This is extraordinary, as any vacant property in Rottingdean is usually immediately sought after because of the neighbourhood's character. Mr. Woodcock cannot sell his property because of the exchange, without which the maisonette and the shop would undoubtedly have been sold at the original price long before now.
  I place the responsibility for this on the Post Office and the Postmaster-General and nobody else, but trying to get justice for the owner is another matter, because my right hon. Friend is running away and denying responsibility. I thought that this would be an ideal case for the newly appointed Parliamentary Commissioner to investigate, but I find that Sir Edmund Compton has no jurisdiction in this type of case. This might be a clear example of another Government non-starter, so I come back to my right hon. Friend the Postmaster-General to seek justice. However, so far, I have looked in vain.
  My right hon. Friend and I have had continuous correspondence since November last year. In the Postmaster-General's letter to me dated 14th September, 1966, he agreed and admitted that the new telephone exchange stood close to the rear of Poet's House. He went on to make the absurd statement that the exchange had not impaired the amenities to such an extent that an ex gratia payment should be offered.
  This is manifestly absurd and is disproved by the fact that nobody would purchase the premises at the present ridiculously cheap price. One has only to visit the premises to see why this should be the case. My right hon. Friend's letter also referred to the fact that, in accordance with the usual procedure, the building plans were put to the local authority, which had approved them after meeting a number of objections.
  I feel qualified to comment on this aspect because not only was I an employee of the Brighton Post Office before coming to this House, but for a number of years was a member of Brighton's

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  Town Planning Committee. This matter was never a straightforward issue of planning permission, and the Minister knows that Government Departments do not necessarily have to obtain planning consent, but can erect buildings where and when they like. Nevertheless, they go through the motions of consulting local authorities, although I believe that the procedures place some duress on these authorities.
  In this case, there is a wider history. I have mentioned that the site of this controversy is Rottingdean, a charming, old-world village whose residents are rightly fierce in protecting the amenities and character of the area. Rottingdean also has an active Preservation Society which has for many years performed sterling work in ensuring that no planning blunders disturb the neighbourhood. It has been largely successful in its endeavours.
  The local authority has co-operated with the Preservation Society on every possible occasion to make sure that Rottingdean retains its charm. But the local authority has been under other pressures. For example, the G.P.O. pointed out that there could be no extension of the telephone exchange in the area while it could not find a suitable site for an exchange. Earlier sites had come under public criticism and, as the delay in finding a suitable site continued, so the pressures on the telephone service became worse and the number of complaints increased.
  It is against this background that Brighton's Planning Committee, in a mood of near-desperation, gave its planning consent. But it was a consent forced on it by the urgency of the situation and the knowledge that, in the end, the G.P.O. could build where it liked and if it liked without so much as a "By your leave".
  Mr. Woodcock, as the victim, because he has been forced to move from Poet's House, now has a large mortgage on his new house and cannot sell Poet's House. His plight is one of urgency which requires an urgent solution. Despite this, my right hon. Friend continues with his claim that the owners have no claim in law for compensation. He says in his letter that the solicitors representing Mr. Woodcock were invited to submit specific
  522
  details of any claim the owners might have; and my right hon. Friend maintains that such details have not been submitted.
  The truth of the matter is that the solicitors representing Mr. Woodcock have done nothing but draw the attention of my right hon. Friend to the financial implications and loss of amenity. Mr. Woodcock has done the same, and so have I. My right hon. Friend has all these facts. What more does he want? Is not the truth that this is a case of prevarication and subterfuge, with my right hon. Friend sheltering behind legal gobbledegook?
  It is prudent to mention that at one time the G.P.O. was prepared to purchase Poet's House, but because it could not obtain planning assurances from the local authority, it did not proceed with the deal. However, Mr. Woodcock has been left with a sizeable can to carry as a result of the planning permission the G.P.O. managed to obtain. This is not a case where the Minister should take refuge behind the comparative safety of the legal advice he may have been given.
  Enough money has already been spent by Mr. Woodcock in trying to obtain justice and this is clearly a case where some humanity is required. I demand it from a Labour Postmaster-General. I want an assurance that my hon. Friend the Assistant Postmaster-General concedes that an injustice has been suffered and that, on humanitarian grounds alone, the Department is prepared to arbitrate on this question, because for far too long this matter has been left hanging in the air.
  It is equally true to say that this whole issue has left a nasty taste in everybody's mouth. It is another of those occasions when the suffocating bureaucracy of a Government Department is unable, or refuses, to mete out justice to an ordinary citizen—another example of the humble individual having his rights treated in a deplorable way.
  The solicitors acting for Mr. Woodcock have said in correspondence that this is a flagrant example of the Post Office overriding the private citizen in a dictatorial fashion, and then declining to pay compensation for the continuing damage. I wholeheartedly agree with that sentiment.

  523
  This matter is a scandal and should not happen under a Labour Administration. Even worse, it is a disgrace that a Labour Minister should countenance such injustice. I urge my hon. Friend to think again, to show that there can be a human side to a public undertaking and that the rights of ordinary individuals, even though sometimes they may not be specifically backed by legal arguments, will be protected by an understanding Minister and Department.
  12.41 p.m.
  The Assistant Postmaster-General (Mr. Joseph Slater): I congratulate my hon. Friend the Member for Brighton, Kemptown (Mr. Hobden) on his success in being able to raise this matter on the Adjournment. I have listened most carefully to his exposition. He has been rather vociferous in his comments about the attitude of my Department in this matter. He has been directly critical of the attitude of my right hon. Friend, who is responsible for the Department, and I will endeavour to put the side of the Post Office against the case which my hon. Friend has put on behalf of his constituent.
  I quite understand that Mrs. Grey should feel strongly about this issue. I say Mrs. Grey rather than Mr. Woodcock because we understand that the representations made about Poet's Corner were made on her behalf. Most of us, if we had an open piece of land next to our home, would prefer that it should not be built on. But, equally, the owner of such a piece of land must, within proper limits, have the right to make use of it; and to put the matter in perspective I will briefly go over the history of it as seen from the Post Office side.
  As my hon. Friend is aware, we have a tremendous demand for telephones, particularly in the south-east of England. If we are to meet it, we must install more equipment in our telephone exchanges. This means, in many cases, that we have to enlarge the building. Rottingdean is such a case. We needed to enlarge the exchange; so, in 1963, we bought an adjacent house and garden. This is the piece of land behind Mrs. Grey's property on which the extension to the exchange has been built.
  By a long-standing administrative arrangement, the Post Office, like other
  524
  Government Departments, consults local planning authorities to obtain planning clearance for its developments. We did this as regards Rottingdean Exchange in 1962. The planning authority, in the usual way, invited comments from the owners and occupiers of neighbouring property, including Mrs. Grey. After it had considered these comments, and agreed with us about some modification of our proposals, the authority gave its clearance.
  About two and a half years later, in June, 1965, when the extension to the exchange was being built, a firm of solicitors acting for Mrs. Grey drew attention to the possibility of damage to the foundations of her house, and claimed compensation for loss of light and amenity owing to the erection of the new building. The Post Office solicitor replied saying that he did not understand on what legal grounds Mrs. Grey could claim that the Post Office development had depreciated the value of her property.
  We heard nothing further until November, 1965, when the solicitors asked whether the Post Office would be willing to buy Mrs. Grey's property for a possible further extension of the exchange. We considered this suggestion most carefully, and, indeed, got to the point of agreeing a purchase price, but the local planning authority then made it clear that planning clearance was unlikely to be given for a further extension of the exchange on Mrs. Grey's property.
  In these circumstances, we decided that the property would be of no use to us, and early in 1966, through our agents, the Ministry of Public Building and Works, we told Mrs. Grey's agents that we were no longer interested in the purchase.
  About six months later Mrs. Grey's solicitors—not the original solicitors, but another firm—wrote to us claiming that much damage had been and was being done to her property and to her rights as an owner. They also said that legal proceedings were contemplated in the absence of any proposals from the Post Office to compensate Mrs. Grey. They also asked how it was that planning permission had been given for the extension without consultation with Mrs. Grey.
  The Post Office solicitor, in reply, referred them to the letter he had sent in 1965 to the solicitors then acting for Mrs. Grey, and explained the procedure by

  525
  which we had obtained planning clearance. In reply, Mrs. Grey's solicitors said that, unless the Post Office wished to revive the idea of buying her property, they would take the necessary steps to enforce her claim. On being told that we still did not wish to purchase the property, they said that proceedings were being drafted and that they were seeking to arrange for the matter to be raised in this House.
  Shortly after this, my hon. Friend, the Member for Brighton, Kemptown wrote to my right hon. Friend the Postmaster-General about the matter. My right hon. Friend explained that he was advised that Mrs. Grey did not appear to have any legal claim and that the new building, though it stood close to a part of Mrs. Grey's house, did not appear to have impaired her amenities to such an extent as to justify any offer of an ex gratia payment in compensation; and he indicated that we had not received, but would, of course, consider carefully if they were received, specific details of any legal claim.
  If, for example, infringement of rights of light was claimed, the Post Office would need to know the extent of the interference with access of light to each window and the use to which the affected rooms were put; or, if Mrs. Grey were claiming that the structure of her house had been damaged, it would be necessary to know the nature and extent of the damage. Without such details there was no judging whether there was any validity in the claim.
  This really is the vital point. Though it is difficult to be certain, in the absence of specific details, the advice my right hon. Friend has received is that Mrs. Grey does not appear to have any legal claim. We have invited her solicitors to send us details if they think that she has a legal claim, and I should like this
  526
  morning to repeat that invitation. If they are in any doubt about what is required, the Post Office solicitor will be glad to clarify this point if they will get in touch with him.
  Except in so far as there is an infringement of a legal right, a claim on the ground of loss of amenity is a claim for an ex gratia payment, and we do not think that there has been such an impairment of amenity as would justify such a payment. It is true that Mrs. Grey's house is on the seafront and, naturally, is designed to get the maximum benefit from the sea view and the sunshine from the south. The extension to the telephone exchange is behind the house and to the north of it. The view which Mrs. Grey claims is blocked by our extension is inland to the Downs, and the extent to which this view could be enjoyed from the house was, I suggest, even before the extension to the exchange, extremely limited.
  I can quite understand Mrs. Grey's feelings about this matter, but as owners of the adjoining land we are entitled to make use of it within proper limits. We need to do so to give an essential service to the local community. I repeat the invitation we have made to Mrs. Greay's solicitors to send us specific details of any claim they feel she may have, and I can assure my hon. Friend, who has so ably presented the case on behalf of his constituent, that any such details will be given careful and proper examination. Beyond this, with the best will in the world, it would not be right for me to go in this matter, which has been going on for so long.
  The debate having been concluded, Mr. DEPUTY SPEAKER suspended the Sitting until half-past Two o'clock, pursuant to Order.
  Sitting resumed at 2.30 p.m.

PRIVATE BUSINESS
  CHURCHES AND UNIVERSITIES (SCOTLAND) WIDOWS' AND ORPHANS' FUND (AMENDMENT) ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure Scotland) Act, 1936, relating to the Churches and Universities (Scotland) Widows' and Orphans' Fund (Amendment), presented by Mr. Ross (under section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 277.]
  PITTENWEEM HARBOUR ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Pittenweem Harbour, presented by Mr. Ross (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 278.]
  ROYAL BANK OF SCOTLAND ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to the Royal Bank of Scotland, presented by Mr. Ross (under Section 1 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 279.]
  ST. ANDREWS LINKS ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to St. Andrews Links, presented by Mr. Ross (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 280.]
ORAL ANSWERS TO QUESTIONS
  BOARD OF TRADE

    Textiles (Dumping)
    Mr. Ronald Atkinsasked the President of the Board of Trade if he will introduce more effective measures, such
    528
    as those operating in Canada, details of which have been sent to him, to prevent the dumping of textiles in the United Kingdom.
    The President of the Board of Trade (Mr. Douglas Jay): No, Sir. Certificates of the domestic value of imports are no, required under our valuation system and they would not reduce the need for the necessary investigation of anti-dumping applications.
    Mr. Atkins: Is my right hon. Friend aware that efficient and knowledgeable British manufacturers with experience in exporting to Canada would be well satisfied with the protection which the measures in Canada give against dumping?
    Mr. Jay: Yes, but I am sure that my hon. Friend knows that under the Kennedy Round negotiations the Canadians as well as ourselves have agreed to a new system of anti-dumping procedures which is much more akin to our present system. Therefore, I do not think we should wish at this stage to move towards the Canadian system.
    Mr. Blackburn: Is my right hon. Friend aware that our present antidumping regulations are of no use at all to the textile industry because their application is to the whole industry, whereas the attack on the British textile industry has been on one section after another?
    Mr. Jay: We are very ready to conduct, and have conducted, a lot of investigations in recent months into the possibilities of an anti-dumping Order on textiles, but we must have the proper evidence and supporting information to introduce one.

    Textile Industry (European Economic Community)
    Mr. Ronald Atkinsasked the President of the Board of Trade if he will take measures to ensure that the British cotton industry will at least maintain its present productive capacity so that it will be able to take advantage of the European Economic Community market, which is highly protected from cheap-labour cottons.
    Mr. Jay: The increase in productivity and the improvement in the structure and equipment of the cotton and man-made fibre sector of the textile industry should

    529
    lead to an increase in its potential output and enable it to take full advantage of export opportunities.
    Mr. Atkins: If my right hon. Friend seeks to imply that the cotton industry is less efficient than similar industries in the United States, Canada and Europe, which implication I would not accept, does he assume that he should withdraw protection against more efficient industries? Does he assert for instance, that the right treatment for a patient ailing from double pneumonia is a cold bath?
    Mr. Jay: I think that the evidence shows that our textile industry is more efficient than some overseas, but it is less efficient than others. What we should all wish to do now is to press on, as we are doing in consultation with the Textile Council, with all possible measures to increase efficiency and productivity.
    Mr. Frank Allaun: Is my right hon. Friend aware of the dissatisfaction amongst Lancashire Labour M.P.s with his failure to control the stream of low-wage imports and of their view that, if he has an obligation and commitments to E.F.T.A., he also has obligations and commitments to Lancashire?
    Mr. Jay: I am also dissatisfied with the inability of some of my hon. Friends to understand that last year imports were much lower than they were in previous years.
    Mr. Crouchasked the President of the Board of Trade whether, in view of Great Britain's possible entry into the Common Market, he will make a statement of the progress made in the reorganisation of the structure of the textile industry.
    Mr. Jay: The competitive position of the cotton and man-made fibre sector of the textile industry has been greatly strengthened over the last four years in a number of ways—by substantial investment in modern machinery, by an increased readiness to adopt shift working where this is economic, and by a number of vertical and horizontal mergers. This reorganisation, which is still progressing, and which should be further encouraged by the Productivity Study which the Textile Council is undertaking, should enable the British industry to meet competition at home and abroad.
    Mr. Crouch: I am obliged to the right hon. Gentleman for giving me such a full answer, but he will have heard in recent days of a statement by the wool side of the textile industry of its confidence regarding possible entry into the Common Market. Has he had a similar expression of confidence from the other side of the Pennines?
    Mr. Jay: I could not say without notice, but I think that those on the west of the Pennines are as well informed as those on the other side.

    Russian Watches (Imports)
    Mr. Patrick Jenkinasked the President of the Board of Trade what investigations his Department has made into allegations that Russian-made watches are being imported into Great Britain at dumped prices; and if he will make a statement.
    Mr. Jay: I have received evidence that watches are being imported from the Soviet Union at prices below the cost of production of similar articles in Western Europe. This evidence is being considered with a view to discussions with the Soviet authorities shortly.
    Mr. Patrick Jenkin: Will the President of the Board of Trade undertake to press forward his discussions with the greatest urgency? Does he recognise that this flood of imports of cheap Russian-made watches is causing severe damage to the British watch trade? If he wants the British watch industry to survive, does he recognise that he must act pretty quickly?
    Mr. Jay: Yes, certainly; our watch industry is of great importance. On the other hand, our imports from Russia are a very small proportion of total sales of watches in the British market.

    Manufacturing Industry (Investment)
    Mr. Patrick Jenkinasked the President of the Board of Trade whether he is satisfied with the anticipated level of investment in manufacturing industry; and what steps he is contemplating to effect an improvement.
    Mr. Jay: The results of my Department's latest inquiry into industry's investment intention will be available next

    531
    week. My impression is that the measures that the Government have already taken are having a favourable effect on investment plans. The further acceleration in payment of investment grants announced this morning will be an additional stimulus.
    Mr. Patrick Jenkin: Does not the President of the Board of Trade recognise that we are in a very serious situation with regard to the level of manufacturing investment? There appears to be no evidence as yet from any other source—we shall await his Department's report next week with great interest—that the level of investment is doing other than continuing the decline which has been reported over recent months. Does not he recognise that the implications of this for the long-term future of the country's economy are very serious indeed?
    Mr. Jay: Yes, but the hon. Gentleman should not denigrate his own country too much. The information at present available on investment in the early part of this year shows that the fall is a good deal less than some of the forecasts which have been made.
    Sir G. Nabarro: Is not manufacturing investment in the private sector running at 15 per cent. to 20 per cent. lower than last year? Should not these figures give cause for grave anxiety?
    Mr. Jay: No, Sir; this is a considerable exaggeration. [HON. MEMBERS: "Wrong again."] I am sure that the hon. Baronet will be glad—
    Sir G. Nabarro: I am not a baronet. Wrong again.
    Mr. Jay: I always live in hope as far as the hon. Gentleman is concerned. I assure him, as I am sure he will be glad to know, that the increase in public investment is making up for many of the shortcomings of private investment.

    Price Increases (Investigations)
    Mr. Boyd-Carpenterasked the President of the Board of Trade why members of the public who respond to his invitation to report price increases which appear to need investigation are not informed of the result of his investigation of the complaints submitted by them.
    Mr. Jay: These reports have been very useful but, as was made clear when they were invited, it would not have been practicable to inform each individual correspondent of the results of investigations.
    Mr. Boyd-Carpenter: How on earth does the right hon. Gentleman imagine that he can keep the co-operation of the public if, when people try to co-operate and help him, he does not even tell them whether, in the event, their complaints have been justified? How are they to know whether he has done anything at all?
    Mr. Jay: Hon. Members opposite are constantly advising and urging us to employ fewer officials in the Government service. In this case, if we were to do all that the right hon. Gentleman requires, we should have to employ a lot more people than we do at present. I think that we have achieved the right balance, and I assure the right hon. Gentleman that action is taken, if on some occasions a letter is not written as well.

    Advertising (Research)
    Mr. Alisonasked the President of the Board of Trade what consultations he has had with industry about the scope of his proposed research project into the economic effects of advertising.
    Mr. Jay: A preliminary discussion with representatives of the Confederation of British Industry and of the Advertising Association took place on 24th May.
    Mr. Alison: Will the right hon. Gentleman confirm that he is not contemplating any tax or levy on advertising as proposed by the Reith Committee set up by the late Hugh Gaitskell?
    Mr. Jay: I am contemplating an inquiry. It is always best to discover the facts before deciding what action we should take.
    Mr. Winnick: Does my right hon. Friend agree that, although there is good and bad advertising, basically the advertising business in this country serves a useful and positive rôle?
    Mr. Jay: Yes, Sir, though far be it from me to distinguish at this moment between the good and the bad advertising.

    Investment Grants
    Mr. Alisonasked the President of the Board of Trade why investment grants under the Industrial Development Act are payable for the installation of electrical generating equipment.
    The Minister of State, Board of Trade (Mr. George Darling): Generating equipment installed by a firm to provide power solely for its own use in carrying on a qualifying industrial process such as manufacturing qualifies for grant in the same way as other ancillary plant or machinery. Where the equipment is installed for the purpose of supplying power to others, grants will be given only in exceptional cases after consideration of the implications for the public generating authorities.
    Mr. Alison: As the Government have recently had to announce a huge increase in the price of publicly generated electricity because of a fall in the volume of sales, is not the giving of encouragement to private industry to generate electricity privately an example of administrative schizophrenia?
    Mr. Darling: There are two answers to that. The point about working in conjunction with the public generating authorities goes back to legislation passed in 1909. On the other point, I am not sure that the increase in electricity charges is due solely, or even largely, to a falling off in demand.
    Mr. G. Campbellasked the President of the Board of Trade whether any investment grants have been authorised for transport vehicles or office equipment, other than computers, whether used by manufacturing or other industry.
    Mr. Darling: No grants have been authorised in respect of vehicles other than those specifically provided for in the Industrial Development Act or for equipment other than computers which is to be used for general office purposes.
    Mr. Campbell: Is the Minister aware that the withdrawal of investment allowances and the ineligibility for the grants of transport vehicles are especially painful
    534
    for areas like the north of Scotland, where transport is such an important factor in almost all industry and commerce?
    Mr. Darling: What the hon. Gentleman is asking for is some kind of regional assistance. This is a matter that might well be considered, but it does not come within the scope of the Industrial Development Act.
    Mr. J. H. Osbornasked the President of the Board of Trade if he will estimate the cost of making an analysis of, and publishing, the value of capital projects for which investment grants have not been allowed under the discretionary clauses of the Industrial Development Act, the cost of publishing the number of applications that have been refused, and the reasons for such a refusal.
    Mr. Darling: No, Sir. I hope to be able to provide in July statistics for most of the claims received in the first quarter. These will show by broad categories the value of the expenditure on which grant was claimed and the amount which qualified for grant, but to extract from thousands of applications details of individual items disallowed and the reasons in each case for refusal would be a formidable and costly operation of limited use.
    Mr. Osborn: Is there not considerable confusion as a result of replacing allowances by discretionary grants? Will the Minister publish the criteria for acceptance and rejection, as was promised during the passage of the legislation? Will the Minister clear up those areas where there is confusion—for instance, what is and what is not a computer?
    Mr. Darling: There is no confusion about this. In any case of confusion we will be willing to give all the help we possibly can to clear it up. The information that the hon. Member is asking for has been widely and freely provided to industry and, so far as we know, there is no industrial enterprise that has not got the information.

    Portuguese Cotton Goods (Imports)
    Mr. Robert Howarthasked the President of the Board of Trade if he is aware that certain British importers of Portuguese cotton goods are threatening to take legal action against the Portuguese

    535
    cotton industry on the grounds that there has been non-delivery of outstanding orders; and if he is satisfied that the agreement reached between Her Majesty's Government and the Portuguese Government limiting cotton imports into the United Kingdom is working effectively.
    Mr. Jay: I have seen reports of difficulties of this kind, but on the general question of imports from Portugal I would refer my hon. Friend to the reply I gave to my hon. Friend the Member for Oldham, West (Mr. Hale) on 15th March.—[Vol. 743, c. 471–2.]
    Mr. Howarth: We appreciate the protection which has been given by the present Government, but will my right hon. Friend now take steps to ensure that the protection covers the problem of a greater degree of categorisation and introduce also, where possible, particularly with reference to Portugal, for example, a quarterly import quota system to prevent bunching at a particular time of the year?
    Mr. Jay: On the question of the main global quota on textile imports, we cannot go back, in the middle of the period, on the agreement which we have already reached. As regards Portugal, I am in consultation with Portuguese Ministers. If my hon. Friend looks at the figures, he will see that, as I predicted, textile imports from Portugal have been falling in recent months.
    Sir Frank Pearson: Can the right hon. Gentleman give the House details of the agreement which he has been able to reach with Portugal, or, if he cannot tell us now, when will he be able to inform us?
    Mr. Jay: No, Sir. I have already said all that it is wise to say if the objectives, which the hon. Gentleman has as well in mind as I have, are to be served.

    Imported Textile Goods (Labelling)
    Mr. Robert Howarthasked the President of the Board of Trade if his Department will prosecute those who contravene the Merchandise Marks Act, 1926, by falsely labelling imported textile goods until such time as the proposed Protection of Consumers (Trades Descriptions) Bill becomes law and protects
    536
    consumers by demanding accurate and comprehensive labelling.
    Mr. Darling: The Board of Trade is ready to consider any complaints that goods have been misdescribed contrary to the Merchandise Marks Act and, in appropriate cases, to investigate with a view to prosecution.
    Mr. Howarth: I thank my right hon. Friend for that reply, but I remain a little puzzled. Is he aware that the Retail Trading Standards Association claims to undertake many prosecutions under the Merchandise Marks Act but, because of its limited financial resources, is not able to investigate a great number of contraventions? Could not the Board of Trade take over the prosecution of people who are at present getting away with deluding the public?
    Mr. Darling: Under the Merchandise Marks Act, anyone may prosecute, and the Retail Trading Standards Association has been extremely vigilant and useful in this regard. I have discussed the matter which my hon. Friend raises with the director of the Association, and we are both aware that the Bill which we have in mind, the Protection of Consumers Bill, will lead to the satisfactory conclusion which all of us want.
    Mr. Bellenger: When is the new Bill likely to be introduced in this House?
    Mr. Darling: That question should be directed to other quarters.
    Mr. Patrick Jenkin: As the Bill was announced in the Queen's Speech of 1964, is it not time we had it?
    Mr. Darling: The hon. Gentleman has not kept up to date. It was introduced in another place, and it went through another place. We are now waiting to introduce it again in this place.

    Trading Stamp Act
    Mr. J. H. Osbornasked the President of the Board of Trade whether he is satisfied with the operation of the Trading Stamp Act; and whether he will make a statement.
    Mr. Darling: I have no evidence to suggest that the present law on this subject is unsatisfactory.
    Mr. Osborn: I am grateful for that reply by the right hon. Gentleman, who greatly helped in bringing the Act to the Statute Book. Have the provisions of Section 1 been complied with? Second, are the provisions dealing with advertisements, display in shops and catalogues being complied with, and who is responsible under Government auspices for seeing that the Act generally is complied with?
    Mr. Darling: The Act lays no duty of inspection or enforcement on the Board of Trade. Complaints, if they are likely to lead to prosecution, should be made to the police, except as regards the matters covered by Section 1(2) of the Act relating to the accounts of private companies and the like. The hon. Gentleman will have noted that we have had to amend the Companies Act in order to take account of that side of the Trading Stamp Act.

    Commonwealth Foodstuffs (Exports)
    Mr. Bruce-Gardyneasked the President of the Board of Trade what steps he is taking to renegotiate long-term agreements with Commonwealth foodstuffs exporting countries governing access to the United Kingdom market, in view of Her Majesty's Government's decision to apply for membership of the European Economic Community.
    Mr. Jay: No question of need to renegotiate anything arises at the present time.
    Mr. Bruce-Gardyne: But would the President of the Board of Trade agree that some of these agreements last into the 1970s? Does his reply indicate that he does not think that there is a chance of the Government's succeeding in their application to join the Common Market, or is he merely trying to see that they do not succeed?
    Mr. Jay: My answer implies no more than it said. I have several times discussed this problem with my colleagues in the Australian Government and they have agreed that until the Kennedy Round negotiations reach a conclusion, as they have, and the application by the United Kingdom to join the E.E.C. has been considered, there is nothing to be gained in our renegotiating the agreements with
    538
    Australia. But when both these uncertainties have been removed, we shall be able to proceed to make further arrangements.

    European Economic Community
    Sir J. Edenasked the President of the Board of Trade (1) what measures he now proposes to take to help British industry to prepare for the increased competition it will encounter in the event of the United Kingdom joining the Common Market;
    (2) what assessment he has made as to which sections of British industry will be most affected in the event of the United Kingdom joining the Common Market.
    Sir J. Langford-Holtasked the President of the Board of Trade for which industries and trades special arrangements will have to be made as a result of British membership of the European Economic Community.
    Mr. Jay: The Government have already adopted a wide variety of measures to assist the efficiency and competitiveness of British industry, and these will be helpful in the event of our joining the European Economic Community. The effects of entry on particular sectors of British industry will, of course, depend upon the terms of any agreement reached.
    Sir J. Eden: Has not the right hon. Gentleman made any special study of the likely impact of British membership of the Common Market on certain sections of British industry? Is he taking no special steps to try to anticipate the day when we join the Common Market by trying to strengthen the competitiveness of British industry?
    Mr. Jay: Yes, Sir. We are taking a great many steps, including the National Productivity Conference which I should be attending at this moment if I were not answering Questions here. All these steps will tend to enhance the competitiveness of British industry, which is highly desirable whether we join the E.E.C. or not.
    Sir J. Langford-Holt: Can the right hon. Gentleman not go further than that? Both he and his right hon. Friends have said from time to time that special arrangements must be made for certain

    539
    industries. Would he not make clear which these industries are?
    Mr. Jay: Any special arrangements affecting particular industries will, of course, emerge only in the course of negotiations, and unless and until those negotiations take place it is impossible to give precise answers about them.
    Sir J. Eden: With particular reference to Question No. 25, will the right hon. Gentleman say whether the I.R.C. is making any special study of this point?
    Mr. Jay: The I.R.C. is engaged on discussions with industry about greater efficiency in particular industries, and in the course of those discussions it will certainly take into account—so far as is possible in view of the uncertainties—the possibility of the United Kingdom joining the E.E.C.

    United Kingdom and Common Market Countries (Overseas Investments)
    Mr. Stratton Millsasked the President of the Board of Trade what was the amount of direct United States investment in Great Britain in each of the last three years and from Organisation for Economic Co-operation and Development or other sources; and what was the amount of United States investment in the Common Market countries in the same period.
    Mr. Jay: As the Answer contains a large number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Stratton Mills: Do these figures show that the United Kingdom has fallen behind in its share of American investment? Is there any evidence to suggest that, if this country were successful in entering the E.E.C., industrial investment by the Americans in this country, particularly in development areas, would show a substantial increase?
    Mr. Jay: All the figures show that in recent years there has been a very large investment in this country by American industry. I would not wish to enter into hypothetical questions about the future.
    Mr. Hugh Jenkins: If the wish of the hon. Member for Belfast, North (Mr. Stratton Mills) were fulfilled, would it not increase the degree of American control over British industry? Would not this
    540
    be the opposite of what hon. Members opposite wish?
    Mr. Jay: I cannot say, because I am not quite sure what the wish is of the hon. Member for Belfast, North (Mr. Stratton Mills).
    Mr. Patrick Jenkin: Does not the right hon. Gentleman recognise that the wish of the hon. Member for Putney (Mr. Hugh Jenkins) is being frustrated by the double taxation arrangements whereby it is more profitable for an American company to invest in this country than it is for a British company?
    Mr. Jay: At present fortunately a great many companies, both American and British, are investing in this country.
    Following is the information:
    The figures are taken in part from British, and in part from United States statistics, which are compiled on different bases. For investment in the United Kingdom, the United States figures differ from ours, principally because a deduction is made in respect of investment which is in turn made overseas by the British subsidiaries of United States companies, and because transactions may be recorded in different years.

    OVERSEAS PRIVATE DIRECT INVESTMENT IN THE UNITED KINGDOM*

    (Board of Trade statistics)

    £ million

    Country or area of investor

    1963

    1964

    1965

    1966

    United States†

    104

    116

    145

    …

    Other member countries of OECD

    55

    43

    52

    …

    Other countries

    1

    2

    -8‡

    …

    Total

    160

    162

    189

    224§

    *Excluding investment in the oil and insurance industries.

    †Including Panama.

    ‡Net disinvestment.

    §Provisional.

    … = Not available.

    UNITED STATES PRIVATE DIRECT INVESTMENT OVERSEAS

    $million

    Investment in

    1963

    1964

    1965

    United Kingdom

    124

    206

    324

    Common Market Countries

    588

    807

    814

    Source: U.S. Department of Commerce.

    Manufacturing Industry (Earnings)
    Mr. Bruce-Gardyneasked the President of the Board of Trade if he will invite the National Economic

    541
    Development Council to undertake a study of the correlation between the comparative rates of increases in recent years in earnings in manufacturing industry in the United Kingdom, France, Germany, Italy, Sweden and Japan and the changes in those countries' respective shares of world exports of manufactures over the corresponding period.
    Mr. Jay: We shall shortly be discussing in the National Economic Development Council the influence on our export performance of various factors, including relative changes in earnings in manufacturing industry in this and other countries.
    Mr. Bruce-Gardyne: Does not the right hon. Gentleman agree that the calculations in the latest issue of Economic Trends suggest that there is no correlation between comparative rates of wage and salary inflation in different countries and export performance? Will he draw that to the attention of the First Secretary of State?
    Mr. Jay: I would not go so far as to say that there is no correlation but a number of other factors, including efficiency of management, marketing and so on, are extremely important in themselves in determining export trends.

    Treaty of Rome (Film Industry)
    Mr. Hugh Jenkinsasked the President of the Board of Trade what restrictions, quotas or protections, at present operative in the film industry, are proposed by Her Majesty's Government for abolition under the Treaty of Rome.
    Mr. Jay: None, Sir.
    Mr. Jenkins: If, unhappily, our application were successful, would not the situation be that we should then be forced to remove the protections which at present have the effect of preserving an independent British film industry, such as it is?
    Mr. Jay: I am advised that this is not the case but if my hon. Friend has evidence to the contrary I should be glad to examine it.

    Development Areas (New Industries)
    Mr. William Hamiltonasked the President of the Board of Trade in view of the continued underlying trend
    542
    towards increasing unemployment, what plans he has for establishing new publicly-owned and controlled industries in development areas.
    Mr. Jay: I have already stated that the vigorous application of my powers under the Industrial Development and Local Employment Acts provides the best means of helping the development areas, and I have recently announced details of a large new programme of publicly-owned advance factories, following four others launched since October. 1964.
    Mr. Hamilton: Is my right hon. Friend aware that, while we appreciate what has been and is being done in the development areas, nevertheless there was a specific commitment by the Labour Party in its last election manifesto to this kind of provision? Is he aware that differentiation between the respective development areas and others will not be solved until we take these additional measures?
    Mr. Jay: Yes; but the responsibility of my Department consists in building publicly-owned factories in development areas, including advance factories, quite a number of which, by accident, have gone to my hon. Friend's constituency. If my hon. Friend is interested in establishments managed by the nationalised industries, which I should welcome, he should address his question to those of my right hon. Friends responsible for the industries concerned.
    Sir K. Joseph: Is the right hon. Gentleman aware that while we deplore the breaches of many of the election pledges of right hon. Gentlemen opposite, we are very glad that they have broken this promise?
    Mr. Leadbitter: My right hon. Friend will be aware that hon. Members on this side of the House are very appreciative of the vast amount of work which has been done in the special areas, but he should remember what my hon. Friend the Member for Fife, West (Mr. William Hamilton) said about the Government's promise. In addition to the advance factory programme, we would like Government action to provide the right kind of industries for the development areas and not merely factories open to any kind of tenant.
    Mr. Jay: Yes, but what people want in these areas is increased employment, if possible in industries which are likely to remain there for the long term, but in any case in any industry which is viable and can carry on in the immediate future.
    Dame Irene Ward: Would it not be helpful if we had a Minister who could reply on what I would call the detailed aspects and not just skate from factories to nationalised industries and then from nationalised industries to the Ministry of Labour? We can never get a comprehensive answer on which we can assess the position and how we are getting on.
    Mr. Jay: I always try to answer the Questions asked.
    Mr. Bruce-Gardyne: Would not the Minister agree that from the answer which he gave me last week the number of jobs created by the present Government in advance factories is infinitesimal in Scotland? All the rest have stuck in the pipeline, about which his hon. Friend the Member for Fife, West (Mr. William Hamilton) and the Secretary of State for Scotland used to be so critical.
    Mr. Jay: That is incorrect. The hon. Gentleman's mistake is that he fails to see the distinction between advance factories, other publicly-owned factories and private factory projects encouraged and assisted by the Board of Trade.
    Mr. Bob Brown: We share the sentiments of my hon. Friends about the efforts of the Board of Trade, but it gives us no pleasure to see an advance factory standing empty for many months. Would not the Minister agree that we would have far better scope for attracting the type of industry we need in the development areas if we had direct State intervention?
    Mr. Jay: I am sure that my hon. Friend knows that, of the advance factories completed in the last two years, a high proportion had been let by the time they were completed. The experiment has proved very encouraging.

    Employment (Hartlepool)
    Mr. Leadbitterasked the President of the Board of Trade how many new jobs are expected to be provided in Hartlepool during the next year arising
    544
    from new factory units and extensions; and what other long-term plans he has for the area.
    Mr. Darling: No precise estimate is possible. Estimates given in the three years 1964 to 1966 by applicants for industrial development certificates in the Hartlepools and West Hartlepools Employment Exchange Areas for the additional employment when their projects are complete and fully manned, averaged about 1,800 a year. Hartlepool will continue to benefit from its inclusion in the Northern development area.
    Mr. Leadbitter: Will my right hon. Friend bear in mind that in three years the unemployment level in Hartlepool has fallen from 12½ per cent., the highest in the United Kingdom, to about 5·6 per cent. this month? We appreciate the Government's efforts to bring about this pleasing result, but will my right hon. Friend continue this special interest and, following what has been said earlier today, consider direct Government intervention to get the right kind of industry into the right kind of place?
    Mr. Darling: We shall do all we possibly can to persuade industrialists to consider Hartlepool, which has some great advantages for industrial development. Direct Government intervention is another question and would require very careful consideration.

    Investment Grants (Kingston upon Hull)
    Mr. Wallasked the President of the Board of Trade if he will make an order under the Industrial Development Act, 1966 to implement, as far as the city of Kingston upon Hull is concerned, the proposal made by the Yorkshire and Humberside Economic Planning Council that investment grants should be payable in the region at a level half-way between that of the present development area and non-development area grants.
    Mr. Jay: No, Sir, I do not believe this is the right policy for meeting the problems of Kingston upon Hull.
    Mr. Wall: Does not the right hon. Gentleman agree that there is a great gap between the treatment of industries inside the development areas and the treatment of those outside? Is there not

    545
    a case for some middle treatment of places like Kingston upon Hull which do not come up to the criteria required for a development area?
    Mr. Jay: The hon. Gentleman does not appreciate that middle treatment is now being given to these areas. In an area like Kingston upon Hull we follow an I.D.C. policy which is completely different from that which we follow in the Midlands or the South-East, and it is very similar to what we follow in the development areas.
    Mr. Edwin Wainwright: Is my right hon. Friend aware that because of emigration many grey areas are being formed in the Yorkshire and Humberside region, and will he therefore have some consultations with the local authorities of those areas to ensure that the grey areas are removed?
    Mr. Jay: Yes, Sir. I did that last week.

    Chipboard
    Mr. Buchanan-Smithasked the President of the Board of Trade if he will take steps to prevent the dumping of chipboard in the United Kingdom; and if he will make a statement.
    Mr. J. E. B. Hillasked the President of the Board of Trade what action he is taking to avert damage to the expansion of the home chipboard industry and to the national investment in forestry caused by the rising imports of subsidised foreign chipboard.
    Mr. Brewisasked the President of the Board of Trade to what extent imports of chipboard have increased in the last year; and what steps he now intends to take to protect the home industry, in view of recent increases in imports.
    Mr. Jay: I have nothing to add to the reply given to the hon. Member for Moray and Nairn (Mr. G. Campbell) on 12th June.
    Mr. Buchanan-Smith: Does the right hon. Gentleman recognise the great difficulties which face manufacturers of chipboard in this country when dumping comes from Iron Curtain countries? Is he aware that great damage is being done to the manufacturing industry in this
    546
    country and also to growers and to employment prospects in areas such as Scotland?
    Mr. Jay: I appreciate the problems. There is a difficulty when we are concerned with Iron Curtain countries, but we propose to discuss this matter with the countries concerned.
    Earl of Dalkeith: Will the right hon. Gentleman undertake to carry out a very thorough investigation into the prices of material coming to this country, bearing in mind the enormous stake which the taxpayer has in forestry through the Forestry Commission?
    Mr. Jay: Yes, Sir. We are investigating this now.
    Mr. Patrick Jenkin: What steps did the right hon. Gentleman take at the recent trade talks with the Russians to bring about a situation in which Iron Curtain countries would give some sort of undertaking about exporting to this country at dumped prices? Does he recognise that it is extraordinarily difficult in these cases to prove dumping within the criteria of the 1956 Act? Can he not do more directly in the course of these trade negotiations to prevent this sort of thing from happening?
    Mr. Jay: Yes, Sir. We will certainly bear this in mind, but it must also be remembered that the Soviet Union in particular is now placing much larger orders with British industry than for many years. Quite apart from anything else, we have to be satisfied that material injury is caused to the British industry before we introduce an anti-dumping Order. However, I will certainly examine what the hon. Gentleman has said.
    Mr. J. E B. Hillasked the President of the Board of Trade why, under his regulation, chipboard from Eire comes into this country duty free while British manufactured chipboard exported to Eire is subject to a 20 per cent. duty; and if he will establish parity of treatment.
    Mr. Darling: Under the terms of the agreement establishing a Free Trade Area with the Republic of Ireland parity of treatment is being progressively achieved by annual reductions of 2 percentage points in the Republic's rate of duty on British exports of chipboard which currently stands at 18 per cent.
    Mr. Hill: Although this situation is nothing like as serious to the British chipboard in dustry as the imports from Iron Curtain countries, it is none the less an anomaly. Will not the right hon. Gentleman agree that as long as this kind of disparity of treatment exists, it will be hard to get the natural growth of trade between this country and Ireland which we would like to see?
    Mr. Darling: There is nothing anomalous in this. We have agreed with the Republic of Ireland gradually to reduce the tariff so that we can get parity of treatment in the course of time. We must have regard to the balance of interests. I think that this is a very good arrangement.

    Textiles (North-East Scotland)
    Mr. Hector Hughesasked the President of the Board of Trade if he will state the extent and value of the textiles imported into and exported from northeast Scotland during the last five years; and if he will state what steps he is taking to increase that industry there.
    Mr. Jay: Trade statistics are not compiled on a regional basis: but the Government's measures to assist industry in the development areas under the Local Employment Acts and the Industrial Development Act are available to the textile industry in north-east Scotland.
    Mr. Hughes: I thank the President of the Board of Trade for what he has already done for Aberdeen. Is there not a good market for textiles straight across the North Sea in Scandinavia, Denmark and North Germany, and will my right hon. Friend exploit that market?
    Mr. Jay: Yes, Sir. That is one of the great assets which north-east Scotland enjoys, together with its representation by my hon. and learned Friend.

    Advance Factories
    Dame Irene Wardasked the President of the Board of Trade if he will publish the full history of Government advance factories built since the first one, giving the place, the number of employees provided for in each one, the occupants to whom the factories were let, the number of times the occupancy has changed, the cost of each factory and the present position of each factory.
    Mr. Jay: I do not consider that I would be justified at the present time in undertaking a research project of this kind covering, as it would, factories constructed over the last 25 years.
    Dame Irene Ward: Is the right hon. Gentleman aware that this is just the point, and that we cannot get at the facts? Will he please look at what the Minister of Health has done in the way of analysis, and do the same, so that we may know whether we have made any progress?
    Mr. Jay: The relevant facts are pretty well known, and I assure the hon. Lady that it is our intention to continue with the efforts that we have been successfully making to increase industrial development on the North-East Coast, on Tyneside in particular.

  SHIPPING

    Suez Canal (British Ships)
    Sir J. Langford-Holtasked the President of the Board of Trade why no instructions have been issued to the masters of British ships passing through the Suez Canal when these are searched for goods in transit for Israel.
    The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu): In our judgment none was necessary and British shipowners agreed with this judgment.
    Sir J. Langford-Holt: Does the Minisster of State agree that this right has already been exercised by Egypt on at least one occasion against a British ship? Have the Government any views on this? Should not he issue clear instructions as to what should happen in the event of this alleged right being exercised again?
    Mr. Mallalieu: It was exercised three years ago and, after a very strong protest, the ship was allowed to proceed. We stand by the principle of freedom of navigation through the Canal.
    Sir K. Joseph: Is the Minister of State saying that no instructions were given because existing instructions cover the situation completely, in which case what are those instructions, or does he accept unworthily some sort of impotence in this case?
    Mr. Mallalieu: Not a bit. As I have already said, the one instance where this occurred was followed immediately by a sharp protest, and the ship was allowed to proceed.
    Mr. Ian Lloyd: As it now appears to be Her Majesty's Government's policy to send a letter where in happier times in such circumstances we should have sent a cruiser, are the masters of British merchant ships now to understand that they cannot expect to receive protection from the Royal Navy on the high seas? Are the Government aware that this will probably lead to the arming of British merchant vessels in the Middle East and the Far East?
    Mr. Mallalieu: I am quite certain that it will lead to no such thing. The way to protect British vessels on the high seas in times of peace is to ensure that international obligations are watched over.
    Sir K. Joseph: The Minister of State did not answer my question about instructions. Is he saying that no instructions were issued because the present ones cover the situation? If so, which instructions cover the situation?
    Mr. Mallalieu: Any ship which was stopped—there has been only one—would report that at once to us and we should follow up with a sharp protest, which was effective in the one instance that has occurred.

    British Foreign-going Ships (Doctors)
    Sir G. Nabarroasked the President of the Board of Trade whether he is aware that, whereas Section 209 of the Merchant Shipping Act 1894 requires every British foreign-going ship with 100 or more on board to carry a qualified medical practitioner, foreign ships operating from British ports are subject to no such statutory requirement; and whether, in the interests of British nationals sailing in foreign ships, he will include appropriate provisions to remedy this state of affairs when introducing revisionary shipping legislation.
    Mr. J. P. W. Mallalieu: I find that the requirements of other maritime countries are, in fact, broadly similar to those which apply to British foreign-going ships.
    Sir G. Nabarro: First, do the Greeks conform to these requirements? Second, could the hon. Gentleman do something with travel agencies in this country advertising, particularly, cruises from British ports for which foreign ships carrying more than 100 passengers are used to warn would-be passengers and cruisers that there may be no doctor on board? Is not this a wise precaution?
    Mr. Mallalieu: The Greek regulations provide that passenger ships must carry a doctor if they will be more than four days between ports. On the second point, the travel agents already have the information, and I agree that it would be extremely wise on the part of any intending passenger who is nervous about it to find out whether the ship on which he is proposing to sail has a doctor.

    Leith Docks
    Mr. Stodartasked the President of the Board of Trade if he will reconsider the exclusion of Leith Docks from the development area; and if he will make a statement.
    Mr. Darling: The boundaries of the development areas are regularly reconsidered, but we have no plans for altering the present boundaries.
    Mr. Stodart: Can the right hon. Gentleman say why it was that the Minister of State for Scotland stated the other day that consideration was to be given to the inclusion of Leith Docks in the development area? Why cannot this be done? Will the right hon. Gentleman now consider not only Leith Docks but also Edinburgh and Leith as well?
    Mr. Darling: There are two answers to that. The first is that the boundaries of development areas are regularly reconsidered. The second is that I am surprised that the hon. Gentleman has so little regard for the other areas of Scotland where there is heavy unemployment and where industrial development is far more greatly needed than in the Edinburgh area.
    Mr. Patrick Jenkin: Does not the right hon. Gentleman recognise that the seven-year guarantee given with the regional employment premium is severely curtailing the power of the Board of Trade to re-schedule development areas?
    Mr. Darling: That is another question and we will consider it.
    Mr. Clark Hutchison: Are the boundaries being considered now or not?
    Mr. Darling: I said that they are always being reconsidered. Obviously there probably will be changes in the boundaries in the course of time, but this is not the time to alter the present boundaries.

    Q4 Liner
    Mr. Kenneth Lewisasked the President of the Board of Trade if he will make it a condition of continued financial assistance to the Q4, that, the "Queen Elizabeth" be kept in service for at least a limited period.
    Mr. Wingfield Digbyasked the President of the Board of Trade whether, in view of the adverse effect which withdrawal of the Queen liners will have on the prestige of British shipping, he will refuse further financial assistance to the Q4 until the company have reconsidered the withdrawal of the Queens; and what representations he made to the United States Government about the application of the new United States law on fire safety to the Queens.
    Mr. J. P. W. Mallalieu: I am not prepared to interfere with the commercial decision reached by the owners. The new United States safety regulations were dealt with in the reply given to the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) on 8th February. —[Vol. 740, c. 311–12.]
    Mr. Lewis: Is the hon. Gentleman aware that over £1 million was spent on refitting the "Queen Elizabeth" last year? Since the subsidy was given to Cunard on the basis of maintaining the Atlantic run and since, in my view, until the Q4 is going it can only be run in on the Atlantic run by keeping the two ships going, should not the Government have something to say?
    Mr. Mallalieu: No, I do not think so —not in the terms the hon. Gentleman is mentioning. Cunard must be in a position to pay its share of the costs of the new "Queen" and to maintain the present "Queens" on the run would,
    552
    in the company's commercial judgment, be a drain on its resources.
    Mr. John Hall: Is it not becoming increasingly obvious that the Q4 is unlikely to prove profitable? What provision is the hon. Gentleman making to cover the potential loss?
    Mr. Mallalieu: That is an assumption that should not be made. In its commercial judgment, Cunard thinks that the Q4 can be run profitably.
    Mr. Boyd-Carpenter: The American fire regulations have been a major factor in the decision to lay up the "Queen Elizabeth". As British passenger shipping has a better safety record under our regulations than that of any other merchant navy, has not the time come for us to tell the Americans this in no uncertain terms?
    Mr. Mallalieu: I agree that the British record on fire regulations has been extraordinarily good. I assure the right hon. Gentleman that very strong representations were made to the Americans about their regulations and that we secured some amendment. I do not think that the regulations in their amended form have any bearing on the decision of the Cunard Line.
    Mr. Edward M. Taylorasked the President of the Board of Trade what recent representations he has had from the Cunard Company regarding the financing of the Q4, which is under construction in the Clyde; and if he will make a statement.
    Mr. Benceasked the President of the Board of Trade what representations he has received from the Cunard Steamship Company respecting the increase in the cost of construction of the Q4; and what reply he has sent.
    Mr. Jay: The company have approached me and discussions are in progress. I am not yet in a position to make any statement.
    Mr. Taylor: Is the right hon. Gentleman aware that the recent statement by Cunard caused great anxiety on Clydebank? Is he aware that, apart from an oil rig, the Q4 is the only contract and that its cost escalation is as much the Government's responsibility as it is that

    553
    of George Brown—[Laughter.]—John Brown? Will he at least give an assurance that, having committed themselves so far, the Government will see that this ship is finished?
    Mr. Jay: I always thought that it was John Brown on the north bank of the Clyde, but we are very well aware of these anxieties. We are examining the company's point of view, and I had better not make a statement until we have reached a decision.
    Sir Knox Cunningham: Is it true that the "Queen Elizabeth" is to be bought by a Japanese firm? What action does the right hon. Gentleman intend to take?
    Mr. Jay: I should not like to answer that without notice. Perhaps the hon. and learned Gentleman will put down a Question about it.

  AVIATION

    British European Airways (New Aircraft)
    Mr. McMasterasked the President of the Board of Trade when he expects to make a decision regarding the application of British European Airways to purchase a BAC211 aircraft.
    Mr. Goodhewasked the President of the Board of Trade what decision he haw now taken regarding the application of British European Airways to purchase BAC211 aircraft.
    Mr. Jay: I expect to reach a decision within a few weeks.
    The decision will turn not only on what will be the most economic fleet for B.E.A., on which I have only recently had a full study from the Corporation, but on practical and financial questions relating to the development and production of the chosen aircraft which I am discussing with my right hon. Friend the Minister of Technology.
    Mr. McMaster: Is the right hon. Gentleman aware that irrespective of the decision on the airbus, it would be a tremendous advantage to British industry and technology to have an aircraft which is both built in Britain and equipped with a new engine designed and built in Britain? Will he, therefore, expedite this matter?
    Mr. Jay: Yes, Sir, I entirely agree with the hon. Gentleman's objective. But there are some intricate technical and financial questions involved in the relation of the engine chosen for the airbus and the engine for other types of aircraft. That is why we are now intensively investigating the matter in consultation with B.E.A., Rolls-Royce and the other parties concerned.
    Mr. Goodhew: Is it not a fact that this aircraft is to have a particularly silent engine? Would it not, therefore, have a great export market?
    Mr. Jay: Among many other factors, the relative quietness of an engine is certainly an asset nowadays in any prospective aircraft.
    Mr. Robert Howarth: Would my right hon. Friend, however, take great care, in that if he agrees to the finding of, I think it is, £100 million for the development of the BAC211, this would not only seem to rule out the prospect of a European airbus but might possibly draw us into the sort of error we have seen so many times before, where B.E.A. requirements ruled out the prospect of export sales?
    Mr. Jay: The matter is not quite so simple as this because the question of whether or not it rules out the airbus depends on which engine is chosen for both. It is because this is rather intricate that we are taking a little time to investigate it thoroughly.
    Mr. R. Carr: While we sympathise with the right hon. Gentleman over the complexities of this decision and its importance, can he assure us that there will be very thorough market surveys of the need of world markets for aircraft of different sizes and of the various times at which those demands are likely to arise?
    Mr. Jay: Yes, Sir. We are certainly doing this work, which is extremely important, in consultation both with the authorities concerned in other countries and with the producers of both airframes and engines in the United Kingdom.
    Mr. R. Canasked the President of the Board of Trade whether it remains the policy of Her Majesty's Government that British European Airways should be limited in their re-equipment programme

    555
    to the purchase of British aircraft; and whether he will make a statement.
    Mr. Jay: I have nothing to add to the reply I gave to my hon. Friend the Member for Bolton, East (Mr. Robert Howarth) on 11th May.—[Vol. 746, c. 270.]
    Mr. Carr: Can the right hon. Gentleman assure us that he is very much aware of the great urgency of the position? When he spoke a few minutes ago about reaching a decision on the BAC211 within a few weeks does that also mean that he will be reaching a decision about the B.E.A. re-equipment programme in a few weeks?
    Mr. Jay: We hope to reach a decision very soon on the whole remain instalment of B.E.A. re-equipment. As the right hon. Gentleman knows, we have already approved a major purchase of BAC111s.
    Sir G. Nabarro: Will the right hon. Gentleman bear in mind during the final stages of his consideration of this vital problem that there will be very wide resentment throughout British industry, in aeronautics and engineering generally, if he decides to buy foreign aircraft for a British national European airline?
    Mr. Jay: I there sympathise with the hon. and gallant Gentleman.
    Sir G. Nabarro: I am not gallant.
    Mr. Jay: The hon. Gentleman used to be.

    Passenger and Freight Traffic
    Mr. McMasterasked the President of the Board of Trade whether he has sought estimates of the growth of passenger traffic likely to be carried by British nationalised and independent airlines on the basis of their present plans; how this compares with the estimates of the total growth of world traffic; and whether he is satisfied with the percentage of world traffic likely to be obtained by British operators.
    Mr. J. P. W. Mallalieu: Estimates I have obtained indicate that on present plans British airlines are expecting their traffic to grow at about the same rate as is forecast by the International Civil Aviation Organisation for growth of world traffic. This seems to me satisfac-
    556
    tory and in keeping with recent experience, but I am sure that the airlines will seek as great a share of it as is commercially worthwhile.
    Mr. McMaster: Is the Minister satisfied with the efficiency of the highly protected State air corporations? Will he give the independents a better crack of the whip so that the spur of competition can improve the efficiency of our entire aircraft industry for the benefit of the country as a whole?
    Mr. Mallalieu: The question of licensing on routes is in the first instance for the Air Transport Licensing Board, but I must point out that other countries designate only one airline per route.
    Sir A. V. Harvey: Why is the right hon. Gentleman so complacent about this matter? B.O.A.C.'s share of traffic on the North Atlantic route is steadily declining and the American share is increasing. The Americans have at least two passenger operators, and we have one. Is not there a case for another independent operator on the North Atlantic?
    Mr. Mallalieu: I think that there is no case for another independent operator on that route. But I assure the hon. and gallant Gentleman that we are not complacent about this. I am as anxious as anybody else that our share should be continually increased, and our airlines have been doing well.
    Mr. R. Carr: Then why does the hon. Gentleman think that our share of this vital North Atlantic route is falling?
    An Hon. Member: Especially when we have good aircraft.
    Mr. Mallalieu: That is a question that I cannot answer off the cuff. There is a number of factors to do with inclusive tour charters which are affecting scheduled aircraft.
    Mr. Ronald Atkins: Would my hon. Friend agree that B.O.A.C. has already rescued one transatlantic operator that went bust, at great cost to the Corporation?
    Mr. McMaster: On a point of order. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter at the earliest opportunity on the Adjournment.
    Mr. Peter Millsasked the President of the Board of Trade what are his estimates of the growth of freight traffic likely to be carried by British European Airways on the basis of their present plans; how this compares with the estimate of total growth of air freight traffic within Europe; and whether he is satisfied with the percentage of this traffic likely to be obtained by British European Airways.
    Mr. J. P. W. Mallalieu: Rather over 20 per cent. per annum, which accords with the general expectation of the rate of growth in Europe as a whole. I expect B.E.A. to continue to be able to secure their full share of the traffic offered that is commercially worth while.
    Mr. Mills: Is this enough? Are we not losing a lot of this trade to competitors such as K.L.M.? Surely B.E.A. should be encouraged to obtain a much larger share of the freight traffic.
    Mr. Mallalieu: The record of B.E.A. in obtaining a share of the freight traffic in Europe is first-class. It is much the largest freight carrier.
    Mr. Peter Millsasked the President of the Board of Trade what are his estimates of the growth of passenger traffic likely to be carried by British European Airways on the basis of their present plans; how this compares with the estimate of total growth of air passenger traffic within Europe; and whether he is satisfied with the percentage of this traffic likely to be obtained by British European Airways.
    Mr. J. P. W. Mallalieu: B.E.A.'s present plans are based on the expectation that their passenger traffic will increase by about 10 per cent. a year over the next five years. A similar rate of growth has been forecast for all intra-European international traffic. I expect B.E.A. to be able to secure a satisfactory share of commercially worth while traffic.
    Mr. Mills: Again, is this really enough? Surely, to help maintain this passenger traffic, is it not more important that frequent services should be provided rather than a large airbus—indeed, feeder services from every area, particularly the South-West?
    Mr. Mallalieu: These are certainly points to be borne in mind. But again I must assert that B.E.A. has done extremely well.
    Mr. R. Carr: Would not the hon. Gentleman agree that the growth of British air transport is tied in closely with having a comprehensive plan for airport development for the whole country?
    Mr. Mallalieu: That is one of the very important considerations.
    Mr. Fortescueasked the President of the Board of Trade whether he is aware that the United Kingdom's share of world scheduled air transport has steadily decreased since 1960; and whether he will take steps to counteract this trend by encouraging competition among British carriers and by improving the efficiency of the air transport licensing system.
    Mr. J. P. W. Mallalieu: The United Kingdom's share has not in fact decreased since 1960 and the second part of the Question, therefore, does not arise. Possibly the hon. Member has in mind statistics which, for the earlier year, include traffic carried by airlines of countries for which the United Kingdom is no longer responsible. I will gladly send him the relevant information.
    Mr. Fortescue: I thank the Minister for that answer. Would he not agree that the terms of reference enshrined in the legislation of the Air Transport Licensing Board mitigate against competition among British carriers and should not something be done about it?
    Mr. Mallalieu: It is not merely the terms of the Board. On international practice we have to deal with foreign Governments.
    Mr. Lubbock: Is the hon. Gentleman aware that, contrary to the assertion of the Chairman of B.O.A.C., our share of trans-Atlantic traffic has been declining? The figures are available in the United States, if not here.
    Mr. Mallalieu: This is the subject of an earlier Question and is known. It is also the subject of Notice of an Adjournment debate.

    British European Airways pilots (Extra Duties)
    Mr. Goodhewasked the President of the Board of Trade why he has refused permission for British European Airways pilots to work extra hours within the maximum laid down for safety reasons, in order to meet the traffic demands foreseen during the summer months.
    Mr. J. P. W. Mallalieu: I have not refused permission. The pilots' request, which relates only to remuneration for extra duties, has now been examined and I have agreed that in the special circumstances of this case the payments may be made.
    Mr. Goodhew: Is the Minister aware that the House will receive that news with great satisfaction?

    Turnhouse Airport, Edinburgh
    Mr. Stodartasked the President of the Board of Trade how many aircraft were diverted from Turnhouse Airport, Edinburgh, because of cross-winds during 1966; and by what date in this year he estimates that that number will be exceeded.
    Mr. J. P. W. Mallalieu: The number of air transport flights diverted or cancelled because of crosswinds during 1966 was 65. This number has already been exceeded in 1967 because of the exceptional weather in February and March.
    Mr. Stodart: Is not that a most deplorable reply in view of the utter lack of consideration given by the Government to the need for an extra runway at Turn-house? When are the Government going to get down to giving this important airport proper facilities?
    Mr. Mallalieu: With the present Government, Edinburgh Corporation has been in almost continuous discussion about the future of the airport. We are hoping to reach a final decision with the Airports Authority. I agree with the hon. Gentleman that it is necessary to do something about Turnhouse.
    Miss Harvie Anderson: Is the hon. Gentleman aware of the number of occasions that aircraft only got in at Turn-house at the second or third attempts
    560
    in high gust wind conditions? In view of the narrowness of the safety margin in these instances, will he please get this runway quickly before there is another disaster?
    Mr. Mallalieu: I assure the hon. Lady that no risks whatever are taken about getting into this airport. That is why there are so many diversions.

    London Airport, Heathrow (Cross-runways)
    Mr. Worsleyasked the President of the Board of Trade whether he will make a statement about the increased use of cross-runways at London Airport (Heathrow).
    Mr. J. P. W. Mallalieu: It is doubtful whether greater use of the north-east/ south-west runways at Heathrow would make any significant overall reduction in noise disturbance, but investigations into this complex matter are continuing and should be completed shortly.
    Mr. Worsley: Will the hon. Gentleman pursue these investigations with energy? The great majority of flights into London Airport (Heathrow) come over the centre of London causing the maximum annoyance to the maximum number of people. Would it not help to abate aircraft noise by using these other runways?
    Mr. Mallalieu: That statement is not strictly accurate. If we used the cross-runways I am sure we would be shifting some of the burdon on to Ealing and Southall and other places. We are trying to find the best way of dealing with this problem.
    Mr. Hugh Jenkins: Is not the only solution to the problem to remove the bulk of aircraft landing to a place other than London (Heathrow)—preferably not Stansted?

    Aircraft Noise (Borough of Kensington and Chelsea)
    Mr. Worsleyasked the President of the Board of Trade whether he will arrange for the level of aircraft noise in the Royal Borough of Kensington and Chelsea to be monitored during the summer.
    Mr. J. P. W. Mallalieu: An extensive programme of measurements of aircraft noise levels will be made at a number of sites in the course of this summer, in order to establish the pattern of noise disturbance in all areas affected by Heathrow traffic including the Royal Borough of Kensington and Chelsea.
    Mr. Worsley: Is the Minister aware how much that statement will be welcomed? Anything he can do to impress on the Airport Authority that the problem of aircraft noise is not one just round the airports but wider than that, would be very welcome.
    Mr. Mallalieu: I understand that point.

    Aircraft Accident (Munich)
    Mr. Fortescueasked the President of the Board of Trade whether he has yet obtained a reply from the German authorities regarding certain technical matters arising from the conclusions of the Second Commission investigating the Munich air disaster in February, 1958.
    Mr. Dobsonasked the President of the Board of Trade what reply has been received from the German Government concerning the technical points put to them by his Department following the receipt of the Second Report of the aircraft disaster at Munich Airport on 6th February, 1958; whether the report is now available for publication; and if he will make a further statement on this subject.
    Mr. J. P. W. Mallalieu: The German Federal aviation authorities have agreed there should be discussions with the German experts, and these are due to commence today. The report will not be published until the discussions have been completed and their implications considered.
    Mr. Fortescue: On 15th March this year the Minister told the House that he was pressing very hard for this information. Has it taken three months to get to this unsatisfactory state of affairs?
    Mr. Mallalieu: It has taken a long time, but it is starting today.

    British European Airways (Internal Flights)
    Mr. G. Campbellasked the President of the Board of Trade if he will give a direction to British European Air-
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    ways to advertise, or otherwise give publicity to, their new schedule of internal flights.
    Mr. J. P. W. Mallalieu: No, Sir. This is a commercial matter for the management of B.E.A.
    Mr. Campbell: Does the Minister realise that although new extra flights in Scotland have started from 1st April, it is taking a long time for many people who would use them to learn of the existence of these flights? Is it not Government policy that these services should be used as much as possible?
    Mr. Mallalieu: It certainly is, but my information is that a Press notice was put out a week before the start of the new schedule and that there were follow-up advertisements after that.

    Tayside (Airport Facilities)
    Mr. Buchanan-Smithasked the President of the Board of Trade to what extent he is having consultations with those conducting the Tayside study regarding the provision of adequate airport facilities for that region; and if he will make a statement.
    Mr. J. P. W. Mallalieu: None at present. The Tayside Study is still at a formative stage and the precise terms of reference are being considered by my right hon. Friend the Secretary of State for Scotland but we shall, of course, be ready to co-operate on the aerodrome aspects in due course.
    Mr. Buchanan-Smith: Is the hon. Gentleman aware that the present situation on Tayside, where we have to rely on an airstrip and on a Ministry of Defence airfield, is thoroughly unsatisfactory? In view of the industrial development of this area, will he do all he can to bring forward definite proposals for proper facilities as soon as possible?
    Mr. Mallalieu: I appreciate that it is most unsatisfactory and that we cannot wait until the Tayside study is complete, which is why we are carrying on with other investigations.

    Civil Aircraft (Certificates of Maintenance)
    Mr. Bidwellasked the President of the Board of Trade what plans he has for changing the regulations at present

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    requiring certificates of maintenance for civil aircraft to be signed by licensed aircraft maintenance engineers.
    Mr. J. P. W. Mallalieu: The Air Registration Board, who are my advisers in airworthiness matters, have suggested that the regulations should be expanded to allow certificates of maintenance to be issued by approved maintenance organisations, and this suggestion is being examined.
    Mr. Bidwell: Will my hon. Friend bear in mind that the licensed aircraft maintenance engineers hold well considered views? Does he recall the question which I put to his right hon. Friend after the statement on the recent air crashes? Will not the Department accept that this is not the time in any way to diminish present aircraft maintenance standards for safety?
    Mr. Mallalieu: This is certainly not the time to diminish standards and if there were any question of that being the effect, we should reject the proposals.

GIBRALTAR
The Minister of State for Commonwealth Affairs (Mrs. Judith Hart): With permission, Mr. Speaker, I wish to make a statement on Gibraltar.
The House will recall that on 20th December, 1966, the General Assembly of the United Nations adopted a Resolution, No. 2231 (XXI), calling upon Britain and Spain to continue their negotiations about Gibraltar, taking into account the interests of the people of Gibraltar and asking Britain, in consultation with Spain, to expedite the decolonisation of Gibraltar. Spain voted for this Resolution. So also did Britain, with the statement, by our Permanent Representative at the United Nations, that Britain could never agree that decolonisation would mean the incorporation of Gibraltar into Spain against the wishes of its people, and also that nothing could prejudge the question of the type of decolonisation which would best fit the circumstances of Gibraltar.
We have been considering our policy towards Gibraltar in the light of this Resolution. In doing so we must have regard to the relevant provisions of the Charter of the United Nations, in par-
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ticular Article 73 which expresses the principle that the interests of the inhabitants of a non-self-governing territory are paramount. We must also have regard to our obligations under the Treaty of Utrecht.
As the House knows, we duly arranged to hold talks with the Spanish Government in pursuance of the U.N. Resolution. The first meeting between delegations of the two countries was to have taken place in London in April. We greatly deplored the action of the Spanish Government in announcing, on the eve of the talks, new restrictions plainly aimed against the economy of Gibraltar. Such action was in clear conflict with the terms of the General Assembly's Resolution, which regretted the occurrence of acts which had prejudiced the progress of the previous Anglo-Spanish negotiations. The talks were postponed, as the House knows, in order to enable us to consider the new situation. As hon. Members know, we raised the matter in the International Civil Aviation Organisation and have also attempted to resolve the problem in bilateral talks with the Spanish Government.
We are taking steps to bring the matter before the Council of I.C.A.O. once more, this time as a dispute under Article 84 of the Chicago Convention. I should prefer not to go further at this stage into the international aspect of the problem, which is primarily a matter for my right hon. Friend the Foreign Secretary.
But we should not be deterred by this dispute or by the difficulties which Spain has made over the holding of talks from pursuing the objectives of the United Nation's Resolution.
I must repeat Her Majesty's Government's firm belief that decolonisation cannot consist in the transfer of one population, however small, to the rule of another country, without regard to their own opinions and interests. We therefore think that the next step in pursuance of the United Nations Resolution should be to give the people of Gibraltar an opportunity to express their views, by a formal and deliberate act, on what would best serve their interests.
We have accordingly decided that a Referendum should be held in Gibraltar in which the people of Gibraltar should be invited to say which of the following

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alternative courses would best serve their interests:
A. To pass under Spanish sovereignty in accordance with the terms proposed by the Spanish Government to Her Majesty's Government on 18th May, 1966; or
B. Voluntarily to retain their link with Britain, with democratic local institutions and with Britain retaining its present responsibilities.
If the majority of the people of Gibraltar vote in favour of the first alternative, we will be ready to enter into negotiations with the Spanish Government accordingly.
If the majority of the people of Gibraltar vote in favour of the second alternative, we will regard this choice as constituting, in the circumstances of Gibraltar, a free and voluntary relationship of the people of Gibraltar with Britain. We will thereafter discuss with representatives of the people of Gibraltar appropriate constitutional changes which may be desired.
If the majority vote for the second alternative, provision will also be made for the people of Gibraltar to retain the right at any future time to express by a free and democratic choice the desire to modify their status by joining with Spain, in which event we would be ready to approach the Spanish Government accordingly.
We attach great importance to the Referendum being held in conditions of complete impartiality. We want the people of Gibraltar to be able to think calmly where their interests lie and to express their choice free from pressures of any kind. We are bringing our intention to the notice of the Secretary-General of the United Nations and we should very much welcome the presence of any observer he might wish to send to Gibraltar during the Referendum proceedings.
We are ready to welcome an observer from Spain, too, and to give the Spanish Government facilities to explain their own proposals to the people of Gibraltar if they so wish. We also have in mind to invite observers from one or two other Commonwealth countries.
It is our intention to hold this Referendum as soon as suitable arrangements have been made for the registration of persons entitled to vote. These arrangements will necessarily take some time.
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Our present expectation is that the Referendum will be held early in September.
Mr. Maudling: It is a little difficult to be sure of how far this statement carries us. Surely the Government have been proceeding on the assumption that the people of Gibraltar do not wish to become Spaniards? Surely this has never been seriously challenged? May I ask the hon. Lady two questions? First, are the Government now at last prepared to give the assurance that they have been so coy about, namely, that they will in no circumstances transfer sovereignty over Gibraltar to Spain against the wishes of the people?
Secondly, and equally important, what practical steps do the Government intend to take to deal with the severe economic pressure that has been put upon Gibraltar, particularly in the matter of flying rights?
Mrs. Hart: To take the first question, this is really already answered by the terms of the Referendum and the terms of my statement. What I have made clear is that, in that the United Nations Resolution places stress, and our Permanent Representative at the United Nations, in voting for the Resolution, placed even greater stress, upon the interests of the people of Gibraltar, it will be clear that we are determined that the interests of the people of Gibraltar should be paramount and that, therefore, it is right that they should decide what they believe their interests to be and where they believe their interests to lie.
On the right hon. Gentleman's second point, we are doing, as I think he knows, a great deal to assist the economy of Gibraltar at the moment. On the question of air restrictions, in practice there has been little or no interference with the travelling of passengers and tourists to Gibraltar, in spite of the air restrictions, and we very much hope that this situation will continue.
Mr. Maudling: I am sorry to press the hon. Lady, but this is a very important point. In answering the first question, she moved a little towards some of the ambiguous phrases used in the past by Ministers, namely, about the Gibraltar people expressing their own views, in their own interest. What we want is a categorical assurance that if it is clear that they do not wish to be transferred

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to Spain they will not be transferred to Spain.
Mrs. Hart: If the right hon. Gentleman will read my statement carefully, what I said there, and I will repeat the relevant sentences, was:
"If the majority of the people of Gibraltar vote in favour of the second alternative"—
namely, voluntarily to retain their link with Britain, with democratic local institutions and with Britain retaining its present responsibilities—
"… we will regard this choice as constituting, in the circumstances of Gibraltar, a free and voluntary relationship of the people of Gibraltar with Britain."
That makes it clear what our intentions are.
Mr. John Lee: My hon. Friend has made a very satisfactory statement. May I ask two questions? First, if the Referendum is in favour of association with the United Kingdom, while I fully concede that the people of Gibraltar may wish to reconsider their decision in future, may we be assured that there will be no further going over this ground for at any rate a certain period—say, ten years as a minimum? Secondly—
Mr. Speaker: Order. Questions must be reasonably brief.
Mr. Lee: If the Spanish Government send observers, may we have an assurance that they will not be allowed to interfere with the running of the Referendum?
Mrs. Hart: Certainly they will not. As I have said, the whole intention is that this should be a completely impartial Referendum. If the Secretary-General is able to provide an observer from the United Nations, if the Commonwealth is able to provide one or two observers, and if Spain wishes to provide an observer, they will be strictly observers. There is no need for my hon. Friend or for right hon. and hon. Gentlemen opposite to tell me what the people of Gibraltar feel in their hearts. I am sure that what lies behind the feelings of the people of Gibraltar is not only the question of where their interests lie—whether in relation to Britain or in relation to Spain—but a number of considerations which bear on the systems of Government in Britain and in Spain.
Mr. Wall: If the people of Gibraltar decide on a British connection, there will then be constitutional discussions with the Gibraltar Government. Why cannot the hon. Lady go the whole hog in the Referendum and decide whether Gibraltar is to be integrated with Britain or have a close association with Britain and so end the present political turmoil in Gibraltar'?
Mrs. Hart: My impression is that one of the things which has understandably been very much concerning the people of Gibraltar, including many members of the Integration Party, whom I met on my recent visit to Gibraltar, has been the fear that there might be a loosening of the ties with Britain. I think that they will be content with the Referendum and with the assurance which I have given them that in any future discussions about constitutional changes in Gibraltar every shade of political opinion in Gibraltar will be fully consulted and involved. I think that they will be reasonably content with that.
Mr. Crawshaw: Is my hon. Friend aware that this decision will not be welcomed by the Spanish Government and that the possibilities are that there will be further threats and action taken against Gibraltar? Can she assure us that this new-found backbone will continue to be shown rather than a clean pair of heels as has been shown in the past?
Mrs. Hart: I do not know whether my hon. Friend is suggesting that I have been showing a clean pair of heels. I assure him that the undertakings which I have given to the people of Gibraltar, and the undertakings given in the House by my right hon. Friends the Foreign Secretary and the Chancellor of the Duchy of Lancaster, are that we will continue to stand by the people of Gibraltar. I see no reason to assume what the Spanish reaction to my statement today will be. What is clear is that we are acting in pursuance, as we are bound to do, of the United Nations Resolution, which calls upon us to continue our negotiations, but to take into account the interests of the people of the territory. What we are now proposing is fully in pursuance of that Resolution for which both we and Spain voted.
Sir A. V. Harvey: Since it is highly likely that Spain will disregard any decision of the United Nations, why does the hon. Lady place so much reliance on the United Nations when it seems quite incapable of dealing with the most elementary matters elsewhere in the world?
Mrs. Hart: I think that we must recognise that the United Nations Charter is bound to govern the actions of any member of the United Nations Organisation. Article 73 states various things. We have the peculiar difficulty in this situation—and let us understand this clearly—of being bound to recognise Article 73, on the one hand, and of being bound to recognise the Treaty of Utrecht, however long ago it may have been drawn up, on the other hand. Thirdly, we must recognise the interests of the people of Gibraltar with whom we have such close associations. It was in recognition of all three factors that we came to our conclusion.
Mr. Palmer: Would my hon. Friend agree that this excellent proposal for a Referendum will be a very useful object lesson to the Franco dictatorship on the workings of a free democracy?
Mrs. Hart: It is not for me to prejudge what conclusions may be drawn by the Government of Spain from the Referendum.
Sir Harmar Nicholls: Is the hon. Lady aware that in some quarters her statement will be looked upon as a weakness? It will give the appearance that we are covering up our responsibilities by pushing the Referendum forward. Therefore, will she use all the diplomatic power and contact which she has to let it be seen that, as her hon. Friend the Member for Liverpool, Toxteth (Mr. Crawshaw) said, we are at last showing some backbone?
Mrs. Hart: It is probably relevant to say that I have in the last few months, both here in London and in Gibraltar, been in very close touch with Joshua Hassan and Mr. Peter Isola and have every reason to believe that they will regard this as a reasonable next step to take. I have no fears that there will be in Gibraltar any inclination to regard this as a sign of weakness on the part of the British Government.
Mr. Colin Jackson: May I endorse my hon. Friend's statement that the people of Gibraltar will widely support the plea for a Referendum? Bearing in mind that there may be a United Nations observer and an observer from the Spanish Government, and since in the Malta Referendum a delegation was sent from the British Parliament, and as this matter affects the British Crown and British Parliament, might not a delegation of friends of Gibraltar be sent from this country for the Referendum?
Mrs. Hart: That is not a matter which has been considered. It is, no doubt, for the Commonwealth Parliamentary Association to consider that aspect. I am reasonably content that if we can get an observer from the Commonwealth and an observer from the United Nations, if the Secretary-General agrees, we shall ensure a completely impartial conduct of the Referendum.
Mr. David Steel: We particularly welcome the statement, since our suggestion was turned down by the Government. Who will organise the Referendum? Will it apply to all over 21 years of age? Exactly what does the hon. Lady mean when she talks about giving the Spanish Government facilities to outline their own proposals? Would she consider extending this constitutional innovation to the people of Scotland?
Mrs. Hart: I am reasonably satisfied that the arrangements as between Her Majesty's Government and the people of Scotland do not offend Article 73 of the United Nations Charter. Secondly, in terms of the Spanish explaining what their position is, at the moment we are basing alternative A on the offer which was made by Spain in May last year. We have made our statement of what alternative A will be, but if the Government of Spain wish to make any comment or observations on it we will be ready to listen to them. On the hon. Gentleman's first point, the Referendum will require an Order in Council defining its terms and the qualifications of voters and making provision for its administration. The Governor of Gibraltar will be responsible for its administration. He will act at his discretion and under the directions of Her Majesty's Government. This is essentially a British act of state.
Mr. Alfred Morris: May I assure my hon. Friend that there will be widespread approval of her statement throughout the country? What contingency planning has there been to deal with any intensification by Spain arising from this statement of its present interference with our flying rights?
Mrs. Hart: I can assure my hon. Friend that "contingency planning" is a phrase which has not been unknown to us in the last few weeks, but he will appreciate that it would not be wise for me to enter into detail as to what it might mean.
Sir T. Brinton: Can the hon. Lady explain to us why, when in this country we have always rejected the idea of referenda as a method of government, in the case of Gibraltar we can contemplate going over the heads of the clearly expressed opinion of both the Government and the Opposition of that territory apparently to prove to the Spanish dictatorship that the Gibraltarians do not wish to be Spanish?
Mrs. Hart: As the hon. Gentleman will know, throughout the whole debate with Spain and in all these difficulties, which arise essentially from the old Treaty of Utrecht, which creates the special condition in this matter, we have tried to adhere to what is legal and right in terms of international law. We are now in a situation where the last binding legal obligation upon us is a United Nations Resolution, for which we voted. But the terms of that Resolution enable us to take full account of and to give great stress to the interests of the people of Gibraltar. One can establish what those interests are by a reference to the leaders of the parties in Gibraltar. That is one possibility. But what is clear is that it is infinitely more meaningful if the people themselves are able to express their views on where their interests lie by means of a Referendum. It is not quite the first occasion. It is the first occasion in a British dependent territory, but there were two occasions in the past, in Togoland and the British Cameroons, which were United Nations trust territories under British administration, when similar referenda were held.
Mr. Arthur Lewis: In view of the Tact that my hon. Friend's statement has
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been welcomed by the overwhelming majority of hon. Members on both sides, with suitable amendments, could she organise a similar sort of referendum in Rhodesia?
Mrs. Hart rose—
Mr. Speaker: Order. These questions are about Gibraltar.
Sir W. Bromley-Davenport: The hon. Lady referred earlier to Resolutions being passed by the United Nations. But what earthly good do Resolutions passed by that body do? What good did a Resolution do to the people of Hungary when they were being massacred—
Mr. Speaker: Order. Even the hon. and gallant Gentleman must put his question about Gibraltar.
Mr. Hector Hughes: Will my hon. Friend specify what assistance Britain will give to Her Majesty's subjects in Gibraltar against outside Spanish influence to ensure that the Referendum will be a real expression of opinion by the people of Gibraltar?
Mrs. Hart: On the basis of my knowledge of the people of Gibraltar, I have no fears that they will not express their views in the proposed Referendum freely and without concern for any influences which may come over the border from Spain.
Sir J. Langford-Holt: The hon. Lady has mentioned two alternatives—closer association with Spain, and closer association with the United Kingdom. The third alternative, which would appear to be obvious, is that of complete independence. Is this to be included in the Referendum? If not, what are the reasons for excluding it?
Mrs. Hart: This is very much linked with the Treaty of Utrecht. If the hon. Gentleman studies its terms, he will see why that is so. It is for that reason that the alternatives will be to pass to Spanish sovereignty or to retain links with Britain.
Several Hon. Members rose—
Mr. Speaker: Order. We must move on.

OFFICIAL REPORT (CORRECTION)
Mr. Iain Macleod: On a point of order, Mr. Speaker. Towards the end of my speech last night, when rehearsing possible future legislation, I am reported in column 429 as saying:
"It may be that in the end some acceptable form of compulsion will be found."
In fact, of course, my case and that from this side of the House, as the Government have always acknowledged, was against compulsion in any form, and the actual words which I used were:
"… some even less acceptable form of compulsion will be found."
In common with all hon. Members, however, I would like to say how much we admire the Official Reporters, particularly perhaps in the hubbub of winding up speeches when they are working against a deadline, but in a matter of such fundamental disagreement between the two sides of the House, I thought it right to make the statement now rather than wait for the corrected version to appear in the Bound Volume.
Mr. Mendelson: Further to that point of order, Mr. Speaker. Might it be added to the record that the shorthand reporters could have been led to this interpretation by the speech at the beginning of the debate by the right hon. Member for Mitcham (Mr. R. Carr), who put forward a close, tight legal framework of compulsion?
Mr. Speaker: That is a political addendum rather than a point of order. I will see that the correction is made.
In asking for the correction, I am glad that the right hon. Member for Enfield, West (Mr. Iain Macleod) called attention, as I have done before, to what, I think, is the unanimous feeling of the House, to the way in which we are accurately and well served by the reporters in the Press Gallery. We do not always make it easy for them.

FINANCE [MONEY] (No. 2)
Queen's Recommendation having been signified—
Motion made, and Question proposed,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of moneys provided by Parliament of any increase in the sums so payable under the Selective Employment Payments Act, 1966 which is attributable to any provision of that Act of the present Session increasing the amount of any payment to an employer in respect of any person and any contribution week under section I or section 3(2)(a) of the said Act of 1966 by a sum not exceeding thirty shillings or such higher amount as the Treasury may by order from time to time determine where the payment is in connection with employment in an area which is for the time being or has formerly been specified as a development area under section 15(2) of the Industrial Development Act, 1966 or in any such locality outside an area which is or has been so specified as is specified in section 15(6) of that Act;

(b) the making out of the Consolidated Fund of payments to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.—[Mr. MacDermot.]

3.57 p.m.
Mr. Terence L. Higgins: It would be unfortunate if this Money Resolution were approved by the House without some protest being made on behalf of the Opposition and, I should have thought, on behalf of back-bench hon. Members on the Government side.
Its purpose is to widen the scope of the Financial Resolutions at present governing the Finance Bill, and, together with the procedural Motion which follows, it will enable the Government's new Clause No. 67 introducing the regional employment premiums to be included in the Finance Bill. So far, Amendments to the Finance Bill have been severely inhibited by the terms of previous Money Resolutions, and it has been very difficult for hon. Members on both sides to get into order Amendments altering the Selective Employment Tax or the Selective Employment Premium Act, 1966. This has clearly made it difficult to debate them in a sensible manner.
It would have been more courteous if the Government, when considering what

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the original Money Resolution should have been, had taken account of the fact that there is widespread protest about the operation of the Selective Employment Tax and very grave doubts about the way in which the Selective Employment Premiums are being paid. For that reason, it is right and proper that we should express our dissatisfaction with the way in which the Government have handled the matter on this occasion.
I would not urge my right hon. and hon. Friends to vote against the Resolution but, rather, that we should wait until we come to the actual debate on new Clause No. 67. It is right, however, that we should express our dissatisfaction.
The Financial Secretary to the Treasury (Mr. Niall MacDermot): The hon. Member for Worthing (Mr. Higgins) has made a general charge which he has not supported in any specific way. This is a Money Resolution for something which does not normally appear in a Finance Bill, namely, a proposal for expenditure.
Naturally, the responsibilities of the Financial Secretary in drafting a Money Resolution on such matters traditionally go beyond those where one is dealing with an ordinary Money Resolution in a Finance Bill, because one has to consider the responsibilities of the public purse.
I do not know in what respect the hon. Gentleman thinks that this Money Resolution is unduly restrictive. The hon. Gentleman complained that the earlier Money Resolution was too restrictive and restricted the debate under Clause 24. I would have been prepared to defend it at the proper time had the House voted on it, but there was no challenge, and I do not think that it would be proper to take up the time of the House in debating it now.
4.0 p.m.
Dame Irene Ward: It is difficult to follow the purpose of this Money Resolution. If the House passes it—and I gather that as we are not going to oppose it it will be passed—will it be in order to table Amendments dealing with the Government proposals for the development areas? For instance, under the present arrangements it is not
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possible to table Amendments to deal with an anomaly which allows the Selective Employment Tax premium to be paid to workshops for the blind run by voluntary societies but not to those run by local authorities. Newcastle-on-Tyne is in a development area and wishes to have representations made on this point. As this issue will affect associations which help the blind in many development areas, will it be in order, so that I can carry out the wishes of the City and County Borough of Newcastle-on-Tyne, to table an Amendment to discuss this matter?
Mr. MacDermot: It is not for me to say what will be in order, but I think that under this Money Resolution the hon. Lady will have difficulty in tabling an Amendment of any character dealing with the effect of the ordinary Selective Employment Tax and the refunds or premiums under it. What we are concerned with here is a proposal in the new Clause for regional employment premiums, and, as the Title indicates, they are of a regional nature. Accordingly, it would be neither relevant, nor within the terms of the Money Resolution, to table Amendments which were limited to the operation of particular industries, or indeed, as the hon. Lady is suggesting, to parts of industries within these regions.
Dame Irene Ward rose—
Mr. Speaker: Order. The hon. Lady has exhausted her right to speak, but she can ask a question before the Financial Secretary sits down.
Dame Irene Ward: Thank you, Mr. Speaker. I wanted to ask whether under the new proposals we would in fact be extending the injustice between the two types of association for the blind.
Mr. Speaker: Order. We are getting into merit. We cannot have that.
Mr. John Hall: Would it not be right to assume that the Government knew some days ago that they would have to table this Money Resolution to enable them to give effect to the new Clause dealing with regional employment premiums? Would it also be right to assume that had this Money Resolution been tabled before we discussed the Clauses dealing with S.E.T. many of the Amendments which were not in order would have been, and that the Committee

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would have been able to discuss many things which it was prevented from discussing by the narrow terms of the previous Money Resolution? Is it a pure coincidence that this Money Resolution has been tabled after the Committee has concluded its discussions on the S.E.T., or is there some other reason for it?
Mr. Raymond Gower: The Financial Secretary is usually very fair in his arguments, but I think that he made a false point when he said that we had lost our right to argue against this Money Resolution because we did not vote against the original one. Had we had any idea that at a later stage there would be such a wide extension as this we would have voted against it, and I do not think that the point made by the hon. and learned Gentleman can be sustained.
Sir Douglas Glover: I would like the advice of the Chair on this Money Resolution. We have discussed various matters in Committee. Various things were ruled out of order because of the narrow way in which the original Money Resolution was drawn. This Money Resolution will widen the scope of debate. Does this mean that on Report Amendments which would otherwise have been out of order will be accepted by the Chair? If it does, it will alter the Opposition's attitude to much of the further debate on the Bill.
Mr. Speaker: The hon. Gentleman is drawing a very long bow if he expects Mr. Speaker, at this stage, and at this point of the debate, to advise on what will be in order on Report. I shall deal with that when we come to it.
Mr. MacDermot: I rise purely out of courtesy to the hon. Gentlemen who have asked further questions. I think, Mr. Speaker, that the answer which you have given is really my answer to the points made by them. It is for them to see whether on Report there is anything in this Money Resolution which widens the debate on Clause 24 when it comes
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to be reconsidered. It is my view that it does not.
Question put and agreed to.
Resolved,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of moneys provided by Parliament of any increase in the sums so payable under the Selective Employment Payments Act 1966 which is attributable to any provision of that Act of the present Session increasing the amount of any payment to an employer in respect of any person and any contribution week under section 1 or section 3(2)(a) of the said Act of 1966 by a sum not exceeding thirty shillings or such higher amount as the Treasury may by order from time to time determine where the payment is in connection with employment in an area which is for the time being or has formerly been specified as a development area under section 15(2) of the Industrial Development Act 1966 or in any such locality outside an area which is or has been so specified as is specified in section 15(6) of that Act;

(b) the making out of the Consolidated Fund of payments to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.

FINANCE BILL (PROCEDURE) (REGIONAL EMPLOYMENT PREMIUMS)
Resolved,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session for increasing the amount of payments to employers under section 1 or section 3(2)(a) of the Selective Employment Payments Act 1966 and for the making of grants to the Exchequer of Northern Ireland towards expenditure incurred under any enactment for corresponding purposes passed by the Parliament of Northern Ireland.—[Mr. MacDermot.]
Instruction to the Committee on the Finance (No. 2) Bill that they have power to make provision therein pursuant to the said Resolution.—[Mr. MacDermot.]

ORDERS OF THE DAY

  FINANCE (No. 2) BILL
  Further considered in Committee [Progress, 12th June.]
  [Sir ERIC FLETCHER in the Chair]

  FINANCE (No. 2) BILL

    New Clause 67.—(REGIONAL EMPLOYMENT PREMIUM.)
    (1) Where, in the case of a person in an employment to which section 1 of the principal Act applies in respect of whom a payment under that section falls to be made to the employer, the establishment in or from which that employment is carried out is situated wholly within a development area, then, subject to subsections (2), (4) and (5) of this section, the amount of that payment shall, in respect of any contribution week beginning on or after 4th September, 1967, be increased—

    (a) if that person was treated for the purpose of selective employment tax for that week as a man over the age of eighteen, by thirty shillings; or

    (b) if that person was treated for that purpose as a woman over the age of eighteen, by fifteen shillings; or

    (c) if that person was treated for that purpose as a boy under the age of eighteen, by fifteen shillings; or

    (d) if that person was treated for that purpose as a girl under the age of eighteen, by nine shillings and sixpence.

    (2) Where in any contribution week the person aforesaid was employed by the employer in question in an employment to which section 1 of the principal Act applies, but

    (a) he worked in that employment for an aggregate of less than twenty-one hours, or he did no work in that employment; and

    (b) that employment was not in pursuance of a contract or as the holder of an office which normally involved that person's working in that employment for an aggregate of twenty-one or more hours weekly,

    the amount of any increase in respect of that person and that week by virtue of subsection (1) of this section, instead of being that for the time being specified in paragraph (a), (b), (c) or (d), as the case may be, of that subsection, shall be one half of the amount for the time being so specified; and paragraphs (i) and (ii) of section 24(1) of this Act shall apply for the purposes of this subsection as they apply for the purposes of the said section 24(1).
    (3) In section 3(2)(a) of the principal Act (which provides for the making to certain employers who are public bodies of payments corresponding to the payments made to other employers under section 1 of that Act), the reference to the appropriate additions specified in paragraphs (a) to (d) of section 1(1) of that Act shall, in relation to persons employed in any such part of the undertaking of an employer to whom the said section 3 applies as is
    580
    specified in Part III of Schedule I to that Act who are so employed at or from places situated wholly within development areas, be construed as including a reference to the appropriate increases for the time being specified in paragraphs (a) to (d) of subsection (1) or in subsection (2) of this section.
    (4) The Minister of Labour shall not be required by virtue of subsection (1) of this section to increase any payment to an employer under section 1 of the principal Act in respect of any person and any contribution week unless the employer produces such records as that Minister may reasonably require—

    (a) of the number of hours worked by that person in that week; and

    (b) of the number of hours of work in a week normally involved for that person in consequence of the terms of any contract or by reason of any office held by him.

    (5) The Treasury may by order made by statutory instrument—

    (a) substitute for all or any of the amounts specified in subsection (1)(a) to (d) of this section such other amount or amounts as may be specified in the order;

    (b) in a case where increases by virtue of this section have been paid in connection with any establishment but cease to be payable by reason of a change in the development areas, provide for increases to continue to be paid by virtue of this section in connection with that establishment for such period as may be specified in the order and of such amount or amounts as may be so specified either in relation to the whole of that period or in relation to different parts of that period;

    and any such order may be made either in relation to all development areas or in relation only to such development areas or parts of development areas as are specified in the order, and may vary or revoke any previous order under this subsection; but no such order shall be made unless a draft thereof has been approved by resolution of each House of Parliament.
    (6) In this section—

    (a) the expression 'development area' means an area for the time being specified as a development area under section 15(2) of the Industrial Development Act 1966, and includes any such locality outside that area as is specified in section 15(6) of that Act;

    (b) the expression 'the principal Act' means the Selective Employment Payments Act 1966.

    (7) If any enactment of the Parliament of Northern Ireland makes provision with respect to Northern Ireland which appears to the Treasury to correspond to the provision made with respect to development areas by this section, there shall from time to time be paid out of the Consolidated Fund of the United Kingdom into the Exchequer of Northern Ireland such sums towards the expenditure incurred in making payments under that enactment as the Treasury, after consultation with the Ministry of Finance for Northern Ireland, may see fit to direct.—[Mr. Callaghan.]
    Brought up, and read the First time.
    4.9 p.m.
    The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move, That the Clause be read a Second time.
    Thanks to the procedure which the House has just adopted, I am able to move this Clause. It will bring such profound benefits to the development areas of this country that I am not surprised the House was unanimous in agreeing that this matter should be discussed.
    There is no doubt that this proposal goes to the very heart of the problems of the development areas. It is of the utmost significance to them in the provision of new jobs, and perhaps I might give two figures to show the scale of the Government's intervention and assistance which is now being given to these areas. The total of the special assistance which has been given to these development areas so far is about £90 million per annum. The total of this new assistance is about £100 million, so the assistance will be doubled. I emphasise that I was referring to the special assistance which they receive and not to the normal kind of Government assistance which is available throughout the whole of Britain.
    I think the Committee will realise from those two figures that the scale of this operation is of a character which has not been seen since the development areas themselves were established, and I think it will be found in the course of some years to have a remarkable effect in equalising economic activity and economic growth between the development areas on the one hand, and the remainder of Britain on the other.
    The new Clause gives effect to the proposals in the Green Paper, which was amplified in the White Paper published last week after our debate. It will have effect from 4th September, 1967, and provides for the new premium to be paid to employers in respect of employees in manufacturing industry in the development areas. It fixes the rate for men and women, for boys and girls, and for part-time workers. The cost of the premium this year, for 1967–68, is likely to be about £35 million—in due course, the Financial Secretary will present a Supplementary Estimate for that sum—and £100 million in a full year. Provision is also made for assistance from the Consolidated Fund to Northern Ireland for the intro-
    582
    duction of corresponding arrangements there.
    As drafted, the Clause does not provide for the termination of the premium, which will therefore continue until fresh substantive legislation is passed, but it gives power to vary the rates of premium up or down without limit, and, importantly, to maintain it for areas which might cease to be parts of development areas. People should have some certainty about the payment of this large premium.
    Subsection (1) specifies the rates of the premium by increasing for employers in qualifying establishments in development areas the rates of the selective employment premium paid by the Minister of Labour under the Selective Employment Payments Act, 1966, or by the designated Minister.
    The classes of employment in respect of which the premium is to be paid will therefore be governed by the S.E.P. Act, that is, it will be confined to manufacturing industry. These classes may be varied by Order under Section 9 of the S.E.P. Act which, in the case of an order varying the application of Section 1, is subject to affirmative Resolution of both Houses of Parliament. Because payments are to be made in this form—this will please hon. Members opposite, but no more than me—they can be made at very small extra cost through the existing administrative machinery of the Ministry of Labour, because the records and registration are already known.
    Once again, the Selective Employment Tax, as it is developing in these broadening aspects, shows what a useful weapon in our fiscal armoury it is becoming.
    The regional employment premium will be payable in respect of employment in the contribution week beginning 4th September. This day has been chosen as the first convenient date after the passage of the Finance Bill and is the same as for the new refunds for part-time and overseas employment. It will allow adequate time for detailed guidance to be given to employers.
    R.E.P. will be paid quarterly in arrears. Quarterly claim periods begin on different dates so as to spread the work load of paying claims for the Ministry of Labour's local offices. Employers submitting claims covering the period July,

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    August, and September will receive the increased rates of premium for September; those claiming for the period August, September and October will receive the increased rates for September and October. Thereafter quarterly payments will include the increased rates for the whole period.
    4.15 p.m.
    At the rates specified, the premium is estimated to represent a subsidy of about 71 per cent. of wages in manufacturing industry in the development areas. The rate for men is 30s., which will be added to the additional element in the selective employment premium, so that the total payable to an employer will be 37s. 6d. a week for a man, 18s. 9d. for a woman or boy and 12s. for a girl. This is, of course, a substantial subsidy and its direct purpose is to be selective. It is intended to make products in the development areas more competitive with those outside.
    Mr. Stanley R. McMaster: Is there any provision for varying this amount between regions, as unemployment varies between regions?
    Mr. Callaghan: There is, and I shall come to that point.
    Subsection (2) provides for the payment 3f half the full rate for part-time workers, which will encourage the employment of those unable to work full time without tilting the balance too far in favour of part-time work. The premium will be paid at half the rate for the worker who normally works less than 21 hours a week, if in any week he either works for less than 21 hours or does not work at all—for instance if he is on holiday—but not if he is sick, since S.E.T. would not then be payable.
    Premium will be paid at the full rate for any worker, whatever his normal hours of work, who works 21 or more hours in any week and for any worker who normally works 21 or more hours a week, even if in any particular week he works for less than 21 hours, for instance, if he is on short-time.
    Subsection (3) extends the payment of the premium to manufacturing employment in fringe establishments of nationalised industries, as was done before. There is a number of such fringe
    584
    activities which I need not specify. It also provides for the payment of the premium to the steel industry, after nationalisation. This will be treated as a manufacturing industry for the purposes both of the premium and of investment grants, and this will require no fresh legislative action.
    Subsection (4) empowers the Minister of Labour to pay the increased premium only provided that an employer provides records of hours worked each week and those normally worked. The records need be only such as the Minister may think are reasonably required. As public money is to be paid out, that is an essential provision.
    Subsection (5) provides that the rates may be varied by Treasury Order, subject to affirmative Resolution in both Houses of Parliament. It does not give power to reduce the premium to nil, which would terminate the scheme, and I have already said that the Clause does not run down. With this qualification, it gives the Government considerable flexibility in carrying out the purposes of the scheme and the necessary powers to carry out the intention in regard to tapering, to which I referred in our earlier debate.
    Paragraph (a), read with the last five lines of the subsection, provides that the rates can be varied up or down without limit for men and women, boys and girls and part-timers, together or separately, and—I now come to the point of the hon. Member for Belfast, East (Mr. McMaster) —that different rates may be fixed for different development areas, whether in existence now or scheduled in future, or for parts of such areas. In other words, there is a great deal of flexibility in the operation of the scheme. The tapering can be arranged by passing successive Orders.
    Paragraph (b) provides additionally for Orders to continue the premium in parts of the country which, through having been descheduled under the Industrial Development Act, 1966, would cease to be development areas. Subsection (6) defines development areas as areas specified under Section 15(2) of that Act, together with the others. Subsection (7) provides for payment out of the Consolidated Fund to the Northern Ireland Exchequer as the result of any local

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    legislation to introduce an R.E.P. scheme there.
    I now turn to what have become known as the "grey areas", for which I have still not thought of a better name. It has been suggested—there is an Amendment to this effect, though I do not know whether it will be called—that this scheme should take account of those areas, but I explained in our debate on this matter that, whereas the problems of development areas are well known, those of the "grey areas" have not been so well analysed and we do not know whether the same treatment is appropriate.
    Nevertheless, there is a problem there. These areas do not give the impression of dynamic growth of some other areas. It is more that factor than large-scale unemployment in those areas which is important. Therefore, as I said in the earlier debate, we believe that there is a need for further study, and we have carried the matter further since I wound up that debate.
    My right hon. Friend the First Secretary has considered this further and has invited Sir Joseph Hunt to act as chairman of a group to study these areas to find the answers to their industrial, commercial and other problems, so as to see what measures are necessary to generate economic growth and a sense of dynamism there. Sir Joseph will be known certainly to some hon. Members as chairman of the Economic Planning Council for the West Midlands, where he did an excellent job. His work there having ended, he can now take on this task.
    My right hon. Friend is at the moment considering the terms of reference and membership of this commission and I will report them to the House in due course Whether the Amendment I referred to is called or not, I hope that my hon. Friends who tabled it will feel that this will go part of the way to meet the problem by making a study of these areas under independent chairmanship—
    Mr. Iain Macleod: The development areas are, of course, a familiar concept and we know their boundaries, but I do not believe that there is any definition of a "grey area". Many hon. Members may feel that their areas are "grey areas". Is there any way, therefore, either in the terms of reference
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    for Sir Joseph Hunt or by some other means, in which the right hon. Gentleman is thinking of defining them?
    Mr. Callaghan: I am obliged to the right hon. Gentleman. This is very much a difficulty, as there is no boundary to or concept of these areas. This is one of the problems which we are considering so that Sir Joseph Hunt shall have terms of reference with some boundaries. I shall certainly bring what the right hon. Gentleman has said to the notice of the First Secretary.
    This new Clause, bold and dramatic though it is—it will have an impact on the development areas over their seven year life which is bound to decrease unemployment substantially and increase employment even more substantially by creating additional opportunities—must take its place among the other measures followed by successive Governments for assisting these areas. I refer particularly to the use of I.D.C.s, the loans and grants made to these areas and to the accelerated programme of training for skill. In my view, the latter is one of the most important issues here. I have seen in my area in South Wales that when expansion comes, it tends to falter because of the absence of sufficiently trained skills in such areas. That is why the Government have paid particular attention to establishing new Government training centres, although it is just as important to encourage training within industry in these areas; and some very good work is going on.
    4.30 p.m.
    I emphasise that this new scheme, however bold its sweep may be—and whether or not certain hon. Members agree with it, they will agree that it is bold in conception; I hope it will be equally bold in execution—must be bolstered by the present policies which are being followed in relation to training, loans and grants to industry, I.D.C.s and the Government programme of advance factories. It is by a concerted move forward on all these fronts that I believe that in the next seven years—because that is the expected life of this premium, before it starts to taper off—we will be able to equalise opportunities for jobs between one part of the country and another to a much greater extent than we have done

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    so far and—because this flows from this activity—equalise opportunity for living in a way which everybody should live in a country as highly industrialised, skilled and cultured as ours.
    If we can, through the efforts of the House of Commons and by Government intervention of this sort, kill this lingering concept of two nations, one of which is growing while the other is decaying, we will be doing something remarkable in our lifetime to subtract from the social tensions inside the country and we will add to the total sum of human happiness. Nobody could ask for more than that.
    Mr. Terence L. Higgins: If for nothing else, we can be grateful to the Chancellor of the Exchequer for quoting in his closing remarks some words once used by Benjamin Disraeli.
    When the Green Paper was first issued it was welcomed not only in the House but throughout the country as an advance in as much as it was possible for a national debate to take place about a fiscal proposal before it was brought into operation. That was certainly an advance on the situation which had prevailed previously in respect of Corporation Tax, Capital Gains Tax and Selective Employment Tax.
    The extraordinary thing is that we now find ourselves in the position where, by and large, the debate has gone very much against the Green Paper. Certainly a great many arguments have been adduced against the policy contained in that document. None the less, the Government have decided to go ahead, and immediately. Despite the recent claims of the Chancellor to the effect that reflation is under way, the right hon. Gentleman and his colleagues must obviously be concerned that unemployment in the regions may be worse next winter than it was last winter. The weather may not be as favourable next winter as it was last year.
    This haste is reflected in the drafting of the Money Resolution, about which we were right to complain, since the simple point is that the Government, in their earlier Money Resolutions, had sought to restrict debate. The moment that they wished to table a new Clause, they were prepared to draft a different Money Resolution to enable them to make this Amendment.
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    This afternoon we want to consider the economic effects of the new Clause, and I should have thought that all this would have been taken into account in the Chancellor's Budget statement—that nebulous concept which he was anxious not to express in quantitative terms. We do not know whether or not he took account of the effect of this proposal or even whether he knew at that time that he would introduce a Clause of this type. Was this an afterthought? Certainly we must now consider very carefully the economic effects of the regional employment premium and the economic justification for it; and I shall concentrate on that aspect. I have no doubt that in the ensuing debate a number of hon. Members will, as they did when we debated the Green Paper, be particularly concerned with constituency and regional points.
    The economic case is fundamentally not one with which we would disagree, because it is undoubtedly true that in the post-war period the economy has been balancing on a knife edge. It has been swinging between periods when, if one reflated, costs and prices were likely to rise rapidly, leading to a deterioration in the balance of payments—before unemployment had been mopped up throughout the country—and periods when, if one took action in the other direction and adopted deflationary policies, unemployment became unacceptably high in the regions before one had cured inflation. Anything which tends to balance up regions of the economy is, therefore, likely to be advantageous.
    If this latest move is successful we shall be able to operate the whole economy at a higher level than would otherwise be possible, but one must take into account, when considering such measures, what the underlying effects are likely to be in terms of efficiency and the utilisation of resources. In other words, it is not only a question of the level of operation but the pattern.
    Therefore, while we do not disagree with the Government's aims—because they are very much the same as those which motivated my right hon. Friend who is now the Leader of the Opposition when he introduced measures to encourage investment in the areas of high unemployment—we consider that this proposal has a number of objectionable

    589
    features; and I do not believe that the economic arguments supporting it can reasonably be taken as proven.
    The main argument put forward in the Green Paper is that the regional employment premium will not be inflationary because it will be self-financing, and that resources will be used which would otherwise remain idle. We should consider precisely what is meant by the term "self-financing". It means two things, depending on whether one looks at it in money terms or in terms of physical resources.
    In money terms, the argument appears to be that the money expended by the Exchequer will be covered by higher Revenue receipts. We are told that the proposal will cost about £100 million. The Government will, therefore, need to show that Exchequer receipts are likely to increase by that amount. How might this come about? We need to look at this in some detail because it is of fundamental importance. I understand that some of the benefits will come back to the Exchequer simply because the higher profits which will result from giving a subsidy of this kind to manufacturers—if they remain profits—will be subject to Corporation Tax. The Government are, therefore, obviously giving something with one hand and taking it back with the other.
    Secondly, will a higher level of activity—the sort of level which the Government hope to achieve; although its achievement is by no means certain—mean that personal and company incomes will be higher so that, in progressive tax terms, more will accrue to the Revenue? I hope that the Chief Secretary will give clear estimates of how much it is expected will come back in Corporation Tax in the first instance and how much he thinks will come back as a result of higher levels of income in the country as a whole later. It is not right for the Government to maintain that this is a self-financing project unless they can demonstrate that it is so.
    From the monetary point of view, the question of timing is crucial. As we saw when S.E.T. was introduced, the Government tend to disregard questions of timing. It is surely clear that the regional employment premium will be paid out immediately, whereas the effects which we may get from a higher level
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    of activity—going on the assumption that it will be achieved—along with the higher revenue which that will produce—may take a number of years, if it happens at all. Thus, in the short run I should have thought that it was quite clear that these proposals will tend to be inflationary or, at any rate, significantly increase the level of aggregate demand in the economy. If so, we should be told so because it is somewhat contrary to paragraph 27 of the Green Paper, which states that the proposal is not advanced as a short-term, counter-cyclical measure.
    I turn from the financial side to the question of whether it is self-financing in terms of real resources. To determine this we need to analyse what the chain of events is likely to be after the payment of the premium is made. For this exercise let us consider a firm in the development area. This firm receives the regional employment premium and it seems that there are a number of things which it could do with it. It could, first, simply use it to increase profits and, presumably, distribute them as dividends. In that case, I suggest that we will find that Corporation Tax is paid, so that the Government would claw back a bit of the premium—remembering that they are announcing its inception with such a great flurry this afternoon.
    So far we have got to the point where it would go into profits. But has the right hon. Gentleman considered what would happen if there is an overspill into other areas, inflationary pressure being exerted in those areas? It will all depend on where the shareholders of the firm are located. It is not clear whether the shareholders of firms in the development areas are located in those areas or elsewhere. They may be located in areas which are normally suffering from overheating. If this alternative is the right one, then the Government's argument is rather weaker than they might lead us to suppose.
    Alternatively, the firm might be operating in a development area under unfavourable conditions. It might say, "We have had this windfall. What shall we do with it? Let us pay off our overdraft". In those circumstances, bank liquidity will be increased. But it is not clear that there will be no seepage of liquidity from banks in the development

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    areas into other areas which are normally suffering from overheating and excessive demand.
    It is probably true that where there has not been as much demand in the past for resources, there will not be as much demand for loans, even with this proposal. Thus, the normal thing will be for it to increase bank liquidity elsewhere in the economy. If that happens, then the Government's argument that it will not seep into other areas will have diminished, and with it the argument about this being self-financing will be correspondingly reduced.
    Perhaps the amount of additional money will be absorbed in wage claims. We should be clear that the whole of the argument put forward in the Green Paper is based on the assumption that wage claims will not eat up a considerable amount of the regional employment premium. In this context, it is significant to note that the T.U.C. and the unions in general seem to have been much the most enthusiastic about this proposal.
    The Government may say that all this will be covered by an incomes policy and that, if this sort of thing happened, they would immediately refer it to Aubrey Jones. Is it seriously considered possible for Aubrey Jones to study all the cases where this might happen? Or is it thought that the Government could introduce a prices and incomes Order on particular unions or firms whenever it happened? It is clear that this will tend to have an inflationary effect and that quite a lot of it—I believe the C.B.I. has suggested 50 per cent.—will go in the form of higher wage claims.
    It is important to note, in this connection, that we in this country have a series of national wage agreements—a restrictive trade practice which, in a sense, this proposal is endeavouring to overcome. The trouble is that such differentials as we have are in terms of the wage drift between regions, the amount paid above the basic national rate. The effect of this proposal, particularly if the Government say, "We must not have too many wage claims as a result of R.E.P., is likely to increase the fringe benefits and other demands in the development areas. So such differentials as we have in labour costs would tend to be diminished, which
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    will, in turn, tend to lead to an uneconomic allocation of resources.
    Yet another alternative is that the intention of the Government will come to pass and we shall find that firms will reduce prices and increase output. However, there are a number of restrictive agreements concerned with national price arrangements, basing points systems, and so on, which have not been adequately covered by the Monopolies Commission and which will tend to work against the Government's intention. Recently, for example, the Ford Motor Company has introduced uniform delivered prices for its cars. Are we to understand that as a result of the R.E.P. this will change and the motor car industry as a whole will tend to have bigger differentials between cars produced in one part of the country and cars produced in another? This is an argument that we need to bear in mind.
    Paragraph 32 of the Green Paper says:
    "Any subsidy tends to increase demand and output".
    That may be so. I make only the one point that the Green Paper clearly has not been written by an economist, who would have spoken of extending demand and output, which means a move down the demand curve, and not shifting it to the right.
    Finally, the money may be used to increase investment—
    Mr. J. Bruce-Gardyne: Would not my hon. Friend agree that the biggest factor in any manufacturer's pricing policies is the state of the market, and that this will not be affected in any way by the Government's proposal?
    Mr. Higgins: It has some effects, but it is by no means clear that they are effects in favour of the Government's arguments.
    As I was saying, the money may be used for greater investment. Indeed, it is crucial that it should be so used if the Government's argument is to stand any chance at all. But if the Government are to argue that the whole thing is self-financing they will need to show that the greater investment that will take place will all be provided in terms of real resources from within that development area. But it is most likely that the R.E.P. will increase the demand on

    593
    capital equipment in other parts of the country as well as in the development areas. So, even to achieve the Government's objective, there will be further spill over into areas other than those which the Government seek to assist.
    The point I make, to summarise, is quite simple. Whichever alternative use of the funds is selected, it is quite clear that purchasing power outside the development areas will be increased. The development areas are not self-sufficient, and whether the R.E.P. goes into profits, bank overdrafts, personal incomes or investment, the Government argument is not very sound.
    It is not true to say that this proposal is simply a regional devaluation. It is devaluation on very special assumptions: freedom of imports, no restrictions on imports into the regions and a number of other factors.
    I turn now to the actual investment decision. How business firms decide whether or not to invest in a proposal is very important. Mr. Sam Britain has pointed out that they tend to think in average rather than in marginal terms. I worked for some time in the same room with Professor Tony Meritt, who is now among the foremost authorities on capital proposals. We were both concerned with whether development should take place in development districts or outside them, and what is crucial is that if one reduces a particular cost of an input, such as labour, one tends to invest more in a technique that is labour-intensive.
    I suggest that the effect of the Government's proposals will be to encourage investment in labour-intensive techniques in the development areas. This will mean that the techniques there will not be such as the firm would have chosen otherwise. It is no good the Chancellor of the Exchequer shaking his head. It will clearly encourage people who invest in capital equipment in development districts to invest in more labour-intensive equipment than they otherwise would have chosen.
    Mr. Callaghan: I would not object if a new electronics firm were to set up in these areas, and electronics is a very labour-intensive industry. It is modem, and technologically advanced. There is nothing wrong with that.
    Mr. Higgins: But the effect of the proposals on the electronics industry, which is capital-intensive, will be absolutely minimal, and will bring to bear no significant influence on the decision whether an electronics firm goes to a development district.
    Mr. Callaghan: With respect, electronics is a clear example of an industry much more labour-intensive than capital-intensive. That is why I chose it.
    Mr. Higgins: I take the right hon. Gentleman's point in terms of the labour-intensive end of the industry, but that tends to cluster round the more advanced stage. This is one of the disadvantages we had under the old capital allowances system. I do not accept the right hon. Gentleman's argument. This may be so in particular industries but, by and large, my general proposition holds, which is that the effect of the proposal must be to encourage firms in development districts to invest in labour-intensive techniques rather than in capital intensive techniques. Quite seriously, this is not open to dispute.
    The trouble is that in between now and the end of the 7-year period, we shall find a situation in which the cost of labour relative to capital has gone up, because this is the other side of the coin when one gets the standard of living rising. Therefore, the techniques employed will tend to be obsolete. I am convinced that the effect of the proposal will be to distort the pattern of investment in a way that is not consistent with the long-run efficiency of the economy or, indeed, of long-run growth.
    4.45 p.m.
    I turn now to the question of alternatives. One of the sad things about the Green Paper is that it did not seriously take the point that one needs to discuss alternatives in detail as well as putting forward the actual proposal. It is asserted very definitely in the Green Paper that the R.E.P. will be unique, in as much as it will be self-financing. I have already suggested that it will not be so self-financing as the Government would like to think.
    In any case, much of the arguments put forward apply equally to the other proposals for encouraging firms in the development areas. I suggest, for example, that better roads and improved

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    communications are likely to have a very significant effect in encouraging investment in the developing districts. When one looks at specific capital proposals, transport costs are very important costs indeed. Such development would be equally self-financing, because it would encourage investment in the development districts but, in addition, it would be a permanent economic advantage as against the R.E.P. subsidy which is clearly going to distort the pattern of investment for short-run political advantages. This is the heart of the matter. All the arguments in favour—self-finance, balance of payments, and the rest—are applicable to a number of alternative proposals which might well be considered. Certainly, if we are to enter the European Economic Community the significance of improved transport to the development areas may be very considerable, indeed.
    Here, there are two minor points that I would like the Chief Secretary to answer. The first is this. We are told now, I understand, that this proposal will continue for at least seven years in order to give it a degree of certainty. This is somewhat inconsistent with the argument we now have just heard that a study will be made to decide whether the development area boundaries should be changed. This will perpetuate the uncertainty that has done much to frustrate development areas of high unemployment in the past. Are we to understand from the Chancellor of the Exchequer, first, that the seven years' guarantee has been given? If so, it means that the development area boundaries can only be extended onwards and not contracted. Secondly, if the seven-year period is to be guaranteed can the rates of R.E.P. only be altered up, because if they can be reduced the guarantee would be little use?
    It is very worrying when one looks at the proposal that this is a subsidy to the manufacturing sector at the expense of the service sector. The fact is that many of the advantages of self-financing which the Government have put forward could be equally well applied to the case for the tourist industry, because the import content of the tourist industry is very low indeed. This is a respect in which many of the development districts—Scotland, Wales and the South-West—have a natural advantage.
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    To give more and more subsidy to manufacturing industry, when it is clear that the pattern of development of countries such as the United States is to expand service industry, is not the kind of interference with the economy which we should wish to see.
    For all these reasons, we believe that the Government's proposals have not been given sufficient consideration, that alternatives have not been fully examined, and that this premium still will not overcome many of the counter-regional effects of the Selective Employment Tax on some of their most important service activities. The basic danger is that this is yet another extension of what one of my hon. Friends described last year as "a welfare state for industry". We do not believe that the R.E.P. will have all the advantages claimed, or, indeed, that the economic case which the Government have sought to put before us today is sound.
    The Chairman: I should perhaps indicate to the Committee that the Amendment to the new Clause in the names of the hon. Members for Lancaster (Mr. Henig) and Accrington (Mr. Arthur Davidson) is not being called for separate debate.
    Mr. Alfred Morris (Manchester, Wythenshawe): All of my hon. Friends will agree that much more needs to be done to reduce unemployment levels in development areas, which represent about half of the total geographical area of the United Kingdom. My right hon. Friends are to be warmly congratulated on the vigorous and sustained efforts they have made to compensate these areas for the loss of employment consequent upon the contraction of the traditional industries and to establish a more even distribution of industrial development throughout the country.
    The figures speak for themselves. In May this year the unemployment rate in the development areas was 3·9 per cent. compared with 1·9 per cent. in the rest of the country. In Scotland, Wales and the Northern Region there are 2·6 per cent. unemployed skilled engineering workers for every vacancy, while in the rest of the country vacancies in these trades exceed the numbers unemployed. The policies already pursued have improved the situation, but employment

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    in the development areas is growing much more slowly than it is in the rest of the country and there has been persistent migration to the more prosperous areas.
    My right hon. Friend the Chancellor of the Exchequer referred to what are now called "the grey areas". I represent a constituency in the north-west of England which is widely regarded as a grey area. In parts of the North-West, there is some apprehension about this proposal having a backwash effect from the development areas on to the grey areas. The fear is that we might be dyeing the admittedly white hair of the development areas at the expense of those whose hair is already turning grey.
    I hope that the Commission which was referred to by my right hon. Friend will reach conclusions as quickly as possible. I and many of my hon. Friends from the so-called grey areas wish the Commission all speed and all success in reporting on the problems of our areas.
    I now want to make some comments and ask some questions, on the proposal to apply the regional employment premium to manufacturing industry alone in the development areas. One underlying assumption of the proposal, which I hope is correct, is that there should be a transfer of output and demand from the Midlands and the south of England to the development areas. One of the central problems of our economy is the obesity of the Midlands and the South-East and the under-nourishment of so many to the North and the West.
    A fundamental element of the assumption to which I have referred is that the premium payments should go primarily to reducing costs and prices rather than into wage increases. But how do the Government propose to achieve this objective? The hon. Member for Worthing (Mr. Higgins) asked whether the National Board for Prices and Incomes will be called upon to deal with this matter. I do hope we shall have some indication of how this attempt to avoid an increase in wage rates for similar jobs to those that exist outside the development areas, if not in the total wage bill will be achieved. What sanctions will the Government use to enforce this condition? Perhaps we could also be told to what extent manufacturers have passed on to
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    their customers the premiums obtained from the Selective Employment Tax?
    One is often approached by constituents about the total passing on of the cost of the Selective Employment Tax to the consumer. I have written to the Minister only today giving him an example of a retailer passing on to the consumer the exact cost to him of the Selective Employment Tax. Before we approve these new premiums, I trust we shall be told to what extent manufacturers have passed on to their customers the benefit of the premiums obtained from the Selective Employment Tax. In present conditions many companies might well use the new premiums to relieve financial pressure rather than to lower prices. What sanctions would apply against firms making this use of the moneys accruing to them under the regional employment premium?
    There is a serious weakness in the proposals at this point, and the Green Paper made little attempt to remove our apprehensions. It repeats the old argument, which is really a myth, that the service industries are not subject to the Purchase Tax levied on the output of manufacturing industries. This myth is one which has not been given credence to only by those who write Green Papers. It is a widely held belief that Purchase Tax does not apply to retailers. I strongly reject this. First, Purchase Tax does not apply to all goods. Secondly, the tax is not paid by the manufacturers but by the retailer. The collection and passing on of the tax to the Customs and Excise are the responsibilities of the wholesaler, although ultimately it is a tax on consumption.
    Little attempt is made in the Green Paper to distinguish between services such as hairdressing and the distribution of essential foodstuffs and fuel. I should have welcomed a much more discriminating study of the industries, manufacturing and services alike, in the development areas.
    5.0 p.m.
    The Green Book goes to great lengths to demonstrate that the distribution of consumer goods must not attract premiums. In paragraph 20 we read:
    "However, provided that the regional employment premium was confined to those categories of employers in Development Areas who already receive the manufacturer's

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    premium, there should be no major difficulty from the point of view of technical feasibility and no substantial increase in administrative costs."
    It strikes me that the question of technical feasibility has, perhaps, been given even more weight than usual. I agree that any proposal must be feasible on technical grounds, but I cannot see why it is not possible to help people engaged in essential service industries, as well as in manufacturing, in the development areas.
    There is in the Green Book no acknowledgment of the part that the distributive trades have to play in providing employment in the development areas. The National Plan for Scotland, in which the right hon. Member for Argyll (Mr. Noble) as well as right hon. and hon. Members on this side will be interested, envisaged the creation of 130,000 new jobs of which 60,000 were to be in service industries. It seems that there are to be no direct incentives to achieve this result but only indirect assistance through the general improvement of the economy brought about by the competitive efficiency of manufacturing industry.
    I should have thought that, in places like the Highlands and Islands of Scotland, no matter what subsidy one injected, one would be unlikely to attract much more manufacturing industry than one finds there now. And this proposal would have been far better for areas like the north of Scotland if it had carried with it some hope of help for the service industries, especially for tourism and other services which are so important to the local economy.
    The proposal is exceptionally weak at this point and I hope that my right hon. Friend the Chief Secretary will say that the Government have not closed their mind to the possibility of helping at least those service industries in the development areas which can play an important part in reducing the level of unemployment.
    There is a tacit assumption in the proposal that the migration of labour from the development areas is a purely economic phenomenon which can be dealt with by subsidising manufacturing industry. But there are many of us who believe that social environment is an
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    important factor in increasing the attractiveness of these areas and the service industries have a great part to play in this field. This reminds one of another of the myths of contemporary discussion about economic policy: that we can stop people moving from one place to another merely by improving employment prospects.
    I turn now to a matter of great importance which has not been discussed at length either in this Committee or when the House discussed the Green Paper, namely, the likely effect of British entry into the European Economic Community upon the pull of the Midlands and South-East England against the development areas. It is argued by many that our membership of the Common Market would much increase the attractiveness of the Midlands and the south-eastern part of England and I hope that my right hon. Friend will say something about the possible effect of our joining the Common Market on the viability of the proposed regional employment premiums.
    There are some controversialists on the subject who argue that the form of help which the Government propose may not even be allowed in the E.E.C. Be that as it may, I still think that we ought to look very carefully into the question and, in paricular, whether the period of seven years can be promised with any certainty until we know the outcome of the application to join the E.E.C. If we join the Common Market, which many people now think is less likely than it was, the pull of the Midlands and the South-East may make some of the grey areas far greyer than they are now.
    The Chief Secretary to the Treasury (Mr. John Diamond): My hon. Friend has asked several questions, which I have carefully noted, and I am following every word of this speech. So that I may follow his argument fully, is he now saying that, if the danger which he envisages is likely to mature, that is a fortiori a reason for supporting the Clause?
    Mr. Morris: I would say that it is a strong argument for having reservations about British membership of the Common Market. I do not especially like the Latin expression "a fortiori". I should have preferred my right hon. Friend to say "a stronger argument" rather than an argument "a fortiori". It

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    is not that I am anti-Latin or anti-anything else—[Laughter.] After all, we are not in the Common Market yet—
    Sir Douglas Glover: This is out of order anyway.
    Mr. Morris: All of us are inclined, from time to time, to go out of order, but it is our good fortune, Sir Eric, that you exercise a certain compassion.
    I would certainly say, that, if the pull of the South-East, the Midlands and certain parts of the East Coast became stronger as against the development areas and the grey areas, there would be a much stronger case for doing even more to help the development areas. I am not against the proposal to help industry in the development areas. My hope is that we can help even more industries in the development areas. There are some sub-regions of development areas where 85 per cent. of the people employed work in the services, but the help given under the Government's proposal will go directly to only 15 per cent. It is not that I do not like the proposal. Of course, I rejoice with all my right hon. and hon. Friends in welcoming it, but I would like it to go even further, to help people who are engaged in what I regard as vital forms of employment in the service industries.
    In my view, fiscal discrimination against service industries is not acceptable. Fiscal discrimination against particular forms of industry has a long history. In the 18th century, the physiocrats held that only agriculture was productive and that all other occupations were unproductive. Indeed, some of the physiocrats even went so far as to call agriculture "good" and all other kinds of industry "bad".
    The Chairman: Order. We cannot discuss the physiocrats on this Question.
    Mr. Morris: I apologise, Sir Eric, but I think that you will agree that there is something slightly physiocratic about this proposal. I was saying that we should not, as the effect of this proposal may do, give help only to certain forms of industry on the basis that they alone are productive while others are unproductive, that one form of industry is good and another is bad. I have said more than once that, in my view, the distributive trades and service industries generally make a most important contribution to the improvement of our economy and to the well-
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    being of our society. Indeed, it is a mark of any advanced industrial society that more and more people are employed in the service industries.
    My right hon. Friend has my great personal respect and support. He says that he has taken careful note of my points, and I hope that when he replies he will indicate the Government's thinking about trying to help even more people in the development areas.
    Mr. Michael Alison: I want to switch for a moment from the service industries referred to by the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) back to a slightly more discriminating look at some of the manufacturing industries which will receive the regional employment premium. It seems to me that my hon. Friend the Member for Worthing (Mr. Higgins) was right to question some of the fundamental economic presuppositions which underlie the proposal, because if there is a flaw in the economic thinking behind the proposals they will be counter-productive in the two sectors which the Government themselves have singled out as most important, namely, the balance of payments and exports generally, and the possibility of increased competitiveness.
    The key proposition in the Government's case seems to be contained in paragraph 7 of the White Paper, The Development Areas, Cmnd. 3310, where they say that inflationary pressures leading to any worsening in the balance of payments will not occur for two reasons. The first is that increased competitiveness in manufacturing industry in the development areas resulting from the regional employment premium, and the second is that increases in imports will be offset by corresponding or possibly greater increases in exports. It is particularly those two features of the general proposition that I want to examine.
    I feel that the Government have not given enough critical attention to the question whether exports are likely to increase to offset the imports which will occur. There is an interesting and important feature in the pattern of exports in the past 10 years or so. That is the progressive shift in the commodity pattern of exports between the mid-1950s and 1965. There has been a definite shift in the pattern of our exports, and this

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    has thrown up an interesting weapon of analysis for looking at export prospects in the development areas by reference to what one might describe as the slow-moving and the faster-moving sectors in exports, corresponding to the slow-growing parts of the economy and the faster-growing parts.
    In an interesting article in The Times Review of Industry on this subject in April, Mr. W. Manser pointed out that if one looks at the commodity pattern of exports one sees that the slow-moving sector comprises textiles, coal, iron and steel and manufactures of metal. That is the export sector which has tended to lag in world trade. Against that, he isolates and identifies what he calls the faster-growing sector, comprising chemicals, machinery—particularly electrical machinery—and vehicles.
    The degree of shift in this commodity pattern has been striking in the past 10 years. The pattern now reflects the fact that whereas in 1953 the slow-moving sector in exports accounted for a quarter of all our exports it has now fallen to 14 per cent. Whereas in 1953 the faster-moving sector of exports accounted for 43 per cent. it had shot up to 52 per cent. in 1965. There has been a progressive shift from the slower-moving to the faster-moving exports.
    My first general criticism of these proposals is that if the regional employment premium is to make any rational contribution to our export performance it must push against what one might describe as the open door in exports and not against the closing door. It must promote a continuance of the growth of exports in the faster-moving sector and must tend to diminish the relative impact of the slower-moving. In other words, it must favour chemical manufacturers, engineering, especially electrical engineering, and vehicle manufacturers and must discourage the exports of textiles and other such declining sectors because world demand for them has dropped, and that is why our commodity pattern has shifted.
    5.15 p.m.
    Although the Chancellor talked about the R.E.P. being a discriminating weapon, this is precisely what it is not in this respect. It is incapable of making any differentiation between those aspects of
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    manufacturing industry which are falling behind in the export league table and those which are moving ahead. I should go so far as to say that it is counterproductive in precisely this way, that because by definition the development areas contain a higher proportion of the slower-growing sectors it will tend to focus the Government's premium encouragement on precisely those sectors in manufacturing industry which we want to discourage. The whole differentiation will be in the wrong way; it will be counterproductive in this important respect precisely because the discriminating weapon about which the Chancellor talks fails to discriminate in the crucial sector of exports between slow-growing and fast-growing, slow-moving and fast-moving.
    Mr. Geoffrey Wilson: I do not think that my hon. Friend has put his case strongly enough. The slow-moving industries are more labour-intensive than others, and this measure will encourage them.
    Mr. Alison: That is true. What my hon. Friend says reinforces my case.
    The second feature on which the Government base their case is not only the suggestion that the measure will encourage exports, which I have questioned, but that it will make manufactured products in the development areas more competitive. This is surely open to doubt because the lack of competitiveness must by definition, having regard to the White Paper and the new Clause, be in some way due to relatively high labour costs. Otherwise why introduce a measure to subsidise them? The cost of labour as an input must in some way be relatively so high in the development areas as to make the product of which the labour input is a large part uncompetitive with the prices charged by manufacturers for products in other parts of the country.
    But when one looks at the regional variations between weekly and hourly earnings one finds, taking just three important sectors which are fast-moving—vehicles, electrical and other engineering products, and chemicals—that there already exist in the development areas substantial differences between weekly earnings, tending to favour the development areas as opposed to the non-development areas. In other words, there

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    already exists a substantial variation between earnings in the development areas, which the subsidy is presumably introduced to widen and increase.
    Perhaps I may illustrate this by quoting one or two figures, and I apologise for doing so. Let us, for example, take engineering and electrical goods, and the average weekly earnings in this sector in two non-development areas and then in two or three development areas for the month of October, 1966. For engineering and electrical goods in the Midlands, the average weekly earnings per man in October, 1966, were 442s. a week. That compares with the average figure in Wales at the same period of 393s. Already there is a difference in the level of earnings as between Wales and the Midlands of substantially more than the premium proposed.
    It can hardly be alleged surely, if the Welsh products are uncompetitive with those of the Midlands, having regard to the existing colossal imbalance between the average level of earnings in these two regions, that what the premium will do is suddenly to make them more competitive. If they are not competitive with the existing degree of regional variation between wage costs, they will never be competitive. One must look elsewhere for the reasons. This is precisely the difficulty. The real problem is not lack of competitiveness, so-called, but in large part is what my hon. Friend the Member for Worthing was getting at when he referred to a change in demand conditions.
    The problem is not that it costs too much in Wales as compared with the Midlands to produce, for example, electrical equipment, but that the sort of electrical equipment being produced in Wales is not in demand either in England or in foreign markets. To introduce a permium which continues to encourage the production of that kind of electrical equipment which is not in demand, or any other manufactured article which is not in demand, is pouring good money after bad.
    Mr. Raymond Gower: I do not dissent from much of what my hon. Friend is saying, but there is the point which has been made by those supporting this proposal. It is that, by this increased inducement, it is hoped that the faster-growing kinds of industry will move into
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    the development areas. In Wales we suffer from a lack of these newer industries but in recent years have gone a long way towards meeting the position. Those who support this new kind of assistance hope that the faster-growing industries will thereby be induced to develop in such areas.
    Mr. Alison: I am grateful to my hon. Friend for that observation, for it helps to crystallise the problem. The difficulty will be that, because the payment will be undiscriminating—for it is to be paid to all kinds of manufacture—it will be counter-productive because firms in the growth sectors seeking to expand in the development areas will increasingly run into the same sort of difficulties there as are encountered in the more prosperous areas—bottlenecks of skilled labour and an increasing shortage of labour. There is to be no differentiation between recruitment of labour for the slow-growing industries and the faster-growing, exported-orientated industries which are needed in the development areas.
    I challenge the whole concept in the White Paper about competitiveness being due to differences in costs and prices. It is a fundamental criticism, and it is supported by an interesting observation by the Economic Development Committee for the machine tool industry. This is a Government-sponsored body. A useful D.E.A. survey comes out every so often and I congratulate the Joint Under-Secretary of State on the excellence of the production. The issue of last October reported the machine tool industry E.D.C. as saying:
    "The evidence of the import study—that is to say, why we import such a large volume of machine tools—emphasised the prime importance"—
    and following are the key words—
    "of design, performance and delivery rather than price in influencing choice."
    Thus, price is rejected by the E.D.C. for the machine tool industry as being the decisive factor in influencing demand. But it is precisely price as affected by the cost of labour input with which the Government are trying to deal.
    Will the premium have any effect upon delivery, design and performance? By definition it will have no effect on delivery. If there is under-employment in

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    the development areas, then clearly delivery dates are not a problem. I question whether the premium will have any effect on the crucial factors of design and performance in the faster-growing sectors of manufacturing industry. I believe that the opposite will be the case.
    One of the important influences affecting design and performance is the whole cultural and intellectual environment of a particular region or area, whether it attracts and encourages the whole panopoly of social, economic and cultural life, art schools and a flourishing social life, whether it offers opportunities for services in the widest sense, including theatres. All this tends to filter through in the end to creative and imaginative design, to changes in performance and so on. This is how one attracts the white-collar workers and those who are tempted to go elsewhere and form the brain drain.
    Mr. J. J. Mendelson: Is the hon. Gentleman arguing that nothing should be done for development areas, which have an urgent problem, until we have the general cultural environment of Luton transplanted to them?
    Mr. Alison: I am suggesting it. I am doing so on the line of what my hon. Friend the Member for Worthing pointed out—that much of this £100 million could be more productively employed in promoting the social and environmental infrastructure of the development areas, tending thereby to draw in some of the modern growth industries, with all that goes with them in terms of a wide variety of employment.
    The Government have gone wrong on this matter. They justify it in terms of more exports offsetting imports and of increased competitiveness, but they are ignoring the key factor that, in increased competitiveness, design and performance, and possibly delivery dates are crucial, and they are failing to differentiate, where experts are concerned, in favour of those growth industries which offer the greatest export potential. There should be a great deal more appraisal of this proposal before it is introduced.
    Mr. Stanley Henig: I hope that the hon. Member for Barkston Ash (Mr. Alison) will forgive me if I do not follow his argument. Last year when
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    the Committee discussed the Selective Employment Tax one of the troubles was that we were often discussing it in terms of a number of different arguments, not all of which were equally good. In discussing the regional employment premium, those supporting it would be better advised to stick to the one argument that it is going to help create more employment in development areas. It seems to me that probably on that argument the proposal will stand or fall, although I want to show that, in creating more employment in these areas, it is likely to cause problems which particularly worry me for some other areas.
    Along with some hon. Members opposite, I, too, rather regret the way in which the Financial Resolution was drawn. Obviously, whether or not the Amendment would have been selected would have been within your discretion, Sir Eric, but I suspect that one reason why it may not have been selected was the way in which the Resolution was drawn.
    Another point is that many of us who have previously argued that the Government, before making decisions, should consult people, have been gratified by the way in which this proposal first saw the light of day in the Green Paper and only today has emerged as the new Clause 67. On the other hand, some of us are a little disturbed by the way in which the House was consulted only last week. It seems a little inconceivable that the Government had not made up their minds by then.
    I suspect that when my right hon. Friend the First Secretary of State introduced last week's debate he was being fairly flexible, but by the end of the debate, during which a great deal of doubt was cast on the scheme, my right hon. Friend the Chancellor of the Exchequer was far more inflexible. I cannot see why this came about, but I am sure that it did. The Government have shown appreciation of some of the worries that were put forward in the debate and we welcome some of the concessions they have made.
    The Chancellor said today that the expenditure incurred by the premium will roughly double the amount that the Government are spending on the development areas. In so far as they do this, it means that development area policy moves to

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    a new plane, because any tendencies which were apparent before in their effect on the rest of the country will not just he reinforced but doubled. I suspect also that these things tend to have a multiplier effect which will increase this trend further.
    5.30 p.m.
    The valid point which has been made concerns the cost of the scheme. There has been a certain amount of statistical juggling in certain places which suggests that somehow the cost of the scheme is nil because of the increase in employment. I suppose one can prove this kind of argument. I have seen these arguments used in other contexts. On the other hand, one is using particular resources in one way to create other resources which might be created by using the particular resources in another way, so it seems to me that there must be a cost.
    The White Paper, which lies behind the new Clause, says in paragraph 29:
    "Since the limiting factor in the increase in total output which can be accommodated without inflationary dangers is predominantly the pressure of demand in the more prosperous areas and since the latter is likely if anything to be reduced as a result of the scheme, it follows that no general increase in taxation is called for."
    There is no increase in taxation, because the effect is directly being paid by areas which do not get the R.E.P. This is fair enough, except for the fear in the back of my mind, and the minds of some of my hon. Friends, that the cost will not as a result be equitably distributed. In other words, the cost of taxation—if it were raised by taxation—might fall equally on the rest of the country, but this will not.
    The problem of the grey areas has already been mentioned a number of times. The Committee will understand that, coming from a very grey area indeed—I apologise to my right hon. Friend the Chancellor of the Exchequer, but there is no other phrase to describe them—I am very worried by certain aspects of the Clause.
    The final paragraph of the White Paper made reference to the fact that some of these problems could be overcome by a more flexible use than before of industrial development certificates. That phrase "industrial development certificates"
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    already sends a bit of a shiver of excitement, shock or horror down one's spine, depending on whose spine it is directed towards.
    The idea of directing industry to certain locations, good though it is, cannot be used to cover all the anomalies introduced by successive pieces of legislation designed primarily to help the development areas.
    In the City of Lancaster we have already been affected by the Government's policy on development areas, and we are likely to be even more affected by the regional employment premium. In Lancaster two big firms employ 75 per cent. of all the people in manufacturing. This was so until eight months ago when one of the firms, Nairn Williamson, decided to lay off 1,500 men or about 60 per cent. of the people which it employed. This is a hefty number. It means that about 20 per cent. of those in manufacturing in Lancaster will be laid off with one stroke of the pen, because the firm had to choose between expansion in Lancaster and expansion in a development area with necessary contraction in the other. It chose to move to a development area and that created some little problem in Lancaster. At the moment there are 665 unemployed, or 2·1 per cent. One thousand five hundred people to be laid off would mean, other things being equal, an unemployment rate of 7 per cent. How are other things not to be made equal? In other words, how much new industry is needed in the area so that one's fears are assuaged?
    Until the Government introduced this proposal this might have been possible. Let us suppose that in the next six to nine months there is a reflation of economic activity and firms seek to expand and, lo and behold, one or two firms get as far as going to the grey areas and apply to the Board of Trade for industrial development certificates and are granted them. This would have been all right. However, the situation is changed because the regional employment premium almost doubles the inducement given to firms not to go to a grey area, but to go to a development area. It may be that the Board of Trade will be so flexible in its use of i.d.c.s that on occasions in the next 12 months it will say to firms wanting to go to a development area, "We will not give you an

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    i.d.c. to go there." It may be that it will be as flexible as that, but I doubt it.
    The problem which we once had in Lancaster with a big firm is likely to happen again. In a small town most firms are not controlled locally. There is only one big employer of labour which could be called a Lancaster firm, and its shareholders come from far beyond Lancaster. The other firms have been taken over from outside. For example, Courtaulds have two firms in Lancaster. If Courtaulds want to expand and develop a new process, do they put it in Lancaster or in some other area where they already have a factory, an area which may perhaps be in a development region and would entitle them to the higher grants of the new regional employment premiums? It seems to me that almost inevitably they will go to the second area.
    Drab and grey as the grey areas are already, they are likely to become even drabber and greyer if the proposal goes through in its present form without anything else being done to help these areas. There will be a massive, overwhelming, inducement to people to go to development areas and the cost will be borne by the rest of the country. However, it will not be borne equally by Lancashire and Birmingham, because Birmingham has a good many natural advantages which much of Lancashire—particularly the northern corner which I represent—does not have.
    I and many of my hon. Friends welcome the announcement by the Chancellor of the Exchequer about this inquiry by Sir Joseph Hunt, but we have a number of questions to put and I hope the Chief Secretary will be aware of our concern and will try to answer our questions. First, when is Sir Joseph Hunt to report? How long will we have to wait? This is a highly urgent problem.
    I know that it is going back to our basic text—the White Paper—but paragraph 49 says:
    "While this study is proceeding, some experience of the effects on different parts of the country of adding the Regional Employment Premium to existing policies and measures designed to assist the Development Areas will be gained and can be taken into account."
    For how long does that mean we have to wait? The regional employment premium is coming into effect in September.
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    Within a few months I fear that some of the effects of the kind I have been outlining will be apparent. Does this mean that we shall have to wait a year before this Committee reports, and how much longer would we have to wait before action is taken? What questions will be put to the Committee at the beginning? Where will its terms of reference be drawn? One would like to know a bit more about this.
    I want to come on to a couple of general arguments which concern me about the R.E.P. They have already been touched on but I think they should be mentioned again. The first concerns the argument about labour-intensiveness. It has been said that this may lead people to hoard labour. I doubt if people will employ labour that they do not need just for the sake of collecting this 30s. from the Government. On the other hand, it means that an employer who otherwise might not employ the extra labourer is given his 30s. inducement so to do. We were told last year throughout the debates on the Finance Bill that hoarding labour was a bad thing. Is is a good thing or a bad thing in the development areas, given that it is generally bad, and cannot we think of a way to help them without encouraging this bad practice? Could one have an answer on that?
    It seems to me, at a conservative estimate, that about 90 per cent. of this expenditure—which has been said to be about £100 million in a full year—will be for the benefit of those who have a job in the development areas and only 10 per cent. will go directly to people newly employed. Are the Government convinced that they could not have found a more efficient method of getting new employment in those areas? It was estimated in that well-known "thunderer", The Times, that it would cost £11,000 for each job created in the development areas. Do the Government have an estimate of their own to set against that, or do they accept the estimate of The Times as reasonable?
    What concerns me most about the problems of the sevice industries is the tourist industry, which is a most important industry in Scotland and in parts of the Lake District, which is in the Northern Region. Last year, as a result of the Selective Employment Tax, tourism was taxed—hotels were taxed. I did not share the

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    huge and sometimes synthetic concern of some others at that time, but now it strikes me that one has the oddity that the tourist industry in those areas pays tax while manufacturing industries in those areas receive it back. Is this logical?
    We in Lancaster, which is 20 miles from the Lake District, rather tend to throw up our arms in horror at the thought that a firm coming to Lancaster gets no extra inducement, while a manufacturing industry going 20 miles north into the middle of attractive tourist country would get it, the tourist industry apparently paying the cost. Perhaps I have put it too starkly. I do not want to be unfair to my right hon. Friends, but I should be glad of some comment from them.
    As a Socialist I have always felt that the problems of those areas which are now called development areas should be given paramount treatment, that something should be done for those parts of Scotland, Merseyside, the North and Wales which traditionally have had the problem of high unemployment. I do not think that any hon. Member would gainsay that.
    I am in the embarrassing position that tonight I am being asked to approve a proposal which will give those places what they richly deserve, but which will have other and undesirable effects. This is my worry. It can best be put in the words of someone in my constituency who said about the Nairn Williamson issue that while he was in favour of more employment in Scotland, he wondered whether the Government had realised that although they had just created 2,000 more jobs in Scotland, at the same time and in the same process and by the same mechanism they had ended 1,500 jobs in Lancaster. He asked what was the point of that. I said that he had not got it quite right, but now that I think about it, what is the point? I should like some comment about this.
    Considering the situation in the grey areas, such as Lancaster, there is a danger that because of the regional employment premium, other things will remain equal and that in Lancaster, for instance, we will not get the new jobs to fill up the Nairn Williamson gap. People cannot go to work in Morecambe because unemployment there is even higher, and so
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    unemployment in Lancaster will creep up.
    Because I believe that my right hon. Friends care about this situation, I believe that if unemployment looks like creeping up in Lancaster to an unacceptable level, and in this context I mean by that the level pertaining in the bulk of the areas which have been designated development areas, they will take action, but I should like my right hon. Friend to be able to say this evening that the Government recognise the problem and that although they are trying at this stage to help development areas, should the fears expressed in the debate materialise, they will act. In particular, I hope that he will say that if unemployment in these areas creeps up as a result, so that from being grey areas they approach nearer to be being black areas, while the previous black areas become grey, everybody may rest assured that the Government will act. Some kind of pledge like that is what I would like to hear from the Government this evening.
    I appreciate the difficulty of saying these things, but, with his well-known ingenuity and the help of his advisers, my right hon. Friend the Chief Secretary should be able to produce a form of words which will reassure not only myself—because in a way I am already reassured in that I have confidence in him—but, most important, reassure those many people in Lancashire who appreciate the Government's policy of helping development areas, but who are themselves worried and anxious about the future. They are right to be worried and they have a right to be reassured. I very much hope that my right hon. Friend will reassure them.
    5.45 p.m.
    Mr. David Steel: We all greatly appreciate the sincerity of the hon. Member for Lancaster (Mr. Henig) and his engaging frankness. I thought at one time that he was talking about a tax on Toryism, but then I discovered that he was referring to a tax on tourism. I would have preferred the former. I make no apology for following his example and referring to my own constituency, because my part of Scotland, the Borders, has become part of a new development area and any

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    discussion of the regional employment premium is of great importance to it.
    In 1964, I was the chairman of a committee which published a study of the problems of the region, a region which had suffered constant and steady depopulation. We concluded that the fault with the existing Government incentive schemes was not only that there were no incentives in areas of depopulation but that the country as a whole did not have any form of planned economy, so that the incentives in areas of high unemployment such as central Scotland merely accelerated the rate of depopulation from parts of the country to those areas where incentives were available.
    I do not like to name individual firms in my constituency, because they were not to blame for the situation, but over a period of years not only did we attract very little new industry to the Scottish Borders, but when existing firms came to expand, they chose to do so outside the area and, naturally, into those areas where there were incentives, the areas of high unemployment, and on several occasions we missed opportunities for industrial expansion on the Borders for that reason.
    The Chancellor of the Exchequer has rightly insisted that we should consider the proposal for regional employment premiums in the context of the Government's regional policy as a whole. Undoubtedly, the most important development in my part of the country has been the decision to widen the criteria of the old development districts, which are now development areas, to include depopulation as well as unemployment, for without that widening we could not be discussing the merits of the premium. That was the first step and the second was to switch to the process of investment grants and to raise the level to 45 per cent. This morning we were able to welcome the statement that the time lag in the payment of these grants is going down. I hope that it will go down very much more. However, there is no doubt that the system is to encourage a process of industrial development in the development areas.
    We now come to the third major proposal for industrial development in these areas, namely, the regional employment
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    premium. Of course it can be criticised as a method, and in previous debates some of my colleagues and I have criticised it as a method. I share the concern of the hon. Member for Lancaster about the principle that, at a time when we are told that there is a national shortage of labour, we should do anything, however slight, which might appear to encourage the hoarding of labour. Other methods might have ben found, but this is the method which the Government have chosen and tonight we have to decide whether we approve of the new proposal.
    My party welcomes the proposal, because we regard as sound the principle of encouraging industrial investment in areas which require it. Even though it may have some side effects open to criticism, no doubt this method will be effective. But it will encourage industry to expand in the development areas only if labour is available. There is no point in giving employers 30s. or 15s. per head to expand in development areas if when they get there they find that labour is not available.
    In my view, it is essential that wage levels should be improved in the development areas in order that the young people and the skilled labour are encouraged to remain. One of the anxieties which people in my part of Scotland have has to do with the growing tendency of amalgamations and the need for more capital in modern industry, which has led to a process of take-over of the traditional tweed and knitwear firms. They are no longer owned by people in the community but by outside financial interests.
    Whereas in days gone by those controlling the firms had an interest not just in the prosperity of their firms but in the community as a whole, and were very often prepared to place the community interest above their own, the firm controlled by outside finance must have profitability as its main objective. This regional employment scheme will allay some of those fears, because if firms in a development area are owned by larger combines, then it is in precisely those areas that the larger combines are more likely to want to expand, not contract.
    They will, I hope, take advantage of the regional employment premium, and we will encourage further expansion in those areas which it had been feared

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    might have lost a good deal of their industry through centralisation and outside control.
    Mr. Michael Noble: I know the hon. Gentleman's area particularly well and I know of its problems. For the last five or six years the problem has been that there has been no one there to employ. It seems tactless to welcome something which gives a premium for something which does not exist.
    Mr. Steel: I was coming to that point. I mentioned employment a moment ago and said that it was important that we had the people there, otherwise there is no point in giving a premium. I agree with the right hon. Gentleman in that. That is why I say that, contrary to some of the fears expressed about the effect of the regional employment premium, if the result is that wage levels are increased through the premium given to employers, then this is something which I welcome, even if the Government do not.
    Some hon. Members were saying that one of the great advantages of the development areas was that wages were low. It is not an advantage. It may be an advantage from an academic economic point of view, but it is not an advantage to those who live there. The young people ask themselves what is the point of sticking around when the wage levels and the general level of prosperity are limited. They go off to the Midlands, the South-East or even central Scotland, where higher wages can be earned. If the effect of regional employment premium to the employers is to create a climate in which new industry comes and forces up wage levels in the existing industries, and where the employees feel entitled to press for higher wages as a result of the premium, then it is something which I welcome.
    In the first debate on the Green Paper I said that I hoped that part of the advantage of this premium would be passed on to the employee. This may make the Government shudder. I am glad to see some approval from Scottish Members opposite, because this is what ought to happen. It will not be enough by itself, and the right hon. Gentleman the Member for Argyll (Mr. Noble) is right to emphasise this. We must have a con-
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    tinued spread of industrial training centres. I am glad to see that one Under-Secretary of State for Scotland is present. The industrial training centres in Scotland at the moment are not evenly enough spaced throughout the country, and I hope that this will be attended to in the near future.
    There is one development in the new proposal which I very much welcome; it is the power to vary the premium within development areas by Ministerial Order. I hope that this power will be used, and I will give three illustrations of when I think it may have to be used. One is the effect of such a premium on the tourist industry. It is no use talking about altering a premium in relation to the tourist industry when what is required is to relieve the industry from the effect of S.E.T. If that were done it would be a positive step forward. This does not so much affect my constituency, but particularly in coastal areas, which are heavily dependent on tourism for their livelihood and economy, if they attract manufacturing industries to the area, offering the premium, the position may be reached when the tourist industry would be even more severely hurt than it has already been by the Government regardine it as an industry which should not receive tax incentives. It may therefore be necessary, within the development areas, for the regional employment premium to be varied if it is proved to be affecting the basic tourist industry in certain parts.
    Mr. Bruce-Gardyne: The hon. Gentleman has referred to the ridiculous S.E.T. Does he not appreciate that this proposal is tied ineluctably to this political tax? Why is his party supporting this proposal, which is not only tied to this ridiculous tax, but which will presumably have the effect of perpetuating it?
    Mr. Steel: I agree that it is tied, administratively, to the S.E.T., but I do not think that the hon. Member would deny that it is quite possible for the Government to accept my suggestion, if they were so minded, of relieving the tourist industry of S.E.T. and at the same time accept this proposal. There is nothing inconsistent about that.
    The second reason why I welcome the reference to varying by Order is that I

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    believe it to be necessary to vary incentives within Scotland. We have the situation where virtually the whole of Scotland is a development area. I have always argued that, from time to time, it may be necessary to use more discrimination between parts of Scotland which are fairly prosperous and demand large employing industries, and those parts on the outer fringes of Scotland, which require particular incentives to attract industry. I hope that this power in the new Clause will be used in order to vary the premium in different parts of Scotland.
    Thirdly, I hope that the power will be used—and I will be interested to know if the Chief Secretary agrees that this is a possibility—to change the level of premium as between male and female employees. This is something which is of particular concern to me. Knitwear, for example, uses a great deal of female labour. The main problem in the Scottish Borders is that we do not have enough male employing industries. If we get male employing industries into the region, then the existing firms are automatically helped because they will have a larger supply of female labour. The wives, and presumably in due course the daughters of the men, will be available for training and work in the mills. The firms will have a direct advantage from the introduction of any male-employing industry.
    Purely from a constituency point of view there is a case for giving not 30s. per man and 15s. per woman, but 40s. per man and 5s. a woman in order to get the basic male employing industry attracted to the area. Have the Government considered that as a possibility? Is this the sort of thing that the Government have in mind in seeking to vary the premium by Order in Council?
    This proposal will be of general benefit to Scotland. It is possible to criticise it in detail and method, but the feeling of the people of Scotland to this proposal was well summed up by an editorial in The Scotsman the other day, which said that for all its drawbacks, and I think that they are admitted, it was better to pump capital into the less prosperous areas than to have nothing at all. For too long we have had nothing at all. This, at least, is something.
    6.0 p.m.
    Mr. Elystan Morgan: It comes as no surprise to many of us on this side of the House that the party opposite should adopt such a wholly negative attitude to this proposal. [An HON. MEMBER: "Which party?"] The Conservative Party. Its attitude towards the development areas has been one of cynicism and sterility. It is proper for us to remember that in May, 1966, the Conservative Party voted against the Second Reading of The Industrial Development Bill, a Measure which created the development areas. In other words, if the party opposite had had its way, there would have been no development areas at all.
    I congratulate the Government on their expedition in dealing with the proposals published in the Green Paper only two months ago. Many of us feared that there would be a rather longer period of gestation. Most of us are aware that the new Clause gives the clearest evidence of the high priority which the Government attach to the need to redress the imbalance between the fortunes of the poorer and the more affluent regions of the United Kingdom. The R.E.P. is only the latest stage in a process of consistent effort towards this end. It will, I believe, be more effective in inspiring growth in debilitated regions than the traditional medicaments which have been administered. The level of premium which has been decided will, I think, achieve the purpose of being attractive to industrialists as an allurement to draw them into development areas. At the same time it is obvious that it is of sufficiently modest proportions to avoid being a temptation to any employer to indulge in labour hoarding.
    The premium proposed will obviously not be a dominant consideration. It will, nevertheless, be a significant subsidiary consideration. After all, it is an amalgam of such marginal considerations as affects hundreds, and perhaps thousands, of decisions of individual manufacturers which can contribute materially to the recovery of a development area.
    The protagonists of this measure have been quick to enter caveats and stress the limitations of the scheme. It is not expected that all the ills of all the development areas can be cured by this measure; no single action could ever be responsible

    621
    for such a sweeping result. But I am sure that all Members would agree that it is vitally urgent that the Treasury, the Board of Trade, the Department of Economic Affairs, the Welsh Office and the Scottish Office should at all times be devising new and original methods of resuscitating the economies of the various countries and regions constituting the development areas.
    The problem is massive, and it is only right that we should at all times keep an exact record of its proportions. I therefore plead for a periodic review of the economic position of each development area and a comparison between its fortunes and the fortunes of other regions outside. Such a review should include, in addition to the well publicised facts of unemployment levels, data concerning economic growth, investment, migration into or out of an area, productivity rates and depopulation. If such a review is conducted, I am sure that many of my hon. Friends will realise the fundamental differences of economic fortune which exist between the development areas and the grey areas on account of which they have pleaded so tearfully.
    It is obvious that the proposed premium will be generally beneficial to Wales. Some are convinced that the R.E.P. is the progeny of the S.E.T., but it is only proper to remind hon. Members that the percentage of people in Wales paying S.E.T. and the percentage of those receiving a refund are substantially different from the figures in the rest of the United Kingdom. In Wales, employers pay the tax on 32·3 per cent. of insured workers and receive a refund on 37·2 per cent. In the United Kingdom as a whole they pay the tax on 38·1 per cent. of insured workers and receive a refund on only 27·3 per cent.
    I make that point because, certain people in Wales are given to assume that the S.E.T. was only another manifestation of a deliberate and malevolent Treasury conspiracy against my land and nation. Since the proportion of industry in Wales to total productivity is rather higher than it is in England, it follows that proportionately there will be a greater benefit from the R.E.P. to the Welsh economy.
    Although I believe the principle of the premium to be unobjectionable, there
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    are two inadequacies which I should like briefly to mention. Both betray a certain lack of flexibility in the proposed administration of the premium. It must be remembered, as has been mentioned by many hon. Members, that the rural areas have already been laid to a substantial contribution on account of the S.E.T. I stress, as I have stressed on previous occasions, that in many areas the imbalance between the number of people who pay the tax and the small proportion who receive a refund is monstrous. The figures for my constituency are that between 7 and 8 per cent. of insured workers receive a refund and between 81 and 82 per cent. of insured workers have the S.E.T. paid in respect of them.
    We cannot look to the R.E.P. to redress this imbalance. Like the S.E.T., it is attached to manufacturing industry. It cannot, therefore, carry out the task of redressing the imbalance in the rural areas. These are already areas in which there are acute problems of growth, and it is these areas which look to the Government for assistance. Many of their indigenous difficulties have been mentioned by the hon. Member for Roxburgh and Peebles (Mr. David Steel). The basic difficulties of a lack of a reservoir of labour, an ageing population, a high rate of outward migration and a lack of a tradition of industrial development constitute a comprehensive problem which no Government have managed to tackle specifically.
    In fairness to the proposal, paragraphs 50 and 51 of the Green Paper state quite fairly that it is probably impossible for the premium to be able to achieve such a task and that the rural areas must look to other and divergent measures. What does not inspire me is the reference in paragraph 51 to the Highlands and Islands Development Board. I do not denigrate the tremendous significance of setting up that Board, or what it has achieved. Nor do I have anything but welcome for the Rural Development Board which it is proposed to set up in Wales. But if the Government delude themselves into believing that the rural areas can be simply left to such plans as those, I am certain that there will be no resuscitation for the economies of those areas.

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    In the main, the rural development boards deal with tracts of upland territory. In any of the schemes which have been published, there is very little reference to the revival of a lowland economy. The stress of such plans is all on the injection of capital into such areas, and there is no corresponding provision for any income subsidy. Therefore, unless the Government can show very soon that they have some bold and radical plans specifically tailored for the need of rural areas, the references to the Highlands and Islands Development Board and such measures will not convince the people that they are able to achieve the task with which the Government are confronted in these areas.
    Just as some of my hon. Friends and hon. Gentlemen opposite have done, I would argue that, in the short term, it would be a perfectly fair and practicable suggestion for the Government to consider excluding service industries in these areas from the Selective Employment Tax. I would go further, because there is very little rational and economic case for the payment of regional employment premium to service industries in those areas when it is remembered that a high proportion of them are engaged with tourism.
    Here is an industry which contributes splendidly to Britain's exports. After all, it is earning foreign currency and "exporting" a service to persons abroad. It is calculated that tourism earns for Wales something in excess of £60 million er annum. It does not behove me in this debate to compare the subsidy and the encouragement given to the tourist industry in Wales with the contributions made by the Governments of many other small countries, but the Republic of Ireland, for example, contributes something of the order of £2 million, the Isle of Man and the Channel Islands each contribute annually something in excess of £100,000 to their respective tourist industries, whereas Wales receives a mere £12,000 or thereabouts. However, that is another argument, although it is proper for us to consider that, as an investment, the regional employment premium could well be paid to that part of the service industries engaged in tourism in such rural areas.
    In the longer term, a careful study should be made of the exact fortunes of
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    firms which in the past have ventured into the rural areas—to trace the history of what has happened to them over a period of, say, ten years. That is the only way in which it will be possible for data to be collected and to know the real character of the problems which confront such developers.
    Very much more thought should be devoted to ascertaining the exact type of industry which is most suitable for those areas. Very often, the tendency in an area almost completely devoid of industry, such as my own constituency of Cardiganshire, is to attempt to seduce any type of industry which can possibly be brought in, with the result that, over the years, there may be a high percentage of failures. This contributes to the general economic malaise of such an area more than anything else.
    My other criticism is that, as it stands, the regional employment premium does not contribute in any way to redressing the imbalance which exists within a region. I appreciate that subsection (5) of the new Clause deals with such a proposition. It gives the Treasury the right by Order in Council to vary the rate of premium. If and when that is done, I will graciously and with great pleasure withdraw my criticism, but we still await such flexibility on the part of the Treasury.
    If we are to rely upon a blanket form of sustenance such as that offered by the regional employment premium, so long as we rely upon it in that form, it can do a great deal of harm to the areas whose economic difficulties are most acute. There is always the tendency for growth to run to the areas of greatest attraction, making the imbalance worse rather than better. I am sure that, in addition to a regional employment premium, we must at all times be vigilant and original in our thoughts and conceive many other types of assistance which perhaps are more appropriate to the needs of those areas than the premium. We should bear in mind the case for substantial tax concessions for people who set up manufacturing enterprises in such areas.
    6.15 p.m.
    Although the record of the Government in advance factories in the development areas is splendid, in that they

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    have built twice as many in the years 1964 to 1966 as were built by the previous Government between 1959 and 1964, there is a strong case for Government-run factories concentrating upon a suitable range of manufacturing enterprises. Bold experiments can be indulged in in the way of industrial trading estates in non-traditionally industrial areas. In addition, a comprehensive study should be made of the possibility of drawing up a plan for the movement of Government offices to peripheral areas. We have seen encouraging developments in that connection in past months, but the situation calls for very much more than haphazard charity from time to time.
    Perhaps more than anything, there should be drawn up a new, radical and comprehensive road programme for areas such as Wales. The tendency seems to be for the building of roads to be tied inexorably to the traffic densities now experienced in those localities. That is no more than an endorsement of the status quo—
    The Deputy Chairman (Mr. Sydney Irving): I must keep the hon. Gentleman to the new Clause, and he is getting away from it a little. Will he come back to it?
    Mr. Morgan: Mr. Irving, I was pointing out that the new Clause has certain limitations, and I was attempting to substantiate the case for the filling in of some of the gaps. Now that you have drawn my attention to the point, I will conclude my remarks by saying that there is a great need to redress the monstrous imbalance that exists between the development areas and the rest of the United Kingdom. In that crucial exercise, time is very much of the essence.
    Reference was made earlier in the debate to the possibility of Britain entering the European Common Market. Many hon. Members on both sides have severe reservations about whether all the forms of assistance now given to the regions will be available in the event of our entry into the Common Market. Many of us have more severe reservations—
    The Deputy Chairman: Order. The hon. Member can discuss only this means
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    of helping the regions. He cannot discuss the Common Market. He must come back to order and discuss the Clause.
    Mr. Morgan: Mr. Irving, I was going to mention industrial development certificates, but to do so would test your patience and your charity much too far.
    The problem facing the Government has arisen from a development which has taken place over two centuries, namely, a haphazard growth which has had neither economic balance nor social purpose. The real problem facing the development areas—and I do not believe that my hon. Friends and many hon. Gentlemen opposite from the so-called grey areas quite appreciate its magnitude—is that of preventing the industrial klondykes of the last century becoming the ghost areas of our day and age. Unless we have bold and dynamic plans, wider in scope and purpose—
    The Deputy Chairman: Order. With respect to the hon. Member, I suspect he has exhausted his capacity for staying in order on this Clause, and unless he can deal with the Clause he ought to resume his seat.
    Mr. Morgan: I will resume by saying that this premium is a crude instrument. It is my wish and my fervent hope that this provision will be sophisticated by selectivity, and will be supplemented at an early date by an appropriate variety of other means of providing assistance to these areas whose needs are so acute.
    Mr. McMaster: I shall resist the temptation to follow the hon. Member for Cardigan (Mr. Elystan Morgan) except perhaps to say that just as he has many doubts about the efficacy of this premium, so I find myself in support of it, and perhaps the best thing we can do is to pair off at the end of the debate to avoid further embarrassment to both of us.
    There are many unused resources in this country. The Government's purpose in introducing the Selective Employment Tax was to encourage the redeployment of labour throughout the country; to get people to move from areas such as mine, Northern Ireland, Scotland, the Highlands and Islands, and other parts of the country, to areas where there was overheating and over-full employment. This policy has failed.

    627
    If people in Northern Ireland could not find employment there—and during the past five years a number of shipyard workers have been laid off—they had the choice either of seeking employment in the Midlands in for example the motor car industry, and accepting the risks and the ups and downs involved in that, or of going somewhere else, for example to Canada. Having packed their bags, it was open to them to go abroad, and I regret that many shipyard and aircraft workers took this course, which meant that their skills and training were lost to the United Kingdom as a whole.
    When my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced his payroll tax—which I think was the forerunner of these measures, though it did not go as far—there was an intervention from a member of the then Opposition, and I would like to refer to it now because I think that it was extremely relevant. The speaker said:
    "The payroll tax is a bad tax. My hon. Friends and I have drawn attention on several occasions to its unfair incidence as between industries"—
    and this will, of course, appeal to the hon. Member for Cardigan—
    "those which use a good deal of labour and little capital and those which are capital intensive and make less call on the country's labour resources".—[OFFICIAL REPORT, 4th July, 1961; Vol. 643, c. 1251.]
    The hon. Member who said that went on to say that the payroll tax would put up the cost of living. The same argument applies to the S.E.T., and the speaker on that occasion was the right hon. Member for Huyton (Mr. Harold Wilson), now the Prime Minister.
    I think that that reinforces the argument that many features of the S.E.T., to which this proposal is attached, are bad for the country. The payroll tax used the old method of the stick. Industry was discouraged from expanding, and new industries from setting up in the overheated areas of the United Kingdom. They were encouraged instead to go to the development areas. As the Committee will remember, Northern Ireland was exempted by my right hon. and learned Friend. This was an encouragement, but it was a negative one. This proposal goes much further. It offers a carrot to in-
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    dustry to go to the development areas, and this is why I am in favour of it.
    The Government's proposals have been welcomed in Northern Ireland, both by the Development Council and by the Government. The Green Paper has been considered, and although there has been a certain amount of detailed criticism of it, on the whole the arguments presented in it, and in the White Paper which has followed, have been accepted. It will cost Her Majesty's Exchequer about £11 million per annum to help Ulster, and nobody can afford to turn up his nose at such a sum.
    We in Northern Ireland suffer principally from the disadvantage of being too remote from the market. Our materials have to be imported, and our finished goods exported. This adds a good deal to production costs, and hampers the Government in their efforts to attract new industries there. I have developed this argument on previous occasions, and I do not intend to develop it at length now. Although we have succeeded in attracting a lot of industry to Northern Ireland particularly capital intensive industries by means of generous grants towards equipment and other capital costs, and by the provision of new factories, sometimes tailor-made factories, for the companies going there. Many companies, such as Chemstrand, I.C.I., and Dupont, which manufacture synthetic fabrics, filaments, and yarns, do not employ a great deal of labour. They are capital-intensive but not labour-intensive, and I think that we ought now to concentrate on attracting labour-intensive industries.
    Instead of the regional employment premium, attached as it is to the S.E.T. which I do not like, I would like to see some other way of helping manufacturing industry. I think that there should he a direct subsidy to help them with their transport costs, but I believe that such a scheme would he extremely difficult to operate, and might fall foul of international agreements such as G.A.T.T. and later, perhaps, the Treaty of Rome if we enter the Common Market.
    6.30 p.m.
    Another frequent criticism of the R.E.P. is that the service industries will not benefit, but I attach little importance to this. Such industries in Northern

    629
    Ireland are bound to benefit from another £11 million. These industries live on the back of the manufacturing industries, which is no criticism. They are essential and contribute to the balance of payments, especially through such invisible exports as insurance and banking, as well as tourism, which is also a big dollar and foreign exchange earner.
    Nevertheless, banking and insurance particularly are concentrated in London and not in the development areas, so one would not help these service industries by payments to them in the development areas, and, except for tourism, one would miss the target. The service industries are there anyway. Even if they are given a subsidy, the number of employees will not be greatly increased, but, as the general prosperity increases, they will expand to meet the demand.
    Therefore, the correct help for the development areas is to help manufacturing industries. Then the resultant prosperity through the improvement and development of existing industries and the creation of new ones will help the service industries too. Northern Ireland has 9 to 91 per cent. of its male population unemployed and there is a pool of skilled labour. I argued through April to June of 1961 when we considered the payroll tax—this is curiously similar to the Green Paper's arguments and just as valid now—that the country is losing the benefit of this pool in the regions.
    We cannot expect the skilled labour which is leaving Northern Ireland's aircraft factories, shipyards, linen and other contracting industries in the same way as labour is leaving coal mining and textiles in Great Britain to be redeployed to those areas where it is most needed. The Government have a social function to attract industry there.
    It has been argued from this side that it is adding to the cost of manufacture, and I agree that if economists managed the country they would try to concentrate employment, by direction of labour or other means, in the most economic places, like the south of England and the Midlands, which are nearest to the market, but the Government must be concerned with social factors—
    The Deputy Chairman: Order. The hon. Gentleman is getting, away from the
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    new Clause, which deals with the regional employment premium.
    Mr. McMaster: I am trying to argue why I should or should not vote for the Clause and it is therefore relevant, I suggest, to put the arguments for and against the question of whether it will achieve its purpose. I shall try to keep to the points already mentioned.
    This premium will encourage the expansion of industry in Northern Ireland and help to attract more industry. Alternative ways of spending the money have been suggested, particularly from my Front Bench, such as building up the infrastructure, but this can happen anyway and is more likely if industry is built up.
    In its comments on the Green Paper, the Scottish Council mentioned the need for more training schemes. This premium is not exclusive and does not mean that more money will not be so spent. If it is effective, more will be spent on training schemes because they will have more point when industry needs more labour. There are very fine training schemes, ahead of the rest of the country, in Northern Ireland, of which we are very proud. These schemes and the infrastructure of roads, hospitals and schools will benefit from this direct expenditure.
    It has been suggested that the money should be spread more widely to farming, tourism and other service industries, but this presents a grave risk. If the jam is spread too thinly, it might have no effect, and, therefore, the Government's help of £100 million should be funnelled into manufacturing industry so as to increase output and reduce reliance on imported manufactured goods.
    This is a short-term measure. I said in the debate on the Green Paper that five years was too short for the R.E.P. to have full effect and was pleased when the Chancellor said that he would extend it to seven, tailing off for two or three years, thus making 10 in all.
    My own Front Bench has suggested that this scheme will encourage manufacturers to be labour-extravagant, but will any manufacturer who knows that it will last for only seven years do so? Before undertaking a heavy capital commitment on a new factory, manufacturers think further ahead than seven years, and although they will, of course,

    631
    use the scheme to the utmost they will take a longer view—
    Mr. Higgins: What is relevant here is that in making an investment decision about how labour-or capital-intensive a project should be, one necessarily gives great weight to the fact that some costs are more important, because more immediate, and one must take into account the time value of money. This is why this proposal is likely to result in an initial investment in industry which is too labour-intensive.
    Mr. McMaster: I grasp that point, but the scheme's effect, even though it will last for only seven years, will not in the long run be a concentration of industry on employing labour. Why should industry not be labour-intensive anyway? If labour is the cheapest way of producing goods in an area with a surplus, should they not decide in the country's interests, to concentrate—I am talking of marginal industries where there is a marginal difference between a new machine and new labour—on employing the unemployed rather than using expensive machines, always remembering that the scheme will tail off after seven or 10 years and one will have to transfer to new machinery?
    It gets the factory started and the economy moving and brings in increased resources, particularly the scarcest of all, labour—
    Mr. Gower: Would my hon. Friend not accept that the present world trend in the most sophisticated economies is that labour is fast becoming one of the most expensive items and that policies which produce that effect would run against the international tide?
    Mr. McMasterI agree. Labour is expensive, but I was talking about a marginal decision on whether to employ the labour and to start a factory or not to do anything. When a manufacturer, or the country as a whole, faces this decision, it is obviously better in the national interest, to employ the labour. After all, it is the manufacturer's concern to make a profit out of the labour, and by employing this labour he provides work and valuable production which we can consume or export. A scheme which is concentrated on manufacturing in an area
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    with 20 per cent. of the nation's manufacturing is both selective and effective.
    I hope that the scheme will prove self-financing. The Government went a little far in the Green Paper to say that it would be completely self-financing. There will be a time lag, but I am sure that eventually the scheme will be self-financing, because it will create more industry to pay the cost. We will not see the end of the trade cycle as a result. The Government are a little starry-eyed to suggest in the Green Paper that, if unused resources are brought into production, enough new goods and exports will be produced to balance our payments and get rid of the cycle, which we have had since the war of recession, of boom and stop-go.
    The Green Paper's suggestion that we would get rid of stop-go by this scheme is too much. As long as we have five year periods of Government, we are too likely to get into balance of payments difficulties, followed by restrictive measures which are replaced near election time by expansionist schemes.
    6.45 p.m.
    The Deputy Chairman: Order. The hon. Gentleman must relate his remarks to the new Clause.
    Mr. McMaster: As a result of the new Clause and the forecasts that have been made—I consider them to be modest, particularly when it has been suggested that unemployment will be reduced by 50 per cent. in the development areas—the people of Northern Ireland will benefit. It will mean a reduction of 4 per cent. in Northern Ireland's unemployment rate. The ups and downs we have experienced in the trade cycle have been particularly severe in areas like Northern Ireland, more so than in the rest of Britain, and I trust that these measures will benefit the development areas.
    Northern Ireland is a special case and is different from the rest of the United Kingdom. Our unemployment rate is much more severe. I am, therefore, bound to disagree with my hon. Friends who oppose this scheme. It will mean that £11 million will be diverted to Northern Ireland, and this is bound to help our economy. I appreciate why 80 per cent. of manufacturers, those in the rest of the country, dislike paying S.E.T.

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    to help the development areas. I also appreciate how competition from the development areas will eventually become an embarrassment to them. Nevertheless, the Government have a social duty to spread employment evenly and to help the less privileged areas.
    If this task is adequately performed, it will benefit not only Northern Ireland but the country as a whole. While I do not altogether like the way the scheme has been tied to S.E.T.—I would have preferred to have seen it tied to the National Insurance scheme, with less dependence on S.E.T.—I would find it impossible to vote against the Government's proposal.
    Mr. Donald Dewar: I wish briefly to comment on some of the arguments that have been used in my part of Scotland to combat the Government's proposals in the Green Paper and presumably will be used against the proposals in the new Clause.
    The reception which these proposals have had in some quarters has been, to say the least, less than gracious, although I have detected a somewhat insubstantial note in the arguments that have been heard. This is largely because hon. Gentlemen opposite are unable to deny that about £40 million of welcome capital will be injected into Scotland's economy. As a result of this, opponents of these measures have been reduced on occasions to rather weak quibbles about the actual fiscal machinery that will carry this operation through.
    In the Report of the Scottish Council (Development and Industry) it is pointed out—and this is one of the major props of the argument often used by hon. Gentlemen opposite—that, when looking at regional problems, there is no one easy panacea which is tailor-made to answer all the questions and difficulties. However, before coming to the Scottish Council's views, I should remind the House of the powerful case that exists for R.E.P.
    I do not accept, in the pristine simplicity with which it is set out in the Green Paper, that the only result of R.E.P. will be a reduction in industrial costs in the development areas and, therefore, expansion generally at the expense of the rest of the United Kingdom and an increase in employment. That is far too
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    neat and comfortable a projection, and I sincerely accept the criticism, if it is a criticism, made by the hon. Member for Worthing (Mr. Higgins) that a fair proportion of the premium will be spilt over in increased wages and possibly in increased profits. However, as the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) pointed out, this does not seem to be in any way a drawback to the proposals from Scotland's point of view.
    I suggest that the new Clause and R.E.P. represent a certain degree of regional reflation which cannot be anything but welcome in Scotland; and that is the spirit in which I view the suggestion. It is difficult to project exactly what the effect of all this will be. One authoritative and, I believe, extremely reasonable projection has been made by the National Institute of Economic and Social Research in its May review of the economy. It states that there may be experts who would disagree with the way they have manipulated the regional multiplier, but the National Institute's projection—and its impartiality is enhanced by the rather jaundiced view which the same document takes of the Government's performance in other economic spheres—is that in about three to five years we can expect a job growth in the regions of between 60,000 and 80,000, with 30,000 in the first year of the operation. This may be a little optimistic, but if things turn out to be anything like that, we shall have nothing to complain about.
    Consider, for example, the unemployment figures for June, 1966, which in the development areas stood at 113,000. One can see just what an enormously significant contribution, if the National Institute is right, the Government's latest proposal will make towards levelling out the unemployment statistics in the country as a whole. Obviously, if it does something—and I consider that R.E.P. must make some contribution—to decrease the pressure of labour demand in the areas of low unemployment and to reduce unemployment in these areas, it will have performed a valuable function. As the District Bank Review persuasively argued in its current issue, there seems to be no doubt that wage reflation is initiated in areas of low unemployment

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    and is transmitted from there to the rest of the country. There is a strong case for saying that R.E.P. will be effective and helpful in this sense; and I do not find the arguments against it in the least convincing.
    It has been suggested that R.E.P. will go some way to encourage labour hoarding in places like Scotland. I wish to make my view perfectly clear. I do not consider that a labour-intensive industry is necessarily an undesirable industry or that there is something inherently inefficient about it. It cannot be called a "black" industry and it cannot be said that regions do not want it. There is a simple case for saying that we want to retain our labour in Scotland and that labour-intensive industries are, therefore, to be welcomed.
    The circular which has landed on the desk of every Scottish hon. Member from the Scottish Clothing Manufacturers Association emphasises this. It is obvious that the whole system of incentives has so far been weighted, tilted, in favour of the capital-intensive firm. It has been worked out by Messrs. Bird and Thirwell of the University of Kent that a project which will have the same gross costs, whether inside or outside a development area, should, taking into account all the investment incentives, as well as the taxation concessions that exist, expect a variation in the net costs of that project of up to 30 per cent. depending upon whether a firm is inside or outside the development area boundaries. This illustrates the fact that we have this tremendous weighting in favour of the capital-intensive firm, and something which redresses the balance in the other direction is no bad thing.
    A major argument used time and again in Scotland—an argument which is often plagiarised and lifted straight from the Scottish Council's Report—is that we want more efficient industrial retraining. The importance of retraining is an unexceptionable truth and no hon. Member will deny it. However, when one considers that only about 30,000 people a year pass through the total of Government training centres in Great Britain, one realises the enormous size of the problem and appreciates that it cannot be tackled by Government training centres
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    alone. A major effort in industrial retraining must take place in industry and there is no reason to think that firms will not use some of the new R.E.P. on these activities. The Scottish Council's own magazine quotes Glyn Davis of Strathclyde University, who pointed out in the Oxford University Papers that although there is a high unemployment rate in development areas like Scotland, because of the comparatively small size of the labour pool available, there is an enormously larger amount of labour idle for an expanding industry in the south of England and in other crowded areas. However, the Scottish Council, commenting on this argument, does not say—and this is more directly connected with the premium—that the real effective effort must be made for retraining by industry itself. Mr. Davis points out that if one looks at the pattern of labour, it reflects on the type of existing industry in the area. That is the conditioning factor, and that is where the effort must be made.
    Despite the fact that the main arguments used against the premium are somewhat sketchy, I appreciate that hon. Gentlemen opposite, as well as those who oppose R.E.P. outside, will not be reconciled to this measure. The Government have shown a certain degree of flexibility by extending the period to seven years, with a tapering-off time. That, too, will not impress the critics of R.E.P., largely because they have got into their heads the idea that Selective Employment Tax is the basis of R.E.P. and that, therefore—they arrive at this theory by some simple and straightforward method of transference—R.E.P. must be bad. They have about S.E.T. some kind of advanced form of persecution mania.
    In the debate on the Green Paper, Scottish hon. Members made a spatter of allegations to the effect that over half of Scotland's working force was employed in the service industries. From that, they have gone on to argue that because Scotland was victimised by S.E.T.—simply because it was a tax and a tax must victimise people—it will also be victimised by R.E.P. It is not accurate to say that more than half of Scotland's labour force is employed in the service industries. Indeed, even if it were, it would be only significant if this was a larger proportion

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    of the working force than in Britain as a whole.
    The National Institute of Economic and Social Research—in some impartial, if not necessarily entirely accurate, statistics—estimated that the total number of people employed in the service industries in Scotland is 46·6 per cent., which is below the British average. If one takes the proportion of S.E.T. retained by the Treasury as a proportion of the total wages bill, one finds that Scotland comes out almost exactly in line with the British average.
    My basic contention is that while S.E.T. is unpopular in Scotland—as I have pointed out, because it is a tax and because all taxes are unpopular—there is absolutely no case for saying that S.E.T. has victimised Scotland or has fallen particularly heavily on the Scottish enconomy. When one goes on to throw in R.E.P., since it is estimated that an extra £40 million will be added to Scotland's economy, the position dramatically changes and the whole thing becomes, to put it at its lowest commercial basis, a tremendous bargain for the Scottish economy and for the people of Scotland.
    Mr. Higgins: The hon. Gentleman has quoted the National Institute of Economic and Social Research in support of his case. He will agree that the National Institute, when analysing the effects of S.E.T. in its publication issued in the spring of last year, clearly pointed out that its effects on the Scottish economy were definitely adverse.
    Mr. Dewar: I was quoting the National Institute purely from the statistical point of view, remembering that these statistics were denied from the Opposition Front Bench when we debated the Green Paper. I am sensitive about this because I come from north-east Scotland, where only 25 per cent. of people are employed in categories 3 to 16 of the Standard Industrial Classification, which are the premium-earning categories. I am not totally indifferent to the argument which is often put forward, that because we are missing out on tourism and the service industries, the whole scheme is bad.
    I confess that I would have been happier if, not necessarily through R.E.P. but perhaps via some other method, some concession could have been given to the tourist industries. If someone tried to argue that there is also a false distinction
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    in that when the government is talking about reducing costs, as the Green Paper does, it tries to maintain that service costs are not often as important as, say, the wages bill, I would be prepared to accept that argument. But we come back to the Scottish Council's original statement to the effect that one cannot have an all-embracing panacea.
    7.0 p.m.
    When talking of Scotland, and talking from a Scottish point of view, as hon. Members opposite very understandably and naturally try to do, it is no good making points that may have some plausibility in the North-East or the Highlands of Scotland and then try to pass it off as the picture for the nation as a whole. To do so is dishonest and a distortion and—I say this quite sincerely—it is unworthy of any hon. Member of any party.
    I shall not dwell on the tourist industry or the service industries largely because I know that the arguments connected with them have been well rehearsed. I suspect that my right hon. Friends on the Treasury Bench have, for a short term at least, decided to harden their hearts, and it is inconceivable that I can sway them. I only hope that the signs of refinement in the Selective Employment Tax machinery as seen in respect of part-time employment and the regional variation may continue, and that, in the future, the position of the tourist and service industries may be reconsidered.
    I recognise that the whole scheme is a tremendous disappointment to many people in Scotland who have an axe to grind. It is a very real blow to those who proclaim, in the face of all the evidence, the Government's supposed indifference to the fate of the Scottish economy. It is a very real blow to those who say that the Government have broken faith with the Scottish electorate and are not interested in revivifying the Scottish industrial scene.
    From the speeches of many hon. Members—including many on this side, such as my hon. Friend the Member for Lancaster (Mr. Henig), who come from these so-called, and perhaps unfortunately called, grey areas, it is clear that those hon. Members are in no doubt about what the effectiveness of this regional employment premium is. I do not

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    for a moment believe that Scottish people share the narrow partisan arguments heard all too often in this House. My only regret is that hon. Members opposite cannot take the advice of the Scottish Council (Development and Industry) and "warmly welcome" what is "an important initiative".
    Mr. Gordon Campbell: The hon. Member for Aberdeen, South (Mr. Dewar) rather typically criticised an imaginary case that he put forward as having been advanced from this side. I did not interrupt him, Mr. Irving, because I hoped to catch your eye, but I should now like to put the actual case rather than the one that he pretended to have been put from this side. It is easy oneself to set up a dummy case which has no relation to fact and then to knock it down, which is what the hon. Gentleman did.
    I oppose the new Clause, not because I am against measures to even out the incidence of employment and unemployment over the country or measures to stimulate activity in the development areas, but because I believe this proposal is not the best method but the wrong method, both from the general point of view and from certain Scottish points of view which have their counterparts in other parts of Britain.
    I will not argue simply on what the hon. Gentleman called the narrow Scottish point but on the very words used in the Green Book which I will quote later. The general arguments have been put in the general debate on the Green Book, and my hon. Friend the Member for Worthing (Mr. Higgins) put some of them very cogently today. I would refer to the article by Mr. Kenneth Keith in The Times of 23rd May which was headed "A Misuse of Economic Resources". The C.B.I. and other bodies have pointed out that there are other, better ways of employing about £100 million a year in the development areas and that those methods would be more likely to achieve the desired results.
    My principal objection to the Clause relates to the areas which I will call special development areas. These are to be found in parts of Wales, the southwest of England, and the Highlands and
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    Islands and north of Scotland. Paragraph 49 of the Green Book states:
    "The Development Areas include some parts where an exceptionally small proportion (from 10 per cent. to 15 per cent.) of the total number of employees are in manufacturing industry."
    That is a small proportion. It also states
    "The South West Development Area … the Scottish Highlands and Islands, mid-Wales and North West Wales are in this category."
    The paragraph ends:
    "… it is clear that the net yield of the tax as a percentage of the wage and salary bill must be rather higher in these sub-regions than it is either in Britain as a whole or in the Development Areas as a whole."
    From information we have extracted from the Government by Question and Answer, I would say that the words that it "must be rather higher" is an understatement. We know from replies given in this House that the amount of money taken out of the Highlands and Islands by the Selective Employment Tax, as a result of the very low level of refunds and premiums being paid in that area, because manufacturing industry provides only about 10 per cent. of employment there, is very high. This is admitted in the Green Book although, as I say, it is an under-statement.
    This aspect of the matter, which was discussed quite fairly in the Green Book, is still valid but, unfortunately, it appears now to have receded from Government thinking. The Government are saying very little about it. They have in the past said that there are other ways of helping these areas. As an hon. Member opposite said earlier in this debate, a lot was said about the Highland Development Board. At other times the Government have said that the 45 per cent. investment grants in the development areas are helping but, unfortunately, these also work on a discriminating principle against service industry and in favour of manufacturing industry, which is such a small proportion.
    Those areas that I would call the special development areas cannot be helped by the 45 per cent. grants, because little is eligible for the grants at all. It is a nought per cent. grant for most of industry there. As was illustrated in an

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    Answer today from the President of the Board of Trade to a Question of mine, transport, both for manufacturing and non-manufacturing industries, is not eligible for the grant, and the investment allowances have been lost. This accumulation of discrimination against a very large percentage of industry in these special areas will be accentuated if these regional premiums are adopted.
    Two reasons are given in the Government's White Paper for this discrimination against the service industries. It is stated on page 6 that by limiting the premium to manufacturing industry there will be less pressure on demand, and on page 13 it is said that it is because of competition that the manufacturing industries in the development areas can then draw employment and extra work from the other areas.
    I suspect that there may be a third reason. I suspect that underlying this proposal there is also a wish by the Government to support exports legally, on the basis that if we provide a subsidy which is on a regional basis it is not offending against international agreements. If that is so, it is a very indirect way of doing it, and I do not think that it is necessary. There are other and better ways of assisting exports.
    I do not disdain or oppose the proposal that £40 million a year should be available for assisting the development areas in Scotland. But the question is, what is the best method of using this money? There have been two fundamental errors. The first is that which regards Scotland as just one of the regions, as just one of the development areas minus Edinburgh and Leith. What may be helpful to the industrial belt of Scotland, however, may be very unhelpful to the other regions of Scotland.
    We normally consider Scotland in five regions—the industrial belt, which is the largest from the point of view of population and industry, and four others, which are large geographical areas in most cases and present quite different problems. What may be thought to be helpful to manufacturing industry in the industrial belt does not necessarily assist the other regions.
    The second fundamental error is that the premium is based on the S.E.T. and therefore not only continues the
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    discriminations I have mentioned but the many anomalies in classifications as well as the creaking machinery for administration of the tax. The hon. Member for Aberdeen, South (Mr. Dewar) talked about the percentage of service industries in Scotland. The point which the Scottish Council made in its submission was that there were about 250,000 more persons employed in Scotland in the service industries than in manufacturing industry.
    Of course, the Scottish Council was not talking about non-service, non-manufacturing industry such as farming, fishing, and forestry, which are yet another sector which has upset some percentage calculations. But the fact remains that the service industries, according to the submission, employ a great many more than the manufacturing industries do, and, as has been mentioned, the Government in their White Paper known as "The Scottish Plan" suggested that 60,000 of the 130,000 jobs they proposed would be in service industries.
    Mr. Dewar: Does the hon. Gentleman maintain that this ratio is different in the United Kingdom as a whole? If it is not, it seems that the point he makes is not valid.
    Mr. Campbell: The point is valid. But it is not easy to bring manufacturing industry in large quantities and quickly to a considerable part of Scotland. I have pointed out that, in the Scottish industrial belt, the premium—although there are general economic arguments as to whether it is the best way of assisting—can be earned by quite a large proportion of the industry there. But if one looks at the welfare of Scotland as a whole, one must consider the very large geographical areas where the amount of industry which will earn the premium is a very small percentage.
    Mr. Dewar rose—
    Mr. Campbell: I shall not give way again. The hon. Gentleman made his point and I have replied. I dealt with this matter because he misunderstood what the Scottish Council said. I did not interrupt him because I thought that I could in my own speech point out what the Scottish Council actually said.
    Within these special development areas, I am naturally concerned with the

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    Highlands and Islands and the north of Scotland, and so far I seem to have been the only hon. Member from that area to have had the opportunity to speak in the debate. At the same time, however, I recognise, as the Government did in their Green Paper, that some special problems arise in the south-west of England and Wales, for example. But, having referred to this in paragraph 49 and subsequent paragraphs, the Government allowed the matter to disappear. I would hate them to say later that they put this point out for discussion but no one had raised it. I have raised it at every possible opportunity and shall take every chance to do so again.
    7.15 p.m.
    The Government seem to have forgotten about paragraph 49, unless they can give a satisfactory answer tonight. The position, therefore, has been reached where, under the S.E.T. and the associated system of refunds and premiums, a great deal more money is being collected and taken out of the seven crofting counties of the Highlands and Islands than is being or can be put back in the foreseeable future by the grants made by the Highlands and Islands Development Board, which is the body mentioned in the Green Paper by the Government as an agency which might be able to help in the other direction.
    One finds, therefore, that the money being collected from the Highlands and Islands, where it is a good deal more per job than elsewhere, is to be paid out in premiums—greatly increased—in the industrial belt of Scotland and in development areas where there is manufacturing industry in other parts of Britain. The funds remitted from the Highlands and Islands will be given out in Glasgow, Newcastle and places like that.
    This must lead to depopulation. It must be a tendency towards depopulation. Yet the Government have said on many occasions that they are trying to stem depopulation. I hope that the Government will explain how they intend to put this right. They are positively encouraging new jobs, or the jobs they hope will remain in existence in manufacturing industries, which are bound to concentrate in the industrial belt of Scotland. It means that more men will be leaving the north of Scotland and
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    the Highlands if the purpose the Government intend under this system is carried out and this money is given to jobs in manufacturing industries which can only be set up to a minor extent in such areas as the Highlands and the North. This will make the anomalies worse, and I cannot see how the scheme, although I concede that it may have some benefits for the industrial belt of Scotland, can do anything but damage to those parts of Scotland I have mentioned.
    Dr. David Owen: I welcome this Clause. I come from what I suppose is an area which would be described as a grey area and which has much claim to be a development area. Whether Plymouth becomes a development area or not, I believe that the premium is an extremely imaginative piece of fiscal policy, and as one who, in the last Budget, made representations to the Chancellor to introduce regional flexibility in the S.E.T., I welcome this proposal and, in the particular economic situation of the day, its emphasis on manufacturing industry.
    The debate has been somewhat parochial. Everyone has argued the case from the point of view of his own constituency interests. Essentially what we are after is a control of the national economy. What we are desperately trying to do is to remove the regional imbalances and the very high areas of unemployment which exert strong social pressures on the Government to take economic policies which can be counter-productive and which are certainly one of the major factors in the stop-go economy. The Government's long-term economic policy has my full support, and I regard this proposal as a strengthening of their armament in this respect.
    It was interesting that the hon. Member for Belfast, East (Mr. McMaster), in a difficult speech, made quite clear that he does not support his own Front Bench. He drew attention to the benefits which will accrue to Northern Ireland from the regional employment premium. Some people talk as though this were a new idea but, in 1962 a labour subsidy was proposed for Northern Ireland. It was discussed very fully, but it was not acted on at the time. We have had a capital subsidy for a considerable time now, and what we need

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    is an extended range of measures, including the introduction of this labour subsidy.
    I turn now to the points made by the hon. Member for Worthing (Mr. Higgins). The hon. Gentleman implied that the T.U.C.s support for the regional employment premium scheme was given purely on the basis that the unions could expect higher wages in the regions. This is a very cynical interpretation. I am sure that the main support of the T.U.C. for the proposal stems from the fervent belief that it will reduce unemployment in the regions. This is the principal reason why the T.U.C. is enthusiastically supporting it.
    Mr. R. J. Maxwell-Hyslop rose—
    Dr. Owen: No, I shall not give way. The debate has gone on a long while, and time is now short. The hon. Gentleman has only just come in, and I would rather give way to someone who has been present in the Chamber for a longer time.
    I was saying that the trade unions support this proposal because of its central basis as a measure intended to reduce unemployment. I am, however, critical of one aspect of it. The Government believe that the scheme will be self-financing. I hope that they are right, but, in the next few years, it will undoubtedly produce an inflationary pressure until it begins to produce some form of payments back. This is extremely worrying in our present situation. Now is not the occasion to argue the short-term aspects of the Government's policy—I have done that in the Budget debates—but I must say that I remain deeply critical of it. I see nothing in the measures being taken at the moment to encourage investment in industry. I see nothing in the present measures to encourage an export-led boom. In January and February, it was reasonable to hope that we were in for an export-led boom, but there is precious little evidence of it now. There is no indication yet of any form of reduction in imports. In the long term, however, which is what this argument is about—it is not a short-term measure at all—inestimable benefits will accrue.
    The hon. Member for Worthing said that, in some strange way, the regional
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    employment premium would encourage manufacturers to invest in equipment which would use a lot of labour. I do not believe it. I am glad that the hon. Member for Belfast, East took him up on the point. If it were to be a permanent premium staying for all time, that might be so, but it is to stay for only seven years and then taper off. But, apart from that, we have an extensive capital subsidy already, and the capital subsidy is more than the labour subsidy. The hon. Gentleman's argument does not stand up.
    In an intervention, the hon. Member for South Angus (Mr. Bruce-Gardyne) raised a point which he has tried to make on previous occasions, both in letters to the Press and in an intervention during the speech of the First Secretary of State the other day. He says that the regional employment premium is inextricably linked to the Selective Employment Tax, to which he has a great aversion. It is not so linked. The First Secretary of State denied categorically that it was, in immediate response to the hon. Gentleman's intervention, so how he can continue to pursue the point I do not know.
    Mr. Bruce-Gardyne rose—
    Dr. Owen: No, I shall not give way. Time is short.
    Mr. Maxwell-Hyslop: On a point of order, Mr. Irving. We are not subject to a timetable resolution. Time is in no way short, is it?
    The Deputy Chairman: Order. That is not a point of order.
    Mr. Bruce-Gardyne: If the hon. Gentleman will read HANSARD, he will see that the First Secretary of State's answer to my intervention last week was that the Chancellor of the Exchequer would deal with the point I had raised when he replied to the debate. Needless to say, the Chancellor did no such thing.
    Dr. Owen: The hon. Gentleman gives me the opportunity to read the relevant passage in HANSARD. My right hon. Friend the First Secretary of State said:
    "… this and the S.E.T. do not integrally and inevitably fit together. It is true in form that the one has come out of the other, but they are not necessarily inseparable."—[OFFICIAL REPORT, 5th June, 1967; Vol. 747, c. 660.]

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    That makes the matter clear. If we wish to separate them, we can. If we have an added value tax, as I hope we shall, and if the Selective Employment Tax is done away with, we can still retain the regional employment premium, which, in my view, is of considerable benefit. I would not like to see it go.
    Mr. G. Campbell rose—
    Dr. Owen: No, I shall not give way. The hon. Gentleman has already spoken. This debate is going on for a long time—[HON. MEMBERS: "Give way."] I shall not give way. There are many other hon. Members who wish to speak.
    This is the central issue which I want the Government to understand. They have, rightly, concentrated at present on manufacturing industry, but there is a real case for the tourist industry to be treated as a separate industry. I want this question to have close examination. It may well be that the tourist industry can be helped in ways other than by a regional employment premium, but I have no doubt that it has considerable benefit to give to the country and it should receive assistance.
    Regions such as some parts of the Highlands of Scotland, the North-West and North Wales do not gain much benefit from the regional employment premium. My own region of the South-West does not gain much benefit, but this is no reason for not supporting it. If it will produce benefit for the nation and be of national value, hon. and right hon. Members ought to be able to look a little further than their own constituencies. I urge the Chancellor to regard the tourist industry as a separate concern and, if possible, bring forward proposals to help it. I must warn my right hon. Friend that the short-term economic outlook for this country is causing many of his hon. Friends grave concern, but, for the long-term, this imaginative piece of fiscal policy is warmly welcomed.
    Mr. Ian Lloyd (Portsmouth, Lang-stone): I wish to make a few pertinent comments on the Clause and on the arguments advanced in a number of Government documents advocating the policy which it embodies. Some of my remarks may be judged impertinent, but I hope
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    that I shall succeed in staying within order.
    First, I take issue with an argument used by the Chancellor earlier today. He emphasised that one of the main considerations in the Government's thinking in determining this measure was the lack of trained skill. His words were to the effect that "Expansion, when it comes, falters because of the lack of trained skill". I subscribe wholeheartedly to the view that the British are among the world's most skilful and ingenious peoples and that in this resource lies, perhaps, 99 per cent. of our greatness, but I would argue strenuously that, in the last decade or two, too much of our available skill has been either untrained or obsolete. Too much of our skill has been absorbed artificially. We have had too much concealed unemployment and misemployment.
    Whenever we discuss this subject in the House of Commons, we talk as though we are up against the extreme limits of available labour all the time. I believe this to be wholly untrue because, basically, the situation is artificial. The decline of the shipbuilding industry, one of the major industries which the Chancellor hopes to help by these proposals, could be attributed in large measure to the serious misemployment and over-employment which has existed in the industry, probably for half a century, as a result of a whole range of economic and social restrictions which I need not go into now.
    Next, I take up the question of the shrinkage of numbers employed, the implication being that it is something to be avoided. This argument, too, cannot be sustained. Shrinkage of numbers employed is in itself a neutral phenomenon. It is taking place in all the most efficient agricultural countries of the world. Shrinkage in numbers is a world phenomenon in the developed agricultural countries. In shipbuilding, too, the surviving efficient shipbuilding nations are those in which there has been a prevailing and significant shrinkage in the numbers employed. The argument could be put another way, that if the shrinkage is associated, either geographically or economically, with a rise in real incomes, it is something to be welcomed. It is on the rise in real incomes rather than on the shrinkage in numbers that we should concentrate.

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    7.30 p.m.
    I turn now to a point made by the hon. Member for Aberdeen, South (Mr. Dewar), who said that labour-intensive investment was the investment most required particularly in Scotland. Here again, the argument is fallacious. It is not labour-intensive investment we require or, necessarily, capital-intensive investment. The choice is not between labour-intensive and non-labour-intensive firms; it is much more fundamental. It is between a high and rising national standard of living with largely capital-intensive firms and industries employing whatever labour is needed and economically justified, however the total results of that developed national output may be distributed, and investment in less capital-intensive firms producing a low or lower national standard of living. These firms are being compelled artificially—usually by legislation but there are other compulsions—to employ whatever labour is deemed by some all-wise bureaucrat to be necessary. That is the real choice facing us.
    Let us forget about the argument about labour-intensive and capital-intensive industries and go to the real crux of the problems. I should like to give a specific example. The world, and Britain with it, is on the verge of what is known as the container revolution. With this capital-intensive method in the United Kingdom the whole dry cargo trade can probably be handled by about 5,000 men. Without it, using the labour-intensive method, it can be handled, as it very largely now is, by 50,000 men. What is the choice? What are the consequences for the national economy? They seem to me to be perfectly clear. The important point is that this choice should not be obscured either in narrow sectors or in the broad national sector by legislation which tends to emphasise artificial criteria.
    The Green Paper refers to the mobility of labour and implies that outward migration from the development areas has exceeded
    "… the degree of geographical mobility of labour which is socially and economically desirable".
    I should like to ask the Chancellor of the Exchequer what is the degree that is socially and economically desirable. How is it defined? Is it static through time?
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    If it is not, how does it change, how is it affected by rising standards of living? How is it affected by the rising ratio of standards of living comparing one area with another. How is it affected by the availability of housing? That is probably the most important point. We should know what is in the Government's mind. I leave it at that.
    The question of service industries has been rightly emphasised and I do not wish to say much more about it. But the word "physiocrats" was produced by an hon. Member opposite, and there was a suggestion that it was an obsolete concept. Going by the sort of judgments made by the Government today, I suggest that it is not physiocrats but "physicalcrats" who seem to dominate our thinking. I could summarise their attitude by saying, "If you can see it, subsidise it. If you can't, tax it."
    The Government argue further in the Green Paper that there will be no effect on the balance of payments, and that argument should be taken very seriously by the House. In paragraphs 33 and 34 of the Green Paper there are what purport to be arguments sustaining that proposition. But I contend that they are not arguments; they are assumptions. They are an act of economic faith. But, as I see it, it is not the task of economists anywhere, never mind those who advise Governments, to have faith in their proposals. I have always understood that their task is to demonstrate the case as fully as their data and assumptions permit.
    It is not demonstrated in the Green Paper. As far as I am aware, it is not done anywhere else, and it should be. I do not believe this particular set of assumptions. I do not believe paragraph 33 which states that:
    "There are strong grounds for holding … it is believed that … there should be … it is believed that …"
    and so on. This is not a convincing argument, and I hope that the Government will succeed in producing others, although I doubt if they can.
    It seems to me that the argument which underlies much of the thinking behind the R.E.P. is that there is excessive demand in certain situations which cannot be controlled as effectively as the Government would like because it spills over into the development areas. I am not

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    convinced by that argument. It seems to me that when this excessive demand is concentrated on those industries in which expansion of output automatically creates a positive balance of payments effect, and when it is possible to define and isolate those industries, we are getting somewhere.
    Of the low import-content industries, tourism has been rightly emphasised, as well as hotels and entertainment. I should like to add electronics and scientific instruments. Every hon. Member can have his own list, and most of our lists would overlap. It is especially in these industries of expanding output and high positive balance of payments content that we should encourage development, investment and employment. We should do this wherever those industries can be found, and not submit them to artificial criteria, wherever they exist. We have too few of them. This measure does not necessarily create this type of industry, but it is certain that it places a specific burden on it wherever it exists outside the development areas.
    It is reasonable to suggest that, as I am speaking critically of the proposal, I might have alternatives. Do they exist? I should have thought that there were two perfectly reasonable alternatives which the Government could bring forward and which they would have to support if they were really serious. I recently had an opportunity of seeing the tremendous economic attraction provided by the free port concept, such as Shannon in Eire and Copenhagen in Denmark. Why do the Government not create some free ports in the development areas? If they are really serious about their intention to benefit these areas, the attraction provided to industry in free ports would be quite certain, quite dramatic and quite effective.
    There is another and possibly more difficult line of incentive which the Government might consider—the rate of personal taxation. Why have not the Government devised a scheme providing that all those subject to personal taxation—because ultimately incentive operates at the personal level—should pay 10 per cent. less at all levels? Possibly the development areas would have to be defined much more carefully and specfically,
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    but what a dramatic effect this would have on the desire of people to go to development areas, to live there and endure the lack of social amenities and various other disadvantages! What a flood of economic activity would follow such a scheme! If the Government are really serious about their intention to help and not simply to sit aloft and aloof in Whitehall and operate the puppets on the strings, that is the sort of thing they should be thinking of doing.
    The Green Paper has questioned, in effect, the ultimate result of the withdrawal of the R.E.P. This suggested to me that it was really a form of tariff barrier that the Government are erecting for these areas, a tariff barrier of, perhaps, at least 2 to 3 per cent., behind which industries in those areas can shelter. Those of us with experience of tariff barriers know that they are seldom effective. The uniformly affect old industries, which are either efficient or inefficient, and new, which are either inefficient or efficient. Only about 1 per cent. of all tariffs are justified, and those are usually not needed.
    To sum up, it cannot be escaped that the proposal is essentially to build a bad subsidy, which will be bound to build up considerable political and economic vested interests, on a bad tax. I have heard no argument today to convince me that the contrary is the case. Is there an ulterior motive behind the proposal? Are the Government attempting to create a situation in which, in the course of time, so much will have been invested and so much employment created on this artificial basis that no Government, irrespective of party, will be able to unscramble the mess? I have a vague and lurking suspicion that that is so. I hone that the Chancellor will succeed in disabusing me of it.
    Finally—and this is the most important point of all—who pays for this? The map shows who pays. Broadly speaking, it is the South. I happen to represent the city of Portsmouth, but I do not regard it as a particularly wealthy city, and vet under this scheme it will subsidise Plymouth and Liverpool.
    Mr. Peter Bessell (Blodmin): Plymouth is not in a development area—I wish it were—so that it will not be subsidised by the city of Portsmouth.
    Mr. Lloyd: The hon. Gentleman is quite right and Plymouth is outside, but certainly Liverpool is in a development area and my point is not invalidated. Portsmouth will have to subsidise Liverpool, Newcastle, Glasgow, Edinburgh and many other cities. This is a monstrously unfair imposition to place on the people of Portsmouth and many other cities in the South.
    Mr. Mendelson: On several occasions my right hon. Friend the Chancellor of the Exchequer has said that this proposal is in general line with his economic policy. Before dealing with that, I want to give a general welcome to the Government's intention to deal with the special and urgent problems of the development areas. The way in which the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd) spoke setting one part of the country against another, represented the kind of backward thinking to which we are accustomed from him on all sorts of subjects.
    I support and have supported measures to encourage employment and investment in development areas, but I am not prepared to accept such a policy as a substitute for the other essential economic measures which are required by the country as a whole and by the development areas. I have in mind certain remarks of the Chancellor, starting with his Budget statement, about the problem of finding 100,000 jobs, most of which would have to be allocated to the development areas, and his view that if we succeeded in that we would then be in sight of the solution to our economic problems.
    I dissent from that point of view. If the Government confine themselves to the measures so far advanced, including this, and do not take radical steps in the immediate future to encourage investment throughout the country, including the development areas, the policy will fail. Certainly it will not bring us closer to a solution of our general economic problems. This is a matter of cardinal importance. The Chancellor seems to be creating the illusion that the provision of 100,000 new jobs in the development areas will produce a solution to our general investment problem. I believe that to be profoundly incorrect.
    Since the Budget I have seen reports from bodies, such as the National Institute
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    for Economic and Social Research, proving conclusively that it is the lagging of investment which is the root of our problems. On several occasions the Chancellor has referred to his expectations of growth in the economy, but the policy embodied in this proposal, which I support, will not bear the desired fruit if at the same time there is not a general all-round increase of investment in the economy within the next six months so that it can percolate through all areas, including the development areas.
    7.45 p.m.
    But crucial investment decisions are not based on tax allowances or special premiums. As my right hon. Friend the Chief Secretary knows very well and has known for a long time, probably longer than I have known this truth, essential investment decisions in board rooms are based on the expectation of selling the goods produced at a reasonable profit at the other end of the line. Allowances and premiums are no more than additions and they cannot take the place of that expectation of reasonable profit, because no allowance and no premiums will affect those crucial investment decisions unless there is a prospect of selling the goods. I therefore hope that there will be a clear declaration from the Government that this proposal is not meant in any way to be a substitute for a general economic policy of encouraging investment, a policy which must be urgently pursued by increasing consumer demand, so that this and other measures can bear fruit for the good of the development areas and the country as a whole.
    This afternoon, the Chancellor rightly drew special attention to training for skills. If we were able to make more progress in this direction, many policies to aid our export effort would be much better advanced. Unfortunately, we are not doing all we can to improve training for skills. The Chancellor was speaking particularly about development areas, but I am thinking also of the old industrial regions.
    I am glad that the Chief Secretary is a senior Treasury Minister, because the specific problem which I want to put concerns him as a Treasury Minister as much as the proposal which we are now considering. There is a limited number of training centres and it is generally

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    agreed—and I was glad to hear the Chancellor say this—that the best kind of training occurs in the firm, in the plant, where there is much accumulated skill and experience. It is physically impossible in the time available to expand the number of training centres; they cannot do what is required with present resources, and therefore retraining must take place in the plant. In addition to that, special training can often best be undertaken in the plant, especially when a man is changing from one skill to a slightly different skill.
    However, there has been an unfortunate development. There are two firms in my area of South Yorkshire, as there are others in other parts of the country, which have developed excellent schemes for retraining in the plant. About 12 months ago, a number of men were facing a crucial decision. The management was declaring their jobs redundant and the men were perfectly entitled under the Redundancy Act to expect a redundancy declaration and immediately to apply for redundancy payments, which, as the Committee knows, would not be subject to tax.
    At about that time the firm concerned developed an excellent internal retraining scheme. It told a number of the men affected, "You have acquired valuable skills in the steel industry and invaluaable experience. Unfortunately, your jobs are coming to an end. You are perfectly entitled to ask for redundancy payments, which will be tax free. However, we ask you not to leave. We have instituted an internal training scheme and we intend to train you for another job. We have taken advice on this matter. Let us assume that you have been earning £24 a week. During the period of training we will pay you £14 a week. We cannot possibly pay you the full rate".
    The employers went on to say: "In addition, we will make up that wage of £14 to 95 per cent. of the wage you previously earned for the period during which you are being retrained. We have taken advice and we can tell you that this additional payment will not be subject to Income Tax, so that you will be placed on terms of equality with people who make the alternative decision; that is, you ask for your reundancy payment
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    and then you do not have to pay Income Tax on it".
    These men accepted this proposal in the knowledge that they would not have to pay Income Tax for that additional payment. Nine months later the management had to come to the men and say that they had been mistaken and they would now have to pay retrospectively full Income Tax on these additional payments.
    This is wrong and unhelpful in many different ways. First, it is wrong because it will have a discouraging effect on these firms and others in the steel industry going ahead with their internal retaining schemes. Secondly, the trade union executives who originally thought up this idea are being approached by steel workers, whose jobs are being declared redundant because of inevitable technological advances, who are asking "What position are we to take?"
    Even if my right hon. Friend cannot give an immediate answer, I suggest that the Government should think again. I advance two grounds: one is efficiency and the other is equity. If some people accept the redundancy payment, which is tax free, and others make the other choice, they ought to be equally treated. There is involved here the important principle of treating taxpayers alike. Industrial efficiency and the future of retraining for other skills, which the Chancellor mentioned, is bound to have a seriously discouraging effect, and these people who have acquired experience and skills in the steel industry, or any other industry, will leave and might never come back. This is the great fear of these firms and the trade union representatives of these men, and I have been asked by them to put this point in some considerable detail.
    I have spent a little more time on that point, because I thought that by discussing a number of details, as well as the Government's general economic policy, we could best advance the sort of purposes that the Chancellor put to the Committee earlier.
    Sir John Gilmour: When one is being offered in one's own constituency or elsewhere a premium of 30s. it seems stupid to turn it down. But, having listened to the debate, I am more

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    than ever convinced that as the Selective Employment Tax in many cases takes money from people who can ill afford it and pays it to those who do not need it, in the same way the regional employment premium will channel a very great deal of money to people employed willy-nilly in the industries in which they are at present working. Therefore, I do not think that it will in any way help the long-term solution of our economic difficulties.
    A practical illustration of an industry which has come to Scotland in recent years is the motor car industry. What effect will it have on building up this industry in Scotland? Will it produce cars more cheaply from Scotland? Will it lead to cars from Scotland taking a bigger share of the market as a whole? What sort of impact will it have? Nothing has been said which in any way leads me to suppose that it will provide the stimulus to industry that we need.
    One other quite different and unrelated point about which I was not quite clear when the Chancellor introduced the Clause is what happens over short-time working. I paid several visits to industrial concerns in Scotland last winter. They were working a four-day week. By working from Monday to Thursday in one week and Tuesday to Friday the next week it was possible for the people concerned to draw four days pay a week from their firms and to draw two days unemployment pay a fortnight. This was arranged between management and unions to make certain there was no industrial strife and people did not have to be paid off.
    The Chancellor said that if one worked for 21 hours one would draw this premium. Does it mean that if people are put on permanent short-time working, to obviate, if you like, paying off members of a firm's staff, they will be able to draw the 30s. a week, although they are only working four days a week?
    My hon. Friends have deployed all the arguments necessary to show that there are many other ways in which this £100 million could be better spent, but no argument has been developed to show that it will certainly help those parts of the country which are outside the big industrial centres.
    My hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) made the
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    point that the central belt of Scotland has over past years had a considerable amount of money spent on it to help it develop. What happens is that it draws and attracts labour from outside the central belt to fill up jobs there. What we need is something which has an element of discrimination to make it much more attractive to go to the areas where there are not the same facilities as in the major industrial areas. I cannot see that the proposals which the Government are putting forward will deal with the long-term employment prospects for Scotland, Ireland or any other part of the country where we suffer from a high level of unemployment.
    Mr. Arthur Davidson: I should like, first, to give a general welcome to the regional employment premium. The benefits which it will bring to the development areas are so obvious that I am surprised that some hon. Gentlemen opposite have seen fit to criticise it. But my enthusiasm would have been greater—fulsome to the extreme—had the Government included Lancashire—in particular, the Lancashire cotton belt. The Lancashire cotton belt has problems peculiar to it, similar to those facing the development areas themselves.
    Speaker after speaker has catalogued the features of the development areas, and all of them could have applied to the Lancashire cotton belt. I will detail one or two of them. A poor rate of economic growth applies to Lancashire. The drift away of younger people to seek work in more attractive industries elsewhere also applies to Lancashire. A resultant distorted age structure amongst the existing population applies to Lancashire. Poor communications, excessive travel to work, and a need to revitalise and modernise towns certainly applies to Lancashire. Above all, over the years there has been a massive contraction of the two industries upon which Lancashire's prosperity was built—coal and cotton.
    8.0 p.m.
    The problems of the cotton industry are well known in this Committee. They have been ventilated on other occasions and I am sure that I would be out of order were I to detail them now. But what are needed in Lancashire are new industries, growth industries, to replace the older industries. While I welcome the premium as it will affect the development

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    areas, we in Lancashire fear that the greater inducement that the premium will give to firms to develop will mean that existing firms in Lancashire and firms which are thinking of going there will find the lure to develop elsewhere irresistible.
    I am sure that the problems of Lancashire are well known to the Government. I raised them in an Adjournment debate which was not exactly over-crowded nor over-reported. I got a not unhelpful reply from the Government. They showed that they understood the problems. Previous Governments have also understood the problems of Lancashire. But understanding the problems is not sufficient. The Government have shown that they understand the problems of development areas and have done something about them. What I am asking the Government to say today is not only that they understand the problems of Lancashire and of the region of Lancashire in which my constituency is situated, but that they will give practical assistance to induce industry not only from outside to go to Lancashire but, in particular, to induce and give help and new incentives to industry already in Lancashire to expand and develop.
    I hope that my observations will be passed to the Chancellor because he specifically asked that no further mention should be made of areas as "grey areas" and I have somehow miraculously succeeded in talking about Lancashire without mentioning those words.
    Mr. Peter Bessell: The main points which caused the Liberal Party to support this Measure were put forward by my hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. David Steel). There are only two points I would like the Committee to consider in addition to those which were made by my hon. Friend, who understandably confined himself largely to the effect of the premium upon the areas of Scotland which come into the development category.
    The development areas as they are at present designated under the 1966 Act are, of course, valuable in that most of them are areas of high unemployment, depopulation, ageing population and where it is difficult to find employment
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    for young people. But it is unfortunate that this measure, which has considerable merit, will not apply to areas within development areas where there is a serious unemployment problem. I can best illustrate this by taking the case of three towns in my constituency, Torpoint, Saltash and Gunnislake. All are places of difficulty.
    Torpoint and Gunnislake in particular have a very high unemployment record and although almost the whole of Cornwall is designated as a development area and will benefit from these proposals, these three towns, which have greater problems than the majority of the development areas in Cornwall, will receive no benefit whatever either from this scheme or from many other schemes which have been put forward by the Government for the assistance of development areas.
    This is because of the utter absurdity of the method whereby development areas are designated. They are based not upon unemployment nor upon the need to develop certain derelict areas. On the contrary. They are decided by the existing labour exchange areas of the Ministry of Labour, and the exchange area into which Gunnislake, Torpoint and Saltash fall happens to be the Plymouth area and it is therefore assumed, because there is no high unemployment in Plymouth, that there is no need to make a development area of these three towns.
    The absurdity of this is illustrated by the fact that communications between these towns and Plymouth itself are quite inadequate. In the case of Saltash, admittedly there is a bridge connecting the borough and the city of Plymouth across the River Tamar and in the case of Torpoint there is a ferry service. In the case of Gunnislake, there is a relatively long train journey, and Gunnislake has as much as 13 per cent. of the employable population on the dole.
    I appeal to the Chancellor to consider seriously whether this measure should not be applied to areas like these, which are literally within a development area but are excluded because of the absurdity of the machinery whereby the 1966 Act is operated. There is nothing to prevent this being done. It is a simple matter for the President of the Board of Trade to make an order. He can do it under Section 15(2) of the Act. He may vary

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    or revoke or change in any way he chooses the areas which are designated as development areas.
    If the premium is to have the effect that is intended by the Chancellor in providing additional employment and additional industry where it is really needed, I ask him to make representations to the President of the Board of Trade to make certain that this really happens, because, as the position is at the moment, it is only an irritation to those people who have been unemployed for a long time to know that there is no possibility of this measure helping them.
    It is also an irritation to those employers who have had the courage and foresight to set up their factories in areas like Gunnislake, Torpoint and Saltash and who have not received any assistance from the Government because these places are outside the development area and who, despite this, have continued to go ahead with their plans, providing employment for the local population and thereby helping to stabilise a declining economy. They are doing this without any Government assistance. When a measure of this sort is put forward and we are asked to support it—as we must, because any gift horse is better than none—it is extremely irritating to these employers of labour within the framework of the development area that they will not receive any benefit.
    My hon. Friend also mentioned the real risk that this measure represents to some of the service industries. I have in mind particularly the hotel and catering industry, again as it is within Cornwall. For example, one of the development areas is the seaside town of Looe. There is no need, I assure the Chancellor, to provide incentives to build factories in a former fishing village which is rightly regarded as one of the most beautiful spots in Cornwall.
    There is no need to provide an incentive to employers to establish factory buildings in Looe or Fowey or Polperro. There is every need to provide incentives in Gunnislake, Milbrook and Torpoint, and yet if the prospective employer of labour, the man who has decided that he will open a factory in a development area, has chosen Cornwall as the place to do this, one writes to the Board of Trade and asks for information, he will
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    discover that he can receive all of these benefits, including the one which we are now discussing, provided that he opens his factory in Looe, but he cannot have them if he opens it at Gunnislake.
    Mr. Diamond: I hesitate to interrupt the hon. Gentleman, but I assure him that I have listened very carefully to him, and I cannot help him in all that he says. I am only dealing with the new Clause before the Committee. I can convey what he says to my right hon. Friend the President of the Board of Trade, but I gather that he is not saying that this is in any sense detracting from the arguments of the new Clause before the Committee.
    Mr. Bessell: I ask the right hon. Gentleman to accept my assurance that I am not opposing the measure. What I am saying is that it has been brought forward without proper consultation between his right hon. Friends the Chancellor and the President of the Board of Trade. The effect of this proposal will be to provide additional employment to promote new factory development in certain parts of the development areas. It will often be the case, as in my constituency, that it will provide incentives in the very place where they are least needed and where they could have a serious effect upon the tourist industry.
    I am certain that the Chief Secretary will agree that it is vitally important that we should do everything possible to improve tourist facilities, to attract foreign visitors, and provide them with the best possible accommodation. To bring a measure of this sort forward which, because of sheer bad planning and the absence of foresight, could have the opposite effect to that which we all desire in certain areas, does not mean that it will not be welcomed in the development areas as a whole. It will be, and it is right that it would be supported, if only for that reason.
    At the same time there is a period between the deliberations of this Committee and Report when proper representations could be made by the Chancellor to his right hon. Friend the President of the Board of Trade, to see whether these provisions could not be extended beyond the existing development areas to those places attached to the development areas,

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    where this kind of assistance is most urgently needed. An alternative method would be for the President of the Board of Trade to make an Order to include these areas which I have mentioned, areas such as Gunnislake, Saltash and Torpoint, within development areas, and cease to be quite as hidebound, as he is at the moment, by the Ministry of Labour's designated exchange areas. This could be done.
    The strongest argument for supporting this new Clause is the fact that it will provide an incentive, not only to employers to build factories within the development areas, and thereby assist in improving the general prosperity of the area, but moreover it should attract more people into the areas. One of the great problems existing in all the development areas which have been discussed by hon. Members on both sides of the Committee is under-population—a lack of young people able to do the work, if it is provided. The only way in which we can hope to increase the prosperity and improve the economy of the development areas is by increasing the population.
    The only way of increasing the population, short of waiting for Nature to take its course, is to bring people in. If we are to do this we have to provide jobs for them to do. The most important aspect of this new Clause is the fact that it should provide the incentive for employers to set up factories and provide opportunities for employment within the development area, thereby attracting to the area the additional population which is essential if one is to have viable economic units in places such as Cornwall, West Wales and Scotland.
    I do not share the fears which have been expressed that this would work to the detriment of the existing employers. On the contrary, I believe that the employers in industry will benefit generally—those who are there already as well as those who, we hope, will come in future. What is worrying me is that it may detract from the service industries, particularly the restaurants, hotels and other industries catering for foreign and British tourists. I hope, therefore, that the Chancellor will put right the two fundamental errors in relation to this new Clause.
    The first one which I elaborated earlier, is that the benefit should extend to those
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    areas which are not included within the development area, and yet which geographically, are a part of it. The second point was that he should also find some means of providing assistance to those service industries helping our balance of payments, which are so essential to the economic growth of certain regions, such as the hoteliers and others associated with tourists.
    8.15 p.m.
    Mr. Robert Sheldon: The reason for the introduction of the regional employment premium in this form was because from July of last year we were running below capacity in plant and in the supply of labour. Given a high employment rate, the advance factories, the training and retraining facilities, the I.D.C.s and investment grants, would have continued to work, without the need for the regional employment premium. The greatest incentive that can be devised for increasing employment in a region is a high level of employment generally, together with an availability of factories and training and ancillary services for the development area.
    In the period when there was high employment, the reductance of manufacturers to go to development areas could not be mitigated by anything that was likely to be brought about as a result of the regional employment premiums. What is needed is high employment for a long period of time. What has happened, and this is shown in Table 2 on page 8 of the Green Paper, is that at a time when unemployment is beginning to rise markedly over the country unemployment starts shooting up in the development areas. It is because the periods of sustained prosperity have not been sufficiently prolonged that the really great problems have arisen.
    There is no greater incentive to a manufacturer to move to a development area than his finding that he is unable to increase his production because he cannot get his labour locally. No regional employment premium is likely to make up for the lack of this incentive. There is a sort of relationship between the regional employment premium and investment grants, and this has to do with the changeover from investment grants from the period when there were tax allowances to the cash payments. The argument was made

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    many times that if one paid people to invest there may be a surplus of machinery, and this is wasteful. Although too much was made of this argument, there was something in it.
    But what followed from this was that if there were excessive purchases of modern machine tools it would benefit the country by providing manufacturers with modern equipment and would disseminate skills which come from the wider use of advanced machinery. But when we subsidise firms to move into development areas and make it easier to get labour at lower rates the waste of manpower, which is the comparison to the waste of machinery, does not bring the advantages which surplus machinery brings. What this means often is that manpower is likely to be inefficiently employed. If it is argued that that does not matter as long as it is employed, that is hardly the course for a country such as ours which should be making the greatest use of its resources.
    Previously firms moved into development areas because they could not get the labour which they needed in their own towns. These were industries frequently with highly automated plant and very considerable investment so that their urgent need for labour was greater than that of the labour-intensive industries because there was more capital per head of labour to be considered. They went into the development areas because they needed that production and not because it was marginally cheaper. Jobs were created in this way because of the high levels of employment.
    Now we shall see large numbers of semi-skilled and unskilled workers brought into new industries. What I think is likely to happen is that after a time, when the employment premium is withdrawn, these firms will find themselves uncompetitive and will have to go out of business. Firms which produce no lasting benefit to the areas, no increase in skills and no benefit to the country are not suitable for an advanced industrial country such as our own.
    There is reference in paragraph 40 on page 14 of the Green Paper to the possibility of serious difficulties arising when the time comes to remove the premium. It may well be that the R.E.P. will operate as a crutch for labour-intensive
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    industries which will find it difficult to operate once that crutch has been removed. Paragraph 26 on page 11 says that the R.E.P. is designed to produce the effect of high national employment without balance of payments difficulties by reducing the labour costs of manufacturing industry in the development areas, thus making it more competitive. I find it difficult to think of a solution which is less likely to make a firm more competitive than to hand it 30s. for every productive worker which it has. Will it rid us of one restrictive practice or initiate the production of one new article or new idea? To expect a firm to drop its prices by relying on the capital provided by a subsidy of 30s. is to misunderstand the way in which industry operates. The market forces are the forces which will finally determine whether the firm charges one price or a lower price.
    What is at stake is upwards of 40,000 jobs. One can take one's choice. It may be 40,000 to 80,000 jobs, depending on the basis of one's argument. But taking the figure of 40,000, which is suggested in the Green Paper, £500 million will work out at a cost of £12,000 per job. If continued for seven years each job would cost even more. This might be acceptable for a highly capital-intensive job but the £12,000 is more likely to be spent in a job where labour costs are high. It is more likely to be spent in employing semi-skilled or barely-skilled workers. I should like to see an alternative way in which that sort of money could be spent more profitably.
    The crux of the argument is the balance of payments problem. A sum of £100 million spent by the Government will not have the same inflationary consequences as the alternative. There are approximately 1½ million people in manufacturing industry in the development areas. They will receive about 2 or 3 per cent. subsidy. That subsidy is supposed to result in a reduction of prices. It is hard to work out exactly the drop in prices which is anticipated as a result of the subsidy, but it might fall between 2 and 5 per cent. To assume that firms, on receiving a subsidy of 2 or 3 per cent., will immediately drop their prices by 2 to 5 per cent. is to misunderstand the way in which industry operates. It will, of course, take the money, but to rely on it expanding its output by a few per cent.

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    as a result of receiving the money is to misunderstand the basic working of the industrial mind.
    I am a very strong supporter of increased regional development for economic and social reasons. The balance of payments argument is most dubious and I do not believe that it has been sufficiently proved. We must consider alternative ways of spending £700 million. If this sort of money were used to give the new regional thrusting development which we want, I am sure that it would not have been difficult to produce a more convincing Green Paper than this one and which showed that training could be massively increased by the injection of capital of this sort and that factories could be built, prepared and made ready to accept the industries which would move into them, together with the roads and services.
    Our main task is to use labour more productively. Industrial output per man hour in the United States, France, Germany and Italy is higher than it is in this country. We do not use labour very productively in industry, and I do not think that this is a means by which we are likely to move to greater productivity. Although it may be said that we can have our islands of poor labour productivity here and there, it must be remembered that ours is not a large country, and the labour practices of one area are related closely to those of another. Ours is not a large country; distances are not great and the difficulties of regional development should not be so large to us as they might be to others.
    The long and expensive method of the regional employment premium involving an expenditure of £100 million per year, year after year, can lead to great dangers. Over this long period, even if it may not be proved conclusively it will be proved to the satisfaction of most that it was either right or wrong. But over the long period of seven years, if we find ourselves committed to something which is proved to be wrong, to have to carry on the commitment year after year could result in the wasteful distribution of public money.
    I am very much in favour of bold and unconventional measures. I am inclined to this by temperament and conviction.
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    I was delighted to see the Green Paper but, when we bring in bold and unconventional measures, it is our responsibility as reformers to make sure not only that an idea is a good one but that it will work out in practice. It is a heavy burden, one we must carry. We must show that the idea will work. I believe that it has not been shown sufficiently that the R.E.P. will work.
    8.30 p.m.
    Mr. Nigel Birch: The hon. Member for Ashton-under-Lyne (Mr. Sheldon) has made a very distinguished speech. It was well thought out, very well prepared, and I agree with almost all of it.
    The objection which I have to the Green Paper policy is that it is an extension of the Selective Employment Tax, which I have always believed to be basically foolish. It is one of the disgusting sequelae of Kaldor. The distinction between service and manufacturing industries was all wrong, the clumsiness and expense of the administration of it was utterly ludicrous, and no attempt has been made to put it right in this Clause.
    The real point on which I agree with the hon. Gentleman is this. I may not quote him correctly, but I think that I am singing the same tune. If a lot of these factories are spread round in areas which are not really suitable, in the end they will go bust. If we are trying to build up the economy of the regions and of countries like Wales and Scotland, we have to see that the industrial development goes to places where it will be successful and economic. They need to have the communications, the water and the population.
    What we want to do is to try to have growth points. As the hon. Gentleman said, this is a very small country and travelling distances are not so great that we cannot have growth points. What we cannot hope to do successfully is to have a little factory in every village, because if anything goes wrong it will go bust and no one will go there unless the pressure of demand is so great in the main centres that people have to go there to get work at all.
    What we want to try is not to spread everything so thin, but to try to concentrate. A number of hon. Members have

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    outlined the problems of their constituencies. If I might take North Wales as an example, the strip along the North Wales coast has been excluded from the Welsh Development Area. That strip has admirable communications, which central Wales has not. It has water, it has the population, people can get there, people are there, and people come in to work. But it is sandwiched on one side by the Wirral, which is part of the Merseyside Development Area. The Wirral is bursting at the seams and appallingly short of labour. As a result, labour is taken from Wales to the Wirral. On the other side, there are the rural parts of Denbigh, Montgomery and Merioneth, which are unsuitable for industrial development. The result of this measure will be to attract more industry to the Wirral and some industry to the remoter areas where it will not be able to stand up to competition in the long run. It is clear that the proposal has not really been thought out.
    While I agree with most of what the hon. Gentleman said, I believe that his bogus Keynesian argument that the £100 million will not cost anything is absolute nonsense. I regret deeply that Lord Keynes died when he did. The general theory in his greatest book dealt with a situation of acute deflation, and it has been much misquoted when people have considered what he would do now. I do not believe that he would have supported this bogus Keynesian argument that we can distribute what the hon. Gentleman rightly described as £700 million. I cannot believe that he would have agreed to it. I am against this proposal. I think that it will be wasteful and damaging to the balance of payments. I think that it will be against the true interests of countries and regions, and certainly against the true interests of Wales.
    Mr. Diamond: We have had a very interesting, and by no means short, debate on this Clause which is one of several we are to debate. Many of them deal with interesting and important points, and I know that several hon. Members are waiting to raise them. We have been discussing this Clause since about Four o'clock. I hope, therefore, that it will be thought convenient and appropriate for me to reply to the debate now, particularly as I have heard almost
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    all the speeches, and during the three-quarters of an hour or so during which I have been out of the Chamber I have had conveyed to me the essential content of those which I did not hear.
    All the main arguments have been argued on earlier occasions. They have been repeated today, and many right hon. and hon. Members are anxious to relate them to their constituency problems and geographical areas. I appreciate this, but, nevertheless, I think that we have to concentrate on the general principles of the regional employment premium, and the general principles underlying the Clause. I hope, therefore, that it will be regarded as appropriate, and by no means discourteous, that I should seek now to reply as fully as I can to the many points which have been raised. It will be impossible to reply to them all in any reasonable space of time, but I assure all those who have spoken that I shall carefully consider all the points which have been made—they cover not only this Clause, but related and more general topics—and read with great care all that has been said. If I fail in the course of my reply to deal with any important points which have been raised, I shall write to the hon. Members concerned.
    It seems to me that, broadly speaking the Clause has been welcomed. Almost all the speeches from this side of the House have been welcoming ones. The Liberal speeches have been in warm welcome, for which I am grateful. The Opposition have not received it so warmly, and I imagine that they will seek to divide the Committee on it later, but I have heard no compelling arguments against it. Indeed, the argument advanced by the right hon. Member for Flint, West (Mr. Birch) was for concentration. He said that we should not spread this so thinly. This is a valid point and it can be debated whether the geographical area is too wide. Some think that it is not wide enough. Many of the speeches have suggested that the areas should be redrawn. One of the Liberal speeches was to that effect. Many of my hon. Friends have suggested that the areas should be wider still. We know the problem to which the right hon. Member for Flint, West referred. He thinks that it should be narrower.
    But whether it should be broader or narrower does not affect the major point

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    that here is a method by which we seek to do something—and nobody has suggested an alternative—to remove what has clearly come to be an established imbalance between areas—a situation which must be intolerable for those living there and responsible for them. They know that whatever they as managers and working men do to help, the area in which they live, and work, and use every effort to help, is doomed to have less than an average share of the prosperity of the country. This is established beyond doubt, and we must do something to help. Every Government has accepted that we should do something to help, and every Government has helped. We have helped more because naturally we take this point more to heart. All we are saying is that in spite of the help that we have given, and in spite of the best endeavours of everybody concerned—and we have had co-operation from all sides of industry, and from all parties—we have not solved the problem of the difference in the level of activity, and in the level of employment, in different areas. Therefore, we must do something more. This would solve most of the problem which in scale, as my right hon. Friend said, equals the sum of everything done so far.
    That is a radical and substantial approach and, if it is right, we should get on with it. If it will achieve a major effect on this imbalance, we should do it as fast as possible. I am, therefore, most grateful for the welcome which it has received from so many hon. Members and for the way in which our publication of these ideas in a Green Paper followed by a Second Reading debate before the introduction of the proposal itself has also been welcomed.
    Many hon. Members want the Clause to be more effective. Some think that it goes too wide, but most said that it should be more selective and, more particularly, wider in its effect. Few speeches have suggested that we should not make this attempt. The hon. Member for Worthing (Mr. Higgins) said that he broadly accepted the economic argument that this would introduce more balance in the level of activity between the regions—
    Mr. Higgins: The right hon. Gentleman would not wish to misrepresent me,
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    I know. I said that we accept the aim but do not approve of the method.
    Mr. Diamond: Well, that is some common ground. I thought that the hon. Gentleman added that he accepted the general economic argument, but I do not want to put words into his mouth.
    That argument is well displayed in paragraph 7 of the White Paper and is the answer to the interesting speech of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that this is not a question of using additional physical resources in a particular way. There is no bar to many of the things which he suggested except the resources available. If this is an alternative, it is not in place of any of his suggestions. If more advance factories were built in development areas, that would not depend on R.E.P. in the slightest. That is a question of policy and resources, but they would be drawn for that purpose and not for the purposes before the Committee—
    Mr. Joel Barnett: Would my right hon. Friend not agree, however, that this would apply only if we assumed that the £700 million to be spent is not counted for tax purposes?
    Mr. Diamond: No. I do not take that point. I do not know whether my hon. Friend has considered the White Paper's argument. I cannot improve on it, but can perhaps explain it as I see it. That is, by transferring some of the activity in the over-heated areas to the less than sufficiently warm areas, in terms of economic activity, by introducing a more even level of economic activity in all areas, we should then be able to do what we cannot do now, and increase the total level of activity throughout the economy, without reaching the levels imposed by the present imbalance.
    We are at the moment prevented from producing sufficient economic activity in Scotland, Wales and Northern Ireland, for example, because, long before every one in those areas can be employed, there is over-employment and over-heating elsewhere. Therefore, we must increase economic activity in the development areas and correspondingly reduce it somewhat in the others in the first stage, followed by raising the level of both. This will be possible as both will be pari passu—
    Mr. Noble: Will the right hon. Gentleman bear in mind my point in the debate a few days ago, that, at the moment, engineering work has to be sent from Scotland to the Midlands because there are not enough trained people there to complete their own orders?
    Mr. Diamond: I am advised by my hon. Friend the Under-Secretary of State for Economic Affairs, who is sitting with me, that he has no evidence that what the right hon. Gentleman has said is correct—
    Mr. Noble: May I give it to him?
    Mr. Diamond: We will be only too happy to examine it.
    8.45 p.m.
    The serious reply to the right hon. Gentleman's point is that we are legislating not for today or for the particular, temporary circumstances of today, but for an imbalance which has been demonstrated over years and has not shown itself adequately susceptible to the treatment and attention of all Governments. No one knows this better than the right hon. Gentleman. That is the situation we face.
    We have taken great care to be sure that we are right about the economic theory, and it is generally accepted that this will result in a call not on resources but on the Exchequer. The right hon. Gentleman asked about this and I have done my best to answer. He asked what part of the Exchequer costs would come back. We are not talking about resources now; there is no ultimate call on resources, for the reasons given in the White Paper. More than half would come back in indirect taxes and relief from social service payments. Thus, the net remaining cost on the Exchequer in those terms—this is a broad estimate to help the right hon. Gentleman—would be less than half.
    Mr. Higgins: This is vitally important. Is the right hon. Gentleman saying that about half would come back from the collection of the premium as Corporation Tax, or is this the total that he expects? If it is the latter, then this will inevitably increase aggregate demand considerably in the short run, with the inflationary effects which would follow. We should not think only in resource terms; the
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    monetary terms are also extremely relevant.
    Mr. Diamond: So that there will be no confusion, I repeat, in resource terms, that there is no inflationary effect for the reasons carefully spelled out in paragraph 7 of the White Paper.
    As to the Exchequer cost—the amount coming back in Corporation Tax and Income Tax—the details for which the hon. Member for Worthing asked, I will give the answer in terms of Corporation Tax, Income Tax, indirect taxes and the relief from social service payments. The net cost to the Exchequer would be less than half, but I cannot measure it more accurately.
    Several Hon. Members rose—
    Mr. Diamond: No. I will not give way further.
    Mr. McMaster rose—
    Mr. Diamond: I have carefully read the notes handed to me about the speech of the hon. Member for Belfast, East (Mr. McMaster). I congratulate him on it and I appreciate that he supports this proposal. I will not give way because I am sure that he is anxious that we get on with it.
    Mr. McMaster: This is an important question.
    Mr. Diamond: I hope that the hon. Gentleman will forgive me if I do not give way. I have many questions to answer.
    I was asked by the hon. Member for Worthing, in an example of the delivered price of a motor car, what would be the position if motor cars were sold at a given delivered price wherever they were made. He wanted to know what we proposed to do to help in areas which should be helped. The answer is clear: that in a period when there was high production, the factories in those areas would be fully stretched and the work would be going to them. In a period of low production in the motor car industry, those factories would be the last to be laid off or to have their production lines cut. So whichever side of the situation one takes, they would be greatly helped.
    The hon. Gentleman then asked how I reconciled the flexibility in the new

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    Clause—he recognised that there might be circumstances in which this flexibility would be needed and that it was, therefore, right to have these powers—with the statement on page 7 of the White Paper about the seven-year period. The best answer I can give is to read the words in the White Paper. After examining the comments made about the scheme, paragraph 17(VI) states:
    "… the intention"—
    that is, the intention of the Government—
    "is that payments of this magnitude in respect of manufacturing employment in Development Areas should continue to be given until their purpose has been achieved—and in any case for not less than seven years in the existing Development Areas".
    I repeat those words and I confirm them. This is the flexibility which we need and imagine we might need if, for example, additional development areas are scheduled later or if variations in the rates should be made to meet changing circumstances in those new areas. The flexibility which we need and which is incorporated in the Clause is not intended to be used in any sense against the intention which I have reread and which I repeat. I recognise—and this is something which has been clearly brought to our attention by the publication of the Green Paper and the value of the debates since then and the representations which have been made—that if investment is to be attracted into these areas, it must be on a fairly permanent basis and certainly of the kind described in the paragraph I have read.
    Mr. Maxwell-Hyslop: Why do the Government call this a regional employment premium when it has nothing to do with the regions but only with the development areas? Is this intended to deceive the public into thinking that this premium will be paid in individual regions, rather than only in development areas?
    Mr. Diamond: That is a valuable contribution, I must say. The answer is "No". The Government have not done anything to deceive anybody and would not even seek to deceive the hon. Gentleman. He is much too bright.
    The spokesman for the Liberal Party, the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel), welcomed our proposal. I am glad of that welcome
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    and I reciprocate by welcoming his proposal, which was that there should be a tax on Toryism. Every Treasury Minister is anxious to find new sources of revenue and I assure the hon. Gentleman that I will examine this one most carefully. He asked whether the flexibility in the Clause made it possible to vary the rates as between the sexes. The answer is "Yes", as my right hon. Friend explained when moving the Clause.
    I come to the two major criticisms which have been made—one about the side effects, as it were, of this proposal, and the other about its inadequacy in the sense that it should go further, especially in relation to service industries. The aspect of side effects was expanded in a most interesting and valuable speech by my hon. Friend the Member for Lancaster (Mr. Henig). He welcomed the proposals in general and said that they were—I quote his words—"a massive overwhelming inducement to go to development areas". I hope that they are. I hope that hon. Members on all sides accept them as a massive, overwhelming inducement.
    My hon. Friend was, however, anxious about the effect on what have come to be called the grey areas, the not-so-dynamic areas, and wanted reassurance about that possible situation. I should like to make it quite clear to him that these proposals are additional to the present methods of assisting in these areas. One of these methods is, as he knows, the I.D.C. method. There is considerable flexibility about the granting of I.D.C.s and nothing in these proposals removes that flexibility.
    The first answer, therefore, is that my right hon. Friend the President of the Board of Trade, in considering a particular application for an I.D.C., in an area that has become in need of the additional factories and employment that I.D.C.s give, as a result of changed circumstances—perhaps dependent, to some extent, on these very R.E.P. proposals—would take into account these new and developing circumstances, and there is nothing in these proposals to limit the flexibility that my right hon. Friend already enjoys in that respect.
    Mr. Barnett: Is my right hon. Friend aware that when a company from the South-East wanted to move into my constituency and asked for an I.D.C., it

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    was eventually encouraged not to come into Lancashire but to go into a development area? Therefore, the I.D.C. is not used to help the grey areas, as they are called.
    Mr. Diamond: I am interested in what my hon. Friend says—and I have no doubt that he has made his representations to my right hon. Friend the President of the Board of Trade—but there is nothing that he has said which is in the slightest degree inconsistent with what I say. What he says is that today, already, before we have these proposals and these regional employment premiums, the President of the Board of Trade is using his discretion so as to direct factories to the areas where they are most needed. I have not examined the case, but I have the greatest confidence in my right hon. Friend, and the principle is one that I should have thought would have found unanimous support.
    All I say to my hon. Friend the Member for Lancaster is that if the circumstances about which he is worried—and, I think, unnecessarily worried—in regard to a certain part of his constituency were to mature, my right hon. Friend would continue to use his discretion in order to help where the help was most needed, and the grey area to which my hon. Friend refers would have succeeded to that position and would be a priority area.
    That is the first answer. The second is that, as my right hon. Friend said in asking the House to give the Clause a Second Reading, this is a new situation which we recognise needs very careful examination. He indicated the kind of examination it will receive and explained that he had asked Sir Joseph Hunt, who has already done excellent work in this field as Chairman of the Economic Planning Council, West Midlands, to do this. Sir Joseph, who is now in London and available to take on a job like this, has agreed to do it. I cannot give the House the terms of reference—they have not yet been agreed—or the further details—an hon. Friend asked when the report would be out—but, as I say, this is a matter that requires the most careful and urgent examination, and that it will receive.
    9.0 p.m.
    In those circumstances, my hon. Friend the Member for Lancaster need not have
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    anxieties, especially if he will go with me on the economic theory, which is that what is happening is a two-stage exercise—first, to get the levels nearer to one another by increasing economic activity in the development areas and to a certain extent decreasing it in the overheated areas; and, secondly, having got the levels more attuned, to increase activity all over, which one is debarred from doing at present, because to get to the point where the hon. Member for Belfast, East is satisfied because his 9 per cent. unemployment rate has been reduced to 1 per cent., means that other areas are hopelessly over-employed and we have inflation.
    Mr. Henig: My right hon. Friend has gone some way towards relieving my anxieties and the anxieties of others, but I wonder whether I can press him a little further. If the industrial development certificate policy were to fail in the short and medium-term circumstances and these inducements to move to development areas failed to keep unemployment in my constituency and others in Lancashire at a level which could be considered reasonable, which is lower than that which we have had in the development areas, could the Government pledge that they would act to restore the situation by some means? If he can give that pledge, I shall be satisfied.
    Mr. Diamond: My hon. Friend is underlining the point which he made earlier and which I took when he made it. Certainly I can give the assurance that if circumstances were such that in this area, which is not a development area at the moment, economic activity became less than that of a development area, it would of course be eligible to be scheduled as a development area and get the help which goes to development areas. But, as I have indicated already, we do not expect that to happen, because of the way in which these proposals will work out. I hope that I have satisfied my hon. Friend and others with similar anxieties that this proposal will have nothing but beneficial effects in the long run and will not put a strain on our resources, or exacerbate the balance of payments problem.
    A number of hon. Members have referred to the service industries and have even gone so far as to suggest that a premium should be paid to all service industries in development areas. The

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    position of service industries, however, is very different. It will be appreciated that one of the essential elements in the argument so far is the balancing effect of increasing competitiveness in development areas and, therefore, to some extent, the reducing of the competitiveness of other areas. This is the effect in manufacturing when there is competition, but it is not an effect, with rare exceptions, in the service industries, because service industries in one area are not in competition with service industries in others in the same way that manufacturing industries are.
    Mr. Maxwell-Hyslop: Nonsense.
    Mr. Diamond: Most of what the hon. Gentleman says is nonsense. I have rarely heard him make a speech—and I have listened to far too many—which is not accurately described by that one word, and I have rarely seen him get up to make an interruption.
    The essential difference is that there is not this competition and, therefore, we do not have to safeguard against the inflationary effect which is built into competition in manufacturing. There would not be an increase in activity in one area which to some extent would be matched by a reduction of activity in another. Therefore, one would not have the freedom from inflation which one derives from the competition of manufacturing industries.
    Mr. Robert Cooke: In attacking my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), the right hon. Gentleman was, I think, neglecting the position of the hotel and tourist trade. Surely, there is a considerable element of competition there.
    Mr. Diamond: I am sorry that the hon. Gentleman is so impatient. Tourism was the item to which I was about to come. I was explaining why we cannot deal with the service industries in the way wanted by some of my hon. Friends, though I repeat that, to the extent that there are areas where there is need for further help, the examination to which my right hon. Friend referred will, no doubt, indicate methods of giving that further help.
    The one service industry in which there is competition is the tourist industry and I cannot, therefore, rely on that argument
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    for not helping it. The Government are already helping the tourist industry in a number of ways. There is the help given by building grants for hotels under the Local Employment Act. There is the Board of Trades hotel loan scheme. The British Travel Association spends a good deal of public money on promoting activity in this field. There are several agricultural subsidies which are of particular help in tourist areas, and in Scotland a great deal is being done through the Highlands and Islands Development Board.
    I recognise the need to help tourism, and I acknowledge the importance which tourism has, although it is often exaggerated, in terms of the balance of payments. Broadly, we reckon that about one-tenth of its receipts are receipts across the exchanges. I assure the House that we are very conscious of the problems of the tourist areas, and we shall take account of what has been said in this debate and elsewhere in reviewing the possibility of additional assistance.
    I have answered the major points which were put to me, Sir Eric—
    Mr. Maxwell-Hyslop: Nonsense.
    Mr. Diamond: I do not know whether that remark was addressed to you, Sir Eric, or to me. I have answered the detailed questions which were put to me, many of them of great importance. I have tried to deal with the major anxieties which certain of my hon. Friends and others have expressed both as to the scheme not going far enough in certain respects and as to its going too far in others. In broad outline, I would say that the scheme has been given a warm welcome in most quarters. There have been questions about its administration. There has been no official Amendment put down to suggest an alternative way of achieving the objectives, which the official Opposition say they approve.
    Mr. Iain Macleod: For the sake of clarification, may I say that we decided that it would be for the convenience of the Committee not to have an Amendment down so that we could, in effect, have a wide-ranging Second Reading debate. This does not mean that we do not intend to put down Amendments at the appropriate stage.
    Mr. Diamond: I am glad that I mentioned the point, as it has given the right hon. Gentleman an opportunity to explain something which might otherwise have been misunderstood. Broadly, judging by the speeches, one can say that this proposal has received a sufficient welcome, and I am sure that, if the matter is divided upon, we can rely on the support of most sections of the Committee.
    Mr. Michael Noble: The Chief Secretary and I have listened to about 90 per cent. of the debate. It is clear from his statement that the proposal has had a general welcome that the 10 per cent. when the right hon. Gentle. man was out of the Chamber covered those occasions when hon. Members both on his side and on ours said that, though they welcomed the general principle—it is difficult not to welcome a general principle which gives a large sum of money to the development areas—they had various reasons for saying that the scheme as propounded in the Green Paper, in what has been said by the Chancellor and by others and in the Clause does not meet the particular problems which they foresee either in their own parts of the country or in the United Kingdom as a whole. Therefore I do not think that the general welcome to which the right hon. Gentleman refers can mean much more than that each Member who spoke paid at least some lip service to the fact that the Government were spending £100 million on an object which is dear to the hearts of every hon. Member, wherever he or she may sit.
    But the Chief Secretary made it absolutely clear in answering the point made by my hon. Friend the Member for Worthing (Mr. Higgins) that, whatever the Chancellor's intent was, the scheme as he has devised it is reflationary to the extent of at least £50 million in the first year or so. We are told in the Green Paper that this is not a contra-cyclical measure, but that is clearly the result of the answer that the Chief Secretary gave to my hon. Friend's point.
    I accept that it is very important that we should have flexibility in thinking about how we are to use the powers which the Government have taken, and I am delighted that the Chancellor has
    682
    said that he has taken the powers in order to be able to vary the amounts and the regions and areas, because this may well be necessary. But the point that the Chief Secretary did not make convincingly enough for me, though it may be the case, is that a firm getting the full premium at the moment will be entitled to believe—if it is to believe in the measure at all—that it will get the full premium for seven years and that after that it may taper off. The Chancellor says that the power is there to vary the the amount of premium, but I take it from the fact that the Chief Secretary is nodding his head that once a firm has established its right to the full premium it will not be the Government's intention in three or four years' time to vary that amount downwards.
    Mr. Diamond: I very carefully read out the paragraph in the White Paper which spelled out completely the answer to the right hon. Gentleman's point.
    Mr. Noble: In fact the Chief Secretary is saying that I am right—or he is saying the White Paper is right, which may be slightly different from what I am saying. But my point is that, once a firm has the offer of the premium, if it is to retain confidence it must know that it continues for the full seven years.
    The other point on which I was not quite clear, even after the Chief Secretary read out the appropriate section, is, if an area is changed, if the "grey" areas to which many hon. Members referred are brought in, whether they will have a seven-year yeriod from the time when they are brought in. If other areas are left, does a firm getting the premium in the area which is removed continue to get it for seven years? I take it that that is so.
    Mr. Diamond: I thought that my right hon. Friend had already indicated that de-scheduling would not affect the issue. In a totally new area it is not a question of seven years from that area becoming a development area but seven years from the date in the Act, as indicated in the White Paper.
    Mr. Noble: I am grateful to the Chief Secretary for clearing up that point. I thought that that was so, but I was not absolutely certain by the time he finished his speech.

    683
    I find it a little difficult to be quite clear on the whole problem of wages. In his opening speech the Chancellor said that this was a very important subsidy; it was 7½ per cent. on the cost of wages. I accept that as the fact. The hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) who welcomed the Bill, as the Chief Secretary said, did so because he wanted the money to go direct on to wage rates in the development areas. If that is the welcome which the Chief Secretary wants, it would entirely ruin the whole purpose of the operation. But many hon. Members opposite, when talking about the wage problem, said that this was a very small thing, that it was only a tiny amount. I hope that they and the Chancellor will make up their minds between them as to whether 7½ per cent. on wages is a significant addition to costs or not.
    9.15 p.m.
    The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris), in an interesting speech, welcomed the principle of the Clause but on the whole was highly critical of the sort of effects it will have on the grey areas. I have some sympathy with that point of view, not because Scotland has grey areas—it is almost entirely, with the rather lamentable exception of Edinburgh and Leith in a development area—but because there is a real problem involved here. I am glad the Secretary of State for Scotland is here to listen to the debate. We believe that we shall have exactly the same sort of problems inside Scotland as the hon. Member for Wythenshawe and many of his hon. Friends fear will occur in the grey areas.
    I was interested to hear the speech of the hon. Member for Aberdeen, South (Mr. Dewar)—I am sorry I missed the first few minutes—because he said that we in Scotland had to think nationally and not locally. I agree. But he was not in the House during the years when I was steadily attacked by his right hon. and hon. Friends for producing a plan for central Scotland. I was told that this was a wicked thing to do because I was neglecting the north-east of Scotland, the Borders, the Highlands and the other areas. But it was clear at that stage that the key to the development of Scotland lay in the development of the central belt
    684
    of Scotland. We spent an enormous amount of Government money on doing just that.
    Now, following the spending of so much money on the development of the central belt, the Government are bringing in an extra £40 million for Scotland. This is an important addition to the measures that can help, but the money is going almost entirely to the central belt again and I fear, as do the hon. Members from the north-west of England, that the pull of this extra premium in the central belt will have a serious effect in denuding areas that we should be trying to build up. Having spent a good deal of money on the central belt, we are now having a large dose of extra money almost entirely going into that area again. I have sympathy with those who feel that there is likely to be a distinct pull away from areas close to a development area which have not got the necessary attractions to compete with that pull.
    I do not think that the Chief Secretary was being as clear in his thinking as he sometimes is when he said that nearly all the service industries do not have the same spur of competition if they are to get established in the development areas, that they do not have the competition with other areas outside. He excepted, on an interruption, tourism and, of course, this is true. But there is also the very large service industry of distribution, which is fully competitive, I would have thought, whether based in Scotland or other places. Long-range lorries convey a great quantity of goods from one end of the country to the other. A great deal of the construction industry is certainly competitive, with English firms operating in Scotland and Scottish firms—to a lesser extent, I am sorry to say—operating down here.
    The points which the right hon. Gentleman did not attempt to touch upon were some of those raised by my hon. Friend the Member for Barkston Ash (Mr. Alison), who made the valid point that there is no part in this scheme—and I accept that it could not cover the whole range of economic affairs—to help exports. The same point was made by the hon. Member for Penistone (Mr. Mendelson), who was also critical of it in the general economic context.
    Mr. Mendelson: I made no reference to exports in particular. I supported the

    685
    measure, but I said that it must not be taken as a substitute for the general policy of increasing consumer demand and thereby increasing investment.
    Mr. Noble: I apologise to the hon. Gentleman. I thought he was on exports. One of his hon. Friends was on exports and, though I have a lot of notes, it is sometimes difficult to sort out who said what.
    I had some sympathy with the hon. Gentleman the Member for Roxburgh, Selkirk and Peebles when he talked about the possibility—which I hope the Chancellor may be able to consider at some stage—of varying the incentives to suit the particular areas or parts of a region. He said that the problem in the Border area is a grave shortage of male employment and if it was possible within an area of that sort to pay a higher premium for male employment and a lower one for females, he, unlike most Liberals, accepted that one could go both ways. This might be an advantage and he welcomed it. I thought he indicated that it was a poor thing, but it was good enough for the Liberals.
    I felt that this was the attitude that my hon. Friend the Member for Belfast, East (Mr. McMaster) took when he said that £11 million was not something to be scoffed at. This is true, but it is interesting that industrialists turned down £100 million on the ground that they did not think it was being used in the right way. If the people who are to get benefits of that sort are prepared to turn them down because they think it is wrong, then I think my hon. Friend might well at least ponder in his mind whether he is right in the long term to accept it without question. The C.B.I. and others must not complain if the Government, having consulted them, turns down flat their recommendations, because this does not put them in any worse position than Privy Councillors today.
    The hon. Gentleman the Member for Cardigan (Mr. Elystan Morgan) spoke for many of us who live in rural areas, because whether this will be the bold, imaginative, wonderful thing that the Chancellor believes it will be for the main industrial areas in the development areas, which many of us doubt, it is certainly true that there is practically nothing in it for the rural areas either in Wales, the South-West, the Highlands and other
    686
    places. Though the Chancellor has said that he has taken all these powers by which he can vary things to help, the truth is that it is almost essential in these areas pretty soon, if I may put it in that form, not just to have taken powers, but actually to be seen to be using powers to help either some of the service industries or in some way to indicate to the people there that they have a future. Once this extra 30s. premium goes on into the industrial areas the drain from the country to the town will accelerate quite fast unless the Government have their plans ready and can tell us what they are.
    The whole picture of the debate, as I have listened to it, falls simply into two distinct halves. There are those hon. Members who live in development areas, or whose constituencies are in development areas, and who have welcomed the idea of having extra money, but without exception those hon. Members representing largely rural constituencies have said that this proposal will do nothing to help their areas.
    Mr. Jasper More: There is a third category, which is a constituency like mine which has a new town which we are trying to start and which is most adversely affected by anything in the nature of these proposals.
    Mr. Noble: I am certain that that is so, but in broad principle the debate has been divided between those representing rural areas, where there is still continuing concern about how the problems of tourism and the service industries are to be met, and those hon. Members who have broadly accepted that a wage subsidy is a good thing—I do not say that it is only because it may find its way into the pockets of those concerned.
    Those hon. Members who have considered the matter in relation to the Government's whole economic policy have failed to say a single word of commendation for this form of measure. Several hon. Members, including the hon. Member for Plymouth, Sutton (Dr. David Owen), the hon. Member for Penistone and many of my hon. Friends, have said that the priority in the present economic situation is investment, and yet not one Government spokesman has seriously suggested that any sizeable amount of this £100 million can possibly get back into investment.
    Mr. McMaster: Does not my right hon. Friend realise that the Chief Secretary has admitted that more than 50 per cent. will come back to the Government, which means it must be going on wages or profits and none to investment or reducing prices or costs?
    Mr. Noble: My hon. Friend is almost certainly right. He is perking up a little. At least the Chief Secretary did not attempt to persuade the Committee that there was anything for investment in this proposal. Although the Chancellor says that he will be considering ways and means of improving training techniques and methods and he may have some ideas to pull out of the hat in due course—we remember that he has shots in his locker—there is nothing in this proposal to help with the two key problems identified by almost every hon. Member who took part in the debate—training and investment, which were identified by the Scottish Council as the two top priorities. Although the hon. Member for Aberdeen, South tried to get away with saying that the Scottish Council had given the proposal a blanket welcome, if he reads its report, he will find that it did not.
    Mr. Archie Manuel: It wanted the money.
    Mr. Noble: Of course it wanted the money, and so does the hon. Member for Central Ayrshire (Mr. Manuel), but there is a great deal of difference between the sort of panic which the Government are in having to get some money into the development areas quickly, in the belief that there will be a considerable economic freeze next winter, whether the weather is warm or not, and seriously considering how best to use £100 million of the taxpayers' money to do the right things for industry in the development areas in the long run.
    The Government have rushed this decision and have made this decision because they have talked themselves into believing that this money will come out of thin air in some curious way. My right hon. Friend the Member for Flint, West (Mr. Birch) showed what nonsense that was. But the Government feel that something must be done, and this £100 million proposal is certainly not something which the Committee and the trade unions will throw out. One cannot see hon. Members opposite passing up a large
    688
    sum of money for the development areas, but it has been wrongly thought out, and our long-term aims will not be achieved by this proposal, and because of that I ask my hon. and right hon. Friends to vote against the proposal when the time comes to have a Division.
    There are much better ways, and there were many alternatives suggested which the Chief Secretary did not even acknowledge. It may have been bad luck, and he may have been out of the Committee at the particular time, but I am certain that some alternatives will be put forward on Report. My right hon. Friend the Member for Mitcham (Mr. R. Carr) produced several alternatives in his last speech, and at least four have been mentioned while I have been in the Committee.
    9.30 p.m.
    Mr. Maxwell-Hyslop: This measure is bad, and the Ministers who advocate it foolish, primarily for three reasons, none of which have been demolished by the speech, if I may dignify it with that expression, of the Chief Secretary. It is bad because it increases the distortions between the manufacturing sections of the economy and the other sections. It increases those distortions in a series of areas which there is already economic distortion. A development area is an area already suffering economic distortion. Secondly, it is bad because it increases the distortion between development areas and areas which are not development areas.
    Many hon. Members on both sides of the Committee have pointed out the difficulties which this measure will create for areas contiguous to development areas, which are in every way similar, but which happen to be outside of the employment exchange district, which is the defining criterion. Those distortions are increased. Third and greatest of all condemnations, it is bad because it does not deal with the causes of why a development area is a development area.
    Lieut.-Colonel Sir Walter Bromley-Davenport: I must ask my hon. Friend not to use such long words, because the hideous animal lobby fodder cannot understand them.
    Mr. Maxwell-Hyslop: I have no doubt that the sheer impact of them will not be lost on my hon. and gallant Friend,

    689
    even if the understanding of them is. The primary cause of most development areas suffering economic misfortune is either because they are remote from main centres of population and demand, or because they have other major geographical disadvantages.
    If only £100 million, let alone £700 million, was spent on communications between the development areas and the centres of demand the whole of the development area would benefit, whether the manufacturing part, the service part or the trading part.
    Mr. Mendelson: If the hon. Gentleman is so interested in this subject, why did he remain out of the Chamber for 90 per cent. of the time and come in now to give us a lecture?
    Mr. Maxwell-Hyslop: I listened to the hon. Gentleman's speech with great interest. I can only assume that the arithmetic which went into his speech was more accurate than the arithmetic which went into that comment. I was observing that if the Government wanted
    to tackle this problem there was no more effective way in which they could do it than by improving the communications, particularly by road, from the development areas to the centres of demand and of the export trade and by cutting out altogether the artificial distortions between one area and another which mean that some parts of the community are more distressed than others and forgetting for all time their apparent determination to increase the distortions which, when the umbrella is closed, as sooner or later it will be, will only leave those areas worse off than they were.
    Mr. William Whitlock (Lord Commissioner of the Treasury)rose in his place and claimed to move, That the Question be now put.
    Question, That the Question be now put, put and agreed to.
    Question put accordingly, That the Clause be read a Second time:—
    The Committee divided: Ayes 217, Noes 129.

    Division No. 365.]

    AYES

    [9.37 p.m.

    Allaun, Frank (Salford, E.)

    Davies, Ifor (Gower)

    Hannan, William

    Allen, Scholefield

    de Freitas, Rt. Hn. Sir Geoffrey

    Harper, Joseph

    Anderson, Donald

    Delargy, Hugh

    Harrison, Walter (Wakefield)

    Archer, Peter

    Dempsey, James

    Haseldine, Norman

    Armstrong, Ernest

    Dewar, Donald

    Hattersley, Roy

    Atkins, Ronald (Preston, N.)

    Diamond, Rt. Hn. John

    Hazell, Bert

    Atkinson, Norman (Tottenham)

    Dobson, Ray

    Henig, Stanley

    Bacon, Rt. Hn. Alice

    Doig, Peter

    Hooley, Frank

    Bagier, Gordon A. T.

    Donnelly, Desmond

    Hooson, Emlyn

    Baxter, William

    Dunn, James A.

    Horner, John

    Beaney, Alan

    Dunnett, Jack

    Houghton, Rt. Hn. Douglas

    Bennett, James (G'gow, Bridgeton)

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

    Howarth, Harry (Wellingborough)

    Bessell, Peter

    Edwards, Rt. Hn. Ness (Caerphilly)

    Howarth, Robert (Bolton, E.)

    Binns, John

    Ellis, John

    Howell, Denis (Small Heath)

    Bishop, E. S.

    English, Michael

    Howie, W.

    Blackburn, P.

    Ensor, David

    Hoy, James

    Booth, Albert

    Evans, Albert (Islington, S.W.)

    Huckfield, L.

    Bottomley, Rt. Hn. Arthur

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

    Hughes, Rt. Hn. Cledwyn (Anglesey)

    Boyden, James

    Faulds, Andrew

    Hughes, Roy (Newport)

    Braddock, Mrs. E. M.

    Fernyhough, E.

    Hynd, John

    Bray, Dr. Jeremy

    Fletcher, Raymond (Ilkeston)

    Irvine, A. J. (Edge Hill)

    Brooks, Edwin

    Fletcher, Ted (Darlington)

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

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

    Foot, Michael (Ebbw Vale)

    Jackson, Peter M. (High Peak)

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

    Ford, Ben

    Janner, Sir Barnett

    Buchan, Norman

    Forrester, John

    Jenkins, Rt. Hn. Roy (Stechford)

    Butler, Herbert (Hackney, C.)

    Fowler, Gerry

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

    Callagnan, Rt. Hn. James

    Fraser, Rt. Hn. Tom (Hamilton)

    Johnston, Russell (Inverness)

    Cant, R. B.

    Galpern, Sir Myer

    Jones, Dan (Burnley)

    Carmichael, Neil

    Gardner, Tony

    Jones, J. Idwal (Wrexham)

    Coe, Denis

    Ginsburg, David

    Jones, T. Alec (Rhondda, West)

    Coleman, Donald

    Gordon Walker, Rt. Hn. P. C.

    Kelley, Richard

    Conlan, Bernard

    Gourlay, Harry

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

    Craddock, George (Bradford, S.)

    Gray, Dr. Hugh (Yarmouth)

    Leadbitter, Ted

    Crawshaw, Richard

    Greenwood, Rt. Hn. Anthony

    Ledger, Ron

    Crosland, Rt. Hn. Anthony

    Gregory, Arnold

    Lee, John (Reading)

    Cullen, Mrs. Alice

    Grey, Charles (Durham)

    Lever, L. M. (Ardwick)

    Dalyell, Tam

    Griffiths, David (Rother Valley)

    Lewis, Arthur (W. Ham, N.)

    Davidson, Arthur (Accrington)

    Griffiths, Rt. Hn. James (Llanelly)

    Lewis, Ron (Carlisle)

    Davidson, James (Aberdeenshire, W.)

    Grimond, Rt. Hn. J.

    Lomas, Kenneth

    Davies, Dr. Ernest (Stretford)

    Hamilton, James (Bothwell)

    Lubbock, Eric

    Davies, G. Elfed (Rhondda, E.)

    Hamilton, William (Fife, W.)

    Lyon, Alexander W. (York)

    Davies, Ednyfed Hudson (Conway)

    Hamling, William

    Lyons, Edward (Bradford, E.)

    MeBride, Neil

    Page, Derek (King's Lynn)

    Thomas, George (Cardiff, W.)

    MacDermot, Niall

    Palmer, Arthur

    Thornton, Ernest

    Macdonald, A. H.

    Pannell, Rt. Hn. Charles

    Thorpe, Rt. Hn. Jeremy

    McGuire, Michael

    Barkyn, Brian (Bedford)

    Tinn, James

    Mackenzie, Alasdair (Ross & Cromarty)

    Pavitt, Laurence

    Tomney, Frank

    Mackenzie, Gregor (Rutherglen)

    Pearson, Arthur (Pontypridd)

    Urwin, T. W.

    Mackintosh, John p.

    Peart, Rt. Hn. Fred

    Maclennan, Robert

    Pentland, Norman

    Varley, Eric G.

    McNamara, J. Kevin

    Prentice, Rt. Hn. R. E.

    Wainwright, Edwin (Dearne Valley)

    MacPherson, Malcolm

    Price, William (Rugby)

    Wainwright, Richard (Colne Valley)

    Mahon, Peter (Preston, S.)

    Probert, Arthur

    Walden, Brian (All Saints)

    Mahon, Simon (Bootle)

    Randall, Harry

    Wallace, George

    Mallalieu, E. L. (Brigg)

    Rees, Merlyn

    Watkins, David (Consett)

    Manuel, Archie

    Rhodes, Geoffrey

    Watkins, Tudor (Brecon & Radnor)

    Mapp, Charles

    Roberts, Goronwy (Caernarvon)

    Wellbeloved, James

    Maxwell, Robert

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

    Wells, William (Walsall, N.)

    Mendelson, J. J.

    Rogers, George (Kensington, N.)

    Whitaker, Ben

    Millan, Bruce

    Rose, Paul

    Whitlock, William

    Miller, Dr. M. S.

    Ross, Rt. Hn. William

    Williams, Alan (Swansea, W.)

    Morgan, Elystan (Cardiganshire)

    Rowland, Christopher (Meriden)

    William, Clifford (Abertillery)

    Morris, Alfred (Wythenshawe)

    Rowlands, E. (Cardiff, N.)

    Williams, Mrs. Shirley (Hitchin)

    Morris, Charles R. (Openshaw)

    Shore, Peter (Stepney)

    Wilson, William (Coventry, S.)

    Moyle, Richard

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

    Winnick, David

    Newens, Stan

    Silverman, Julius (Aston)

    Winstanley, Dr. M. P.

    Oakes, Gordon

    Winterbottom, R. E.

    Ogden, Eric

    Silverman, Sydney (Nelson)

    Woodburn, Rt. Hn. A.

    O'Malley, Brian

    Slater, Joseph

    Woof, Robert

    Orbach, Maurice

    Small, William

    Wyatt, Woodrow

    Orme, Stanley

    Spriggs, Leslie

    Yates, Victor

    Oswald, Thomas

    Steel, David (Roxburgh)

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

    Steele, Thomas (Dunbartonshire, W.)

    TELLERS FOR THE AYES:

    Owen, Will (Morpeth)

    Stonehouse, John

    Mr. Harold Walker and

    Mr, John McCann.

    NOES

    Alison, Michael (Barkston Ash)

    Fortescue, Tim

    Nabarro, Sir Gerald

    Astor, John

    Foster, Sir John

    Nicholls, Sir Harmar

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

    Gilmour, Ian (Norfolk, C.)

    Noble, Rt. Hn. Michael

    Awdry, Daniel

    Gilmour, Sir John (Fife, E.)

    Osborn, John (Hallam)

    Barber, Rt. Hn. Anthony

    Glover, Sir Douglas

    Osborne, Sir Cyril (Louth)

    Beamish, Col. Sir Tufton

    Gower, Raymond

    Page, Graham (Crosby)

    Bell, Ronald

    Grant, Anthony

    Pearson, Sir Frank (Clitheroe)

    Bennett, Sir Frederic (Torquay)

    Grant-Ferris, R.

    Pike, Miss Mervyn

    Berry, Hn. Anthony

    Gresham Cooke, R.

    Pink, R. Bonner

    Birch, Rt. Hn. Nigel

    Grieve, Percy

    Powell, Rt. Hn. J. Enoch

    Black, Sir Cyril

    Gurden, Harold

    Prior, J. M. L.

    Blaker, Peter

    Hall, John (Wycombe)

    Pym, Francis

    Body, Richard

    Hamilton, Michael (Salisbury)

    Ramsden, Rt. Hn. James

    Bossom, Sir Clive

    Harrison, Col. Sir Harwood (Eye)

    Rawlinson, Rt. Hn. Sir Peter

    Boyd-Carpenter, Rt. Hn. John

    Hawkins, Paul

    Renton, Rt. Hn. Sir David

    Boyle, Rt. Hn. Sir Edward

    Heseltine, Michael

    Royle, Anthony

    Braine, Bernard

    Higgins, Terence L.

    Russell, Sir Ronald

    Brinton, Sir Tatton

    Hiley, Joseph

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

    Bromley-Davenport, Lt. Col. Sir Walter

    Hirst, Geoffrey

    Smith, John

    Brown, Sir Edward (Bath)

    Hobson, Rt. Hn. Sir John

    Stainton, Keith

    Bryan, Paul

    Hogg, Rt. Hn. Quintin

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

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

    Holland, Philip

    Summers, Sir Spencer

    Buck, Antony (Colchester)

    Hunt, John

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

    Taylor, Frank (Moss Side)

    Bullus, Sir Eric

    Hutchison, Michael Clark

    Temple, John M.

    Burden, F. A.

    Jenkin, Patrick (Woodford)

    Thatcher, Mrs. Margaret

    Carlisle, Mark

    Jopling, Michael

    Tilney, John

    Carr, Rt. Hn. Robert

    Kaberry, Sir Donald

    Turton, Rt. Hn. R. H.

    Clegg, Walter

    Kimball, Marcus

    van Straubenzee, W. R.

    Cooke, Robert

    King, Evelyn (Dorset, S.)

    Vaughan-Morgan, Rt. Hn. Sir John

    Cordle, John

    Lancaster, Col. C. G.

    Weatherill, Bernard

    Corfield, F. V.

    Lewis, Kenneth (Rutland)

    Webster, David

    Costain, A. P.

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

    Whitelaw, Rt. Hn. William

    Craddock, Sir Beresford (Spelthorne)

    McAdden, Sir Stephen

    Wills, Sir Gerald (Bridgwater)

    Crowder, F. P.

    Maclean, Sir Fitzroy

    Wilson, Geoffrey (Truro)

    Dance, James

    Macleod, Rt. Hn. Iain

    Wolrige-Gordon, Patrick

    Dean, Paul (Somerset, N.)

    Macmillan, Maurice (Farnham)

    Wood, Rt. Hn. Richard

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

    Maude, Angus

    Woodnutt, Mark

    Eden, Sir John

    Maxwell-Hyslop, R. J.

    Worsley, Marcus

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

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

    Wright, Esmond

    Emery, Peter

    Miscampbell, Norman

    Wylie, N. R.

    Errington, Sir Eric

    Monro, Hector

    Eyre, Reginald

    Morgan, Geraint (Denbigh)

    TELLERS FOR THE NOES:

    Farr, John

    Morrison, Charles (Devizes)

    Mr. Jasper More and

    Fletcher-Cooke, Charles

    Murton, Oscar

    Mr. Timothy Kitson.

    Clause added to the Bill.

    New Clause No. 68.—(LLOYD'S AND OTHER UNDERWRITERS.)
    (1) Arrangements under Schedule 21 to the Income Tax Act 1952 (special reserve funds for underwriters) may authorise the making of payments pursuant to paragraph 7(1) of that Schedule (withdrawals from special reserve funds into premiums trust fund to meet a loss) on a provisional basis before the amount of the loss has been finally ascertained and certified by the inspector.
    (2) The amount so withdrawn shall not exceed such proportion of the estimated loss as may be specified in the arrangements.
    (3) When the amount of the loss has been certified by the inspector such adjustments shall he made by repayment to the underwriter's special reserve fund or funds, or by further withdrawal of sums for payment into the underwriter's premiums trust fund, as will secure that the net amount withdrawn from the underwriter's special reserve fund or funds in respect of the loss is that required pursuant to paragraph 7(1) of the said Schedule 21; and no tax consequences shall ensue on the withdrawal of sums in respect of a loss until the amount of the loss has been so certified and any such adjustments have been made.
    (4) This section shall be construed as one with the said Schedule 21.—[Mr. MacDermot.]
    Brought up, and read the First time.
    9.45 p.m.
    The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move, That the Clause be read a Second time.
    This Clause will enable Lloyd's underwriters to make withdrawals from their reserve fund by reference to provisional losses in advance of the final certification of the losses for tax purposes. The present scheme, which was introduced by Sir Stafford Cripps in 1949, has, on the whole, worked well, but it turns out that these arrangements cannot be operated quickly enough in the exceptional case where underwriters face very heavy losses of the kind that arose following Hurricane Betsy.
    The Clause will enable them in such circumstances to make withdrawals on a provisional basis. It will not make any difference in the end to the tax position. The tax consequence will follow as at present on final certification of the loss, after the year's account has been closed two years after its end.
    Mr. Iain Macleod: The Clause is entirely acceptable to us, and we are grateful to the hon. and learned Gentleman for his explanation.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

    New Clause No. 2.—(OWN AS YOU EARN.)
    (1) Where, in accordance with the provisions of this section, a special banking account (hereinafter referred to as an 'Employee's Savings Account') is opened on behalf of an individual, he shall be entitled to such relief from income tax as is provided in this section.
    (2) An Employee's Savings Account shall be an account deposited with a joint-stock bank or with a trustee savings bank or such other institution as the Commissioners of Inland Revenue may on application approve, and the Commissioners shall on application approve any institution which is in their opinion capable of handling such an account, bearing in mind the conditions hereinafter provided, the interests of persons on whose behalf accounts are opened and the need to protect Her Majesty's revenue.
    (3) An Employee's Savings Account shall be operated subject to the following conditions—

    (a) it may be opened by any employer on behalf of an employee, or, in the case of a self-employed person on his own behalf;

    (b) sums of money, stocks and shares or other securities may be placed in an account by an employer on behalf of the holder of the account, or, in the case of a self-employed person, on his own behalf;

    (c) the total value of any moneys or shares or securities so deposited in an account shall not exceed in any year of assessment the sum of two hundred pounds;

    (d) interests or dividends due on any money or securities held in an account may be paid into the said account;

    (e) without prejudice to paragraph (g) below, no other money may be paid into an Employee's Savings Account, nor any other shares or other securities deposited there;

    (f) any moneys or shares or other securities deposited in any account shall thereby become the sole property of the individual on whose behalf they have been deposited and this shall not in any way be affected by any subsequent change of employment;

    (g) any individual on whose behalf an account has been opened may at any time at his own discretion sell shares or other securities held in his account, may withdraw or leave in the account the money raised by such sale, may purchase new shares or securities with funds standing to his credit in the account, or withdraw any money standing to his credit in the account;

    (h) any joint-stock bank or other approved institution may offer and pay interest on moneys deposited in an account; and

    (i) no person may have more than one Employee's Savings Account opened on his behalf.

    (4) Where the total income of an individual for the year of assessment includes, or would

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    but for this section include, any sum deposited in an Employee's Savings Account by his employer on his behalf or, in the case of a self employed person, by himself, or any sum equal to the value of shares or other securities so deposited, such sum shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing
    Provided that in the event of any individual withdrawing any money from his account other than dividends or interest, an amount shall be chargeable to his assessment under Schedule E income tax for the year in which the withdrawal takes place equal to—

    (a) the original amount of the money withdrawn from the account at the time at which it was deposited in the account, or, in the case of shares or other securities which have been disposed of and the proceeds withdrawn, their original value at the time at which they were so deposited; or

    (b) in the event of any shares or securities being worth less than this at the time at which they were sold or exchanged, regardless of whether they were withdrawn from the account at that time or subsequently, the value realised in such sale or exchange.

    (5) Where the total income of an individual for the year of assessment includes, or would but for this section include, any sum paid or credited to an Employee's Savings Account in respect of interest on moneys deposited therein, those sums shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information if or in so far as they do not exceed fifteen pounds.—[Mr. Richard Wainwright.]
    Brought up, and read the First time.
    Mr. Richard Wainwright: I beg to move, That the Clause be read a Second time.
    The Chairman: With this Clause we can discuss new Clause No. 40—"Tax relief for regular savings or insurance schemes", and new Clause No. 41—"Relief from income tax on the first £15 of investment income", with a Division on new Clause No. 40 if desired.
    Mr. Wainwright: There is an error in the Clause as it appears on the Notice Paper. Unfortunately the words "of information" have been omitted at the end of line 41. Line 41 should therefore read:
    "shall be disregarded for all purposes of the Income Tax Acts other than the furnishing of information."
    This formula appears from time to time in the Clause because, although we seek tax advantages for certain savings, we do not seek the extraordinary and ultimate advantage of National Savings Certificates, that of not being returnable
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    to the inspector of taxes. We do not say that the savings we seek to encourage should not be returnable but that they should not be assessable.
    The Clause would benefit the citizen and the Exchequer. The private citizen with a much wider effective choice of savings media would benefit especially when he had something, however small, to put by as a long-term investment and which he wanted to protect from the erosion of inflation. We also want to provide the Exchequer, for which we feel strong concern, with a much greater volume of savings.
    On the cost of this provision, we follow the Chancellor's message in his 1966 Budget statement:
    "The message is clear: 'More savings, less tax'."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1440.]
    Unfortunately, the British public largely did not get that message and have not yet got it and we are offering the right hon. Gentleman a loudspeaker to get it over.
    We seek definite and attractive tax advantages for a variety of savings. The last 50 years have proved that tax advantages enormously influence the success of savings schemes. If we join the E.E.C., one of the greatest things which we shall take in is some of the most varied, reliable and efficient methods of institutional savings in the world, which have been built up largely with the impetus of considerable tax advantages. Our pensions schemes, life assurance and industrial assurance schemes, the whole range of National Savings for the small saver and, of course, the building societies are all powerfully assisted by different tax advantages which Parliament has given.
    Unfortunately, a price has been paid for the efficiency of the savings media and it is the comparative neglect of channels for taking small savings direct to industry. Compared particularly with the United States and West Germany, our assistance to the small saver to invest directly in industry is under-developed, and this is what we particularly want to remedy.
    The Clause seeks four main forms of tax advantage for limited amounts of annual savings so long as they remain effectively saved. So long as these

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    securities remain effectively saved, we ask that Income Tax should be wholly deferred, which means that if and when they are withdrawn from the banking institution authorised to hold them tax-free, they will be subject to Income Tax at the rates and under the rules prevailing. Therefore, in the fairly obvious instance of the employee or self-employed person who puts shares or money away when earning at a high rate and withdraws them in time of sickness and old age, his effective rate of tax will be lower than when he was fully employed.
    The second advantage is that the umbrella of the banking institutions would be a complete insulation not only against the payment but against the computation of Capital Gains Tax.
    Third, we propose that, while these monies are in the custody of the banking institution, any interest which they attract should be tax-free up to the now customary figure of £15 a year. This might excite some criticism from the Treasury Bench as each party, when in power, has been desperately anxious not to extend this privilege, which is extended to investors in the Post Office and Trustee Savings Banks.
    However, since we are trying to provide an incentive to savings, it would be wrong to insist that they should be taxed on the interest while in the bank. The Exchequer may regret the generosity which allowed this tax-free privilege, but it is with us and should not be withheld from any acceptable form of savings.
    The fourth major tax advantage which we seek is that there should be no assessment on the discount element of shares which an employer makes available to his employees. This is particularly important, as the history of those industrial countries which have encouraged employee shareholding shows that the issue of shares at a discount is particularly valuable.
    The Financial Times of 14th March this year said:
    "In 1960, only 12 per cent. of the manufacturers listed on the New York Stock Exchange had stock purchase programmes for their employees. Last year"—
    that is, 1966—
    "this figure had risen to 22 per cent."
    In the course of the investigation by the National Industrial Conference Board in New York, which produced this informa-
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    tion, is was found that about half the plans that they analysed allowed an employee to buy stock at a discount to provide him with additional protection if the price of his stock were to fall. This is of great importance when people are starting their careers as investors because an early fall in stock for which they have paid good money has an extremely discouraging effect.
    10.0 p.m.
    We recognise—as the Liberal Party has recognised for a long time—that a provision of this kind is only one form, and certainly not the only form, of securing worker participation in industry. However, it has the great merit of being easily and conveniently available and much good is to be achieved by the sort of tax incentive which the Clause provides. As Liberals, we look forward to a period when there will be much wider measures of employee participation in the control and direction of industry and a bigger share in its rewards. But in preparation for the time when this comes about, we want to see employees becoming familiar with the responsibilities of share ownership, with company structure and with all that goes with the role of an ordinary shareholder.
    We have high hopes from the Government because the Clause is not new. It was, in substantially similar form, debated in Parliament in 1958 on the Finance Bill of that year. On that occasion the right hon. Gentleman who is now the President of the Board of Trade said:
    "The aim of this Liberal revolution is thoroughly laudable. It is the spread of ownership of shares over a higher proportion of the individuals of the community."—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1496.]
    We see no reason why the right hon. Gentleman should have changed his mind in the intervening years and we see every reason why he should have influenced his colleagues to support his view.
    Mr. MacDermot: I hope that the hon. Gentleman is not misleading the House into thinking that my right hon. Friend supported the proposal.
    Mr. Wainwright: I was hoping, knowing the discipline of the party opposite, that over the years the right hon. Gentleman had influenced his colleagues into supporting the view he then adduced. I

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    also hope that the same might be said of his party's management.
    As for the Conservative Party, we hope that all that Conservative hon. Members have said in recent years about a share-owning democracy will lead them to support the Clause. The only argument which their Chancellor, now Lord Amery, was able to adduce against a similar proposal in 1958 was the curious Gladstonian argument that
    "… Income Tax should fall impartially on all income from all sources …"—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1495.]
    Since then the Tory Party has been reinforced in the House by the members of the Bow Group and progressives of various schools of thought. We hope that we will see the fruits of the younger generation of Tories steering their older colleagues away from the purely Gladstonian view of the rôle of Income Tax.
    We sometimes flatter ourselves that world prosperity in recent years has narrowed the gap between the wealth of different sections of the community. But I ask the Committee to consider whether this narrowing of the gap is not superficial and highly precarious because it is based far more on temporary income than on a real shift of ownership of wealth.
    In a sense, the community is still divided between the few who are masters of their own savings—who control, so far as man ever can, their own fortunes—and the vast mass of the population who, although, broadly speaking, are more prosperous than their counterparts of a generation ago, are still precariously dependent on income from week to week. The object of the Clause is to clear part of the jungle which separates the mass of the people from share ownership and control over their own fortunes; control which, we believe, is their right.
    Mr. Paul Dean: There will be agreement on both sides of the Committee with many of the points made by the hon. Member for Colne Valley (Mr. Richard Wainwright). I wish to concentrate on New Clauses 40 and 41. I am not claiming that these proposals—particularly Clause 40, which is fairly broad—are in any sense technically perfect, but I hope that the Financial Secretary will not rely on drafting arguments.
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    The main point we wish to put forward is what we regard as a sound principle and, like all sound principles, it can be stated simply and shortly. It is that thrift benefits the nation and the saver. It provides security for the saver and his family and the seed corn for future national prosperity. I hope that the Financial Secretary will not use narrow legalistic arguments about the canons of taxation law. After all, those are not unalterable; they are there to serve the needs of the community and not to be our masters. I hope, too, that he will not take his stand on what we sometimes hear from the present Treasury Bench about the purity of our taxation system. Far be it from a Government which have introduced Corporation Tax, Capital Gains Tax and Selective Employment Tax to talk about the purity of our taxation system.
    It is also the case, as the hon. Member for Colne Valley has said, that tax relief is already granted to certain forms of savings. It is given in recognition of the extra expenses incurred by the man with a family. We grant tax relief on occupational pension schemes and on life assurances. Those are just examples of tax reliefs. We believe that they are right, and that they should now be extended.
    We also totally reject the notion that tax allowances mean "giving away" money, and that they "cost" the Exchequer so much. We have not yet got to the stage where the Government of the day own the money we earn, although this Government are certainly trying to dictate how much we earn through their prices and incomes legislation. Tax allowances mean that the Government take a little less of our money than they other wise would. It is true that tax allowances mean a certain loss of revenue, but if the Government took less of our earnings, if they encouraged thrift, self-help and increased savings, the country would be a good deal better off than it is.
    The case for the greatest encouragement of regular savings has been deployed on many occasions, not least by my hon. Friend the Member for Farnham (Mr. Maurice Macmillan) and the Wider Share Ownership Movement. I propose to say very little about that except to emphasise that we are constantly being told by the Government that we are consuming too

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    much, with all the problems of inflationary pressures that that creates; that we are indulging, as the party opposite likes to call it, in expenditure on candy floss. In so far as there is any weight in those arguments, the more we can encourage people to put their money into savings the more those arguments are likely to be met. I propose to concentrate very largely on contractual insurance, which is dealt with in the Clause, and place it in our social services and taxation policy.
    There is little doubt that the Government are facing a growing dilemma. They face a situation in which the momentum of the development of the social services is slowing down. And one has only to read or listen to the Socialist intellectuals to have this point demonstrated very clearly. I give only one quotation, and that is from Professor Brian Abel-Smith's pamphlet "Socialist Affluence". Looking at the calculations made in the National Plan that is now defunct, Professor Abel-Smith says:
    "The calculation shows that the public services (current) and housing increased by 34·5 per cent. in constant prices between 1958 and 1964 and are planned to increase by only 28 per cent. between 1964 and 1970. Thus the absolute rate of growth was greater in the six years preceding 1964 than in the six years planned from 1964 onwards."
    There is no wonder that there is disillusionment on the benches opposite about the way in which the social services are developing, but those figures were on the basis of the National Plan, and we all know that that will not be achieved.
    Not only do we have this slowing up, but we have had stiff increases in direct taxation. The Financial Secretary acknowledged this dilemma only last Friday when replying to a debate when he said:
    "… growth in public expenditure on the social services is a matter of great concern to the Government, not least because of the claims that it makes on the resources of the economy, but also because of its implications for taxation."—[OFFICIAL REPORT, 9th June, 1967; Vol. 747, c. 1535.]
    Incidentally, what a contrast this is to the good old days of Tory Government when we had both substantial increases, real increases, in social service expenditure and reductions in taxation at the same time.
    We know that the Government believe in high taxation—we have heard it from
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    Treasury Ministers time and again during this Finance Bill—but even they admit that there are limits to the extent to which direct taxation can be put up, so they face the dilemma of the slowing down of the advance in the social services and rising taxation at the same time. We believe that one of the ways out of this dilemma is to encourage private provision so as to relieve the pressure on the State services and to bring additional resources to social welfare as a whole.
    Why is this dilemma becoming more acute? It is partly because of the very large figures which are involved. Current expenditure on the social services is now well over £5,000 million a year, and that amounts to about 50 per cent. of all Government current expenditure, and of that figure no less than 70 per cent. comes out of taxes and rates. This must present a budgetary problem of a very difficult character to any Government.
    But there is another equally important factor which in the long term is growing in importance, namely, the inevitable built-in growth factor in most of these services—the fact that standards are rising, that a social service benefit which five years ago was satisfactory is no longer adequate, the fact that medical science is improving all the time and that treatments are becoming more costly, the fact that we have and will continue to have a growing proportion of our population who are non-earners, who are either young or old.
    The dilemma was stated extremely well in an article in The Times by Mr. Peter Jay on 31st May. It is interesting to note that most of the evidence which I am calling is from people who, on the whole, are sympathetic to the cause of hon. Members opposite. Peter Jay makes an interesting calculation. He estimated that social service expenditure at constant prices would rise by more than 60 per cent. between 1965 and 1975 to keep pace with current policies, not to improve, but simply to keep pace with them. He estimated that this would mean an increase in taxation of about £200 million each year, unless there were cuts in Government expenditure elsewhere. He came to this rather arid conclusion:
    "Any further increase in taxes, additions to industrial costs and preemption of resources for Government social expenditure would

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    entail a greater degree of austerity towards privately financed personal consumption than is commonly supposed to be politically possible."
    10.15 p.m.
    This is the dilemma in which the Government find themselves. I do not suggest that those figures are necessarily accurate, but the broad drift of the argument put by Mr. Peter Jay is one which has appeared increasingly in recent years and months. We should encourage people voluntarily to solve this dilemma for the nation and for themselves by devoting more of their income to family insurance. People are doing this already. Occupational pension schemes, encouraged as they are by tax reliefs, now cover well over half the population. Health insurance covers about 2 million people and is growing at the rate of 10 per cent. a year.
    But for personal health insurance there is no tax relief. Anyone who takes out health insurance pays his taxation towards the National Health Service and his health insurance contribution but there is no tax relief of any kind. In other words, in this instance, as in the instance of education, the tax scales are weighted against private provision and self-help.
    These occupational pension schemes and health insurance schemes are now by no means confined to a few rich people. They are spreading down the income scale, and surveys show that a substantial and growing number of people wish to provide much more for themselves. One recent survey asked, "If you were given the choice of paying increased taxation to improve the State services or greater encouragement through tax relief and the like to provide for yourself, which would you choose?", and over half the people questioned plumped for the second, to provide for themselves rather than to pay more taxation in order to have additional provision through the State services. We shall neglect this growing upsurge among a wide range of our community at our peril.
    It is said that, if we were to encourage private voluntary insurance in this way, the State services would suffer. In fact, the very opposite is true. How many
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    more millions of pounds would we be spending now on supplementary benefits were it not for occupational pension schemes and life assurance? The same is true for health insurance which gives cover for private treatment. One of the organisations, the B.U.P.A., has set up, through its sister organisation the Nuffield Nursing Homes Trust, hospitals and nursing homes to provide surgical and other treatment, and no fewer than 11,000 patients were treated in these homes last year. Here is a concrete example of the National Health Service being relieved of pressure at no cost to the State whatever. In other cases, where private patients go into private beds in National Health Service hospitals, they pay for their beds, they pay the full cost, thus providing additional revenue for the National Health Service. The same is true in education. How much more would our education service cost the State were it not for the 250,000 children being educated privately at no cost to the State whatever?
    Another argument used is that the extension of private services through tax relief would draw off scarce medical resources from the State service. I believe that that also is incorrect. Under our present arrangements we are already faced with a serious and growing brain drain of doctors going abroad for a variety of reasons. It is at least arguable that with the extension of private provision some of those doctors would continue practising in this country.
    The same happens with nurses. There are nurses who, for a variety of reasons, are not prepared or not able to work in the National Health Service, but are retained in health work because the private institutions can use their services. Therefore, I do not believe that either of those arguments is correct—either that the State services suffer or that scarce medical resources are drawn off. The opposite is rather the case.
    My conclusion is that the desire for saving and accepting growing personal responsibility for welfare is increasing all the time, that it is socially and economically right, and that it can be the salvation for the standards and development of our State social services. Now is the time to give this healthy trend the boost and encouragement which it needs and deserves.
    Mr. Barnett: I wish briefly to refer to new Clause 2, which was moved by the hon. Member for Colne Valley (Mr. Richard Wainwright) on behalf of the Liberal Party. It is nice to see so many Liberal Members here, and it is a pity that they do not move more new Clauses. But it would be fair to say that the Clause is a typical Liberal crackpot scheme. I could have understood some of his hon. Friends moving it, but I find it difficult to understand his doing so.
    I am sure that the idea was put forward with the best intentions, but it clearly had not been thought out, because the loopholes for evasion and avoidance are absolutely massive. Either the hon. Gentleman was not aware of them or he did not think it necessary to mention them. I am rather surprised. I am sure that he must have thought of some of them, especially, for example, that the opportunity for self-employed people to reduce their taxable income by £200 a year would be something that no self-employed person could resist. Equally, with an employee, the opportunity to reduce his income by £200 a year would be irresistible, without having any real effect on net saving. There are opportunities of doing it either by borrowing, for example, or taking existing savings, withdrawing from them and switching yearly.
    Mr. Richard Wainwright: Does not the hon. Gentleman agree that this switching is exactly what happens every time the Chancellor, as he has done this year and last, announces further facilities for National Savings Certificates to be purchased?
    Mr. Barnett: I had misunderstood the hon. Gentleman. I thought that he and his party were looking for a new form of savings, for an increase in net savings. If he is now telling us that they are not looking for any new net increase in savings I wonder why he brought forward this crackpot Clause. Not only are the loopholes for evasion and avoidance enormous, but the Clause makes administrative nonsense, as the hon. Gentleman must have known. One has only to think for a moment about the difficulties in dealing with the P.A.Y.E. scheme, of withdrawals into a savings account and payments back into it, the adjustments in the code number or the
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    tax deductible weekly—not annually—to understand the sort of administrative problems that would arise.
    We talk about Capital Gains Tax being complicated, but it would have nothing on the scheme proposed in new Clause 2, which stems from Liberal ideals that one can get something new from gimmicks. If Liberal hon. Members had thought out this problem, I am sure that they would have understood—I am sure that the hon. Member for Colne Valley understands—that this idea, which I honour by calling it an idea, could not result in any net extra savings.
    The whole concept of the Clause stems from the idea that there is some miracle to be performed by a massive increase in net savings. We all pay lip-service, and more, to the idea of trying to increase net savings. Every Chancellor has pointed out that if we could achieve this we could save increases in taxation. Strictly speaking, that is true. But we should at the same time honour the ingenuity of those concerned with the National Savings Movement over a long period because they have dealt with many forms of saving, both for small savers and for others. They have done it by way of gimmicks, as, for example, the Premium Bonds, which did not really result in any net savings either. Almost every form of savings has been tried, including the Post Office Savings Bank and National Savings Certificates.
    If we go on pretending that there is some miracle whereby we can get a massive increase in net savings, we are in danger of doing ourselves a great disservice. One would like to think, and I suppose that it is true, that we could get some increase in net savings by using modern techniques of salesmanship—perhaps a television savings bond of some kind. But the real net savings increase overall, excluding switching, would not likely be so massive as many of us would like to see.
    I would like to see the Government giving some thought to improving sales techniques of savings. I would also like to see hon. Members stop pretending that in some way we can reduce taxation in a big way by some form of new savings. But I hope that we shall not get the sort of stupid administrative

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    idea incorporated in this Clause by the Liberal Party.
    Mr. Bessell: I shall not bother to refer to the speech of the hon. Member for Heywood and Royton (Mr. Barnett). He always manages to combine offensive terms with his ludicrous speeches when he refers to the Liberal Party, and he does it with a facility which almost causes me to admire his efforts.
    I want to refer to the new Clause moved so admirably by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright), because it contains in it one particular provision which the Liberal Party has always believed is of vital importance to the interests of that section of the community which has for too long been called the working class—I say for too long because it is thereby separated from the rest of the community in a way that is not only offensive but quite unnecessary in these days.
    The Liberal Party has always believed that it is imperative for the people who work in industry at all levels to have a share not only in the profits of their labour but also to have a major share in the responsibilities of the administration of the company concerned. I do not hesitate to pay tribute to the Labour Party for its long history of jealous protection of the rights of the working people. It has done a job which is not only the envy of the rest of the world but which is admired on this side of the Committee as well as on its own side. But it is strange to me that it has never managed to take that one further step forward, the step which would break down this ugly division which exists in our country, the division which seeks to separate the people of this nation into two parts, those who employ and those who are employed.
    10.30 p.m.
    I do not believe that we can ever have maximum production from any of the branches of industry which thrive in Britain and are the natural source of our wealth till that division can be broken down, till we can bring about a genuine partnership in British industry, a partnership which is based on mutual trust because there is a mutual participation in profits and a mutual responsibility
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    for the success of the company or firm concerned.
    As the Committee will know, the Liberal Party has sought by one means or another—over many years—to introduce into successive Finance Bills Amendments which would provide an incentive for employers to embark upon schemes of co-ownership or co-partnership which, in my view and the view of the Liberal Party, would go a long way towards bringing about this partnership in industry between the two sides and rid the nation of this ugly barrier which divides the worker from the employer. We have never, it is true, been successful in persuading either of the other parties to accept in a Finance Bill a Clause or an Amendment to a Clause which would provide this incentive for employers.
    This time we have sought, as my hon. Friend the Member for Colne Valley has already told the Committee, to provide that incentive through this new Clause which he moved so eloquently.
    I should like just for a moment to dwell on the reasons why I consider that, if the Government could be persuaded to accept this new Clause, and if we could make a start towards a genuine partnership in industry, this would be of such enormous benefit to the nation as a whole. It is recognised that in the last few years we have not been able in this country to produce the kind of output in industry to enable us to compete effectively with those nations of Europe which are selling in many of the markets which were formerly almost exclusively our own. This is because of the fact that there is, in my view, an absence of genuine incentive to the working people today. They do not feel that they have the dignity of enjoying ownership within the company or firm by which they are employed; they do not have the same benefits in terms of profits which go to the shareholders and to many of the directors who control their activities; they do not have the same ability to sway decisions which are made by the directors, or by shareholders who, often, never see the factory floor.
    We in the Liberal Party believe that the only way in which we can really see a genuine increase in production is by providing this incentive to the employees in industry, by giving them some of the

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    dignity of being employers, by giving them some of the responsibility which at present is shouldered by only one section of the industry concerned, by giving them some of the profits which go into the pockets of the present shareholders.
    I know that it is frequently argued that this would be unfair to those people whose capital is at present employed in industry and that it is right that they should enjoy the maximum profit from their investment, but the evidence of those companies and corporations in the United States of America and other parts of the world which have embarked on co-ownership schemes is that the increased production, the consequent lowering of production costs and the inevitable increase in sales to the public have resulted in an improvement in the net profit to the original shareholders or stock holders as well as providing a profit for those working on the factory floor.
    This evidence, combined with the fact that this system of joint ownership in industry would break down the barriers to which I referred earlier, barriers between employer and employed, and bring about a greater dignity to those in the employed class of industry, and would bring a higher rate of production, is something which I ask the Chancellor to consider seriously. I ask him to rid his mind of the prejudice which has existed not only in the minds of members of the Labour Party, but in many trade unions, against any system of participation or joint ownership. I ask him to look at the thing purely on the merits of the case for improving productivity and thereby assisting Britain's export drive. I ask him to look at it, too, on the social merit of breaking down these barriers which we all know to have worked so much to the detriment of the progress of the nation.
    I do not share the optimism of my hon. Friend the Member for Colne Valley and I do not think that the Financial Secretary will accept the Clause, but I hope that between now and Report the Chancellor will think about the arguments put forward, not only in the Committee tonight, but in many parts of the world by learned economists and sociologists about the advantages of a system which provides for voluntary co-ownership.
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    There is no reason why on Report an Amendment should not be introduced which, by one means or another, would encourage employers to spread the ownership, if they wish to do so, of their companies and firms and thereby at least take one step forward towards bringing about the kind of partnership which Liberals believe to be the only way, in the last analysis, of resolving the unrest, the suspicion and the mistrust which exist in British industry at many levels and which have hampered production and prevented the growth of a genuine property-owning democracy.
    Sir Douglas Glover: Having listened to the debate so far, it is with great chagrin that I find myself supporting the hon. Member for Heywood and Royton (Mr. Barnett) more than the Liberals. Of course, emotionally we all want to bring about what the Liberals suggest in the new Clause. Nothing would give me greater pleasure than for the whole of industry in this country to be a sort of co-operative organisation in which all the employees were shareholders. But we have to accept that human beings are all different from one another.
    There are some people, who, if they are given £100, would spend it in a week, while there are other,, about 5 per cent., who will buy shares, and save the money. The Liberal Party has the idea that people should buy shares in the company for which they work at a discount. My commercial attitude to this is that all the English people whom I know think that there must be something wrong with anything offered to them at a discount. If one tries to sell them shares in a company at two-thirds the market price they will ask:
    "What is the gaffer up to now? He is trying to take us for a ride."
    They are suspicious. Every year they see great placards in shop windows, advertising goods at half price. They buy things and then decide that they are sorry to have bought them. If one starts selling shares at two-thirds the market price they will think that there is a catch in it. [An HON. MEMBER: "They may be right."] They may be right. This is one of the great problems about obtaining a widening of a share-owning democracy. There is nothing that I would love to see more than that

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    everyone should own shares in the company for which they worked.
    I do not think that life has altered much. We talk of Unilever, which is probably the largest company in this country, and about the third largest company in the world. Where did it start? My great-great-grandfather, who was a doctor, provided £100 for Mr. Lever to start making soap in his back kitchen.
    He was the man who conceived it, and out of that developed Unilever, with its most extraordinary ramifications. At present there are young, vigorous people starting companies who cannot offer much to shareholders, to those who are working in the business. The business might go bankrupt in 12 months.
    Suppose that I start a business with five employees and I ask them to give me £100 out of their salary and in 12 months' time we go bankrupt. I do not know if they would be very grateful to me, but in most cases they would probably have me in the courts. Suppose that I do not ask them for the money and 12 months later I have overcome the first hurdle and the business is growing. Now I have 25 employees, and I am not so keen on asking them to join, because it is my money and it is beginning to make a profit.
    This is the way that businesses grow. They do not grow in theory, they grow in actual practice of people doing things. All these Amendments from the Liberal Party seem to suppose that there is a sort of business which stops at a certain point—when one stops all effort and says, "We will ask all employees to be shareholders." But the people working for the company then would not be the same as those who worked for it 12 months ago, and would not be the people working for it in 12 months' time. One is not dealing with a static working population.
    Mr. Bessell: The hon. Gentleman has advanced his theory, to which I listened with great interest. Would he now be kind enough to address himself to the reasons why certain American companies, including Chrysler, and certain British companies, including I.C.I., and the John Lewis Partnership, have found it possible to embark on co-ownership schemes, if his argument is correct?
    Sir W. Bromley-Davenport: I have the answer to that one.
    Sir D. Glover: Take I.C.I. No person has been more disappointed than I over this. Statistics show that about 50 per cent. of the shares in the so-called I.C.I. share ownership system are sold within three months of being received. In other words, it is only another way of giving the employees a bonus. Some people hold on to their shares. There are others who, even if they had been paid the bonus in cash, would have bought shares. In other words, they are the people who want to acquire shares and will give up the benefits of today for the benefits of tomorrow.
    10.45 p.m.
    I know many people who, if they are given £500, will have a jolly good holiday and spend the money, but who is to say that in the long run they do not have a happier life? Other people, if given a similar sum, will invest it in I.C.I. There is an enormous difference between the mentality of the person who wants to become the owner of shares, and the person who wants to have a happy life and spend his money. There are not all that number of people who want to forgo the benefits of today for the benefits of tomorrow. Perhaps this is one of the great troubles with the nation at the moment. There are not enough people who want to forgo today's benefits for some increased benefits in 20 years' time.
    Having given a great deal of time to the Liberal proposals, perhaps I can come to the admirable speech of my hon. Friend the Member for Somerset, North (Mr. Dean). This really follows on the remarkable debate that we had last Friday on a Motion moved by the hon. Member for Pembroke (Mr. Donnelly) on the simplification of Government. I made a speech, and perhaps I can tell the hon. Member for Heywood and Royton that afterwards one of his colleagues said to me, "Douglas, for the first time in my life I agreed with everything you said".
    But what did I say? I said that in the social welfare field the public would pay by way of taxation only sufficient to provide what I would call the floor of that service, and therefore if we want to increase the benefits of the Health Service

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    we must give people the right to pay for increased benefits in it, and it is that with which one hon. Gentleman opposite agreed. The right hon. Member for Sowerby (Mr. Houghton) went a long way towards saying the same thing. I have talked to many people, mostly, I think, supporters of the party opposite, since I made that speech, and they all agreed with me.
    This House is way behind the thinking of all those who have really studied the problem of what we are going to do about social welfare. We have to take it that human beings are prepared to help their mates, their colleagues, but they are prepared to help them only to a certain level. They are not prepared to be deprived of the benefits of their efforts by taxation to the level that it really affects their standard of life if they can see people on the other side of the road enjoying an excess benefit from that social welfare.
    If we are to get a really good Health Service we must provide the opportunities for people to spend, or insure—I think that insure is a better word—beyond the bottom level. If we do not do this, we will not only not make progress in providing for the well-being of people in this country, but the Health Service will break down.
    It is not as though we are talking of a wonderful edifice rather like Constantinople, before it was attacked by Suliman the Magnificent, but an edifice which is breaking down and which needs money. The only way to get that is to have additional revenue and, therefore, I hope that the party opposite will begin to take more notice of this because they are the only people who can implement what is suggested.
    If they are honest, they must admit in their own hearts that even the so-called progressives are finding an increasing appreciation of the fact that we shall never get really good welfare on the basis of the soup kitchen mentality for the simple reason that that way nobody will get above the bottom level. It is becoming fundamental thinking in the Socialist brains trusts, and the progressive societies and the ordinary people want to talk about this problem.
    If we are to get the welfare society which provides the sort of standards
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    which we want, it will require a great deal more private insurance than we have accepted up to this moment, and the final thing which I want to say—[Interruption.] Well, I do not mind if everybody gets bored and walks out. I shall still get into HANSARD. The final thing I want to say is that in the time during which I have been in the House, I have come to believe that the great weakness of democracy, and it is democracy about which right hon. and hon. Members opposite talk so much, is that we spend nearly all our time arguing about the problems of 20 years ago and not in throwing our minds into the future. Let us, for example, take the Health Service.
    The Temporary Chairman (Mr. Bryant Godman Irvine): That is not relevant.
    Sir D. Glover: I think that it is relevant because the producing machinery would produce what I am going to say in a moment.
    Mr. MacDermot: The way to accept order is to accept the Ruling of the Chair.
    Sir D. Glover: I will accept order from the Chair, but not from the hon. and learned Gentleman.
    Dealing with any Amendment of the sort which we are now discussing we have to try to think what it is that we are doing and why the whole atmosphere in this country is going to alter in the next 20 years. We on this side of the Committee are preparing for the right sort of pattern in which the people would want to live.
    Mr. Maurice Macmillan: I support the Amendment standing in the name of two of my hon. Friends and the principle which underlies the Amendment tabled by the Liberal Party, although the massive increase is almost as over-optimistic as the principle. I would not associate myself entirely with the rather limited aspects of co-ownership and co-partnership implied in some of the speeches which have been made in support of this new Clause, although it is not specified in the actual wording of the Clause itself.
    It is about 20 years now since the Wider Share Ownership Movement, to which reference has already been made tonight, was first talked of; and it grew, not from Liberal ideas, but from a Conservative

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    Party pamphlet written and published by my noble Friend, Lord Aldington.
    I am happy to say that since those days it has received noble support from the Liberal Party and from many right hon. Gentlemen opposite. Successive Governments have accepted the principles that we have put forward from time to time. But alas, few people have been moved, either by the logic of our case or the eloquence of our supporters, to put any of those principles into practice.
    In making this statement I am not making a party political charge. When I refer to "the Government" I am not so much referring to the principles, economic or political, of the politicians, but to the position which emerges from the entire Governmental apparatus and machine. I confess that in my short stay in a junior capacity at the Treasury there was little I could do to alter these attitudes, although I initiated one or two ideas which have been put into practice. We have put forward various schemes of employee shareholding, not necessarily the employee holding shares in the company in which he works but more in the nature of the American pattern, with equivalent provisions for self-employed persons. Perhaps I am prejudiced, but I think they were more realistic than the proposals contained in the Liberal Clause.
    My hon. Friend the Member for Somerset, North (Mr. Dean) referred to the results of the various schemes which are in operation. He mentioned that three-quarters of the employees who received shares in this way sold them and regarded them as a bonus. This is true, but it is rather like the optimist or pessimist looking at his glass and saying, "It is half full" or "It is half empty." Equally, one could say that one-quarter of the employees of I.C.I. now have shares in the business which they would not have had but for the operation of this scheme.
    The hon. Member for Colne Valley (Mr. Richard Wainwright) referred to Lord Amory's defence of the impartiality of the tax system; that it should fall equally on all taxpayers, regardless of how they spent their income. That is the classic case which any tax expert would put forward. It is understandable for the Inland Revenue or a Tory Chancellor to adduce that argument, but I find it harder
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    to understand when it is adduced, as it no doubt will be, by a Labour Financial Secretary, for the present Government seem curiously reluctant to use the fiscal system for social purposes in the way they accused us of being frightened of doing when the Tory Party was in power.
    The record of the parties shows that while we may not have preached quite so eloquently, we were a little more efficient. In encouraging savings, we should seek to encourage all savings, and in doing so I would argue that the economic situation which confronts us, and which has confronted us for many years, is totally different from that which existed before the war. It is different in a way which has not yet been recognised by the attitudes of successive Governments; and that goes for the problems of savings, investment and shareholding.
    One of the major pre-war problems was that of getting a level of investment that matched the then level of savings. Since the war the problem has been that of getting savings at a rate which matches the need for investment. The Chancellor is constantly referring to the necessity for people to save more so as to be taxed less. The surveys that have been made of the capital needs of the country, projected into the future, to 1975 and 1980, show that unless a substantial increase can be made in the level of personal savings, the capital required by industry will become provided, in increasing proportions, by major institutions and that the people will have a smaller direct investment in the production of wealth.
    There is one other happy difference from the pre-war situation. Increased social security benefits, although there are problems, have largely eliminated fear as a motive for saving and investment. I am not so cynical as to assume that fear and greed are the only motives for human conduct, but the removal of the fear that the loss of one's savings will leave one destitute—which I am glad has been removed—nevertheless leaves a gap which successive Governments have not yet filled.
    11.0 p.m.
    Therefore, two major changes in our social life have not yet been recognised and should be recognised by this Government, in view of their past statements and accusations, as they fundamentally prefer

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    the sort of system which produced the changes and the accompanying problems. The Clause would extend the small dividend privilege to all incomes and not just those received from lending to the Government. It has been argued that the privilege is much greater for the rich Surtax payer than for the small saver, but this bias becomes much less in investments on which the return is far greater than the miserable return to the small investor who lends to the Government. There is, therfore, a strong case for extending the allowance to all investment from income.
    I hope that the Chancellor and the Financial Secretary have not eliminated the possibility of some form of contractual savings plan under the umbrella of National Savings to meet some of the possible criticisms of the existing National Savings certificates. The only comment I would add to the wonderful speech of my hon. Friend on the problems described in the new Clause is to hope that, by drawing it so widely, we will be told the Government's thoughts on contractual savings generally and the fiscal encouragement which may be given to such schemes, whether or not they include pensions schemes and a social service element.
    Savings can be increased, although it is difficult, but it requires a new approach, not only to increase them but to maintain the existing level in an economic situation which is discouraging for the saver and investor. It is a question not only of increasing savings and investment but of social, as well as political and economic, purposes, of spreading the ownership of the country's wealth.
    That is why I cannot go with the Liberal Party in its view of co-ownership and co-partnership, because it is not only the weekly wage earner who is concerned, but, in some cases, the relatively high-salaried employee also finds it difficult to become an owner in any significant sense. In some ways, it is very wrong that those on whose energy and initiative the creation of wealth so much depends should, owing to our fiscal system, find it so hard themselves to acquire part of the capital they have helped to create.
    It is not so much a question of encouraging people to take part in the management and the responsibilities of the businesses that employ them, because
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    that seems to me to be a confusion between the functions of workpeople, staff, management, directors and shareholders. It is rather that there is no reason why anyone, no matter what his individual rôle may be as a worker in industry, should not become the owner of industrial equity not restricted to their own company but in general terms.
    As time goes on, the greater the difficulties that the earner, even the very high earner, finds in becoming an owner, and it remains relatively easy for the man or woman who is basically a dealer rather than an earner. There is an increasing need for private capital, private investment, and a widening spread of ownership.
    I do not ask the Financial Secretary to accept any of these Amendments. I do not even expect him to do something on Report. I am being very modest in my request, which is that he will give a sign that the rigid attitude of successive Governments towards giving fiscal encouragement to savings, investment and ownership is at last becoming a little more flexible.
    Mr. MacDermot: The hon. Member for Colne Valley (Mr. Richard Wainwright) said that the object of the new Clause was to encourage savings, especially from small savers, and to provide the Exchequer with a greater volume of savings. Any scheme which held out a fair and serious prospect of achieving that objective—and I assume that by encouraging savings the hon. Member meant new savings—would obviously receive very sympathetic and favourable consideration from any Chancellor of the Exchequer. But I fear that the criticisms of this scheme advanced by my hon. Friend the Member for Heywood and Royton (Mr. Barnet) are all too much to the point.
    The difficulty that we encounter here, as with all schemes that I know of to date for the encouragement of savings by way of tax relief, is that no one has succeeded in devising a means of seeing that the benefit of the schemes would go to the new saver, or would do anything more than marginally to increase the actual volume of savings, and that the greatest benefit would not, in fact, go to people who already had saved—and the more they saved, the wealthier

    719
    they were, the greater would be the benefit. These are the well-known difficulties.
    Such a large and generous scheme as has been advocated tonight would be costly to the Exchequer in a way that could not be justified unless it could be proved to the hilt that it would produce some very tangible and substantial benefit to the economy. At the moment, there are reliefs under our taxation system for savings. By far the most important is life insurance relief in its many forms. That is something which has been accepted for a long time as being a reasonable exception to make to help people making provision for retirement or death or other emergency. It is accepted as being a specially deserving category.
    Other exceptions all come within the field of National Savings where encouragement is given to people who are prepared to lend to the Exchequer. Some of these exceptions are directed particularly at the small saver. The whole of the National Savings Movement and the Trustee Savings Banks, which form part of it, has a long history of arrangements by which the Government agree to give favourable terms and favourable taxation exemptions to people who lend to the Government. In particular, these arrangements help the small saver. This applies to the £15 exemption for interest at the Post Office Savings Bank and Trustee Savings Bank ordinary accounts.
    I would remind the Committee that the whole question of tax relief on savings was considered by the Royal Commission which reported on it in its Final Report, Command Paper 9474. Its view was that strictly speaking no tax relief on savings was equitable in that it meant that two people with equal incomes and otherwise equal circumstances paid different amounts of tax according to how their incomes were disposed of.
    I do not know whether it was this kind of consideration that the hon. Member for Somerset, North (Mr. Dean) had in mind when he asked me to dismiss from my mind the canons of taxation law. They are not something we can dismiss from our minds. It is a basic princple which we all know and accept, that if we are to have a taxation system which will be generally acceptable we have first to convince the taxpayer that we are
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    making it as fair and as equitable as we can. If two people find themselves receiving different taxation treatment by what seems to them arbitrary principles, we do not get that sense of justice.
    I would apply this to the Liberal Party proposal that £200 of a person's income invested by his employer, or by himself if he were self-employed, in a particular type of bank account should be tax-free. Another person might be paying out £200 a year to buy his house. Although he might get some tax relief on the interest, he would not, in general, get any tax relief on the income out of which he makes the capital payment. There are many other forms of expenditure which are equally worthy, but which would not attract tax relief. The Royal Commission accepted that it was reasonable that there should be exceptions for life insurance.
    Sir D. Glover: There is a fallacy in the argument that the Financial Secretary is putting to the Committee. A person buying a house is putting a claim on the resources of the nation whereas a person saving his money in Government stock of some sort is not putting a claim on the resources of the nation. Therefore, there is an argument that one is getting an advantage against the other.
    If I might return to what my hon. Friend said, canon law was sacrosanct in this country until the trial of the seven bishops.
    11.15 p.m.
    Mr. MacDermot: We were talking not about the canon law, but about the canons of taxation law, a rather different thing.
    Neither the Liberal Party's scheme nor any of the others which we are discussing on the new Clauses proposes to limit the exemption to cases where the moneys are lent to the Government. I agree with the hon. Member for Ormskirk (Sir D. Glover) to this extent, that this is a principle underlying the exemptions in respect of National Savings, the savings being in the form of money lent to the Exchequer.
    I shall not go over the detail of new Clause No. 2, the Liberal Party's scheme. I should not adopt at this Box quite the terminology used by my hon. Friend the Member for Heywood and Royton (Mr. Barnett), but, with respect, it struck me

    721
    as being a rather ill-thought-out scheme. Among its obvious defects is the absence of any provision for the person whose employer refuses to co-operate in the scheme, a defect which does not, however, handicap the self-employed, who could benefit from it.
    One of the main difficulties of the Liberal scheme is that, whereas benefits under pensions schemes are drawn in regular amounts and the taxpayer can see the pattern ahead, and is liable to pay tax on them as he withdraws them, other savings and investments are drawn out less regularly and, frequently, are drawn in large lump sums to meet some substantial item of expense, be it the purchase of a house, a motor car, or whatever it may be. Under this scheme, if the savings when withdrawn are to be taxed as income of the year of withdrawal, they might be liable to a very high rate of tax, perhaps even bringing the ordinary taxpayer into the Surtax class for that one year. I suppose that, in theory, one could work out provisions for spreading, but this would make the scheme even more complicated and administratively difficult than it is now.
    Apart from problems of that kind, the essential difficulty is that the Clause favours only one of many different kinds of savings. If the Government were to concede it, they would very soon be obliged to give similar tax relief to many other people, and this would result in a considerable extra cost to the Revenue, without any assurance that the concession was resulting in any worth-while new savings rather than being, as I have said, a method of switching existing savings or for distributing earnings tax-free under the guise of savings.
    The cost of the scheme is guesswork. It is anyone's guess how much advantage would be taken of it, but, to give a basis of calculation to hon. Members who may care to make their own guesses, if one were to assume that 1 million people took advantage of the scheme, that the deposits averaged £50 each, and that the taxpayers concerned would normally be liable to £10 tax on that, which is not a high rate, the immediate cost to the Exchequer would be £10 million for each £50 million saved. And query—How much of that would be in new savings?
    In submitting new Clause No. 40, the hon. Member for Somerset, North began
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    modestly by saying that the Clause was not technically perfect. That is the understatement of the year. I do not think that the Clause can be taken seriously as a possible addition to this or any other Finance Bill, for it is, as drafted, no more than a declaration of intent—and we know of the criticisms made from the benches opposite about declarations of intent.
    Mr. Dean: The hon. and learned Gentleman should address himself to the principle of it. I should be perfectly happy if he said that he accepted the clear principle behind the Clause and would bring forward his own draft on Report.
    Mr. MacDermot: The hon. Gentleman had better wait for it. The Clause gives no definition of any kind of contractual insurance or savings schemes that are referred to and I thought that the hon. Gentleman's speech threw singularly little light on that. On the face of it, the scheme would include car or house insurance, or mortgage repayments. The Clause does not include any kind of limit on total allowable payments, such as applies to life assurance premiums.
    But I shall not dwell on these matters, and shall assume that the sole purpose of the Clause was to provide a peg for a debate on the general subject of tax incentives for savings. We heard remarkably little from the hon. Gentleman on this subject as well. He made a very interesting and general speech which I thought was fairly characterised by his hon. Friend the Member for Ormskirk, who pointed out that he was continuing the debate we had on a Private Member's Motion last Friday. It was a very interesting debate and I thought that that was where we were again. But I had to strain to glean illumination from the speech about the intentions underlying the Clause.
    As far as I could follow it, the hon. Gentleman's main suggestion was that, as was suggested last Friday, we should encourage the division of our health insurance into a sort of flat-rate basic system for everybody, with a graduated improved health service superimposed for those prepared to pay for it under an insurance scheme. What we learned today, and what seemed to be the Clause's chief intention, is that it is now proposed that the State should help subsidise superior

    723
    private health services by means of tax relief. That is an interesting idea, but it would not commend itself to the Government as a measure that we could support in the Finance Bill.
    The scheme does, in its generality, overcome the criticism I made of the Liberal Party scheme of being one that would just benefit one particular form of savings, because it is so wide that its intention seems to be to grant tax relief to almost any kind of savings.
    What reason is there to think that to do this would have any substantial effect on the level of savings? Certainly, it would have an enormous effect for the Exchequer. Whether the hon. Gentleman likes to call it "cost" or "loss of revenue", the loss to the Exchequer would be vast. It is anybody's guess how much it would be. That must depend on the scope of the schemes to which it is to be applied, and the total amount that is saved under them.
    The same generality extends to the more modest proposal in new Clause No. 41. That is a proposal to extend to investment income generally the existing Income Tax exemption of the first £15 of an individual's interest on ordinary deposits in the Post Office Savings Bank and Trustee Savings Bank. That exemption represents interest at 2½ per cent. on a deposit of £600. This exception has for long been recognised as a special concession to these savings institutions within the National Savings Movement. To quote what has been said before about the reason for this, there are two main features involved:
    "First, that the rate of interest should be a static 2½ per cent., and that the money saved would pass directly to the Government. It would, therefore, assist the Government's monetary policy because more of the State's borrowing needs would be met without increasing the liquidity of the jont stock banks."—[OFFICIAL REPORT, 7th June. 1956; Vol. 553, c. 1437.]
    That statement of principle might appeal to the hon. Member for Farnham (Mr. Maurice Macmillan) more than anything I would say, because it was the answer given by his father when Chancellor of the Exchequer in resisting claims of this kind.
    Mr. Maurice Macmillan: I have never found that filial piety implied agreement
    724
    on economic policy. I have criticised previous Governments as much as this one. This system has been going on for a long time and that is why I want the hon. and learned Gentleman to alter it now.
    Mr. MacDermot: But the hon. Gentleman must produce better arguments in favour of an alteration than the one he adduced tonight.
    There is already a recognised exemption of £15 in this case, as I understand. There are special reasons for the exemption. It relates only to what is a guaranteed fixed low rate of interest on monies lent to the Government in a way which provides an elementary form of banking service for the investor at no charge to him. All these are circumstances which bear no relation to the claim of the proposed new Clause for a general exemption for all forms of investment income up to the £15 limit.
    Mr. Maurice MacMillan: What the hon. and learned Gentleman is saying is that the low rate of 2½ per cent. is justified by a tax exemption which, of course, only benefits those who pay tax on higher levels and benefits most the Surtax payer. The smaller saver who pays no tax merely gets the disadvantage of 2½ per cent.
    Mr. MacDermot: No. The small saver gets 2½ per cent. on moneys which he has lent through the facility of the Post Office Savings Bank and the Trustee Savings Banks. This is virtually the facility of a current bank account for which he pays no bank charges. He gets that facility to start with and gets a guaranteed fixed 2½ per cent. in addition, together with his capital guaranteed as well.
    This is something which bears no relation, for example, to the position of a person who invests money, whatever it may be, in unit trusts or in company equity shares and for whom the hon. Gentleman proposes the £15 exemption should run. As I have said, the benefit of this and all these schemes would be the greater as one went up the scale. The higher a person's marginal rate of tax, the greater would be the benefit of any scheme of this kind.
    The hon. Gentleman ended by inviting me to lend some encouragement to the thought that the Government had not turned their minds against any form of

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    tax relief for savings. All I can say to him is that, from, all the proposals and schemes we have considered—and he himself knows that the Government have had various proposals put to them about this—we do not as yet see our way to accepting any such proposal, for the reasons I have given at the outset.
    We would need to be assured before we could support any such scheme that it really would attract new savings, that it would not merely result in switching and that the cost involved to the Exchequer would produce a return if not to the Exchequer then certainly to the economy which would justify the expenditure involved. Of course, in particular, we would be attracted by a scheme which would serve to extend the savings habit and encourage people to save who do not save at the moment.
    These are the criteria by which we try to judge proposals of this kind, and I am afraid we have not yet found one which satisfies the criteria.
    11.30 p.m.
    Mr. Richard Wainwright: The Yorkshireman is familiar with the experience that to reach a very desirable destination he finds that he has to drive through miserable and depressing Lancashire drizzle.
    I am sorry that the hon. Gentleman the Member for Ormskirk (Sir D. Glover) is not in his place. What an exhibition he put up. If my great grandfather had had the good fortune to invest £100 on the ground floor of Unilever I would not begrudge people the opportunity to do the same in modern circumstances.
    The hon. Gentleman then produced the hoary old tale that the "boys" of I.C.I., when they get their annual share bonuses, rush to the stockbroker to get rid of them and "go on the loose". I know of no evidence at all that those who disinvest out of their I.C.I. shares do not use the money in a responsible fashion.
    I have many constituents who work for I.C.I. in the dyestuffs division and who share in its annual distributions. My experience is that a number of them do take the view, which is a view that the Conservatives often urge upon us, that it is unwise to have large investments in the company for which one works and have, therefore, got out of their
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    shares at what they regard as a favourable moment and reinvested elsewhere.
    I have personal evidence to that effect, and until somebody produces indications—and there has been none yet—that people are simply, on a large scale, turning their I.C.I. employees' shares into cash, and I shall not believe that particular story.
    Then we have the hon. Member for Heywood and Royton (Mr. Barnett), with his abacus and his beads, protesting that he cannot add up these transactions and do the accountancy. He does great injustice to the splendid people he represents to suggest that news of the computer has not travelled as far as Heywood and Royton. There would be no difficulty at all, with the aid of the computers which the Inland Revenue is already using to some considerable tune, in conducting these particular transactions.
    The hon. Member also parades the old Socialist idea, a modern version of the mercantilist theory, that there is a fixed fund of savings and that there is simply nothing we can do about it. Liberals repudiate this dreary doctrine entirely. Given sufficient incentives, and hope of protection against inflation, the volume of saving can be materially increased, and other countries have proved it.
    The hon. Member for Farnham (Mr. Maurice Macmillan), who gave some tepid support to our new Clause, committed an indiscretion which is often noticeable when proposals on co-owner-ship are being discussed. He suggested—and it has been done before—that we want to shift the worker into management. Not at all. There is no evidence in any Liberal booklet on co-ownership that we want to interfere with management.
    What we are saying—and it is a simple proposition—is that those workers—[HON. MEMBERS: "Young Liberals?"] I include young Liberals. We say that those workers who want to accept the responsibility of being shareholders should be encouraged to do so, and that those workers who prove themselves competent and can gain the confidence of their fellow workers should have an opportunity of taking part in the direction of industry, but not, under these schemes, in the management.
    I come now to the observations of the Financial Secretary. He was eloquent

    727
    about the dangers and difficulties of giving special tax concessions to savings. With this I concur, but if so, why does his right hon. Friend the Chancellor come to the House two years in succession making some parade of increasing the opportunities for investment in National Savings certificates and other forms of national savings with tax advantages?
    If the Government were to appear before us tonight saying that they went along with the Royal Commission in insisting that Income Tax should fall completely impartially on all forms of income, whether saved or not, one could respect their position; but when they continually widen a certain field of tax-free investment, it is inconsistent to object to our scheme on those grounds. They should be willing to admit to their Socialist supporters that every time the Chancellor of the Exchequer increases the opportunities for buying National Savings Certificates he is making a substantial hand-out to Surtax payers.
    The Financial Secretary tried to excite our sympathy on behalf of the worker who would not be able to get his employer to co-operate in making use of the advantages which would flow from our Clause. What are trade unions for? Is this objection ever raised to the enormous tax advantages of pension schemes? It is quite open to a stubborn, obdurate employer to say, "No, I will resist the tax attractions of pension schemes. I will have nothing to do with them. I will stick in my last ditch and pretend that the tax advantages are not there." That choice is open to an employer, but no Government have ever said that on those grounds they would withdraw all the tax concessions—and they are many—which apply to pension schemes.
    The rest of the Financial Secretary's objections, I regret to tell the Committee, were dredged up from the reply of a Conservative Chancellor of the Exchequer to just such a Liberal Clause which was debated in Committee in 1958, and particularly the extraordinary objection that under our scheme it would be possible for somebody who was unwise enough to withdraw a very large amount of savings in any one year to incur Surtax. Indeed, that would be possible.
    728
    If a taxpayer was foolish enough to time his withdrawals so that the whole lot fell in any one tax year, I would think that a little Surtax penalty was what he deserved for his folly. Any taxpayer who was not able so to arrange his withdrawals that some fell on 4th April and some on 6th April would not deserve very serious consideration from the House of Commons.
    The Financial Secretary in concluding at least indicated that he did not have a completely closed mind on the subject. He said that he wanted evidence of a scheme attracting new savings. Let me put this proposal to him, although it does not affect the attitude that my hon. Friends and I will take in the Division Lobby tonight.
    The Financial Secretary and his colleagues are now taking the country to some extent into a policy of financial regionalisation, as we discovered in the debates earlier today. Let him, therefore, try a scheme of this kind in one region of the country. Let him, for preference, take one of the more prolifigate regions where the record of thrift is not as high as it is in my own area. I will not offer him the name of any particular region, but let him go to a region where the rate of savings has been disappoining. Let the scheme be introduced on a regional basis, and my hon. Friends and I are quite prepared to abide by the results.
    Meanwhile, we shall certainly divide in favour of our new clause when the time comes.
    Sir W. Bromley-Davenport: I will not detain the Committee more than one minute, but I would like to take up the Financial Secretary on one statement which he made. He referred to the security to the small saver who put his money in the Post Office. I have never heard people talk such tripe.
    Think of the man who buys a £1 National Savings Certificate, which matures after, say, five or six years. By the time it matures, owing to the depreciation of the and inflation it is worth less than when he bought it. So do not let us have any nonsense about the security of putting money into the Post Office. If, in a depreciating currency, a person, instead of putting his money in the Post Office, invests his money in equities, he

    729
    takes a risk, and may lose everything; on the other hand, he may double or treble his capital. But, after all, it was risk capital that made this country great.
    Question put, That the Clause be read a Second time:—
    The Committee divided: Ayes 124, Noes 178.

    Division No. 366.]

    AYES

    [11.40 p.m.

    Alison, Michael (Barkston Ash)

    Glover, Sir Douglas

    Nicholls, Sir Harmar

    Astor, John

    Gower, Raymond

    Noble, Rt. Hn. Michael

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

    Grant, Anthony

    Osborn, John (Hallam)

    Awdry, Daniel

    Grant-Ferris, R.

    Page, Graham (Crosby)

    Beamish, Col. Sir Tufton

    Gresham Cooke, R.

    Pearson, Sir Frank (Clitheroe)

    Bell, Ronald

    Grieve, Percy

    Pike, Miss Mervyn

    Bennett, Sir Frederic (Torquay)

    Grimond, Rt. Hn. J.

    Pink, R. Bonner

    Berry, Hn. Anthony

    Gurden, Harold

    Powell, Rt. Hn. J. Enoch

    Bessell, Peter

    Hall, John (Wycombe)

    Prior, J. M. L.

    Black, Sir Cyril

    Hamilton, Michael (Salisbury)

    Pym, Francis

    Blaker, Peter

    Harris, Reader (Heston)

    Ramsden, Rt. Hn. James

    Body, Richard

    Harrison, Col. Sir Harwood (Eye)

    Royle, Anthony

    Boyd-Carpenter, Rt. Hn. John

    Hawkins, Paul

    Russell, Sir Ronald

    Boyle, Rt. Hn. Sir Edward

    Heseltine, Michael

    Smith, John

    Braine, Bernard

    Higgins, Terence L.

    Stainton, Keith

    Brinton, Sir Tatton

    Hiley, Joseph

    Bromley-Davenport, Lt.-Col. Sir Walter

    Hobson, Rt. Hn. Sir John

    Steel, David (Roxburgh)

    Brown, Sir Edward (Bath)

    Holland, Philip

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

    Bryan, Paul

    Hooson, Emlyn

    Summers, Sir Spencer

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

    Hunt, John

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

    Buck, Antony (Colchester)

    Hutchison, Michael Clark

    Taylor, Frank (Moss Side)

    Carlisle, Mark

    Jenkin, Patrick (Woodford)

    Temple, John M.

    Clegg, Walter

    Jopling, Michael

    Thatcher, Mrs. Margaret

    Cooke, Robert

    Kimball, Marcus

    Thorpe, Rt. Hn. Jeremy

    Curdle, John

    King, Evelyn (Dorset, S.)

    Tilney, John

    Corfield, F. V.

    Kitson, Timothy

    Turton, Rt. Hn. R. H.

    Costain, A. P.

    Lancaster, Col. C. G.

    van Straubenzee, W. R.

    Crowder, F. P.

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

    Vaughan-Morgan, Rt. Hn. Sir John

    Dance, James

    Lubbock, Eric

    Wainwright, Richard (Coins Valley)

    Davidson, James(Aberdeenshire, W.)

    Mackenzie, Alasdair (Ross & Crom'ty)

    Ward, Dame Irene

    Dean, Paul (Somerset, N.)

    Maclean, Sir Fitzroy

    Weatherill, Bernard

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

    Macleod, Rt. Hn. Iain

    Webster, David

    Doughty, Charles

    Macmillan, Maurice (Farnham)

    White law, Rt. Hn. William

    Eden, Sir John

    Maginnis, John E.

    Wilson, Geoffrey (Truro)

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

    Maude, Angus

    Wolrige-Gordon, Patrick

    Errington, Sir Eric

    Maxwell-Hyslop, R. J.

    Wood, Rt. Hn. Richard

    Eyre, Reginald

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

    Worsley, Marcus

    Farr, John

    Miscampbell, Norman

    Wright, Esmond

    Fletcher-Cooke, Charles

    Monro, Hector

    Wylie, N. R.

    Fortescue, Tim

    More, Jasper

    Foster, Sir John

    Morgan, Geraint (Denbigh)

    TELLERS FOR THE AYES:

    Gilmour, Ian (Norfolk, C.)

    Morrison, Charles (Devizes)

    Dr. M. P. Winstanley and

    Gilmour, Sir John (Fife, E.)

    Murton, Oscar

    Mr. Russell Johnston.

    NOES

    Allaun, Frank (Salford, E.)

    Crossman, Rt. Hn. Richard

    Fraser, Rt. Hn. Tom (Hamilton)

    Allen, Scholefield

    Cullen, Mrs. Alice

    Galpern, Sir Myer

    Anderson, Donald

    Dalyell, Tam

    Gardner, Tony

    Archer, Peter

    Davidson, Arthur (Accrington)

    Ginsburg, David

    Armstrong, Ernest

    Davies, Dr. Ernest (Stretford)

    Gordon Walker, Rt. Hn. P. C.

    Atkinson, Norman (Tottenham)

    Davies, G. Elfed (Rhondda, E.)

    Gray, Dr. Hugh (Yarmouth)

    Bacon, Rt. Hn. Alice

    Davies, Ednyfed Hudson (Conway)

    Gregory, Arnold

    Barrett, Joel

    Davies, Ifor (Gower)

    Grey, Charles (Durham)

    Baxter, William

    de Freitas, Rt. Hn. Sir Geoffrey

    Griffiths, David (Rother Valley)

    Bennett, James (G'gow, Bridgeton)

    Delargy, Hugh

    Hamilton, James (Bothwell)

    Bishop, E. S.

    Dell, Edmund

    Hamling, William

    Blackburn, F.

    Dempsey, James

    Hannan, William

    Booth, Albert

    Dewar, Donald

    Harper, Joseph

    Bottomley, Rt. Hn. Arthur

    Diamond, Rt. Hn. John

    Haseldine, Norman

    Boyden, James

    Dobson, Ray

    Hazell, Bert

    Braddock, Mrs. E. M.

    Doig, Peter

    Hooley, Frank

    Bray, Dr. Jeremy

    Dunn, James A.

    Horner, John

    Brooks, Edwin

    Dunnett, Jack

    Houghton, Rt. Hn. Douglas

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

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

    Howarth, Harry (Wellingborough)

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

    Ellis, John

    Howarth, Robert (Bolton, E.)

    Buchan, Norman

    English, Michael

    Howell, Denis (Small Heath)

    Callaghan, Rt. Hn. James

    Ensor, David

    Howie, W.

    Cant, R. B.

    Faulds, Andrew

    Hoy, James

    Carmichael, Neil

    Fernyhough, E.

    Huckfield, L.

    Coe, Denis

    Fletcher, Ted (Darlington)

    Hughes, Roy (Newport)

    Coleman, Donald

    Foot, Michael (Ebbw Vale)

    Hynd, John

    Conlan, Bernard

    Ford, Ben

    Irvine, A. J. (Edge Hill)

    Crawshaw, Richard

    Forrester, John

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

    Crosland, Rt. Hn. Anthony

    Fowler, Gerry

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

    Jones, J. Idwal (Wrexham)

    Morris, Alfred (Wythenshawe)

    Silverman, Julius (Aston)

    Jones, T. Alec (Rhondda, West)

    Moyle, Roland

    Small, William

    Kelley, Richard

    Newens, Stan

    Snow, Julian

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

    Oakes, Gordon

    Steele, Thomas (Dunbartonshire, W.)

    Leadbitter, Ted

    Ogden, Eric

    Stonehouse, John

    Ledger, Ron

    O'Malley, Brian

    Thomas, George (Cardiff, W.)

    Lee, John (Reading)

    Orbach, Maurice

    Thornton, Ernest

    Lever, L. M. (Ardwick)

    Orme, Stanley

    Tinn, James

    Lewis, Arthur (W. Ham, N.)

    Oswald, Thomas

    Urwin, T. W.

    Lewis, Ron (Carlisle)

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

    Varley, Eric G.

    Lomas, Kenneth

    Lyon, Alexander w. (York)

    Owen, Will (Morpeth)

    Wainwright, Edwin (Dearne Valley)

    Lyons, Edward (Bradford, E.)

    Page, Derek (King's Lynn)

    Walden, Brian (All Saints)

    McBride, Neil

    Palmer, Arthur

    Walker, Harold (Doncaster)

    McCann, John

    Parkyn, Brian (Bedford)

    Watkins, David (Consett)

    MacDermot, Niall

    Pavitt, Laurence

    Watkins, Tudor (Brecon & Radnor)

    Macdonald, A. H.

    Pentland, Norman

    Well beloved, James

    McGuire, Michael

    Prentice, Rt. Hn. R. E.

    Wells, William (Walsall, N.)

    Mackenzie, Gregor (Rutherglen)

    Price, William (Rugby)

    Whitaker, Ben

    Mackintosh, John P.

    Probert, Arthur

    Whitlock, William

    Maclennan, Robert

    Rees, Merlyn

    Williams, Alan (Swansea, W.)

    McNamara, C. Kevin

    Rhodes, Geoffrey

    Williams, Clifford (Abertillery)

    Mahon, Peter (Preston, S.)

    Roberts, Goronwy (Caernarvon)

    Williams, Mrs. Shirley (Hitchin)

    Marion, Simon (Bootle)

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

    Wilson, William (Coventry, S.)

    Mallalieu, E. L. (Brigg)

    Rose, Paul

    Winnick, David

    Manuel, Archie

    Ross, Rt. Hn. William

    Winterbottom, R. E.

    Mapp, Charles

    Rowland, Christopher (Meriden)

    Woodburn, Rt. Hn. A.

    Maxwell, Robert

    Rowlands, E. (Cardiff, N.)

    Woof, Robert

    Mendelson, J. J.

    Sheldon, Robert

    Yates, Victor

    Millan, Bruce

    Shore, Peter (Stepney)

    Miller, Dr. M. S.

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

    TELLERS FOR THE NOES:

    Morgan, Elystan (Cardiganshire)

    Silkin, Rt. Hn. John (Deptford)

    Mr. Walter Harrison and

    Mr. Charles R. Morris.

    Mr. Iain Macleod: I beg to move,
    That the Chairman do report Progress and ask leave to sit again.
    This is an obvious natural break. The next Clause concerns tax relief for the blind. It is one to which we attach great importance, and we would like to start the day with it. If the Chancellor is willing, I suggest that we stop now.
    Mr. Diamond: I have no hesitation in agreeing with the first part of the right hon. Gentleman's statement. It is a suit-
    732
    able time at which to end our labours. We have not, numerically, made an enormous amount of progress, but I recognise that the new Clauses that we have been discussing are substantial ones, and I feel sure that the Committee will want to make perhaps even more rapid progress tomorrow. In that spirit, I assent to the right hon. Gentleman's Motion.
    Question put and agreed to.
    Committee report Progress: to sit again Tomorrow.

HEALTH CHECK WEEKS
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]
11.52 p.m.
Mrs. Joyce Butler: In the present organisation of the National Health Service, emphasis is placed primarily on diagnosis and treatment in medical care, while less attention is paid to prevention, after-care and rehabilitation. Although primary prevention is the ideal to be aimed at, it is limited by lack of finance and knowledge of preventive procedure. Only quite recently the Office of Health Economics has reminded us how little we know about the effects of nutrition upon health.
Last week the Minister of Transport reminded us that the medical assessments of the dangers of exhaust fumes are by no means known. Therefore, with so many uncertainties in the sphere of preventive medicine, early diagnosis has rather special merit, in that it makes treatment available earlier on the time-scale of the disease developing.
We are familar with mass radiography units, which are universally used throughout the country and widely accepted. These give early warning of possible lung disease such as, tuberculosis. Similarly, we have in recent years seen a great development in clinics for cervical cytology. These clinics, which have been established in various parts of the country, are interesting in that they have grown very rapidly.
There are still variations between one region and another, and it may be possible for the Parliamentary Secretary, in replying to this debate, to say a word about these regional variations. The interesting thing is that the Minister of Health has sent a circular to local authorities reminding them of the importance of establishing these clinics. The clinics established for cervical cytology have in many cases gone on to take tests for the prevention of breast cancer, and in some cases diabetes and other diseases. This is one aspect of early warning which is taking place.
The other aspect is in the sphere of education and research, where the findings with regard to the dangers of tobacco smoking in relation to lung cancer are
734
well known. Less well-known, but equally important, is the work which has been done on bladder cancer in the rubber industry and asbestosis and lung cancer in industries associated with asbestos. I mention these because they are all fields of early diagnosis, and in a sense preventive medicine, which have had a tremendously important effect on the greatest scourge of health at the present, the spectre of cancer, and a fact which I think should be more widely known than it is is that largely because of early detection and early treatment 30,000 cases of cancer are cured every year.
It is not only tuberculosis and cancer which can be prevented by early warning devices of this kind. Other diseases can be detected, and a very interesting experiment was begun in Rotherham in 1962 when attempts were first made to introduce diabetes diagnosis at the same time as the mass X-rays took place. Every year since then the service has been available for short periods, and further techniques have been added each year.
In the autumn of 1966, in nine days 5,763 people took an average of five tests from the 11 that were available. Of those attending, women predominated in the ratio of 2 to 1, but the failure rate was twice as high for men as for women. The individual tests were for anaemia, chest X-ray, diabetes, vision, glaucoma, hearing, artery, heart, and lung function, cervical cytology, breast cancer, and mental health. More than 1,000 failed at least one test, and one man in four and one woman in seven, were found to have hidden illnesses.
The list of cases found makes very interesting reading, because there were 300 cases of suspected diabetes, 18 men needed urgent attention for hypertension, five had active tuberculosis, two women had cervical cancer, 128 had diseases of the chest, and 50 women were referred for further breast checks. Of the 1,825 people who took a mental health test, 486 had some degree of mental trouble, one in 16 women, and one in 15 men.
A further interesting point is that the cost of this service is about 10s. per test, which is very reasonable. The medical officer of health for Rotherham stresses the importance of adequate mechanism for follow-up, and he also stresses the

735
importance of co-operation between the three sections of the service, that is, the local medical officer of health department, the hospital service, and the general practitioner. He calls it "making a slight dent in the problem of early diagnosis and preventive medicine", but the public response indicates that it is very much more than a slight dent. It seems to be something of a new wind blowing through the Health Service. The public response has been quite amazing.
I have spoken to the hon. Member for Rotherham (Mr. O'Malley) and to other hon. Members who were at Rotherham when these clinics were held. They were quite staggered to see the queues of people who went there. They did so quite informally and this is one of the great things about the Rotherham scheme. People do not have to make appointments to attend. It is all very informal. Their fears are brought into the open, and they are able to have something done about them; they are able to have something done about their hidden fears.
One of the problems about cervical cytology has been in persuading the public to accept the procedures when they have been available, but there was no problem in persuading members of the public to accept mass screening in the Rotherham experiment. There has been action elsewhere, and in Epsom an experimental scheme was run for ten days in September last year, with about five thousand attendances, fewer than a thousand of those being from men, pro-ably because the idea had got around that the tests were for women only. Some women waited for six hours to take a test.
There has been screening for breast cancer, diabetes, cervical smears and other diseases in some clinics, and at Epsom, eleven months' planning was involved. The cost for the five thousand was about £1,500.
Salford has been running multi-clinics for ten years, and last year, 3,753 patients attended over a six weeks period for tests which included vision, hearing, diabetes, anaemia, chest, and cervical smears, and the cost amounted only to 3s. in the £ rate. In Bedford, and Chester-le-Street, consideration is being
736
given to similar multi-clinics, and in Darlington there has been a screening clinic and they are considering there what further steps can be taken.
There has been a great surge of interest in the Press and among members of the public since details of the Rotherham scheme were published, and it interested people so much that more and more they are asking, "Why cannot we have something similar in our area?"
The Minister has so far refused by means of question and answer in the House to do anything, but could the Parliamentary Secretary tonight say that he will give a little more thought and consideration to the kind of facts which I have produced and to other information which is available? There have been special "weeks" and mass screening tests have been carried out and information has been sent to local medical officers of health asking them to consider staging something similar in their own areas wherever it might be practical to encourage them to do so. It has been done with cervical screening and, as the Parliamentary Secretary knows, there is tremendous variation between one area and another in what is done. The Medical Officer of Health of Darlington talks of future action which will emerge from the screening tests carried out in his area.
It is not only the results which are produced from the holding of these "weeks" in the bringing forward of cases and the giving of treatment which is appropriate, but there is also the possibility of developing a further measure of preventive medicine in the health service. We can learn from the varied experiences; ideas are formed, and there are lines of development for future work; and the cost of it all is comparatively small. The Kaiser Foundation Clinic in California estimates a cost of £9 per patient, and has computers linked with four experimental centres in different parts of the United States, so important do the Americans consider this type of preventive medical work. It is not desirable that the Minister should think in such terms, but it is important that all medical officers of health in different parts of this country should think in terms of something of the kind of which I have spoken tonight.

737
Therefore, I urge him to reconsider this question. I know that he is concerned about the manpower difficulties, but I am assured by the medical officers of Rotherham and other places that, when the staff are keen, they will put in the extra time and effort for a week or ten days and the follow-up and that this can be done out of limited resources. Our limited resources of general practitioners and hospitals will not permit mass preventive medicine, but short sharp courses along the lines of Rotherham's are possible.
I therefore ask him to look at this again, and, if he cannot give an answer tonight, perhaps he would put it to the Minister again to see whether some circular on these lines can be sent to medical officers of health.
12.6 a.m.
The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow): The House is indebted to my hon. Friend the Member for Wood Green (Mrs. Joyce Butler) for raising this important matter, and if I cannot give the assurance which she would like about the circular tonight she will know that the debate will be examined by the various authorities. My right hon. Friend has devoted a great deal of attention to these check weeks and no doubt will be formulating a thorough policy which will take account of her points.
I am glad of the opportunity to explain why we are not encouraging all local authorities to follow the example of Rotherham and others. It is not because we underrate the importance of preventive medicine: that is a misconception. On the contrary, we believe that specialist weeks may be effective for health checks and we approve of the enterprise of Rotherham and other authorities.
My right hon. Friend has been advised by his Standing Medical Advisory Committee that screening of the general public should be undertaken only for conditions which can be clearly diagnosed and for which effective treatment is available. We accepted this advice and are working in this framework.
Satisfactory screening tests exist for only a limited number of conditions. A number of requirements has to be met before general screening for a particular disease can be recommended. The disease must, first, have a recognisable
738
latent or early symptomatic stage. Second, the test must be reliable and capable of being applied widely and efficiently. Rotherham's medical officer of health himself has described many of these tests as fairly blunt instruments.
Second, it is no use having tests which fail to detect people who have the condition, as they may then be lulled into a false sense of security, or an inaccurate one, since many patients will then have to undergo further full-scale examinations or may be treated unnecessarily. The efficiency of the available tests varies; some are more reliable than others. Third, we have to be satisfied that further treatment will prevent or alleviate the disease.
In the light of this situation, our advisers have considered the present screening tests for various diseases. Certain methods are fully accepted and have been in use for many years. Mass radiography for the detection of tuberculosis and other chest diseases is probably the best-known example. Even here, however, experience has shown that best results come from concentrating on certain groups known to be vulnerable rather than routine screening at regular intervals of the public as a whole.
Screening tests are widely used in the maternity and child welfare services. Mothers are screened at ante-natal and post-natal clinics for a wide range of conditions. Young babies are screened for phenylketonuria, hearing defects and other congenital abnormalities. Older children are examined by the school health services.
During the last two or three years exfoliative cytology for cervical cancer has been accepted, on the advice of the Standing Medical Advisory Committee, as a test which should be offered to all women at risk. My hon. Friend knows of the progress that has been made in this sphere, and I pay tribute to her for her work in this matter. As a result of her work and the work of others, the public consciousness has been alerted to the need to provide an overall service.
We keep in close touch with scientific developments in this field. For several years we have taken the initiative, in collaboration with the Medical Research Council, in arranging research to establish the value of screening for various

739
diseases. We are financing a large number of special studies and will continue to encourage studies wherever these seem likely to produce useful results.
When the medical requirements have been satisfied, we have also to be satisfied that the diagnostic facilities and facilities for treatment will be readily available to all those who have been offered the tests. My hon. Friend is well aware that when we first started the smear-taking service for cervical cancer it had to be restricted to certain groups of women because of the shortage of laboratory space and of technicians to examine the smears, but these shortages are now being overcome and more and more local authorities are able to offer the test to women of all ages.
Screening for cervical cancer is, in fact, a good example of a well-validated testing procedure which can throw up cases for early and effective treatment. It is a service to which, as my hon. Friend knows, my right hon. Friend attaches great importance. It has grown at a rapid rate. The figures for 31st December, 1966, are available and they show that the annual rate of screening in England and Wales was over 1,350,000 tests, an increase of 11 per cent. over the figure for six months previously.
Progress, therefore, continues to be good. There are, of course, variations between regions and between areas within the regions. The rate of development depends on many interlocking and local factors. We are, however, keeping a careful watch on the situation and encouraging progress in the less well-served areas. I hope my hon. Friend will accept that my right hon. Friend and I are both keenly interest in this subject, but I do not want to go into this in too much detail tonight because cervical screening is only one of the subjects germane to this debate.
Checking on people's health is, therefore, a routine in the maternity and child welfare services, in the mass miniature radiography service and in the cervical cytology service. Some local authorities also organise testing for diabetes and breast cancer or run health clinics of an advisory nature for the elderly. The special feature of Rotherham is that it organises its screening services around a week or fortnight instead
740
of throughout the year. There are advantages and disadvantages in this course.
One particular drawback of organising the screening in one intensive period is that a load is suddenly thrown on the hospital and general practitioner services. Another drawback is that it is impossible, in the period of one or two weeks each year, to make available a screening service for all people at risk. Such screening weeks have long been tried in other countries, and my hon. Friend mentioned the Kaiser scheme in America, but emphasis is now being laid on regular services for conditions where the worth is considered proved.
One of the studies which we are undertaking is research into the organisation of screeening through general practice. We are investigating whether patients in a group practice can be invited by their own doctors to attend for a number of screening examinations, at the end of which their results will be reviewed by their own doctors. This is not to play down the valuable and necessary work of local authorities, but we are not satisfied that all screening should be carried out through the public health service.
For these reasons also, research workers from our Social Science Research Unit attended the last clinic at Rotherham to carry out studies into the socioeconomic aspects. They sought to find out what kind of people came to the clinic, and whether they were or were not a typical cross-section of the population; what motivated them in choosing to attend, and what it cost them in time and effort. The unit also set out to assess some of the direct clinic costs in terms of the professional times and skills that were used. The data from this research will, we hope, supplement the report from the medical officer of health and, when analysed in conjunction with it, should enable us to make a tentative step towards an evaluation of these weeks.
We are most interested in the work that is being done at Rotherham, and the way it is organised. Medical and other officers from the Department have gone to Rotherham to see the clinics, and have been in constant touch with Dr. Donaldson, the Medical Officer of Health. In February of this year, my right hon. Friend saw my hon. Friend

741
the Member for Rotherham (Mr. O'Malley) and officers and representatives of the council to discuss the whole problem. We should like to pay tribute to the energy and enthusiasm of the organisers concerned.
Rotherham has been running health weeks for four years. At the first week, in November, 1963, two tests only were offered—chest X-ray for tuberculosis, and diabetes. In 1964, there were additional tests for anaemia, cervical cancer and hearing. By 1965, the week had been extended to a fortnight, and tests added for glaucoma, breast cancer, lung functions and vision. Last year, the clinic ran also for a fortnight and had 11 tests, the extra two being the examination of blood pressure and a questionnaire for mental illness.
During all of these weeks, the local authority has worked in very close cooperation with the local general medical practitioners and with the Sheffield Regional Hospital Board. This is of the utmost importance because of the work which will be thrown on the hospital laboratories and out-patient departments, and on the general practitioners in following up cases.
There is, perhaps, one point worth making here. Although at Rotherham 11 different tests were offered, not all of them were undergone by all who presented themselves. Indeed, I understand that the choice whether to have each test offered was left to the individual patient. That seems to me right and proper; one cannot compel people to have these tests. But it does mean that a patient who presented himself might choose in ignorance not to have a test which, in fact, he ought to have.
At the moment, we are awaiting a report from the Medical Officer of Health on the recent results. We are aware that
742
reports have appeared in the Press about this year's findings, but these were preliminary findings only. Since the Medical Officer of Health's report, which will contain his commentary on and discussion of the figures, has yet to be published I do not think that it is right to comment at this state on the results which have appeared. We have them in the Ministry, and are studying them closely in conjunction with our own research.
Let me sum up our position. We are advised, and we agree, that screening of the general public should be undertaken only for conditions which can be clearly and accurately diagnosed, and except in these circumstances screening of the general public can do harm and is, in any case, a wasteful use of resources both local and national. For this reason, I am not convinced on present evidence that this method of detecting disease should be recommended to health authorities generally. We are, however, most interested in the work that is being done by local authorities in this field and are following it closely.
In all that I have said, I emphasise most strongly that nothing should be construed as being in any way a criticism of what has been done over the last few years at Rotherham; that nothing should be construed as casting any doubt upon the validity of the results they are obtaining. All that is in our mind, as I have explained in some detail, is the doubt whether, taking account of the sudden burdens thrown on the analytical and treatment services, we are in a position with great conviction to recommend to authorities generally weeks such as have been discussed and mentioned by my hon. Friend.
Question put and agreed to.
Adjourned accordingly at nineteen minutes past Twelve o'clock.

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

INDONESIA AND FAR EAST FORCES' NUMBERS
2.36 p.m.
LORD REDMAYNE: 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 were the total number of British troops in Hong Kong, Singapore, Western Malaysia and Eastern Malaysia, respectively, immediately before the confrontation with Indonesia began.]
THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON): My Lords, the approximate strengths of the Services in Hong Kong, Singapore and Western Malaysia before confrontation, which I have taken as at September 30, 1962, were as follows: Hong Kong, 9,500; Singapore, 27,000, and West Malaysia, 13,500. The figures include Gurkhas and locally enlisted personnel, and ships on sea service based on Hong Kong and Singapore. There were no British troops stationed in what is now Eastern Malaysia.
LORD REDMAYNE: My Lords, I thank the noble Lord for that reply. All I really want to get is a like-for-like comparison as between the situation before confrontation and that after confrontation. I am a little confused by the statement made by the Secretary of State in another place on May 1, in that he referred to men and women working in and for the Services. May I therefore ask the noble Lord whether he can give me a straight comparison in one form or another, either in terms of Servicemen, or in terms of Servicemen with civilians?
LORD SHACKLETON: My Lords, I should like to help the noble Lord, but I do not find it as easy as I should wish to meet the particular points he is asking.
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However, I will give him what information I can, although, strictly speaking, his points do not arise out of this Question. What Mr. Healey said in his reply in another place about a reduction to 20,000 was, I am afraid, a slip of the tongue, and a correction was made in the OFFICIAL REPORT of another place on May 5. But I do not blame the noble Lord for not spotting it, because I myself had not spotted the correction.
On the comparisons, my right honourable friend said that he expects the total of the three forces in Singapore and Malaysia, Servicemen and civilians, including crews on sea service in the Far East and locally employed personnel, will be about 70,000 in April, 1968. This does not include Hong Kong, where there are about 12,000 Servicemen and civilians. The total strength after confrontation, which was at the highest point, taking into account all the Services and civilians was 102,000 on July 1, 1966. In relation to that, the noble Lord will recall that there was this anticipated reduction of a total of 20,000—a reduction by that number. I am afraid that I may not have cleared the noble Lord's mind very much. If he would like to pursue this matter with a Question on the specific point he has in mind, I will try to help him a little more
LORD RHODES: My Lords, is it not true to say that approximately 35,000 civilians are employed by the three Services in Singapore alone?
LORD SHACKLETON: My Lords, again this is going a little wide of the Question, which relates to the troops before the Indonesian confrontation. I think it would be difficult to break down the exact number, but the noble Lord will not be far out in his assumption. But I rather think that my right honourable friend, so far as the future is concerned, has not yet forecast what the final split will be.
THE EARL OF SELKIRK: My Lords, may I ask whether I should be correct in deducing that the figure before confrontation in Malaysia and Singapore was about 30,000, and the figure in Malaysia and Singapore to-day is equally about 30,000?
LORD SHACKLETON: Is the noble Earl referring to troops or to troops and civilians?
THE EARL OF SELKIRK: Troops. Service personnel.
LORD SHACKLETON: My Lords, on a quick addition, the figure for Singapore and Malaysia was in 1962 about 50,000, and at the end of confrontation, if I can do my mathematics quickly enough, it would seem to be something over 60,000. What I cannot tell him is the precise position of the run-down at the moment. But it is of that order of difference between the two figures so far as troops are concerned.

DUAL-CARRIAGEWAY ROADS CENTRAL RESERVE
2.41 p.m.
LORD FARINGDON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether the research into the best treatment of the central reserve on dual carriageway roads and motorways has been completed; and, if so, what conclusions can be drawn.]
LORD SHEPHERD: My Lords, the experiments with the use of shrubs as an anti-dazzle screen are continuing on the Medway Motorway (M.2). Results so far have shown that with very careful ground preparation certain species of shrubs can survive in conditions prevailing on a motorway central reserve, particularly if they are protected by screens; coarse hessian has been used for some time. After another winter the screens will be removed to see whether growth continues or the plants die back. Experiments on M.1 with various crash barriers, and at the Road Research Laboratory into new and improved types of barrier, are still continuing. Conclusive evidence on all these trials will take some time to produce and is not likely to be available in the near future.
LORD FARINGDON: My Lords, I thank the noble Lord for his frankness. It is more satisfactory to be told once and for all that it will take some time, than to have the usual answer that the information will be available in a few months. I am not quite clear from what the noble Lord said—and perhaps he can enlighten me—what is meant by "barrier"?
LORD SHEPHERD: My Lords, I hope that the noble Lord appreciates—and I think he will if he is a gardener—that not all the plants that one puts in necessarily grow and flourish, and this is one of the difficulties that has to be faced.
VISCOUNT GOSCHEN: The green-fingered Shepherd!
LORD SHEPHERD: This is one of the difficulties experienced on the Medway motorway. In fact, we put in eleven different types of shrubs and three of them did not survive under the prevailing conditions. To deal with the second part of the noble Lord's supplementary question, the barrier to which I was referring in the latter part of my Answer was a steel barrier, which is erected particularly where the centre verge is very narrow.
LORD FARINGDON: My Lords, do these steel barriers act also as antidazzle barriers?
LORD SHEPHERD: My Lords, we are looking into this question to see that the screens not only form anti-dazzle barriers but also act as a protection for traffic moving on the two carriageways.
LORD NUGENT OF GUILDFORD: My Lords, is the noble Lord aware that we sympathise with him in these difficulties and wish well the work that is being carried out to find plants that will survive salt, and so on, which comes up off the roads in the winter? But is he also aware that on the M.4 a different kind of structure has been put on the central reserve; namely, lamp standards? Is that really a wise thing to do? Might they not be the cause of serious accidents?
LORD SHEPHERD: My Lords, if the noble Lord would put down a Question I will seek to answer it, after making the necessary inquiries. It is some time since I travelled on that road, and I am not in a position to answer that question at the moment.
LORD ST. JUST: My Lords, is the noble Lord aware that shrubs are not so effective as anti-dazzle netting, and that such netting and crash barriers appear to be the answer on all Continental motorways?
LORD SHEPHERD: My Lords, I think that probably material forms of structure may be useful, and in some cases

915
are perhaps better than shrubs. On the other hand, shrubs eventually will give some form of beauty to what I think are rather monotonous slabs of concrete, and certainly they will help to prevent drivers from being distracted by the type of road. With regard to crash barriers, I would agree with what the noble Lord said, but it often depends on the width of the carriageway. One other factor that must be borne in mind is that if there are long stretches of barriers there is a chance that the driver who is on the fast lane will have his vision obscured for quite some distance.
LORD MANCROFT: My Lords, can the noble Lord tell us how the shrub survival ratio of eight to three compares with the ratio of survival of human beings on the same road?
LORD SHEPHERD: Not without notice, my Lords.
LORD BROCKWAY: My Lords, following that answer, may I ask my noble friend whether the Government will give any consideration to the beauty of these roads which tend to become monotonous? I am thinking particularly of the A.40, at the approach to Denham, where the flowering shrubs are a great addition to the attractiveness of the road.
LORD SHEPHERD: Certainly, my Lords.
LORD REDMAYNE: My Lords, may I ask the noble Lord whether consideration is being given to the use of the climbing rose, as giving both amenity value and just the right elasticity to absorb shock? This is a perfectly serious point. Roses are of even greater value than many other forms of barrier.
LORD SHEPHERD: My Lords, I believe that this type of plant is used in the United States of America, but I gather that it needs to be a fairly deep bush. One of our misfortunes in this country is that we have had to restrict the width of the centre verges, because if we go to (I think it is) nearly 52 feet, which is the normal width in the United States, this would decrease the land in the district of the motorway by some 17 per cent., and I think that those in this House who are farmers would certainly raise objections to it.
VISCOUNT BRENTFORD: My Lords, may I ask two short questions? First, can the noble Lord give any forecast at all as to the date when conclusions will be reached on these matters? Secondly, is it only on the M.1 and the M.2 that these experiments have been carried out?
LORD SHEPHERD: My Lords, I think the experiments are taking place on a number of our motorways, and also at the Road Research Laboratory. As to when conclusions can be reached, I will be quite frank with the noble Lord. I think that it will be some time, because there are many disadvantages to steel barriers, and research is being done to find a form of structure which will reduce the disadvantage to the vehicle that hits the barrier and is then thrown straight back into the following traffic.

ANGUILLA UNREST
2.49 p.m.
LORD ROWLEY: 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 representations have been received from the Prime Minister of St. Kitts with regard to the situation in the Caribbean island of Anguilla.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH AFFAIRS (LORD BESWICK): My Lords, the Premier of St. Kitts, Nevis and Anguilla informed Her Majesty's Government of the situation in Anguilla on May 30. His message stated among other things that the majority of the police detachment of 13 had left Anguilla and the airstrip had been blocked, thus preventing the Chief of Police from landing. A grave threat to the authority of Government existed and the Government's resources of police were totally inadequate. The Premier asked for the assistance of policemen or soldiers in the task of restoring law and order in Anguilla. We are at present discussing all aspects of this situation with the Deputy Premier, who has come to London at the Premier's request, and with other Commonwealth countries in the Caribbean.
LORD ROWLEY: My Lords, can my noble friend indicate the source of the trouble in this island? Do they have a measure of self-government? Is the trouble economic or constitutional? What is causing the trouble?
LORD BESWICK: My Lords, first may I thank my noble friend for withdrawing his Question on Monday, when we heard that the Deputy Premier was coming. It was hoped that discussions with him would have been completed by now, but I am sorry to have to say that they are still going on.
The trouble about which the noble Lord asks stems from a general fear that the island will be neglected by the central Government of the new Associated State now that the authority of the United Kingdom has been removed. It is therefore, basically, an economic fear. But there is a particular fear, which was in fact expressed at the time we had discussions on the Bill in this House, that arrangements for local government agreed upon at the London Conference in May, 1966, would not be put into practice.
LORD OGMORE: My Lords, has the noble Lord given all the information we need in this matter? Is it not a fact that firing has broken out at St. Kitts itself, that virtual martial law has been declared, and that the guard of a power station has been injured by machine-gun fire from what some people call terrorists, whoever they may be? Is it not a fact, too, that the Prime Minister may need police and troops not only for Anguilla but for his own island, St. Kitts?
LORD BESWICK: My Lords, the Question I answered was, of course, the one on the Order Paper. So far as the situation in St. Kitts is concerned, it is true that a situation has developed there since Mr. Southwell arrived here: there was an outbreak of firing on the Sunday night. It may well be that some assistance will be required there, and that matter we are also considering.
THE EARL OF MANSFIELD: My Lords, will Her Majesty's Government consider the advisability of sending out a delegation to St. Kitts and the island of Anguilla so as to determine the real causes of the trouble and what the grievances are, and whether they are genuine?
LORD BESWICK: My Lords, I am not sure that that would be the best way of dealing with this problem. Possibly a more hopeful line of approach would be to get some of the other Caribbean Governments in the area to consider the situation, and we are in fact in consultation with them at the present time. If their good offices are proffered we, for our part, shall be happy to avail ourselves of them.
LORD FARINGDON: My Lords, I wonder whether the noble Lord has seen reports in some papers to the effect that, apart from the ejection of the police, there has been no deterioration of law and order in Anguilla.
LORD BESWICK: My Lords, it is perfectly true that, the 13 police having left, the remainder of the island seem to be governing their affairs quite well.
LORD ROWLEY: My Lords, would my noble friend consider giving me a fuller answer if I put down a Question next week? Does he consider that discussions will be over by then?
LORD BESWICK: My Lords, I should certainly hope so, and I shall be glad to give any more information available.
LORD OGMORE: My Lords, would the noble Lord consider giving information on a wider field, as I said before. Is it not a fact that to treat this one island, Anguilla, where there is peace at the moment, in isolation is to mislead the House, because the real flare-up at the moment is in St. Kitts, not Anguilla.
LORD BESWICK: My Lords, with respect I think the noble Lord is mistaken. There was an associated Government established there of the three islands. There was difficulty at the time in Anguilla, which wanted a measure of local government. This local government was promised to them. So far, the machinery for local government in Anguilla has not been established. We should like to see it established as quickly as possible, and the discussions, to which my noble friend referred, relate to that separate problem on that separate island. If the noble Lord cares to put a question down about St. Kitts I shall be glad to answer it.
THE EARL OF SELKIRK: My Lords, can the noble Lord confirm that we have

919
no residual responsibility for internal security at all?
LORD BESWICK: My Lords, our responsibility is for external affairs.

FLASHING LIGHTS FOR DOCTORS' CARS
2.56 p.m.
LORD NUGENT OF GUILDFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they intend to authorise a special priority flashing light system for doctors' motor cars; and, if so, how they propose to control it.]
LORD SHEPHERD: My Lords, the British Medical Association have recently been informed that there are no legal or technical objections to the use of a distinctive flashing lamp which has been developed privately for use on doctors' motor cars. Use of such a lamp would not confer special privileges on doctors so far as traffic regulations are concerned but would be intended to indicate that the doctor is seeking the co-operation of other road users and the police to enable him to gain easier passage through congested traffic to answer an emergency call. The Ministry of Transport is consulting the Home Office in order to ascertain what assistance the police will be able to give. It is the intention that the British Medical Association should control the sale and distribution of these lamps.
LORD NUGENT OF GUILDFORD: My Lords, may I thank the noble Lord for explaining the intention behind this idea? While I sympathise with the intention, is the noble Lord aware that there seem to be two serious objections to encouraging the use of priority lights on motor cars: first, that it may not be understood and may therefore cause confusion; and, secondly, that in so far as it is effective in getting priority in traffic is there not a danger that it may be used by other people, by criminals, by unscrupulous people who wish to gain the priority for themselves? Is it really wise to encourage such priorities?
LORD SHEPHERD: My Lords, if I am right in my reading of the Press and
920
the representations that have been made to the Minister of Health and the Minister of Transport, I think there is wide sympathy for doctors, particularly when they are meeting emergency calls. The British Medical Council saw my right honourable friend the Minister of Transport and put these proposals to him. This will be a special lamp, issued under a special patent, and it will be within the control of the British Medical Association. Of course, things could go wrong if the British Medical Association were to issue these lamps freely or under no particular control, but I do not believe this will be so. The noble Lord may be right in saying that certain lamps could be copied by criminals and the like, but considering the problem of the doctors I think it is a risk worth running at this stage. If there is widespread abuse no doubt we shall have to consider the position.
LORD NUGENT OF GUILDFORD: My Lords, may I ask the noble Lord one further question? Is he aware that where priorities are allowed for vehicles now they are attached to a particular vehicle, like a fire engine or ambulance, easily recognised, and that is what makes the system perfectly satisfactory? Are there not bound to be dangers in a system of this kind?
VISCOUNT DILHORNE: My Lords, can the noble Lord tell us what colour these lamps will be?
LORD SHEPHERD: My Lords, the Government, and in particular my right honourable friend, recognise some of the difficulties and dangers that may arise from this arrangement; but, on the other hand, there is widespread sympathy and an undoubted need for something to be done to make the work of doctors easier, particularly when they are answering emergency calls, and we should seek to do something. Certainly, if this arrangement is abused other steps may have to be taken. In reply to the question of the noble Viscount I may say that these will be lamps with a green light in the forward position and a red cross to the rear. It will be quite distinctive from any other form of blue or orange light.
LORD BALFOUR OF INCHRYE: My Lords, is it really wise to increase the proliferation of these flashing light? Already, many garage repair cars and lorries

921
carry them. Are we to understand that these lamps convey no statutory privilege to the users, and, if so, is there anything to prevent dentists, midwives and nurses all claiming an equal right to use them? Would not the best way of helping doctors be if the Ministry of Transport arranged special parking facilities for doctors when they are visiting their patients' houses instead of harrassing them as at present?
LORD SHEPHERD: My Lords, the noble Lord was trying to be constructive at least in the first part of his question but I fear he rather spoiled his supplementary question by making, I thought, a rather crude statement. Obviously, the Government and my right honourable friend wish to help the doctors, but clearly we cannot provide parking spaces for doctors in every street in every town throughout the country. What we are seeking to do—and there is possibility of abuse here, and certain difficulty—is to help the doctors. If a change is found to be necessary, then we shall have to consider a change after consultation with the British Medical Association. We are trying to help the doctors, and I am surprised that there is so much criticism of our attempts to do so.
LORD SEGAL: My Lords, is my noble friend aware that there is a real need for some degree of priority in areas of severe traffic congestion; that this concession need not be universal, and that the risk of abuse is negligible so long as the issue is left entirely in the hands of authorised professional bodies?
LORD SHEPHERD: My Lords, may I make it clear to my noble friend that this light does not give priority. All it does is to indicate that in the car there is a doctor answering an urgent call, who is seeking to obtain the co-operation of the police and other road users.
LORD DERWENT: My Lords, I think I understood the noble Lord correctly, but was it not rather unwise of the Minister of Transport to give this scheme her blessing before consulting the police? I think the noble Lord said that the Ministry were now going to consult the police, which to me seems the wrong way round.
LORD SHEPHERD: My Lords, I think the noble Lord will see that what
922
I said was that we are going to consult with the police to see what assistance they are able to give when this light is made available to the doctors.
LORD SOMERS: My Lords, I did not quite hear the noble Lord's original Answer. Did he say that this would not confer any extra privileges on the doctors, such as passing through traffic lights or passing to the right of islands, and so on?
LORD SHEPHERD: The noble Lord is quite correct.
BARONESS HYLTON-FOSTER: My Lords, did I understand the noble Lord to say that the red cross would be on the back of a green light? I think he will remember that under the Army Council rules and the Geneva Convention the red cross has to have a white background, and also has to be the subject of permission before it can be used.
LORD SHEPHERD: My Lords, the light will be green in the front; the part of the lamp which is facing forward will be green. On the lamp facing to the rear of the car there will be a red cross on a white background.
VISCOUNT BRENTFORD: My Lords, if there is no legal or other objection to having flashing lights on cars, what is the justification for giving the B.M.A. a monopoly of this description?
LORD SHEPHERD: My Lords, we are not giving the B.M.A. a monopoly. The noble Viscount himself has indicated that there is at the moment no statutory prohibition against putting flashing lights on a car. But this would be a recognised lamp, I hope recognised by the public and the police, and put on the car for purposes with which we hope everyone will agree.
LORD BOOTHBY: My Lords, this is a Starred Question. We have now been debating—
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, I was about to suggest that perhaps the House has had about enough of this for this afternoon.
SEVERAL NOBLE LORDS: Hear, hear!

GIBRALTAR
LORD SHEPHERD: My Lords, at about 3.30 p.m. my noble friend Lord Beswick will be making a Statement on a referendum from Gibraltar.
CITY OF LONDON (VARIOUS POWERS) BILL [H.L.]
Read 3a and passed, and sent to the Commons.
WIRELESS TELEGRAPHY BILL
Brought from the Commons; read 1a, and to be printed.

SCIENCE AND TECHNOLOGY
3.5 p.m.
THE EARL OF BESSBOROUGH THE EARL OF BESSBOROUGH rose to call attention to the administration of Government science and technology; the division of responsibility between the Department of Education and Science and the Ministry of Technology, and the Report of the Working Party on Liaison between the Universities and Government Research Establishments (Cmnd. 3222); and to move for Papers. The noble Earl said: My Lords, I am most grateful to your Lordships for allowing this Motion to go forward on a day when so many noble Lords who are experts in these matters are able to speak.
When I first became Parliamentary Secretary for Science in 1963 I had perhaps been more concerned with the administration of the Arts than with that of the Sciences, although I had some knowledge of research in the electronic industry. And I was distressed, despite the invitation of the noble Lord, Lord Cottesloe, not to take part in the debate on the Arts a few weeks ago. Some 20 speakers put down their names to speak then, and only about a dozen have done so this afternoon. Yet, as was pointed out by the noble Lord on that occasion, we are this year spending only some £15 million on the Arts, compared with some £1,000 million on research and development. I might point out here, too, that while only £14 million may be spent on the Arts, only about £11 million is spent on medical research.
However, in regard to the two cultures—if indeed there are two—I must continue this afternoon to perform my role as a kind of noble Lord, Lord Snow, in reverse. I am sorry that he is not with us this afternoon. Although I regret that I was never as successful a playwright as my noble friend is a novelist, and I am not now a chemist, I have in the past three and half years learned something about the organisation of science, or what we now call "the science of science".
Just before Christmas of last year we had a debate, intiated by my noble friend Lord Windlesham, on the subject of the brain drain, which according to some recent reports is getting worse. I think we all agreed during that debate that while the reasons for the brain drain were mostly concerned with money and facilities, they were also concerned with the general climate in this country—by which I mean not only unfavourable meteorological conditions but also the metaphorical climate engendered by the considerable bureaucracy which now controls the administration of science and technology in this country. I have often heard from those intending to emigrate of frustrations arising out of our bureaucratic processes and the obstruction which young scientists sometimes suffer at the hands of their superiors. I think, too, that our committee structure, running from top to bottom in Government and in the universities, increases frustration because of delays in taking decisions. Some complain that it takes too long to make certain university appointments; and, due to the delays, a man here may sometimes despair and look for another job. I may say that if the Public Accounts Committee are now to look at individual university accounts, this will further protract the work: additional staff will be required, and further committee discussions will ensue. Having to justify every penny of its expenditure would, in my view, be a considerable waste of time.
Look at the present committee structure in the administration of Government science and technology. We may be rationally organised—perhaps more rationally than some other countries; but are we not also perhaps over-organised? Some distinguished scientists say they are so busy attending top Committees and Councils that they have little time to do creative work of their own. This

925
committee structure becomes more and more complex. Before the setting up of the Ministry of Technology we had at the apex only the Advisory Council on Scientific Policy of which my noble friend Lord Todd was the able Chairman. Now, in addition to the new Council for Scientific Policy, under Sir Harrie Massey, we have an Advisory Council on Technology under the Minister and Professor Blackett, as well as the new Central Committee on Scientific and Technological Resources, of which Sir Solly Zuckerman is Chairman.
We also have the Committee on Manpower Resources for Science and Technology, under the distinguished chairmanship of the noble Lord, Lord Jackson of Burnley, on which I know there is good collaboration. I think we ought to congratulate the noble Lord on this, although I am sorry to say that at the last moment, due to indisposition, he is unable to be with us. Then we also have the Select Committee on Science and Technology in another place, and we must all welcome its existence. But I wonder whether all these committees and their working parties and sub-committees make for decisive action. I will say more about this later.
I put down this Motion at a time when we were very much concerned about the problems facing both the Department of Education and Science and the new Ministry of Technology. At that time the Ministry of Technology had lost its first two Ministers—Mr. Frank Cousins and my noble friend Lord Snow, as well as its Permanent Under-Secretary, Sir Maurice Dean, and its more recently appointed part-time Controller, Professor J. B. Adams. At about that time, too, Professor Blackett, who is greatly respected by all your Lordships, became President of the Royal Society, which must mean, I think, that he can no longer give as much time to the work of the Advisory Council on Technology. Then, on the science side, my noble friend Lord Bowden, who is with us to-day, resigned as Minister of State, and the Deputy Under-Secretary concerned with these matters also retired. Things certainly did not seem to be going at all well, and science seemed to be out on an uncertain limb in Curzon Street. I was unhappy about the situation. Since then, new Ministers and officials have taken their places and settled into the two Depart-
926
ments. And, in addition, the new Central Advisory Committee has been established in the Cabinet Office under the chairmanship of Sir Solly.
I would say immediately that I hope that the creation of that Committee, on the formation of which we should like to congratulate Sir Solly, may meet some—only some—of the criticisms which I might otherwise have made about the division of ministerial responsibility. Clearly, having set up an additional Advisory Council on Technology separate from the C.S.P., it was no doubt necessary to set up a central co-ordinating committee to co-ordinate them. I believe that the creation of the Zuckerman Committee was in a sense an admission by the Government that the set-up before its establishment was not satisfactory. But it is, of course, another committee of which we already have so many.
However this new Committee—and this is a good thing—appears to concern itself with the whole problem of allocating resources over the entire field of scientific and technological manpower, whether in defence, industry or civil science. I understand that it also concerns itself with the co-ordination of our space activities which have in the past been—and indeed still are to-day—the responsibility of many different departments.
May I ask the Government whether they consider that our separate space efforts are effectively co-ordinated by the new Committee? And is one United Kingdom Space Agency now likely to be established? Further, are we pressing ahead with the development of commercial communication satellites which, it seems to me, should at this time have priority over purely scientific satellites, good as they are.
The Prime Minister said in another place that, with the formation of Sir Solly's Committee, "the whole scientific strategy of the nation" could thus be reviewed by one body. May I ask whether it is now being so reviewed, and will its review be published? Personally, I would agree that defence should be included in the work of such a central Committee and that it was as wrong for civil and military research to be divided before the war, as it has been wrong for the present Government to separate basic and applied science. Central Committees

927
in other countries are concerned with all three, and I am glad that Sir Solly's new Committee is too. I think it will play a most important role—I would judge the most important of all.
I would ask whether we still need a C.S.P. and an Advisory Council on Technology. The Government may say we do, but the result is a plethora of committees and councils. And the existence of all these committees and working parties means that we do not get positive decisions: we do not make up our minds. There seems to be no central point at which executive action is taken. We must somehow improve the speed and effectiveness of Government action. Foreigners, I know, are mystified. Since we all agree that in the development of big science and big technology we must go more and more into co-operative projects such as CERN, ELDO and ESRO and INTELSTAT, does the present organisation in which so many departments and committees concerned—not only in Education and Science and Technology, but also the Foreign Office—really facilitate the advancement of such wider collaborative projects with Europe, the Commonwealth and the United States?
For example, am I right in thinking that both the C.S.P. and the Zuckerman Committee are concerned with the question of our participation in the proposed giant 300 G.E.V. particle accelerator at CERN, which I understand is to cost some £148 million, with running costs of around £25 millions a year? What would be the position if these two bodies, the C.S.P. and the Zuckerman Committee, were to give conflicting evidence on the desirability of our participating in this scheme?
Whatever views we may hold about the recommendations of the Trend Committee, I ought to make it clear that a Conservative Government would not have set up a separate Ministry of Technology but would probably have established an Industrial Research and Development Authority which would have taken over the N.R.D.C. and the Research Stations and Associations of the D.S.I.R. Therefore, despite the formation of Sir Solly's new Central Committee, I still retain the view that the separation of science and technology is not satisfactory at a time when, for the sake of science
928
and economic growth, it becomes more and more important to bring the work of basic and applied scientists closer together.
LORD WYNNE-JONES: My Lords, does the noble Lord mean that pure science would be brought in entirely with technology and would be divorced from the universities, or not? I was not quite clear.
THE EARL OF BESSBOROUGH: No: the only point I am trying to make is that we should not have had the two Ministries. Of course, the Research Councils would have continued to operate in the same way, but in all probability there would not have been this channelling up to two Ministries rather than to one. This is supposition, but it is roughly what we had in mind. I recognise that it is very difficult to see where the seamless robe of education, science and technology should be divided. The Government may say that it is a robe too large for any one man to wear—even if he has, say, three or four Ministers of State and some Parliamentary Secretaries under him to share it.
One inconsistency in the present set-up seems to me to be that although science and technology have been in principle separated, the fundamental research at present undertaken by the Atomic Energy Authority and the Ministry of Aviation—now under Technology—is separately administered from the Research Councils which are doing mainly basic work under the Department of Education and Science. So much fundamental research is being undertaken by the universities there is certainly an overriding case for the universities to be administered by the same Department as the Research Councils. But I get the impression that during the past year the C.S.P., which is the parent body of the Research Councils, is operating in something of a vacuum; and I am not wholly persuaded that the C.S.P., the University Grants Committee and the Research Councils are pursuing a sufficiently strong policy in co-ordinating their grants for basic research.
I understand that the Science Research Council are at present renting research facilities from the Atomic Energy Authority. Do the Government think that this is a satisfactory arrangement? It may be necessary in the short term in view of

929
the present separation, but surely this arrangement should be altered in the long term. It is surely a little absurd for one Government organisation to rent facilities from another. In 1966–67 approximately £70 millions is, I think, being spent by the five Research Councils, of which the C.S.P. and the Department of Education and Science are the parents—that is to say, the Medical, the Agricultural and the Natural Environment Councils; the Science Research Council (which concerns itself with big science and research grants to universities); and, lastly, the Social Sciences Research Council. I understand that this figure of £70 million also includes grants to the Royal Society and the Office of Scientific and Technological Information, whose services I hope the noble Lord will be able to tell us are being extended. In addition, I understand that some £40 million is also being spent by the University Grants Committee on research grants. Then in addition the Defence Department, the Ministry of Technology and the Atomic Energy Authority award extra-mural degrees in order that work to a definite line of interest to a responsible Department should be carried out.
It was, I think, the original intention that the C.S.P., now under Sir Harrie Massey and concerning itself as it does with the work of these Research Councils, should have greater powers over a narrower range of research establishments than the previous Advisory Council under Lord Todd—narrower because, of course, large sections of the D.S.I.R. were hived off to the new Ministry of Technology. But I doubt whether it was possible for the C.S.P. to achieve these greater powers. My noble friend Lord Bowden will no doubt be able to enlighten us on this.
LORD SHACKLETON: My Lords, may I interrupt the noble Earl? Is he suggesting that the D.S.I.R. was responsible to the A.C.S.P. in the past, because I did not quite understand what he was saying about the respective powers.
THE EARL OF BESSBOROUGH: No, my Lords. But it was under the same Minister. It was ultimately under the Minister for Science. My right honourable friend Mr. Hogg was, in fact, the sole Minister at that time. But I do not know how effective the C.S.P. is now, in determining the overall pattern of the distribution of the resources of these Councils, and on long-term policy. How
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far it does this effectively I am not in such a good position to know as the Government, and I ask the noble Lord who is to reply how effective the C.S.P. is in determining this overall pattern and the distribution of resources. Am I right in assuming that the job of the C.S.P. has not materially altered since the establishment of the new Zuckerman Committee?
I shall not this afternoon go into the recommendations of the interim Report of the Working Group on Manpower Parameters for Scientific Growth under the chairmanship of Professor Swann. We discussed this before Christmas, and I think we all realised what an excellent job it did. The Group seemed convinced that further attention should be given to meeting the demand in industry and schools, at least in part, by redeployment from other sectors, such as Government research establishments.
We also discussed at the end of last year the Tri-Annual Manpower Survey, and I shall not go into that again. But I should like to say, on the whole problem of relations with industry, that I think the industrial liaison officers—who have been considerably increased in number—are, within limits, doing an excellent job in establishing closer links between universities and industry. But no-one wants to remain a liaison officer indefinitely, and I think the establishment of the I.L.Os. was designed rather to ameliorate a situation which probably should not exist, than to solve a basic problem.
This vast and very important problem of relations between industry and the universities is not, of course, discussed in the excellent Report of Sir Gordon Sutherland, to which I refer in my Motion. That Report is concerned solely with liaison between the universities and Government research establishments, and not with industry itself. I think we should all very much like to thank Sir Gordon and the members of his Working Party for the work which they have done. As we know, Sir Gordon is himself one of the most notable examples of the brain drain' in reverse. His conclusions and recommendations on pages 56 to 60 certainly merit your Lordships' attention. They are concerned with closer staff relationships, with co-operative research projects, with the formal association of research establishments with

931
universities, with the recognition of establishment research for higher degrees, as well as with mobility and transfer.
There are many good things in this Report, in particular the section on Sweden starting on page 48. I think it is the view of the Working Party that Sweden has solved some of these problems more effectively than any other country, and that relationships between teaching, Government research establishments and industry are closer and more integrated than in other countries. In Sweden there is, I think, a much greater degree of mobility between the three elements. This may be largely due to the fact that some common pension arrangements have been adopted in each sector. In this country, as Sir Gordon's Report says, pension arrangements for permanent employment are often quite different in the universities and Government research establishments, and of course we know how different they are in industry.
I hope, therefore, that the Government will look at the Swedish model, although I realise they are a smaller country and their problems are no doubt less complicated than ours. Other noble friends, including my noble friend Lord Windlesham, will, I know, wish to deal in greater detail with Sir Gordon's Report to-day. It is a most useful document, and I hope that the Government will see to what extent its recommendations can be implemented. I only hope that another Report will be forthcoming on relations with industry. May I ask the noble Lord whether we can expect this?
While links between Government and industry are certainly being built up in no uncertain way through the Ministry of Technology, links between universities and industry may not be as satisfactory as they should be, although in some cases they are certainly improving. But I was interested to read some recent remarks by the Director of the Rubber and Plastics Research Association. He referred to the reluctance of universities to release more than a mere trickle of good graduates to industry, adding that the universities tended to absorb the majority in their own expansion. They were, in his words, "gobbling up their young".
While I recognise that the universities must expand, this form of cannibalism (or do we call it anthropophagy?) is surely
932
unhealthy, and I do not think we should expand the universities so fast that industry is liable to suffer seriously. They should expand at a steady rate, but not at the expense of other sectors in the economy. I am sure that my noble friend Lord Todd, as Chancellor of Strathclyde University, and my noble friends Lord Sherfield, Chairman of Imperial College, Lord Wynne-Jones and Lord Kings Norton, who have all studied these matters closely, will have something very interesting to say on this problem. Had Lord Jackson of Burnley been with us we should certainly have had a galaxy of talent from Imperial College here this afternoon.
There may be some merit in a system whereby Ph.Ds can be granted to those already in industry. London University is, I think, already ahead in granting external degrees, and Cambridge, too, has certain schemes which are worth looking at. But, above all, would not be the best plan be for Ph.Ds to be awarded for joint research work by universities and industry? This would certainly be an effective way of keeping the two closer together. I should like to mention, if I am not boring your Lordships for too long in this connection, the Science Research Council's admirable Science in Industry Award, in which the employer makes up the salary of those competing for it. Then, too, I.C.I. have a scheme of this kind whereby young engineers recruited from universities are permitted to return for a further period of research if they wish to do so, having worked in the company for a certain length of time. These seem to me excellent and enterprising schemes which should be encouraged and extended.
I am also interested to see that Sussex University is to open a Department of Operational Research in the autumn, and that this will work closely with a similar department at Lancaster University. I gather from Professor Rivett that £45,000 of the Lancaster Operational Research Department's budget of £70,000 is, in fact, earned, with only the remaining £25,000 coming from the University Grants Committee. This is an excellent example of co-operation between universities and industry, and I hope that other universities may be able to devise ways of achieving such co-operation in other disciplines, if they have not done so already.

933
I hope also that the Government will study the important efforts being made by Academician Lavrentiev, who was responsible for the establishment of the Science City of Novosibirsk in Siberia. There the teaching academy is particularly concerned with the application of science to industry, and I gather that they have now set up factories in close proximity to the academy to facilitate the exchange of pure and applied scientific developments. When I visited the Science City a year or two ago I was very much impressed by what they were doing, although they have a long way to go; and I shall be interested to hear what the noble Lord, Lord Bowden, who has also been there, has to say about this. I think the Government should look at what is going on there.
To return, at the end of my remarks, to the division of responsibility between the Ministries, should not the division have been made between higher education, science and technology, on the one side, and the schools, on the other? Clearly, each Government Department should have its own scientific advisers; and science, the scientific method and scientific management should undoubtedly pervade every Government Department. But at present such advisers are there to do specific jobs required by their Departments, and not the kind of basic or even applied research of which the practical results are not always immediately evident.
It would, in my view, be a mistake for the principal research establishments which I have mentioned—apart, perhaps, from building research and road research, which already come under the executive Departments concerned—themselves to be under the other executive Departments, such as the Ministry of Health or the Ministry of Agriculture. This would certainly restrict unduly the freedom of the scientists in question. And although we should not perhaps exaggerate the importance of this freedom, I think we ought to respect the Haldane principle. But we are not going to get the best out of this country unless we get the best out of industry, and industry must not just be a "job shop" for the Government.
The Ministry of Technology is certainly holding out a number of carrots to indus-
934
try, and no beneficiary in industry can be too critical of those who have a lot of carrots in their hands. I recognise in particular what the Ministry have done in keeping our computer industry alive, and what they have done in regard to machine tools and, perhaps, in rationalising the optical instruments industry. If we are to have a Ministry of Industry, which the Minister of Technology has described his Ministry as being, and including certain functions of the Board of Trade, then clearly it must have some kind of organisation. The present Ministry is a vast empire covering a very wide range of industry, and not only, I think, "the commanding heights", which were originally described by the Labour Party as being liable to be nationalised. It employs, according to one report, some 23,000 scientists, technologists, research workers and others, by no means all of whom were employed in the old D.S.I.R., the old office of the Minister for Science or the Ministry of Aviation. When there is a shortage of qualified scientists and engineers in industry, is it right to freeze so many in Government service? We must in this respect do everything we can to break Professor Parkinson's famous law.
In regard to the present structure of the Ministry of Technology, I think this is badly wrong. Too often the people in the most senior Civil Service positions are said to block sensible action both by the Ministers above them and by the more technically expert civil servants be-low them. I am not blaming officials, who are in fact doing their jobs and trying to make the unwieldy machine work, but I do blame Ministers who allow this kind of thing to happen. Industry will die if the Ministry's role is mainly telling it what to do and controlling the purse strings. Government must trust industry more and encourage its inventive skills. It must create incentives and rewards. How is the vast increase in civil servants consistent with encouraging inventiveness? More should be done in industry itself rather than in Government research establishments. For example, millions are being spent on biology, both in universities and the Agricultural Research Council. I believe that more of those employed in the latter should go into industry—provided, of course, the right sort of pension arrangements can be made.
LORD SHACKLETON: May I interrupt the noble Earl? Would he develop this particular point a little more? What are his reasons for saying that there should be fewer people working on biology, and that they should go into industry? He must give some criteria for the sweeping statements that he is making.
THE EARL OF BESSBOROUGH: I do not think that these statements are at all sweeping. Indeed, I have heard some much more sweeping statements made, and I have tried to moderate my remarks so far as possible. But if the noble Lord will allow me to finish, and allow some other people to speak, I think he will find these views further developed. Undoubtedly there is a tendency—perhaps the noble Lord will allow me to finish—for a number of highly qualified scientists and engineers to be frozen, to some extent, in Government establishments.
LORD SHACKLETON: May I interrupt the noble Earl again? He specifically spoke about biologists. Would he tell me what criteria he is applying? It is no use his making sweeping statements that people are misemployed, and that they ought to be doing this or that, unless he gives some justification for saying so. I shall be very interested to hear his reasons.
THE EARL OF BESSBOROUGH: I cannot go into them all this afternoon, although I shall certainly do so with the noble Lord afterwards. I do not want to specify exactly in which units, let us say, it seems that some of those employed might be more usefully employed in the chemical industry. I do not want to go into the detail of that. All I can say is that there is a point here which I hope the noble Lord will accept and look into.
I believe that the Government could encourage industry by helping new processes evolved by individual firms on a pound-for-pound basis and by ensuring collaboration with universities. The Research Association formula is all very well in its way, but much important research may still be conducted outside the Asociations. That is why I believe that individual firms should be assisted, so that industry itself, rather than the taxpayer, would be paying a larger share of the cost of research. We have to throw
936
a larger competitive element into industry and the universities. In the United States, a considerably higher percentage of research work is carried out in the business enterprise sector, and I think this is very healthy.
It would, I think, be preferable to have only one Ministry responsible for research, both basic and applied. But if we are to continue, roughly speaking, with the present set-up and have a Secretary of State for, say, Industry and Trade, on the one side, and a Secretary of State for Education and Science, on the other, then I think it would be a good plan—this is a purely personal suggestion—for one of the existing Ministers of State to be responsible for both science and technology; that is to say, in the first instance for all basic and applied research, conducted not only by the universities and Research Councils but also by the old D.S.I.R. stations and R.A.s, and the Atomic Energy Authority. That Minister would refer only major contentious issues to the Secretaries of State concerned. He would not be extra to the present establishment, and would have no additional officials, but would, as I say, be one of the Ministers already functioning either from the Department of Education and Science or from the Ministry of Technology. He might be situated, if necessay, in the Cabinet Office, near Sir Solly's new Committee.
There is just one further question that I should like to ask the noble Lord, and that concerns the structure of the atomic energy industry. The noble Lord, Lord Beswick, told me on May 4 that the Minister of Technology and the Minister of Power were discussing the whole question with the Central Electricity Generating Board and the Atomic Energy Authority. I should like to know how far we have got on this. Your Lordships may have observed that Sir William Penney (to whom, I am sure, we shall all wish to extend a warm welcome when he joins us in this House) recently described the present overlap and replication of nuclear research and development in Europe as prodigiously wasteful. What was needed, he said, was a searching examination as to whether the structure of the industry was best suited to the future.
I hope that the noble Lords who are to speak for the Government will be able

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to give me replies to some of the questions that I have put to them to-day, of most of which I think I gave them prior notice. Whatever may be the results of the wars in Vietnam and the Middle East, and whether we go into the Common Market or not, the one vital element which can ensure our standing in the world is scientific and industrial strength. We must be determined to remain a scientific power. Have we the best organisation to keep it so? I have spoken of the Council for Scientific Policy, of the Advisory Council on Technology and of the new Central Zuckerman Committee. Are we in fact getting any nearer to unified scientific direction, or have we now merely a muddled and Unholy Trinity? My Lords, I beg to move for Papers.

GIBRALTAR REFERENDUM
3.40 p.m.
LORD BESWICK: My Lords, I should like to repeat a Statement made in another place by my right honourable friend the Minister of State on the subject of Gibraltar. The Statement is as follows:
"The House will recall that on December 20, 1966, the General Assembly of the United Nations adopted a resolution, No. 2231, calling upon Britain and Spain to continue their negotiations about Gibraltar, taking into account the interests of the people of Gibraltar and asking Britain, in consultation with Spain, to expedite the decolonisation of Gibraltar. Spain voted for this resolution. So also did Britain, with the statement, by our Permanent Representative at the United Nations, that Britain could never agree that decolonisation would mean the incorporation of Gibraltar into Spain against the wishes of its people, and also that nothing could prejudge the question of the type of decolonisation which would best fit the circumstances of Gibraltar.
"We have been considering our policy towards Gibraltar in the light of this resolution. In doing so we must have regard to the relevant provisions of the Charter of the United Nations, in particular Article 73 which expresses the principle that the interests of the inhabitants of a non-self-governing territory are paramount. We must also have regard to our obligations under the Treaty of Utrecht.
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"As the House knows, we duly arranged to hold talks with the Spanish Government in pursuance of the United Nations resolution. The first meeting between delegations of the two countries was to have taken place in London in April. We greatly deplored the action of the Spanish Government in announcing, on the eve of the talks, new restrictions plainly aimed against the economy of Gibraltar. Such action was in clear conflict with the terms of the General Assembly's resolution, which regretted the occurrence of acts which had prejudiced the progress of the previous Anglo-Spanish negotiations. The talks were postponed in order to enable us to consider the new situation. As honourable Members know, we raised the matter in the International Civil Aviation Organisation and have also attempted to resolve the problem in bilateral talks with the Spanish Government. We are taking steps to bring the matter before the Council of I.C.A.O. once more, this time as a dispute under Article 84 of the Chicago Convention. I should prefer not to go further at this stage into the international aspect of the problem, which is primarily a matter for my right honourable friend the Foreign Secretary.
"But we should not be deterred by this dispute or by the difficulties which Spain has made over the holding of talks from pursuing the objectives of the United Nations resolution.
"I must repeat our firm belief that decolonisation cannot consist in the transfer of one population, however small, to the rule of another country, without regard to their own opinions and interests. We therefore think that the next step in pursuance of the United Nations resolution should be to give the people of Gibraltar an opportunity to express their views, by a formal and deliberate act, on what would best serve their interests.
"We have accordingly decided that a Referendum should be held in Gibraltar in which the people of Gibraltar should be invited to say which of the following alternative courses would best serve their interests:

(a) to pass under Spanish sovereignty in accordance with the terms proposed by the Spanish Government to us on May 18, 1966; or

939

(b) voluntarily to retain their link with Britain, with democratic local institutions and with Britain retaining its present responsibilities.

"If the majority of the people of Gibraltar vote in favour of the first alternative, we will be ready to enter into negotiations with the Spanish Government accordingly.
"If the majority of the people of Gibraltar vote in favour of the second alternative, we will regard this choice as constituting, in the circumstances of Gibraltar, a free and voluntary relationship of the people of Gibraltar with Britain. We will thereafter discuss with representatives of the people of Gibraltar appropriate constitutional changes which may be desired.
"If the majority vote for the second alternative, provision will also be made for the people of Gibraltar to retain the right at any future time to express by a free and democratic choice the desire to modify their status by joining with Spain, in which event we would be ready to approach the Spanish Government accordingly.
"We attach great importance to the Referendum being held in conditions of complete impartiality. We want the people of Gibraltar to be able to think calmly where their interests lie and to express their choice free from pressures of any kind. We are bringing our intention to the notice of the Secretary-General of the United Nations and we should very much welcome the presence of any observer he might wish to send to Gibraltar during the Referendum proceedings. We are ready to welcome an observer from Spain too and to give the Spanish Government facilities to explain their own proposals to the people of Gibraltar if they so wish. We also have in mind to invite observers from one or two other Commonwealth countries.
"It is our intention to hold this Referendum as soon as suitable arrangements have been made for the registration of persons entitled to vote. These arrangements will necessarily take some time. Our present expectation is that the Referendum will be held early in September."
LORD CARRINGTON: My Lords, I must thank the noble Lord for repeating
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that Statement. I think it would be true to say that in this dispute about Gibraltar Her Majesty's Government have been very forbearing—indeed, some people might say they have been too conciliatory. So far, on the whole, the actions taken by the Spanish Government have been pin-pricks; although I think the air regulations are of a rather more serious character. If the reference to I.C.A.O. is unsuccessful we shall have to press noble Lords opposite on what they intend to do in that respect. But we think it is very important at this stage that Her Majesty's Government should retain the confidence of the Gibraltarians, and I was glad to hear the noble Lord say in the Statement, as I understand he did say, that there was no question in any circumstances of any transfer of the sovereignty of Gibraltar against the wishes of Gibraltar.
LORD BESWICK: My Lords, I warmly thank the noble Lord, speaking for the Opposition, for the way in which he has received this Statement. I can confirm that the assurance for which he asked is, in fact, embodied not only in what I said but in the spirit which animates the policy of Her Majesty's Government.
LORD BYERS: My Lords, we on these Benches give a general welcome to these proposals, although they are unusual. I hope they will not be used as a precedent in other parts of the world such as Rhodesia. This leads me to ask: who is going to organise the Referendum? The Statement made reference to offering facilities to the Spanish Government. What sort of facilities will those be; and who will be responsible for putting the case for the second alternative?
LORD BESWICK: My Lords, so far as the presentation of the Spanish Government's case is concerned, the details will have to be worked out. If they accept our invitation, this will be entirely a matter for negotiation or discussions between the Spanish Government and ourselves. So far as the actual administration of the Referendum is concerned, that will be the responsibility of Her Majesty's Government; but, as we have said, we shall be pleased to have observers on the spot to see that everything is done in the most fair and objective way possible.
LORD BYERS: Would the noble Lord say anything about who is to put the case for the second alternative?
LORD BESWICK: My Lords, it would fankly, be a matter for discussion among the people of Gibraltar themselves. I do not myself think that the case is one that requires a lot of presentation.
LORD ROWLEY: My Lords, in view of the considerable amount of self-government in Gibraltar—we recognise the existence of a Chief Minister and a Cabinet—would it not be for them to be responsible for the mechanics of the Referendum, with representatives, as we hope, from Spain and with observers from the United Nations to satisfy public opinion throughout the world that it is a fair and impartial Referendum?
LORD BESWICK: My Lords, the actual mechanics will require in the first place, as we see it, an Order in Council which will be submitted to Her Majesty, laying down the legal framework for the Referendum and giving the Governor power to make regulations on matters of detail, and to appoint a Referendum Administrator. It will be the task of the Administrator to have the register compiled, and of course the details about qualifications of voters will be matters for discussion.
LORD OGMORE: My Lords, in the discussions with the people of Gibraltar as to their future association with Britain, if they choose the second alternative, as we all hope they will, would the Government think of suggesting to them that there might be a representative or representatives from Gibraltar in this House?
LORD BESWICK: My Lords, I think the noble Lord, Lord Ogmore, now has in mind the case for integration, which is also being canvassed in Gibraltar. Such proposals are not embodied in the choice which is now being offered to the people of Gibraltar, or which it is proposed to offer them.
LORD OGMORE: My Lords, I was not suggesting that there should be integration. I was making a suggestion, which I have made on previous occasions with regard to other territories, that in such a case it would be a very happy thing for both countries if there were a representation in this House.
LORD BESWICK: My Lords, I think that is a matter which may well be discussed later. In the first place, however, the choice is on a general principle, which would not, I should have thought, have included a detail of that kind.
LORD IRONSIDE: My Lords, would the noble Lord, Lord Beswick, say whether the Government have the concurrence of Sir Joshua Hassan, the Chief Minister?
LORD BESWICK: My Lords, naturally we have been in close touch with the Chief Minister, but the responsibility for the suggestion was that of Her Majesty's Government.

SCIENCE AND TECHNOLOGY
3.52 p.m.
Debate resumed:
LORD SHACKLETON: My Lords, to return to the Motion of the noble Earl, Lord Bessborough. I should like to thank him for putting it on the Order Paper, and for giving advance notice of the questions he would like answered. Having said that, I must confess that I have not much else for which to thank him. I rather regret the introduction of a good deal of what I can only describe as partisan political prejudice on a subject which, traditionally, we have debated in this House on a non-partisan basis. I only wish I could be as certain that the policies we are following are right as the noble Earl is certain that they are wrong, because this is a very complex and difficult field.
It is no use any of us thinking that solutions to the relationship of Government and science and technology have yet been completely found, or are likely to be found in the very near future. That is why I took up the noble Earl on his reference to what I understood he suggested was the misemployment, or the wasted employment, of Government scientists. He particularly mentioned biologists. He refused to explain the criteria on which he based this statement.
It is no good our discussing a problem as complex as this against a series of positive assertions based, so far as I can tell, on frustrated opinions expressed by the noble Earl's friends. There are, for instance the figures about Government

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scientists and technologists. I am just going to give him this bit of argument, and then I hope to address myself in a less partisan way to the debate. I do not know whether the noble Earl knows how many scientists and technologists are employed by Government, as opposed to industry. He certainly gave a picture, or an impression, that there were far too many employed in Government. In fact, the Government have only 10 per cent. of the scientists and only 14 per cent. of the technologists, as compared with 26 per cent. and 47 per cent. in industry. I do not want to get into a dog-fight on this matter. I will merely say that this is a much too complicated subject to be dealt with in a series of gloomy and, if I may say so, unconstructive criticisms. And I hope that in the rest of this debate your Lordships will raise our standards back to those embodying the impartiality and constructive suggestions which have marked our debates in the past.
It is not use pretending—I must make absolutely clear to the noble Earl—that any country has solved, once and for all, the problems of Government organisation for science and technology. Indeed, the subject—that is to say, the direct impact of Government and how it should organise or interfere—is in itself new. We have had public institutions for the support of research and development for many years, certainly for more than 50 years, but the first Advisory Council on Scientific Policy was established only in 1947—twenty years ago—and one cannot compare the present new structure with the structure which existed in the days of the A.C.S.P.
It was another twelve years before there was a Minister for Science, and we are still in the experimental stage as is every other advanced country. In the United States argument ebbs and flows for and against a Department of Science; and there is still no such department there. There has been a Science Minister in Germany for only about five years. So I think that there is no need to apologise for being experimental in outlook, willing to try changes for good reasons, least of all in relation to science. What is required is a certain amount of humility on the part both of the Government and of their critics and a lack of dogmatism about what the ideal solutions may be.
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I do not propose this afternoon to go over the whole of the ground that we debated in the past, when we discussed the Trend Report and other Reports—and certainly it is a subject of endless and fascinating interest. I should like to say something about how we in Government see the developments in this field; and again I stress that I do so without any positive certainty that we are necessarily on the right road—and certainly we are not on final solutions. There is room for a great deal more experiment and a greater willingness to realise that the ideal solutions may lie far in the future. This is a difficult and dangerous field for Government intervention. That is why I stress the importance of humility.
My Lords, some ages have been distinguished by a romantic and others by a reactionary outlook. In some ways I think that ours is the age of frustration. That feeling was certainly very marked in the speech we heard from the noble Earl. There is, I think, a great deal of frustration to-day because we cannot at once realise the achievements of which our attainments in education and civilisation hold out a promise. We are trying to improve on a massive scale upon what previous generations managed to achieve for a fortunate few, and it is natural that we should be afflicted both by the issues of organisation and by shortages of resources. We have, and we shall go on having, both of these in plenty, and it would be wrong, I think, to argue that these difficulties are the essence or at least the sole essence, of the problem. We have to keep our eyes on objectives and accept that organisations must serve them.
No organisation of itself, paper or otherwise, can do more than help us achieve what we want. What is important is that we do not set up wrong organisations that lead to the sort of frustration about which the noble Earl has been talking—for example, too many committees. Certainly committees are a great problem of civilisation. It may be that we shall evolve something to take the place of committees, but if we are to have organisations people have to talk to one another; and communication is sometimes easier round a table than by letter.

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Let me give some of the reasons for the division between the Department of Education and Science and the Ministry of Technology. Again, I am speculating to some extent in regard to this matter. There may be arguments which sound smooth rationalisation, but nevertheless there are sound reasons for dividing for administrative purposes the support of the scientific environment from the support of the exploitation of science. I hope that your Lordships will bear with me in speculating in this way. These two operations are separate in objectives and even in methods, though there may be overlapping in countless directions. For the former, the discovery of new knowledge is the supreme factor; for the latter, the attainment of results measured in terms of economic performance. Each of these tasks is difficult and complex. One can go on for some time exploiting existing knowledge with considerable success, but unless also resources are preserved for adding to that knowledge, the time comes when one is forced to buy new knowledge from one's competitors and one is deserted by scientists of the calibre needed to keep abreast of world science. I know there are those who will argue the contrary to this, but I submit that there is validity in it.
Each of these jobs is man-sized and needs in the present context the weight of a full departmental organisation. The Ministry of Technology are concerned with getting the fruits of research for the economic system. If the Department of Education and Science were to undertake this task also, they would become an economic as well as an educational and scientific organisation. This would be too much to ask of them. Again, it is too early at this stage to return to the point of view expressed by the noble Earl about the division between higher education and schools. On this, we may find something more when Dr. Dainton reports his finding. On the other hand, the Ministry of Technology does not need to be responsible for the Research Councils in order to foster the modernisation of industry, any more than it needs to be responsible for schools and universities in order to get the right distribution of skills in the economy.
I would say to the noble Earl, and I am sure that he will agree with me in this, that we can have too big and too
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centralised an organisation, as many large industrial concerns are aware. Super-Ministries have not had a happy history and they can fail simply because the burden of policy-making and management ought to be shared out more. It may be argued that the ideal state existed when Mr. Hogg (then Viscount Hailsham) and the noble Earl were responsible for the Ministry of Science, when the Minister had the satisfaction of being able to say that he could get the whole of his Ministry into a single bus. This is an ideal state for an organisation of that kind, but unfortunately, as things developed, it was not possible to confine it to one bus. It has now reached the stage, if we are to make the progress which is necessary, and on which the scientific community are supporting the Government and the country so well, when it is better to have two small organisations which know what they have to do rather than a larger body whose right and left hands are not always able to be co-ordinated. It is extremely important to see that the right hand does not cut off the left hand when it happens to be turned in another direction.
Let me turn to the position of the universities in this context. The universities are concerned not only with education. They are in an indissoluble way concerned also with research. They must occupy a key position between education and research, and in our view it is sound that one Minister—again, I put these views with humility—should be able to take a view over the whole of this territory. The University Grants Committee and the universities ought therefore to be linked with the Department that is concerned with education. I suggest that the present division between the Department of Education and Science and the Ministry of Technology is a wise experimental solution and is to be welcomed as giving to each organisation a clear run at objectives which in some respects are limited. No horse can run well if it is facing too many ways at one time.
There is a difference of ideology between the scientific environment, where knowledge overrides time, place and country, and the competitive environment of technology, where results in time and within the budget are what count. Of course, there is much science in technological issues and there are vital scientific elements in all the main issues of

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State, whether in foreign affairs, industry, defence, transport, or any other. But scientific issues there are not necessarily overriding, whereas, in my view, they must be so in the environment of basic science.
What counts in this complex and difficult field is that the interface between basic science and its application should be understood, or at least recognised, and that sufficient numbers of scientists and technologists of the highest abilities should recognise in the application of science and technology at least as worthwhile a challenge as the discovery of new knowledge itself; and lastly, that there are in practice as well as on paper effective arrangements for consultation and co-ordination.
Let me turn to the Central Advisory Council on Science and Technology, in regard to which the noble Earl had some kind words to say—at least they were not totally discouraging. More than half of Government expenditure on scientific research and development is still for defence, though the disparity is a good deal less than it was. The rest is divided between the Department of Education and Science and the Ministry of Technology and half-a-dozen other civil Departments with minority shares, such as Transport, Agriculture, the Scottish Departments, Public Building and Works, Health and overseas.
Clearly, there is the need for a place where the whole question of the balance and direction of Government investment in science and technology can be argued out. Such a place is provided by the Central Advisory Council on Science and Technology, under the chairmanship of Sir Solly Zuckerman. It is important to recognise that this is a relatively new institution. There were those who thought that it was a mistake to set it up but, like the noble Earl, I felt that there was a need for such an Advisory Council, mainly of scientists, industrialists and technologists, to advise the Government collectively.
It is then the task of the Government to take decisions. The task of the Committee is not the administrative one of co-ordinating or allocating resources. This must be for the Government machine, whatever its imperfections, when
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Ministers have accepted the advice of the Council. It has not been long enough in existence to say very much yet about its work, but it is getting down to a tremendously difficult task, in which it has to look also at the organisation of science and technology in the widest way. Its links with other advisory bodies are close: the Chairman of the Council for Scientific Policy, the Vice-Chairman of the Advisory Council on Technology, the Chairman of the Defence Research Committee and members from these bodies are all members of the Central Council. This organisation provides machinery for discussion of the inter-relationships between these three main aspects of the Government's policy for science.
The work of the new Council is complementary to that of the Council for Scientific Policy, whose task is to advise the Secretary of State on the volume of resources needed for science—and I would put "science" in this respect in quotes—that is, the work of the Research Councils in supporting research both in the universities and in their own establishments, together with some other functions such as the support of documentation, on which I shall have something to say later, the grant-in-aid to the Royal Societies of London and Edinburgh, and also how those resources should be divided against these needs.
The Council for Scientific Policy has been in existence for rather more than two years: it published its first Report last spring, and a second Report is already in the pipeline. We have had Reports from two of its Working Groups. There was one on computers, on which your Lordships will remember we had an interesting debate, and one on Liaison Between Universities and Government Research Establishments. These have been published. There have been in existence eight Working Groups, of which four are now in existence. The Council has made some encouraging progress in advising on the resources necessary for basic science, and in discussing long-term objectives with the Research Councils. Present Government expenditure on Science Votes is 11 per cent. in real terms (it is more in money terms) greater than last year.
It is a natural reaction to say that in times of economic pressure resources

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should be diverted from basic science to the application of existing knowledge. No one can deny the importance of achieving more effective exploitation of the results of our science. This is one of these interminable and fascinating subjects about which one could argue at great length. Recent American studies suggest that research and development expenditure forms a relatively small proportion of the total expenditure needed to make and sell an article commercially. But such arguments have tended to ignore the cost of basic research and the educational system which are, of course, absolutely essential to underpin a programme of applied research that may be relevant to a particular product.
In the field of manpower, therefore, it is clear that some shift in the balance of employment between the discovery of knowledge and its application in practice will have to be achieved over the next decade. But so far as resources for basic science are concerned, what is needed is the kind of understanding of the cost of maintaining scientific excellence which the Council for Scientific Policy is seeking. This is excellence to which noble Lords, like the noble Lord, Lord Todd, my noble friend Lord Snow and others, have attached so much importance, which is necessary to retain the essential vitality and quality without which investment in science would be a waste of money.
It may turn out that there is no direct relationship between resources for science and resources for its exploitation: the former depends upon the cost of attaining a level of excellence which is internationally set; the second depends upon economic factors which spring from the situation of the country at a particular time. In other words, it may be just a little too easy to suppose that resources are interchangeable between new discovery and the exploitation of knowledge. What is required is a clear understanding of what is needed to do each job effectively. This again emphasises the arguments in favour of the sort of divisions that have been made in Government organisation.
I should like to refer to the role of the Advisory Council on Technology and compare it with the Council for Scientific Policy. In this field it is extremely difficult to draw an effective diagram of
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inter-relationships—and, indeed, I doubt whether it can be done two-dimensionally. The Advisory Council on Technology is not really—although there is a certain semblance on paper—a parallel body to the Council for Scientific Policy. The Council for Scientific Policy is an Advisory Council chaired by an independent scientist, Sir Harrie Massey, and it reports formally to the Secretary of State for Education and Science.
THE EARL OF BESSBOROUGH: May I ask the noble Lord about one point? He said that the Council for Scientific Policy is an advisory body. There was an intention that it should have greater powers, as I said in my speech, over the narrower range. The noble Lord considers it to be purely advisory, does he, although the word "Advisory" was dropped from its title?
LORD SHACKLETON: It is an advisory Council. It may well develop, and in the process we hope that it will help to determine policy. But it will be for the Government machine to carry out the policy decisions that may be arrived at. This is not to say that it may not have certain executive functions within its own field of operation in order to activate itself in giving particular advice. But it is essentially an advisory Council. The Advisory Council on Technology, on the other hand, consists mainly of industrialists and is chaired by the Minister himself. This is a forum in which advice and opinions are exchanged, informally and in confidence, on the general development of the Ministry's work and policies. The discussion is wide-ranging and takes in all aspects of the responsibilities of the Ministry of Technology. It must also be remembered that much of the emphasis of the work of the Ministry of Technology is in the industrial and economic field, and that its research responsibilities are only part of a rather wider remit. This is a point which I know the noble Lord, Lord Jackson of Burnley, was going to deal with, and I am sorry to hear that he is unable to be present to-day.
Let me now turn to the co-ordination of Advisory Committees. Here, however sturdily I may stand up to the frustration of the noble Earl, I have a certain amount of sympathy with him. Links with the Central Advisory Council have already

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been mentioned. There are particular arrangements for ensuring links between the Ministry of Technology and the Department of Education and Science. There is joint membership (Professor Blackett and Dr. Adams) between the Council for Scientific Policy and the Advisory Council on Technology, and the secretary of each advisory body attends the meetings of the other.
More intimate arrangements have been made for rendering advice on scientific and technological manpower. The Committee on Manpower Resources for Science and Technology advises both Departments, and the secretariat is drawn equally from both sides (if one can call them sides), and there are other formal arrangements in existence. The Chairman of the S.R.C. attends the A.C.T., and the papers of both Councils are circulated in both Departments. This is quite apart from the informal links at the various operational levels to ensure that there is common understanding and agreement on spheres of action. Thus, it is accepted that between the two Departments migration of skilled manpower to American industry is primarily the concern of the Ministry of Technology, just as the flow of candidates in science and technology into and out of higher education is a matter for the Department of Education and Science. These are matters of practical arrangement, but I must stress, of course, that cross-membership is not enough: there needs also to be effective co-ordination at the official level, and this is a matter of particular importance even though it may not appear obvious in the diagram of the different Councils.
There are close links between the Science Research Council and the Ministry of Technology on the support of basic research in technological fields. This, again, is the prime responsibility of the S.R.C., and the Ministry of Technology have their own advisory body, as I mentioned. Scientific manpower policy provides one of the most striking examples of close collaboration between the two Departments. The Committee on Manpower Resources, under Lord Jackson of Burnley, reports both to the Secretary of State for Education and Science and to the Minister of Technology; and here again the secretariat is drawn equally from both Departments, who decide informally
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on the topics of principal interest to each. The main Committee have reported twice, and two reports of working groups have also been published.
Then there is Professor Swann's Report, with which many of your Lordships will be familiar, which deals with the balance of employment in science and technology as a whole; and this illustrates the advantages of looking at the whole subject and trying to suggest a balance between both sides. His Report is an interim one (it will be followed later by a final Report) and it shows, I think, that there is great value in looking at the flow of scientists and technologists into employment as a dynamic system to be studied as a whole; and that there are important lessons of balance and motivation to be learned—although let me not suggest that automatic solutions will present themselves.
The current manpower studies—and I have referred to some of the reports—have thrown more light on these problems, but of course they are nothing like new. We have debated these manpower problems for a number of years. The most tantalising problem is that it is likely that over the next five years—this is why we await the Dainton Committee's report with such interest—the candidates for scientific and technological places in higher education will, if anything, decline in absolute numbers, because the growth of sixth forms is offset by a tendency among young people to choose other—I hesitate to say more appealing—subjects or mixtures of scientific and non-scientific subjects.
We have debated this whole problem, and the noble Lord, I remember, on another occasion, has referred to a number of factors which influenced it. There is no doubt that it is a worrying one. It promotes careful thought about the attractiveness of science, at least as it is presented. In fact, there is hardly a subject which gives more scope for argument and discussion than this particular one. It is not, perhaps, much consolation —or it may be a little consolation—that similar tendencies are discernible in other countries, such as Germany and the United States. In any case, we look forward to Dr. Dainton's diagnosis, and, we hope, his prescription, though it will not be an easy one to find.

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Another striking problem is the situation revealed by Professor Swann's analysis of the flow of qualified manpower out of the universities. He has shown how the proportion of the ablest graduates entering industry and school-teaching has declined, until we may ask how we are to ensure this continuity either of our science teaching in the schools or of our capacity to go on paying for science in a technologically competitive world. This again was a subject to which the noble Earl referred: the demands of the universities. But, of course, they sprang from the laudable purpose of Governments—both this and, if I may say so, very much the previous Government also—to expand the universities, and we have to face the consequences of this action. These are large-scale problems, and in these advisory groups we hope to have an early-warning system which will enable us to respond in time.
Much of the imbalance which the Swann Report showed was due, as I have indicated, to the really phenomenal growth in higher education and not to hoarding, for which I am sure no university would ever admit it had the resources. We hope that this phenomenal growth, with its acute consequences, will not be repeated for a number of years, because undoubtedly it is imposing a tremendous strain on the stock of scientific manpower in the country. Noble Lords will recall the reports of bodies such as the Institute of Physics on this matter.
THE EARL OF BESSBOROUGH: My Lords, may I ask the noble Lord whether I am not right in thinking that the universities are expanding even faster than Robbins anticipated, and therefore should we not look at this matter very carefully to see whether they are not going a little too fast? I am only asking the noble Lord. He knows better than I do.
LORD SHACKLETON: My Lords, I notice the extremely guarded words of the noble Earl, and I fully sympathise; it is a most delicate subject. I think that perhaps I will not be drawn any further. It may be that my noble friend Lord Beswick would like to deal with this, but one would certainly not wish to come to any misleading conclusions on it.
Again, the Report points out that patterns of career expectation have been created which may well have to be re-
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vised. Yet in all these issues one must never forget, least of all in educational matters, that we are still a free people, and we choose to take our own decisions on our own careers in the light of all the advice and the policies which are available.
Let me turn lastly to the question of executive action—I am sorry to be so lengthy: I will try to speed up. This must rest with the Minister who is responsible for the policy of his Department and the funds it is empowered to spend. The web of committees is a sort of elaborate array or system of antennae designed to ensure that the wisdom and experience of expert bodies involved are taken up to the point of decision-taking. There is, or there ought to be, no confusion or complexity about this. Nor, I submit, is the structure of advisory bodies, within our present knowledge of human organisation, more complex than the subjects they are charged with studying. The work of these committees has thrown up problems and objectives to which the organisation of Government can and must respond, at risks of a kind to which the noble Earl has drawn attention.
I had intended to say something about Sir Gordon Sutherland's Working Party, but I understand that the noble Lord who is to wind up for the Opposition is going to deal with that subject, so perhaps your Lordships will allow me to leave it, apart from saying that they have made a very comprehensive study and it is a very important part of the total picture. But, as the noble Earl said, there are other aspects of inter-Governmental and university and industrial relationships which must not be ignored.
The relationship between the universities and industry is, for instance, a subject for further examination. Some research has been carried out and we believe it is necessary to extend the survey to examine methods of improving liaisons between universities and industrial research in general. I am sure noble Lords will be glad to know (if they do not already know it) that a joint committee of the Committee of Vice-Chancellors and of the C.B.I. is examining this problem, and the Government will be happy to lend them such assistance as may be possible.
It is almost impossible to do justice to all the aspects of science and organisation,

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and I have always been conscious that one body has been peculiarly frustrated and has complained that successive Governments have always ignored them. I refer to the social scientists. I do not see that there is time to debate this subject adequately to-day, but so that noble Lords may not think that the Government underrate—and I am sure no noble Lords themselves would underrate—the importance of the work of the Social Science Research Council and the really appalling shortage of social scientists, many of whom could be playing a part in helping to solve these problems about which we are talking to-day, may I say that this is something we might debate on another occasion. It does not fit tidily into the pattern, but it is clear that in science, as in so many other forms of human evolution or other evolution or development, we move by a series of mutations, artificial or natural, and the Social Science Research Council was a very desirable such development.
There is, however, one important subject which I think in a review in which we are covering the whole organisation we ought not to ignore, and that is the problem of scientific and technical information—a problem which is international in nature and is vital for the further progress of science; namely, that there should be an improvement of information for scientists. The noble Lord, Lord Kings Norton, who succeeded me, and who indeed I think is still President of ASLIB, has himself been actively informed and involved in this. While recently the bulk of new thinking and experiment has been concentrated in the U.S.A., now all scientifically-based advanced countries are beginning to contribute and have either set up or are considering setting up a national policy-making body.
In this country, this body—the Office for Scientific and Technical Information —was set up within the Department of Education and Science just over two years ago. Perhaps it is too early to call it a success story, but it shows a measure of activity, in that it has already built up an impressive programme of support for basic research, experimental services and improvement of existing services—on which it is empowered to spend £370,000 in 1967–68, where two or three years ago I doubt whether it was spending
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One-tenth of that. Indeed, much of the work was left to bodies, not only like Asus but certain industrial bodies of which the Atomic Energy Authority was the notable leader, to develop the potential role of what may best be called almost a new science, again, the role of computers, in storing and handling the mounting tide of scientific literature.
I should like to refer in particular to the retrieval service for medical scientists, known as MEDLARS; to the Chemical Society's experiments with chemical information services (how often in the past we have worried about chemical abstracts!); the work of the Institution of Electrical Engineers on information services for physicists and electric/ electronic engineers. These are major experiments, covering large subject fields, and these have also been developed in co-operation with Europe under the ægis of the Information Policy Group in O.E.C.D.
Equally important to OSTI are experiments in the expert analysis of literature as a basis for information services more precisely tailored to user-needs. On the one hand, the Office for Scientific and Technical Information is supporting reference data centres which attempt to ensure that important reference data for scientists are effectively collected, evaluated, disseminated and retrieved. The only thing we are still lacking is a name for a subject which really ought to have its own title. Some while ago I suggested that it should be called "exaggalectics", from the Greek word "exaggalo"—to inform, but it seems to have an unfortunate ring and I think we ought to have a competition for a word comparable to one which will be familiar to the noble Earl, Lord Bessborough—I refer to "cybernetics"—because we really need a word to describe the science of information dissemination, retrieval, and so on. Of course, the Office for Scientific and Technical Information is supporting actively admirable bodies such as ASLIB, and the National Lending Library for Science and Technology. There are real developments in this field, and I hope at some stage we might have a further discussion upon them.
One interesting point which I should have liked to deal with—and again, inevitably, a debate of this kind can only be a further discussion in a theme which

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is widening and making greater demands —is the extent to which all Government Departments, not just the two mentioned by me (and the noble Lord mentioned others) should have the professional administration necessary to evaluate the benefits which may be derived from research and development, and, where necessary, the facilities to carry out such research as they think desirable. Here, too, there is no finality and there is indeed some controversy, but I am sympathetic to the importance which the noble Lord attached to that.
I have attempted to give some rationale, some basis and even a little philosophy in relation to the present system of organisation of Government activity in the field of science. I emphasise again that I approach the whole subject with humility. We do not know the best form of organisation. Research and development is a continuous and restless process. It is possible to look at it in ways other than that of supporting the scientific environment and the application of science. It is a cyclical process, which both uses and generates wealth. No-one can pretend that the present pattern of Government organisation for science and technology is ideal; like the structure of many British institutions it has arisen as a result of piecemeal decisions taken over past years. One cannot just stop the progress of science in order to allow it to be considered by committees to formulate perfect organisations for its management, although we have tried to do so. We have set up committees, like the Trend Committee. Not everybody was satisfied with that, but they did contribute to the new thought and, as I believe, to a more effective organisation. And we can look at the vast changes which have taken place in the scientific field of government over the past few years, and especially during the past two years. So this is by way of being a progress report.
I know that my noble friend Lord Beswick will deal with a number of the points in the field of space and international co-operation to which the noble Earl referred. I think our basic sciences can reasonably be regarded as healthy and world-renowned. Because the application of research results in industry as judged by our economic performance appears to be only mediocre, many people have
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suggested that we should divert some of those resources given to basic science to applied research and development. This is rather like suggesting replacing Barrington and Graveney by two bowlers in order to improve our bowling performance. I believe that, despite the rather strange lack of return on some of the admirable scientific work, it is argued —indeed, it is argued by Mr. Austen Albu in The Times to-day—that we may shortly be going to receive the benefits. What we have to do is to go on approaching this problem with energy, with enthusiasm and, above all, with a lack of dogmatism. That will enable the machine to develop, to find its own opening for growth. And we must be aware that science will go its way provided it is not too trammelled by bureaucracy. We have attempted to find the right combination which ensures that difficult and essential decisions are taken by the Government while allowing the necessary freedom and giving the necessary support for science and technology in this country.
4.42 p.m.
LORD TODD: My Lords, I should like first of all to thank my noble friend Lord Bessborough for putting this Motion before us to-day because, of course, it touches on a number of points which are of very considerable national importance. What I propose to do, if I may, is to make a few general comments, first about the position of science and technology in the structure of Government, and secondly on some matters arising from the Report of the Working Party under the chairmanship of Sir Gordon Sutherland, to whom I, like other speakers, am very much indebted. Of course, I agree entirely with the noble Lord, Lord Shackleton, that this is an extremely complex subject; and that neither we nor any other country, for that matter, have found the real way to handle this whole complicated thing; although I hope the noble Lord will pardon me if I say that when he explained the complex interrelationship of these various committees I began to think the matter was perhaps even more complex than I had thought before. That is, of course, a purely personal opinion.
I think the first thing one has to recognise is that, whether we like it or not, science and technology (and the latter, after all, to-day means essentially

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the application of the results of scientific research to industry, agriculture, medicine, administration and defence) dominate everything that we do. As the noble Lord, Lord Shackleton himself said, they permeate even politics and public affairs. And so the plain fact is that to-day it is to my mind impossible to reach any sensible decision on broad matters of policy without scientific and technological factors being involved either consciously or unconsciously. It follows, therefore, that to think of a science policy as a kind of entity, as something which is distinct and separate from general Government policy, is just nonsense. Science and technology must be looked at simply as component parts of national policy; in fact in many areas they form the very basis of national policy. I think that sometimes when people are discussing this subject there is confusion between what I would call the administration of Government scientific activities—I mean who looks after "hiring and firing" in the National Physical Laboratory, and so on—and what I would call the place of scientific and technological information or advice in the formulation of policy. It is really this latter aspect on which I should like to touch mainly.
The first public recognition of the need for scientific and technological advice in the formulation of policy at Cabinet level in this country came, I think, in 1947, when the Advisory Council on Scientific Policy was set up under the Lord President of the Council. During the period when I had the honour to be Chairman of that body, from 1952 until its demise in 1964, a further formal step in this recognition was taken when the office of Minister of Science was created, although in actual practice the office of Minister of Science was occupied by the then Lord President of the Council. The arrangement at that time had the great merit that there was a powerful Minister advised by the Advisory Council on Scientific Policy, and he could, in theory at least, ensure that scientific and technological factors were given proper weight when national policy was being determined in the Cabinet.
This is not the occasion to discuss the structural weaknesses of Government scientific organisation at that time; but
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weaknesses there were, and it was because of this that the Trend Committee on the Organisation of Civil Service was set up. The Report of that Committee, of which I was myself a member, has been implemented in part, but only in part, by the present Government. The real essence of the Trend proposals was that there should be a senior Minister who would not have normal departmental responsibillity but would carry responsibility for the various Research Councils and for a body which it was suggested might be called the Industrial Research and Development Authority, a body which was to be concerned primarily with the promotion of technological innovation in industry. And this is, of course, one function of the present Ministry of Technology. This Minister was to have an Advisory Council on Scientific Policy which would advise him on scientific and technological aspects of overall policy for which the Minister would be responsible.
When the present Government came to power they took a rather different line. As we all know, they separated science from technology, putting science, at least as represented by the Research Councils and university science, in the Department of Education and Science with a Minister of State in charge, advised by a Council for Scientific Policy, with a correspondingly restricted remit as compared with the Council suggested by the Trend Committee, and they created a Ministry of Technology with an Advisory Council on Technology to advise the Minister on policy questions. I am not going to go into the question of exactly how this was done, because the noble Lord, Lord Shackleton, has fully detailed this. I confess that this division seemed to me at the time, and still seems to me, a wrong decision.
I do not believe that it is reasonable, even if it were possible, to separate science and technology; and to go further and put them under different Ministers, each with a separate Council to advise on policy matters, seems to me equally wrong. The problems of science and technology, of manpower and resources, and of priorities, are so interwoven with one another and with economic policy that to my mind there is room for one policy only, not two or three, and one should avoid at all costs the risks of

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getting two or three policies. Incidentally, I believe that my point of view has come to be accepted by the present Government, because, frankly, I can draw no other conclusion from the recent creation by the Prime Minister of the Advisory Committee under Sir Solly Zuckerman, which appears to take on the function that was intended, I believe, originally for the old Advisory Council on Scientific Policy, and that was to advise the Government on the broad strategy of science and technology in Government and over the whole field of national policy. That move I welcome, because it makes obvious sense. It may cause some modification in the breadth of the remit of the Council for Scientific Policy or the Advisory Council on Technology.
But it is quite clear that one must have a Committee of the type which has been formed. Whether it is wise to put this responsibility for science, as apparently it is being put under our present system of Government, with the Prime Minister is something that remains to be seen. For my part—I give a personal view only—I should have thought it would be better to place the responsibility on a Minister not "of" but "for" Science and Technology without departmental responsibility who would be a member of the Cabinet and who would have a policy function. One could have in addition a Ministry of Trade and Industry, instead of a Ministry of Technology. I do not like the term "Ministry of Technology": it is a funny expression. Neither do I like "Ministry of Science" for that part. But there could be a Ministry of Industry whose Minister need not be a member of the Cabinet.
It may be said that here I am getting into the realms of political nomenclature. This is something in which I am not too experienced, so I will not press it. But I will say this: that although, as the noble Earl, Lord Bessborough said, the Ministry of Technology looks a little overblown these days it has, after a rather slow and uncertain start, undoubtedly taken a valuable initiative in some matters. But I feel, frankly, that the governmental separation of science and technology has shown up in what I think is the rather fumbling and muddled approach there has been to the problem of priorities in science, and the establishment of a closer relationship between academic and industrial science.
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This brings me to Sir Gordon Sutherland's Report on Liaison between Universities and Government Research Establishments. Given that the present situation is to continue, I agree wholeheartedly with the conclusions reached in this Report. But several of these conclusions, and a good deal of the evidence given by members of the staff of government research establishments—for example, the desire to take part in teaching, to have university status and to take Ph.D. students—to me suggests that we ought perhaps to be a little bolder in our approach to these problems.
I have always held that there are only two sets of circumstances in which research can be relied on to be pursued successfully over a long period. One is when the research is directed to clear-cut economic, and preferably changing, objectives. This is the sort of situation which obtains in industry. There you can carry out research for a long period with a more or less permanent staff. The other way in which you can do it, and where you do not need to have economic objectives, is where you give effect to it by the simple device of having it depend on a continuous through-put of transient young research workers who do not remain in the group doing research for any long period—where, indeed, there is a training function involved for the small permanent staff and the whole thing is kept alive by the continued flow of young and fresh minds. That is the sort of thing that obtains only in the universities.
The trouble is that Government establishments which do not have a clear-cut economic objective (and there are many such) operating as they do with a largely permanent staff, do not fall into either of these categories. As a result, they tend to be ineffective, except perhaps in the initial phase of their development when the staff is new, young and enthusiastic. The desire expressed by those members of the staff from the Government research establishments to teach and to have Ph.D. students is, to my mind, merely a manifestation of this situation.
Some Government establishments we must of course have. There are those which concern what I may call in a general way public services: the Road Research Laboratory laboratories dealing with standards, like the National Physical Laboratory and certain others. But, for

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the rest, apart from those dealing with specialised defence problems, I think that, in the main, these Government establishments should be more directly associated in some cases with universities and in other cases with industry.
I greatly welcome moves which have recently been made to develop the links between some establishments and the universities: for example, between the National Engineering Research Laboratory and the University of Strathclyde, of which I have the honour to be Chancellor. I think this is a good type of move. But I consider that the greatly desired increase in contact between the universities and industry is not going to be achieved by merely appointing a few industrial or Government scientists and technologists as honorary professors, setting up one or two joint projects and allowing a few young men to take external Ph.Ds. You need something much more direct than this if you are to get anywhere.
Why cannot we be bold for once and, for example, take the National Engineering Research Laboratory right out of the Ministry of Technology and put it slap under the control of the University of Strathclyde? Not only do I believe that this would be more effective so far as research is concerned, but I believe that if this kind of thing were done the development of applied science in universities and, what is more, the recruitment of their graduates into industry would be greatly simplified. After all, this kind of thing has been quite successful in the United States, and I do not see why it should not be successful here.
If you turn to the other side, I do not see much future for places like Harwell or the National Gas Turbine Research Establishment if they carry on as Government research establishments. Why should not the National Gas Turbine Research Establishment be put slap in the aero-engine industry? After all, that is where it really belongs and where it ought to have been developed in the first place. I find it rather hard to see the need for a Government station to provide research requirements for modern industry. If there is a need for this kind of thing, then we should stimulate the industry concerned to put its house in
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order. If we did, I think we should hear a great deal less about "brain drains" and the difficulty of recruiting young scientists into industry.
I know that I can be accused of prejudice when I say this because I am a chemist. But I would remind your Lordships that the chemical industry does not complain about or suffer so much as other industries in regard to these particular things. For instance, if you look at the findings in the Report of Professor Swann's Working Party you will see that the chemical industry recruits a large proportion of people from the universities, many more than most other sciences. If ever there was a research-based industry it is the chemical industry.
This makes me think. I wonder whether any of these other industries in trouble, and perhaps the Government, too, should not look at what has happened in the chemical industry, an industry where, so far as I am aware, they have never shown either the need or the desire for Government research stations to aid them, but in effect have done their own research and co-operated fully with universities all the way through. Action in the Government research establishments along lines of the kind I have just mentioned will certainly present administrative difficulties, but I do not think they are insurmountable; far from it. Certainly they should not be allowed to prevent action, because I believe that the idea of Government research establishments in areas outside the public services may have been a good one in its day, but that day has passed.
Finally, it seems to me that if the newly formed Advisory Committee on Science and Technological resources can establish priorities and can help set out a general policy in Government in which these can be implemented, and if it can promote the kind of change that I have suggested in Government research organisation, our present structure may evolve into something which is really workable. If it does not, I do not think we should hesitate to change the whole of our administrative set-up.
5.0 p.m.
LORD BOWDEN: I, too, should like to thank the noble Earl, Lord Bessborough, for introducing this subject to us this

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afternoon and for giving us an opportunity to discuss a very important document which was presented to the country by Sir Gordon Sutherland and his Committee a short time ago. They concerned themselves, as the noble Lord, Lord Todd, has said, with some aspects of what, in my view—and I think in Lord Todd's view—is a grave national administrative weakness.
We are, as we well know, spending on pure research and development in this country as much as, if not more than any other of the great Western industrialised Powers. At the same time, as we know to our cost, the rate of growth in gross national product and the rate of growth of our industry are lagging sadly behind the performance of many of our prime industrial competitors. There can be no doubt, as we have many times said in a rather self-congratulatory manner, of the quality of our science. There is every misgiving and doubt about the way in which it is being used, about the interaction of our scientists with industry, and particularly about the efficiency of the whole of that part of the machine over which the Government exercise control.
I should like to begin by saying that the proposals which were made by the noble Lord, Lord Todd, for East Kilbride, have been great favourites of mine for many years. In fact, I have urged them for at least ten or fifteen years; but so far to very little purpose. But I think that before one contemplates dramatic changes such as those of which he spoke, perhaps to save Harwell from the fate which is apparently impending, we should turn to consider as first steps some of the recommendations made by Sir Gordon Sutherland and his Committee. They have discussed certain matters which come under the control of the Government. They have discussed the organisation of the research laboratories for which the Government are responsible and their association with the universities.
The Sutherland Committee have shown beyond any doubt that in this particular matter we are less efficient in all the countries with which the Committee have been concerned. I myself know something of the collaboration between Government research establishments and universities in America, in Germany, in Russia, and
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I can confirm from my own observations the relatively much greater efficiency which these other countries have achieved than anything we know in this country. The reason is part of a great English malaise, which may be due in part to our refusal to admit that anything that is useful and profitable is at the same time worthy of study by serious-minded gentlemen who find themselves, at least temporarily, in universities. The American universities model themselves on German practice, and have been copied in turn by Russia, and I believe, by China. They all accept that they have three fundamentally important tasks of equal significance, the lack of any one of which is enough to ruin them. These tasks I will enumerate, for they are fundamental to our topic this afternoon.
The Americans believe that a university must be prepared to concern itself with any or all of the problems of contemporary society in so far as it is able to do so. This is true whether or not the topic under discussion forms a part of one of the traditional, conventional or classical academic disciplines. The second proposition is that a university must be prepared to convey any information it has come by to any human being in the community who is capable of profiting by it, whatever the age of the individual concerned. My third proposition is that universities must teach undergraduates—and I put them in that order perhaps deliberately to shock.
These three tasks are inseparable and of equal importance. We know in England that we must teach undergraduates in our universities, but our own universities have never conceded that they have an obligation to concern themselves with any problems other than those in which they happen to be interested at the time. They have never accepted the fact that change is taking place so rapidly, that people become out of date so quickly, and that universities must re-educate the professional man throughout the whole of his life.
One may ask how this influences their relationship with Government science. The answer is fundamental. Government laboratories have been set up in this country to undertake research work which in America would as a matter of course

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be entrusted to the universities themselves. The idea that we should have to associate, by some specific administrative action, the work of an organisation like Harwell or East Kilbride with a university would never arise at all in either Russia or America—for two quite different administrative reasons. In America the task would be entrusted to a university. In Russia a different organisation would be set up to tackle it, but the staff of the research centre and the staff of the university would be the same people. So the tasks would be intimately associated both in Russia and in America.
So the problems with which the Sutherland Committee were concerned do not arise by the very nature of the organisation with which other countries have succeeded in solving their problems. We seem deliberately to create them for ourselves and to do so by attempting to set up research establishments concerned specifically with particular problems. We find that, although they are equipped at enormous expense, have apparatus which is unrivalled, perhaps, in the world, and have every opportunity for their work, nevertheless in the end they tend to wither on the vine. The reason they do this, as the noble Lord, Lord Todd, said, is that they are dissociated from the opportunity of experiencing either the urgent problems of an industrial firm, anxious all the time to preserve its products from competition; or, on the other hand, the continuing stimulus of young men who go through, bringing new ideas and giving a new impetus. They may leave behind a major contribution to knowledge, but certainly they take with them the experience of seeing science in progress with the best apparatus in the world and under conditions of extreme urgency. It is the experience of working under these conditions which converts a college graduate into an engineer or scientist. Nothing else can do it.
We have created enormous difficulties for ourselves in setting up a machinery which almost automatically and instinctively separates these two components of what should be one indivisible whole. One of my oldest friends was in charge of the Solid State Department in Malvern, which was better equipped at the time than any other such establishment in England. He decided to leave R.R.E., Malvern, to go to a university because
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he wanted to teach undergraduates. When he got there he found himself wholly unable to equip his laboratory as he wished, and so in sheer desperation he went to America to work in M.I.T. where, as a matter of course, the two tasks were associated because it had never occurred to anybody that they could be separated.
Our problem is peculiarly British and insoluble within the framework of the administration which we have created for ourselves. I cannot over-emphasise the extreme importance of realising that in a university research and teaching are inseparable once the first degree is passed; a man can learn what science is only by doing it, and to do it he has to work on real, genuine problems with good apparatus, under good conditions, under an able man.
It is quite intolerable that the universities in this country should be put into a position in which they are almost forced to use the Ph.D. degree as a bribe to persuade people to go and work, sometimes with inadequate apparatus and under very poor conditions, on problems of insignificant economic importance, problems which have been chosen simply because they can form the subject of a three-year dissertation. They are deprived of the opportunities which they would have in any other country of the world of working, with the best facilities in the country, on real, urgent problems under good conditions. I sincerely hope that the Government will take seriously the problem of reorganisation, which will make the Sutherland Report irrelevant by demolishing the administrative process which has led to the difficulties to which Sir Gordon Sutherland has drawn our attention in this most valuable document.
This is a problem which I think transcends in importance almost any other with which the universities are confronted. It is not enough merely to create more undergraduate places. It is not enough to set up small research schools in universities, isolated all over the country, each competing desperately for men, apparatus and ideas, and to hope that as a result of this we shall create a lively, flourishing science, and a prosperous industry. Our competitors ensure at all times that their young people are part of the real world; the world in which urgent problems are solved with good apparatus under ideal conditions.

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These are problems which demand solution, and it will not be enough merely to endorse Sir Gordon Sutherland's recommendations which, I am glad to say, have been accepted by the Vice-Chancellors. Nor will it be enough to point out that it will be of immense help to Harwell; that it should have a closer association with the university. This, of course, is true. I have made speeches in Harwell and in Oxford, at great length on many occasions, pointing this out. People pay lip service to it but always complain that the administrative processes are such as to make closer association almost impossible.
I should like at this moment to pay tribute to some of the work which has been done at Harwell, and particularly at Culham. There are very few centres of excellence in this country or, in fact, in the world. There are, however, a few places in which work of very great sophistication is being done under extraordinarily good conditions, and under the most imaginative direction. I think that Culham is probably the best of its kind which we have in this country, and it ranks with any institution of its kind to be found anywhere in the world.
It is little less than tragic that such a magnificent establishment as Culham should now be suffering, as it is, from grave doubts and uncertainty about its future, which are having a most deplorable effect on the morale of the staff; and that such an establishment should not as a matter of course be regarded as a wonderful place for young people to go and learn the technique of science by doing it. In other words, I say that Culham should be a component of a university institution. I would not presume to describe this afternoon precisely how this could be done, but it should be done and it could be done. It would transform the education of physicists and it would transform the future of Culham, which, as I have said, is one of our greatest single national assets though it is likely, if we are not careful, to be wantonly destroyed through neglect, and it is suffering terribly at this moment from grave doubts as to its future.
If I may just mention another, simpler example of what I mean, Aldermaston has at this minute a magnificent tandem generator; a splendid machine which they built themselves to the design of the
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High Voltage Electronics Corporation in Burlington, Massachusetts. This is probably the best of its kind in the country. It is the kind of machine which universities all over the world are buying and installing. But the Ministry of Technology are trying to find a university, anywhere in America, which will take it off their hands on the grounds that they cannot afford to maintain it. This is folly. The cost of transporting the thing, of taking it out of its very elaborate mounting and from the building which houses it, is almost half the value of the machine. Here we have an opportunity to provide facilities for a research school, unrivalled perhaps in this country, which is being wantonly destroyed because of the failure to appreciate the opportunities which exist, or could exist, for collaboration between universities and Government research establishments of various kinds. The fence at Aldermaston will have to be moved, but this is not an intolerably difficult exercise.
For a long time Harwell cost us every year almost as much as all the universities in England put together. This is incredible but true. I do not think the universities started to cost more every year than Harwell did until ten years ago. Despite this, and despite the extraordinary opportunities which the creation of new machinery provided, it was not used as it should have been, as an educational media.
There are many things which I could mention; for example, the manufacture of these enormous nuclear machines in the Rutherford Laboratory. The actual manufacture and creation and design of such pieces of machinery represents the most sophisticated modern engineering which the world can offer. It could and should have been used as a method of instructing young men in the techniques of modern engineering. It was not so used. The consequence is that our industrial firms have little or no understanding of the problems, because they do not have engineers who know them. It means that when, for example, CERN goes out to contract for new apparatus the British manufacturers rarely succeed in getting any of the contracts. It means, furthermore, that a vast opportunity, unrivalled so far in my lifetime, was totally ignored and neglected. These are most tragic examples of the failure of this

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country to understand and to solve years ago some of the problems to which Sir Gordon Sutherland's Committee has drawn our attention.
I should like, since my time is short, to draw the attention of the Government to one particular problem to which the Committee referred; one which could be resolved almost overnight, and for the lack of which we still suffer greatly. I refer to the problem of the transferability of pension rights. Your Lordships may think this a relatively trivial matter to which to refer after what I have already said, but it is in fact important, if only because it could be solved so easily. It is extremely difficult for people to move from the scientific Civil Service—the Atomic Energy Authority—to university, to industry and back again. This is a problem which simply does not exist in many countries, because for years there has been an almost universal opportunity for people to move without loss of pension rights from any part of the economy to any other. We, uniquely, make it difficult, and we do so as a result of a curious set of Treasury regulations concerned with such trivia as the conditions under which an employer's contribution to a pension fund may be taken away without incurring a liability to tax. The regulations which govern the interchange of pensions between different components of the body politic are more complicated in this country than anywhere else in this world: they cause more confusion, they are more frustrating. and the final result is less satisfactory than in any other Western country of which I know.
I hope your Lordships will forgive me if I illustrate the absurdity of the situation, and the bizarre results which sometimes follow, by describing the circumstances which confronted me when I left an industrial firm to go into the academic world. The pension fund to which I subscribed was one of those in which, if the holder of a pension leaves voluntarily, he has to forfeit all the contributions which the employer has made on his behalf. If, on the other hand, he leaves under duress, he takes it with him. So after I had decided to leave I was under a tremendous temptation to go and smite the chairman of my firm on the nose in order to be fired, because then I should have taken with me several hun-
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dreds of pounds—less, of course, any sum awarded against me as damages for common assault. I resisted the temptation, which was great at the time, but I cannot understand what Treasury genius it was who, deliberately or accidentally, produced a regulation which imposes such strain on people anxious to move.
My Lords, to my certain knowledge there has been a Committee sitting to consider this problem of transferability of pension rights for three or four years. So far, it has produced no results of any kind, and I would beg the Government to believe that the simple resolution of this quite simple administrative problem, which could be resolved by the Treasury very simply, would do so much to ensure the freedom of movement of people from one part to another of what is in fact the same enterprise; namely, the complete, composite body of the industry, of the research and the universities teaching. It would do more to improve the mobility of labour and increase the flexibility of British industry than anything else that could be devised. In another place about a year and a half ago my right honourable friend the Chancellor of the Exchequer remarked that he hoped to be remembered as the Chancellor who had introduced an entirely new type of tax, the selective employment tax, which would, he said, improve the mobility of labour and make it easier for the Government to send people from one part of the industrial organisation to another. I should like to assure my noble friend who is to reply to this debate that if the Chancellor could solve the problem of pension transferability he would do more to render his name blessed and to increase the mobility of high-quality labour within the British economy than all the selective employment tax he will ever think of.
My Lords, I have wandered far from my main theme, but I would beg your Lordships to believe that the document we have in front of us is one of the great State documents of this generation. The problems it poses should never have been allowed to arise; but as a result of the solution of them, I hope we may see some alleviation of our difficulties, and may arrive at a position in which we no longer spend more on research and get less for it than any other country in Western Europe.
5.23 p.m.
LORD SHERFIELD: My Lords, I apologise for the fact that my larynx is partially out of order and that the resources of science and technology have not yet been able to effect a cure. But if my remarks are inaudible, they will also inevitably be brief. I will say only a few words about the first part of the Motion. I was not one of those in favour of setting up a Ministry of Technology. I supported the recommendations of the Trend Committee, which were referred to by the noble Lord, Lord Todd. I remain of the opinion that the present arrangement is not the best one; but, fortunately, even the wrong system can be worked by the right people, and it is clearly not very useful or profitable to discuss or press for fundamental changes at the present time.
There is, however, just one point that I would make. I know that it is highly debatable where the line of responsibility should be drawn between basic scientific research and development; and, of course, there is now a complex of committees, to which reference has been made by previous speakers. I simply want to express my own opinion that the present division is not the best one. I should like the first opportunity of reorganisation to be taken to transfer scientific research from the Ministry of Education to the Ministry of Technology, and a Minister of Science and Technology should take over the responsibility for the Research Councils.
My Lords, the Report we are discussing deals with the relations between universities and Government research establishments, and I have nothing new to add to what has already been said about its recommendations. But I should, like to take the discussion a little further, to a closely-related problem of equal, if not greater, importance; namely, the relationship between the universities and industry in scientific and technological matters. The noble Lord, Lord Shackleton, referred to this question, and I shall approach it from a slightly different angle from that taken by the noble Lord, Lord Bowden. I think it is a commonplace, and, on the whole, a valid criticism of our national performance in the last twenty or thirty years, that in spite of the excellence of our scientific research and development we have failed
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to exploit the commercial possibilities of our scientific achievements.
This is a field in which the United States has been outstandingly successful. It is true, of course, that in the United States Government support for science-based industries, through the defence and aerospace programmes, is on a very much larger scale than in this country. Nevertheless, what is often called the "spin-off" from this expenditure—that is to say, the application of innovations thrown up by defence and other Governmental research and development to ordinary commercial purposes—has been much more successfully developed there than in this country; and it is in this question of the relationship between scientific research and development and industrial applications that we have found perhaps our weakest point.
The classic example of the development of "spin-off" is the relationship between the Massachusetts Institute of Technology and the science-based industries—many, but not all of them, small—which have grown up on the perimeter of Boston. There is cross-fertilisation here which has led to remarkable results. Something very similar exists in Southern California, around the California Institute of Science and Technology, around the University of Stanford and in other places. Virtually nothing of the kind exists in this country. There seems to be a different climate in the United States: the academic world seems more alert to the commercial possibilities of their research work; industrialists seem to be more aware of the help they can get from the academic world. The attitude of mind on both sides appears to be more alert and receptive than it is in this country.
Recently, there has been some stirring over here. The National Research Development Corporation can, of course, do a great deal more than it used to do with the increased funds which have now been placed at its disposal. There has been some discussion in the Press about science parks on the lines of a development which has been successfully carried out in Canada, and generally there is a much greater awareness of the problem. There is the project at the University of Lancaster, to which the noble Earl, Lord Bessborough, referred. But relatively little seems to have happened in practical terms.

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There are various ways in which the problem can be tackled. The practice that has already been adopted in some institutions of appointing from industry qualified individuals as professors for one or more years to lecture and teach could be expanded. In the opposite direction, all reasonable facilities could be given to members of academic staffs to act as consultants to, or part-time directors of, industrial firms. Of course, a proviso has to be made that this work must not interfere with the academic teaching, but if the process is properly controlled it can be of mutual value, as the United States experience has shown; and perhaps there is room in this country for more positive encouragement and less reluctant approval.
Such investigation as I have been able to make shows that there are one or two specific examples of "spin-off" from Oxford and from Cambridge, but they seem to be confined to the field of the manufacture and sale of high-grade scientific instruments. I cannot help thinking that there is scope for greater activity and achievement here. Proposals have also been discussed from the side of the Universities for the formation, in conjunction with the engineering department of a university, of an industrial development unit or company to promote the commercial aspects of the work of the department. Some financial subvention would be needed to start the unit off but thereafter it is thought that the unit could be self-supporting on royalties, consultancy and development contracts. There is also the problem of patents. The question here is whether full use is made of all the patented information or whether many patents, once taken out, are left to moulder in the files. I have no preconceived notion as to the best way of making progress but I am sure there is a need for greater awareness of the problem and closer study of it.
It is often said that the obstacle to the successful exploitation of a technical innovation is lack of finance. I doubt whether much that has a genuinely commercial prospect suffers in this way. There is the National Research and Development Corporation. In the private sector there is technical development capital; and there are the clearing banks, who I do not think are as backward as is sometimes thought in lending for such
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purposes. Of course, there is bound to be disappointment from time to time. But this, I think, is due to different evaluations of a project rather than to lack of finance.
It may be that the scope for action in this country is less than it is in the United States, but I find it difficult to believe that it is as small as the practical achievements up to date have suggested. The noble Lord, Lord Bowden, may have put his finger on the fundamental defect in the earlier part of what he has just said. In any case, the conclusion seems to be that the main problem is not so much lack of finance as lack of organisation and initiative, and the failure of mutual communication between the industrial and academic worlds. I hope that the Government, through the Ministry of Technology, and by encouraging the National Research and Development Corporation, will do everything they can to stimulate interest in this subject. I was glad to hear what the noble Lord, Lord Shackleton, said about the action contemplated in this field; but I hope that initiatives will increasingly come both from the universities themselves and from industrial firms.
5.33 p.m.
LORD KINGS NORTON: My Lords, may I, too, thank the noble Earl, Lord Bessborough, for his wide-ranging speech in support of his Motion on a subject of such vital importance to the economy. I should like also to take this opportunity of apologising to the noble Lord who is to wind up this debate, in that I may be prevented by a long-standing engagement from being here when he comes to speak.
At the outset, I should like to comment briefly on some particular remarks made by the noble Earl and to add one more question to his list. He said that it would be advantageous if Ph.Ds. were awarded for research done jointly in university and industry. Under the Council for National Academic Awards this is possible, and Ph.Ds have been awarded for work done jointly in the colleges of technology and industry. The pioneer work in this field was done by the predecessor of the Council, the National Council for Technological Awards, and holders of the M.C.T. of that body can now exchange their degree for a Ph.D.
My question to the noble Lord who is to reply to this debate is whether, in the

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present organisation of Government science, there is satisfactory provision for the Ministry of Transport, the Ministry of Public Building and Works and the Ministry of Power to obtain the resources which, I suppose, will be rather beyond the resources of their own research establishments. Is there a system of liaison which enables the Ministry of Technology to put some of its resources at their disposal? The noble Earl's questions were critical of the current govern mental administrative structure for science. I, too, am rather critical of the present arrangements, but I hope that the noble Lord, Lord Shackleton, and the noble Lord, Lord Beswick, will believe that my criticisms are intended to be constructive.
My Lords, I should like to approach the difficult and complex problem of the organisation of the country's research and development work in a rather old-fashioned and simple-minded way. I should like to make it clear at the outset that I shall confine myself to research and development in the industrial context, particularly in the areas covered by the Council for Scientific and Industrial Research, of which I was the last chairman. I suppose it is too late to make our terminology logical. I sometimes think that if we use words more accurately we should make fewer organisational errors.
The great division, which we all recognise, whether we like it or not, is between the arts and the sciences. On which side of the division do the technologies lie? Not, I think, on the arts side. It follows then that the technologies are among the sciences. So when we speak of science and technology, as we habitually do, we introduce an element not only of tautology, but of confusion. I believe that we should understand quite clearly that technology is part of applied science, and that the natural sub-division on the science side is between pure science and applied science. To me it follows that if, administratively, we must make a division it should be one in which pure science, with all its pure research, lies in one compartment, and applied science, with all its research and development, lies in another.
If your Lordships will forgive me mentioning in a brief moment what you already know, pure research is the search for new knowledge for its own sake. From
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the administrative point of view, it requires the maximum of finance and the minimum of direction. The dividends on the investment come but rarely, but when they come they can be enormous. The great dividend of nuclear power is the direct consequence of the probing for new knowledge of the structure of the atom. The chief problem in the support, by Government or otherwise, of pure research, is identifying the people capable of doing it, who are much less numerous than the people who think they are so capable. In this connection, the administration of pure research, the Government function, I suggest, is identifying the people and financing them; and, so long as the Department responsible can get the collaboration of proven fundamental scientists and the Treasury, it does not matter very much which Department it is. I would suppose that the Department of Education and Science is appropriate; the Ministry of Technology could be more so, particularly if its title were amended.
It is when we come to applied science that the administrative problem becomes so difficult. I believe that applied science is, or should be, concerned with the achievement of recognisable utilitarian objectives, preferably those likely to be of profit to the economy. A new objective, which almost inevitably is to do something better or faster later on than we do it now, involves those responsible in new research investigations in building upon the knowledge that the fundamental scientists have put on record, in arranging for new investigations to fill gaps in the relevant spectrum of knowledge, in building models, in building prototypes, in testing, in modifying.
Somewhere in the spectrum of effort there is a changeover from what we popularly call "research" to what we think of as "development". But—and this, my Lords, is my excuse for this lecture—the whole spectrum is one and indivisible. It resembles the seamless robe of the noble Earl but whereas he contemplated the division of his robe, I think my spectrum should remain in one piece. In the pracadministered on the assumption that it tical fields of industrial endeavour it does so. In the industries I know it is does so. I believe that in Government it would best be administered similarly.
That is why, my Lords, I believe that the Trend Committee were wrong—

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eminent and knowledgeable as were its members, among them my noble friend Lord Todd, from whom I always hesitate to differ, but with whom I find myself this afternoon in almost complete sympathy. They wanted:
"A Science Research Council for the support of research projects on pure and applied science"
on the one hand, and an Industrial Research and Development Authority on the other. They divided my spectrum, which should remain whole. They cut the noble Earl's broadloom robe in the wrong place.
The present Government did not accept the Trend Report, but they accepted the Science Research Council. Instead of the Industrial Research and Development Authority, they created the Ministry of Technology, and I think that represents an improvement. But because the spectrum of applied science has been divided, it has been necessary to create a complex system of liaison between the Ministry and the Science Research Council. Some people believe it works; some people believe it does not, and I confess that I have my doubts about it.
My Lords, I think that our administrative machinery, and in consequence our national achievement, has been bedevilled by this belief that there is one thing called applied science and another called technology. Our achievement, according to a paper at present before the Prime Minister's National Productivity Conference, suggests that the economic consequences of our research and development expenditure are bitterly disappointing. In other words, it supports with figures what the noble Lord, Lord Bowden, told us this afternoon. Economic growth is faster in all the other European countries considered, though their R and D expenditures are smaller proportions of their gross national products.
Admittedly, they had further to climb in the post-war years than we had, and it is difficult to allow for this factor. But also, according to the paper I referred to, the United States of America, admittedly spending an even higher proportion of their gross national product than the United Kingdom, has achieved a greater increase in output per capita than we
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have, and they certainly started from a higher base line. I consider that if our efforts in research had been more closely linked, as has already been suggested this afternoon, to probably profitable objectives, as I believe they are in these other countries, the growth of the economy in return for our very great research expenditure would have been vastly greater.
How might this have been achieved? How may better performance in the future be achieved? I believe we need not only an administrative machine capable of identifying the dividend-making projects, the projects likely to profit the economy, but a machine which ensures the harnessing of the maximum resources to achieving them. Whatever industry does for itself in selecting projects of probable profit, I believe we need machinery for co-ordinating these efforts and, still more important, for determining the more ambitious ones which single firms, through limited resources, cannot be expected to embrace.
I should think that the complex of Neddies is the machinery for this coordination and selection. Perhaps, if these duties are not at present prominent in their terms of reference, their composition as well as their terms of reference may need adjustment. For the achievement of the objectives we need the closely co-ordinated efforts of industry, the research associations, the Government research establishments and the university and the College of Technology applied research departments. It is for this coordination that we look to the Ministry of Technology. The Ministry, of course, assumes this duty, but in one direction at least I want it to do more.
I believe that most of the research associations and Government Departments are reasonably close to their associated industry, but I believe that there is a wealth of talent of immense economic potential in the applied science departments of universities and colleges which has not become sufficiently involved in the drive for profitable objectives. This, I think, was what the noble Lord, Lord Sherfield, was saying in slightly different language. I suggest that to involve this talent to the utmost should be an objective of Government scientific policy, an objective of industry's scientific policy,

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and an objective of the Ministry of Technology. Government can achieve this in more than one way—by direct contract to the academies and, among others, by developing liaison between the academies and Government research establishments; the latter being, of course, the subject of an admirable Report by Sir Gordon Sutherland's Working Party which has already been referred to this afternoon.
That Report discloses a somewhat disquieting situation to which the noble Earl briefly referred and on which the noble Lord, Lord Bowden, has commented so wisely. In their conclusions the Working Party say that they were left in no doubt that nearly all Government research establishments would welcome a much closer relationship with universities and are keen to take action to effect it. They go on to say that only a minority of universities appear to them to be willing to take a strong initiative to the same end. One would guess that this would include the new technological universities. The Working Party find the attitude understandable, and they mention the fear in some university departments that their research activities might be weakened by some of the proposals for closer liaison. I find this puzzling. There are many departments in universities and colleges of technology in which the work going on is manifestly of an applied—a technological—character. Its broad object must be intended to benefit the associated industry. The closer it gets to the establishments concerned with the same technology, to the industry concerned with that technology, to the relevant research association, the more likely the academic effort is to be of value.
A lifetime of experience of applied research in Government, university and industry has not suggested to me that research aimed at practical objectives is of less interest than research done without such objectives. On the contrary. And no one is suggesting that the universities should do work which they do not want to do. My hope is that the attitude the Sutherland Committee discovered in the Government establishments will be matched by a desire for collaboration of the same character, sweeping not only through the universities and through the colleges of technology but through industry which, while I believe it takes in most fields advantage of the facilities offered by Government research estab-
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lishments, does not try hard enough to involve in its projects the wealth of talent in academic applied research.
Like others who have spoken this afternoon, I should like to see a much more intimate partnership between industry, Government establishments, research associations and academic research departments, with combined teams on industrial projects, and with liberal interchange of staff, such as was discussed by the Sutherland Working Party, for Government Departments and universities. This interchange, so valuable for the intense collaborative effort which I am sure we need, would be facilitated enormously by a national pension scheme for all professional people. I was glad that the noble Lord, Lord Bowden, referred to this subject in such emphatic terms, and one would hope very sincerely that the Government will try to bring it about.
My Lords, may I briefly summarise the views I have expressed? I believe that the Government administration of applied research, in which I include technology, should not be divided between two Departments. I suggest that all that is clone in applied science should flow from the setting of objectives which, if achieved, would be likely to profit the economy. I suggest, further, that the definition of these objectives is a duty of the N.E.D.C. organisation; that in trying to achieve them the Government and industry ought to seek the full collaboration of the relevant university and college of technology departments. Perhaps there is nothing very novel in these suggestions—and some of them have been said in different and more emphatic terms already this afternoon; but if the necessary changes are to be accepted by all involved, great changes of mind, as well as changes in organisation, will be necessary.
5.51 p.m.
LORD WYNNE-JONES: My Lords, I hope that the noble Earl, Lord Bessborough, and other noble Lords will forgive me for saying that, much as I have appreciated their speeches, I think that the most important contribution to-day has come from the noble Lord, Lord Todd. I thought that he put his finger on the most important matter in connection with these Government establishments.

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I spent two years of the war at the Royal Air Force Establishment, Farnborough. I was asked to go there to look after the Chemistry Department, and I found (it is now so long ago that I can say this without fear of offending people) that this department was still working, in the year 1943, upon the projects on which they had been engaged in the year 1920. It was still working upon the problems of camouflaging aircraft, because in the First World War camouflaging aircraft was of high importance. It was still working upon dopes to be applied to fabric-covered aircraft. At that time, there was only one, the Wellington, still flying. It was still working upon paints, in spite of the fact that by then there was a well-established paint industry in this country. I could go on enumerating the problems upon which it was working, scarcely one of which was relevant to the Second World War.
This was not entirely the fault of the people who were working there, because they themselves had put forward certain schemes. They had put forward before the war the whole of the FIDO scheme, but it was disregarded and put away in a file. In the first year of the war, a high-level committee was formed and at the end of a whole year this high-powered committee produced FIDO, exactly the scheme which the small Chemistry Department at Farnborough had produced before the war and which had been ignored.
Further, they spent a long time during the early stages of the war investigating explosions in fuel tanks. They pointed out that probably the biggest single risk for a bomber flying over Germany arose from incendiary bullets hitting a fuel tank, because when a fuel tank was at a height of, say, 20,000 feet and the aeroplane had been flying for a time, the temperature dropped so low that it no longer had in the tank a non-explosive mixture, but a highly explosive petrol-air mixture, and this was more dangerous than when the temperature was high. They were not believed, and they argued with the Air Ministry for a year before protection for fuel tanks was brought in, and it was not until just after Christmas, 1943, that we had protection of all fuel
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tanks, though it could have been done earlier.
It was things like that which made the people working in that laboratory feel extremely discouraged and disheartened. And we have to realise that practically all Government establishments, except when there is the impetus of a war, tend to go down into a peaceful state of quiet study of the problems with which they were dealing in the previous war. This applies not only to defence establishments but also, as the noble Lord, Lord Todd, said very strongly, to all research establishments if they are divorced from industry or from the universities.
A man has to have a purpose to do research. He just does not go and sit down and do research. He does it because he is compelled by the need to solve a real problem. Like the noble Lord, Lord Kings Norton, I do not distinguish between pure and applied science. Both are equally important. The important thing is what is urging the research. We shall get the impetus to do pure science, as the noble Lord, Lord Todd, said, only when there are young men doing research. It is not old people who make discoveries—I am old enough now to say that: it is young people who make discoveries; and it is our job to see that their vitality is unleashed. In my opinion we can do this only by linking basic research to the universities, not by doing it in research establishments, and by having technological research closely linked with industry.
I am glad to see that my noble friend Lord Bowden has returned, because at this point I shall be slightly critical of him. He made what I thought was a somewhat unfair attack on the whole organisation of science in this country. I do not agree with him. I believe that a great deal of what we have done has been extremely good. I think, for instance, that our research associations have been very good. I do not say that all of them have; but in the main they have worked well, and I would say that if we had not had these research associations set up jointly by the Government and industry, there is many an industry in which no research at all would have been done. These associations have played a valuable part, and it is important that we should continue them. We may have to

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prune them. Probably some have outlived their day; and there are others which require reform.
The noble Lord, Lord Todd, made a wise remark when he said that we cannot plan science apart from planning industry. Science is not an isolated activity. I hope your Lordships will believe that those of us who have practised science all our lives have done so because we have regarded it as part of a communal activity, with the hope all the time that what we are doing is playing a part in the development of community and industry. When people say that we in the universities do not want contact with industry, I reply frankly that that is nonsense. It may be that we do not want every type of contact. It may be that we do not want to be asked to do something which we are not qualified to do. But in my experience we all want to feel that the things which we are producing in research are going to play a valuable part in industry. What we complain about is that industry is not interested and will not respond to it.
Remarks have been made about the difference between this country and the United States. I know a little about the United States. Both my daughters are married and living out there, and all the grandchildren I have are Americans. Every time I go there and visit universities and industries—and I have been frequently in both—I have been struck by the fact that industry is waiting to find out new ideas. Mention has been made this afternoon of consultants. Every American industry is bribing people the whole time for consultants. If any one of us visits the United States, he is asked immediately by a dozen firms to go and give a lecture, and they will pay all one's expenses for going. I am rarely asked to give a lecture for any industry in this country, but in America I should be asked continuously. I have even had work which we have done in Newcastle known and appreciated by an American firm, who have written to their British associates and said: "Who are those people working in Newcastle on this problem? I suppose you are supporting them." But the British firm had never heard of us.
It seems to me strange that even to-day in this country we are failing to get the proper collaboration between industry
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and the universities, between Government establishments and universities. I think that, so far as the Government establishment is concerned, the answer of the noble Lord, Lord Todd, is the right one: associate them entirely with universities, or wipe them out, or put them with industry. If your Lordships look at this map which is put at the back of the Sutherland Report, you will see quite simply why the association between Government research institutes and universities is not so good as it should be. If you take the area North of a line from the Wash to the Severn you will find scarcely a single Government establishment, until you get to Scotland. The whole of the Northern part of England is devoid of these Government research institutes.
One asks: "Why are there no associations?". In order to come down to your Lordships' House I travel overnight, and I shall be catching a sleeper back at one o'clock to-morrow morning in order to get back to do my day's work. This can be done, and I do it; but it does not encourage when these institutions are all sited in the London area. We ought to have a number of these research institutes close to every university of this country. People cannot be expected to travel 270 miles. It is an easy journey from Newcastle to London, but if I want to go from Newcastle to Cardiff it is a very different story, and it would probably take me a day and a half. One has to realise that we have partly created the problem by putting all the Government institutions in the London area.
There are a great many things that are wrong, and a great many things that we do well; but there is nothing we are doing to-day that we could not vastly improve upon. I think we could take three simple steps. One is to follow the advice of the noble Lord, Lord Todd, and associate all the Government institutions with the universities. Secondly, we should scatter them around the country where there are universities; and thirdly, we should get all our industry to begin to appreciate that there must be a close contact and a reciprocal contact.
I should have liked to quote to your Lordships a letter, but perhaps I can recollect just one sentence from it. The letter was written by the director of research of one of the large electrical

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companies in this country to a lecturer in my own laboratory, who had written to him, knowing that they were doing a certain type of work which was related to work that we were doing. He wrote that he was most interested in pursuing work along these lines. He asked whether he could discuss it with them, and suggested that perhaps the company might be prepared to give some support for a research student. The reply that came back—and this is almost verbatim—was: "Industry pays the University Grants Committee and the Science Research Council to support research in universities, and we are not prepared to do anything about it."
6.5 p.m.
LORD IRONSIDE: My Lords, I, too, am grateful to my noble friend for introducing this Motion which ranges broadly across the field of science. The points raised by my noble friend are, I think, most relevant to the whole problem of strengthening the technological base of this country, and I should like to draw attention to some of the areas which are affected by the division of responsibility between the Ministry of Technology and the Department of Education and Science, which is referred to in the Motion. If the noble Lord, Lord Shackleton, could find a bus large enough to put the Government's advisers in, I have the impression from what he said that it would probably be a double-decker.
To start with, I want to refer to that important area which one might say is at the very heart of things; that is, scientific and technical information and all its facets of collection, storage, retrieval and dissemination. One comes to the point of the name here. It is difficult. No prizes are being offered for finding a new name, but we now have such names as "datamation" and "automation" with us; and if the word "information" did not already exist in the English language, this might well be the one that would be chosen.
THE EARL OF BESSBOROUGH: May I say that the French have a word "informatique". I wonder whether that might be considered suitable for use generally for data processing. It might be the answer. I do not know what we call it.
LORD IRONSIDE: I do not believe there is a similar word in the English language to "informatique", and I think we need to have further thought about it.
The noble Lord, Lord Shackleton, referred to OSTI and its activities, and particularly the point that it is there to promote and co-ordinate improvements in the existing information services and stimulate the development of new systems and techniques which are likely to be worth introducing into the information network, the budget for which is now around £370,000. This is certainly an increase over the previous year. This expenditure is to be welcomed, as there is a growing recognition of the information problem in the world, and we must ensure in this country that we have the information network that is needed by scientists. I think it is clear that, like others, we have only just started to scratch the surface of this problem, but the overall object is directed finally to finding ways and means of manipulating information by machinery (in this case by computer), with the minimum amount of human intervention.
As the computer industry is sponsored by the Ministry of Technology, in addition to its other sponsorships, one can immediately identify a division of responsibility in a field which needs close coordination if the country is to derive the maximum benefit from the total amount of work which is being done in various places towards developing the necessary techniques. This is an important point, because it is impossible to copyright the software or language of a computer, although the hardware designs can be protected in the usual commercial manner, and I can see a possible situation arising where computer software technique language will strongly influence computer design. The divisions of responsibility of this kind can at times, I think, be a good thing and can be made to work, but very often they arise through natural circumstances and as a result the best is not achieved.
In the case of scientific and technological information handling, new ground is being trodden by the Department of Education and Science through OSTI which may cause the computer technologist to rethink his techniques. This in turn may call for a change of emphasis

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by the Ministry of Technology in sponsoring the computer industry and ensuring that national requirements are recognised early and that needs can be met at the right time by British companies—an all-important factor in this field, where United States companies are very often setting the pace in Europe. The problems of information handling are immense, and I believe that a good example should be set by the Government in coordinating the work in this area, if not actually bringing it under one umbrella in order to obtain more of a concerted effort—something similar to the Action Concerté in France.
Information is not the only area in which there is a division of responsibility. Another one is space science and technology, where the Ministry of Technology has inherited a responsibility, which is a somewhat fragmented one, involving space activities at the R.A.E., Farnborough, and other establishments, with extensions into industry, as well as other places. This covers satellites, satellite communications and launching vehicles. However, the pure science interest in space can, I think, be said to lie with the Department of Education and Science through the Science Research Council and the University interests, but in practice our long-term involvement in space science and technology is expressed largely in terms of support for ESRO and ELDO where the Department of Education and Science and the Ministry of Technology, respectively, have responsibility for managing our interests. Hence, we have a two channelled arrangement in this field with two Ministries and two European links.
The management of British space interests under a single head has been considered before and rejected, but I am glad to see from an Answer given by the Prime Minister in another place to a Question that the division of responsibilities on the British National Space Programme is a matter to be looked at by the Central Advisory Council of Science as a step towards better co-ordination of our space activities. I feel that there is a real need for greater co-ordination of activities in support of space and of the space programme, in which science and technology generally are being drawn closer together.
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ESRO is about to consider its first major scientific project, the large astronomical satellite; the French and German Governments are considering implementing the SAROS project to put up a communication satellite over Europe; and I gather that no decision has yet been made about the British Government's participation in this project. One way and another, a great deal of money is being invested in space in Europe, and this is bound to have some beneficial impact on industry. But I believe that a nationally coordinated effort is necessary to stimulate the best results and to recognise, on a limited budget, what will be the most productive ventures in the space field.
It is interesting to look back at what was said by the Technical Director of ESRO some years ago, speaking about the organisation. He said that,
"although the aims of ESRO are the furtherance of space science, the method of achievement of these aims is almost wholly technological".
My Lords, history has shown that developments required in particular fields of engineering have always resulted in inventions and the development of new materials and techniques which become available elsewhere. I think that coordinated national effort is vital in addition to support of the European ventures.
Dealing more specifically with the matter of the two European scientific organisations, ESRO and CERN—and here I declare an interest—to which we devote part of our scientific budget, they are briefly referred to in the context of liaison between universities and Government research establishments in the Sutherland Report, at the bottom of page 4. However, I feel that they are largely swept under the carpet in the Report by its saying that they are both operated largely for the benefit of university research workers. This is possibly fairly true for CERN, but certainly not, in my opinion, for ESRO, in whose 1964–65 Report the participation of industry is specifically mentioned.
At this point I should like to draw attention to certain differences in these two organisations which both contribute to the aims of science and, in particular, to the likely future investments by them which will have some effect on our own technological position. Both these

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organisations are large spenders and are about to seek approval for expenditure of further substantial sums on new projects which involve procurement of equipment: at CERN the giant particle accelerator, for example, which will cost, as my noble friend said, something like £150 million overall; and at ESRO the new large astronomical satellite, which will cost something like £25 million—that is to say, if these projects are approved. The United Kingdom contributions to ESRO and CERN are themselves significant, and it is important that, if we wish to continue to obtain benefit from our investments in support of these two organisations, we should seek to ensure that the returns are not only in the form of scientific and technological information and brain gain, but also in terms of technological and industrial know-how and experience. This can surely happen only if industry is able to participate in projects of the organisations through contract work.
As I said before, I think it is recognised by ESRO that industry has its part to play, and British firms have had a fair degree of success in obtaining significant contracts—in fact, around £2 million out of the total contribution to date of £7 million to £8 million. However, the same is not true of CERN, as this country has had only about £2 million worth of contracts, out of a total of £48 million worth placed. This compares with a total contribution, over the period of CERN'S life, of £20 million. This £20 million is three times the contribution to ESRO to date over a much shorter period.
I do not think this is the occasion to debate ESRO and CERN affairs in detail. but one may perhaps draw attention to them in general terms as a significant part of our investment in these particular fields of science, which, if it is to bear fruit, must include the benefits to technology and industry. For example, no attention at all is given in the CERN Annual Report for 1965 to the part played by European industry, and this factor leads one to think that the attitude of the organisation to industry has not encouraged a number of firms to compete for the significant contracts which are opening up new ground.
Here I should like to refer to what the noble Lord, Lord Bowden, said about
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the value to engineers of being able to participate in the construction and design, and so forth, of the equipment which has gone into the Rutherford Laboratory. I think that here he may have hit the nail on the head. This might point directly to one of the reasons why we have been so unsuccessful at CERN. As CERN is on the Franco-Swiss border, this may be more true for firms who have the advantage of being on the spot. One of the criticisms which I have heard levelled at CERN is that they expect participating firms to forgo their profits in exchange for the benefits to be obtained. I am sure that British industry is ready to do business with CERN, but not necessarily if it means entering into it with the knowledge of sustaining a loss in competition with Continental firms, who, incidentally, it is thought, may have a number of advantages over British firms in purely nontechnical ways, not only because they are better placed perhaps geographically, but through fiscal benefits of one sort or another.
The Government have been invited by Marks and Spencer to look at its procurement techniques, and although it looks as though the result of this may be that St. George may possibly star with St. Michael, I am sure that the purchaser expects to see the supplier make profits in order to encourage the best performance. The Government, with enlightened purchasing methods and various direct and indirect fundings procedures, may be able to do a lot indirectly to help British industry compete more successfuly for CERN and like business with their Continental competitors, and to obtain, for example, some of the £100 million worth of CERN equipment business which is confidently expected to be placed by them during the next five years. Part of this would include the money to be spent on the large accelerator.
However, in view of the United Kingdom's poor performance on CERN business I feel that a deeper probe should be made by the Government to find the real reasons for this, as the loss of business is a technological loss as much as anything. This is most important as the English site in Norfolk may be selected by the end of the year to house the large accelerator, on which £65 million of the overall £100 million will be spent—that is, assuming that approval is given by the

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Treaty countries—and in those circumstances a great deal more will surely be expected of industry in the way of participation, with the customer on the spot.
Whether we like it or not, my Lords, I believe that the big sciences of space and high-energy physics are here to stay, and are potent forces in bringing science and technology, in general, closer together, and that it is essential for the Government to co-ordinate these activities closely, and, where necessary, bring them together under the responsibility of one authority.
6.23 p.m.
LORD MITCHISON: My Lords, it is expedient to be short, but not, I think, to omit to thank the noble Earl for giving us the opportunity of having this debate, and to thank, too, those very distinguished noble Lords—distinguished in the field of science—from whom I, at any rate, have learned much to-day and derived much interest. This is, perhaps, a rather narrow Motion, but in fact it raises the 64.000 dollar question whether we can so organise our affairs as to deal with the discoveries we are making, in this instance in the field of natural science. I understand the complexity of it, the difficulty of it. Science itself leads to unpredictable results the field of it is constantly increasing in diversity, so I should expect there to be some considerable confusion.
That is quite common, I understand, in revolutions, and on October 1, 1953, the present Prime Minister introduced a paper called Labour and the Scientific Revolution at the Party Congress at Scarborough. He made an extremely eloquent speech, which I heard: but in the manner of eloquent speeches it has in some respects not been fully carried out, and one of those respects was the introduction of a Minister of Science. A great deal of the speech turned on that. Well, there is not yet a Minister of Science. On the contrary, science has been hitched on to the Ministry of Education.
I know my own Party quite well, and I think that the Ministry of Education tends to be a trifle teacher-dominated. Anybody who takes the trouble to look through the debates in another place on the subject of education will find that the speakers include a disproportionate
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number of professional teachers, and often there is no one else. I suggest that we do not want to do that with science, and I agree with those who have said that the distinction between science and applied science or technology—or whatever words one uses—must be one of degree and not of fundamental substance. After all, if we think about medicine and the relations of medicine with science the shallowness of the distinction becomes apparent. I think it has arisen really from the way in which things have grown in this country and the form of the organisations which have had to deal with it. But, be that as it may, I suggest that the weight of opinion to-day in favour of handing science over to a Ministry which will also cover technology—call it what you like—has been overwhelming, and that opinion should not be disregarded because it is, unlike my own, that of people who are competent and know what they are talking about.
Then it is said, what about the universities? I see no objection to one Ministry looking after science in the universities while another Ministry looks after other aspects of the work of universities, including, perhaps, a great deal of the teaching work. New forms of educational institutes are growing up which I think show us the possibility of that being done. In Oxford, for instance, quite lately a school has been started for post-graduate students—scientists, as it happens. It has no undergraduates at all. In that respect it resembles a rather odd institution called All Souls. But there it is. If one is talking in terms of Ministries, that body belongs to the Ministry of Science and it does not belong to the Ministry of Education.
I want to go no further on those lines but I do wish to say one other thing. I know a good number of young scientists and a good number of young university people, and I think they feel that the wave of enthusiasm on which the Labour Party was returned to power was largely based on an appeal to scientific knowledge and the possibilities of scientific knowledge, and that the Government have fallen rather short in the provision of money and resources.
We cannot derive any comfort from the Tory Party about this. They got out of any difficulty by doing nothing, and at the time when Mr. Quintin Hogg (as he now is) was Minister of Science there

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was the story about the 'bus that would contain all his staff. I hope the noble Lord, Lord Todd, will forgive me if I tell a short story. I went to that Ministry to try to find out what they were doing. I must say I was a bit staggered by the size of the staff and the fact that they did not have any highly qualified scientists or anyone of scientific standing there. I said, "What do you do if, in the course of the government of this country, a rather difficult scientific problem suddenly occurs?" "Oh," they said, "we ask Lord Todd". I said, "What happens if Lord Todd is not here?" "Oh", they said, "we wait until he comes".
It is all very well, but the noble Lord, Lord Todd, would be the first person to agree that that is hardly the right way to discharge the duties of the Government. So if I am critical of my own Party I am equally critical of the Party opposite in this matter. But when one looks at the money provision, one finds there has been, as I see it, not so much a slowing-down of the whole programme but a failure to increase it in accordance with the hopes which so many of us, including myself, entertained at the time.
I think we have an arrangement for a quinquennial grant for the universities which covers a substantial part of their expenditure, which certainly has its advantages. I believe that some people thought it necessary. It tends to increase with no more than a regular small increase, roughly parallel with the increase in the cost of living. It is not only that. If you look at the recurrent expenditure in universities you find there has been an increase, but in regard to the capital expenditure there has actually been a decrease between the estimates this year and last year. Obviously, on matters of capital expenditure one cannot build too much on a single year but, without going into figures in detail, the general impression is that during the "freeze" one of the preferred subjects has not on the whole been science and the universities generally. It ought to have been, I suggest, if in fact we are to cope with the problems that beset every growing industrial country, every modern country, at the present time.
These are dealt with in different ways. There was a ministerial meeting recently under the auspices of the O.E.C.D. which
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pointed out that there were substantial differences. I think there is a great deal to be said for the method adopted by some countries—the meeting instanced France and Belgium—by which all the research and development expenditure in various departmental budgets is put together and then passed to a committee of, I think, a dozen scientists, from them to an inter-ministerial committee, and it then becomes part of the total budget. Our provision in our annual budgets is not really a forward provision at all. It is what has been spent in the year before with some small additions to it, and it certainly does not get what I think it ought to have in this case, the comments and criticism of a number of people with special scientific knowledge. I am always a little distrustful of people who say that such and such a profession ought entirely to run its own affairs. But that really is not the position here. Science is something so much larger, so much more fundamental, so much a part of our own lives, that it is at our own peril that we neglect making proper provision for it.
I suggest that there are two criteria, one of which is obviously a matter for scientists and is sometimes called "what is good science"—that is to say, what, regarding science in the abstract, are fruitful fields of advance—and another is in connection with the social effect of scientific discovery, which is very much more a matter for Government. Government is guesswork in many respects, and if you have got two irreconcilables nowadays there are two things only you can do with them: one is to let Parliament or the Minister of the day decide, and the other is to toss up. You have got to face that possibility. But you need not be driven to it if you find them irreconcilable only because you do not know sufficiently what you are talking about. I suggest that that gives us some sort of line on which to deal with this very baffling question of the role of Government and the role of experts with science.
I have little more to add, except this. One noble Lord said something about getting the right thing by doing it in the wrong way but with the right people. I understand that. But I believe that one of the great problems in getting science applied nowadays lies with the British businessman. That does not apply to all of them of course, but there are a

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terrible lot of them who are so narrow-minded and so reluctant to adopt new ideas that they failed, for instance, to get their fair share of the CERN contract, as the noble Lord pointed out. And they fail in other respects to keep up with the advance of the times. One says this, and of course as a loyal member of the Labour Party I would not mind saying that it would necessarily involve the abolition of the Tory Party, too. But at this late hour we cannot really go into that. I think that noble Lords opposite would agree with me that there are elements of fault, or shall we say inertia, in the British businessman, and sometimes in Tory politicians, which are really of very great hindrance to advance in this country. This is, after all, a challenge to us on this side. Cannot we do any better than that? If we say this is a scientific revolution it is up to us, as revolutionary experts, to cope with it. I see my noble friend is really shocked by that.
LORD SHACKLETON: No.
LORD MITCHISON: I am glad he approves. Seriously, this is a matter which cannot be approached on conventional lines and by methods which have served in the past for other purposes. It is something fundamental to advance in this country. It is something which all of us as good citizens ought to be prepared to face up to, and to say to ourselves, as I am saying to myself and and to no-one else: "You stupid old man; you really ought to try to shake up your ideas and your thoughts and see if you understand something at any rate, of what your children are doing about science".
6.37 p.m.
LORD RITCHIE-CALDER: My Lords, I want to thank the noble Earl, Lord Bessborough, for opening this debate, and to apologise to him and other noble Lords who have taken part earlier because I was not here. I was very much involved in the general context of our discussion because I was applying the good old Dr. Squeers Dotheboys Hall principle of "W-i-n-d-e-r-s. spells winders"; now go and clean them". I and several of my noble friends in this House have been hewing coal in the middle of
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Nottinghamshire, which is not inappropriate, because there we were seeing the end results or the culmination of science and technology in the latest most automated pit in Britain. When I think that noble Lords on the morning shift produced something like 100 tons of coal each at the coalface, it seems to me another example of something that is implicit in this debate.
I noticed that in the Report of the Sutherland Working Party on Liaison between Universities and Government Research Establishments it was apparently excluded from their remit that they should consider the nationalised industries in terms of the universities and research establishments. After our experience this morning, I think this is a great pity, because it seems to me that in fact we have in Bevercotes, as was described to us this morning, a laboratory. It is an attempt to establish a prototype of the kind of completely advanced and completely automated collieries that this country ought to have. It is significant and true that we have there a laboratory—and it is a laboratory. It is the Winfrith, if you like, of the National Coal Board, and should be regarded as such when your Lordships begin looking at the £20 million capital investment that it cost. It is a research establishment. It is carrying out the kind of work on which a great deal more will be built.
But in terms of our present debate it seems to me—and I am sure to some of my noble friends—that this is another example where there should be a much closer identification between the universities and, in this case, the research establishment of a nationalised industry; that the liaison should in fact be far, far closer. It is not simply, as was suggested in some private discussion to-day, a question of the National Coal Board giving research plans to a university or college of advanced technology. It is that in the great development of a colliery life at Bevercotes we are discovering other end problems which have got to be referred back for fundamental research. It is not merely tidying up the end results. Therefore, we have to recognise (and I gather, certainly from the noble Lord, Lord Wynne-Jones, and from my noble friend Lord Mitchison, that there is general agreement, which I certainly share) that it is a great mistake

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to separate science and technology, or to regard them as separate. I never have.
I believed, with the Prime Minister, at least at one time, that we should have a Minister of Science; and indeed it should have been so. It is impossible, in this day and age, to separate and distinguish, except departmentally, in the sense of where we put the people who are to work it, the philosophy of science and technology. There is no distinction now. Science and technology are part of the same spectrum. We have something we call pure science, academic science. We have have something which we call fundamental or basic science, which the French more intelligently called oriented science. We have applied science, we have technology and we have the results. I suggest that in point of fact we should think of it quite differently. We should think of the makers possible, who are the people doing pure or fundamental research who make possible; we should think in terms of the makers to happen who are in fact the applied scientists; and we should think of the makers to work, who are the technologists; and we should think of the makers to pay, who are the people who produce the goods. This is the point.
I want here to say that we need something else in these definitions that I am offering your Lordships. We need makers to think. At this moment not nearly enough thought is going into what is really needed in science—and indeed into what the end and object of science or technology really is. We are not doing it. We are not doing it because we are beginning to lay a great deal of stress on certain things which may appear to be self-evident at the moment. We may be in a national crisis of trying to catch up on something which puts an enormous push behind one form of development, and we shall find ourselves presently being carried along in what I can only regard, in the circumstances, as a current, something which we have financed to the point where it is carrying us along in its momentum. This is not helping science. It cannot be. We must get back to the point where we are really taking account of the directions in which we are trying to strive.
As my noble friend Lord Mitchison said, we are caught up in a revolution,
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and we have to man the barricades of that revolution. The fact is that we are slacking now. Something has gone wrong in our thinking about this. I, like my noble friend Lord Mitchison, have almost great resentment about what seems to me to be a misdirection. I do not mean now merely setting up the Ministry of Technology and the splitting off of science into the Ministry of Education. Something else has happened. And I ask my Front Bench seriously how, in fact, we are going to get to a re-integration of the ideas which impelled many of us before the last Election. I do not think I need do this, but I assure my own Front Bench that it was, as Lord Mitchison said, the inspiration, or the temptation, the illumination, which was given by the promises of scientifically orientated policies that inspired the younger generation to support the Labour Party.
At this point I would suggest that we have seriously to re-examine our scientific policies. We cannot merely go on creating committees, and then creating committees to overlook the committees. I admire no one more than my friend Sir Solly Zuckerman, but in the case of setting up his Committee I would ask, "Who takes care of the caretaker's daughter when the caretaker is busy taking care?" What is happening that makes it necessary to supervise the supervisor? This does not seem to be right, and in my opinion cannot be right.
I thank the noble Earl, Lord Bess-borough, for giving us in this House the opportunity to discuss this matter, because at least the other place has made its mark by demanding and succeeding in getting a Select Committee—not a Committee to "look after the caretaker's daughter." I hope that from this point forward we (and your Lordships have demonstrated your deep and real concern about what is in fact the scientific future of this country) shall take care of the science, and the technology will take care of itself. That is not always true, but it is basically true now that the feed-back between science and technology will produce the interlocking, at least in the results. But we must, I seriously feel, take a hard look at where we are, and where we are going. We have had the excuse of the freeze. Let us ask ourselves what will happen when the icepack breaks.
6.48 p.m.
LORD WINDLESHAM: My Lords, from this Bench I should like to add my own personal thanks, and I am sure those of all noble Lords on this side of the House, to my noble friend Lord Bess-borough for initiating this debate to-day. The Motion is a wide one, and had to be if it was to allow a comprehensive debate. In his most authoritative speech my noble friend has shown both his familiarity with the full range of issues involved and how carefully he has thought about them. This evening at the end of the debate I shall not follow him or other noble Lords into the labyrinthine committee structure concerned with the administration of Government science and technology, to which the noble Lord, Lord Ritchie-Calder, has also just referred.
It seemed to me that my noble friend raised a number of pertinent questions in opening this debate, and the self-stated humility of the reply by the noble Lord, Lord Shackleton, turned out to be exceptionally well-judged, in view of the critical speeches that came afterwards. However, as I say, I do not intend to pursue the committee structure any further now. The relationship between Government on the one hand and science and technology on the other is one that can bear a great deal of scrutiny and deserves informed discussion of the sort which has taken place this afternoon. In this way our debate has been both useful and constructive.
I would make only two general comments. The first is that it is a relationship that should be kept as flexible as possible. What we are discussing is not a static relationship between fixed assemblies of people and things, but rather how they stand in relation to one another at a particular moment of observation. Second, I believe it is shortsighted to evaluate science and technology only, or even mainly, in terms of the essential contribution they make to economic growth. This is of course of great importance, but none the less it is true that science is already transforming the whole nature and character of society. As the noble Lord, Lord Todd, said in his speech, there is hardly any political decision that can sensibly be taken without scientific or technological considerations being consciously or unconsciously involved. Science is chang-
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ing our understanding of the world and, as it does so, it may, if we are fortunate, help us to understand ourselves. Since a substantial amount of scientific and technological activity is taking place under Government auspices—the noble Lord, Lord Shackleton, gave some indication of the number of scientists and technologists in Government employment—and since further activity is financed by public funds, although not actually carried out by people in the public service, it is worth considering the role of Government.
As I see it, the Government's function is twofold. First, it must decide on the allocation of resources of money and manpower; and, second, it should encourage the creation of an environment that is not only sympathetic towards the scientist and technologist but appreciative of his efforts and determined to see that 'they are properly rewarded, both in terms of money and esteem. In carrying out the first of these functions the Government have to call on the aid of the scientist himself, because responsible decisions cannot be made on the amount of money to be spent on scientific research, or on the distribution of this money between different sciences, without taking professional advice. But, at the same time, the Government have to keep in mind what they want. This is difficult for the non-specialist because it is hard for him to know what he wants until he knows what is available, what is capable of achievement in the future, and how far in the future, and the risk element. All these matters require professional assessment. At the same time he has to take care not to compromise the independence of the scientific judgments involved. Therefore, if the Government is to be enabled to draw up its own scale of priorities and make decisions based on them, there has to be some form of consultative machinery.
There have been many interesting comments on the consultative machinery as at present organised, and on the recommendations made in the Trend Report and elsewhere as to the most desirable shape of consultation, and I do not want to pursue them at this stage in the debate. The only point I will make—and I think it is a new point—is that there is a direct connection between the decision-taking process in Government, with the advice

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of the consultative bodies, and the climate of opinion among the scientists and technologists who are in Government service or who depend on essential Government support.
Inventiveness and genuinely original work depend very much on the right atmosphere. This must be particularly true of the greater part of modern scientific research, where solitary intellectual effort has been replaced by team work. Although there is a limit on the extent to which a really fertile environment can be induced from the outside, there is a boundless and destructive quality to the harm that can be done by the wrong sort of external administration and control. If there seems to be a great grey blanket of officialdom hanging over everything, even if it is a friendly and benevolent officialdom, discouragement and lack of enterprise can result. The noble Lord, Lord Wynne-Jones, in speaking of his own past experience at the Royal Aircraft Establishment at Farnborough, gave an instance of the sort of lack of enthusiasm and wasted work on the wrong projects which results, not necessarily from a hostile bureaucracy, but from one which may be trying to do its best, but is just not functioning in a very efficient manner.
I turn now to the Report of the Working Party on Liaison Between Universities and Government Research Establishments, Command 3222, which has been the subject of a number of comments. To me, the case is established beyond any doubt for closer collaboration between universities and the research establishments. If I can summarise five of the principal reasons that come out of a reading of the Report they are these. First, that in certain fields of research the joint use of expensive capital equipment can save public money. Second, facilities which exist for post-graduate work, both in terms of equipment and also skilled supervising staffs in Government research establishments, should be more fully utilised. The Report says in paragraph 94 that there is room for 400 to 450 research students now, and no doubt with a little effort this figure could be increased.
The third reason is that some of the staffs of the Government research establishments would benefit from part-time lecturing or advanced university teaching. The Working Party remarks in
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paragraph 12 of the Report that there is a discipline in preparing and delivering a systematic course of lectures on one's general field of research and that this can be a useful stimulus. The fourth reason is that there is a danger—which was also mentioned in our debate to-day by the noble Lord, Lord Todd—that Government research establishments may become ingrown and stale because they lack the influx of fresh young minds. In university laboratories there is a continuous influx—an annual turnover of about 30 per cent was quoted in the Report—which leads to a more stimulating atmosphere. Lastly some research establishments are recognised as national centres of excellence which university departments concerned with similar interests could greatly benefit from. In this connection in paragraph 56 of the Report some rather disquieting things are said about the length of time it took for universities to make full and enthusiastic use of the central facilities in high energy nuclear physics at the Rutherford Laboratory.
Therefore, although the case for closer co-operation is very clearly argued in the Report, it seems that the courtship is still a one-sided one. The research establishments are almost unanimously in favour of a closer relationship with the universities and are keen to effect it. That is stated in three different places in the Report. But, with some notable exceptions, the universities seem far less keen. Although there is already a wide range of contacts, both formal and informal, between universities and Government research establishments, the reluctance on the part of the universities to see them further extended seems to be rooted in an understandable attachment to the corporate nature of a university and its responsibilities towards its students. This was spelt out clearly by the Vice-Chancellors' Committee in 1964, in a statement set out in paragraph 110 of the Report:
" … a university cannot delegate to an outside institution its fundamental responsibility for designing the training of Ph.D. students, for promoting research of a kind appropriate to their training, and for supervising them during training; "
The Report also identifies residential qualifications for higher degrees as a stumbling block, although London and Cambridge have both recently made some

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changes which seem to have worked out satisfactorily. The Vice-Chancellor of Birmingham University went further, perhaps, than anybody else in expressing his concern lest research establishments might be able to offer the recruitment bait of a Ph.D. in addition to the drawing power of a substantial salary, and attract university students, thus prejudicing the future of research within universities.
If I underline one final point from the Report, it is that contained in paragraph 198(c) on page 57, which is as follows:
" … where new Government research establishments are created, these should be sited as close as possible to an appropriate University."
This is a particularly important recommendation. In a number of instances, fruitful relationships have developed between research institutes and universities where a research centre or science based industrial plant was either adjacent or very close to the university. The noble Lord, Lord Sherfield, remarked on this in his speech earlier. M.I.T. and the spin-off development around it in Boston, the Stanford Research Park adjacent to Stanford University, in California, are two examples he gave, and there are others as well.
The noble Lord, Lord Todd. referred to the constructive collaboration at East Kilbride between the National Engineering Research Laboratory and Strathclyde University, and it was also praised in the Report. It was this association which led the noble Lord, Lord Todd, into his "bolder" (I believe that was the word he used) line of argument, that the National Engineering Research Laboratory might be put squarely under the control of the University of Strathclyde. The fact that he is Chancellor of the University of Strathclyde has, I am sure, nothing whatever to do with this proposal.
The noble Lord went on to propose that other research stations might be transferred to the appropriate industry, and that others might become part of universities. This is a general line of argument on which I am looking forward—and I am sure the noble Earl, Lord Bessborough is also—to hearing the Government's reply to-night, particularly since it has behind it the authority of the noble Lord, Lord Todd, and the noble Lord, Lord Bowden.
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If I can add a gloss to what has already been said, it is that the Report indicates that it is the Medical Research Council's units which have the closest relationship with the universities. If we look at this, what do we see? First of all, that M.R.C. units tend to be very close in location to teaching hospitals and universities. And, secondly, that in general there is interchangeability of pension arrangements between the M.R.C. academic staff and the Federated Superannuation System for Universities. There is also, incidentally, a far higher average of Ph.D.s among M.R.C. employees than there is among any other Government research body referred to in the Report. This suggests that the experience of the M.R.C. supports what the noble Lord, Lord Todd, and the noble Lord, Lord Bowden, have suggested.
In conclusion, therefore, I would say that the Report of Sir Gordon Sutherland and his colleagues is very welcome to us on this side of the House. It is a definitive analysis. What is necessary now is to keep up the pressure, both on the universities and on the research establishments. The existence of the Working Party, the questionnaires they sent out, the visits they made, the hearing of evidence and, finally, the publication of the Report—all these things kept the subject in the forefront.
But it would clearly be disastrous to relax the pressure now, in the interests both of making more efficient utilisation of scarce and expensive facilities, and also of helping to realise the full educational potential which exists in the research establishments. The Government must see to it that progress is made. This may mean a structural reorganisation, to re-align as many of the research establishments as possible with the universities or with the appropriate industries. I hope that in his reply the Minister will be able to tell us something of the Government's attitude towards the Report of the Working Party, and also what action has already been taken, or is planned, to implement the specific recommendations contained in the Report.
7.6 p.m.
LORD BESW1CK: My Lords, the noble Lord, Lord Windlesham, wound-up for the Opposition in what I thought was a typically soundly-reasoned contribution

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and it fitted in well with the general spirit which has been manifest throughout this debate to-day. As he said, we are immensely indebted to the noble Earl, Lord Bessborough, for introducing the discussion, and, speaking for the Government, I should like to thank all those noble Lords who have taken part, not only for what they have said but, again, for the basically constructive spirit in which they have chosen to put forward their comments and, in some cases, criticisms.
It would be quite presumptuous for anyone—and certainly for myself, with no departmental responsibility in this field —to purport to answer this discussion adequately. I hope we shall all agree that if we take away and each consider more carefully the written words which have been said by the others, the greatest value can be extracted from this afternoon's deliberations. For my part, I undertake to ensure that the complex of Departments and committees which we call the Government will consider extra carefully—I hope I have the support of my noble friends here—what has been said in this informed and interesting discusssion.
I doubt if I can add anything more about the dividing lines which the Government have chosen to draw between one Government Department and another, and which, together with the supporting organisations, have been the subject of so much of what has been said. My noble friend Lord Shackleton put before us what I thought was a very clear exposition of the thinking behind the present arrangements, but, as he said, and I emphasise, this structure is not necessarily immutable. The noble Earl, Lord Bessborough, himself referred to changes, or at least one change for the better, which has taken place recently, and I was particularly gratified to hear the comment made by the noble Lord, Lord Todd, about recent improvements. No doubt if experience, or noble Lords' arguments, eventually show the desirability of further refining or improving of this structure, then further changes will be possible.
The noble Earl, Lord Bessborough, asked me a number of questions about our effort in atomic energy. So far as the future structure of the Atomic Energy
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Authority is concerned, I cannot add more to what I said in answer to the noble Earl's question some two or three weeks ago. The future structure of the Authority is, as he knows, a matter of discussion at the moment between the Minister of Technology and the Authority, and I cannot usefully speculate on the outcome. But the issues involved have been defined, and he has helped to define them.
THE EARL OF BESSBOROUGH: My Lords, on the point about the Atomic Energy Authority, may I ask whether I am right in thinking that what I believe they call the techno-economic analysis unit has been set up to consider these matters with the A.E.A. and the C.E.G.B., and shall we get a report from that unit, or shall we hear what the results are? I am a little worried about this matter. Would it not be better to set up an independent committee of people who were not employed within either Department, the Ministry of Power or the Ministry of Technology, or the C.E.G.B. or the A.E.A.? It was a point I had hoped to make in my speech and I think it is extremely important. I should much rather see an independent committee looking at this matter.
LORD BESWICK: I think it was the noble Earl himself who, earlier in the day, spoke rather sadly about the plethora of committees. I am surprised he now wants to set up another one for this particular purpose—
THE EARL OF BESSBOROUGH: A committee to take decisions.
LORD BESWICK: —especially as the field which we are considering has been the subject of a good deal of investigation by the Select Committee. Although I will certainly consider the point the noble Earl has made, I cannot give him any encouragement that decisions will have to await the appointment of another committee.
I was asked by the noble Earl another specific question about the rental of research facilities from the A.E.A. by the S.R.C. The noble Earl asked whether the arrangement was a satisfactory one. The answer is, Yes, it is. The A.E.A. have facilities which are not being used to the full, and the S.R.C. are able to put them to very good use. For example, the

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S.R.C. rent time on the Harwell Cyclatron, the Tandem Generator, the Electron Linear Accelerator; and they also use instruments on the Dido and Pluto Research Reactors. At Aldermaston, they rent time on the Herald Research Reactor, and the irradiation facilities. In the case of the Tandem Generator, about which my noble friend Lord Bowden had some acid comments to-day, my understanding is that the decision about the future of this instrument is in line with advice tendered by the S.R.C., on which, as he knows, the universities, which he was complimenting, are represented.
LORD BOWDEN: Could my noble friend assure me that when the decision on this matter was referred to them they were given any assurance that, supposing they were to take it over, they would have funds to use it?
LORD BESWICK: That particular point I shall certainly have to consider, but it is a fact that even the best of machines in this field, no matter how expensively they are installed, do come to an end of their useful time.
LORD BOWDEN: If I may interrupt again, this makes it even odder that at this minute exactly similar machines are being sold by the firm to which I referred, whose director told me this story last week. He is selling them all over the world at this minute to be installed to start up work of a type that is now being stopped.
LORD BESWICK: I think it would be inadvisable for me to go further in this matter. I simply say that, although the noble Lord assures me that the facts are as he says, all the factors, I would have thought, were taken into consideration by the S.R.C. when the matter was considered by them.
I was asked by the noble Lord, Lord Kings Norton, in his most valuable speech a specific question about the availability of research resources for the Ministry of Transport, the Ministry of Public Building and Works and the Ministry of Power. Both the Building Research Institute and the Road Research Laboratory were, as he knows, formerly under one administration, and the interchange of information goes on. The scientific collaboration betwen former colleagues
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is there, and there is no difficulty at all so far as the machinery of exchange of information is concerned. Whether the availability of resources is adequate is of course another matter, and this problem is one which is now being considered.
I was asked by the noble Earl about the possibility that there was a duplication as between the C.S.P. and the A.C.T. I should not have thought that this was a real problem. Whereas the C.S.P. is an Advisory Council, chaired by an independent scientist, Sir Harrie Massey, and reporting formally to the Secretary of State for Education and Science, the A.C.T. is chaired by the Minister himself and is a forum where advice and opinions are exchanged, informally and in confidence, on the general development of the Ministry's work and policies. It must also be remembered that much of the Ministry's work is in the industrial and economic field, and that its research responsibilities are only part of a much wider remit. I have no doubt that the noble Earl will agree that this involves a substantial difference between the work of the C.S.P. and the A.C.T.
The noble Earl asked me about relations between the Science Research Council and the A.E.A. Here we are moving into the field of what I understand current jargon apparently calls "big science". In this field programme planning needs to look many years ahead,
probably a decade in the case of nuclear physics. At the present time the S.C.P. and the Research Councils are discussing future programmes. Over the years, the A.E.A. have built up activities in power and applied science of a very high quality, and it is a matter for discussion as to how far they will be willing to go on doing this, as opposed to relying on the improved facilities in the universities and the Research Councils. I think we shall all agree that decisions are needed, and quite quickly, for projects such as the major facilities for solid-state physics (the high-flux-beam reactor and the high magnetic field laboratory), and these, of course, can be planned only on a clear understanding of the functions of each.
I have a note here which says that "big science" is a mixture of science and technology of a peculiarly pregnant kind. By that, I suppose it is meant that there is a lot of "fall-out"—always

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provided, of course, that the initial collaboration between scientific and technological factors was a wise one. I agree with those noble Lords who have emphasised that the Americans have shown, in their data processing, electronics, aeronautical and communications industries, how their very heavy scientific and technological investments for other purposes can be exploited for commercial gain. I am sure this means that in this country, too, industry must be prepared to accept more apparently unremunerative prototype and experimental work, on the fringes of existing technologies, in order to secure incidental but probably quite important advantages.
The point was developed by the noble Earl, Lord Bessborough, particularly, as to whether "big science" was now so big that it could be afforded only on an international basis, and probably I ought to give some indication as to the general thinking about international collaboration in these matters. It seems there are some reservations in Whitehall thinking about the value of international effort, and a disposition to challenge the proposition, which some advance, that an international effort is a good thing for its own sake. Here, I speak especially of the field of research. International organisations have a way of developing their own interests, which may or may not serve the interests of those who support them; and the problems of control of the programme of work have not yet been satisfactorily solved. It is difficult enough, as noble Lords will know, with a national effort, but it is especially difficult when it is an international one. There is always a conflict between those who seek a balance between national and international programmes and those for whom the international facility seems an end in itself.
What I have said here must not be interpreted as decrying in any sense the value of co-operation, but only as doubting the wisdom of setting up expensive organisations—expensive not only in terms of money but in manpower. To the extent that we can facilitate the movement of men and ideas from one country to another, then of course we are wholly in favour of such policies. In concert with the Royal Society, the C.S.P. has been active in encouraging an increase of inter-European mobility of European scientists.
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It puts the highest value on such movement, whether by short-term fellowships, visiting academic posts or by research training. On its advice a scheme was discussed in the O.E.C.D. for an international agreement on reserving resources for such movement. The hope and expectation is that this movement across the Channel, unlike some of our experiences across the Atlantic, will more likely be a two-way affair, invaluable both to the receiver and to the sender. At the moment I understand that the number of European scientists now moving either way is small; but I hope that it will increase.
The reservations about research on an international scale do not apply to the projects or, to use the American term, "facilities", many of which are so expensive that they become impossible for a country of our size. One of the projects now under consideration is that of the European Molecular Biology Organisation, or Emso as, inevitably, it becomes. Here the C.S.P. view is that, although development of this field is of outstanding importance, a new laboratory in "a green field" is not at this stage the solution, and what is needed is the encouragement of existing centres. There may well prove to be a case for according a special status to some of the existing European centres, and this is under active consideration.
Mention has been made this afternoon of the proposal which, if implemented, would dwarf all other international projects of this kind. I refer of course to CERN. I thought that it would be of some interest, and would help to answer questions which have been put to me about the way in which decisions are taken in matters of this kind, if I traced the process of decision-making in the case of this particular project. The cost of this machine, as the noble Earl himself indicated, is estimated to be £150 million. That is only the estimate; I imagine that the actual cost would be much more. It provides a test for all the national and international means for arriving at decisions of science policy. The project arose from the recommendation of an international team, responsible for the present facility near Geneva. It had the backing of European nuclear physicists, who have studied the proposal in detail. They believe that unless this

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project is undertaken Western Europe must surrender the lead in high energy nuclear physics after the present and projected equipment has exhausted its utility, which will be by about 1980. Then, having reached that stage, it came to the individual national members for their national decisions.
In the United Kingdom the stages were as follows. The Nuclear Physics Board made its recommendations to the Science Research Council, of which it is part. The S.R.C. assessed its scientific merits in relation to other projects and advised the Secretary of State accordingly. The Secretary of State consulted the Council for Scientific Policy on the effect on resources for science as a whole. If, as will almost certainly be the case in this instance, the project cannot be met from within expected resources for science without damage to other programmes, and as it raises national and international issues which are part technological and part outside the scientific field altogether, it must be considered by Ministers who are advised collectively by the Central Advisory Council on Science and Technology.
LORD TODD: My Lords, may I ask the noble Lord whether it is not true that the whole of this matter was threshed out and precisely these points were taken under the old system? You will find it All in the Annual Report of the Advisory Council on Scientific Policy issued about four years ago. Why do we keep going on and on with exactly the same thing, and doing nothing?
LORD BESWICK: My Lords, I had not quite completed the recital of these events. I was asked how the system is working. Although I know that to the noble Lord it is "old hat", for the sake of the record I was trying to illustrate not necessarily the advantages but some of the problems involved in the present set-up. I agree that it all sounds complicated; but I hope also that the noble Lord will agree that the issues themselves are involved and are not confined to simple scientific ones.
For example, we have to determine how strong are the scientific priorities. Can this project take precedence over other desirable scientific projects? Are the estimates of cost sound? Has an assessment been made of the economic and
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technological implications? What is the significance for international scientific cooperation and for "Europeanisation", as some would say? What would be the effect of the choice of site? Can resources be made available against other desirable national objectives? The machinery for all these decisions exists, but the taking of decisions inevitably, as the noble Lord himself has said, is a protracted process. The Science Research Council will shortly report to the Secretary of State, and the C.S.P. is already studying the wider issues. The site is unlikely to be selected until August, 1967; and even this may be deferred. The decision on resources, which involves long-range planning, is only beginning to be undertaken in science policy; and I am not able to go on to say when a decision can be anticipated. But I hope, by using this case at any rate, I have answered some of the questions put to me about committees which are involved in a decision-making exercise of this kind.
Many tributes have been paid to-day to the Sutherland Report. I add my own. But none was more generous than that paid by my noble friend Lord Bowden, who said that it was one of the great State documents of our time. I was asked by the noble Lord, Lord Windlesham, about the Government attitude. We welcome this Report, and I do not believe there is anything that has been said by any noble Lord on the subject of this Report with which I shall disagree. I was very glad to notice that the noble Lord. Lord Sherfield, with whose physical handicap we sympathise, but who improved as he went on—and I am speaking again of his physical capacity to speak—was able to say that the recommendations contained in the Report were primarily for the universities and not initially for the Government. The recommendations do not, in general, call for specific new decisions by the Government, but they will, we hope, create a climate in which the advantages of further co-operation of types existing already, to a limited extent, might be commended to all concerned, including particularly the universities. I was glad to hear from my noble friend Lord Bowden that the Vice-Chancellors had expressed themselves in such a constructive way on the recommendations of the Report.
LORD BOWDEN: My Lords, can the noble Lord say whether the particular point on pensions—which is referred to in extenso by the Sutherland Report, and to which I myself referred and which is a matter solely for the Government—is under consideration, and whether anything is likely to be available for us?
LORD BESWICK: My Lords, a good deal of study has been given to this. It is not, of course, a matter solely for the Government. So far as the public sector is concerned, there is a very wide degree of interchangeability. That is not the problem. The problem is interchangeability from the public to the private sector. This is not a problem about which the Government can take any unilateral decision.
LORD BOWDEN: My Lords, if I may say so with great respect, the difficulties to which my noble friend has referred are in fact due to Treasury regulations which could be changed. It is because of the extremely obscure way in which the income tax laws have been drafted that all this trouble has arisen. It is certainly true to say that there are difficulties between the private sector and Government, but they are due to the difficulties under which private industry labours. This particular point is of very great importance indeed, and is one upon which, as I have said, committees have been debating for a very long time. I should like to ask my noble friend whether it is likely that any solution is in sight.
LORD BESWICK: My Lords, I am sure we were all greatly impressed with the experience of my noble friend who came very near, as he put it, to hitting his former "boss" on the nose in order to acquire transferable pension rights. I thought the illustration which he gave was interesting. Beyond that I cannot go, certainly not this afternoon. But the point has been taken, and this is a matter to which I hope further consideration will be given as a result of this debate.
I was particularly glad to hear my noble friend Lord Wynne-Jones pay a tribute to what Government establishments have achieved. I know that the noble Lord, Lord Todd, and the noble Lord, Lord Bowden, did not intend to decry these Government establishments, but something of what they said could have been construed in that sense. To
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identify the problem, as they did, is not to solve it. The establishments are there. I should have thought that they were necessary in the pattern of industry which we inherited after the war, and I was particularly interested that the noble Lord, Lord Todd, should have given, as an example, the illustration of the National Gas Turbine Establishment. He was suggesting that that was an organisation which might work more efficiently within the industry. But he could not have said that three years ago or even two years ago. The contribution which that Establishment was making in a fragmented industry was absolutely essential. Surely no one single unit in the aero engine industry could have assumed responsibility for running an institution of that kind. Even to-day it is doubtful whether industry would undertake the amount of expenditure involved in research justified wholly on defence grounds. Nevertheless, I will go on to say that the pace at which universities can, in practice, take over technological operations of this kind is limited.
The problem of how best to organise physical and human resources in Government establishments is now under examination in the light of the problems. both physical and human. I would again correct the impression which may unwittingly have been conveyed by noble Lords that the Government establishments are unprofitable. Many valuable industrial developments have grown out of their work. Industrial collaboration is encouraged, and will be increasingly encouraged. But having said that, I accept that it is important to ensure that the resources in such establishments are used to even better advantage, and this I believe will be facilitated now that most of the establishments are under the responsibility of the one Minister.
LORD WINDLESHAM: My Lords, I wonder whether the noble Lord will go a little further on this. It is no good just saying that the Government research establishments are doing a useful job and that the noble Lord is sure they will continue to perform valuable and useful work in the future. The noble Lord, Lord Todd, gave us an analysis of the motivations inside research laboratories which are likely to lead to successful results. Because of the experience with which

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the noble Lord speaks, the Government will obviously give a great deal of thought and study to what he has said. But the fact is that neither of the two motivations he advanced exist in most Governmen research establishments. Of course changes cannot be made over-night. But is the Minister able to go a little further and hold out any hope that some of the research establishments might enter into negotiations and discussions with appropriate universities or industries? Strathclyde University was quoted as an example. The answer that has been given so far does not really meet the problem.
LORD BESWICK: My Lords, what I said, I think, went a little further than the noble Lord has suggested. I said the pace at which universities can in practice take over these technological operations is limited.
LORD WINDLESHAM: My Lords, have they taken over any at all?
LORD BESWICK: My Lords, I said that the pace at which they could take them over is limited. I further said that now we have a Minister with overall responsibility for ensuring that these establishments are used to the utmost, it is more likely to produce a situation in which we might go along in the direction the noble Lord is suggesting, than was the case before. More than that, however, it would be unwise for me to say. I am sure that the noble Lord, Lord Todd, will not expect me to say that the universities could take over any of these establishments either this week or next.
LORD TODD: My Lords, if I may say so to the noble Lord, I expected merely that the Government might pay attention to the view of the situation in such establishments which is very widely held in scientific circles, and perhaps move towards a solution of this type in so far as it is possible to do so.
LORD BESWICK: My Lords, the very fact that the proposal has been put forward by someone with the authority of the noble Lord is of itself a guarantee that it will be considered. I was very interested in what was said, and if after further consideration I can write to the noble Lord and give him a fuller answer, I shall be very happy indeed so to do.
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My Lords, the noble Lord, Lord Mitchison, called for what he described as new thinking in a revolutionary situation. Certainly the speed of physical developments to-day is creating a situation of perpetual revolution. I would certainly on my own intiative go so far as to say that no Government can afford in this revolutionary age to be over-content with its administrative structure relating to science and technology. I hope that all concerned, the Government no less than the academic and industrial world, will find in the discussion which we have had to-day much stimulation and will, I hope, gain some encouragement from what has been said.
7.39 p.m.
THE EARL OF BESSBOROUGH: My Lords, I am most grateful to all noble Lords who have taken part in this debate, and especially to the Government spokesmen for having given such generous answers to our questions. I can assure the noble Lord, Lord Shackleton, that the last thing I should wish to be is dogmatic, and at the same time I hope that I have no less humility than he. It is, of course, never easy to see exactly what the right pattern should be. Naturally, not all is bad with the Ministry of Technology. I said that they had done some good things, but certainly the present organisation seems to be overcomplexed and unwieldy, leading to serious delays. I agree with what many noble Lords have said, especially the noble Lord, Lord Todd. I hope that the Government will do something about his suggestions, and not merely consider them, because there has been great support for them in the House this afternoon.
I wish that I could thank every other noble Lord personally, but as it is so late I doubt whether the noble Lords themselves would wish me to do so. I must say this, however. Of the twelve speeches I have heard, certainly seven, maybe one more, seem to be against the Ministerial separation of basic and applied science—I will not use the word "technology". On this I might be tempted to divide the House. I do not quite know what happens when one does not withdraw a Motion for Papers. Perhaps all that would happen would be that I should be sent some Papers which

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the Government would be publishing in any case. Therefore, rather reluctantly, I propose to withdraw my Motion, again thanking all noble Lords who have taken part in a most interesting and valuable debate.
Motion for Papers, by leave, withdrawn.

ESSEX COUNTY COUNCIL (CANVEY ISLAND APPROACHES, ETC.,) BILL
Brought from the Commons; read 1a, and referred to the Examiners.
ROAD TRAFFIC REGULATION BILL [H.L.]
Reported from the Joint Committee on Consolidation Bills with Amendments, and recommitted to a Committee of the Whole House.
  EGYPT: COMPENSATION PAYMENTS FOR 1956–57 LOSSES
  EGYPT: COMPENSATION PAYMENTS FOR 1956–57 LOSSES